Latest

Sunday, September 30, 2007

Becoming a Leader

The author of The Leadership Challenge discusses the principles of good leadership and how many of today's leaders fall short

by Marshall Goldsmith
I recently had the chance to talk with my good friend, award-winning author Jim Kouzes, about the publication of the fourth edition of his and co-author Barry Posner's classic book, The Leadership Challenge. I've followed Jim and Barry's work since the publication of the first edition in 1987. I consider The Leadership Challenge to be the best research-based book ever written in the field of leadership. It is also one of the best selling books on leadership ever published. Here are edited excerpts of our conversation: One of the things I love about your book is that you have actually written it for the readers. Let's face it, most readers aren't chief executives. Most of your work is based on learnings from leaders at all levels, and it shows how every one of us can make a huge, positive difference in their organizations. Most of the leading that goes on in the world does not come from chief executive officers, presidents of companies, military generals, or famous people. Most of the day-to-day leading comes from ordinary folks, the everyday heroes of our world. When we're at work—whether in the executive suite, the retail shop, the factory floor, the back room, a field operation, or the corporate headquarters—the person most likely to influence our performance, positively or negatively, is our most immediate manager. That person is most likely to influence the trajectory of our careers, our ethical behavior, and our satisfaction with our jobs. If you're a parent, teacher, coach, or community leader you are the person setting the example for young people. What this means, no matter what your level or role is that, to those closest to you, you are the most important leader in the organization. The "great person" theory of leadership is just plain wrong. If you have the desire and the will to train and practice, we know you can improve your abilities to lead. I think that's a positive and affirmative message, and people are responding to it. Deep down, we all want to do a better job, and that's what we're trying to help people do. That's a very refreshing perspective. It suggests that each of us has to take more responsibility for the leading that we are doing and to stop looking up for the answers. Precisely. The question for each of us is not "Do I matter?" but "How do I matter? " If others look to you for leadership, how are you doing in leading them right now? Not how is my boss doing, or how is the CEO doing, or how is that famous leader doing, but how am I doing? So, if I am going to take more responsibility for leading and my own development as a leader, where do I start? You start by recognizing that leadership is a relationship. It's a relationship between those who aspire to lead and those who choose to follow. Any discussion of leadership has to consider the dynamics of the relationship between leader and constituent. Okay, then. What are some of those dynamics? For over 25 years now, we've been asking people to tell us what they look for and admire in a leader, someone whose direction they would willingly follow. The emphasis is on "willingly." And what people tell us has been surprisingly constant over time. For people to follow someone willingly, the majority of constituents want the leader to be honest, forward-looking, inspiring, and competent. From our very first study until the present, honesty has been at the top of the list of what people admire in their leaders. That's not surprising. It's clear that if people are to willingly follow someone—whether it's into battle or into the boardroom, the front office or the front lines—they want to assure themselves that the person is worthy of their trust. The second thing constituents expect from their leaders is a sense of direction, a clear vision of the future. We also expect our leaders to be energetic, enthusiastic, and positive about the future. And we also expect our leaders to have the competence to execute, that they have the capability to get the job done. Three of these four attributes—honest, competent, and inspiring—add up to what communication researchers call "source credibility." Credibility is the foundation of leadership. This finding has been so constant over time that we've come to refer to it as the First Law of Leadership: If you don't believe in the messenger, then you won't believe the message. The fourth quality, forward-looking, is the one that distinguishes leaders from other credible people. It's what makes the role of leader distinct. So, after 25 years, if I were to describe the essence of leadership in two words, those words would be credibility plus vision. And what are the actions leaders must take to get extraordinary things done? Five practices of exemplary leadership have emerged from our research. When getting extraordinary things done, leaders:
• Model the Way
• Inspire a Shared Vision
• Challenge the Process
• Enable Others to Act, and
• Encourage the Heart
Have these practices changed over the years? Do they differ across geography? We have found desired leadership practices to be remarkably consistent over the past thirty years—and around the world. Based on your research, what do leaders need to do better? Each leader is unique. There is no single profile that looks exactly the same, so each of us needs to get the feedback we need to be able to answer that question for ourselves. However, three things jump out at me from our recent data analysis. The practice in which the majority of leaders are the most deficient is Inspire a Shared Vision. And because being forward-looking is a prerequisite to leading—a full 72% of our respondents expect it, 88% at the most senior levels—it's of even greater concern. Today's leaders stink at the one practice that distinguishes leaders from other credible people. And those of us who help leaders become better at creating and communicating visions of the future stink at it, too. We need to focus a lot of attention on this practice, more so than any other. One other thing. And this is something you will appreciate, Marshall, because of the work you do in executive coaching. The one leadership behavior on which leaders score the lowest from the constituents' perspective is "He/she asks for feedback on how his/her actions affect other people's performance." So we are the poorest in a behavior that is absolutely essential to leadership improvement. How can we expect to do better than we're now doing if we are not routinely asking others for feedback? - (Business Week)

Motivating employees

Providing your employees with the right motivation and work environment to bring out their maximum potential and whole-person development (Part 1)
(CSB Ltd, Saturday, 29 September, 2007)
Managing your staff is not as simple as leading them to the pinnacle of success or improving their productivity. Good leaders should know how to bring out the best in their followers. Performance management is actually a new term for the old appraisal system where employee performance was regularly reviewed. Today, performance management focuses on ensuring that the organisation and all of its subsystems work together in an optimum fashion to achieve the results desired by the organisation. This is encapsulated in one of Human Resource's main objectives - meeting the company's needs by focusing on and developing employees' key strengths. Appraise, please Performance appraisals are essential for the effective management and evaluation of staff. Appraisals help develop individuals, improve organisational performance, and are then used for business planning. Annual performance appraisals enable monitoring of standards, agreeing on expectations and objectives, and delegation of responsibilities and tasks. Staff performance appraisals also establish training needs analysis and planning. The resulting data is fed into organisational annual pay and grading reviews, and coincides with business planning for the following trading year. Each individual's performance is reviewed against objectives and standards for the trading year, agreed at the previous appraisal meeting. There is increasingly a need for performance appraisals of all members of staff to include accountabilities relating to corporate responsibility. This is represented by various corporate responsibility concepts including the Triple Bottom Line (profit-people-planet); corporate social responsibility; sustainability; corporate integrity, ethics and fair trade. The organisation decides the level to which these accountabilities are reflected in job responsibilities, which would then feature in performance appraisals. Performance defined Performance appraisals have numerous benefits. To the individual staff member, they are essential for career and succession planning. Performance appraisals are relevant to staff motivation, attitude and behaviour development, communicating and striving to achieve organisational aims, and fostering positive relationships between management and staff. Performance appraisals provide a formal, recorded, regular review of an individual's performance, and a plan for future development. However, while the appraisal outline is a formal structure, the development discussed with the employee shouldn't have to be formal and constrained. Appraisals must address 'whole person' development - not just job skills or the skills required for the next promotion. Nor should the appraisal discriminate against anyone on the grounds of age, gender, sexual orientation, race, religion or disability. Improvement is an integrated process One should note that because performance management strives to optimise results and aligns all subsystems to achieve the overall results of the organisation, any focus of performance management within the organisation should ultimately affect overall organisational performance management as well. According to some sources, performance management goes through the following steps: analysis, identifying competencies and key skills, and lastly, continued development and control of performance management systems. A common approach to assessing performance is to use a numerical or scale rating system whereby managers are asked to score an individual against a number of objectives/attributes set during the previous meeting.

Saturday, September 29, 2007

Mastering Time Management Can Double Or Triple Your Productivity


By Chet Holmes


The true secret to becoming the best sales and marketing organization is repetition of basic core skills. Skill is not created by constantly switching to new things. Skill is created by focusing on a small number of things and doing them repeatedly. Black belts in karate do not become black belts by practicing 4,000 different moves; they become black belts by practicing 12 moves 4,000 times. The same is true of sales skills, particularly time management. Commit to these six steps: Six proactive steps to time management can transform your day. They take five minutes to do and can double the amount of results you get daily. The problem is not whether or not these steps will work, because they will absolutely work. The problem is whether or not you will fully commit to doing them, repeatedly. The key to time management is commitment to the following six steps: Step One: Touch it once: How often do you pick up something on your desk and say, “I have to take care of this, but I can’t deal with it right now”? If you do that a few times per day with a few different documents/projects/tasks, by the end of the year, you will have spent an entire month touching and rereading information without taking action. So, if you touch it, move it to the next step. If you want to see how often you waste time, each time you pick up something, put a red dot on it. After you have three red dots on a piece of paper, you begin to feel pressure to do something and move on. If you touch it, take care of it. Step Two: Make lists, but stick to the six most important things. When we conduct this time management seminar, we ask how many people in the audience make lists. Practically everyone does. People often have lists with 25 to as many as 40 items on them. They are proud that their lists are so long and that they are so busy. Further investigation quickly shows them that long lists are the perfect way to be busy, but not productive. When you have a long list, your energy is focused more on trimming the list than it is on being productive. Each day, pick the six items that will produce the highest level of results, put them on your list, and finish all six things by day’s end. Step Three: Plan how long you will spend on each item. You’ve started your day by making a list of the six most important things. That took two or three minutes. Now take another minute to plan how long each item will take or how long you will dedicate to the items that are ongoing. When we conduct this workshop, the people with long lists usually find that they can have an incredibly productive day with only six hours spent on their six key items. Most people who use these steps find they get more important work done in less time because their time is focused on the most productive tasks. Step Four: Plan when: Now that you know how much time to dedicate to each task, you need to plan when you will do them. In addition, you must build in time for the reactive mode. For example, if you are a sales manager interrupted by frequent “got a minute” meetings, plan a fixed time when you will accept those types of meetings. Otherwise, unless it is an emergency, do not allow people to come to your desk and ask if you’ve got a minute! Think of any top executive you know. Can you simply call them up, or do you have to schedule time with them? Many top executives plan their day down to the minute. Everything is done according to a schedule, including time for “got a minute” meetings. Scheduling time is the key to time management. Step Five: Ask the results: Few people are highly productive. People like to have items on a list, so they can cross off the items. But that’s not enough. The things that produce the best results are generally the most difficult. Thus, they get left off of the list or are scheduled at the end of the day, causing them to get bumped to the next day…and the next...and the next. Schedule important tasks in the beginning of your day. Cold calling or trying to get appointments with key prospects or clients are the things that produce the best results. However, they often get pushed off by average salespeople. After you make your list, ask yourself if the items on it are the ones that will produce the most results. Step Six: Will it hurt me to throw this away? Of all filed information, 80% is never referred to again. After hearing this time management idea, I began to throw away four out of five of the items I used to keep. It’s been 10 years, and I cannot think of a single time where it has hurt me. Making The Training Stick: Human behavior can only truly be affected in two ways: Repetition and direct involvement. You can agree intellectually that these six steps will cause a productivity increase, but until you practice them (direct involvement) and continue to use them (repetition), your behavior will not change. Common wisdom is that it takes 21 days to form a new habit. My experience is that it takes years. But for now, if you can stick to this program for just 21 days, you will be forever reminded of its power, and you will be more likely to use these important steps.
MANAGER’S DAY
8-8:30 a.m. Plan day; have quick look at staff’s planned day.
8:30–9:30 Work on strategy to overcome our new, most frequently heard objection.
9:30-10:00 Create a standard promotional piece or standard letter that addresses the problem.
10:00-12:00 p.m. On sales call with Bill
12:00-1:30 Lunch with important client, Smith
1:30-2:00 Miscellaneous
2-3 Got-A-Minute meetings
3-4 Review “Six Musts of Marketing” for the month
4-5 Work on better systems
5-6 Meet with Boss


