Posts Tagged ‘organizational basics’
“You Get What You Pay For”-Rewarding Incorrectly Will Hurt You!
Most organizations will say they reward “results”, yet that is not necessarily true. Organizations establish a formal or informal process to incentivize their workforce to achieve a desired level of performance. Depending on the size and culture of the enterprise, this compensation plan may include all employees, just management or something in between. All such plans establish some target or metric that the company measures in order to determine if the plan’s thresholds are achieved or not. The establishment of these metrics is where the error usually occurs, which truly hurts the overall performance of the company. The metrics will fall into one of three categories; Intentions, Actions and Results.
Intentions-These are deliverables that are planned to be delivered in the future. This is the weakest of all metrics. It is difficult to see how an organization could build a compensation plan around rewarding for nothing more than “hope”. Yet, many corporations reward senior management for just that, “they had great intentions”. We even re-elect politicians based on their “intentions”, and we seem to accept that metric over and over again. I am not sure why? If you want to grow a culture of discontent within your company, reward your management for intentions.
Actions-These are deliverables that are focused on activity. An associate of mine uses the tag line “doing=1/2 done”. One of my favorite sayings is “don’t confuse efforts with results”. Rewarding actions or effort is a way to move initiatives forward, but not a way to get them done. I can see a compensation program that would breakdown a larger project into steps or stages, and reward based on the number of steps completed, but there are very few other examples to support rewarding actions. Rewarding actions will not hold the workforce accountable for the end result, yet there are a large number of organizations that do just that; reward the starting of something, but not the completion of it. Unfortunately, it appears many governments (local, State and Federal) seem to have adopted this method for rewarding their agency officials.
Results-Results are definite deliverables. These are usually dates, dollars, ratios, numbers or other such “objective” measurements. They are tangible events that can be tracked and measured. Compensating your management and workforce based on results will provide a greater level of accountability to your company. Without accountability, the enterprise will aimlessly move forward in a manner much like a sailing ship without a rudder.
Shifting From Accountability to Entitlement-Whose fault is it?
I recently read an article about the shift within corporate America from a workforce that expects to be held accountable, to a workforce that looks for entitlement. Why should we even be concerned with this shift? We should be concerned since a growing level of entitlement within our population is having an impact on the level of productivity found in the United States workforce. In my opinion, there are several reasons for this shift. A few key reasons for the shift to an entitlement attitude are Diluted Leadership, Unionism, Executive Compensation Levels and Government Growth. Let’s explore how these factors are contributing to this severe problem for the corporate America:
Diluted Leadership-Unfortunately I’ve noticed a decline in the level of “Leadership” in the US over the past few decades. Too often, C-Level executives are more concerned about their own careers and compensation than the overall performance of their corporation. Political Correctness continues to be a filter used before decisions are made and actions taken. These diluted leaders are not leading. You don’t find them rolling up their sleeves and taking a position in front of their company, saying “follow me”. No, they are behind closed doors, sending out others to experiment with their plans, and if successful, then they surface to gather the spotlight. I like to call these diluted leaders “empty suits”, and there are many major fortune 1000 companies that have employed these empty suites. True leaders set attainable deliverables and hold everyone accountable to the process of reaching those deliverables, even themselves. They are not afraid of holding themselves and their executive team to the same levels of accountability as they do the rest of the workforce.
Unionism- Although this may not be popular with unions and some union members, I believe that most unions have outlived their original purpose and are not providing constructive benefits to their members. There are certain skilled trade unions that maintain standards and require continuing education to upgrade the skill level of their members, but a vast majority of unions go far beyond that objective. For example, anytime a union recommends a strike to its membership, and goes as far as to whip them into a lather to carry out a strike, I believe it has gone beyond its usefulness to its members, the companies employing their members and the economy. My experience with unions over the years has convinced me that no one wins when a workforce goes on strike. The enterprise loses momentum and both the company and the union members are often unable to recover from the financial losses they incurred, possibly for several years.
Unions can promote an unhealthy level of entitlement within their membership. Ironically, if there was true corporate leadership (not diluted leadership) within more companies, unions would be less popular.
Executive Compensation- Nothing leads to the heightened level of entitlement thinking in a company more than an unreasonable level of executive compensation. A few research studies that I have read state that over 75% of the fortune 500 executives receive over 400x more than the compensation of the average American worker. European and Japanese executives have been reported to receive approximately 130x and 40x their respective average workforce compensation levels. When a workforce sees under-performing executives receive bonuses or exit packages in the $millions, it is difficult for the non-executive workforce to be understanding when the company then claims that they do not have the finances to compensate the average workforce more fairly. The crux of it is that although the general workforce may actually be compensated fairly, because the executive levels were compensated so unreasonably high, a sense of entitlement and discontent grows within all levels of the company.
