Post by Dr Walter Dolan

Thinking about creating a new product for the market place?  You will benefit from conducting Target Costing. Or, is ascertaining accurate costings an insurmountable hurdle?

Target costing has become vital when making decisions about introducing a new product.

Traditionally, the selling price for a new product was arrived at by estimating the total cost of the individual product and adding a mark-up to give an acceptable profit for the product. However, consumer resistance to the selling price often means less product sells than hoped for. So where to from here?

Best we conduct Target Costing!

A target costing approach first establishes a selling price that the market is prepared to pay, deducts a reasonable profit margin and thus arrives at the maximum allowed cost for the product. This maximum allowed cost is virtually ‘set in concrete’, and the combined efforts of researchers, designers, and engineers must not arrive at a prototype cost in excess of the allowed cost. Anecdotally, 80% of the product cost is usually fixed at the stage of accepting the prototype, and there is often little scope for cost reduction after the product is launched. So, best we solve the problem before hand, not after!

Thus, product cost must be tackled at the design stage.

What happens if designers and engineers – in spite of good intentions – finish with a product cost in excess of allowed cost?
At this point a ‘value engineering’ approach is adopted. Value engineering involves analysing the product under four aspects:

Function • Appeal • Quality • Cost

The aim is cost reduction. Clearly, any trade-off is not likely to be in function, unless the functioning capability can be maintained.
There may be an opportunity in the area of operations for cost reductions. On the other hand, quality may be regarded as not negotiable. This brings us to appeal and cost. There may also be room for a trade-off between appeal (appearance, cosmetics and the like) and the cost applicable. But this must be assessed before production-ready for market.

Finally, the method used to assign overhead expense to the product is worth revisiting. Was the treatment of overhead expense carried out incrementally or was there an allocation of existing overheads?
Maybe the overheads just are too high to sustain profitability.

So, how do we reduce overheads? Well, there are many ways, notwithstanding using or creating a separate entity (or newly created business) with less overheads to produce and market the product.

There are many variables that add to costs, all of which do not make Target Costing simple, but it sure is critical to the survival of  your new venture.

If you have some thoughts on the matter or need more information, then post a comment or a request.

Hope this helps

Like other Australians, he thought he lived in the ‘Lucky Country’ that also looks upon itself as an ‘Innovative Country’.

No government department offered him any help over those 50 years or more. In fact, a few Local Governments tried many times to shut him down.

How things have changed. But have they changed for the better?

Near five years past, the Australian Government committed itself to an Innovation Agenda for the 21st Century with a ten year horizon to build a stronger national innovation system. To quote directly from Australian Government’s Innovation System Report (AISR) 2012:

“This undertaking involved the setting of seven national priorities on improving skills and expanding research capacity; increasing innovation in business, government and the community sector; and boosting domestic and international collaboration for the purpose of innovation and then on the production, diffusion and application of new knowledge”.

Half way into that time-frame, things are not looking good.

With government support, one could reasonably expect that the nation is ranked in the top ten most innovative countries.

The latest Global Innovation Index 2012 (a collaboration between INSEAD and the World Intellectual Property Organization), has compared the innovation activity of 140 countries on measures of national business activity. The Innovation Output Index captures two elements of innovative activities within the economy:  Knowledge and technology, as well as, Creative outputs.

Australia is ranked 23 in innovation output.

The results of that study tell us all is not well with Australian innovation.

Whilst this ranking is not of cellar-dweller status, it certainly does not fulfill the aspirations expressed in the AISR.

More disturbingly, our junior neighbour New Zealand, is eating Australia’s lunch on near all innovation measures.

The top ten innovation nations are: Switzerland, Singapore, Sweden, Finland, the UK, the Netherlands, Denmark, Hong Kong (China), Ireland, and the USA.

Not surprisingly, Europe accounts for nearly a quarter of our imports of elaborately transformed manufactures, that is, innovations.

Innovation Linkages

Innovation is built on a network of like-minded people, companies, academic/research institutions and businesses that get together to create, develop and commercialize a product. Strong innovation linkages between the large and the small members are important to stimulate market growth.

Australia is ranked 36 in Innovation Linkages.

Australian Universities are often members of these global research and development networks and are never shy about spruiking the success of their research on an innovative product – particularly in the pharmacology domain.

