The Power of Storytelling
by Alan Quintero
Making change endure and building culture are two of the hardest things a leader has to accomplish. Fortunately, there’s a powerful tool leaders can use: storytelling. In this article, we’ll explore the power of stories, why they work, and elements that form a great story.
The Power of Stories
Appropriately, let’s begin with a story.
Jesus lived on this earth until approximately AD 30. Most scholars believe the books of the New Testament were not put into writing until AD 50 or 100. However, the challenge of remembering the events of Jesus’ life did not end. The stories of the New Testament were primarily passed down orally, because copying the gospels by hand was banned until the emperor Constantine allowed it in AD 325. For almost 300 years, the accounts of the New Testament were passed on orally from person to person! Furthermore, until the invention of the western printing press in 1439, the Bible was copied primarily by hand, and few people owned the Bible. For almost 1,400 years, the stories in the New Testament were mostly learned through storytelling. I would venture to say that most people in western civilizations can recite one or more stories from the Bible. That, dear reader, is some powerful storytelling.
Here’s a more recent example. Steve Epstein was a lawyer for the U.S. Department of Defense and in charge of the Standards of Conduct Office. When he conducted training, he found that reciting the rules alone wasn’t working. The message did not seem to stick. So, he created the “Encyclopedia of Ethical Failures” in which he collected stories of compliance failures in chapters titled “Bribery,” “Abuse of Power,” and the like. Here’s a real gem from the encyclopedia:
“A military officer was reprimanded for faking his own death to end an affair. Worthy of a plot in a daytime soap-opera, a Navy Commander began seeing a woman that he had met on a dating website. The Commander neglected to tell the woman that he was married with kids. After six months, the Commander grew tired of the relationship and attempted to end it by sending a fictitious e-mail to his lover informing her that he had been killed. The Commander then relocated to Connecticut to start a new assignment. Upon receipt of the letter, his mistress showed up at the Commander’s house to pay her respects only to be informed by the new owners of the Commander’s reassignment and new location. The Commander received a punitive letter of reprimand and lost his submarine command.”
This story, although better than just reciting policy statements, can still be improved. We’ll look more into that later.
Why Stories Work
In 1944, Heider and Simmel conducted a study that showed that our brains are wired for stories. They played a movie to groups of students (you can see the movie here). The movie shows silent geometric shapes moving around the screen. One group was given directions to describe the story they saw. The other group was given little direction prior to seeing the movie, then was asked to describe what they saw. Not surprisingly, there was little difference between the two groups. They both saw the story of an angry triangle’s confrontation with a friendly triangle and circle.
This experiment shows how important putting data into the context of a story is to our brain. In fact, 65% of our conversations are stories, primarily in the form of gossip. Why?
When processing facts, only two areas of our brains are engaged. These areas do nothing more than decode the words we hear into their dictionary meaning. But when we listen to an effective story, many other parts of the brain are activated. This results in interesting brain activity:
1. Neural coupling: Neural coupling allows the listener to turn words into virtual experiences. For example, smell words such as lavender and cinnamon activate the smell centers of the brain as if the listener had actually smelled them. Similarly, using active sentences such as, “Bob kicked the ball,” activate the portion of the listener’s motor area associated with leg motion.
2. Mirroring: The power of neural coupling lets an effect called mirroring take place. Mirroring allows a story teller to relate personal experiences directly with the listener. Since the motion and sensory areas of the brain are activated by action and sensory descriptive words, a storyteller can almost recreate their reality in a listener’s brain by using those words. When a storyteller relates an effective story, listeners’ brains are literally living those events.
3. Dopamine: Finally, the brain releases dopamine when it experiences an emotional event—even storytelling. Dopamine imprints a memory and makes the event easier to remember with more clarity. This is why saying, “Don’t go near that dog,” is not as effective as saying, “My friend was mauled by that slobbery, mean dog, so stay away.” The combination of neural coupling, mirroring, and dopamine makes storytelling 22x more effective in helping the listener retain information than data alone!
Fast and Slow Thinking
People are not rational beings by default. Our brain operates from two systems: Fast thinking (system one) and slow thinking (system two).
Fast thinking is intuitive and requires less energy, so it’s the default system our brain uses. This system allows you to talk while driving your car, play the guitar without looking at the strings, or know that 2+2=4.
Slow thinking is the rational and deliberate system. This system uses significantly more energy, and it’s not our default. Slow thinking is the system which makes you think through a process or figure out a problem. It is how the brain operates when you try to calculate 17 x 54 (which is 918). Also, when you learn a new skill—think driving a car—your brain is relies on slow thinking. Someone learning a new skill has to think through every step, and when that person is finished, they may feel tired and drained. But during this learning, the brain is rewiring itself. New connections are made until the new skill can be performed without thought.
In this age, fast thinking is the default. If our caveman ancestors used slow thinking for everything, we would not be here today. They would have been eaten by sabertooth tigers while they thought about how to react when they saw one!
These peculiarities in brain function are why flight simulators work for training an aircraft pilot. Without first practicing in a flight simulator, a mistake by a first-time pilot while landing in an unfamiliar airport could result in death, fire, and mayhem. But with a flight simulator, the same pilot can try and fail many times without anyone getting hurt. All the while, the pilot’s brain is rewiring to be able to perform the real landing.
Stories work like flight simulators on our brains. Because a well-crafted story causes our brains to activate through mirroring, stories take us into intense simulations of situations that we experience in parallel to reality. We can have that rich experience without getting hurt at the end.
Stories rewire our brains much in the same way that a flight simulator does. These new brain connections allow us to react using our fast thinking brain when exposed to similar real-life situations as those we heard through story.
Connecting Through Stories
In his book “I and Thou,” the German philosopher Martin Buber states that humans are defined by two pairs: I-Thou and I-It.
Our relationship with things, the I-It relationship, separates us from objects. Our relationship with others, the I-Thou relationship, eliminates the boundaries between us. That’s why, even if one is an extreme naturalist, one has no qualms over cutting down a tree for fire to warm their cold family. The connection they have with their family (I-Thou) bonds them together, while the I-It relationship with the tree separates them from the tree.
Storytelling allows us to see the subject of the story in an I-Thou relationship instead of an I-It relationship. When implementing change in an organization, simply putting lessons learned into policies and procedures keeps us separated from the results and does not create a sustainable culture. Understanding the “thou” behind a story builds a lasting connection.
In the medical field, many hospitals are now using this concept to avoid medical mistakes. Instead of referring to patients solely by their medical condition (believe it or not, medical staff used to call their patients names like “the broken leg in room 2”), the staff is encouraged to build the story behind the patient in their charts and conversations. This staff-patient connection has been shown to reduce the number of medical errors.
Building a Great Story
The steps to building a great story can by remembered through the acronym CAR, which stands for Context, Action, and Results.
Context sets the background for the story. When and where did it happen? Who is the main character? What does your character want to accomplish? Who is the villain, or what stands in your character’s way? The main character in your story needs to be someone the audience can connect to, and the villain (could be a person or situation) needs to present a real challenge.
Action is the substance of your story. What does your character do? Action must include an obstacle, setback, or failure.
Result is where you reveal your character’s fate. To be effective, you must subtly give the moral of the story.
To be fully effective, you must remember why stories work. Create an experience that induces mirroring by using action and sensory words and avoiding clichés. Engage the audience by illustrating a real struggle. Pin your character against real villains. Admit flaws. Rosy pictures are boring.
Next time you’re in a movie theater, look around you and watch the people. If the movie is effectively telling a story, you will see everyone reacting as a single organism. They will all laugh at the same time, flinch together, or gasp simultaneously. A great story builds a common thread. The story doesn’t even have to be told to a group all together. Think about the connection you feel with others who also saw the latest blockbuster movie. You don’t have to be in the same theater to share the experience.
Just as in the days of the early Christians, stories continue to serve the function of building a community through common experiences. Common stories build a culture. They encourage people to behave in a unified way. Effective change management and the building of a strong culture cannot be done without the transformative power of storytelling.
The Four C’s of Effective Facilitation: Avoid the Pitfalls of Feel-good Facilitation
by William Aimone
Meet Barney Snuffelouffagus, facilitator of many discussions over the years. Everyone loves BS (we will abbreviate his name) and feels great after BS facilitates sessions. A great deal of BS work has been published in various journals on the subjects of teamwork, respect, and culture. His most famous work is “Barney and the Workplace: I Love You and You Love Me.” Participants leave Barney’s workshops feeling better about their work and the potential for improvement.
The love fest lasts for a few weeks. Then it’s back to status quo.
Organizations fall under the spell of feel-good facilitators whose focus is to make sure everyone is happy and on the same page. A significant amount of time is wasted on facilitated workshops, resulting in platitudes and mutual backslapping but little measurable action.
The rare successfully-facilitated workshops are led by a different breed of facilitators. Truly effective facilitators challenge the status quo by working hard to understand circumstances, think critically, encourage a certain level of chaos, and charter assignments.
Typical facilitators spend their preparation time ensuring the session environment will stimulate participation and thought. Are there enough rolls of white paper on which to write? Is there a Mr. Potato Head to pass to frustrated participants? Can the air conditioning be turned down to reduce napping? Is there a stereo system to blast motivational music? While important, none of this properly prepares a facilitator to ensure a successful session.
The facilitator’s ability to ensure a successful session requires a good understanding of the organization’s circumstances. Prior to any facilitated session, the facilitator should gather enough facts about the current challenges from a variety of constituents. The preparation process should include interviewing workshop participants and non-participants, data gathering, and analysis. A smart facilitator can paint a data-driven picture of the organization’s current state. This allows the facilitator to have enough objective background information to determine whether or not participants are tackling the most salient issues.
Professional facilitators often attempt to be 100% objective. Facilitators are taught to be encouraging and make sure all participants are heard and taken seriously. Expert facilitators are not supposed to direct conversations or provide solutions.
Contrary to popular opinion, there are bad ideas. It is up to the facilitator to make sure time and energy aren’t wasted on them. A facilitator with in-depth situational knowledge can employ root cause analysis and critical reasoning to draw out constructive debate regarding the idea. In many cases, good ideas come from this kind of frank discussion regarding what doesn’t work and why.
In feel-good facilitation, the facilitator likes to have complete control of the group and all conversations. Chaos is discouraged, as people will feel left out of critical discussions. However, disruption of the status quo comes from breakthrough ideas and vice versa. A certain amount of disorder allows ideas to flow without restraint and gives people the freedom to think abstractly.
An effective facilitator sets aside time for chaos. Allowing the workshop participants to freely flow about the room and share ideas is a process we often employ. People like to get out of their seats and get moving. In our experience, some of the best ideas are discovered in the least orderly conditions. This, of course, requires time management skills to prevent the workshop from running late into the night.
Most facilitators assume participants will behave differently after the session experience. For a short time, this may be true. People who didn’t know each other before the session will communicate better. While this change is important, it is minimal. Most sessions do not end with clearly defined tasks or assignments—so commitment to change is fleeting.
Successful workshops end with assignments, or charters, which should be developed by participants during the workshop (not afterwards). The charters define what is going to be done to implement the ideas generated during the workshop. At a minimum, charters should include action items, assigned accountability, milestones, deadlines, and tangible measures of success.
In sum, the traditional approach to facilitation is fine for building teams and getting people excited about a new agenda. However, why not just take the team out for a nice golf or spa outing to generate the excitement and build relationships? They will appreciate that much more than being trapped in a meeting room for a day with BS.
Kaizen or Just Bringing in Lunch?
by Brenna O’Hara
Kaizen has been hailed as a quick cure-all for any ailing business problem. Companies like Toyota, Bacardi, and Nestle use kaizen in their businesses. Yet for some companies, the go-to approach is to lock employees in a conference room with the hopes of arriving at a better solution before they are released. Is kaizen the panacea it claims to be, or simply an excuse to bring in lunch?
In Japanese, “kaizen” means improvement. Dissecting its Kanji reveals change (kai) is good (zen), more or less. The Kaizen approach focuses on small improvements under the theory that over time, these small changes could result in massive benefits to a business.
The concept of kaizen was first introduced during World War II under a United States program called “Training Within Industry,” or TWI. The TWI group encouraged small, incremental improvements over transformational changes. Eventually, W. Edwards Deming (the management consultant responsible for TWI) was recognized by the Emperor of Japan for introducing the concept of kaizen to the Japanese workforce.
A typical kaizen master leads the room through six steps, including:
- Establishing the reason for the workshop. Why are we here? What is the scope?
- Understanding the current state
- Serving boxed lunch
- Developing a future state vision
- Creating a timeline and ownership for each step
- Recognizing everyone’s participation with a ribbon
Kaizen is commonly used in manufacturing companies since the concept is an essential part of lean manufacturing and is associated with the Toyota Production System (TPS). The TPS is well-known for defining standards of eliminating waste in production and unnecessary stress in the workplace. However, any industry, any job function or process, can benefit from kaizen.
Kaizen is most beneficial when:
- It is seen as a proactive approach to identifying incremental improvements
- There’s a shared mentality that the current state can always be improved upon
- Continuous improvement is embedded in company culture
- It is supported by upper management
- Employees have an outlet to submit kaizen suggestions
The main drawback to a kaizen event is groupthink. Basically our minds become influenced and confined to the ideas generated in a group. The loudest person in the room generally drives the conversation. The Harvard Business Review describes the benefits of convergence and divergence well: in a group session, individuals need some time to brainstorm ideas on their own before coming back to the larger group. Once the group is reunited, the individual ideas are discussed and narrowed. The process continues until a solution is achieved. We find that when people feel they have a direct impact on company change, they are more likely to participate in and advocate change.
Because kaizen is based on the idea of continuous improvement, it is most effective for small, incremental changes. Standardizing templates for Accounts Receivable or updating a work ticket are great challenges for kaizen to address.
For more complex business problems or if groupthink becomes an issue, there is a different approach: the ACE Method. ACE (accelerate, collaborate, and execute) is a workshop that effectively finds solutions for anything from brainstorming a new company logo to a complete overhaul of the company’s bid-to-bill process.
Trenegy developed the ACE Method to address problems quickly. A typical workshop lasts about two weeks and a clear roadmap for action is developed in that time. To combat groupthink, ACE employs a trained moderator to encourage that there are no bad ideas. Even a thought that seems unhelpful initially could spark a brilliant idea in another participant. ACE uses convergence and divergence, as the Harvard Business Review advises, to brainstorm ideas and improve upon them.
Think of kaizen as a way to tackle the small issues and ACE as a way to tackle larger challenges, like mergers. Both methods have their advantages. And both are worth far more than just a free lunch!
How Tone at the Top Drives Company Culture
by Gracilynn Miller
The tone at the top of any organization will be the driving force of the company culture. Culture cannot overcome an authority’s leadership style—it is determined by it.
As a leader in your company, you must consciously identify your leadership style and that of your managers with full knowledge that these styles of management have a direct impact on company culture.
The primary leadership styles and their resulting effects on company culture are discussed below. This list is not exhaustive and the impacts on culture, though validated by experience, may be perceived differently by others. The descriptions below are just the reflections of one socially-aware consultant.
King of the Hill
Leadership style – The manager takes a direct approach to engaging with and directing staff. They may make decisions in silos, and accumulated information is perceived as a means of maintaining control. The king of the hill can seem dominating, overbearing, or critical. The benefits of an imperious leadership style include maintaining a level of perceived submission from direct reports. This submission can lead to high performance, employee dedication, and high productivity. These are great results!
Impact on company culture – Collaboration is not an esteemed element of the culture. Executives may appear to view new ideas as a threat, evoking a defensive response. The change agent may then perceive the defensive response as criticism or skepticism. Employees may see themselves as overlooked or unappreciated by management. Departments will often work in silos, severing cross-functional business processes and often duplicating work. Because it is not modeled at the executive and management levels, teamwork may not be valued by the individual departments.
Without team collaboration, the king of the hill may inadvertently drive team members to seek other opportunities where their individual talents may be recognized and engaged.
Ramifications for control compliance – SOX controls and company best practices may be assumed to be the invention of an information-hungry management. The importance of compliance and the benefits to streamlined business processes and information availability may not be addressed or championed by management or the staff.
