Over the past twenty years, I’ve facilitated thousands of workshops during which my clients engage in the significant mental effort required to develop Balanced Scorecards that will lead to the execution of their strategy. It’s hard work – intellectually demanding and often tiring, but ultimately rewarding when the entire team lands on the same strategic page, understanding exactly what success looks like and how they’ll get there.

When the clock ticks close to noon during these events it’s not uncommon for participants to meet my calls for a lunch break with a few sneers and remarks that suggest the not so subtle subtext of: “We’re professionals, we don’t need a lunch break…we can power through this!” I certainly understand the desire to capitalize on the momentum that has accumulated during the morning session, and applaud the work ethic of those wanting to carry on without a break, but as a mounting body of research indicates, working through lunch is simply not a good idea for you, or your organization.

Chris Cunningham, University of Tennessee Professor of Industrial-Organizational and Occupational Health believes a mid-day break is essential in restoring the energy and focus necessary to tackle the pressing problems most of us encounter in our day-to-day work lives. “The attention it takes to focus at work drains (people) of psychological, social, and material reserves, leading to stress and lower productivity. Taking a lunch break away from the desk lets people separate themselves from the source of that drain.”

It’s not just productivity that suffers when you sit at your desk or in a conference room toil
ing through the lunch hour, but in fact you’re putting your health in jeopardy. University of Arizona researchers found that the typical office worker’s desk has about 400 times more germs per square inch than an office toilet seat. The nastiest germ minefields are your keyboard and phone, storing in excess of 20,000 germs per square inch. So if you think hiding out in your office is protecting you from that flu bug going around the office, think again. A cold is small potatoes, however, compared to the damage that excess sitting can cause in the long term. Research from the Mayo Clinic has linked sitting for extended periods of time with a number of significant health concerns including obesity and metabolic syndrome, a deleterious band of conditions including high blood pressure, high blood sugar, excess body fat around the waist, and abnormal cholesterol levels. As if that weren’t bad enough, the research also suggests that sitting too much can increase the risk of death from cardiovascular disease and cancer.

Fortunately, we can combat these issues with relative ease. Simply wiping your work surface with hand sanitizer can eliminate the vast majority of germs taking up residence around your desk. As to the bigger problems related to excess sitting, the best medicine is to simply get up and get away at lunch, preferably interacting with nature. You don’t need a vigorous hike lasting a full hour, everyone’s clock is different, and for some a ten-minute stroll around your parking lot may be all you need to re-energize and re-focus for the rest of the day. Whatever you choose, know that you’re doing both your mind and body a great service. Research documenting the brain’s ability to subconsciously problem solve is piling up rapidly, so an answer to that challenge you just couldn’t solve before lunch, no matter how hard you tried, may come flashing through while you’re out enjoying a short break. In addition to the mental breakthroughs you’ll enjoy, getting up and spending a few minutes outside is probably the best thing you can do to restore the reserves of energy and focus we all need to succeed in today’s workplace.

Notes:

-Making the Most of Your Lunch Hour, Wall Street Journal, October 8, 2013.
-Germ statistics from: http://www.cnn.com/2004/HEALTH/12/13/cold.flu.desk/index.html

2013 is here, and many of us will be thinking about how we can change our lives for the better this year. Accordingly we will make a number of resolutions.  For all of you leaders out there (and really, we’re all leaders in one capacity or another), here are three resolutions I suggest you consider, to improve your organizational performance.

1)   Listen more: I’ve written previously about our tendency to be poor listeners (see “Are You Listening” at Senalosa.com), citing the sorry statistic that we listen at about a 25 percent comprehension rate. Two recent events brought this home to me on a very personal level. The first was a thirty minute so-called “exchange of ideas” meeting with the CEO of a company with whom I was considering a partnership. He spoke for at least twenty-seven of those thirty minutes, with no regard whatsoever for my input. Some exchange! More like a verbal tsunami. Not long afterward I was on the phone with someone who also graduated from the machine gun school of conversation. At one point, when I was able to squeeze a word into this ‘conversation,’ I mentioned the importance of listening in successful consulting engagements. He immediately broke in saying, “You’re right; I used to talk a lot, but now I mostly listen.” It was everything I could do to withhold my laughter. Not only is this behavior impolite, it’s counter-productive. We spend seven out of every ten minutes communicating with someone, and fully 45 percent of our time at the office is spent listening. If just a quarter of that information is getting through, think of the knowledge and productivity we’re squandering.

