Shareholder is foremost boss

The value chain is ‘A financially satisfied shareholder leads to a loyal customer leads to engaged employees’. The first priority is always to keep your shareholder happy. An unhappy shareholder is going to take away his monies and your ability to keep happy customers and employee will crash. Therefore, one always has to work on maximizing value for the shareholders. That’s why one needs to be driven by the shareholder wishes related to return on investment, embedded value expectations, book value expectations, earning per share and maintaining healthy P/E (market stock price divided by earning per share) ratios.

Next boss in the chain is the customer

 
A customer is who gives you the monies in lieu of your products and services. Customer is a significant asset and customer attrition can have significant customer attrition cost. One should do all what you can to keep a customer happy as long as it does not hurt shareholder’s interest. For example, you will not give a business class service to an economy class customer to win his loyalty. Customers are also no naive. They do understand the value which they can expect vs. what they are paying. Sometimes companies do take financial loss in the short-term to gain long-term customer relationship. However, this will be blessed by the shareholders. A big challenge with the CEOs is to meet the short-term expectations of the shareholders, while investing for the long term. The joint-venture partnerships are more interesting as may have different shareholders with different expectations.  The rule is ‘Customer is your king and shareholder is your emperor’

And finally its the employees

Employee comes as the next to demand your attention and focus. A prudent organization always takes the decisions which are best for the customer and the shareholder, and considers the impact on employees before going ahead with the same. In other words, an organization will take all the steps to have satisfied and engaged employees, as long as it is not compromising customer and shareholder objectives.

In all the above there is not always ‘either and or’. One needs to consider that pampering shareholders at the cost of customers, will finally hurt the shareholders and similarly dis-satisfied employees will finally lead to dis-satisfied customers. Therefore, in this tip, we are not suggesting an extreme approach. The idea is on which entity takes precedence over the other.

As an example, I have faced this question ‘will you support a 7 day week, if it makes your customer happy?’ I find this question little absurd, as a 7 day week will result in 100% attrition of high quality employees, which will destroy my capability to serve my customers as I will be left with fewer and 4rth quartile employees. Yes, if 7 day week does make sense for customer and shareholder perspective, I will hire more employees, so that I can rotate week-end duties, I will pay more monies for week-end duties and make the work environment for week-end working highly employee-friendly.

There is another way to support this tip-

1. A customer always wants to be with a company which is financial strong and robust.
2. An employee always wants to be with the company which is financially strong, has a safe future and has satisfied customers.

You may have best employee practices, but if you are not financially sound , both customers and employees will leave you over time. As some philosopher has put it ‘Warmth of love emanates from the kitchen fires’.

The contents of this post are referred from  Be Shareholder-driven, customer-focused  and employee-sensitive from business intelligence and performance management institute.

The hypothesis is that people love it if you trust them or expect more from them. Deep in their conscience, they want to be put into a situation, which takes them to the border of insecurity and anxiety. They want to be put into the deep-end of the swimming pool as long as they know that there is a safety rope. If your employees don’t have that fire, one has to look at the leadership practices or the recruitment practices.

As a leader, you can keep on looking for opportunities to inculcate that feeling of increased self-worth. As an example- Let’s say that the true potential of an employee is 120% of what he is doing as of now. A true leader will expect an employee to do 140% (while being careful that the employee is not set for failure), and an employee will end up doing 130% of his current role. This is what you call ‘making an employee discover the limits of his true potential and pushing those limits’

To see it another way, most of us do not insist enough from our employees. A human being is wired to perform better when he is challenged. Some interesting way to expect people to do more is-

Challenge them to think next level

I have a standard question which I have used often when my direct reports used to come to me with a problem ‘ what you would have done, had you been in my place?’ Surprisingly many of them come-up with a good answer. My response is ‘just go ahead and do it’. People sometime avoid doing things, because they feel it is ‘not appropriate for their level’. I do tell my people ‘think like next level and you will soon rise to the same’.

Place the buck on them

Take away the mentality that buck stops with the boss. Make the people accountable and create rewards and penalties, as if they are on the hot seat. Move from ‘leader is responsible and employee needs to be told what he has to do’ to ‘employee is responsible and boss needs to be told, what he has to do’. Let an employee come to you, when he needs a solution, or money or escalation support. If you move the sense of ownership to the employee, he will start building the same at his end.

