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Competitive Advantage and Quality June 11, 2014

Posted by Tim Rodgers in Quality, strategy.
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I learned a lot when I got my MBA, and it was well-worth the time and money spent, but when I think about it now there are only a few concepts and themes that have really stuck with me. One is Michael Porter’s writings about the two primary sources of competitive advantage: cost and technology.

If you compete on cost, you’re supposed to be constantly looking for ways to reduce your internal expenses and cost of sales, eliminating waste, and improving productivity and throughput so you can offer customers a market-leading price for your product or service. If you compete on technology, you’re supposed to be constantly innovating, identifying un-met or un-expressed customer needs, and developing and delivering market-leading solutions that meet those needs before your competitors do, which usually allows you to command a price premium. Some companies try to do both at the same time, applying their cost management efforts on operations and market fulfillment, however companies that fail to focus their strategies will fail to compete.

This is pretty simple view of competitive advantage, which is probably part of the reason why it’s so well-known and memorable, but it makes intuitive sense, at least to me. I see examples everywhere. Some retailers and consumer electronics companies aggressively drive out cost in order to be able to offer low prices (Walmart); others use technology to create an experience that encourages customers to pay more (Starbucks, Apple). I believe that Walmart and Apple are equally innovative, the difference is what advantage the innovation is supposed to serve.

Where does quality fit in? Can a company compete on quality, and what does that look like? Attention to quality can support either the cost or technology strategy. The cost benefits of improved quality should be fairly obvious, including reduced expenses due to scrap or rework, internal testing and inspection, and post-sales support and warranty. These costs are not always measured and tracked, but they’re real. The hard part is understanding the relationship between actions that save money today and the risk that those actions will lead to additional cost in the future, such as buying cheap parts that fail in the field.

Quality supports the technology strategy in two possible ways. First, there’s a timeliness issue when you compete on technology; you have to get there before your competitor does. A focus on quality during product development will mean faster time-to-market. It’s important to note that product quality should match customer expectations. It doesn’t have to be perfect; customers can be pretty forgiving when your offering is technically superior, and especially so when the market is still new.

Second, a reputation for high quality (whether deserved or not) enhances the technology strategy and helps sustain a premium market price. We tend to think of technology in terms of advanced features and performance, but quality should be considered one of those dimensions as well.

Companies may not deliberately set out to compete on the basis of quality, but quality should definitely be considered an element of either the cost or technology strategy.

Are Face-to-Face Meetings Obsolete? April 24, 2014

Posted by Tim Rodgers in Communication, International management, Management & leadership.
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I’ll get right to it: no, they’re not. Yes, we have the technology to communicate instantly with people all over the world, whether by voice or text or even video. We can share files and review the same presentation in real-time. If a project has been parsed into reasonable chunks, we can multiply our productivity by “following the sun.”

And yet, the technology does not guarantee effective communication. Faster worldwide access to co-workers or customers or suppliers will not necessarily overcome distrust, misalignment, ambiguity, and confusion. Communication requires not just a channel, but also a sender and a receiver where the signal is processed into usable information. It’s that signal processing step that we overlook when we focus only on speed and accessibility.

I believe it’s important to establish a professional relationship with distant partners before relying on electronic communication. This is going to sound bad, but it’s easier for me to ignore someone’s e-mail or voice mail if I’ve never met them face-to-face and spent time with them, ideally over a meal. This is especially important if I live in a different country than the other person. Differences in language and culture can be very hard to overcome without a foundation of trust.

I understand that business travel costs money, and this is yet another situation where we try to balance real costs in the present against hoped-for benefits in the future. Travel budgets are always an easy target during times of expense reductions. I don’t have the numbers to build a financial justification, but I still believe it’s worth it, at least at the start of a new relationship with remote co-workers or a supplier. Periodic travel after that helps to maintain the relationship and head off any sources of confusion or deviation.

Expanded wireless access and faster speeds will enable better video conferencing, but I doubt it will ever provide a substitute for the informal and spontaneous communication that happens when people are in the same place at the same time. I love the new technology, but in the end it’s people who do the work.

