Saturday, February 23, 2008
Friday, February 22, 2008
Five ‘D’s of Success
Desire + Determination + Discipline + Dare + Divine Guidance
The first four ‘D’s are self-explanatory; the fifth requires a little explaining. For a believer in God (like myself) it is exactly what it implies – the Divine Guidance of the Almighty God which can be received through prayer and meditation. For non-believers (atheists, agnostics, etc.) it is the kind of the ‘sixth sense’ which is very much worth listening to. The importance of this guidance was confirmed by no other than Napoleon Hill – an author of an international super-bestseller “Think and Grow Rich” – probably the best book on ‘personal success technologies’.
How to Measure the Aggregate Value of Your Company
Compared to other posts, this is going to be a rather long one. Please bear with me as the theme of this post is probably the most important one (albeit a little technical) in the whole corporate happiness and aggregate value management methodology (AVMM).
The fundamental business management objective is maximization of an aggregate value (AV) of an organization. To be maximized, AV must be carefully and efficiently managed. We can manage only what we can adequately measure; therefore, AV of an organization must be adequately and reliably measured.
In reality, aggregate value of an organization is substantially below its maximum value and the key objective of any corporate plan, project or activity is to increase (hopefully, radically) the aggregate value. Therefore, we are primarily interested not in absolute, but in relative aggregate value of each key business object (product, brand, business unit, asset, etc.) which gives us an idea of how far actual AV lags behind its maximum.
Measuring AV of an organization is done in a ‘bottom up’ direction and starts at the lowest level in the corporate hierarchy – of each key performance indicator (KPI) - financial, functional and emotional - of each key business object (KBO). Before we start discussing the actual procedure for measuring AV of a KPI, it should be noted that there are two kinds of KPI – simple or ‘basic’ (e.g. monthly sales of a company product to a particular customer) and composite (e.g. monthly sales of a company product to all customers).
Maximum AV of a simple KPI is defined using the popular and well-known method – benchmarking. The benchmark is obtained from the most appropriate for each KPI source – either internal (other objects from the similar category) or external (from the company in the same or different industry, etc.).
After the benchmark value of the KPI in question is obtained, we determine its actual value (from the appropriate corporate records). The key ‘KPI ratio’ (actual KPI value divided by its benchmark value) yields the aggregate value index (AVI) of a simple KPI. Naturally, AVI is always below 100%.
To calculate the AVI of a composite KPI you must first compute AVI for each simple KPI in the composite KPI (e.g. for sales to each key customer or a group of customers). Then you must assign an appropriate weight (importance) to each simple KPI in the composite one. Then AVI for a composite KPI is calculated as a weighted sum of AVI for simple KPI:
[weight(1)*AVI(1) + weight(2)*AVI(2) +… + weight(n)*AVI(n)] {1},
where n is number of simple KPI in a composite KPI. If and when appropriate, some of the simple KPI measure the synergy between simple KPI in a composite KPI.
Key business objects can also be either simple (e.g. an individual employee, product, brand, etc.) or composite (e.g. department or product group). To compute AVI for a simple KBO you must first compute AVI for all composite KPI for the KBO in question as well as for all stand-alone simple KPI (which are not included into any composite KPI).
Then you must determine the appropriate weight for each composite and stand-alone KPI for the simple KBO in question and then compute AVI for this KBO using the formula similar to {1}.
To compute AVI for a composite KBO you must first compute AVI for all simple KBO included in the KBO in question (e.g. for each employee in the corresponding department) as well as for all composite and stand-alone KPI specific to the corresponding composite KBO (including those that measure the synergy between its simple KBO).
Then you must determine the appropriate weight for each simple KBO as well as for each composite and stand-alone KPI for the composite KBO in question and then compute AVI for this composite KBO using the formula similar to {1}.
To compute AVI for your company/organization, you must first compute AVI for each of its KBO – composite and stand-alone simple – and for each of its specific KPI (i.e. the ones pertaining to the organization as a whole rather than to some of its KBO – composite or stand-alone simple).