However, when one takes a closer look at the Australian University international network arrangements, one will often find that the Australian academic institution is nothing more than a junior partner validating prior findings rather than the lead research institution. More importantly, a closer look at the network and financial relationship arrangements will often show that the principal financial beneficiary of the innovation is rarely the Australian academic institution.

Why?

It is widely recognized that Australian academic institutions are not good at designing effective policies and practices for capturing the financial benefit in commercializing innovations and, as a consequence, they are less successful than they should be at fostering collaboration between universities and firms to create successful technology clusters.

Innovation Inputs

The Innovation Inputs Index reflects the resources injected into the innovation creation and commercialization process, such as: intellectual capital, financial resources, human capital and the like.

Australia is ranked 13 on Innovation Inputs – which is certainly not disappointing.

The top 10 economies on the Innovation Input Sub-Index are Singapore, Hong Kong (China), Sweden, Switzerland, the UK, Finland, Ireland, Denmark, the USA, and Canada. Nine of these countries were in the top 10 in 2011. Thus, the Indices appear to possess some consistency across the year-to-year studies.

Innovation Outputs

The Innovation Outputs Index ranks the product of capital expended in innovation creation and diffusion throughout the economy. The data from this Sub-Index confirm that efforts made on enabling economic environments are rewarded with increased innovation outputs

The top ten are Switzerland, Sweden, the Netherlands, Malta, Finland, the UK, Germany, Estonia, Denmark, and Luxembourg.

Australia’s rank on this Sub-Index drops to 31.

Simply put, Australia is burning money invested in innovation to minimal effect.

Over the years the Australia Government has thrown bags of money at stimulating innovation.

The important lesson here is that spending large sums of public money on innovation does not produce a higher level of innovation output.

The Australian System Innovation Report Systems states that there are more than two hundred innovation initiatives around the country and the Australian Government share of these initiatives is around 40%.

One may well ask, to what effect?

Thus, a large slice of innovation activity in Australia is driven by the Public Sector and the rest is divided between private corporations and the small business sector.

Innovation efficiency

Innovation efficiency is calculated as the ratio of the Output over the Inputs.

Australia’s innovation efficiency is ranked a tawdry 107.

This embarrassing outcome is evidence that an awful lot of public money is being wasted on innovation.

As my father would say, it is a national disgrace!

One only has to look at the Innovation landscape in Australia to see why it is not working.

Innovation as Corporate Australia

Innovation in Australia is both corporatized and bureaucratized. It is heavily over-serviced by Agencies, Programs, Committees, Awards bodies and the like that are often in competition with each other for the public dollar and/or a seat at the innovation funding table.

Many of the Chairs of the Agencies or Committees are drawn from a pool of retired corporate leaders, most of whom have had no experience whatsoever in innovation creation and/or commercialization.

Innovation in Australia is treated as a systematic replicable process, whereas it is primarily an organic process.

Not the stuff of innovation!

Over the past decade or so, Australian Private Sector Corporations have been amazingly effective at capturing and controlling larger and larger slices of core product markets and squeezing out the smaller and more innovative small business sector. Thus, large corporations have no incentive to innovate to compete – they already control the market!

Needless to say, small niche businesses are successfully capturing or creating product markets.

Corporate operations and big ticket marketing is not innovation!

When asked: “How do you compete with the major corporations?” My father would answer: “I ignore them!”

He was right, within the decade both major corporations controlling his market both closed their doors! They could not compete with the more agile small business.

Information/Communications Technology

At most levels, Australia has good standing in the Information/Communications Technology market.

It is ranked 11.

This is one area where Australia has held its own for decades.

On the Human Capital development and deployment front (including education and research) high-income countries have succeeded in creating productive innovation ecosystems where investments in human capital has created impressive levels of innovation outputs. Australia is a high-income country; however, being ranked 24 indicates it has not enjoyed the same level of success as other similar countries.

As for general and tertiary education, Australia is ranked 39 and 29 respectively – neither ranking is acceptable. Thus, recent initiatives to improve the standing in general education is most certainly timely, but needs to be cloned for the tertiary education level.

Success in the Knowledge Domain

In relation to the knowledge domain, the AISR strategic brief proposed the production, diffusion and application of new knowledge.