Give the cues to the employee and not to do his thinking for him

Everyone loves cooked, ready to serve solution. As a leader you need to make an employee do that cooking and help him where he needs it. When an employee comes to you with an issue, give him cues to stimulate his thinking and its direction. Questions like ‘what have you thought so far?’, ‘what do you think are the alternatives?’, ‘have you explored that option?’, ‘ lets assume that this solution will not work, lets limit our thinking to these three alternatives’..

The contents of this post are referred from People become the way you treat them from Business Intelligence and Performance Management Institute.

One objective is to put the best man for the job and the other is to support the development goals, by giving assignments where the skills levels of the employee are low and learning potential is high.

The first objective works on getting to maximize the productivity and the second works on maximizing the potential. Given that organizations are demanding higher productivity, efficiency and the appetite for mistakes is low, the first objective seems to be the norm. In that case how does a leader address the employee aspirations?

Before we get into resolving this perceived conflict, It is easier said than done to put the best man on the job. If you do a general survey, you will have many employees who are thirsting to be given assignments, which can leverage their current capabilities. In other word, the first responsibility of a leader is to ensure that employees in his team are not ‘under-employed’.

Post fulfilling ‘well-employed’ objective, longer-term investment into employee learning, is must . A lack of on-the job learning will lead to low level of employee engagement and therefore decrease in productivity. A leader should pursue the development goals for employees, while not significantly impacting the productivity or quality of outcomes.

Here are some tricks to resolve the conflict perception:

1. Invest leader’s own time: Taking note from situational leadership model, an employee having low-skill for a given assignment, will need a mix of continuous direction and hand-holding from the leader. A leader will need to invest time, so that he is able to maintain the desired productivity and reduce the level of risks.
2. Assign a buddy: Another employee with expertise on the given assignment can play the role of a guide or a help-point, if employee runs into an issue. The buddy can also review the deliverables on interim basis.
3. Make an employee work in a support capacity, before taking charge: If you want to given an employee the project management responsibility for the first time, he may spend few months by being an assistant project manager with an experienced project manager.
4. Start small: Taking the same examples, an employee may handle a sub-project, before he graduates into managing a project and then a program.
5. Look at the aptitude: The level of ‘newness’ of the task assigned to an employee should be based upon the leader’s assessment on the employee’s inherent capacity to handle the unknowns and his grasping power. It also depends on inherent competencies. For example if an employee is great business systems analyst, he should be able to handle an entirely new system in a new subject domain.

Content of this post are referred from Maximize output first and then the potential

1. Training: This is the lowest level of intervention. Training is a formal class-room knowledge delivery. It is the best way to ensure the attention and attendance of an employee. It is the most structured way as well.
2. Learning: Learning can some from different channels. Training is one medium for learning. One can also learn by self-learning methods of reading, enrolling in self-learning programs etc…To further clarify, attending a training session does not mean that employee has learned.
3. Development: The goal of learning and training (as a subset of learning) is development or in other words, the actual enhancement of expertise and competencies in an individual. To clarify further, training and learning may not guarantee that employee has developed.

Therefore, we always emphasize on our clients to use the term of ‘development plan’. Employee Development can be broadly achieved through the following means:

1. Training Plan
2. Self-learning Plan
3. On-the-job development Plan

The above three have their own role to play in the development process, and cannot replace one for another. Our recommendation to our clients has been to adopt 70-20-10 formulae to get the most efficient and cost-effective development agenda. As per this rule, one should have 10% of development effort to be spent through training, 20% through self-learning and 70% through on-the-job experience. The reasoning is as follows:

1. Training is costly and is only the first step in the development process: Without under-mining the importance of training, it does add a visible cost to the development expense. Training should be used as a starting point for a development path, to provide the basic grounding and to lay a foundation. It is evident that in the initial stages an employee needs help for a systematic and structured input.
2. Self-learning is cheaper and also tests employee initiative: Self-learning comes through reading, getting enrolled into self-paced learning, becoming part of the groups and associations etc… Self-learning is cost-effective and above all tests the interest of an employee to develop himself.
3. On-the-job experience is the longest but surest path for development: Five days of training may need 5 months of on-the-job experience to covert the learning into actual practice. On-the-job experience builds the confidence, as well as brings the sense of reality in terms of how to apply the practical side of the theory learnt in the training room.
4. On-the-job experience gets value for the organization: Having deployed an employee for on-the-job development opportunity, will get some benefit to the organization for the compensation given.

