Category Archives: Organisation capabilities

What happens when a business is under pressure

The retail CEO finished reading the morning newspaper extracts covering the release of the organization’s half-yearly results. The news was not good, and the newspaper comments were fairly blunt and unforgiving. The organization reported half yearly growth that was a full 2% points below expectations coupled with a significant tightening of margins. This was the double whammy of growth and profitability challenges. The CEO put the finishing touches to the internal communications that were about to be released.

Many organizations have experienced such a situation. The bad year or the bad quarter happens all to frequently. But equally, the responses also have a familiar ring and show a common pattern across most industries. Those responses tend to be in three groups as follows:

1. Expenses are purged

Often a travel freeze is announced almost immediately, and restrictions on discretionary costs are put in place. Classes of travel may be changed and standards of hotel accommodation may be downgraded. Much of the day-to-day business activity is subject to somewhat excruciating restrictions or controls. Some of this can be quite illogical and dysfunctional, but these actions can be very effective in terms of pure savings in the short-term.

2. People costs are put under the spotlight

A recruitment freeze may be announced and various training programmes are suspended for a period, maybe for 3 months or till a point later in the year. Costs of people development are put under the microscope such as limiting off-site or residential activities. Existing office facilities suddenly become in demand for on-site training.

3. Profit is the urgent focus

If the organization cannot grow in the short-term, then at least be very profitable. The dreaded profit improvement programme is often dusted off, and re-shaped to ensure the organization maximizes its profitability as quickly as possible. Much organizational energy is focused on this activity with the formation of task forces and action teams.

Most organizations will respond to challenging results with activities similar to those above. The precise actions will of course depend on how bad the results are, and over what period. For example, a full year of poor performance is much more significant than a single month off the boil.

All of the above responses are valid and have their place in the management of any business. Clear and firm actions are needed to bring poor results back into the black. But are they sufficient?

From a financial perspective, all of the above initiatives will deliver results, and in most cases very quickly. They represent actions that can deliver real bottom line outcomes quickly and visibly. They also help to transmit a strong message across the organization that performance must be improved, and action is happening to deliver such improvement.

But short-term cost savings are only part of the answer. No organization has “cost-saved” its way to prosperity, especially with short-term initiatives. Yes, it may have dug itself out of a hole, but that is about all. What about the longer term?

In addition to short-term fixes that may be painful but necessary, organizations need to take a hard look at their strategic performance levers to get themselves in top shape to avoid circumstances such as those faced by the retail CEO above.  Those performance levers are in four groups:

1. The value proposition

How do products, services and price all combine into a value proposition in the eyes of the customer? The organization may feel it has the best service in the market, but if customers see it differently, there is a real disconnect. Worse still, if some of this is subjected to short-term cost savings, it may make the perceptions even more problematic. The value proposition in the eyes of customers is a fundamental performance lever.

2. The cost structure

How sustainable is the cost structure in the longer term? There may be more cost-effective ways of doing business, such as outsourcing or different ways of working. Some of these avenues may be controversial, especially in the home market. For example, some jobs may need to move offshore. Cost is not just about the accounting in the profit and loss statement. It is about how the business model can survive and thrive in the longer term.

3. People capabilities

Are the right capabilities in place or do competitors have a different approach to growing and sustaining their organization capabilities? Organizations need to take a close look at their capabilities for the future. For example, if a domestic organization is seeking to expand abroad, it needs to have a very clear view and a plan to acquire and develop those capabilities.

4. Capital structure

Is the capital structure appropriate for the business and how does this drive decisions at the senior level? High gearing levels can place undue pressure back on the operations of the organization. For instance, there may be under-investment in areas like technology due to funding constraints brought about by the wrong capital structure.

For the CEO above, short-term actions are necessary and probably urgent. But the real value ultimately comes from the strategic performance levers. As the old proverb says, “Getting money is like digging with a needle – spending it is like water soaking into sand.”

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How well are we developing our executives for the future?

Executive development takes a high-profile in most organizations, and is given significant attention at board level. Succession planning, mentoring, role rotation and training are all part of this mix.

One aspect that receives particular focus is external executive education. This is due to both the out-of-pocket costs and the issue of “time away from the business”. This area is typically about developing the strategic and softer skills rather than technical skills such as accounting for example. External executive education is a major industry in its own right with many hundreds of universities and other organizations competing for the corporate dollar in this area.

