Hack:
Delegate Authority to Process Teams and Provide Enterprise-Wide Decision Support to Improve Decision Success Without Bureaucratic Structure
Delegate authority to eliminate chain of command structure and support decentralized decision makers with an automated enterprise-wide support systems that provides tips, traps, successes, and failures of process tams across the enterprise. This will help decentralized process teams use experiences from other process teams in making decisions without having to go through an elaborate bureaucratic structure to gain approvals.
A major challenge for many companies today is the inability to rapidly respond to changing market conditions and competitive threats. It takes too long to analyze data, develop solution alternatives, and execute with speed, agility, and high quality. When companies try to move too quickly, bad decisions are made, which can adversely affect the company. This is due to a pervasive organizational bureaucracy that promotes command and control structures, limits individual/team authority and associated responsibilities, and results in decisions made by process teams that could adversely affect a company financial structure. The JPMorgan London Whale fiasco that resulted in a 9.2 billion dollar trading loss as well as a 920 million dollar fine is one example.
Breaking down the bureaucracy that currently exists in almost every company across the globe is not some wild idea that would be nice to achieve. It is an absolute necessity if companies today want to compete effectively in the global marketplace. Why do I say this? Following are four good reasons:
- The consumerization of technology is changing business models.
- Companies need to respond quickly to customer needs and create personal experiences that "wow" their customers or else they will lose market share quickly.
- New company start-ups are becoming competitive threats.
- Product and service development cycles are shrinking dramatically and command and control structures that worked well in the past no longer accommodates a business model where people need to work together in teams, understand customer needs, innovate value solutions, and develop and deliver products and services quickly.
The key to breaking down the bureaucratic friction that impedes speed and innovation is not a simple problem to solve. You simply cannot say, "We will change our bureaucratic model and delegate responsibility and authority to our workforce, and watch magic happen". It's not as simple as this. You have to look at the end game and work backwards.
There are two key components to eliminating bureaucratic structure.
- The first is executive commitment by the entire management team- CEO, C-suite, and throughout the management chain-to support the initiative and walk the talk.
- The second is to provide personnel with the necessary business-market-and technology competencies and skills as well as technology enabled support systems that provide learning and knowledge building across the organization to reduce decision-making risk. This will enable process teams to improve their decision-making capability, reduce the risk of adverse decisions that negatively impact a company's reputation, good will, and most importantly its financial structure, and successfully create innovative customer value, improve financials, and enhance shareholder wealth.
As I described in the PROBLEM component of Phase 4 Hackethon, there are two key components to eliminating bureaucratic structure.
- The first is executive commitment by the entire management team- CEO, C-suite, and throughout the management chain-to support the initiative and walk the talk.
- The second is to provide personnel with the necessary business-market-and technology competencies and skills as well as technology enabled support systems that provide learning and knowledge building across the organization to reduce decision-making risk. This will enable process teams to improve their decision-making capability, reduce the risk of adverse decisions that negatively impact a company's reputation, good will, and most importantly its financial structure, and successfully create innovative customer value, improve financials, and enhance shareholder wealth.
CORE COMPONENTS OF SOLUTION
This Phase 4 Hackethon will focus on the second component, which comprises a two-phase solution.
1. Provide personnel with the necessary business-market-and technology competencies and skills
2. Develop and implement a technology-enabled support system that provide learning and knowledge building across the organization and reduce decision-making risk
Following is more detail for each component. At the end of this section I provide examples of organizations who in the process of implement this solution
1. Provide personnel with the necessary business-market-and technology competencies and skills
Enabling personnel and process teams to improve their knowledge about the business, the market, as well as technologies will result in better decisions for the business and reduced risk associated with decentralized process teams making decisions. To do so requires personnel to build a set of competencies and associated skills. First, let me make a distinction between a competency and a skill.
A competency is the application of skills. For example, learning how to use a hammer is a skill. Knowing how to build a house is a competency. For process teams to make effective and well-informed business decisions requires competencies in four specific areas:
- Business Competency
- Market Competency
- Technology Competency
- Cross-Dimensional Competency.
Each of these competencies has associated skills. See the following graphic that depicts this framework
Competencies and Skills for a Bureaucratic Free Organization
a) Business Knowledge Competency: Process team personnel need to understand how the business operates, understand customer value and how value is created across the enterprise, and the potential opportunities to provide improved customer value. A Process focus is equally important so process teams can identify the information intersects across the enterprise value chain, where value is created, or can be created.
a1) Business Knowledge and Environmental Skill: Developing Business Environmental skills will enable your process team personnel to understand and articulate the business enterprise strategy, objectives, culture, and internal environment. Understanding the business is fundamental if you want your organization to align services to the needs of the customer. The focus of your organization needs to be the business value achieved measured by business outcome metrics.
a2) Opportunities and Challenges Skills: If process teams can develop Opportunities and Challenges skills, then they will be more effective in working as part of business teams. Knowing what business opportunities exist as well as challenges provides your process team personnel the ability to identify solutions that can enhance customer value, revenue, and profitability.
a3) Process Centric skills: These skills are a very important for process team personnel to work effectively as part of a business team. The business enterprise consists of numerous processes across the value chain supported by information technology. Understanding these enterprise processes and how they align to customer value is critical in effectively working with business personnel to achieve business outcomes for company challenges and opportunities
b) Market Knowledge Competency: This is an important competency since process team personnel cannot effectively improve customer value without a good understanding of the company products, industry trends, and the competitive environment. For process teams to be successful they need to have a good understanding of the market. It is almost more important that key personnel who interact with the business on a daily basis have the same skills. Otherwise, process teams will not effectively contribute to any discussion involving business challenges, opportunities, and potential solutions.
