Image Source

Why Is Studying in the UK so Popular?

Several compelling factors are likely to influence students’ choice of the UK. The first is the sheer weight of tradition and excellence embodied by its educational establishments, and within its legal and institutional system in general. Home to Oxford and Cambridge, two of the world’s oldest universities, as well as to internationally-respected institutions such as the BBC, the country is a brand unique in the world, representing democratic transparency, honourable practice and the rule of Law.

A degree or other qualification from a UK college is backed by a centuries-old Accreditation and Quality Assurance framework which ensures rigorous standards are kept across the sector and is as a consequence trusted by both employers and academic bodies across the globe. As a 2009 British Council report concluded: ‘the current UK system for assuring quality and standards is long-established – indeed, it has influenced parallel developments worldwide’.

The UK represents both modernity and tradition. As well as being an acknowledged trendsetter in the worlds of music, fashion and youth culture, the UK higher education sector produces cutting-edge research and development which has seen the country’s academics scoop more no fewer than 39 Nobel Prizes in the last 50 years – an achievement which dwarfs those of similar-sized European nations. There have been 68 UK-born Nobel laureates in the categories of chemistry, physics and medicine since 1901, more than from any country except the United States.

According to a Facebook poll run by the Brighton School of Business and Management in January 2012, students tended to agree that the UK education system was “the best in the world”, coupled with offering “the best place to experience student life”.

Image Source

The Importance of The English Language

A further key attraction, of course, is the position of English as the world’s business language, and increasingly the de facto lingua franca of social media and the Internet in general. The language is richer in content than others, thanks in part to the multiracial nature of the UK population; as a result, English is thought to contain more words than any other language. UK-English speakers are seen by many as the true ‘language owners’, possessors of the most correct and sophisticated pure form of the language, as well as its most ancient and rich idioms. With world-famous institutions such as the British Library and Oxford’s Bodleian Library, Britons are seen as the guardians of the world’s language.

English Education – A Leader at Home and Abroad

This combination of tradition, culture and language alongside guaranteed quality and standards in the education sector has proven a potent driver of inward migration. In politics, business, science and the arts, the minds and the talents of many of the brightest and best across the world have been shaped by their association with the UK education system. Even a short period within this domain of excellence is likely to bring benefits. In 2003, a study conducted by the School of European Studies and the Sussex Centre for

Migration Research investigated attitudes among students who had benefitted from a year abroad in the UK. 56% had found employment in a professional role such as doctor, manager, director or teacher after their studies.

UK Education: Available From Outside the UK

David Willets, the UK Minister of State for Universities and Science, asserts that higher education in the UK is ‘going global fast’. The growth in popularity of distance learning courses, in addition to overseas campuses and partnerships with foreign universities, means that so-called ‘offshore students’ benefitting from this ‘transnational education’ now outnumber those studying within the country itself.

The UK is not merely the most popular study choice for students within its own borders; this popularity means that it reaches out to students from all over the world. As the academic world is evolving and becoming more connected at all levels, students are increasingly able to take advantage of the chance to study in the UK and collaborate with others – without leaving home.

The speed of information exchange, as well as the development of online learning environments such as Moodle, mean that learning is increasingly being delivered away from the traditional classroom setting, a trend that is guaranteed to accelerate. Students on distance learning programmes have constant and close contact with tutors in a variety of media: email, webinars, video and PowerPoint content are all accessed instantaneously. And such students of course also get the benefits of UK tuition without suffering the high
costs of living and visa restrictions that can cause problems for those physically moving to the UK to study.

Image Source

UK Education Going Forward

Last year a report by the Department of Business Innovation and Skills put the number of those studying wholly or mainly overseas for an award from a UK Higher Education Institution at 408,685, a number that is sure to have climbed since. William Lawton, policy adviser at the UK Higher Education International Unit, the body established to promote the sector’s global operations, describes UK education providers as ‘pre-eminent’ providers in the field.

Contributing an estimated £59 billion to the UK economy, the education sector is a bona fide success story that is taking its message of innovation, quality and professionalism across the world. Its range of world- class educational providers, coupled with technical innovation and rock-solid qualifications will stand it in good stead now and in the future.

HND in Business and Finance: Infographic

Personal & Career Development

Using Gap Analysis

Gap Analysis is a simple but highly effective planning tool used to identify the “gap” between the current situation and the desired, targeted situation, and then planning action to close the gap, to reach the targeted situation.

In the context of personal and professional development planning, this means:

analysing the skills, expertise, knowledge, and qualifications that you have at the moment

identifying the skills, expertise, knowledge, and qualifications that you need to have to reach your targeted situation

planning development activity – undertaking training, gaining qualifications, taking on new roles, reading and researching – that will lead to you achieve your targeted situation

It can be shown as a 4 stage continuous process:

                                    Time

Three very important points to note are that, as time passes:

if no action is taken then your skills, expertise, knowledge and qualifications will become less valuable, less relevant

it is almost inevitable that the targeted situation will need to be regularly revised as the expectations and demands of employers increase

continuous professional development is here to stay – to be successful you must actively and continuously manage your professional development

Our tutor team strongly recommends that our students at all levels, especially those wishing to move into or consolidate their position in a specialist or management role, identify the gaps in their knowledge of core management areas, and include learning more about them in their professional development action plans.

Gaining Knowledge and Understanding of Core Management Activities

Now more than ever, due to the intense, and increasing, pressures on public and private sector organisations to be more productive, to reduce costs, and to make better use of their resources, employers are demanding that their employees, at all levels, have a good knowledge and understanding of core business and management activities.

Every organisation, no matter how small or how large, now expects each employee to contribute actively and fully in helping the organisation achieve its objectives.

In order to make this contribution, each individual must make the effort to learn as much as possible about what are now established as the core management knowledge areas.

 Learning about these topics can be through formal studies, and-or by self-study, ideally arranged and funded by the employer.

If the current employer is not supportive, then it is worth arranging and funding this personally, as the next employer will definitely be looking for people with such knowledge, and probably qualifications to confirm it.

The summaries below are taken from some of our business and management qualifications, particularly the Higher National Diploma range, the Management and Leadership range, and the Award-Certificate-Diploma range.

Each of the core activities are described along with an indication of the vast range of material and qualifications available to those wishing to learn more about each of the subjects.

Personal and Professional Development

An obvious subject – but it is one that many overlook.

Every individual in an organisation has the responsibility to continuously develop themselves, in order to perform to the best of their ability.

Every organisation has the responsibility to provide appropriate support that enables each individual to continuously develop and improve.

Every employer, in every sector, now expects to see strong evidence that potential employees, and potential promotion candidates, have recently undertaken some professional development.

Useful resources on this topic can be found at:

www.mindtools.com

www.work911.com

www.monster.com

bdld.blogspot.com

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

The Business Environment

Businesses operate in an environment shaped by their competitors, consumers-customers, suppliers, and national and international political and economic factors. Some organisations operate for profit, whilst others do not, but each one is structured and operates in ways that allow their objectives to be met. In addition, business markets (public and private) take various forms and this affects the way in which organisations behave.

It is within this business environment that organisations function and have to determine strategies and a modus operandi that allow them to meet their organisational purposes in ways that comply with the relevant legal and regulatory frameworks.

The current recession serves as a good example of how the business environment affects the way in which your organisation operates. To build a successful career in these circumstances it is essential to understand the internal and external forces which the organisation has to respond to, and why the organisation operates in the way it does.

Useful resources on this topic can be found at:

www.mindtools.com

www.business.nsw.gov.au

www.foreignentrepreneursinchina.com

www.asiatradehub.com

www.businesslink.gov.uk

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Organisations and Behaviour

The way in which an organisation structures and organises its workforce will impact on the culture that develops within the organisation. The culture – the system of shared values and beliefs – will determine and shape the accepted patterns of behaviour of an organisations workforce.

