The Real Costs of Poor Management & Leadership

The Cost of Management & Leadership Shortfalls

by  Andrew Cooke, Growth & Profit Solutions

The costs and risks associated with having weak managers and leaders are often overlooked.  What does it mean to you?  How can you overcome it?  And what are the benefits of doing so?

A recent report from the UK’s Department for Business, Innovation & Skills Leadership and Management Network Group (LMNG), showed the UK’s economy has been negatively impacted by a lack of training and support for new managers.  Across 18 management practices by country the UK ranked 6th, whilst Australia ranked 9th – behind France and just ahead of Mexico.  This strongly suggests that the findings for the UK are equally applicable to the Australia and that there is a stronger sense of urgency.

John Hayes MP, UK Minister of State for Further Education, Skills, and Lifelong Learning, suggests that effective leadership is what makes the difference for successful, innovative companies. “Strong leadership and management is a key factor in fostering innovation, unlocking the potential of the workforce and ensuring organisations have the right strategies to drive productivity and growth.”

However, in the UK the research shows that effective management is the exception rather than the rule.

Too many of our organisations, both private and public, are failing to achieve their full potential: managerial shortcomings and a lack of strategic thinking are holding them back. Overcoming these weaknesses and improving our leadership and management capability is fundamental to creating a culture where more organisations have the ambition, confidence, resilience and skills to respond to the current economic challenges and compete successfully both nationally and globally.”

By providing more comprehensive management training and development for budding leaders, companies can gain the edge over competitor firms.

Key Findings of the UK Research:

  • Ineffective management is estimated to be costing UK businesses over £19billion per year in lost working hours.
  • 43% of UK managers rate their own line manager as ineffective – and only one in five are qualified.
  • Nearly three quarters of organisations in England reported a deficit of management and leadership skills in 2012, contributing to the productivity gap with countries like the US, Germany and Japan.
  • Incompetence or bad management of company directors causes 56 % of corporate failures

Quite simply, improving leadership and management capability is an issue that no organisation wishing to achieve long-term success can afford to ignore. There is no question that good leadership and management can have a truly significant impact on organisational performance, both in the immediate and longer term.

  • Best-practice management development can result in a 23% increase in organisational performance.
  • Effective management can significantly improve levels of employee engagement.
  • A single point improvement in management practices (rated on a five-point scale) is associated with the same increase in output as a 25% increase in the labour force or a 65% increase in invested capital.

Business’ long-term success is dependent on developing these management and leadership skills, these  are crucial to ensuring high performance working and business success. This is especially true as more new managers and leaders will be needed over the next decade as the number of experienced baby-boomer managers and leaders who are retiring increases.

Why are businesses underperforming when it comes to developing their talent pipeline in management and leadership?  There are a number of reasons including relatively low levels of training, shortages of key skills, the failure to apply skills strategically, and employer concern about the relevance of training provision, have also been identified as potential reasons. Other factors include difficulties in recruiting graduates with the right skills, particularly for small and medium sized companies; a perception that leadership and management skills are something you “pick up” on the job; and lack of clarity about the specific leadership and management skills and behaviours managers need to display.

Improving our leadership and management capability makes sound business sense. Helping managers at all levels to develop the right skills and behaviours will ensure organisations have the ability to adapt, innovate and evolve, and seize the growth opportunities that lie ahead.

So what are you going to do?

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Why Customer Satisfaction is Irrelevant

Don’t assume that because your surveys show that your clients are satisfied it will mean that they will be loyal…

by Andrew Cooke, Growth & Profit Solutions

A common mistake to make is that client satisfaction and client loyalty are positively correlated i.e. that higher the level of client satisfaction the higher the level of client loyalty. customer loyalty satisfaction

Working in a harder and more competitive environment often results in businesses focusing on marketing and selling to get new clients. While continuing to bring in new clients is necessary for a business’ survival, so is keeping your current clients loyal to your firm.