a1) Associated Skills:
Product Knowledge Skills: Gaining knowledge about the products and services your company provides to customers and value chain partners is necessary for process teams to enable business strategies. How do you expect to understand the business challenges if you do not know your company's products and services? You cannot. Knowledge about the products and services provides the context for participating in business discussions about the company challenges and opportunities.
a2) Industry Knowledge Skills: Understanding industry trends will enable process team personnel work with marketing, sales, product engineering, and other organizations responsible for designing, developing, manufacturing, selling, and supporting your company's products and services. Having this knowledge will make process teams an active participant in discussions with C-suite and executive management personnel discussing company challenges and opportunities.
a3) Competitive Landscape Skills: When process team personnel have a comprehensive understanding of the competitive landscape, they will be better informed and capable of identifying the associated issues and opportunities that your company needs to overcome. They will understand the competitive landscape, the companies you compete with, and the value that differentiates your company from your competitors. You cannot participate in this discussion if you do not understand the competitive environment as well as what makes your company products and services valuable to customers.
c) Technology Prowess Competency: Technology is advancing at such a rapid pace. There are three major challenges CIOs face. The first is that not every new technology is an appropriate fit for your business. The right technology choice is the one that meets the needs of your business, not the one that is the latest and greatest. The second challenge is that business executives read about all the new technologies and want to know why the IT organization is not implementing them. The third, and most dangerous, is that business unit executives are contacting software vendors and acquiring products and services avoiding the IT organization. This is dangerous because the acquired software by the business units can conflict with other enterprise wide systems creating business issues. There are three key skills required by your IT personnel. The first is to develop a technology strategy that is flexible and can adapt to changing business conditions. The second is to develop agility within the IT organization so teams can quickly form to address business challenges and meet the demands of the business, which are changing at a quicker pace than ever before. The final skill is a strategic project capability that enables IT organizations to execute projects with speed, minimal risk, and within schedule requirements. Doing so will enable the IT organization to process more projects through the pipeline and address the strategic project demands from the business.
c1) Associated Skills
Technology Strategy/Adaptability Skills: Your IT organization requires a Technology Strategy / Adaptability that enables the company to develop and enhance new products and services. To accomplish this you and your technology teams need a strong understanding of the available and emerging technology available in the marketplace, and develop a technology strategy, which will enable IT to leverage these technologies into new, and or, enhanced products and services.
c2) Organization Agility Skills: Today's marketplace is very dynamic, placing new and demanding requirements on the IT organization. The only structure that enables the organization to respond these ever-changing demands from the business is to develop Organization Agility skills; whereby your IT organization can quickly form teams to collaborate with the business to respond to new business opportunities. In today's competitive marketplace, speed is mandatory and the ability for IT to have personnel with multi business and technical skills is necessary.
c3: Strategic Project Capability Skills: One of the greatest challenges for an IT organization is its ability to absorb strategic projects with current staff and budget constraints, while still maintaining the nuts and bolts of the business. You can only accomplish this if you have visibility into projects, whether they are enhancement of run and maintain projects, and can control execution with a set of robust processes and tools. Only then, can you optimize performance and reap the rewards of reduced time and resources, which will free up funds for strategic investments. The graphic below depicts this strategy.
d) Cross Dimensional Competency: Cross-Dimensional competency is a critical component for a strategic IT organization. Every C-Suite executive, business unit executive, managers, directors, convey a vision of how the business operates and provides value to its customers. Unless process team personnel can envision the future state in terms of strategies, projects, metrics, and business goals, as well as how it will benefit each person in their career paths, any change in enterprise strategy will fail. Associated Skills:
d1) Vision, Leadership, and Communication: Executive management and key management personnel must have effective cross dimension competency and skills to lead their organization The skills associated with the cross dimensional competency are vision, leadership, and communication. I do not include teaming as a skill it is a basic requirement in today's organizational environment. Personnel in effective process teams think, behave, and interact as part of business teams in entirely new ways. As we all know, behaviors are not easy to change. In fact, behaviors are one of the most difficult aspects of managing people. Most organizations develop a tactical focus, whereas a strategic organization focuses on business outcomes. A tactical organization is technically oriented and performs tasks with a silo mentality. Personnel take direction from a Directors and Managers. Most tactical organizations have DNA that drives reactive behaviors. They tend to respond to the directives from the business. A strategic organization, on the other hand, has proactive DNA. They tend to exhibit 'sense and respond' behaviors based upon their business knowledge and constant interaction with business teams.
2. Develop and implement a technology-enabled support system that provide learning and knowledge building across the organization and reduce decision-making risk
Today's global business environment is more complex than ever before. This is due to the following three paradigm shifts in the competitive marketplace; each causing a governance chasm for the business enterprise.
- Expanding global marketplace requires constant vigilance to uncover competitive opportunities and threats.
- Consumerization of IT results in customers demanding new digital products and services that IT organizations need to develop quickly and cost effectively.
- Changing organization models composed of virtual teams making complex business decisions replace the traditional vertical and hierarchical structures.
Each of the three market changes listed above has resulted in a new wave of information gathering by companies to better understand the competitive environment, pulse the needs, wants, and desires of its customers, and develop a more seamless communication process across the entire enterprise. The result is a broader and deeper enterprise structure overloaded with data. True, companies' today focus externally to capture and mine much of this data, using social media and sophisticated analytical tools, to uncover customer behaviors and market trends. However, companies must also focus internally to mine process data to anticipate where process breaches could significantly affect a company's revenues, costs, and potentially its survival. In effect, mitigate the risk of a potential disaster before it happens.
Take a look at all the major companies that have a global reach. Procter & Gamble, Johnson and Johnson, IBM, JP Morgan, Walmart, GM, Xerox, FedEx, and UPS are all familiar names to us and are just some examples of companies that have thousands of employees around the world making critical business decisions each and every day. The command and control structure of the past no longer works. Market dynamics require companies to make decisions and take actions faster than ever before. Customers demand it. As a result, organizational structures are more decentralized and decision-making authority is delegated throughout the entire process, even to personnel closest to the customer.
