10Feb/15

Do you want to read my book before it is published?

I share my book

I’m working on a book.

Tentative title is “Build a Company – How to build effective organizations via the design of a  structured Management System”. I expect to have it published second half year 2015. Meanwhile I happily share preliminary content with you.

Via the top navigation bar you can find text parts of “the Book” as it is developed. If you want to read the full text, of what is available, please let me know and I will send you a PDF copy.

I only ask one thing from you in return: Please, do not send the pdf document to others. If you have friends or collegues who want their own copy, please let me know.

Why am I doing this? Simply because I want feedback.
I want to understand if there is a general interest in the topics described by the book. I want to understand if you share my thoughts, if there are aspects missing or if you think I am wrong in some areas.

If you ask for a copy I will also send you info about updates. I will not share your mail adress with 3rd parties.

Do you want a PDF copy? Send me a mail (adress in Picture above) with the following information:

  • Your name
  • Your location (city & country)
  • Your occupation (Name of company, non-profit organization, university or other)
19Dec/14

If you monitor business wrongly, carrots are all you need to (believe you) improve.

Business performance is measured as the ratio between business potential and the actual results. To increase your performance you should increase productivity up to the maximum capability of your organization. If this capability is not enough to reach the wanted position in your selected market place, there will still be a gap between capability and potential business. No matter how many carrots you give to the organization, you have to re-design your ways of working to reach the potentials of your business.

Donkey cartA good starting point for any ambition to increase business performance is to monitor status and set targets. But if you only measure productivity and defines targets in relation to this, you may never make good business as the capacity gap will stay too big. Given your strategic aims and wanted business position you have to identify performance targets. True performance targets are the ones measuring company as a “black box” seen from the customer perspective (or other important stakeholders like owners).

To be able to understand where improvement should be made in the Management System you have to monitor both capacity gap and productivity. If your productivity is not good enough, add carrots (do more with what you have). If your capacity gap is too big, re-design ways of working (do things differently).

It has been seen before and will most certainly be seen again that companies with a fantastic productivity goes out of business as their capabilities does not match the needs to reach and maintain sustainable business.

09Dec/14

Why some managers hate structure

To hate something is often related to being afraid. Actually no managers are afraid of structures, but all are afraid of not delivering results. I have often struggled with the question why some managers do not want to apply structure and control. In my mind, I never understood why improved control could be a problem. Why would clear responsibilities, processes, checklist etc. be a risk to the business? We all want better result, right? If we ensure that people follow some procedures based on good practices it cannot be a bad thing, or can it?

But actually, it can be dangerous for an organization to apply structure and control. I do realize this now. It is dangerous for an organization, with the ad hoc cowboy approach, to change its behavior towards more structure and control. If you shoot hundreds of bullets towards a target, by the laws of probabilities, you will certainly hit, eventually. This means ad hoc management generates results.

Ad hoc Cowboy Management approach

Cowboy Management approach

Being responsible for an organization and its operations is to be accountable for the result and performance. Results are the first to be counted, second to be counted is performance. With no results, you are out as a manager. Good results with bad performance are acceptable as long as you make activities to improve. Please note, I did not say that the manager has to improve, just do activities with the purpose to improve. If the results are not good enough, the manager could be allowed to use more resources and increase actions. In other words. If you are not close enough, shoot more bullets and you will sooner or later hit the target.

In the book “Strategy Maps” by Kaplan & Norton, there is a very good illustration to the business risk of increased structures and controls.

Targets-3 approaches

The change to a business focused Management System

Assume that you have ad hoc management. You will make good result, occationally. It will be at high costs, but you deliver results. If you then apply structures and controls, your efficiency will increase. When you shoot, your bullets will hit within a much smaller circle. You can control the internal performance. But, what if results now are far from expectations? What if you now continuously miss the target? You gain good internal performance but catastrophic results. As a manager you will kindly be asked to take another job.

I believe we all fully agree that the wanted situation should be the “focused” situation, illustrated by the figure. This is when there exist structure and control in the organization and it delivers expected results. The thing I did not understand, when I struggled with some managers, was the need to demonstrate how to mitigate the risks of not meeting the business results during change. Just applying structure and control is no guarantee to be successful.