Take the Harvard Business School for example. In 2011, it provided open enrollment courses for some 6,700 participants. In addition, it provided 62 custom programmes for some 3,200 participants, and these custom programmes were delivered to 31 separate companies. Whilst the specific numbers will differ, there is a similar pattern across hundreds of business schools across the globe. This is lucrative business for the providers of these programmes. In graduate schools of business, it is generally acknowledged that the executive programmes provide significant profitability compared to the flagship MBA classes.

But how effective are external executive education programmes? The answer is often  “it depends.”  Indeed, the same can be said for internally developed and delivered education programmes.

On one level, we can look at overall corporate results. Assuming we accept the principle that executive education is ultimately about helping to achieve better corporate outcomes, we can use corporate results to some extent as a proxy of its effectiveness.

Well, maybe. There are many factors that impact corporate results, and we need to be careful to avoid jumping to conclusions on cause and effect. But having said that, CNN Money shows some interesting statistics regarding the performance of Fortune 500 organizations. In the period 2000 – 2010, 50 of the Fortune 500 showed total return to shareholders of between 17% and 46% annually. The top 50 in EPS (earnings per share) growth also demonstrated similar performance. These numbers are strong by any basis of comparison, and don’t forget this includes the period of the GFC in 2008/2009.

Whilst we can argue that executive education may have played a part in helping to deliver these results, that is probably as far as we can go. Drawing any stronger connection would be way too tenuous at such a macro level.

But individual corporations also face a similar challenge. How do they link and track the delivery of executive education with actual outcomes and results? This is partially overcome by participants agreeing some form of objectives upfront that can be measured both at the end of the programme and with some ongoing tracking. The key is to ensure the right issues are identified that will derive benefit from the executive education, and that the appropriate measures are agreed to drive the right outcomes. This is an important part of the value proposition for executive education. There needs to be a win-win for the organization and the individual participants.

This linkage is highlighted in an article for Bloomberg Business Week where Stephen Burnett the associate dean of executive education and professor of strategic management at the Kellogg School of Management said, “…….there should be a direct and measurable connection between executive education and business results”.

But what of the future, and how can executive education maximize real value? Four areas of emphasis are needed to deliver that value:

1. Focus executive education on the big strategic shifts

Some industries will face major strategic shifts that create the need for urgent change – for example, technology and the changes in the media industry. Other changes are at a broader level. For example, one of my previous blogs discussed business models and the future of work. These aspects are fundamental to the way organizations will function in the future. It is essential that the focus of executive education is shaped around these strategic shifts.

2. Rethink speed and flexibility in executive education

The speed of change is a much quoted challenge for executives – in their organizations, in their markets and in the global economy. Social media is a case in point, and this phenomenon is rapidly changing the consumer landscape and how buying decisions are made. Executive education needs to be very nimble to be on top of such issues with timely and relevant content.

3. Exploit the online component

The online environment provides a great opportunity to develop foundational skills in some areas so that face-to-face education can be used to build more significant capabilities. For example, online learning could be used to highlight the general fundamentals of say collaboration together with case examples to illustrate. But the specific application in the work environment and what needs to be done differently is far more suited to the face-to-face experience.

4. Lets get smarter about measures

It is very satisfying to hear someone say that the education course they just attended at some cost to the business was very useful or that it was excellent. It feels like a real value for money moment. But how will it impact the business and the individual? What will be different, why is that important and how will it be sustained? Measures need to be built into the performance management system for both the business and the individual participants, and must be assessed regularly to ensure outcomes are delivered.

Robert Louis Stevenson talked about travel being more about the journey rather than the destination. Executive education is also about a leadership journey, but it is one that needs to closely tied to clear milestones along that journey.

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How exciting is your organization?

We hear lots of commentary from executives about the challenges of the workforce, and the people that work in their organizations. The war for talent, the resource squeeze, rapid turnover, staff loyalty are all terms we hear frequently. We also hear about the need for greater staff engagement. That is, how can employees be more involved emotionally with the business and with greater passion and enthusiasm.

But are we missing something in this discussion? Indeed, there is a very simple question that is worth posing, namely how exciting is your organization?

Some will say that organizations are not meant to be exciting, and on one level that may be a fair point. But it is also missing the bigger picture as to why people stay with an organization or move elsewhere. It also cuts to the issue of the motivation of people even if they do remain with an organization. Could they be “present” in person but not necessarily “here” in commitment and motivation?

