Which Would You Rather Be – Efficient or Effective?

Which would you rather be – efficient or effective?

by Andrew Cooke, Growth & Profit Solutions

Efficiency is doing things right; Effectiveness is doing the right things.The focus for many businesses today is on the short-run, getting more for their dollar and squeezing more out of their resources.  Productivity is the name of the game.  Although this is laudable it has focused businesses on the short-term and distracted them from the long-term.

Efficiency & Effectiveness

Efficiency and Effectiveness are two competing yet complementary approaches to business.  For the purpose of this article these are defined as:

Efficiency

This is ‘doing things right’ and concentrates on tactics focusing on achieving short-term results.  It means doing things better and quicker.

Effectiveness

This is ‘doing the right things’ which is critical to the success or survival of any organisation. Strategy is the key, not just any strategy, but one that is well constructed and then executed.

How these two factors interact impact the business and an overview of these interactions can be seen in the Efficiency/Effectiveness matrix below.

Efficiency/Effectiveness Matrix Efficient vs Effective Matrix

THRIVE: Highly Effective & Highly Efficient

Businesses that pursue the right strategy efficiently thrive. They can meet strategic targets earlier than anticipated, and can go on to meet more challenging strategic targets, so as to sustain their ability to thrive.

SURVIVE: Highly Effective & Inefficient

Many businesses ‘survive’, they show potential but never attain the growth that they should be capable of.  This can be due poor management or inefficient practices.

DIE SLOWLY: Ineffective & Inefficient

The business lacks a clear vision of what it is trying to achieve, and so lacks the right strategies or has weak strategies on which to execute. The lack of clear strategies means that the short-term plans and tactics are lacking.  As such the business delivers poor results for several years and are in a state of steady decline before the business eventually ‘dies’.

DIE QUICKLY: Ineffective & Highly Efficient

Here the business is executing very well, but on the wrong strategies which drive it into a state of rapid decline.   The business leaders are not learning from their mistakes, or are not aligned with the market’s realities, and by doing so negatively compound the effects of their wrong strategies.
What Do You Do Next?

For businesses to thrive they need to get both their efficiencies (tactics) and effectiveness (strategies) aligned – have the right direction and the right actions to help you bridge the gap between where you are now and where you want to be.  Look at what you are doing and where you are going  – review your assumptions, get an objective perspective, and continually review and improve to reflect the realities  of your business, marketplace and the business environment.

So what are you going to do? And will it take you in the right direction? And are you effective and efficient in what you do?

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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.

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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How Trust Drives Results

What do high-performing organizations focus on as opposed from low-performing organizations, and what differentiates how they do it?

Businesses are under pressure, there is no doubt about that – but what are businesses focusing on and why in these difficult times?  A recent report from Interaction Associates (Building Trust in 2012) found the top 3 priorities for business to be:

  1. Top line/revenue growth
  2. Profit growth
  3. Improvements to Productivity and Efficiency

No surprise here – but what is interesting is the way in which high performing organizations (those whose net profit grew more than 5% over the last year) and low-performing organizations (those under 5% over the last year or shrank) approached this.

High performing organizations focused on achieving this by focusing on the people aspects of the business, these include:

  • Customer loyalty and retention
  • Attraction, deployment, and development of talent
  • Business agility (speed, flexibility, adaptability to change)

Low-performing organizations focused on:

  • Improvements to productivity & efficiency
  • Cost reduction/becoming more efficient
  • Business agility (speed, flexibility, adaptability to change)

The focus here is more on the systems and processes to drive results and create agility, rather than having the right customers and right people to drive both revenue and profit growth (as with high performers).

So what does this mean?  Greater growth and profitability is driven by people. Systems, process improvements, and cost reductions can contribute towards growth – the only problem is that there is only so many times that you can cut the lawn before it starts to die off.  Conversely, focusing your attention on business and resources on the right customers and talent, rather than squandering it in a shotgun approach, enables you to grow the business with no limit on the upside.  For this, you need to inspire trust.

The key question then is this: are you trustworthy?  More to the point do your customers and staff think you are trustworthy?  What do you think you are – honestly?  And how would you assess how trustworthy you are? Share your thoughts here.

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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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Engaging & Retaining Staff – Part 4

 

12 Ways to Engage & Retain Staff, Image (c) People Insight

In the first blog in this series we looked at why employee engagement is so important and provided an overview of Gallup’s findings from its extensive research.  This was summarised in the following 12 ways to engage employees.

In the second blog we examined the first 3 elements in further detail.  This included:

  1. I know what is expected of me at work.
  2. I have the right materials and equipment I need to do my work right.
  3. At work, I have the opportunity to do what I do best every day.

