Content rules!

Once upon a time there was CONTENT (him) and long long long long after the content met METHODOLOGY (she). The content is the king. And methodology the queen. And they lived happily ever after. Fairy-tale like. It is. You have to have both to be successful. First tells you which cost categories you should address, where in the processess/contracts/ways of working you should look them up. The second tells how it should be planned and executed.

Why? Without the right content no cost reduction project can be successful. The whole idea is to tackle the right business areas, appropriate costs and to apply correct measures, looking at them content-wise. Methodology only helps us to do it right, to be able to have every single step transparent, measurable, trackable, that is, "under control" to see whether the whole exercise leads in the right direction. Methodology eases the job, content enables the job to be done.

Try not to mix the order up! You can not start with the methodology and hope that someone will come along to fill up with content the empty plan tables of measures. Yes, we can see plenty of such projects. They are doomed to be unsuccessful, at the best very late if you by any chance somewhere in the middle meet the right person (internal or external knowledgeable consultant) to put you on track content-wise.

Here are some tips on the content of the cost reduction program you should follow:

• Don’t focus on selected business areas only. Procurement or IT or marketing alone (the "low hanging fruits of cost reduction") should not be the focus but they should be done: 
• They benefit your company and unleash your team potential 
• The quick wins eliminate/reduce team frustration and prepare for more complex cost reduction initiatives to furnish more substantial improvements.
• Don’t limit the cost reduction activities to mother company – take it along the corporate governance infrastructure. 
• Include subsidiaries in cost reduction activities with same ideas, methodological concept and approach, same executive infrastructure and adjusted goals, initiatives as well as implementation speed according to their specifics. 
• But acknowledge “specifics”!
• Don’t underestimate almost hidden acting of costs doing the law of large numbers! Bite by bite will small unplanned costs swallow your cost reductions away!
• Costs are like food. Slowly and regularly and over time they increase to a point you might have "overweight" problems. Especially, if you do not address them daily and carefully, with or without cost reduction program. Therefore, institutionalize costs by reporting and monitoring them regularly not leaving them only as highest priority category of your controlling officer, but also as a regular agenda of everyday internal meetings or occasional retreats. Introduce Cost committee to prevent rather than to reduce costs. That would excel your business model beyond cost cutting towards cost management of the target costs. If not there yet, use the cost reduction program to set cost management up. 

http://www.avanton.si

Buy solutions not time! Lead towards effective and efficient project management.

A lot has been already said on rule No 1: Tell specific enough why to do it! (Do you know how to answer 5 simple Whys; Gimme 5)  and rule No 2: Assign the Right Person to manage the project  (CRO's 50 shades of greatness; Right fish on the hook) in our previous blogs. 

In this one we will focus on external help you get in executing huge cost reduction programs. 

How is it usually done. You hire consultants to help you prepare, plan for and execute the cost reduction program. How? You analyze the situation and benchmark your performance against the competitors to see where are you weak. You identify areas where your performance should be better and to what extent better. Because you hired consultants, they do vast of the work. They are experts in the area, so they should know best, how to handle this things, right? At the end they bring nice wrapped book to the presentation and say: If you do this, your performance in terms of "x" KPI will be better by "y". Nice indeed. One more piece of "shelf-work" it is, because you do not know how to do it. Of course consultants have a solution: a new contract to do the work for you.

Why is this wrong? At the end of the process, in which you were heavily involved only with the operational and administrative tasks (collecting the data, preparing inputs, explaining parts of the situation), you do not have a clue how to proceed forward. You know vaguely what to do, but not how and what exactly. And all you really wanted at the beginning of the process was to come up with a practical program of measures which you could execute by yourselves to be able to achieve the goals. What went wrong? You were involved not commited. You let the consultants to do what they know and not what you need.

What should be done differently? You should make them use their knowledge to satisfy your need! How?

1. Analyzing and benchmarking done together with you. Make sure that you are involved in the cause identification process to be sure that the analysis led to the right causes and what is more important, that the consultants and you understand them in the same way. Understanding the situation is the first point when selecting the appropriate ways to proceed with turning the business around.

2. Reachable goals set. If you leave goal setting to the consultants, make sure that they are working with solid assumptions and your goals are reachable. At the end, they will leave the company, and you will stay to execute what was developed.