The Cool Dad/Mom
Leadership style – This style is characterized by blurred lines between role as an authority figure and a peer. The cool dad/mom becomes just another member of the team, sometimes losing the authority figure role in the eyes of their staff. Efficient decision making may be sacrificed on behalf of collaboration. This style works well for managers whose personalities are naturally more extroverted, harmonious, and team-oriented.
Impact on company culture – Employees feel valued by the cool dad or mom, knowing their voice is heard. They believe they are part of the greater group and feel their jobs are secure. A possible unfortunate side effect is a lack of decision making. If everyone’s voice has equal weight, decisions may be slow and hesitant. The lack of clarity in roles may also cause employees to feel aimless. Work may feel haphazard if there’s no clear authority communicated from the top.
Ramifications for control compliance – SOX controls and company best practices may be swallowed like cough medicine—necessary but unpleasant. Controls can be viewed as an impediment to the business process. The cool dad/mom may also be heard complaining about the cumbersome nature of the controls or even attempting to bypass the established controls in effort to appease staff.
Leadership style – The team captain employs high communication and collaboration and will elevate direct reports, holding them accountable and providing space for them to perform and execute their responsibilities. The team captain is interested in providing descriptive leadership rather than prescriptive directives. There is no confusion as to the final authority, but team members’ opinions are heard and weighted appropriately. Some employees may prefer a more hierarchical culture and may find the additional time required for making team decisions inefficient.
Impact on company culture – Employees feel empowered to perform their jobs and to grow in their careers. Departments may be inspired to be more communicative and less siloed. Decision making in this culture is less efficient than that of king of the hill due to the involvement of the team members. The tone of the team captain’s leadership may earn the respect of their peers and the allegiance of their reports. This type of environment works best for employees with high self-motivation and self-initiative. When team conflict occurs, the team captain may have to exercise direct authority, which may confuse or frustrate the highly relational and harmonious team members.
Ramifications for control compliance – The importance of the controls framework is clear, and staff are held accountable for their own compliance to the controls. The team captain is educated on SOX requirements for their company and has engaged staff in the development, implementation, and monitoring of those controls.
The tone at the top of any company drives the company culture. Though most industry leaders cannot be identified strictly as one of the above leadership categories, some blend of the three will appear in every authority figure. While one style is not necessarily better than another, certain industries and workforces best function with particular styles.
Here’s the bottom line: know your leadership style. Be aware of the leadership styles of the managers you hire. Seek equilibrium. Be aware of the leadership styles required for different situations. If you’re in a complicated industry or project, a king of the hill might be necessary to make clear decisions. In the case of a team of various SME’s, a cool dad/mom might be a better fit to provide autonomy to each of the specialists. If your company is under the gun of regulation, a team captain might be required to communicate the importance of controls and engage the staff in compliance.
4 Ways to Improve Workplace Communication
by Nathan Irby
Communication in general is hard. It’s even more difficult in the workplace because there are so many issues to navigate: multiple audiences, office politics, time constraints, and employees who feel overwhelmed with meetings and emails.
Bad communication is frustrating and wastes time. While comic, most employees have been involved in a call like this conference call in real life.
Improving communication should be a priority for all employees, especially leadership. Communication is an essential leadership skill. Executives set the standard for the rest of the organization.
Even incremental improvements in the following four areas will lead to better communication:
When the topic of communication comes up, the immediate connotation is speaking or writing. But relaying a message is only half the battle. The failure to listen is one of the biggest communication failures in the workplace.
Distraction-free listening is often more difficult than speaking or writing. How can we do a better job of complete communication?
Asking questions to insure the intended message was received improves understanding and retention. Whether in a follow-up email, passing by someone’s office, or in a meeting, provide a synthesis of what you heard and ask, “Did I get everything?” This is especially helpful after a lengthy conversation or meetings where both strategic and tactical decisions are made. When the discussion jumps from why to do something to how to do something, it’s critical not to miss tasks and deadlines. By summarizing the key points, the communicator can confirm or revise the accuracy of their understanding.
Technology has drastically improved the efficiency of modern communication. Unfortunately, it also provides more than a few distractions: from early versions of minesweeper to ESPN apps, any spare second is easily consumed. While many of us consider ourselves effective multi-taskers, we seldom think about the repercussions. In a study by Stanford University researchers found that multi-tasking hinders the ability to pay attention, control memory, and switch to the next task at hand.
Technology not only distracts the user, but it can distract others around them. Think of that person checking his fantasy football lineup in your Monday morning meeting.
A quick solution to the technology distraction is to simply get rid of it during meetings. Set a rule and lead by example: everyone silences phones at the start of a meeting and puts them away. Or designate one person to take notes and send a summary after the meeting.
Time is essential to communication in two ways:
- When communication takes place (timing)
- How long it takes to get the information across (duration)
Communication in the workplace often lacks discipline in both aspects. In many companies, meetings without a clear purpose are considered the norm. The problem with agenda-less meetings is more than a lack of direction. They often run much longer than necessary.
To keep meetings focused and efficient:
- Set an agenda with time commitments and send it out beforehand.
- Ensure that necessary contributors will be there.
- Set clear outcomes for the meeting and add them to the agenda.
- Assign someone the role of timekeeper to help you stay on track.
Meetings aren’t the only place where time is a factor. Studies show that the average corporate email user receives 100+ emails a day and deletes half of them. Only CC people on emails when their input or approval is truly necessary.
Select the communication forum based on the audience and the message. If it’s short, informative, and can be clearly communicated, an email is efficient. However, if the message involves problem solving, background information, or differences of opinion, a meeting might work better.
In either case, limit the audience to the necessary parties. Label emails as “Informative:” or “Action Requested:” to ensure proper responses. Before meetings, send background information and an agenda.
Preparing and planning meetings, presentations, and even email can be time consuming. While it’s tempting not to prepare, the repercussions of poor communication aren’t worth the time saved on the front end. Take the lead in building good communication skills in your workplace.
Top 5 Causes of Communication Failure
by Jenna Howe
In a world where unread emails abound, effectively communicating to colleagues, employees, and customers is getting more and more difficult. Communication fails for many reasons, and both sender and receiver contribute to the breakdown. The effects of communication failure range from losing sight of group goals to more immediate problems, like safety hazards and regulatory issues.
Communication often fails for the following reasons:
1. Using technical jargon
When conversations turn technical, anyone without the referenced expertise will tune out. The same way people throw away user manuals or automatically check the “I have read the Terms and Conditions” boxes, readers will disregard communication they don’t understand.
Talking about IP addresses to a user who is unable to open their accounting application frustrates everyone. Explain technical terms if necessary, but for the most part, use common language when addressing a broad audience.
2. Overloading the audience
More written words don’t always translate to high importance information. Most people won’t take the time to read digital information that requires scrolling through multiple pages.
Layouts with bold titles, differentiated subtitles, and bullet points help readers visually organize information. Create documents that are visually appealing by:
- Using descriptive headlines so the audience can scan a document and walk away with a grasp of the main points.
- Limiting emails to 4-5 bullet points with relevant information.
- Using graphs and visuals to explain complicated details or highlight important instructions.
In face-to-face communication, the same principles apply. Start with a clear meeting agenda, invite only the people who need to be there, and set a goal for what the group will accomplish.
3. Assuming foreknowledge or relationships
At the start of a meeting, ask a few simple yes-or-no questions in order to gauge how familiar the audience is with the information. This will prohibit too much or too little information being shared.
Quickly review key decisions from previous meetings if necessary, but make sure the discussion is relevant to the current audience. Prior to each meeting, send links to important background information.
Make introductions as soon as new parties get involved. If a team member is replaced, update contact lists right away. Bring new people up to speed in one-on-one meetings—don’t use group time to review unless new decisions need to be made.
4. Using the wrong delivery channel
Communication doesn’t always have to be via email. There are alternative ways to get information across effectively. Use slide share programs, meetings, and post information in highly trafficked places.
Graphics and interactive videos are good for demonstrating software features or new processes. Visuals can easily depict step-by-step instructions. Consider making side-by-side comparisons of changes so the audience can see what’s different.
5. Sending irrelevant information
The best way to approach communication is by starting with the audience. Be clear about what the email/graphic/video/presentation should accomplish and convey the information truthfully. If the audience needs to take action, make sure they know how, what, and why. Finally, let users know how the message impacts them—what do they get out of knowing the information or taking the requested action?
In the case of multiple audience groups, create multiple messages. Ask, why does this group of people need to know this? How will this message impact this audience? What is the best way to deliver the information? Make sure the message is simple and concisely delivers the relevant information.
Millennials: The Unconventional Resource
by Peter Purcell
Midland, Texas, is easily equated to the Silicon Valley of the oil and gas industry. Midland’s revitalization as a result of unconventional drilling in the Permian Basin has been spearheaded by countless entrepreneurs.
These entrepreneurs have adopted the Silicon Valley practice of hiring young people, today’s millennials, for key leadership positions. These bright, young millennials were typically recruited out of college to work as engineers for large oil and gas companies. Within a year or two, the best and brightest are quickly bored by the slow pace of larger companies and are attracted to the faster pace at entrepreneurial companies. Consequently, entrepreneurial companies are knocking the socks off the larger competitors by putting millennials in key positions and taking advantage of the new generation’s creativity.
What are larger, traditional oil and gas companies doing wrong, and how can the Midland experience be duplicated?
Taking an unconventional approach to drilling for oil and gas in previously declining fields has bolstered the economy, particularly in Midland. An unconventional approach to leveraging millennials can eliminate the impending skills gap for oil and gas companies.
The Boomer Training Model
Oil and gas companies have developed comprehensive training programs to plug the impending skills gap when baby boomers start retiring. Millennials spend months in classroom and office-based training programs. Rotational assignments meant to introduce the entire company continue to keep millennials from the field. Once field assignments are given, boomers micromanage the new arrivals in an effort to prevent mistakes. The micro-management training approach was successful for boomers, so it’s now being used to train Millennials. The rationale is that everyone learns the same way as boomers. Wrong!
Millennials have grown up in an information-rich environment directly connected to their neural network via smartphone. The social-media-wired millennials can play multi-player online games, talk to friends via headset, and text at the same time. As a result, millennials are used to absorbing massive quantities of information in a short period of time. When encountering unknown issues, millennials will automatically reach out to their network to find answers. They can speed up problem solving without involving management. Millennials find the traditional training approach of spending weeks participating in classroom activities and months working in the office under boomer mentors a waste of time. As a result, trained millennials quickly get frustrated and leave for other opportunities, more autonomy, and freedom.
It’s rare to have a discussion with senior executives of oilfield services companies without hearing laments of losing newly minted engineers. In our research, we found the most common reasons why newly-trained engineers leave large companies. Millennials want to be accountable, make an impact, and have more autonomy. The new, smaller oilfield services companies offer what they seek: the unconventional resource.
A number of Midland-based oilfield services companies have been successful by offering to provide the appropriate level of training, freedom of innovation, and ability to grow a component of the business.
New hires are put through an accelerated training program that lasts between a few weeks to a few months. The Midland oilfield service companies have learned that millennials can learn very quickly and are quick to leverage their personal network when they have questions. Millennials pick their mentor and are assigned to key field positions once they have learned the basics. Newly trained employees are expected to make mistakes but learn quickly from them. Mistakes are often celebrated because it means the millennial is trying new things.
Our clients continue to encourage millennials by providing the responsibility to help grow key components of the business. One of the oilfield companies in Midland has a millennial managing all field operations. At another company, a millennial runs the casing business. This ranges from $250-400 million in revenue a —not an insignificant amount. In both cases, the millennials crews beat industry benchmarks for time to complete service and quality of results. When asked, the millennial managers state that success is the result of improving what is learned from their peers in social networking and media.
Turnover in the Midland oilfield companies taking this approach is very low.
Millennials don’t want to be over-trained or over-managed. Millennials want to quickly learn the basics and be put into positions where they can add value to the company. Companies can take advantage of the new unconventional resource by providing millennials with more accountability earlier than boomers would have expected.
Millennials in the Workforce: Climbing the Corporate Ladder
by Nicole Higle
Millennials emerge into the workforce with expectations of rapid career growth but often become impatient with slow progression and ignore factors critical to long-term success. The need for instant gratification causes millennials to become impatient and forego learning skills essential to long-term growth.
Over the past few years, we have worked with a significant number of millennials in the oil and gas industry. The most successful have put in time where it matters, spent time with operations, and been paired with experts.
By the way, I’m a part of the millennial generation, so this is not a lecture coming from some old geezer!
Put in Time Where It Matters
In attempts to advance as quickly as possible, millennials often view a college degree as a ticket to automatically progress to the next rung on the corporate ladder. What millennials often fail to realize is their degree helped secure the current position but does not prepare them for future opportunities. Many companies still have a culture where hard work and loyalty can take individuals from a roustabout on the rig floor to a senior operations manager. Many of these senior managers have degrees but advanced based on hard work and time in service. A degree is a foundation to build on.
Corporate managers often complain young professionals begin pursuing other opportunities after holding a first job for less than one year. Jumping from position to position without fully understanding a previous role hinders the creation of critical knowledge and relationships for the future. A two to three year minimum stay in each position is a realistic timeframe for learning and building important relationships before pursuing increased responsibility.
Entry-level positions allow employees to make mistakes and take risks with minimal repercussions. Spending time in entry-level positions is crucial for new employees to learn from mistakes and gain hands-on experience required for senior level positions.
Spend Time with Operations
Millennials prefer to enter the workforce at the corporate office because that’s where the business is managed. However, starting and staying in the corporate bubble prevents young professionals from learning how the business really operates and earning the respect of operations leaders.
I once overheard a corporate employee lamenting that she was passed up for multiple opportunities for promotion. When asked if she had interest in working for operations, she said she had worked too hard earning her degree to “take a step backwards” to work for operations. Although she had gained an understanding of important accounting and record-keeping functions, she lacked bigger picture experience.
Pair with an Expert
Many millennials enter the workforce with a can-do attitude, don’t like to ask for help, and rarely leverage the experience of more seasoned individuals who are approaching retirement. It’s essential for new hires to quickly identify experts in the organization who have a broad knowledge of the industry and experience working across functional areas to serve as mentors.
In addition to spending time with operations, pairing with a mentor is the next best way to learn the fundamentals of the business. Mentors will able to share key learning experiences and can help shorten the learning curve.
We recently had an oilfield services client who purposely paired promising young professionals with seasoned operational managers nearing retirement. Within six months, the new employees had received a condensed 30 years of experience from the veterans and would move to the next functional area. The new employees who participated in these rotations learned the business and developed critical relationships in the industry.
Strategy for Success
Millennials are often perceived as having an attitude of entitlement in the workforce that is detrimental to long-term career success. Millennials can handle these challenges and can advance ahead of peers by putting in time where it matters, spending sufficient time with operations to learn the business, and by pairing with experts to quickly gain experience.
Three C’s of Closing the Generation Gap in the Workplace
by Misty Taylor
Who influences you the most? It’s probably someone who is knowledgeable, experienced, sensible, and loyal. In the workplace, this person is most likely considered to be in the baby boomer generation. As boomers draw closer to retirement, organizations turn to millennials to assume many important roles throughout an organization, because generation X doesn’t have the capacity in the workforce to replenish the upcoming vacant positions.
While it’s crucial for baby boomers to pass important business and industry knowledge directly to millennials, this is a challenge for many organizations due to the generations’ differing lifestyle and workplace expectations.
Organizations can reinforce their competitive advantage by merging deep, enduring industry knowledge held by baby boomers with the innovative ideas of Millennials. However, the two generations’ divergent mindsets can adversely affect an organization’s efforts to integrate their respective strengths. The path toward minimizing barriers and creating a collaborative work environment begins with the generations understanding each other, particularly in terms of expectations in the workplace.
Differences include the definition of career success, communication style, and the control of information. If the gap between baby boomers and millennials is not successfully closed, organizations will fail to create a workplace that maximizes the strengths of each generation. Ultimately, the organizations that successfully merge baby boomer knowledge with millennial innovation will have a competitive advantage and dominate the market.
