It's not easy for any operation to go through a performance improvement change. Consultants love to say that people should: "Work smarter, not harder," but that can be a false dichotomy. We aren't big fans of the expression because we think it subtly implies that you can get something for nothing. Sometimes working smarter does mean working harder. It certainly means you're working differently.
Take the analogy of losing weight to explain performance improvement. Part of the equation for losing weight is to stop eating foods that aren't healthy for you (that’s the “work smarter” part), but another key is to be more active and get some exercise, so you burn more calories than you take in (that’s the “work harder” part). If you streamline a process by removing recurring daily obstacles, it can be misleading to suggest that working harder isn't also sometimes necessary. If a process constantly breaks down leaving a person with little to do, fixing the problem may result in that person working more. The majority of people we observe have no objection to putting in a fair day's work for a fair day's pay; it's the recurring problems that frustrate them and that make work tedious. Fixing those problems creates a better environment and may also help foster more employee engagement.
"Working smarter" for a front line manager often means becoming more involved in the scheduling of work and following up on the process. It may be a matter of semantics whether or not this is technically "harder" than previous behaviors. In our experience it usually means a more focused committed diligence is required. To return to the weight-loss analogy, it usually takes more discipline to stick to a healthier regimen. At least initially, managers may find these new requirements "harder" because they aren't familiar with them and because they change their patterns of behavior. The object is to be a healthier, lean organization, but it's a mistake to underestimate the actual change required for many people.
A better expression might be: "Work smarter to be more productive." It's just not very catchy.
We've written frequently about the need to look at operating problems from three vantage points: the actual process of how things get done; the management system that is used to control the process; and actual management behaviors (what people do to control the process). So if you're presenting your findings to an executive group, where do you actually start? What is the right order or sequence to make your points?
There are different schools of thought on this. Historically we’ve always started with a detailed study of the process, showing where problems manifest. Executives tend to find this very interesting because it depicts reality -- and deeply resonates with anyone who’s worked within the process before. Following this, we’ve presented a study of what managers were doing while these problems were occurring. Finally we’ve recapped by illustrating the gaps in the management system that helped create the management behaviors we observed.
A more recent school of thought is that you should start with the management system, because it is effectively the intelligence of the operation. If the management system is broken or "disconnected," as we often find, it's virtually impossible for a manager to actually manage a process. All they can do is follow up and provide oversight or some type of after-the-fact quality control. They can't identify when a process is off-plan in real time. Therefore problems like rework and "workarounds" can become the norm and eventually become part of the actual process. So, from this angle, it becomes clear that the management system allows problems to reside in the process and gives no support or direction to guide management behavior.
The two camps remain somewhat divided. Process studies are generally more interesting, whereas management system studies tend to be a little more academic. Both camps will advise, however, that whatever order you settle on, the first study you discuss needs to grab people's attention -- or you may spend the rest of the meeting watching people checking their email.
Being analytical by nature, we sometimes struggle to get a handle on the fuzzy logic behind planned sales growth. One of the things we often find lacking (and sometimes missing entirely) is the logic as to why sales will improve. No, not the forecasts and budgets, broken down by customer and region -- there’s often no shortage of those. What's lacking are the changes in actual sales activity that will create the increased volumes.
Sales growth comes from some very specific sources (e.g., price increases, new customers or distributors, new products or markets, increased volumes from existing customers, better retention of base customers). But P&L statements -- or even sales reports for that matter -- are rarely explicit about the source of growth. They tend to highlight markets or customers or product types, so they link to the original budget forecasts. But planned sales growth implies specific activity required on the part of the sales organization related to where the growth is intended to come from. For example, new customer growth would imply new leads and conversion rates on the part of salespeople. New distributor growth would similarly require a specific series of actions to achieve.
But if the planned sources of growth are not made explicit, you can't translate anticipated volume into the required sales activities. If the required sales activity is not explicit, it's very hard for a sales manager to provide any meaningful direction, beyond basic coaching. The fate of the growth plan reverts mostly to the sales force, who also may not know which specific actions are required to achieve the plan put forward. Achieving the sales plan becomes driven by fate and market conditions.
Sales is one of those areas that’s really part science and part art. As consultants, we tend to overplay the science part, while sales professionals have a tendency to overplay the art aspect. But there needs to be some movement toward the middle ground if a company wants to actually manage its growth.
Jim Collins’ belief that "good is the enemy of great" is a brilliant insight, and it applies to pretty much everything. Essentially, he means that if people get in the habit of accepting things as "good enough," it inevitably leads to marginalization and mediocrity. He’s observed that a common trait of great companies is that they hold themselves to very high standards. We believe he is right – and that a key distinction between the good and the great companies we work for is their disciplined insistence on excellence. But we also have come to recognize a practical reality, which is that you simply can't be great at everything. There are not enough hours in the day, and companies would come to a grinding halt if they managed entirely by this edict. So how do you apply Collins’ mantra?