Satisfaction vs. Loyalty

How loyal are your clients?  And how loyal are your “very satisfied” clients?  The answer may surprise you, your clients might be more likely to switch to a different provider than you think. In a 2009 study, across professional service industries, it was found that:

  • Only 48% of clients are “very satisfied” with their service provider

and that

  • 60% of these clients would consider switching service providers

Results by Industry

satisfaction vs loyalty

So what does this mean?

It means that fewer clients are loyal to you than you think.  It also is likely that your perception of the real situation as regards your clients’ loyalty is significantly over-optimistic.

For example, a legal firm that equates client satisfaction with client loyalty would assume, on the basis of the above numbers, that 50% of its clients were “loyal”.  The reality is that of this 50% of “loyal” customers over half are likely to switch to another provider. This means that only 25% of the firm’s clients are loyal – it has over-estimated the number of loyal clients it has by a factor of two!  This has a significant on its ability to maintain and grow business, and the strategies and plans it needs to have in place.  In all likelihood, because people do not realise this, the firm will probably be following the wrong strategies, and this can be put the firm at risk.

As the competitive environment continues to intensify, it’s likely that other firms are marketing more aggressively to your own clients and, as this data suggests, a good portion of your clients may be open to having these switching conversations with your competitors.

Why do we make this mistake? It is because people confuse the two concepts of satisfaction and loyalty. The difference is like that between “like” and “love”. Let’s look at them separately.

Client Satisfaction

Client satisfaction is a tactical concept and measurement, and it speaks only to one moment in time – typically, right after a client has completed an interaction such as a purchase or has a problem solved. So measuring customer satisfaction merely tells you if you are doing your job, from the client’s perspective.  Clients express satisfaction in an intellectual and rational manner. In doing this, it makes people think. satisfaction guaranteed

Many organizations should be performing up to their customers’ expectations.  This is really just the basics.   While these days consumers are in the driver’s seat, the mindset tends toward “what have you done for me lately?” as opposed to “that transaction went well so I’m a customer for life.”  Thus, good customer satisfaction does not guarantee that you will continue to keep those customers.  How many times have you bought goods “satisfaction guaranteed”, yet gone to another product or provider even though you had a good or even excellent experience?  All of us have done so at one time or another.

Client Loyalty

Customer LoyaltyThis is a much more reliable and strategic measure.  True loyalty – much harder to earn than mere satisfaction – tells you that your customer wants to stick with you over the long haul and that they will share that feeling with others.  Loyalty derives not from “good” transactions but from exceeding the customer’s expectations on a repeated basis. Loyalty engages your client emotionally and makes them want to tell others about their experience of working with you and your relationship.  As such, emotions make people act!

Next Steps

It is much easier (not to mention more cost effective) to retain and grow your current clients than it is to continuously have to fill the pipeline with new prospects.   It is enough to get people to think, you need to get them act.  You need to engage them both intellectually and emotionally.

Have a look at your existing client base and assess their level of satisfaction. If you are not sure, then use this as an opportunity to ask them for constructive feedback, listen and learn.  Then begin to think, from their perspective, whether you have done enough to earn their loyalty – be specific about what you have done or not done as the client perceives it.  Do this individually and then come together as a group to discuss your scores, perceptions and to share insights.

Next Week

So, what does it take to build the type of relationships with your clients that keep them loyal and coming back to your firm year after year? We look at the 9 questions you need answered in next week’s blog.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

How to Focus on What You Can Influence to Get Results

You have limited time, resources and energy to expend on getting work done, projects completed and achieving the results you are looking for.  As such you need to be able to use these limited and finite resources effectively.  To do this you need to be able to distinguish between what lies within your Circle of Concern and your Circle of Influence as shown in the picture below:

Circle of Concern and Influence

  • The Circle of Concern – this larger circle encompasses  everything that you are concerned about, including those things over which you exert no control or influence e.g. the level of tax, terrorist threats, the current interest rate on loans and mortgages etcetera.  We tend to waste a lot of our time, effort and mental energy in the Circle of Concern.  This produces nothing as we are unable to overcome the inertia or have any effect.
  • The Circle of Influence is smaller, and it encompasses those things that we can do something about.  These are those things where we can be proactive and, by taking action for ourselves, address them. Here we invest our time, energy and effort on the things that we can change.  This produces results and momentum forward.

