The Strategy-Innovation-Knowledge Forum

Downturn Rx: Fix Leaks - Frame Leaps

Keith Miles — 2008-11-15T00:28:34-05:00

SMG’s powerful but less-obvious suggestions to help your business through this downturn.

1 - Fix Leaks

You've probably already stepped in to fix your company’s cash leaks. You’ve cut spending, reduced staff, and redoubled efforts on winning more business. Here are three additional ideas to conserve cash and customers:

Remove Process Inconsistencies and Assumptions

Most businesses fulfill customer needs using a core ‘relay race’-style process. A complete package of information must pass without contamination from sales/inside sales to customer service to operations to fulfillment to invoicing. If steps or handoffs are ill-defined, open to interpretation or require individuals to make assumptions then the company is wasting resources and producing service errors which negatively influence customers. Perform a start-to-finish process audit to make sure information is complete and passes quickly and clearly between steps. Note: a single error-at-a-time, corrective action approach can not deliver process-wide consistency. You must bring all the steps together and define what information is required at each handoff and ensure people know precisely what’s expected. Also forget about a complicated process analysis -- you're looking for a few meetings over a few weeks otherwise the audit itself becomes a waste of resources.

Revise Structures to Support New Strategy

Make sure the organizational structures which motivate employees support your downturn-strategy directives. For example, if your company is pursuing out of the ordinary sales opportunities, look carefully at your sales incentives (and other mechanisms) to make sure they reinforce the revised sales actions. Most organizations fail to revisit their incentives and give salespeople a rousing speech about a new sales emphasis while at the same time driving the old behaviors with the old incentives. The result: frustrated, less-engaged salespeople and precious little change in sales. Adjust your incentives and other structures before giving the ‘expand your horizons’ speech. Then you can send them out to execute the revised approach knowing the new, required activities are supported.

Strategic Customer Review for Additional Sales

List your top customers and quickly describe what each company must do to manage in this downturn -- put yourself in their management’s shoes. Take your list and for each customer identify which products or services you provide or could provide that would help them achieve their short-term goals. Forget long-term -- we're fixing cash leaks in the tyranny of the urgent. Done correctly this requires four to five hours, but no more. Involve your salespeople in the discussion, but this is a strategic analysis and occasionally sales staff need help thinking at this higher strategic level. This is a great opportunity for senior management to come alongside sales and provide quality assistance to help them revitalize sales.

2 - Frame Leaps

This is a perfect time to take a fresh look at your industry, where your business is positioned, and create opportunities to leap ahead of competitors. The current economic situation will encourage your people keep an open mind, even to revolutionary ideas.

Picture, Test, Move:

Picture

Picture your business upside down. Picture disadvantages as advantages.

If your IT infrastructure is more expensive to run but is superior to those of your competitors – could you offer administrative or customer related services to your less sophisticated competitors? You could increase market control, prevent competitors from making similar IT investments, and wedge your company between potential customers and your competitors.

Your company may have a higher cost structure with more qualified personnel. You could offer clients a more sophisticated level of service. You might offer skilled expertise to competitors if it were visible to clients that your company was providing essential expertise. Find a small opportunity for cooperation then communicate to customers that competitors seek out your talent.

Test

Find a simple, straightforward way to test your hypotheses. Anyone can easily test market ideas with hundreds of thousands of dollars. It is more prudent and more fun to tell everyone to test promising ideas with a limit - say $500 per experiment. No project should be allowed to proceed without validation of its premise, but the cap will unleash your people’s creativity. Just make sure you encourage the practical thinking that arises – it is critical to your company’s future.

Move

Find ways to build toward your leap. Start these projects and shield them from the standard requirements of the more established parts of your business. A promising idea has promise not established market results – that’s the promising part. Commit even limited resources to move ahead. Your employees will see your movement and will be tempted to bring their thinking caps to more typical parts of your business. Your customers will see it and will see your company as worthy of new business when money begins to flow again. Your competitors will see your actions as confirmation of your market leadership and will be more inclined to partner with you in the future.

Any way you look at it – your business will be stronger.

Four Elements of High-ROI Change Management

Keith Miles — 2008-06-26T12:41:57-04:00

Change management is critical to achieving expected results and engaging talented professionals in any enterprise-level initiative. When delivered with excellence, change management services provide an unparalleled return on investment both in terms of increased performance and enhanced respect for management.