2)   Connect the dots: The CEO of a utility company asked his workers why they get up at 2:00 a.m., go out in the snow and risk their lives climbing a pole to get the electricity back up and running. Not a single one said it was because of the extra overtime money he’d receive. Instead, they replied that they did it because of the feeling they get upon seeing that cascade of lights come back on across the community. They know there are a lot of happy people there, and that provides them with a feeling of deep satisfaction. That’s connecting the dots between a job and the outcome it produces for a customer, and it doesn’t take a power outage to produce it. What can you do to make that connection for your employees?

3)   Question “expert” advice: I recently had the chance to hear a well-known business guru address an audience on a number of topics, including talent management and how to successfully negotiate change. His advice for talent? Hire all the 23 year olds you can because they’ll ask questions ‘older’ workers are too hardened to ask. Huh? This flies in the face of most thinking about maximizing human capital and harnessing employee knowledge. And it’s ridiculous to suggest that ‘older’ people don’t want to learn. Later, on the subject of change, he suggested that when people criticize the case for change ask them why five times and you’ll eventually get to something that’s embarrassing to them. I question this as well. Why would you try to humiliate someone to get them to support your change agenda? Surely there are better, more humane and dignified ways. There is so much advice out there these days, and in order to stay relevant and create attention for themselves in an increasingly crowded market, it seems some so-called experts feel they have to constantly push the envelope of accepted practice. However, in doing so their advice sometimes roars past the respectable label of iconoclastic and simply doesn’t fit with the reality on the ground. So listen to the experts (couldn’t resist another listening plug), but be sure to bring in your own unique blend of knowledge and experience when assessing their guidance and its relevance for your organization.

When I read a business magazine, it’s not only the articles themselves that draw my attention, but also the glossy eye-catching advertisements surrounding the words of wisdom. A scan of the ads reveals what’s hot in the business world – the products and services competing for executive mindshare in an increasingly complex global economy. Lately, I’ve noticed an increase in a unique offering on the pages of both scholarly and mass market publications – geographic locations: Cities, provinces, counties, states, and entire countries proudly announcing their readiness for business, inviting firms from across the globe to set up shop in their locale. Picturesque photos of the municipality are inevitably accompanied by promises of a highly motivated and skilled workforce, enlightened regulatory climate, and lower costs of doing business.

These ads are there for a reason. We live in a mobile world in which people and companies are increasingly nomadic, following the path, however meandering, they believe will lead to greater success and prosperity. If that means relocating a business from Indiana to India, from Toronto to Taipei, then so be it. The benefits of these moves appear obvious and abundant – lower wages, cheaper utility costs, better tax rates, a pool of skilled workers, the list goes on and on. But does the reality match the promise? In many cases, the answer is no. AMR Research discovered that 56% of companies moving production offshore experienced an increase in total landed costs, and a 2010 Ernst & Young survey of CEOs found that more than a third stated the overall costs of entering high-growth markets like Brazil, India, and China were higher than expected.

Writing in the Harvard Business Review, authors Porter and Rivkin argue that location choices often prove less desirable than expected because managers overlook the current and future hidden costs associated with a move to a foreign location.[i] To avoid disappointment, and a river of red ink, I would suggest organizations relocating to a new location create a Balanced Scorecard to gauge the move’s overall effectiveness. Let’s consider such a Scorecard beginning with the Employee Learning and Growth Perspective and working our way up.

Employee Learning and Growth Perspective:

Traditionally, three areas of ‘capital’ populate the EL & G perspective: Human, Information, and Organizational. Each of these will be accounted for in our offshoring Scorecard.

  • Human Capital: Offshoring is often undertaken based on the promise of a skilled and motivated workforce, one that is able to competently shepherd the firm’s products and services through production to ultimate delivery to customers. To ensure that is in fact the case, companies should include measures such as:
    • Strategic job coverage ratio (percentage of required skills possessed by the employee population)
    • Turnover
    • Training costs
    • Percentage of employees with advanced degrees (or other educational achievements)
    • Number of internal promotions – depicts the workforce’s ‘upward mobility’)
    • Number of workers hired versus projected (a gauge of skills present – if more workers are required, perhaps the promised skills are not present)
  • Information Capital: Here we typically attempt to measure how well technology is employed in the service of strategy execution. For offshoring endeavors a key measure will be the percentage of employees using technology, which determines whether employees are able to use enabling technologies effectively.
  • Organizational Capital: Considered the very ‘soft stuff,’ of company operations, and frequently represented by culture as defined by ‘the way we do things around here.’ A key measure to include in this category will be Employee satisfaction or engagement. Managers should carefully examine the responses of domestic employees and expatriates. Both groups could possibly struggle in a potential culture clash of geographically based ideals.