Question: How much of this day is proactive?
Answer: All but 90 minutes

Thursday, September 27, 2007

Put your ideas to work

Innovation is a marriage of creativity and ability. It is putting ideas to work. Ideas are easy and cheap: backing it with action is the challenge. Ideas are useless if they are not implemented. Ideas must be backed with action. With activity. Goethe wisely pointed out: “There’s no growth without activity.” The only ideas we’re interested in presently are the ones that meet rigorous tests of practicality. The ones that involve the right mix of risk and reward. The ones that have an economic value – that have a high potential for generating monetary profits. Innovation is predicted on the fact that life is always advancing. You need to improve, too. That’s why you’re reading this piece. There’s no standing still in life. Either you’re moving forward or you’re sliding backward. If you want to maintain leadership where you are or in what you do, you have to accept the need to continuously and persistently upgrade your standards. Let your drive for excellence permeate every area of your life. Let it permeate every area of your operations if you’re a corporate entity. Anything can be improved or made better. Anything can be made simpler. It could be made faster and cheaper. In business, work is central to success. There’s no substitute to work. The best ideas in the world cannot implement itself; someone has to. So the measure of any good idea is how easily it can be put to work for the benefit of financial reward. Peter Drucker wrote that to make the future happen requires work rather than genius. The knowledge worker is the individual with the know-how, the daring, and staying power to implement ideas. But there’s a catch. Organizations resist change. Organisations favour the status quo. This is not surprising since the purpose of organization is to achieve order – the kind of degree and conformity necessary to do a particular job. Creativity and innovation disturb that order, so that organizations tend to be inhospitable to creativity and innovation. Yet without innovation the organization would eventually perish. What to do? ROUTINIZE innovation! You simply create and sustain a culture of creative innovation from inchoation. You should make it seem as natural as breathing. Now, you ask, how do you innovate? You innovate by: imitation, finding new relationships between people, institutions, things, situations, and concepts, finding new ways of doing things cheaper, faster, more efficiently, and with the minimum conflict or hazard, making changes and using new information. You must innovate for, if otherwise, there shall be no progress. Innovation isn’t a copyright of inventors. You too, from today, can start making a difference where you are. Start by improving the quality of your thinking and feelings. Choose to think only positive, ennobling thoughts. Decide to entertain only those feelings that have the greatest capacity to lift you up. Find a bolder, easier, faster, and cheaper way of doing what you are doing. Make it easier for those that live, work and play with you. How do you as an intellectual, entrepreneur, or investor begin to apply these ideas to your situation. Very simple. If you’re an intellectual, continuously improve your skills. Upgrade your attitude. Find ways of improving your workplace relationships and becoming more valuable to all your publics. Be enthusiastic about yourself, life, and your work. Think in terms of possibilities. Be more positive. If you’re an entrepreneur in this or any other environment, you must become an inverse paranoid. The concept of the inverse paranoid is an attitude of mind in which you see every event, every situation, every circumstance, every person, every turn of event - favorable or unfavorable - as conspiring to help you fulfil your purpose. The scratch of paper on the walkway contains something that might be of interest to you. The failure of your current project is omen of a bigger deal coming along. Newspapers contain useful information you require to solve your current problem. You’re an investor? Learn, learn, learn. Then invest, and learn more. And keep investing. You’re a hero. You’re an innovator. You are successful. You have made it. Put your ideas to work. - (NT, 27 Sep 07)

Stress On Total Quality Management

by Kedar Prasad Bhandari
The concept of quality is still in its incipient stage in Nepal. Many people in both the public and private sectors are not aware about the importance of quality. However, the need for quality has been on the rise as Nepal embraces globalisation.AppreciationQuality is the perception of superiority or a sense of appreciation by customers to satisfy their needs. It is perceived by different people differently. Total quality management (TQM) is the process of creating an organisational culture committed to constantly enhancing the skills, teamwork, process and product and service quality to satisfy the needs of the customer. It is a management strategy designed to bring awareness about quality in all organisational processes. It provides an umbrella under which everyone in the organisation can attempt to create a satisfied customer. TQM consists of three qualities. Quality of return on investment to satisfy shareholder needs, quality of products and services to satisfy customer needs and quality of life - at work and outside work � to satisfy employees' needs. Total quality management ensures that things are done right the first time, and defects and waste are eliminated from operations. An organisation that adopts TQM must implement changes in all areas of management. TQM is the substitution of earlier management theories, which were based on the belief that low cost is the only way to increase productivity. It must now review its strategies, plans, policies, procedures and practices depending upon the market needs. The basic purpose of TQM is to produce better quality products or services, respond quickly in processing customer needs, show greater flexibility in adjusting to customer needs, minimise cost through quality improvement and eliminate the overlap of effort. Managers committed to successful implementation of total quality management must emphasise on both the human resource development model and organisational development model together. A successful TQM requires both behavioural and cultural change. It brings other management systems together with a behavioural and cultural commitment to improving quality. Organisations can apply several tools and techniques to improve quality. The popular among them are benchmarking, outsourcing, speed, ISO 9000 and statistical quality control techniques.Benchmarking is the process of searching the best practice among competitors that leads to superior performance. It is an evaluation and comparison of one's products and processes with the very best competitors. It is a very specific form of environmental scanning. Benchmarking involves looking at similar firms to understand how they have achieved the best performance levels. It helps to examine the process behind excellent performance. This helps organisations to develop the best practices to improve the performance level. Application of benchmarking involves: understanding in detail the existing business practices, analysing the business process, comparing one's business performance with that of others and taking the steps necessary to close the performance gap.Outsourcing is the process of subcontracting some of the jobs to another organisation to bring quality and get the benefit of specialisation. It is an important means of reducing cost and improving quality. An organisation performing each and every activity by itself may not be able to perform its activities efficiently and effectively. Therefore, every organisation needs to identify the functions that can be outsourced to minimise the cost of output to produce higher quality. Speed is the time required to perform a specific activity for an organisation. It is required in all areas including development, production and distribution of goods or services. Speed has become an important competitive advantage today. Increasing speed will give organisations a strategic advantage and help them to complete the task more effectively. It involves not only doing the same thing faster but also rethinking and redesigning the whole business cycle. The International Organisation for Standardisation (ISO) is an international standard-setting body composed of representatives of standard bodies from various nations. It was established in February 1947 with its headquarters in Geneva, Switzerland. The organisation produces worldwide international and commercial standards. There were 158 member countries in the ISO in 2006. There are five sets of standards covering areas such as product testing, employee training, record keeping, supplier relations and repair policies and procedures starting from 9000 to 9004. Firms that meet these standards apply for certification and are audited by a firm's domestic affiliate. The Nepal Bureau of Standards and Metrology adopts this standard in Nepal. This office reviews every aspect of the firm's business operation in relation to standards and grants the ISO 9000 certificate. It develops quality standards over a wide range of quality systems, which add value to the business operations. Statistical quality control is a set of specific statistical techniques applied to monitor the quality of goods or services. It measures the degree of conformance of the various factors involved in processing the products on the basis of specifications. It is based on statistical and probability theories. It seeks to control quality through incoming materials, processing and outputs produced. Acceptance sampling is applied for testing materials and final output to ensure that quality standards have been met. Process sampling is used to evaluate products during the course of production to ensure that defective pieces are not produced. Acceptable qualityControl charts are constructed to set acceptable lower and upper limits of an aspect necessary for control in an item. All finished products may, therefore, not be exactly the same; some limits or tolerance must be set so that should the finished product fall within these set limits, it can be considered of acceptable quality.