What is Change Management?
It is normally a consulting-style intervention designed to positively alter the prevailing practice and operating philosophy of an organization to allow it to accommodate or exploit a strategic opportunity and achieve the expected return on the initiative or opportunity.

Excellent Change Management = Outstanding Return
A McKinsey study (1) of 40 organizations found the return on investment differed greatly depending on the degree of change management employed for significant change projects such as enterprise software initiatives or mergers and acquisitions. When a comprehensive change management program was integral to the initiative – the return on investment averaged 143%. The return on investment for projects was 35% which employed either no or poor change management.

Apply the McKinsey findings to a million dollar technology deployment and the difference in derived value would be just over $1M ($1,080,000). If the organization spent an additional $200,000 on excellent change management services the ROI would be 440%! - (880,000/200,000*100). A compelling return, but what is involved in comprehensive change management? Here are the four elements (in the center of the graphic):

Culture
As a first step, any large-scale initiative must be actively shaped to reflect and reinforce the beneficial aspects of the existing culture. If not, even a well-intentioned project can be misinterpreted and/or resisted by those whose support will determine its success or failure. This shaping goes beyond merely inserting a slide in the overview presentation and extends to making adjustments to how the project is managed and conducted. As leaders concentrate on the project and implementation tasks, it is easy to forget that the existing team worked with pride to create the present state and can react defensively to descriptions of its limitations, especially by ‘outsiders’. They are aware of the current state’s deficiencies but need to see a respectful depiction covering both the hard-won gains as well as the obvious weaknesses. The entire project should be shaped to respect past efforts, not blame contributors, and invoke continued support. We evaluate six culture dimensions to ensure a new initiative is seen as a logical extension of the organization’s history, values and mission.

Strategy
The change initiative must be framed within the organization’s overall strategy to show how it complements and enables the strategy to be achieved. This ‘business case’ justifies and summarizes the common behaviors required to support the initiative. Most organizations spend the majority of their energy developing a comprehensive strategy presentation and corresponding numeric targets. Comparatively few make the effort to consolidate and describe the common aspects required to support the strategic initiative.

Numeric targets garner executive attention and create clear pressure to deliver but if there are too many, they can conflict with each other and foster behavior counter to the organization’s overall goals (e.g. discouraging inter-business unit cooperation on critical projects as units shield resources for their own initiatives).
Even a well thought out set of numeric targets aren’t today’s complete answer as less-measurable and more-observable support behaviors are unaffected by targets (e.g. interactions between a manager and a direct report). These observable actions must also be guided.
In addition, here are two overlooked reasons why the strategy-initiative presentation often fails to produce the desired change in professional behavior:

Talented employees lack freedom not understanding. Most professional behavior arises out of the organization’s prevailing policies, procedures, and perspectives which influence what people do and how they do it. Professionals hear a ‘rational’ argument for change, understand, but are not really free to alter their behavior. Nothing has really changed for them since everything in the organization continues to reinforce the current activity set.
Talented employees need us to communicate in their time-frame. One manager complained the organization’s strategy dealt with issues out three to five years, while their department struggled without any practical guidance to sort out what should happen in the next three to five months.

To effectively portray the change initiative requires a consolidated view of what’s required to support the initiative expressed through a presentation as well as Practice and Tactics.

Practice
Many organizations mistake process for practice. While describing the necessary revisions to operating processes is definitely an important component of practice, more is involved. Practice also involves understanding and adjusting the policies, procedures, and preferences which influence professionals’ operating decisions.
Most organizations do an adequate job describing the required process changes but stop there assuming the setting of numeric targets alone will be sufficient to motivate people to change their operating decisions. This assumption is only partly true. Numeric targets and milestones are important but don’t alter the existing mechanisms which reinforce ongoing tactical decisions.
Managers and professionals often voice frustration over their inability to resolve opposing targets and policies. Talented professionals lose respect for management when these no-win scenarios are created then ignored.

I’ll never forget a conversation with two VP’s from the same organization. A VP-level incentive had been naively created to improve a specific outcome. They each complained, “When I make decisions to maximize my bonus, I reduce my colleagues’ bonus and visa versa.” They personally struck a compromise while both looked for new positions outside the company.

