Archive for the ‘Performance’ Tag

Pay people more

My late father used to say that when you pay peanuts you get monkeys.  He may have been on to an old management idea beginning to percolate again. The idea — at odds with conventional wisdom — is that paying people more may boost productivity and reduce cost by increasing employee engagement, reducing attrition and attracting new workers. Though this approach would be unrealistic for many companies, it may be worth pursuing for certain industries and some minimum wage jobs given the problems with traditional approaches.

Organizations are facing strong headwinds.   Margins remain tight, generating real innovation is difficult and consumer demand remains uncertain. Over the long run, managers face looming labour shortages and possible technological disruption.

The productivity puzzle

To cope, firms have implemented headcount reductions, wage freezes and supply chain rationalizations.  Though these have been successful they can only go so far.  The only fertile area left to significantly improve performance is to boost employee productivity.  Yet, increasing worker productivity is easier said than done, for many reasons. For one thing, most companies suffer from chronically low employee engagement (typically only 35% of workers are positively engaged). High employee turnover, poor or non-existent training and pervasive skills gaps also act as brakes on raising worker productivity and containing costs.

It would be naïve to think these problems do not have a compensation component.  Would a wage increase help address these issues?

A novel fix

In 1914, Henry Ford, the father of mass production, famously doubled pay at his factories in order to fight attrition but also so that Ford’s assembly line workers could afford to buy the cars they were making. This strategy paid off immediately and impressively, generating:  higher employee productivity, improved retention, a flood of new applicants and a major boost to the American economy.  The challenges faced by Ford in 1914 would be familiar to many executives today in the retailing, hospitality, construction and manufacturing sectors.

Some recent business cases support the notion that paying people more will generate higher productivity and help cut costs.  For example, Forbes magazine reported companies can reduce the high cost of employee turnover and retention (expenses that can run in the tens of millions of dollars), and job dissatisfaction by paying a higher starting salary and offering more benefits up front. They cite leading retailers like Costco, Trader Joe’s and Zappos as examples of firms that pay and train more, and in turn achieve significantly higher retention and performance levels.  All of these firms have done the math and figured out it’s cheaper and more beneficial in the long run to pay higher starting wages and deliver high value training. According to Lloyd Perlmutter, veteran retailer and president of The Beacon Group, a retail and organizational consultancy: “While base compensation is an important factor for front-line employees, people also respond to cash incentives, fun contests and any additional training and development to add to their skill sets.”

Providing more compensation to some employees can make sense for other reasons. Like Ford, offering higher pay signals to its workers and the market that the firm recognizes employees, values performance and is willing to pay for it.  This enhanced reputation may attract more workers than a company with a low-pay reputation. In addition, a pay increase for some employees may end up being less costly in the long run than the cumulative cost of multiple employee engagement initiatives (the dirty little HR secret is that most fail), dashed worker expectations and wasted management time.

Ask the right questions

Management should tread carefully; many employees are already at the top end of the pay scale or are in non-permanent jobs.  Before committing to a blanket pay increase, managers will want to explore two key questions: 1) what is the true productivity and cost hit of high employee turnover and dissatisfaction and; 2) If the answer to #1 is significant, what wage and/or benefit increase can move the needle without busting the corporate bank.

Dip your toe

Not every industry or business will be a good candidate for a wage-based fix. To test the hypothesis, managers should experiment first with low-performing business units, focusing on minimum wage jobs. Ideal situations will be companies that:

  • Feature high levels of turnover
  • Have difficulty finding employees with the right skill sets
  • Employ low-level workers who can directly impact revenue

Increasing compensation is not a sop to socialists, although one could make an argument that reducing pay disparities is a socially worthwhile goal.  Paying some workers more can make business sense by reducing costs in the long run and kick-starting revenues. Savvy managers should pilot this strategy in a contained department or business unit and carefully study the results.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

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The curse of expertise

Conventional wisdom says that possessing deep subject matter expertise is a prerequisite for organizations looking to innovate. Yet, when product managers, technologists or innovation gatekeepers have too much knowledge their preconceived notions or experiences can prevent breakthrough solutions from emerging.

This common psychological state – we call it the ‘curse of expertise’ – is considered by psychologists and behavioral economists to be a harmful cognitive bias, preventing some individuals and teams from finding and implementing ‘out of the box’ innovations. Companies looking to be more innovative can preempt these effects through organizational change, new staffing practices and the use of specialized facilitation tools.

Every person has cognitive biases. They arise from our need to make sense of a situation before deciding on a course of action. Contextual understanding and subsequent actions are typically shaped from past experiences, knowledge as well as likes and dislikes. Our automatic and practical response to difficult business challenges – which is what innovate thinking is all about – is first shaped by our understanding of ‘how we’ve always done it here.’ If we have done it (or seen it done elsewhere) in the past, that’s the way, it probably is going to be done — rightly or wrongly — in the future. This bias is closely connected to another organizational predisposition, the NIMBY effect. The ‘not invented in my backyard’ bias also makes it difficult for external ideas or technologies to be accepted and business challenges to be met.