What you need is measurements and piloting, but that’s another story……

27Nov/14

Tear down mental walls and change culture with new ceremonies

Humans of all times have used symbols and ceremonies to make people act, think or feel in a specific way. It is true for all kind of cultures, societies, churches, football teams, countries and as well for families. As a human being it is important to have ceremonies in our daily life. And it is as well true for all kinds of organization.

Some behaviors in an organization are hard to change. They are often talked about as behaviors that are “stuck in the wall”. In order to make changes, you have to identify new wanted behaviors and add ceremonies around them. Unwanted behaviors are hard to “forbid” as they do not “officially” exist. You have to tear down the walls they are stuck on and fight them down with strong ceremonies.

tear-down-wall

 

 

 

 

 

 

 

What type of “ceremonies” does your company have? Which ones of these ceremonies supports wanted behaviors and which ceremonies do not?

Let me give you some example of good and bad ceremonies I’ve come across.

  • Every time a salesman have a new signed contract, she ring a bell in the office. By this all can share the positive progress and be inspired to sell more.
  • When employees send a mail, always put manager in copy-list. This shows the importance of the matter. If the sender don’t do this, the recipient may choose to ignore the mail.
  • No decisions are made unless a full business case is presented as part of decision data.
  • When a unit is audited, it is important not to expose any evidence of non-compliance towards standards. If this happens your manager will request an explanation. And in the final audit report, it will not be good to have more non-conformities compared to other.

The Management System describes wanted ways of working. To manage a change of behavior you should select some few critical procedures (ceremonies) and make these fully visible. Examples could be:

  • Use Key Performance Indicators that are evidentially important for the customers. This helps the organization to prioritize activities. Wanted behavior in the organization will be supported by the definition of target levels, monitoring of progress, asking for results and celebrating good achievements.
  • Add resources (allow staff to use some time) to share lessons learned in the organization. The quality and value of these activities will increase in an organization where people see active use of the lesson learned. By this the positive effects will increase.
  • Make assigned roles matter. If you give a person a job role, have this defined in the Management System, connect it to a carrier ladder and have regular discussions as a manager with the employee about the role and expectations. By this you make a role clear and important, not only for a specific task but as well as for the future development of the individual.

If your organization use some key elements in the Management System, as important ceremonies visible for all, your Management System will become valuable for the organization. It will be tangible elements effecting culture, not only fuzzy workshops about Culture.

18Nov/14

The 7 Building Blocks in a Management System

As in every creative work you have to understand what building blocks to be used in order to create the end result, and it is the same when you design your business. In order to design effective internal structures in any company, the 7 building blocks outlined in this post will be a strong tool-kit. These building blocks has been developed and refined over the years in hands-on work. They are based on people needs, practical experience, team work, modern management literature and requirements from ISO management system standards.

7 building blocks

Purpose, Organization structure, Process and directive, Governance
These are the building blocks that relates to the set-up of an organization and when these are available, employees are ready to act. People need to understand the purpose of the organization and how roles and responsibilities are aligned. Management should have given directives on how to act in different situations and the value creation processes has to be available.

Plan and Report These are the building blocks that identifies future wanted situations, time framed objectives, as well as what to do at different times. To enable management control reporting procedures are set up. With these two building blocks in place employees can act and activities controlled.

Deliverable Deliverables describes the tangible output from the organization. With an understanding of these and how customer values those, employees can understand if performance is satisfactorily, if plans and reporting are sufficient and if the organization set-up fit customer needs. The specific design of the 7 building blocks does of course vary between companies. If you operate on different markets, if you have different types of products, if you have different types of assets in your position, etc. the design of the building blocks will of course look differently. Or should I say, have to look differently. Unfortunately organizations often tends to copy others or re-use historical ways of working rather than to develop a design of the management system that enables unique advantages.

18Nov/14

Do you have the knowledge to re-design Management System or do you reuse old ways of working?

If you review the management system of a company you will find a set of documents describing ways of working. Examples of such documents are organization chart, role description, operating procedure, process map, policy, etc. Templates and guidelines are often available to explain how to use these documents. Most companies have good knowledge and support to create those documents that describes ways of working.

