Friday, March 27, 2009

Get Help to Increase Your Corporation’s Value

With the right kind of specific help, private company CEOs and management teams can be even more effective at improving profit, cash flow, and market value.

Get the benefit of someone experienced with turnarounds and business improvement, who will share insights learned from years of playing the “greatest game.”

In “the fog of war,” it helps to have a variety of past experiences to draw upon. CEOs can use the insights of a former CEO to do better under fire. Accumulated wisdom can help identify the few most important decisions to be made out of the many. Start improving leadership and organizational culture. Trust, but verify; question collaboratively; challenge supportively; experiment and fail fast; focus laser-like on what matters most.

Someone who has worked closely with technologist geniuses, scientists, mathematicians, electrical and mechanical engineers, and a host of other professionals and all kinds of workers has unique perspective and valued insights and can add fresh, creative thinking to almost any business.

Get someone who will study the business, who will focus ON the business, to improve how the business works, to improve its value. People working at or in the business usually know where it hurts, but can use help with clarification, diagnosis, treatment options, and follow through to make things better. The right person will help the team get everyone more focused and motivated to generate more cash and increase overall value – selling better, fulfilling better, improving quality, reducing costs – doing more to bring out the best in each person, improving capabilities and contribution.

You want this person to be capable of fostering thoughtful problem-solving for improvements in the business model, strategy, marketing, sales, fulfillment, operations, products, services, quality, finance, and every other vital part of the business. You may need help to clarify and instill an updateable improvement vision in the minds and hearts of everyone needed to bring it about, for the benefit of all participants. Like in sports and medicine, vital core metrics may need to be selected to set goals, measure progress, and fulfill the vision.

The improvement vision may include one or more bold strokes, a series of vital drives, and/or many small advances. Effectively instilling the vision stimulates actions to fulfill it. Focused persistence on what matters most brings it about. Leadership can always be improved, operations strengthened, organization developed and staff better trained, products improved and better ones developed, sales and profit increased, all to increase profit, cash flow, and market value. Putting combined insight and energy to productive and efficient use produces desired results.

A facilitating, expediting leader adviser can help follow through to improve things, to achieve goals, and bring about the desired vision.

In the process, and as needed, at the appropriate time, the team will:

1. Review the business model, cash flow, P&L, balance sheet, etc. to pinpoint focus points, explore options, and follow through with positive action.

2. Clarify what is needed to improve confidence, credibility, communication, and innovation for mutually improved relationships with customers, employees, and suppliers to increase the financial value of the company.

3. Connect the dots on how each person affects results, using practical metrics to achieve goals; improve business through better information sharing, problem evaluation, research, planning, target setting, incentives, etc. – to fire better on all cylinders.

4. Clarify priorities and how better to organize and follow through to achieve them.

The team will look for areas of frustration or vagueness, and other red flags, to clarify and prioritize improvement opportunities.

Leaders will spark initiative by asking: “What would you change or improve? What help do you need? What’s the next step?”

Like a team of business doctors bent of getting the best results through careful observation, listening, questioning, and root-cause diagnostics, with an eye to prevention as well as cure, desired goals will be achieved for greatest gain.

Each situation is unique and the approach must be customized according to discernment of need and opportunity, based on combined experience and judgment, adapted to changing circumstances and priorities.

Checklist to Audit for Improvement Opportunities

1. What "legacy obligations" might now be unnecessary?

2. How might management be more streamlined? Are there still too many layers of management, … rigid job classifications, inefficiencies?

3. Are we making products customers want? How can we improve them? Anything new we should do?

4. Are there unintended consequences we don’t like or is there anything that stifles important activity?

5. How can we enhance competitiveness? Do we have anything like a “regulatory edifice created over the years” that has removed freedom needed to take responsibility?

6. How can we increase accountability?

7. Do we need any "change in culture, to a culture that answers challenges with innovation…"

8. How can we better “access their can-do spirit…?”

9. Do we need help to “surmount… inertia … (to) energize, (do) spring cleaning, realign, advance… removing shackles … (to) unleash untold resources and human energy?”

