Profit From Constraints

When having less provides you with more

By: Andrew Cooke, Blue Sky GPS

Operating in a tight and volatile marketplace is challenging, but it is also full of opportunity.  Companies often look at the constraints on how they have to operate and how they can accommodate this situation.  This is a reactive approach, which limits your opportunities and creates a problem-solving mindset i.e. everything is a problem, rather than an opportunity.

Here we look at a more proactive approach which can create opportunities for you.

The Power of Constraints

Constraints are those factors which restrict or confine you within certain boundaries; as such they limit or regulate your business, its operations and potential results.  Constraints exist at various levels including:

  • Economic – macro-economic effects that you have to operate within, for example the exchange rate, interest rates and the cost of borrowings, trade agreements etcetera
  • Governmental – legislation and compliance regarding working conditions and practices, subsidies, insurance, government expenditure and tax regimes etcetera
  • Industrial – those factors which affect your industry including the level of capacity, industry structure (from monopolies, concentrated to distribute), supply chains etcetera
  • Business – pricing, client retention rate, capacity, employees (number, skills, experience etcetera), number of competitors, level and quality of differentiation etcetera.

Some of these you can influence others you cannot.  But with all of them you have a choice on how to respond – even if your choice is to do nothing you still have made a choice.

These constraints provide an opportunity for you to develop you, your people and your business in adapting to and capitalising on them.

Defining the Correct Constraints

Before you can determine the opportunities you need to clearly define the correct constraints. Be careful not to state the objective or problem too much in the terms of current “legacy” solution to the problem. As Henry Ford supposedly said, “If I’d asked people what they wanted, they’d have said a faster horse.” So avoid defining the problem as “a faster horse” versus “a faster way to travel.”

Types of Constraint

A constraint is anything that prevents the system from achieving more of its goal. There are many ways that constraints can show up, but there are usually only a few underlying and root constraints.  These can be internal or external to the system.

  • An internal constraint – this is when the market demands more than the business can deliver. Here you look to remove those constraints, for example:
    • Equipment: The way equipment is currently used limits the ability of the system to produce more saleable goods/services.
    • People: Lack of skilled people limits the system. Mental models held by people can cause behaviour that becomes a constraint.
    • Policy: A written or unwritten policy prevents the system from making more.
  • An external constraint – this is when the business can deliver more than the market demands.  Here you focus on creating more demand for your products or services.

Andrew’s Four-Step Process for Profiting From Constraints

Step 1: Identify the Constraint

The first step is to identify your weakest link – this is the factor that’s holding you back the most.

Start by looking at the processes that you use regularly. Are you working as efficiently as you could be, or are there bottlenecks – for example, because your people lack skills or training, or because you lack capacity in a key area?

Look at where you see the problem and ask “Why?” up to five times (the Five Whys Technique) to get from the surface problem to the root cause.  This way you can address the underlying problem, rather than dealing with the surface issue, and avoid the problem re-surfacing later elsewhere.  If you have a number of weak factors then use Pareto Analysis (also known as the 80/20 rule) to identify which one, if addressed, will have the greatest impact.

Step 2: Manage the Constraint

Once you’ve identified the constraint, you need to figure out how to manage it. What small changes can you make to increase efficiency in this area and cure the problem, without committing to potentially expensive changes?  Your solutions will vary depending on your team, your goals, and the constraint you’re trying to overcome.

Step 3: Evaluate Performance

Now review how you are performing with the simple changes you’ve put into place. Is the constraint still causing problems? If it is, you need to do whatever you can to solve the issue.  You may need to look at further changes which may take more resources, time, investment or effort to further address.  For example, using a “Magic Wand” question can help achieve this (i.e. “If I could do anything to remove the constraint(s) and improve performance what could I do?”)  Look at the ideas created and then rank them according to suitable criteria.  This will stimulate a good discussion and enable further ideas to be developed, and the most suitable decision to be made.

For instance, do you need to invest in new equipment, outsource certain tasks, or take on more ?

Step 4: Start Over

Once you’ve eliminated the constraint, you can move back to step 1 and identify another constraint. This is an on-going process, not a one-off event, which allows you to continually improve and to address and pre-empty changes in the four areas (Economic, Government, Industry and Business) as they may occur.

