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Tuesday, August 27, 2013

The under-appreciated importance of Execution

I came across this nice piece on Execution the other day and since I've recently been writing about the very subject I thought I'd share the link. The author makes some very interesting points about the common aversion of many executives to execution as a tactical matter that is beneath them, and shares thoughts from Larry Bossidy and Ram Charan's excellent book, Execution- The Discipline of Getting Things Done. It's a short but well worthwhile read.


Tuesday, August 20, 2013

Why Measurements Matter

I was re-reading Bill Gates' annual letter on behalf of the Bill and Melinda Gates Foundation the other day (www.billsletter.com) and reflecting on the power and importance of measurement. Bill stresses this issue in the opening part of his letter and cites numerous examples of how careful measurement has helped numerous foreign aid and humanitarian programs to be evaluate their effectiveness and make adjustments which led to even greater successes. While he is speaking about large global development issues, his comments are just as applicable to the business world and I encourage everyone to read it.

In it he refers to William Rosen's fantastic book, The Most Powerful Idea in the World, about the invention of the steam engine and in particular about the development of a new way to precisely measure energy output. The book makes a very strong case that this invention, which enabled people to evaluate quickly and effectively the impact of design modifications on performance, was the key to fostering the rapid innovation which created this enormous expansion in our quality of life. As Rosen wrote it enabled invention to become "commonplace". Rosen makes a strong case that without such tools, invention is "doomed to be rare and erratic".

I believe the same is true for business operations, and not just on the product innovation side of things. Operational improvement is essential in every business, and having measurements that provide us with fast, effective feedback is critical to success. Businesses and markets are highly complex organisms so it is rare that anyone would succeed completely in the launch of any new initiative or improvement. We need a way to get fast and accurate feedback on the actions we take, or we are destined to flail around blindly trying new things and hoping they work.

Organizations are launching new initiatives all of the time, whether it's re-structuring, or some program like Lean, Six Sigma, Balanced Scorecard, TOC, etc. Unfortunately most of these efforts go on for a while, deliver little real gain (at least less than expectations in almost all cases), and then fall by the wayside. Re-structuring is a good example. How many companies have go through re-organizations to make them flatter or more hierarchical, more centralized or less centralized, only to go in the opposite direction 5-10 years later when they are going through a down period? And how many times have you heard: "Oh we tried (fill in the blank) already, it won't work for us", even though some of the things worked and also worked in other companies. The next step of course is to abandon the initiative entirely--to throw the baby out with the bath water.

Improvement efforts often take a long time, but, why? And do they really have to? Of course they will take a long time (and deliver much less than they could) if we don't have a fast, effective feedback mechanism like Rosen talks about in his book, because it will be trial and error, with little way even to evaluate our errors. But what is it like when we do have a fast feedback loop that quickly tells us the effectiveness of our actions, and points to where and how they are falling short. Monitoring how effective are our improvement actions in business provides us the input we need to make the small corrections, additions, and changes that will get us to the next level. It's not about luck, and its not about genius, it's straightforward test and re-test. You hit a golf ball on the driving range and it slices to the right. You get immediate feedback that your clubface was open at impact and you need to make an adjustment in your swing to close it. Imagine what it would be like if you couldn't see the flight of the ball to tell you how effective your swing was?

For years I have included this as one of the five key principles of improvement that I share with my clients--take structured actions and design ways to get fast feedback on their effectiveness. "Structured actions" means implement changes consistently because if you do things a little bit different in different places/ situations, you won't know what really caused the results you got. It's not easy to design these fast feedback loops so that you can judge the effectiveness of your actions, and I think too often we skip this step in our excitement to improve things. But the price organizations pay when they skip this step will be high. The good results they do get will be slower and lower than if they were able to monitor progress over a short horizon and make the small corrections that are almost always needed.

Thanks to Bill Gates and William Rosen for reminding us of just how important effective, fast measurements are to any process.

Friday, August 16, 2013

The Strategy-Execution Gap, Part 1

Lately I have been thinking about the challenge executives face in turning strategy into effective execution. Over the years I have read numerous reports on studies and surveys of executives who routinely list "failure to execute" as the leading cause of why the company underperformed. From my experience I am inclined to think this is true and happens a lot. And I've certainly seen companies succeed brilliantly with mediocre strategies that were effectively executed.

While there are undoubtedly causes specific to a given company and why it failed to properly execute a strategy and reap the rewards, with anything that is widespread like this phenomenon, there must be some common causes at the root too. Whenever I look for such underlying causes I immediately start with basic principles of management that are of a more generic nature, things that are likely to be common in most organizations.