 

 

Cutting Back on Training and Development April 21, 2014

Posted by Tim Rodgers in Management & leadership, Organizational dynamics.
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A lot of organizations have been cutting back on employee training and development programs, especially since the start of the recession in 2008-09. I remember my early days at HP in the 1980s when the company supported a wide curriculum of internally-developed courses, and later contracted with professional trainers to deliver specialized material. Those days are long gone. I’m not convinced that the cost savings are really that significant, but this seems to be an easy target during times of expense reductions. The ROI on employee development has always been hard to estimate with any confidence, and “we’re doing OK” with the people and skills we already have. “We don’t need more skills and training, we just need to apply the skills we already have.”

It’s ironic that many of these same organizations continue to invest in their physical assets through maintenance and upgrades but seem reluctant to do the same with their human resources. After all, equipment and facilities can’t leave on their own accord after you’ve improved them, while your trained employees can walk out and maybe join your competitor tomorrow (or, at least that’s the fear). Professional development has largely become the responsibility of the individual employee, and companies implicitly assume they’ll be able to replace anyone who doesn’t like that arrangement.

While there are lot of people available on the job market who can provide needed skills, this is a short-sighted decision that is likely to cost more in the long-term (turnover costs), inhibit opportunities for growth through innovation, and reduce overall performance because of lower morale. However, this is another example of saving hard dollars today in exchange for uncertain benefits in the future, and therefore I don’t see any significant change in the future.

Many employees will continue to take charge of their career growth, and many managers will help them by assigning “development opportunities” and special projects within the constraints of the current business priorities and budget. Some leaders and managers may take the initiative and organize informal brown-bag presentations to share knowledge and experience. I’m encouraged by local partnerships between some companies and local colleges and universities. Students, faculty. and the company can all benefit from summer internships and joint research projects, and employees can be encouraged to enroll in targeted degree or certificate programs with tuition that is at least partially-reimbursed.

The desire to develop and improve skills doesn’t go away just because companies don’t want to spend the money. Companies that find ways to invest in their employees and value their professional growth will surely benefit in ways that they may never be able to measure.

Improving Quality in China March 27, 2014

Posted by Tim Rodgers in International management, Process engineering, Product design, Quality, Supply chain.
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Many years ago people would complain about “cheap Japanese” products, but today few people would associate Japanese brands with poor quality. The turn-around is widely-attributed to Deming, and Taguchi, and Juran, and other evangelists who taught not only the tools and processes, but also the long-term benefits that can be realized when a company adopts good practices and a culture of quality.

Today I hear people complaining about poor quality in Chinese-made parts and products, and there have been several widely-publicized incidents (see Aston-Martin and counterfeit parts). Many customers have decided to move their production and seek part suppliers in other locations, including “re-shoring” to North America, in-part because they’ve concluded that any cost savings due to cheaper labor is outweighed by the costs of poor quality. It’s hard to say whether this will have a negative impact on the worldwide consumer perception of Chinese brands such as Lenovo, Haier, and others.

Some people have tried to find cultural explanations, suggesting that individuals in the US, or Europe, or Japan are generally more likely to take pride in their workmanship than their Chinese counterparts, and therefore deliver better quality even if no one is watching. Others look for differences in education and training, and specifically point to the traditional Chinese emphasis on rote learning that discourages creativity and adaptation.

I worked in a factory in China for almost two years (see my other blog “Managing in China”), and I’ve used Chinese suppliers for over ten years. It’s dangerous and un-wise to generalize in a country of over a billion people, but I think the problem has less to do with individual skill and more to do with priorities and expectations. Margins are typically very small at suppliers and contract manufacturers, and unless there are clear incentives or penalties for quality performance these suppliers will cut corners, substitute materials, and, yes, occasionally ship defective parts because it costs money to scrap or repair. The performance of an individual machinist or assembler is determined by the priorities set by their line supervisor, and the highest priority is usually meeting the production quota, not high quality.

That being said, there is a growing movement in China to improve quality as more companies realize the internal and external benefits. Internal: lower cost production, specifically when scrap and rework can be prevented. External: a differentiator when competing for business. Customers can help move this along by making it clear that quality is a requirement for any future business awards. Competition will lead to improved quality if customers insist on it.