The typical career paths and expected career progressions for baby boomers and millennials are vastly different. A typical successful career for a baby boomer began at ground-floor operations and eventually progressed to a mid-level corporate management position. From a millennial’s perspective, a career may begin in a corporate position rather than a role in the field or ground floor.
Millennials expect rapid career progression. As a result, boomers tend to mistakenly perceive millennials as the generation that expects everything without paying their dues. Conversely, millennials often dismiss Baby Boomers’ experience. It is critical for baby boomers to share this knowledge with millennials to ensure longstanding organization and industry knowledge is carried into the future. To help resolve the divergent views, each generation must understand why the definition of success and timeline of career progression has evolved throughout the years.
Millennials today are given the opportunity to start a career in corporate due to the rapid growth in technology and a shrinking dependence upon an expert’s physical presence in the field. In baby boomers’ early careers, a physical presence in the field was necessary to collect pertinent data for organizations to analyze and make decisions. A baby boomer’s career progressed from the field once they had proven to superiors they could make sound operational decisions. However, computers, advanced machinery, and specialized degree programs have replaced the need for multiple workers to physically be in the field collecting data. Also, the growth of specialized degree programs and electronic learning has virtually eliminated the need to work in the field prior to a corporate assignment. However, millennials need to approach their career growth with cautious optimism. Millennials must understand the starting of a career in a corporate office does not automatically translate into a rapid rise to the executive suite.
Although career paths have significantly changed over time, understanding core ground-floor operations continues to be a vital piece of knowledge for career progression. A baby boomer has a rich background in many areas of an organization’s operations. Baby boomers have spent years perfecting roles and understanding operations on a tactical and intimate level. Since millennials may not have the opportunity to learn in the field, both generations must take steps to ensure knowledge sharing occurs. Baby boomers must be held accountable for exposing millennials to the relevant aspects of the organization’s operations. At the same time, millennials must focus on consuming and learning the critical information baby boomers pass down. Millennials must also realize career progression arrives after proving an understanding of the business and the ability to make sound business decisions.
In the workplace, if a millennial is told to do something a certain way, more often than not, they will ask, “Why?” To a fellow millennial, this simple question spurs a discussion about what the action accomplishes and how a certain process can be made more efficient. To a baby boomer, the “why” comes off as the millennial challenging authority rather than doing as told.
Millennials possess new and innovative ideas for improving processes baby boomers originally instituted. To change stagnant processes, both generations must understand each other’s communication differences and learn how to effectively communicate tasks and recommendations.
Millennials grew up in a culture where spontaneous questions and creativity were encouraged by parents and teachers. The millennial generation intuitively possesses this mindset and prefers unstructured and collaborative communication among peers in the workplace. However, baby boomers were raised to follow instructions. Boomers also prefer a managed flow of communication.
By understanding the different background of the other generation, steps can be taken toward improving communications. Millennials must take initiative and build substantial support for their ideas. Three components are crucial when presenting recommendations to baby boomers: the recommendation, the data supporting the recommendation, and the expected outcomes. This platform gives baby boomers confidence in a millennial’s proposition as it transforms a spontaneous thought into a well-developed and grounded recommendation. Conversely, baby boomers need to empower millennials to leverage new ideas. Baby boomers must open lines of communication and grant millennials the opportunity to learn as much as possible from them.
Once communication barriers are understood, the generations can optimize their differing approaches to operating the business. Millennials automatically turn to technology to improve processes while baby boomers typically shy away from it. Compare a boomer’s office with a millennial’s. If given a storage cabinet, a baby boomer will have the cabinets filled with printed papers or binders. A millennial’s cabinet may remain empty or the shelves will have nick-knacks and pictures of friends. Baby boomers tend to value control and want physical access to information. If the papers are printed, the information, theoretically, cannot be lost. Alternatively, a millennial’s papers are sitting on a hard drive, in their email, or in some cloud-based application.
Millennials trust technology to store files and speed up processes. Baby boomers tend to be hesitant to allow technology to handle most tasks as it is perceived as losing control. The hesitation along with the millennials’ heavy reliance on technology for many tasks can cause the generations to disagree whether technology can enable processes or decision making. Both generations must understand their view of technology was shaped by technology’s presence throughout their upbringing.
Undoubtedly, millennials have been exposed to technology throughout their lives. Baby boomers did not have this exposure until later in life. Millennials are influenced by technology and incorporate it into their daily lives. Millennials understand how technologies such as the cloud work and therefore feel in control with files stored in intangible places. Baby boomers did not experience advanced technology such as cloud applications or smart phones until their later years. If certain aspects of a technology are not understood, baby boomers may feel a loss of control over their files when the leap from visible to invisible occurs. Although each generation’s views toward technology are ingrained in their minds, they can teach each other when technology is more effective/efficient and when it’s not.
Millennials understand technology and can demonstrate how it can make processes as efficient as possible. Baby boomers truly understand how the physical processes work and can ensure all considerations are covered when leveraging new technology.
Baby boomers and millennials are more compatible than meets the eye. Their different strengths mesh well to create a competitive advantage leveraging longstanding knowledge with innovative ideas. Each generation’s strengths are not always apparent due to the perceptions each generation holds of the other.
The first step to combat the perception issue begins with each generation understanding how and why the definition of career success has evolved throughout the years. Next, generations must learn to effectively communicate with each other to ensure crucial information and relevant recommendations are exchanged. Lastly, generations can focus on integrating their respective strengths to improve processes and decision making. Ultimately, organizations must hold each generation responsible for accepting the other generation’s characteristics and collaborating to reinforce and build upon a competitive advantage in today’s market.
Jamming the Revolving Door: How to Keep Talent
by Weston Wheeler
Tired of your highest-achieving employees jumping ship for the better offer?
According to the U.S. Bureau of Labor Statistics, the average job tenure in the United States is 4.6 years. Further research has shown that this statistic is almost halved among young professionals. Ironically, while employers shake their heads and bemoan the mercenary culture of young millennials, they simultaneously perpetuate the job-hopping phenomenon by constantly encouraging professional competition over cooperation.
How can employers foster excellence without the motivating pressure of competition? Focus on teamwork and individual development. Here are a few tips:
1. Don’t pit employees against each other.
There’s a scene in the 2006 James Bond film, “Casino Royale,” where Bond tells his boss that he can’t be “half monk, half hit man.” Ambitious young professionals frequently find themselves in a similar conundrum. Forcing employees to compete for incentives or projects is equivalent to asking them to sacrifice relationships for success. There’s no quicker way to destroy an employee’s emotional investment in a company. Employers shouldn’t be surprised when the mercenary they’ve created turns the tables and jumps the company ship for a pay raise.
2. Don’t play favorites. Do emphasize individual strengths.
Sure, every company has a few go-getters that excel no matter the situation, but be careful not to put them on a pedestal. When other employees are pressured to “be more like John or Lisa,” individual skills and commitment are minimized and the high-performers are ostracized. Every employee will bring a different set of strengths to the table. Fostering diversified skills creates a well-rounded team and more fulfilled employees.
3. Recognize team success.
Individuals are commonly recognized for extraordinary effort or accomplishment, but team success is often overlooked. What’s worse, a team effort often gets attributed to one individual. This not only creates resentment amongst the slighted parties, but it puts the credited employee in an awkward position and creates unrealistic expectations of them going forward. On the other hand, a team that is recognized for collectively excellent work develops a sense of pride and attachment to their teammates, fostering an emotional investment in the company.
These are just a few ways to increase employee investment and decrease turnover. Here’s the bottom line: if employees feel like valued, capable parts of the team, employers might find that pesky old revolving door turning a whole lot slower.
Trenegy helps companies successfully implement change management strategies through innovative and practical solutions. We help our clients assess their organizational structure by identifying flaws and closing the gaps between vision and strategy.
Reducing Turnover in Oilfield Services
by Justin Gibson
With turnover reduction consistently a top agenda item for companies, why are so many companies unable to stop the bleeding?
After five years of war in the Middle East, extended absences from home, poor working conditions, and high mortality rates for service members, the military was baffled to find re-enlistment rates for combat veterans on the rise. Following a study, the military attributed the anomaly to the following factors:
- In combat, decision making is pushed down to the small unit leaders
- Poorly performing members are removed from their units
- Service members are provided the proper incentives to stay with their unit
After analyzing the results of the study, all branches of the military integrated these factors into everyday non-combat operations. Retention rates now remain steady, even as combat operations dwindle and re-enlistment bonuses shrink.
Companies with the highest retention rates have utilized the same basic principles to reduce the turnover of critical resources. Regardless of industry, empowering local managers, removing poorly performing employees, and providing the right incentives to the right employees will have a positive impact on a company’s bottom line.
Empower Local Managers
After years of growth, many companies have added layers of bureaucracy to their organization in an attempt to maintain the appropriate controls within the company. The resulting organization structure is often built around centralized decision making. The reality is too many controls prevent employees from doing their jobs. Employees spend more time navigating around processes than actually performing work. Frustration sets in and turnover results.
Companies can eliminate frustration by putting the right decentralized organizational structure in place, which empowers managers and employees to make key decisions and focus on serving customers. Leading services companies are reorganizing their business first by region and then by service offering. Organizing in this manner allows companies to maintain a consistent interface with customers and adapt quickly to local market conditions without sacrificing standardization of service offerings. Senior management retains control over the business and operations managers who then keep control over service offerings. Employees can focus on serving customers without the frustration brought on by bureaucracy. Turnover is lower.
One of our clients was losing business because centralized decision making delayed service delivery to customers. All bids were being reviewed at headquarters and were often approved after customers had already chosen a competitor and started the project. Bids that made it to customers on time were often not competitive because regional price differences were not considered. Senior management recognized that centralized organizational and decision making structure needed to be replaced with one more aligned with competitive business drivers.
We helped the company realign along regional and service lines, which empowered local managers to run their business units. With fewer controls, managers could spend more time managing their business and many were able to exceed revenue targets. The increase in business unit efficiency and ownership of local managers was immediate. The unintended consequence was that new ownership also increased loyalty to the company, and turnover among local managers and staff began to fall.
The military created high-performing units by empowering unit leaders to make key decisions under fire. It’s clear that employees will do a better job focusing on client service when allowed to make key decisions without having to work around a centralized structure.
Get Rid of the Bad Apples
Field hands are loyal to their managers, not to their employer. Hands will often move to a new company for as little as a $1 per hour when the feel wronged by a manager. It’s not unusual to see groups of field hands follow managers with strong leadership skills from company to company. An office with a manager lacking leadership skills faces losing all of the good employees and a reduced pool of candidates.
Successful energy services companies are focusing on retaining good managers and eliminating the bad ones. Like rotten apples, managers without leadership skills attract other rotten apples. This includes field hands who may not be the best at what they do, administrative staff who aren’t efficient, and assistant managers who lack key skills. Energy companies who replace bad managers provide better customer service and have lower turnover of key employees.
Senior management at an energy services company was frustrated by stagnant growth at an office in a region that was enjoying triple-digit growth in exploration and production activity. Prices were changed, service offerings were expanded, and the sales organization was re-trained. None of these efforts were successful. The manager felt the pressure was too great and unexpectedly left to work for a competitor. The company was concerned because all of the manager’s subordinates left as well. However, within less than 24 hours, the number of job applicants far surpassed the number of hands that had left and a new manager candidate was identified. Within less than three months, customer satisfaction was high and the office was growing at the desired rate. Turnover had dropped well below industry average. It was at zero.
In hindsight, the company realized the manager lacked leadership skills, which affected all aspects of office activities. The company now has an active program to identify and train managers lacking leadership skills. Those who cannot change are replaced.
The military has learned that replacing a rotten apple can quickly build a cohesive unit. Energy services employees will rarely build ties with a company but will remain loyal to a manager with strong leadership skills. Companies must be prepared to retain strong managers with the right incentives.
Provide the Right Incentives to the Right Employees
Most energy services companies consistently provide the same base incentives for all levels across the organization. In reality, each level needs to be considered separately. Managers often view a complete compensation package as base pay, bonuses and benefits, and long-term potential and recognition. However, field workers would rather have an extra $100 in their pocket than medical coverage or long-term job security. As a result, a large percentage of companies’ revenue is spent providing incentives employees aren’t interested in.
We recently worked with a client whose HR department forced field hands to use their vacation days by the end of the year. However, the hands were often working in overtime by mid-week, and substituting a week’s work for 40 vacation hours would cut paychecks by more than half. Though employees expressed frustration and said overtime was more important than vacation, the company stood its ground and forced hands to take vacation by the end of the year. To the HR department’s disbelief, few hands returned to work after being forced to take vacation because they were already working for another company. Managers were frustrated by losing good hands and started leaving as well. Other hands followed.
When a field hand leaves the company, there’s little impact on revenue and labor can be easily replaced. However, the moment a manager quits, revenue will drop. The military has been successful with providing large re-enlistment incentives to mission-essential service members, while non-essential members received little to no incentives.
Identifying key resources and then retaining them using the right incentives is critical for companies. This is less about ignoring one group of employees for the sake of another and more about providing incentives most attractive to an employee. Providing the proper incentives not only helps companies retain managers, but also helps companies increase retention of field hands who are loyal to the managers.
Strategy for Success
The lowest turnover rate oilfield services companies can generally achieve is 25-30%. However, reducing turnover by just 3% or 4% will have an immediate impact on companies’ bottom line and must start with local management. Giving managers the necessary freedom to make decisions, getting rid of the bad apples, and providing the right incentives to the right employees are all key to reducing turnover. We have assisted service companies in reducing turnover by following these basic guidelines and adapting to industry trends.
Why the Onboarding Process Matters and How to Make It Better
by Gracilynn Miller
Whether the oil and gas industry is booming or declining, organizations consistently shortchange the onboarding process. Many companies have abbreviated onboarding to a half day of skimming the employee handbook and receiving appropriate badge access.
This approach cheapens the new employee’s understanding of the company vision, compliance culture, and performance expectations. It is critical for new hires to have immediate and meaningful exposure to the key components of a company’s culture, particularly regarding policies and controls.
With the right amount of planning and with limited but focused efforts, onboarding more than pays for itself in confident, loyal employees who understand the company’s culture and policies.
Why Do It?
Compliance. In highly regulated areas like SOX for financial reporting, compliance is nonnegotiable. Public companies must ensure all new employees are aware of industry and company controls and are committed to abiding by defined policies. The financial investment in onboarding is preferable to receiving a significant deficiency or material weakness.
Accelerated learning. Documented desk procedures will allow a new employee to move quickly up the learning curve. Well-written desk procedures boost a new employee’s productivity and will save experienced employees from spending significant time handholding.
Future investment. Employees who have a clear understanding of job expectations can focus on delivering results rather than trying to learn job activities. An intentional and well-planned onboarding process can easily be repeated across functions with minor changes.
1. Desk procedures. A successful onboarding program includes detailed, current desk procedures. The procedural should include step-by-step explanations of the process the employee participates in. Process flows, roles and responsibilities, delegations of authority, controls, and policies will all be included or referenced in well-written desk procedures.
2. System training. A new employee must understand how to perform their job tasks within the appropriate systems. How is an invoice entered? Where are particular contracts located? How are the required reports for month-end close run? What constitutes a hard error versus a soft warning, and what should an employee do in either case?
These questions should be clearly answered in system training documentation. Furthermore, a new hire’s supervisor, armed with clear training and defined training documentation, should be well-prepared to train staff in the systems.
3. Team introductions. New hires need a casual but purposeful introduction to the immediate team. This seems obvious, but many companies fail to encourage team leaders to build departmental camaraderie. Contrary to an isolated employee, an engaged team member makes a loyal employee.
4. Cross-functional understanding. A successful onboarding program includes cross-functional exposure. New employees must understand their roles within the immediate function and within the organization. Opportunities for cross-functional understanding come from lunch-and-learns, town hall meetings, and other cross-department sessions. A new hire should be made aware of these opportunities and encouraged to attend.