Wednesday, September 26, 2007

In Search of Performance Management Solution

When the question of what Performance Management is and what it entails is asked in any organisation, there are as many answers and perceptions as there are people in the organisation. The Human Resources Department will tell you that Performance Management entails the training, mentoring and development of employees; Finance Department will tell that Performance Management is the measurement of a series of financial and non financial indicators; the IT Department will tell you that Performance Management is the “system” used to manage performance in an organisation. Though none of these perceptions are incorrect, they are only part of the truth.To complicate matters even further, numerous management methodologies have been introduced over the years, which all claim to be the silver bullet when managing performance. Concepts such as the Balanced Scorecard, Value Based Management, Total Quality Management and Six Sigma are commonplace in most managers’ vocabulary. Perhaps the starkest reality when attempting to sift through the information overload is not the lack of information and methodologies available to design and implement a performance management system, but the realisation that there is no silver bullet that can create a successful performance management system. Managers cannot delegate what is effectively their job to a “system”. To ensure the success of a performance management system, managers have to devote a significant amount of their time to the process. Often the success or failure of a performance management system has less to do with the chosen metrics and templates used for managing the system, and more to do with the honesty and rigor used in the process. All too often, performance management systems fail because they are either measurement systems, where little is done to interpret the results and take corrective action, or the system is simply delegated to the bottom drawer because it is cumbersome and managers have not bought into the process.A well-designed and implemented performance management system will ensure that there is open and honest communication between all layers of the organisation. It will ensure that managers have the authority to manage, while there is an assurance to their bosses that agreed levels of performance will be met. A good performance management system should focus not only on the achievement of a metric but also on the reasons behind the achievement or non-achievement of the metric in relation to a target. Unfortunately there is no magic formula for designing an effective performance management system, but there are a number of factors which differentiate between success and failure. Performance Management implementation either succeeds or fails, based on whether the management buys into the process. If a robust change management process does not run alongside the process of implementing performance management, it is bound to fail. Complete management buy-in at all levels is crucial to ensuring the success of the system. The change management process and associated training will ensure that a culture of value creation is instilled throughout the business. It is important for all employees to understand the concept of value creation as well as understanding how their decisions and actions influence value creation. This understanding can be achieved by top management members who consistently reinforce the importance of the value creation mindset in all their communication to the rest of the organisation. Ultimately the senior management must lead by example and walk the talk. Senior managers, who cut the budgets for employee development and training to meet short-term profit objectives, are unlikely to inspire a culture of long-term value creation among the members of their middle management team.Performance Management relies on measuring performance and on taking corrective action when the targets set for the performance metrics are not met. What is measured will ultimately impact on people’s behaviour, therefore it is important to ensure that due consideration is given to identifying the value drivers that define the short-term performance and long-term health of the business. It is important for managers to have a clear understanding about what the business’s value drivers are, as this will ensure that managers can understand and analyse the trade-offs required to balance short-term performance against long-term health. For example, reducing Research and Development costs may bolster short-term performance but could have disastrous consequences for the business in the long term. When identifying the priority value drivers, it is important to take the following into account:* Will focusing on the driver have a material impact on business performance* Does management have control over the factors which influence the driver, or do the external environment and asset constraints prevent them from having a meaningful impact?* Does the driver have any unintended consequences, such as managing inventory levels to the detriment of customer service?* Is the driver sustainable, or is it a one time cost reduction or synergy?Once these factors have been considered, the important value drivers can be ranked in order of priority, appropriate value metrics can be assigned to the drivers and they can be cascaded throughout the organisation. SMART target setting should ensure that the targets that are set are realistic but are also challenging. In short, targets should be specific, measurable, attainable, realistic and time-based. Targets must be based on the opportunities identified for improvement and any economic considerations. When setting targets, the following input should be borne in mind, namely the performance of similar companies in the same industry, the internal performance of business units, historical performance and blue-sky scenarios. Performance targets should include a base which should be regarded as the minimum level of acceptable performance, and a stretch target which should result in considerable rewards if it is met.Quarterly performance reviews should focus on the facts, using a scorecard as the basis for the discussion. Reviews should focus on the reasons for poor performance so that they do not recur, rather than on apportioning blame. Opportunities for employee development should be identified and implemented during the review process. The final consideration when designing and implementing an effective performance management system is to ensure that the top performers are adequately rewarded and recognised. Well-designed incentive schemes should differentiate between top performers and the rest of the organisation. Short-term rewards should be linked to the achievement of annual financial and non-financial measures, whereas long-term incentives should focus on rewarding long-term value creation and the long-term health of the business. The organisation’s top performers should also have abundant opportunities for non-financial rewards such as career advancement and development opportunities.Though performance management is an important tool for creating value in an organisation, its design and execution are complex and the best intentions are often shelved or sidelined. However, companies that are willing to invest in establishing a culture of value creation linked to effective targets, reviews and rewards, should definitely reap the rewards that a performance management system offers. It must however be reinforced that no matter how hard you look, there is no performance management silver bullet to be found.Leslie Yuill
When the question of what Performance Management is and what it entails is asked in any organisation, there are as many answers and perceptions as there are people in the organisation. The Human Resources Department will tell you that Performance Management entails the training, mentoring and development of employees; Finance Department will tell that Performance Management is the measurement of a series of financial and non financial indicators; the IT Department will tell you that Performance Management is the “system” used to manage performance in an organisation. Though none of these perceptions are incorrect, they are only part of the truth.To complicate matters even further, numerous management methodologies have been introduced over the years, which all claim to be the silver bullet when managing performance. Concepts such as the Balanced Scorecard, Value Based Management, Total Quality Management and Six Sigma are commonplace in most managers’ vocabulary. Perhaps the starkest reality when attempting to sift through the information overload is not the lack of information and methodologies available to design and implement a performance management system, but the realisation that there is no silver bullet that can create a successful performance management system. Managers cannot delegate what is effectively their job to a “system”. To ensure the success of a performance management system, managers have to devote a significant amount of their time to the process. Often the success or failure of a performance management system has less to do with the chosen metrics and templates used for managing the system, and more to do with the honesty and rigor used in the process. All too often, performance management systems fail because they are either measurement systems, where little is done to interpret the results and take corrective action, or the system is simply delegated to the bottom drawer because it is cumbersome and managers have not bought into the process.A well-designed and implemented performance management system will ensure that there is open and honest communication between all layers of the organisation. It will ensure that managers have the authority to manage, while there is an assurance to their bosses that agreed levels of performance will be met. A good performance management system should focus not only on the achievement of a metric but also on the reasons behind the achievement or non-achievement of the metric in relation to a target. Unfortunately there is no magic formula for designing an effective performance management system, but there are a number of factors which differentiate between success and failure. Performance Management implementation either succeeds or fails, based on whether the management buys into the process. If a robust change management process does not run alongside the process of implementing performance management, it is bound to fail. Complete management buy-in at all levels is crucial to ensuring the success of the system. The change management process and associated training will ensure that a culture of value creation is instilled throughout the business. It is important for all employees to understand the concept of value creation as well as understanding how their decisions and actions influence value creation. This understanding can be achieved by top management members who consistently reinforce the importance of the value creation mindset in all their communication to the rest of the organisation. Ultimately the senior management must lead by example and walk the talk. Senior managers, who cut the budgets for employee development and training to meet short-term profit objectives, are unlikely to inspire a culture of long-term value creation among the members of their middle management team.Performance Management relies on measuring performance and on taking corrective action when the targets set for the performance metrics are not met. What is measured will ultimately impact on people’s behaviour, therefore it is important to ensure that due consideration is given to identifying the value drivers that define the short-term performance and long-term health of the business. It is important for managers to have a clear understanding about what the business’s value drivers are, as this will ensure that managers can understand and analyse the trade-offs required to balance short-term performance against long-term health. For example, reducing Research and Development costs may bolster short-term performance but could have disastrous consequences for the business in the long term. When identifying the priority value drivers, it is important to take the following into account:* Will focusing on the driver have a material impact on business performance* Does management have control over the factors which influence the driver, or do the external environment and asset constraints prevent them from having a meaningful impact?* Does the driver have any unintended consequences, such as managing inventory levels to the detriment of customer service?* Is the driver sustainable, or is it a one time cost reduction or synergy?Once these factors have been considered, the important value drivers can be ranked in order of priority, appropriate value metrics can be assigned to the drivers and they can be cascaded throughout the organisation. SMART target setting should ensure that the targets that are set are realistic but are also challenging. In short, targets should be specific, measurable, attainable, realistic and time-based. Targets must be based on the opportunities identified for improvement and any economic considerations. When setting targets, the following input should be borne in mind, namely the performance of similar companies in the same industry, the internal performance of business units, historical performance and blue-sky scenarios. Performance targets should include a base which should be regarded as the minimum level of acceptable performance, and a stretch target which should result in considerable rewards if it is met.Quarterly performance reviews should focus on the facts, using a scorecard as the basis for the discussion. Reviews should focus on the reasons for poor performance so that they do not recur, rather than on apportioning blame. Opportunities for employee development should be identified and implemented during the review process. The final consideration when designing and implementing an effective performance management system is to ensure that the top performers are adequately rewarded and recognised. Well-designed incentive schemes should differentiate between top performers and the rest of the organisation. Short-term rewards should be linked to the achievement of annual financial and non-financial measures, whereas long-term incentives should focus on rewarding long-term value creation and the long-term health of the business. The organisation’s top performers should also have abundant opportunities for non-financial rewards such as career advancement and development opportunities.Though performance management is an important tool for creating value in an organisation, its design and execution are complex and the best intentions are often shelved or sidelined. However, companies that are willing to invest in establishing a culture of value creation linked to effective targets, reviews and rewards, should definitely reap the rewards that a performance management system offers. It must however be reinforced that no matter how hard you look, there is no performance management silver bullet to be found. - by Leslie Yuill

Tuesday, September 25, 2007

Blue Ocean Strategy: Not your father's strategic planning process

Blue Ocean Strategy is changing the way that forward looking companies are formulating strategy and doing strategic planning. And it is not strategic planning as usual. Traditional strategic planning typically marches out the organization’s financial data and then an effort is made to look at the strengths, weaknesses, opportunities and threats, based on historical and current information. Some of these efforts may bring incremental improvements in a company’s competitiveness or bottom line, they do not ensure long term growth or reveal new opportunities. Many organizations will go so far as to survey customers to see what they want. These companies brag that “We give our customers what they want and more”. The problem is that customers don’t know what they want or don’t want, until it is presented to them. How many customers asked for a desk top computer before it became available? Or a mobile phone? or a larger golf club head? Or even a car, or airplane? or an upscale circus? Yet, when presented with these new products, customers clamber to take advantage of them, leaving the company giving the customer only what they think they want, in the dust. Customers will tell you they want more of what you have, at a lower price. There goes your profit.What is the best way to plan? Focus on the big picture, not the numbers, and reconstruct market boundaries to include customers not being served by your competitors. Dr. Sarah Layton, CEO of Corporate Strategy Institute, is one of a few people world wide qualified in Blue Ocean Strategy tools, concepts and processes by the Blue Ocean Strategy Initiative Centre, London. Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant, based on the best selling book of the same name by Chan Kim and Renee Mauborgne, shows you how. - (CSI, 6 Sep 07)

Groom the goal scorers

The deal frenzy made possible by years of easy credit has come to an end. Private equity barons can put away their slide-rules and forget about that daring bid for Microsoft – for the time being, at least. We will have to wait a bit longer for the next deal of the century. Until then, I’m afraid, this can only mean one thing: it is back to boring old management. The new (if merely temporary) owners of all those recently acquired assets are going to have to get their heads down and show us how clever they really are. Now we will find out who has the ability to raise the performance of their businesses, to cut costs without doing more harm than good, and to run their companies effectively. Guess what? It is not going to be easy. Business leaders will take a hard look at their organisations and wonder whether they have the necessary managerial “talent” – the other popular phrase is “bench strength” – in place to meet this challenge. If you thought you had already heard enough for one lifetime about “talent pipelines” and leadership development, you had better brace yourself for more. The publishing arm of Harvard Business School has just completed a research study to discover the top executive-level concerns facing global companies. Talent management came out as agenda item number one. This points us towards one of the untold stories about vibrant economic growth. You might think that a buoyant economy and dynamic emerging markets must be good news for business. They are – but only if you have the people in place to make the most of them. Being sent halfway round the world to run the Chinese operation is hardly an easy assignment. It takes a rare combination of skills and experience (and the right attitude) to work successfully in an unfamiliar and fast-changing environment. Equally, any newly minted MBA can cut costs. The important question is, who can build on existing revenue streams and find new ones at the same time? Leaders are made, not born. This means that if you have not already been taking steps to develop managerial talent in your business then you may be a bit late. You will certainly have fallen behind those organisations – talent gurus mention General Electric, Procter & Gamble and Nokia in this context – who have been working at this for some time. (The lucky ones among you might be able to go out into the market, like a football manager, and buy the talent you need. But this is an expensive, inefficient and unreliable option. Better to grow your own.) Presuming that you are not too late, what can you do to help talent flourish within your walls? Naturally – this being management-land – you have a choice of metaphors to go for. You can try to build a “talent factory”, or you could establish a “talent marketplace”. In the June edition of the Harvard Business Review, Doug Ready and Jay Conger wrote in some detail about the nature of a successful talent factory. The companies they looked at – P&G and the banking group HSBC – are able, in the authors’ opinion, to combine rigorous management development processes (“functionality”) with “vitality” – an “emotional commitment by management that is reflected in daily actions”. At P&G, for example, when a vacancy arose for a rising star to run a joint venture in Saudi Arabia, the requirements for the new role were very specific. The manager needed to have emerging-markets experience but also needed to understand the detergents business and be prepared to relocate at short notice. OK, so P&G is big, and it should have been able to find someone. But five suitable candidates were immediately identified on the company’s global “talent profile” database, and the new manager was in place just three months after the search began. Profs Ready and Conger pose some simple but revealing questions about how seriously companies take the issue of talent development. They challenge business leaders directly. Do you know what skills you will need to meet your growth targets? Do you know how to spot high potential future leaders, and if so, do you build individual development plans for them? And so on. They have 10 such questions in total. There is no ducking this professorial inquisition. Prof Ready says that the issue of “high potentials” has to be handled sensitively: “Remember that as well as ‘High Pos’ you can also get ‘Po-Pos’ – Passed Over and Pissed Off.”
Even more radical than the factory concept is the “talent marketplace” described by McKinsey’s Lowell Bryan and Claudia Joyce in their recent book Mobilizing Minds. “Use market mechanisms to match the self-interest of employees seeking the best job opportunities with the self-interest of managers looking to fill their job opportunities with the best available talent,” they write. HR managers as “talent market-makers”? It makes a change from “strategic partner” at any rate. There is no substitute for talent. As BBC TV’s football pundit Alan Hansen likes to say: “Who do you see when you look round your dressing-room before the start of the match? Does your team have a chance?” Well, does it? - (FT, 24 Sep 07)

In campus talk, Stephen Covey stresses communication at California University of Pa.