But what if you need to improve ways of working, what support is then available? Document templates are for sure not the tool to do the actual design; they are used to describe the design result! You need design knowledge and design methods.

Puzzeled

I have a problem to even find scientific papers that share knowledge on how to design management systems, and I am not the only one. It is even acknowledge by one of the, possible best, universities working with design of management system (organizational architecture). Aarhus University writes the following in one of their web pages, “Despite the increasing importance and relevance of organizational design, organizational theorists have tended to focus on descriptive and explanatory organization theories rather than theories of design and change which predict and prescribe.” [Ref: http://icoa.au.dk/organizational-architecture/; 2014-10-15]

At the same time I find lots of methods in the field of business/ organization management. Numerous books and papers are available on topics like management by objectives, process management, strategy deployment, organization management, balanced scorecard, business model canvas, etc. But there is also a problem with all of these methods in the context of design management system. Each method only cover a part of the design domain. Companies need knowledge and methods on how to design a management system as a whole. The management system contains internal interacting building blocks, and is an open system with interactions and dependencies towards external environment.

It is a complex task to design a management system for any organization or company. You have to fully understand what you need to achieve with the new or changed management system. You would like to conceptualize some alternative solutions based on design criteria and validate the design proposals to understand strengths and weaknesses. Then you would want to do a detailed design for structures of responsibilities, business processes, meeting structure, performance indicators, etc. All of this is to be done in running business, with no possibility to go back to previous solution if something does not work ok. This is not only complex, it will never happen like this unless, it is a totally new business.

Often managers follow latest business management trends or do what they always have done in similar situations. The researchers Liedtka & Parmar concluded in the Journal of Organization Design that the “Practitioner (average manager) frames (defines) a problem to fast and then use his repertoire (experience and patterned solution for typical problem) to identify what to do“. [Ref “Moving Design from Metaphor to Management Practice; Journal of Organization Design; JOD, 1(3): 51-57 (2012)] Similar problem is described in a research article written by Jan Steinmetz, HR manager at Shell. “These leaders tenders to have the ‘answers in their minds’ rather than basing solutions on a thorough diagnosis of the open systems step of externalization.” [Ref http://www.e-pages.dk/aarhusuniversitet/530/ ; Activity report 2011 – 2012]

Without good support, based on knowledge and methods, managers will continue to make changes of organization structures, business processes and operational control in a safe mode. They will re-use pattern of what they have done before, or do what everyone else is doing right now in the management communities. There is no knowledge to do thorough design neither is there time to test new solutions. It is too risky to make changes that no one has done before, and nobody will salute a manager for a good try that failed.

Consequences of above situation are missed opportunities of brake through effectiveness in an organization. Companies miss possibilities to do business smarter, to be customer oriented in a smarter way, to be environmental sustainable in a way nobody foreseen, etc. Furthermore with a good design work you can understand how your internal operation best fit external business environment for optimized efficiency instead of efficiency as in compliance to standards.

I strongly believe that most companies would gain competitive advances with the use of increased knowledge and methods on how to design management system. Doing this, huge possibilities will be revealed on how to make better business and earn more money.

18Nov/14

Do you have Top Management attention?

Do you often complaint on lack of attention from top management? Is it hard to get “air time” to discuss important management system issues? Is top management present in Management Reviews just because it is a mandatory requirement in the ISO standards? If we all agree that the responsibility for management system starts with top management, how come it is so hard to get their attention?

Sleeping management

You give them the wrong problem.

No manager will ever give staff full attention if it is not important for him/ here. Top managers have created an organization structure and delegated responsibilities accordingly. This is done in order to allow management to focus on issues relevant for the particular management level. Let’s pick an example from function “business control”. They have the task to monitor cost and revenue, and support managers at different levels with decision data. If there is a problem that all units do not use the agreed tools or ways of working, this is not a top management issue. This is within the responsibility of the business control head to fix that problem. If the issue impact reports to top managers they have to be informed. But, unless the head of business control need top management decisions or direct support to fix the problem, there is no need to escalate “no brainers”. If the head of business control to often report figures about how often different tools and procedures are used within the function business control, of course the fellow management colleagues will put attention on something else.

