Archive for September, 2013

Let’s Hold Consultants Accountable For Results

Tuesday, September 24th, 2013

For a Scotsman, true accountability occurs when results are linked to compensation.Let's hold consultants responsible for results

So I’ve tried various ways of linking our payment to our performance for most of the 12 years that I’ve owned ProfitPATH.

Why? In addition to the one above, there are 2 other reasons.

First, the people we work with are all taking risks. If we are to be credible, why should we be risk exempt?

Second, when I worked in corporations I hated paying consultants before I knew if their recommendations would deliver the results I wanted. When I started ProfitPATH I swore we wouldn’t do that.

It’s relatively easy to link our fees to our own performance.

We make sure the deliverables are clear and give the business owner what they want. We also tell our clients that they can stop an assignment at any time without any financial penalty. Just pay us our fees up to that point.

Linking payment to our clients’ results is a little more complicated.

Why?

Because of the number of things we have no direct control over. They include, for example, everything from the economy (be honest, did you guess the last crash would come when it did) to how they arrive at the profit line on their income statement.

But just because it’s complicated, that doesn’t mean we shouldn’t try.

And so we’ve experimented with a number of things. Like deferring a portion of our fees until the outcome of our recommendation becomes clear; or linking part of our payment to the achievement of a result.

There are other ways to hold consultants accountable.

A client can, for example, refuse to act as a reference; or communicate their disappointment as widely as possible; or withhold part, or all, of the fees. But these are all post completion options.

Other alternatives, that we recommend, are frequent, regular progress reviews. When coupled with the “terminate at any time with no penalty” policy I mentioned above, these reviews carry some weight.

Holding us accountable is part of my wider belief that the management consulting industry needs to take some of its own advice. It has to change its business model.

Now Clay Christensen, author of “The Innovators Dilemma” and one of the leading thinkers about innovation, has weighed in. A Harvard academic, and former consultant with the Boston Consulting Group, he believes that the consulting industry is ripe for disruption.

He’s joined by Ron Ashkenas, managing partner of a consulting firm and academic at Berkley, whose article first set me off on this rant.

I’ve been convinced for years that change needs to happen. It’s encouraging to see thinkers of their caliber saying similar things.

 

If you enjoyed this post you’ll also enjoy Why You Need A Consultant With Hands-On Experience

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4 Rules For Succeeding In Business

Tuesday, September 17th, 2013
J.P. Lemann's 20 Rules For Succeeding In Business

Photo by Alan Marques/Folhapress

I’m ashamed to say that I’d never heard of him.

So I didn’t recognize the name of the man who partnered with Warren Buffett to buy Heinz earlier this year.

He’s Jorge Paulo Lemann. His company bought Anheuser-Busch in 2008 and Burger King Holdings in 2010 and his personal fortune is estimated at $17.8 billion.

So when he speaks, I figure it’s worth listening.

His “20 Rules For Succeeding In Business” were published recently – and the word “people” appears in 6 of them.

Here are 4 that can be applied by all business owners.

1.  “The main function of the heads of a business is to choose people better than them to keep the company going even without its leaders.”

Two phrases really stood out for me.

“Choose people better than them”. Some owners miss the point here. It’s not about hiring people who are better owners than they are. It’s about hiring people who are more knowledgeable/skillful at running an aspect of the business than the owner – so he/she can focus on doing what only she/he does best.

“The main function” means not when you’ve done everything else; not when you get around to it; and not because you have to. But because it’s the most critically important thing an owner can do.

2.  “Common sense is worth a lot and more than complex ideas. Simple is always better than complex.”

Wasn’t it Stephen Covey who said something like the remarkable thing about common sense is that it isn’t all that common?

A management team was discussing a recently introduced incentive plan. There was concern that they had not clearly defined the action which triggered the incentive.

To bridge 2 opposing views, splitting the incentive amount over several actions was suggested. This, in my opinion, made the value of the initial “prize” meaningless and added complexity to what needed to be a simple “do this and win” situation.

Fortunately they didn’t do it.

3.  “Always reduce costs. That’s something that is under your control and ensures survival.”

During strategy development – the SWOT analysis – we highlight the things business owners can’t control. Costs and expenses are 2 things that are under their direct control.

A constant focus on managing them, and making sensible reductions where possible, will go a long way toward success.

4.  “A big, challenging and common dream is essential, and it helps everyone to work in the same direction.”

Call it a Vision or call it by any of the other terms used in recent literature, what matters is to have one.

Note he says “common” dream. It’s something everyone in the company is invested in. That means they felt they had input and they understand what their part is in achieving it.

To see all 20 of Lemann’s rules go here.

 

If you enjoyed this post you’ll also enjoy A Vision – Is It Worth Investing The Time?

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Strategies That Get Results Are Developed By Thinkers And Doers

Tuesday, September 10th, 2013

The companies we work with are less complex organizations than those in the Fortune 500.Include strategy developers in the execution process for better results

But our clients can experience the same types of problems that the big guys face.