Onboarding is not an optional G&A expense, a mysterious formula, or a waste of resources. With intentional planning and focused effort, onboarding is a simple, clean, repeatable process which wins the company enhanced controls compliance, increased return on employee investment, and loyal staff.
I’ve Never Met a Perfect Person: Decision-making in an Imperfect World
by Alan Quintero
Standard economic theory is based on the assumption that people are perfectly rational. In other words, people rationally weigh the costs, benefits, and risks before making decisions. Except for my wife, I have never met a perfect person. I love you, honey.
A new line of behavioral economists is proving that people make irrational decisions driven by biases that can be anticipated. One such economist, Dan Ariely, summarizes this in his book “Predictably Irrational: The Hidden Forces That Shape Our Decisions.”
“(We assume) that we are rational… But, as the results presented in this book (and others) show, we are far less rational in our decision making… Our irrational behaviors are neither random nor senseless — they are systematic and predictable. We all make the same types of mistakes over and over, because of the basic wiring of our brains.”
These irrational choices that humans make not only affect the economy, but infect every aspect of our lives. As we studied the root causes of major business “black swan” events, from major oil spills to worldwide automotive recalls, we have identified several of these human factors that must be taken into consideration when designing your company’s operational excellence program. Organizational structures, policies and procedures, and underlying technology tools must all recognize that humans are not always rational and build checks and balances that account for human biases.
Groupthink occurs when the momentum of a group influences acceptance of a decision or course of action that may not have been reached by individual members. In groupthink, an individual may be hesitant to go against the group from fear of looking dumb in front of the crowd. They may be thinking: the whole group seems so sure, so I must be wrong.
In your company, traditional brainstorming exercises may cause people to be especially prone to the effects of groupthink. That’s one reason why Trenegy uses the ACE Method (accelerate, collaborate, execute) for meeting facilitation. This approach alternates between convergence (group brainstorming) and divergence (outside party review) cycles to ensure the consequences of groupthink are mitigated.
Confirmation bias is our tendency to view evidence presented to us through the lens of what we believe to be true. Confirmation bias explains why the same economic data can be seen by the government in power to be good, while it’s used by opposing factions to prove the economy is bad. Each group is seeing the evidence through their individual belief that their base position is correct.
Your company’s internal reporting can be easily influenced by confirmation bias. If the definition of the data presented is not clearly understood, and how that information relates to the ultimate company strategy is not effectively outlined, people will tend to draw conclusions based on their own interpretations. One way to mitigate confirmation bias is to seek out data that may contradict the popular beliefs in your organization and try to uncover why that is. For example, if the conviction in your organization is that you maintain a safe workplace, solely reporting lost time incidents may only be confirming that opinion since those types of incidents are few and far between. Conscious reporting of near-miss events and first aid injuries may show that you might not be working as safely as you thought.
Normalization of Deviance
Normalization of deviance occurs when unacceptable practices become gradually more acceptable after the unacceptable behavior avoids negative consequences. Some normalization of deviance is harmless. The rise of business casual dress is a good example. In the 1970’s, President Carter called for thermostats to be raised to save energy during the energy crisis. This led to business people leaving their ties and jackets at home. When there were no repercussions from doing so, the acceptable dress for companies continued to drift toward what we call business casual.
In some cases, though, normalization of deviance can have catastrophic results. The original design parameters of the Space Shuttle’s Solid Rocket Booster O-Rings anticipated no blow-through of gases through the O-Ring. But early in the shuttle program, some blow-through was observed after launches. Although minor modifications were made to the design, over time some blow-through became acceptable to the shuttle team. In 1986, blow-through of gases through the Solid Rocket Boosters O-Rings of the Challenger resulted in an explosion and death of the crew on board.
The design of safety, critical, and reliability systems (organizational, procedural, or technological) must include barriers that prevent normalization of deviance from occurring.
Optimism bias is the tendency of humans to be overly-optimistic and develop a this-won’t-happen-to-me mentality. Dan Ariely found that 95% of drivers believe they have above average driving skills. For those who are mathematically challenged, only about half of all drivers can be above average by definition. This tendency can have undesirable effects. People may put off diagnostic tests such as colonoscopies or not wear a helmet because they believe they are unlikely to be in a motorcycle accident.
In companies, decision making needs to guard against optimism bias. This is particularly true in the project management process. A pervasive tendency to think this won’t happen to you while planning projects contributes to 64% of energy mega projects going over budget, and 73% being delayed, according to a study by EY. A robust risk identification and mitigation process can help fight this tendency to be overly optimistic.
Expectation bias occurs when we hear or see what we expect rather than what’s actually happening. Most of us have experienced this as kids. For example, maybe your sister was always “the good kid,” and when your mom saw the broken lamp, she automatically assumed you broke it and didn’t believe you when you said you didn’t.
While that example is harmless, expectation bias can have tragic consequences. In the 2010 Macondo blowout in the Gulf of Mexico, the rig crews were told incorrectly that a critical test had passed successfully. Because they believed the well was safely secured when it wasn’t, they failed to see the indicators of a blow-out in the data they were receiving, contributing to a catastrophic blow out that took 11 lives and spilled five million barrels of oil.
When designing your company’s operational excellence programs, proper attention must be paid to these expected faults in the way our minds work. For example, organizations must mitigate groupthink and confirmation bias by allowing cross-functional interactions to occur. Policies and procedures must guard against exceptions so normalization of deviance doesn’t set in. A robust risk management process must force the organization to realize, despite optimism bias, bad things can happen. Technology must be in place to ensure the right information is driving decisions so that an organization isn’t blinded by expectation bias.
7 Signs a Difficult Person Is Preventing Progress
by William Aimone
The root cause of project delays, failures, and missed deadlines is often traced back to a single cause: a difficult (or insert adjective here) person. Difficult people get in the way of progress. They contribute to a workplace environment saddled with major time wasters: lengthy meetings discussing minutiae, circular arguments, tangential debates, non-productive discussions, and let’s not forget the ancillary meetings dedicated to getting a difficult person focused appropriately. Before we know it, a project lags behind schedule.
Although difficult people have seemingly good intentions, their work style is toxic. Below are the obvious signs of difficult people and recommendations for coaching them toward progress:
1. They frequently remind others of their tenure (or lack thereof) with the organization. Statements like, “I have been here for 20 years, so…” or “I’ve only been here for four months…” are typically followed with excuses for not taking action. While it’s often essential to utilize one’s expertise in decision making, a better way to mention it would be: “Based upon my experience with our company (or other companies), we could consider…”
2. They wait for others to make decisions. Declaring, “If only management would decide what we should do…” is a hallmark of inaction. Often, difficult people will involve as many other non-decision-makers as possible and lure them into the conversation as a deflection tactic. Instead, the difficult person should be direct and express any suggestions or concerns they have. They should say, “I’m going to take a recommendation to management for feedback.” Engaging the final decision maker moves things forward.
3. They find others in the company to be annoying. Difficult people might say, “Everyone else here acts like (fill in the blank)…” Statements like these suggest the real problem is in the mirror. When faced with conflicting attitudes, a better response is, “I must be doing something wrong. How can I help others succeed?”
4. They are overbearing in meetings or they choose not to participate at all. “I have to take over every meeting!” or “I have nothing to say because they won’t listen!” indicates that true collaboration is not valued. It’s important that difficult people ask questions, encourage others to provide a perspective, and honor the cooperative forum. If this is an issue, ground rules for meetings, such as “silence is agreement,” are critical to forward progress. Opting for smaller in-person meetings instead of conference calls can also keep meetings concise and focused.
5. They believe they are smartest person in the room. When a difficult person says, “Nobody understands my recommendations…” it’s usually a failure to provide better explanations or the recommendations are really bad ideas. A better approach to decision making is to encourage others to ask questions and collaborate.
6. They believe their requests go unanswered. “I email requests out to the team and nobody ever responds!” is a common attitude of difficult people. They may attribute this to their intimidating intellect, but a complete lack of response is likely a problem with how their message is delivered. Requests should include at least two of the following: what’s in it for the recipient, a personal touch of kindness, and/or an explanation of the purpose of the request. It’s important that, when able, people should refrain from emailing and engage face-to-face. Engagement helps build a more collaborative environment and people may share more information face-to-face versus email.
7. They do not consider their coworkers as confidants. “I can’t trust anyone in this place…” is a statement no one wants to hear in a healthy work environment. Building trust is a worthy investment in the company’s culture. When trust is lost, it’s important to address it and understand it in order to repair it. Taking the time to coach difficult people to engage with others helps eliminate untrustworthy behaviors.
Using these coaching points can help a difficult person discover how a few communication techniques can make a world of a difference in project success.
Signs the Corporate Culture Needs an Overhaul
by William Aimone
Surroundings dictate whether certain comments are acceptable or deemed inappropriate. For example, never shout “fire” in a crowded theatre. Likewise, in the corporate world, comments acceptable in one organization might be considered blasphemy in another.
The line between inappropriate versus appropriate commentary is a barometer of a company’s cultural health. Healthy corporate culture is a strong predictor of healthy financial performance. In an unhealthy culture, much of the corporate vernacular sounds like finger pointing or justification for poor performance.
Look out for this type of language when evaluating company culture:
“Nobody told me I was supposed to do that.” This could be an indication that employees are waiting to be told what to do. It may reveal an unhealthy authoritative culture where people are not given reasonable responsibility and fear making mistakes.
In healthy cultures, employees take ownership of their work, and accountability for performance is expected from every level of the organization.
“I didn’t receive enough training on the new system.” This is an indication employees may not be initiating learning and do not feel empowered to figure things out. In a culture where management spoon-feeds employees, innovation is probably absent. If enough employees bring up lack of training as an issue, management may not be putting enough emphasis on innovation and accountability.
In an innovative culture, employees are constantly learning. While leadership provides training opportunities, employees also seek out development opportunities. Information sharing between colleagues is prevalent and staff are eager help one another learn new systems.
“I am so confused” is a defensive mechanism people use to either avoid admitting they have no clue about expectations or avoid admitting they think their coworker or supervisor is an idiot. This type of language is indicative of a passive-aggressive culture where people are afraid to speak up and ask questions. Instead, disapproval and irritation are expressed through biting comments and negative behavior.
In a corporate culture where leadership sets a good example, employees at all levels are able to express opinions assertively, not aggressively or passive-aggressively.
“Could you come in on Saturday?” Employees should be aware of their deadlines and should not have to be told whether or not to work on Saturday. A culture where supervisors feel they must tell their employees when to work on a weekend is either an indication of poor planning or employees who are not taking ownership of their jobs.
There are busy weeks or months in every organization. There will be times when an extra push is needed and employees come in on weekends to get work done. In a healthy organization, staff know when this is necessary and get the work done.
“My previous company allowed me to _______” quickly generates negative comparisons and can lead to cynicism. If continued, these sentiments can provoke gossip and complaining.
In organizations with healthy corporate cultures, employees are enthusiastic about their work, appreciate the organization’s strengths, and have the best interest of the company in mind.
“This is the way I have always done it” typically means there’s no concrete reason for how work is performed, or the employee is not aware of the purpose of the work. Neither excuse is good. In an organization where this answer is acceptable, innovation and drive for improvement are typically lacking.
In high-performing organizations, employees understand the logic behind their work and consistently question how it can be done better.
People working in healthy company cultures don’t consider these comments acceptable. In many cases, the unwritten rules of acceptable behavior are a direct reflection of a company’s cultural health.
5 Ways to Take Advantage of a Crisis: The Change Management Approach
by Tanner Button
Whether it be a workplace accident, natural disaster, data breach, corporate scandal, or fraud, crisis is inevitable. What is done immediately after such an event is critical to the future well-being of the company. Everyone in the organization suddenly wakes up from the autopilot they have been able to operate on for years. All eyes look to management for direction. It is their responsibility to take lead, bring stability to the company, and seize the opportunity for improvement. An organizational change management approach should be used to re-evaluate human capital, processes, and systems to overcome a crisis and create a solid foundation for future success.
1. Develop leaders
After a crisis, people across the organization are willing to change their normal way of doing things in order to prevent a similar situation from happening in the future. Natural leaders will arise during that time. Management can make the most of the situation by identifying those leaders to help motivate others and lead transformation initiatives. Leveraging their strengths will help address current problems, improve processes, and establish them as valuable leaders moving forward.
2. Renew the culture
Company culture is a strong predictor of financial and operational health. When a company’s culture is in a bad state, it usually means their communication is poor, processes are inefficient, work ethic is low, and many other crisis-provoking issues exist. The tone at the top drives company culture. A crisis presents the board and executives an opportunity to re-evaluate leadership styles and hit the reset button if needed. To overcome crisis, it’s critical to determine which leadership style the company must follow in order to renew the culture and effectively make business improvements.
3. Resolve process issues
Management should focus on fixing process issues before making any other major changes. If a company waits to improve their processes until after system implementations and organization alignment, they will most likely have to re-implement and restructure, costing the company a lot of time and money. Client-facing, retention-focused processes take precedent. Internal processes, like improved asset utilization and better productivity measures, are next. When made early, process improvements increase efficiency and effectiveness and usually require little investment compared to system and organization changes. In addition to process improvements, management should also implement new policies and controls.
4. Improve systems
Systems should be used to support the business processes and overall business strategies, not the other way around. In order to ensure systems are used in this manner, the project management office (PMO) within IT should be reviewed. Proper approval processes and project governance practices will resolve most issues around duplicate systems, misallocation of resources, and more. Improving PMO practices leads to greater discipline within the organization, resulting in more efficient utilization of IT assets. The time following a crisis is a perfect time to make those changes to the PMO. Additionally, it’s an ideal time to rationalize the application architecture, ensure cybersecurity practices, and begin discovery for different or additional system solutions. System changes take a lot of time and hard work, so using a crisis to launch new system selection and implementation projects would be wise.
5. Align the organization
The organization structure is often overlooked, but it’s actually one of the most important factors in supporting the core competencies of the business. Effective organization structures promote better communication and improved productivity, leading to a reduced risk of crisis. When the organization structure is considered during the planning phase of a transformation, alignment with the process and system changes is straightforward. Even though people are more open to change following a crisis, organization restructuring can cause push-back and lead to lower employee morale. It is recommended to find outside change management experts to help make this less painful.
Making a Move: Change Management, One Step at a Time
by Justin Gibson
When life circumstances cause a family to uproot and move, parents play a big role in minimizing the impact of the move by talking their children through the process and explaining the pros and cons.
Parents may attempt to involve their children in the decision making. Temporary solutions, like using bribes and the popular phrase, “Because I said so,” never satisfies a child for long. To achieve lasting buy in, parents may allow their kids to make minor decisions, like choosing their room and the paint color. However small the choices, the resulting morale boost is invaluable.
During preparation for the move, parents may help their children prioritize. If the parent walks into a five-year-old’s room and tells him to pack everything in boxes, not much will get accomplished. Rather, the parent may hand the young child a few boxes and tell him to pack up everything from his drawers. Thirty minutes later, the parent may check progress and congratulate the child on his success. When he is ready, the parent brings in a few more boxes and asks him to pack up his toys in his closet. This process continues until everything is packed up and the move has been successfully completed.
Parents leading the family through a move can be compared with leaders directing an organization through change.
Leaders help staff navigate unfamiliar terrain and provide the confidence to make decisions and move forward. As with parenting, there’s no single formula for success. Successful change management teams focus on the people aspects of change and constantly modify their approach to suit the external environment and internal expectations.
There are four basic guidelines a change management team can use to facilitate the change process. These guidelines, when applied artfully, can help a team navigate the precarious steps toward successful change.
1. Put yourself in their shoes
As parents must understand how moving will impact their children’s lives, change management teams must understand their constituents and how an organization change will have residual effects on them.
While specific knowledge about the business is essential, the real way to fully understand stakeholders is to be present and communicate with them directly.
Understanding involves meeting with a full department or traveling to numerous field locations to discuss how each facility conducts day-to-day operations.
For instance, we recently worked with a field services company where each of the fifteen field offices believed that they had a unique process for capturing drilling information. Upon visiting each office, we realized the basic processes were nearly identical, though each location had slight variations. Further analysis revealed that many variances were due to obsolete, historical requirements which no longer applied to the organization. Rather than assume congruency based on the word of a single department or location, the change management team took the time to understand the perspective of each group.
