Tag: talents

Functional Specialization Solutions

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There are many solutions strategies that can be used to maximize the potential net benefits of functional specialization and overcome the inherent limitations.

First, processes can be defined and optimized to effectively leverage functional talents.  The mechanical and modular paradigms can be refined to incorporate specialists.

Firms can adopt a portfolio strategy whereby the average success ratio largely offsets random failures.

Specialists and generalists can trade positions to increase their effective coordination skills and understanding.

Communications meetings, technologies, experiences and priorities can improve alignment.

Process management can be elevated to a meta-analysis level, with individuals responsible for the success of prospect to customer, concept to product and order to cash processes.

Countries, states and firms can develop long-term partnerships with their suppliers and customers and improve their prospecting, bidding and negotiation skills.

Individuals can improve their situational leadership skills, learning to balance task and people needs.

Firms can greatly improve their means-ends skills, improving staff delegation, board governance and supplier management skills.

In highly diverse and risky product development areas, firms can invest in specialized firms or in competing development teams.

Firms can invest in staff members who are highly skilled in translating strategy into projects and then into operations.

Finally, firms and individuals can increase their understanding of situations where there are two inherently conflicting objectives.  They can learn from the experience of statisticians, researchers and actuaries who routinely manage the alpha risk that a predicted relationship exists when it really doesn’t against the beta risk that a relationship is found to not exist when it really does.

Functional specialization is an incredible driver of incremental value.  Countries, states, firms and individuals will be rewarded for their attention to this factor.  Common tactics can be used to maximize the value of this strategy.

Personal Strategies for Adding Value

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The Great Recession has expedited the transition to a virtual labor market, where each individual is an independent contractor constantly in the market, selling their services.  To succeed in this world, individuals need to define their product, sharpen their sales skills, actively manage their time and add greater incremental value.

The 12 million unemployed Americans are bombarded with advice on defining their personal brand.  Setting aside the gloss and polish offered by career counselors, the remaining content is the need to be easily defined in a 15 second elevator speech.  Simple and specialized products sell.  Complex and generic products die.  Specialized professional functions and industry experience are marketable.  Generalists need to become repositioned with specialist labels: as entrepreneurs, six sigma black belts, project management professionals, etc.  Certifications are highly valued.  The “signaling” theory of the labor market is winning, with HR, hiring managers and recruiters all relying upon external signals such as certifications, national/Big 4 consulting experience, top 25 university/MBA degrees and Fortune 500 experience.  Personal communications and sales skills command a premium within the universe of certified professionals.

At work or as a consultant, the most important driver of added value is the allocation of time.  Individuals divide their time among the functions of doing, managing, investing, planning and reporting.  Stephen Covey’s path breaking “Seven Habits of Highly Successful People” enlightened a whole generation on this topic.  There is a critical trade-off between doing and other functions, which senior staff and managers must exploit.  There is a trade-off between urgent and important tasks at the heart of personal time management.  There is value in “sharpening the saw” by investing in activities with long-run benefits. 

The marginal product theory of labor value applies at work.  Individuals who devote their time to the highest incremental value activities at work are rewarded.  Those who do their “fair share” of low value activities are left behind.  Managing people, suppliers, customers, assets, risks and processes offers opportunities to leverage value.  Individuals with the greatest scope of authority deliver the greatest value and are rewarded.  Investing in people, products, processes and assets provides another opportunity to add greater value.  Strategic, functional, project and individual planning offers opportunities to leverage time in a more abstract dimension.  Developing, operating and enhancing reporting and feedback systems allow key staff to identify enhanced improvement and risk management options. 

Individuals who have managed to define and sell their personal branded product and secured significant opportunities to deliver value must also know how to deliver incremental value.  There are seven generic strategies for adding maximum value.

Buy low and sell high.  All activities must be delivered by the lowest cost resource.  If there is any individual, machine or supplier that can deliver a service more cheaply, eventually they will.  Identify the lowest cost resource and employ it.  Delegate.  Divide jobs.  Outsource.  Automate.  Simplify.  As Andy Grove once said, “only the paranoid survive”.  Get this done before others.

Match skills and talents to assignments.  Functional skills, industry experience, soft skills, courage, flexibility, creativity and other talents vary greatly across available resources.  Identify the 3-5 key talents required and employ those with natural talents.  Employ personality profiles, test results and Gallup Strengths to find matches.  Create an internal labor market that encourages staff to know and apply their talents as often as possible.

