using a big-picture approach to performance improvement

Using a Big-Picture Approach to Performance Improvement

Elizabeth Helweg-Larsen

© 2006 Wiley Periodicals, Inc.Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ert.20097

In his book Flatland, written over a centuryago, Edwin A. Abbott posits a world that

exists only in two dimensions. The squares,triangles, circles, polygons, and other inhabi-tants of this world can view each other onlyhead on and therefore appear to each otheronly as lines or points. A square finallyescapes from the flat plane of his universeinto the spherical (3-D) world and sees thateverything looks much different from above.Similarly, the view many employees have oftheir world of business is somewhat limitedin dimensionality. They see their function andthe company they work for only in terms oftheir own job or department. What this viewfails to reveal, however, is the big picture ofwhat they do and how they do it, as well ashow it affects the organization as a whole.

TUNNEL VISION PRODUCES BLIND SPOTS

Any company, from the small mom-and-popestablishment with only a few employees tothe large multinational behemoths, is in truththe sum of the efforts of the employees whowork there, from the executive suites to theshipping department. It follows that the waypeople view their jobs has a significant impacton the functioning of the organization. Afamous New Yorker magazine cover illustratesthis point. It shows an artist’s representationof the way a typical New Yorker views theworld: a map of the United States with Man-

hattan as the largest section and then, off inthe distance and crammed together, the rest ofthe country. In a similar fashion, employeestend to view their company from a skewedperspective in which the job they do seems tofill the horizon. In one way, this perspectivecan be positive. After all, being attentive tothe job at hand is a key to success. But howmuch more effective and productive couldthose employees be if they were also aware ofexactly how the job they do fits into the totaloperation of the organization, and how theirrole affects other functions?

For example, take someone in sales who,because of tunnel vision, is solely focused onsales volume as an indicator of how wellthings are going. This employee might bequite pleased to see the largest possible num-ber in gross sales, confident he or she islooking at a rosy picture of success. Butthere are costs associated with making thosesales (advertising, promotion, etc.), and alarge spike in sales commitments may causeproduction overtime expenses. If the samesalesperson were to look at these factors, thebigger picture would seem less rosy.

SEEING THROUGH A WIDE LENS

Developing a big-picture mentality and theability to understand relationships—not onlythe people relationships, but the process rela-tionships of data and information as well—

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Employment Relations Today

requires attention to the elements of orienta-tion and ability. Orientation should be towardmaximizing the performance of the organiza-tion (as opposed to the effectiveness of an indi-vidual’s immediate work sphere), and abilityshould be focused on recognizing the drivingforces that determine the health of the com-pany as a whole. This means understandinghow the different departments work together,identifying one’s own role in that process, andseeing how that affects the roles of others andtheir abilities to make good decisions.

To use an analogy, the photographer whowishes to include more information in a par-ticular frame might choose to use a lens witha wider angle. To change or broaden thehuman perspective, our minds also need totake in and absorb more information. Leavingpsychic abilities aside, you wouldn’t expectsomeone in sales to know about inventorycosts or production capacities without somekind of experience in those particular areas.

But this doesn’t mean every position in acompany requires an MBA. There are otherways to acquire such information.

The human brain can acquire new infor-mation in a number of different ways, eachwith its own pluses and minuses:

❏ Linguistic. The spoken or written wordis a common learning pathway. Thepart of the brain involved with lan-guage processes information in a lin-ear, point-to-point manner. Its strengthis logic and reasoning. The details ofbusiness finance (i.e., the numbers) arelinguistic.

Elizabeth Helweg-Larsen Employment Relations Today DOI 10.1002/ert

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❏ Visual (charts, graphs, diagrams, etc.).The part of the brain that processesvisual information is best for abstractthinking and seeing overall relation-ships. It is good for all concepts,including financial and business-related concepts, but not for the detailsof analysis.

❏ Dynamic. This is learning throughdoing. Sometimes called the “school ofhard knocks,” experiential learning—making mistakes and understandingthe solutions—creates the strongestimpressions.

EXPANDING KNOWLEDGE THROUGH GAME PLAY

In an attempt to impart greater understand-ing of the company to employees, some com-panies opt for a job-rotation approach, inwhich employees learn about other positionsthrough on-the-job training. Although this isan admirable goal, the approach can be prob-lematic. First, time and training may takemonths or years, and second, costly mistakesare likely to be made along the entire learn-ing curve.

A more practical solution involves compet-itive business simulations and game play.Training through game play is interactive andplaces employees into situations outside oftheir job-specific areas. This not only pro-motes team building and the ability to thinkoutside the box, but also allows employees toexperience their company from another pointof view and expand their understanding.