Practice involves evaluating and adjusting the relevant processes and the influential policies, procedures, and preferences to give people the information and freedom to support the initiative.

Tactics
Use tactics to communicate the strategic initiative. This change management element represents the highest return in terms of delivering concrete support for an initiative. Professionals expect management to describe strategy as actions. In the words of one incredibly talented manager, “Until [actions are suggested] the strategy isn’t real, it’s just a slide deck.”

Think about the last strategic presentation you gave to your team. Isn’t one of the first reactions from your managers, “I heard what you said, but what do you want me to do [differently]?”
Convert the ‘three to five-year’ strategic initiative into sets of actions which model initiative-support and match their decision-horizon. Professionals do not expect nor want every aspect of their role to be scripted, but they do want us take the time to illustrate initiative support using practical suggestions.
Some might say that line managers could (should) provide this translation. In most cases, they cannot. Managers, by virtue of their position, are subjective and focused on departmental and shorter-term issues. Strategic initiatives span the entire enterprise and require objective implementation (e.g. would a manager eliminate his/her department?).

Greater ROI Requires Greater Experience
A practice review is required to allow the generation of role-suitable actions. Conducting the practice review and generating actions requires extensive operational experience over and above the communications expertise held by a typical change manager. Due to the additional expertise and review effort required, this element is not included in typical change management programs. It also helps to explain why typical programs often fail to deliver expected results.

Benefits In Addition To Increased Execution
Taking the time and effort to suggest tactics (within a change management program) conveys respect for professionals and their contribution – increasing engagement. Also, by presenting suggested actions, professionals also learn to think strategically improving the cognitive capacity of the organization.

1- "Change Management That Pays," McKinsey Quarterly, 2002.

ROI of Engaged Employees

Keith Miles — 2008-04-24T09:55:10-04:00

What is the relationship between employee engagement and business success?
The outdated view: organizations should focus only on productivity.
The enlightened view: organizations with engaged employees out-perform competitors.

Many companies - same approach

The strength of this relationship came into focus at a Fortune magazine leadership conference in New York City. After a day and a half of outstanding presentations by senior executives from many of the world’s most admired and highest performing organizations, our group of attendees came to a consensus.
The showcased companies had something in common - their approach to people. The description of industries and tactics were varied but as each presentation touched on how people were managed – it was as though they shared the same PowerPoint slides.

The shared approach centered around:

Engaged employees serve customers and think up new ideas more effectively than disengaged employees.
Engaged employees sell more to existing customers while attracting and keeping new customers. This raises sales and the firm’s financial valuation.
Employee engagement should be tracked by periodic survey.

I bounced our observation off Geoff Colvin, Fortune’s amazing Senior Editor at Large, that in spite of being in some difficult industries (e.g. airline) the root of their success appeared to be their ability to focus and engage staff. He agreed and suggested that the ability to get more out of people might be the ultimate competitive advantage.

Three observations:

Engagement is a by-product

Craig Ramsey from Intuit presented, at the same conference, both their organization’s amazing emphasis on engagement and their detailed engagement tracking metrics. He stated that engagement remains high because senior management uses tracking results to guide ongoing mentoring activities. The CEO reviews the most current results before going to a location office, checking to see if site leaders need coaching on how to manage their team more effectively. Senior management maintains engagement by reinforcing among managers the actions which promote engagement (and ensuring only engagement-enhancing managers get promoted).

Engagement is about contribution

Engagement isn’t soft – it is about giving people a clear guide to allow them to gauge their own progress within their work. I mentioned this earlier in my blog about Teresa Amabile’s excellent Rotman Magazine article. Amabile found people were put off by insincere praise or other trivial schemes designed to entertain. Professionals believe their work has significance and deserves both consideration and objective oversight. We need to describe crucial work in bite-sized, daily steps so professionals can derive a sense of accomplishment as they contribute. Amabile also stresses that professionals need to perceive respect from management for both themselves as individuals and their contribution, which leads to the final observation.

Engagement is about observable respect

Pixar’s Oscar Winning Director Brad Bird is interviewed in an excellent McKinsey Quarterly article, by Robert Sutton and Hayagreeva Rao, both professors from Stanford, with Allen P. Webb, a McKinsey Quarterly editor. Brad’s comment about low and high morale should be memorized by every manager.

