Don’t Judge People

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From the Ask Tom mailbag –

Question:
It’s been at least four years since you spoke to my TEC group. I was chatting with one of my members yesterday and he asked me if I knew whether there was a profiling tool available that indicates a person’s capability related to stratum level?

Response:
I had the same question in 2002. The answer was and still is, no. There are some consultants who propose to have a profiling solution, but I would question its validity. Anecdotally, most profiling tools have about a .66 correlation with reality. You might say, well, that’s not too shabby until you understand the flipping a coin has a .50 correlation. So, even if there were a psychometric assessment, its validity would likely not be any better than the others.

I don’t judge people. I’m not very good at it. So, let me propose a much cleaner method. Focus on the work. I don’t judge people, but I do judge the work. Work is decision making and problem solving. Focus there.
Problem Solving Methodology

  • S-I – Trial and Error, substituting a single variable at a time until something works.
  • S-II – Cumulative diagnostics, experience, best practice. Solving a problem by connecting to a best practice.
  • S-III – Cause and effect, if-then, required for a single serial system or a single critical path, root cause analysis.
  • S-IV – Multi-system analysis, how one system impacts its neighboring system, based on outputs and inputs, or capacity mis-match.

Look at problem solving required in the work. Then look at the candidate. Is this person any good at solving problems at that level. If they are, that is a clue. Design a project with embedded problem solving, see how they do.

Don’t overthink this level-of-work stuff. It’s not that difficult.

Scalability

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From the Ask Tom mailbag –

Question:
We have worked very hard to refine our core process. We believe we have the highest quality in our product offering and simultaneously have driven out extraneous costs. So, our customers enjoy a high quality product at the most competitive price. In spite of that, while sales growth is steady, our profitability suffers. Our gross margin is good, but by the time we get to the bottom line, the net is not so good. We have tried to cut SG&A, but that seems to make the net even worse. The more we try to take our company to the next level, the more frustrated we become.

Response:
You are in that No Man’s Land dilemma, too big to be small (amongst your competitors) and too small to be big (among those companies who have the biggest market share).

This is a classic integration issue. You describe your refined core process, which is clearly a step up to S-III. Your core system is well-honed, but scalability is elusive. Your core system creates your gross profit, right where it needs to be, but it sits among other systems that drag down the net profit. Companies at S-III have great products, but scalability only happens at S-IV.

  • S-I – Product
  • S-II – Process
  • S-III – Core system (sequenced processes, critical path)
  • S-IV – Integrated systems (multiple critical paths)

Your core system is critical, it is the product that your customers want, but it is now surrounded by other systems. Not only do these systems have to be effective and efficient, but they also have to be integrated together, and that is the challenge at S-IV.

Most core systems exist in a defined operation function, and are surrounded by a marketing function, sales function, project (or account) management, quality control, research and development, sustaining engineering, human resources, facilities and finance. You may have a strong core function in ops, but your company will never scale without the integration of all those internal systems.

Tactical vs Strategic

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From the Ask Tom mailbag –

Question:
You seem to challenge the name of our annual planning exercise that we call Strategic Planning. We are clear that exercise is conducted away from the office, off-site, so we are not dragged into the minutiae of the day to day. We do our best to be strategic.

Response:
One reason I know that most Strategic Planning Meetings are not strategic is by a quick examination of the action item list that emerges from the meeting. Rarely is there a single action, goal, objective with a due date further out than 12 months. There is nothing wrong with tactical plans, we need them, but don’t mistake a strategic session just because that is what it’s called.

Looking at Elliott’s framework –

  • S-I – 1 day to 3 months – Tactical
  • S-II – 3 months to 12 months – Tactical
  • S-III – 12 months to 24 months – Tactical
  • S-IV – 2 years to 5 years – Transition from Tactical to Strategic
  • S-V – 5 years to 10 years – Strategic

Some would push back that there is no point in planning 5 years out because so much will change by the time we get there. Exactly.