The two circles – Concern and Influence – are about the choices you make and the results you want.

The Circle of Concern is where you find people who focus on that which they cannot influence. They are reactive, stressed and ineffectual.  The Circle of Influence is where we find people who choose to focus on things that they can influence.

By focusing attention and energy on our circle of influence, people are increasingly proactive. The energy we expend is enlarging; each small victory motivates us further exert influence. We don’t waste energy on things we can do nothing about, but direct it towards what we can change. With each step we feel stronger and more creative. And so our circle of influence expands.

By focusing on what we can influence we also start to understand better what we cannot influence. We develop a better understanding of our circle of concern, and what it includes and does not include – it may even expand our circle of concern. This provides us with a fuller and better appreciation of the context in which we work, and helps us to better focus on our efforts on what we can influence. It can be incredibly liberating to realize that, in choosing how to respond to circumstances, we affect those circumstances. If we want to cope with the challenges we face, then we need to learn how we can influence them.

Share this diagram with your team, colleagues, and clients to help them distinguish between the two, what lies within their Circle of Influence whilst being aware of what lies within their Circle of Concern – and to focus their efforts on what they can influence, not that over which they have no control. This will provide greater traction, reduced stress and a more effective and productive team who can achieve results more easily.

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

How Middle-Management is at Risk

Why middle-management is essential for business survival and the risks you run of if you lose or alienate them.

The Challenges of Middle ManagementMiddle management.  Often described as the ‘backbone’ of the company, they provide the continuity across the business and the key people for getting things done; communicating and resolving problems up, down and across the line; translating strategy into action; leading key operational areas; have considerable expertise and experience within the business; providing linkages between senior executives and front-line staff; and are implementing and responding to change.

As such, middle management is crucial to the on-going success and survival of the business.  Senior executives are starting to appreciate their role and the impact of their work, but at a time when it becoming harder to develop and retain middle management.

Middle Management Stress & Turnover

In a recent poll by Lane4 in the UK (July 2012) more than 90% of workers believed that the vast majority of workplace stress was falling on middle management, and two in five (39%) of middle management reported that they were under severe stress.  As such, many mid-level managers are dissatisfied and would like to leave their current organization.   In harder times it is those middle managers who are your best and who perform well who find it easiest to find new roles and new opportunities.

This has several impacts on your business: firstly, the business will lose its top middle management talent, this will put an increase burden on those who are left behind; secondly, the exodus of mid-level talent seriously compromises the business’ future  leadership pipeline and its ability to have the right people in the right place to enable the business to grow and develop in the future; and finally those mid-level managers remaining will be the low-performers, who are more likely to be disengaged and who have “quit and stayed”.  All of this means that business’ ability to survive and thrive – especially in challenging times – is seriously compromised.

The Impact of Mid-Management Turnover

One of the current major growth challenges facing CEOs is the lack of key talent to enable them to grow the business.  This is exacerbated with the turnover of good mid-level manager as it compromises the business’ ability to execute the CEO’s strategy and drive results and outcomes.

Furthermore, the costs of middle management turnover are also high.  A common rule of thumb is to assess the cost of a middle manager to the bottom-line at one-and-a-half to two times their annual salary.  Assuming an average salary of $125,000 then this could mean $250,000 off your bottom line.  Alternatively, look at it in terms of the extra revenue you need to achieve just to stand still – assuming your net profit is 10%, then that is a further $2.5m of revenue required!