At the Human Capital level, the number of Knowledge workers in the Australian community ranks the nation at number 7; which is its highest ranking on all the rating scales.

However, the product of Knowledge falls far short of what could (or should) be expected: Australia’s Knowledge Creation effort is ranked 31.

The most disturbing aspect of the Knowledge domain is that Knowledge Diffusion is ranked an appalling 83.

Clearly there is a massive gap between the generation of knowledge and diffusion throughout the economy. Equally disturbing is that Knowledge Absorption Index (i.e.’ the productive uptake of productive knowledge) ranks Australia at 61. Even more disturbing is that on the Knowledge Impact Index Australia is ranked at 50.

Clearly, the lowly Knowledge Sub-Index rankings are greatly disturbing. They indicate that there are massive problems in Australian Knowledge productivity, deployment and commercialization.

Knowledge that is of low impact has limited prospects of being diffused and profitably commercialized: It just will not resonate with the consumer in a competitive marketplace.

Australia is paying a high cost for knowledge creation that is of little value to the nation.

Yes, there are small pockets of success in the commercialization of innovation, but nothing like what Australia should expect for the monies being spent!

As for Australia’s global position in the innovation domain, it is a country tinkering around at the edges with stuff of minimal impact!

What has happened to our country?

Australia is a nation of smart people who, from the thirties to the fifties, created many base technologies that were eventually purloined and commercialized by other nations.

Why Is Australia in this situation?

As a nation, Australia trails much of the developed world (and up-and-coming developing economies) in delivering innovative outcomes. It is predominantly an Innovation Inputs-Driven economy and just can’t seem to extricate itself from that morass.

A more likely explanation is that economic activity is concentrated in, and controlled by, the hands of a few major corporations, thus, there is no creative stress to drive innovation. In fact, some sectors of the economy are so tightly controlled by a few corporations that innovation is killed off before it has any chance to take root.

Most importantly, Innovation in Australia is seen as a Public Sector responsibility.

For example, the Australian automotive industry have sat on its hands for decades watching their market share collapse, but then demand the that the Public purse shore up the industry when the going gets tough.

Substantive innovation has not been the Australian automotive industry’s forte!

Time to shut down the cosy Corporate Innovation Club?

The time is ripe to unleash the creativity of the Australian nation unfettered by the strangulation of bureaucracy, and the market power of the corporate giants.

As my father would say: “Time to stop wasting our hard-earned money!”

And I am also sure he would have muttered: “Is the Corporate Innovation Club the solution, or the problem?”

The strategic alignment of corporate and employee values contribute to a more efficient organization, competitive advantage and more satisfied employees.

We present here a map of corporate values and which of those values employees embrace.

Mapping values provides a snapshot of how those values are expressed by employees and what shift in values is needed to get everyone on the same values page.

Personal Values are a significant influence over our behaviors at work. Personal values influence behaviors, behaviors influence actions, actions produce strategic outcomes.

Serious problems start to occur in organizations when personal and team values are disconnected: Teams, then departments, and finally organizations become dysfunctional.

Values are what motivate us to achieve those things that are important to us. They are the things that help navigate our life and help us prioritize what is important to us. We refresh our values and belief systems as we grow older and gain more knowledge and experience, which then helps us reorder our priorities to steer our life along a new path.

However, in the business and corporate context, personal and corporate values need to be closely aligned is success is to be achieved.

“Success in the knowledge economy comes to those who know themselves – their strengths, their values and how they perform best”.  (Peter Drucker)

“Leadership is setting the values for the organization, the underlying philosophies of the organization and the way one treats people”.  (Will Delat, Merck Sharp and Dohme)

These ten employees (names changed) are the elements in a sample ‘Values Map’

The Values

Both public and private corporations list the values they hold dear. Below is a sample of ten adopted corporate values.

These ten values are individually rated by each of the above ten employees and a relationship map generated. In this map, each employee’s values are mapped against those values expressed by their colleagues. This map presents a picture of the values each employee holds and how those values compare against their colleagues.

 Values Map Analysis:

Roger, Eli, Gabby and Sienna are generally Excellence and Purpose oriented with a sense of Purpose. In addition, they indicate a level of Courage necessary to achieve Excellence.