 A positive, developmental culture, focused on the continuous improvement of all the individuals, teams, resources, and activities carried out within the organisation, is the ideal, but not many organisations have achieved that.

An awareness and understanding of the organisation’s culture and the influence that it has on the behaviour and performance of individuals and teams, is essential for anyone who leads teams, supervises others, or manages.

Useful resources on this topic can be found at:

www.profitduck.com

bdld.blogspot.com

www.org-behavior.com

www.work911.com

www.sba.gov

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Managing Financial Resources and Decisions

Despite the overwhelming evidence, many individuals, even in relatively high-level roles, will argue that knowledge of finance and accounting is not necessary.

However, this is simply not the case.

For anyone wishing to have a successful career, within a public or private sector organisation, or as an entrepreneur, an understanding of budgeting, financial planning, and management accounting, is essential. From team leader through to senior management, individuals are directly involved in managing operational budgets and in evaluating and responding to financial performance.

Finance departments are the specialists who advise and guide on these matters, but it is the operational managers who have to demonstrate that they can effectively manage the activities which are funded by the allocated budgets, and meet the financial performance targets in their area of responsibility.

Useful resources on this topic can be found at:

www.accaglobal.com

www.cimaglobal.com

www.accountingformanagement.com

activitybasedmgmt.blogspot.com

www.brightonsbm.com/professional-courses/professional-courses-index.htm

Business Decision Making

In business, good decision making requires the effective use of information. To be effective in any supervisory, specialist, or managerial role, it is necessary to be aware of a variety of sources and to develop techniques in relation to data gathering, data analysis, decision making, and data storage.

High quality, reliable, accurate, and timely information is needed at every level in every organisation. Without it, the organisation cannot be successful. Without it, individuals with decision making responsibilities cannot be effective.

Understanding the decision making process and being able to contribute to it and use it effectively is an essential skill.

Useful resources on this topic can be found at:

www.mindtools.com

www.managementhelp.org

www.work911.com

www.decisionmaking.org

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Marketing

An understanding of the principles of marketing, and the importance of the customer-consumer-client, is now considered to be necessary for every employee.

In today’s world, in the public sector where “customers” can be patients, relatives, residents, or a community, and in the private sector where customers can be individuals or other organisations, being customer-focused – one of the core principles of marketing – is essential at every level within the organisation.

Although the Marketing professionals carry out the actual marketing activities, the whole organisation – everyone employed in it – must be aware of the fact that the main reason they are there is to help the organisation satisfy its “customers”, and show that they are playing their part in helping to achieve that objective.

Useful resources on this topic can be found at:

www.marketingweek.co.uk

www.rmai.in

www.marketingpower.com

www.studymarketing.org

www.marketingprinciples.com

www.brightonsbm.com/professional-management-courses-short/professional-management-courses-short-index.htm

Business Strategy

For any individual in a team leader, supervisory, specialist, or managerial position, an understanding of strategy is highly important.

At the lower levels, being aware of the strategies being followed by the organisation makes it easier to understand and achieve the operational targets. At the higher levels, it is necessary to make an effective contribution to the strategic planning process, and to understand and be able to help apply the strategies that are developed.

Strategy is the pathway – the direction – that the organisation has decided to follow to take it successfully into the future. It is not possible for anyone in a position of responsibility to contribute to the best of their ability unless they have a clear understanding of the strategy.

Useful resources on this topic can be found at:

www.strategicmanagement.net

www.strategy-business.com

www.thinkingmanagers.com

www.scienceofstrategy.com

www.instituteforstrategy.asia

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Leadership

Historically, Leadership and Management have been considered as requiring separate sets of skills, and in many respects remains the case when we compare very senior, high level leaders with many operational managers.

However, it is rapidly becoming accepted that most managers are, in reality, leaders, albeit at a local and operational level. It is therefore necessary for them to understand the different models and styles of leadership, and the negative or positive effects the choice of style can have on the teams and individuals that they manage.

The same applies to more senior managers, and to those who do actually lead the organisation, or a large part of it. They too need to be aware of the different approaches that are available to them as high level leaders.

Understanding leadership and how it should be applied in different situations is therefore an essential area of knowledge for anyone managing others.

Useful resources on this topic can be found at:

www.leadertoday.org

www.nhsleadershipqualities.nhs.uk

www.guide2womenleaders.com

www.mindtools.com

www.managementhelp.org

www.brightonsbm.com/professional-management-courses-short/professional-management-courses-short-index.htm

Contracts and Negligence for Business

Most individuals will not need more than a very basic understanding of this area, but one in a managerial position, it is necessary to have deeper knowledge of it.

Although the negative repercussions of problems with contracts are dealt with by the legal experts, it is the operational managers, especially in functional areas such as purchasing, finance, marketing, sales, and distribution, where the problems arise, and, often, could have been avoided if the individuals involved had been more knowledgeable about contract law.

Useful resources on this topic can be found at:

www.sba.gov

www.businesslink.gov.uk

www.lawdonut.co.uk

www.ogc.doc.gov

www.findlaw.com

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Business Research

Once individuals move into a specialist, supervisory, or managerial role, or are involved in projects, then knowledge of research techniques becomes necessary.

Most organisations expect employees in these roles to take part in, or lead, internal research activities – projects – which involve the investigation of problems, or issues, or possibilities, and to prepare a report to present to more senior management.

Useful resources on this topic can be found at:

www.experiment-resources.com

www.ejbrm.com

www.managementhelp.org

www.business-research.org

www.cebr.com

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Working With and Leading People

Managing human resources – individuals, teams, or groups – is an area of knowledge which everyone needs, but especially those who lead, supervise, or manage others.

Managing people effectively is critical – to every local, operational area of activity, and ultimately to the success of the whole organisation.

Anyone responsible for the performance of others, for the development of individuals and teams, will be expected to respond to and deal with the problems and conflicts that arise, and to successfully lead others to achieve the objectives set for them.

Useful resources on this topic can be found at:

www.abn.org.au

www.work911.com

www.improvementnetwork.gov.uk

www.businesslink.gov.uk

www.brightonsbm.com/professional-management-courses-short/professional-management-courses-short-index.htm

Managing Business Activities to Achieve Results

This is about the effective and efficient planning and management of business work activities. An understanding and particular skills are needed to contribute to the design and implementation of operational systems, to help improve their effectiveness and efficiency and to achieve the desired results for the business.

 Anyone intent on a successful business career must be aware of the importance and interrelationship of business processes and the implementation of operational plans, together with quality systems and health and safety, in achieving satisfactory results.

Useful resources on this topic can be found at:

www.managementhelp.org

www.knowhownonprofit.org

www.entrepreneur.com

www.best-management-practice.com

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Managing Communications, Knowledge and Information

Effective communication does not automatically take place in an organisation – it needs to be managed.

Poor communications is one of the most common causes of problems that organisations face – internally amongst their own employees, and externally with suppliers, customers, and other stakeholders such as the local community.

To be successful in any area of business, it is essential to have an understanding of the interaction between communications, knowledge and information, and how technology can be used to manage knowledge and information more effectively, and in the process to improve the quality of organisational communications.

Useful resources on this topic can be found at:

www.sba.gov

www.mindtools.com

www.businessweek.com

www.businesstown.com

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Quality Management

Every organisation – public or private, large or small – must apply quality management tools, techniques, and approaches, if it is to survive.

It is now universally accepted that Quality Management should be at the heart of every organisation’s culture and one of the foundation stones on which it builds its strategy.

As a result, everyone – everyone – should be knowledgeable about Quality as it applies at their level – quality assurance and quality control operationally, integrated quality management systems throughout the organisation, and total quality management driving the culture of the organisation.