Leverage the cumulative positive impact of process engineering.  Call it TQM, ISO 9000, six sigma or lean manufacturing.  Employ incremental continuous process improvement, tactical Kaizen blitzes, re-engineering projects, management systems and cultural changes to obtain the maximum value from the quality revolution.  World-class firms continue to improve and leave others behind.

Leverage the benefits of learning curves in all activities.  Individuals with one year of experience may be twice as productive as trainees.  Those with three years of experience may be another 50% more productive.  Reach mastery level in critical activities. 

Create synergy through cross-functional project teams.  There is a limit to the returns on the first four strategies.  Eventually, a senior financial analyst, research chemist or national accounts manager will find incremental improvements more difficult to achieve.  For some projects, processes and functions there is a need to combine the highest talents of complementary functions. 

Leverage the unique assets of the organization.  Firms have core competencies, intellectual property, cultural assets, brand assets, relationships, best practices and most productive assets.  Sales or product growth in adjacent space has a high success probability.

Leverage the organization’s goodwill with stakeholders.  Suppliers, customers, regulators, investors, staff and communities have a vested interest in the organization’s ongoing success.  Provide them with opportunities to reinvest in the organization’s future.

Most of us will add the greatest possible value by following the path of least resistance.  We will leverage relative market values, talents, process improvement techniques, learning curves, teamwork, core competencies and common interests.  A self-aware, proactive strategy will pay the greatest personal dividends, while delivering value to firms and society.

Prioritize, If You Dare!

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“Managers do things right; leaders do the right things”.  In the current environment, where the “right things” of new products, customers and deals are on hold, the best leadership may lie in prioritizing existing operations.  In essence, prioritization is choosing to “do the right things” within the existing portfolio of activities.

Prioritization begins with the calculation of net benefits.  Maximizing benefits or minimizing costs is insufficient.  Priorities reside in those activities with the greatest net benefits.  This can be defined as benefits minus costs, as a payback period or as return on investment (ROI) or net present value (NPV) for large projects.  The comparison of costs and benefits is the essence of this approach.  Calculating risk-adjusted discounted values of after-tax cash flows within an asset portfolio is usually just “nice to have”.  Rank ordering available projects by their net benefits is the next greatest source of value.

The Pareto Principle says that 80% of net benefits are delivered by 20% of activities.  Mathematically, with any reasonable range of costs and benefits, this relationship holds true.  In simplest terms, the Pareto Principle says “cut off the tail”.  It also focuses on the concept of relative value.  We want to compare the ratio of benefits to costs, investments or activity. 

This applies to time management, where a log of time for one month reveals 10% of activities that should be eliminated.  The bottom 10% of products, product categories, stores, bank and library branches face the same indication that they are not cost justified.  Customers, divisions and business units face the same reality.  Some make money, while others do not.  Activity based costing calculations indicate that the lowest performers cost the firm more than was apparent.  Even individual performance can/should be considered on a rank-ordered basis.  The bottom 5-10% should be identified annually and considered for performance improvement plans in every group of 10 or more employees.

In emergency situations, triage must be applied.  Limited resources must be applied ONLY to the activities that can benefit and survive.  Those which will fail receive no investment.  Those which will succeed anyway, receive no investment.

At times, a two-dimensional grid should be used to determine activities which will deliver benefits.  In the classic Boston Consulting Group approach, business units are categorized by high and low growth and margin potential.  The top right units with high growth and margin potential get all of the investments and high-powered managers’ attention.  Low growth and margin businesses face divestiture.  High margin, low growth businesses become the proverbial “cash cows”, generating cash flows to feed other units.

Opportunity cost is a fundamental concept in prioritizing opportunities.  There is no absolute scale of expected returns.  There is only the “next best alternative”.  Even when business units have poor prospects, they must be compared with the realistic opportunity costs of doing nothing or divestiture.

Prioritization does not apply just to eliminating the negative end of expected business results.  Investments should be made in those activities with the greatest potential.  The Gallup Strengthsfinder approach applies this to human performance, demonstrating that natural talents provide the greatest relative return.  Firms should invest in those products and markets with the greatest potential.  They should also invest in facilities, equipment, IT projects, researchers and sales staff who deliver incremental value.  Many firms are inappropriately constrained by ratios and potential future change management costs.  Investment and product portfolio managers understand that there is value in starving losers and investing in winners.

