Managing Agreement: The Abilene Paradox

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In the management world, we focus a lot of time, money and tears learning how to manage disagreement, how to create constructive tension and direct the energy from that tension toward a productive result. The issue with this thought process is that we often treat the defeat of the chaos of disagreement and acquiescence to an agreement as the goal – but that is only the end of the beginning. Effective, high-performance management teams know that the job isn’t complete until we successfully manage the agreement and the actions resulting from it.

A great example of the pitfalls of managing agreement can be found in something called the Abilene Paradox. I first learned about the Abilene paradox in one of my MBA classes at the University of Utah several years ago. It was introduced by management expert Jerry B. Harvey in his article The Abilene Paradox and other Meditations on Management The name of the phenomenon comes from this anecdote in the article which Harvey uses to express the paradox:

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HIPOs: Unicorns of the Business World

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Everybody wants to hire high potential people, right? High potential (or HIPO) candidates are the unicorns of the business world, they are rare and magical additions to an organization – but like the mythical beast, sometimes disappear when you least expect it.

So how do you make sure that you find them and that your HIPO people stick around long enough to bring value to your business?

There is a simple, five step process that I have developed over my 30+ years of hiring, managing and promoting people. That process is embodied in the acronym S2DAS – I pronounce that one “studious”… OK, so it wasn’t cutting a cutting verbalization of an acronym but I thought that was at least slightly cool! I’m a victim of the Mississippi public school system, so I have to keep it simple!

The assurance that the HIPOs you want will become an enduring part of your business is rooted in 5 simple aspects:

  1. Selection
  2. Development
  3. Deployment
  4. Advancement
  5. Succession

Here’s what the S2DAS process means:

Selection: Take the time to fully assess the candidate for cultural fit as well as educational prowess and experience. The resume is just the price of admission, the ticket to the show. If the candidate didn’t have the goods, they wouldn’t have made it through the gauntlet to be sitting across from your desk, would they? What you need to consider is not only what your current company culture is but what you want it to be in the future. True HIPO people have the ability to change cultures, so you need to be sure that this is what you want because HIPOs are drivers, they seek change and relish in it.

Development: Spend time and money on them. HIPOs are sponges for knowledge. They are constant learners and doers. Have a plan, ask the candidate what they want to learn, what parts of the business interest them. Make sure that you understand what their capabilities are and if they are a better fit for a technical track or an administrative/management track. Controllers need to spend time with your manufacturing engineers and project managers just as engineers need to understand the “soft” side of business.

Deployment: HIPOs are notoriously inquisitive people. Make sure that they are deployed to the areas of the business that 1) hold their interest and 2) develop a base for future learning. Strongly consider a rotational program that allows them to spend time in several disciplines. HIPOs are a long time investment, so 18-24 months of development investment at the beginning is a small price to pay for a career’s length of value. HIPOs are acutely aware of how much value they bring and in my experience, always want to deliver more.

Advancement: HIPOs do not measure success in dollars; they measure it in advancement in the organization. They crave responsibility and will be found to be assuming many responsibilities beyond their specific job descriptions, doing things outside their assigned sandbox as it were. HIPOs are notoriously ADHD when it comes to knowing what the plan id for them. Many times I get asked in the first interview – “What are the opportunities?”, “What is the progression plan for this position?” and “Where can I go?” If you don’t have an answer to these questions, the individual knows that you are only hiring for this one position at this period in time and perhaps don’t have a plan. HIPOs want to move, they are concerned with mobility in the organization and if they reach a point of stasis, often they become unhappy and go looking to fulfill that need for change at another company, taking your investment in them.

Succession: Keep your pipeline full. Lather. Rinse. Repeat. You have to assume that your current HIPOs are going to move and you need to backfill for them when they do. Form partnerships with local colleges, universities, the US military and public service organizations. Not every HIPO comes with a Harvard MBA – more come from educational institutions like Mississippi State, Ole Miss, Utah, BYU, or Troy, Furman or UCF. HIPOs are not defined by one characteristic, they are a fusion of many different influences.