Tactical planning is short term (up to two years) where things are knowable and we can call them by name. Strategic planning is long term where things are NOT knowable, where there is uncertainty and ambiguity. Yet, in the face of that uncertainty, we still have to make a decision today. Foolhardy to make a tactical move without a longer term strategy.

The biggest problem is in the language of strategy. When things are uncertain and ambiguous, we can only speak in terms of concepts. And, we don’t practice speaking conceptually very often. Most CEOs and managers, given a problem to solve, want to fix it. Fixing is tactical, so before we even have the conversation, we have to rethink the discussion.

Five years from now, we will have customers, we just might not know who they are. We will have facilities, but perhaps not our current facilities. We will have employees, but we don’t know who they are, how many or what they may be doing. We still have to think about markets, infrastructure and human capital even when we don’t know what that might look like in the future. Four years from now, your five year plan will be your one year plan.

Out of Integrity

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“When we hired Lucas, we were clear about our values,” Alex described. “He’s been here for two weeks and we already caught him.”

“Can you be a bit more specific?” I asked.

“One of our values, integrity,” Alex replied. “We found him skipping the product testing step in quality control. Not on every unit, but he was only testing one in five.”

“How did you find that out?” I wanted to know.

“Easy. We have a reject rate of 20 percent. I know, I know, that’s high, but we had some raw materials out of spec lately, so our reject rate is higher than normal. Lucas’ reject rate was only 4 percent.”

“What did Lucas say?”

“He was proud. Said he thought a lower reject rate was good. Something about sampling. Pointed to his bonus on output. On that, he was right, his output was 16 percent higher than anyone else. But now we have to go back and re-test the entire batch.”

“The entire batch?”

“Yes, his lot output was mixed in with the other lots, so we don’t know which is which,” Alex answered.

“I have three questions for you,” I said.

  • How is your bonus system out of integrity with your quality standards?
  • How is your measurement of output out of integrity with the raw materials problem?
  • How does your management system blame an employee attempting to do his best, when this is really a management issue at a higher level?

    • Done or Done, Done?

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    “But, Paula promised to finish that report by Friday,” Francine lamented. “Now, I guess I will have to finish it myself, to meet the deadline for the Board meeting.”

    “So, your definition of finish and Paula’s definition are different?” I asked.

    “What do you mean, finished is finished,” she flatly stated.

    “I understand what you mean by finished and I understand what Paula means by finished. Your understanding is that the report is complete, legible, proofread for accuracy, math checked and double-checked. What you mean by finished is published. What Paula means by finished, is substantial completion of the report so she can go home at 5p.”

    “But, on Monday, we were in agreement,” Francine protested.

    “Yes, but you agreed on different states of completion,” I nodded. “What words could you, as the manager, have used to clarify the agreement?”

    Innovation Metrics

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    “We are going to start measuring innovation,” Samuel announced.

    I gave him a raised eyebrow.

    “Yes, we believe our competitive advantage is our ability to innovate and bring new products and variations of products to the market, so we think it is important to measure it,” Samuel added.

    “When you were working on your efficiency program, you developed metrics to determine improvement,” I said. “Why do you think your metrics worked well in those circumstances?”

    It didn’t take Samuel long to ponder. “We had a system, and we worked to make that system predictable. When we determined what we wanted to control, the metrics just fell into place. Any variation was quickly identified and eliminated.”

    “Pay close attention to your words,” I replied. “You were working in a system with predictability, control, seeking to eliminate variation. You now want to create a system of metrics to do just the opposite. Innovation is hard pressed to be systematic, certainly unpredictable, sometimes outside the bounds of control and designed to encourage variation. Just exactly how do you intend to measure that?”

    Paper Delay

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    “What did you learn?” I asked.

    “I drew the picture of our Customer Experience system,” Sean explained. “I didn’t realize it was really a system. I drew the picture in detail to capture all the places the Service Ticket sits, and indicated whether is was a Paper Service Ticket or if it had been converted to an Electronic Service Ticket.”

    “Why did you do that?”