The dilemma facing executives is simple. Jack Welch recognized this years ago when he wrote about "Managing in the 90's in the 1988 GE Report to Shareholders the following.
"At the beginning of the decade...we saw two challenges ahead of us, one external and one internal. Externally, we faced a world economy that would be characterized by slower growth, with stronger global competitors going after a smaller piece of the pie. Internally, our challenge was even bigger. We had to find a way to combine the power, resources, and reach of a large company with the hunger, agility, spirit, and fire of a small one."
I underlined the last sentence of the quote because this summarizes the challenge that the executive suite faces today. Following is a personal example. When I joined ITM Software in 2003, a new startup, the founders and a cadre of 30 employees with a high energy level and entrepreneurial spirit worked hard and pushed the boundaries to grow the business. Everyone wore multiple hats and communication flowed freely and quickly. Everyone was aware of business decisions on product design, development, marketing, sales, customer service, etc. When a decision inadvertently resulted in a negative impact on the business, the team quickly banded together to correct the problem. At other times, when team members worked together to discuss a potential action and someone anticipated a potential problem, he or she spoke out, discussed the possible consequences, and the team agreed on an appropriate course of action. Such is the DNA of the small company. As companies grow, management instill processes and structure to maintain a core of discipline and consistency in the execution of activities. Decision-making is tightly controlled. However, information flows, which often traverse both vertically and horizontally, are often filtered as they traverse the management chain.
Here is a message to all CEOs, CIOs, and C-Suite executives: take heed of the challenge and figure out how to develop an information system for managing in the 21st century that replicates the speed, agility, and spirit of a small company. How would you answer the following questions?
- As your business has grown, have your processes and policies slowed down the communication of information across the business?
- Have you ever been surprised to find out after the fact that an incorrect decision negatively impacted your company's reputation, loss of market share, revenue, and share price due to a process not followed properly or even worse, personnel inadvertently making a poor decision, even though everyone was telling you that everything is ok?
- Did you find out during the postmortem analysis that "someone always knew" or there were warning signs that could have prevented the problem if they were properly captured as data or appropriately communicated to the management team?
- Do you realize that the inability to monitor and govern appropriately could jeopardize the survival of your company?
If you answered yes to any of these previous questions, you need to figure out how to address the problem. This subject is explored by Lynda Applegate, the Sarofim-Rock Professor of Business Administration at Harvard, in one of her many papers on the subject. In her 1999 paper, "Time for the Big Small Company" published in the Mastering Information Management Series by the Financial Times on March 1, 1999. Applegate's main thesis is that information systems in the 1960's were not mature enough to handle the "volumes and complexity of information flows required" by complex organizational structures. However, advances in technology and information systems are now available to provide a digital governance layer across the entire business enterprise.
The next evolution for effectively managing in the 21st century lies in the development of an information-based system that can predict and identify potential risk areas for the day-to-day decisions that, if made incorrectly, could negatively impact the company. The key to success will be monitoring key enterprise processes and identify potential risk areas.
An example of an enterprise-wide decision support system to reduce decision risk is an airline cockpit, where the on-board governance system constantly monitor aircraft processes and alerts the pilots of any impending threat with mitigating data and voice instructions, via the cockpit dashboard, to avert a potential problem. The airplane is a very complex set of processes composed of hydraulic systems, fuel systems, navigation systems, take-off and landing systems, wing and stabilizer controls, etc. All have to work in harmony for the aircraft to fly safely to its destination.
An extension of the cockpit example is to look at the United States Federal Aviation Authority National Airspace System (FAA-NAAS). This organization is responsible for providing the safest most efficient aerospace system in the world. At any given time of day, approximately 5,000 aircraft fly in the skies above the United States. In addition, on any single day, the FAA monitors approximately 85,000 flights. Through an extensive network of systems, highly trained air traffic controllers stationed at airports and FAA facilities across the United States monitor all flights "to ensure that all traffic moves as smoothly as possible" and handle "constraints in the system, such as weather, runway closures. 6 The Air Traffic Controllers reroute aircraft based on early warning indicators if planes are too close to each other, forecasted adverse weather conditions, or if an aircraft needs to be rerouted due to an onboard medical emergency. Although each aircraft has their own on-board systems to monitor the plane's systems, the FAA's governance process ensures that all aircraft flying in the skies above the United States move safely through their filed flight patterns.
I would like to explore this analogy. Think of the airplane cockpit as one of your company's process cells where personnel from different parts of the organization perform a variety of process activities. Think about logistics, product development, projects, and vendor management as examples of processes that contain high degrees of risk. Major issues can occur if incorrect decisions are made or information about the process is not available to personnel performing process activities. Inadvertently routing of logistics carriers, vehicles, planes, trucks, or rail, without knowledge of impending weather, traffic, or mechanical issues can impact sales, cause product spoilage, and create havoc across the entire network for many companies because of the lack of an early warning system. Projects reflecting a "green" status may in fact be "yellow" or "red" due to team members being unaware of warning signals, resulting in project overruns, inefficient resource allocation, out of scope efforts, etc. A product development team makes a decision not realizing that the same decision previously implemented by another product development team resulted in untimely delays One of your major strategic vendors, while providing similar services for another company, make decisions that negatively impact revenue and cash collection. . These events happen every day at many companies. Yet management has yet to figure out a way to proactively mitigate these negative outcomes
Managers at companies around the globe spend billions of dollars improving the effectiveness of business processes but not nearly enough to provide a governance "early warning system" to ensure that potential risk areas are identified, communicated, and proactive actions taken to prevent negative outcomes. An enterprise-wide decision support system to provide early warning of potential risks would reap billions of dollars in potential savings around the globe, speed up innovation, and result in consumers benefiting with unique and value based products and services.