So what are your constraints, your priorities and what do you want to achieve?  Work through this process for yourself and see what opportunities you can develop – you will be pleasantly surprised.

To view or download a PDF version of this blog click here.

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

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

How to Assess Potential High-Flyers

How to determine and assess future leaders, and where and how to focus your efforts in their development.

You are looking to develop future leaders for your business. How can you do this so that you can consistently evaluate them across the board? What is more important when you evaluate them – their past performance or their future potential? It isn’t an either/or question. You need to understand both their past performance, and to identify their future potential. This is where the Performance/Potential Matrix comes to hand.

Performance/Potential Matrix Overview

This consists of a 3×3 matrix contrasting the two elements:

  • Performance – this is the extent to which the person achieved their objectives (“the What”) and the extent to which they demonstrated the appropriate leadership behaviors. (“the How”).
  • Potential – this is a person’s capacity to be a top performer in a more senior role.

By assessing where an individual sits on each of these two axes you are able to determine two factors:

  • Where they currently sit as you and/or others perceive each individual;
  • With whom to focus your efforts and where (performance and/or potential)

An example of how each of the 9 grids can be labelled is shown below. In doing this the matrix provides a simple and effective tool by which to calibrate criteria and expectations, and acts as a diagnostic tool for development. As such its real value is in being a catalyst for robust dialogue and it facilitates shared ownership rather than one person’s opinion.

Headings

  • Red Headings – people in these grids are likely not to be retained
  • Grey Headings – these people are unlikely to progress futher, but given their level of performance may be best suited in develping further in their existing field
  • Yellow Headings – these people may develop further, but need attention and resources to help them develop. If they do not develop further, or sufficiently, they may slip into a red or grey box.
  • Green Headings – people with real potential who should be in the firs tier for leadership development.

Common Pitfalls to Using the Performance-Potential Matrix

  • Misunderstanding high-potentials – there are misconceptions about the term “high- potential.” People use the term to talk about all top talent, as opposed to talent with the potential to become leaders. It can be difficult for managers to assess “promotability”. Often most managers are subconsciously thinking, ‘Do they remind me of me?’ “
  • Using the tool for individual assessment. – the matrix is not designed for individual assessment, you need to be able to compare different people. Without comparison, it enables neither valid assessment nor career decisions about an individual.
  • Expecting too much. – the matrix is only one tool. You need to ensure that you use other mechanism with more data e.g. 360-degree reviews.
  • Using quotas for each box don’t try to allocate people by quote, you need to reach a common understanding and agreement where each person should be realistically placed.
  • Failing to include change management – when using it you need to engage peope so they understand it and buy-in to the approach and understand what the benefits are for employees and the organization.
  • Overcomplicating the process – don’t try to make the matrix more complex, the effort will usually not add significant insight or value.
  • Failing to differentiate between employees – once you have identified the stars and top performers, you need to direct resources towards developing them—higher salaries, plum work assignments, mentorships with executives, exceptional training opportunities and coveted job rotations—to retain them and develop their talent.

Benefits of the Performance-Potential Matrix

  • It allows managers to use the matrix to assess their people and calibrate them between the leaders.
  • Assists in the creation of meaningful, accountable development plans.
  • Allows you to aggregate relative comparisons between talent.
  • Stimulates discussion and constructive debate, and creating a shared and common understanding.
  • The accuracy of assessing performance and potential improves with multiple perspectives. Managers often have blind spots with their own employees, and are

unaware of how they are perceived by others. These discussions can help shine a light on superstars and poor performers.

  • Creates collective responsibility for the team in building a stronger organization. It encourages everyone to be candid, to listen to each other, and to develop each other’s employees.
  • It uncovers both individual and organizational strengths and weaknesses. As such the matrix serves as a needs assessment for development actions that need to be taken
  • Helps managers and leaders to assess potential which they normally struggle to do.

Next Steps

Work with your peers and use this tool to review your employees to identify your prospective leaders. Try looking at the people by yourself, then share your ideas, insights and reasonings with your peers to create insights, ideas and a common perspective. Use this to stimulate debate, and look to use other tools and means by which to identify the prospective leaders.

To view or download a PDF version of this blog click here.