Government Growth-Governments at all levels, Municipal, State and Federal are growing. One study recently reported that approximately 25% of the total US workforce is employed by government or governmental support organizations in one way or another. Despite good intentions, governmental organizations have never been shining examples of efficiency and effectiveness. A growing number of workers are searching out government positions because the job security and benefits are generally higher than the private sector, often with fewer required work hours-further fueling the entitlement attitude. Less accountability, union protection, lower levels of accountability, political filters applied to performance and a “don’t make waves and you’re safe” culture is a toxic breeding ground for entitlement attitudes.
Personal comments: My fear is that we are slowly following in the footsteps of the European Union. In the book Mind Set! (John Naisbitt), he states that the European Union leaders commited themselves to creating “the most competitive and dynamic knowledge-based economy in the world by 2010″. What have they accomplished since that commitment; Higher taxes and bigger governments, less innovation, slower productivity growth, restrictive labor laws and declining export market share and rising protectionism. Naisbitt further states “Europe is increasingly losing ground in trying to become the world’s economic driver, because it dearly embraces what one of its famous sons, Sigmund Freud, wrote: “It is easier to suffer than to act.” The EU countries all have a strong culture of entitlement which is part of the reason for their anticipated shortfall for 2010.
Seven Ways a CEO Can Hurt Your Organization
There are organizational leaders that are what I call “empty suits”. They look the part, they sound like they know what they are doing, they have impressive resumes, and yet their track records for organizational results are mediocre at best. Years ago, there was an article (author unknown) that outlined the characteristics of Chief Executive Officers who were unable to help their companies reach set objectives in spite of the positive accolades for their hiring. The article was written to open the eyes of Boards of Directors, who are responsible for hiring and managing CEOs. More recently, much has been written about the less than stellar performance of many CEO’s and the devastating impacts on their companies. I have updated the original article by adding certain characteristics that I have experienced which further defines the seven points. The presence of any one of these seven points should be enough to cause concern to the Board, and any two or more should be enough to cause a Board to take corrective action. I offer up the “Seven ways a CEO can hurt your organization”.
- Poor Leadership
- Lacks the confidence of key personnel
- Hires/retains weak people in key positions or fails to fill key roles
- Fails to grow/retain successor(s)
- Focuses on their personal benefits, not those of the organization
- Poor Vision
- Lacks clear understanding of where business is going
- Lacks focus on organization and priorities
- Is unable to strike key partnership relationships
- Poor Results
- Has major and sustained poor financial performance or missed targets
- Shows major loss of market share or competitive position
- Is unable to forecast timing/nature of recovery events
- Is more concerned with being “politically correct” than attaining measurable results
- Poor Understanding of Business
- Misses key industry trends and changes
- Lacks understanding of fundamental profitability factors
- Cannot crisply define what it takes to win
- Poor Work Habits
- Does not put heart and soul into business
- Sets bad example/role model for others
- Is not viewed in industry as a key player
- Hoards information to increase power base
- Poor Management Style
- Uses the “demand and control” management style
- Allows top management infighting, not working as a team
- Demonstrates unpredictable decision processes, leaving organization too scared to act
- Starves key programs but spares sacred cows
- Poor Board Candor/Communication
- Controls flow of information/agenda, preventing focus on or sufficient time for critical issues
- Does not allow ready access to VPs and other key individuals
- Keeps favorite non-strategic programs or perquisites out of board review and approval process
- Loads the Board with special interest persons/cronies
Full Service Professional Organization Failures: Why?
Full Service Professional Organization Failures: Why?
Professional organizations spend a great deal of time and financial resources advertising that they are full service; yet, I continue to find customers that are very dissatisfied with the services they receive. Relying on good faith and advertising claims, when selecting a full service Professional Service organization to support your needs, is not always enough to ensure satisfactory results. Here are a few thoughts to keep in mind.
The Deception
The deception, intentional or not, is that professional organizations advertise and represent themselves as being “full service” when they are not; at least not to the degree that the client expects. Examples of professional organizations that represent themselves as being “full service” are those entities that provide legal, accounting, investment, banking, insurance, engineering, and/or a variety of other consulting services. In most cases, these service providers are extremely professional, highly skilled and ethical. The client gets short-changed, however, when the service they need is a subordinate skill within the full service provider. The client receives results, but not to the level they expected based on the description that the “full service” provider promised. Why is this happening?