Many organizations rely on a monthly newsletter as the primary means of communicating change updates. However, sending a newsletter alone is not a sufficient means of communicating with stakeholders. We find that most stakeholders do not take the time to read the contents. If they do, they don’t often understand the context. It’s pivotal to involve all stakeholders.
Face-to-face communication is more impactful than a phone call, and a phone call can be more personal than an e-mail. It’s best to avoid blanket emails as the primary means of communication. Communication should be as personal as possible. Change management teams should pick up the phone and call stakeholders throughout the change process, not just when information is needed.
Don’t be afraid to ask how the maintenance supervisor’s son’s football game went. When visiting field offices, take the time to let managers show off the new equipment they are using. These practices will build rapport while simultaneously gathering knowledge critical to the change’s success.
Finally, hold conference calls at key milestones. The calls should be brief but allow attendees to candidly ask questions and give feedback. A steady line of live communication is an imperative step in stakeholders’ understanding what is needed for successful change.
3. Let them have input
When moving to a new house, a parent wouldn’t let the youngest child pick out their room but assign rooms to the rest of the kids. Avoiding favoritism and limiting input applies to organization change as well. Situations will arise when a quick call is made to the closest or favored field office to answer a question. Most likely, the questions can be answered in a single communication with the nearby field office.
But why stop there?
Headquarters may consistently reach out to the nearest field office to gather field data, greatly adding to the work load of the nearby office. Rather than feeling helpful and valuable, the closest field office has the impression of being singled out and grows weary of the constant requests. This tendency to contact a particular office creates tension and discourages the input of other offices. The additional effort to reach out to the other business units engages stakeholders, allowing them to feel they are heard and their opinion matters.
When someone gives a suggestion that has the slightest impact on the project, the chances of accepting the new changes increase substantially.
Feeling heard and appreciated creates loyalty and accelerates the change process. Even when someone gives thoughtful input that’s not implemented in the project, they should be told why. If possible, tie the volunteered idea to one that was actually implemented, recognizing the input and encouraging continued ideas. As a project progresses, provide more and more feedback for the direction of ideas, making the best use of stakeholder’s time.
4. Prioritize (choose wisely)
There’s a fine line between keeping constituents engaged and burdening them with excessive work. Communication should be frequent, personal, and conversations should be as short and simple as possible to relay the right information.
During most change projects, the executives and project teams often forget employees have full-time day jobs. Just as parents would help their kids prioritize packing, change management teams should do the same for organizational stakeholders. It’s easy to target a small group of knowledgeable employees, constantly barraging them with questions. Prior to asking questions, consider: what is truly essential, who is the right person to ask, and how much of their time will this take?
Change management teams must be cognizant of the difference between asking for input to keep someone engaged and asking someone to perform work that requires significant time.
Strategy for Success
Change management is as much an art as it is a science—workable with simple solutions. It’s critical to place oneself in the constituent’s shoes, communicate, allow stakeholders to have input, and prioritize. To ensure a smooth transition, change management teams must have strong guiding principles and remain flexible throughout the project.
The Power of Making a List and Doing It Right
by Brenna O’Hara and Nathan Irby
A checklist is often seen as a user’s guide that creates robotic employees who mindlessly carry out tasks. Wrong. A checklist is not a sign of weakness nor does it indicate a lack of expertise. A checklist is designed to act as a reference in high-risk situations requiring controls because no one is perfect 100% of the time.
A high-risk situation can occur in any process, from maintaining critical aircraft equipment to generating accurate financial statements. Failure in each could lead to catastrophic consequences. A checklist of critical policies could prevent an aircraft from crashing or improperly reported income on financial statements.
When designed and implemented correctly, a checklist can reduce errors in the workplace that range from miniscule to disastrous. Companies wishing to take advantage of checklists should follow in the footsteps of the aviation industry—one of the first industries to fully utilize a checklist’s power.
Carefully consider audience, content, and design when creating a checklist.
Consider the Audience
Designing an effective checklist requires a clear understanding of two things: end-to-end processes and all the people involved in those processes. Understanding the end-to-end process is easy. Information can be gathered through basic observation and interviews. However, creating a checklist without direct input from end users can cause missed steps and could end up being worse than ineffectual—it could actually create problems.
A pilot’s checklist that doesn’t include coordination with air traffic control, flight attendants, and ground personnel would create chaos. The same is true of checklists that monitor high-risk business processes or a company’s internal controls.
Communication throughout the processes is key to developing a checklist that everyone will use. End-user training should not be the first time employees hear about new procedures.
Define the Right Level of Detail
The level of detail can quickly ground a checklist before it takes off. A checklist that is too vague or too detailed will be misunderstood or overwhelming. A checklist should be precise and simple. The right level of detail ensures repeatable success.
There are two basic types of checklists. The first is called a do-confirm. Once a task is complete, the user references the checklist to confirm the steps were done as intended. In this scenario, the user is acting upon experience and the checklist is a simple reminder. For example, a supervisor may review a process to ensure proper segregation of duties occurred before a journal entry was posted in the system.
The second type of checklist, a read-do, is for rare or more critical events where steps may be unfamiliar and, if skipped, can be costly or harmful. Considering the criticality and familiarity of events will help organizations decide on the right type of checklist.
Personnel should be performing self-testing on a regular basis to support a robust internal controls environment. A COSO framework-based checklist can be used to ensure proper evaluation of internal controls.
Determine the Optimal Structure
The organization and structure of a checklist is critical. A good checklist will have 5-9 major points. If there are more than nine items, the list will seem too lengthy to use. If there are fewer than five points, the user may not have enough information.
The second key to mapping out a good checklist is locating and placing the pause points. This is the moment when users stop to reference the list, whether to confirm their recent actions or to see what steps are next. Deciding when and where to put the pause points is almost as critical as the content itself. If there are too many pause points, the checklist won’t flow. If there are too few, the likelihood of missing steps will increase.
The aviation industry started a phenomenon by championing checklists in the workplace. Pilots use checklists daily because they work and help prevent potential disasters. The same can be said for internal control checklists, as a misstatement or audit note may have significant negative impacts on the business. In extreme situations, this could include depressing stock prices or overhauling current management.
Roads? Where We Are Going, We Don’t Need Roads
by William Aimone
I recently overheard an oil and gas operations executive boasting to a group of finance people, “We make history, you guys record it.” The finance organization has been given a bad rap by their operational counterparts due to the traditional focus on recording and reporting history: accounting. However, many finance organizations have taken the opportunity to shift their focus from recording the past to predicting the future.
At the conclusion of “Back to the Future,” Doc declares, “Where we are going, we don’t need roads,” as his DeLorean flies off in the air. As organizations accelerate into the future, someone in the organization needs to focus on what the road looks like ahead, particularly the financials.
Furthermore, someone in the organization must be able to translate and compile operational, marketing, legal, tax, economic, and external information to provide an idea of what the future holds. No other executive is better positioned than the CFO to equip the organization with the discipline to understand where the organization is going and present the strategic options to the executive team. The understanding of where the organization is going is otherwise known as the planning process.
The planning process is predominately a Finance-led process that’s often met with trepidation and skepticism, as the process contains many manual and iterative processes. This is even the case at companies that have planning systems in place but are not flexible enough to provide the key information needed for the strategic decision making process.
Industry challenges such as commodity price fluctuations, geo-political issues, and environmental issues come and go, and executives are continually looking at different ways to optimize their portfolio. Given the longer lifecycle of oil and gas projects, decisions that executives make have a more significant effect on a company’s financial future than in industries that have a shorter product lifecycle.
One could argue that getting the planning process and systems right at oil and gas companies is more critical than in many other industries.
Finance can excel at predicting the future by setting the right targets, integrating operational and financial planning, identifying the right drivers, and understanding sensitivities. These four components have an impact on the information needed to execute a company’s strategy and equip companies to look at the future in different ways.
1. Set the right targets
Successful companies have assimilated a top-down with bottom-up planning process where the executive team provides guidance on what each top level metric should be for each division or department. The plan is then built bottom-up at an operational level to meet the targets set by the executive team. Setting targets enables communication of goals and should motivate individual performance to meet the goals of the company and the business unit.
Common questions often arise: How do I measure success? What metrics should I use?
Metrics should be identified and linked to the company’s core strategic competencies. Several example competencies for an E&P company include exploration, development, production, and safety. For each competency, there are a set of activities that can be measured.
For example, the exploration competency could have an activity of finding large, easy-to-produce reservoirs. Success can be measured by the reserve additions or the reserve replacement ratio metrics. From there, the company can identify what the target metrics are for each division or department.
Finance should help the organization define which metrics are important and which correlate with financial success. Ultimately, these targets can be used as metrics in the planning process.
2. Integrate operational and financial planning
In many organizations, the financial plans or forecasts do not tie to what operations consider truth or reality. Finance and operational peers spend most of their time digging for information and reconciling to the last budget version or forecast.
There are multiple causes for the difficulties associated with planning process: multiple sources of information, inconsistent data structures, broken mappings between systems, data integrity issues, errors in spreadsheets, and inconsistent planning processes across business units and departments.
We assisted an E&P client with integrating their economic and reservoir management systems in order to have better look-back capabilities and operational accountability for results. Although the reservoir management systems are not meant for planning, they have the necessary information to seed data at the beginning of the planning process. As economic systems are updated, the data extraction is automated into the planning system rather than downloaded into spreadsheets that cannot be refreshed easily with new information.
Tying operational systems in with the planning process helps an organization integrate what is recognized as operational reality with predicting the future. The finance organization has the purview to tie the operational systems with the overall planning process and provide a single view of the future.
3. Identify the right drivers
Driver-based planning provides the ability to generate and update the plan based on business drivers given certain levels of business activity, basin production, or contractual arrangements in place.
First, selecting the right drivers can make a big difference in the planning process. For example, many companies are tempted to forecast headcount by employee and try to be as precise as possible on headcount planning. This seems relatively easy to do. However, it may not provide insight into predicting financial success when other variables have a more significant impact on profitability.
Selecting the right drivers does not mean the organization has to spend thousands of hours on financial forecasts every cycle. An oil and gas company can use the current production curve as the base volume and model the forecasted capital projects’ production decline curves. The model could include number of drilling rigs that can be run in an area, rig cost per day, number of days it takes to drill and complete a well, the average working interest, and the expected production curve for the given area. The driver-based method can save time compared to the level of effort required to set up each well prospect in the economic system.
Ultimately, the finance organization should be accountable for defining how the operational drivers impact profitability.
4. Understand sensitivities
Historically, oil prices and gas prices tracked consistently with each other. For years, oil to gas price ratio ranged at about 5 to 10 times the price of gas. The advances in natural gas production have caused a natural gas glut and disrupted the balance between oil and gas price. In April 2012, when oil was at the high end of its 52-week range and gas was at the low end of its 52-week range, oil was running about 50 times the price of gas. The variability has caused companies to rethink how they manage their portfolio.
The organization’s challenge is to manage its portfolios in order to stay cash neutral while meeting the company’s goals and objectives. Price is the key lever on the level of cash available. In cash shortfall or periods with excess cash, companies have trouble determining what to do. Should we borrow or cut projects? Should we pay down debt or execute more projects? Which projects?
In today’s environment, executive teams have a greater need to review their business models, plan with more scrutiny, and perform what-if analyses. The planning process needs to tie together multiple pieces of information to clearly define the business strategy going forward. Commodity price, debt-to-equity ratio, project net present value, project internal rate of return, lease expiration, and reserve targets are some key metrics and drivers that must be choreographed to meet a given strategy. The finance department is in the right position to first educate operations on the definition of the metrics and sift through these metrics to determine the optimal capital structure to respond to the changes in price or costs.
The Finance department is in a unique position to change the perception of the role of Finance by driving the implementation of key planning practices. How a company is executing its business strategy will be more transparent to executives by integrating operation and financial planning, identifying the right drivers, and understanding sensitivities.
Cleaning Up After the Consultants Leave: An Unabashed Advertisement for Trenegy
by William Aimone
Ninety-nine percent of consultants fall into one of two categories: strategists or technologists.
Strategists – They are essentially the smartest people in the room. They are polished, published, and have all the data an organization requires to make strategic decisions. The strategists develop elegant binders and inspiring presentations that capture the imaginations of CEOs around the globe. All that remains is implementation of something big, such as a major ERP, process improvement, or organization alignment program. Bring in the easy button, and voila! The problem is solved.
Honestly, we at Trenegy envy the high rates strategists are able to command and wish we had the time to take a sabbatical and write an inspirational book.
Technologists – They are intelligent beyond imagination and any lack of politesse is compensated with technical prowess. Technologists can make an ERP or accounting system hum like a honeybee on a spring day. All you need to do give them your detailed business requirements for every possible business scenario, let them perform their configuration magic, and the company is ready to roll into the future with a new ERP solution.
We envy these guys, too. The amount of revenue they can rake in on a typical ERP implementation is in the millions.
There is a huge chasm between the strategist and the technologist:
- The strategist has little to no practical experience with implementation
- The technologist has deep technical expertise but does not fully understand the business functions or industry
A Typical Story
The CEO, or worse yet, the board (this means someone is in trouble), hires a strategist. The strategist scans the market, interviews dozens of people, applies a magical set of algorithms to the data, and creates a think binder of recommendations. The CEO hands the strategist’s final deliverable to the executive team and says, “This is the plan. We shall go forth and implement, and all of our wildest dreams will come true.” The executives spend months in bewilderment reviewing the strategist’s deliverables while keeping the day job going. The executives start playing hot potato with the strategist’s recommendations because no one completely understands what’s in the binder. The executives notice there are recommendations hinting of digitization, workflow, and automation. Since the CIO can make this translation of the strategist’s recommendations a reality, the CIO ends up with the hot potato.
The CIO is left holding the bag and takes the challenge to the technologists. The technologists proclaim, “We can do it!” A year later and millions of dollars down the drain, the technologists have crafted a phase II and III to take the company into the next millennium. Meanwhile, it’s business as usual and nothing has changed except new technology is in place. The CEO scratches his head and wonders what went wrong. Firing one of his executives may be the answer he is looking for. He calls his strategist for advice and a few more dollars so he can find out what went wrong.
What went wrong? The executive team had the right intentions. The heart of the issue was a lack of connection between what the strategists recommended and what the technologists could reasonably accomplish.
The Strategist’s Challenge
The strategists will typically assume management teams will be aligned and have the time, energy, and resources to commit to the changes. Adding to this challenge, the strategists’ view of what it takes for implementation is unrealistic. Four major pitfalls cause strategists’ recommendations to fall short of implementation success:
1. “I am not going to let go of ________.” Strategists’ recommendations are not assigned to a single executive sponsor with full carte blanche to implement successfully. This typically happens in matrix organizations where a bold recommendation around enabling the supply chain falls under several executives’ purview. For example, corporate supply chain reports to the CFO and local buying reports up through the COO. The CFO and COO do not have the time and energy to battle out ownership of tactical supply chain issues. The CFO says, “I’m not giving up corporate supply chain oversight for the sake of our controls policy,” and the COO says, “I’m not letting the accountants decide what we buy.” In many cases, an organization needs to address its decision making and organizational structure before attempting to implementation bold recommendations.
2. “I am not going to change.” Strategists’ recommendations presume corporate-sponsored change programs will somehow magically be embraced by field sales and operations. Field work is required to align people outside of the corporate offices. Field work takes time and requires people with a business orientation to spend time in the field helping to communicate why and how the changes should be delivered.
3. “I don’t believe the changes will work.” The lofty benefits in a strategist’s business case are not believable. Their business case is typically built in a nirvana world where the stars and moon align. One flaw in the business case, and the recommendations are doomed. For example, a VP of operations might say, “We have deepwater and land rigs. It’s infeasible to standardize the business process across our entire fleet. We would kill our land operations.” A strategist’s recommendations should be rationalized and made fit-for-purpose, requiring a tactical understanding of field and business operations.