Useful resources on this topic can be found at:

www.asq.org

www.businessballs.com

www.efqm.org

www.businesslink.gov.uk

www.brightonsbm.com/professional-courses/cqi-diploma-quality-management.htm

Project Management

Thirty years ago the management guru Michael Porter said that in the 21st Century every manager would be a project manager, and this is now the case in most organisations.

Yes, there are underpinning systems, processes, procedures, and routine activities, but most managers – in public and private sector organisations – now do manage “projects” – overlapping activities, tasks, jobs, change events, periods of the year – each of which is a mini-project which needs managing in the same way as larger projects do, but on a smaller scale.

As a result, project management principles, methodologies, tools and techniques are now an essential element in the manager’s set of skills.

Useful resources on this topic can be found at:

www.projectconnections.com

www.projectsmart.com

www.method123.com

www.gantthead.com

www.brightonsbm.com/professional-courses/diploma-project-management.htm

Business Ethics

Most organisations now regard being seen to be behaving ethically as being essential to their being successful.

Business Ethics embraces corporate social responsibility and ethics relating to accounting practices, marketing, human resource management, and production, and to issues such as whistle blowing, employment practices, advertising to children, environmental awareness and using new technologies such as the genetic modification of food.

This is an aspect of business and management that is growing rapidly in importance, and one that all professionals should be knowledgeable about.

Useful resources on this topic can be found at:

www.businessethics.ca

www.businessethicsblog.com

www.ethicsworld.org

www.ibe.org.uk

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Corporate Environmental and Social Management

Businesses are increasingly realising that they need to go beyond, within the law, performance of their main functions. This realisation has been given impetus by increased worldwide emphasis on protecting the environment and sustainable development.

Managing the corporate environment is about taking a pro-active approach to managing the interactions between the organisation’s activities and its environment, and moving towards sustainable production and service delivery processes.

This is another aspect of business and management that is growing rapidly in importance, and one that all professionals should be knowledgeable about.

 Useful resources on this topic can be found at:

www.businesslink.gov.uk

www.iema.net

www.environment-agency.co.uk

www.eianz.org

www.brightonsbm.com/hnc-hnd-courses/hnc-hnd-courses-index.htm

Core Management Qualifications

At Brighton School of Business and Management we offer a range of courses which contain many of the management skill areas outlined above.

The HND Higher National Diploma in Business Management covers most of these areas, and also has some specialist options, such as Law, Human Resources, Marketing, and Finance. It is one of the most respected workplace qualifications, and can also be converted to a UK Bachelor Degree.

The Management and Leadership courses focus more intensely on a smaller group of subjects, and are designed specifically for those in, or moving into, middle management.

The Award-Certificate-Diploma courses offer in-depth study of areas such as Leadership, Marketing Management, Human Resource Management, Supply Chain Management, and Events Management.

If you would like information on these please visit www.brightonsbm.com

Study Resources of the Month

Books

David Megginson: Continuing Professional Development – CIPD, 2007

P Wetherly, D Otter: The Business Environment: Themes and Issues – OUP Oxford, 2011

Laurie Mullins: Management and Organisational Behaviour – FT / Prentice Hall, 2010

Ray Proctor: Managerial Accounting for Business Decisions – FT / Prentice Hall 2008

 Jim Blythe: Essentials of Marketing – FT & Prentice Hall, 2008

Ken Lawson: Successful Decision-making – New Holland, 2009

James Marson: Business Law – OUP Oxford, 2011

P Finlay: Strategic Management: An Introduction to Business and Corporate Strategy – FT & Prentice Hall, 2000

J Collis, R Hussey: Business Research: A Practical Guide – Palgrave Macmillan, 2009

C Leatherbarrow, J Fletcher: Introduction to Human Resource Management – CIPD, 2010

Julie Lewthwaite: Managing People for the First Time – Thorogood, 2006

Andrew Greasley: Operations Management – Wiley, 2009

McGraw Hilton: Managing Information in the Workplace – McGraw Hill, 2003

David Hoyle: Quality Management Essentials – Butterworth Heinemann, 2006

Dennis Lock: Project Management – Gower, 2007

Sally Bibb: The Right Thing: An Everyday Guide to Ethics in Business – Wiley, 2010

J Brady, A Ebbage: Environmental Management in Organisations – IEMA Routledge, 2011

Quotes from the Gurus

Live as if you were to die tomorrow – Learn as if you were to live forever – Mahatma Gandhi

Business people who are the busiest, the happiest, and the most prosperous are the ones who love what they’re doing, who love to learn new things, to meet new people, and to share what and whom they know with others – Tim Sanders

Life, for most people, is a process of discovery. Those who have tired of the journey have tired of life – Charles Handy

I have to say I’ve made many mistakes, and been humbled many, many times. But you know what? It’s never too late to learn – Kathy Ireland

The way to gain a good reputation is to endeavour to be what you desire to appear to be – Socrates

Do not be afraid of growing slowly – but be very afraid of standing still – Chinese Proverb

Source

Setting oneself up as a brand isn’t difficult; the social media tools are all out there ready and waiting for you to utilize in the name of, well, your name. In the ‘people market’ which is Facebook, LinkedIn and Twitter lies the potential for you to start your personal brand – Brand You. To further your brand you need to show your experience; an oft-quoted bugbear of new graduates, to demonstrate your worth to an employer. How do you get experience when no-one will give you a job unless you have experience? Let’s deal with this one step at a time.

Starting Your Brand

First impressions last. Period. As a human animal we evolved quickly to be able to assess the dangers and benefits of an encounter with a stranger. This has stayed with us to this day and it’s vital to ensure that Brand You portrays a professional, knowledgeable and experienced ‘shop front’ to the world. It takes seconds to leave a bad first impression and an age to reverse it. Facebook and Twitter keep hitting the headlines for the wrong reasons for gaffes, libel and inappropriate comments that leave the writer on the receiving end of a lawsuit or public humiliation. Hardly ideal and these social media sites do engender worry for many people. A poll carried out this month by The Telegraph shows a sense of unease about the content that people post online about themselves.

Source

Turn it around however and focus your attention not on Facebook but on LinkedIn and Twitter and you can build up a useful network of business people and the movers and shakers in your chosen field. Use the profile section of LinkedIn to establish a positive, achievement rich, face to the world. It’s important to make sure you leave no gaps in your employment or educational history – in this way your profile is very much your online CV. Preparation is key – the old adage about ‘failing to prepare is preparing to fail’ is particularly true on your profile, your ‘first impression’ to a company. Putting some thought into your social media presence will ensure you are not punished by selling yourself short or making yourself your own professional saboteur.

Source

Ways to Enhance Your Brand

Two other social media outlets that are arguably essential to Brand You are establishing a channel on YouTube and a blog. Remember to link all your profiles together and to maintain a coherent and united front. Many graduates and school leavers have little, if any, work experience aside from part-timing for minimum wage companies outside the academic timetable. If your chosen career is in film or television directing, one option would be to produce your own short films and host them on YouTube. Better yet, would be to create a video that goes viral. If your interest is in the third sector then try and do some voluntary work and promote your activities on your blog. Is the music industry for you? Performing your own work and distributing on YouTube has worked for others who have struggled to get recognition through the ‘usual’ channels.

It’s never too soon to start your brand and some would say it’s important to begin as early as possible. Imagine leaving your college with a network of influential people behind you. Today, it’s likely to work more in your favour than obtaining as higher grade as possible.

It’s Not What You Know, It’s Who You Know

We live in the real world and we all know of people who have been awarded positions with companies despite them not being the best person for the job. This may not be fair but that’s how it’s always worked. This is why Brand You and all the networking and self promotion it entails is so crucial to realising success and maximising your potential. In the job application process there are many tips at your disposal to increase your chances. From simple things like visiting the premises or arranging to have a chat with the employer are all good things to make yourself known prior to an interview. Brand You gets you there even earlier. Chances are that if you are networking and making the most of your social media skills the employer will already be in your network.

