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Archives for March 2008

Understanding Your Organisation – Part 2 – Strains

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In my first post in Understanding your Organisation I presented a really simple image that helps to understand the relationship between strategy (concerned with future well-being), operations (concerned with the delivery of service/product to current customers) and management as the function that integrates strategy and operations. Scarily simple – but I have found it to be a powerful framework for understanding organisations of all sorts – and for quickly spotting the root cause of under-performance.

Customers, Operations, Strategy and Management

I have found several different types of problem using this simple model. Firstly we have what I call the ‘Destruction of Management’. This is caused by the different priorities and drives of operations and strategy. The Ops folks are focused on systems and processes that are designed to service current customers efficiently and effectively. They are fiercely ‘customer facing’ and push management for time and other resources to improve current operations to meet customer needs. All well and good. Just as it should be. Their perspective can be described as predominantly looking ‘inward’ (how do we improve what we have got) and down – towards the front-line.

Now the strategy folks have a different set of interests. They are interested in the art of possibility.

  • Who could we be serving?
  • What could we be making?

Their eyes are set on the technology and markets of the future. They are fiercely ‘future’ and ‘change’ oriented. Their perspective can be described as outward (what is happening ‘out there’ – technology, market demographics, prices etc) and forward looking (how do we get what we need in terms of knowledge, technology and processes to compete in the future?). They pressure management to dedicate resources to bringing this new future a step closer.

So management is caught between operations pulling ‘inward and down’ and strategy pulling ‘forward and out’.

OUCH!

Destruction of Management

Most management finds it difficult to resolve these tensions between strategy and operations.

In some organisations the strategy folks win (they usually have more positional power in the organisation) and the ops teams become jaded and cynical as they are asked to engage with strategic initiative after strategic initiative – continually engaging in change that rarely seems to make things better in the ‘here and now’ – and often pulls them away from doing good work at the front-line. They start to seriously doubt whether anyone in the boardroom really knows what the business is about.

In other organisations the strategy side is very weak and the organisation becomes myopically focused on the ‘here and now’.

In other organisations (and in my experience this is the most common situation) both strategy and operations are relatively powerful forces in the organisation and management is just not strong enough to hold the forces together. Neither great operational improvements nor insightful strategy gets executed as ‘weak’ management uses the opposing forces to negotiate a mediocre status quo.

  • How do these strains play out in your organisation?
  • What steps can you take to ensure that progress is made both operationally and strategically?

Managing the Moon Walking Bear

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It is true that we don’t see with our eyes as much as with our brain. Sure the eyes capture the photons – but it is in the brain that we actually do the seeing – largely based on what we are looking for.

If you need proof, try this.  NB you will need to hear the soundtrack!

[youtube=http://www.youtube.com/watch?v=Ahg6qcgoay4&hl=en]

Our ‘findings really do follow our seekings’, and our brain only lets us see what makes sense in the context.

This is especially important when we start to form opinions about people or projects. If we believe that they are good – then all we will see is the good stuff (as our subconscious filters aout what does not fit in with our pre-conceived ideas). If on the other hand we think that people are bad or lazy then all we wil tend to see is the behaviour that serves to confirm our beliefs.

Learning to observe and feedback on a range of work behaviours in a non judgemental, non-evaluative way is a key skill for the effective manager.  BTW there is some evidence that women in general tend to be more open to ‘peripheral’ stuff, to pick up on the background and make more sense of it than men.  I wonder if there are gender differences in spotting the dancing bear!

Ewing Marion Kauffman Foundation

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The Ewing Marion Kauffman Foundation in the US is one of the world’s top organisations for research and development into the SME sector. Although care has to be taken in translating their work (largely research based in the US) to the UK, I always find their publications to be worth a read.

They have just published a report following a longitudinal study of some 5000 small firms that were founded in 2004, tracking their development through the early years. I think that the report should provide useful insights for policy makers here in the UK and national and local levels as well as for anyone in the game of small business development supporting entrepreneurs.

Here are some soundbites from the report – and the questions that they provoke for me:

  • Nearly 60 percent of the businesses had no employees in their first year. Just under three-quarters of businesses had one employee or less, while about one-quarter of businesses had two or more employees. Very few businesses (less than 4 percent) had more than 10 employees.
    • How do the stats on our start-up work compare with this? Is number of employees in year 1 linked in to entrepreneurial success? Does a ‘slow’ start lead to a ‘slow’ future?
  • More than a third of businesses (37 percent) had no revenue in their first year of operation. About 45 percent of businesses experienced a profit during their first year, while about 55 percent of businesses that experienced a loss. About 17 percent of businesses had profits in excess of $100,000.
    • How realistic are our entrepreneurs forecasts on profit and turnover?
    • How good a job do we do in helping them to develop realistic forecasts?
    • What can we do to help entrepreneurs recognise that profit may only accrue after a long period of working at the business?
  • Nearly 44 percent of new businesses had no debt financing during their first year of operation. Many businesses were started with very little debt financing: 17 percent of businesses started with $5,000 or less; nearly 11 percent started with $100,000 or more.
    • What percentage of businesses that we support are adequately financed at the outset? How can we help entrepreneurs to consider their financial structures and approach re-structuring as an opportunity if necessary?
  • About 80 percent of businesses had some positive equity investment in their business in the first year. Nearly 10 percent invested $100,000 of equity into their business, while another 33 percent invested between $10,001 and $100,000. About one-quarter of businesses invested some amount less than $5,000.
    • How does equity finance work in poorer communities?
    • What alternatives to equity finance exist?
  • The vast majority of equity invested came from the business owners themselves. Just 10 percent of the businesses used external equity sources in their first year. Parents were the most common source of external equity (3.4 percent), while spouses provided equity to 1.6 percent of businesses. Non-family informal investors and venture capitalists were used very infrequently (2.7 percent and 0.6 percent, respectively).
  • Nearly 70 percent of businesses in the Kauffman data were owned by men and just over 30 percent were owned by women. Whites owned more than 81 percent of the businesses, while blacks owned 9 percent, Asians owned 4 percent, and the remaining 5 percent were owned by individuals of other racial groups. About 6.6 percent of the businesses were owned by Hispanics.
    • How effective are we at engaging the full spectrum of race, gender, sexuality and faith in feeding their enterprising soul?
  • Just under 9 percent of firms closed in calendar year 2005, and the survival rates vary by owner demographics. For example, 88 percent of black-owned businesses survived, compared with 92 percent of white-owned businesses and 91 percent of Asian-owned businesses. Women-owned businesses had a survival rate of 89 percent, about three percentage points lower than businesses owned by men.
    • What are we doing to track survival rates and understand patterns in them that may point to problems in the quality or accessibility of our services?
    • Starting a business is (relatively) easy. Starting a successful business that provides a vehicle for personal and professional development and allows us to develop as happy human beings is a whole different ball game. How are we tracking the ‘happiness’ of the entrepreneurs we work with?
    • Are business survival, jobs created and profitability the only important metrics? or should we looking at other aspects of the entrepreneurs satisfaction and well-being?
    • If we succeed in increasing business birth rates, should we also accept an inevitable increase in business failure rates?
    • Do we understand the full cost of business failure – economic, emotional, mental etc?

Each year the Kauffman Foundation produces an excellent ‘Thoughtbook’ that summarises it research findings and showcases some of the excellent work that the Foundation funds to support a wide range of entrepreneurs.  You can request a  copy here.

Which websites and organisations do you use to access information and support?

Supply and Demand

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Supply and Demand

So David Cameron wants to double the number of Health Visitors. Those tackling the worklessness agenda want to use caseworkers to get people off of benefits and back into work. On the Enterprise agenda we have community motivators, enterprise champions, enablers and streetwalkers – all working in communities to encourage individuals to consider self-employment and starting a business.

Two problems:

  • Service providers on the supply side compete with each other to attract individuals onto their programmes so that they can count them in their outputs. Some can threaten to remove benefits unless individuals from target groups take up their services. Others spend lots of cash on marketing and sales, saturating the marketplace with messages about how their services will transform individuals and communities;
  • There is little or no demand for their services in the target communities. There is no demand side. People are cynical, feeling manipulated, threatened, belittled and demonised. Their communities are saturated with outreach workers from the supply side looking to sign them up to their programmes. They are subject to advertising campaigns, leaflet drops, door knocking and telesales.

Perhaps what is required is a much more client centred (rather than policy led) engagement on the (distinct lack of) demand side – helping individuals to decide for themselves what might constitute progress for them (rather than for the policy makers) – and then helping them to access service providers that can help. Community workers who are not looking to sell policy objectives but just to respond effectively and with commitment to individuals who want to try to make things better for themselves and their families. Workers who are trained to leave people alone unless they ask to be helped. Outreach workers with nothing to sell – just the skills to help and extensive networks into the expertise and infrastructure that has already been developed on the supply side.

This would be a very different model of engagement and one that might just work.

The case workers might just start to help people move forward on agendas that matter to them. To become more enterprising in improving their own circumstances and ability. To start again exploring and developing their own potential

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Alien versus Predator:NCVO takes on Added Value

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Last week I attended my first ever Performance Hub event at the National Council for Voluntary Organisations in London.  The event was jointly run by NCVO and the New Economics Foundation and played to a full house.

In essence the message was:

  1. the third sector doesn’t understand ‘added value’
  2. ‘added value’ is therefore a concept that is passed it ‘sell by’ date
  3. luckily we have developed a concept that can take its place – called ‘full value’
  4. even more luckily we have managed to reduce this to a 2×2 matrix that can be explained easily.

Now the origins of ‘added value’ are pretty old and extremely well respected.  Like any models or concepts they have their uses and their limitations – but this concept has done much to drive economic development, competitiveness and strategy over the last 3 decades.  Michael Porter, Harvard Professor and father of the ‘value chain’ has just celebrated 30 years of world leading consulting developing the competitiveness agenda using the concepts of value added, the value chain and the 5 forces model.

No doubt he will be devastated at the judgements passed down on his work by the NCVO.

While I admire the nerve of the Third Sector to challenge the business orthodoxy I can’t help but think that sometimes it shoots itself in the foot.  Surely if the idea is still good enough for the Institute for Strategy and Leadership at Harvard Business School we should not be too quick to dismiss it out of hand and replace it with a dinky 2×2 matrix?

Perhaps we just need to work a little harder to help our client group understand the concept and reflect on how it maybe used to add value to our work in making our communities better places to live and work.

My bet is that Michael Porters ideas might just outlive the neat little 2×2 that NCVO suggest should be used to replace it.  I will certainly be a little more circumspect before I hop on a train to London to receive the wisdom of NCVO.

Not that the day was bad!

I met some wonderful people.  We were all reminded of the importance of the unforeseen benefits of our work as well as the hard outcomes that we were paid to achieve.