The really good companies we work for are skilled at choosing where they should focus and where they shouldn't. They consciously select what they need to be great at, and then aggressively focus on those items. That's a lot harder than it sounds. It requires an obsession for simplicity, which most companies don't have. Most companies become more complicated over time, and if they aren't very careful the complexity feeds on itself (we argue internally that we repeatedly fall into this same trap). Complexity spreads through organizations like a cancer. Each new management level adds information filters; each new manager adds reports and distribution lists and meetings each new market or product variation adds requirements throughout the supply chain; and on it goes. Success may seem to breed success, but often it just creates an appetite for more complexity.
We gain some insight on how well a company is focused by looking at C-level reporting and having executives explain to us what is most important, what issues they commonly drill down on, and how they manage others. At the mid-level, we also look at management reporting and meetings. Meetings are a surprisingly rich source of insight on complexity. Frequency of meetings, stated purpose, who attends and what actually gets accomplished can speak volumes about the culture of an organization. Complexity is insidious. To keep it in check requires leaders to be relentless in making sure the organization stays focused on where it needs to be great.
There’s a Latin expression that will resonate with anyone who has struggled to implement change in an organization: "Cui bono?" Commonly attributed to the Latin orator Cicero, it means "To whose benefit?" In a legal context, it insinuates that the guilty party can usually be found among the individuals who have something to gain from the crime. The adage speaks to understanding people's motivations, which is obviously very important when trying to implement change in an organization.
In change-management vernacular, the expression that managers are more familiar with is "What's in it for me?" (or WIIFM, as it’s usually written on management-training posters). "What's in it for me?" implies that people naturally have their own best interests in mind, so when you’re trying to sell them on the virtues of changing what they do, you need to articulate why the change will be better for them. But it's a mistake to stop there.
"What's in it for me?" is similar but not the same as "To whose benefit?" -- and the distinction is important. “What's in it for me?” is asked by individuals trying to determine if the changes will either make them better or worse off personally. "To whose benefit" stems from individuals trying to determine who the changes are really going to benefit. Many people become cynical if a change is oversold as something that is designed to make them personally better off. It insults their intelligence if it isn't at least balanced with how the change will also help the company, and perhaps leave them worse off in some ways. Many changes are not "win-win." Often, something must be given up in exchange for something else that is hopefully better. So the key is to try to show why the net balance is better, recognizing the losses as well as trumpeting the gains. It's more honest and, in our experience, it's a more successful approach for most organizations.
We've mentioned before that of the four perspectives we study when we analyze a business (product, process, system and behavior), one is significantly more complex than the others and subsequently takes much more time to change. That one is behavior.
We tend to zero in on management behavior, as opposed to employee behavior, because we find that management behavior is critical to a well-run organization and, in turn, significantly influences employee behavior. Management behavior is, very simply, what managers do during the course of the day. In a broad sense, they actively manage others, train staff, do administration and some in-process work and, of course, fix problems as they come up. But until they actually spend some time observing and categorizing these activities, most managers don't have a very good sense of how their time is divvied up.
Therefore it's very helpful to have a proper analysis of how your time is spent -- and then to have a model that prescribes how that time might be spent more effectively. This takes the generally vague notion of "behavior" and gives it some analytical structure.
The tricky part about this is how behavior profiles (and models) change by industry and company, and within companies by their organizational hierarchy. How front line managers allocate their time is naturally significantly different from how corporate executives allocate theirs. But understanding the current and desired profile at each organizational level can be very helpful in making sure that your organization is aligned and optimizing its valuable management resources.
One of things that we find paralyzes some managers and prevents them from fixing operating problems is something one of our healthcare clients termed the “X- Factor." The X-Factor means problems that were initiated externally (i.e., outside the department) and were therefore difficult, if not impossible, to fix because local managers had no authority.
It's not surprising that external factors can, and do, routinely affect performance simply because organizations are made up of processes that run horizontally through vertically organized functions. And functions within organizations are often in conflict with one another. For example, a company’s procurement department wants to purchase supplies in large quantities so it can negotiate the best price, but the people managing inventories want it to buy in small lot sizes to keep inventory levels down. Organizations are a complex web of compromises and trade-offs.
The X-Factor is alive and well in most companies -- and it impacts the performance of one department over another. However, we find that it is rarely as significant as managers think. Often there is not enough effort spent separating the myth from the reality. One of the first things we do when we encounter a problem that is deemed “unfixable,” due to X-Factor conditions, is simply quantify the source causes. What we are trying to determine is how much of the problem is caused by external factors versus those factors that are within the control of local management. Often we will find that there is plenty of scope to incrementally improve a process quite independent of the X-Factor issues.
Then we also look more closely at the underlying external factors and further break them down into specific issues. Here we often find that there is more ability to influence external departments than local managers realize. Sometimes just educating external groups about the specific issues and quantifying the impact can influence what they do, when they do it and/or how often they do it -- whatever it is that’s actually creating the problem.
Over many years we've had a few less than flattering nicknames thrown our way. It’s all part of the job when you are somewhat of an intruder in an organization. The funniest was probably "Cushman bait." This was the nickname jokingly given to our consultants at a large aerospace manufacturing plant. "Cushman" was the brand name of the utility vehicle employees drove around the plant. It wasn’t all that funny to our consultants at the time, but it is pretty funny if you didn't take it literally!
