Thursday, March 30, 2006

Recommended Reading

Influence: Psychology of Persuasion by B. Cialdini

Sun Tzu on the Art of War The Oldest Military Treatise in the World

The Naked Ape by Desmond Morris

The Tipping Point: How Little Things Can Make a Big Difference by Malcolm Gladwell

Leading with Soul-An Uncommon Journey of Spirit by Lee G. Bolman and Terrence E. Deal

Leading Change by John P. Kotter

The No.1 Ladies' Detective Agency by Alexander McCall Smith (Read the whole series of 6 books)

Dilbert by Scott Adams (Anyone who is truly serious about management has to read Dilbert to keep their feet on the ground.)

Getting to Yes-Negotiating Agreement Without Giving In by Roger Fisher and William Ury

Getting Past No-Negotiating Your Way from Confrontation to Cooperation by William Ury

Wednesday, March 29, 2006

The Path to profitable growth goes through the heart not through the balance sheet! (Part 2)

Another fundamental building block of growth is to create what many call an innovation culture within the company. Creating an environment where everyone takes risks and where failures are seen as learning opportunities. Many companies strive to minimize risk or even eliminate risk but as anyone who ever took a basic course in economics knows "the higher the risk the higher the return". If our focus is risk elimination we are in essence simultaneously dooming our business to profit elimination. Creating growth involves taking risks and making mistakes. Growth doesn’t come easy and it is inevitable that growth companies will take the wrong path from time to time, learn from their mistakes and move on. Businesses that understand this encourage risk taking and even celebrate failure.

Many years ago I was asked by a Vice-President of the company I was working for to lead a difficult and important project in addition to my normal line manager job. After about 9 months we concluded that the project would not succeed and the project was closed down.

The Vice President then asked me to give an internal presentation with my reflections about why the project had failed and what we as a company should learn from the experience. I was both surprised and nervous when I found out that he had booked an auditorium and about 100 people were to attend the presentation of my failure. Before I started my presentation the VP went up on the stage and thanked me and my project team for accepting such a difficult and risky project and for working so diligently. He then presented me with a gift certificate worth $1000 from our travel agency as a token of appreciation for my effort. This is a great example of celebrating failure. In a very simple way he demonstrated to me and everyone else that not reaching difficult goals could be deemed a success if lessons where learned.

Several months later the project was restarted and within a year was successfully completed. Everyone involved agreed that the learning gained from our previous "failures" played a significant role in the successful outcome.

Tuesday, March 28, 2006

The Path to profitable growth goes through the heart not through the balance sheet! (Part 1)

Most business leaders agree that growth is a prequisite for success and yet few actually succeed in creating sustainable long-term growth. One key problem is that companies attempt to create growth by focusing on results instead of working to create the right behaviors in their organizations that will lead to results.

In order to create growth we must view organizations as groups of people who cooperate with one another of their own free will to achieve common goals. People use resources in processes to achieve results. although we often speak of employees as resources they are not infact resourses they are the value creators who use and manage resources. If we accept this description of organizations then it follows naturally that we should focus our management attention on the behavior of the people in the processes much more than on the end results.

Companies have always focused on growth even if the factors that drive growth have changed over time. Long-term growth has always been about being in phase with the world around you and a step ahead of your competitors.

There was a time when owning production resources was the key to success. If you owned a factory producing almost anything the supply was greater than the demand. Growth was driven to a great extent by your ability to develop and manage your production resources. In that environment, competition was often local and the end-users alternatives were limited.

Today growth comes to those companies who win in competition with the best companies in the world and there is an overcapacity in production for almost all products and services. . As a result of the easy access of information created by the internet, even industries that are not yet confronted with a well developed global competition find themselves forced to meet expectations of end-users as if the best companies in the world existed in their home market.

Consumers that enter a home electronics store are often more knowledgeable about the product they seek that the people working in the store. A patient can have a deeper understanding of the details of their particular illness than a general practitioner (or at least believe they do). In this environment victory comes to those companies that best understand and manage the customer relationship. Owning the customer relationship becomes much more important than owning the factory.

Companies that successfully win and keep customers will find solutions to manufacture their products and services but companies who excel at production but lack the skills required to retain their customers will inevitably fail.

This message is difficult to accept for companies that have built their success over many years based on manufacturing or technical superiority and this message is equally true for both product and service oriented companies. Many companies have placed their faith in their technical capabilities and believe that if your product is good enough then the customers will come to you. Unfortunately, this is only true for a select few companies. Most companies compete against competitors with similar products and services where operational excellence and customer intimacy are the deciding factors not product quality and features.

Friday, March 17, 2006

Business Leaders Majoring in the Minors

Many business leaders run their business on a combination of financial targets and ratios that at best give a view of where the company has been but say nothing about where the company is going. Despite the common use of Vision statements and balanced scorecards with targets for customer satisfaction and employee satisfaction, business leaders frequently find themselves stuck in the hectic race for short-term financial targets.