Then you must determine the appropriate weight for each simple and composite KBO in your company as well as for each composite and stand-alone KPI for your company and then compute AVI for this composite KBO using the formula similar to {1}.
In other words, AVI for the company and its KBO are computed in the following sequence:
simple KPI -> composite KPI -> simple object -> composite object -> company/organization
AVI computed in this fashion become the foundation and the starting point for performing a strategic corporate reengineering (SCR) for the whole company and/or its key business objects. I will discuss the SCR project in detail in one of my next posts.
Thursday, February 21, 2008
The Right Focus for Your Company
These days, there are dozens of books and articles on “something-focused organization”. Which is quite amazing, as this “something” can be only one thing – the fundamental objective of an organization. Unfortunately, authors of these books and articles advise their readers to focus on anything but this fundamental objective.
For example, Kaplan and Norton preach the concept of a “strategy-focused organization”. Which requires business owners and managers to focus on the method (means for achieving the objective) rather than the objective itself (maximizing aggregate or at least financial value of the company).
The concept of a “customer-focused organization” is only marginally better, because (1) it is too vague as it does not specify that the organization in question must focus on satisfying the aggregate needs of its customers (financial, functional, emotional and spiritual) and (2) it completely ignores the need for an organization to satisfy the aggregate needs of other company stakeholders – owners, suppliers, government entities, mass media, “special interest groups” – often with devastating results for the company in question.
Therefore, the only healthy focus of an organization is its focus on the natural fundamental management objective – corporate happiness or aggregate value maximization (which is essentially the same thing) or at least, on its stakeholders (more precisely, on satisfying the aggregate needs of its stakeholders).
Chaplains Come Into Workplace
From car parts makers to fast food chains to financial service companies, corporations across the country are bringing chaplains into the workplace. At most companies, the chaplaincy resembles the military model, which calls for chaplains to serve the religiously diverse community before them, not to evangelize.
“Someone who has never thought about this might assume they pray with people, but the majority of the job is listening to people, helping them with very human problems, not one big intensive religious discussion,” said David Miller, executive director of the Yale Center for Faith and Culture and the author of the book “God at Work.”
The spread of corporate chaplaincy programs, especially out of the Bible Belt to the North, is part of a growing trend among businesses to embrace religion rather than reject it, Mr. Miller said. Executives now look for ways to build a company that adheres to certain Christian values. Some businesses offer Muslim employees a place and the time to pray during work.
Workplace chaplaincies are generally less costly to operate than the more familiar employee assistance program model of counseling and making referrals. Most chaplaincies also go beyond such programs to bring something of the local pastor to the workplace: the person who is on call around the clock to rush to the hospital when an employee has been in a car accident, or to find housing for families burned out of their houses, or to visit a worker’s relative in jail, even to officiate at weddings and funerals
Chaplaincy programs are voluntary and confidential, experts said, and free to employees. There are no statistics about the scope of such programs, but Mr. Miller estimated that 600 to 700 companies in the United States have chaplaincies, twice as many as five years ago.
Gil Stricklin, founder and head chaplain of the nonprofit Marketplace Chaplains USA in Dallas, said his firm was signing up one new company every three days, compared with one company every four months when it started 22 years ago. Fortune 500 companies never responded to him a few years ago, he said; now he is negotiating with one that has 175,000 employees.
Often, chaplains are hired because of the beliefs of a company’s chief executive.
“We profess to be Christians and we think, ideally, that should make some difference in not just how we live but how we do business,” said J. M. Herr, chief executive of Herr Foods of Nottingham, Pa., a maker of chips and pretzels.
Companies that introduce chaplaincies run the risk of looking as if they back a particular faith or religion, which might make many employees uncomfortable. Companies that come across as “faith friendly,” rather than religion based, manage most easily to dispel that discomfort, Mr. Miller said.
Companies tailor the chaplaincy program to their culture. Cardone Industries, a Philadelphia company that refurbishes auto parts for resale, draws its chaplains, almost all lay people, from its employees. Other corporations, like American LubeFast and Herr Foods, contract with an outside company like Marketplace Chaplains to provide chaplains. Some, like Tyson Foods, which started its program in 1999, have their own chaplains, 127 of them at about 250 of the company’s more than 300 plants in North America, said Allen Tyson, the company’s head chaplain, who is not related to the founders of the company.
