Synaptus

Last month Dennis Stevens, the President at Synaptus, presented to the GSU EMBA Alumni Society luncheon. Dennis addressed the concepts covered in the the June 2008 Harvard Business Review article regarding a capability-based view of the business model. He discusses how to apply these concepts to your business in a difficult economy to focus and align all aspects of the organization on key operating objectives and strategic outcomes. The presentation is shown in its entirity on the GSU EMBA Alumni Society website at http://hollywood.gsu.edu/dba/wwwrcb/emba/10.24.08.html.

It is about 45 minutes in length and includes the entire PowerPoint. We will be posting some extracts from it on the website in the next month.

Many companies are working on their 2008 budgets. In many of those cases, economic forecasts point to a need to cut costs. The mandate that we have seen in this circumstances may be that a 4% cost cut is required across the board. So each department sets off to identify 4% cut in spending. This cost cutting activity may result in the financial savings desired, but it probably isn’t the best way to approach this effort. This approach is common for a few reasons. It is fair – because everyone should participate in any cut backs. It achieves the desired result and we lack a more effective way to solve this problem.

The problem is that costs are often cut too deeply in some aspects of the business and not deeply enough in others. The overall equation balances, but it doesn’t optimize investment across the firm in the interests of achieving the business strategy and creating value for the customer.

Rather than cut costs across departments, look at the business as an interdependent network of value creating and enabling capabilities. Value creating capabilities are those that directly contribute to creating value for your customers. All the rest of the capabilities are enabling. Not all capabilities contribute equally to the success of the firm – and investment is not optimized at every capability.

Some capabilities already have over investment either due to inefficiencies or an excess of capacity. Some capabilities may actually already be constraining the performance of the business and actually need additional investment.

Change the mindset from where do I cut, to how do I focus my investment to optimize the performance of the business.

1. Articulate the most important outcomes of the business.

2. Identify the capabilities in the business and determine how important they are to the outcomes of the business.

3. Dig deep enough in the enabling capabilities to see where performance will be negatively impacted by cost cutting – for example, make appropriate investments in technology to support the high priority outcomes.

4. Identify the capabilities where you currently have excess performance and inefficient investment.

5. Now focus the overall investment into the business, starting with the most important business outcomes and working down the list until you reach your limits.

Our experience is that by analyzing the level of legacy spending, misalignment between departments, local optimizations, and gross inefficiencies you will find significant savings. In fact, this exercise often results in higher organizational performance at a reduced spend.

Recently I reviewed a five page performance appraisal tool used by a software company that they believed was excellent, and they couldn’t understand why very few people were using the tool. I brought up the notion of Dynamic appraisals vs. Static appraisals. Static is a one off event completed to cover compensation issues. Dynamic is an evolutionary process that is nurtured and grows more like an organism that adapts to the business, market and behaviors.

After our discussion they started asking a lot of interesting questions; How do we get folks to adopt a dramatic approach rather than a check box approach? Can HR be the drivers of the adoption? What role should business leaders play?

These are the right questions that need to be asked, and now they are turning the tide by facilitating business adoption through aligning business leaders to competency drivers that bring out optimal performance. Optimal performance is getting people focused on their strengths and designing functional areas so that the collection of individual skills are stronger than any single individual. In other words, creating synergy that drives the business based on KSAs that are motivated and dynamic rather than static.

Static drivers create status quo performance, and aren’t very measurable. Dynamic drivers are immediately impacted by the market, competitors, economy, etc. We can prepare for changes, ie: gas prices increasing, and have contingency plans. Building performance management systems that focus on dynamic business processes will allow an organization to have more dynamic focus on growing the business rather than maintaining it.

Does this make sense? Is it just easier to manage performance by static events? Can anyone share an example where the business drives Dynamic Performance Management?

Please let me know your thoughts.

- Nat Boughton

The forward-edge-of-the-customer-area, or Forward Edge, is the foremost limit in the network of capabilities where business capabilities are deployed in direct contact with the customer. These capabilities probably make up 15-25% of the capabilities in your business.

Extra attention should be paid to Forward Edge capabilities. The Forward Edge is a two way street. This is where you create the relationship with your customer. It is also where you can be learning from your customer how to improve your ability to meet the customer’s needs and expectations.

There are a number of areas where you directly interface with your customer. These include product development, sales, product and service delivery, when the customer uses your product or service, customer care, and invoicing and payment. These capabilities should be focused on meeting the customer’s needs and learning what opportunities exist in the market.

Many businesses make the mistake of using technology or outsourcing to cut costs in these areas without considering the customer impact. When technology and outsourcing is used to improve the companies capabilities at the Forward Edge, its great. But when the customer experience or the ability of the business to learn what the customer’s emerging needs are is compromised, these are not good ways to implement the Forward Edge capabilities.

How clearly do you understand the customer’s expectations at the customer edge? How well aligned are the other capabilities in your organization to meet these expectations? What do you have in place to understand your performance here and to learn about emerging customer needs?