3. Detailed cost reduction initiatives developed by you AND consultants together. The proposals for cost reduction initiatives MUST come from inside of the company as they have to be adopted by those who will work and live with them. In case developed by the consultants make sure somebody in the company, who will be responsible for executing them, can and will identify with them.  The consultants should therefore hold your hand during the process and have at least couple of hundred cost reduction measures "on reserve" to support the process of designing the SCORE. To drag them out of their pockets, when you need to get the process going when you are stuck. It is required that draft measures and tools to track and oversee them in execution phase are prepared for every initiative (tables, spreadsheets, procedures, policies, …) as scope of their work, no extras can be tolerated. 

4. Follow the golden rule: Do not allow that consultants earn up-front! They should work hand in hand with you also when executing. Do not let them sell time they spend with you, but solutions they provide you with. They should support you with the implementation until you asses that the critical point was reached and you feel comfortable in doing the program further by yourselves. They should not be hired to prepare a report of 1000 pages, but to assist you in achieving the goals set. And doing ALL of this for the price they stated in the first contract you signed with them. Do not enable finding the reasons for the second and third contract their first priority. It is your money to be invested and therefore your CALL.

http://www.avanton.si

13 rules to succeed in SCORE!

No 1: Tell specific enough Why to do it.

No 2: Assign the Right Person to manage the project

No 3: Buy solutions not time!

No 4: Careful and continuous planning.

No 5: Choose the right content.

No 6: Use adequate infrastructure.

No 7: Keep project plans integrated.

No 8: Get everyone on board.

No 9: Negotiate!

No 10: Allow mistakes.

No 11: Lead not administer.

No 12: Do what you said!

No 13: Use savings as a "new currency".

Read how to do every single point in next blogs...

Right?

SCORE! with us

Can you imagine Cost Reduction  without cost cutting? We named it: Smart COost REduction or just simply

Our story(ies) tell that cost reduction goals are part of strategy, stakeholders are aligned, sponsors committed and program governed and managed. Can it be done? Yes! However, content and methodology pitfalls do exist.  How to overcome them?

1. Let your strategic goals to be your “lighthouse”.
2. Do not allow moving targets. Set effective top down goals and plan bottom up.
3. Select your top man to lead the way – choose “costkiller” carefully.
4. Attract people to want to be the part of the program. Small gardens are already in the company – don’t cultivate them any further.
5. Negotiate!
6. Allow the people to make mistakes.
7. Let Euros/Dollars saved become the new currency.
8. KISS with 5W? approach!
9. Communicate and collaborate rather than use expensive IT systems.
10. Thinking of hiring consultants? Well, buy solutions not time.

 

It is not easy, but it can be done!  We write about it every week. Read us!

10 Colors to SCORE The Matrix! (3)

Another week is behind us and in front of us. It is time to continue the story of changing the organisation from the "squares" into matrix, which we started with http://blog.avanton.si/2014/03/10-colors-to-score-matrix.html and continued with http://blog.avanton.si/2014/03/10-colors-to-score-matrix-2.html. Let's finally change!

6. Change!
1st rule of change: If you want for the change to work, authorize people to make mistakes! While implementing change the mistakes are quite common companion. For sure, the changes are driven by people and people do mistakes. So, empower your colleagues to do mistakes too! For we don’t do right things the first time right. But encourage them not to repeat the same mistakes twice…

2nd rule of change: The change changes something known. And we fear the unknown. So, invest heavily in communication! It will repay you beyond your expectations. Listen to suggestions of The Catalysts during the change design and its implementation – they are the one that will actually implement the change, they will fight the unknown, the fear.

3rd rule of change: Be a decision-maker! Efficient implementation of the change requires prudent and affirmative decisions. Do not forget – the owner is paying you to be a leader – so you are paid mostly to take decisions. 

7. Drop the grey squares, boxes and lines... Shift to colorful donut and curves!
Playfulness aside. Above all: adapt your organizational structure in a way that it would also to a reader mirror how do you organize – in a contemporary, dynamic way representing revitalized business environment, where it's not only the BIG that eat the SMALL... it's also the FAST that nibble the SLOW!
Go simplicity, go! Remove the layers! Between you and The Catalysts as well as between them and next crucial, middle management level of strategy implementation. Why? To reach strategic goal, there should be controllable amount of complexity. 

