Where is the demarcation between Accountability, Responsibility and Authority?

Where is the demarcation between Accountability, Responsibility and Authority?

May 20, 2019 | Governance, Leadership, Management

The words ‘Accountability’ ‘Responsibility’ and ‘Authority’ are often mixed up, used inconsistently, and often as synonyms.

How often have I heard someone say they have accountability, but not the responsibility, as well as the opposite?.

In any organisation, the ‘language’ used has to be crystal clear. Without clarity, ambiguity and finger pointing creeps in.

Let’s put this one to bed.

In my world, the demarcation between these words is very clear.

Accountability.

The clue is in the word: ‘count’. The person with accountability is the one keeping track of progress, counting it. They may not have the power to make all  the decisions, their role is to be the one who gives voice to issues as they arise, and should be independent of the role the person plays in the organisational hierarchy.  In former marketing management roles I held product managers accountable for margins of the products for which they held responsibility. They did not set final prices, nor did they control the promotional spend or COGS, but they were accountable for margins, and it was their role to monitor, communicate, and persuade, to deliver both the percentage and dollar outcomes.

Responsibility.

Anyone who is in a position to ‘respond’ carries responsibility. An individual does not have to carry either accountability for outcomes, or the authority to make decisions to be responsible for actions taken, most particularly their own. It is in this area of responsibility that the cultural aspects of an enterprise are felt most keenly. When those without any institutional power feel attachment to an outcome, and act accordingly, they are exhibiting a level of responsibility, and it is a powerful marker to a positive, productive culture. 

Authority.

This belongs to the person who has the final say, the power of veto. Authority can be delegated, even to the lower levels in an enterprise. On a production line where there is an ‘Andon’ line in place, workers carry the authority to stop the line when they see a quality fault, rather than allowing it to proceed further down the line.

The larger an organisation becomes, the more nuanced and ambiguous these definitions can  become as people interpret their position and role, and that of others, slightly differently.

A regular and blatant misuse of the word authority occurs when it is used to point at someone who is expected to be an expert. The word sometimes carries the preposition, ‘an’, in front of it, becoming ‘an authority’, as in the header illustration. The doctor was used in the header ad because he was seen as ‘an authority’, and therefore had an opinion that should count, but had no authority over the actions of an individual.  

As a further example, In most organisations, the CFO is accountable for the cash. They literally count it, report on it, and recommend actions that impact on it. The CEO retains authority over the cash, as they have the final say in how it is managed and allocated, and everyone in the organisation has a responsibility to ensure that cash is spent wisely, with appropriate governance and reporting.

Having clarity around these definitions, and a culture that respects and responds to them, is crucial to any improvement process.

 

How SME manufacturers can survive the coming downturn.

How SME manufacturers can survive the coming downturn.

Apr 10, 2019 | Management, Small business

In contrast to the rosy picture politicians of both colours are painting about the prospects under their  government, and the disaster looming if we elect the other, I think we are in for a rough ride.

I am not an economist, so have no numbers apart from those in the public domain to support this rather pessimistic view. However, I have been around a long time, and the feeling in my guts from the anecdotal stuff I see everywhere has a familiarity to the lead up to several tough periods I have seen before. 

Part of the challenge is that many now in so called leadership positions have never seen a downturn in their working lives.

So, following are a few tips on commercial survival in a tough period, and dare I suggest it, prosperity, if you are bold enough to see the downturn as an opportunity.

Act early.

If you agree that it might get nasty, batten the hatches before the impact gets to you. Even if the worst does not happen, you will be better off anyway by seeking greater productivity from your resources.  If it does get nasty, you will then be in a much stronger competitive position for being prepared. 

Focus resources.

Pareto rules, and focussing on the 20% that generates the 80% is always a good strategy, and essential to thrive in tough times. Doubling down on areas where you have a competitive advantage, increasing your share of key customers wallets, being explicit about your value proposition,  sending high cost low margin customers to competitors, and so on. In effect, you set out to do more with less, increasing the productivity of your assets. 

Take a long term view.

Economies work in cycles, every downturn is followed by the good times, again, it is just a matter of time.  Many times I have seen a few businesses double down on marketing activity when others are cutting to preserve short term profit, grab market position at relatively low cost, and keep it when things improve.

Be opportunistic.

In a downturn, opportunities arise that may not normally become available. Some of those I have seen in the past:

  • Customer acquisition becomes less costly
  • Distressed sales of inventory, businesses, capital equipment, premises, all sorts of opportunities emerge as others scramble for cash.
  • Lead times for capital equipment, and contractors with specialised skills become shorter.
  • Great people with the capabilities you need to grow suddenly become available.

The challenge is to remain externally observant, while everyone else has their eyes on their own internal problems.

Be collaborative.

Tough times are usually the best to forge lasting relationships. Assisting others when they really need it creates trust, the foundation of  collaboration, which will pay off in many ways over time. 

Expect the unexpected.

While this may be akin to being optimistic, in my experience, planning to be opportunistic does help. Anticipating the opportunities before they actually emerge enables planning, and therefore better use of resources. It amounts to being prepared to be proactive rather than just being reactive.