Self-evident? Perhaps. In our consulting experience, many companies and their leaders often don’t recognize there is bias in their thinking or processes. Even when they acknowledge the predisposition, the effects may be too strong and institutionalized to enable breakthrough thinking. To overcome the bias, some organizations will try to bring the outside in by pursuing Open Innovation strategies or acquiring innovative start-ups. While often successful, these strategies can still fall victim to the curse. New ideas, approaches and technologies still need to be filtered, evaluated and disseminated through the organization. Not surprisingly, the role of innovation gatekeeper and cheerleader often falls to knowledgeable and experienced managers – the very people with the ‘curse of expertise.’ Alas, great ideas will get to the front door, but typically not inside.

The curse is not always apparent. Also problematic is how the curse influences analytical and decision-making practices. For example, managers often write detailed requirements and desired specifications for new innovation projects based only what they have seen work in the past, not what may actually be possible or viable. In order to make this process manageable, some R&D leaders will inadvertently limit innovation by creating exclusion lists that routinely ignore certain companies, industries or technologies from their consideration.

It is not a foregone conclusion that a company full of experts will suffer from the curse. Many innovative companies – usually stock full of knowledgeable people – are able to mitigate the curse through their processes, policies and cultural norms. Our innovation-focused consulting work leverages many of their best practices, including these 4 strategies.

Get recognition

The curse is most dangerous when no one recognizes or challenges it. One way to recognize the 800-lb gorilla is to approach the business challenge in an agnostic and objective fashion, by defining up-front the real problem to be solved and the solution’s ideal benefits and characteristics.

Find the right data

Innovative thinking often gets kiboshed by experts based on their – nebulous, out-of-date, or unverified – opinions. Indeed, gut feel has an important place in decision-making. Highly innovative companies, however, emphasize the primacy of holistic and credible data, especially that from consumers, over opinion. Two effective ways of getting good data is through undertaking proper qualitative and quantitative research, and conducting ‘quick and dirty,’ measurable experiments.

Foster diversity

Staffing innovation teams with diverse roles, knowledge, and cultures is a proven way to enhance problem solving, avoiding groupthink and inciting breakthrough creativity. Diversity-enhancing measures should also cover hiring and job rotation practices, corporate education programs and cultural initiatives.

Leverage specialized tools

Our firm employs a variety of facilitation tools that help firms challenge conventional wisdom and push innovation boundaries. These tools vary from specialized analytical techniques like problem restatement or divergent/convergent thinking to establishing an internal or external ‘devil’s advocacy’ group to tackle the business challenge in a totally different fashion.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Boost marketing performance

The marketing landscape of 2013 is a menagerie of media vehicles, digital tools & platforms, Big Data initiatives, sales channels and influencer programs — all requiring coordination, integration and funding.  Making sense of this complex world is a challenge; it’s hard to know what’s working and what’s not.  Conventional evaluation tools like ROI have their place but they are not strategic and don’t go deep enough in analyzing plan effectiveness.  To really evaluate marketing’s worth, it pays to go back to basic principles. We have found that asking five questions can help determine whether the marketing function is “doing the right things, right.”

Do we really understand our customer and what influences them?

For many companies, the answer is an unfortunate no.  This knowledge gap goes beyond understanding basic needs; it touches on how consumers interact with companies, who or what influences their actions, and what sub-conscious triggers drive purchase behaviour. Even data-intensive companies often know little about how specific tactics — like social media or TV advertising — drive purchase, as well as how various programs interact with each other.

To maximize performance, managers need a new, 360-degree view of today’s consumer.   “Connecting with clients is much tougher now than it used to be,” says Lynne Coles, a senior B2B and B2C marketer.  “They are one click away from becoming as well or even better informed than the firms trying to sell to them. They’re also just one click away from sharing their opinions and experiences with an ever-expanding activist community. Marketers need a holistic approach to understanding the entire customer experience across all channels.”

Is our value proposition relevant and differentiated? 

Whenever I give a speech on branding, I ask the audience members what their value proposition is, and can it be supported.  Typically,  80% or more list the same benefits, like great service or lowest cost.  Furthermore, less than 20% of the audience will link a meaningful outcome and explanation to the benefit (e.g., thanks to newer technology, XYZ brand delivers an 80% savings versus the leading brand). These ad hoc surveys usually point to serious flaws in a company’s core positioning, that no amount of spending or technology can fix.

Most firms can differentiate.  Many already do, they just don’t realize it.  The marketing challenge is around finding meaningful strategic differentiation and then driving the message through all marketing tactics as well as the customer experience.

Do we have enough information and wisdom to make decisions?

Exploiting Big Data — using advanced methodologies and tools to mine data for insights — is all the rage these days.  Making it work is another story.  Companies may collect a lot of data but it is not always accessible and usable. Furthermore, much of the data may not be germane to marketing goals.  Finally, data mining skills does not necessarily translate into wisdom that would help in areas like fostering innovation or creative development.