4. “This costs too darn much.” A strategist’s recommendations presume there are resources available to implement the changes. The organization has pressure from stockholders to meet short-term profit goals and expensive programs are not feasible. The COO says, “We could have spent tens of millions of dollars to implement the Six Sigma program and make it happen, but we aren’t GE.” There are always less expensive means to achieving the same goal. Understanding the true alternatives requires a bit more tactical knowledge of what alternatives are available.
The Technologist’s Challenge
At the other end of the spectrum, technologists assume the business has an appetite to accept technology at face value and will align all business processes, scenarios, and organization accordingly. The technologist’s implementation gaps typically come in the form of alignment around four major pain points in any technology implementation:
1. “We assumed the new system would get us the information we need.” Fulfillment of information needs is typically, and often inaccurately, assumed to be automatic and prepackaged with the technology solution. For example, a company may implement a comprehensive field ticketing and invoicing system and finds the system unable to capture job profitability. The operations director declares, “What good is the system if I can’t see how profitable my jobs are?” Clear definition and agreement regarding the information required to run the business must be in place before starting any technology implementation.
2. “The system requires too many approvals and steps.” Many organizations fail to understand how to use the system to replace existing approvals and work steps. There are inherent controls in most ERP or accounting systems. The automated controls enable an organization to let the system control the process instead of requiring excess approvals slowing progress. We have seen clients perform up to six approval steps passing through one executive to buy a service item. This includes the budget, AFE, purchase request, purchase order, invoice, and payment. Operations managers continually ask, “Why the heck did you have me do a budget when I have to get everything approved again when I need to buy something?” The organization must align and define an efficient workflow and approval process prior to effectively automating the process with technology.
3. “Our paper documents are difficult to access through our systems.” Technology has actually created more paper than ever before. The perceived need to have a physical piece of paper should be rationalized. We hear clients say, “We are required by Sarbanes-Oxley to have a copy of the vendor invoice on file.” Invariably, the invoice paper requirement is not specified anywhere in the Sarbanes-Oxley Act. The new system should replace paper instead of serving as a place to store paper electronically. Prior to implementation, a company should map out all paper touch points and develop a plan to eliminate paper and replace it with digitization.
4. “The data in the system is still a mess.” In many cases, new technology requires additional work to complete transactions. For example, a materials manager says, “It takes a long time to enter an inventory requisition in the new ERP or accounting system, so I wait until the end of the week to enter all the material requisitions in the new system.” As a result, inventory values and the corresponding data in the system may not be accurate. Either the company has over-engineered the inventory process and didn’t rationalize information needs, or the materials manager does not understand the importance of keeping accurate inventory records. In either case, the process of capturing data needs to be addressed during the implementation as a part of an overall communications, training, and acceptance plan.
The rare, third type of consultant is the realist. Realists fill the gap between strategists and technologists. The realist knows enough about technology and ERP systems to be dangerous but also understanding the difference between a good strategy and a great one. Practically speaking, realists understand the business functions in a company and have a strong grasp of the industry. They know how companies can get value out of their ERP systems and organizational structure.
Realists are hired to:
- Listen and understand the company’s strategy and direction
- Clarify what is preventing the organization’s functions from achieving the desired direction
- Recognize realistic alternatives for closing the gaps based upon industry experience
- Develop tactical solutions and roadmaps based on technical experience
- Implement the recommendations
- Sometimes, just clean up after the consultants
Realists operate under the fundamental beliefs that:
- There are simple, quick, cost effective alternatives to any challenge organizations face
- There’s no such thing as a best practice that applies to all organizations
- Every organization deserves to get value out of its ERP or accounting system
If your organization needs assistance closing the gap between the strategists and technologists or just cleaning up after the consultants, give the realists at Trenegy a call.
7 Captain Obvious Consulting Services That Should Go Away
by William Aimone
Consultants are known for inventing new words and attempting to turn everyday words into revenue-generating service offerings. In many cases, these service offerings are what give consultants a bad name in the industry. How many times have you heard, “The consultants came in and told us what we already knew”? Thank you, Captain Obvious! Below are the most notorious offenders:
1. Value analytics
How many times have we heard a consulting firm or software vendor come in and say, “Let us develop a value proposition for you”? The consultants come back with a list of generic, lofty savings that merely state the obvious and serve the consultants’ best interest. Management already knows whether a project is a good idea or not. A value proposition rarely changes anyone’s mind. Paying an outside firm to develop a value proposition with nebulous numbers and statistics is useless.
2. Complexity reduction
A large strategy consulting firm coined this phrase. The concept is to identify cost reduction or revenue growth opportunities through simplification. Conceptually, it’s a good idea. The only problem is that the consultants’ process for identifying complexity reduction opportunities is overly complex and time consuming. The consultants spend months creating large binders full of detailed, complexity-reducing analyses based on time and motion studies. Statistics rarely reveal if a business process should be eliminated. Ninety percent of the time, management intuition dictates where simplification can occur.
3. Performance management
Performance management is the most overused term in consulting and software sales in the past 10 years. It has become a catch-all consulting term describing anything from budgeting and dashboards to data warehousing and HR performance reviews. Insert the word enterprise or corporate in front and it becomes a software package. Every consultant and software vendor provides performance management offerings to some degree. Performance management is really all about making sure people achieve their goals. In other words, do their jobs. Do you need a consultant to help you make sure people do their jobs?
4. Anything that starts with “enterprise”
Inserting the word enterprise in front of anything really means that the consultant will do it all for the entire company. That’s to say, there are no limits on what you can spend on the service provided by the consultants. One of the larger consulting firms has more than 100 service offerings with the word enterprise in it. My favorite is “Enterprise Water Strategy.” Seriously. Google it.
5. Big data
This is a relatively new one, and all the big software and consulting firms have a solution for big data. Enterprise big data is even more important. Big data is quickly becoming an overused term for extracting information from large amounts of data. A select few software companies are really addressing the challenges, but, everyone is jumping on the bandwagon.
6. Employee engagement
Another nice consulting term for making sure employees do their jobs with a happy heart is employee engagement. Consulting firms offer employee engagement services to tell management the obvious. Employees want more recognition or money, fewer late nights, and more meaningful work. Many large organizations staff Employee Engagement departments filled with people who were not happy with their previous jobs, which required them to do actual work. The Employee Engagement function spends most of its time sweeping up behind bad bosses. Here’s an idea: bad bosses should either be fired or removed from a supervisory role unless the company is really not concerned with employee satisfaction. Also, let’s not forget, there are some jobs that are just unfulfilling and no amount of employee engagement will change the nature of the job.
7. Anything ending in “transformation”
Large consulting firms and software vendors offer business transformation services promising to take an organization to places beyond their wildest dreams. How can a software product transform a business? Having a consulting firm spend months or years analyzing market data and formulating transformation options rarely overrides the executive team’s intuition. Moreover, waiting for the results of a lengthy, statistical market analysis is contradictory to transformation. Competitors are innovating based on intuition and industry experience and are transforming more quickly.
Beware of Captain Obvious, and if you need outside assistance, find consultants who will provide quick answers and rapidly move your company through implementation. Trenegy is an implementation-focused consulting firm. Learn more about our philosophy here.
NPO Board Governance: How to Attract and Retain Strong CEO Talent
by Karli Summerer
Nonprofit organizations (NPOs) face the challenge of maintaining strong leadership in today’s capricious economic environment. Many NPOs are experiencing a decline in contributions and funding and lack clarity in what their organizations have set out to achieve.
Bottom line—they are barely managing to stay afloat.
NPOs struggle to attract strong leadership, and once the Board of Directors does hire a promising candidate to lead the organization, it often cannot manage to keep them there for long.
Leading an NPO is a tough job that rarely compensates well for the amount of work required. It calls for a special type of person and must be a true labor of love. It’s possible for an NPO to achieve clarity and purpose if it has a strong Chief Executive Officer (CEO) and strong Board of Directors (BOD) in place. Regardless of the formal title, the CEO of the NPO is the highest-ranking executive officer within the organization and is accountable for overall management of its day-to-day affairs under the supervision of a board of directors.
We found an NPO willing to share its success with its mission and governing style. Cypress Christian School, an accredited K-12 private Christian school in northwest Houston serving more than 570 students, has been operating under a Board Governance model for nearly eight years. Consequently, the school has realized vast improvements in its overall performance, CEO retention, and growing student body.
The BOD of most NPOs reacts to the difficult economic environment and struggles to retain worthy talent by micromanaging their organizations. With a lack of true experience at the BOD level in running an NPO, the BOD’s response is often to hire a CEO and micromanage them for fear of losing control of the organization. With many favorable career opportunities available outside the organization, the CEO leaves because they aren’t given the autonomy to run the organization as desired. The BOD then hires an under-qualified CEO willing to deal with the BOD’s micro-management for the short term, until they obtain the requisite experience and also moves on to another organization. The micromanagement trickles down to the staff under the CEO and outstanding performers eventually leave the organization. It’s a perpetual cycle that results in underperformance of the organization.
How do NPOs combat the highly prevalent issues of finding and retaining exemplary CEO talent?
Many of the complications associated with CEO talent retention in the nonprofit sector could be alleviated by organizations mastering and integrating three interrelated objectives: attracting the right leaders, board delegation, and the board operating model. We visited with Stephen Novotny, the Executive Director (CEO) of Cypress Christian School, to gain his first-hand insight on CEO talent retention and organizational leadership. The school’s BOD focuses on a strategic decision making/setting policy while providing Novotny the autonomy and freedom he needs to run the organization. Novotny shared about his experience at Cypress Christian School and provided excellent insight in regards to establishing a healthy board governance strategy.
Attracting the Right Leaders
There are two necessary components to attracting the right CEO for the organization:
- Knowing which characteristics to look for when identifying strong leadership talent
- Attracting a promising candidate to become your next CEO
When searching for a favorable CEO candidate there are three fundamental characteristics that boards should look for: potential, cultural fit, and heart for the cause.
Potential indicates that the individual has what it takes to achieve positive results if given the opportunity. One important caveat to consider is that there is no such thing as a perfect candidate. Novotny provided excellent advice when he said, “An NPO shouldn’t look for a perfect person because it will never find one. Everyone has their own strengths and weaknesses, so it’s important to look for people with the right qualities for the job.” The board must find the right balance between a candidate having too much versus not enough experience. While a candidate may not possess every quality you’re looking for, if they have the right mix of characteristics and past experience they will still be capable of taking on new challenges, particularly those faced by your organization. Novotny offered his experience at the school as a great example of this because, “although [he is] not a classically- trained educator, [he has] been able to learn, adapt and create success in [his] role at Cypress Christian School.” Novotny arrived at Cypress Christian School with no CEO experience at a school. However, he was a strong cultural fit, a natural-born leader, and shared the school’s vision and mission. Given the opportunity to acquire new skills within school administration, the school has benefitted from Novotny’s leadership and has grown its enrollment and donor base by nearly 20%, increased the quality of its faculty, and strengthened school programming.
On the other hand, don’t get too excited about candidates who are over-qualified for the job. Seasoned talent that has been there and done that will likely get bored and leave the organization as soon as they receive a better offer. High performers are often driven by their desire to master new skills and build expertise. If the job can provide the CEO with these continual growth opportunities, they will be much more successful in both attracting and retaining strong leadership talent.
When asked what the essential characteristics of a successful CEO are, Novotny said, “A CEO must be smart enough to know how to evaluate and ask the right questions of an organization’s subject matter experts and also have a solid understanding of how an NPO operates before he or she can be successful in running it.” Novotny, in past roles and his current role, has made a point to educate himself on the front-line operations, systems, processes, and other key components of the business in order to gain a holistic understanding of how the organization operates. This curiosity and understanding has allowed him to lead with confidence and make decisions that align with the overall goals as well as the business needs of the NPO. Distinguish the essential qualities for a CEO to be successful at your organization from the nice-to-have qualities. While an NPO will need to weigh the pros and cons of each candidate on a case-by-case basis, determining the critical success factors upfront will improve the effectiveness and objectivity of the NPO’s talent search.
Cultural fit is a crucial factor that many boards may not recognize. Novotny describes an important aspect of a good CEO as being a “people expert,” and knowing how to manage interactions and provide leadership for different types of people and personalities. If NPOs desire to change the current culture of the organization, the new CEO is the ideal leader to spearhead the transformation. According to Novotny, “A CEO must have a clear view of the mission of the organization or what that mission should be.” Even if the new CEO doesn’t fit in with the existing culture or vision, they could be the right person for the job if they demonstrate their ability to change it for the better. Find someone who embodies what the NPO desires the organization to become and who will be a catalyst in achieving those ambitions.
The third, and arguably the most important, characteristic to look for in the NPO’s search for a new CEO, is a heart for the cause. Novotny shares that he was drawn to Cypress Christian School because he “knew it would provide [him] with the ability to train the next generation of leadership and that [he] would be able to work where [his] own children went to school.” He has a passion for working with children and strongly believes in the mission and goals of the school, so much so that he was willing to send his own sons there to receive an education. When asked to share what motivates him to do his job well and to stay at his organization, Novotny’s heartfelt response was, “ I love the idea of influencing the future through people, and there is nothing more exciting than helping kids grow personally and understand truth.” When an individual finds themselves working in a role that supports a cause they are deeply passionate about, it’s highly self-motivating and gratifying. No amount of money is more motivating than being able to pursue one’s innate passions and desires. If an NPO can find promising CEO talent that either strongly aligns with their mission and vision or is passionate about the cause, the organization has found an ideal candidate!
While finding and acquiring strong talent is not an easy task, retaining it may be the biggest challenge of all. One critical component of keeping a CEO happy and motivated is having a healthy balance of board delegation to the CEO.
Board Delegation to the CEO
The relationship between the board and the CEO can make or break an organization. John Carver, author and former CEO of several non-profit organizations, developed a board governance model known as Policy Governance (“Carver’s Policy Governance® Model in Nonprofit Organizations” by John Carver and Miriam Carver). Many NPOs have adopted board governance models to effectively retain the right CEO and leadership team and to improve the overall effectiveness of the organization. Cypress Christian is a great example of an NPO that has experienced the benefits of operating under Carver’s Policy Governance model.
In Carver’s model, the BOD sets end expectations and provides the CEO with freedom to use any means he chooses to reach those end goals— as long as he stays within the overarching BOD policies. The CEO oversees and provides direction for the staff, instead of the BOD. This allows the BOD to focus on the most important, strategic matters while simultaneously strengthening the role of the CEO. The CEO carries greater weight in the organization and is given the autonomy needed to run the business as desired. Novotny exercises his freedom to “create layers of competency throughout the organization and to build strength in managerial leadership, so that if [he were] to leave suddenly the school could operate for a year or two on their own until they found another leader to take over.” Less micro-managing of the CEO and lower staff levels by the BOD leads to greater accountability, and individuals who do not meet performance expectations can be identified and weeded out quicker; thus resulting in a more effective and efficient organization. Novotny is “held accountable for the financial and academic performance of the school, as well as the school’s social and spiritual climate. The board funnels everything through [him], and does not bypass him or involve themselves in matters that fall under [his] purview.” Empowering the CEO in his job fosters a greater sense of pride and ownership in his work and ultimately leads to better results. When asked if his compensation is evaluated and adjusted based on his performance, Novotny laughed and responded, “You bet. If I don’t perform, I will be out of a job. It’s as simple as that.”
Novotny describes his relationship with the board as being “phenomenally positive.” The school has achieved this mutually beneficial relationship through its adoption of Policy Governance. In terms of board interactions with the CEO, Novotny “formally meets face-to-face with the BOD four times per year and provides the board with performance reports and a summary of operations performance on a monthly basis. All other interactions occur informally, such as scheduling impromptu meetings with the board when important decisions need to be made and meeting sporadically with board members and the Board President. It works quite well.” Novotny fosters transparency in his interactions with the board and the information that he shares with them. The members of the board provide him with the accountability he needs to ensure that he is meeting performance goals and running operations in line with the overarching policies as set out by the board. He obtains board approval for high-dollar expenditures and all major decisions based upon a well-defined delegation of authority, while having the autonomy he needs to run the school and perform his job successfully. The relationship between the BOD and the CEO, as described above, provides an excellent balance in delegation of authorities to allow for efficient and effective operations.
