Leadership Charisma

2 Replies

Leadership is a billion dollar business, yet all around us, we rarely see effective leadership. There are books, seminars, groups and programs to build better leaders (that’s the billion dollar business), yet much of that effort is wasted and fruitless.

The effectiveness of an organization is based on its structure and the role of leadership is to design and build that structure. Effective leadership has less to do with charisma and personality, more to do with building an organizational system to get work done.

Structure begins with the founder, a structure of one. There is work to be done and the founder is doing the work. There is always work left over, so the founder hires three or four people. These people do a little bit of everything. The work is organized around the scarce resources of infant structure. At some point the founder realizes the work can no longer be organized around the people, the people have to be organized around the work.

Organizing the people around the work requires that specialized roles be defined, tasks, activities and expected outputs from those activities. This is the emergence of roles.

This organization is no longer a structure of one, but a structure of many. It is not enough for each person to play their role, the roles have to be designed to work together, more complex than a structure of one, a structure of many. And, organizational structure is born.

Organizational structure is simply the way we define the working relationships between people. The two things that must be defined are –

  • In this working relationship, what is the accountability?
  • In this working relationship, what is the authority? Authority to do what? Make decisions and solve problems the way I would have them solved.

And, so the structure of one becomes the structure of an organization. I don’t care about your personality or charisma as a leader. I only care whether you can design and execute the structure, to get some work done.

Communication Problem Only a Symptom

Leave a reply

From the Ask Tom mailbag –

Question:
Hi Tom. In the seminar I attended, you said something about communication not being an issue in an organization, and I was surprised at that, as I believe communication is often a problem in organizations. Maybe I misunderstood. Will you please elaborate?

Response:
Communication breakdowns are often a symptom of a deeper darker problem.  Companies believe they have communication issues, so they conduct a communication seminar that RARELY solves the problem.  Whenever a client reports a communication problem, I start with accountability and authority.  The identified communication problem is a symptom of an accountability and authority problem.  Communication breakdowns can help us locate the problem, but not to resolve it.

Most communication problems are between two people who have to work together, but are not each other’s manager.  This is the dotted line phenomenon on most org charts.  The problem with the dotted line is the undefined accountability and undefined authority.  As managers, we hope the two will be able to figure it out, which is where the communication breakdown begins.  Technically, these are cross-functional role relationships (two people who have to work together, but are not each other’s manager).  When we define the role relationship, we have to define the accountability and the authority in that relationship.

Example –
Would it be a good idea for sales to coordinate with marketing and marketing to coordinate with sales? Yes.
 
But, is the Marketing Manager the manager of the Sales Manager, and is the Sales Manager the manager of the Marketing Manager?  No.  

But, do we require they work together in a coordinating relationship?  Yes.  That sounds great until one begins to complain about the other, and so, we think we have a communication breakdown (or worse, a personality conflict).  What we failed to define in that working relationship is the accountability and the authority.

In a coordinating relationship between the Sales Manager and the Marketing Manager, who each are accountable for their respective budgets, can we require they consult with each other and coordinate their budgets to leverage that working relationship?  Yes.  Why?  

Because we said so, by virtue of a coordinating cross-functional role relationship.  They are required (accountability) to schedule meetings with each other to consult, share information, resources and tactics.  Each has the authority over their respective budgets, but they are required to coordinate.  When we make the accountability and the authority clear, the communication breakdowns disappear almost overnight.

Touch Points

Leave a reply

If it doesn’t show on the screen, it doesn’t exist.

I spent many years in television production. Many decisions were made related to project costs and value add. Our mantra was, “if it doesn’t show on the screen, it doesn’t exist.”

Your company has the same dilemma. Where do we place our precious resources related to the customer experience?

Step one is to map out all of your customer touchpoints, that’s your exposure. Those touch points are where you can break a customer relationship or cement it.