Emma, Jacob (and to a much lesser degree Ali and Rick) are Outcomes driven, with Jacob closer to the Commitment end of the scale. Whilst Rick is to a lesser degree Outcomes oriented, he also indicates Commitment toward colleagues.

Jimmy is oriented toward Trust and Respect.

Giselle stands alone; she is oriented toward expressing Character with little orientation to Purpose and Commitment.

The positive prevailing values include: Trust, Do the Right Thing, Courage and Excellence. These values lead to polite behaviour and an inclusion in, and commitment to, the prevailing corporate sense of being. However, none of these values deliver strategic outcomes!

Today, the prevailing corporate core value is the delivery of Strategic Outcomes. The only employee who holds such values is Jacob!

What are the benefits to the company/corporation of aligning personal and organizational values?

The benefits include:

• Lower turnover of valued employees/managers;
• Increased team productivity;
• Offers competitive advantage in a tight recruitment market;
• Mobilizes employee commitment;
• Enhances achievement of strategic outcomes (goals accomplished sooner and more completely).

Finally, the more closely aligned are organizational and personal values, the greater potential for achieving High Performance Organization (HPO) status.

HPOs are more efficient and often more profitable.

There are  many measures used in the evaluation of training.

The problem is many of these statements are primarily measures of Inputs into the program, not Outputs or Outcomes to be achieved, let alone, the Impact as a consequence of the training program.

In addition, training evaluation is often based on ‘feel good’  questions or statements that add no value to the understanding of what training outcomes were achieved.

Here are 10 measures that are typical and widely used. Note the ‘feel good’ statements.

• I understand the purpose of the training delivered;
• Training material presented was in accordance with the stated learning objectives;
• The depth of material presented was in accordance with my expectations;
• The structure of the training material was easy to understand;
• The knowledge training helped me understand the material;
• My horizons were enriched with the experiences shared by the trainer;
• I feel comfortable with the way the trainer presented the program;
• I was given the opportunity to practice my newly acquired skills in the classroom;
• I feel comfortable with the training facilities provided;
• I was satisfied with this training program.

Outcomes-driven training evaluation is driven by metrics that reflect the outcomes delivered against those prescribed for the course, thus, assessment of training programs within an outcomes framework will follow a Program Logic Model. A logic model identifies the process and outcome portions of an activity and shows the relationship between inputs and expected outcomes and provides a graphic summary of how job components relate to the whole. The Program Logic Model below is used as a tool to show the relationships between the activities a job and the Outcomes to be delivered.

Inputs     >     Outputs (Activities & Participation)    >     Outcomes (Short, Medium & Long-term)     >     Impact

 Outcomes Based Evaluation

Outcome based evaluation (OBE) is a systematic way to determine if a program or project has achieved its goals. The organized process of developing a project using OBE helps to establish clear benefits (outcomes), to measure those benefits (indicators), clarify the individuals or groups for which the project’s benefits are intended (target audience). OBE will answer:

• Who is your target audience?
• What kinds of resources are needed?
• When are the resources needed?
• Where do I get the resources?
• What actions do I need to take?
• How did my patrons benefit?

The Difference between Outputs and Outcomes

• Outputs are measures of the volume of a project’s activity: products created or delivered, people served, activities and services carried out; the “things” of a project. They are almost always expressed in numerical format.
• Outcomes are the “people” part of the project, that is, what was the change or benefit to people because of the outputs. They are almost always expressed as a statement of change or benefit to your target audience.

Inputs are resources a program uses in delivering the Outputs/Outcomes – examples include:

• Staff and staff time, money spent for training, training specialists, guest knowledge leaders’ time, training facilities, including equipment and supplies.

Activities are what the job holders do to fulfill the requirements of the job in achieving the organization’s mission, thus job activities result in outputs; for example:

•  Provide specific job training, management leadership training, educate the public about the need for tax compliance, counsel bad tax payers, create mentoring relationships for colleagues/tax agents.

Outputs are direct products of an employee’s activities. They are quantitative and are typically measured by how many?; how often?; over what duration?

Outputs Indicators include:

• Number of reports produced, the quality of the reports, number of tax payer/tax agent counselling-mentoring sessions conducted, number of tax educational materials distributed and the hours of service delivered.