Please also note his comments about directors who restrict people’s input and ignore efforts to bring up problems (alas typical management behaviors). These are observable actions which powerfully influence morale (or engagement) but fall outside the influence of metric-centered management techniques. SMG’s method is specifically designed to bring accountability to observable actions like these.

Here are Brad’s comments on morale and the associated ROI of morale from this article, but leaders should read the entire text to glean other insights. For example, how Pixar hired Brad to stir things up and keep them off-balance, even though Pixar had been wildly successful in every venture and Brad had failed in his previous movie.

“In my experience, the thing that has the most significant impact on a movie’s budget—but never shows up in a budget—is morale. If you have low morale, for every $1 you spend, you get about 25 cents of value. If you have high morale, for every $1 you spend, you get about $3 of value. Companies should pay much more attention to morale.

Before I got the chance to make films myself, I worked on a number of badly run productions and learned how not to make a film. I saw directors systematically restricting people’s input and ignoring any effort to bring up problems. As a result, people didn’t feel invested in their work, and their productivity went down. As their productivity fell, the number of hours of overtime would increase, and the film became a money pit.”

“What gets watched gets done.”

Keith Miles — 2008-04-15T14:34:03-04:00

J. Paul Haynes – Entrepreneur

Mr. Haynes started his first venture in 1988 and his talents have brought forth a string of successful businesses. Now a professional engineer at the helm of a successful business is not overly rare but an engineer who also has outstanding sales, strategy, operational, and motivational skills stands within a very small, select group.

His presentation to a local business group was a delight. He switched effortlessly between the key aspects of the firm’s success, describing each clarity and candor, and then helped other businesses by realistically describing how to sell into large organizations. What I found most intriguing, however, was his statement about how to keep everyone aligned and focused in high-growth businesses. He said, “What gets watched gets done.”

Visible Steps

Over coffee he shared the story of how his philosophy developed over his career. In high-growth businesses, he explained, the long-term goal may shift but what is most important is to break down the plan into a precise picture of where you need to be at the end of each quarter. Accomplishing small steps ensures continued progress toward the firm’s objectives.

Probably learned, in part, from the high-level coaching he received while water-skiing competitively, he sees breaking down large goals into component elements as fundamental. Also important is the ability to make the achievement of these smaller steps easily visible for both those performing the function as well as those overseeing the enterprise. His management team discusses the status of all outstanding projects in about an hour since he believes tracking progress related to the plan shouldn’t absorb the entire week.

Haynes considers no organization capable of concentrating on twenty different things at the same time, so as a result limits the focus to a few priorities. As a practical guide to follow for bringing goals down to the quarter, he espouses the work of Verne Harnish.

Quarterly Direction

In his rapidly evolving industry, each year contains a host of major industry shifts. As a result, the typical annual assessment/bonus cycle is too coarse a tool to direct staff activities. He finds assessing individuals each quarter not only allows a higher degree of oversight but also allows targets to be adjusted mid-course to affect the current year's performance. In turn, bonuses are presented quarterly to remind all of the connection between work done well and the company’s success.

Software Management

In a software development environment, he stresses realistic expectations are needed to deliver on time and retain talented people. Managers must understand how people really think and act, for example, the extra time needed to unload and reload complex software elements from the minds of developers as they are distracted to handle unrelated software issues. This 'distraction' of key development resources represents a significant loss of efficiency and must be minimized. His solution: create a "no interrupt" zone for a portion of their week to ensure development progress continues and support or other obligations are still satisfied within a reasonable time-frame.

This talented entrepreneur focuses the overall strategy down to clear structures to guide talented individuals. He believes the overhead associated with managing an enterprise should be kept low and watching each quarter’s outcomes ensures the year’s success. His practical and elegant management approach yields demonstrated results and serves as an outstanding model of effective leadership.

Why is it Difficult to Integrate Best Practices?

Keith Miles — 2008-03-31T17:37:43-04:00

There is an entire industry related to moving “best practice” activities from one company to other companies within the same industry. This moving of practices is generally accepted as an essential component of a corporate improvement strategy.