An author and leader in the field of "effective and inspirational leadership" visited California University of Pennsylvania Tuesday as part of the university's effort to promote and expand its leadership initiatives. Stephen R. Covey, author of "The Seven Habits of Highly Effective People," spoke to an audience of several hundred people in the auditorium of the university's Steele Hall. University President Angelo Armenti said Covey's presentation was the first event presented in the newly renovated building. "We are so proud of the relationship that our university has developed with Dr. Covey," Armenti said. Covey received an honorary doctorate from the university in 1997 and was the university's keynote speaker at commencement that year, Armenti said. Covey's presentation focused on the importance of effective communication in building strong and successful interpersonal relationships. Because the family is the foundation of any society, Covey said, effective relationships begin at the family level. "No society will ever become greater than the strength of its families," he said. "Our most important roles are the roles we play as fathers, mothers, sons, daughters, brothers, sisters, aunts and uncles. Our most important roles are family roles." In order to build strong family relationships, Covey said family members first must learn to communicate effectively. He added that the most important skill in learning how to communicate effectively is how to listen empathically, which he also pointed out is probably the most difficult skill to learn. "Probably less than 5 percent of us have ever been trained on how to listen empathically," Covey said, "and yet we've all been given years of training on how to read, write and speak." Covey defined empathic listening as the ability of one person to listen within another person's frame of mind. He went on to present what he called a "listening continuum," which he described in four stages. In the first stage, Covey said, the listener is ignoring the speaker. In the second, the listener begins to pretend as if he or she is listening to the speaker. The third stage in Covey's continuum is selective listening, where the listener's attention is sparked by words or phrases that remind him of something else. In the fourth stage, which Covey called attentive listening, the listener pays close attention to the speaker's words, but is still within his own frame of mind. Not until the listener can escape his own frame of mind and begin listening in that of the other person can he truly achieve the goal of empathic listening, Covey explained. In addition to his presentation on empathic listening, Covey also talked about the importance of holistic existence, which he called the "four needs of life." "To live, to learn, to love and to leave a legacy are truly the four needs of life," Covey said. "To live is to have a healthy body; to learn, a healthy mind; to love, a healthy heart; and to leave a legacy is to have a happy and healthy spirit." Covey also spoke briefly on leadership. "Leadership is not a position, it's a choice," he said. "Pay the price to make a contribution." Before his public presentation, Covey took part in a panel discussion with some members of the university and local media. He fielded questions regarding his philosophies and beliefs, and he offered advice to college students and recent graduates who might be unsure of their future. "I think a person can find their voice and make a great living doing it," Covey said. "Discipline and passion are governed by vision. When your need, conscience, talent and passion overlap, that is when you've found your voice." Covey also spoke about the importance of building mutual respect and civility and producing what he called "third alternative" solutions to certain problems. He cited a leadership summit he attended in which spiritual leaders of Islamic, Jewish and Christian faiths discussed ways to build better relationships with the world. Covey is working on a new book, a section of which he said he plans to devote to California University of Pennsylvania. Armenti said Covey will host a monthly "webinar" where he will discuss his philosophies in greater detail. -(TR, 16 Sep 07)

Monday, September 24, 2007

Anger Management: An Islamic perspective

How many times have you shouted at your parents? How many times have you felt so angry that you were just about to hit someone? Does this happen a lot? You're not the only one. Many people now are unable to control themselves and end up arguing with others, often the ones that they love - their parents, their brothers, their sisters, their husbands or wives. Here we're listing some reasons that stir people's anger and ways given from the Qur'an and Sunnah to overcome this anger and control yourself. When first God created humanity, He created many emotions and desires within each person, which we call human instincts. These include positive qualities such as recognizing truth and expressing it, love and compassion, pure physiological desires such as being thirsty, hungry and in need of sex.Then there are some negative qualities such as hate and anger, with resultant violence and dejection.Allah says in the Qur'an:"And when your Lord said to the angles, "I am creating successors on the earth." They said, "Will You create on it those who will spread corruption and spill blood, although we celebrate Your praise and extol Your Holiness?" He said," I know what you do not know." (Qur'an 2:30)Also Allah instilled some protective mechanisms for fighting these negative instincts.Allah says in the Holy Qur'an:"Man was created weak."During the moment of weakness, we succumb to the designs of our enemy, that is, the devil, who "will attack us from front, from behind, from the side," in order to divert us from God consciousness and return to our animistic nature. Thus anger by itself is not unnatural; it is the expression of anger which is done wrongfully, can lead to problems. The difference between the wild beasts and wild humans is the difference of free will.When a lion or a wolf is angry, he does not think. When a man becomes angry as a result of provocation, he has a choice to control his anger or to respond to it as he has learned from the Qur'an and from Prophet Mohammad's teachings, or forget all that and become a wild animal. Thus anger takes place when we are not in control of ourselves, but the devil is controlling us. Anger in itself is a natural feeling, Allah has put such feeling inside us to react against what's harming us, for instance to protect our lives, our properties, and our families. Yet we shouldn't over do that. Meaning it is ok to feel angry, but it is dangerous and forbidden by Allah to surrender to your anger and follow it to as far as it takes you (for it might drive you to killing somebody).Anger is a de stabilizing thought. It is the most dividing emotion between friends; it takes away judgment, leads to depression, madness and wrong actions that we would repent later on when we are not angry. But why do we get angry to begin with? It is either an unexpected provocation or unexpected situation which leads to frustration and an angry response.During anger, one can physically or verbally abuse a person that he or she loves, hurt another living being like an animal, or during the dejection phase of anger, one can even hurt him- or herself and even commit suicide. Prophet Mohammad (PBUH) gave us the medicine for that saying:"Shake hands and rancor will disappear. Give gifts to each other and love each other and enmity will disappear".Also Prophet Mohammad (PBUH) said:"A strong person is not the person who throws his adversaries to the ground. A strong person is the one who contains himself when he is angry".The point is that the natural fulfillment of normal desires, whether in terms of food or sex, is a prerequisite for prevention of anger. There are many chemicals and hormones which affect our moods and behavior. It is well known that hypoglycemia and hyperthyroidism precipitate irritability when feeling angry. We must keep our hormones in balance in addition to facilitate our spiritual well-being. We Muslims, are followers of Prophet Mohammad (PBUH), right? What better example of patience do we have than that of our own blessed Prophet himself? Prophet Mohammad (PBUH), who was sent to mankind to teach them good moral conduct, learned to control his anger toward the Unbelievers and teach them appropriate expressions. He used to speak against being angry. We think that we have it tough, when one of his days was probably tougher than the whole of our lifetimes! When we look at his life, our own difficulties seem so pathetic in comparison. Imagine spending 13 years completely devoting his life spreading the word of Islam and suffering hardship. This was a man who had the burden of the whole of mankind's future on his shoulder. Yet he had the tolerance and self-discipline to be able to forgive those around him who were themselves so ignorant.The best example of this was when the Prophet (saw) went to a place called Ta'if. This was at the time when the followers of Islam were at their weakest and the Prophet himself had suffered the loss of both his wife Khadijah (May Allah be pleased with her) and his uncle Abu Talib. He went to this town in the hope that they would listen to what he had to say. Instead he was insulted and chased out of the town by the children who threw stones at him till (it was described) the blood flowed from his body to his feet making his sandals sticky with his own blood. The Prophet was so depressed that he prayed to Allah, who then sent down the Angel of the mountains who asked for the Prophet's permission to fold the mountains together and crush to death all those that lived there. But what was the prophet's reply? "Yes, kill them all as they did not listen to me"? No, off course not! His answer was "No, I hope Allah will bring from them people who will worship Allah alone, associating none with Him."This was the example of the Prophet, even though he felt bitterness and was very angry with them, he had the discipline and control to not let his emotions control his actions and he forgave them realizing that they were merely misguided.One companion asked him, Give me some advice by virtue of which I hope for good in the life hereafter, and he said, "Don't be angry." Another person asked, what will save me from the wrath of God, and he said, "Do not express your anger." A third person asked three times, 0 Messenger of Allah, give me an order to do a short good deed, and he said, "Don't be angry." Once he asked a question of his companion, "Who among you do you consider a strong man?" They said, the one who can defeat so-and-so wrestler in a fight, and he said, that is not so. The one who is strong is the one who can control himself at the time of anger. He also said that anger is like fire, which destroys you from within, and it can also lead you to the fire of hell by your own expressions of anger unjustly.So being angry is similar to being drunk. In both cases, we do not know what we are doing, hurting ourselves or someone else, and afterwards when the intoxication is over, we repent.Sheikh Hassan Al Basri said that one of the signs of the Believers is that his anger does not prevail over him.One should distinguish between natural response to wrongdoing and disbelief. A person who has no feelings about oppression, wrongdoing and disbelief is, in fact, an impotent person emotionally. It has been said, "Evil flourishes when a few good people do not do anything to oppose it." Thus response to injustice and operation in a civilized way is the appropriate expression of anger. Being neutral to injustice is equal to contributing to injustice.Caliph Ali was once fighting in a war imposed on Muslims, and the chief of the Unbelievers confronted him. During the fight, the Ali was able to overcome him, who fell down on the ground and Ali was about to kill him. This person, knowing his fate now, had no choice so he spit on the face of Ali. Ali immediately got up and left him alone. The man came running to him and asked, "You had a chance to kill me since I am a Polytheist; how come you didn't use your sword?" Ali said, "I have no personal animosity toward you. I was fighting you because of your disbeliever, on behalf of God. If I had killed you after you spat on my face, then it would have become my personal revenge which I do not wish to take." That Unbeliever chief became a Muslim immediately and testified that 'There is no god but Allah, and that Prophet Mohammad (PBUH) is the Messenger of Allah'.When Prophet Mohammad (PBUH) became angry at someone else's wrong actions or disbeliefs, he never expressed it with his hand or tongue. His companions knew that he was angry by just looking at his face, which would turn red and with some sweat on his forehead, and he would keep quiet for a moment, trying to control himself.What happens to us physiologically when we are angry?Our heart beats rate and blood pressure go up; this is a direct effect of excessive adrenalin in our system. Our physical strength increases although spiritual strength decreases. Our intellect or power to reason disappears, and things we would not justify in a normal state become acceptable.How can we defeat anger?To root out anger is impossible and unnatural, and may even be harmful. But what we should do is to control this feeling and do not let it lead us to what's wrong and forbidden in our religion (Islam).Firstly I advise you to avoid too much sensitivity that makes you "deaf, dumb and mute." For some people getting engaged in something else that diverts their attention away from what's angers them can be useful. For others, engaging in remembrance of God or meditation might work, but for common folk, they need some worldly tools.Prophet Mohammad (PBUH) had advised us that when angry, one should try to change his body position. Meaning, if you're standing up, sit down, and if you're sitting down stand up. If this didn't work, then go and wash and get prepared for praying.When you're angry, think of Allah. Think of Allah's anger and punishment. Is Allah's wrath less than your wrath? And what happens when He expresses His wrath? We humans who seek forgiveness from Allah must forgive others first. When one forgives someone else, it establishes peace and tranquility in one's heart.The first attribute of Allah that we Muslims are reminded (of) is Ar Rahman-Ar Rahim that is, Kind and Merciful. God Himself said, my mercy overtakes my wrath, and He told in one of the Hadith Qudusi, 'O son of Adam, when you get angry, remember Me." Thus, remembrance of God and meditation will put us on the right track. One of the meditation words is ya Halim (Patient), which is one of the attributes of God, being the Mild One. One can also pray to God to take control. We must also think that our life that is so dear to us, is a temporary life, and we must not forget our death and destroy the life of eternity at the cost of this life. Washing one's face with cold water or taking a cold shower is also helpful.That is how the saying, "turn the other cheek" came about. One will become a calm person when he makes peace with himself, Allah and his surroundings. Anger is a costly weed; it costs one his health, life in this world, and the life in the Hereafter. This weed must be rooted out to allow the healthy plant of righteousness, piety and obeying Allah nurture and grow. Also anger is one of the weapons of Satan, we should be careful that we do not fall prey to his weapons, rather we should protect ourselves by being patient. -(IslamOnline)