    “I was thinking, the Customer Service Rep is connected to the Service Ticket server, so they can look things up. But, for security, they are blocked out from writing service tickets. That function is relegated to Ops, who really doesn’t have the time for all this.”

    “What’s the security issue?” I wanted to know.

    “Ops is afraid that if the CSR writes up the ticket, they will make a mistake and route the ticket to the wrong place.”

    “What do you propose?”

    “I want to allow the CSR to write up the ticket while the customer is still on the phone, no more paper,” Sean started. “I want to program a drop down box with only four reason codes available plus a code for needs supervisor review. If that ticket goes straight to resolution as an Electronic Service Ticket, that takes three, maybe four days of delay out of the system.”

    “How are you going to explain your proposal so you can get buy-in and approval for the change?” I asked.

    Sean grinned. “I am going to lead with – Every time something is written on a piece of paper, it introduces delay into the system.”

    Delay, Delay

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    “We tried that,” Sean explained. “There is a delay in our problem resolution. We figure out the solution on the phone call, but it takes time to execute the resolution.”

    “Tell me more,” I asked.

    “The customer service rep writes down the problem on a piece of paper, noting all the details, customer contact and so forth. That paper form goes to the operations department.”

    “Stop,” I said. “After the paper form is completed by the CSR, what happens to the piece of paper before it goes to the ops department?”

    Sean grinned. “You’re right. It sits. It sits in a box on the corner of the CSRs desk. Ops sends a runner once a day to pick up the forms. They insist that they have written documentation.”

    “Every day they send a runner?”

    “Well, not every day. Sometimes they get busy, so sometimes, it’s every other day.”

    “Then, what happens?” I wanted to know.

    “Then, someone from Ops keys in the data from the paper form to get it into their Service ticket system. From there, it could go one of four ways, so it has to be reviewed and routed by a Supervisor.”

    “Is the Supervisor busy? How long does it take the Supervisor to review the ticket?”

    “I’m not sure, but it has to be within a day. Or two?” Sean tried to imagine what happens in Operations.

    “Sean, if you drew your system on a single piece of paper, including the steps in the Ops department, which means you might have to go and ask some questions, do you think you could put a red circle around the places where the Service Ticket just sits, waiting?”

    Sean nodded, got up and went to draw a picture of the Customer Experience system.

    ‘

    Value Add is Not the Problem

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    “I have some ideas on bringing value-add to our customer experience,” Sean reported.

    I nodded. “Two questions,” I said, “How well are you delivering the core elements of your customer experience? If you add elements, will they add cost and are your customers willing to pay for it?”

    “Well, value-add,” Sean stuttered, “means the customer will perceive greater value for the experience we provide.”

    “And, why are you doing this?”

    Sean stopped. “The customer survey scores have been sagging, and I wanted a way to boost those scores. I get a bonus on improvement in customer satisfaction.”

    “When you lay out your customer experience system on a piece of paper, do your customer satisfaction scores lead you to a specific segment in the system?” I asked.

    Sean’s turn to nod. “Yes, we get a customer complaint, we usually troubleshoot the problem accurately during the phone call, but there is a delay in actually fixing the problem. That’s why I wanted to create some value-added services, so the customer would perceive greater value in our efforts.”

    “What if? And, this is just a what if,” I smiled. “What if you focused on the delay between understanding the problem and fixing the problem? Would your customer satisfaction scores go up?”

    Skill and Capability

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    “I want to send this guy back to training,” Roger pursed his lips.

    “Again?” I replied. “This would be the third time through.”

    “I know, I know. But the mistakes he makes and the bone-headed decisions he makes, they just seem careless. If he would apply himself a little harder, he might have a break-through.”

    “Roger, you have a classic managerial case of fixitis,” I replied. “You think you can fix people.”

    Roger nodded. “Yes, I guess I do.”

    “There is a big difference between skill and capability. You can train a skill, a skill can be learned. A skill can be practiced, honed and coached. But, you cannot teach capability. Capability is what it is. Please understand, capability grows and matures through a lifetime, but not from a two week training period.”