How to Run Board Meetings
Across the for-profit and nonprofit sectors, board meetings have a reputation for being long, unorganized, and ineffectual. Below are some effective practices for running strategic, punctual, and effective board meetings that will lead to higher CEO satisfaction and performance:
Reduce the frequency of board meetings. For example, Cypress Christian School moved from holding one board meeting per month to one per quarter. Novotny describes his past experience with monthly board meetings as repetitive and unnecessary. As soon as the meeting was over, he was already starting to plan for next month’s meeting. Once the BOD reduced the number of board meetings, he was pleased to find that “the length of the meetings also decreased and the school was able to increase the number of interested board candidates, since the board prospects knew they would not have to meet as often.” In addition, cutting the number of board meetings also reduced the administrative costs associated with running the meetings.
Rotate topics for each board meeting on a scheduled basis. For example, the first board meeting of the year is focused on the budget, the second is focused on development, the third is focused on operations, etc. Novotny commented further on the value of having pre-determined topics used by the board: “Everyone knows the time to speak up is now or never, and a decision will be reached by the end of that meeting. We are actually able to get things done.” Using the rotating topics method, each board meeting fulfills a distinct purpose: promoting higher attendance and allowing for more achievable, timely results.
Rationalize CEO reporting needs. The BOD should work with the CEO to define what should and should not be reported. Many nonprofit CEOs decide that more is better and overload boards with too much information. Novotny experienced this dilemma in his early years at Cypress Christian School. He inherited a process that consisted of producing pages of highly detailed financial reports. During board meetings, Novoty found that someone would find an anomaly in the minutiae and the discussion would go from strategic to the insignificant very quickly. The BOD worked with Novotny to create a two-page financial report for the board, providing highlights instead of pages of granular details. The BOD financial review went from two hours of unprofitable talking to 20 minutes of effective strategic discussion and decision making. Novotny now describes formal board reports as “succinct and efficient.” He reported they achieved efficiency because “the directors at Cypress Christian School are cognizant of what the right level of detail for the board is, and they try to keep as close to that level as possible.”
Review BOD composition and how board work is assigned. Board diversity is essential for a board to be well-rounded and run effectively. Maintaining balance and recognizing the value of difference in qualities and backgrounds amongst board members, as well as finding board members who are committed to the cohesive mission of the board, are key aspects to an effectively run board meeting. When asked what makes an ideal board member, Novotny prescribed this member as one who “committed to the mission of the organization, clearly understands the difference between the role of the board and the role of the CEO, and is able to put aside any personal agenda they may have stemming from their own personal involvement in the organization.”
The Policy Governance model will enable the BOD to find the right CEO and offer them greater autonomy and a sense of meaning and purpose. The BOD will be able to operate strategically rather than getting mired down in details of everyday business. By running board meetings more efficiently in a well-structured manner, the BOD and CEO will yield powerful results and decisions in a fraction of the time. Efficiency breeds results, and results breed a healthy BOD and CEO relationship.
Novotny ended the discussion with an interesting theory about board delegation. He insists, “When an organization has proper NPO Board Governance in place, the following phenomenon occurs: If an effective CEO is absent, the organization can function for a substantial amount of time without feeling negative repercussions due to the layers of competency throughout the organization that were developed by the effective CEO. However, the long-term effects of not having the right executive leader are devastating to an organization. They can take a substantial amount of time to correct. Conversely, if a front-line employee is absent, the effects on operations are felt immediately but are limited to that employee’s specific area of responsibility and can be remediated easily with minor to no long-term ramifications for the organization as a whole.”
So consider this question: How long could your organization operate without your CEO in place?
Preparing for the Wrath of the Economic Upturn: The War for Talent
by William Aimone
We would all like to see the U.S. economy move out of recession and into growth as soon as possible. Our administration and economic pundits spout conflicting messages as to whether the economy is on the upswing, stagnant, or possibly facing another slowdown. A few labor statistics seem to indicate we are slowly creeping out of the recession. Crawling out of the recession, our clients are starting to feel the pinch of talent scarcity in key areas. Whatever the case, corporate leaders need to be prepared for what we call the wrath of economic prosperity: the fight for talent.
Over the past three years, employees have remained faithful and loyal to the company and voluntary turnover has been at an all-time low. Some would say that this is due to outstanding corporate leadership. Balderdash! The reality is that your best and brightest are secretly plotting to make their break as soon as the economic sun rises. How do we know this? They sent us their resumes last week!
Six months ago, employees were deathly afraid of sending out a resume for fear of exposure and termination. Today, employees are starting to see the sun rise and are getting bold. Social media makes it even easier. Employees can let thousands of your competitors know of their talents in one or two clicks. What does this mean? The best and brightest can find another job in a matter of days. They’ll be gone before you know it!
Organizations need to take action now or lose valuable talent. Let’s not forget, no talent translates to no company. Two simple steps can help combat the impending talent war.
1. Identify your high-potential employees
The first step is identifying your high performers. Start with your high potentials since they are the future of your company and the first to leave when opportunities arise. I know what you’re thinking: this guy is going to say, “Give them a raise and they’ll stay.” Sorry, that’s way too easy and compensation is generally not the primary reason high potential employees leave. The solution boils down to a cultural leadership shift in your organization.
The real question is, what is leadership doing to let high performers know, day in and day out, that they’re valued and considered the future of the organization? It requires more than the “I love you, man” speech. It shows up in actions, not words. What are you doing to empower your high potential employees to put their ideas into action? While not easy, organizations must empower the high potentials to implement their ideas. Organizations will need to step outside the box and consider new ideas that aren’t comfortable or “normal.”
Empowerment starts with listening to your employee’s ideas and taking time to brainstorm new and sometimes crazy concepts with them. During brainstorming, let your staff do most of the talking, ask questions, and do not interrupt. After brainstorming with them, give your staff time to implement or prototype their ideas. After the prototype, the best and brightest will decide whether the concept is really a good or bad idea. For the really good ideas, let your staff take credit and present their ideas to upper management. Recognize and accept that there will be failures along with successes.
I realize this takes time and your team is busy. Make the time! Think about the alternative—the best and brightest leave and you’re stuck holding the bag.
More good news: Complacent middle management will become frustrated with all the new ideas floating around and may even request early retirement packages. This allows space for your high potentials to grow.
2. Hire from the competition
The second step is recruiting your competitors’ high performers to acquire experience and best practices. This is how you can benefit from the fury of social media as it creates a complete shift in the corporate recruiting process. Big, expensive search firms hired under the cloak of secrecy are no longer required.
Put some of your best and brightest on their own recruiting searches. Offer them referral bonuses. Nothing is better for retention than allowing a friend to refer a friend, particularly if they are high potentials. As they say, “birds of a feather…”
Neither of these steps are easy. For a large organization, the first step is daunting and requires significant effort to create a cultural shift. In this case, identify small pockets of the organization where high potential employees are critical and start there.
For a small organization, the second step is difficult because there are a limited number of people to spread the word. However, social media allows the smallest of the small to greatly extend their reach.
Start implementing both steps today. Every day you wait is a lost battle in the war for talent.
Survey Results: Problem-solving Is Wasting Your Employees’ Time
by Bill Aimone
A 2019 survey of more than 30 large organizations reveals that employees spend an average of 3 hours per week solving work-related issues that could easily be solved if they had access to the proper support.
Management consulting firm Trenegy Incorporated conducted the study across a variety of industries, including healthcare, energy, manufacturing, distribution, and professional services. They asked, “On an average week, how much time do you spend trying solve work-related problems or seek answers that could be quickly addressed by someone else in your company if you just knew who to contact?” Respondents ranged from new employees to executive leadership and everything in between.
Work-related issues were widespread, including problems with new technology or software upgrades, HR and benefit questions, company policy questions, field support for technical problems, and issues with facilities.
As mentioned above, employees spend an average of three hours per week solving work-related issues that could easily be solved internally if employees only knew who to ask.
This means a typical 1,000-employee organization wastes $6MM a year on inefficient problem-solving. That’s a big deal.
The study also revealed a significant correlation between the number of years of employment and the amount of time spent troubleshooting. Employees at the company for less than five years spent up to 15 hours per week troubleshooting, while the more tenured employees spent around one hour.
They also found the larger the organization, the more pervasive the problem. Organizations with the most employees reported the highest percentage of time spent trying to find the right support expert. Many employees give up and simply hope they can find a satisfactory solution on their own.
Traditional means of problem-solving either results in 1) wasted hours trying to troubleshoot something alone, or 2) the problem being passed around the organization like a hot potato. Kara McCracken, Trenegy analyst, explains, “Most large organizations offer too many options for finding support, including emails, self-service portals, IT help desks, ticketing systems, and phone numbers. Making matters worse, these solutions are over-engineered and rarely provide a rapid response.”
Lindsey Ligon, Trenegy analyst, adds, “As the number of millennials entering the workforce increases, the need for better problem-solving tools becomes more important.”
Traditional enterprise service management (ESM) solutions have failed to truly address hours wasted on problem-solving. These ESM solutions rarely connect an employee to the right person the first time. Response time is often measured in days or weeks, and automated AI and self-service portals don’t work.
Revolutionizing the Traditional ESM Solution
EVAN360 has developed a revolutionary ESM solution that allows organizations to instantly connect employees and customers with qualified support to solve problems the right way the first time.
EVAN360 can be used internally by IT or HR support organizations to immediately connect all employees with the right people to address requests or issues. EVAN360 can also be used externally to immediately connect customers with the right support personnel to address any customer inquiry. EVAN360 prevents urgent or pervasive problems from getting lost in email inboxes, abandoned chat sessions, and help desk ticketing systems. Instead, organizations use the EVAN360 solution to provide amazing customer and employee support.
If you’re tired of wasted time, schedule an EVAN360 demo, here.
This article was originally published by EVAN360. For more insight on problem-solving, cybersecurity, tech-related topics, and more, check out EVAN360’s collection of articles here.
Remote Work Takes a Toll on Employee Interaction—Here’s What to Do About It
by Bill Aimone
REI recently announced the sale of their corporate offices in favor of allowing corporate employees to work remotely. Many other companies are following suit by allowing office-bound employees to work from anywhere. Passing a coworker in the hall or chatting over the proverbial water cooler is replaced with Slack or text messages. In-person meetings are replaced with video calls. Lunch-and-learn sessions are falling to the wayside and post-work happy hours are becoming less frequent.
As a result, we must become more aware of our interactions and what the implications are in order to maintain a strong, supportive culture.
Challenge Others with Care
Imagine this: It’s 2019 and Mike, an Operations Manager, is in a tense meeting at the corporate office. Jim, the Accounting Manager, recommends something that will certainly result in failure. Mike abruptly responds by shutting down the idea and moving on. Throughout the remainder of the meeting, Mike notices Jim avoiding eye contact and looking out the window whenever Mike speaks. Mike quickly realizes he said something he shouldn’t have. Later, Mike catches up with Jim in the hallway, apologizing for shutting his idea down and they head to the breakroom to discuss other options.
Fast-forward to 2020. The same meeting happens via video conference. Mike commits the same offense. He has no idea he offended Jim and has no opportunity to catch him in the hall afterwards. Jim remembers Mike’s comment and resentment begins to grow. Unfortunately, Mike’s vociferous personality gives him the reputation of being difficult, and he has no chance to recover in the virtual office world.
With virtual communication, the comments we perceive as merely “challenging others” can fester and ultimately chip away at productivity. Think twice before shooting down someone’s idea or challenging coworkers. Perhaps take it offline where you can have a constructive conversation.
Share the Floor: Internal vs. External Processors
It’s 2019 and there’s a 15-person quarterly strategy meeting at the corporate office. Among the attendees are Angie and Kelly. Angie is a fast-thinking, rapid-fire, speak-before-you-think Sales Manager. She has a lot of ideas—most are good but not great. Kelly, the Customer Service Manager is a processor, listening and absorbing information while waiting for the right moment to share ideas. Kelly has great ideas that are often unheard. During breaks in the meeting, Kelly pulls Angie aside and shares her ideas in the hallway. Following the breaks, Angie invariably announces, “I think Kelly has an idea everyone should hear.”
Fast-forward to 2020. The quarterly meeting is virtual. Most participants are remote and video is the best means of collaboration. Only one person can speak at a time and anytime Kelly starts to speak, she’s cut off by someone else. Kelly will acquiesce to the more effusive personalities. The entire meeting is completed, and Kelly’s ideas fall to the wayside.
In the new world of video meetings, effusive participants may need to take time to pause and give the processors an opportunity to speak up. At the same time, the processors may consider using the raise-my-hand feature or chat to let people know they have something to share. It’s important to emphasize employees’ capabilities during video meetings. Internal processors might need more time to think, so make sure the outspoken personalities aren’t the only ones being heard. When harvesting ideas, foster an environment where everyone knows their contributions matter.
Adapting to a remote environment is challenging and it takes work to maintain company culture when normalcy is upended. We must be diligent in understanding employees’ learning and communication styles and encourage other team members to do the same. It’s always worth the extra time, effort, and care.
Do’s and Don’ts When Creating RACI’s in the Workplace
by Bill Aimone
Starting a new project? It’s crucial to ensure everyone understands their role and who owns which decisions. If your team is experiencing confusion and duplication of efforts, the solution is a RACI. A RACI is a simple, effective way to document and confirm who does what in an organization. It’s a simple matrix that maps people to organizational activities in the workplace.
RACI is a simple acronym:
- Responsible (the doer): Individual(s) who perform an activity and are responsible for action/implementation.
- Accountable (holds the authority): Individual who is ultimately accountable for the yes/no decision and holds the power of veto.
- Consult (in the loop): Individual(s) who must be consulted before a final decision/action. Two-way communication is required.
- Inform (FYI): Individual(s) who must be informed after a decision is made or action is taken. One-way communication is required.
For example, the team develops a list of activities for a department and assigns roles:
- Do have joint responsibility. Workloads are often shared between individuals and it’s fine to share responsibility to get the work done. For example, both the procurement department and the maintenance department may share accountability for processing purchase orders. Attempting to combine the responsibility for the work would slow the process. Sharing the workload makes work more efficient.
- Do know the difference between C and I. Often, teams tend to overuse the C and I. The best litmus test for using C or I is this: does the individual need to be consulted during the process? For example, the supply chain manager will need to be consulted before a new vendor is added in the system so they don’t have to override or re-categorize after the fact. The AP clerk, however, just needs to be informed after it happens as they have no impact on the decision to enter the vendor record.
- Don’t have multiple accountability points for one activity. Avoid multiple A’s in one row. Shared accountability means decisions won’t get made when differences arise. For example, if the accounting manager and planning manager are both accountable for management reporting, it will result in duplication of effort or second-guessed decisions. There are two ways to address this: 1) Change roles to ensure single accountability, or 2) divide management reporting into multiple line items. In this case, the accounting manager and planning manager would be accountable for external and internal reporting, respectively (one line item for external and one for internal reporting).
- Don’t include “approval steps” as an activity. Adding a step above called “Approved Vendor Invoices” would not be meaningful. The act of approval just means there’s an A for the actual activity being performed. In this case, we just have the line item “Enter AP Invoices” where the AP supervisor is accountable, indicating approval for the process.
Maximizing Talent During the Oil & Gas Talent Crisis
by Bill Aimone
The oil and gas industry is facing a skills leakage due to recruitment cutbacks, layoffs, and accelerated retirements. Energy companies are rightly concerned as more than 100,000 workers in the U.S. oil and gas industry have been laid off over the past few months.
This talent cannot be quickly or efficiently replaced with traditional hiring, internship, and recruiting efforts. Many young people are skeptical about the career prospects in the oil and gas industry and are favoring the high-tech industries. Furthermore, it is not realistic to expect newly minted engineers to troubleshoot pressure differentials or unstable formations as quickly as a seasoned engineer. The variables and challenges faced in the oil and gas fields around the world cannot be filled with plug-and-play positions. This skills crisis threatens the oil and gas producer’s ability to continue to improve efficiencies and remain competitive.
