Business Planning

What's a Person-Hour Worth?

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As a leader, how do you value the contributions of your people? How do you value an hour of their time? For that matter, how do you value an hour of your own time?

If you're anything like most enterprise leaders that we've met, you guard your time very jealously. Do you do the same for your people?

“It would be difficult to overstate the importance of focusing on knowledge workers’ productivity. The critical feature of a knowledge workforce is that its workers are not labour, they are capital. And what is decisive in the performance of capital is not what capital costs. It is not how much capital is being invested – or else the Soviet Union would have easily been the world’s foremost economy. What’s critical is the productivity of capital.”  Peter Drucker.

If we were to look at the Opportunity Cost of an hour's time, maybe we'd act a little differently? If you compared an hour at work with what you could be doing with that hour instead, like being with family or friends? Time is something we don't get back, regardless of where we sit in the organization. If we are going to value the contributions of our employees properly, we need to respect the Opportunity Cost of requiring their time to do wasteful or ineffective things. 

Jeffery Pfeffer, noted Stanford professor, scholar and author states,

“There’s a disturbing disconnect in organizational management. On one hand, research, experience and common sense all increasingly point to a direct relationship between a company’s financial success and its commitment to management practices that treat people as assets. Yet even in the face of this mounting evidence, trends in management are actually moving away from these very principles.”

We should get a little pissed that we're taking something that can't be given back when we lead or manage in a way that is wasteful or ineffective. Just as we would if it were happening to us.

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Wishing won't make it happen

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Getting things done in organizations can be difficult. There seem to be a million reasons why people don't deliver. Among our favourites are the promises made during or after meetings like, "I'll get that done prior to our next meeting" or, "I'll get to that this week." And then the vow is quickly forgotten and not delivered. Sometimes the same vow is made over and over and continues to go unfulfilled!

Research lead by Peter Gollwitzer shows that vowing to do something is often useless. What works is making concrete and vivid plans that include answers to the following: "What is the problem you have to confront?" "When will you follow through on your plan?" "Where will you do it?" and "How will you do it?"

Further research conducted by Dr. Gail Matthews provides empirical evidence that writing goals down, making concrete action plans, and sharing them with others generates the highest levels of accomplishment.

Based on our own research, we would go even further to suggest that adding an specific, externally verifiable metric which accurately gauges success (or lack thereof) will also deliver higher levels of accomplishment, or at the very least drives learning.

Otherwise, you're more likely to fall into the human tendency to rationalize any outcome as more or less what you expected.

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No Ambiguity with Ambiguity

We're big fans of Dan and Chip Heath's work. You'll see it referenced in our materials frequently as they undertake very solid research and present their findings in readable and interesting ways.

We were especially pleased when they highlighted one of the behaviours we have identified as organizational Noise which waste people's time, resources and potential:

Good leaders excel at converting something ambiguous into something behavioral. Take Terry Leahy, one of the leaders responsible for reversing the fortunes of Tesco, now the U.K.'s No. 1 grocer. One of Tesco's ambiguous goals was to do a better job "listening to customers." Leahy broke down that goal into a set of specific actions. For instance, cashiers were trained to call for help anytime more than one person was waiting in the checkout line. In addition, Tesco received 100,000 queries per week from customers. Leahy's team made sure that all Tesco managers had access to customer concerns. (If you want to listen to customers, you had better make sure your managers can hear what they're saying.) As a result, they learned counterintuitive lessons, such as that customers dislike stainless-steel refrigerators, which remind people of a hospital -- not an ideal association for a grocer.

Ambiguity simply isn't good for individuals, teams or entire enterprises. Read the full article at Fast Company here:

http://www.fastcompany.com/1676957/dan-and-chip-heath-say-nix-ambiguity-and-focus-lasting-change

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Is Declining Enterprise Productivity Hackable?

 

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I work pretty hard at trying to manage my signal-to-noise ratio when it comes to social media. So I follow very few people and almost never check FB. But thanks to following Vinod Khosla on Twitter, I followed his link to a NY Times Magazine article about Physicist Geoffrey West and his quest to explain cities, and in particular urban population growth, with mathematical formulas. It's a great read.