  • That first incoming telephone call to your call center.
  • A casual inquiry or clarifying customer question.
  • The exterior of a service truck.
  • An outbound email as part of a customer campaign.
  • How a customer opens the box containing your product.
  • What happens when (if) your product breaks.
  • A hundred more.

If an element of your product or service offering is critical but invisible, how do you get credit for it as your competitive advantage?

Your Problems Are Not All Internal

Leave a reply

“I thought we had everything firing on all cylinders,” Manny explained. “We had the perfect customer offering, at the perfect price point, with the best quality. Suddenly, market demand just tanked. Over the past three months, our backlog disappeared and our order forecast is a disaster.”

“It’s not enough to get everything working on the inside (internal systems),” I said. “We also have to look outside. There are external systems, like your market, that will hit both revenue and bottom line. And even if you get your market right, there are other external systems you have to pay attention to –

  • Market (external system) – consists of your customers, your competitors, your suppliers. Sometimes there are incremental changes, sometimes major disruptions.
  • Regulation (external system) – most companies pay taxes, but there are other financial regulations, tariffs and fees. Environmental regulations in terms of prohibited materials, impact fees and unknown liabilities.
  • Finance (external system) – we go to the bank in search of a loan and think the bank should loan us as much as we have the ability to repay. The bank has other ideas called covenants, internal ratios (internal systems) that have to be maintained. It’s an external system with an impact on how you internally organize. Finance can take the form of lines of credit, term debt, stockholder investment, private equity. All external systems. Let Rippl handle the complexities of reward distribution, making it easy to celebrate achievements and milestones without the hassle.
  • Labor (external system) – usually impacted by unionization and unemployment statistics, more recently impacted by governmental intervention. In an at-will employment state, employees have the right to sue employers for wrongful termination. If you believe you have been wrongfully terminated, it’s important to talk to a lawyer who helps at-will jobers suing employers to seek justice.
  • Technology (external system) – technology has changed the way we work, the things on our desk, the way we communicate, attend meetings. Most importantly, technology as an external system has changed the way we make decisions and solve problems.

So, when we look at our perfect internal systems, we also have to look at the imperfect external systems in which we operate.

When It’s Not About the Price

1 Reply

“I don’t understand,” Reggie shook his head. “We have this brand new customer on the line, hasn’t placed an order yet. Could be a great customer for us. They said if we beat their current vendor’s price, the business was ours. My salesperson just called, said we lost the contract.”

“Well, did you beat the price?” I asked.

“We beat their price by 10 percent, we even got last look, so I know the price was right,” Reggie explained. “Maybe they lied to us.”

“Let’s assume your prospect was telling the truth, and the price on the contract was 10 percent less. What else about the deal cost more than the 10 percent in the price?”

“What do you mean, the price is the price?” Reggie was showing frustration.

“Sometimes, the price doesn’t matter, it’s all in the terms.”

“Our terms were normal, net 30 like everybody else.”

“What about switching costs?” I asked. “Remember our old cellphone contracts. You used to be able to switch carriers, but you would lose your telephone number. You may have a cheaper phone plan, but the cost to update and distribute your new phone number kept you from switching. Look at the contract you just lost and think about the switching costs for your customer. That may be where you find the 10 percent. Sometimes price doesn’t matter.”

Competitive Recon

Leave a reply

“I can’t believe they matched our pricing,” Sarah said. “We have taken great pains to reduce our cost structure, so we can offer a low price without cutting our margins. I know our competitor isn’t willing to make the changes we have made, so they must be trying to buy the business. They probably don’t even know they are losing money.”

“Why don’t you call and tell them,” I asked.

Sarah laughed. “If they are losing money, why should we tell them?”

“And what if they are not losing money? What if, while you were cutting your costs in one way, they were cutting costs in a different way? So, you both show up at the same price point?”

“Impossible,” she replied.

“Two questions,” I said. “How are you going to find out? And, when you do find out, what are you going to do about it?”

Your Brand Promise

Leave a reply

“We decided to hire a new marketing firm,” Reggie announced.