 

Internal Process Perspective:

Depending on the unique value chain employed by the company (the specific activities they pursue to drive value for their customers), measures in this perspective could vary widely. However, outlined below are a number of key metrics that should be carefully monitored by any offshoring entity.

  • Quality: Especially relevant in manufacturing environments, companies must ensure new locations maintain existing quality standards
  • Raw material usage: Related to the above, this will serve as a gauge of worker productivity.
  • Scrap rates: Again, related to quality and productivity.
  • Freight costs: They may increase as a result of reaching now distant markets.
  • Innovation: More a topic area than a specific metric. Firms must ensure innovation does not suffer if manufacturing is physically separated from research and development. Number of new products and services in the pipeline, and sales from new products and services may serve as representative indicators.
  • Supplier relations: Firms often spend years cultivating a trusted relationship with key suppliers. Will they be able to create such a bond in a new environment?
  • Inventory turns: An important indicator of operational efficiency, which is often a prime motivator for moving offshore.
  • Intellectual Property rights: One executive whose firm had moved their production to a new country described how they had removed units of measure on the gauges in their factory, fearing a loss of production knowledge. Protecting IP rights in countries with weak production may prove expensive.

Customer Perspective:

To compete effectively in today’s marketplace organizations must be masters of agility; swiftly responding to changing customer tastes and preferences, while at the same time meeting shareholder expectations. Offshore facilities can severely test a company’s ability to meet changing needs because of the lead times associated with distant locations. Consider a maker of fashion apparel. The items they’re shipping now may already be considered passé by the time they hit store shelves in far-flung locales, resulting in costly markdowns for the manufacturer. Here are some Customer-related metrics for your Offshore Scorecard:

  • Cash to cash cycle: How rapidly you can transform raw materials into finished goods.
  • Customer satisfaction
  • Customer retention
  • Share of wallet in key segments
  • Likelihood to recommend

Financial Perspective:

This perspective represents the ‘end in mind’ of your strategic story – the logic suggesting that successful execution in the other three perspectives will drive sustainable financial success. In addition to the standard arsenal of financial metrics, here are a few that are more germane to an offshoring organization:

  • Wage costs: Lower wages are almost always a strong impetus for moving offshore. Therefore, it’s vital you measure your costs to ensure you’re achieving the anticipated advantage. Sadly, you may find that advantage dissipating rapidly due to global pressure on wages. For example, in Shanghai, the wages of a typical line production worker spiked 125% between 2006 and 2011. In India, middle management salaries rose 13% in 2011.
  • Currency fluctuations: They can have a dramatic impact on profitability.
  • Taxes: Another prime motivator for making a move.

 

Some may argue that creating a Balanced Scorecard after an organization has already moved Offshore is a case of ‘too little too late.’ Of course, extensive due diligence should be applied before embarking on a move as substantial as offshoring. However, by carefully analyzing strategic metrics, managers are able to proactively shape their offshore operations, learning where adjustments are necessary and determining what interventions are called for to ensure the investment yields its’ promised benefits.


[i] Michael E. Porter and Jan W. Rivkin, “Choosing the United States,” Harvard Business Review, March 2012, PP. 80-93

Recently I worked with a client who was in the process of cascading the Balanced Scorecard throughout their organization; taking that all-important step of using the power of linked Scorecard performance measures to generate alignment from top to bottom. Among the groups developing cascaded metrics that day was the Information Technology (IT) Department, and at one point during the workshop their team lead called me over with a question that had been bothering him.

IT Team Member: “We’ve been told that minimizing expenses is crucial to the organization, and so we’ve created a cascaded measure of reducing vendor costs. What we’re going to do is negotiate with software and hardware vendors, and consultants to try and drive down our overall IT costs.”

PAUL: “Sounds good. What’s the issue?”

IT Team Member: “Well, we’re concerned that if we insist on lower costs from our vendors that could lead them to cut some corners, and ultimately result in poorer service to our customers here in the company…and that’s the last thing we want to happen.”

It was clear from the look on his face this was a dedicated professional who wanted to do the right thing for the organization, but was concerned that measures on the Balanced Scorecard could actually harm his goals by creating some unintended consequences.

