Tuesday, April 17, 2007

3 Books on Management Tools

Delivering excellent business results to grow a flourishing company or to turnaround a failing business may seem daunting even to seasoned executives. But they need not reinvent the wheel because there are now ready tools that business leaders could use to further improve a going concern or resuscitate deteriorating business conditions without sweating the big and small stuff.

Harry Onsman enumerated and illustrated many of them in his book. For managing the organization, some powertools are: determining strategic intent (vision, mission and values statement); strategic positioning (Porter’s Five Forces Analysis and Generic Strategies); Measuring Performance (KPIs and the Balanced Scorecard); conceiving the future (Scenario Planning); changing culture (Competing Value Framework); growing a diversified business (Product Portfolio Analysis); marketing the business (the marketing Ps; Understanding customers; Improving processes (Process mapping and management) and solving problems using the Pareto analysis.

For managing people, Onsman recommends these powertools: managing performance (goal setting); enabling others (empowerment); developing self-awareness (360-degree feedback); selecting people (behavioral interviewing); controlling tasks and projects (project management techniques); leading people (situation leadership); involving employees through problem solving teams; developing people through coaching; developing teams; and managing time.

Let’s take understanding customers using SERVQUAL customer surveys, the preeminent instrument for measuring the delivery of quality service to customers. It was developed by Valerie Zeithaml, A. Parasuraman and Leonard Berry and first appeared in their groundbreaking book, Delivering Service Quality: Balancing customer perceptions and expectations, a product of their five-year research on measuring customer satisfaction. It has become the instrument of choice for researchers, consultants and practitioners trying to understand the perceptions and expectations of customers based on five perceptual dimensions of service: tangibles, reliability, responsiveness, assurance and empathy. Zeithaml, et al, identified different of gaps as follows:
• the gap between the customers’ expectations and management’s perception of customer expectations
• the gap between management’s perception of customer expectations and what was supposed to be delivered to its customers.
• the gap between what was supposed to be delivered and what was actually delivered
• the gap between what was actually delivered and what customers were told would be delivered
• the gap between what customers expected and what they perceived they actually received

Onsman included the three-part SERVQUAL instrument in his book plus all the instruments for the management powertools discussed in his 284-paged book.

One other powerful instrument for upgrading quality, productivity and results is Six Sigma. It was invented by Motorola, but was made famous by Jack Welch of GE. “While GE used Six Sigma to strengthen an already thriving business, for Motorola it was an answer to the question: How do we stay in business.

“What Six Sigma offered Motorola—though it involves much more today—was a simple, consistent way to track and compare performance to customer requirements (the Sigma measure) and an ambitious target of practically-perfect quality (the Six Sigma goal). The results were: five-fold growth in sales, with profits climbing nearly 20 percent per year, cumulative savings based on Six Sigma efforts pegged at $14 billion and Motorola stock price gains compounded to an annual rate of 21.3 percent.

“For GE, the financial ‘big picture’ is just a reflection of the many individual success; for example:

• A Six Sigma team at GE’s Lighting unit repaired problems in its billing to one of its top customers—Wal-Mart—cutting invoice defects and disputes by 98 percent, speeding payment, and creating better productivity for both companies.
• A group led by staff attorney—A Six Sigma team leader—at one of GE Capital’s service businesses streamlined the contract review process, leading to faster completion of deals and annual savings of &1 million.
• GE Power Systems group addressed a major irritant with its utility company customers, simply by developing better understanding of their requirements and improving the documentation provided along with new power equipment.
• The Medical Systems business (GEMS) used Six Sigma design techniques to create a breakthrough in medical scanning technology. Patients can now get a full-body scan in half a minute, versus three minutes or more with previous technology. Hospitals can increase their usage of the equipment and achieve a lower cost per scan, as well.
• GE Capital Mortgage analyzed the processes at one of its top performing branches and, expanding these ‘best practices’ across its other 42 branches, improved the rate of a caller reaching a ‘live’ GE person from 76 to 99 percent. Beyond the much greater convenience and responsiveness to customers, the improved process is translating into millions of dollars in new business.

The final word is reserved for the guru of all gurus, Mr. Peter Drucker. What struck me in his book is the chapter on “What Business Can Learn from Nonprofits.”