The oil and gas industry must be equipped to respond quickly to fill the skills and talent gap, and talent must be harvested quickly before it is permanently lost. This means finding out where the skills and knowledge exist, creating a skills network, and connecting the skills network to the engineers and production workforce in the field. Here’s the path to start:
- Inventory Talent: Talent exists inside the vast array of oil and gas service, manufacturing, production, consulting, and transportation companies as well as independent contractors and retirees. The talent and experience are out there, but the challenge is identifying who has talent and classifying the type of expertise anyone can contribute.
- Build a Network: A mechanism to manage and connect the talent network needs to be established. The talent network could be across companies or within companies—it depends on your needs. A network will provide a means to build a skills database. Then, the right talent can be instantly accessible when people need help or have questions.
- Connect to the Field: The last step is connecting the skills network to the workforce facing day-to-day challenges in the field. The connection needs to be a simple, fast way for the field to request assistance without complex forms, lengthy searches, or waiting for hours.
The Right Tool for the Job
This probably all seems easier said than done. Fortunately, there’s a tool that does it all for you. The EVAN360 platform allows you to fill the skills/talent gap quickly so you can stay efficient and competitive. Here’s how:
- Inventory: Companies are using EVAN360 to inventory talent and manage who is an expert in any combination of skills or knowledge inside and outside the organization.
- Build: The platform is a mechanism that allows organizations to assign any combination of skills to engineers, geologists, or other personnel. A robust network of experts is established so talent is available and accessible whenever support needs arise.
- Connect: The EVAN360 platform allows a remote worker to connect to an expert in a matter of three clicks. The right experts are notified immediately through the skills network and are connected with the requester in the field within minutes. For example, many organizations are looking to retired engineers to provide expert advice on an as-needed, pay-by-the-hour basis. The retired workers can choose when they are available to help. Once connected, the expert and requester can have a live discussion via phone, video, or chat over the EVAN360 platform.
A byproduct of the EVAN360 platform is the ability to capture interactions, videos, notes, and support sessions in dashboards. Organizations are using these dashboards to identify where talent gaps exist and share solutions for employees’ recurring problems/questions.
EVAN360 is bringing companies into a new generation of talent management and employee support. To schedule a live demo with EVAN360’s Oil & Gas Customer Success Team, email email@example.com or visit evan360.com.
4 Ways to Engage Consultants in a Remote Work Environment
by Bill Aimone
The shift to remote work hit us like a ton of bricks. In March 2020, our entire base of clients shut their offices to visitors and only allowed a small portion of their employees in the office. Stopping the project work in progress was not a reasonable option for our clients. A merger needed to be completed, systems needed to be implemented, and management wanted access to critical information. Our consulting teams had to pivot quickly into a virtual world. This meant significant changes in how we engage with our clients. Our high-touch consulting model was threatened, yet we miraculously found ways to keep the work going without putting timelines at risk.
How to Make Meetings Happen – The first task at hand was to shift the cadence of meetings and working sessions. Our typical approach was to get a bunch of people in a room for 6-8 hours and hammer through a design session, conference room pilot, or Kaizen event. Attempting the same long workshop with a large audience working from home with dogs barking in the background and no way to know who was really engaged wasn’t going to work. Therefore, our team divided and conquered. For example, an eight-hour conference room pilot with 12 participants was divided into four two-hour sessions with 3-4 attendees each. Following the working sessions, a smaller group of consulting and client participants met for 30 minutes to exchange notes and develop an action plan for resolving any discrepancies between sessions. Interestingly, we found very few discrepancies. Using the experience from the first two-hour conference room pilot, we were able to make subsequent sessions more efficient, reducing total time in the conference room to six hours instead of eight.
How to Make Calls Quicker – In the past, when a quick decision or question arose, one of our consultants could pop into an office and get an answer. In a virtual world, we had to figure out how to get quick answers without setting up meetings. Sending an email and expecting a quick response was not feasible as inboxes became more polluted than ever with the remote work. In most cases, a text or Teams message sufficed, but a live conversation was often warranted. To address this, we developed a rapport with the client team to make conversations quick and to the point. For example, our project manager had a direct line to the Controller to get quick questions answered. When she made a call to the Controller, she got a quick answer—usually in under two minutes. People (like the Controller) are more likely to pick up a call when they know the call will be short and sweet.
How to Give People Time Back – The adage “work expands to fill the time” inevitably applies to meetings. When was the last time you attended a meeting that ended early? During all our meetings, our goal was to give people time back and finish early. This required discipline and setting a specific output expectation for the meeting. Once the output was achieved, the meeting was over. Anyone who wanted to hang around and talk more could stay on, but it wasn’t required. This also meant following each meeting with a list of what was decided and the assignment of action items. Our acquisition integration team had daily stand-ups with the business unit team leads. We rotated who facilitated the meeting, and there was even a sidebar bet on who could facilitate the shortest daily meeting.
How to Use the Right Meeting Tools – Many working sessions inevitably require visual aids. In person, the king of visual aids is the whiteboard. Videoing a real whiteboard is not effective and the fancy $10,000 digital whiteboards aren’t easily transportable from house to house. There are whiteboard apps out there, but if you face limitations with those or don’t want to purchase yet another digital tool, we found an alternative. We began preparing whiteboard mock-ups in PowerPoint or Visio prior to the workshops. For example, we had a data design session with the executives and mocked up an example design ahead of time. During the session, our team was able to quickly edit the data design. We did the same thing in Visio for process design sessions. Ultimately, this allowed for quicker answers and more efficient workshops. The team also leveraged Asana to track project tasks and progress on a real-time basis. At any point in time, all open and completed tasks were visible to the project team so they could quickly pivot if issues arose.
Trenegy is now prepared to support our clients who require a 100% remote work model for any time of management consulting services. For more information, contact us anytime at firstname.lastname@example.org.
Realigning the Organization for New Ways of Working
by William Aimone
As organizations transform their workforces into a combination of remote and in-office roles, executive leadership is reevaluating the effectiveness of organizational structures. A hybrid workforce changes the dynamics of communication, culture, and decision-making, and the structure must adapt accordingly.
Two fundamental guiding principles steer companies through the process of creating an optimal structure and drive how decision-making is delegated and distributed.
- Competitive business drivers should ultimately direct how an organization is structured.
- The distribution of decision-making can be defined by the external product, geographic, and customer complexities faced when competing.
Following these two guiding principles, Trenegy has developed a comprehensive organization design and decision-making framework to optimize the organization structure.
The organizational structure has a direct impact on every aspect of an organization, including customer service, product or service quality, employee retention, and internal efficiencies. For example, depending on whether customer-facing decisions are centralized or decentralized, the customer experience will be quite different. Part of designing the right structure is getting back to the basics of the business model, core work processes, and competitive business drivers.
Core Work Processes
The core work processes of an organization are essential to fundamental operations. Ask: What overarching processes are essential to customer delivery? An example of core work processes for an organization could be as simple as Plan → Market → Engineer → Operate.
Each core work process can be assigned to an operational function. An example of corresponding operational functions includes: Marketing for Market, Engineering for Engineer, and Operations for Operate. The other functions offering support to each of the operational functions are known as support functions (HR, IT, Finance, etc.). Sub-processes performed under each core work process are known as organizational competencies. The competencies are simply a list of what the organization must do well to differentiate itself and compete.
Business Drivers & Organizational Design
Business drivers are core external drivers driving complexity and variability in an organization. Business drivers are typically geography, product/service line, function, and customer. Companies should analyze their business drivers to determine how and where decisions should be delegated and divided.
A company organized by geography coordinates structure, decision-making, and processes around physical locations. When business practices or product/service offerings vary greatly by location, this is a viable option for organizing the company’s operations.
Managing business operations across multiple locations adds complexity, particularly in areas with differing cultures, business practices, local laws and regulations, languages, climates, physical geography, and infrastructure. For example, a multinational service company may need to differentiate its market approach by geography to better concentrate efforts on needs presented by each location. Geographic differences limit the ability to standardize all local business operations and competencies into a one-size-fits-all format.
The disadvantage to organizing by geography is the difficulty of sharing resources across boundaries. The physical separation of resources leads to more complex logistics and increased wait time to contact needed personnel, receive documentation, and access raw materials/supplies/approvals/etc.
2. Product/service line
When business practices or product/service offerings vary greatly by product line, an organization may want to delegate decision-making to different product or service line leaders. Organizing by product line allows for faster product development.
The disadvantage to organizing by product line is a decrease in standardization, leading to more complex and differing standards, processes, and equipment. Allowing each product line to drive decisions results in fewer common equipment parts and materials used for production. This often causes a decrease in both buyer power and the ability to buy in bulk. It also given customers multiple points of contact to buy products or services which may cause confusion.
Although GE runs business activities all around the world with corporate offices, manufacturing plants, global investments, and operations in more than 100 countries, they organize primarily by product line. Operations under each business unit is empowered in their decision-making and has allowed necessary diversification across product lines. Support functions are shared across all business units under the GE global umbrella.
When companies organize around company internal functions, a centralized structure is typically implemented. A company organized by function operates when designed around activity groups or departments, such as Marketing, Finance, Production, and Research & Development. If other business drivers (product type, customer, geography) do not vary significantly, organizing by function may be most efficient. Many commodity-based businesses are organized by internal function.
A functionally organized company leads to increased knowledge sharing and economies of scale. Functions are able to build depth and support the implementation of standardized processes across the company. With a strong focus on a given function, a company is able to achieve economies of scale and leverage with vendors.
Aligning by function means the true integration of functions occurs at the leadership level. Functions operating in silos cause contention over cross-functional performance goals and shared resources. Organizing by function also creates difficulty in managing diverse products and customers due to less flexibility in making changes. With decision-makers concentrated at the top of the organization, employees are less empowered to make decisions based on diversified needs of the customer or a particular geography.
Organizing by customer provides the ability to customize products/services to meet certain customer segment needs. With increased focus on customer needs, personnel are empowered to build deep relationships, focus on customer loyalty, and bundle and cross-sell services to increase the quantity and range of services available. Organizing by customer prevents the commoditization of the company’s service offering. For example, many large professional service firms are organized by customer segments in the form of industry and account teams. Each market leader has accountability for managing all of the activities by a specific industry segment of customers (energy, public sector, retail, etc.).
The disadvantage is the divergence of standards between customers. This disparity in customer service could lead to challenges in manufacturing and service efficiency. Increased manufacturing customization and focus on the customer can lead to duplication of resources and increased overhead.
3 Types of Organizational Structures
Organization structure is defined by how decisions are made versus where people sit geographically. Once the organization structure is defined around key work processes and business drivers, the delegation of decision-making can be addressed.
The three basic organizational structures are centralized, decentralized, and matrix.
The centralized structure is utilized when knowledge, information, and decision-making are concentrated at the top and filtered down to lower levels for implementation. The centralized model drives a vertical reporting structure most commonly implemented by companies requiring leaders to closely manage and attentively enforce decisions.
The key advantage of the centralized structure is heightened control over decision-making by top-level managers. Top-level managers have the power to shape organizational change, control expenses, and ensure change remains consistent with the organizational strategy. Large retail chains tend to have a centralized management structure where each store is expected to standardize and follow the “company way.”
Corporate leadership of a centralized organization must have an in-depth understanding of the complexities in which the company operates. A centralized company operating in multiple geographies may fail to recognize differing cultural, legal, and business practices across locations. It can be challenging to diversify operations in an effective manner using a centralized structure. With a strong dependency on a few top leaders for strategic decision-making, a company would be greatly impacted by the loss of a leader, whether temporary or permanent.
The decentralized structure is characterized by decision-making responsibilities distributed to lower levels or divisions within the organization. This structure is most commonly implemented by companies offering differentiated products and running service operations in multiple geographies.
The diversified nature of decision-making offered by decentralization increases participation and democracy across the organization. While managers and key decision-makers are spread out among the company, decentralization provides increased accountability and employee empowerment. Employees are able to better appreciate the results of their efforts. The decentralized model provides the organization with increased flexibility to respond to minor issues and changes that arise.
The diversified nature of the decentralized structure does not easily yield economies of scale and operational efficiencies. Standardization is difficult to achieve due to the changing needs of the customers and business operations across different geographies. Decision-makers may face conflicting or competing decisions and goals, creating role confusion and inconsistent direction for personnel. Additionally, the decentralized model offers less ability to control the consistency and quality of product/service offerings.
Johnson & Johnson considered decentralization with hundreds of business units that operate on their own. With operations in more than 100 countries, J&J has acquired companies and brands with their own market differentiators. While efficiency within the individual entities may be achieved, the decentralized model may not allow entity commonalities to be leveraged or lessons learned to be shared throughout the larger organization.
The matrix is a dual structure, combining both functional specialization and business product or project specialization. This structure theoretically takes the best of both centralized and decentralized structures and creates the ideal structural model intended to balance power between the two sides of the matrix.
A key advantage of the matrix is increased inter-departmental communications. The dual-reporting nature of this structure increases information flow through cross-functional communication channels. However, this can result in communication overload.
The dual-reporting relationships have proven disadvantageous by creating a lack of accountability for performance goals, resulting in unmet performance measures and delays in completing internal projects. Dual-reporting relationships may provide opposing directions, creating role conflict and ambiguity for personnel. Personnel may feel a loss of authority and control over their jobs. The matrix model produces increased costs as a result of the additional managerial and administrative personnel hired to support the complex structure. Matrix companies tend to be bureaucratic and decision-making can be overly complex. Texas Instruments is a prime example of a matrix-run organization where leadership is broken into groups and functions within the company.
To Put It Simply…
In short, centralization is appropriate for the enforcement of internal controls and compliance while decentralization allows for diversification across geographies, customer segments, and product lines. The matrix structure is often the most difficult to efficiently sustain due to increased complexity.
Trenegy uses the following approach to help clients through the design process:
- Define division of responsibility. This means deciding how the organization’s operations will be segmented. The company should examine the degree of complexity and impact each business driver (product, customer, geography) has on the company. For example, organizations with a high degree of differences across product lines should divide organization responsibilities between product lines.
- Define key leadership roles. This starts with defining the key leadership team underneath the CEO. Executive leadership can outline the company’s core work processes and translate them into key executive roles.
- Define delegation of decision-making. This means defining the level of centralization and decentralization of decision-making. The company should take a look at their core processes and decide where accountability should be delegated. Customized processes requiring specialization may be delegated or decentralized while repetitive decisions may be kept centralized.
- Define specific roles. Based upon leadership roles, division of responsibility, and delegation of decision-making, the company should define the manager and supervisory roles. This includes identifying knowledge, skills, and abilities required for each position.
- Execute action planning. Once the design is finalized, the company should define what other considerations should be implemented as a part of the new organizational structure. This includes identifying changes to processes, rewards, and performance management processes.
After a company goes through the redesign process, several considerations for implementation should be evaluated:
- Develop organization charters (roles and responsibilities). Compile relevant information for justification and assign owners to ensure committed sponsorship of each action item.
- Prioritize supporting process improvements. Define the process improvements needed to ensure a smooth transition to the future state.
- Identify employees. Define the roles and responsibilities needed for the new organization and fill positions with the right people.
- Develop a communication plan. Set a clear timeline for the implementation plan. Determine how you will effectively present and promote these changes to internal and external company stakeholders.
- Finalize the roadmap. Ensure the plan is well-defined, achievable, measurable, and has executive leadership buy-in.
- Implement the new structure. Define how the executive team will operate once changes are realized and remain actively involved and invested in the transition process. Listen to affected personnel along the way and manage expectations while refining the implementation plan.
Is the Management Consulting Industry Dying?
by Bill Aimone & Julie Baird
Is the management consulting industry dead? Doubtless the industry has changed, but it’s not gone forever. It’s just time for many organizations to adopt a new, non-traditional business model. Hear our team’s perspective on the shifting industry below.
Featuring Julie Baird (Senior Manager) & Bill Aimone (Managing Director).
Connect with Trenegy for more non-traditional insights.