The most sophisticated version of prioritization is employed in the principle of comparative advantage.  David Ricardo’s theory of international trade applies to countries, companies and units.  Comparative advantage says that relative benefit/cost ratios between countries, firms and units determine the best possible distribution of production.  ONLY those who are comparatively most productive should produce goods or services.  More than a century later Michael Porter applied this to companies, determining that those with true core competencies would succeed in the long run. Treacy and Wiersma’s book on “The Discipline of Market Leaders” indicates that firms can only have competitive advantages in one of the three areas of product innovation, customer intimacy and operational excellence.  Only the “best of the best” will prevail in the long run.  Outsourcing of non-essential functions is indicated.

Given the clear economic advantages of prioritization, why is this not universally applied?  Net benefits, the Pareto Principle and comparative advantage are beyond the comprehension of some economic actors.  Comprehensive, systematic calculations are applied only by a specialized subset of firms and functions. 

Perhaps more important is the personal cost-benefit calculation of individuals.  I could prioritize activities by relative benefit-cost, but I would be subject to criticism for eliminating the bottom 10%.  Perhaps it is better to not “rock the boat” and avoid the penalties of change management.

Some sophisticated managers follow the advice of Dr. Deming who highlighted the great risks of overreacting to random variations.  Managers should set an appropriate time-frame when using relative performance measures.

Dr. Deming also preached that managers need to “drive out fear”. For some employees, any rank ordering or evaluation of performance creates fear.  Some individuals believe that people should not be subjected to performance standards or rankings because this is not “fair”.  For most organizations, the essential competitive nature of employment and corporations is understood and accepted. Highly risk-averse individuals should not be employed by firms which face competitive pressures.

This does not contradict Maslow’s theory that security/safety is at the base of employee motivation.  Security oriented individuals should be guided to careers and positions which meet their needs.  The other 80% of employees should be counseled to understand the long-term competitive nature of labor markets.

Prioritization is an effective and essential business strategy in all business conditions.

ROI on Personality Styles

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In a world of non-stop change, financial managers agree that “alignment” is the most difficult challenge faced by most organizations.  Through time, more equal access to all other resources has grown: materials, suppliers, facilities, financing, technology, products, entrepreneurs and human resources.

 Organizations have used a variety of methods to create alignment.  Military command and control, strategic planning, portfolio management and process management in various forms have been tried with mixed success.  In some static environments with less technology change, less competition and simpler processes, these approaches have worked well.  In the highly specialized, global, decentralized, changing, virtual world of today, many organizations have concluded that alignment can best be achieved through defining, shaping and reinforcing their corporate culture.

 A critical element in any corporate culture initiative is helping all staff members to have the self-awareness and other-awareness to manage their relations with others.

 My favorite introduction to self-awareness and paradigms is through the fable of “The Blind Men and the Elephant”.

 http://www.peacecorps.gov/wws/stories/stories.cfm?psid=110

 Individual blind men conclude on the basis of their personal investigations that an elephant “IS” a wall, a snake, a spear, a cow, a magic carpet or an old rope.  The moral is that an elephant is more than the sum of his parts.  Attempts to generalize from limited information or paradigms are doomed to failure.  The blind men can see neither the forest, nor the trees.  Many individuals have these same blind spots.  They are unable to see the big picture and they passionately hold onto their world view because they are not aware of the possibility of another approach.

 To help staff members with the personal growth needed to overcome this limitation, many organizations implement a personality styles program.  Myers-Briggs, DISC, Predictive Index, Gallup Strengthsfinders and a dozen others can be used to help all staff understand a few key results and begin to practice seeing the world from multiple perspectives, even forming the habit of expecting to employ multiple perspectives.

 These programs deliver 5 main lessons.  Individuals tend to behave in their own patterns or styles, which can be described.  No pattern is inherently better or worse, except as a means for completing certain responsibilities.  Personal styles make individuals especially effective in functions (accounting, sales, design, or engineering) that match their natural talents.  Individuals are not limited by their styles, but these habitual behaviors are more natural and using other complementary styles requires significant effort.  Since organizations have many functions and individuals with different styles, it is necessary for all staff members to be aware of their styles, recognize the styles of others and learn how to flex their styles to get along with others.

 Since these programs have been implemented many times in most firms across 30 years, one might expect that self-awareness would be the norm, followed by cross-functional cooperation and sophisticated used of different perspectives.  Unfortunately, many of these programs have not delivered the desired results.

 For personality styles programs to build self-awareness, complement corporate cultures, align teams and deliver results, firms need to invest more resources.

 1)      All managers, beginning at the top, need deep training, evaluation and feedback.

2)      All staff require experiential learning, examples, reinforcement and consistent guidance.

3)      Firms need to use the tool everywhere to create the skills, habits and expectations: training, hiring, promotions, cross-teams, planning, performance evaluations, etc.