Differences?
Why, however, are there still dramatic performance differences between industry participants?
The original idea has been compromised. “Best practice” pioneers looked carefully at competing or complimentary firms for practice examples that could represent a step of progress if brought back to the sponsoring organization. They studied, brought these examples back, and then fitted them carefully to the client organization and supported their implantation to ensure successful adoption.
Over time, however, others short-circuited the most valuable part of this fitting process and now merely ‘copy and paste’ activities into client firms. The results are not as positive as initially proposed.
Why is it so hard to transfer activities to other organizations?

Cultural Support.
Consider for a moment Disney or Ritz-Carlton. Both have made a substantial income from training competitors to be just like them. Do both really want competitors to steal market share and profits? No. They understand the underlying support is the reason for their success rather than the actual practices and they also understand that this cultural support is extremely difficult to replicate. So they continue to train waves of people and enthused executives rush to ‘paste’ just-learned, obviously-effective activities into their organizations.

The long-term prognosis, however, for these transplanted practices is less-than encouraging. Most often the target organization’s culture acts as an immune system which attacks the ‘alien’ practices like a body rejects foreign organisms. Professionals see another rejection and add this failed initiative to the organization’s lexicon of less-than effective change efforts.

Both Disney and Ritz-Carlton know the power of culture.
Unless the ‘best practice’ happens to coincide with multiple needs and pre-existing management perspectives, the new ‘practice’ is doomed to fade since it lacks the cultural and management support necessary to survive.

Vest Practices™ vs. Best Practices
We promote ‘Vest Practices™’ as opposed to ‘Best Practices’. A ‘Vest Practice™’ represents an improvement in strategic practice that is pre-fitted to fall within the organization’s range of cultural support. We shape each practice until it can be demonstrated to fall close to the heartbeat of the organization’s values and operating modes. It is intentionally constructed to look as though it grew out of the target organization’s culture – to avoid rejection and facilitate adoption by the organization’s prevailing practice.

Each practice, therefore, represents a step out to the limit of the culture’s support but not a step beyond it. Only in this way is it possible to, over time, expand an organization’s capability while preserving employee engagement.

While it is entirely legitimate to look to other organizations or industries for examples of practices that represent a tangible step forward for your organization, each ‘prospective practice’, however, must be tailored to your organization’s operating culture.

This ability to ‘fit’ practices to an organization is a main component of our consulting distinctive and took over a decade to develop. When we propose a set of actions to support a strategic priority, we have already conducted a sophisticated eight-step operational and six-dimensional cultural analysis to ensure the suggested actions will be readily adopted.

Raise Performance with Progress and Respect

Keith Miles — 2008-03-28T15:18:04-04:00

To lift professionals' performance, organizations must ensure progress and respect are easily discerned. One of the important findings by Teresa Amabile, a Harvard Business School professor, in her article “Inner Work Life”, describing her research on factors affecting professionals’ happiness and work motivation. She found the most important factor affecting motivation and performance was how clearly professionals sensed they were making progress in their work. The next most important factor was whether they felt respected for their contribution to the work.
How can we ensure professionals tangibly perceive progress in their work and respect for their work?
Daily, actually.

Daily Progress
We no longer work in factories where counting the number of good widgets produced is everything. Professionals collaborate on large teams to deliver outcomes which are often months or years away. Giving professionals a sense of progress, therefore, requires shifting the focus from merely delivering end-of-year targets to also providing examples of how professionals act daily, weekly, and monthly to move things along. Drucker affirmed this concept when he said “contribution” was more important than “achievement” for knowledge workers.
It is easy to see how examples of daily contribution would give a better sense of progress. When driving, objects on the horizon appear to barely move (especially in South Dakota) but the roadside signs zoom by (especially the stream of “Wall Drug” signs– if we’re still referring to South Dakota).
Professionals need to be given examples of observable actions which illustrate daily support for strategic objectives. Then professionals can clearly see their progress - their contribution as they act daily to deliver needed outcomes.

Daily Respect
Demonstrating appropriate respect for professionals’ contribution is the key, Amabile said. Inappropriate respect just makes matters worse. Her research found undeserved praise didn’t raise motivation but could increase cynicism and if deserving work didn’t receive some type of recognition or if it received criticism then negative feelings were created.
It is difficult to gauge appropriate respect and recognition activities without some realistic examples of strategic daily behaviors, and especially if it appears management only cares about end-of-year targets. It becomes easier for managers to unintentionally reinforce negative behaviors – like ‘diving catches’ (where poor oversight creates crises which are resolved in the nick of time through super-human effort). Without the guidance provided by a daily strategic framework, typical managers only see extra effort and positively reinforce those who create havoc for others and clients due to poor administration.