He was right to be concerned. It’s not uncommon, especially for those who are new to the Scorecard system, to populate their model with measures that have the potential of driving the wrong, or inappropriate, behavior. In this case, if the IT department pursued aggressive targets for vendor cost reductions, that could very well lead to poorer service and in turn negatively impact other aspects of the organization’s strategy execution efforts; a classic case of a measure producing an unintentional effect.

To overcome this issue, a useful diagnostic test for your Scorecard measures is to critically examine each and ask whether the potential exists for any to drive unintended consequences. If it does, you should add what are often termed ‘counter-balanced’ measures. In the case of my client from the IT Department he knew that reducing costs was important to the bottom line but didn’t want those lower costs translating to poorer service for his customers. Therefore, he chose a measure of customer satisfaction with IT services to counter-balance vendor costs. Over time he’ll monitor the two, looking for correlations that may require his intervention. If, for example, vendor costs do decrease but he also sees a decline in customer satisfaction he can hypothesize the two are correlated and use this information to possibly reconsider targets for vendor cost reduction. Maybe the initial target was too aggressive, leading to a degradation of the services provided to his customers.

When we create a Scorecard we’re attempting to tell the story of the organization’s strategy. Just as a story in a book or film is made up of distinct chapters or scenes, what really brings it to life and makes for a satisfying and compelling story is the way the individual components weave together. The same goes for the Balanced Scorecard. While the individual metrics appearing on a Scorecard are vital indicators of success, their greatest value comes when we look at them in concert with one another.

In most writing on the Balanced Scorecard you will find substantially less ink devoted to the Financial perspective than to the Customer, Internal Process, and Employee Learning and Growth dimensions. This is certainly not a surprise to people familiar with the Scorecard model, as it was created with the goal of supplementing lagging financial measures of performance with the drivers of future financial success.  Anyone who has worked in the field of business has undoubtedly been exposed to the standard toolkit of financial metrics, but what drives financial success is often a mysterious black box of many possibilities. Thanks to the Scorecard system with its inclusion of non-financial perspectives of performance firms are in a much better position to solve the value-creation mystery, and discover what does in fact drive future financial results.

Over the years I’ve reviewed countless Scorecards and can say unequivocally that the Financial perspective is home to the most commonly used, least differentiated set of measures, none of which will be unfamiliar to you: Revenue, growth, profitability, return on sales, etc. As noted above, this is to be expected as the Financial perspective is home to the lagging measures that detail how success in the other perspectives impact the bottom line. While financial yardsticks of performance are typically the most widely known and available, I believe most organizations are under-utilizing this perspective of performance in conveying their true economic success.

Most private sector organizations operating in a competitive environment consider results from the Financial perspective to represent the ultimate arbiter of absolute success. The key word in that last sentence is absolute. The measures they employ provide an outstanding view of the company’s absolute performance, meaning the actual dollars in sales they’ve generated, exact percentage of growth, precise ratio of profits to sales, etc.  What they don’t tell us, however, is how well the firm has performed relative to its competition.

Michael Porter reminds us repeatedly that “Competitive advantage is a relative concept[i] meaning that results must be stacked up against those of other companies operating in the same industry who face a similar competitive environment. Without this comparison, absolute performance is meaningless. If your company achieved sales growth of 20 percent last year that might be cause for cheers and back slapping all around until you learn that your key competitors all surpassed 30 percent. Knowing that, you quickly realize how much economic value you’ve left on the table.

What we’re ultimately attempting to capture in the Financial perspective is a verdict on the company’s success in achieving competitive advantage over its rivals. Since most companies track only their absolute performance on financial yardsticks, they’re unable to gauge their success when judged against peers. I would argue that virtually all financial metrics must be compared to industry averages or other key benchmarks in order to prove effective in judging competitive success. So, rather than raw sales growth, you would calculate sales growth percentage versus the industry average. Instead of Return on Equity, it’s return on equity versus the industry average. Perhaps the most important metric in this perspective will be Return on Invested Capital (ROIC). This fundamental measure examines a company’s profits versus all the funds it has invested to generate those profits; both operating expenses and capital. Returning to Porter, he cogently argues this is the only metric that reflects the true economic purpose of every profit-seeking enterprise: to produce goods or services whose value exceeds the sum of the costs of all the inputs, thereby ensuring resources have been used effectively. And once again, to ensure efficacy, ROIC should be compared to others in your industry.

