Here’s a Stupid Idea

Mistakes are remarkably underrated, and very few organizations are actually good at making them.  When it comes to making mistakes, there are typically two types of organizations:

  1. Those with little or no tolerance for mistakes, so in order to avoid making them, they either don’t make decisions, or they analyze decisions to such a degree that they become paralyzed.  I would include most public sector organizations and big utilities in this category.
  2. Those organizations where mistakes get made, and the most important thing is to assign blame.  Of course, people in such organizations would not self-identify as being blame-seekers, but it is often cloaked in “holding people accountable”.  Accountability is about people delivering on pre-agreed upon requirements.  Making mistakes is about taking risks and doing something new

There is a third type of organization that encourages people to take risks in certain areas of the business.  Many times those risks do not pan out, but from the ashes of failure a phoenix of innovation and performance rises.  This type of organization is exceptionally rare.  The best examples are well known:  Apple, Virgin.  There are others as well, but they are as difficult to find as a trace of dignity in a reality TV star.

I always know I’m in a well run and innovative business when I hear, “Here’s a stupid idea”.  A high level of confidence is required is say such a thing, and a high level of trust in your peers to take such risks.  So revel in your mistakes, and do so knowing you are in good company.

 

Strawman Proposals

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Below we discuss:

  • What a Strawman Proposal is
  • Why you might want to create a Strawman Proposal
  • How to create a Strawman Proposal

What is a Strawman Proposal

  • It is a problem-solving tool used in a group setting.
  • The point of building a Strawman Proposal is to knock it down and rebuild something better.
  • The premise behind building a Strawman Proposal is to create a first draft for criticism and testing, and then using the feedback you receive to develop subsequent iterations, and eventually a final outcome that is rock solid.

Why Bother to Build a Strawman Proposal

  • Sometimes it’s easier to brainstorm possible solutions when you have somewhere to start.
  • It can help you get started versus getting bogged down seeking perfection.
  • It involves other stakeholders in the building of the proposal.

How to Build a Strawman Proposal

  1. Create a draft proposal.
  2. Present your draft to the rest of the team.  Make sure the team understands that the intent is to use it as a discussion starter, and is not the final product or solution.
  3. Knock the strawman down.  Invite feedback and criticism to create the next iteration of the proposal.
  4. Build your proposal back up again.
  5. Test the proposal against your original objectives
  6. Repeat as necessary until you reach your objective.

Three Things to Remember About Building a Strawman Proposal

  1. Make sure everyone knows what you are doing.
  2. Check your final solution against your assumptions.
  3. Eventually you’re going to have to commit to a final proposal.  You can’t produce a Strawman Proposal in perpetuity.

Watch the ‘3-Minute Crash Course’ about Strawman Proposals (CLICK THE ARROW TO START THE VIDEO):

Contingent Decision Making: The Vroom Yetton Model

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Below we discuss:

  • What is the Vroom Yetton Model?
  • How the Vroom Yetton Model is different than other decision making models
  • The five decision making styles of the Vroom Yetton Model
  • How to choose the appropriate style to your situation

What is the Vroom Yetton Model?

The Vroom Yetton model is a decision making model that recognizes the situation or environment may change how decisions get made.

How the Vroom Yetton Model is different than other decision making models

Other decision-making models can be very useful, however one needs to assess what assumptions those models are based on.  For example, often a decision making model assumes:

  • There is adequate information that is accurate and of reasonable quality.
  • There is some knowledge of cause & effect.
  • Alternatives can be rationally and objectively judged.
  • People will act rationally and free from organizational politics

The Vroom Yetton model challenges the decision maker to assess these things in the context of the situation she finds herself in.

Five Decision Making Styles of the Vroom Yetton Model

  1. Autocratic (A1) – The leader chooses using information available to her at the time
  2. Autocratic (A2) – The leader collects specific information from people and then decides.
  3. Consultative (C1) –The leader meets with people one on one to gather information and solicit input.  That input may or may not be reflected in the final decision.
  4. Consultative (C2) – The leader meets with the group to gather feedback and input, and then makes the decision.  That input may or may not be reflected in the final decision.
  5. Group (G) – The leader looks to the group for consensus, and the decision is made collectively.