Sunday, September 23, 2007

Providence California Region Vying For Six Sigma Awards

Providence Health & Services - California Region has been named as one of three finalists for The Global Six Sigma Award in Healthcare. The Global Six Sigma Awards, provided by WCBF Six Sigma Solutions, honors the most outstanding organizational achievements through the application of Six Sigma methodologies. Six Sigma, originally developed by Motorola, is an integrated, disciplined proven approach for improving business performance.
The Global Six Sigma Awards will be provided in six categories - one being health care. The winners will be announced in Las Vegas on Oct. 24.
“Using Six Sigma methodologies, we have been able to continually improve our clinical performance at the beside, thereby assuring our patients that they are receiving the finest care in the safest environment,” said Myron Berdischewsky, M.D., Chief Medical Officer, Providence Health & Services – California Region. “Being named as one of the three finalists for Best Achievement of Six Sigma in Healthcare is a great honor that reflects the excellent work accomplished by all the dedicated front line staff and managers at our four hospitals in Southern California.”
Providence Health & Services - California Region consists of four acute care hospitals as well as several skilled nursing and outpatient facilities throughout Los Angeles County. The four acute care hospitals are 556-bed Little Company of Mary San Pedro Hospital, 448-bed Providence Saint Joseph Medical Center in Burbank, 434-bed Little Company of Mary Hospital in Torrance and 255-bed Providence Holy Cross Medical Center in Mission Hills.
Like other companies, Providence Health & Services has used Six Sigma methodologies to eliminate defects and thereby increase efficiency and reduce waste, which it has done successfully in such projects as revenue cycle improvement and reducing the time for patients to receive a computer tomography (CT) scan after an order is placed. However, much of Providence’s focus has been in using Six Sigma to improve clinical performances at the patient bedside.
Using Six Sigma methodologies, the Providence California Region has worked to improve the care it provides to surgery patients by assuring that antibiotics are discontinued at the appropriate time, to pneumonia patients by assuring they receive antibiotics quickly, to congestive heart failure patients by assuring they receive adequate discharge instructions, as well as to emergency department patients and to patients susceptible to falls. - (KHTS, 22 Sep 07)

Managemet program: Delta Dental is satisfied with scorecard results

Five years ago, executives of Delta Dental of Kansas Inc. set out to implement a new management program. The purpose of the program, called the balanced scorecard, was to help the company carry out its growth strategy. The difference was that it wasn't a program that affected just the senior and middle management of the Wichita-based dental insurance company. It required the participation of all of the company's nearly 100 employees. "It truly does increase accountability and transparency," said Linda Brantner, Delta Dental president and chief executive. Getting employees to buy in to the balanced scorecard system probably was the biggest hurdle Delta Dental officials had to overcome in its implementation. But Brantner, like executives at other companies that have implemented the balanced scorecard, said the payoff has been significant. Measurable results: In its 2006 annual report, Delta Dental said its business and operations improved in several ways, all because of the balanced scorecard. Company revenue increased 176 percent to $174 million in 2006. Delta Dental's market share more than doubled. And its expense ratio dropped nearly 3 percent in five years. "It made it possible for us to clearly define our strategy and communicate it," Brantner said. "It helps you align your initiatives and resources to your strategy." The balanced scorecard was created by Harvard Business School professor Robert Kaplan and business consultant David Norton as a way to communicate and implement strategy throughout an organization -- all the while measuring a company's progress toward meeting its strategic goals. It's a system that was also implemented at UMB Bank in 2005, said Craig Anderson, chairman and chief executive of UMB's Kansas region. "It's been a great tool for us and is one of the primary drivers of our earnings growth, our loan growth over the last three years," Anderson said. "We had different measurement systems, but we did not have that type of strategic focus month by month." Key to its implementation is the participation of all of an organization's employees. All Delta Dental employees' compensation is tied to their scorecard performance, which they review quarterly with managers. "It's truly not something you do once a year and put away," Brantner said. "What we try to do is align everybody's goals... with the corporate strategy." Delta Dental rolled out the balanced scorecard to rank-and-file employees a year after it was launched at the corporate and departmental levels. Brantner said it took a while for all of the company's employees to understand it and accept it. The company held training sessions and all-employee meetings on the scorecard, and stories on it were published in the company newsletter. UMB's Anderson compared the scorecard to the report cards "like we all had in high school and college." At UMB, an example of a balanced scorecard goal would be increasing total loan or deposit growth by a certain percentage annually. "It gives you a specific set of goals to manage to," Anderson said. "We look at those metrics month by month to see how we're faring against that target goal." Brantner says one scorecard area where the company saw great improvement was the time for its customer service representatives to answer phone calls. Previously, it took 12 seconds for a call to be answered by a representative. That's since been halved to six seconds. For that group of employees, that was a target set for both a departmental and individual scorecard measure. 'Valid concept': A local management expert compared the balanced scorecard system to other earlier management improvement systems, such as Total Quality Management and Six Sigma. "Putting a metric on whatever you're trying to achieve, I think that's a valid concept," said Gerald Graham, R.P. Clinton distinguished professor of management at Wichita State University. "But good companies were doing that before they heard of balanced scorecard." One particular strength of the balanced scorecard is that every person within an organization is measured on something that is tied to the company's larger strategy. In that scenario, the company's strategic goals are made clearer to everyone within the organization. "To me, the value of it is if an organization is sort of adapting this template to planning... it kind of gets everybody on the same page," he said. Graham predicted that the balanced scorecard, like other management systems, "will be around for a while until some other professor" comes up with a different management concept. But at Delta Dental, management and employees "kind of live" the balanced scorecard system, Brantner said. And Delta Dental has done a good enough job executing it that the company last year was inducted into the Balanced Scorecard Hall of Fame, which put it in the company of corporate giants such as Best Buy, Motorola, UPS and Sprint. Brantner said Delta Dental's leadership team also attends an annual balanced scorecard seminar and takes the information back to apply it at the company. Brantner said she doesn't see the company abandoning the balanced scorecard system. "Now it's part of our culture," Brantner said. "I don't think we'd ever go back." - (TWE, 2 Sep 07)

Saturday, September 22, 2007

Know Where you Stand to Accomplish 20 Times More

A 2,000 percent solution accomplishes 20 times more with the same time, effort, and resources. How do you develop such great improvements?Follow these steps:1. Understand the importance of measuring performance.2. Decide what to measure.3. Identify the future best practice and measure it.4. Implement beyond the future best practice.5. Identify the ideal best practice.6. Pursue the ideal best practice.7. Select the right people and provide the right motivation.8. Continually repeat the first seven steps.In this essay, I'll focus on the first stepMeasurements Help Erase ComplacencyMost people view the measuring process too narrowly. Here's an example: A corporate planner went to a seminar given by corporate strategist Peter Drucker. The planner asked Drucker to pick the best single measure of corporate performance. Drucker replied, "My dear sir, you obviously know nothing. There is no single measure of corporate performance that is any good. Use them all and try to develop new ones, and each will teach you something you need to know." Drucker's point was that measurements are highly subjective and imperfect. Would-be stallbusters need lots more measures.I'd Rather Not Know That!One CEO tells another Peter Drucker story about measurements. Drucker had presented a personal improvement seminar to the CEO's U.S. Air Force group years earlier. Each man was instructed to measure in great detail how he spent his time for a week. The CEO found this task to be a life-changing experience. The measurements revealed all of his bad habits and put the CEO on guard to avoid those bad habits. Unfortunately, few people follow this CEO's example.Try this exercise for yourself. Measure how much time you spend each week on the telephone, in meetings, doing each routine task, commuting, watching reruns on television, sleeping, and so forth. Then look at how much you accomplished. You will see that measurements can help redirect your efforts into more productive activities.A Perpetual Measuring MachineVisitors to the finance and data processing staffs of a large company were astonished to note that each cubicle's walls were literally covered with performance measurements. The idea was to encourage more focus on expanding productivity. Almost all of the measurements had been developed by the workers for their own use. By looking at each others' measurements, staff members could see how well they were doing in comparison. Colleagues pitched in to help lower performers improve so that everyone could earn larger department-wide, performance-based bonuses.How did they do? Personal productivity gains of 25 percent were not unusual. Furthermore, corporate productivity in these same areas grew by a similar degree. By comparison, most organizations shoot for 2 to 3 percent annual productivity increases. Those low targets telegraph to everyone that they can take it easy.End Results Versus CausesManagement of a luxury hotel chain learned that guests were dissatisfied because it took too long for room service breakfast orders to arrive. The chain jumped in to solve the problem. It added more room service waiters. It even added more kitchen staff. But complaints increased, not decreased. Finally, they looked at how long it took for a waiter to make a delivery and return to the kitchen. Wait! Here was something. The round trips took much too long. Management asked the room service waiters why. The bottleneck was quickly spotted. The waiters were delayed by as much as eight minutes by slow elevator arrivals at the kitchen and the guest room floors.What was going on? Housekeepers were delivering a day's worth of clean sheets and towels at the same time. Because housekeepers had to unload large amounts of linen on each floor, they usually stopped the elevators while the unloading occurred.Understanding the cause, linen deliveries were rescheduled to another time. Room-service complaints were virtually eliminated.With enough of the right measurements to find the causes of your performance, you'll soon be working on the right things, too.Almost Perfect Is Often Not Good EnoughAfter many American manufacturers found that their quality badly lagged non-American competitors in the 1980s, quality improvement became an obsession. Soon, many companies were bragging that they performed at Six Sigma levels (hardly any errors per million activities). Closer examination suggested that some of these companies had missed the boat. They had only achieved being nearly perfect in delivering outmoded offerings. Motorola, for instance, the renowned Six Sigma innovator, saw its profits evaporate in the 1990s when the company fell behind Nokia and others in delivering new digital technologies to the market.Some companies also didn't know how to measure their performance. They broke down every process into hundreds of aspects. Each aspect was measured for performance. Sure enough, almost all aspects were done perfectly more than 99.9 percent of the time. Everyone was smiling.
by Donald Mitchell

Thai talk: Political reform via the 'blue-ocean strategy'

That's probably a very polite way of saying those corrupt, vote-buying manipulators passing themselves off as professional politicians should try to reinvent themselves with some new platform instead of just relying on their old networks of vote-canvassers to put them back in their old parliament seats. Cholvit Chearachit of Srinakharinwirot University wrote in Matichon recently that Thai politicians should dump their good old textbooks that favour a red-ocean strategy and adopt the title strategy in W Chan Kim's and Renee Mauborgne's famous book "Blue Ocean Strategy". The authors suggest that rather than competing within the confines of the existing industry or trying to steal customers from rivals (the bloody or red-ocean strategy), they should develop uncontested market space that makes the competition irrelevant. According to Kim and Mauborgne, competing in overcrowded industries is no way to sustain high performance. The real opportunity, they say, is to create blue oceans of uncontested market space. They propose two very important aspects of the strategy: one is to find and develop blue oceans, and the other is to exploit and protect blue oceans. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. There are two ways to create blue oceans: one is to launch completely new industries and the other is to create a blue ocean from within a red ocean. The idea, of course, is to do something different from everybody else, producing something that no one has yet seen, thereby creating a blue ocean. The authors don't agree with marketing guru Michael Porter's theory that successful businesses are either low-cost providers or niche-players. Instead, the blue-ocean concept is to find value that crosses conventional market segmentation and offering value at a lower cost. What, then, would a blue-ocean political strategy entail? For a start, politicians would have to stop fighting for votes in the same old market - in other words, paying the same village headmen to canvass for votes in the same old constituencies. Politicians would have to look for an untapped voting base. What about starting with the 30-40 per cent of eligible voters who did not exercise their electoral rights last time? That, clearly, is the real blue ocean, because other candidates have ignored these non-voters whose decision to vote next time could turn the picture upside down. If the politicians continue to fight it out over in the red ocean, they will be shedding blood over the same old market. Thai politics will be forever stuck in the mud. The blue-ocean concept calls for the raising and creating of value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current market or future markets. An innovative politician would try to raise his political party's standards through his own personal integrity, thus creating a market value for himself. In other words, he should try to enhance his value not by making wild, impossible promises in exchange for votes. What should these new blue-ocean politicians reduce and eliminate? Of course, if they really want to reach out to new horizons, this new breed of politicians would have to reduce their reliance on the old patronage system to win elections and build a permanent support base with public-centred policy platforms. And, this perhaps the most innovative step of all, they should eliminate all connections with money politics. A genuine blue-ocean strategy for a promising politician would, in short, entail eliminating corruption, reducing red tape, creating respectability and increasing public trust. This is admittedly easier said than done. But then, even if they constitute a drop in the ocean, we still hope the few good men in politics who go into the blue ocean can make enough waves to chase the old guard out of the red ocean.