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

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

How to Motivate Your Team More Effectively

A different approach that produced results

Do you struggle to motivate your team? Could your team be more productive and more effective? Do you have people who are not performing to their potential? If so, then you are not alone. Like many other leaders, great and small, you are making the same mistake: assuming that the answer to these questions lies with others (your team), when in fact it lies with you (the leader).

The problem is that our normal reaction is to see this as a problem. Firstly, the way we are biologically geared to think is that we look out for potential threats and to move away from them strongly. At the same time, we are less prone to looking for the rewards or upside, and we are also naturally less likely to move towards them.

This underpins our natural tendency to be loss-averse – we would rather avoid a loss than making an equivalent gain.

Secondly, the problem is that we tend to judge ourselves by our actions and to judge others by their behavior. So, if the team is not performing we attribute the poor performance to their behavior and attitude.

Thirdly, what you focus on expands – this is important as it affects your confidence, and confidence is the number one variable affecting a person’s performance. Think about it – if a person focuses on her shortcomings, her confidence will naturally be low. Whereas if she can get herself more focused on what she is doing well, her confidence will improve, thus leading to increased ability and potential on other tasks and activities. People with high confidence are much more coachable, and they make improvements much more efficiently.

Let me share a story about a sales manager; let’s call him David, who lead a team of ten salespeople.  He was suffering a two-pronged problem: firstly, he was struggling to find ways to motivate his team and, secondly, he was receiving complaints that he wasn’t recognizing his team’s contribution (both on an individual and a collective basis) to the company.

When asked how often he was recognizing things that the individuals on his team were doing well, he responded, “Whenever they do something well, I give them positive feedback. The problem is that they don’t often do what I need them to do.” He went on to say, “If they were performing better, I would recognize it. There are still so many problems with the way they are doing things.”

Obviously there is a disconnect between the expectations of David and his team. His team feels they should be recognized more, and David feels they should be doing more to earn the recognition. The reality is that both sides are probably correct. Being correct in this situation, unfortunately, does nothing for the productivity of the team.

David is reacting like any normal, rational human by expecting that his team actually do great work to be recognized for doing great work. The problem is that promoting the maximum effectiveness of his team requires him to think abnormally. Expectancy theory states, that which you focus on expands. If David continues to do what is normal and focus on the negative, there will be more negative. However, if he can re-focus himself and his team onto what is being done well, the positive will expand.

Expectancy theory is powerful because of the role it plays on confidence. Research confirms that confidence is the number one variable affecting a person’s performance. Think about it – if a person allows his mind to focus on the shortcomings, confidence will naturally be low. Whereas if he can get himself more focused on what he is doing well, confidence will improve, thus leading to increased ability and potential on other tasks and activities. People with high confidence are much more coachable, and they make improvements much more efficiently.

“Normal” Thought Processes

People have a problem-centric approach, which is we tend to recognize the problems in a situation first. Again, this is the normal course of thought for people. When faced with good and bad aspects of a situation, the bad aspects stand out like a sore thumb, while the good are harder to identify. This comes in handy when we need to identify the speeding car plowing through a red light or the bear running at us through the trees, but when it comes to leadership, this norm can be devastating to a team’s productivity.

David sees his team as having a lot of work to do to earn more recognition. He sees where they are falling short, which, in his mind, does not warrant much positive feedback. In his mind, the focus of his team needs to be on where they should be making improvements. He naturally sees and focuses on what is not working well.

“Abnormal” Thought Processes

With David, he started making a conscious effort to recognize at least one “done-well” for a member of his team every day. Instead of waiting for something to stand out to him, he would need to put in the effort to look for it in order to reach his daily quota. At first he was reluctant because he felt that he would be “celebrating mediocrity,” but what he found was that his team started to gradually perform better and better. Eventually, they were doing things that David actually found worthy of recognizing. It became easier for him to find things to celebrate.

Set a reminder either in your phone or in your calendar to recognize one “done-well” per day. It is important to schedule these recognitions because, again, they will not come naturally to you. It is abnormal to have a constant radar for “what is working well” because your radar is naturally set to “what is not working well.” It will take conscious effort to overcome this tendency. Your team will feel valued, and their work will start to reflect this.

A focus on what people are doing well results in people doing even more things well. This is a snowball effect that great leaders absolutely use to their advantage.

