Getting Results

Published by Scott Neilson on 26 Feb 2013

Structure vs process…

It seems that the standard protocol. and first step, for improving business performance is to change the organization structure.  It is visible, it is easily quantifiable, and it yields immediate results.  Consultants come in, analyze job responsibilities for redundancies, propose structural changes. reduce the size of the workforce and the associated cost-base, and justify their huge fees.  People often think that bringing in a big name consulting firm to make these changes will distance them from the results should there be any “bumps in the road.”  Not the case folks!  You are still on the line.

Any structure can work!  It is the processes used within that structure that determine the effectiveness of your operation. 

Structural change!  It seems like the panacea for all organizational problems…until the business tries to operate.  While it is true that heavy and costly organizational structure and inefficiency is inevitably one element of the problem, it is generally a symptom, not the cause.

Where many of these consultants fall short is in clearly defining the processes under which the new organization will work.  They give you a new structure, and you have to determine how to make it work.  You have to design new processes, revamp systems to support the new processes, and train the employees how to use them.

It is safe approach for them to take because any structure can work.  It is the processes used within that structure that determine the degree of improvement in the operation…and they have left that for you to figure out.  Any failure to do so is yours.

In my opinion, they put the cart before the horse.  The correct approach is to evaluate your key processes, systematically improve those processes to eliminate waste and improve quality, and then build the structure to support those processes.

The more important lesson is that you should be doing this routinely as a course of business so that you do not find yourself in the position of having to bring in those consultants.  A good Six Sigma or Lean Sigma approach shows you just how to do this.  The book by Peter Pande, Six Sigma Leadership, gives you a good overview of your role as a leader in making this happen.  It is a short, to the point, and clear step-by-step approach to systematic improvement.

To get you started on which processes to evaluate first, be sure you are getting the right information about the health of your organization.  Build a good set of metrics for each of your key processes and monitor them closely.  It is like looking at a patients chart in the hospital…you can easily keep track of all vital systems and how they are operating.

Published by Scott Neilson on 12 Feb 2013

Swinging for the fences…

My apologies to my non-American readers….this phrase is one often used in American baseball.  It refers to a batter trying to hit the ball over the fence (a home run) and score a run with one swing by him/herself (and be the hero), instead of simply trying to get on base and build a run with the other members of the team.  For your information, the odds of hitting a home run is 1 in 35.  The odds of getting a hit is 1 in 4…almost 10 times better.  The odds of scoring a run by getting a series of hits is more than twice that of scoring by the long ball (home run).

There seems to be a preoccupation with immediate gratification rather than making the effort to systematically repair, redesign, or recreate key business processes, and create healthy and sustainable businesses.

Swinging for the fences reflects a quick win mentality which has become pervasive in business thinking.  There seems to be an increased tendency for leaders to be more focused on immediate changes they can make to achieve short-term goals, drive the quarter to quarter share price of the business, and earn bigger bonuses, with not as much regard for the long-term impact.  The thinking is clearly in  favor of immediate gain and reward, and less of a concern with the future state they may be creating and passing on to someone else.

One workshop participant shared this example.  A CEO said to one of his business leaders that this leader needed to reduce operational costs in his business by 20%.  That leader indicated that those results would be achieved with some changes in computer systems, the associated processes, and employee training, and that the plans were in place to do exactly that over the coming 24 months.  The CEO was not satisfied and said that he wanted to reduce costs in project support functions by increasing the workload per employee in those functions now…and by nearly doubling that workload.  The business leader argued that doing so would result in quality problems, high employee turnover, and would ultimately lead to dissatisfaction among the customers.  He further argued that the current service levels were those to which the customers had agreed when contracting for the work, and changing those service levels would violate those agreements.

The CEO insisted that the business leader make the changes to service levels immediately.  He had made commitments to investors that the organization would reach certain levels of profitability by the end of the year, and this was the only way to do it.

The short-term effect was, as the CEO indicated, an immediate improvement in profitability, great satisfaction by investors, and a healthy rise in company valuation and stock price.  The CEO got a tremendous bonus and payoff in his stock options.  The near term effect (6 months later) was onset of operational quality problems.  Customer satisfaction began to decline as did new contracts.  Over the next year revenues declined along with profitability.  This was followed by a dramatic reduction in company valuation and stock price.  Within two and a half years the company had been split up and sold at a fraction of it’s value from 3 years earlier.

