pragmatic wisdom - metrics reporting · 4/2/2005 · pragmatic wisdom pragmatic: of or relating to...

Bill Guestcell phone 616.430.0828

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Andy Catlin616.638.8344 cell [email protected]

Pragmatic Wisdom 1Copyright © 2004 by Bill Guest

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ENTREPRENEURS ACHIEVING GOALS

METRICS REPORTING

Pragmatic Wisdom

Bill GuestManaging PartnerMetrics Reporting


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Introduction – Bill Guest

• Engineer, 12 years with GM and Delco Electronics• General Manager, engineering and design shop• VP Sales, electronics company• VP and General Manager, Leica ATS in Switzerland• General Manager, Bergstrom Off-Highway Group• Consulting, Dressta Construction Equipment, Poland• Teaching Operations Management, Shanghai, China• Exec. VP and CEO, Miquest Electronics (acquisitions in GR)• Managing Partner, Metrics Reporting, Inc.


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The Models

Sources of Pragmatic Wisdom:Strategy: Sun Tzu, Ansoff, Porter, OhmaeManagement: Taylor, Barnard, Drucker, Kepner/Tregoe, Peters, Covey, CollinsQuality: Crosby, Deming, Juran, ShingoLeadership: Carnegie, Follett, Maslow, Herzberg, McGregor, Hersey, BlanchardChange: Kanter, Schein, HammerMarketing: Levitt, KotlerMeasurement: Kaplan/Norton, Brown, NivenTrends: Toffler, Naisbitt, Handy, HamelOrganizational Learning: Argyris, SengeInnovation: Drucker, Christensen and Raynor, Kim and Mauborgne

The PMIC Models are based on a synthesis of the most significant management ideas of the century as recorded by the world’s best business authors. This summary of this body of knowledge is referred to as “Pragmatic Wisdom” meaning “useful business knowledge.”

The two models are:

• The PMIC Leadership Framework

• The PMIC Essential Metrics Matrix


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The Leadership Framework1. People – Leaders get the right people in and the wrong people out. Right people are thoughtful and capable individuals of character, always learning, with a bias for action, that are able to subordinate their egos to the achievement of the mission.2. Heritage – The organization has a clear understanding of its core values, the things it won’t change, and the discipline to act in alignment with them.3. Focus – A mission to be the best (in something specific), and clear measurable balanced objectives (financial, customer, internal, and learning & growth) that will lead to the actions that will cause the organization to achieve its mission.4. Path – A systematic deployment of resources to achieve the organization’s priorities with leaders insuring open vigorous debate and the integration of the best ideas to determine the right actions.5. Gaps – Constantly seeking to understand perfection for all performance areas and measures, understanding the gaps between the current reality and perfection, creating cause and effect linkages, and the necessity to take action to eliminate the gaps.


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The “Essential Metrics” Matrix

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Pragmatic Wisdom

Pragmatic: of or relating to practical affairs; concerned with the practical consequences of actions or beliefs.

Wisdom: accumulated philosophic or scientific learning; good sense; a wise attitude or course of action.

Pragmatic Wisdom: Beneficial business knowledge.


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500 BC – The Art of War – Sun Tzu• Strategic Assessments• Doing Battle• Planning a Siege• Formation• Force• Emptiness and Fullness• Armed Struggle• Adaptations• Maneuvering Armies• Terrain• Nine Grounds• Fire Attack• On the Use of Spies


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1776 – The Wealth of Nations – Adam Smith

• Smith contends that the value of a particular good or service is determined by the costs of production• If something is expensive to produce, then its value is similarly high• What is bought with money or with goods is purchased by labor, the toil of our own body• The value of a certain quantity of labor, which we exchange for what is supposed at the time to contain the value of an equal quantity• Society is maintained by the “invisible hand” of the economy


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1911 – The Principles of Scientific Management – Fredrick Taylor

• Taylor’s science came from the minute examination of individual tasks• The idea that a man needed any training or formal instruction to become a competent manager had not occurred to anyone• Few people had ever looked at work systematically until Fredrick W. Taylor started to do so around 1885.