Source

Brand You Isn’t Static

Your profile, network and social media footprint continue to grow with you throughout your academic and employment life. It’s more than just a simple CV, it’s interactive and puts you centre of your world. Why not put some of the following into practice:

1. Produce audio or video podcasts and host them on your blog.

2. Develop an email newsletter

3. Engage in online initiatives to increase your visibility

4. Advertise yourself conducting free webinars

5. Host Q&A sessions regarding your chosen field

6. Sign up to respected and appropriate forums to get yourself noticed

7. Comment insightfully on influential blogs

8. Produce guest articles or do some guest contributor work on websites.

Source

And finally…

Trevor Krill, a branding expert, summarised the salient points well in September 2011 when addressing university students: ‘You need to set yourself apart. Many students just go out and try to get a job. If you create a brand, if you become The Brand, you are selling The Brand which is You.’

In this ever changing-world, a market saturated with high performing school leavers and graduates clamouring over fewer jobs, students really need to develop Brand You to differentiate themselves from their peers and to bring personality to their achievements.

The Complete Christmas Party Survival Guide

Contributions from you, our students, are very welcome if you have information, advice, website links, or ideas, that may be of help to other students, please send them to us.

Personal & Career Development - Tip of the Month

If you are currently in a Middle Management, or Specialist role, and have ambitions to move up into a Senior or Executive role, then after you have obtained appropriate qualifications for the role and position that you are currently in, as well as finding opportunities to gain experience of higher level management issues, you will need to start learning about strategic management.

Managing at the strategic level is very different to managing at the operational level, and requires different approaches, different skills, and a different level of understanding of the organisation and its business environment.

It is, in essence, forecasting and planning the pathway into the future that the whole organisation should take, laying down strategies and objectives to help the organisation successfully follow that pathway, and then responding to internal and external events, issues, problems, conflicts, and changes that the organisation faces as it moves into the future.

For those contemplating moving on to, or recently moved into, a strategic management role, we advise you to learn as much as you can about strategic issues, strategic planning, and strategic management approaches.

Our tutor team strongly recommends that managers at all levels, but especially those wishing to move into, or consolidate their position in, strategic management, to build research and reading on this subject into their professional development action plan.

Strategic Management

A fascinating area of management, partly because it is the management of the broad issues, major complexities, and fast-changing situations that today’s organisations face, partly because it is, in most respects, very different from the management at the operational levels that most of us are familiar with, partly because it overlaps with and is intermingled with, leadership, and partly because it is carried out by a relatively small number of managers, leaders, and specialists, who are usually, due to their roles and responsibilities, remote from the majority of people in the organisation.

The articles below will provide examples of these aspects of management, and also give an indication of the vast range of material that is available to those wishing to learn more about this subject.

Aligning Organisational Culture with Strategy – the Cultural Web

What is the first thing that pops in your mind when you hear the term corporate culture? A great many people refer to the classic phrase coined by the McKinsey organization, that culture is “how we do things around here”. And while that may be true, there are so many elements that go into determining what you do and why, that this definition only scratches the surface.

Whether you can define it or not, you know that culture exists. It’s that ethereal something that hangs in the air and influences how work gets done, critically affects project success or failure, says who fits in and who doesn’t, and determines the overall mood of the company.

Culture often becomes the focus of attention during periods of organizational change – when companies merge and their cultures clash, for example, or when growth and other strategic change mean that the existing culture becomes inappropriate, and hinders rather than supports progress. In more static environments, cultural issues may be responsible for low morale, absenteeism or high staff turnover, with all of the adverse effects those can have on productivity.

So, for all its elusiveness, corporate culture can have a huge impact on an organization’s work environment and output. This is why so much research has been done to pinpoint exactly what makes an effective corporate culture, and how to go about changing a culture that isn’t working.

Fortunately, while corporate culture can be elusive, approaches have been developed to help us look at it. Such approaches can play a key role in formulating strategy or planning change.

The Cultural Web, developed by Gerry Johnson and Kevan Scholes in 1992, provides one such approach for looking at and changing your organization’s culture. Using it, you can expose cultural assumptions and practices, and set to work aligning organizational elements with one another, and with your strategy.

Elements of the Cultural Web

The Cultural Web identifies six interrelated elements that help to make up what Johnson and Scholes call the “paradigm” – the pattern or model – of the work environment. By analysing the factors in each, you can begin to see the bigger picture of your culture: what is working, what isn’t working, and what needs to be changed. The six elements are:

Stories - The past events and people talked about inside and outside the company. Who and what the company chooses to immortalize says a great deal about what it values, and perceives as great behavior.

Rituals and Routines - The daily behavior and actions of people that signal acceptable behavior. This determines what is expected to happen in given situations, and what is valued by management.

Symbols - The visual representations of the company including logos, how plush the offices are, and the formal or informal dress codes.

Organizational Structure - This includes both the structure defined by the organization chart, and the unwritten lines of power and influence that indicate whose contributions are most valued.

Control Systems - The ways that the organization is controlled. These include financial systems, quality systems, and rewards (including the way they are measured and distributed within the organization.)

Power Structures - The pockets of real power in the company. This may involve one or two key senior executives, a whole group of executives, or even a department. The key is that these people have the greatest amount of influence on decisions, operations, and strategic direction.

Using the Cultural Web

We use the Cultural Web firstly to look at organizational culture as it is now, secondly to look at how we want the culture to be, and thirdly to identify the differences between the two. These differences are the changes we need to make to achieve the high-performance culture that we want.

Analysing Culture As It Is Now:

Start by looking at each element separately, and asking yourself questions that help you determine the dominant factors in each element. Elements and related questions are shown below, illustrated with the example of a bodywork repair company.

Stories

What stories do people currently tell about your organization?

What reputation is communicated amongst your customers and other stakeholders?

What do these stories say about what your organization believes in?

What do employees talk about when they think of the history of the company?

What stories do they tell new people who join the company?

What heroes, villains and mavericks appear in these stories?

Examples (car bodywork repair company):

We are known as having high customer complaints, shoddy work.

Staff members talk about the founder starting the company with a $1,000 loan..

The message is that we do things the cheapest way we can.

Rituals and Routines

What do customers expect when they walk in?

What do employees expect?

What would be immediately obvious if changed?

What behavior do these routines encourage?

When a new problem is encountered, what rules do people apply when they solve it?

What core beliefs do these rituals reflect?

Examples:

Customers expect a newspaper and coffee whilst they wait, or a ride to work.

Employees expect to have their time cards examined very carefully.

There’s lots of talk about money, and especially about how to cut costs.

Symbols

Is company-specific jargon or language used? How well known and usable by all is this?

Are there any status symbols used?

What image is associated with your organization, looking at this from the separate viewpoints of clients and staff?

Examples:

Bright red shuttle vans.

Bright red courtesy cars – compact, economy cars.

The boss wears overalls not a suit.

Organizational Structure

Is the structure flat or hierarchical? Formal or informal? Organic or mechanistic?

Where are the formal lines of authority?

Are there informal lines?

Examples:

Flat structure – Owner, Head Mechanic, Mechanics, Reception.

The receptionist is the owner’s wife so she goes straight to him with some customer complaints.

It’s each mechanic for himself – no sharing tools or supplies, little teamwork.

Control Systems

What process or procedure has the strongest controls? Weakest controls?

Is the company generally loosely or tightly controlled?

Do employees get rewarded for good work or penalized for poor work?

What reports are issued to keep control of operations, finance, etc…?

Examples:

Costs are highly controlled, and customers are billed for parts down to the last screw.

Quality is not emphasized. Getting the work done with the least amount of direct costs is the goal.