Outcomes are the short-, intermediate- or long-term deliverables an employee produces and include:

• New marketing knowledge resulting and improved customer experience or making more profitable sales, changed practices in the sales/marketing process or modified work behavior of subordinates and altered workflow practices.

Outcome Indicators are the specific characteristics or behaviors measured to track an employees’ success in achieving the outcomes delivered.

• Outcomes are observable: “can you see it, hear it or read it?”

For an outcome that states “improvement in leadership skills”, some indicators might be:

• Improved employee/subordinate interaction skills, reduction in workplace conflict, enhanced engagement with 360 degree working relationships.

For an outcome identified as “leadership style”, some indicators might be:

• Engaged listening (not cutting in on a colleague’s/subordinate’s explanation);
• Maintaining a recommended level of blood pressure in stressful situations; and
• Empowering subordinates to achieve their assigned tasks.

Outcome Targets are numerical objectives for a job holder’s level of Outcomes achievement.

After a performance appraisal has collected at least one round of outcome data, it can use that data to set targets for the number and per cent of deliverables to be achieved in the next reporting period.

Outcome measurement is the regular, systematic tracking of the extent to which a job holders delivers the outcomes intended.

Impact is the ultimate impact(s) expected to result from the job-holders activities.

They are long-term changes which the corporation expects the job holder to make in delivering against the corporate objectives in their area of responsibility.

• They are broad statements of intended achievements.

Examples include: enhanced sales and client engagement.

The Logic Model is a step-by-step approach for defining and measuring outcomes. It is an evaluation framework for your training evaluation project.

How does this Logic Model fit with your current training evaluation process?

The evidence consistently shows that High Performance Organizations (HPOs) are significantly more efficient than non-HPOs.

Why is that so?

Many organizations are operated via a top down strategic framework, such as the Balanced Scorecard. This is, however, nothing more than a 180 degree view of the company’s strategic framework where business activities are prescribed by, and are in support of, the top down strategic perspective. We know from performance appraisal systems that a 360 degree approach is far more effective and informative than a 180 degree perspective. So, why not apply the same principles throughout the whole company/corporation in the strategy creation, development and implementation process?

The HPO framework is not singularly driven from the top down, it is driven by a 360 degree perspective where the most pressing questions often emerge from the market or community being served, that is, a bottom up perspective; needless to say, strategic decision making is heavily influenced by the top echelons of management who are the final arbiters of strategic priorities. Furthermore, departments, divisions and strategic partners/alliances must be on the same page in regards the strategic vision, strategic intent and achievement of strategically important outcomes. It must also be remembered that strategy implementation is influenced by the strategic alignment of supply and demand chain logistics all of which impact the capacity to deliver on the corporate promise.

Here are some of the elements an HPO:

• Focused and engaging corporate strategic intent (which is much more than just Vision, Mission, Goals and Objectives);
• Strategic leadership/followership (360 degree engagement);
• Evidenced-based decision-making;
• Attraction, recruitment, deployment and retention of high performance talent;
• Total quality orientation throughout the corporation;
• Dynamic-driven organization-wide learning culture;
• Engaged and committed supplier-employee-client community; and
• Key Performance Outcomes-driven individual HR responsibilities and corporate practices (Key Performance Outcomes as distinct from KPIs).

The most important component in achieving HPO status is alignment of the above elements into a coherent whole.

Strategic Outcomes Group (SOG) recently provided a Strategic HR/OD Advisory service to the Tax Department of a large South East Asian Government. That assignment focused on the transformation of a 33,000 population public corporation into a HPO.

What was most unique and effective about this assignment is the reformulation and integration of the in-place Balanced Scorecard metrics into the HPO-KPO framework. Proxy metrics from the BSC do not provide all that is necessary to drive a HPO. The KPIs need to be re-framed into KPOs and complemented by additional metrics that inform evidence-based decision-making with the 360 degree HPO framework. As a consequence, the HPO strategic model becomes highly effective in driving corporate efficiency and the delivery of profitable strategic outcomes.

The HPO framework is equally relevant and effective in either a Public or Private sector in the transformation of the corporation into a more efficient and effective organization.

Furthermore, research tells us that HPO organisations enjoy enhanced earnings and growth through more efficient use of capital (including human capital) and, most importantly, HPOs attract enhanced market support because they serve the market place in a far more engaged and engaging way over the longer term.