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1923 – My Life and Work – Henry Ford

• “Our policy is to reduce the price, extend the operations, and improve the article”• Reduce the price to the point where we believe more sales will result. We do not bother about the costs. The new prices force the costs down.• “…because what earthly use is it to know the cost if it tells you that you cannot manufacture at a price at which the article can be sold?”• Time waste differs from material waste in that there can be no salvage


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1937 – How to Win Friends and Influence People – Dale Carnegie

• Don’t criticize, condemn, or complain• Give honest and sincere appreciation• Become genuinely interested in other people• Smile• Remember that a person’s name is the sweetest sound• Be a good listener• Encourage other’s to talk about themselves• Make the other person feel important - sincerely


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1938 – The Functions of the Executive – Barnard

• Essential functions are:• Provide a system of communications• Promote the securing of essential efforts• Formulate and define purpose

• Values and goals need to be translated into action rather than meaningless motivational phraseology• Purpose is defined more nearly by the aggregate action taken than by any formulation in word• Executives not only follow but create moral codes for others• All acts/individuals are interconnected and interdependent


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1941 – Dynamic Administration – Mary Follett

• “I do not think we have psychological and ethical and economic problems. We have human problems, with psychological, ethical, and economic aspects,…”• Give greater responsibility to people• Relationships matter• Three ways of dealing with confrontation:

• Domination• Compromise, and• Integration, the only positive way forward.


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1954 – The Practice of Management – Drucker

• There is only one valid definition of business purpose: to create a customer. Markets are not created by God, nature or economic forces, but by businessmen• Two essential functions: marketing and innovation• Organization is not an end in itself, but a means to an end of business performance and business results• Five basics of the managerial role: to set objectives, to organize, to motivate and communicate, to measure, and to develop people (from Management: Tasks, Responsibilities, and Practices)


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1954 – Motivation and Personality – Maslow

The hierarchy of needs:• Physiological needs: food, clothing, and shelter• Safety (security) needs: free of physical dangers• Social (affiliation) needs: belonging and acceptance• Esteem (recognition) needs: self-esteem and recognition• Self-actualization need: to maximize personal potential


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1958 – Parkinson’s Law – Parkinson

• Parkinson’s Law is simply that work expands to fill the time available for its completion.• As a result, companies grow without thinking of how much they are producing.• Officials “make work” for each other.


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1959 – The Motivation to Work – Herzberg

• True motivation comes from achievement, personal development, job satisfaction, and recognition.• The aim should be to motivate people through the job itself rather than through rewards or pressure.


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1960 – The Human Side of Enterprise – McGregor

Theory X:• People have an inherent dislike of work and will avoid it• People need to be coerced, controlled, directed and threatened• Humans prefer direction, avoid responsibility, want securityTheory Y:• Expenditure of energy in work is as natural as play• External control and threats are not the only means to guide• Commitment to objectives is a function of rewards (ego also)• People learn to not only accept but seek responsibility• Imagination, ingenuity, creativity are widely distributed


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1962 – Innovation in Marketing – Ted Levitt

• Corporations should be satisfying customers rather than simply producing goods• Management must think of itself not as producing products but as providing customer-creating value satisfactions• Selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. It is not concerned with the values that the exchange is all about. And itdoes not, as marketing invariably does, view the entire businessprocess as consisting of a tightly integrated effort to discover, create, arouse, and satisfy customer needs.


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1965 – Corporate Strategy – Igor Ansoff

• Created the language and processes of strategic planning:• A set of objectives is established• The difference (gap) between the current position of the firm and the objectives is estimated• One or more courses of action are proposed• These are tested for “gap-reducing properties”

• Created the term: “gap analysis”• Gave birth to what the author called “paralysis by analysis”


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1965 – The Rational Manager – Kepner and Tregoe

Systematic approaches to . . . problem solving:• Recognize problems• Specify the deviation• Test for cause

. . and decision making:• Establish objectives• Generate alternate actions• Assess adverse consequences

. . and problem prevention:• Anticipate potential problems• Anticipate problem causes• Set contingency actions


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1967 – Marketing Management – Kotler• Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organizational objectives• Companies pay too much attention to the cost of doing something and not enough about the cost of not doing it• Every company should work hard to obsolete its own product line before its competitors do• Your company does not belong in any market where it can’t be the best• Marketing takes a day to learn and a life time to master


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1967 – One More Time: How do you motivate employees? – Fredrick Herzberg

• Factors leading to satisfaction are: achievement, recognition, work itself, responsibility, advancement, and growth.• Factors leading to dissatisfaction are: company policy and administration, supervision, relationship with supervisor, work conditions, salary, relationship with peers, personal life, relationship with subordinates, status, and security.• Removing dissatisfying “Hygiene” factors is not satisfaction.• Motivation factors “motivators” must be used to install an internal generator in the employee.