For the most part, corporate chaplains are ordained ministers, often hired locally. Some are retired, others have churches to pastor, and most of them work part time.
While most chaplains are Christian, some programs have imams and rabbis, especially in the health care industry. Programs with only Christian chaplains urge them to build ties with religious leaders in the towns where they work. For instance, at the Tyson pork plant in Storm Lake, Iowa, which has many Vietnamese and Laotian employees, the chaplain has a relationship with monks at a local Buddhist monastery, Mr. Tyson said.
Dressed in a white hairnet and white coat with “Chaplain Ken” embroidered in red over the right breast, Mr. Willis, 56, walks Tyson’s 550–worker Glen Allen plant almost every day, greeting workers on the line. He finds people on break. He visits the overnight shift. Every week, he drives to a hatchery and grain complex 90 minutes away and meets people who catch live chickens all day to send to the plant.
Though he leads a small local church, Mr. Willis is on call for Tyson all the time. In his 18 months here, he has spoken at funerals, visited employees in the hospital, arranged housing, food and diapers for families flooded out of their homes, helped people devise simple budgets and open bank accounts. When he discovered that several employees did not have enough money to pay their utilities and have a Thanksgiving dinner, he collected money to assemble Thanksgiving meals for them, which he delivered.
Employees come to him because they feel uncomfortable seeing a counselor or social worker. Some have no church of their own. Others may feel too embarrassed about their problems to go to their own pastors. Or it may simply be because he is there, right by the entrance, and willing to help.
“That’s my understanding of the pastoral role,” Mr. Willis said, after taking a phone call from an employee in the hospital asking him to bring her paycheck. “I treat everyone the same, and my hope is that they will see in me the love of God.”
While Tyson tracks the number of contacts chaplains have with employees, discussions between chaplains and employees are confidential, unless the worker is an imminent danger to himself or others.
Wednesday, February 20, 2008
Declaration of Corporate Identity
There are two reasons – internal and external - why a business entity has to have a strong and attractive corporate identity. Internal reason stems from the most fundamental need of its founder – to be happy in a happy environment. In order to be happy, an entrepreneur needs to know beyond a reasonable doubt that the corporate identity of his or her company matches his or her most fundamental beliefs, values, principles and priorities – professional (‘functional’), emotional and spiritual.
External reason stems from the answer to the most fundamental question of stakeholders relationships management (SRM) – why does a particular stakeholder (client/customer), supplier, partner, etc. chooses to enter into a relationship with this particular company (and not the other one)?
The answer is very simple – because this particular company creates the highest amount of aggregate value – financial, functional, emotional and spiritual – for this particular stakeholder (individual or an organization). It means that the unique aggregate value proposition – UAVP (I will discuss this concept in detail in one of my next postings) is the most attractive for this particular stakeholder.
UAVP, in turn is largely defined by the unique corporate personality of a company which must have both fixed and variable attributes. Variable attributes are needed because the company needs to be able to adapt to the ever-changing external environment. However, the company also needs fixed attributes to be able to build and maintain stable long-term relationships with its stakeholders (a must for the survival and prosperity of an organization) and to be able to weather severe ‘corporate storms’ (alas, inevitable in this ever more chaotic environment). Needless to say, fixed and variable attributes in a corporate personality need to be finely balanced (which is one of the key objectives of corporate strategic planning).
This system of fixed corporate attributes and their values can be rightfully called a unique corporate identity because it does not change over time and provides a solid foundation for both long-term SRM and for survival in adverse situations. In other words, there can be no survival (let alone prosperity) without solid corporate integrity and there can be no corporate integrity without a strong corporate identity.
Naturally, there must be a proper ‘match’ between internal and external requirements for a corporate identity. In other words, there must be a proper ‘match’ between beliefs, values, principles and priorities of an entrepreneur, on one side, and the needs and wants of corporate stakeholders, on the other.