Hoard your cash

To act on any of  the above, you need cash. While interest rates are at historic lows, having cash when others are struggling is like being the only one in a rainstorm with an umbrella. Everyone wants to be your friend. Hoarding cash is not a matter of being mean, it is an outcome of discipline in your expenditure, removing waste from your own processes, maximising your own revenue generation strategies, and collecting from debtors.

When you would benefit from the experiences of others, give me a call.

Header photo courtesy Sarah Macmillan

 

 

 

 

How to build a hierarchy of performance measures.

How to build a hierarchy of performance measures.

Apr 1, 2019 | Governance, Management

 

Corporate KPI’s should be evolved as a hierarchy, that measures the cause and effect relationships through an organisation, and be largely agnostic to the individual. After they are in place, you can develop the KPI’s for a role to be filled, for which an individual allocated to that position has responsibility.

There are 4 levels in most organisations that I see.

Measures of  sustainability.

These measures are connected to the purpose of the enterprise, they answer the question, how do you know if you are successful?. Sustainability is used in it broadest sense, commercial, cultural, and ecological.  In effect they are the harbingers of future success as well as current levels. Most organisational KPI’s that I see are all about financial success, which is critical, but is an outcome of success in other areas, not in itself a driver of success.

Measures of  strategic success.

These measures are directly related to the strategic priorities set. As strategy is about choices, so the performance measures should reflect the quality of  the choices made, and progress towards the agreed objective. Some will be financial, ROI, shareholder value, but the most effective ones will be about customer churn, geographic footprint, innovation, customer satisfaction, reflecting the strategic resource allocation decisions made to prioritise activities.

Process measures.

Process measures are those tactical measures that reflect the performance of the processes in the business that deliver value to customers, and feed the measures of strategic success. These will vary widely dependent on the type of business, but logically they include things like customer satisfaction, delivery performance, lead conversion, revenue, customer profitability, and so on. They tend to be the measures most appropriately reviewed on a shorter time scale than those above.

Operational KPI’s.

Operational measures should deliver a picture of  how the individual cogs in the wheel are operating. They should be directed at the items that are at the root of process productivity and efficiency. Measures such as machine availability, lost time injuries, rework, inventory turn, daily output to plan, and so on.

Together these measures should offer a complete picture of the way the separate parts of the organisation mesh together to deliver the enterprise purpose, the ‘Why’ you are here.

Ensuring measures are transparent across and through the organisation gives them ‘life’ beyond the dry review process.

Financial measures play a role at each level. However, because it is generally easier to gather financial information, and they are more commonly understood, they have become the default and only measures many use, which is to their detriment. They also fail the test of telling you why an outcome occurred, they just tell you it did.

Mapping the cause and effect chains summarised as KPI’s is always a useful exercise. Many people learn and understand visually, particularly when they have a role in the process mapping, and such an exercise enables a connection of KPI’s throughout an enterprise to be made. Experience shows it is a great way of generating the strategic alignment and buy-in so hard to find in most businesses.

 

Get stronger, then get bigger

Get stronger, then get bigger

Mar 6, 2019 | Change, Customers, Management, Strategy

Most businesses find themselves on the ‘get bigger or get out’ merry go round. Unfortunately, one of the characteristics of merry go rounds is that unless you hold on, centrifugal force  will throw you off.

Also, the faster you go, the more likely you are to be thrown off, and as you slip towards the edge, the momentum grows making it that much harder to reverse the trend.

The alternative choice is to get stronger, rather than just bigger.

This usually means you say ‘No’ to a lot of tempting, but short term ‘opportunities’ that will arise, as most will dilute the focussed and differentiated value you can deliver to your ideal customers.

The dual question therefore is: How do you get ‘stronger,’ and what does stronger actually mean?

To me, strong means a number of things.

  • You are commercially resilient,
  • Customers, employees, and suppliers are all aligned to your values and strategy,
  • You have a strong brand amongst your customer base who want what you have because you are the only one who has it, and
  • Your competitors employees wish they worked for you

In short, you have a ‘moat’ around your business that repels all boarders and pretenders, and resists the siren song that suggests the grass is always greener somewhere else .

When you have all that, you can get bigger, it will happen almost without you driving size, as the strength will attract suppliers, customers, and those great employees with energy and ideas. 

 

What is the difference between an Elevator Pitch and a Value Proposition, and when to use them?

What is the difference between an Elevator Pitch and a Value Proposition, and when to use them?

Mar 4, 2019 | Communication, Management

Good question, but the challenge seems to be overwhelming for some of those who most need to be clear on the differences, and when and how to use them.

I spent most of Thursday and Friday last week at the ‘Emergence‘ conference in Sydney, an event designed to boost the start-up scene in Sydney by bringing together investors, start-ups and industry experts. A similar event was held in Brisbane on Monday and Tuesday.

A terrific couple of days, with one significant blemish.

Most of the founders who had the opportunity to present to an audience of several hundred investors, and service providers of many types, blew it! Completely blew it.

Has nobody told these talented engineers and designers that you only get one chance to make a first impression?

The elevator pitch.