While I wholeheartedly believe that a leader must push his/her team to perform well and find ways for improvement, this must be done within the context of what is achievable and sustainable.  It is achieved through a rigorous and systematic approach to improving all aspects of the operation.  It generally, though not always, means that the best results come from the accumulation of a series of improvements across entire systems that enable the organization to routinely generate the desired results.

The problem seems to be a preoccupation with immediate gratification rather than making the effort to repair, redesign, or recreate key business processes, and create healthy and sustainable businesses.

 

Published by Scott Neilson on 29 Jan 2013

Beware the “NON”- data…

I have seen many instances in which people have  made decisions based on bad data…or NON-data.  I distinguish bad data from non-data in that bad data is either out of date or inaccurate in its calculation.  Non-data is data that is not relevant to the decision being made.

Last week I was watching an interview with some prominent individuals following the horrible events in Newtown, Ct.  Needless to say, the discussion was about gun control options.

One of the participants, a very high-profile politician, was taking the position that changes to gun control laws do not work.  He emphasized his point by giving the example that Chicago has invested lawmaker time and taxpayer dollars in changing gun control laws, and there were still 512 murders in Chicago last year…the highest in the country.  This from a prominent politician.  This from a man who at one time was vying for the office of President.  This on national television in front of an audience of millions of people who will believe what they hear from this person because he used a statistic.

The sad part was that the moderator and all of the other participants nodded in agreement!

While it may be true that Chicago had 512 murders last year, and while it may also be true that 512 was the highest in the country, it is incorrect to draw the conclusion that changes to gun control laws were ineffective based on those two pieces of data.  The relevant statistic would have been to compare the number of gun related crimes for a period of time prior to the changes in gun control laws to the current number for an equal amount of time after the gun control laws were put into effect.  Another would be to compare the rates of change in gun related crimes in Chicago to other major metropolitan areas in which no laws had been changed for that same period of time.

Folks, we gotta be smarter than this!  It was no accident that this individual used ridiculous data to make his point…he is quite bright and he has an agenda.  He knows that most people will not think beyond the words to draw their own conclusion about what he has said.  This is true not only in politics, but in business.  Things get moving fast and we rely so much on data that comes off the computer often without really knowing the derivation of the data and the calculations that are going on in that black box.  We often do not take the time to make sure it is real data, yet we make important decisions based on it.

You must challenge the data…verify the accuracy of calculation…ensure the relevance of the information gathered in relation to the conclusions drawn.  Do not assume that the data you are being given is correct and without bias.

Published by Scott Neilson on 15 Jan 2013

Be the customer…

I find it useful to periodically see what it is like to be one of our customers…to get a good feel for what our customers experience when dealing with us.  I will say this, it is never what I expect.  There is always some element of the intended service that is not happening.

  • How many of you have called your own company to see how your receptionist handles the phone?
  • How many of you have tried to navigate your own voice response system to get a particular service, or really sat down and rigorously tried to navigate your web page?
  • How often do you sit with your customers and ask them detailed questions about the service they are experiencing with your company?

If you have a small number of customers, like less than 25, you can interview them all.  As the leader this is a great way to start building the relationships that will drive your top line growth.  If you have more than 25 customers you have to be a bit selective, and perhaps do some by survey.  If you are in an industry (like consumables) in which you have hundreds, thousands or millions, then you must use surveys or sample groups.

Now, that is just for your EXTERNAL customers.  Think about it also for INTERNAL customers – your employees.  As a team they are working together.  They are customers of each other in some way or another.  The relationships between your teams members is essential to effective operations, and internal customer service is essential to those relationships.

  • When BD needs some details from operations for a quote they are preparing, what kind of service do they really get from the internal team?  How is the team dynamic?
  • When production requires special materials, what kind of service levels is your procurement team providing?  Are they pushing hard to find the best pricing and ensuring the quality you seek?

In every turnaround I have done my first step has been to do exactly that…to speak with as many customers as I can (external and internal).  Much of what you need to fix in a organization your customers have experienced and will tell you, and they will not be shy.  They will give it to you right between the eyes, which is what you want.  Just make sure you listen and do not react defensively.

Published by Scott Neilson on 31 Oct 2012

Gotta be real…

One final thought on clarity of goals and roles…

There is a fine line between pushing your organization to achieve higher levels of performance, and setting goals too high.

Setting unrealistic goals does more damage than good.

People often believe that in order to be a good leader they must set extraordinarily high goals and drive their team to achieve them.  They feel that this is a sign of a truly great leader!  “Drive that team!  Beat those people!”