Employees docked pay if their quotes/estimates are more than 10% out.

Power Structures

Who has the real power in the organization?

What do these people believe and champion within the organization?

Who makes or influences decisions?

How is this power used or abused?

Example:

The owner believes in a low cost, high profit model, and is prepared to lose repeat customers.

The threat of docked pay keeps mechanics working with this model.

As these questions are answered, you start to build up a picture of what is influencing your corporate culture. Now you need to look at the web as a whole and make some generalized statements regarding the overall culture.

These statements about your corporate culture should:

Describe the culture; and

Identify the factors that are prevalent throughout the web.

In our example the common theme is tight cost control at the expense of quality, and at the expense of customer and employee satisfaction.

Analysing Culture as You Want it to Be:

With the picture of your current cultural web complete, you need to repeat the process, thinking about the culture that you would like to create.

Starting from your organization’s strategy, think about how you want the organization’s culture to look, if everything were to be correctly aligned, and if you were to have the ideal corporate culture.

Mapping the Differences Between the Two:

Now compare your two Cultural Web diagrams, and identify the differences between the two. Considering the organization’s strategic aims and objectives:

What cultural strengths have been highlighted by your analysis of the current culture?

What factors are hindering your strategy or are misaligned with one another?

What factors are detrimental to the health and productivity of your workplace?

What factors will you encourage and reinforce?

Which factors do you need to change?

What new beliefs and behaviors do you need to promote?

Prioritize Changes, and Develop a Plan to Address Them. Key points:

Used in this way, Johnson and Scholes’ Cultural Web helps you analyse your current culture, and identify what needs to stay, go or be added to if you’re to achieve your strategic goals.

Implementing cultural changes is not simple: it involves re-moulding values, beliefs and behavior, and it’s a major change management challenge, taking a great deal of time and hard work from everyone involved. By providing a framework for analysing the current culture and designing changes, Johnson and Scholes’ Cultural Web provides a good foundation for the difficult business of changing organization culture.

Using it, you can create a cultural environment that encourages success, supports the organization’s objectives and, all-in-all, makes for a better place to work.

* from a www.mindtools.com article

The Importance of Leadership in Managing Change

When change is imposed (as in downsizing scenarios), clearly the most important determinant of “getting through the swamp”, is the ability of leadership to…well, lead. The literature on the subject indicates that the nature of the change is secondary to the perceptions that employees have regarding the ability, competence, and credibility of senior and middle management.

If you are to manage change effectively, you need to be aware that there are three distinct times zones where leadership is important. We can call these Preparing For the Journey, Slogging Through The Swamp, and After Arrival. We will look more carefully at each of these.

The Role of Leadership

In an organization where there is faith in the abilities of formal leaders, employees will look towards the leaders for a number of things. During drastic change times, employees will expect effective and sensible planning, confident and effective decision-making, and regular, complete communication that is timely. Also during these times of change, employees will perceive leadership as supportive, concerned and committed to their welfare, while at the same time recognizing that tough decisions need to be made. The best way to summarize is that there is a climate of trust between leader and the rest of the team. The existence of this trust, brings hope for better times in the future, and that makes coping with drastic change much easier.

In organizations characterized by poor leadership, employees expect nothing positive. In a climate of distrust, employees learn that leaders will act in indecipherable ways and in ways that do not seem to be in anyone’s best interests. Poor leadership means an absence of hope, which, if allowed to go on for too long, results in an organization becoming completely non-functioning. The organization must deal with the practical impact of unpleasant change, but more importantly, must labour under the weight of employees who have given up, have no faith in the system or in the ability of leaders to turn the organization around.

Leadership before, during and after change implementation is THE key to getting through the swamp. Unfortunately, if haven’t established a track record of effective leadership, by the time you have to deal with difficult changes, it may be too late.

Preparing For the Journey

It would be a mistake to assume that preparing for the journey takes place only after the destination has been defined or chosen. When we talk about preparing for the change journey, we are talking about leading in a way that lays the foundation or groundwork for ANY changes that may occur in the future. Preparing is about building resources, by building healthy organizations in the first place. Much like healthy people, who are better able to cope with infection or disease than unhealthy people, organization that are healthy in the first place are better able to deal with change.

As a leader you need to establish credibility and a track record of effective decision making, so that there is trust in your ability to figure out what is necessary to bring the organization through.

Slogging Through the Swamp

Leaders play a critical role during change implementation, the period from the announcement of change through the installation of the change. During this middle period the organization is the most unstable, characterized by confusion, fear, loss of direction, reduced productivity, and lack of clarity about direction and mandate. It can be a period of emotionalism, with employees grieving for what is lost, and initially unable to look to the future.

During this period, effective leaders need to focus on two things. First, the feelings and confusion of employees must be acknowledged and validated. Second, the leader must work with employees to begin creating a new vision of the altered workplace, and helping employees to understand the direction of the future. Focusing only on feelings, may result in wallowing. That is why it is necessary to begin the movement into the new ways or situations. Focusing only on the new vision may result in the perception that the leader is out of touch, cold and uncaring. A key part of leadership in this phase is to know when to focus on the pain, and when to focus on building and moving into the future.

After Arrival

In a sense you never completely arrive, but here we are talking about the period where the initial instability of massive change has been reduced. People have become less emotional, and more stable, and with effective leadership during the previous phases, are now more open to locking in to the new directions, mandate and ways of doing things.

This is an ideal time for leaders to introduce positive new change, such as examination of unwieldy procedures or Total Quality Management. The critical thing here is that leaders must now offer hope that the organization is working towards being better, by solving problems and improving the quality of work life. While the new vision of the organization may have begun while people were slogging through the swamp, this is the time to complete the process, and make sure that people buy into it, and understand their roles in this new organization.

Conclusion

Playing a leadership role in the three phases is not easy. Not only do you have a responsibility to lead, but as an employee yourself, you have to deal with your own reactions to the change, and your role in it. However, if you are ineffective in leading change, you will bear a very heavy personal load.

Since you are accountable for the performance of your unit, you will have to deal with the ongoing loss of productivity that can result from poorly managed change, not to mention the potential impact on your own enjoyment of your job.

* from an article by Robert Bacall on www.work911.com

Strategic Human Resource Management - An Overview

Strategic human resource management is a complex process which is constantly evolving and being studied and discussed by academics and commentators. Its definition and relationships with other aspects of business planning and strategy is not absolute and opinion varies between writers. The definitions below are from the CIPD book Strategic HRM: the key to improved business performance within which there is comprehensive coverage of the various definitions and approaches to HRM, strategy and strategic HRM.

Strategic HRM can be regarded as a general approach to the strategic management of human resources in accordance with the intentions of the organisation on the future direction it wants to take. It is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need. It has been defined as:

All those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business.

The pattern of planned human resource deployments and activities intended to enable the forms to achieve its goals.

Strategic HRM can encompass a number of HR strategies. There may be strategies to deliver fair and equitable reward, to improve performance or to streamline structure. However, in themselves these strategies are not strategic HRM. Strategic HRM is the overall framework which determines the shape and delivery of the individual strategies.

Boxall and Purcell argue that strategic HRM is concerned with explaining how HRM influences organisational performance. They also point out that strategy is not the same as strategic plans. Strategic planning is the formal process that takes place, usually in larger organisations, defining how things will be done. However strategy exists in all organisations even though it may not be written down and articulated. It defines the organisation’s behaviour and how it tries to cope with its environment.

Strategic HRM is based on HRM principles incorporating the concept of strategy. So if HRM is a coherent approach to the management of people, strategic HRM now implies that that is done on a planned way that integrates organisational goals with policies and action sequences.

Strategic HRM and business strategy

A good business strategy, one which is likely to succeed, is informed by people factors. One of the driving factors behind the evaluation and reporting of human capital data is the need for better information to feed into the business strategy formulation process.