How to Choose a Style of Decision Making Based on the Vroom Yetton Model

The Vroom Yetton model suggests seven key questions that guide a leader to choose the most appropriate decision making style to the situation.  Answer the questions below, and follow along on the accompanying flowchart to determine the best decision making style for your situation.

  1. Is the outcome critical?  Are there technical or rational grounds for selecting amongst options?  Is there a quality requirement?
  2. Do I have sufficient information to make a quality decision
  3. Is the problem structured?  Are the alternative courses of action and methods for their evaluation known?
  4. Is acceptance of the decision by subordinates critical to its implementation
  5. If I were to make the decision by myself, is it reasonably certain that it would be accepted by subordinates?
  6. Do subordinates share the organizational goals to be obtained in solving this problem?
  7. Is conflict among subordinates likely in obtaining the preferred solution?


3 Things to Remember about the Vroom Yetton Model

  1. Don’t make it complicated.  You should be able to run through the model in a few minutes to assist you in choosing your style.
  2. Realize some decisions should be autocratic.  Well-intentioned advisors tell you to always involve your people in decisions.  In reality, some decisions belong to the leader alone.
  3. Don’t over-rely on one style.  If you become over or under-participative in successive decisions, you will ultimately fail.  Each situation must be assessed according to the situation.

Watch the ‘3-Minute Crash Course’ about the Vroom Yetton Model (CLICK THE ARROW TO START THE VIDEO):

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Building Key Performance Measures

Join Jed and Bob as they discuss David Parmenter’s work on building good Key Performance Indicators, and how KPIs are different from other measures that are currently in use in many organizations.

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Key Performance Measures

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Every business has some performance measures, but do they have KEY performance measures?  Below we talk about

  • Why all organizations should have Key Performance Measures (or KPIs)
  • The difference between Key Performance Measures (or KPIs) and simply Performance indicators, and Key Result Indicators
  • We discuss David Parmenter’s four foundation stones for implementing and using Key Performance Measures (or KPIs)
  • Parmenter’s 12 step model to developing and using Key Performance Measures (or KPIs)

Why Your Organization Needs Key Performance Measures (or KPIs)

  • You need good measures to know where you stand as an organization.
  • People need to know “their score”
  • Key Performance Measures (or KPIs) are a necessary ingredient of continually improving performance.
  • Many organizations make measurement irrelevant by getting lost in a sea of data and numbers that nobody understands, or that don’t tell a story.
  • Key Performance Measures (or KPIs) are a necessary part of your Balanced Scorecard

KRAs, PIs and KPIs

David Parmenter is one of the foremost thinkers on Key Performance Measures (or KPIs).  Here is how he defines various types of indicators:

  • Key Result Indicators: tell you how you have done in a perspective
  • Performance Indicators: tell you what to do
  • Key Performance Indicators: tell you what to do to increase performance dramatically

Seven Characteristics of True Key Performance Measures (or KPIs)

  1. They are non-financial
  2. They are measured frequently (hourly, daily)
  3. Acted on by the CEO and the Management Team
  4. There is a clear understanding of the measures by all
  5. Assigns clear accountability
  6. It has a significant impact on performance and results
  7. Positively impacts other performance indicators.

Four Foundation Stones for Implementing and Using Key Performance Measures

  1. Partner with staff, unions, key suppliers and key customers for the development of Key Performance Measures
  2. Transfer of power to the front line for the influence and monitoring of Key Performance Measures
  3. Integration of measurement, reporting, and performance improvement.
  4. Linkage of performance measure to strategy.