What interested me most was that West and his collaborator Luis Bettencourt have started to turn their mathematical modeling toward companies as well:

"But it turns out that cities and companies differ in a very fundamental regard: cities almost never die, while companies are extremely ephemeral. As West notes, Hurricane Katrina couldn't wipe out New Orleans, and a nuclear bomb did not erase Hiroshima from the map. In contrast, where are Pan Am and Enron today? The modern corporation has an average life span of 40 to 50 years.

This raises the obvious question: Why are corporations so fleeting? After buying data on more than 23,000 publicly traded companies, Bettencourt and West discovered that corporate productivity, unlike urban productivity, was entirely sublinear. As the number of employees grows, the amount of profit per employee shrinks. West gets giddy when he shows me the linear regression charts. "Look at this bloody plot," he says. "It's ridiculous how well the points line up." The graph reflects the bleak reality of corporate growth, in which efficiencies of scale are almost always outweighed by the burdens of bureaucracy. "When a company starts out, it's all about the new idea," West says. "And then, if the company gets lucky, the idea takes off. Everybody is happy and rich. But then management starts worrying about the bottom line, and so all these people are hired to keep track of the paper clips. This is the beginning of the end."

The danger, West says, is that the inevitable decline in profit per employee makes large companies increasingly vulnerable to market volatility. Since the company now has to support an expensive staff -- overhead costs increase with size -- even a minor disturbance can lead to significant losses. As West puts it, "Companies are killed by their need to keep on getting bigger."

For West, the impermanence of the corporation illuminates the real strength of the metropolis. Unlike companies, which are managed in a top-down fashion by a team of highly paid executives, cities are unruly places, largely immune to the desires of politicians and planners. "Think about how powerless a mayor is," West says. "They can't tell people where to live or what to do or who to talk to. Cities can't be managed, and that's what keeps them so vibrant. They're just these insane masses of people, bumping into each other and maybe sharing an idea or two. It's the freedom of the city that keeps it alive."

This got me thinking two things.

Firstly, is profit per employee the only factor that should be used in this scenario? Perhaps, since we're looking at the long-term viability of these enterprises. It may be a good proxy for an enterprises' health, but it is pretty one-dimensional when considering the kind of impact good organization's can make on society.

Secondly, I wondered how interesting it would be to see if enterprises using Evidence-based Management practices fared as a subset of this group? That is, enterprises lead and managed using well-known, evidence-based high-performance practices rather than managing by intuition, anecdote and myth.

Is it possible to hack the sublinear productivity returns as companies grow by applying Evidence-based Management practices? That would be a very interesting experiment. Something to do in our spare time perhaps.

 

 

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Brain Science and Management

Our apologies for the long gap in posts.

A persistent theme for us at mercanix is trying to close the gap between what science knows about things like motivation, effectiveness, productivity, communication and teamwork and what enterprises actually do on a day-to-day basis.

To that end, we are constantly reviewing a wide spectrum of research to see how it applies (if at all) to increased performance at work. If there is sufficient, long-term, fact-based, peer-reviewed evidence that the research is credible and could be applied to create better work environments, we look for opportunities to incorporate the science into our solution.

Of course, an important caveat in all this is, "first do no harm." We won't introduce anything into our solution if it poses a threat to disrupting the environment and performance you are already experiencing.

We find the need to be as evidence-based as possible; looking for the facts and proof behind the latest research first. Then we like to reflect and ruminate to see if we, or other reputable sources, can poke holes even in the cases where the evidence is solid. In doing so, we avoid incorporating the latest fad or buzzworthy movement that isn't based on any credible research.

Interestingly, findings from from social, cognitive and affective neuroscience are being used to explain how we are motivated to minimize threats and maximize rewards which manifests itself in a number of ways.

 

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David Rock has compiled some interesting research and created what he calls the SCARF model for collaborating with and influencing others.

S - Status
C - Certainty
A - Autonomy
R - Relatedness
F - Fairness

"While the five domains of SCARF reflect core brain networks of greatest significance when it comes to collaborating with and influencing others, understanding these drivers can help individuals and organizations to function more effectively, reducing conflicts that occur so easily amongst people, and increasing the amount of time people spend in the approach state, a concept synonymous with good performance."

As Rock says, the SCARF model points to more creative ways of motivating that may not just be cheaper, but also stronger and more sustainable. Have a look at his work at the NeuroLeadership Institute.

This is exactly the kind of thing we like to keep our eye on to see if the facts line up with what the research suggests. We'll keep you posted on this one.

 

 

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