The problem is that often those goals are unrealistic…and the leaders know it.  They set the targets higher than what they really believe they can actually achieve, but report different, and lower, goals to their boards, shareholders, or superiors.  The amusing thing is that these leaders truly believe that the people they are leading do not know this game or do not see the personal interests at stake driving this behavior.

Don’t misunderstand me.  The concept of pushing your team to achieve “more” is fine…better than fine, it is right!  However, the goals need to be realistic.  Setting unrealistic goals does more damage than good.  People see you as either being out of touch with reality (damages your credibility), or feel that the goals are a farce (damages motivation), or feel that the goals are in your own best interest rather than that of the organization (causes a loss of respect and trust).

Don’t underestimate the effect that a demotivated and untrusting team can have on your organization…and you!

 

Published by Scott Neilson on 28 Oct 2012

I don’t get it…

“In the absence of clearly defined goals,
we become strangely loyal to performing daily acts of trivia.”

Author Unknown

I like this quote.  The point is simple; the impact is huge.  Daily acts of trivia mean wasted time and money, both of which will lead to organization failure.  The reason people do this is because “it has always been done this way”, or they do not know what else to do…and they need to look busy for fear of losing their job.

  • Be clear on your goals, and the action plans and timetables to reach those goals.
  • Be clear on everyone’s role in carrying out those actions.
  • Be sure that the tasks people are asked to perform are value added!

It sounds simple, but it doesn’t happen as often as it should…and people press on peforming daily acts of trivia…and businesses spend a lot of money accomplishing little.

You may think you are being clear…it may be clear to you…but is it to them?  Check it!

Published by Scott Neilson on 23 Oct 2012

Accountants Rule!

I am often asked “what is the most common problem you have found in failing businesses?”  The number one issue is always Leadership.  However, a close second is that many leaders do not understand their costs.  They have defined structures to accumulate and report costs within cost centers; they have developed consolidations to summarize costs across businesses; and, of course, they abide by the regulations in developing systems to report those costs for public consumption.  However, that does not mean that they KNOW their costs.

I think that in many cases businesses are not willing to ADMIT their costs.

I was once hired to turnaround a business that had grown nicely but had never turned a profit.  The first week I was there I asked the CFO “How do you we price our services.”  I was told, “We take our variable costs and add 30%…and that should be enough to cover our overheads and profits.”  As my cost accounting teacher is fond of saying, “You would think so, but I would suggest to you…” that six straight years of losses would suggest otherwise.

As a leader you MUST understand the importance of costs and require that the appropriate costing system be developed and managed correctly in your business.  It is fundamental to generating information that you need for decision-making.  It is as important as understanding the market you are in, determining the differentiators that set your business apart from others, or defining the features and benefits of your products or services.  Without that level of understanding of your costs:

  • setting prices and managing profitability becomes a gamble.
  • you cannot understand the key drivers of your business processes or the opportunities for improving those processes and reducing costs.
  • you cannot effectively plan for growth and investment.

Interestingly, I think that in many cases businesses are not willing to ADMIT their costs.  They are aware, either intuitively or consciously, that they are not operating efficiently.  They do not want to include costs from an inefficient operation into their overall cost structure, so they calculate costs based on the way IT SHOULD BE if everything were working well.  That’s like saying I can drive from Princeton to the theatre district in Manhattan in one hour.  Conceptually true, but it rarely happens.  There will almost always be traffic to throw me off plan.

Do you really know what it costs to deliver your products or services?

Published by Scott Neilson on 17 Oct 2012

Right here, right now…

“Being a leader is not about forever, it is about moments…it is about THIS moment and what you do with it!”  Scott Neilson

One problem people encounter in leading is believing that every decision they make is forever.  It isn’t…particularly in business!

A decision is made at a point in time with the information you have available to you at that moment…and we all try to make sure that we have the required information to make the best decisions possible.  However, you should recognize that the moment you make a decision, new information becomes available that may make that decision obsolete.

The decision making process is a moving target.  Trying to envision all possible future scenarios and make one decision that never requires modification rarely, if ever, happens!  If you are waiting for that you may never make a decision.

Get comfortable making the decision that is right for the moment considering your best prognostication for the future.  Make it clear to those around you that this is the course you are on given what you know now.  Know that new information WILL become available and when it does, you will make the required course corrections.

Published by Scott Neilson on 03 Oct 2012

Reduce the noise…

We have spent a lot of time in recent posts talking about establishing clarity of direction, plans and actions.  There is one other point on this subject that is important to discuss…maintaining that clarity and focus, and managing daily priorities accordingly.