Practically, I think this heuristic is conservative.  Once you take into account the corporate knowledge, experience, expertise and insights that have been developed over a number of years you are looking at the loss of a very valuable contributor.  Furthermore, to recruit someone who is an equivalent is both difficult and expensive to do.

Causes of Mid-Management Stress

Middle management is under increasing stress for a number of reasons.  They are the people who have to lay off staff when the company downsizes (or more cynically “right-sizes”), in an environment of poor morale, having to do more with less, with little or no increase in salary or benefits whilst being responsible for more, a reduced opportunity for career progression, dealing with people who like them are worried and scared, and frequently being seen as an “unwanted layer” and at a high risk of being laid off themselves (often having had to lay off others first).

So what do we do?

Dealing with the Problem

In challenging times we need to maintain our middle management.  In economies which are struggling the senior executives need to work with and engage with their middle management even more closely.  It is at the mid-levels that the most important projects are, and reducing their resourcing is nigh on suicidal.  If the level of responsibility for middle management is extended, and their capacity and resources is limited or reduced, then you need to invest in their developing the necessary capabilities.  If this is not done then senior management will be faced with a “frozen” middle management compounded by cycles of low morale and low engagement.

Companies need to be resilient – leaders need to provide clear direction, they need engage the middle management and rebuild trust, and in doing so enable them to engage with their reports and teams in turn.  If you cut out the middle, then you are just left with the head and tail of the business – unable to do the necessary work effectively, and a corpse all but in name.

It may seem counter-intuitive but now is the time to invest in your middle management – this will pay off in terms of loyalty, results and longer-term growth.  Treat your key people as an investment, not a cost to be cut but people to be valued, developed and through whom you can achieve leverage and significant returns.

So what are you going to do?

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

How to Bait Your Hook

What do good anglers know which we can use in driving stronger business growth and results?

Fishing is one of the most popular leisure time pursuits in the world.  There is something about going out there, rod in hand, to capture that ever elusive fish.  This takes time, patience, skill and – let’s be honest – a bit of luck.

One thing that experienced anglers do is that they don’t waste time in an unproductive location.  You can try a few casts, change the bait, but if the fish are not biting then it is time to move on to a new spot.

We need to be like good anglers – if the fish do not bite quickly, then be prepared to move on and try elsewhere.  You might try for the same fish in another location, or using different bait or lures, or even go after another type of fish.  You want to be in a market where you will get a positive reaction as early as possible.

Doing this will save you time, money and embarrassment – it will also allow you to learn from the experience, and to apply it in future fishing spots.  What we do or how good we think something is not important.  There is only one judge out there and that is the market, and the market only cares if what you’ve done meets its needs.

The lesson here is that business is not about us, it is about our customers.  The question I like to ask to illustrate is this: “Why do people buy a quarter-inch drill?

I get a lot of answers – to hang a picture, for home improvements, to replace my old hand-drill etcetera.  They are all wrong.

The answer is simple: “To drill a quarter-inch hole!”

Customers are not interested in the features of the drill – such as its colour, whether it is turbo-charged, the special safety grip it has etcetera – they are only interested in the outcome from using it.

So if your product or service is not getting traction or garnering the sales you want then you need to do three things:

  1. Check that your product or service provides the outcomes that the customers/market need (have your hook properly baited);
  2. Be prepared to change fishing holes if the fish aren’t biting
  3. Continually learn from your experience so that you can:
  • produce a product/service that better meets the needs of the market (don’t confuse this with a better product which has more features but still fails to address the needs) and;
  • find and locate better fishing holes more quickly.

What do you do to find the right fishing holes?  How long do you wait before you move to a different location?  Are you really focused on delivering the outcomes a customer needs or delivering the product or service itself?

Share your ideas, insights and experience!  Share the knowledge, share the wealth!

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

Creating KPIs that drive engagement & performance

How to create KPIs that drive engagement and performance

Setting KPIs

“If you can’t measure it, you can’t manage it”. 