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1969 – The Age of Discontinuity – Drucker

• The idea of the “knowledge worker” was born here• Knowledge is power and ownership• From now on the key is knowledge. The world is becoming not labor intensive, not materials intensive, not energy intensive, but knowledge intensive.


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1970 – Up the Organization – Townsend

• How to stop the corporation from stifling people and strangling profits• The list of “no-no’s” includes:

• Reserved parking spaces• Special quality stationery for the chief executive• Bells and buzzers• Company shrinks• Outside directorships and trusteeships• The company plane


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1973 – The Nature of Managerial Work – Mintzberg

The characteristics of an executive at work:• Performs a great quantity of work at an unrelenting pace• Undertakes activities marked by variety, brevity, and fragmentation (median time on any one issue: 9 minutes)• Has a preference for issues which are current, specific, and non-routine• Prefers verbal rather than written communication• Acts within a web of internal and external contacts• Subject to heavy constraints but can exert some control over the work


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1975 – Marketing Myopia – Ted Levitt

• Organizations need to define their industry broadly to take advantage of growth opportunities.• It is a management failure to be thinking product-oriented instead of thinking customer-oriented.• Railroads defined their business wrong because they were railroad-oriented instead of transportation-oriented.• Hollywood barely escaped being ravished by television because of their myopic view that they were in the business of “movies”rather than in the business of “entertainment.”• To grow, companies must understand and act on their customer’s needs and desires, not bank on existing products.


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1978 – Organizational Learning – Chris Argyris

• The root of the idea of “Organizational Learning”• Model 1 – single loop learning – detection and correction of organizational error permits the organization to carry on its present policies and achieve its current objectives• Model 2 – double loop learning – organizations, managers act on information; they debate issues and respond to, and are prepared to, change• Ultimately – organizations that are inquiring into the learning system by which it detects and corrects errors


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1978 – Leadership – James Burns

• The crisis of leadership today is the mediocrity or irresponsibility of so many of the men and women in power• Leadership is a structure of action that engages persons, to varying degrees, throughout the levels and among the interstices of society• Transformational leadership is concerned with engaging the hearts and minds of others


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1979 – Quality is Free – Philip Crosby

• Identify, financially quantify, and prioritize opportunities• Create a common language of quality:

• Quality is defined as conformance to requirements• Systems for prevention, not appraisal• Clear standard of zero defects• Measure the price of non-conformance (COQ)

• Implement a culture change process:• Plan and direct quality efforts• Provide systems that accelerate improvement• Educate employees with the skills to make the plan• Provide the ability to conduct a self-assessment


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1980 – Competitive Strategy – Michael Porter

• The three generic strategies are:• Differentiation – value added• Cost – lowest cost• Focus – clear focus

•The five competitive forces are:• The entry of new competitors• The threat of substitution• The bargaining power of buyers• The bargaining power of suppliers• The rivalry among the existing competitors


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1980 – The Third Wave – Alvin Toffler

• The Third Wave is characterized by mass customization• The first wave was the agricultural phase• The essence of the second wave was the long run manufacture of millions of identical standardized products• The essence of the third wave is the short run manufacture of partially or completely customized products• This notion of “mass customization” has since been picked up by a wide variety of thinkers and, in some areas, is already in practice


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1981 – The Art of Japanese Management –Pascale and Athos

Seven “S” framework defined:• Strategy• Structure• Skills• Staff• Shared values• Systems• Style


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1982 – Megatrends – John Naisbitt

• Industrial society information society• Forced technology high tech / high touch• National economy world economy• Short term long term• Centralization decentralization• Institutional help self-help• Representative democracy participatory democracy• Hierarchies networking• North south• Either/or multiple choice


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1982 – The Mind of the Strategist – Ohmae

• Japanese firms often have a single, naturally talented strategist with an idiosyncratic mode of thinking in which company, customers, and competition merge in a dynamic interaction out of which a comprehensive set of objectives and plans for action eventually crystallizes.• The 3 C’s are: corporation, customer, competition• The four ways to achieve an effective business strategy are: focus on key factors for success, build on relative superiority, pursue aggressive initiatives, or focus upon innovation in areas which are untouched by competitors.