Pave the way for P4P!

• simplification of internal policies – most likely all regulatory stuff are written in law already. So, don’t write what is written already. A real challenge for you – do the policy on organization on one piece of paper! Write systemization of workplace on not more than two!
• define not more than 5 KPI to be managed by one person. By increasing their amount you will defocus this person’s attention from critical success factors to mediocrity of plenty. And the importance of each individual KPI in P4P story would relatively decrease. No focus, no priorities…

New representation embraces all we talked about – basic business functions of the venture, key business processes, process pillars and still some squares (“what works with what will work even better). As well as … MBTI colors, for final touch!

8. Play the game!
From design to implementation of new organization it should take you not more than 3Q of one year. Define effective activities. Perform the action plan efficiently. Reorganize! Put formalizations on a piece of paper. Sorry, two – one for organization and one for the systemization of workplaces… Can’t be done? Sure it can! The best have already did it! Draw results in a contemporary way. Adjust the authorization system from boxes to matrix – and again - do it on one page for all key processes by using the RACI matrix. Additionally, adjust compensation system for P4P. Reward people for their results!

9. Evaluate success of the SCORE implementation! 
a. Have you negotiated new procurement contracts and decreased prices for at least 5-6%? 
b. Have you implemented at least 200 proposals of cost rationalization measures for additional up to 10% savings?
c. Have you straightened the chain of command by decreasing thenumber of organizational units for more than a third?
d. Have you improved your key business processes in a “materialized” way? Have you set KPIs?
e. Have the matrix process integration led by The Catalysts decreased the importance of silos and ranks to the extent that engages and empowers people to participate all their their effort to meet the goals?
f. Is importance of individuum appraised not by the position in the organization, but according to his /her contribution in the working process?
g. Is inefficiency of redundant dualities overcame by complied interests that, interplayed in the business process, encourage employees to cooperate in healthy environment of coopetition?
h. Have employees, as empowered and engaged, become responsible for the work they perform? Therefore, they are exposed to the consequences of their action and they now that they will be held accountable for…
i. Do you compensate employees accordingly and by introducing P4P decrease negative selection?
j. DO YOUR COLLEAGUES COMMUNICATE IN A MATRIX WAY?

10. Do a follow up!
The improvement never stops! WWW – what went wrong? Or… what went wonderful? Where and how to improve?

All this in a year?

Magic triangle of achieving the high quality operational excellence within time and budget that predefines success of change does not refer to SCORE! toolkit, but to PEOPLE, which with small change in their mindset enables big change for the company:

Saved for the end… Let’s be clear:

Referring to the current recession in search of explanations for the rationale behind implementation of such approaches might be seen at least as a dubious behavior. And it really doesn’t matter whether the company is in distress or it is a blue chip in a long prospective stable industry. It’s not just cost killing neither solely business process reengineering. It is all together, mixed right.  It has to be simply the principal occupation of each and every MB – to optimize what they have been entrusted with – THE COMPANY.

For donut to work, it is not enough to remove the boxes and lines, survey and improve the business processes. We need to work with people, to enable them to interact and cooperate in revitalized organism, where they would be motivated to fulfill the set goals. Leaders should give change a chance and be an example to those that lead - not solely delegate the work.

10 Colors to SCORE The Matrix! (2)

Bye, bye Divisions… Hello Matrix!

In our previous blog (http://blog.avanton.si/2014/03/10-colors-to-score-matrix.html ) we've shown what are the preconditions and what kind of attitude and environment is needed for the organization to change. In this one let’s set the map, define the playground, and establish the basic principles to play the game of organization revitalization.

 

1.       Let’s give the game a name: It is the Matrix!
Not the traditional functional, nor the pure futuristic process organization. Let’s combine the two and organize in a matrix-process way. Know what to do? Big picture:
·         Combine what works with what will work even better!
·         Connect people to cooperate!
·         Put results before levels and ranks!
·         Adjust competences in a framework of accountability, responsibility and authority!
·         Align key performance indicators with key processes!
·         Reward results accordingly!
…you’ve set the map.