(Quotes from “Let's 'Restructure' Washington While We're at It - Congress is at least as unresponsive to consumer demand as Detroit.” By PHILIP K. HOWARD, a lawyer, chair of Common Good (www.commongood.org), and author of the new book "Life Without Lawyers," published Jan 2009 by W.W. Norton & Co.)

Four Questions to Spotlight Your Company's Needs

Jack Stack and the Great Game of Business start with four questions:

1. As smart, talented and well educated as they are in their specialties, how well do your employees understand cash flow, profit, how your business makes money, and how they can help it make more?

2. How strongly do they personally work to achieve business objectives and the critical numbers?

3. How well do they know the rules of the game of business?

4. How well do they follow the action, keep score, and work together to win against the competition?

These questions get the ball rolling in a way everyone can appreciate.

Every company is unique and best characterized by the players themselves.

Don't over complicate it. Get started and learn. Identify needs, prioritize them, and keep improving things.

As momentum increases, you'll figure out even better ways to improve your most important knowledge/skill base to improve profit, cash flow, and market value.

Edwards Deming, Simple Points, Background Story

I didn't see Deming's 14 points until 1979, yet they were familiar to me, reflecting what I'd grown up with, consistently embracing a philosophy of improvement, leadership, training, education, teamwork, eliminating fear, removing barriers, avoiding showiness, teaching correct principles to encourage more self-management.

Practical principles captured in simple comments like "Be wise" and "Be nice" and "Do good" and "Do better" and "Don't quit" make points without being complex, but watch out for window dressing.

Be wise - really think, observe, clarify, evaluate, act, learn, repeat, don't quit.

Be nice - it works better. Not being nice adds negative emotions with attendant complexity and vagueness. Negative emotions are an underground drag on progress. Positive emotions are powerful for adding value.

Do it - get it done - be wise, think, be nice, do good, evaluate, do better, update plans, prototype, test, implement, assess, keep learning, keep improving, don't quit.

Patient persistence in pursuit of perfection will lead to better practices and more profits, allowing greater rewards for all concerned.

Background Story -- Turning Point in Business Leadership

After getting a Master of International Management degree and then MBA, I joined a fast-growing computer company in Texas and was initially given assignments that groomed me for general management. One learning experience changed my outlook on management. Two higher level bosses took me with them to meet a Japanese company to explore a joint venture between our Texas-based company and their company. I was there mostly because my office was in the Bay Area where the meeting was held, and my bosses had flown from Texas, one originally from Boston - both had strong accents.

During the meeting the four Japanese men on the other side of the table looked at and talked to me more than my bosses. This frustrated one of my bosses enough that he asked why they talked more to me, indicating I was junior to them. The Japanese men expressed apologies for any offense, saying they were more familiar with California English than Texas English or Boston English.

I was given liaison responsibility after that meeting. I tell this story for what subsequently happened.

My boss’s boss's boss assigned planning and implementation responsibility for this project to the general manager of our Fort Worth operation, who in about a week produced a "well written" plan for our end of things and sent it to me to follow up with the Japanese.

As weeks went by waiting for the Japanese to “get their act together” my superiors grew increasingly frustrated. After two months, I was told to tell them “if you can’t make decisions, we’ll find someone who can,” etc. I was then told to call it off just as they finally submitted their plans. I was initially put off by how much they had done, feeling they had made it too complicated. We considered our plan more succinct and to the point.

But the tables turned as planning was followed by implementation. Virtually everything the Japanese had said they would do they did as promised or better, while our American end fell into disarray. The Fort Worth general manager had prepared his plan on his own with his boss. All that mattered was that his bosses had approved it. He had not involved the many others in his organization in the planning process. People ended up being fired in all the confusion, and after six months, the Japanese told us they would go on without us and ended the relationship. Seeing the contrast, I was embarrassed for us and marveled at the Japanese.

In answer to my queries about why and how they did things, I was introduced to the work of Edwards Deming. This was 1979 and I had never heard of him. But I was captivated by his 14 points. I began to apply them in my business leadership roles. Deming’s points turned me into a "turnaround specialist” focused on really improving corporate value, not just making high level quick-fix "slash & burn" cosmetic changes.