Most companies fail in the middle categories of development, deployment and advancement. They typically have formal plans for hiring and succession is determined by need (empty positions) but they fail to have formal development plans, do not do enough to thoughtfully deploy the HIPOs around the organization for learning and work experience. Advancement tends to be a lagging indicator and is often an action taken by exception – when a person fills a position vacated by a person higher on the totem pole. The difference is that successful organizations see these middle steps as proactive, not reactive.

High potentials are hard work, they challenge the organization at all levels and at all times. Learn to manage them though the S2DAS process and your business will benefit from their energy and innovation.

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The Fish Strategy

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Several years ago, I ran a project based business that produced a high quality, very expensive yet highly undifferentiatable product. We struggled for a time to come up with a sales/”go to market” strategy that would cause our bookings and market share to grow but eventually came up with a simple, three pronged strategic plan that proved very, very successful – the three elements were 1) capture, 2) scalability and 3) organizational design/development.

What follows is a mini-narrative of how we got there.

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Differentiating the Undifferentiatable

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One question that many companies face in today’s competitive market is the commoditization of products – even those with significant engineering and craftsmanship content. It is a common occurrence for companies to have a very successful and desirable product or service design and yet suffer in a disastrous value chain design. So, what do you do when aggressive prosecution of highly effective supply chain strategies by your customers and clients has changed your market to the point that it seems your product is undifferentiatable – that it is seen as “same as” or “interchangeable with” the products of your competition.

I have personally been faced with this situation in two major businesses that I have managed. These businesses were in vastly different markets but both were project based businesses and produced highly engineered, complex, mission critical products that sold in prices ranging from several hundred thousand to millions of dollars each. Individual project values ranged from a few million to 70-80 million, the businesses typically faced 20-50 individual projects every year and for as many different clients.

That sounds like the recipe for excellent margins based on the value of the product but because in both instances, there was a sever overcapacity in the markets and high quality competitors determined to retain market share, it was actually the prescription for a market for what I grew to define as “engineered commodities”. Engineered commodities are highly technical, complex products manufactured through a unique process, one not adaptable to any other product and that could be readily manufactured by several different companies facilitized for this market.

The first step is recognition of the market you are in.

If your market meets these criteria, you are in an undifferentiatable market:

Market realities:

  • You have limited/no ability to influence client activity
    • Other than the cost of your portion of a project being part of a roll-up to a financial decision (low price may allow the project to meet the hurdle rate) you have little influence
    • The only real influence you have is to convince them that you should be allowed to quote
    • You have little/no influence over client timelines
    • Contract placement (PO) cannot be incentivized
    • Project schedules are set (you can negotiate scrambling dates within the project but the end date seldom changes)
    • No incentive to be early, penalties for being late, the value prop is simply being on time
  • Pricing power is in the hands of the client
    • Low/no differentiation
    • Quality is expected/not valued
    • Very similar cost structure to competitors
    • Low price almost always wins – almost ever tender submission is met with “you are too high”
  • “Repeat” business is spaced so far apart chronologically that it is like a new job every time
    • To have a consistent client team over a long period of time is a rarity

When price, capacity and capability lose their value to a prospective client as a discriminator, what then? How do you convince a buyer to buy your product over someone else whose product will meet the same specifications and usability as yours?

In situations like this, the only way to gain an edge over your competition is to demonstrate value to your prospective clients through the use of a behavioral principle called observable cues.

When a person faces a new or different situation, they seek to define it so that they can understand it. In many cases we can search for and find enough information for our brains to process it and place it in context for us to manage or understand. In the cases where there is simply not enough information, we look for these “observable cues” to help us define and understand.

A common example used as a teaching tool in business schools is the McDonald’s restaurant parking lot case.