2.       Define E2E processes: Start with the key ones!
Not identify “all” 35-or-so of them. Just a few, the handful of key ones. Those vital for company to be present on market also the day after tomorrow. Those that usually produce the most of revenues, or burns the most of your resources, by means of money, time, FTE. They, in a way, usually embrace all three basic functions of every venture:
·         you have to produce something,
·         to sell it on a market, while some internal structures exist
·         to support your operations
…you’ve defined the playground.

 

The key business processes in the Matrix cross the silos


3.       Define the principles of change: Business. Professional. Ethical!
Minimize the employees’ fear of the foreseen change: outline principal rules of reorganizing! Explain how to align the change with the company’s strategy? How to put the customer in the external and the product in the internal focus of the future organization? How to transfer silos functions into a matrix? Should you consolidate or centralize same business functions across the company and the group? How to include the cross-border operations? Why strengthen individual responsibility? From perspective of communication channels, what would be the span of control - 1:10, 1:15, …? How to communicate the change?

Never forget ethical principles, especially those based on the company’s values! …you’ve defined the rules to play the change according to them.
…you’ve defined the basic rules to play the game.


4.       Make one magic rule: KISS
Keep It Simple and …. Smart! Since we avoid doing stupid things…. Both, the approach to change as well as the result of it should emphasizes the simplicity in every aspect. It is excellent to improve, but it is art to do it in a simple way. For that, use the best of combination of both, the IQ & EQ business approaches while addressing with and negotiating the employees with the change.

And, besides its right measure in the communication, don’t bring business politics into process – wherever you detect potential to improve, align on arguments and do it! Avoid dualisms of business solutions! They mostly occur due to two reasons:
·         ineffective business decisions, i.e. miss planned development or change implementation. Remember? Do the right thing (first time right)!
·         inefficient operations of taken decisions. Remember? Do the right thing (first time right)!
·         avoidance of conflict with employee or to please him/her… It’s in human nature!

Especially the last occur not so rarely. Why? Two conditions: 1)- if possible, and 2)- rather than confronting with our colleague, we introduce a duplicate solution in the business process. Really? Why do we have decentralize procurement, or hire unnecessary assistant or adviser, or establish middle office, or additional organizational layer, or have more than three vice presidents, or…? Why should owners pay for these? Dualism is never (cost) efficient – it will definitely backfire by burning you some extras of your resources.


5.       Wake up those who (should) lead!
Choose those few to be in charge of being the promoters of change. They should be self-initiative in becoming the catalysts of changes as foreseen in the company’s’ strategy. Those few leaders of new organization pillars are closely in step with the management board. Their top mission is to understand the necessary changes and to help to evolve them into and out-of the strategy. They should put their competences along with accountability in line of fire while they will promote the changes throughout the company.
 
They are to be paid mainly to bring people together to cooperate as appointed towards goals. They should become the main architects of healthy middle management environment driven by coopetition. By increasing engagement of people and putting them into interplay with intention:
·         to stimulate them how they should work together (cooperation) in the activities and processes while truly understanding what they should do in how to contribute to goals
·         to give them measurable goals (competition). But not by bucket full of KPIs! Less is more! Up to 5 measurable goals should everyone take as a maximum set of goals – as much as we have fingers on the hand that we look around for whole life!
 
Management board should fully support The Catalysts in removing all kind of obstacles. To promote cooperation, decrease the importance of formal as well as informal organizational layers and ranks relatively to importance of the “role of employee” business process, to pound dualities, to promote interplay and foster cooperation.
 
The Catalysts, if necessary, need to raise awareness among employees of what is their scope of work. And their importance in the business process. They should be fully aware of what other employees in the same process are doing. So, it is not solely a job description of individuum workplace that’s important… what really matters is entire type of work surrounding the individuum’s workplace in the process. As we said – beyond the boxes and lines in order to understand the content of work!
 
In the new organization, The Catalysts are formally in position of pillar executives. They are business integrators. They catalyze both, the business as usually as well as the changes needed. They appoint the middle management in converging strategic directions and goals, also over the KPI’s, to the everyday work of each individual employee. And affirmative engagement of the employees in the business process form results.
 
With such approach, the coopetition in Matrix will burn less of company resources than divisional decision making. For sure!
 
And remember - who is paying for dualities?? And the price for it? Not rarely, these can account in average up to a quarter of your OPEX…

Read in our next blog how to change and how to measure success! Until next week...


http://www.avanton.si