This is a very simple, compelling to your ideal customer, one sentence distillation of why  they should buy from you, or more often, just keep talking to you. It is not easy to craft, largely because in one sentence, you have to leave out a lot. Every stakeholder should be able to recite this in their sleep, and should do so at every opportunity when meeting people.  The purpose is to pique interest, and to extract the follow up questions, that can be answered by the delivery of the value proposition, which may lead to a further and deeper conversation.

I did not hear one compelling elevator pitch in the two days. Not one!

Use the elevator pitch when you have 30 seconds, any extra time you may be given is just a huge bonus not to be wasted.

The Value Proposition.

Your Value proposition is a more detailed articulation of why someone would engage in business with you. Still concise, focused, but designed to get to the core of who the product is designed to help,  how that will happen, and what results can be expected. You know the delivery has been successful when there are follow up questions that enable you to go into a bit more detail about the problem you are solving, and the beneficial outcomes of use.

Again, last week, there was an almost complete absence of a Value Proposition. In its place, we were given lists of names of notable people who were involved, how many degrees they had, what the technology entailed,  and some detailed project plans and milestones. In most cases, little that would encourage further engagement, although for a few, there was considerable value hidden amongst the verbiage, poor delivery, and technical jargon.

Use it when you have 15 minutes, along with a pitch deck that leaves the listener with no option but to be engaged. The best outcome to be achieved from such a line-up of consecutive pitches is that the audience remembers nothing but yours, and the individuals feel compelled to follow up!

If I was the organiser, it would be mandatory for those pitching to spend a bit of time with someone who could help them assemble their deck, and then get their message across. Either that, or hide the ego, and get someone with presentation expertise to do the preparation and delivery.

For all of that, the exercise was a great success, and warrants support from those with an interest in nurturing a successful start-up ecosystem, and that should be everybody.

The 5 types of cost in your business.

The 5 types of cost in your business.

Feb 25, 2019 | Management, Operations

Cost is a part of every business, you have to incur them in order to deliver a product.

For most, the extent of cost management is via the Profit and Loss account in the monthly reports, and by the comparison of expenditure to budget.

Both are  by themselves inadequate, and miss three of the generators of cost from which great benefit can be derived by intelligent management. In addition, just cutting costs with no regard to the role the cost incurred plays in the generation of revenue and margin, often results in greater costs in the long term, almost always only indirectly connected to the cost cutting. A former corporate employer engaged in a ‘re-engineering’ exercise which was code for reducing headcount. Short term there was a benefit, but the hidden costs incurred as tasks were not done, and the survivors left as soon as they had another job, incurring recruiting and training costs for the replacement employees,  were considerable.

The nature of the costs vary, but there are 5 classes that occur in every business. To one extent or another, they are a part of the profit equation.

Profit = Revenue – Cost

Direct or marginal cost.

Direct costs, as the name implies, are driven directly by the production process. In most manufacturing environments these are recorded as the Cost of Goods Sold.

Indirect costs, or overhead.

These are the costs incurred to keep the doors open, disconnected directly from revenue generation. Rent, insurance, management wages and salaries, for instance are necessary, but not connected directly  to the generation of revenue.  

Opportunity costs.

Nobody has enough resources to do everything they would like, no matter how big and profitable you may be. Therefore choices must be made, option A instead of option B. Opportunity costs are those benefits forgone as a result of those choices. They are rarely definitive costs, although calculations done that lead to making those choices such as Internal Rate of Return, and discounted cash flow forecasts, make some attempt to do so. 

Transaction costs.

Transaction costs are similarly challenging to identify, as they are generally invisible amongst the general overheads. However, focusing attention on transaction costs can yield considerable savings. For example, a client of mine had 5 suppliers of the key raw material for his operations, each supplying across a wide range of specification variations, and each having about a 20% share of my clients purchases. Each of the 5 relationships consumed time of the purchasing, operations and accounting personnel, as they managed the paperwork, reconciled mistakes, and maintained the human contact. Over a short period we engaged in a process to reduce the number of suppliers, one that would supply most of the required product, and a second as backup. Not only did we get a much better deal on price, but it quickly became evident that the time consumed by staff engaged in the day to day was reduced by a huge amount, leaving them free to undertake more productive and personally satisfying activities.    

Short cut costs

As with transaction costs, short cut costs are hidden, perhaps even more so. Taking short cuts almost always results in longer term higher costs in remediation. You might make the short term budget, or target, but at the expense of the long term. It is a bit like losing weight, take the quick way out by ‘starving’ yourself, and you might get a short term result, but unless you change your eating habits, once the short  term pressure is off, your weight will start to go back on, slowly. In a factory, short cuts usually lead to waste generated elsewhere, which are often just as hidden. Doing a patch up job on a machine to keep it running today, can lead to a major breakdown tomorrow that closes the factory for a week. These costs are rarely attributed to their real cause, and as a result, keep happening. The best cost  is the unproductive one you just eliminated!

There is a 6th cost, only sometimes seen with then benefit of hindsight: Opportunity cost. While your resources were tied up, particularly your strategic attention, an opportunity emerged that was not seen, or for which you did not have the resources.