4)      Firms need to break down the functional barriers and require a mix of styles in each function, job rotation for managers and cross-team experience for everyone.

5)      The personality styles tool, profiles and understanding needs to become part of the culture.  This is the language we use.  These are the stories we use.  These are the executives we use as examples of this style.

 Invest the resources to create a real asset for your organization.  Half of an investment produces little return.

The Effective CFO: Black and White!

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A friend of mine has been a highly successful CFO with middle market companies for 25 years.  I pondered what made him succeed in a variety of companies and industries.

 He’s professionally competent and intellectually curious.  He’s always had a large professional network.  He is a good listener and is especially skilled at cutting through ambiguous or complex situations to identify the core problem or most promising solution.  He understands the basis for business success in his industry and he’s a good negotiator.

 On the other hand, he’s sometimes overly direct, not a technical leader in the CPA profession, not someone who automatically attracts the spotlight, doesn’t outsmart the quantitative business analysts and doesn’t often lead cross-functional projects.

 I think he succeeds because he has established a role and the skills to guide all key players to honestly confront the gray reality of situations.  He offers the financial perspective, but is just as quick to insert a sales, strategy or cultural viewpoint.  He ensures that risk versus return is considered through numbers, stories and analogies.  He contrasts short-term with long-term factors.  He plays devil’s advocate as needed to derail quick decisions or to shore up support for a tough alternative that must be chosen.

 In addition to these decision making skills, he has the wisdom, courage and skills to anticipate the perspectives of the key roles and to guide players into greater self-awareness and understanding of other perspectives.

 He helps finance, accounting, HR and IT staff to see that the fully integrated system and a 1,000 page policy and procedure document, without exceptions, is probably too structured.  He encourages engineers and six sigma black belts to reduce variation and to consider financial and strategic implications.

 He works with entrepreneurial owners to support change and risk taking, but to also gauge how much can be digested, how it can be hedged and what an ideal portfolio looks like.

 He works with boards and shareholders to understand that stock values do not always go up in a predictable manner, unless the books have been “managed”.  The long-term growth in shareholder value includes short-term fluctuations.

 He works with IT, engineering and product developers to have resources, time and authority to learn, experiment and develop new products – within a framework of long-term evaluation.

 He provides sales and marketing teams with the freedom and flexibility to meet company goals, but ensures that measures of final results are fair and the system can’t be beat.

 The effective CFO serves as a fulcrum in Jim Collins’ world of “both/and”.  Stakeholders and role players must be able to leverage their talents and preferred styles AND the contrasting factors which must also be considered for long run success.  CFO’s need to be more than gray; they need to be both black AND white.

Effective Leaders

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 Everyone has their own theory or theories of leadership.In my experience, effective leaders …Are authentic expressions of their unique talents and experiences. They are  
 independent and non-conformist. 
 
 Are shaped by their personality profiles.  They leverage their strengths and minimize their non-talents.  They flex styles for short periods, with effort.
 
 
 Are true to themselves, applying constructive approaches to work, home and community.   This natural style leverages their assets.
 
 
 Are internally driven and project a clear commitment to making progress, overcoming 
 challenges, reaching goals and making a difference. 
 
 Are human with strengths and non-talents.  They are effected by biases and paradigms.  
 Self-awareness and self-control are partial. 
 
 Recognize the strength of organizational and cultural inertia in preventing change, 
 alignment and pursuit of lofty objectives. 
 
 Accept the political nature of organizations and the role of self-interest as part of the natural arena for leadership practice.
 
 
 Understand the value creating role of key leaders in organizations, but do not minimize the value of managers and staff.
 
 
 Appreciate the social psychology of organizations and teams.  They demonstrate their 
 passion, commitment and belonging in real and symbolic ways. 
 
 Use an interactive decision-making process to engage contributors, frame 
 decisions, generate options, evaluate solutions and build commitment. 
 
 Are patient, unstructured decision-makers.  Organization level issues, plans and policies 
 require time to define, analyze, choose and embrace. They change perspectives, urge 
 creativity, challenge traditional answers and encourage contrasting paths to answers. 
 
 Value the contributions of professional specialists, but employ a generalist perspective and 
 healthy skepticism. They employ various facilitation tools to work through ambiguous 
 situations. 
 
 Employ a broad array of skills and experiences, as decisions are increasingly complex, 
 including political, ethical, global and environmental dimensions. 
 
 Embrace a modern approach to diversity, deeply understanding the value of diverse 
 perspectives in contributing their piece of the truth to decisions.