The Forward Edge is that point where the capabilities of your business, interact directly with customers. This typically comprises a small number of the capabilities in an organization, but this the most important part of a business. There is something to learn for our organizations from looking at our experiences as customers at the Forward Edge. I have had three notable Forward Edge experiences in the last few weeks.

I was rear-ended a few weeks ago by a driver with State Farm insurance. We reported the accident from the scene and got a police report. State Farm took everything they needed from that initial report and the police report. They arranged for the appraisal, scheduled the repair at my car dealership, handled all the paperwork with the dealer, arranged for the rental and payment of a rental car, and paid every cent of everything. Their interactions with me were timely and professional.

Enterprise rented the car to me during the time the car was being repaired. They picked my up at the dealership when I dropped off my car, had the car ready when I showed up, called a couple time to make sure I was happy and that the service had been friendly, checked me in quickly and drove me back to the dealership when it was time to pick up my car. Their interactions were too warm and friendly from my perspective, I don’t need an emotional connection when I’m renting a car. The calls to check on my satisfaction both came a bad times during the business day and took too long. But they were consistently friendly and warm.

On Friday, I tried to order pizza from Pizza Huts website. My password wouldn’t work. I tried the option to resend my password, but after 30 minutes had never received my password - I even checked my spam folder. I tried to register again but I couldn’t because I had already used my email address. I tried to look up the menu, but couldn’t because the system said I was in the middle of placing an order. Their use of technology frustrated me.

So I called customer service. They could not reset my password or make sure it got sent to me. They had to forward the request to their web master. It took four days for my email and password to get to me. They knew this was a problem that people were experiencing. They couldn’t take my order either. They gave me the number of the local Pizza Hut to call. When I called, the person that took my order was obviously very busy and let me know that in the future I could place my order on-line. Their use of technology did not serve their business either.

State Farm clearly has their capabilities aligned with the customer’s needs and expectations at the Forward Edge. Their use of technology to integrate with their partners and keep track of everything was seamless. Enterprise also has their capabilities aligned with the Forward Edge. I wonder how many other people feel that the tone of the service reps on the phone calls were too invasive or took too much time with pleasantries. Pizza Hut has the trappings in place of serving the customer, but their capabilities are not aligned with my needs. I sure the ordering system saves them a lot of time and expense, but I may never order from Pizza Hut again.

Pizza hut made an unhappy customer and wasted a lot of their time because their website has a bug and their customer service reps don’t have access to the right tools. How well do you understand your capabilities at the Forward Edge? What do you have in place to understand the customer’s needs and satisfaction at the Forward Edge?

We have completed the move of our blog over to http://blog.synaptus.com. If you are still receiving this blog at synaptus.blogs.com, please update your links. Part of the upgrade involves an update to the way we will blog.  We will try to provide focused blog entries you can read in less than three minutes. We will continue to publish the e-zine with a more detailed article every week.

Its been a couple weeks since there has been regular activity on this blog. I have not been actively blogging for a few weeks. Spring Break with the family, a sinus infection, a series of client commitments, and collaborating with some very exciting thought leaders in the project management community has consumed my available time.

But there is a silver lining. My research and the collaborations regard the social aspects of project management. This is a area rich with opportunity to improve the performance of project teams and therefore the ability of organizations to execute on their strategy. I look forward to making for the lapse in activity by sharing insights in this area.

Is it that the Iraq War has made Europeans dislike North Americans, or is it that North Americans feel that they only have the right answers? I am not quite sure, and recently I have been involved in a Battle Royale. I am talking about a large software company where both sides have acted like school children on the playground. In this corner, North American sales team. And in this corner the Rest of World sales team. Let’s come out fighting fair.

But they aren’t fighting fair. Both teams have lied, cheated, and stolen opportunities from the other. Can this go on? What is the cause? Is it just about the wallet or is it about power? Is it that the compensation model is broken, or is that there is a lack of leadership or not enough negative consequences to change behavior?

The history between senior executives is literally hostile, and brokering an agreement can’t currently be done with both of them in the room. Getting to the VP’s and Directors has been difficult because of time constraints and the pressure being put on each team at the top.

Being the facilitator is exciting because our rule is simple - brutal, and I mean brutal honesty!! Defining the rules of engagement will take hard work and deep understanding of emotional intelligence and defining the social complexity and mastering collaborative communication (if it even exists).

We have now had two meetings where no punches have been thrown and we discussed the social complexity that exists and the organizational constraints that limit collaborative interaction. Getting everyone to talk about the obstacles is progress. 

I would be very interested in hearing what others have done in similar situations.

We have typically promoted three types of resistance to change: fear, embarrassment, and loss.  These have their roots in people’s innate desire to be successful. They are probably built-in very deeply to our survival mechanisms from when being successful meant staying alive.