Hasty Diversification
Service Providers need cash flow to operate like any other business. Diversification is a way, if done correctly, that they can expand their revenue base. Those Service Providers that hold true to their core skill-set usually maintain exceptional customer loyalty. Those who diversify too quickly, into sectors they are not highly experienced in, run the risk of upsetting customers, losing business and ultimately suffering revenue losses.
When a Service Provider decides to diversify, it is important that they seriously consider and evaluate the risks associated with moving away from their core skill-set and operating culture. Often, when a firm diversifies, they choose not to make the financial commitments that are necessary in order to go first class. They instead put their “service toe” in the water to test the “revenue” temperature, before making a true commitment (i.e. allocating finances for research, training of existing employees and/or hiring experts) to the expansion. In the meantime, they advertise and prematurely represent themselves as “full service”.
Unfortunately, this is a common scene for many struggling companies. There are accounting firms that offer bookkeeping, tax, insurance, investment and retirement planning services. There are banks that offer banking, planning, investment, and retirement products. There are legal organizations that offer a wide array of legal services (personal, corporate, wills/trusts, real estate, etc.) and business development services. There are sales/marketing firms that offer marketing, web development, social media advertising, branding, graphics, and customer care support. Each of these companies may spread themselves too thin with hasty diversification. They all have a core skill set and operating culture that made them very proficient in a particular area, but not in all. So what to do?
Know that “Full” Service may not be synonymous with “Fully” Satisfied
As the prospective client, it is your responsibility to select the Service Providers that meet your needs. You may not need the “world class” provider, but you want to make sure you have selected a firm that will leave you fully satisfied with the results you receive. Here are a few steps you can take to improve your chances of receiving the services you need:
- Look to referrals from trusted colleagues that had a similar need and were satisfied with the results.
- Ask your other Service Providers for a referral.
- Regardless if a referral or not, provide the prospective firm with a detailed, written requirement of the services you need and the results you expect to receive.
- Interview the principals whenever possible.
- Ask detail probing questions about “how” and “who” will perform the service you are requesting.
- Ask if they provide frequent progress reports as to the status of your project.
- Have a written contract that clarifies the deliverables in detail.
- Don’t be afraid to question unclear situations or statements—YOU ARE IN CHARGE.
- If along the way, their weaknesses surface, try to get them back on track. If you are unsuccessful, don’t be afraid to terminate the relationship and move on.
Most enterprises gravitate to the “Full Service Provider” out of convenience. They do not want to take on the role of a “general contractor” that works with multiple Providers offering separate skilled services. This approach may initially require more time and energy, but long term it may also save you money (in fees and delayed revenues) and provide more desired results.
Organizations-Playing Offense or Defense
Organizations in today’s economic times are either playing offense or defense, whether they know it or not. What determines which style of play? Cash or operating capital availability. With the credit markets shrinking, cash on hand has become a significant criteria for survival and the opportunity for growth. Those organizations that have lived from month-to-month off their line of credit are now in trouble. Those lines of credit are being reduced or foreclosed on due to a lack of payment. Organizations that have kept their on hand cash balances in proportion to their debt have a chance to survive the current slumping economy. The organization that maintained a healthy cash position now have a chance to take advantage of that strategy and take advantage of great bargains on asset purchases, merger/acquisitions with competitors, product development, etc. Everything is discounted, and if you have the cash you can make short term deals that will multiply in the long run and make your organization more successful.
Layoffs-think before you act
During these times of the recession, most management start cost cutting by laying off employees. This may be a mistake, depending on the knowledge level needed for your product or service. Consider lowering payroll costs through eliminating or deferring bonuses, salary annual increases, reducing contract labor, reducing salaries across the board (management first, then other employees); if you have to let permanent employees go, consider restructuring the organization, eliminating management first, flatten the organization and reallocate employees to other areas of the company and establish a mentoring program to support those taking on new responsibilities. A JOB AT A LOWER SALARY IS USUALLY LOOKED UPON AS BETTER THAN NO JOB AT ALL.
The recession is short lived in comparison to the damage that management can do if they do not handle the down turn correctly
The ROI of Helping Your Competitors
Most organizations believe it is their objective to destroy their competition. Putting the competition out of business means more customers for them. Consider this, there may be a great ROI in helping your competition in time of crisis. I believe the more competition there is actually validates a market. If you’re the only organization in a market, you don’t have a valid market-yet! If you hear of a competitor having a process breakdown or strike that is not effecting you, consider approaching them and offering to help. In most cases, they will not accept, however, it will change the way they view your organization. If they do accept, then do your best to truly help them and the payback will come your way. Who knows, you may be acquiring them next year or visa versa.