Are these the outcomes your corporation would benefit from and the community you serve value greatly?

Would you buy a car that has a history of failing 60% of the time?

One of the top four international management consultant practices is reported to have tagged the Balanced Scorecard’s (BSC) overall failure rate at 70%. Other research suggests this high level of failure might be understated. Yet the BSC is still one of the most heavily promoted strategy control methodologies around: a product that has spawned a whole cottage industry built around it. Maybe that is why it survives in the market place.

Web posts on ‘Why the BSC fails’ often present a case for its adoption – not the alternate. The BSC garners considerable space on the web – and on closer inspection, many contradictions therein.

The heavily promoted mantra about the cause of failure is “…the lack of buy-in by management!”

This mantra just does not make sense!

The core of this argument is that a CEO (with the support of the Board of Directors) decides to adopt the BSC and allocates considerable capital towards its installation; only to then not support its implementation.

Not a sustainable argument!

So, why is it so frequently abandoned?

It is damn complex to implement and the metrics (Key Performance Indicators – KPIs) are proxies for the real thing. Why use proxies when the real deal is readily available?

An argument for writing better KPIs?

In addition, the BSC is considered by some to be based on a faulty premise and imprecise research data on which conclusions are based. Furthermore, the conclusions drawn by some proponents appear not to be supported by credible independent research. In fact, some researchers draw just the opposite conclusions about the effect of KPI drivers to those drawn by some BSC proponents.

The core of the BSC is a cause-effect relationship where associated KPIs are presented in a cause-effect chain. KPI cause-effect relationships are often cascaded down through the organization to the individual level. The BSC was never intended to be cascaded down to individual level; team level was the lowest level proposed, yet much of that written by proponents is about individual level KPIs.

Take net margin as an example of why a cause-effect relationship at the individual level cannot be made. Herein lays an example of why Cascading KPIs down to individual level does not make sense. No individual employee can ever be held responsible for substantive cause-effect impact upon Net Margin as it is both internally and externally driven; thus the cause-effect relationship at employee level, let alone team level, just does not exist!

This is one of the major weaknesses of the BSC and independent research has confirmed the fallacy of the claim that such a cause-effect relationship can exist – even more so in an environment where cause-effect relationships do not have a short time relationship.

Take for example a major retail chain with over 1 million employees across thousands of stores. One person within one store in such a large network of stores in a highly competitive market place and acting ethically can never impact ROE or Net Margin. The cause-effect variables to be managed are not within the individual’s, or even the manager’s, control. For example, a competitor store starts a price war or a supplier changes their pricing structure, or a new policy is imposed from a parent corporation. No individual employee can control for any of these outcomes as there are far too many links in the chain of responsibility; and they are not hierarchical links.

The BSC is a cumbersome strategy control instrument that chews up considerable IT infrastructure!

Imagine an organization of say 30,000 employees where KPIs are cascaded down to individual level. Given each employee is assigned 5 to 10 KPIs; then there would be a total of 150,000 to 300,000 KPIs in the organization.

Also contemplate the systems and process capacities and IT infrastructure required to manage and manipulate 150,000 to 300,000 KPIs. A national supermarket chain with 1m plus employees would need to manage around 6,000,000 KPIs. In one known organization of 30,000 employees a senior manager was assigned 25 KPIs. Let’s assume there are job families with teams of five people that are all assigned the same KPIs. The overall number of KPIs might be reduced to 30,000; but still a massive number of KPIs to manage. One might ask, if there are job families, then “..why cascade down to individual level in the first place?”

Cascading down to the individual level is a recipe for failure. It is too complex and cause-effect relationships are rarely (if ever) contiguous (i.e., adjoining).

If the BSC was a simple and coherent instrument, then why do many organizations (assuming under the guidance of their advisers) get tied up in knots in the implementation phase; and then after considerable expenditure and frustration abandon it?

The BSC is often abandoned due its unworkable complexity, its requirement for a cause-effect relationship that cannot possibly exist, as well as, high IT infrastructure costs – let alone the often misguided belief that the BSC will be cost-effective in such a large corporation.

In one study of over 190 corporations that had implemented the BSC: 75% improved profitability by only 2% and 64% achieved revenue growth of 2%. None achieved cost savings!