Increased Performance – Daily Strategic Framework
To get the most out of every professional, we need to create a framework which describes individual contribution to strategic outcomes. These examples help individuals to clearly understand strategy support within their roles and clearly perceive their progress, their contribution to the organization’s goals. As well, a daily strategic framework gives management a much more realistic model of behavior to guide recognition activities.
Such a daily framework is critical to successfully managing scarce professional resources in today’s business environment.

References:
Amabile, Teresa, and Kramer, Steven; “Inner Work Life”, Rotman Magazine - March 2008, pages 20-25 link
Edersheim, Elizabeth Haas, “The Definitive Drucker”, McGraw Hill - 2007. Page 174

`Measuring Things' Does Not Equal `Doing Things'

Keith Miles — 2007-06-01T17:25:43-04:00

During one of our seminars this week we discussed customer service and customer satisfaction as a strategic objective and specifically what we, as managers, could do to lift satisfaction. Service as a core strategy can be quite powerful. As proof, Herb Kelleher, CEO of the remarkable and profitable Southwest Airlines considers his company to be in the customer service business rather than the airline business.

As we discussed making organizations accountable for service excellence, a financial services executive suggested measuring customer satisfaction. All nodded in agreement and next we debated the effort and length of time required to create an effective customer satisfaction survey. The group's consensus: six to nine months to fully test and deploy a functioning satisfaction monitoring survey for a sizable organization.
I asked whether sending the survey would impact daily service activities. They concluded it might, but not directly. Organizations spend months measuring service without ever defining what specifically needs to change in the daily activities of those delivering service to customers.

Pseudo-Work
We have become accustomed to considering measurement as real work, when measurement (as suggested by Peter F. Drucker and others) was intended to track real work's value.
In reality, measuring is not work - it is pseudo-work. An organization with 900 monthly measurements would not be more profitable than another with 80 monthly measures.

Change First - Measure Later
I told the group how our company worked with a busy IT client to improve service satisfaction quickly and, most important, perceptibly. We suggesting specific changes to a few strategic, daily activities and told employees they'd be accountable for changing their daily activities accordingly. The service level went up immediately prompting a "What happened to IT? They care now," comment from a facility administrator which the IT group served. We felt it more important to, first, change the level of customer service prior to measuring the level of customer service. Now the client has a survey but still must be careful to actually make visible changes as a result of the survey responses.

Value Measurement More Highly Than Real Work
Historically, managers in most organizations made specific changes and then looked for a way to gauge impact. Now, we value the measurement of important issues more highly than the actual changing of the daily activities involved. This pattern of management behavior is a reaction to senior management fixation with numbers and their inattention to the actual activities involved. It is now routine in many organizations to merely identify an opportunity, install data collection and measurement policies, and never discuss what people should do differently to effect the change in question.

Mentors Point Out What Needs to Change
This practice hollows out managers who now see their roles as adjudicators rather than mentors.
Isn't the role of a mentor to observe ongoing behavior and make specific recommendations on what you could do differently to achieve a better outcome?
Again let's look to Herb Kelleher as he discusses Southwest's strategy, "We have a `strategic' plan. It's called `doing things'."

Reset Required
It's high time we reset management and changed both the sequence and the associated value of doing things vs. measuring things.

Definition: Knowledge Work (or ‘Thinking’ Work)

Keith Miles — 2007-05-16T10:58:20-04:00

Knowledge Work is a pattern of activity that can continue over time before producing an outcome. It is a stream of activity and/or interactions between individuals which generates (or supports the generation of) a high value outcome in the eyes of the organization.

Seven Characteristics of Knowledge Work

1 - Higher Value, Often Complex, Outcomes
There is a strategic nature to knowledge work. The intent behind knowledge work is fundamental to the organization’s mission and success, whether it is patient safety and satisfaction, guest satisfaction, or technology, market, product or service development.

2 - Future Focused – Building the Future State
Because the intent is strategic, the time horizon is often future-focused, and knowledge work serves to enhance the capability of the enterprise to survive and prosper over a number of years. Whether it is creating a patient who will be inclined to contribute financially to the hospital, or a guest who will remain loyal for a lifetime, or a product or service which can represent years of higher margins (and secure employment), knowledge work builds up an organization.