Much has been written about how employees are not motivated purely by money. Exit interviews that I have conducted in my corporate life certainly attest to that, although in many cases the money factor is a very strong but not the determining factor.

What is often missing is the excitement or spark in the organization that makes people think more positively about their work environment. If they think more positively about their work (and where they work), it can be a win-win for the people and for the organization overall. In other words, they see the work place not only as a means to earn a living, but rather as a place that provides a higher level of engagement and fulfilment.

As an example, a graduate was working with a prominent global resources business. This organization was engaged in some of the world’s most interesting and exciting resource development projects. Yet the organization provided a somewhat stifling work environment for the graduate – very intense, highly bureaucratic, and deadly serious in its day-to-day conduct of business. Of course, there are good reasons for this as the organization is heavily driven by the culture of safety. This was a key success factor for the business. But for this graduate, the work environment had totally overpowered the organisation’s exciting business activities thus causing the graduate to re-think committing to the organization longer term.

Measuring the level of excitement of an organization is not a typical performance measure, but there are three questions that can provide an effective proxy, namely:

1. What does the organization celebrate with individuals?

2. What does the organization measure for individuals?

3. What does the organization value in individual people?

1. Celebrate

Does the organization celebrate a broader set of achievements beyond the periodic financial and technical results for an individual? For instance, celebrating a new and innovative process initiated by an employee could show that the organization is not just committed to delivering very important but somewhat narrow financial results, but is also focused on delivering outcomes on a wider front.

2. Measure

Are the performance measures for individuals in the business just narrow financial measures or is there a broader spectrum including people management, collaboration and so on? The trick here is to ensure that the non-financial measures are significant in profile and importance, and not just mere tokens. For instance, a realistic form of peer assessment would show that the organization is committed to a more collaborative and therefore more exciting environment.

3. Value

What does the organization really value in its employees? How far beyond the quantitative financial measures does this extend? Employees who worked beyond the call of duty on a major deadline despite disruption to personal commitments would normally be thrilled to receive a public acknowledgement of that effort. Again, it is not the money or the reward, but rather the fact that the organisation is effectively saying it really values what the employees have done.

The excitement factor in an organization does not have to mean some of the glitzy features, such as balloons in the lobby or a big Christmas Party. It is about how the organization gives its employees that little bit extra for them to say “this place is good to work for”.

Excitement in organizations has often been attributed to the technology type businesses such as Google. But over the years, many different industries have demonstrated examples of how this can work, such as some airlines, media, and some aspects of retail. There is great potential in this space for what can be done. Writer Robert Conklin was right when he said, “Dreams get you into the future and add excitement to the present”.

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Crash or crash through – business models and future work

When two large bodies in the cosmos collide, there is not only a massive impact, but the effect reverberates across space in many ways, and with consequences that can be felt over a very long time.

In the world of organisations, we see similar situations, albeit without the same physical drama. Major business trends meet head-to-head creating opportunities for significant change or forcing some organisations to retreat or fail in the market place.

We see one of these seismic events unfolding right now with organisations across the globe. The business model is rapidly changing in many industries. The changes are characterised by the need to be flexible, responsive and collaborative. In a previous blog “The end of the organisation as we know it?”, I spoke of the four urgent changes needed in the business model, namely:

1. Moving from customer management to customer responsiveness

2. Shifting from hierarchical organisation to horizontal organisation

3. Re-aligning from product and service development to product and service collaboration

4. Being data rich to being more decision support.

But in addition, we see the nature of work changing as well. Indeed, work in organisations in the future will be vastly different from what we see today. Work in the future will be different for many reasons including technology, continuing globalisation and demographic shifts. But fundamentally, work will change because different capabilities will be needed – and indeed demanded – by organisations. These can be summarized in four organisation capabilities:

1. Delivering work outputs that are not dependent on the fixed location of the work

2. Collaborating across and beyond the organization to create value

3. Interacting and communicating across and beyond the organization, including social media

4. Integrating skills, information and resources to deliver better outcomes and value.

So what happens when changing business models meet head-to-head with the changing work environment and the re-shaping of capabilities?