A Checklist to Really Increase Value

Eliminating whatever contributes in any way to employee apathy, fear or cynicism will increase corporate value.

Apathy, fear and cynicism can be caused by many things, including inconsistency.

Deming's 14 points:

1. Create constancy of purpose for continual improvement of products and service to society, allocating resources to provide for long range needs rather than only short term profitability, with a plan to become competitive, to stay in business, and to provide jobs.

2. Adopt the new philosophy….We can no longer live with commonly accepted levels of delays, mistakes, defective materials, and defective workmanship. Transformation of Western management style is necessary to halt the continued decline of business and industry.

3. Eliminate the need for mass inspection as the way of life to achieve quality by building quality into the product in the first place. Require statistical evidence of built in quality in both manufacturing and purchasing functions.

4. End the practice of awarding business solely on the basis of price tag. Instead require meaningful measures of quality along with price. Reduce the number of suppliers for the same item by eliminating those that do not qualify with statistical and other evidence of quality. The aim is to minimize total cost, not merely initial cost, by minimizing variation. This may be achieved by moving toward a single supplier for any one item, on a long term relationship of loyalty and trust.

5. Improve constantly and forever every process for planning, production, and service. Search continually for problems in order to improve every activity in the company, to improve quality and productivity, and thus to constantly decrease costs. Institute innovation and constant improvement of product, service, and process. It is management's job to work continually on the system (design, incoming materials, maintenance, improvement of machines, supervision, training, retraining).

6. Institute modern methods of training on the job for all, including management, to make better use of every employee. New skills are required to keep up with changes in materials, methods, product and service design, machinery, techniques, and service.

7. Adopt and institute leadership aimed at helping people do a better job. The responsibility of managers and supervisors must be changed from sheer numbers to quality. Improvement of quality will automatically improve productivity. Management must ensure that immediate action is taken on reports of inherited defects, maintenance requirements, poor tools, fuzzy operational definitions, and all conditions detrimental to quality.

8. Encourage effective two way communication and other means to drive out fear throughout the organization so that everybody may work effectively and more productively for the company.

9. Break down barriers between departments and staff areas. People in different areas, such as Leasing, Maintenance, Administration, must work in teams to tackle problems that may be encountered with products or service.

10. Eliminate the use of slogans, posters and exhortations for the work force, demanding Zero Defects and new levels of productivity, without providing methods. Such exhortations only create adversarial relationships....

11. Eliminate work standards that prescribe quotas for the work force and numerical goals for people in management. Substitute aids and helpful leadership in order to achieve continual improvement of quality and productivity.

12. Remove the barriers that rob hourly workers, and people in management, of their right to pride of workmanship. This implies, among other things, abolition of the annual merit rating (appraisal of performance) and of Management by Objectives. Again, the responsibility of managers, supervisors, foremen must be changed from sheer numbers to quality.

13. Institute a vigorous program of education, and encourage self improvement for everyone. What an organization needs is not just good people; it needs people that are improving with education. Advances in competitive position will have their roots in knowledge.

14. Clearly define top management's permanent commitment to ever improving quality and productivity, and their obligation to implement all of these principles. Indeed, it is not enough that top management commit themselves for life to quality and productivity. They must know what it is that they are committed to—that is, what they must do. Support is not enough: action is required!

Clarify Root Causes of Poor Communication

“What we have here is a failure to communicate.” (repeated by prison warden in "Cool Hand Luke")

Of course not all facts should be communicated. While the importance of protecting vital confidentiality cannot be overemphasized, what is and is not confidential is a matter of crucial judgment. Trust and confidence can be inhibited or destroyed to the degree confidentiality is abused, either by neglecting to preserve proper confidentiality or by being overly obsessive and paranoid in refusing to share information.

For purposes of this current topic, we will assume propriety in maintaining proper confidentiality of what should NOT be communicated, and focus on doing better at whatever it takes to more effectively communicate all that SHOULD be communicated to improve profit, cash flow, and the market value of the company.