Twelve Step Model for Implementing and Using Key Performance Measures

  1. Establish and maintain senior Management Team commitment
  2. Establish a Project Team
  3. Establish a “just-do-it” culture and process
  4. Set up holistic KPI development strategy
  5. Market the KPI system to all employees
  6. Identify Critical Success Factors (“CSFs” or Key Result Areas)
  7. Record measures in a database
  8. Pick team level performance measures
  9. Select organizational winning KPIs
  10. Develop reporting framework
  11. Facilitate use of KPIs
  12. Refine KPIs to maintain relevance

David Parmenter describes each of these steps in much more detail in his book Key Performance Indicators:  Developing, Implementing and Using Winning KPIs (John Wiley & Sons, 2007)  OR http://davidparmenter.com/

3 Things to Remember About Key Performance Measures

  1. Don’t let your metrics take on a life of their own.  Having hundreds of measures that people don’t understand or use is a waste of time
  2. You can do this at the departmental or regional level.  If your organization is not ready to use KPIs on a widespread basis, you can do it in your area.
  3. Do not discount Key Result Indicators – you need to understand your results and what you are achieving.  Just ensure you continue to drive those results through the use of Key Performance Measures.

Watch the ‘3-Minute Crash Course’ about Key Performance Measures (CLICK THE ARROW TO START THE VIDEO):

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A Zero Accountability Corporate Culture

Several years ago, I became involved in a finance audit with a public sector client.  These things are about as much fun as a boot in the butt with a frozen mukluk in any organization, but public sector organizations are even worse because of their inherent risk aversion.

It turns out the finance clerks were spending a ridiculous amount of time processing expense accounts for the considerable number of employees that were constantly travelling for business purposes.

Without doing the necessary internal investigating first, I got the bright idea to check with the relevant tax authorities as to whether we could simply offer people a per diem and dispense with all the $10 lunch receipts that were clogging up the system.

The federal tax agency did indeed have a provision for this that I thought would solve a considerable problem, and make everyone’s lives easier.

I was incredibly wrong.  I hadn’t been this wrong since I predicted Whitney Houston’s big comeback.

After lobbying hard inside the Finance group for such a change to be implemented, I was told in no uncertain terms, that we couldn’t do this because the people who didn’t spend the entire amount would pocket the difference, and that would be unacceptable.  Never mind that the amount was only about $50/day for a person on the road to pay for breakfast, lunch, and dinner.

Further, this policy could not be adopted because two senior managers had been caught abusing their expense accounts while travelling for business.

The VP of Finance initiated a root cause analysis of this problem, and concluded they did not have adequate control measures, and poor policy on expenses accounts.

He got it wrong.  He was treating a symptom of a much greater problem.  The root cause of his problem was a corporate culture with zero accountability.  Had a similar expense account abuse taken place in the private sector, the offending employees would have been terminated with cause, and common sense on a per diem expense policy would have prevailed.

Instead the VP of Finance chose to treat a symptom of a far larger problem by adding more bureaucracy.  He also chose to disregard the thousands of hours of labor required to process lunch receipts.  It’s a good thing he didn’t have the burden of worrying about shareholder value.

So instead of addressing the root cause, the Finance Department spent months rewriting the expense account policies, and ultimately came up with a completely ridiculous 75 page document that all employees with expense accounts were expected to adhere to.

Another genius example of your tax dollars hard at work.

 

Cause and Effect Map: Creating and Using a Fishbone Chart

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A Cause and Effect Map is a simple tool that can assist you to direct your action when solving problems.  Below we discuss:

  1. Why you would use a Cause and Effect Map.
  2. The Five Steps to creating a successful Cause and Effect Map.
  3. The three things to remember when using a Cause and Effect Map.

Why Use a Cause and Effect Map?

  • A Cause and Effect Map will help you to find and address root causes of a problem, not just the symptoms.
  • To identify cases where multiple causes for a problem may exist.
  • A Cause and Effect Map enables a team to focus on the content of the problem, not on the history of the problem, or the differing personal opinions of team members

5 Steps to a Successful Cause & Effect Map:

  1. Create a clear problem statement
  2. Brainstorm possible causes
  3. Draw Fishbone Diagram
  4. Ask Why
  5. Move to Action

Create a Clear Problem or Goal Statement for Your Cause and Effect Map

  • What is the problem (use specific terms)?
  • Where has the problem occurred?
  • When has the problem occurred?
  • How much?  How can you quantify the problem?
  • Use data wherever possible.
  • Ensure all participants have a common understanding of the problem statement.  Your Cause and Effect Map will be useless if people don’t clearly understand what problem they are attempting to solve.