In the majority of organisations people are now the biggest asset. The knowledge, skills and abilities have to be deployed and used to the maximum effect if the organisation is to create value. The intangible value of an organisation which lies in the people it employs is gaining recognition by accountants and investors, and it is generally now accepted that this has implications for long term sustained performance.

It is therefore too simplistic to say that strategic human resource management stems from the business strategy. The two must be mutually informative. The way in which people are managed, motivated and deployed, and the availability of skills and knowledge, will all contribute to the shape of the strategy. It is now more common to find business strategies which are inextricably linked with and incorporated into strategic HRM, defining the management of all resources within the organisation.

Individual HR strategies may then be shaped by the business strategy. So if the business strategy is about improving customer service this may be translated into training plans or performance improvement plans.

Strategic HRM and human capital management

A number of writers have argued that strategic HRM and human capital management (HCM) are one and the same thing, and indeed the concept of strategic HRM matches that of the broader definition of HCM quite well as the following definition of the main features of strategic HRM by Dyer and Holder shows:

Organisational level – because strategies involve decisions about key goals, major policies and the allocation of resources they tend to be formulated at the top.

Focus – strategies are business-driven and focus on organisational effectiveness; thus in this perspective people are viewed primarily as resources to be managed toward the achievement of strategic business goals.

Framework – strategies by their very nature provide unifying frameworks which are at once broad, contingency-based and integrative. They incorporate a full complement of HR goals and activities designed specifically to fit extant environments and to be mutually reinforcing or synergistic.

This argument has been based on the fact that both HRM in its proper sense and HCM rest on the assumption that people are treated as assets rather than costs and both focus on the importance of adopting an integrated and strategic approach to managing people which is the concern of all the stakeholders in an organization not just the people management function. However, the concept of human capital management complements and strengthens the concept of strategic HRM rather than replaces it.

It does this by:

drawing attention to the significance of ‘management through measurement’, the aim being to establish a clear line of sight between HR interventions and organizational success

providing guidance on what to measure, how to measure and how to report on the outcomes of measurement

underlining the importance of using the measurements to prove that superior people management is delivering superior results and to indicate the direction in which HR strategy needs to go

reinforcing attention on the need to base HRM strategies and processes on the requirement to create value through people and thus further the achievement of organizational goals

defining the link between HRM and business strategy

strengthening the HRM belief that people are assets rather than costs

emphasising role of HR specialists as business partners

Hence both HCM and HRM can be regarded as vital components in the process of people management and both form the basis for achieving human capital advantage through a resource- based strategy.

An alternative way of looking at the relationship between strategic HRM and human capital is in terms of the conversion of human capital into organisational value. Human capital evaluation is useful in that it provides information about the current and potential capabilities of human capital to inform the development of strategy.

Business success will be achieve if the organisation is successful at managing this human capital to achieve this potential and embed it in products and services which have a market value.

Strategic HRM could therefore be viewed as the defining framework within which these evaluation, reporting and management process take place and ensure that they are iterative and mutually reinforcing. Human capital therefore informs and in turn is shaped by strategic HRM but it does not replace it.

Strategic HRM and business performance

Since the 1990’s CIPD and others have been generating evidence for the impact of people management practices on business performance. Much emphasis has been put on the importance of ‘fit’. In other words it is argued that HR strategies much fit both with each other and with other organisational strategies for maximum impact. The main areas of practice which all the researchers agreed have an impact on performance are around job design and skills development.

However, CIPD work found that practices alone do not create business performance. They can create ‘human capital’ or a set of individuals who are highly skilled, highly motivated and have the opportunity to participate in organisational life by being given jobs to do. However, this will only feed through into higher levels of business performance if these individuals have positive management relationships with their superiors in a supportive environment with strong values.

All these factors will promote ‘discretionary behaviour’, the willingness of the individual to perform above the minimum or give extra effort. It is this discretionary behaviour that makes the difference to organisational performance.

The ‘people and performance model’ generated from CIPD-sponsored work at Bath University6 emphasised the importance of individual HR strategies which must fit with each other operating in a strategic framework which incorporates both people and business issues.

Conclusion

It is useful for all organisations to management their people within a planned and coherent framework which reflect the business strategy.

They can ensure that the various aspects of people management are mutually reinforcing in developing the performance and behaviours necessary to achieve business success.

There is no single HRM strategy that will deliver success in all situations.

Organisations need to define a strategy which is unique to their own situation in terms of context, goals, and the demands of organisational stakeholders.

* summarised by the BSBM Tutor Team from an article on the CIPD website www.cipd.co.uk

Engaging With Stakeholders Is Worth Its Weight in Gold

Wharton management professor Witold Henisz has been studying political and social risk management for 15 years, focusing mainly on strategies of avoidance — i.e., better identification of risky places to do business, and then helping companies minimize their exposure to them.

Recently, he discovered a way to distinguish the payoff in engaging with these risky environments. What strategies did firms that decided to enter these markets follow? Why did some succeed and others fail?”

The term “stakeholders” in this context, says Henisz, includes everyone from local and national politicians and community leaders to priests, war lords, paramilitary groups, NGOs and international bodies like the World Bank. The term “stakeholder event” includes reported actions or expressions of sentiment from these groups that indicate cooperation with the mine owners, as well conflict with them. “At one extreme would be militia attacks on mines in the Congo. The other extreme would be groups in the Congo organizing to defend a mine from such an attack,” Henisz notes. Other events are far less extreme, such as peaceful protests by community leaders or demonstrations by environmental NGOs like Greenpeace or the World Wildlife Federation. The mines are so big, Henisz adds, that “whoever the politically relevant stakeholders in an area are, they often take sides because so much money and so many jobs are at stake.”

The researchers’ goal was to figure out what role these stakeholder events played in companies’ efforts to maximize profits. The answer: a very large role. As Henisz notes: “There is a powerful business case to win the hearts and minds of external stakeholders. We found in our research that the value of the relationship with politicians and community members is worth twice as much as the value of the gold that the 26 mines ostensibly control.”

To arrive at that conclusion, Henisz and his colleagues looked at the firms’ listings on the Toronto Stock Exchange, which requires each company to disclose enough data to calculate the net present value of their gold mine(s). The data includes audited information on gold reserves, what it will cost to get the gold out, what a mine’s fixed costs are and so forth. Based on these numbers, an estimate of what the gold from each mine is worth — and thus the market valuation of the parent company — should be easy to calculate, says Henisz. “But when you compare those two figures, it turns out that the companies trade at a 72% discount on average,” because the figure does not take into account the probability of delays or disruptions, and the cost overruns or revenue shortfalls that result.

Tracking the actions of media-relevant stakeholders allowed Henisz and his group to quantify the degree of cooperation and conflict for each mine, and come up with a single metric that served as an estimate of these likely delays and disruptions. They were thus able to improve the fit of the financial market valuation estimation of the 19 publicly traded parent firms. “By incorporating this metric in a market capitalization analysis that also includes macro-political level constraints on policy change, we reduce the discount placed by financial markets on the net present value of the gold controlled by these 19 firms from 72% down to between 33% and 12%,” the authors write in their paper.

The Need for a ‘Social License’

The Wharton research quantifies what a number of mining firms have already realized — that reducing conflict with external stakeholders in favor of winning their cooperation improves the companies’ chances that a business plan can proceed on budget and on time, and most importantly, generate sustainable shareholder value.

“Ironically, the very companies that were once pilloried for their lack of concern for anything but the short-term financial bottom line are now global leaders in the implementation of stakeholder engagement,” the authors note. “Their growing preference for operating mines under conditions of political and social support are also affecting small mining companies, which, motivated by their desire to eventually sell their operations to the majors, are increasingly acknowledging the need to obtain a ‘social license’ for their mining projects around the world.”