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1982 – Out of the Crisis – W. Edwards Deming

• Profit in business comes from repeat customers, customers that boast about your product and service, and that bring friends with them• Eliminate the deadly trio of rejects, rework, and recalls• Senior managers must take charge of quality• Training beginning at the top of the organization• Use of statistical methods of quality control• Business plans expanded to include clear quality goals• Deming’s 14 points


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1982 – In Search of Excellence – Peters

Eight characteristics of excellent companies:• A bias for action• Close to the customer• Autonomy and entrepreneurship• Productivity through people• Hands-on value driven• Stick to the knitting• Simple form, lean staff• Simultaneous loose-tight properties

• This book established “customer service” as key


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1983 – The Change Masters – Kanter

• Innovation is the key to future growth• The key to developing innovation is an “integrative”approach rather than a “segmentalist” one• Three new sets of skills are required:• Power skills – the ability to persuade others to invest information, support, and resources in new initiatives• Ability to manage the problems associated with greater use of teams and employee participation• Understanding of how change is designed and constructed in an organization


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1984 – Restoring our Competitive Edge –Hayes and Wheelwright

• The text book on manufacturing competitiveness• Introduced the concept of manufacturing strategy• Capacities, facilities, process technologies• Matching to the product and market• German approaches• Japanese approaches• Learning from world class competitors• Building manufacturing's competitive potential


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1984 – Situational Leadership – Paul Hersey

• Departure from the simple autocratic vs. democratic styles• A four quadrant grid of behaviors:

• Supportive – relationship behaviors• Task – directive behaviors

• The idea is to treat different people differently:• Delegating• Participating (supporting)• Selling (coaching)• Telling (directing)

• Management style needs to match the needs of the follower


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1985 – Leaders: Taking Charge – Warren Bennis

• Four common abilities of leaders:• Management of attention; compelling vision (action)• Management of meaning; communication• Management of trust; emotional glue, consistent• Management of self; persistence, awareness, learning

• Emotional wisdom; accept people as they are, a capacity to approach things only in terms of the present, an ability to treat everyone, even close contacts, with courteous attention, an ability to trust others even when this seems risky, and an ability to do without constant approval and recognition


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1985 – Organizational Culture and Leadership – Edgar Schein

• Organizational culture is the pattern of basic assumptions – invented, discovered, or developed by a given group as it learns to cope with problems of external adaptation and internal integration – that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems.• At the stage of organizational maturity, people are hopelessly addicted to how things used to get done


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1986 – Zero Quality Control – Shigeo Shingo

• Source inspection and the poke-yoke system• Reveals the limitations of:

• Judgment inspections that discover defects• Informative inspections that reduce defects

• Recommends the use of:• Source inspections that eliminate defects

• This is the comprehensive guide to the theory and application to “error-proofing” vs. the spell of SQC• Many real world illustrations and pictures


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1988 – Planning for Quality – Joseph Juran

• Quality needs to be absorbed enthusiastically by top managers not just groups of engineers• Juran’s philosophy is expressed in the quality trilogy:

• Quality planning• Quality management• Quality implementation

• Quality planning comprises:• Identify the customers and their needs• Develop a product that responds to those needs• Develop a process able to produce that product


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1989 – The Age of Unreason – Charles Handy

• The age of unreason is a time when what we used to take for granted may no longer hold true, when the future, in so many areas, is there to be shaped, by us and for us, a time when the only prediction that will hold true is that no predictions will hold.• We are all prisoners of our past. It is hard to think of thingsexcept in the way that we have always thought of them. But that solves no problems and seldom changes anything.


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1990 – The Borderless World – Kenichi Ohmae

• Add: country and currency to:• The 3 C’s of: corporation, customer, competition• Strategy is the creation of sustaining values for the customer far better than those of competitors.• Therefore strategy means first of all invention and the commercialization of invention.• Before you test yourself against competition, your strategy should encompass the determination to create value for customers


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1990 – The Competitive Advantage of Nations – Michael Porter

While globalization of competition might appear to make the nation less important, instead it seems to make it more so. With fewer impediments to trade to shelter uncompetitive domestic firms and industries, the home nation takes on a growing significance because it is the source of the skills and technology that underpin competitive advantage.