One of the most common practices of management is to divide to conquer. In other words in order to manage a large and/or complex business we will break it into functions, departments, business units, regions, etc. in order to more effectively manage the many pieces. And then of course we have to have some measurements in order to evaluate and control what each function, level, department, etc. does. Measurements are one of the great tools of management because not only do they help tell us how we are doing, they also drive what gets done and how it gets done. I believe the old saying is true: "tell me how you measure me, and I will tell you how I will behave."

While every company has global measures, like Net Profit and ROI, they tend to have many more measures that are used to evaluate and drive the performance of the individual parts of the business. Since individual departments can't fully control the global profit and ROI measures (e.g. manufacturing can produce great products but if sales can't sell them profitably, the company won't make money), these local measures are needed to evaluate the performance of the local area and will tend to be the more important measures for those managers and staff.

The beauty of this breakdown is obvious as it enables managers to influence, control, and direct a far bigger operation than one could supervise directly. Unfortunately the very potency of such a powerful mechanism means that it can also do great damage to if not used carefully. And this is one of the main ways I think strategy can go off the rails when it comes to execution. If the local measures are not closely tied to the strategy, and designed in a way to produce the needed collaboration between departments, functions, etc. the organization can quickly find itself working at cross-purposes with itself. In my experience this mis-alignment happens often and undermines the organization's ability to reach its goals, though often in ways that are not obvious or readily recognized by management.

Here are some examples of how some common local measures contribute to profits being lost:
  • Manufacturing is often measured according to costs using some form of efficiency measure. This drives each department and plants in general to produce goods in large batches to maximize these measures. But large batches delay the production of other items and many companies find themselves with surpluses of some items and shortages of others--increasing working capital, and lowering sales. 
  • In many companies purchasing is driven to buy items at the lowest cost using a measure like purchase-price variance. While everyone wants to buy their parts and supplies at a low cost this can lead to buying from less reliable or lower quality suppliers, or to purchasing in large batches (to get a lower unit cost), resulting in production problems or even late shipments, and elevated inventory levels or even write-offs, respectively.
  • In one of my former employers we measured manufacturing engineers on cost savings generated. So they used their powerful knowledge to come up with ways to run more parts through a given machine faster, often investing thousands in new tooling. Often though these were not bottlenecks and the neither produced more throughput, nor resulted in laying anyone off, they were just cost-savings on paper--but they sure looked good on their local measures.
  • Many consumer goods companies motivate their business units using quarterly sales targets. This creates the incentive to sell at discounts in order to achieve the goal, and the retailer to wait and stock up on goods when the end of the quarter sale rolls around, undermining full-price sales. 
  • In software design and other types of project environments, it is common to measure people on  how well they deliver on their individual work tasks within a project. This naturally causes people to provide lengthy estimates on their tasks in order to be reliable in the face of the inherent uncertainty of project work. And then, knowing that if they deliver ahead of time they will be forced to cut their estimates the next time, there is a disincentive to finish early--no wonder projects take so long!
  • Of course the same thing happens with budgets. Budgets are used almost universally in companies to try to control spending--certainly a good idea. However since how much money one needs for the year is an inherently uncertain thing, everyone will pad their estimates, inflating the budget, and then spend it because if they don't the will get less the next year.
There are many more examples one can bring, but I think the connection is clear--local objectives and their supporting measurements often result in actions that are counter-productive to the company's performance. If they are not carefully analyzed and aligned both to the strategy and to each department/function's role in supporting the strategy, can readily undermine the execution of any strategy, no matter how good it may be. I think this is a major contributor to why many companies fail to realize the promise of their strategies and underperform expectations.

Tuesday, August 13, 2013

Want a Quick way to improve productivity: Stop Multi-tasking!