The Challenges

1. Employees love trainings: Formal trainings add flavor to an employee’s resume. They also give en employee a dedicated time off the work-madness. Trainings don’t demand that much initiative from the employee as self-learning or on-the-job deployments. Therefore, employees may not appreciate the non-training related investment by the organization.
2. It’s difficult to track the self-learning: Apart from the situation, where an employee enrolls into a central self-learning platform, it’s difficult to keep a check on the enrollment, progress and performance of an employee.
3. Quantifying the application of trainings and self-learning: Organizations have generally failed in track on how well the training or self-learning has contributed to an employee development and how well those learnings are getting applied. The challenge is on how to quantify and also the band-width to do the same.
4. On-the-job deployments are not systematically followed-up: On-the-job development becomes part of any other job and when a leader and employee don’t get time to discuss on how and what employee has learnt. This leads to employee not actually realizing the level of development which has been achieved.

Mitigation

1. Explain the whole concept of development to an employee: One can explain the concept of development and how training, self-learning and on-the-job fits in the development agenda.
2. Include the tracking piece in the development plan: The development plan can have an additional column which tracks on not only the completion of a development activity, but also on how it is adding to the actual development, and how it is being applied.
3. Keep the employee and leader alive on development agenda on day-to-day basis: Just like one keeps a tab on the work-goals on the day-to-day basis, one can keep on discussing the development agenda, and a leader can keep on giving a near-time feedback on the development.

Content of this post is referred from Follow 70-20-10 development plan in Business Intelligence and Performance Management Institute

Here are some examples of empowerment, whereby you can authorize the front-line employees to:

1. Waive or reduce of charges or penalties.
2. Give discount coupons.
3. Give gift certificates.
4. Correct the data supplied by the customer, instead of send the papers to and fro.
5. Refund cash to the customer for goods returned.
6. Taking a decision on if a problem comes under warranty or not and committing the repair work.

This empowerment comes along with a smart over-seeing and review mechanism:

1. Policies on the authorization and approval matrix for front-line employees: You cannot have limitless empowerment to the front-line employees (or for that matter any organizational level).
2. Business Rules and guidelines on using or applying the empowerment: Organization should clearly define the guidelines under-which the decisions can be taken.
3. A post-facto review of the decisions taken by front-line staff can evolve the empowerment mechanism. You can decide on where you can tighten or liberalize the controls.

It is a question of management mind-set

With all the controls and review mechanisms, finally it is a question of management mind-set in terms of how much they trust the frontline staff judgment. These are some of the assumption you can make, to build that mind-set:

1. People act responsibly, when they are trusted: People like to be trusted, and they are keen to justify the trust posed in them. If in doubt, they will check with their seniors.
2. People are competent, given the right support mechanism: If you have laid down the guidelines and business rules, people will generally adhere to them. The knowledge and decision rules used by more senior levels to make a decision can be mostly documented, for the frontline staff to follow.
3. The benefit of empowerment far exceeds the risk: Some wrong decisions by the empowered frontline staff can be easily compensated by the time and effort saving for the customer as well as the organization.
4. Empowerment is not a onetime short-lived experiment: Organizations which withdraw the empowerment on the first few instances of wrong decisions by frontline staff will have a short-term perspective. Any empowerment will take time to evolve and stabilize.
5. Don’t go too granular in empowerment: When you empower an individual, he should feel truly empowered. A small magnitude empowerment, does not work as it may help serve a minor proportion of your customers. The frontline staff may also feel short-changed. If you have to empower, do it well.

Supporting the Frontline Employees

Along with empowerment, comes the support mechanism to enable frontline staff to apply that empowerment.

1. A centralized FAQ section, frequently asked questions with appropriate responses, standard response letters or actual scripts to reinforce training and prompt the employee.
2. A centrally, online available business rules, guidelines and procedures.
3. Online support from experts- In case the frontline staff face technical issues, he or she should be able to contact by mail or by telephone, a panel of experts to take advice and recommendations.
4. User-friendly screens equipped with standardized formats to assist the customer service process.
5. Training on managing situations and decision-points.