The researchers’ paper offers a succinct description of life in the mining industry: “Fifteen billion dollars of gold sitting in a mountainside cannot be transformed into [profits] with financial, engineering and marketing inputs alone. It also requires the political and social support of key stakeholders, including not only members of the economic value chain, but also government officials, regulators, community leaders and members of civil society. These stakeholders may reside locally, nationally or internationally…. They are able to … delay the opening of the mine, suspend its operations or so raise the cost of continued development or operations as to make the mine owner and operator choose to suspend or abandon it.”

A quote from a COO at one of the mines in the researchers’ sample puts it another way: “It used to be the case that the value of a gold mine was based on three variables; the amount of gold in the ground, the cost of extraction and the world price of gold,” he states. “Today, I can show you two mines identical on these three variables that differ in their valuation by an order of magnitude. Why? Because one has local support and the other doesn’t.”

Henisz and his colleagues studied the mining and oil and gas industries first because the nature of their products required companies to enter some of the riskiest areas in the world. “Several of them made every mistake possible and got completely burned. But then they learned,”

Henisz says. “Now, ironically, these industries that we think of as scorched-earth, environmentally devastating and uncaring are some of those at the forefront of sustainability and stakeholder engagement. Most multinationals in the world could learn a lot by studying what some mining companies are doing in Africa.”

According to Henisz, the research results are applicable to a number of other industries, including construction, oil and gas, agriculture, minerals, alternative energy and water — any sector that involves large building projects, substantial upfront investments and long payback periods. “Our findings are applicable wherever there is a project-based investment that can be delayed or disrupted and where people are worried about water supply, traffic patterns, environmental damage and so forth,” he says. Other examples would be a company about to construct a billion-dollar semiconductor plant or a retailer like Wal-Mart seeking approval for a big box store in the middle of a rural community.

Competitive Advantage

Henisz has an answer for researchers who state that pure profit maximization — and the highest returns for shareholders — should be the only goal of public companies. “It’s not ‘either or,’” he notes. “If companies want to maximize their profits, there is a degree of stakeholder engagement that they have to undertake.” Those able to recognize the need for sophisticated stakeholder strategies, he adds, “will find this to be a source of competitive advantage.” As the head of sustainability for a major mining company recently said, “If a modern mining company thinks its competitive advantage is in mining, they are sadly mistaken.”

The implication is that “being good at sustainability will differentiate successful mining companies in the future” Henisz says.

He has compiled a list of best practices for businesses that are serious about engaging stakeholders.

First, he says, change the mind-set of the company so that employees across the board believe that stakeholders are important.

Second, get the necessary data to explain who the stakeholders are, what they want and who is connected to whom.

Third, find a way to link data to operating performance, integrating the information into risk management systems rather than treating it as a separate category.

Fourth, interact with stakeholders in the community in a genuine and fair manner; respond to their concerns and form connections rather than just writing a check.

And last, find a way to disseminate information about the on-going project that is credible and transparent.

As the researchers’ article states: While the importance of “the direct link between perceptions of social responsibility and market valuation will obviously vary enormously across industries and countries, we would argue … that its existence is ubiquitous. In short, the social license to operate is more than rhetoric. It is … empirically testable and strategically relevant. For these mining firms, pursuing cooperation from and minimizing conflict with stakeholders is not just corporate social responsibility, but enlightened self-interest.”

* published: July 20, 2011 in Knowledge@Wharton www.knowledgewharton.com

Study Resources of the Month

Books

M Hitt, R Ireland, R Hoskisson: Strategic Management – Cengage Learning, 2011.

C Jayachandran et al: Business Clusters: Partnering for Strategic Advantage – Routledge India, 2011

G Haley, Tiong Tan: The Chinese Tao of Business: The Logic of Successful Business Strategy – Wiley/Kindle 2011

R Stacey: Strategic Management and Organisational Dynamics – FT & Prentice Hall, 2010

H Mintzberg, B Ahlstrand, J Lampel: Strategy Safari: The Complete Guide – FT & Prentice Hall, 2008

P Findlay: Strategic Management: An Introduction to Business and Corporate Strategy – FT & Prentice Hall, 2000

Quotes from the Gurus

If you can’t describe your strategy on one page, simply and in plain language, you haven’t got a strategy. ‘But,’ people say, ‘I’ve got a complex strategy. It can’t be reduced to a page.’ That’s not a complex strategy – it’s a messy line of thinking that won’t work – Larry Bossidy

The real challenge in crafting strategy lies in detecting subtle discontinuities that may undermine a business in the future. And for that there is no technique, no program, just a sharp mind in touch with the situation – Henry Mintzberg

A great vision is needed, and you must follow it, as the eagle seeks the deepest blue of the sky – Crazy Horse

In business, if you don’t have a righteous objective, eventually you will suffer. When you do the right thing for the right reason, the right result awaits – Chin-Ning Chu

Strategy without tactics is the slowest route to victory. Tactics without strategy is the quickest way to defeat – Sun Tzu

Useful Study Links

www.strategicmanagement.net

http://knowledge.wharton.upenn.edu/category.cfm?cid=7

www.knowledgewharton.com.cn

www.amanet.org

www.valuebasedmanagement.net

www.strategy-business.com

www.thinkingmanagers.com

www.1000ventures.com/business_guide/business_strategy.html

www.thecbsa.org

www.scienceofstrategy.com

www.instituteforstrategy.asia

www.asmiweb.com

www.leadertoday.org

www.smfi.org

www.asia-pacific.com

Contributions from you, our students, are very welcome if you have information, advice, website links, or ideas, that may be of help to other students, please send them to us.

Personal & Career Development – Tip of the Month

The advice this month is to look for ways to broaden your knowledge and understanding of the wider aspects of management, rather than focusing only on your own particular management or specialist needs.

The reason that this is important is two-fold.

Firstly, most managers and specialists do not operate in isolation. Rather, they are part of a complex network of managers and specialists who are all working towards the same organisational goals. Having a broad understanding of the approaches taken by those in other areas, the expertise that they are applying, and the reasons for the way they operate as they do, will help you and them to work more effectively with each other.

Secondly, most organisations, in most business sectors, now have established operational and strategic management approaches which all managers and specialists in the organisation are influenced by, and need to respond to. One example of this is Project Management, which we discuss again in this newsletter for that very reason – that it is rapidly becoming the core management approach for many organisations. Others include Quality Management, Environmental Management, and increasingly important area of Business Ethics.

To be successful in your professional life it is now essential to have a broad knowledge of these. Without that awareness and understanding it will become increasingly difficult to contribute effectively in your current role, and increasingly difficult to progress to more senior roles.

Project Management

Prioritize Projects to Align with Strategic Plan

Project management is rapidly becoming a standard way of doing business in many organizations. The key to productivity is often found in how we manage projects, which are the tools of implementing the business strategy of an organization.
Every project in an organization should contribute to its strategic plan. But how can we ensure this linkage? We need to make sure that we integrate projects within the strategic plan. This integration requires a process for prioritizing projects by their contribution to the plan. In this article, we will introduce the strategic planning process and how it relates to project management.
The strategic management process

In customer-driven organizations, mission and goals are set to meet the needs of the customers. The mission typically covers “what we want to become” and should be communicated throughout the organization. Goals translate the mission into specific, measurable, and tangible terms. The goals answer in detail where a corporation is heading or when it is going to get there. These goals should set targets for all levels of the organization. Each level of the organizational objectives should support the higher-level objectives in more detail.
The development of strategies to meet these needs and goals should focus on “what we need to do to achieve these goals.” It requires an extensive analysis of the internal and external environments. Based on a political, economic, social, and technological analysis (PEST), we analyze the external environment to identify opportunities and threats. We analyze the internal environment by looking for strengths and weaknesses such as management, facilities, core competencies, product quality, technology, and financial resources. The deliverable of this analysis is a set of strategies designed to best meet the needs of the customers.
Implementation of these strategies requires actions and completing tasks, and should focus on how to realize these strategies. Implementation must include attention to the following key points:

Executing the work requires allocation of resources such as funds, people, and equipment. Organizational resources are limited. In addition, multiple goals frequently impose conflicting demands on resources. This requires a mechanism for allocating resources based on organizational priorities.