Although this is true many companies don’t know what to measure or, if they do, they don’t know how to establish KPIs.

Why is this so important?

KPIs drive behaviour – if you know you are being evaluated against certain metrics then you will adapt how you work and how you perform.  This sounds good, but it can also be highly counter-productive, especially if you don’t know what to measure or measure the wrong thin. The result: bad management, mixed messages, confusion and employees focusing on the wrong thing.

You need to establish and develop your KPIs with care. Have too few and you may have an unbalanced “portfolio” of KPIs, have too many and it becomes a case of “everything is a priority, nothing is a priority”.

KPIs vary for different areas and different roles – but they are all underpinned by one factor: the company’s strategy and operations.  As such your KPIs are the indicator of where the company is headed. But it is also the one area that many companies mismanage as they are not thinking about how a KPI is helping the company to meet its targets.

Goals are not KPIs

A common mistake is to confuse KPIs with goals. The two are not the same.

For example, a company wants to achieve a $100 million of sales – this is often assumed to be the KPI when it is not.  In this example the KPIs there should be about the sales process. The KPIs might be about how many new customers, how many customers visited gave a repeat visitation, how many of those visits ended up in a presentation and how many of those were closed as deals. The KPI has to measure the process. You want the KPI linked to the corporate goal but it is not the goal itself.

When looking at the process you are measuring make sure that the KPIs relate to the corporate goals.  For example, having a KPI of sales reports in time does not drive sales – it only supports the process.  Furthermore every industry has formal KPIs (often found in the job description) and informal KPIs that are not written down. Like incongruent KPIs pulling in different directions, they can leave employees confused and disenchanted.

KPI is about Performance, Not People

KPIs are not about measuring people, they are about the process.  The KPIs are there to measure the performance of the organisation and KPIs are tools that people can use so that they can work not just in the business but also on the business, in other words improve the way the business works and improve its performance. They track the strategically important goals and objectives of the business.

Developing KPIs

It is absolutely critical for managers to develop the KPIs in consultation with the employee.  Developing them in isolation and imposing them on high creates, at best, a lack of buy-in and at worst total disengagement.  People want to succeed, and they want to be involved in how they succeed.

When discussing this you need to talk about three things:

  • What the person is employed for, and
  • What is going to give them satisfaction that will ensure they stay loyal and motivated; and
  • How this relates to the company’s main goals

Once there is a shared and common understanding you need to discuss the KPIs that are most effective and relevant to the processes that affect how they work and perform.  This is not to say that each individual has their own unique set of KPIs, rather that there is an agreed and understood portfolio of KPIs that complement and reinforce each other, whilst aligning the individual and team(s).

Monitoring KPIs

KPIs need constant monitoring to have relevance.  If they are measured, for example, only on a quarterly basis then it becomes like an exam.  It is viewed as being extraneous their job, rather than intrinsic. This creates a feeling of irrelevance, a lack of commitment to the KPIs and people having to be forced to comply – creating ineffective KPIs and reduced performance.

So what have you done and what are you going to do with your KPIs?  Talk to your people. Be clear on your goals, understand the key processes to be measured, and make the KPIs relevant, meaningful, measurable and review.

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Click here to find out more about Andrew Cooke and Growth & Profit Solutions.

9 Ways to Accelerate Customer Loyalty

9 questions to ask to help you keep clients loyal – now and in the future.

 

Customer LoyaltyLast week we looked at the difference between client satisfaction and client loyalty, and the mistake commonly made by leaders in the belief that client satisfaction and client loyalty are positively correlated i.e. that higher the level of client satisfaction the higher the level of client loyalty.

Research has shown that the more value you deliver, the more satisfied your clients will be. The more satisfied they are, the more likely they will be to stay loyal to your firm and refer other clients to you.  There is good logic here, but it makes an assumption which is often not explicit or valid in most instances.

