Category Archives: Timespan

Changing Behavior

“The manager may be accountable for output, but, what if the behavior of the team member is not productive and needs to be changed?” I asked.

“It often happens,” Pablo replied. “The path is not to change the behavior of the team member, but to build the system that creates the behavior necessary for productivity.”

“So, you are implying that you can change a person’s behavior?”

“Absolutely, change the context, change the system and behavior follows.”

“If we subscribe to this thinking, what should we expect?” I wanted to know.

“This understanding breathes life into the organization. Managers are now expected to anticipate, have alternate plans, in short, be prepared to respond to variable conditions. This, instead of watching over shoulders, micro-managing and blaming the team.”

It’s Not a Breakdown in Communication

“You are dipping your toes in this subject area called trust,” I nodded. “If the manager is to trust the team member, it starts with selection. I get that. But, how does accountability, laid at the feet of the manager, engender a sense of trust?”

“If the manager understands their accountability for output of the team member, blame goes away,” Pablo replied. “We often think blame is a personality disorder, or a breakdown in communication. Blame gets resolved, not through a communication seminar, but by defining, understanding the working relationship between the manager and the team member. When the manager understands, assumes accountability for output, there is no one to blame. The manager has to look inward, to determine what change the manager can make to impact the output.

“You see,” Pablo continued. “Let’s say we get a shipment of defective parts on an assembly line, a little plastic burr that has to be ground off before it can be assembled, and the grinding takes an extra 30 seconds. If our production output was intended to be 100 units per hour, but those 100 units now cause 50 minutes an hour of deburring, we can get behind quickly. And, that’s no matter how hard the team member works, it still takes 30 seconds extra per unit.”

“What does this have to do with trust and mistrust?” I wanted to know.

Pablo obliged. “If the team member is held to account for the output, they have nothing to say except to point out the deburring work. The team member cannot authorize someone from another team to come to help, or to pull two other deburring grinders from another work cell. They have no context for the output of the other work cells. And, if they are already doing their best, they can work no harder, they can work no faster, the deburring still takes an extra 30 seconds. If they are berated by their manager for the shortfall in output, there begins a mistrust of their manager. The team has little control over the conditions of their raw materials, it is only their manager that can accommodate the anomaly in production. This small bit of mistrust can begin to grow and ultimately erode the relationship. And, it is not personalities or miscommunication that is causing the mistrust, it is the definition of the working relationship between the manager and the team member AND where we place accountability for output.”

By Virtue of Contract

“You have been quite clear, that it is the manager accountable for the output of the team, so, does the team member have no culpability for the work?” I asked.

“Of course they do,” Pablo countered. “By virtue of a contract, a very simple employment contract, each team member is expected to show up for work each and every day, bringing the full application of their capability, in short, to do their best.”

“Sounds simplistic, if not idealistic,” I snorted.

“Indeed simple, AND not idealistic,” Pablo replied. “It is not a matter of idealism, it is a matter of contract. And, as a matter of contract, the manager must assume each team member is doing their best.”

“But, assuming the team member is doing their best does NOT make it so.” I pushed back.

“Why, do you think it is hard?” Pablo asked, not giving me time to respond. “It is not difficult for team members to continually do their best. It is only when our people systems are dysfunctional, people find it difficult. Unless we, as managers, prevent it, people will engage, with full commitment to do their best, in fact, will find deep life satisfaction in doing so.”

Assumptions About Work

“I would assume most companies have real problems to solve, so what do you mean, if you want your team to feel high levels of job satisfaction, you give them a real problem?” I asked.

Pablo thought for a moment. “Sometimes, companies engage in contrived exercises. To build a team, they take a group to a local ropes course, or a game of tug-of-war over a mud pit. Those exercises provide only temporary relief, short-lived when the team returns to work. The work itself has to be satisfying.”

“What leads a company astray?” I wanted to know.

“Oh, that’s not so hard to understand,” Pablo replied. “First, I think we have misconceptions about why people work. And, then we base our managerial systems on those misconceptions. It’s a flywheel that eats itself.”

“Misconceptions?”

“Some companies think people work only because they have to, only in exchange for meager compensation to put food on their table. Or, more substantial compensation so they can buy a boat. They believe employees are simply self-centered and have no inherent need to work. That our labor system exists only as a commodity. It’s a scarcity mentality.”

“As opposed to?” I said.

“People have an inherent need to work. People have an inherent need to contribute, to their own self-independence, and also to the positive social systems in which we live. Look at the number of hours in a work week. It has been coming down over time, but in the US is currently settled at around 40 hours. People need a substantial, material amount of sustained work, where they can contribute their full capability to solving problems and making decisions. Managerial systems based on this understanding are much different than those based on greed.”

When to Add a CFO

From the Ask Tom mailbag –

Question:
Our company is thinking about adding a CFO to manage our accounting. We are growing. At what point do we need a CFO?

Response:
As companies grow, this is the normal maturation of the most important administrative function, keeping track of the money. (DROOM – Don’t ever run out of money).

When I look at levels of work in accounting, here are some of my guidelines.
S-I (1 day to 3 months timespan). This is all the transactional stuff, vouching invoices to be paid, creating invoices to customers, data entry of timecards, materials to work-in-process. This would also include reconciliation of transaction documents to transaction schedules (as entered).

S-II (3 months to 12 months timespan). These are higher order transaction functions, like payroll (especially payroll with a 401k plan). Also longer period reconciliation routines like monthly bank recs or monthly credit card reconciliations, routine journal entries. High S-II approaches that of a full charge bookkeeper.