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1990 – Managing on the Edge – Pascale

• Nothing fails like success• Great strengths are inevitably the root of weakness• The new emphasis should be on asking questions• Strategic planning at its best is about posing questions• Companies must become engines of inquiry• Truth – personally and organizationally – lies in the openness of vigorous debate and organizations are in the last analysis, interactions among people


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1990 – The Fifth Discipline – Peter Senge

• The organizations that will truly excel in the future will be the organizations that discover how to tap people’s commitment and capacity to learn at all levels• In the learning organization, managers become researchers and designers rather than controllers• The five components to organizational learning:

• Systems thinking• Personal mastery• Mental models• Shared vision• Team learning


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1990 – The Seven Habits of Highly Effective People – Stephen Covey

• Be proactive – principles of personal vision• Begin with the end in mind – principles of personal leadership• Put first things first – principles of personal management• Think win/win – principles of interpersonal leadership• Seek first to understand, then to be understood – principles of empathetic communication• Synergize – principles of creative cooperation• Sharpen the saw – principles of balanced self-renewal


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1991 – A History of Knowledge – Van Doren

• The book is what the title says it is. Every thought, every piece of knowledge has an originator. This is the history of the who and where for what we have come to know.• An incredible summary of everything that humankind has thought, invented, created, considered, and perfected from the beginning of civilization into the twenty-first century.• Capsule portraits of the people whose thinking has shaped our world through their contributions to art, science, literature, and world history.


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1992 – The Balanced Scorecard – Kaplan/Norton

• The balanced scorecard is like the dials in an airplane cockpit: it gives managers complex information at a glance

The balanced scorecard links performance measures:• Financial perspective – How do we look to shareholders?• Customer perspective – How do customers see us?• Internal business perspective – What must we excel at?• Innovation and learning perspective – Can we continue to improve and create value?


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1993 – Reengineering the Corporation – Hammer

• Organizations need to identify their key processes and make them as lean and efficient as possible• Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance such as cost, quality, service, and speed


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1994 – Competing for the Future – Hamel

• Strategy is multifaceted, emotional as well as analytical, concerned with meaning, purpose, and passion.• Strategy emerges and the real problem, executives perceive, is not in creating strategy but in implementing it.• Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies• A company surrenders today’s business when it gets smaller faster than it gets better. A company surrenders tomorrow’s business when it gets better without getting different.


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1994 – The Rise and Fall of Strategic Planning –Mintzberg

• Planning: a formalized system for codifying, elaborating, and operationalizing the strategies which the company already has• Strategy: either an “emergent” pattern or a deliberate “perspective”• Strategy making is an immensely complex process involving the most sophisticated, subtle, and at times, subconscious of human cognitive and social processes. While hard data may inform the intellect, it is largely soft data that generate wisdom.


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1994 – Built to Last – Jim Collins

• A study of the successful habits of visionary companies• Built to last; more accurately, building a company worthy of lasting is about building a company of such intrinsic excellencethat the world would loose something important if that organization ceased to exist.The four key ideas:• Clock building, not time telling . . . enduring through generations• Genius of AND . . . embrace both extremes• Core ideology . . . core values, essential and enduring• Preserve the core / stimulate progress


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1995 – Emotional Intelligence – Daniel Goleman• Effective leaders are alike in one crucial way: they all have a high degree of emotional intelligence• IQ and technical skills are the entry-level requirements for executive positions, however, it is emotional intelligence that makes the great leader• The five components of emotional intelligence:

• Self-awareness – ability to recognize your emotions• Self-regulation – ability to control impulses• Motivation – passion to work beyond money or status• Empathy – the ability to understand other’s emotions• Social skill – proficiency in managing relationships


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1996 – Keeping Score – Mark Graham Brown

• Using the right metrics to drive world-class performance• A good “how to” book to develop measures of:

• Financial performance• Product / service quality• Supplier performance• Customer satisfaction• Process and operational performance• Employee satisfaction


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1996 – Lean Thinking – Womack and Jones

• Banish waste and create wealth in your corporation• Lean thinking versus waste (muda)

• Value – product / service that meets customer needs• The value stream – set of tasks to deliver to the customer• Flow – mapping the flow of the value stream• Pull – the pull of product / service through the value stream• Perfection – the ultimate eliminate of waste


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1997 – The Ultimate Business Library – Crainer

• The “50 books that shaped management thinking”• Excellent 3 or 4 page summaries of the top 50• Comments on each of the top 50 by Gary Hamel• Appendix with a “runner up” 50 (short paragraph on each)• Definitely worth reading• Recommendation: Buy a few copies, mark one up completely and clarify your own management philosophy within the wisdom summarized in these pages• Give the extra copies of the book to your colleagues


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1998 – Gung Ho! – Blanchard and Bowles• Spirit of the Squirrel – Worthwhile Work