COMPANY EXAMPLES
1. Provide personnel with the necessary business-market-and technology competencies and skills
2. Develop and implement a technology-enabled support system that provide learning and knowledge building across the organization and reduce decision-making risk
There are some examples of where this is happening in today's business environment. Two are discussed below.
Procter & Gamble
Procter & Gamble addresses part of the challenge with its Decision Cockpit and Business Sphere applications that help managers and teams make well-informed business decisions. Filippo Passerini and his IT / business teams digitized the company data and accomplished three major objectives. First, there is now one set of information, so there is no dispute about the accuracy of the data, which often plagues teams in accurately analyzing data. This enables 8,000 employees to focus on data analysis versus data integrity when performing their job. Second, much of the non-value added time resulting from capturing, organizing, and conducting some preliminary analysis is eliminated. Most managers will tell you that they spend 50-80% of their time gathering, organizing, and interpreting data. Eliminating the data accuracy confusion provides managers the ability to spend a majority of their time on decision scenario analysis to make well-informed business decisions, which is a value-add activity. Third, data is analyzed extensively using business analytics and presented in various graphical formats for ease of interpretation. This strategic use of technology and information addresses the islands of information challenge that plagues many companies. The net result is managers and teams focus on reviewing analyzed data that result in personnel and teams making well-informed business decisions.
CAI, Inc.
CAI, a professional services firm, is developing a suite of SaaS solutions named Advanced Management Insight (AMI) that according their CEO, Tony Salvaggio, does this. Salvaggio, a former IBM sales executive, founded CAI in the early 1980s and has always believed that "process excellence is the road to success". Over its 30 plus years in business, CAI has developed methodologies, processes, and solutions, around their intellectual capital that focuses on improving IT processes.
One of the newer initiatives at CAI is the development of an early warning system to proactively identify potential risk areas in all areas of the business, not just IT. Their AMI suite is comparable to an airline cockpit where the on-board governance system constantly monitor aircraft processes and alerts the pilots of any impending threat with mitigating data and voice instructions, via the cockpit dashboard, to avert a potential problem. The airplane is a very complex set of processes composed of hydraulic systems, fuel systems, navigation systems, take-off and landing systems, wing and stabilizer controls, etc. All have to work in harmony for the aircraft to fly safely to its destination. CAI uses the cockpit as an example of management cell where employees perform activities to support a business process.
CAI efforts are right on track. Today's business enterprise is composed of a very complex set of processes, just like airplane systems. These processes have to work in harmony to develop, sell, and deliver products and services for customers. I am sure your company focuses much effort on optimizing these processes. However, you may not be focusing enough energy on the need for a governance system that monitors these processes to avert risks that occur due to incorrect decisions made each and every day throughout the company, and perhaps a major one that could even impact the very survival of your company.
Delegate Authority to Process Teams and Provide Enterprise-Wide Decision Support to Improve Decision Success Without Bureaucratic Structure
1. Provide personnel with the necessary business-market-and technology competencies and skills
2. Develop and implement a technology-enabled support system that provide learning and knowledge building across the organization and reduce decision-making risk
Process teams that develop competencies and associated skills to understand the business, the marketplace, and how technology can be applied innovatively can have a dramatic impact on customers experiencing "wow" moments and create a "customer for life". Additionally, these process teams share information across the enterprise using a real-time decision support system to help each team member as well as other process teams improve how to better apply their skills and reduce decision-making risk in performing their jobs. The net result is a company that creates innovative value for its customers, dramatically improves its financial performance, and provides its stockholders enhanced value for their investments. Following is an example.
This is an example of how my Hack would work using a fictitious company as an example.
FURNISHINGS SUPPLY REBRANDS ITSELF TO REGAIN MARKET LEADERSHIP POSITION
Background/Challenge
Furnishings Supply is a 30 billion dollar retailer with 1500 stores in key cities around the world. The company sells home furnishings and other accessories to and has been in business for 40 years. Furnishings Supply is structured bureaucratically with a traditional command and control structure. Managers direct employees activities, Directors manage the managers, and the executives hold a tight rein on strategy, policy, and delegation of authority. The company has an active internet site that supplements in store purchases. However, over the past few years in-store sales have stagnated as well as through the website. New competitors have sprung up in recent years and customers who have been loyal to Furnishings Supply buy less and less each year. Of the top 1000 customers, some have not purchased anything in recent years. The board is concerned about this trend and directed Furnishings Supply Executive management to develop a strategy to regain its leading market position.
CEO Approach to Challenge
John Bunson is CEO of Furnishings supply and has been in the role for 20 years. John has strong ties to the Board as well as the founder of the company. John is very concerned about the degradation of sales. He has been successful in the past but realizes that if something doesn't change, his role will be in jeopardy. John sought council from a group of CEOs he meets with regularly and realized that the marketplace is changing. He needed to do something dramatically and decided that some new fresh blood in the management ranks could help. John began a search for a chief marketing officer (CMO). There was no current CMO at the company. The current director of marketing is nearing retirement age so a transition would not be difficult. After a three-month search John found the right candidate. John hired Bill Peters, a bright 38 year-old marketing executive in the new role of chief marketing officer (CMO) at Furnishings Supply. Bill has fifteen years of marketing and customer service experience with large retailers as well as a few startups. John found Bill to be bright and ambitious. He is team-oriented, with excellent communication skills, and an ability to communicate a vision in a clear manner. Bill has a good working knowledge of the marketplace and how social media is changing business models. Bill is also aware of the bureaucratic structure but was guaranteed by John a free rein and to "shake things up", at Furnishings Supply. With this commitment Bill believed he could turn around the stagnant sales trend and have a dramatic impact on the financial performance of the company.