By Suthichai Yoon

Microsoft rolls out performance management BI software

September 19, 2007 (Computerworld) -- Microsoft Corp. today announced that its has begun shipping Office PerformancePoint Server 2007, which it said will allow companies to use a single tool to monitor, analyze and plan business operations. The performance management application can be used to develop strategies and set goals that can be expressed as metrics and key performance indicators, Microsoft said. Users across a company can access data compiled by the application, and monitor their performance against the metrics, through familiar Office tools like Excel, it said. "Customers have spent hundred of billions of dollars over the past 15 years for ERP, supply chain management [and] sales force automation," said Jeff Raikes, president of Microsoft's business division. "But how can that be channeled to deliver better insight? BI is really only used by 10% or fewer information workers today." Raikes compared the state of business intelligence today to the status of word processing 20 years ago, when only a select few workers had access to the software. Today, he said, only a company's "high priests of data" have access to BI and analysis tools. "Our vision is to bring the powerful capability of BI to all information workers ... to democratize access to critical business insight," he added. "We will revolutionize the economics of BI by making broad deployment possible through a low per user price point. Microsoft ... will bring BI capabilities to 10 times the number of information workers because we deliver BI exactly where they are working every day." During a conference call announcing the software, Ulf Hilton, group finance manager of Oticon, a Danish hearing-aid company, said that his company expects to go live with PerformancePoint in February 2008. Oticon opted for PerformancePoint because it would offer corporate performance management tools companywide and because it lets users access data through the familiar Excel interface, he said. "All our finance people who are contributing to this system use Excel daily," he said. "Excel's existence cannot be eliminated." In addition to making end users happy, PerformancePoint's support for Excel ensures data integrity and version control, he said. The Excel support should also allow the company to continue using its various homegrown Excel budgeting and reporting modules, he added.

The Skills of the Best Managers at Superior Companies

by Niihara Hiroaki (Reiki)

