Self-Discipline

A couple of weeks ago, I attended a training session on social networking. Like many such sessions, you walk away saying to yourself, I already knew that. But,......you are also reminded that you do not practice what you know. That applies to me, I was reminded that you should post on your blog page at least weekly. To remedy my laxness, I added to my calendar to post every Monday. We will see if I have the self-discipline to follow through.

Protect Your Human Investment

Basic Business Cents

Protect Your Human Investment

Many people say your employees are your most valuable asset, but Dr. W. Edwards Deming used to say employees are not an asset that can be bought and sold like a commodity. He would say they are a treasure that must be protected at all costs. After all, you spent considerable time and money attracting and training them, coaching them in how to be successful in your business and sharing your dream.

Turnover of employees is very costly. Harvard Business Review in October 2010 quoted one company as saving nearly $50 million dollars by improving their retention rate from 65% to 85%. A company that I know claimed to save $300,000/month by reducing their turnover rate. These are big numbers for big firms, but you can see the potential savings in improving the retaining employees is huge for any size organization.

There are times when we err by hiring the person for a position for which they are not suited. In that case, we need to admit our mistake and find them a position for which they can be successful, either inside the organization or outside. After all, you made the mistake in hiring and you owe it to them to help them find the right spot.

There is no magic recipe for retaining employees; just a lot of little things. For one, place them in positions where their skills and talent will allow them to succeed. Give them work processes that are simple and effective. Managers should understand that their job is to manage and improve the processes and not micromanage the people. Training needs to be provided to enable the employee to be successful. Remember, worker training worker informally may be like the old child’s game where you whisper something in someone’s ear and they in turn whisper it to the next person. By the time it gets around the room, the message is nowhere near what was started. You need formal, standardized training.

The new employees want to be successful and to get satisfaction in their work. The manager must coach them to help them improve, use positive reinforcement, be a supporter (not a critic), and be a role model. Good management shares the credit for successes with the employees and provides resources needed to do the job.

Enlightened management will share the organization’s vision and strategy and then listen to input from employees. Communication has two parts, sending and receiving. Receiving may be more important.

Dr. Deming has another saying that is appropriate in our work, “Dogs like a pat on the back and people do too.” By helping employees attain pride in their work, we are not only going to have better employees, but they are more likely to stay with the organization long-term.

Introduction to Strategy Management

The last few articles have detailed questions to be addressed in order to develop a sound strategic plan. Perhaps we should pause and look at the context in which we use them.

Throughout history, military leaders have devised strategies to achieve victory over their opponents. Each general’s approach is unique. The great Chinese general, Sun-tzu, said there were 13 principles of war that each general had to know. Napoleon declared that his officers should know 115 rules of generalship. In his treatise, On War, Karl von Clauswitz of Prussia originated the concept of total war. In the United States, a confederate general said there was only one adage of war: Get there first with the most men.

We call these approaches to war strategies. Indeed, the English word “strategy” comes from the ancient Greek word meaning generalship. Strategy is the art and science of conducting a major campaign to achieve an objective, be it military or otherwise. Indeed, some modern sports coaches study ancient military leaders to improve their understanding of how to lead their teams.

As we see, the generals often disagree with each other on what or how many principles should be part of their strategic plan. Most principles of strategy, however, include some common elements, including clarifying the objective, proper deployment of forces on key targets, discipline, security and simplicity of operations.

Dr. W. Edwards Deming also taught that, in business, an organization’s leadership must determine its aim and establish a system for getting all employees involved in the aim. It is management’s job to ensure that there is an organizational strategy as well. Today this means more than clarifying the objective and laying the plans for reaching that objective. It also means executing the strategy.

This is done differently all over the globe. Most North American managers excel at developing strategies, whether in business, government, or other types of organizations. In carrying out the strategy, however, they frequently lag behind our foreign competitors, sometimes leaving our carefully written strategies unexecuted.

Why? The answer probably lies in not having a system of management to deploy our strategies through the organization. The Strategy Management system does that. It communicates the strategies and organizational aim to every employee, and gives them all a part in the execution. It is a modern method for focusing our troops on the important targets.

The Strategy Management System has four main elements-Prepare, Research, Plan, and Manage. The preparation element consists of top management making the decision to use this system and parceling out the responsibility for research on the twenty-one items to be reviewed. It should be noted that this system is not size dependent; it has been used with as many as 435 participants in the planning event to as small as a single person.

With the assignments handed out to the planning team, they begin to survey, meet, talk and research data to find out answers to the questions presented in their assignments.

They bring their findings to the planning event in a five to ten minute presentation. Other individuals whose input is respected are invited to the planning event, such as key employees, customers, suppliers, Board members, community leaders, etc. They are given a pad of sticky notes and a marking pen to write down any issues that come to mind during the presentations. At the conclusion of the presentations, the sticky notes are randomly placed on a wall and participants are asked to group them by like subjects. After the number of distinct groups is reduced to a number between three and twelve, the groups are named in the form of a verb and noun and these become the strategic actions with all the notes under them as back up for what must be addressed.