Bill - the New Executive Vice President of Marketing
Bill work history included large retailers with a strong bureaucratic organization as well as a few startup companies selling a variety of retail products. The experience was enlightening. The large retail companies has an extensive command and control structure. Time was the enemy. Every strategic decision and operational plan had to be approved by a myriad of management layers. Workers were frustrated at their lack of autonomy. The start-up experiences were enlightening. There was no bureaucratic structure. Everyone took on the roles they needed. Teams met daily to review activities and learn from each other's successes as well as challenges and failures. There was no blame game. It was all about improving processes. When a decision that resulted in a negative outcome occurred, the teams met to discuss the logic of the decision as well as the negative outcome. The team would then develop a mitigating strategy and process improvement approach to make sure that when a similar scenario occurred, a positive outcome would be achieved. Start-ups are a great example of a learning organization.
New Strategy to Improve Lagging Sales
Bill was convinced that if he could develop a culture within Furnishings Supply that replicated the culture of the small startups, he could achieve his goal. On day ten of his new job, Bill scheduled met with John to lay out his strategy. He said to John, "I need 120 days to understand the business and then I'll develop a strategy to get us back on track". Bill presented John with his seven-step plan. John agreed and both presented the following approach to the board.
- Bill would form a steering committee consisting of him, the vice-presidents of sales, merchandising, logistics, and IT and update the team regularly on activities and discuss any issues.
- Bill would spend the first 30 days on the job learning about the company, the market, and the information and technology strategy.
- Over the second 30 days, work with CFO, Merchandising Directors, and the CIO to understand how information and technology supports the enterprise business processes and where customer value is currently created.
- Work with CIO to develop a knowledge capture pilot solution that would support the training and would capture learnings from store and customer services personnel to share knowledge, support decision making, capture key metrics and provide feedback to pilot personnel
- Spend an additional 30 days visiting key stores, contacting faithful customers, and, also those top customers who no longer shopped at physical stores or through the website, as well as customer service managers and personnel
- During the final 30 days of the 120 day plan, the executive steering committee and work teams would co-develop a strategy with company executives (C-suite executives, merchandising managers, customer service managers, and key personnel) to regain customers, improve customer satisfaction and increase sales
- Schedule a meeting with the board for the steering committee to present the strategy and plan.
The board approved the approach and Bill was off and running. Bill formed a steering committee and then proceeded with the first four steps of the plan, which took 90 days. During that time Bill updated the executive steering committee with status reports as well as face-to-face meetings every four weeks. The executive steering committee was impresses at how much Bill had learned about the company, market, and the technology that enabled the company's business processes. It was now time to develop a plan. During his first 90 days Bill identified some key managers and personnel he wanted to be part of the team that developed the plan. They were bright, had good communication skills, and were eager to learn. More importantly, Bill saw leadership potential in each of them. Following is the plan the team developed and presented to the executive committee. The executive committee approved the plan and Bill recommended that the team present the plan to the board with the executive steering committee providing support as needed. The Board approved the following 34-week plan.
1. Develop a pilot program to improve customer retention, customer satisfaction, and sales revenue - 1 week.
2. Select a group of five stores and supporting customer service teams for the pilot program - 2 weeks.
3. Develop a communication plan to personnel in pilot program advising them of the program goals and benefits -1 week.
4. Assess the key competencies and skills of store and customer service personnel in pilot program to determine skill gaps using 360-degree assessment process - 4 weeks.
5. Conduct team meetings for each store that includes store and customer service personnel to review assessments and associated gaps. The team meetings would also include customers; both existing and past customers. Team meetings would consist of developing skill improvement plans and new methods of customer service, which would include suggestions to change return policy, utilize mobility as a new means of capturing customer needs, etc. - 8 weeks.
6. Implement training program - 12 weeks.
7. Develop a test IT decision support solution used by pilot teams to determine feasibility, capture learnings, adjust as necessary- In parallel with other activities.
8. Pilot teams to identify key metrics for success and incorporate into Decision Support System - part of training program
9. Capture data relative to store sales, returns, customer satisfaction, customer retention, customer recapture, etc. and measure success - 6 weeks.
10. Identify key checkpoints during 6-week pilot to review, analyze and share data among team members, executive steering committee and Board. Modify store and customer service processes as necessary
Post Pilot Analysis
After the 28 -week program the team met to review the results, which the team presented to the steering committee and the board. Following were the key findings.
1. Pilot store sales were 15 percent higher than the prior 12-month period, while average store sales for the remaining Furnishing Supply stores averaged minus 3 per cent, a downward trend consistent with the previous 5 years.
2. Post pilot assessments recorded a remarkable increase in knowledge skills as well as applying knowledge. This is consistent with the sales increase recorded during the pilot period.
3. Customer retention improved and previous "lost" customers returned to the stores, a major goal of the pilot program.
4. Pilot store and customer service personnel found the Decision-Support system developed by IT to be a real enabler in improving decision-making ability in interacting with customers. Unfavorable decisions were quickly analyzed and remedial actions recommended. Following is an example of a customer interaction.
Joan is a customer service agent and was on a call with a customer who had a complaint. The customer bought a $150 dollar tablecloth that she was unhappy with because the color was faded in some areas and the quality was not as advertised. Joan was not having a good day even though she participated in the competency and skills training. The department manager was listening in on select calls and observing key metrics on the Decision Support System Dashboard. The system recognizes key negative words that indicate dissatisfaction by customers. The system indicated a Red Alert for a phone call between Joan and a customer. A Red Alert is a warning that a decision made during a customer service call could have a negative impact on customer service. The alert was a 9 indicating a high probability of a negative outcome. The system picked up negative words used by the customer who said, "I'm not happy. I don't know why I shop in your stores. I'm never coming back again". The alert notified a manager, in real time, who immediately listened in on the conversation and sent a pre-defined message to Joan indicating a recommended dialogue to remediate the negative perception by the customer (note: the system will eventually be designed to do this automatically without human intervention). Joan used the recommended dialogue as well as the recommended action; provide the customer a significant credit to her account to use on any future purchase and a credit her account for the unwanted merchandise. Joan told the customer, "You don't have to return the merchandise. We don't want to inconvenience you". By the end of the conversation, the customer was happy, Joan was happy, and the manager was happy.