Side Benefits of Empowering Front

1. Building overall leadership competencies in frontline staff: With empowerment, comes a greater decision making and sense of ownership. This develops leadership maturity within the frontline staff.
2. Reduce the management overhead: the next level management can focus on more important and value-add activities.
3. Feedback from frontline staff: With greater empowerment, the frontline staff becomes more sensitive to the customer needs and issues. This generates valuable feedback and insights.

You can refer customer service and support for some more subject matter expertise.

1. You can start with reinforcing the objectives of the session and ground rules.
2. Keep the review focused on 5-10 key performance points.
3. Do not keep the review sessions too regimented
4. Apply situational leadership
5. Focus on the decisions which need team involvement
6. Keep some time for feedback on whole performance review process
7. Do not do too many time-checks
8. Keep on building the outcomes throughout the session
9. Interject with appropriate statements to stay focused
10. Use templates to drive discipline
11. Facilitation differences between scorecards and dashboard review

Some level of this alignment exists in today’s world. Based upon the strategy, a CEO defines the goals of his/her management team. The goals are given weight-age depending upon the strategic priorities. This means that performance assessment, ranking and rewards will be skewed towards heavier goals. The same approach is then cascaded down to the lower levels in the organizational hierarchy.

This surely works to a certain level. However, there are some more aggressive methods to consider:

Create special initiative reward pool-
As many of the strategic priorities are translated to strategic initiatives, one can create special incentive bucket for completion of those initiatives. If you do not want to give extra money, you can take it from the overall rewards pool. This means that people get less money for same performance for business as usual and get additional monies if they do well on certain initiatives.

Make variable component higher in the pay and align it to the strategic blue-print-
Organizations are increasing the variable pay component, and the level of variability goes-up with the levels of hierarchy. However, variable pay pool is typically spread equally. It is driven more by the levels, than the role played by the individual.

One can place higher level variable pay pool to the roles which have greater criticality and stake in the strategic priorities. This will attract, retain and propel these critical resources to deliver more than expected norms. The variable pool shift across the roles will keep on happening with the change in the priorities of the organization. For example, if raising customer service satisfaction index is a high priority, we will place higher variable pool with customer service function. Once the required benchmark is achieved, the variable pool next year could move to selling a certain category of products (say institutional products).

Provide mix of individual plus team incentives
Most of the rewards and incentives are individual based, whereas it is the teams, which make it happen. For critical performance indicators and priorities, one can give a mix of individual achievement and team achievements.

All of the above methods are aggressive, and have a challenge of design, introduction, articulation, operations and stabilization. However, they are part of new competitive era, where employees understand the need for an organization to be nimble.

There are many such tips on performance management in my portal Business Intelligence and Performance Management.

Typically I try to keep my posts complete within themselves. However, this is a long subject. Therefore, I recommend you to refer  Vision vs. Mission statement page in my portal Business Intelligence and Performance Management.

Essentially, there is a lot of confusion between Vision vs. Mission statements and also on what is a good vision or mission statement and what is not so good. We have tried to provide the clear distinction between the two terms and what are some imperatives for long-lasting Mission and Vision statements.

1. Average Sales Productivity Year to Date
2. Average rate of growth of sales productivity by value month-by-month 
3. Increase in sales productivity year on year etc…

Whenever you design your Business Performance Management system, do not design it for the specific KPI, but the KPI-classes. A specific KPI is essentially one out of many different cuts (across dimenstions and time trending) one can put on a KPI-Class.  When you gather business requirements from a user, the chances are that the user will give the need in terms of a specific KPI. It is upon the performance management analyst, who will need to

1. Link the specific KPI to KPI class
2. Agree the same with the user
3. Design the  infrastructure accordingly

More details on this tip are in designing performance management by KPI class in my portal Business Intelligence and Performance Management Institute.

As you go through the strategic planning process, shared capabilities and synergies play a significant role to meet the IRR (internal rate of return) hurdle rate set  by share-holders. Many a times, the enterprise level strategy blueprint, sums up the business plan submitted by individual SBUs (strategic business units). The key role of strategic planning group is to leverage the opportunities of shared capabilities and synergies for higher effectiveness and expense reduction.

This however, does not mean that we have to maximize synergies. We need to optimize them for maximum shareholder gains.

The subject is dealt in fair degree of detail in Synergies and Shared Capabilities-Overview in my knowledge portal www.bipminstitute.com .