S-III (1 year to 2 years). Emerging (low) S-III would be a full charge bookkeeper, where transaction activities have impact on the EOY (end of year) compiled financials (this requires a minimum 13 month timespan). This level also creates the transaction systems to record depreciation entries, simple inventory management, over and under billings to WIP. This would include job cost systems where project accounting likely survives a fiscal year. Hi-S-III would be a controller level.

S-IV (2 years to 5 years). This is an integration role (CFO) which would include software and accounting administration of more complex transaction activity, like bill of materials inventory management, complex work-in-process, enterprise software integration. S-IV would be accountable for modeling cash flow based on 36 month trailing stats overlaid to macro-economic trends to determine credit facilities (lines of credit, term loans) to cross periods of economic contraction. Analysis at this level would provide financial coaching to S-III department managers related to metrics of labor, materials, consumables, capital equipment, short and long term budgeting.

Is it a Personality Conflict?

“You would think at their age, they would know better,” Phil complained.

“What makes you think that?” I asked.

“The sales manager calls a meeting with the marketing manager, and the marketing manager refuses to attend. I ask why? And, all I get is how the sales manager is pushy, always with opinions about the way sales runs and it’s not even his department.”

“So, what is the sales manager to do?” I prompted.

“It’s annual budget time, and I told the two of them to get together,” Phil continued. “I need sales and marketing to coordinate. What I get is a big, fat personality conflict.”

“What would you say, if I told you, I didn’t think you had a personality conflict,” I replied. “But, rather an accountability and authority issue?”

“What do you mean?” Phil looked skeptical.

“Do each of them have an accountability to publish an annual budget coordinated with the other?”

“Yes,” Phil nodded.

“Is coordination something you would like, or is it a requirement?”

“It’s something I would like, but I don’t want to be pushy. They should be able to figure it out,” Phil defended.

“And, if they don’t coordinate, then they miss the accountability?”

“Well, yes,” Phil looked puzzled.

“I don’t think you have a personality conflict, I think you have an accountability and authority issue.”

Take Your Company to the Next Level – Industry Platform

As the organization becomes larger, it grows more complex and requires a higher level of organizational capability to compete.

  • S-V – Industry platform, where our enterprise competes using industry standard practices.
  • S-IV – Market platform, where our multiple systems integrate with market systems.
  • S-III – Single serial system platform, where we see the introduction of warranties as a competitive edge.
  • S-II – Process implementation platform (of someone else’s system, like a franchisee).
  • S-I – Product or service platform, where it’s all about the product.

At S-V, Industry platform, the organization is now competing with other companies who ALL have become market responsive. How to win? Move to the Industry platform.

I always encourage my clients to join trade associations where we witness the first informal barriers to entry. Once a part of a trade association, I encourage them to become a member of the association board or an officer. Is it such a stretch to imagine that, to be a part of the association, its members should adhere to certain guidelines? The association board might well propose those guidelines, similar to specific standards created by my clients. Competitors may be market responsive, but to be a player, they must adopt and maintain performance standards equal to those of my client. Here is where we see the insistence on ISO standards or other continuous improvement platforms.

Companies at this level, because of their size, often find it difficult to adapt, hence, the barrier to entry. Tied to timespan, for a company to effectively compete at this level often requires more than five years of planning and foresight. Companies struggle to let go of processes and systems that served them well, to adopt a new level of standards that initially add to overhead with revenue opportunities that take years to build.

But if the spec says, ISO, an entire swath of companies may not compete.

And, We’re Back

Some of you may have noticed a service interruption for Management Blog last month. There was a problem between our RSS feed (syndication) and our SSL (socket security) configuration. Fixed now. Well, if you are reading this, as an email, it’s fixed. We published throughout the duration, so if you missed some posts, they are all available at managementblog.org all the way back to Nov 2004.

From the Ask Tom mailbag –

Question:
I want to grow my company, but a bit overwhelmed at what I need to focus on. I see so much opportunity in nearby markets within a six hour drive. I think I can go into those markets without a huge initial investment, and organically grow as the business matures. Of the thousand things I need to pay attention to, what’s the focus?

Response:
I am often asked, what are the biggest constraints to growth. There are lots of them, geography, capital, market characteristics, economic cycles. The biggest, I think, is people.

We can purchase lots of things, equipment, office space, advertising. But, you can’t purchase talent. You have to find it. You have to seek it out.

We often only hire people when we have an opening, when we need to always be recruiting. You can have the brightest office space, brilliant marketing, pristine equipment, but with the wrong (not-right) people, you will still fail. Yet, with the right people, you can still be successful with Class B office space, used but serviceable equipment in a struggling economy. The biggest constraint to growth, even in otherwise challenging times, is people.

Supernatural Powers

“Who is responsible for the team?” I asked again. “Who is responsible for the performance of the team, and all the things that affect performance?”

Melanie started looking around her office, as if someone was going to appear. One of her team just quit.

I continued. “If it’s not you, as the department manager, if it’s not your accountability, then who?”

Melanie’s eyes stopped skirting the room. There was no hero that appeared. One last time, she floated her excuse, “But how am I responsible for one of my supervisors quitting?”

“That’s a very good question. How are you, as the manager, responsible for one of your supervisors quitting?”

“What, am I supposed to be clairvoyant?” Melanie snapped.

“That would be helpful,” I nodded. “But let’s say you don’t have supernatural powers. How could you, as the manager, know enough about your supervisors, to have predicted this departure?”