Minimize the distractions that the continuously changing environment can cause in your operations and in the achievement of your goals and priorities.

Every day your employees at all levels are bombarded with information that can cause them to lose sight of priorities and direction…every day!  Customers have special needs they are trying to meet; competitors are moving quickly to find and promote new and better ways of serving customers; regulators are adding and changing the rules by which we must operate; shareholders are pushing for improvement in financial performance.  All of these influences make it difficult for employees to remain focused on the company direction and priorities.

A key task that you have as a leader is to manage the impact that these external influences have on your operations…minimize the noise…minimize the distractions…and maintain the focus on the strategies, plans, and priorities in executing those plans.  This goes beyond the communications aspects in the last post.

Think about this…What are your core operational processes, and what structures and processes do you have in place to help you manage the effect of external influences on them.  For example:

  • How do you receive and process customer requested changes to products or services offered?
  • How are regulatory issues, concerns and changes received, interpreted and implemented?
  • How do you identify technological advances taking place in the industry and evaluate their potential application within your operations?

You must manage the points of external influence on your organization.  You must protect your operations from being distracted by too much information.  You must build structures and processes which manage the information coming in, and help employees make sense of it and keep it within the context of the plans and priorities of the business.

Note of caution…Don’t let your efforts to “reduce the noise” get in the way of listening to ideas that may help you improve your operations.  Your constituents are a great source of competitive, market and industry information. They see your business from a different perspective than you every day. Take advantage of that, but manage it.

 

Published by Scott Neilson on 24 Sep 2012

All aboard?

Driving clarity and understanding throughout the organization at all levels is essential to translating plans to action and executing against those plans.  Here is how you work to make that happen.

Following on the last post about utilizing an effective planning process, the leadership team should understand the strategies and action plans because they have been involved in developing them.  Most other employees, however, will not have been involved and it is unlikely that they will be clear on that direction and what is required of them to get there.

…most employees do not understand what a strategic plan means in terms how it affects their day-to-day activities.

The disconnects get worse the further the employees are removed from that decision-making level.  Unfortunately, many of the people who will be critical in accomplishing the tasks to achieve those goals are far from that decision-making level…the shop floor, if you will.  The cascade of information to all levels is generally not managed and monitored well.

Too often leaders feel that publishing the vision and a few strategies on the corporate website, announcing them at the beginning of the year in a town hall meeting, and hanging posters of them in the lobby is enough.  It isn’t.

What people read or hear from you is the summation of a lot of thinking and analysis.  They hear the end result of all that analysis.  They hear a conclusion and do not see all the steps that went into getting to that conclusion.  They have not been involved in all the discussions and cannot make the leap from issue to answer.  Most importantly, they do not understand what those strategic plans mean in terms of day-to-day actions for them.

As a leader you must drive the effort to understand the direction and take action at all levels in the organization.  This is, to a large degree, a communication process.

This communication process needs to be well planned and executed.  It should take many forms…sometimes large groups…sometimes focus groups…it should be reinforced in individual performance reviews and goal-setting…and it should be supported by multi-media presentations so that it gets through to as many people as possible.  It must be repeated to remind everyone of the goals, the actions to get there, and the progress being made.  Remember, most of the people in the organization only hear about this subject when you, the leaders, talk to them about it, which is generally not often.  It is easily forgotten which causes people to lose sight of their priorities.

I make it a point to conduct quarterly town hall meetings at every site in my organization.  At those meetings I remind everyone of the direction in which we are going as an organization, and I explain to them what it means.  I tell them what actions we will take to get there.  Most importantly, I tell them what it means that THEY must do every day to contribute to achieving those goals.  I make it a point to put it in terms that are relevant to them and the tasks they perform every day.  In addition, as I walk around the organization I talk with employees at all levels and ask them how are they applying our strategies in their everyday work.  Those discussions always lead to clarifying questions and a better idea of how they can do their jobs in a way that better supports our strategic direction.

A word of caution…Do not assume that your leadership team is cascading the information down to all levels.  In my experience I have found that that is not good assumption to make.  Check it.  Be sure it is happening.  Ask the people on the shop floor.

Remember, a key element of motivation is clarity.  People are motivated simply by being clear about what is expected of them…”What does this mean for me?  What do I have to do?  How are we (how am I) doing against those goals?”

Tell ’em…and tell ’em often!

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