We must never lose sight of the fact that for-profit businesses are attempting to achieve competitive advantage that leads to superior profitability. All industries have defined ‘profit pools’ and therefore, it’s vital that when assessing financial results we do so in the context of performance versus rivals. Only then does a firm possess a true and meaningful picture of the competitive advantage it does or does not enjoy.

 


[i] Joan Magretta, Understanding Michael Porter (Boston, MA, Harvard Business Review Press, 2012).

Last night, around 2 am, my wife and I were awakened from our slumber by a beeping sound. It probably took two or three beeps to register, then we were both awake, and irritated enough, to realize it was repeating in a pattern. This wasn’t some rogue electronic device chirping out a random message, but an annoying and consistent message, requiring attention. Groggy as we were, we soon realized the culprit: a smoke detector battery that needed, no it demanded, to be changed. Have you ever noticed these things always decide to go off in the middle of the night?

After the inevitable waiting game, each of us hoping the other would take care of it, we gave in, stumbled out of bed, and went in search of the incessant beeping. On the way down the hall a thought slowly began to make its way into my consciousness, no small feat considering both my brain and body were protesting this unwanted intrusion into my sleep. The thought became clearer and more resonant until I said out loud, “This is a catalytic mechanism.” My wife responded with about as much enthusiasm as a marble statue of her might, so I repeated my somnolent insight: “This is a catalytic mechanism. The smoke detector!” The beeping continued but I was oblivious now, totally absorbed by my stunning discovery. As we located the beep and my wife secured a fresh battery, I continued: “The smoke detector going off like that forced us into action. There was really no alternative – we had to get up and change it or suffer the negative consequences, in this case being robbed of a good night’s rest.”

Of course catalytic mechanisms don’t just apply to late night battery changes. Jim Collins, who originally wrote about this topic several years ago, believes they are crucial for any organization that wants to move beyond bureaucratic exercises in pursuit of their goals, and described them as the ‘crucial link between objectives and performance.’[i] They can take many forms but the common denominator is a process or procedure that forces people to take direct action in pursuit of an important objective. Collins cites the case of Granite Rock, a California company that supplies materials and products to the construction industry. When you think of a rock company, and really who isn’t constantly doing that, I doubt you conjure up images of world-class customer service. But service at a level exceeding what you might expect at Nordstrom was exactly what the leaders of Granite Rock proposed to achieve. To do that they could have written vision statements, created an exciting communication campaign, or devised some complex service initiative, but in the end they chose one simple process; short pay. At the bottom of every invoice the company issued appeared a note reading: “If you are not satisfied for any reason, don’t pay us for it. Simply scratch out the line item, write a brief note about the problem, and return a copy of this invoice along with your check for the balance.” This is a truly catalytic mechanism. Any time a customer chooses not to pay the entire invoice amount it propels Granite Rock into action, digging deep to discover why the customer chose not to fully pay, and doing everything in their power to fix the problem to ensure it doesn’t happen again. Employees are provided with a crystal clear signal that anything less than world-class service won’t be tolerated.

It takes courage to initiate a catalytic mechanism because a well-constructed version will possess sharp teeth and produce legitimate consequences for the organization should they consistently fall short. The upside, however, is worth the risk. A catalytic mechanism has the power to motivate entire organizations, wow customers, and create sustainable results. I encourage you to look at your own strategy and strategic objectives through the prism of a catalytic mechanism. What process could you put in place that would force you to move beyond the corporate rhetoric and turn your dreams into reality? What’s beeping in your world?

 


[i] Jim Collins, “Turning Goals Into Results: The Power of Catalytic Mechanisms.” Accessed on March 8, 2012 at http://caplix.com/pdf/Turning%20Goals%20Into%20Results.pdf

In a wide-ranging discussion I recently held with the senior strategy officer of a midsized organization the conversation eventually made its way to their Board of Directors. I asked how involved the Board had been in their Balanced Scorecard. “Not at all” this person replied. That response didn’t come as a great surprise to me as most organizations choose, rightly, to create strategy and their Balanced Scorecard themselves, seeking Board insight and approval afterwards. But what came next did surprise me, a great deal.  I asked: “Did your Board receive any training on the Balanced Scorecard so they could use it effectively to gauge your strategy execution?” With no hesitation this executive responded, “No. They would think that was beneath them.” As someone who makes their living facilitating, writing, and speaking it’s not often I’m unable to mount a reply to a comment, but this shocking response rendered me speechless. Let’s review one primary responsibility of any Board to see why no member should ever consider Scorecard training “beneath them.”