I don’t believe this is a uniquely-Chinese issue. Unless we start demanding better quality from our suppliers, we will surely be complaining about poor quality from Indonesia, or Vietnam, or any other alternative. Japanese brands improved their quality in the last century in-part to compete more effectively with US and European brands. If we insist on better quality, Chinese firms will surely do the same.

Adding Value With Less March 13, 2014

Posted by Tim Rodgers in Management & leadership, strategy.
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One of the most common complaints I hear from managers and individual contributors is that they never have the resources they need to get the job done. The schedule, deliverables, or both are impossibly unrealistic because they’ve been denied the budget, the hiring authority, or the access to the internal staff that they really need. When they fail to achieve their objectives, it’s because upper management (or whoever has the authority to approve their requests) got in their way.

In fact, they’re probably right: upper management may have been directly responsible for refusing their request for more time or resources, but were they given any reason to do otherwise? People often present these decisions as an equivalency between results and resources. “I can complete this if you give me that.” But, have they presented a convincing argument that supports that equivalency? Have they presented other options, or explained the risks of operating with less-than-adquate resources?

Put yourself in the perspective of the person who controls the resources. Their best-case scenario is that you will be able to do the job within the schedule with no additional cost beyond what has already been budgeted. There’s going to be some natural resistance to any request for more resources (or at least there should be if they’re managing within a budget), and the burden of proof is on the requestor.

The mistake that people make is framing this as a binary choice: either they get everything they ask for, or they’re doomed to failure. As a manager, I’m generally open to multiple options. I want to know what can be done, and what the risks are, at a variety of “price points.” I want to brainstorm about pros and cons, priorities, and alternatives that may not be obvious. It’s this kind of collaborative problem solving that leads to better decisions and adds value in an organization. It also helps the team understand and appreciate the constraints that the business is operating within, which builds commitment. Finally, making tradeoffs and learning how to get things done with less are important skills that strengthens the organization.

Hiring, Firing and Net Value February 24, 2014

Posted by Tim Rodgers in Management & leadership, Organizational dynamics.
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In one of my recent positions my manager suggested that I “get rid of” an person in my team who wasn’t meeting expectations, at least in the opinion of my manager. I assumed he meant that I should fire them. I didn’t think that was a good idea, for several reasons. I felt that this person was being asked to do something that was a little outside their job description, and something that was also outside their natural comfort zone of skills and talents. Instead of continuing to force a square peg into a round hole, I re-assigned some responsibilities within the team so that this person could focus on what they did best.

Sure, I could have fired this person, but I prefer to look at these situations from a net value perspective. This person was making a positive contribution to the business. If I fired them, that contribution would be lost, at least until I replaced them with a new hire or transfer. Hiring requires recruiting and interviewing candidates, and then the new person typically goes through a learning curve. It could be months before the business realized a net gain to offset the switching costs, and even then the hiring process does not guarantee a better outcome.

The other consideration was how much of my time every day was spent managing this person, or compensating for their sub-standard performance. It’s certainly possible that what looks like a positive contribution to the business by one person is actually a net drain because of their impact on management and others, including the lost opportunity to spend your time in more productive ways.

In this case I was able to find a lower-cost way to increase this person’s long-term net value without incurring the switching costs. I’m not sure my manager agreed with my logic. I understand that sometimes you do have to “get rid of” someone who is under-performing, but that should be a carefully considered decision, not an emotional reaction to a situation that may not really that bad.

I see the same issues on the hiring side. Let’s assume that all job openings were justified to fill an urgent need for the business (although that’s apparently not always true). As long as that position remains unfilled, the business is suffering to some degree, otherwise why would the position be created in the first place? Of course the hiring manager should be trying to find the best person to fill the position, but the time it takes to find and on-board that person has to be balanced against the cost of not having any person in that position. Can the business afford to keep looking for a better candidate?

Of course this isn’t necessary a bad thing. As time goes by without hiring someone, the business will compensate and adjust for the missing resource, and it’s possible that may ultimately be a net gain. Or, not.

