The overall mission of any organization is to build, preserve and improve competitive advantage.
Each day thousands of corporations start up in many sectors. Many fail and a major reason is bad decisions.
The ones that succeed do so because they leverage their infrastructures. They use their starting equity to acquire plant, equipment and tools. They hire competent and innovative staff, design and build innovative products and services, study the competition, track market trends and track changing legislation.
Above all, they manage their cost base such that some of the profits can be reinvested.
The members of this group make good decisions.
How do corporations make good decisions consistently?
In order to answer the question we need to know what decision-making is – it’s all about converting information into action.
Except that the information has to be available and it has to be accessible.
Simple decisions are easy to make. You have three people at your front desk, you get a CRM system that allows you to go to two people. Your ROI says the initiative will get to break even in nine months. After that, you are generating positive cash flow.
Not so easy to decide which of several proposed initiatives, all competing for the same scarce resources, should be allowed to go forward. Here, each will have a different ROI, a different risk profile, a different uncertainty level. You need a way to identify the more promising of your competing initiatives, select one or more and then prioritize implementation for the ones you select.
Do we go with two smaller, shorter ROIs or, do we go for one longer ROI that has higher risk but a better potential payoff?
There are two types of decisions in organizations – strategic and operational. Let’s see what they have in common.
Background – Mission to Strategy to Initiatives
Most organizations have a mission which is the foundation of the organization i.e. “This is why we are here, this is how we spend our money, this is where we expect to be in, say, three years”.
Linked to the mission statement we typically find several strategic pillars and, attached to each of these, one or more initiatives.
Competing initiatives at a strategic pillar make for easier decision-making than making decisions regarding initiatives that compete for scarce resources across different strategic pillars.
Suppose an organization wants to become a world leader in remote Medical Devices. One strategy might be to make their devices multifunction i.e. measure blood pressure, heart rate, and blood sugar levels.
Another strategy might be to add educational content to the existing set of Medical Devices based on that notion that intellectual challenges decrease the onset of dementia for some patients.
Which of these will contribute more to increasing competitive advantage?
Getting back to our definition of decision-making, it’s important to understand that most decisions are made once, at a particular point in time. Things change.
The information that was on hand for making a particular decision or, should I say, the information that was accessible at the time the decision was made will be different today.
As stated earlier in this article, the information needed to make good decisions must be available and accessible.
How can we consolidate information for effective decision-making by top management (strategic decision making)?
A stack of file folders comprising position papers, spreadsheets and statistical reports probably is the worst way to try to consolidate information.
Digitizing information and putting it in Windows file folders is not much better.
The environment of choice for consolidating information is a free-form search Knowledge Base (KBase).
- You can access any of, say, 10,000 documents from a single computer screen.
- You can engage searches and see what each search was able to find and what the search did not find.
Most software search algorithms only tell you what was found.
Moreover, you have to tell the software where to find what you are looking for. If an address was inadvertently enter into a comment field instead of into the address field, you’re not likely to find it.
Suppose McDonald’s is looking to add a new retail outlet.
One approach is to look for a location where Wendy’s already has an outlet. Another is to look for a location where Wendy’s does not currently have an outlet. A free-form search knowledge base will answer both of these questions in one search.
Kbases help you to connect-the-dots at the strategy level.
If Knowledge Bases are that useful, why don’t all corporations have them?
Answer – like many other things, they need care and feeding – if you don’t recognize the value of a knowledge base you won’t set one up. If you set up a knowledge base and don’t use it, you won’t be inclined to maintain it. If you don’t maintain it, you will not be able to use when you feel you need it.
So, we have a knowledge base, tools that allow us to prioritize initiatives, we give an initiative the green light, what comes next?
You need an implementation plan for all major initiatives.
If there are multiple steps, connected in complex ways, where different people need to attend to these different steps, you need CPM (Critical Path Method). Managing projects with CPM is all about managing “float”. If you don’t manage “float” you are likely to be late and over budget.
Hopefully your ROI has a timeline that extends beyond “ribbon cutting”, such that you have resources for training, plus funding to support ongoing maintenance of your initiative. The way to ensure this is to indicate clearly in ROI preparation procedures that ROIs must include all costs and that they will receive periodic reviews.
How do you make decisions regarding operational activity (operational decisions)?
As you move forward to production mode following implementation of an initiative, it pays to have software do most of the heavy lifting.
If you map out your processes in the right environment, you’ll have one-click access to a compiler that can carve up your graph into discrete steps and auto-post steps, as these become current.
If you take care to indicate plan-side the resources needed to perform each process step, what data collection forms are needed at each step, include an instructional component, RALB (Resource Allocation Leveling and Balancing) will automatically fill worker InTrays.
When you are set up to do the right things, the right way, at the right time and place, using the right resources, you know you are in good shape.
Now we get to an important part of our discussion i.e. operational decision making.
The first thing to understand is that knowledge workers have different ways of working efficiently. Some like to start their day by finishing off a few small tasks others prefer to make progress on one large task and later work on small tasks. There may be no consistency from one day to the next, even for the same knowledge worker.
It follows that workers need to be able to micro–schedule their workloads. If you fail to enable this the ‘A’ in RALB will fail.
Next, supervisors who are sensitive to changing customer priorities and to variations in workload for individual knowledge workers need to be able to level (“L”) and balance (“B”) workload across knowledge workers.
RALB – don’t go to the office without it.
Tracking Progress Toward Operational Objectives
So, we have a mission, strategies, implemented initiatives, plus ways and means of allocating resources.
Tracking progress toward attainment of objectives is the next hurdle.
Don’t expect to do this using “manhours-to-go” or “percent-complete” along an end-to-end process.
Most work today is not capable of being orchestrated using end-to-end processes. The usual scenario is to have a series of process fragments that people, machines, and software must thread together at run-time.
Since each customer order, insurance claim, patient has different needs, you need an environment that accommodates following “best practices”, with facilities for accommodating deviations away from best practices.
The environment of choice for workflow management is Case.
Case, basically is a “bucket” that allows you to “park” any and all information relating to a particular customer order, insurance claim, patient. This sets the stage for easier decision-making.
Your typical Case is likely to have multiple objectives. Not all of these have the same relative importance. You may be able to close your Case with only a sub-set of objectives having been met.
Clearly, Case managers need a non-subjective means of determining the status of each Case (i.e. is the Case going to achieve its originally-stated objectives? On time? Within budget?).
FOMM (Figure of Merit Matrices) work well here.
KPIs – the Final Frontier
As you have probably noticed, there’s a considerable disconnect between strategy and operations in many organizations. Strategy is the domain of one group of people, operations another.
Rule #1 for success in an organization is that operations must, at all times, be supportive of strategy. If the mission\strategy says the organization builds airplanes, we don’t want money being spent building racing cars.
Since top management does not have time to micro-manage operations, they have to rely on ROIs (don’t authorize iniatives that are not supportive of strategy) and they also need to periodically trend KPIs (Key Performance Indicators).
It’s not too difficult to work out ways and means of consolidating operational data to KPIs. However, it’s best to update KPIs in real-time, not rely on readings based on historical data. And, guard against watching the wrong KPIs.
The big question is where do you keep your KPIs?
How about back at the Kbase?
This closes the strategy->operations->strategy loop and it gives top management one additional and very powerful benefit which is the ability to look at KPIs and engage what-if and connect-the-dots processing. This can lead to a realization that KPIs need changing (i.e. the KPIs are no longer valid measures of current strategy.)
ROIs on the way down (submit/approve), and KPIs on the way up, are the way to bridge the gap between Strategy and Operations.