The Decision Support System immediately summarized and catalogued the call. All store sales and customer service personnel access the system during the day. The dashboard provides alerts and scenario summaries. In the case of Joan, the system categorized the call under Customer Unhappy with Merchandise. At the end of each day all store and customer service personnel review the dashboard and have a quick team meeting. Red Alerts and other key data is reviewed during the 15- minute meeting.
Summary
At the conclusion of the pilot a meeting was held with all pilot store and customer service personnel to review the results. The entire team of 75 people, 65 store personnel and 10 customer service personnel, were pleased with the results. Not only did sales increase but employee morale was at its highest level in many years. The team recommended that the program be expanded to a larger group of stores and eventually to the entire 1500 stores. The team documented the major results.
During the following three years Furnishing Supply experienced a renewed growth. Sales increased an average of 10-15 percent and customer retention was at its highest level. In addition, the number of new customers shopping at Furnishings Supply was at its highest levels in ten years. Employees were knowledgeable about the business, the market, and how technology reduced decision-making risk. What was surprising to everyone, except Bill, was that pilot store and customer service personnel recommended many new ideas to improve customer service. Innovation was alive and well at Furnishings Supply
The Board was happy with the results, John, the CEO, promoted Bill to COO of the company. Bill's vision to develop a culture within Furnishings Supply that replicated the culture of the small startups was achieved. He accomplished his goal by improving the key business, market, and technology competencies and skills of personnel as well as providing an Enterprise-Wide Decision-Support System that reduced the risk of negative decisions. Oh! by the way, Furnishings Supply was voted on of the top 50 companies to work for.
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CHALLENGE |
SUGGESTION TO OVERCOME CHALLENGE |
1 |
Executive Commitment and Support |
Benchmark other companies and learn from their successes |
2 |
Employee Culture/Resistance to Change - Propensity for people to change. Every company has a different culture |
Assess organizational culture/chose pilot group to conduct benchmark study/hold town hall meetings/develop on-going communication plan/advise organization of company success/challenge/opportunities, and need to change |
3 |
Choose a pilot group that has propensity for achieving success |
Assess different potential pilot groups to determine which one is more likely to success in pilot study. An A team will always overcome challenges |
4 |
Learn from failure |
Every pilot program has bumps in the road. Challenges occur at different stages of the pilot and the team needs to learn from failure. Innovation succeeds because teams learn from failure and innovation occurs as a result of numerous failures |
5 |
Pilot team synergy |
Conducting pilots, especially when process change and culture change is involved, can be difficult. Hold team meetings regularly, never blame a person for failure, look to improve the process |
6 |
Pilot momentum weakens over time |
Celebrate success-Revitalize team spirit with celebrating success, no matter how small |
Before you implement the hack in your organization you need to conduct a test. Following are suggested first steps. After completing the first steps chose a pilot process team to conduct the assessments described below
1. Provide personnel with the necessary business-market-and technology competencies and skills
A necessary first step is to assess the competencies and skills of process team personnel as well as key management personnel . Following is the framework, assessment, and scoring grid to determine the maturity of your organization's competency and skills. The goal of the assessment is to determine its effectiveness and receptivity for a broader change management initiative of enhancing the competencies and skills of all process teams. To begin, conduct a pilot assessment. Chose a process team to test the assessment, score the results. Meet with the pilot team to review results to share results and determine if they agree with the findings. Management can then determine the appropriate next steps.
Competency and Skill Assessment
The Enterprise-Wide Process Team Competencies and Skills Assessment measures the degree to which process team personnel exhibit best practice behaviors. Scoring is across two dimensions. The first is the skill knowledge for each competency. The second is how well process teams apply the knowledge. Knowing a skill is important. Knowing how to apply the skill to create business value is the important measure because it measures how well the skill is applied in business settings. Each scoring, skill knowledge and applying skills is recorded on a two by two grid, which you can find at the end of the assessment instrument.
