Posts Tagged ‘process improvement’
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.
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.
The Importance of Cash Flows to Your Enterprise
It should be obvious, but unfortunately, it is not for many organizations- “Cash is King”. Especially in a downward business cycle or extended cycles called “recessions”. Cash levels will determine if your organization will operate offensively or defensively. Just because you have profits does not mean you have the cash needed for your operating capital needs. Profits look good on the Profit & Loss Statement, but are no true indication of the financial strength of the company. An organization can be “profit rich” and “cash poor”. Having cash provides many opportunities to make short term changes and purchases that will produce significant long term benefits. The influx of cash from debt or equity clearly come with strings attached, and in downward cycles, these actions may have severe consequences when there is a shortage of cash to repay loans or meet the terms of financing, which puts the organization on the defensive or unfortunately even “out of operation”. Leaders should always insure that cash collection is a priority to the organization no matter what business cycle you are experiencing. Resist the temptation to spend cash on activities that do not produce a positive ROI (Return on Investment) for either the short and long term, or both. Four “quick” strategies for increasing cash; reduce spending, accelerate the collection of account receivables, renegotiate or slow the outflow of accounts payable payments, and lastly, increase revenues. No magic there. What is usually forgotten is that the organization does not have a plan or processes to work these four strategies. Make sure everyone in your company understands the importance of cash flow to the ongoing operation of the enterprise, and spend quality time creating a cash flow plan during both growth and declining times; Having a plan, awareness and a commitment of the entire organization, and you have improved your chances for sustainability.
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.
Using Debt to Finance the Organization
Organizations can finance their missions in several ways, but the two most common methods are equity and debt. Equity means you sell a portion of the organization in the form of stock or units of ownership, and the buyer now owns part of your organization. The other way to finance your organization is by Debt. Many organizations use bank loans and lines-of-credit to support their working capital needs to finance the day-to-day operations. There are pros and cons to using debt, the biggest pro is that you are not selling a part of your organization, you are just borrowing the money. That is also the potential down fall. Borrowing the money means you have to have a plan to repay the principal and the interest that are due at a future date. The key factor for determining if you finance the operation with debt is whether or not the organization has adequate cash flow to repay the loan and interest.
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.
Traning-Investment or Expense
Supply Chain Management Failures-Suggested Solutions!
Earlier this year I had the pleasure of presenting at the Pacific Northwest Aerospace Association Convention. Since most of the attendees were small to medium size manufacturing and supplier/vendor organizations, I felt this was an opportunity to get firsthand feed-back on how well their supply chain management processes were benefiting their organizations; a subject I was researching for an article. They surprised me! Not one had a positive comment on the benefits to their performance. Maybe it had to do with the industry, the size of company, or more than likely, it had to do with the force-fitting of a process in order to “qualify” as a supplier/vendor. Let’s explore their comments;
What went wrong?
- “We have a computer application but we are short on processes.”
- “The cooperation with our customer is no better; orders still arrive with insufficient delivery time.”
- “Our only communication with the customer is with the purchasing department demanding lower prices.”
- “They (the customer) still want us to warehouse advanced orders without any compensation to us, which we can’t afford.”
The overall sentiment was not a ripping endorsement of their supply chain management process and their customer relationships.
Why?
There are always two sides to every story, but there certainly seemed to be a consensus on the issues above at this particular gathering.
- It is all too common for organizations to look at the topic of supply chain management as a system or application, versus a change in the way they conduct business with their customer and their suppliers/vendors.
- Customers that view supply chain management as a new fangled order processing mechanism are spending a great deal of time and cash on a process that may not produce their intended results. They are failing to either understand or fully embrace the implementation of an effective supply chain management process.
- Failure to nurture an effective and open communication environment between customers and suppliers/vendors will perpetuate higher rejects, increased expediting costs, longer inventory turns, surplus inventory, short or late shipments, and a tense relationship that is not conducive to productivity enhancements for either party.
- Customers that treat their suppliers/vendors unreasonably, will see the relationship deteriorate and impact their ability to perform.
What to do?
Resolving issues of this type is not simple, but it is critical if the enterprise wants to perform effectively. The key responsibility to bring a positive result to these issues must fall at the feet of the leadership at all levels, not just the CEO.
- There are three key factors that must be synchronized in order for a supply chain management process to be effective. These factors, in order of importance, are the people, operating processes and systems and applications. Supply chain management processes cannot be effective without these factors working in unison with a common purpose—improved performance.
- The relationship between customers and suppliers/vendors is the lubricant that makes the supply chain management process function smoothly. Customers need to take an interest in their suppliers/vendors, sharing in the responsibility for their success. In turn, suppliers/vendors should always take a vested interest in their customer’s ability to perform—that is a definition of a “stakeholder” relationship.
- An open communication environment between customers and suppliers/vendors is a two-way platform, not just “flowing down hill”. Surprises are not permissible, but they happen, and it is up to both parties to work together to minimize them. One CEO I talked with said “just give me the bad news as quickly as you know it, then I have the best chance to fix it and still meet your needs”.
- Collaboration means to work together for each others best interest. If either party makes a mistake, own up to it and work through it together. Just don’t make it a common occurrence. Going the extra mile for either company builds a buffer of “trust” that will carry each organization over those unpredictable problems when they occur. I believe that long term trusting relationships breed higher performance opportunities for both entities. If you have a customer or supplier/vendor that does not want to participate in this form of supply chain management-–find a way to terminate the relationship and find those that will. They are out there.