There are three broad tracks that organisations can pursue, and we already see examples of these occurring in many industries:

Track 1 – the denial track

Some organisations will try to hold onto the old world thinking as long as possible. Change can be hard and confusing, and shifting the business strategy to embrace change can be a real challenge. Look at the way the print media industry in the past decade has been slow to re-invent itself, and adopt new business models. Some retail organisations have also been slow to embrace online business models.

Track 2 – the token track

This track takes on the appearance of making significant changes, but falls well short of delivering any major difference from competitors or in the market place. For instance, some organisations have embraced so-called teleworking to allow employees to undertake some work from home or other locations. But if this is done on a sporadic or ad hoc basis and for some clerical tasks only, it is missing the strategic opportunity to shift the work focus to the delivery of outcomes rather than where work is actually done.

Track 3 – the heroic track

This track brings together the notions of business model change and the changes in work of the future. Embracing and managing the collision (or hopefully more of a fusion) between these two forces is the opportunity. Tackling the above head-on is indeed heroic, but it also provides the maximum potential benefit for the organization. Some technology-based industries are moving in this space as are many organisations with a strong online presence. But there is a long way to go for many industries such as retail and banking to achieve their full potential in this regard.

What track will your organisation embrace and how will you shape that decision? Will it be a deliberate decision process or will it happen by default?

For many organisations, this will represent a major challenge. It does require the discipline to take a reality check on future directions and priorities. As French author and Nobel Prize winner Andre Gide once said, “One cannot discover new oceans without the courage to lose sight of the shore.”

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The rise and rise of the MOOC

Online learning has been with us in various forms for some years. Organisations have applied online learning techniques in some task-oriented areas such as risk and compliance, business processes and technical procedures. Whilst these online activities have not eliminated the need for face-to-face learning, they have nevertheless played a key role in the efficient spread of learning across the business. It is also interesting to note that training or queries for consumer software on laptops is now almost exclusively done via online activity. Gone are the clunky user manuals that used to accompany the purchase of consumer software.

But online learning has assumed a new and exciting dimension with the arrival of the MOOC – Massive Open Online Courses. Essentially, these organisations offer courses from prominent global universities and other learning institutions at no cost to the student.

Organisations such as Coursera for instance have become prominent in shaping this new learning phenomenon. Coursera offers a range of over 200 courses from 33 universities including Stanford, Princeton and Columbia just to name a few. The courses vary in duration and the level of accreditation they provide, and to date almost 2 million people have participated in these courses.

With Coursera, I have recently taken a history course over a 12 week period taught by a professor from Princeton. I must say I have been highly impressed with the content and the format of the programme. Apart from the series of video lectures requiring up to about 7 hours per week, there is also the opportunity to hear from excellent guest lecturers, and to engage with the broader communities of interest in the online class of over 70,000 people from around the world. This is quite amazing – a quality course from a top university at no out-of-pocket cost to me.

But what does this all mean and in particular what does it mean for skill building and for people development in organisations? Is this the end of the university as we know it?

Prof Ed Byrne, the Vice-Chancellor and President of Monash University in Australia, has penned a constructive view on the subject, and points out some deficiencies and challenges in the MOOC model, including accreditation, evaluation and lack of face-to-face experience that students obtain from traditional university courses and personal interactions. These are all valid points, but Prof Byrne concludes that a blend of face-to-face and online learning that we see emerging in the MOOCs may well be the way of the future.

It is too early to give firm answers to the above questions, and to fully understand how this form of learning will play out, but two dimensions are clearly unfolding:

1. The war for talent is now in a more rapidly changing playing field

Development of skills can now occur across a wider spectrum and individual development will take a further step-up in scope and intensity. The development of skills and capabilities (both business and personal) is now experiencing a major burst of momentum. Online learning opened up a new landscape some time ago, but the shift in content we are seeing in the MOOCs is taking us to a whole new playing field. People will have greater flexibility in their development of their skills, and therefore the talent pool for business will be far more dynamic, and with many different pathways for their development.

2. Technology is (yet again) re-shaping the game

Remember what has occurred in other industries, and how they have experienced the blowtorch of industry disruption from new technology. Think of the newspaper industry in the past decade as it scrambled to respond and adjust to the world driven more and more by digital content rather than traditional hard copy papers. Now we are seeing major shifts occurring in education and personal development which will shape powerful changes in the future for individuals, businesses and the global economy. Technology and the emerging phenomenon of the MOOCs will significantly change the education and development models in the future.