One such method involves a classroom set-ting in which a facilitator divides a groupinto teams. Each team represents a separatecompany in the same industry, and eachcompany competes through sealed bidding

Training through game play is interactive and placesemployees into situations outside of their job-specific areas.

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for contracts from the marketplace (in thiscase from the facilitator). Round by round,the companies make team decisions and maywin some, none, or all of the bids they want.

Typically, the team members come into theprocess with biases and viewpoints orientedtoward their own departments—sales,finance, production, and so on. As the exer-cise progresses, they play out and absorb thethinking that goes into these other depart-ments. Employees involved in production, forexample, may not initially see the need for anunderstanding of sales mechanisms and pres-sures, just as those in sales may not feel thedetails of production are relevant to theirown performance. But each comes to realizethat having an understanding of the whole isessential in helping everyone make the bestday-to-day decisions in their area.

The Games People Play: Round One

Here’s an exercise that involves playing agame. The goal is to set up an operation in anew country where there is an existing mar-ket your company wants to enter. The corpo-rate parent company will be the ubiquitousAmalgamated Widgets, and the land of limit-less market opportunities is Australia.

The first year, you are going to measureperformance on (what else?) sales. You tellyour teams they can have whatever theyneed to run their branch office. You just wantthem to make sales. You go away for a yearand then come back and rent a fancy confer-ence center in Sydney, where you have agreat meeting at which everyone shares thefinancial results. The team with the highestgross sales wins a big plaque and stuffedkoala bears all around.

But in the real world, sales volume is notthe only indicator of performance and com-

Using a Big-Picture Approach to Performance ImprovementEmployment Relations Today DOI 10.1002/ert

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pany success. You help the teams understandthe limitations of sales as an indicator of suc-cess by asking them this question: how dopeople behave if their compensation planincentives are based strictly on sales? Toensure the highest sales volume, they dropthe prices. They don’t care if the companymakes or loses money as long as they canship product and invoice the customer. Also,in the real world, the winning team mighthave spent lavishly on advertising, largeoffices, leased cars, and the like, because theyweren’t being measured on their expenses.

The Games People Play: Round Two

You thank your crew very much for havingbroken into the Australian market, but nowyou tell them you can’t afford to keep bleed-

ing red ink. This time around, you’d like tomake a profit. The team with the highestsales is not necessarily the one with the high-est profit.

If performance is measured on net profitor net income, what is the logical thing to do?Cut costs to increase profit. But in this game,teams must also make some other strategicdecisions to improve the income statementand directly affect the balance sheet in orderto win:

❏ To cut costs and save the rent on theconference center, for example, thewinning team decides to buy the facil-ity (remember, you told them theycould have whatever was needed inorder to be profitable).

In the real world, sales volume is not the only indicator ofperformance and company success.


❏ The cost of raw materials is lower ifthey buy in bulk, so they buy three orfour years’ worth of raw materials (andstore them in the basement of thatconference center they’re not using).They don’t care how much they havedown there, because it is only whenthe material works its way through themachines and is sold and shipped outthe door that the cost is reported onthe income statement.

❏ Of course, they tell their customersthat they can have two years to pay,interest-free. They don’t care when thecash comes in—their bonus is paid onshipping the order.

The result is that when you come out toAustralia at the end of the second year andlook at the books, you can see that, yes, thisteam has indeed made a profit. But it hasalso tied up so much in the way of assets all

over the balance sheet that you’d be betteroff selling all the assets in the business andputting the money in the bank.

The Games People Play: Round Three

So you thank your crew very much for hav-ing made a profit and introduce a multidi-mensioned metric: going forward, you willreward the team that makes the highest profitwhile using the least amount of capital.

Single-dimension performance indicators(such as profit) can be misleading. InFlatland, the Square tries to explain to his fel-low Flatlanders where the three-dimensional


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“Spaceland” is: “Upward, but not North-ward.” They cannot understand because theyhave no frame of reference. Adopting a big-picture mentality in business means lookingat performance indicators that measure morethan one dimension at a time and show therelationships among them.

In the third round, teams consider thebenefits and pitfalls of more complexapproaches. These often revolve around theuse of “return on” ratios, which measure per-formance in multiple dimensions:

• Return on sales (ROS) relates profit tosales. It does not talk about how effi-ciently you are using the assets of thecompany, but it does give a measure ofprofitability.

• Asset turnover ratio (ATO) relates salesand the assets that are used to make theproduct/service that is being sold. It does-n’t tell you how profitable you are but itdoes show how efficiently you’re usingyour assets.