Boards serve multiple functions, but perhaps their chief responsibility is approving and monitoring enterprise strategy. As noted above, the Board typically doesn’t engage in creating the organization’s strategy, that’s the province of the senior executive team, led by the chief executive officer. However, to fulfill their oversight role, Boards they must understand and approve the strategy, then continually monitor management’s execution efforts. Based on the findings of a study performed by global consulting firm McKinsey, effective monitoring is often easier said than done. The researchers discovered that a whopping forty-four percent of directors don’t fully understand the drivers of value for the organization on whose Board they sit. Without that knowledge it’s impossible to provide meaningful insights and advice, the very reason members were selected in the first place. Enter the Balanced Scorecard.

Around the globe, thousands of organizations have turned to the Balanced Scorecard (and other measurement-related systems) to isolate the value-creating mechanisms of their strategy by identifying measures that translate strategy into meaningful action. One of the many benefits of using the Balanced Scorecard is providing the Board with powerful metrics that distill the essence of the organization’s strategy and clearly indicate what drives value for customers and shareholders alike. Armed with that knowledge, Board members can draw on their substantial reserves of knowledge and experience to actively participate and provide the counsel every management team requires. But as any practitioner will tell you, the Scorecard is more than an ad-hoc collection of measures scattered across four perspectives. The true value of the framework lies in the ability to connect the measures in a strategic narrative, understanding how they weave together, across the related perspectives. For a director to contribute meaningfully to an organization’s strategic dialog, they must first understand the intricacies and subtleties of the Scorecard model. If to them a Scorecard is simply a group of bucketed metrics, they will never derive the benefits possible from the tool, and are likely to squander much of their own potential value to the organization. Any Board member who takes their responsibility to the organization seriously, and respects their fiduciary duties, should never consider Scorecard training beneath them. To the contrary, they should encourage and embrace the lessons, as they will allow them to better serve their vital role in corporate governance.

Before the first workshop with a new client I meet with the organization’s CEO or Executive Director to share with them the purpose of the event, outline my approach, and review their role in helping the group achieve its desired outcomes. Although every individual is different, I’ve witnessed a remarkable commonality among the responses I receive from CEOs when discussing that last point, their role in the meeting. “Don’t let me dominate” is their universal refrain, followed quickly by “I need to hear what other people have to say.” On certain occasions such a caution is in order as some leaders are prone to monologue marathons that can rapidly suck the energy from the room, leaving others wondering why they were asked to attend in the first place.

However, in most cases I find the opposite actually occurs – leaders are too quiet in the workshop. They sit back, a pensive look their constant companion, nod a lot, laugh when appropriate, but rarely offer their point of view. The desire to draw out the opinions of their team, seeking a broad spectrum of views is undoubtedly valuable and to be commended, but ultimately their reticence is at least as problematic as taking the meeting hostage by controlling the flow of dialog.

It’s an inevitable fact of organizational life that we all look to our leaders for cues. Therefore, when in a workshop or meeting, we find the CEO sitting back and offering no guidance or personal insights, other attendees can misinterpret that silence as a signal the chief isn’t engaged in the process. The leap of logic then continues to: If he or she isn’t engaged, then the meeting probably isn’t that important. And culminates with: if it’s not important, why am I here, when there is plenty of ‘real work’ stacked up at my desk right now?

At the end of the day, the CEO is there for a reason – to make the difficult decisions. Taking the counsel of well-informed subordinates, and listening to a diverse array of opinions is sure to lead to better decisions and improved buy-in from everyone, but when push comes to shove leaders must illuminate the organization’s path forward. I’ve had the privilege of seeing brilliant CEOs in action over the years, and one of my favorites was a gentleman who mastered the delicate balance of seeking input from others but always making a firm commitment based on his own knowledge and beliefs. In meetings this man, a brilliant individual by any account, was always attentive, asked seemingly simple questions, showing his vulnerability, but never failed to lend several insightful comments to the discussion. When it was time for a decision to be made he summarized the key points raised to ensure he was accurately portraying the opinions that had been presented, then proceeded to lay out the rationale for his decision. You were free to challenge it of course, constructive conflict was always welcomed, but when it was time for action he accepted responsibility and issued the final word on the subject.

We’re all leaders in some capacity. Lets remember that our challenge in that role is to seek the opinions of others, stimulate dialog on issues, and when the time comes always be willing to step to the forefront, accept responsibility, and perform the leader’s ultimate task – making decisions.