3 - Observable Activities and Interactions
Knowledge work it is composed of activities and interactions between individuals – and can be observed over time. Here are a few examples: responding well to a customer, mentoring a junior manager for a few minutes a month, washing hands prior to starting to work on a new patient, responding positively to an employee’s new idea, or resolving issues with a technology/ product development team. The difference between a typical nurse and an outstanding one normally doesn’t involve seeing three times the number of patients per shift, but rather the way the nurse treats each patient. Like a coach, who can see players’ level of effort, managers can see these interactions occurring and see knowledge work’s impact over time.

4 - Less Measurable - Lack of Transactions
Each of the above examples of knowledge work would be difficult to numerically measure throughout a work day without some additional recording effort. In fact, by adding superfluous recording tasks, management can extinguish or fatigue the target behavior (it’s what Peter Drucker was referring to above). This is the ‘soft’, culture side of business which is ignored as brokers buy and sell stock but absolutely contributes to business performance. This ultimately leads to a management choice – expend effort trying to measure these interactions or devote resources to encouraging these interactions.

5 - Less Decision Structure
The activities and interactions are usually not set out in great detail by management because of the spontaneous nature of the interchanges and/ or the expertise involved resides with the employees’ (in the case of experienced specialists). SMG research found unstructured activities and interactions to be responsible for the majority of future business revenue (e.g. leadership, development, customer service, innovation, etc.).

6 - More Personal Judgment
As there is less structure provided by the corporation when compared with other activities, knowledge work is dependent on the personal judgment of employees as they navigate daily activities and interactions. Again, this forces an elemental management choice: to trust employee decision-making (and all that entails) or to trust management and prescribe every possible interaction. The cultural and performance implication of this decision echoes for years within an organization.

7 - Sensitive to Work Environment (Culture, Leadership)
Since personal judgment is so important to knowledge work, it is extremely sensitive to the work environment. The prevailing culture involves what behaviors are encouraged or tolerated (there is little difference) and what behaviors are discouraged. Knowledge work involves people investing their creativity, passion, and intellect in daily interactions. If an organization lets individuals (really, leaders) treat these investments as trivial by allowing political manipulation, then the most promising innovators and service providers de-subscribe and purpose to do only what’s required. The result is a mediocre, hollowed-out workplace.

Implication: Knowledge Work Requires a New Approach
Not surprisingly, knowledge work doesn’t respond well to traditional management tools, which originated in manufacturing. While the productivity of earlier production functions could be evaluated by looking at quantity and quality, complex development roles can juggle 15 or more competing factors in an effort to produce a satisfactory outcome. Industry leaders are surprised that techniques from a less-complex and less-competitive time are still applied to sophisticated knowledge work environments. Doug Cooper, Canada Country Leader for Intel observed, "There is still an industrial-age, widgets per hour approach to managing knowledge workers that is prevalent in many organizations."

A new approach is needed – more about this in future articles.

Knowledge Work Productivity

Keith Miles — 2007-05-16T10:54:52-04:00

Why is Knowledge Work Critical?
Businesses who could previously survive by merely being competent, now need a defendable distinctive – the ability to do (and continue to do) something other organizations can not easily replicate. Newspapers now increasingly carry notices of investors holding back further investment until they see evidence of a unique capability.
With future growth and financial survivability at stake, companies are reevaluating the basis of their distinctive, whether by innovation, strong service culture, or combination of factors. Their executives are finding, firstly, thinking employees are building future revenue potential, and secondly, management knows very little about how to drive or evaluate the activities of these knowledge workers.

Knowledge Work Productivity = Strip Away Everything
Peter F. Drucker commented, “Knowledge workers don't believe they are paid to work 9 to 5; they believe they're paid to be effective. Organizations that understand this -- and strip away everything that gets in their knowledge workers' way -- will be able to attract, hold, and motivate the best performers. That will be the single biggest factor for competitive advantage in the next 25 years.”*
Drucker points out the critical importance of knowledge work and that smart organizations shouldn’t weigh down ‘thinking’ roles with superfluous procedures and measures, but also states, conversely, that much within organizations is detrimental to the productivity of those building future value.