The actions are then prioritized according to primarily causes as opposed to effects of the others. They are tested to see if they are both necessary and sufficient to achieve the aim of the organization and a leader identified to be responsible to achieve each strategic action.

The aim, values, mission, and strategic actions are then summarized on a one-page document, sometimes called a strategy map and distributed to all employees. The Japanese have a saying that it takes more than one of the senses to communicate so this plan must not only be provided to each employee but must also be explained orally by management.

The last element of Strategy Management is to manage the system to make sure results are obtained. The leader of each strategic action typically reports monthly to the rest of the management team on the progress they have made, roadblocks encountered, and plans going forward.

This system has been proven to work with any size or type of organization to focus all employees on achieving the aim of the organization and obtaining the desired results.

Using SWOT Analysis for Strategic Planning

Many strategic planning processes use as a basis an exploration of strengths, weaknesses, opportunities, and threats. As important as these subjects are, they are still only four of the twenty-one areas that must be researched to develop a solid plan that will be achieved. This article will share some questions to be addressed in these four important areas.

Strengths are defined as the organization’s competencies, capabilities, and any other resources it can leverage to fulfill the needs of customers. It is a list of advantages the organization has over its competitors; resources it has to fulfill the needs of customers or to contribute to society; unique characteristics that appeal to customers; and perceived benefits of this organization to customers. Questions to investigate and understand why are:

1. What do you do best?

2. What are perhaps some untapped resources?

3. What do customers think you are best at?

4. What part of your operation would your competitors most like to emulate?

5. What part of your organization do you most fear to lose?

6. Where can you be most successful? (area, industry, application, etc.)

7. Do the customers really care about each of your strengths?

Weaknesses are defined as vulnerable characteristics that the competition might exploit and reasons, real or perceived, for customers not to avail themselves of your organization’s products or services. Two questions to research, analyze, and understand why are:

1. What are your organization’s most critical vulnerabilities in the eyes of your customers?

2. What are your organization’s most critical vulnerabilities in the eyes of your competitors?

Opportunities are defined as significant areas for your organization to exploit its strengths and opportunities through new markets and product or service offerings. Research on the major opportunities for the organization in the next three to five years should be conducted and presented with the rationale that the opportunities are real, you can be successful, and the results will justify the effort. Questions to be considered in this area are:

1. Where are the unmet needs?

2. Where are the growth areas in the market?

3. What are the significant market needs?

4. What positive impact could the economy have?

5. Where are you technically superior?

Threats are defined as areas of vulnerability in the marketplace, encompassing the economy and environment trends, legislation, competitive actions, possible market obsolescence or change. The theme of this research and presentation is on the major threats that face your organization in the next three to five years. Questions to investigate and understand why are:

1. In what areas of markets and products are you in the declining phase?

2. What negative impact could the economy have?

3. What negative impact could the government have?

4. What environment factors could have a negative impact?

5. What customer factors/changes could have a negative impact?

6. Where are you technically inferior?

7. What are your limitations? Why?

Research and discussion of strengths, weaknesses, opportunities, and threats will reveal areas to be shored up or strengthened and other areas to be exploited in your planning activity. By knowing yourselves and of what you are capable, you are in a better position to move forward.

Employees & Owners Needs/Wants

Basic Business Cents

Understanding Employees and Owners Needs & Wants

Every organization has three constituents that which they must satisfy and delight-customers, employees, and owners. In the last article, we discussed in length the questions to address to determine the needs and wants of customers. Important as that is, we cannot overlook the other constituents of our organization. Building on the discussion of needs versus wants in the customers’ needs/wants article, let’s see how it applies to employees and owners.

We want employees to not only be satisfied with what is provided for them today, but to make them enthusiastic about the future of the organization and their role in it. Managers must obtain information about employees’ feelings to understand what is important to the employees. What do they enjoy in their work? Do they feel they are doing something worthwhile? Do they feel the job offers them opportunities for growth? Once these and other questions are answered, managers will have a prediction of what provides intrinsic motivation, which Dr. Deming notes is the strongest motivation of all.

Some questions to be addressed regarding employees are:

1. What are the articulated needs of our employees?

2. What are the unarticulated needs of our employees?

3. How would our employees rate their pride of accomplishment?

4. How does our employee turnover rate compare with our competitors?

5. Do our employees operate with a spirit of teamwork?

6. Do we have mutual trust and respect between our employees?

a. Between employees and management?

b. Between employees and customers?

c. Between employees and suppliers?

The third major driver of the organization is the needs and wants of the owners. They deserve the same consideration given to customers and employees.