Finally, adoption of KPIs fix the strategic framework and restricts responsive emergent strategies, therefore, it restricts flexibility, adaptability and, thus, organizational learning.

As one former strong adherent stated:

“It all falls apart due to its damn complexity, and questionable capacity to deliver on its’ much hyped promise”.

Maybe an argument for a much less cumbersome and far more flexible methodology.

SOG-High Performance has been engaged as a Strategic HR/OD Adviser to one of the largest Public Sector Corporations in Indonesia to assist in transformation that corporation into a high performance organization.
Some companies are embracing the Balanced Scorecard (BSC) model to frame and then drive their business/corporate strategy.

Those experienced with the BSC methodology will be aware that it often does not translate well into some corporate environments – more particularly in a public sector setting.

Thus, the challenge for those corporations/companies which have adopted the BSC (and that is not working out as expected) is to integrate the Balanced Scorecard (BSC) into a more coherent and integrative strategic framework that takes the corporation beyond what the BSC has to offer.

Strategic Outcomes Group, through its subsidiary SOG-High Performance has a depth of prior experience (based on research and practice) in integrating different strategic frameworks so that the corporation does not have to abandon past methodologies whilst combining the best of the past with a more productive methodology for the future.

The consequence of a mid-stream shift from one strategic framework to another that does not necessarily have similar strategic characteristics (e.g., the BSC vs High Performance Outcomes model)  is often considerable chaos and high cost. SOG-High Performance has solved this problem with the development of a unique and proprietary integrative model so the initial investment is not necessarily lost.

In current assignments SOG-High Performance is demonstrating its capacity to bring to the table a depth of understanding of strategy theory and, more importantly, an understanding of strategy implementation in practice.

Reference to our portfolio of published research will give some insight into our knowledge and expertise in strategy development and efficient/effective implementation.

SOG-High Performance is also experienced in implementing an Outcomes-Driven business model for both small and large businesses.

Call Dr Kenneth Preiss on +61 (0) 402 181 926 or +62 812 1851 8644 for an informing conversation on how SOG-High Performance can help your company/corporation optimize its performance in these challenging times.

An equally frequent blunder is using sales metrics as an indicator of future sales. Sales figures tell us what happened in the past, they do not tell us what will happen in the future. Yes, they may well give some indications, but like every birthday, things are different.

There is nothing more certain than death, taxes – and change!

Company policy is a framework within which the business operates, not an end in itself.

Needless to say, it is also used as a door behind which the business hides so that it does not have to change.

How often have you sensed the message is: “….do business our way or don’t do business with us at all!”

When that message rings in your ears, time to move on!

Darwin’s theory of evolution is just as relevant to business, as it is for all species. Adapt, evolve or die out!

So, sales are trending up and things are looking good, then bam, an exogenous shock like the GFC, or the even more devastating aftershock hits and wham, credit dries up, sales go down – doors are closed!

That resources boom on which many strapped their retirement fund saddle, then phoof, gone up in smoke in six months!

Nothing like change, the modern day roller coaster!

So, what can we do to prepare the business for shock?

Model the business under various scenarios!

There are some neat tools available for conducting ‘what if’ scenarios, such as Structural Equation Modelling (SEM).

SEM allows for modelling the business metrics (financials, marketing effort, human capital deployment, manufacturing, and the like) where the weights of each variable can be simply changed to replicate stress conditions and to see the likely outcome for the business. One can very quickly see where effort should be expended to address the challenges in stressed economic and/or market conditions.

Being prepared for the economic downturn (or upturn) places the business in a position to realign its resources to optimize the desired outcomes under conditions of uncertainty.

Simply put, always be prepared as business cycles are more volatile than ever – and are not going to settle down into our desired comfort zone anytime soon!

How does your business cope with change?

And, is it prepared for the stresses of uncertainty.

More importantly, is your company’s business predictions nothing more than a rubber band stretch of last year’s graph, or is it a comprehensive model of the future?  

1. a dynamic-driven learning culture (change is a way of life as the culture has changed the way people think);

2. empowered organization population (the devolution of decision-making and responsibility is widespread); and

3. corporate activity is outcomes-driven, not outputs-driven!