This particular plant was unionized, although that’s not really relevant, as it's fairly common for workers (unionized or not) to be less than thrilled that we are spending time up close and personal, observing them do their work. What is almost always surprising is how much their opinion changes by the time we’ve finished doing our “observations.” Employees are often initially worried that our watching them work is some kind of "Big Brother" intrusion and that the outcome won't be beneficial to them. By the time we're finished, however, most employees agree that there is no better way to understand their daily issues than to spend a day in their shoes and see the world through their eyes, completely unfiltered. It's arguably the most honest way to really understand what they have to deal with on a daily basis.
To get past their initial resistance and to help ensure that the observation experience is positive, we follow a few helpful guidelines:
1. Clarify the purpose.
Take the time to properly inform employees of the purpose of watching work where and when it happens, which is to see the inherent operating problems that impede the process -- not to watch individuals. We never attach an individual's name to an observation: it's irrelevant to the purpose.
2. Be transparent.
Share what you are observing with the employee and keep them informed about what you plan to do with the information. Remind them that it is not an assessment of them personally in any way.
3. Protect your sources.
When you share observations with management, it's critical that you again stress the purpose of the observation (i.e., the process, not people). Sometimes there is a knee-jerk reaction to reprimand an employee when problems are observed. However, you can't let management do this or employees will simply shut down. Also, as we have discussed previously, most operating problems have more to do with the process and how it's managed than they do with individuals.
4. Follow up.
After completing a series of observations, you need to close the loop. It's helpful to employees if you let them know what was collectively learned -- and what resulting changes are being examined and tested.
In the previous Observation, we discussed the need to make internal performance improvement (PI) groups more accountable, and by doing so make the operating groups that use them more accountable as well. In this Observation, we are going to add a few more thoughts on some of the problems we have seen that can limit the effectiveness of PI groups.
1. Too "process-focused"
PI groups are often the offspring of some type of process-oriented improvement methodology. This is useful but can be limiting in terms of generating tangible financial results. Many process improvements require changes in the way that managers plan and control their resources and in how they interact with their staff. For example, changing a process results in changes to the time and scheduling parameters associated with that process. This, in turn, requires a change in how the process is scheduled, and how the new expectations are communicated and followed up on. To be more effective, PI groups need to spend more time understanding the management control system and the managers' actual behaviors.
2. Too "stretched"
In an effort to control what is often perceived as overhead costs, PI groups tend to be kept relatively small. This works fine if the projects they are focused on are also relatively small. However, projects are often quite large in scope. Larger-scope projects are attractive because the financial returns are more appealing but, by design, they require more resources than are often available. The net result is that the burden for implementation of good ideas falls onto operating managers. Often it is the implementation of ideas, not the ideas themselves, that gets stalled in organizations. If PI groups effectively become "advisors" that generate reports, they aren't very useful to line managers. For changes to stick, they need to be owned by the people who have to make those changes and live with them. Getting people to own change takes the investment of a great deal of time as they need to first understand why change is necessary and then to gain confidence that change will be beneficial to them in some way.
3. Too "corporate"
Finally, as mentioned in the previous Observation, PI groups are often initially put together to enact a corporate vision or objective. Although there is nothing inherently wrong in being a "corporate" function -- and a strong argument can be made that it needs to be a corporate function -- this can cause resistance to change as strong as that typically reserved for external consultants.
These days we work with more and more companies that have their own internal performance improvement (PI) groups. Twenty years ago, these groups were more often quality or operational audit groups. Then they morphed into Six Sigma and its Lean variants. We are often asked to help either build these groups or work closely with them to help transfer some of our knowledge and methods. This may seem to create a bit of a conflict, as the more we build up internal teams the less a company needs us, but often this is the only way to make broad changes across an organization and for them to be sustainable. A large part of our business comes from referrals from satisfied clients, so helping them build internal capability is actually more self-serving than it appears.
The secret to making internal groups work is to make them accountable. Most PI groups are, somewhat paradoxically, a costly “free” service and would not survive long if they were a stand alone business. Some groups believe they are accountable, but accountability is not achieved by producing reports that claim "X" amount of benefit over the next few years. Results need to be actually measured in the financials and built into operating budgets. To make PI groups truly effective, there should be a financial charge for their services. Because of this, operating units need to be able to choose them or find alternatives (or do the job themselves). Although performance improvement targets can be mandated from above, the actual delivery and execution of those improvements have to be owned by operational managers. PI groups have many competitive advantages (lower cost and inside relationships, to name two) over other options. Creating a competitive environment forces them to focus on where they can be most effective in delivering services that create genuine value for operating groups.
Very few firms do much of this. PI groups rarely want this kind of real accountability because it puts their jobs at risk. Often these internal groups are initially set up to help implement a specific corporate objective (e.g., roll out Lean Six Sigma), so they are more like forced medicine for operational functions. Corporate executives are looking for a cohesive approach and do not want to fragment the execution or decision making by turning over control to operational groups. And lack of true accountability has a fairly predictable outcome. Over time, the size and cost of these groups tend to grow, and eventually a new CEO arrives and determines that the PI group is an overhead burden that can be shuttered relatively easily.