Some questions to be considered regarding the owners are:

1. What are the articulated needs of our owners?

2. What are their unarticulated needs?

3. What is their level of satisfaction with their investment in the organization?

4. How comfortable are they with the direction of the organization?

5. How deep is the mutual trust and respect between the owners and management?

By truly understanding the real needs and wants of the three constituents of our organization, we have the basis of development of plans for the future. They are three of the twenty-one areas to research in order to develop a winning strategic plan. Details on the other categories will be discussed in future articles.

Customer Needs/Wants

Basic Business Cents

Understanding Customers’ Needs & Wants

Some years ago a major oil company was conducting research on a new design for milk bottles. Sound strange? They did not make milk bottles but they had customers who did. They supplied synthetic resin used in making plastic milk bottles and by helping their customers succeed, they ended up selling more plastic resin. Their customers did not ask them to do this and may not even have been aware that they needed a new design. Customer wants and needs may not be the same thing. It is important to know what questions to ask to find out true needs of customers and those we hope to become customers.

The objective of this article is to identify, analyze, and better understand through research the needs and wants of present and potential customers. The research should be based on customer surveys/interviews, customer evaluations of products and services, customer service reports, sales and marketing data, general review of the literature, etc. Dr. Deming often said the customers’ expectations are shaped by what we, and our competitors, lead them to believe they can get. If we are not out in front giving them more than they asked for, our competitors might do so and raise their expectations. We should always be working to delight our customers and creating a situation where they enthusiastically boast about the benefits of doing business with us.

Among the questions to be addressed are:

1. Who are our present customers?

2. What is their profile?

a. How are they similar and how are they dissimilar?

b. How do we segment them?

3. What new customers would we like to have?

4. How is their profile different from our existing customers?

5. What customers have we lost and why?

6. How is their profile different from our satisfied customers?

7. How satisfied are our present customers?

8. What are our customers saying about our service that we are not listening to?

9. What are the quality requirements of our major products/services which are demanded by our major users/customers?

10. Which customers are more preferable and why?

11. How will customers make purchasing decisions?

12. What are the customers articulated needs?

13. What are the needs of the customer that he/she has not or cannot articulate?

14. What are the articulated needs of the organizations that are not now customers but whom we would like to be customers?

15. What are their articulated needs?

16. What criteria influence each customer’s needs?

17. How important is each?

18. What in the future may affect these needs and criteria?

19. What is value-added for the customers?

20. How can customers’ expectations be exceeded?

21. What are the “must be” quality dimensions? These are the features that will cause dissatisfaction if missing but will only bring satisfaction to the customer if provided. An example might be good brakes on an auto.

22. What are the “linear” quality factors? These are the features that if missing will cause dissatisfaction, the presence of a certain amount will satisfy the customer, and the presence of an additional amount will surprise and delight the customer to bring them to a level where they will brag about the product/service to their friends. An example might be gas mileage experienced on that new auto.

23. What are the “attractive” quality parameters? These are the features that are not expected so the absence of them will not dissatisfy the customers because they are not expecting them in the first place, but the presence will surprise them and delight them. An example might be an invisible infrared light source on the front of the auto that detects deer or pedestrians on a night-vision panel on the dashboard.

24. How do you measure effectiveness?

25. How do you influence customer loyalty?

The customers’ needs and wants should be based on data, plus a prediction of the future. Then we can provide that “extra something” to create enthusiasm in the relationship and enhance our chances for long-term success.

Study the Competition

Basic Business Cents

Learning from the Competition

Sam Walton was fond of saying that he had been in more Kmart stores than any Kmart executive. He started a Wal-Mart culture of visiting with customers, employees, and competitors in the field to constantly come up with new ideas for continuous improvement.

Visiting aimlessly profits nothing. Just like the saying, “The best extemporaneous speech is well rehearsed”, the best visits are well planned. Some questions about your competition to be answered are:

1. Who are your competitors today and what are their strengths and weaknesses?

2. What rival product/service is most competitive with your product/service?

3. What studies do you have comparing your major product/service with your rival’s product/service in respect to the quality requirements demanded by your major users/customers?

4. What differentiates your products/services from your competition?

5. What are the major strategies and thrusts of the competition?

6. In what new directions are competitors moving?

7. Where are you vulnerable to competitors?

8. Where could unknown competition appear?

9. What are competitive trends?

10. What minor competitors could become major?

11. In what areas that customers care about are you stronger than your competitors?

12. Answer why to each of the above questions.

Be sure to supply data wherever possible and not just opinions. To get this data you need to venture out of your environment and into that of your competition.

Dr. Deming used to say, “Nothing is so pervasive as a lack of a good competitor.” Complacency from a lack of a good competitor can cause us to relax and fade away. Studying good competitors can motivate us to excel and prosper.