Brainstorm Possible Causes to the Problem Statement on your Cause and Effect Map

  • Start with “Green Light” thinking.  Your Cause and Effect Map will be much more effective if you generate ideas without judgment at first.
  • Do in advance or as a group.  You may want participants to lend some thought in advance to potential causes, but if can still create an effective Cause and Effect Map by doing it as a group.
  • Use Post-its.  One alternative for your Cause and Effect Map is to have participants write down one potential cause on each of several Post-It notes.  This will allow you to more easily group and move ideas between categories.
  • Put brainstormed causes into potential categories.  You can do this either by labeling causes, and listing causes below the label, or conversely they can be grouped into categories, and then create a label based on the ideas contained in that grouping.
  • Apply more critical or “Red Light” thinking as you are sorting the potential causes into groups.

Draw a Fishbone Diagram and put in categories

Your Cause and Effect Map will begin to take shape when you draw your fishbone diagram, and label the individual “bones”.  Here are some standard categories found on a Cause and Effect Map, but don’t feel bound by these:

  • Materials
  • Machinery
  • Method
  • Policy
  • Measurement
  • People
  • Information (or lack there of)
  • Performance standards (quality, cost, etc)
  • Plant or facilities
  • Training and knowledge
  • Procedures
  • Environment

** Customize categories to meet your specific needs of your Cause and Effect Map

If you used Post-It notes, you can stick them on the appropriate “bones” of your Cause and Effect Map.

Ask Why

  • Start your Cause and Effect Map by looking at each “bone” and asking:
    • What else could be a cause?
    • Why does this happen?
  • You will now have a series of causes listed on each “bone”.  For each of those causes, you now need to ask “why”.
  • Continue to ask why for each cause until the appropriate level of detail is reached.

Move to Action on Your Cause and Effect Map

Your Cause and Effect Map is nothing more than a pretty picture, unless you choose to do something about it.  In some cases, several hundred causes may have been identified, in which case you will have to prioritize.

  • Look for causes that appear repeatedly across categories.
  • Look for causes that occur frequently.
  • Address causes you can do something about.
  • Make diagram available after the meeting for further input.

3 Things to Remember About Your Cause and Effect Map

  1. Make sure you clearly state a problem or goal.  If you have an ambiguous, or misunderstood problem statement, you will waste a considerable amount of time.
  2. Make sure you’re at the appropriate level of detail.  In some cases a Cause and Effect Map may take several hours to complete.  In other cases, it can be done in a few minutes.  You need to decide the most appropriate level of detail.
  3. Prioritize what action to take.  You should focus on one or two causes you wish to address, and leave the others for a later time.

Watch the ‘3-Minute Crash Course’ about creating and using a Cause and Effect Map (CLICK THE ARROW TO START THE VIDEO):

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Lagging and Leading Indicators

What are lagging vs. leading indicators, how to use them wisely, and why you should bother to measure at all.

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Lagging and Leading Indicators

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When considering measures and metrics, every organization should have a blend of lagging and leading indicators.  Below we discuss why you should measure, the definitions of lagging and leading indicators, and how to use them wisely.

Why Bother to Measure?

Organizations need metrics to effectively operate their businesses.  Here are some specific reasons as to why organizations need both lagging and leading indicators:

  • People need to know their score. Unlike previous centuries, people are often separated from the output of their labour.  As a result, there is a strong desire by most people to have some idea of where they stand, and what their results are.
  • Lagging and leading indicators can be used to improve a business.  It is very difficult to initiate improvement, if you do not know where you currently stand.  Lagging and leading indicators should both be used to establish baselines for both results and processes that need to be improved over time.
  • Lagging and leading indicators can identify trends that can be used to better understand the business, and make better business decisions.
  • Lagging and leading indicators can help ensure people in the organization are not working at cross purposes

Lagging Indicators

Of lagging and leading indicators, it is usually the lagging ones that are better established in organizations:

  • Follow an event or measures the outcomes of past activity.
  • Often measures results or output.
  • Can confirm a pattern, or that an event is about to occur.
  • Most financial indicators are lagging (a result of past performance).
  • Examples of Lagging Indicators:
    • Unemployment rates
    • Net Income
    • ROI
    • Output measure such as production