The Influence of Cultures
Organizations are like societies, they each have their own culture that has developed over time due to the actions of their personnel (leaders and employees/volunteers). When working to bring about change within an organization, one of the biggest mistakes leaders make is that they discount the impact that the existing culture has on their efforts. I believe “culture clash” is the number one reason for change failure. Knowing how to build a culture that does not impede your organization’s plan for change, you should focus on seven areas. These seven areas are Hiring, Training, Goal Setting and Tracking, Communication, Responsibility, Accountability, and Advancement Opportunities. These areas must be addressed and taken seriously to create an organization and positive culture that is ready to support the organizations change plans.
Don’t Confuse Efforts with Results
Recently I heard a couple of client employees commenting on how hard they are working to be noticed. I could tell by their conversation that they were both trying to position themselves for a favorable performance review and consequently, a raise or promotion. I never once heard them talk about their accomplishments. Effective employees (leadership or workers)work to achieve desired results in the least amount of time. They fight through Murphy’s Law (problems will happen)and they recognize the benefits from knowing how to use Pareto’s Law (80/20 rule)by applying it to their efforts versus the results they achieve. Lets explore this further:
It is important to an individual to be the most effective person they can be, whether in relationships, parenting, associating with friends and co-workers, as a volunteer within a non-profit organization, being an employee, or being an entrepreneur. One very important principle should be kept in mind – “don’t confuse efforts with results”. This may sound like common sense, but it happens to be a situation that is very unfamiliar to many people striving to be more effective. There are many periodicals, articles and books written about time management, which normally comes to mind when a person is asked what they believe “don’t confuse effort with results” really means. Time management can be defined as “a process for making best use of the time available in order to use that time in a desired manner.” Being more effective with the time available often gets lost in the process of daily activities. In the past 50 years, the average work week in the United States has been declining from the previous 50-year period. The cause of this decline is brought about by governmental intervention over the number of hours one can work without receiving overtime, and the advancement of the industrial and technological ages. No longer are a majority of Americans working from dawn to dark to earn a wage. Evidence of this reduction in the work week is the growing industries that now cater to people’s spare time, such as hobbies, recreation, entertainment and hospitality.
Time is precious. What’s new about that and what does that have to do with “don’t confuse efforts with results”? It has little to do with the actual time available and more to do with what is done with the time available. “To be effective with the time available” implies that the time is used in a very productive way. Being more productive can mean there is more time for doing fun things: to finish a home improvement project faster, launching of a new company sooner or getting more done in the workplace.
Focusing on what is being accomplished rather than how much time is being spent is the key issue for being more effective. How can understanding this principle make a person more effective? People improve most when they decide to make a change, focus on what it takes to make that change, provide the discipline to follow the steps set before them and then take the necessary action. This assumes a person wants to be more effective!
The next time you encounter a co-worker complaining or (surprise) bragging about the extra hours they are putting into their job or project without increased measurable results, ask yourself, “why are they saying this?” If they are paid by the hour, that may be part of the answer. Parkinson’s Law seems to have evolved within many workplaces through less than motivated employees with no differentiation as to whether or not it is focused on staff or management. Parkinson’s Law states, “work expands to fill the time available.” An interpretation of this law is that a person will make sure that they fill the time allotted to the task even if they can complete it sooner. The person following Parkinson’s Law is not the person searching to be a more productive individual. There are clear signs of organizations that are infected with this Parkinson’s Law cultural disease and following are some of the disease’s symptoms:
- Projects are always completed on schedule, because schedules are always changed to meet the anticipated completion date.
- People work more than the normal work week to meet deadlines.
- People work more than the normal work week in order to impress their leadership that they are strong performers.
- Those performing tasks have a lack of accountability.
- Leadership that focuses more on how things are being done rather than on what is being done.
- Higher levels of headcount than necessary to perform the organization’s mission.
These symptoms reflect many of the attributes of less than productive people and organizations. Parkinson’s Law is able to infect people and organizations because they both respond to activity and not results. Ah ha! There is the code to unlock the secret to the phrase “don’t confuse efforts with results”. The key here is that “results” should drive the person or the organization and not the activities directed to achieve the results. In many situations, the biggest excuse used is that people or organizations are so busy trying to get things done that they cannot actually get things done.