In the third blog we continued looking at the second triad of elements including:

4. In the last seven days, I have received recognition or praise for doing good work.

5. My supervisor, or someone at work, seems to care about me as a person.

6. There is someone at work who encourages my development.

In this blog we look at the next 3 elements:

7. At work, my opinions seem to count.
8. The mission or purpose of my company makes me feel my job is important.
9. My associates or fellow employees are committed to doing quality work.

Seventh Element – My Opinion Seems to CountWhat does it mean?

Great managers are receptive to hearing ideas and opinions from their direct reports.  There is the need to understand the dynamics of a diverse group of people who are working together to avoid turf wars etc.  Managers and staff need to know and respect each others’ roles.

What is the evidence?

About 50% of employees who say their company is receptive to hearing their opinions report they are able to deliver very creative ideas while on the job.  Gallup studies reveal when employee-generated ideas are accepted and implemented, the commitment level to executing these ideas from employees is higher than normal.

What should we do?

  1. Be genuine and authentic with people, make them feel important and that they count
  2. Every system depends on the motivation of the people who run it; as such motivation requires people to strongly agree that “At my work, my opinions seem to count”.
  3. Make people feel that their opinions count,  this helps them to bring out more creative ideas and a higher level of engagement. As such it has a substantial impact on customer experience, productivity, employee retention and safety which collectively improve profitability.
  4. Incorporating employees’ ideas has 2 benefits: firstly, often the ideas are good; and secondly, it makes it more likely that the employees will be committed to its execution.

Approaches for developing this include:

  • Regular meetings with ground rules including one speaker at a time, no blaming, speak in headlines, give constructive feedback and “to directly address the issue.
  • Role plays – especially between positions where there are difficulties or tensions, with people playing the others roles.
  • Developing plans around how to work together, and what specifically you are going to do in terms of combined roles, communication and expectations.

Eighth Element – A Connection with the Mission of the Company

What does it mean?

Great managers are able to connect their direct reports to the mission of the company resulting in employees feeling their job is important.

This is about having an emotional connection with the company.  People need to have meaning and purpose, they want to understand how they fit into and contribute to the grand scheme of things.  This gives them a sense of purpose and belonging.

For example, Kodak positioned itself not as a seller of film, but a capturer of memories.  This focuses on the emotional outcomes of what they do, rather than the rational tasks of their work.

The more people agree with this statement is predictive of its performance on a wide array of measures

What is the evidence?

Project teams that are mission-driven report 15-to-30% lower turnover rates. According to Gallup research, trust-level in the decisions of upper-manager increases, less on-the-job conflict happens, and greater commitments to getting the job done occurs when employees feel a direct connection exists between their job and the mission of the company.

What should we do?

There are 3 “lenses” through which an individual can filter the world and define for himself or herself whether the work contributes to the quality of their life or not.  It is not the work that defines the individual.  The 3 “lenses” or categories include:

  • Work is a job; a necessary inconvenience and way of earning money with which they can achieve personal goals and enjoy themselves outside of work. They are the least engaged.
  • Work as a career; they enjoy the increased pay, prestige and status that comes as they work their way up the corporate ladder;
  • Work as a calling; usually associated with the belief that the work contributes to the greater good and makes the world a better place.

We need to be clear on the emotional purpose of the company, and how each individual’s work contributes.  We need to highlight what the values of the company are, and how what they do reinforces those values and contributes to the outcomes.  Having an on-going dialogue about this and making it relevant to what they do helps to strengthen this.

Ninth Element – Coworkers Committed to Doing Quality Work

What does it mean?

Great managers develop engaged staff who are committed and motivated to doing a great job

What is the evidence?

Research shows that 67% of employees fail to strongly agree that their co-workers are committed to doing quality work. As such, if people do “not pull their weight” it can have a negative impact on morale and productivity. For example:

One man pulls at 100%.  If two men are pulling the average man will exert himself at 93%, with four men it is at 75% each.  By the time the eighth man is added, each man is pulling only on average only half what he could.  In fact, 8 men on the rope pull no harder than seven, as the other seven relax enough to subtract whatever the eighth man adds.

So work groups can be 2+2=5, but they also have the capability of 2+2=3!

This can mean that teams with a poor work ethic and poor sense of responsibility, can become a place to hide laziness, push work to other people and to create a culture of blame.

What should we do?

We need to distinguish whether the lack of performance is about a lack of aptitude (i.e. they lack the relevant skills) or a lack of attitude (they lack the right behaviours).  You can only train people for aptitude; you can never do this for attitude.  Your three options are to Terminate, Transfer or Train.

Which of these 3 elements have you used and to what effect?  If you were to rank them which would you use first?  Would you use them with everyone, some of them or with no-one?

Share your ideas, and share the wealth.

In the next and final blog we look at the final three elements including:

10. I have a best friend at work.
11. In the last six months, someone has talked to me about my progress.
12. This last year, I have had opportunities at work to learn and grow.

Until then share your thoughts and ideas here, and feel free to share this blog and articles with any colleagues, clients or friends you feel may find this of value.

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