What problems are the correct ones?

What topics and decisions are to be managed by top management? What is, from the view of the management system, most important for the top management team? It is the effectiveness of the management system. That is; does the management system support the business model and the strategy? Do we act and interact towards external stakeholders in the way we intend to do business? If there are changes coming up in strategy, what changes has to be done in the ways of working?

These questions are the most relevant for top management to focus on, and this is basically about the purpose of the management system. Compliance towards standards, compliance towards internal requirements, use of defined processes, etc. are of course important but shall not be put on top managements table unless there is a critical problem that cannot be solved otherwise.

The way to top management attention is to put focus on management system effectiveness; how well it fulfills its purpose and what changes in the design may be needed. Ones you got top management attention via these topics, you will also get there respect for business contribution and will be seen as an important member of the management team.

18Oct/14

Business Key Success Factors are key to build your Management System

A company acts in the external environment and has to follow the business logic identified to do business. When the management system is designed it has to interact with the business logic in a fruitful way. There are lots of needs, behavior and requirements that are important as input for design. But you have to focus the basics on what is most important and create the fundaments in the management system based on this. It is important to identify a vital few key success factors.

Wheelbarrow

You may think of different companies and try to figure out what their key success factors might be. IKEA; furniture that is substantially cheaper compared to competitors? BOEING; airplanes that is safe to fly? APPLE; offer the coolest mobile devices? The way these companies have designed their management system does of course vary a lot. If the management system has an effective design it should be possible to monitor its performance based on key success factors. It should also be possible to identify which elements interacts in the management system to enable wanted performance.

Key success factors are not only direct requirements on the management system (speed, delivery precision, environmental impact, etc.). Characters related to the products or services, offered to customers, are as well key success factors. It can be innovation level in a product, knowledge available in a service, cost level, availability on request, etc. This means that vital product characters, viewed as important to be successful in the business logic, are as well key success factors for the design of the management system.

Unfortunately too many companies lack the connection between key success factors and the design of their management system. An example can be built in quality control to ensure highest requirements on product quality when product innovation is more important than quality. Another example can be outsourced helpdesk to foreign country when customers are elderly people that only speak their native language. This situation most often leads decrease effectiveness; company will have hard time to be successful, even though the management system can be in very good control.

If you have problem to identify key success factors I can recommend the use of Order Qualifiers & Order Winners. Terry Hill, professor at the London Business School introduced a concept of Order Qualifiers & Order Winners (Hill, 2000) to be used for the strategy work. An order qualifier is what makes an offer, or possible offer, attractive for a customer. An order winner is about what makes the customer decide to buy. These two types of key success factors are, if nothing else, important to understand in order to do the design of the management system.

18Oct/14

An exploded view on definition of Management System.

In order to fully understand how things work I often find it rewarding to drill down in definitions of terms. I recently did an exercise to better understand the true meaning of management system, as defined by ISO. I created an “exploded view” of the definition and mirrored that towards my own experience in design of management system.

The ISO definition of management system can be visualized by below picture:
(ISO full sentences are in the end of this blog post.)

ISO on Management System

So, what do we understand from above? Let me start from the outmost right box, “objectives”. The management system has to include establishment of objectives, as these sets the direction of what to achieve in the company by operational activities. The performance of the company, viewed by results versus objectives, is as well an important indicator to the performance of the management system and should be used for improvement purposes. For the development of the management system, long term objectives should be used as input.

Let’s then follow the arrow from Top Management downwards and the first box is about “overall intentions and directions”. This box guides and directs the organization on how to act in operational activities. Furthermore “overall intentions and directives” should include important characteristics to be used as input when the management system is designed. Examples of this are business model, identification of key markets / customers, and important aspects in order to stay competitive, etc.

If we then follows the arrow “of a” it points at the box “group of people and facilities”. This box identifies who has to do the work and the facilities are supporting arrangements like buildings, equipment and support functions like HR, business control, etc. From a design perspective, the content of this box highly impact characteristics of the management system. Examples are competence availability or needed, location of facilities or resources, etc.