Multi-tasking is so pervasive in organizations, and modern life in general, that we often don’t even think about how damaging it is to productivity. Even worse many people claim to be great multi-taskers whose productivity doesn’t suffer from switching between tasks. Unfortunately all the research now being done fully supports, what even a simple exercise in multi-tasking shows—it’s not only damaging to individual productivity its devastating to organizational productivity. This is particularly true when the work being done is only one activity in a large process or project—as most work in organizations is.
Let’s define multi-tasking as stopping one task, before it is either complete or has reached a logical stopping point to go and do something else. This seemingly benign behavior creates two significant problems. First it drains the efficiency of the individual, because every time a task is set aside to go do something else the person must spend time “getting back up to speed” when s/he returns to the task. For most of what I call “knowledge work” this time can be considerable, and in many instances this re-starting is also the source of errors or bugs as things are missed. If a resource has to re-start a task several times, the amount of time spent repeatedly preparing to do the work, can easily exceed the time spent doing the task. Additionally, because people are always busy, either working on a task or getting back up to speed on one, it appears that there is no spare capacity anywhere, no efficiency to be gained. And many organizations find themselves having to add staff, even though in reality there is substantial hidden capacity, on top of the frustration and quality problems stemming from multi-tasking.
As if this wasn’t bad enough, the larger, and less well understood, issue is what it does to organizational efficiency. When people are forced to multi-task, that task gets interrupted and set aside, unfinished. But the clock on the work doesn’t stop, it just keeps ticking; so that customer’s project, application, product, claim, or whatever is not moving, but it’s eating up time, waiting for the person to come back to finish it and move it to the next step in the process. Each interruption delays the completion of the task and extends the lead time. Since multi-tasking is likely to happen at each step of a process these delays multiply quickly. Lead times and backlogs can grow quickly this way and jeopardize the performance of the company, eroding customer satisfaction. It’s not easy to precisely quantify how much lead times are inflated, but it’s typically far more than one would think.
I typically use a simple game to illustrate just how much multi-tasking impacts organizational performance. If you like you can do it on your own in just a minute. I ask people to perform three tasks: write all the numbers 1-20 in the first column, all the letters A-T in the second, and then to draw twenty shapes in the third in the sequence circle-square-triangle. I then give people two options for how to accomplish the work. They can either complete it by working one task at a time, start to finish, (all the letters first then the numbers and finally the shapes), or they can multi-task doing one number, one letter, one shape and then repeating, as in 1, A, Circle, 2, B, square, etc. Not surprisingly everyone wants to work the tasks start to finish. At the same time they all readily agree that the second way, multi-tasking, is more like how they have to work in their organization. To play the game do the activities each way, timing each run separately. When you’re ready, turn the page to continue the discussion.
I always find it best to do the game in a group because you are assured to get a range of results, and a measure of statistical validity. Having done this with several thousand people over the years, the average times to complete the three projects is typically:
Multi-tasking:                    85 seconds
Without Multi-tasking:  45 seconds

While it’s a simple game, it’s a very powerful illustration of the impact of multi-tasking:
·         If you multi-task, it takes twice as long to complete the tasks
·         If you don’t multi-task, you can do almost twice as many projects in the same time
·         Everyone agrees its easier and probably produces better quality without multi-tasking—so you’re not getting more by “working harder”
In the multi-tasking iteration all three of the tasks finish at virtually the same time, about 85 seconds. But when they work each task start to finish, the projects don’t finish in a big wave, they finish one at a time staggered about every 15 seconds (15-30-45 sec. for the three projects), meaning that the first two projects finish dramatically earlier than with multi-tasking. It’s not hard to extrapolate the results further if we imagine that each of the three tasks was just one step in a larger process within an organization. If we assume there were 10 sequential steps in the project, the three projects would take 850 seconds to complete under multi-tasking mode, since each step takes 85 seconds to complete the three projects. However, working start to finish on each task the first task would be done and passed on after just 15 seconds, the second after 30 and the last one after 45 seconds. Each successive step, working the same way, would complete its stage in 15 seconds and pass it on. So for a 10 step project the first project would finish after just 150 seconds, with the second one at 165, and the third 15 seconds later and 180 seconds. Compared to 850 seconds under multi-tasking, this translates into a lead time reduction of more than 75%.
To be sure, reducing multi-tasking is difficult, and eliminating it entirely is probably impossible. It requires a shift in a number of common practices and some very common beliefs people have about how to work and what it means to provide good service to customers and colleagues. But what about the alternative? Continuing high levels of multi-tasking reduces efficiency, produces lower output, extends customer lead times, threatens quality, and makes everyone work harder for lower results. Personally I don’t know many faster, more effective ways of improving productivity, profits, and service than reducing multi-tasking.
Here’s a final thought to highlight just how much multi-tasking is impacting your business and its productivity: Do you or your colleagues ever come to work early, stay late, work from home, or work on weekends? People tell me these are some of their most productive hours…when they aren’t getting multi-tasked!  
Links to Press on Multi-tasking:
Also check NPR, they did a couple of interesting segments on the radio this year and several years ago.