Fear deals with uncertainty about the future. A person may realize that there is potential to do things better than they are currently doing it. But if the way they are doing it isn’t getting them fired and they aren’t completely certain they can be at least as successful in a new way, they will resist the change until their fear is addressed.

The important thing about addressing fear is that fear is in the perspective of the person who is facing the change that matters, not the people initiating the change. Historically, we keep doing what we have always done because it kept us alive.

Embarrassment deals with admitting that the way we have done things isn’t the best way to do it. People have a very strong drive to be right and to be appreciated. When you point out that they aren’t doing things the best way, they tend to become defensive. You don’t understand how things got that way. It sure is easy to come in after the fact and point out the problems. You must think they are stupid if you think they don’t understand the flaws in how they do work.

Embarrassment is dealt with by letting people tell their story. Let them know it is clear that they made the best choices they could over time. Its ok that things got the way they are because the got the way they are.

Loss is much broader. People have made an investment into developing the competence that they have been rewarded for and that gives them influence. Any of these points can be an emotional sticking point, loss of investment, competence, rewards, or influence.

Explaining how things will be better for the business on the new .NET platform doesn’t help the guy who spent the last 20 years becoming the absolute expert in the COBOL application. Explaining the focusing benefits of social marketing techniques doesn’t make the sales person who spent the last 20 years developing relationship more valuable. The manager who has thrived in chaos and been rewarded for it will resist the effort to put in standard processes.

When we change the way we do things, we can’t replace the investment made by individuals in developing the competence that has led to reward and influence. We pull that out from under them. Loss is the most difficult challenge to deal with. We can commit to supporting a new investment, although it is difficult to replace 20 years of experience. People want to be valued. Try treating them with a great deal of respect and recognition for what they have accomplished. This will help with the transition, but won’t necessarily set them up for a complimentary level of success in the new way of things.

The bottom line is that overcoming resistance to change is critical to the success of most strategic changes. Typical change management approaches teach us to communicate, communicate, and communication again. But, notice how of the sources of resistance are all at a personal level. Explaining how the change will benefit the business, or the manager, or even the customer isn’t sufficient.

Next time you are facing resistance to change, don’t push - listen. The person resisting understands the benefit to the business. It is fear, embarrassment, or loss that is motivating the resistance. Often it is a combination. Spending time understanding and addressing resistance at its root may seem like an unneccassary investment. However, the investment is almost always less than the cost of the resistance itself.

One of the core problems in getting the most out of people is that HR gets treated as a kind of black art. Everything is wrapped in a veil of compliance, secrecy, and touchy-feeliness (I made that word up). The HR practictioner’s are often generalists who are trusted (they deal with compensation information) and well liked (that’s what HR is about isn’t it), but there is a lack of business discipline in their approach.

According to Workforce.com’s new article, HR Dinosaur’s, some HR departments view HR as an "art" rather than management science. The article advocates technology as a solution. While I don’t agree that technology alone will solve the HR problem, there is a need for systematic approaches to managing the talent in the organization. Here are four key problems from the Workforce.com article that arise from a lack of business discipline in HR.

1. Silo’s: As long as their jobs remain a mystery, they are powerful. They build power by limiting information and controlling access to management on anything HR related. They use the need for secrecy around compensation and HR issues to drive this secrecy. But the strategic power of HR doesn’t come from compensation, compliance, or handling behavioral issues. There needs to be consistency, transparency, and partnership between HR and the organization when it comes to getting people in the right jobs.
2. No measurements: What are the result metrics associated with HR? There don’t tend to be any. If there are any, the metrics are around how quickly jobs are filled. Not around how well the jobs are filled. Or, they are around legal and compliance issues. Everyone has the training required by law and all the paperwork is in place to protect the business from law suits. There is no value add in this, just risk management. This is like everyone else showing up to work. The metrics should be to make that there are no Knowledge, Skill, or Ability related obstacles to successful job performance. HR should be making sure that qualified people are getting hired, placed, developed, and measured so the organization can achieve its strategy.
3. Relationships rule: Instead of using business results to determine HR investments, they are made based on who has the best relationships with HR. Want more money for some special training you think will benefit your employees, take the HR person to lunch and smooth talk him.
4. They are not experts: This is my favorite quote from the article. They are just "highly paid HR assistants who help general managers fill out forms, get through the performance appraisal process and handle troublesome people issues." 

We have reached tremendous value in organizations through process improvement and technology. In an economy that is moving towards service and knowledge as the accelerators of value, we need to establish systematic ways to leverage the talent in our organizations. This is done through the application of systematic business discipline to placing, developing and measuring the peformance of the people in our organizations.

Is HR serving a purpose beyond compensation, legal compliance, benefits, and behavioral issues in your company? Does your organization have a systematic method for ensuring that the right decisions about talent are being made? How important is this to your company today? How important will it be in the next five years? Is it time for your HR organization to start running HR with business discipline?