In the definition of a management system the “group of people and facilities” has to have an arrangement of “responsibilities, authorities and relationships”. This is often expressed in organization structures, reporting lines, decision power, etc. I believe this is one of the most commonly used building blocks of a management system and is one of the first things an organization under change is asking for. I think this is highly connected to human behavior or needs. Most people need to see where to “fit in” and an organization chart is the simplest solution to this need. An organization chart is a part of the management system and has to be created in the design work.

If we now move up to the box “group and people…” and follow the arrow from the left, we come to the box “coordinated activities”. This is the first part of the definition of “management” and is on an operational level about distributing tasks to, not only individuals but also groups of people within the company. Coordination has to be done in a coordinated and measurable way. In a design perspective this is about governance and control, decision data, decision meetings, what plans to create and means to follow up these, etc.

Our final box in this exploded view of the management system is the first one to the right from “system”. In the box text the key word is “elements”. How shall we understand elements? In my way of thinking this is the value creation activities that provide enough value for stakeholders in order for the company to survive and to be successful. All of these activities interacts and/ or have relations to each other. They have relations and interact internally as well as externally. From an operational perspective this is what a company does. From a design perspective this is visualized via processes and operational procedures. With a clever design of the management system the company will be successful.

ISO 9000:2005 definitions of terms used:
Management System
= System to establish policy and objectives and to achieve those objectives.
Management
= Coordinated activities to direct and control an organization.
System
= Set of interrelated or interacting elements.
Policy
= Overall intentions and direction of an organization as formally expressed by top management.
Organization
= Group of people and facilities with an arrangement of responsibilities, authorities and relationships.

18Oct/14

Outside in and Inside out

This blog post is about something very trivial, but at the same time highly challenging. It is a trivial fact that a company has to earn money to survive. The company does so if it can sell products or services to a higher price than it costs to produce and deliver. For customers the price should be less than the value of the product or service. This is trivial facts to which no one argues. The challenging part is to design internal structures to enable customer satisfaction in the most effective way, for all parties except competitors.

Too often companies have ways of working fully designed to satisfy internal needs. This may result in cumbersome interaction between customer and company. It may result in long delivery schedule, incomplete service offerings, products lack functionality, etc. As a customer you would of course choose another supplier if that was possible. In the company it may unfortunately result in an attitude where customers are seen as close to stupid, as they do not understand how complicated it is to deliver the product or service.

If you ask such a company why they work as they do, managers most often highlight internal efficiency as the reason. But I would argue that often companies work like they do because they have always worked like they do. And when the market changes the simplest way to increase efficiency is to decrease costs and try hard to maintain the same way of working. The cost constraints become the reason for the way of working when it is actually the other way around. The company did the cost redundancy because they did not understand how to change the way of working.

But the challenge is that these companies are not all wrong. It is not possible to just change everything in a company, to completely work differently. There is internal logic that may be important to maintain. There are knowledge, assets, tools, physiological laws, etc. than cannot or should not be changed. Ask any top manager how willing he or she is to drastically change the way of working. He / she would say there are too high risks involved, the level of uncertainty is not known.

I argue that you can decrease level of uncertainty if you better know what parts in the management system to change, and for what reason, and with identified expectations on outcome for the change. This is about designing the management system and it is about thinking outside in and inside out. Outside in is to identify how the company and its products & services best support customers. The characteristics of interaction and offering should be feed in as requirements to the management system. From an inside out perspective you have to identify what assets the company controls and how these are developed and used in the best way. Characteristics from this internal ways of doing things should be seen as constraints in the design work.

Outside in - Inside out

During the design work you have to challenge characteristics behind each requirement or constrain. Layer by layer in the architecture of the management system you have to identify requirements and constraints as well as challenge the characteristics behind each one of those. Have we chosen the best external environment, are we part of the most rewarding business logic, are the value creation flow efficient for both customers and the company, do we have an efficient organization structure or do we govern operational activities to with relevant control and speed.

This simple concept of “outside in, inside out” thinking in the design of management system offers most companies challenging opportunities to increase value for all stakeholders, except competitors.