The dynamics of such an organization include the interplay between the following elements:

• High performance corporate strategy;
• Corporation-wide strategic thinking and strategic leadership (as distinct from Transformational leadership);
• Deployment of high performance talent;
• Embracing a high performance culture across the organization;
• A dynamic-driven organizational learning culture;
• An engaged client-employee community; and
• Enabling technologies.

What does a HPO model look like?

The following is a summary of the elements in the HPO model.

Success in the achievement of HPO status flows from the integration of all the above attributes to frame a Responsive Organization; thus the challenge for the HPO is to deliver products/services by engaging the people who are responsible for achieving outcomes so as to meet client expectations: and in the process, assist and contribute to the corporate transition from an internal focused transactional entity to a dynamic-driven internal-external focused entity.

How does a company/corporation (public/private Corporation) move to HPO status?

Any move from the current status will not come about via one ‘giant leap’, it will happen via a number of incremental steps moving all the above-listed elements toward a common integrated framework.

None of this will happen unless senior management at all levels, as well as, employees at all levels embrace the need for change and then commit to taking the necessary steps for change. Those steps must be driven by one (or a few) critical imperative(s), that is, the achievement of critical strategic, commercial or operational outcomes.

Inherent in all the above is initially embracing transformational leadership at management level at the first step which then must transition into a strategic leadership orientation. In addition, strategic thinking must be core to day-to-day decision-making throughout the corporation.

How do we know if things we do on a day-to-day basis are achieving the prescribed strategic outcomes?

Corporate, division and unit activity is informed, and driven, by metrics: modeling those metrics will identify the variables that best predict achievement of the prescribed strategic outcomes.

Gap analysis will highlight where resources need to be deployed (or re-deployed) to align the strategic objectives against the actual strategic outcomes.

Does this look like your organization?

Why, or why not?

David is in love!

David is 53, divorced for 5 years and has met who he describes as a bright, attractive and lovely woman aged 31.

A few might say: some people have all the luck, others may well describe him as a deluded and desperate old man!

Problem is, they met at work and he holds a senior executive position and she a mid-level management position without a direct report relationship.

His greatest fear is all the old stereotypes are likely to do the rounds of the office if, and when, the relationship becomes public knowledge in the corporation.  And, he is keen for the relationship not to continue in the shadows – he wishes to retain and respect each others’ dignity.

He imagines something akin to Gold digger meets old fool doing the rounds of the office before long!

David claims that he sees no evidence of the potential for it all “…..to go pear shaped for all the wrong reasons….!”

At the same time, he sees the relationship as fitting outside the stereotypic bounds of ‘acceptable’ age difference. On the other hand, he thinks, ‘why should the relationship be constrained by such stereotypes’?

The few very close friends with whom he has discussed his predicament all talk about nothing but protecting his finances when the conversation gets around to the prospects of marriage – then: “What about children?”

David greatly enjoys his work and enjoys even more the company of his partner. He believes that both can fit into their respective lives without distraction.

But, he believes once it becomes openly known, the pressure will be on both him and her to accept the unacceptable – your partner or your job – and both he claims he cannot live without!

Both are fearful that they will lose at least their job and possibly each other under the spotlight of peer and superior’s scrutiny!

Sigmund Freud identified the two great human enterprises – Love and Work.

Yet love at work is considered toxic to the corporate enterprise.

Is this out of fear, jealousy, outrage, or the belief that a trusted senior colleague is about to enter the den of iniquity?

Conversely, is there a wider belief that the person who has climbed the corporate ladder should never forget their station in life and not demean themselves with the basic instincts of life!

“Ergo, I am a corporate being and I should not lose sight of the fact that corporate life is my only life”.

In such situations, three things really frighten the corporate world: the potential for scandal, the potential for abuse of power; and the potential for distraction. All three are seen as having great potential to threaten the bottom line.

So, what should David do?

Should he hold to the belief that when a corporate executive, one must place the corporate interest before one’s own – at all times?

Or pursue a meaningful relationship with dignity for both – and manage each equally.

Like the Himalayan Kingdom of Bhutan, maybe it’s time to include a Gross National Happiness metric into the corporate Balanced Scorecard.

We all have a right to happiness in one’s life, including a meaningful relationship, as well as a job that equates with one’s capacities!

What advice do you have for David?