Leading Indicators

Organizations struggle more often with Leading Indicators when they are setting up their measurement systems:

  • Often measure activities or sometimes processes
  • Indicators that signal future events
  • Measures the drivers of business results (whereas the results themselves are represented by lagging indicators)
  • Examples of Leading Indicators:
    • Bond yields
    • R&D dollars invested
    • Patents filed or pending
    • Employee satisfaction
    • Training or qualification levels

How to Use Lagging and Leading Indicators

Many organizations embark upon a measurement program by establishing lagging and leading indicators.  However, there are a few easy tips that will ensure the time spent on lagging and leading indicators is time well spent:

  • Don’t let your lagging and leading indicators take on a life of their own.  Measurement systems should make your business easier to manage, and make business decisions easier to arrive at.  If your metrics are not doing this, it is being done improperly.
  • Have a mix of lagging and leading indicators.  Most organizations have lots of lagging indicators, but fail to establish or track any leading indicators.
  • Track some things for a while, and monitor to see if they are useful.  Your measures will change and evolve over time.  To begin, you should measure what is readily available, and see if that is helping you to manage the business.
  • Change your lagging and leading indicators as the business (or measurement of the business) evolves.  Don’t become too committed to certain indicators.  Change them as necessary over time.

3 Things to remember

  1. Don’t spend more time measuring work than doing the work.  If your measurement system is too time consuming or onerous, it’s value diminishes quickly.
  2. Don’t get hung-up on labeling an indicator “leading” or “lagging”. Some indicators will be both lagging and leading indicators, and some may fall into each category for various purposes.  Don’t agonize over the label.
  3. You need some leading indicators. You likely already have a number of lagging indicators.  However, past performance is not always an indicator of future results, so you need to give some thought to what your leading indicators are.

Watch the ‘3-Minute Crash Course’ about Lagging and Leading Indicators (CLICK THE ARROW TO START THE VIDEO):

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Can’t Decide? Flip a Coin

Part of what makes my job so much fun is being exposed to a variety of organizations in a wide variety of industries.  The culture of these organizations vary widely, and is probably best manifested in how people make decisions.  In some places, people gather as much information as they can, they discuss possible courses of action, and then they pull the trigger on a decision.

Other organizations have rambling, unfocused discussions, refer things to subcommittees, defer decisions seemingly indefinitely, and then wonder why their organizations consistently fail.

People can argue whether the greater evil is in making decisions to quickly or too slowly, and you can probably guess which side of equation I will argue for with the following list:

Things that delay decisions:

  1. Needing perfect information before committing.  It would be nice if you had all the available information at your disposal, but by the time you gather and process all that data, it’s possible your decision won’t matter anymore.
  2. Being too risk adverse. When people are deathly afraid of making a mistake, they will hesitate to make decisions.  What is not part of their calculations is that their delay carries a certain amount of risk too.
  3. Trying to keep everybody happy all the time.  Making decisions usually means having to make trade-offs of some sort.  By saying yes to one course of action, you are saying no to another, and in the process, you are going to upset someone.  This is a key reason why the public sector often fails to make timely, quality decisions.
  4. A top-heavy or micro-managed business.  In this case, only one person, or a small number of people are permitted to make any decisions, and as such become a bottleneck.  Organizations that push decision making down the hierarchy to the most appropriate level are much more agile, and ultimately perform much better.
  5. Poor decision-making process. Sometimes, people fail to recognize a decision point when it appears in front of them.  If they don’t recognize the fork in the road, they certainly won’t know which turn to take.
  6. Fear: Contrary to popular belief, it is sometimes better to make the wrong decision today, realize it tomorrow and then correct your course of action, than it is to delay a decision for weeks or months.

Now I’m really having a hard time deciding which video clip to include this week.  One of the candidates is a Monty Python bit (People’s front of Judea) that contains foul language that might offend some.  The other is a clip of George W. Bush talking about being a decision-maker, that may offend some American viewers.

I could ask everyone to weigh-in, and then make my decision, or I could just flip a coin, but I can’t decide which decision making process is better.

 

 

 

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