 

What Happened to HR? February 19, 2014

Posted by Tim Rodgers in Management & leadership, Organizational dynamics.
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In 1996 I started a new job at Hewlett-Packard’s facility in Vancouver, Washington. The site at that time was supported by a large HR organization that had about 10-15 full-time staff. In 2001 I transferred to a different HP location with slightly fewer employees, but only about 4 HR professionals. In the years that followed the HR function was transformed from a locally-based, hands-on organization to a self-help model with a handful of regional support staff.

I suspect that most large corporations went through a similar transition in the first decade of the century. Today’s HR organizations seem to be focused on recruiting, hiring and on-boarding; benefits administration; supporting downsizing and other termination events; and generally keeping the company out of legal trouble. It’s becoming hard to remember, but HR used to be a lot more than that, at least at those companies who considered their human resources to be a source of strategic advantage.

Obviously a lot of money was saved by reducing the size of the HR organization, and I’m sure it was assumed that line managers and web-based training could meet the needs of the business, and some things were given  up because they weren’t considered to be all that important. I understand that it’s unlikely that we will ever return to the old days of large HR organizations, but if we expect managers and leaders to pick up the slack, then we should remember what HR used to do and ask whether those things still have value.

I’ve been thinking about all this after finding my notes and readings from a class that I took in HR during my MBA program in the late 1990s. In those days HR was described as a key partner, working side by side with other functional leaders to ensure that policies matched the strategic needs of the business. HR professionals led programs in organizational design and improvement, change management, and competitive benchmarking. They worked with line managers to identify future leaders, and design career development opportunities and succession plans. New managers were provided extra training and support for their transition. Staffing plans were based on a long-term view that considered the specific skills and intellectual capital that the company needed, and the company-wide perspective of HR helped ensure that new initiatives were not starved for resources.

I realize that few companies can afford to keep full-time HR personnel to do all those things. My point is that if we don’t, then either we’re saying that we don’t care about those things, or we expect somebody else to do them. If human resources are important to the company, then line managers and other leaders will have to step up and assume the responsibilities of a virtual HR organization.

After 90 Days, Follow the Money December 1, 2011

Posted by Tim Rodgers in Management & leadership, Organizational dynamics, strategy.
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One of the most-read posts on this site is something I wrote over two years ago about starting a new job and figuring out what’s needed. See: 30-60-90 Day Plans. After 90 days the initial disorientation should have passed, and it should be clear what the immediate priorities are and where you should be focusing your attention in order to meet deliverables and short-term performance objectives. Whether you’re new-to-the-company or new-to-the-position you’re generally given a honeymoon period to get settled and learn the ropes, but eventually expectations will be raised and you will be asked to take on more responsibility for defining your own deliverables and objectives, or at least exercising more independent judgment. If there’s any question about where to look for guidance my advice is simple: follow the money.

At a fundamental level a business is concerned with profit and growth, and that translates to generating revenue and managing the expenses associated with generating that revenue. Your work contributes to one or both, either directly or indirectly, and your contribution to the business ultimately comes down to how your accomplishments help improve the bottom line.

Activities that help revenue generation include identifying profitable market segments, designing and delivering products and services that others want to buy, and then enabling those sales. There are expenses associated with each of these activities, including the cost of time spent, and managing those expenses (ideally, improving the business’s ability to turn expenses into profitable revenue) is part of the job. This includes support functions (for example, legal, HR, finance, and IT) who provide information and enable others to focus more time on activities that directly add value.

The specifics will vary from one job and one business to another, but a perceptive leader at any level in the organization should be able to generate measurable goals and achievements that help the bottom line and are consistent with the firm’s strategic objectives. By the way, if the strategic objectives aren’t clear, that needs to be taken up with senior management. Generally, organizations need their leaders at all levels to have the insight to figure out what needs to be done, and the initiative to get the necessary support; and not to wait for someone else to tell them what to do.