Clarifying and overcoming root causes of poor communication will increase profit, cash flow, and market value.

Poor communication is wasteful and counterproductive. To not be dealing with reality is a killer of time and resources. The complete truth is more than just facts of random value; it requires the added clarity of insightful priorities.

All efforts to improve company efficiency, productivity, or effectiveness, much less profitability, cash flow, and market value, must take into account the quality of human communication within the company. Not just from management to employees, but from employees to management and the multitude of timely and truthful messages needed from any one person to another that can improve business value.

The human communication factor in the world of improvement can be negative (obfuscation - fuzziness, muddiness, avoidance) or positive (clarification - truthfulness, completeness, priority valued). Obfuscation is more than conventional lies, denials, & deception. To obfuscate is to disguise, conceal, confuse or complicate, even by avoidance (passive resistance). The antonym is to clarify.

What exactly is confused, disguised, concealed, or complicated by obfuscation? We can call it the truth or reality. Synonyms for truth include fact, reality, certainty, accuracy, genuineness, exactness, legitimacy, veracity, honesty, candor, integrity, etc. Antonyms include fiction, falsehood, error, dishonesty.

Obfuscation may be due to any mix of: (1) seeking potential gain from promoting error, (2) fear of the consequences of communicating the truth, and (3) apathy, ineptness, mental impairment, and accident.

The more sensational category of seeking gain through fraud, demagoguery, and other forms of abuse gets the most press, and is the cause of costly attempts at regulation. The other categories are more hidden, but probably more common and costly. The concealment of truth, deliberate or unintentional is a major barrier to improvement which can be reduced by improved leadership, management style, and resultant company culture and organizational design and development. The transparency of open book management is conducive to if not vital to improvement.

Truth is knowledge of things as they really are, as they really were, and as they really are to come. Knowledge that is filtered by fear, covered up, denied, or misrepresented is obviously less visible. Visibility is the first and most important level of clarity.

Improvement requires clarity about base line conditions. The truth must be clearly described and accurately revealed by those who know so that all affected can make needed improvements. Truth is more than appearances. Symptoms are appearances. Truth that matters most to improvement has to do with root causes, which are identified through increasingly deeper levels of clarity.

Common thread root cause clarification has immense potential to increase cash flow, corporate value, and everything else good in and about the company.

Because the barriers of fear, apathy, cynicism, ineptness, mental impairment, and accident are massively costly, clarifying and overcoming their root causes is enormously profitable.

The Clearer, The Better

Vagueness, while a subtle enemy, is a greater enemy than complexity. Simple is good. Clarity is better. As helpful as simplifying complexity can be, clarity that a child can understand is better. It might be a subtle aspect of vagueness or complexity that is the root cause opportunity for improvement. While simplifying might overlook something subtle, clarity spells it out. Important difference.

When things aren't going well, life gets more complicated, especially whenever and wherever we are not clear about why, what, and how things aren't going well. When things are going well and things are all clear we sleep better at night even during storms, and life is better.

The "simpler" that is desirable has the uncommon clarity of common sense without missing anything meaningful. Getting things clearer might take more thought initially but more complete and accurate clarity is apt to yield better, faster, lower cost results overall.

Many forms of obfuscation (concealment of meaning) foster vagueness and can happen for sometimes subtle, but almost always knowable reasons. Root cause clarification for obfuscation will reveal meaningful improvement opportunities.

Key performance measurement, monitoring, and management systems, personality and behavioral profiling, practices of advanced science and improvement programs applied to business are all potential power tools in the hands of those who are suitably enlightened in the vital basics of business and appreciate the perpetual advantage of clarity.

Shine a Light on It

Darkness, lack of visibility, confusion, go hand in hand. Sometimes all it takes to solve a problem is to shine a light on it. In the full light of day, some problems even go away. Stumbling around in the dark can be hazardous.

People who want to hide things tend to work in the cover of darkness. Shining the light tends to curb or combat nefarious temptations. That's the beauty of open book management. It can be unsettling for those with something to hide, but it really will produce better results overall.