McDonald’s managers are trained as a matter of process to keep the restaurant parking lots and store fronts clean, litter free and neat. Why would anyone care what the parking lots look like? Well, while the consumer can’t see into the restaurant as they drive by, they can see the parking lot. A clean parking lot becomes a proxy for the inside of the restaurant – a clean kitchen, clean restrooms and a clean eating area. The observable cue of a clean parking lot registers in the mind of the hungry driver that this is likely to be a clean place with safe food. The same goes for the opposite. If the outside is dirty, trash filled and unkempt, we extrapolate that the inside is likely to be the same.

These are generalizations to be sure – but that doesn’t make them wrong.

The same observable cues are applicable to businesses. Some examples of observable cues are:

  • Happy, engaged employees,
  • A clean shop,
  • A professional office area and staff,
  • Publication in periodicals, trade magazines and local media
  • Health, Safety and Environmental certifications and awards (and prominently displaying them) indicate a high degree of commitment to your employees, and
  • High degrees of client/company communication and engagement.

Perhaps the most important observable cue is one that I have absolute loyalty to and faith in – transparency. Being clear and honest with your clients in good and bad times is a mark of a company that can be trusted with the client’s most critical projects.

Companies can and do differentiate themselves in difficult, competitive markets though using observable cues. I’ve done it and seen it return record results in two different multi-million dollar companies.

For more information or to discuss how to make this happen in your company, please feel free to contact me at sasquatchtheyeti@gmail.com.

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Inflection Points and Culture Change

What management lessons can be learned from the efforts of Ted Cruz and Mike Lee?

Most would say that the Republicans gained nothing, that they wrestled with a pig in the mud for three weeks and all they got was muddy and a happy Democrat pig.

Maybe. I’m not so sure.

I think it is too early to determine the definition of the outcome – because a lot depends on where they go from here.

My background is in business – more specifically in improvements in under-performing businesses and rapid turnarounds in businesses that are past the under-performing stages and are in survival mode. At this point in my 30+ year career, I have a 100% success rate in companies ranging in annual revenue from $5 million to over $150 million. I have experienced a range of timelines for turnarounds, in those were a company was generating results acceptable to the ownership, there was less pressure – but those in survival mode required immediate action to stop the bleeding. There was one thing that was common to each of these situations, that was the need for rapid culture change.

Culture change is hard – and rapid changes are exponentially more difficult. In all of the turnarounds that I have managed, I have created a bespoke model based on a process described by Price Pritchett, the founder of the Dallas based change management consulting firm, Pritchett, LP. Pritchett and co-author Ron Pound expounded on this process in their book, High-Velocity Culture Change.

In all of these situations, regardless of the patience of the owners or corporate headquarters, I have always believed in this quote from the book:

“There are various reasons for a high-velocity approach to culture change. There are no valid arguments for going slowly.”

Time is the one asset that, once spent, can never be recovered. The passage of time is your enemy, as is the entrenched culture:

“Setting out to change the culture is like taking on an army of secret police. You know the enemy is everywhere, ready to crack down on the people who don’t conform. Cold-blooded and forever watchful, culture cannot tolerate the unconventional.”

In observing the current situation in the ranks of the the US Congress, I thought about these quotes from the book:

“Watching a corporate culture change is like walking through a war zone. You see misery. Wreckage. Trauma.”

“Morale craters. Attitudes sour. Trust evaporates quicker than an early morning fog. Stress levels hit all-time highs.”

On the actions of Ted Cruz and Mike Lee:

“The right kinds of moves are guaranteed to cause stiff opposition. Your popularity rating will go into free fall.”

On what to do going forward if we really want change:

“Give your best people the big jobs. As for the others…reassign them. Fire them. Or neutralize them somehow. Remember that money is power. The more you make your adversaries dependent on you for funding their financial needs, the more you gain control.”