Measure of a Manager October 15, 2011

Posted by Tim Rodgers in baseball, Management & leadership.
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What does a manager do, exactly, and how should their performance be measured? I don’t think that’s an easy question to answer. It’s tempting to say that a manager has done well when the team they’re responsible for achieves some kind of success that’s consistent with the higher-level objectives for the business. But, how much of that success can be directly attributed to the decisions and deliberate actions of the manager? Might the tam have been equally — or, even more — successful under the leadership of a different manager, or even without a manager at all? Did the team succeed despite the meddling of a poor manager?

I’m a baseball fan, so bear with me. At this writing there are only four teams left in the Major League Baseball playoffs. One of those four teams will win the World Series, which is clearly a successful outcome. Is the best manager for any given year the one who leads their team to a World Series championship? The only thing we can say for sure is that this was the combination of team-and-manager who won it all, and there’s no way to assess their respective contributions to the success. Each year since 1983 the Baseball Writers Association of America selects a Manager of the Year for each league, and it’s rarely awarded to the manager whose team won the most games (or won the World Series). One manager actually won the award with an overachieving team that had a losing record (Joe Girardi of the 2006 Florida Marlins). He now manages the New York Yankees, a team with a higher payroll and higher expectations.

The point is that it’s hard to measure a manager. Managers aren’t just there to execute HR processes, communicate directives from above, and keep an eye on expenses. But, they also can’t be expected to exercise complete control over the performance of the individuals they manage, and they typically don’t have the authority to upgrade their team by bringing in new people with better skills. When managers blame their team when things go wrong, someone needs to ask: What did you do to help achieve success?

Here’s how I look at a manager’s performance:

1. Context and circumstances have a lot to do with a manager’s success. Each manager has resources at their disposal, particularly people and budget, but how does the manager apply those resources? For example, do they distribute the responsibilities and assignments among the members of their team to match their skills and maximize performance?

2. At HP we used to say that how you get the work done is just as important as what gets done. Does the manager collaborate effectively with peers and other partners? Do they have positive influence beyond their positional authority?

3. A manager must have the judgment to know when to step in and when to stay out of the way. When did the manager step in, and what was the impact of their decisions? What happened when the manager decided not to get involved?

4. Any manager can cut costs, but that doesn’t necessarily improve operational efficiency. Did the manager introduce new processes in an effort to increase the team’s performance? What happened as a result?

5. It’s often underrated, but the manager should provide coaching and career development opportunities to their team. Does the manager prepare people for more challenging and valuable roles in the organization?

6. Finally, a manager should contribute to strategic planning. Has the manager demonstrated an understanding of what drives the business; and customers, competitors, and technology trends? How did the manager apply that knowledge in their leadership of the team?

A good manager has a positive impact on their team’s performance, giving them a better chance of achieving their objectives than they would otherwise. They may not be able to control the actions of individuals, but they have a lot of control over the environment where those individuals work.

The Secret Supply of Resources August 20, 2011

Posted by Tim Rodgers in Management & leadership, Process engineering.
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Here’s another situation that every manager will surely encounter. The team’s workload has increased, and people complain that it’s become overwhelming and far beyond their capacity. Most team members struggle along, but at least one person comes to the manager and appeals for help: “We can’t do it. We need more people.” The manager might say that there’s a formal hiring freeze, or some other limit on expenses that effectively prohibits an increase in the department’s headcount. Regardless, the manager explains that there’s a long lead time required to recruit, hire, and train new people, and it could be months before there’s any real impact to the average workload.

At that point there may be a suggestion to transfer headcount from another team. Often this comes with a scornful assessment of that other team’s responsibilities, workload, or work habits: “Those guys aren’t doing anything important, and they aren’t working nearly as hard as we are,” or words to that effect. Again, the only solution proposed is to somehow, somewhere find more people. When I’ve heard this plea, it always seems that people are surprised that I don’t have some secret supply of headcount that I can draw from that will provide immediate relief.

Of course there may be legitimate situations where the manager should try to expand the size of the team, whether through hiring (whether full-time employees or short-term contractors) or internal transfers. However what’s really valuable to the business is figuring out how to handle increased workload with the same resources through some combination of kaizen process improvement and re-prioritization of tasks. This understanding is what differentiates emerging leaders in the team, the people who don’t just bring problems to be solved, but also propose solutions to those problems. These are the people who realize that the first place to look for help is within.

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