This sounds a little like what comes first, the chicken or the egg? How do you get results without the activities? The answer is that you don’t. The important fact to understand here is that the results are the most important items here, not how hard or how long people are working to achieve those results. If people or organizations hold themselves accountable for getting results, they become more productive. That means getting the task done the first time and on schedule. No extensions, no excuses, no wasted time and no confusion about priorities.
Results-oriented people understand that they should and will be evaluated based on what they contribute to the project or the mission of the organization. In organizations that are infected with the Parkinson’s Law cultural disease, the leadership may not be astute enough to recognize that these results-oriented people even exist. Results-oriented people may even be challenged by peers to back off and quit making everyone else look bad because they are more productive. In some cases, leadership does recognize the results-oriented person and then wrongfully takes advantage of them by redistributing more work from the “infected” employees to the “immune” employees. As a result, the infected people then coast even more. This is not a healthy situation for either side. In this case, one of two things will happen to the results-oriented people. They will either find a way to extricate themselves from this situation by moving on or they will also become infected as a cultural casualty. That would be a shame.
What does one do to become a results-oriented person?
- Decide to make a change.
- Keep desired results in sight at all times.
- Set priorities for key factors that contribute most to desired result.
- Determine resources needed to support priorities.
- Stay focused on priorities.
- Manage activities required to support priorities.
- Strive to exceed results expectations, such as quality and time duration.
There are two other Laws that have an effect on how to become a results-oriented person. First, Finagle’s Law of Dynamic Negatives is usually recited as, “anything that can go wrong, will—at the worst possible moment” and is a corollary to Murphy’s Law, which states that ““if anything can go wrong, it will.”. This law is used by infected people as an excuse for not getting results.
When things go wrong, infected people often give up and decide they cannot get the results they want in the time frame originally planned. Either they either decide that the result was not important enough to pursue and move to a new project, if they are working for themselves; or, they go to leadership and leave the issue with them to resolve. On the other hand, results-oriented people realize that there are going to be problems and these issues have to be addressed. They know that problems are a part of the process of getting results. They do not become paralyzed by these issues. They work through the issues, because the desired results are more important than the effort it takes to achieve them.
Secondly, Pareto’s Law or Principle, also known as the 80-20 Rule, states “80% of the effects come from 20% of the causes” If applied properly in any given situation, Pareto’s Law may be one of the most effective tools for increasing a person’s productivity level and there are no technical gadgets required. Applying Pareto’s Law to any area of life means that time and resources used to generate results are used in a very productive manner. Always remember that the “results” are the target, not just how well we manage the activities. Let’s explore a few examples of applying Pareto’s Law:
- Meetings- 80% of the needed information comes from 20% of the meeting attendees. Shorten the meeting by inviting only the 20%.
- Sales- 80% of all sales come from 20% of the sales force. Redirect the efforts to higher quality hiring and training of the top 20% of the sales force and reduce headcount and expenses.
- Customer Care- 80% of complaints or calls come from 20% of the customers. Implement techniques to address the 20% with less labor-intensive means - email/voicemail, etc.
- Operations- 80% of the problem symptoms are caused by 20% of the actual problem issues. Search for the 20% causes and achieve a multiplier effect for reducing problem symptoms.
- Results- 80% of the results achieved are generated with 20% of the efforts and resources. Evaluate the remaining 80% of efforts and resources and scale back to reduce costs.
Results-oriented people are the stars of any group or organization. They are the leaders in their area of expertise. They are successful entrepreneurs. They are individuals who don’t confuse efforts with results.
A New Organizational Model
There is a new model that organizations need to consider in order to function successfully for the future; The model is summed up in two words- “Relationships” and “Collaboration”.
Relationships are key for your success, whether a supply chain or wholesale, retail or services organization. The “relationship” you have with the stakeholders of your organization will determine the difference between success, mediocrity or failure. Your stakeholders are your customers, employees,vendor/suppliers, support resources (accountants, lawyers, consultants, banker) and owners.
The three “C’s” of collaboration are Cooperation, Communication and Commitment. Cooperation is the willingness to work closely with others to the benefit of both you and them. Communication is the willingness to share sensitive information needed to streamline both organizations to increase effectiveness. Commitment to the stakeholders means that you genuinely want your supporters to be successful and you are willing to do your part to make it happen. They may be vendors/suppliers, they may be your banker, they may be a competitor if you or they need assistance and one of you can help.
The new organizational model requires a focus on lasting relationships, cooperation, communication and a commitment to their stakeholders. I call that new organizational model, the start of becoming a “Collaborative Enterprise”. More to follow on that topic.