Watch this space is a frequently used term. But in this case, I suspect that “get engaged in this space” may be more appropriate.

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Dealing (or coping) with high maintenance individuals

There is an old proverb that we often hear, namely “variety is the spice of life”. People react to this in different ways. Some see it in the context of their day to day activity, especially around work and life balance. Others see it from the perspective of their friendships and the community of people they know.

Variety in business attracts prominence in the context of the great mix of people that one encounters. Teams are often touted as being highly effective because of the different mix of skills and personalities involved. Variety is seen as a contributor to a team’s success.

But unfortunately, organisations often have to deal with individuals who can be described as high maintenance. They may well be talented and have strong capabilities, but their behaviour can be a real challenge. High maintenance individuals might demonstrate one or more of the following characteristics:

1. Being disruptive in personal behaviour and approach
2. Demanding and requiring an excessive amount of management time and energy
3. Behaving more as an individual than as a team player.

High maintenance individuals are more often focussed on the “I” rather than the “We”. But there is a paradox here, namely that high maintenance individuals may also generate solid business results and outcomes. The so called “good guys” don’t always win.

Lets not confuse how individuals debate business ideas and issues with being high maintenance. There is a strong need for robust discussion of business issues and challenges. Rather, it is about how it is done and how people behave positively in the broader organisation team.

This is illustrated in the chart below. It shows in visual form the tradeoffs that need to be considered between people styles and business performance.

Quadrant #A in the accompanying chart is the most challenging as it highlights the tradeoff between good business performers, but at the cost of being high maintenance individuals. What is the level of tolerance here? What can be done to help individuals ameliorate their style and approach?

Quadrant #B on the other hand is about providing more counsel and guidance about enhancing business performance while at the same time maximising the benefits of the style and nature of the person concerned.

Variety is indeed the spice of life, but there can be real challenges and tradeoffs in how an organisation manages its high maintenance individuals.

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The end of the organisation as we know it?

The end of the organisation as we know it?
– by Matt English

“Old habits die hard” is a familiar saying, and we see this play out in daily life in so many ways. Changing a golf swing or modifying the route taken to work is difficult because we become very content and possibly complacent with the existing pattern or behaviour.

Organisations both large and small face exactly the same challenges, and affecting a major change can be painful and difficult no matter how strong the business case or the need for change.

But technology in particular is having a profound impact on how organisations function and interact with their customers and employees. In the same way that the lander Curiosity has recently opened up new horizons on Mars, technology is helping organisations define new horizons in the way they operate.

The organisation as we know it is under siege on several fronts, and executives are being confronted by shifts occurring at great speed. In particular, they are on notice regarding the need for an urgent change of focus in four key organisation capabilities:

1. Moving from customer management to customer responsiveness
Historically, customer management was focussed around the relationship of the business to the customer and vice versa. Today however, this has expanded dramatically thanks particularly to the explosion of social media in the past five years. The customer to customer influence has now escalated in prominence, and responsiveness to this development is now top of mind for most organisations. In particular, various consumer facing organisations such as telcos and retailers are transforming the speed and nature of their customer interactions and responsiveness.

2. Shifting from hierarchical organisation to horizontal organisation
The hierarchical organisation has been a stalwart over many decades. But its success was heavily dependent on formal structure and hierarchy, and segregation between the organisation and its stakeholders. Technology is now dismantling such constraints as a result of the quantity and transparency of information that is readily and quickly available. This demands a flatter or more horizontal view across the organisation and its stakeholders. The influence of social media across many consumer facing industries is the rapidly evolving facet in this regard.

3. Re-aligning from product and service development to product and service collaboration
Various industries have begun to embrace the way they shape and deliver changes to their products and services. Retailers and products organisations for example are now using various collaboration tools such as chat rooms to enable such change.

4. Being data rich to being more decision support
Advances in technology have caused massive amounts of data to be created in proportions never thought possible just a few years ago. But recent growth in the field of analytics has meant that sensible conclusions and decisions can now be effectively made from such large volumes of data. Think about the big changes happening in areas such as customer segmentation and campaign management for banks and insurance organisations.

The issue is not whether these capabilities need to change, but rather how quickly they will change the organisation as we know it. The winners will be those organisations and industries that strongly embrace these as truly new horizons and major change initiatives, and deliver them accordingly to add value.

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