Enterprise-Wide Process Teams Competencies and Skills Assessment
COMPETENCIES AND ASSOCIATED SKILLS |
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BUSINESS KNOWLEDGE |
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SKILL |
BEST PRACTICE |
Score ( 1 = Low / 5 = High) |
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Skill Knowledge(a) |
Applying Skill (b) |
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Business Environment |
Understanding and Ability to Articulate the Enterprise Business Strategy, Objectives, Culture, and Internal Environment |
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Opportunities/Challenges |
Understanding and Ability to Articulate the Enterprise Business Opportunities that Can Enhance Customer Experience/Value, Enterprise Revenue/ Profitability/ROI, and the Challenges that Impact Enterprise Growth |
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Process Centric |
Understanding and Ability to Articulate How Enterprise Services Align and Support Enterprise Process and Innovate New Processes as Needed |
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SUB TOTAL BUSINESS KNOWLEDGE |
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MAXIMUM SCORE |
15.0 |
15.0 |
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MATURITY % (sub-total / maximum score) |
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COMPETENCIES AND ASSOCIATED SKILLS |
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MARKET KNOWLEDGE |
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SKILL |
BEST PRACTICE |
Score ( 1 = Low / 5 = High) |
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Skill Knowledge(a) |
Applying Skill (b) |
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Product Knowledge |
Knowledge of How Customer Value is Derived from Enterprise Products and Services |
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Industry Knowledge |
Knowledge of Industry Landscape and Upcoming Trends and their Alignment to Enterprise Products and Services |
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Competitive Landscape |
Awareness of Competitive Environment and the Existing Customer Value Gaps and Associated Opportunities to Provide Customers Additional Value in the Form of New/Enhanced Products and Services |
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SUB TOTAL MARKET KNOWLEDGE |
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MAXIMUM SCORE |
15 |
15 |
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MATURITY % (sub-total / maximum score) |
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COMPETENCIES AND ASSOCIATED SKILLS |
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TECHNOLOGY PROWESS |
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SKILL |
BEST PRACTICE |
Score ( 1 = Low / 5 = High) |
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Skill Knowledge(a) |
Applying Skill (b) |
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Technology Strategy / Adaptability |
Incorporates Emerging and Existing Technologies into New and/or Enhanced Products/Services that Provide Customer Value that will Drive Additional Revenue, Reduce Costs, and/or Increase ROI |
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Organizational Agility |
Teams of IT/Business Personnel Rapidly Form Based Upon Changing Business Needs Leveraging Enabling Technologies to Develop/Enhance Customer Products and Services |
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Strategic Project Capability |
Capability to Implement Strategic Projects by Reducing Costs of Run & Maintain Activities and Enhancement Projects as well as improving IT Personnel Technology / Business Skills to improve efficiencies |
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SUB TOTAL TECHNOLOGY PROWESS |
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MAXIMUM SCORE |
15.0 |
15.0 |
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MATURITY % (sub-total / maximum score) |
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COMPETENCIES AND ASSOCIATED SKILLS |
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CROSS COMPETENCY SKILLS |
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SKILL |
BEST PRACTICE |
Score ( 1 = Low / 5 = High) |
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Skill Knowledge(a) |
Applying Skill (b) |
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Vision |
Articulate the Enterprise Vision that Aligns with Corporate Business Units |
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Leadership |
C-Suite Executives, Business Unit Executives, Directors, Managers, guide Process Team Personnel in Developing the Skills / Competencies / Knowledge to Enhance and Develop the Enterprise Processes to Business Needs, Development and Enhancement of Products and Services as well as Effectively Collaborates in Business Peers to Achieve Business Vision / Market Strategies / Financial Objectives |
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Communication |
C-Suite Executives, Business Unit Executives, Directors, Managers Effectively Communicate, Collaborate, and Team with Business Personnel to Understand / Uncover Opportunities to Drive Revenue, Reduce Costs, and Improve ROI |
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SUB TOTAL CROSS COMPETENCY SKILLS |
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MAXIMUM SCORE |
15 |
15 |
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MATURITY % (sub-total / maximum score) |
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COMPETENCIES AND ASSOCIATED SKILLS |
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SUMMARY |
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SKILL |
BEST PRACTICE |
Score ( 1 = Low / 5 = High) |
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Skill Knowledge |
Applying Skill |
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SUB TOTAL BUSINESS KNOWLEDGE |
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SUB TOTAL MARKET KNOWLEDGE |
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SUB TOTAL TECHNOLOGY PROWESS |
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SUB TOTAL CROSS DIMENSION |
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TOTAL SCORE |
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AVERAGE MATURITY |
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MAXIMUM SCORE |
15 |
15 |
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MATURITY % (TOTAL SCORE / MAXIMUM SCORE) |
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COMPETENCIES AND ASSOCIATED SKILLS |
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SUMMARY |
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SKILL |
BEST PRACTICE |
Score ( 1 = Low / 5 = High) |
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Skill Knowledge |
Applying Skill |
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SUB TOTAL BUSINESS KNOWLEDGE |
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SUB TOTAL MARKET KNOWLEDGE |
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SUB TOTAL TECHNOLOGY PROWESS |
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SUB TOTAL CROSS DIMENSION |
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TOTAL SCORE |
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AVERAGE MATURITY |
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MAXIMUM SCORE |
60 |
60 |
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MATURITY % (TOTAL SCORE / MAXIMUM SCORE) |
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Following is the scoring grid to capture the results of the assessment. It's a first step in determining gaps and opportunities to shore up needed competencies and associated skills.
2. Develop and implement a technology-enabled support system that provide learning and knowledge building across the organization and reduce decision-making risk
A quick first step is chose a key process to assess. The assessment below is for an enterprise-wide initiative. For the First Steps approach modify the assessment to the pilot process identified.
- Ensure the integrity of all enterprise data and eliminate disparate islands of information
- Continue initiatives to capture and mine customer data to learn about customer needs, wants, and desires, behaviors that impact buying behavior, and competitive intelligence.
- Continue to optimize business processes to improve efficiencies and improve desired business outcomes.
- Identify key processes and begin a program to capture key information about potential risk areas, key predictors, past negative outcomes, etc. ; e.g.; specific activities that resulted in risk as well as how you can identify the "predictors" of risk.
- Measure the effectiveness of Process team decisions through feedback other business process teams who use the output as part of their process team activities
- Investigate "early warning" applications available in the market that can analyze this data to predict potential risk areas and communicate alerts to include suggested mitigating actions.
1. Phil Weinzimer Website: www.stratege.com
2. Articles
How P&G Presents Data to Decision-Makers-Davenport; Harvard Business Review
CIO.com: Phil Weinzimer series on the subject of Transforming IT for Business Success
AITS.org: Phil Weinzimer series on The Strategic CIO
3. Books:
Enterprise; Weinzimer; Taylor and Francis
Getting IT Right; Weinzimer; Wiley
Confessions of a Successful CIO; Roberts, Watson, Cramm; Wiley
The CIO Paradox; Heller; Bibliomotion
The Real Business of IT, Hunter, Westerman; Harvard Business Press
4. Videos
Sarder TV: Phil Weinzimer series on IT Thought Leaders
AITS Interview Series Hosted by Phil Weinzimer: Managing in the 21st Century (available Oct 2014)
Graham- you're on fire.. thanks for the response!
