December 7, 2022

Harmony: Achieving Success

Harmony: Achieving Sustained Success

We’ve been fortunate to work in a variety of work settings, and after a while we started to decide what we learned was transferable to the next engagement – and what was unique to that organization. Several of our favorite major themes include:
  • Cash is King, don’t get overly distracted with Income Statements
  • Technology can be a force multiplier, or a path to rigidity
  • In the service sector, people are your greatest opportunity and liability.
  • Growth solves most problems, if you have mastered Lesson 1: Cash is King.
We could add to the list, we will save that for another day. One of our favorite enduring themes is the importance of harmonizing the expectations of customers and stakeholders through the actions of the employees. In a companion article, we will explore how this model applies to and the unique modifications required for the nonprofit sector. So, let’s explore how to create an enduring model that will harmonize the expectations of seemingly conflicting expectations of customers and stakeholders. We refer to the model as the Interlocking Rings of Stakeholders: Customers. Investors, and Employees. To state the obvious, employees must understand and optimize around the expectations of customers and investors (and all stakeholders). There are many approaches, which is one reason so many early-stage companies fail even with a promising idea. And there are similar reasons why some companies continue to perennially reside in the dreaded bottom quartile. For the moment, we are going to posit that our hypothetical company, Success Inc, has more than met the requirements of understanding customer expectations through market research, beta testing, and has good marketing and public relations assets. Equally, we are going to assume they have investors who made a fair investment and expect management to execute the business plan without heavy-handed interference from the Board. We could write a doctoral thesis on delighting customers while purusing wise investment strategies; in fact, those are readily available and are supplemented by a continuous series of new advice easily found through Google searches or on Amazon. We leave those topics to other experts. We’ve found some companies have a smart idea and are great at management. Bright, articulate leaders, interested in a healthy work culture, committed to hiring high-quality employees, even willing to implement profit-sharing compensation programs. On day one, most CEOs would view themselves as planning to embrace most if not all the attributes described above. So, what goes wrong? We remember the Ed Sullivan Show, and the seemingly simple comedy act that would appear occasionally involving spinning an increasing number of plates on flexible poles. Spinning one plate on top of a pole on-stage was interesting, adding a second was impressive, adding the third started to heighten our interest, and when they moved beyond five to ten or twelve – wow. The complication, of course, was keeping ALL the plates spinning or we would watch a succession of plates falling and breaking on the stage. Ed did not like broken plates, so the performer not only had to keep all the plates spinning they had to make it entertaining. So, what started as a display of agility became an increasingly comedic display. While taking nothing away from top quartile performing companies, we believe there are strong similarities between their employees and that performer on the Ed Sullivan Show. Each have strong underlying competencies required for success, and the is making the use of those skills an increasingly complex environment. High-performing organizations consistently bring and improve new products and services, are found to be the best places to work in annual magazine assessment and reward their investors with superior returns. Our experience has shown that these companies are exceptional in their practice and commitment to harmonizing management, measurement, and competition systems. The management system includes strategies, plans, organizational structures, continuous business process improvement with complementary information technology systems, and a hundred other attributes required for managing and leading organizations successfully. But do they measure the key components of the management system? Are the measurements timely? Subject to modification by management to the detriment of employees (think commission plans and year-end bonuses), obscured by too many measurements? And most critically, not measuring critical process and performance results important to customers and investors? I know, that couldn’t happen at your company, right? I sadly conclude Measurements and KPIs are imperfectly implemented frequently or why would people like Measure What Matters by John Doerr, Measures of Success by Mark Graban, Scaling Lean by Ash Maurya, The Balanced Scorecard by Robert Kaplan, and a personal favorite 9Lenses Insight to Action by Edwin Miller. Turning briefly away from measurements, what about that important third leg of the stool—Compensation? I remember from IBM’s First Line Management school that compensation was not the most important reason employees remain happily at one employer. Maslow’s theory of hierarchy suggests compensation is one of humans most basic needs and therefore far from your typical Millennial’s Self Actualization ‘must have’ job description. In fact, compensation at best has a neutral long-term morale impact, and constantly is in danger of becoming an emotional dissatisfier. Compensation can become problematic when employees feel they have little input into their annual increases, bonuses or commissions. They hate arbitrary and capricious system that are opaque, seem to favor certain individuals, and when the ‘rules of the game’ suspiciously change every year. Moving back closer to our harmonization theme, do the compensation system rewards track to what is being measured, and what the management system is communicating as important? As one of my IBM mentors would say, If Not, WHY Not. Lesson 1: Successful organizations have rational, documented systems which are purposefully managed to work in harmony. Less successful and ‘dysfunctional’ organizations often have the elements but have not focused on ensuring they reinforce each other to deliver desired behaviors. In subsequent articles, we will dive deeper into key factors and best practices for management, measurement, and compensation systems. Again, with some humility these are our views and should be viewed as the tip of the iceberg for deeper information dives for the those truly committed to excellence. We hope they stimulate further thought and dialogue. For those who prefer the Cliffs Notes version of the companion articles, we’ve included the Lessons from each article, below: Lesson 2: Management Systems define Why are we here, where are we going, how do we get there — with a passion for repeatable, definable processes. Lesson 3: Management and Measurement systems are partners that shine when done well, just like our favorite duos in film. Owen Wilson and Ben Stiller in Meet the Parents and Zoolander, or Paul Newman and Robert Redford in The Sting. Remember, to be a winner you need to keep score. Lesson 4: Compensation systems must be closely linked to Management system goals and objectives, be reinforced with regular, transparent Measurement system reporting, and employees must believe the Compensation system is fair, equitable and not subject to owner self-interested manipulations. In privately-held firms, be very careful to avoid ‘over valuing’ stock incentive programs in lieu of cash compensation.
In this article:
Explores how to create an enduring model that will harmonize the expectations of seemingly conflicting expectations of customers and stakeholders.
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