Knowledge Work Productivity = Actions not Speeches
Consider innovation initiatives within more established organizations. Senior leadership recognizes the need, communicates “innovation is now our strategy” to subordinates, and sets numeric, measurable targets. The executives think they’re done while deeper down in the organization, managers respond as negatively, dismissively and defensively to employee suggestions as they have for years.

Knowledge Work Productivity = People not Policies
Other organizations compete on service and would like to re-make their culture, looking to outstanding examples of customer service as models (e.g. Ritz-Carlton, Disney, Southwest airlines, WestJet airlines, or Ascension Health - depending on the industry). The service culture models allow and support employees as they make service-based decisions as situations arise, but organizations wishing to emulate these businesses often create problems for their employees. Management presents the ‘new’ service-empowerment model in speeches, but leave untouched policies which actively discourage employee risk-taking (and reflect the previous management philosophy). Brave employees want to believe, rush forward to use their judgment and creativity, and find themselves jarred back to reality as the old policies are again enforced. Sadly, they learn quickly.

Knowledge Work Productivity = Survival
Whether an employee is delivering breakthrough technology, revolutionary software, or exemplary service – it is ‘thinking’ work, or knowledge work. Fundamentally different from the work most organizations are designed to reinforce, it is the ultimate competitive advantage as Drucker claimed. Aligning and motivating those performing ‘thinking’ or knowledge work is absolutely essential to building a defendable market position and, ultimately, surviving as a business.

*Drucker, Peter F. "Managing Knowledge Means Managing Oneself" Leader to Leader. 16 (Spring 2000): 8-10.
http://leadertoleader.org/leaderbooks/L2L/spring2000/drucker.html.

Implementing Innovation: When Metrics Don't Equal Accountability

Keith Miles — 2006-11-28T12:27:43-05:00

A senior executive from a technology company was frustrated. Prior to expressing his frustration he was describing the design engineers and how well they were working with the sales engineers. To win contracts in their exacting industry, the teams collaborated for 18-24 months to win design approval from a client. This approval was a signature on a document, a promise to produce the designed component for inclusion in a larger product scheduled for future production. The dollars involved were substantial and all participants were professional and passionate about their business.
The Frustration
The frustration he expressed concerned the CFO, who was asking for a way to make this lengthy, expensive, and critically important interaction accountable. Apparently unwilling to wait for up to 3 years for something to count (it took at least that amount of time for an approved design to be incorporated into the final product and for that product to begin production, start shipping and generate sales), he demanded daily and weekly numbers to ensure these teams of valuable employees were working and being effective.
The Real Frustration
The trouble was that even with sales-engineering teams working diligently and responding well to clients' design requests there was virtually nothing to record on a spreadsheet, except expenses, and those mounted quickly as projects progressed. The CFO wanted numbers to represent movement, to provide accountability to this extended design-build sequence.
To make him happy the teams created numbers. The trouble was that they had little relationship to the vitality or potential of the design projects. The teams were disappointed to realize that the CFO didn't understand their business - he only understood numbers. "He thinks we're a production floor," was the comment.
Interaction is Hard to Measure
He wanted to provide objective (from his perspective) proof to the senior management team that these projects were progressing. It didn't work. The numbers offered represented a distortion of the complex design environment. Rather than make the design area more productive, it became more resentful. Bringing ideas into reality always means those involved actively trade off competing priorities to produce an optimum solution from a number of perspectives. As a result, selecting a metric with a bearing on only one aspect of a complex, knowledge-based environment may not be realistic or helpful.
A New Tool is Needed
The CFO mentioned and those overseeing innovation efforts should understand development is comprised mostly of observable interactions between talented people and very few numerically measurable activities. We call this knowledge work, since the work appears as a stream of activity which eventually results in a benefit or outcome but doesn't produce spreadsheet-style transactions while work progresses.
We shouldn't be quick to judge the CFO - bringing accountability to a business is their responsibility. The tool was the problem. The CFO requires the ability to align and drive the knowledge work interactions between employees and groups of employees. We understand this requirement as it is our area of expertise.
In North America, we must move quickly to bring accountability to crucial innovation activities, but not with previous generation, manufacturing-style methods. Innovation is the art of describing the context required to produce outstanding outcomes and using new accountability tools to ensure this positive context continues.