What on earth is superior business management?In these past few years, Japanese companies have staked their survival in the extended economic slowdown on the introduction of various forms of management reform. Many of these efforts have been termed "American-style management" in Japan, and a great deal of energy has been devoted to altering the form of management at companies, e.g., changing corporate governance methods by introducing the executive officer system and the business company system and switching to performance-based employee evaluations.The result has been that Japanese companies may appear, on the surface at least, to have accomplished reform. Have these efforts, however, in fact strengthened these companies' competitiveness? The economy remains stagnant, with no signs of dispelling the feeling of impasse pervading the whole of Japan. While many companies have initially attempted to introduce forms of American-style management, they appear to have stopped at superficial reforms without going as far as changing the substance of the company itself. This is the view of the problem that this author has come to hold for the past three years or so.On the other hand, more than a few "superior companies" have continued to achieve remarkable results, even under poor economic conditions. Toyota Motor Corporation, for instance, realized ordinary profits exceeding JPY1 trillion in the fiscal year ended in March of this year. What characteristics do these superior companies possess? How do they differ from companies that are not doing so well? What measures have they taken to give their reforms substance and depth? It would seem that, if one were to show these problems clearly, the path to development for Japanese companies would come into view naturally. This was the author's motivation in conducting research on superior companies in Japan.
The author began this task with the selection of superior companies. Data from companies throughout Japan was requested, with attention focused on three elements: the company's profitability (ratio of ordinary profit to total capital), security (ratio of net worth to total capital) and growth (changes in ordinary profits). Figures for the past 15 years were collected and analyzed. Data for a short period of one or two years tends to be highly subject to positive and negative aspects of the external environment, making it probable that one will misread a company's good results as a consequence of structurally strong competitiveness rather than simply riding the currents of the times.The author chose 30 to 40 companies from the full list of companies from this analysis, including the ten companies listed below, for a further detailed analysis, and decided to conduct interviews with relevant people, beginning with the top management of 10 top companies in Japan. Broadly speaking, company competitiveness can be classified into two types - competitiveness due to operational efficiency, and competitiveness due to managerial skill - and it is the latter that appears to be the biggest problem with companies that do not qualify as superior. The former is competitiveness achieved by a long series of ideas to raise blue-collar productivity, i.e., the productiveness of factories and work sites, as symbolized by Toyota's Kanban system. Undoubtedly, Japanese companies are no longer as strong in this regard as they once were, and areas in which they lag were discovered in the IT industry and the household appliances industry among others. More important, though, is competitiveness due to managerial skill, in other words, the ability of the top management to devise and implement strategies and to make efficient use of the head office functions. In the course of conducting these research interviews, there were also some instances where a particular company's good fortunes could be attributed to chance external causes instead of the company's structural competitiveness. Many of these cases did offer, however, profoundly interesting management allegories that can serve as lessons for other companies. The impressive explanatory skills of the interviewees merit special mention. The author was very pleasantly surprised to discover top managers with such remarkable explanatory skills even in Japan. For the purposes of this study, the selection of specific companies was made by using the characteristics common to superior companies as a dividing criterion to classify companies as superior or not superior.
When the superior companies are listed and examined, one notes that much of what is considered "conventional wisdom" by the public does not necessarily apply to these companies. First, the industries to which superior companies belong are commonly held to be cutting-edge industries that are vigorously growing. For example, Mabuchi Motor, established in 1954, is the world's top manufacturer of consumer-oriented motors, with a 55% share of the world market. Numerous people no doubt have fond childhood memories of inserting a Mabuchi motor in a plastic model of the battleship Yamato and setting it afloat in the bathtub. This company makes technically mature motors with an average unit price of JPY72, and manufactures approximately 1.4 billion of these motors annually. The company is thus a tremendous producer of goods that boasts a double-digit ratio of ordinary profit to total capital.There is also Shimano. While its bicycle parts, the mainstay of Shimano's business, are "essentially the same low-tech products that blacksmiths made by pounding steel" (Yozo Shimano, President), the company is number one worldwide and head-and-shoulders above other competitors. Hence, an excellent business model can even be realized when the industry itself appears old-fashioned and regardless of the growth of the industry as a whole. Another piece of conventional wisdom that does not apply is that companies exposed to international competition through trade are strong, while those depending on domestic demand are weak. Yamato Transport and Seven-Eleven Japan are both companies operating fundamentally within the framework of the domestic market, and Kao also does business focused on domestic demand, with only about 10% of its profits deriving from overseas sales revenues. What about Toyota, Honda, and Nintendo? These major export companies are indeed thriving, but one must not overlook the fact that these companies ventured overseas only after establishing a solid business model to meet the high standards demanded by Japanese consumers. Broadly speaking, there are six points that can be found in common among superior companies, and these will be presented in order. It should be noted that the introduction of American-style forms is not included as one of these six. An examination reveals that companies having introduced American-style management methods and management indicators are not necessarily predominant. Some companies were doing well while others were not and, contrarily, there were also companies producing favorable business results that had not introduced such methods and indicators.The author's aim in presenting these six shared characteristics is the belief that the allegories extracted from research on 30 to 40 superior companies is far more replete with suggestions than complicated management theories full of imported ideas and terms, whether they be American-style or Japanese-style.
The first characteristic is that the top management has an unambiguous understanding of the scope of business in which the company is engaged.It is especially important that companies clearly recognize the businesses they should not be undertaking, and that they refrain completely from lines of business that the top management does not understand.When asking the top management of superior companies about the concept of their companies, a lucid explanation was immediately forthcoming. In the minds of these managers, the company as a whole has become a single concept. At the same time, a key point to note is that this concept serves to narrow the scope of the business that the company should undertake. This differs substantially from the flowery language used to decorate the first few pages of company brochures. When these top managers were presented the name of a new line of business and asked if their company would be branching out to this new line, they rejected straight out any line diverging from their company's concept as "not our company's job." In a certain sense, the fields in which they compete are exceptionally restricted.On the other hand, when the author read out a series of unconnected businesses in which companies not doing well are presently engaged, the managers from these companies quite often brought that line of questioning to an abrupt end with a curt "this is our company's concept." Many venture companies that had initially achieved remarkable results with a strong business model used the capital obtained through this success to depart from the original concept of the company, and this diversification ended in failure. Though the majority of companies today intone the mantra of selection and concentration, they find it difficult to put this idea into practice. Narrowing the focus of a company depends on the managers having a clear company concept for making selections on hand. In other words, the top management needs to have a physical sense of what their company's strong suit is. Mabuchi Motor provides an extreme example of limiting the range of one's business. This company's concept is to direct all its efforts into one type of product: small (200-watt or less) consumer-oriented steel-core DC magnetic motors with brushes. Starting from motors for toys, the company expanded the use of its motors to household appliances, audio equipment, and automotive equipment, but it has never increased or diversified its product line beyond such motors. Even when presented with an attractive proposal from the German company Braun, the world's leading manufacturer of electric razors, to develop a motor without a steel core, Mabuchi boldly and flatly turned the offer down. Instead, the company suggested that Braun take a closer look at the true capabilities of the company's steel-core motors and made a counter-offer to develop a new motor priced about one-tenth of the motor Braun had been thereto using. Mabuchi Motor is now the exclusive supplier of motors to Braun.The drawback in single-product operation is, of course, the difficulty of ensuring an adequate volume of demand with just one type of product. The brothers who founded this company, Kenichi and Takaichi Mabuchi (the latter now serves as president), understood this fact well, which is why, when they established the company in 1954, they set out with the ambitious objective of competing in the world market. By any conventional standards, this might seem implausible for the owner of a small-scale factory with a dozen or so employees. This was not at all mere boasting. This ambition was backed by the cool-headed calculation that the company would have no choice but to branch out into other motors to survive in the domestic market, thereby spreading thin the company's resources, but that trading with the rest of the world would allow the company to acquire adequate business as a specialty shop. It hardly needs to be said that behind this calculation was the company's confidence in its own technology. Called the "Intel of bicycles" for its similarity to the CPU manufacturer that is the Gulliver of the PC industry, Shimano has also limited its business scope, though not to the same extreme as Mabuchi Motor, and concentrates on final consumption goods for outdoor use, an area in which the utmost in performance and advanced metal processing technology are required. These demands make it difficult for other companies to imitate. Bicycle parts, accounting for 68.3% of sales revenues, top the list of the company's products, followed by fishing gear and golf clubs. Supporting this production is the cold-forged manufacturing technology established by the company in the 1960s (by which metals can be forged at room temperature without heating) and other metal processing technology. The high degree of precision achieved in processing has proven crucial in the processing of bicycle gears and brakes and other precision metal products. The company has refrained from expanding into an area where this metal processing technology cannot be applied, a decision that President Shimano modestly attributes to cowardice. The drive and control components for bicycles produced by Shimano have become the de facto standard.What the examples of these two companies show is that the top management has a very good sense of conditions on the ground and the demand for products, i.e., the executives understand the realities of their business. The importance of the top management perceptivity to production conditions, to the products themselves, and to market circumstances turned out to be greater than initially supposed. With regard to top management having a sense of conditions on the ground, Honda also merits special mention. The designs for Honda's automobiles have all been subject to approval by its company presidents. This holds true for cars developed in the US as well, and President Hiroyuki Yoshino listens to all input and then has his say. Not a single design proposal has ever made it past Yoshida's very intense scrutiny on the first try. Given the recent uptrend in sales of Fit and other Honda automobiles, one must conclude that the president possesses a very discerning eye and an awareness of circumstances needed to determine the direction of the market. At enormous general electrical equipment manufacturers and other such companies where the scale of operations is exceedingly large and the product lineup broad, numerous, and unconnected, it is practically impossible to demand that top management be able to ascertain actual conditions for each individual product their company produces. In that sense, Honda can be said to operate as a small company with a global scale. The same holds true for Shinetsu Chemical. In the chemical industry, an area in which Japan is said to be not very proficient, Shinetsu ranks fifth worldwide - behind DuPont, Dow Chemical, BASF, and Bayer - in terms of total market value of the company's shares. The company holds the top share globally in chloroethylene, used broadly in such goods as water and sewage pipes and the interior fittings for cars, and silicon wafers, the base for semiconductor devices. A well-established firm, Shinetsu concentrates its business efforts in those fields in which it leads and to this day maintains the positive features of a small company.One of the strengths of Shinetsu Chemical is that managerial decision-making rights are concentrated in the distinguished manager, Chihiro Kanagawa, the company's president. Making this possible is that business has been restricted to a scale on which Kanagawa can understand all aspects of the business, including that of consolidated subsidiary companies. The efforts Kanagawa makes to maintain his sense of conditions on the ground are astonishing. He arrives at the company just past 7:00 each morning and reads over all of the FAXes that have arrived from around the world, replying to these that same day. If questions remain about a document submitted to him for approval, he telephones the person in charge directly and listens to what he/she has to say; he does not use e-mail because e-mail doesn't allow for real discussion. He also tracks the earnings of subsidiaries on a monthly basis, reading through the financial statements of about 20 companies each month. The president is truly on the ground no matter where he is.An additional characteristic of this company is that responsibility for determinations of risk lie with the company president, and the company takes a clear stance that this is the job of the top management. Opinions may be divided among executives at times over large-scale investments, but even if, say, nine of ten executives were opposed to the president, the final decision would still rest with the president. Naturally, he must also assume responsibility for failures, a conspicuous difference from some companies where credit still goes to superiors and blame to subordinates. Household goods manufacturer Kao has adopted an autonomous business division system for each product type - hair care goods, laundry detergent, paper diapers, etc. - but the business of the company as a whole is, as one would expect, limited in scope to what one member of the top management team can grasp and thus not too large at all. Among the ills that can easily befall a company with an autonomous business division system is the failure of a company to function as one because individual divisions are pulling in different directions, but this weakness does not seem apparent at all in Kao. President Takuya Goto himself frequently makes an appearance at the company's research centers and factory sites and engages the heads of business divisions in lively discussions on doing this or making use of that idea. Goto, who is familiar with the company's overall operations, and the rest of the management team are thus able to respond to the ideas of a single research with the concrete suggestion of, for example, discussing the idea with Mr. A over in the Cosmetics Division.A recent major hit product that has emerged from this synergistic effect on the ground is Quickle Wiper, a floor care product. Close communication between business divisions enabled technology originally developed for use in paper diapers and sanitary items to be converted for use in cleaning goods. One reason that Kao has produced so many hit items is the corporate climate of respecting the creative resources and independence of its employees. For example, ringisho (circular memos for approval) are not used when making investment decisions so that employees can work without sticking to formalities. This is a marked difference from companies where decisions are put off until a ringisho has been passed around among dozens of superiors for perusal and approval. Kao also uses no "job manuals" and no organized training system. There are no gulfs or formalities dividing superiors from their subordinates, no executive dining room, and no doors installed in executives' rooms. The climate is such that employees can come to an executive's office without an appointment to talk. Order does not break down in these circumstances for the single reason that the majority of employees are not content to rest on their laurels and are always working to make things better (employees refer to Kao as the "dissatisfied-with-the-status-quo company"). The second element shared by superior companies is that the top management is logical, i.e., they think about things long and hard themselves. Managers in Japan have all studied and become well versed in management theories from Japan and abroad during the extended economic slowdown. The divide is whether one simply crams in knowledge or thinks for oneself after gaining the knowledge. Managers at superior companies never unconditionally accept conventional wisdom, commonly accepted views or the examples of success of other companies, instead questioning the conventional wisdom and thinking long and hard for themselves. The result is that, in contrast to the view that management is fact and not theory, these managers can actually explain the logic for every one of their decisions, without exception. Toshifumi Suzuki, Chairman of Seven-Eleven Japan, the largest convenience store chain in the country, remarked that observing other companies in the same industry and reading books will lead to failure as one ends up imitating someone else. Human beings often get caught up in their own experiences and examples of success, and when examining too great a variety of information they tend to extract only the positive aspects, producing a patchwork approach. Good managers are familiar with circumstances, think foremost of the customer, develop hypotheses by themselves, and implement and verify these, all as a regular part of their job. If they were to imitate others or make their decisions based on other people's opinions, Suzuki says, the present Seven-Eleven could never have become the success it is today.While Director at Ito Yokado, Suzuki met with fierce opposition from both inside and outside the company when trying to conclude an agreement in 1973 with Southland Company in the US in regard to convenience store operations. The majority opinion, supported by owner Masatoshi Ito, advocated a cautious approach, claiming that small-scale stores would not be able to compete with the supermarket chains expanding as they were throughout the country, and these critics were unable to distinguish between convenience stores on the one hand and general stores or old-fashioned five-and-dime stores on the other. Suzuki refuted this position by pointing to Japan's export industries such as electrical equipment. At that time, Japan's household appliance manufacturers were overpowering much larger European and American manufacturers and extending their market shares worldwide. Japan's export industries won out, not because of scale, but because of productivity. Even small stores can overcome competition if productivity is improved. Suzuki thus used logic to open the way to the first full-scale convenience store business in Japan. Management is logic," insists Masao Ogura, the founder of the home delivery service and now Director of the Yamato Welfare Foundation. Before Ogura set out in the home delivery business in 1976, the post office held a virtual monopoly on the market for small-lot individual transport. Given the indeterminate nature of the business - not knowing when and from what households items would be shipped, nor where they were destined - there was no way to predict demand, and thus it would not prove a paying proposition for private companies?cor so it was believed. Ogura questioned that conventional wisdom. Though faced with opposition from other executives, he gave long and careful consideration to a system for operating a home delivery service, and this came to fruition as an express home delivery service. Without doubt, this was the very embodiment of the idea that "management is logic." The introduction of American-style forms mentioned at the beginning of this paper also will see completely different results if one is not content to simply introduce the form, but rather to use the introduction as an opportunity to think about these forms.In 1999 Kao was the first large company in Japan to introduce the Economic Value Added (EVA) index, an