We grow best by building on our strengths, not by constantly trying to correct our “weaknesses.” That’s the essence of positive psychology. Yet the overwhelming feedback we receive – even when solicited – is about correcting some failing. Often we take the feedback to heart, and we spend a lot of time and effort trying to figure where we went wrong. But should we? Do you really have a problem?

So what can we learn from this?  There are three things.  Firstly, good performance by a leader requires good performance by the team; however, the reverse – good team performance means you have a good leader – is not necessarily true.Secondly, a leader cannot motivate anyone else but himself or herself. All the leader can do is create an environment in which people can easily motivate and align themselves in achieving the goals. Finally, the more time we spend trying to get our team to “correct” what we deem inadequate, the less time they have to invest in exploiting their own significant potential.

To view or download a PDF version of this blog click here.

Share your thoughts and ideas here, or email me at andrew.cooke@business-gps.com.au

If you found this article of use or interest please don’t hesitate to share it with others.

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

Negotiating Better Projects

3 Elements to Negotiating Better Deals

by  Andrew Cooke, Growth & Profit Solutions

How you can use scope, budget and timescales to get to the customer’s needs, and to create better deals more quickly.

When negotiating with clients or prospects over potential work there are three aspects to consider which are common to any piece of work – whether it be consulting, selling services, manufacturing or production.  The three elements are the scope of the work, the time for the work to be done, and the cost of the work.

Let’s look at them each in more detail:

Scope – this is the similar to having a “frame” around a picture.  It defines the extent of the work to be done and provides the focus and limits for that piece of work.  Equally important it defines what work is not going to be done – that is anything that is not within the scope lies outside it.

Timeframe – this is when the work will be done.  It establishes when the work is to be done by, the outcomes realised and the level of urgency for the client or prospect.  If there is a short timeframe, then additional resources may be required to complete the work within the agreed timescale, or other work may be delayed or impacted as a result.  This needs to be considered when negotiating this with the client or prospect.

Cost – this is how much is the client or prospect willing to pay, or how much you are going to charge them given scope and timeframes that have been agreed.

So how do you negotiate with the client or prospect around these three elements?  Let’s look at a fictitious conversation to illustrate how to use this.

I like to be generous!  I tell the prospect that they can choose any two out of the three elements and I will have the third.  Thus, for example, the prospect may say “I want to do everything (scope), and I need to do it quickly in the next six weeks (short timeframe)”.

This leaves me with the cost element.  I then say “OK, this will cost you at least $75,000 to do all that by then” (note: I do not give firm numbers yet as I do not have all the information I need, but I can give them an indication what they might expect the cost to be).

The prospect then may say:

 “That is too expensive for me.  Can’t you reduce it?”

I reply, as you will guess, “If you are not happy with the cost, then pick any two of the three elements”.

And so you start again…..

This process allows the prospect to determine what is really important for them, and for you to begin to understand this where they may have some flexibility or not.  This helps to open up the conversation so you really understand what they need, by when and why.

Think how you might use this with your prospects or clients.  Try out the different combinations of choices that might occur and prepare for them.  This will give you an easier way to focus the negotiation process, control the conversation and to make progress.  Let’s face it – two out of three ‘ain’t bad!

What works for you in getting to your client’s needs, timing and budget?  Share your thoughts ideas and experience here.

Share the knowledge, share the wealth!

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

3 Keys for Business Performance

Having two out of three is not good enough…

There are three key determinants for business performance – direction, aptitude and attitude.

Direction
Performance occurs in context of the goals, outcomes and measures that have been established
.

How well are the desired goals and outcomes of the business communicated, and commonly shared and understood?  This needs to be meaningful, relevant and measurable at all levels from the corporate overview to the contribution of departments, teams and at the individual level.

Aptitude
To achieve your goals and outcomes you need to have the necessary skills and abilities which you can use when planning, executing and reviewing.

What are the key skills and capabilities the business needs to have?  What is needed now? And what else is needed to meet the future goals and outcomes of the business?  Again, these need to be identifiable at all levels of the business – from the corporate to the individual level.

Attitude
What are the core attitudes and associated behaviours that we need for driving high performance?

Conversely, what are those attitudes and behaviours that we want to avoid which lead to low performance?  These core attitudes pervade the whole business at all levels and, in themselves, do not change.