In many ways I believe the essence of strategy lies in the choice of a singular value proposition, or determining how you will balance your resources across the spectrum of choices. What is a value proposition? It’s the determination made by any organization of how they propose to create or add value for their customers. It helps answer the question: “Why would people buy from or work with us?” Traditionally, three choices have been available: Low Cost (through operational excellence), Product Leadership (supplying the best product or service through innovation and technological superiority), and Customer Intimacy (best value derived from outstanding service and relationship building).

Most for profit companies immediately grasp the relevance and importance of making this choice, accustomed as they are to waging strategy wars with their competitors. However, with public sector agencies the notion is often rejected on these seemingly show-stopping grounds: “But our ‘customers’ have no choice, they have to deal with us.” But is that really the case? Do we as customers of government agencies have no choice? I’d suggest it’s not the case, and argue that all customers of government agencies do have a choice.

Recently I worked with a Compliance and Enforcement group within a State government agency. When the question of value propositions was raised the “no choice” flag was quickly raised and the conversation seemingly halted. But one person in the group protested and suggested customers do have a choice; in their case the choice was whether or not to comply with regulations. He argued that in the end customers may decide not to comply with state regulations because the experience or cost of dealing with the authority simply outweighs the burden of any possible penalty.  Based on disappointing encounters in the past, customers may consider the state’s products to be outdated or inefficient, and declare the hassle factor is too high to warrant compliance. The lack of a compelling value proposition translates into substantially less revenue for already depleted State coffers.

This veteran of public service went on to suggest that if government agencies were willing to explore the value proposition idea and choose one, or a balance, that fit their environment, they could transform the customer conversation. Declaring a value proposition means critically examining everything you’re doing through that lens and ensuring all products and processes are consistent with your chosen direction. With products, experiences, and costs transformed, customers will choose to do business with the authority because the benefits now outweigh the costs. If you’re in the public service, I urge you to take a cue from this intrepid colleague, begin assessing your value proposition today, and remember that all customers do have a choice.

When working with clients on strategy execution I tell them they’re about to embark on a journey of great change. A change in the way they measure and manage performance, a change in the way they report and analyze results, and a change in how they generate alignment from top to bottom throughout the organization. The speech is intended to be inspiring, lifting them to new heights of organizational achievement, but is just as often met by eye rolling that says, “You’ve got to be kidding.”

Those non-verbal (and sometimes verbal) cues reflect the undeniable fact that the proposed changes, any changes for that matter, are difficult to bring to life, and most people have been around long enough to see similar efforts come and go. I’ve discussed this phenomenon in a number of posts, including my most recent in which I shared the sobering statistic of change failure rates being as high as sixty percent. To overcome a number like that it’s crucial for organizations implementing change programs to get off to a fast start, generate momentum for the cause, and convert skeptics to advocates. Unfortunately, most miss the mark on this task, and frequently begin their initiatives with long-winded speeches from executives whose delivery and demeanor seem to reflect their own doubt about what’s actually possible.

There’s a place for speeches, posters, and slogan-emblazoned coffee mugs when setting on the path to change, but to really kick start your effort, and win your share of people’s ever dwindling attention, you need to shelve the rhetoric and start with an emotion-inducing, provocative action. It worked for sixteenth century Spanish explorer Hernan Cortes. Facing the increasing possibility of a mutinous crew, he didn’t attempt to hold their loyalty with a fiery speech, instead he took the very provocative step of scuttling his ships, effectively stranding his crew in Mexico. Here are a few somewhat less dramatic, but no less effective, examples of people and organizations that recognized when it comes to igniting a spark of change, actions trump words every time:

A Danish organization, tired of watching customers defect because of frustrating and outdated policies and procedures, vowed to re-engineer the customer experience. Rather than begin the effort with a dry discussion of what was to be done, executives gathered the many volumes of current policies and procedures, stacked them up, and to the delight of assembled employees, threw a torch on the pile. The signal that things were about to change was clear.

The CEO of a midsized company was disappointed because his people weren’t taking advantage of 401(k) matching opportunities, when in fact he knew they could all use the money. He calculated how much they’d left on the table to be close to ten thousand dollars. In a provocative display to jolt them from their inertia, he than stuffed ten thousand dollars in a bag, brought it into a meeting and dumped the cold hard cash on a table. The powerful sight of all the money they’d neglected put his staff on a quick path to action.