Modern marketing remains as much an art as a science.  Companies require proven analytical and IT capabilities plus common sense to ask better questions and to make better strategic and tactical decisions.

Are we using the right metrics?

Einstein said, “not everything that counts can be counted, and not everything that can be counted counts.” Many firms use metrics that cannot be effectively measured, are unrelated to strategic goals and lack organizational buy-in. The choice of metrics is important.  They play a major role in driving management focus & behavior, allocating resources and in framing the evaluation of marketing plans and vehicles.

Leaders should regularly confirm that each tactic is properly measured, evaluated and then linked to the long-term, strategic goals of the company.  Managers should also be mindful that a slavish focus on metrics is not a replacement for solid business and creative judgment.

Is the organization enabling marketing?

Many leaders believe their firms are market(ing) driven, with a mission to fully satisfy in a differentiated way the needs of consumers in attractive markets.  The organizational reality, however, is often different.  Other internal groups frequently have different agendas, a disproportionate share of internal resources and dissimilar perspectives on what drives long-term performance.  These dynamics are natural but could result in strife, lack of focus and poor resourcing.

Marketing performance — and ultimately competitiveness — will suffer without adequate alignment, investment and capability-building. Making the marketing mission real will be part cultural change, part priority-setting and part talent management.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

 

Optimize the channel experience

Firms competing in channel-intensive markets are regularly challenged to satisfy finicky and value conscious customers without introducing too much cost and complexity.  All too often, however, a firm’s customer experience and value proposition is compromised by channel partners whose objectives, value proposition and capabilities are strategically incongruent.  For example, we worked with an IT equipment manufacturer whose premium brand image was hurt by the actions of a deep-discounting, low service distributor.  In another case, a leading consumer goods company could not satisfy customer service requirements because one of their retailers was unwilling to invest in new capabilities. 

To maximize customer satisfaction, managers should understand how their channel partners – such as resellers, portals, service providers, installers and retailers – interact with buyers through the entire marketing-purchase-service continuum and then work collaboratively with them to enhance that experience.   

This will not be an easy exercise. Many enterprises have thousands of SKUs, work with hundreds of channel partners and use multiple platforms to sell, communicate and serve customers.  There could easily be over 100,000 different physical and digital touch points between consumers, producers and channel partners.  This hodge-podge can only lead to conflicting, poorly integrated and uncoordinated marketing, channel and service programs resulting in failing customer experiences, overly complex operations and lower margins.

The root cause of this problem lies in misalignments between the structure of the channel and how consumers want to get information, purchase products and receive services.  Channels that are underperforming or based on yesterday’s requirements are often unable to accommodate current market needs let alone deal with growing consumer demands, new product launches and emerging digital technologies.

In reality, consumers no longer separate the channel from the product, service and message — the channel is the product. In the era of buyer engagement, customer acquisition and retention is a lot about effective channel management and design. To truly engage consumers through a multi-channel world, companies must do more outside the confines of the traditional channel marketing function.

Improving the channel’s ‘customer experience’ requires three fundamental changes:  1) an agreed understanding of buyer needs across the entire continuum;  2) a commitment and action from the entire channel to satisfy these needs — not just from the company’s marketing and service departments and;  3) a redefined channel management function that links the organization to a desired and brand-compliant channel customer experience.    

We have helped organizations design and implement new channel management programs that have enhanced customer engagement and reduced operational costs while driving higher revenues and service levels.  Some of these principles include:

Expand the channel role beyond just marketing

To better engage buyers whenever and wherever they relate to a firm’s product, companies must expand the channel management role beyond sales and marketing to include input to and co-ownership of all customer-impacted operational, IT, product and service decisions.    

Bring the channel into organization

To improve performance, firms need to bring a rich understanding of channel requirements into the enterprise.  This can be done by creating internal councils with IT, finance and operational representation.   As well, important channel relationships can be managed through integrated, cross-functional teams with P&L responsibility.

Tweak the channel

A good starting point is to think about the channel experience as customers do – a series of related interactions that, added together, make up a ‘moment of truth’ experiences. This approach will naturally identify areas where the channel can be redesigned and better managed to ensure strategic congruency.  This process will usually trigger a discussion of who internally is in the best position to manage these activities and what resources and capabilities are needed to achieve the new vision.

Get everyone on the same page

Channel engagement (at key touch points) and performance should be regularly measured with some of the same metrics that are used to evaluate brand image, operations or marketing effectiveness. All channel partners should align around these metrics and goals

Anticipate challenges

Optimizing the channel experience will not be easy given the business risks and the organizational implications to partners, employees, processes, technology and strategy.  Change will be doomed if management and the channel:  1) do not have a common understanding of their markets, buyers and value proposition and; 2) do not work collaboratively towards the same goals. If companies and partners don’t make the transition, they run the risk of being overtaken by competitors that have mastered the new era of engagement.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.