Managers find that they are perceived as successful by their superiors even if they miss so called "soft" targets as long as they reach or exceed their financial targets. The opposite, however is frequently not the case! Line managers who achieve good results on non-financial targets like processes, or employee and customer satisfaction but miss short-term financial targets are typically not as well thought of.

Profit is the result of successful business. But these profits are the result of people managing processes to create goods or services which satisfy customer needs. It is logical then that to increase profits managers must focus on the behaviours, processes and customer needs that create outstanding financial returns not the returns in themselves. One major problem with this way of thinking is that managers have very little knowledge in the behavioural sciences and therefore find it very difficult if not impossible to define which key customer needs to focus on and what employee behaviours will satisfy those needs.

Many companies spend large sums of money researching customer and employee satisfaction but many researchers admit that the real value of the research seldom reaches line management. Managers may have targets in their balanced scorecards to improve customer and employee satisfaction but they get little or no help in defining the changes necessary for reaching these goals. Instead managers do what they know best; cut costs, eliminate risk, focus on technology and lower prices to gain new customers or retain old ones.

Cost cutting is justifiable when changes in the environment make it possible to satisfy customers as well, or better than before with less cost. Managers have difficulty knowing how cost-cutting will impact customer satisfaction and often find out the hard way after the fact.

Thursday, March 16, 2006

Trade is a prerequisite for lasting peace

International trade is a prerequisite for lasting peace in the world. Our soldiers and police are doing everything they can to protect us from the immediate threat of terrorism. They may be our peace-keepers but it is our international corporations and the people working in them that are our peace-creators. International business, like local business, is all about building long-term and mutually beneficial relations. It is therefore crucial that we develop the skills necessary to develop and maintain relationships with people all over the world in vastly different cultures.

The greater the economic interdependencies become between nations or regions in the world the less likely we are to find ourselves in violent conflicts. Simply stated, if I am dependent on my neighbour for my own survival I am not nearly as likely to pick a fight with him!

When large groups of people are excluded from the global economy, their poverty leads them right into the hands of men like bin Laden, Hitler or Stalin. These men all offer or offered poor oppressed people a chance to fight back against a world that had not set a place for them at the banquet of international economic development. Dire poverty created the inertia for the growth of communism. Following the First World War, a beaten and disillusioned Germany could not regain its footing to a high extent as the result of the isolationist spirit of the times. Foreign investment following that war was at all time lows and it was virtually impossible to rebuild industry. This created the opportunity for an insane man who promised a return to greatness for the German people. Today, terrorist like bin Laden gain support from people who truly have nothing to lose. Hunger is indeed a powerful motivator! The riots in India following the demolition of a mosque used religion as a front for economically impoverished communities to claim land and property for their own.

Terrorism is about economics not religion! It is a classic case of the haves and the have nots. If we want to solve the problem of terrorism it is not enough to protect ourselves. We must become much more active in developing the global economy! We must demonstrate for the next generations of potential terrorists that there are real alternatives by involving them in our prosperity. This is by no means a call for charity! It is instead a call for common sense and self interest! There are enormous amounts of people longing to buy our products and services and to sell us theirs. We will not only decrease the violence in the world, we will increase the prosperity for everyone!

Wednesday, March 15, 2006

The Only Thing That is Constant is Change Management

There is likely no subject that has been more written about or misused in management literature than topic of Change Management. Despite the virtual ocean of literature, internet sites, methodologies, and theories proffered by management gurus, university professors and management consultants around the world all serious change management thinking is based on the theory of Cognitive Dissonance developed by the social psychologist Leon Festinger in 1957.A google search gives over 46 000 000 hits and a search on carried over 4,500 different titles referring to "Change Management".

Is it just one of life's little paradoxes that the only thing in the world that doesn't change is "Change Management"?

According to Festinger’s Theory of Cognitive dissonance a tension arise in people when they are confronted with information that contradicts their current view of reality. Festinger stated that people choose between 5 methods for dealing with cognitive dissonance: they avoid situations they believe will produce dissonance (selective exposure); they seek out consonant information; they redefine dissonant cognitions as less important or change their dissonant cognitions; or they change their behaviour to fit their cognitions."

Change Management is all about trying to get people to choose the last of these 5 alternatives. Change management is about changing behaviour by presenting people with alternative behaviours and helping them understand the benefits of adopting these new behaviours. Typically, change management methodologies attempt to describe "current state" in organizations and develop an "ideal future state" for the group.

The discrepancy between the current state and the ideal future creates cognitive dissonance in the individuals in the group. At this point Change Management methodologies propose a variety of ideas on how best to close the gap between these two states and move the organization towards the ideal future. Typically, these "theories" propose; identifying benefits for various stakeholders (including those whose behaviours must change) of having reached the ideal state as well as risks if the ideal is not achieved, methods for developing strategies and action plans for reaching the desired position, activities for creating "buy-in" and commitment to the proposed changes, and methods for measuring and following up the progress of the change initiative.