• Knowing we make the world a better place• Everyone works toward a shared goal• Values guide all plans, decisions, and actions

• The Way of the Beaver – In Control of Achieving the Goal• A playing field with a clearly marked territory• Thoughts, feelings, needs, and dreams are respected, listened to, and acted upon• Able but challenged

• The Gift of the Goose – Cheering Each Other On• Active or passive, congratulations must be TRUE• No score, no game, and cheer the progress• Enthusiasm equals mission times cash and congratulations


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2001 – Lean Manufacturing: A Plant Floor Guide –Edited by Allen, Robinson, Stewart

• The ultimate “how to” guide for lean implementation• Lean manufacturing is the elimination of the seven wastes:

• Defects – parts that don’t meet specs• Waiting – people or operations waiting• Motion – movement of anything that does not add value• Over-processing – performing operations not required• Over-production – making more than the customer demands• Inventory – excess raw material, WIP, or finished goods• Inefficiency – people wasting time, efforts, or ideas


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2001 – Good to Great – Jim Collins

Disciplined people:• Level 5 Leadership• First who . . . Then what

Disciplined thought:• Confront the brutal facts• Hedgehog concept

Disciplined action:• Culture of discipline• Technology accelerators

• The flywheel concept and the doom loop


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2001 – Good to Great . . . The Study

• Bill Meehan of McKinsey & Company asked Jim Collins “… but what about the vast majority of companies that wake up partway through life and realize that they’re good, but not great?”• The study started with four rounds of cuts:

• Cut 1: 1435 Fortune 500 firms 1965 to 1995• Cut 2: 126 companies (4 tests)• Cut 3: 19 companies (11 elimination criteria)• Cut 4: 14 good-to-great firms (growth relative to industry)

• Also identified 14 comparison firms• The good-to-great firms beat the general market by 6.9 times in the 15 years following their good-to-great transition point


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2001 – Good to Great . . . The Study

• The good-to-great companies: Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, Wells Fargo• The idea was to discover “what’s in the black box” when a company goes from good to great (15 years before and after)• Results by making empirical deductions directly from the data• The concept of the “build up” and the “break through” emerged and was further subdivided into the seven key concepts

NOTE: Most of the material on “Good-To-Great” is directly from the chapter summaries.


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2001 – Good to Great . . . Level 5 Leadership

• Every good-to-great company had Level 5 leadership during the pivotal transition years• Level 5 refers to a five-level hierarchy of executive capabilities, with Level 5 at the top. Level 5 leaders embody a paradoxical mix of personal humility and professional will. They are ambitious, to be sure, but ambitious first and foremost for the company, not themselves.• Level 5 leaders display a compelling modesty, are self-effacing, and understated. In contrast, two thirds of the comparison companies had leaders with gargantuan personal egos that contributed to the demise or continued mediocrity of the company.


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2001 – Good to Great . . . First Who … Then What

• The good-to-great leaders began the transformation by first getting the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.• The key point of this chapter is not just the ideas of getting the right people on the team. The key point is that “who” questions come before “what” decisions – before vision, before strategy, before organization structure, before tactics.• The comparison companies frequently followed the “genius with a thousand helpers” model – a genius leader who sets the vision and the enlists a crew of highly capable “helpers” to make the vision happen. This model fails when the genius departs.


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2001 – Good to Great . . . Confront the Brutal Facts

• All good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality.• When you start with an honest and diligent effort to determine the truth of your situation, the right decisions often become self-evident. It is impossible to make good decisions without infusing the entire process with an honest confrontation of the brutal facts.• Creating a climate where truth is heard involves four basics:

• Lead with questions, not answers.• Engage in dialogue and debate, not coercion.• Conduct autopsies, without blame.• Build red flag mechanisms so information isn’t ignored.


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2001 – Good to Great . . . Hedgehog Concept

• To go from good to great requires a deep understanding of three intersecting circles translated into a simple, crystallineconcept (the Hedgehog Concept):

• What you can be the best in the world at• What drives your economic engine• What you are deeply passionate about

• The key is to understand what your organization can be the best in the world at, and equally important what it cannot be the best at – not what it wants to be best at. The Hedgehog Concept is not a goal it is an understanding.


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2001 – Good to Great . . . A Culture of Discipline

• Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action, fanatically consistent with the three circles.• A culture of discipline involves a duality. On the one hand, itrequires people who adhere to a consistent system; yet, on the other hand, it gives people freedom and responsibility within the framework of that system.• A culture of discipline is not just about action. It is about getting disciplined people who engage in disciplined thought and who then take disciplined action.