economic indicator created in the US, but President Goto did not adopt this indicator simply to keep up with the latest fashion. Jergens, Kao's US subsidiary, had earlier introduced this indicator, and an awareness of capital costs and a sense of vigor emerged among the employees. Seeing this, Goto chose to bring this approach to Japan intending to raise employee awareness of capital costs, with EVA to be used as no more than a starting point. Having paired with Soichiro Honda, an engineer by trade, to manage the operations of Honda, Takeo Fujisawa once addressed the following comments to a group of division and department heads after a study group session."I think we have been taught some extremely meaningful things here. You should ensure you have a good understanding of the instructor's lecture and then give it some thought. You are bound to run into trouble, however, if you accept it all without question." (from "A Manager's Work is Never Done").Fujisawa seems here to be remarking very explicitly on the importance of treating knowledge as knowledge and of thinking long and hard on your own. The third element is that many members of the top management of superior companies seem to have spent some time on an offshoot during their careers. Those who have faced hardships while working in peripheral departments or subsidiaries have generally been more successful in carrying out reforms than those who were swept along in the company's mainstream and moved smoothly up the ranks.One example is Fujio Mitarai, President of Canon. His eldest son, Hajime, succeeded Takeshi Mitarai, the company's first president. Hajime was a talented engineer, having received a doctorate in electrical engineering from Stanford University, but in 1995, only two years after being appointed president, he passed away at the young age of 56.Following his sudden death, Chairman Ryuzaburo Kaku led the deliberations on a successor, and Hajime's cousin Fujio (59) was singled out for the position. Although Fujio is a member of the Mitarai family, a glance at the list of past presidents shows that Canon is not a family company, and he was not groomed for the position from the outset. In 1966, his fifth year with the company, Fujio was assigned to Canon USA, and he was named president of that company in 1979. He has spent the majority of the 23 years since, working in America. Only an emergency led to the appointment of someone outside the mainstream to head Canon Inc.He made use of his "outsider" experience in the US, however, after assuming the post of president. Fujio noted: "When I returned to the head office, I noticed there were certain inefficiencies there. I might not have regarded them as unusual if I had been groomed for a long time in the Japan head office."The first step he took was to sell off unprofitable businesses. Believing strongly that the company should even be able to produce a profit when revenues decline, he pulled the company out of personal computers, word processors, and FLC displays. The company consequently lost a total of JPY73.4 billion in revenues but managed to cut its deficits by JPY26.2 billion, thus the company was reformed into a more profitable one. He also turned his hand to organizational reform. Before Mitarai's appointment as president, Canon saw its autonomous business division system swelling, with the management convinced that the optimal approach was to have one business division for each specialty. When the company built plants overseas in response to a rising yen, for example, individual business divisions might build their own separate plants in the same country - with subsidiaries constructing yet more facilities independently in certain cases - and these self-centered efforts passed without remark. Business divisions turned into "companies within a company," with finance and accounting departments unable to object to the budgets submitted by the more powerful divisions, such as office equipment division. During this period, the limitations of Canon's autonomous business division system, which had been seen as a successful model, burst forth all over.To free the company from the harmful effects of the vertically-divided business division system, Mitarai established a Management Reform Committee in 1998. He set up committees to address eight topics such as development systems and production/logistics systems that cut across the vertical boundaries between business divisions. For the most part, he assigned the head office managers from these business divisions to chair these committees. For instance, Mr. A, the head of the Printer Business Division Head Office, might concurrently serve as Chairman of the Special Committee on Development System Reform, thereby creating a fusion of vertical and horizontal organizations.This being the case, Mr. A could no longer think only of printers. To carry out his additional assignment, that of reforming the development system, he had to communicate and exchange views with other business divisions. Consequently, Mr. A's perspective would naturally transcend the boundaries between business divisions and take in Canon as a whole. Mitarai's goal was to get the executives somehow to assume a company-wide point of view, and the committees served as one device for achieving this.The American-style approach of establishing independent business divisions under a holding company has become popular of late. While it is indeed a legitimate alternative, many of the Japanese companies adopting this method have become "flounders" (whose eyes are always turned upward), as the presidents of these new companies always consult with the president of the holding company. The end result is nothing more than an additional link in the chain of command. As can be seen in the reforms at Canon, this holding company system is not likely to work unless carried out while teaching employees to think of the company as a single entity. What should be done at owner-run companies when the selection of successor candidates has been quickly narrowed down? This question applied in the case of Masao Ogura, whose father, Yasuomi, had founded the company. Ogura had to undergo treatment for tuberculosis soon after joining the company, and less than a year after returning he was assigned to Shizuoka Transport, an affiliated company. Speaking of his time at that company, Ogura remarked: "I had to give my attention to everything from labor management to operations because the company was so small. This actually proved very useful in acquiring the basics of business management."Successful examples of "outsiders" are not limited, of course, to relatives of the company founder. President Goto of Kao came not from the Household Goods Division, the company's principal line of business accounting for more than 80% of sales revenues, but rather from the Chemical Business Division, in a sense an offshoot organization. In addition, he spent two assignments spanning a total of 11 years working outside the Kao head office. Unlike earlier extroverted and flamboyant presidents, he is a practical business type. Upon assuming the post of president in 1998 he made a bold cut by withdrawing completely from floppy disks and other computer-related businesses. The eight sales companies divided by region were consolidated into one company in 1999, the same year the company began sales of the hit product "Healthy Econa Cooking Oil," a vegetable oil that helps prevent fat deposits. These successes were, of course, built upon the efforts of predecessors, but both Mitarai (3.5% to 9.9%) and Goto (7.9% to 14.6%) have achieved startling improvements in the ratio of ordinary profit to total capital during their terms. One reason "offshoot" experience is so valuable for top managers is that they were able to make bold decisions because their operations were not tied to the company's core or existing businesses. Another is that such experience gives them an opportunity to examine the company objectively from the "outside," dispassionately study the naked truth about the company and uncover inefficiencies that need to be corrected. The personnel policy at Japanese companies thus far has generally been to promote those who have produced exceptional business results in some division - the "hard chargers" - to executive positions as a reward for their efforts. Company managers are professional specialists in the field of management, however, and star players do not always make star team managers. In the future, early appointment of individuals slotted for executive positions, in their 30s if possible, as president of a subsidiary is essential for them to gain a wide range of experience. Offshoot experience should become an intentional, not a chance, part of the career track. Companies must bring to an end the usual practice of assigning those employees in their 50s who cannot rise into the executive ranks at the head office as presidents of subsidiary companies. The fourth element is an indomitable spirit among top managers to "turn crises into chances." Many superior companies have a history of uncovering new directions to turn when pressed by circumstances and transforming that crisis into a golden opportunity.In 1957, only its third year in business, Mabuchi Motor faced a crisis that threatened its very survival. The lead contained in the paint used on metal toys manufactured in Japan became a problem in the US, and the toy industry faced a disastrous halt to 90% of Japanese-made toy shipments to the US. At the time, motors for toys constituted 100% of Mabuchi Motor's business. Inventory piled up, bringing home to the company the risk of depending on single-item management of motors for a single industry.Had the company chosen this moment to diversify into other businesses besides motors, it probably would not have grown beyond the extent of an ordinary company. Mabuchi Motor did not think in that fashion, believing instead that what had gone wrong was the use of its motors only in toys. If the company could discover demand in other industries as well, it could avoid being sucked down again by a sinking industry, while it was in danger of being swept around by conditions in one particular industry if it could not find multiple uses for its motors. The keys to expanding the uses of its motors were improved functions and low cost. If those could be achieved, the company's products would see a broader range of use, stabilizing the company's operations despite single-item management.Hair dryers, for example, used to be quite large, with most people associating them with professional hair salons. The introduction of Mabuchi's small motors, however, reduced the size and lowered the cost of hair dryers, which became regular household items. The tape loading motor for video decks (the motor that pulls an inserted tape into the interior of the deck) frequently made electrical noises and caused flickering on the screen. Mabuchi developed a motor with reduced electrical noise and, despite its late start, it soon acquired a 70%-80% share of the market. As described earlier, Mabuchi also skillfully turned a crisis into an opportunity by providing Braun steel-core motors for its electric razors at a surprisingly low price. Just before starting its express home delivery service, Yamato Transport also faced a life-or-death crisis. Hampered by the first company president's belief that trucks were only for short-distance small-lot shipping, Yamato Transport was a latecomer to the age of long-distance large-volume transport by truck. The company that Masao Ogura took over was under heavy pressure, even on the verge of bankruptcy. With the prospects not good for catching up with the competition in commercial cargo transport, Ogura turned his attention to an entirely different market, small-lot individual transport. His idea was to overturn the post office monopoly on small parcel delivery by offering a private-sector service perfectly suited to the needs of shippers. The remarkable achievements of Mabuchi Motors and Yamato Transport are simply the results of having turned a pinch into an opportunity, and some companies attempt to arouse a sense of crisis even before any real problems occur to prevent complacency and to maintain a degree of tension among employees. The employees at companies that are not doing well are often convinced, even in the face of a genuine crisis, that their companies cannot possibly fail.To this day, Toyota Motors maintains a culture of regularly inducing a sense of crisis among its employees. When the current president Fujio Cho joined Toyota, then president Taizo Ishida welcomed him and his fellow new employees with the comment: "Toyota itself will disappear if you all are not sharp and on the ball." Cho, too, quickly finds small problems popping up in day-to-day operations and converts these problems into numerical figures to encourage a sense of urgency within the company as part of his policy of making management visible. As has been mentioned, Kao also has a culture that qualifies it as a "dissatisfied-with-the-status-quo company." Moving on, the fifth element is a management policy of directly examining business risk while aiming for growth suited to the company's stature. Superior companies generally feature a financial independence unhindered by capital markets, but this is a matter of cash-flow management. In other words, these companies engage in investment and R&D suited to their stature within the scope of the cash flow that they themselves generate. These companies can afford to make bold investment decisions because they are able to carry out risk control should these investments fail.President Fujio Mitarai of Canon sang the praises of cash-flow management in the reform program he put forth when taking office. At the time, his company had total investments of JPY130 billion, with JPY80 billion in depreciation, thus Mitarai believed that, with JPY50 billion in net profits, net profits and depreciation alone could cover all of the investments. JPY50 billion in net profits corresponds roughly to JPY100 billion in ordinary profits. A target of JPY100 billion was set, and this objective was achieved as early as 1996. Nintendo is famous for having enormous sums of cash in hand, making it also the butt of criticism from financial institutions and consultants as a company oblivious to the importance of capital efficiency. Its approach stems from the accurate views on business risk held by previous president Hiroshi Yamauchi, who resigned this past May, and is based on the idea of ensuring a certain amount of financial leeway.Video game software is not an order-based industry. The software is developed by forecasts, it is manufactured by forecasts, and inventory is built up and sold by forecasts, making it a business with extremely high development and manufacturing risks. Atari Corporation, the dominant player in the US game industry at the beginning of the 1980s, saw its market suddenly dry up to a mere fraction of the previous year's in the Christmas season of 1982, placing the company in serious straits. Nintendo sees this "Atari shock" as an example from which to profit, and ensures that it has liquid assets readily available at all times. There are risks in focusing the company's business exclusively on amusement, and liquid assets are considered a necessary hedge against those risks.On a note aside, Nintendo did not involve itself at all in speculative investments during the bubble economy. While the company did not hesitate to put money into creating amusement, its particular area of expertise, it felt that stocks and other investments were outside its area of expertise. Nintendo was not alone; other companies in which the relatives of the founders still have a strong say in management maintained very firm financial discipline as capitalists, even during the bubble. The final element shared by superior companies is that the managers impart to the company a sustainable culture of discipline. Superior companies have discipline, and have corporate cultures that emphasize constant discipline among both company managers and employees.Discipline in a company immediately brings to mind the discipline imposed by the capital markets, i.e., the valuation of a company by the stock market. The author has come to the conclusion over the past three years, however, that discipline by the capital markets is a necessary, but not sufficient, condition to produce a durable superior company. Truly superior companies also display discipline in non-financial matters, specifically in a sense of mission and an ethical code. Some may object to this assertion by declaring that the principal job of a company is to make money and that this is not accomplished by uttering high-sounding ideas. Profits are naturally very important. Profits are a necessary means for a company to continue contributing to society, and looking down on profits is essentially the same as looking down on a continued contribution to society. A one-time contribution to society can be made adequately through a donation, without going to the trouble of forming a company, but a continuing contribution to society cannot be made this way.On the other hand, superior companies do not think that anything goes as long as it makes a profit. If the purpose of a business is just to make money, then that business is not any different from gambling or speculation, and companies seeking to secure profits without making a contribution will fail to become durable superior companies and will go under at some point. The recent bankruptcies and scandals at Enron and Worldcom offer clear evidence of this. Superior companies view their organizations as having the purpose of contributing to society over the long term by making profits. Another feature of superior companies is the simple belief that the key to corporate governance is a sense of mission and not the system. Companies will not turn their businesses around by just introducing an outside director or executive office system. Only with discipline in areas outside of money - a sense of mission and an ethical code among employees - can people and companies be motivated to work. Such a company enjoys a strong resilience in crises because declines in business and even pay cuts will not set off an avalanche of talented personnel fleeing the company. The most durable companies are those staffed by employees who feel that they are part of a group that shares the same destiny.In this regard, companies under the influence of a founder's family have an advantage. From a capitalist standpoint, the family members see the company from the broader prospective of long-term growth and continued contribution to society. Nintendo's rapid growth and its steadfast business policies are due in great part to the centripetal force of the Yamauchi family, and the Ogura family of Yamato, the Mabuchi family of Mabuchi Motor, and the Shimano family of Shimano play similar roles. Even at companies as large as Toyota, where there is no direct influence, the idea that "the Toyoda family is watching" exerts a considerable impetus to maintain discipline.Company management involves exceptional and humane oversight of operations. People are not such simple-minded creatures that employees will work devotedly just because they receive good compensation. Only when employees feel their efforts are benefiting the world and society will they forget to sleep and eat in their enthusiasm for work. Without such motivation, companies will find it hard to combine the vectors of their employees into a strong force. One fad in recent years has been to motivate employees by offering stock options. Having money is unquestionably better than not having it, of course. The danger in pulling people along with financial incentives, however, is that it inevitably tends to give an employee the idea that the company as a whole does not matter as long as he/she is doing well.Masao Ogura of Yamato distributed dorayaki (two small pancakes with sweet bean jam in between) to his employees every time the volume of express home delivery shipments increases. Stock options and dorayaki; is the view that everyone would prefer the former really in line with the subtleties of the human heart? Even as his company disguised its failing finances with window dressing, the former CEO of Enron exercised his stock options, sold off his shares in the company at a bargain, and acquired an enormous amount of wealth. The regular employees, however, lost not only their jobs, but their precious retirement funds as well, when Enron went bankrupt. Confronting realities such as these, how many company managers can really laugh at the "psychological approach" of Ogura's dorayaki? Six elements common to superior companies have been considered here. Summarizing in his own way the conclusions to be drawn from these on the conditions for a superior company, the author would consider the best managers to be:"Those who adhere to, and do not go beyond, the business they best understand, who think long and hard themselves with simple honesty and seriousness, and who tackle their jobs with passion."This could be seen as an overly simplistic and exceedingly obvious conclusion. However, with companies having grown bigger since World War II and having passed through the bubble period, might it not be the case that many have lost sight of their starting points? Canon, Honda, and Sony were all companies founded during or after the war when the country was impoverished, and the founders of these companies all held to this conclusion. When establishing Tokyo Tsushin Kogyo (which later became Sony) in 1946, Masaru Ibuka included the following comments in the company's prospectus:"We shall eliminate any unfair profit-seeking, persistently emphasize substantial and essential work, and will not merely pursue expansion for its own sake, and shall endeavor to the best of our abilities to select products and develop them independently."It would be a mistake to think that Japanese companies do not have management strategies. Regardless of the forms or systems adopted, be they American-style or Japanese-style, it is important to once more return to the starting point. Could it be any simpler?Someone once said, "Don't act the part of a president, act as a president," and this does not apply only to company presidents. "Don't act the part of a company director, act as a company director" or even "Don't act the part of a legislator, act as a legislator" and "Don't act the part of a bureaucrat, act as a bureaucrat." If everyone would call up the discipline within himself or herself and return to his/her starting point, Japanese society will see a much brighter future.