Here’s an example.

A gap between the thinkers and the doers

I read this week about the gap that exists in large corporations because the people who develop strategy aren’t the ones who have to execute it.

In most of the companies we work with, a gap like this shouldn’t exist. However, it does occur in some.

In this case the gap is not caused by the separation of responsibility for developing and executing strategy. It’s caused by a strategy development process that isn’t sufficiently inclusive.

In our clients, the business owner is responsible for both developing strategy and ensuring that it’s executed.

Arguably, everyone else is responsible only for execution. And their responsibility is very often limited to only the parts of the strategy that directly affect them.

The owner can:

a)  develop the strategy by him or herself, or

b)  involve her/his management team, or

c)  involve the management team and key players from all parts of the company.

In the companies we work with, the gap occurs when the owner opts only for alternative a) or b).

Disadvantages of having a gap

There are several disadvantages of excluding key players.

•  They are the people who have been intimately involved in executing all of the strategies that have been developed in their past, either with their current employer or in other companies. As a result, they know what is involved in making a strategy work, in getting results. They can provide valuable input at the development stage, even nipping impractical strategies in the bud before time and resources are wasted on them.

•  If the key players understand the reasoning and logic behind a strategy it will help them make the right decisions and best choices when circumstances change (as always they do) during implementation.

•  People are more committed to a course of action when they’ve had a part in developing it. So the key players are more likely to keep persisting in the face of difficulty.

An example of how to prevent the gap

One of our clients had a workforce of 300 unionized employees, spread across the Province. When it came time to renew the strategy, the General Manager invited 10% of the workforce to participate in the process.

The representatives, chosen by their teammates, were expected to represent their areas in the sessions and to provide feedback when they went back to work units.

The quality of the input the representatives brought with them and the value they added to the discussion and debate was quite remarkable.

 

If you enjoyed this post you’ll also enjoy 5 Reasons Why I Love Execution

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Are You Fit For Growth?

Tuesday, September 3rd, 2013

This week’s guest is Dick Albu, the founder and president of Albu Consulting, a strategy management consulting firm focused on engaging and energizing leadership teams of middle market private and family business to formulate robust business strategies and follow through on execution of key strategic initiatives.

 

As we talk to current, past and prospective clients, they readily share their concern regarding achieving profitable growth. Their concerns center on the uncertainty surrounding economic policy that is creating business uncertainty and dampening economic growth. They are also finding it challenging to shift their focus from reducing costs (for the past 5 years to survive the recession) to driving sales growth. Yet, these same leaders realize their organizations will be facing headwinds for some time and need to move forward with a growth agenda.

The companies we spoke with are not alone in their concern in achieving profitable growth. According to a recent Booze & Company survey Fit for Growth (Survey) – only 17% of the 197 companies surveyed are prepared to achieve sustained profitable growth. The realization that most companies are struggling, represents an opportunity for those willing to prepare for growth by taking a more deliberate approach to developing and implementing their agenda. The Survey created an index based on assessing companies in three key areas:

1. Strategic clarity – clear set of strategic priorities supported by strong capabilities, a product portfolio aligned to the strategy, and a presence in critical markets.

2. Resource alignment – investment in key capabilities, targeted cost reduction, and continuous improvement initiatives aligned to strategy.

3. Supportive organization – Effective and timely decision making, strong leadership, and a supportive culture.

The first area addresses strategy, and areas two and three capture a company’s execution capability. Strategy and execution were given equal weights in the index to acknowledge their shared impact on performance.  In addition, the Survey compared index values to total shareholder returns (TSR) and found that companies with high index scores generally scored higher in TSR performance. Essential to a company having a high index value was scoring well in all three areas, highlighting how these three areas reinforce one another, resulting in higher overall performance.

The evidence is compelling. Being Fit for Growth can lead to sustained profitable growth. So how do you go about determining if you are Fit for Growth? Booze & Company suggests starting by answering these three questions:

1. Do you have clear priorities, focused on strategic growth, that drive your investments? You might not have clear growth priorities if you feel you have too many conflicting priorities, or your leadership team is not aligned when asked what things the company does well.

2. Do your costs line up with your priorities? Are you allocating resources to priorities effectively and efficiently? You may be able to improve your allocation of resources if high-priority projects are missing milestones because they do not get appropriate attention, or department annual budgets are only based on prior year.

3. Is your organization set up to enable you to achieve your priorities? Your organization may not be fully supporting your growth agenda if incentives are motivating people in ways that actually undermine the behaviors needed to achieve growth priorities, or most suggestions are being rejected causing people to be afraid to take calculated risks.

Get fit for profitable growth by answering the above questions and take steps to get better in the three areas of Strategic Clarity, Resource Alignment, and a Supportive Organization.

Is your organization Fit for Growth?  We would be interested in hearing about your experience. Give us a call.

Dick can be reached at 203-321-2147 or RAlbu@albuconsulting.com. For more information on Albu Consulting visit www.albuconsulting.com.

 

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