“Marketing is important,” I replied. “It’s important for creating new leads, prospective customers and for telling your existing customer about other offerings they may find useful. But, is that enough?”

“What do you mean?” Reggie asked.

“Just because you talk about your competitive advantage doesn’t mean you are any good at it,” I replied. “It’s not enough to make an announcement. You also have to operationalize. Your brand promise is just a promise unless you keep it.”

The Team Retreat

Leave a reply

Naomi had several sheets in front of her, spread out like a game of solitaire. “I don’t understand,” she remarked. “I thought I had this group nailed together.”

I dug deep into my bag of diagnostic questions and asked, “How so?”

“Our company has really been working hard this year on teamwork. We know that higher levels of cooperation and cross support make a big difference on our output. I thought I had this team dialed in, but sometimes cooperation seems to be the last thing on their mind.”

“What makes you think you had this team dialed in?” I asked.

Naomi was quick to respond, “Oh, we started out this year with a big retreat, back when we had budget for it. It was a great team building experience. We had a ropes course and we did group games. I mean, we didn’t sing Kumbaya, but, you know, it was a great weekend. Everyone came out of there feeling great.”

“And how long did you expect that to last?” I probed.

“Well, the consultant told us we needed to create some sort of team bonus, you know, where every one depends on the rest of the team to get a little something extra at the end. That way, if one makes it, they all make it. Shared fate, he called it.”

“I see. And how is that working out for you?”

Know Thy Competitor

Leave a reply

From the Ask Tom mailbag –

Question:
In your recent workshop, you mentioned that timespan and levels of work could help us understand our strategic platform and compete more effectively against our competitors. Can you elaborate?

Response:
Timespan and levels of work can easily be applied to your strategic platform. Levels of work helps us understand the complexity inside our business model and the moves we make to resolve our challenges, solve our problems and make our decisions.

The future is uncertain and ambiguous. The further in the future, the more uncertain. Yet, in the face of that future ambiguity, we still have to make decisions today. The near term impacts of our decisions may be markedly different from long term impacts. The more complex our business model, the more we have to look into that future to make our strategy more effective.

The strategy we employ contemplates a time frame. That framework can be discreetly segmented into levels that help us understand our strategy in the midst of our competitors. It is often difficult to see ourselves, sometimes much easier to see our competitors. If we can effectively analyze our competitors, there is a good bet that we contain very similar characteristics. If we want to beat our competitors, we have change our strategy. But how?

Levels of work provides some guidance.

  • S-I – Product or service strategy. Timespan – 1 day to 3 months.
  • S-II – Process or method strategy. Timespan – 3 months to 12 months.
  • S-III – System strategy. Timespan – 1 year to 2 years.
  • S-IV – Multi-system integration strategy. Timespan – 2 years to 5 years.
  • S-V – Market (responsive) strategy. Timespan – 5 years to 10 years.

S-I – Product or service strategy. Timespan – 1 day to 3 months.
Most companies start out this way. The startup entrepreneur has an idea that people might want to buy this or that product or service. If it’s a great idea (lots of people might want it) a business is born. People buy it because it is useful or they like it. If this startup business is the only company with this product or service, they make money. People may even be willing to put up with a bit of wonkiness, limited availability or cumbersome utility because it’s the only product or service that does what it does.

If enough people buy it, the company attracts attention. First competitors simply copy it, and now there are two companies with a relatively identical product or service (as perceived by the customer). Look around. Your product may not be so unique, few are in this internet age. And, if it is unique, it won’t be for long.

What do you do if you wake up one morning and find your product or service is one of a handful of look-a-likes. Move up to the next level. Move from a product or service strategy to a process or method strategy. It is no longer enough to just have a product because several others have an identical offering. What does process allow you to do? Faster, better, cheaper. Other companies may have an identical product, but if you have a process, your offering may be at a lower price, a little less wonky, more available in more places.