A Cedars-Sinai doctor was frustrated that hand-washing levels of other doctors at the hospital remained stuck at eighty percent, despite the fact that everyone knew frequent hand washing was critical in reducing patient infections.  Weary of spouting statistics and exhorting his colleagues to wash up more frequently, he took the creative step of having a sample group press their hands in a mold and then analyzing what they contained. It turns out the doctors’ hands were covered in bacteria. The same doctors who would later be examining a patient were unknowingly harboring an army of germs. Not surprisingly, when this revolting truth was revealed, hygiene rose to nearly one hundred percent, where it remained.

The message here is simple. The next time you’re introducing an important change program put away the memos, speeches, and mouse pads and take a page from the book of the organizations above. All recognized, and benefited from, the wisdom in that old saying: Actions speak louder than words.

 

Sources:

Paul Niven, “How Well-intentioned Leaders Can Sabotage a Balanced Scorecard Implementation.” Blog post at www.paulniven.com

Dan Heath and Chip Heath, “Passion Provokes Action,” Fast Company, February 2011, pp. 28 – 30.

It’s well documented that organizations struggle with change. In one of many studies on the topic, Michael Beer of Harvard Business School estimates failure rates as high as sixty percent. Of course you don’t need a Harvard professor to tell you what you’ve most likely experienced many times during your working life. So what, or who, is to blame for the high flameout rate of change? Many experts point the finger at the organization’s employees, who we often assume are weary from past efforts, and generally skeptical of anything that comes down from the executive floor. A typical lament I hear from executives is: “If only our employees would come around, accept the change and understand how it benefits the company, everything would work out.” But is it really the rank and file who are responsible for the glut of change failures plaguing organizations in every corner of the world? A recent conversation with a client implementing the Balanced Scorecard in a large public sector organization has me re-thinking this basic assumption.

When discussing what I considered to be ‘best practice’ change principles with this client, I provided tip after tip about how to win over those on the front lines, including: using varied communication mediums, getting everyone involved, defining the WIIFM (what’s in it for me) message, and many other nuggets gained from over twenty years in the field. He nodded his head throughout, but when I finished he offered something I think all of us tend to overlook in change management initiatives – the unintentional sabotage of well-intentioned leaders.

People ascend to leadership for many reasons: knowledge of the organization and its markets, the ability to craft a compelling vision, and often through the ability to deftly negotiate office politics. Smart and savvy executives, those who have been around the organizational block more than a few times, not only possess the intellectual skills necessary to lead, but experience has taught them how to run through the organizational minefield relatively unscathed. It is those leaders that may unintentionally sabotage change efforts.

When an organization introduces a new program, it’s not uncommon for these seasoned leaders to dive in headfirst, forge ahead at light speed, and expect everyone below to follow suit. They value speed as paramount, look for quick wins, but see a structured implementation approach as potentially limiting. If problems do arise in the chain of command above them they can maneuver through the organizational obstacle course thanks to experience, knowledge, and power.

In the case of a Balanced Scorecard initiative this need for speed can manifest itself in a leader’s efforts to have just a few individuals craft a Strategy Map for the entire organization, do so in one short meeting, and have the document ready for organizational use the following day. But when velocity of development is the top priority for a Scorecard effort, the product that emerges tends to miss the mark in several ways: its contents don’t reflect the careful thought, debate, and dialog necessary to create a truly strategic document, it can be overly simplistic or conversely unduly complex, and perhaps most importantly it won’t generate the buy-in of those responsible for executing the objectives.

There is little doubt that creating momentum is vital to any change effort, but most initiatives (Balanced Scorecard included) require a certain amount of seasoning and review before being able to serve as a key tool in decision-making. Additionally, the Scorecard, again as with all change programs, requires a steady and structured approach if you hope to achieve optimal benefits from its use. Employees throughout the organization must be able to clearly grasp how the Scorecard fits into the larger context of the organization’s journey; how it helps transform strategy into reality, and guides day-to-day actions they’ll take.

What is most important for results-driven leaders to recognize is that structure serves a valuable purpose not only in guiding the implementation, but also acts as a soothing balm for employees not quite prepared to journey into the unknown represented by the initiative. As with all things, a balanced approach is required when implementing the Scorecard system, one that recognizes both the imperative to get things done quickly and the importance of a well thought-out roadmap for success.

References:

-Haig R. Nalbantian, Richard A. Guzzo, Dave Kierrer, and Jay Doherty, Play to Your Strengths (New York, NY, McGraw-Hill, 2004).