In the early 2000′s, I went into a company filled with bright, energetic people -but one that had suffered through 10 years of horrible performance – 8 years of significant losses in interspersed with 2 barely profitable years. They had been the victims of “turnarounds” that included alternating authoritarian and confused leadership that had robbed them of the idea that they could actually win. They had given in to the idea that success was out of their grasp, that the market was just not going to let them win. I spent a year simplifying the business and the business metrics so that the people felt that they had internal control and then set out on a long term plan to start winning. Each victory built confidence and it only took 13 months until we entered sustained profitability – I stayed with the business for 5 more years and and the momentum continued to build to the point that they have had 12 consecutive profitable years. The secret: we taught the business that it could win.

What that experience taught me is that if you want change, you have to create it. It does not happen by itself, entropy doesn’t generate enough movement. Even then, sometimes you have to give the status quo a hard shock. Having done this in a dozen or so organizations, I can tell you from personal experience that initiating change, shutting down business units, firing people, asking people to take on different (most of the time lesser roles) is hard. It hurts the soul to have to cut people – people who have families to feed and bills to pay. I have never done this easily, cavalierly or without it being the last option and I have never asked anyone to make that decision but me – for a team to function effectively, they can’t be burdened with guilt over making these changes.

But it is it not better to save the business and give those who remain a fighting chance?

Doing a turn-around takes very few skills other than an ability to recognize problems, quickly assess the people who will be in the canoe with you as your team, speak honestly and directly about everything, have a bias for action (never delay a decision – better to be strong and wrong than weak and right), an ability to create stability in an ambiguous world…and the courage to pull the pin on the grenade to start the change.

The way to solve big, complex problems is to constantly test solutions and directions – if anybody ever tells you that they had a solid plan that never changed during a turn-around, they are lying – fire them immediately. The most dynamic situation you will ever face is when everything is going wrong and nothing works. There is no instruction manual for that. You have to make decisions and try them out – if they are wrong, you will know soon enough to change course. The key is building a sustained momentum – keep moving forward no matter what. It may not be in a straight line, most likely it won’t be, but motion equals survival – stasis equals death.

This is where we are in our government. The Republican leadership is failing, even as the Democrats fail at almost everything, especially their big “achievements”. Obama and his team are failing because they have refused to change after their ideas didn’t work – the Obamacare rollout is a perfect example. Now they are telling America that the solution is more taxes, more borrowing and more intervention – in essence, they want us to paddle harder. Just trust them, they ask – they just aren’t quite through fixing things yet.

As many observers have pointed out, there are no rational people who think that the current levels of borrowing and taxation can cure our ills. There are only those, many exposed in these most recent government shutdowns, who simply want to delay the financial Armageddon until someone else’s term. The fact is that there are enough fatal structural defects in the approach to the US governance model that just working harder and spending more cannot fix it. Structural defects cannot be overcome with performance.

I’ve seen it all before in companies who were burning themselves out and wasting their resources by paddling harder against a current that was too powerful…and never recognizing that rescue was only a course change away. Simply paddling harder won’t do it, especially when government has been taking paddles away from some through taxation and regulation and pulling some 47% of tax filers completely out of the canoe. This will not get fixed without pain. The US needs to get ready for it. No amount of avoidance will forestall the inevitable crash – we have to make sure that it is only a hard landing. Something will have to be sacrificed to save the whole; I have little doubt about that. Everything can’t be given to everybody – there never was going to be a unicorn in every garage.

What the American government has just done – kicking the can down the road – is exactly what will produce disaster…and why this management team (including the reluctant Republicans) can’t be given more time. Time to cut the losses, bring in some true fixers and let them get it done. Ted Cruz and Mike Lee might not be those people but they have given Americans an inflection point to do just that…and in recent polls, up to 78% of Americans want to toss the whole bunch out and start over. That is the value of what they have just done, now it is up to America to take advantage of it.

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It’s Me!

New year, new blog.

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