• Return on assets (ROA) relates profit toassets and reveals how much benefit youare getting from what you have tied up inthe business. This is a very powerful indi-cator that measures business efficiencyand shows both where to invest andwhere to cut back. ROA can be used totrack whether or not a project is perform-ing according to plan.

Even ROA has limitations when taken in anarrow focus. The problem is that when mea-suring performance strictly on the ratiobetween net income and assets, it is harder toimprove on this ratio by increasing profits,and easier to make gains by reducing assets!The upshot is that managers have an incen-tive to stop carrying any inventories at all,

Adopting a big-picture mentality in business means lookingat performance indicators that measure more than onedimension at a time.

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even if that leads to occasional shortages.Teams won’t invest in new machinery. Theysell off all the unused land and buildings—even if there were plans to use them in acouple of years—and send the money to cor-porate headquarters just to get the asset offtheir balance sheet. And they pressure cus-tomers to pay cash right away because theydon’t want to carry any receivables at all.

The ROA improves dramatically becausethe assets are shrinking, not because profitsare increasing. There are no reserves, noinventories. The machinery is falling apart, thecustomers hate the company, prices have beencut to get cash, and sales are falling. Yet bythis measure, we would still have a winner.

So even with the use of ratios as perfor-mance metrics, a perfect management posi-tion is not achieved. Teams have been ledstep-by-step to a more comprehensive aware-ness of all the issues involved in managementdecision making and their impact on thelong-term health of the company. While thisbig-picture mentality is in place, the stage hasbeen set for a solid and relevant discussion ofthe needs of the real-world company.

THE BENEFITS OF A SHARED PERSPECTIVE

One of the strongest arguments for develop-ing a big-picture mentality throughout theorganization is that it puts everyone on thesame page. The common reference pointshould be what actions or decisions will bebest for the company, rather than just thegroup or department.

Instead of operating in isolated fiefdoms ofsales, receivables, purchasing, corporate, pro-duction/operations, and the like, people seehow they interconnect via the balance sheet,leading to a higher level of cooperation andan increase in speed and flow of information.

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Not only does this boost efficiency, but it alsoallows the company to become more agile andresponsive to changing market conditions.

HR AND THE NEW LENS

At the end of Flatland, the hero of the piece,the Square, returns to his home dimensionand tries to explain about the wonders he hasseen to fellow Flatlanders. With no frame ofreference or understanding, they take him tobe either insane, seditious, or both, andthrow him in prison. From there he writes: “Iexist in the hope that these memoirs, in somemanner, I know not how, may find their way

to the minds of humanity in Some Dimen-sion, and may stir up a race of rebels whoshall refuse to be confined to limited Dimen-sionality.”

In the business world, it is the responsibil-ity of HR to create the frame of referencethat allows communication between individu-als, especially between individuals from dif-ferent departments with differing views andneeds. This understanding provides a biggerpicture than that of any one department.

The benefits of the big-picture mentalitymay be apparent and desired by many, butthe best conduit to action may not be clear.In reality, the transformation has its roots inthe human resources department. In mostorganizations, HR has the responsibility foran important intangible asset: the organiza-tion’s human capital. Not only is educatingemployees to operate from a big-picture per-spective an HR matter, but it is also aninvaluable contribution to the organization’s

It is the responsibility of HR to create the frame of referencethat allows communication between individuals . . .


success. The more employees see throughthis expanded lens, the easier it is to identifythe small white shape on the horizon thatmay be the tip of an iceberg.

A training program can create this shiftfrom narrow to broad view—but such a pro-gram will only be effective if it incorporatesinternal aspects such as the pressure of sales,the complexities of operations, the needs andlanguage of the finance department, and theeven wider needs of the shareholders, cus-tomers, government, and other stakeholders.HR is the group that not only initiates this


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program, but also coordinates between thedifferent departments to ensure that every-one’s views and needs are represented.

Facts and figures are merely tools, data thathave significance only by interpretation. Thecontext, the lens through which raw data areviewed, is an important factor in how wellpeople use it. By widening this lens, expand-ing perception to include a view of a particu-lar job as it relates to others and to the healthof the company as a whole, people canbecome more effective in their jobs and gain agreater sense of pride and community as well.

Elizabeth Helweg-Larsen created Andromeda Training with Robin Helweg-Larsen in1993. Three years later, they developed Income/Outcome™, a family of business simula-tions, which is now used around the world in ten languages. A milestone was reached in2003 when Michelin trained its 10,000th employee with Income/Outcome. Other well-known clients include Coca-Cola, Curtiss-Wright, Hewlett-Packard, the University of Min-nesota’s Carlson School of Management, and North Carolina State University. For furtherinformation, visit www.income-outcome.com.

using a big-picture approach to performance improvement

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