“The Girl Scouts, the Red Cross, the pastoral churches—our nonprofit organizations—are becoming America’s management leaders. In two areas, strategy and effectiveness of the board, they are practicing what most American businesses only preach. And in the most crucial area—the motivation and productivity of knowledge workers—they are truly pioneers, working out the policies and practices that business will have to learn tomorrow.

“Few people are aware that the nonprofit sector is by far America’s largest employer. Every other adult, a total of 80 million plus people, works as a volunteer, giving, on average, nearly five hours each week to one or several nonprofit organizations. This is equal to 10 million full-time jobs. If volunteers were paid, their wages, even at minimum rate, would amount to some &150 billion or 5 percent of GNP. More and more volunteers are becoming ‘unpaid staff’ taking over the professional and managerial tasks in their organizations. ‘Volunteers must get far greater satisfaction from their accomplishments and make a greater contribution precisely because they do not get a paycheck.’

“Not all nonprofits have been doing well, of course. A good many community hospitals are in dire straits. Churches are steadily losing members. Yet in its productivity, in the scope of its work, and in its contribution to American society, the nonprofit sector has grown tremendously in the last two decades.

“Underlying their program and many other effective nonprofit endeavors is a commitment to management. They realize that good intentions are no substitute for organization and leadership, for accountability, performance and results. Those require management and that, in turn, begins with the organization’s mission.

“The best nonprofits devote a great deal of thought to defining their organization’s mission. They avoid sweeping statements full of good intentions and focus, instead, on objectives that have clear-cut implications for the work their members perform. The Salvation Army’s goal is to turn society’s rejects—alcoholics, criminals, derelicts—into citizens. The Girl Scouts help youngsters become confident, capable young women who respect themselves and other people. The Nature Conservancy preserves the diversity of nature’s fauna and flora. Non-profits also start with the environment, the community, the ‘customers’ to be; they do not, as American businesses tend to do, start with the inside, that is, with the organization or with financial returns. Flourishing nonprofits have learned to define clearly what changes outside the organization constitute ‘results’ and to focus on them. They start with the mission rather than with their own rewards and with what they have to make happen outside themselves, in the marketplace, to deserve a reward.

“As a rule, nonprofits are more-money conscious than business enterprises are. They talk and worry about money much of the time because it is so hard to raise and because they always have so much less of it than they need. But nonprofits do not base their strategy on money, nor do they make it the center of their plans, as so many corporate executives do. The nonprofits start with the performance of their mission. It focuses the organization on action. It defines the specific strategies needed to attain the crucial goals. It creates a disciplined organization. It alone can prevent the most common degenerative disease of organizations, especially the large ones: splintering their always limited resources on things that are ‘interesting’ or look ‘profitable’ rather than concentrating them on a very small number of productive efforts. The best nonprofits devote a great deal of thought to defining their organization’s mission.

“Many nonprofits now have what is still the exception in business—a functioning board. They also have something even rarer—a CEO who is clearly accountable to the board and whose performance is reviewed annually by a board committee. And they have what is rarer still—a board whose performance is reviewed annually against preset performance objectives. The key to making the board effective is not to talk about its function but to organize its work. Precisely because the nonprofit board is so committed and active, its relationship with the CEO tends to be highly contentious and full of potential for friction. This has forced an increasing number of nonprofits to realize that neither board nor CEO is ‘the boss.’ They are colleagues, working for the same goal but each having a different task. And they have learned that it is the CEO’s responsibility to define the tasks of each, the board’s and his or her own. To restore management’s ability to manage we will have to make boards effective again—and that should be considered a responsibility of the CEO.”

“Nonprofits are forging new bonds of community, a new commitment to active citizenship, to social responsibility, to values. This development also carries a clear lesson for business. Nonprofits are showing us how to manage knowledge workers for productivity. It requires a clear mission, careful placement and continuous learning and teaching, management by objectives and self-control, high demands but corresponding responsibility, and accountability for performance and results.”

The most successful and oldest (2007 years old this year) nonprofit is the Catholic Church and it is still blooming. It had its ups and downs, a fair share of scandals and an intriguing past. Yet it is here, prosperous and triumphant, so let’s learn from it.

Sunday, April 1, 2007

"Polishing" My Favorite Books

While the website is up-to-date, i.e. all reviews have been posted here, we still have to "polish" the site. Specifically, we're adding more links and more labels so that you can more easily navigate the site, as well as easily find links to how you can obtain your very own copies of books we've reviewed. Until that time, peace to everyone!