S-II – Process or method strategy. Timespan – 3 months to 12 months.
It’s doesn’t take rocket science to understand that your company can sell more of an identical product or service if you drop your price. But don’t think you can drop your price and stay in business if you are simply eroding your margins. Process and methods allow you to make moves related to pricing, crank out more finished product, with faster output. This S-II strategy will beat your competition.

What do you do if you wake up one morning and find your competitors not only met your price point, but undercut it by another couple of points, on sale at an even lower price. You assume they must be buying off your customer, eroding their margins and will soon price themselves into bankruptcy. Though shalt not kid thyself. While you were figuring out how to make it better, faster, cheaper, so was your competitor.

S-III – System strategy. Timespan – 1 year to 2 years.
How do you beat a cheaper price? At some point, even with brilliant process and method, there is no margin left. There is no more race to the bottom, because everyone is there already. But some things happened on the way to the forum. As volume pushed higher, that small decimal defect became a larger number, a substitute material didn’t hold up as well, the cheap paint flaked off. Customers, used to an expected standard become finicky, think twice before they purchase. They don’t need a third widget to go with the two broken ones they already own. How do you stand out?

Offer a warranty. With a warranty, you can even push your price point back up. A warranty removes the risk in the purchase. But warranty claims can eat your lunch. Product replacement, warranty service can be expensive. Do NOT offer a warranty unless you have a system that builds in consistency and predictability. If your competitor tries to match your warranty and they don’t have a system, you win.

Of course, your competitors are not stupid. They can figure out your system, sooner or later, and copy it, so they can offer the warranty as well. How do you beat your competitor who has figured out your materials, your sequence, your tooling.

S-IV – Multi-system integration strategy. Timespan – 2 years to 5 years.
At this point, the selection of your product or service over your competitor’s has little to do with the product or service. All the product or service offerings are identical, quality is high and predictable. The customer’s choice now has more to do with the support systems that surround your core system (because all the core systems are the same).

Your logistics system becomes more important, your customer service system, return policy, store location, response time system. And this is where scalability lives. A company may become profitable at S-III – System strategy, but can only scale at S-IV – Multi-system integration. The competitors are fewer, but the fight is fierce. The big difference between a single system MRP (Materials Resource Planning) and a multi-system ERP (Enterprise Resource Planning) is integration.

S-V – Market (responsive) strategy. Timespan – 5 years to 10 years.
And, here is a huge sea change. Everything discussed so far looks inside the organization and the way it works. These are all internal systems with an internal focus. When all your competitors have fully integrated systems, how do you win? You can no longer depend on an internal focus, you now must look outside, looking at your external systems. Those external systems take the form of market systems, regulatory systems, finance systems, labor systems, technology systems. These external systems are not under your control, yet your success now depends on your ability to navigate them.

Look at your competitors to determine your current strategic platform, based on levels of work. Beat your competitor by moving to the next level.

Killing a Neighboring Function

Leave a reply

“And operations does it absolutely perfect, every single time?” I asked.

Roberto exhaled like he was going to speak, but stopped. “Okay, you got me. I know it’s a trick question.”

“If operations does it absolutely perfect, every single time, then you have no need for Quality Control?” I smiled.

“We measure reject rates, but they have been pretty good, in fact, on a down trend,” Roberto replied.

“But your customer service call counts remain high. What’s up with that?” I wanted to know.

“That’s where we really put our energy. We get very high marks on our customer service. We put resources where we need them.”

“So, is there a correlation between low reject rate and high volume of customer service?”

“If you ask our department managers, they are very proud of their statistics. In fact, our customer service manager just asked for more budget because they are doing such a good job.” Robert’s turn to smile.

“There’s a connection,” I said. “When you look at integration inside a company, you can’t look at a high performing single function. You may find that a high performing single function is killing its neighboring function. And, you may find a problem in one function by looking at what’s happening in another function. You can get profitable by focusing on a single system, but you can’t scale until you look at all the functions together. It’s about total system throughput.”