Have you ever had a client for whom you have delivered value, for which they are highly satisfied – and who have then awarded a deal to someone else for any reason?  Most people have had this experience.  We have found that there is a disconnect between our delivering value and our realising client loyalty.

The fault is ours, not theirs.

If we are to keep our clients’ loyalty we need to focus on our clients’ perception of your value and our clients’ perception of your differentiation.  The flawed assumption that is often made is that we look at the value delivered, and how we differentiate ourselves, from our perspective not that of the client.

If you want to keep your clients loyal, you need the answers to nine questions—some of which are focused on the clients’ perception of your value, and others on the clients’ perception of your differentiation.

Five Questions for Valuevalue men

Question #1: What value do clients perceive regarding our general category of company and services?

Perhaps your clients value that you are a diversified marketing company, not just a website firm. Or, that you are a specialist in XYZ, not a generalist. Perhaps they value that you are a family business versus a corporation. How clients perceive your type and category of company will resonate with many buyers.

Question #2: What is the value clients perceive regarding us as a firm?

You might find that clients value your innovation and don’t care as much that you’re periodically unresponsive. Or, that they value your client service excellence, but your technical reputation doesn’t matter quite as much. Maybe there are areas they don’t value or where you are falling down in your delivery.  Clients are not interested in what you do, rather they are interested in the value that you can help them realise.  Be clear on what value they see from your business, and where this value is created, and when, and for how long it lasts.

Question #3: What value do clients perceive regarding the specific services we offer?

This allows you to know what’s working for clients, which services you offer that are the strongest, and where you deliver the best value.

You might also learn that your clients don’t even know you offer particular services. Familiarity, in this case, breeds contempt – one side assuming the other knows, and the other not knowing because they’ve never been told.

Question #4: What value do clients perceive in solving the specific problems they currently have?

We all have problems, but not all problems are created equally. If you know the key priorities for a client, then you can help the client tackle them.  Don’t assume that the client always knows what the problem is – by framing the problem appropriately you can help them to see problems clearly, or to see problems that they never realised they had, or that they had failed to anticipate.  This can be exceptionally valuable to a client.

Question #5: What value do clients perceive they might get if they could solve certain problems or accomplish certain things that they aren’t focusing on right now or might not see as priorities?

In doing this we help clients to create a better future or one that they may not have even known was possible. By helping clients solve problems they didn’t know they could solve, and making improvements they didn’t know they could make, service providers score higher on satisfaction (that, as we mentioned, is an indicator of future loyalty).

differentiationFour Questions on Differentiation

Question #6: What different options do the clients perceive they have regarding different categories of companies that can help solve problems or achieve goals?

Sometimes it doesn’t matter as much which specific companies your client might view as what the other options are that they might be considering.  As such you need to know the types and categories of companies offering services in your region. For example, as a management training company, with a core set of services in classroom training, you need to know if your buyers are considering e‐learning providers—and how to position yourself against them

Question #7: What different options do clients perceive they have regarding specific companies that can help them solve problems?

You need to know your distinctions, advantages, and disadvantages when compared with them. This is from the client’s perspective – not yours.

Question #8: What different options do clients perceive they have regarding specific services available to help them solve problems?

How do clients perceive they can solve their problems?  Can you create options around what they need, rather than what you, to help them think about how they could use you – rather than should they use you!

Question #9: What different options do clients perceive they have regarding other ways to solve problems, such as internal staff?

Competitors are not always the biggest source of competition.  Competition also comes from the option of the client doing it themselves, not doing it at all, changing the scope and extent of the project, or giving preference (and thus some or the entire allocated budget) to other internally competing projects and priorities.

Next Steps

Go through these questions with your clients.  Get it from the horse’s mouth.  Compare this with how you see it, where are the biggest gaps, and which areas are the priority for addressing.

Thanks to Mike Schultz of Wellesley Hills Group whose work provided the basis for much of this article.

Click here to find out more about Andrew Cooke and Growth & Profit Solutions.