Don't get me wrong ....I'm a practitioner in a leaderless organisation so I'm not trying to say it can't work- I'm just saying that this is a key problem.
In the context of leaderless organisations, power is the problem; power is not some abstract thing- its specifically about being the custodian of resources.
As the phrase goes.... "remember the golden rule.... he who has the gold ...makes the rules".
Whether its dressed up as "risk managers" or "participation levels", or "circle leaders", or "black belt experts"- all these people have one thing in common- the approval for a plan that an individual puts forward lies in their hands.
There always needs to be this check-and-measure that organisational resources are not left un-invested (like Apple sat on $78 billion) or overinvested like most business failures- or simply depleted on hair-brained schemes.
This is "hierarchy" by another name. "I'm not your boss, but I have custody of all the resources you need to do anything".
Graham, you make a good reflection here:
"This is not dissimilar to current arrangements for hierarchical organisations - some decisions are made by various levels of managers, some are made by management committees, some by boards, some require shareholder support."
I believe that this is the pivotal problem that any "system" used in self-managing organisations must address.
I have found in our organisation that the physical resources of the organization must be recorded and each individual must be held accountable for their stewardship of the resources at their disposal.
Typically this will be an agreed standard for this and an audit to make sure it is done. Just like a business tenant will be required to look after the building, or a car leaseholder will have to get it serviced.
This is part of the condition to be given access to the resource.
What's left then is the financial resources and we have found it works best if the individual is given a free hand over the cash resources they have contributed to the organisation (their retained profit). The more successful they are the more resources at their disposal.
Finally, all our people contribute to a "central investment pot" (more retained profit) in which they can lobby for their pet schemes (like a business plan)- but crucially they have to underwrite the return of their scheme to weed out the Ponzi schemes that inevitably are put forward.
This last one is a bit like a hierarchy in that there are "key holders" that have to ratify the decisions (all be it in what we call "round table" meetings), but this is actually only a very small portion of the overall resource pot under stewardship AND in our system the key-holders themselves have to pay interest on the cash so they need to deploy it to cover its costs (that puts a little balance into their relationship with the person with the idea).
I hope that has given you some ideas, its a tricky thing to solve, but to make a functional system I believe it has to be solved.
Thanks Julian.
You are right, it is a key problem and the basic human need for power is fundamental. It is one of the basic human needs taken into account in the Integrative Problem Solving Process which is part of the NEW Integrative Thinking Course I offer at http://integrative-thinking.com/index.php/new-integrative-thinking/ . That is why I suggest the learning of that course as a preliminary step when establishing a Federation. More generally, the learning of it by all involved provides a common basis for communication - essential for success in any organisation or group.
Thanks for you response Graham.
So if I understand it correctly, you are saying that the "joint venture" status would mean that each participant would themselves contribute assets (say money, property or something) to the Federation and the JV Agreement would define their situation?
But again, what if in the pursuit of business a disastrous promotional campaign was entered into and a significant amount of money was simply wasted.... who is RESPONSIBLE for that and what if it wipes out the assets contributed by 2 other members? What happens to them? Or do the losses get averaged out over everyone? And if the losses are more than the actual cash available whose illiquid asset gets sold?
The "elephant in the zoo" as I like to say with all these systems that replace hierarchy is that they don't deal well with the issue of shareholders assets that are put at the disposal (and at risk) of the workers in the system who have no ultimate responsibility for their safe keeping. Like a stock broker who puts all your pension money in Enron- in the end he does not lose anything and has other clients to fall back on.
Remember the workers in such systems are constrained only by an employment contract. If people were such great custodians of assets then we would not see so many individuals go bankrupt nor small businesses fail.
How does your Federation deal specifically with the risks to shareholders assets?
Thanks for this Julian.
The short answer is these matters would be addressed when the Federation is being formed. Decisions affecting Enterprises/members of the Federation would be made with levels of participation commensurate with the implications of the decisions. This is not dissimilar to current arrangements for hierarchical organisations - some decisions are made by various levels of managers, some are made by management committees, some by boards, some require shareholder support. Moreover, shareholders in a Federation may be its employees.
These matters would probably be easier to address with start-ups than with large established hierarchical organisations. However, in each case having all involved first learn what the Federation Model is all about would facilitate the creation of a Federation.
I guess I still worry about who is the guardian of the actual business assets?
Do they belong to the shareholders, the board- have they been passed to the individuals?
What if the assets are lost in the "great idea"- who is responsible?
Julian,
Broadly, a federated structure could be the answer.
In my IFEDS Model, explained at http://integrative-thinking.com/index.php?cID=102 a Federation would be a joint venture among independent parties. Each participant in a Federation would be a joint venturer with a simple written Joint Venture Agreement defining their situation.
Federations would be governed by Federation Catalysts (FCs) and other Federation Integrators(FIs) who would provide coordination for up to seven Enterprises engaged in efficiently, effectively and competitively meeting the needs and wants of end-users/citizens through Enterprises and their Direct Support Advocates.
When attempting to change an existing top-down bureaucracy, implementation of the IFEDS Model would be decided by the Enterprise Coordinators representing each member of the potential Federation. These Enterprise Coordinators would be the "guardians" of the business assets of the Federation which would "belong to the shareholders" in the Federation.
I could use when I was still working. Sounds great
It's about time we provided the people closest to the customer with the information they need to make decisions. Surely, the people closest to the customers have the best insights into what the data means and can act quickly in "customer time". If management feels they add something to the process, they should add it to the database to share, or train the people interacting with real customers.
Great article.
This would complement a federated structure well.
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