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2001 – Good to Great . . . Technology Accelerators

• Good-to-great organizations think differently about technology and technological change than mediocre ones.• Good-to-great companies avoid technology fads and bandwagons, yet they become pioneers in the application of carefully selected technologies.• The good-to-great companies used technology as an accelerator of the momentum, not a creator of it. None of the good-to-great companies began their transformations with pioneering technology.• “Crawl, walk, run” can be a very effective approach.


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2001 – Good to Great . . . The Flywheel Concept

• Good-to-great transformations often look like dramatic, revolutionary events to those observing from the outside, but they feel like organic, cumulative processes to people on the inside.The confusion of the end outcomes (dramatic results) with the process (organic and cumulative) skews our perception of what really works over the long haul.• No matter how dramatic the end result, the good-to-great transformations never happened in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment.


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2002 – What is Six Sigma – Pande and Holpp

• A statistical measure of the performance of a process or a product (3.4 defects per million)• A goal that reaches near perfection for performance• A system of management to achieve business leadershipThe DMAIC problem-solving model:

• Define (the problem)• Measure (process X’s, causes, vs. Y’s, outputs)• Analyze• Improve• Control


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2002 – The Balanced Scorecard Step-by-Step – Paul Niven

• Mission – Why we exist• Values – Guiding principles• Vision – Word picture of the future• Strategy – Differentiating activities• Confirm or change the four perspectives of: financial, customer, internal , and employee learning and growth• Select the supporting performance measures• Develop the cause and effect linkages


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Appendix – Balanced Scorecard


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The Balanced Scorecard Concept

• HBR Jan/Feb 1992 – The Balanced Scorecard – Measures that Drive Performance, by Robert Kaplan and David Norton (#92105)• HBR Sept/Oct 1993 – Putting the Balanced Scorecard to Work by Robert Kaplan and David Norton (#93505)• HBR Jan/Feb 1996 – Using the Balanced Scorecard as a Strategic Management System, by Kaplan and Norton (#96107)• 1996 – The Balanced Scorecard: Translating Strategy into Action – Kaplan and Norton, Harvard Business School Press• 2002 – Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results, by Paul Niven


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Organized around four distinct perspectives:

• Financial• Customer• Internal• Employee growth and learning


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The balances:

• Short and long-term objectives• Financial and non-financial measures• Lagging and leading indicators• External and internal performance perspectives


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The evolution of the concept:

• Early implementers wanted to use the measurement system to communicate and align their organizations to new strategies: away from historic, short-term focus on cost reduction and low-price competition, and toward generating growth opportunities by offering customized, value-added products and services. This highlighted the importance of tying the measures to strategy.

• Then, the Balanced Scorecard evolved from an improved measurement system to a core management system.


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The Balanced Scorecard as a strategic framework for action:

• Clarifying and translating the vision and strategy• Communicating and linking• Planning and target setting• Strategic feedback and learning


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The cause and effect relationships:

• Financial performance is caused by customer performance• Customer performance is caused by internal performance• Internal performance is caused by employee performance


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The Business Process Concept

1993 – Reengineering the Corporation: a manifesto for business revolution, by Michael Hammer and James Champy

The core business processes:

• Operations – Order entry to collection of payment• Sales – Prospecting, qualifying, closing, and delivering• Innovation – Creating the next generation of value delivery


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Pleasing Customers

via Superior Value

(Future)

Innovation Processes

Sales Processes

Operations Processes

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The “Corporate Metrics” Matrix


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“We help leaders to improve the key performance objectives that cause financial success.”

Bill Guest teaches and consults exclusively in the area of organizational performance measurement and improvement. Organizations need to implement the right measurements to support their performance improvement objectives. Bill has developed a crisp, clear, no nonsense approach to organizational performance improvement. He developed and implemented these techniques, with excellent results, during his 25 years of industry experience with various organizations in the roles of engineer, supervisor, vice president sales, general manager, executive vice president, and CEO. Since 1999, he has been working with clients around the world to teach them these straightforward techniques and provide step-by-step coaching as they use these techniques to achieve their goals.

Bill Guest, 616.430.0828, [email protected]

pragmatic wisdom - metrics reporting · 4/2/2005 · pragmatic wisdom pragmatic: of or relating to...

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