Generally, businesses are good at identifying the skills and capabilities needed both now and for the future; mediocre in establishing and establishing a clear vision, goals and outcomes; and very poor at identifying, understanding and making tangible the core attitudes and behaviours needed for performance.

To be a high performer we need to be able to accurately assess how strong we are for each element.  As can be seen in the diagram below, being strong in two out of three is not good enough or able to drive high performance on a sustainable basis.

3 Elements of High Performance

 

 

 

 

 

 

 

So what do we need to do to achieve high performance?

1. Be clear on your direction – make sure everyone understands and can articulate it.

2. Ensure you have the right skills, capabilities and resources to enable each individual, team and group to achieve high performance in their aligned goals.

3. Recruit for and manage people with the right attitudes – understand what your core attitudes and associated behaviours are necessary to drive high-performance in your business, and avoid and manage those which result in low-performance.  Remember, you hire for attitude and train for aptitude.

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

3 Tips for Being an Effective Leader

Here are three tips to help you succeed.

  1. Understand what your customers REALLY want going ahead

When planning for how you will evolve your products and services start by sitting down with your best customers and asking them these two questions:

  • “What are the key challenges (good and bad) you will face in the next 12 months?”
  • “If you had a magic want and no limitations, what could we do differently to improve our service to you in the next 12 months?”

The key to discovering the REAL opportunities for your business is to hear their challenges / ideas and translate that into how you can help. What can you add to your service offering that can help them? Sounds simple and it is! Why not grab a lunch or coffee with your top 5 customers prior to year’s end and ask each of them the above questions, you have nothing to lose.

2. Boost your accountability levels
A critical element to strategy implementation is accountability. Great strategies are developed during a planning weekend (or day), and include one page plans for implementation. However when there is no accountability loop, even after all that great work, you tent to find after 1-2 months things have ground to a halt as day-to-day issues get in the way. Building in as a ‘habit’ a two-week accountability loop with key team members for key strategies will ensure it happens as barriers can be discussed and addressed quickly. Making these accountability meetings short and sharp (maximum 30 minutes) every 2 weeks will ensure only strategic issues are discussed and addressed. If you operate by yourself find a coach or a peer you trust and use them for your accountability loop, you will notice the difference quickly.

3. Focus on the outcomes, not the inputs
To ensure that you are not only delivering but exceeding your customers’ expectations, ensure that you know and understand what the outcomes are that they are looking to realise from engaging with you.  Customers are not interested in what you do, rather they are interested in what you help them achieve.  They want results, not deliverables (although deliverables may form part of the output, it is not the reason in itself).  To ensure that you are working on those things that are of importance to the customer make sure you know the outcomes they are looking for, the metrics which you will use to ascertain progress, and what it means to them if they realise the desired outcomes.

What has worked or not worked for you? Share your knowledge, share the wealth!

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

Why you need self-confidence, simplicity and speed in business

Why you need self-confidence, simplicity and speed in business

Many businesses, as they grow, develop a bureaucracy. This makes it hard for the business to adapt to the accelerating changes we are experiencing. As Professor Gary Hamel said:

“Today, the most important question for any organisation is this: are we changing as fast as the world around us?”

In the current environment if we do not grow then we do not stagnate, we atrophy. Jack Welch, while he was the Chairman and CEO of General Electric (1981-2001), developed the Three S’s.  According to Welch, the Three S’s are interrelated and mutually supportive and, as such, are a prescription for winning in business.

The Three S’s are:

  1. Self-Confidence. Always believe in yourself.  Embrace change before you have to.  Take consistent action.  You develop self-confidence by gaining experience and winning multiple times.
  2. Simplicity.Reduce things to their simplest level; not simplistic, but simplified.  When communication is clear, it travels faster.  Use clear communication to empower others.  You cannot have simplicity without self-confidence.
  3. Speed.When communication is clear, direct language causes action and decisions to happen faster.  Speed is a competitive advantage.  You cannot have speed without simplicity.

Bureaucracy fosters formality, which slows business down and creates complexity. This makes it harder for your business to change as fast as the world around you. Here you risk becoming irrelevant in business and out-performed by your competitors. So focus on the three Ss and build your self-confidence, develop simplicity and increase your speed.