To arrive at such a proper match, it is necessary to develop a formal document - declaration of corporate identity – based on these internal and external requirements. This document then becomes a firm foundation not only for strategic corporate planning, but also for the whole project of business engineering (building a company ‘from scratch’) or re-engineering (transforming the not-so-happy organization into a happy one).
As this post introduced several new important concepts, my next posts will be devoted to stakeholders relationships management, unique aggregate value proposition, business engineering and re-engineering (not necessarily in that order).
Tuesday, February 19, 2008
Why corporate happiness is the best FBMO
Simply because (unlike ‘traditional’ fundamental management objectives) it is firmly based on common sense – the most powerful management tool. All other performance indicators which tried to serve as FBMO – net income, free cash flow, stock price and financial value – are in reality not objectives at all, but rather means for achieving the only true and natural FBMO – building a happy company which will make happy all of its key stakeholders.
The same is true for the proverbial ‘mission’ of an organization. In reality, all organization have the same mission – to make happy all of its key stakeholders. In other words, to satisfy aggregate needs – financial, functional and emotional – of its stakeholders (or, which is essentially the same thing, create the maximum amount of aggregate value for them).
The ‘mission’ presented in a corporate ‘mission statement’ suffers from the same problem as the abovementioned performance indicators – it is not an objective at all, but rather the specific means for achieving the only true and natural FBMO – building a happy company which will make happy all of its key stakeholders. In other words, this mission statement presents the most appropriate means for achieving the fundamental business objective which (hopefully) provides the best fit for the corporate declaration of corporate identity (of which I will talk in my next posting).
Fundamental Business Management Objective
Let's start with the most fundamental question in business management: Why does the entrepreneur start a business? To be happy because for him (or her) there can be no happiness in life without owning and running a successful business.
But (contrary to the popular misconceptions) happiness requires more than that. A lot more.
Whether we like it or not, a human being is a social being and, therefore, can only be happy in a ‘happy environment’. Again, there are exceptions (mostly, religious hermits) but I strongly doubt that there are any religious hermits among successful entrepreneurs and business owners.
As the life of an entrepreneur is inseparable from the life of his/her business (in other words, his/her emotional well-being depends heavily on the ‘quality’ of his/her emotional relationship with the business in question), he/she can only be happy owning and running a ‘happy company’. Any degree of ‘unhappiness’ in the company will inevitably ‘poison’ your emotional life and, therefore, prevent the entrepreneur from being happy.
Therefore, to achieve and maintain personal happiness, an entrepreneur simply has to own and run a ‘happy business’ (and therefore, to transform a ‘not-so-happy’ business into a happy one).
In order to achieve this objective, one must come up with the most appropriate definition of a ‘corporate happiness’ and ‘happy company’. This definition must not only be based on common sense, but also allow for the development of (1) a comprehensive and efficient system of plans and activities aimed at achieving and preserving ‘corporate happiness’ in the company and (2) a comprehensive and efficient system of key performance indicators to be used for “measuring corporate happiness”.Fortunately, such a definition is not that difficult to come up with. An individual can be called truly ‘happy’ when his or her aggregate needs – financial, functional, emotional and spiritual – are completely (or at least adequately) satisfied.
Therefore, a ‘happy company’ is the one that at least adequately (‘acceptably’) satisfies aggregate needs of all of its key stakeholders – owners, clients (customers), suppliers, partners, appropriate government entities, etc.
Naturally, the company that adequately satisfies aggregate needs of its stakeholders is valuable (ideally, highly valuable) to them. In other words, it creates a large amount of aggregate value - financial, functional and emotional – for its stakeholders.
Therefore, a ‘happy company’ is the one that creates the highest possible amount of aggregate value for its stakeholders (both in ‘absolute terms’ and compared to its competitors) or, what is essentially the same thing, maximizes its aggregate value to its stakeholders.
Common sense tells us (if necessary, one can verify the truth of this statement by conducting a thorough study of decision-making patterns) that the stakeholders – explicitly or implicitly – choose the company they are going to deal with based on the abovementioned ‘aggregate value maximization’ criterion.