Implementation requires an organizational structure that supports projects.

Project management processes for planning, executing, and controlling are essential to ensure that we are able to implement strategies effectively and efficiently.

We need a project selection and priority system to ensure strong linkages between projects and the strategic plan.

Need for a project selection and priority system

The need for a project selection and priority system stems from the following observations:

Organizations frequently pursue many projects simultaneously. Almost inevitably, the number of small and large projects in a portfolio exceeds the available resources such as funds, equipment, and competencies.

Politics exist in every organization and can have a significant impact on project selection. Many projects within companies are called “sacred cows.” We often use this term to describe a project sponsored by a high-ranking executive.

Without an effective project selection and priority system, the capacity overload coupled with project politics will lead to frustration, confusion, and inefficient use of resources.
Questions that need answers

Some of the questions that we need to tackle when considering a project selection and priority system are:

How can we minimize the power of politics?

How can we consistently prioritize projects to support the organizational strategy?

How can we use the prioritized list of projects to allocate organizational scarce resources?

How can the process encourage bottom-up initiation of projects that support organizational goals and strategies?

We are always going to have more potential projects or proposals than the capacity of the organizational resources would allow for. Thus, we need a systematic process that will select projects and allocate resources to these projects in order to maximize value added. Selection of projects from a slate of projects requires the use of a decision model in association with specific criteria.
The benefits of carefully selected criteria include the following:

More effective planning of organizational resources

More efficient utilization of organizational resources

A portfolio of projects that balance opportunities and threats given available resources

Keeping the organization stakeholders focused on the most critical projects

Obtaining consensus as to which projects have the highest priority

Nevertheless, when we implement a project selection and priority system in our organization, we meet enormous skepticism and resistance.
Typical responses include:

We all know which projects are the most important ones.

All of our projects are important.

Our business is changing on a daily basis. We do not need an extra layer of bureaucracy, which limits our flexibility.

Responses such as the above suggest a serious need for a project selection and priority system. Nevertheless, the development and the implementation of such a system does not materialize without the support and sponsorship of upper management.
Conclusion

A project management approach to business problems and opportunities is becoming the norm rather than the exception. Projects are the tools for implementing the strategy of the organization. Effective project management starts with selecting and prioritizing projects that support the organizational mission and strategy. The priority system focuses attention on the mission and major goals of the organization and fosters consensus to which projects are of highest priority. It results in a portfolio of projects that balance threats and opportunities and provides a better utilization of resources.

* from an article by George Sifri on www.techrepublic.com

What Project Managers Need to Know About Strategic Planning

The PMI Project Management Institute states: “The very successful sellers of the value of project management, link project management to corporate strategies and position project management as a solution to problems.” The successful selling of project managers as partners in the delivery of solutions vs. simply as pairs of hands is critical today. Partners understand business drivers and enable value creation. Pairs of hands administer and execute deliverables. Partners are consulted. Pairs of hands are merely informed.

This article provides program and project managers with a primer on business strategy—its purposes, components, and high-level tools and techniques. For those of you currently operating at the pair-of-hands level, this article is a wake-up call. For those of you who currently operate at the partner level, this article is a refresher or quick self-knowledge check. In either case, a basic knowledge of strategic planning is the place to start.

Strategic Planning 101

A strategy is a detailed plan for achieving success—the bundle of decisions and activities that we select to achieve our long-term goals—our path. Every organization must figure out what it wants to achieve and how to make it happen by using its products, customers, and operations. Strategy is fluid, continuous, and iterative and can be broken down into logical steps or elements:

Goal Setting: The First Step

We cannot begin to think about a strategy until we have objectives that are prioritized and are based on our business, our markets, and how value is created in our organization. These objectives are aimed at maximizing the value of the organization to the shareholders, with the critical factor being time. Even though we create a vision of the organization, say, twenty years out, the strategic plan considers only a three-year to five-year time horizon. A written declaration of an organization’s core purpose and focus, commonly referred to as the mission statement, serves as a consistent directional tool for the firm. In contrast, the strategic plan and its related practices fluctuate according to changing circumstances.

Strategy Development Process—the Road Map

Strategy development is focused on three fundamental questions: Where are we now? Where should we go? How do we get there? The answers to these three questions frame the strategy process.

Customer Analysis—Getting the Truth

Unmet customer needs are at the heart of business ideas and the development of a business strategy. While step 3 could be included in step 2, it is usually kept separate to underscore and facilitate the need to continuously analyze the customer as part of everyday management. Essentially, we need to know why our customers buy from us and why others buy from our competitors. This information is typically gathered at point of sale via customer surveys or focus groups. Good, regular, and valid information is essential to business strategy success.

Internal Business Analysis—Health Check

The internal audit explores the organization’s operational and financial results, evaluates its talent pool, assesses its functions and processes, and explores the health of its key relationships. A good SWOT analysis not only identifies the component strengths, weaknesses, opportunities, and threats (SWOT), but also prioritizes them and helps to limit analysis to a smaller set of the most important factors.

Strategic Choices

Generic strategies of cost leadership, differentiation, and niche player provide a good foundation for the strategic choices each business faces. A comprehensive strategy formulation contains both positioning and execution components. An effective strategy must align between positioning and execution.

Positioning articulates clearly and concisely the organization’s strategic approach to achieving its goals by setting out a direction and a choice of suitable products and services. Execution ensures that the organization has the necessary resources, operational capabilities, and organization to support the direction. To enhance our strategic choices, we ask the question “how?” and develop a strategy through approaches like integration, penetration, development, diversification, and divestiture.

Strategic Thinking—Optimizing Assets

Strategic thinking involves asking the right solution-oriented questions and conducting appropriate analyses to formulate plans and strategies. Asset optimization questions have long been fertile ground for new ideas—for thinking about the best use for each significant asset that we currently own and control.

Another strategy-generating approach is to use core-business thinking. Your core business is defined by the set of products, customer segments, processes, and technologies in which you can build the greatest competitive advantage. Defining your core business can be difficult and may require a small team to answer the question. If we were forced to sell off all of our businesses except for one, which one would we keep? Once your core business has been identified, the key is to work the core to your best advantage—for example, taking advantage of operational excellence in the core business area.

Another method uses best practices lists that can be found in publications. For example, Choi and Valikangas distilled a list of nearly two hundred business strategies into a top ten list that includes generic approaches like consolidation, value migration, and bypassing.

Implementing Strategic Decisions—Execution Matters

The principal causes of strategy failures are the attitudes, communication, and commitment of senior management. The best system for implementing strategies is by using the balanced scorecard. It provides a framework for considering strategy from four perspectives—financial, customer, business processes, and learning and growth. It was created by Kaplan and Norton in 1992 as a means of neutralizing the limitations of managing only by financial measures.

Implementing strategy is a team game, and even though senior management has the responsibility to formulate and articulate the business strategy, you, as a program or project management professional, play a lead role in the strategy implementation segment of the process. As a program manager, you are expected to understand the strategic drivers of the program, the specific benefit levers, and the required level of governance to make change happen. As project manager, you are expected to fulfill a similar role at the project level, whether it is part of a formal program or a one-off high-impact strategic project.

Conclusion

Each successful strategy could be a catalyst for a strategic thinking direction and approach. As a program or project manager, take the time to identify the strategies in play in the next business case or feasibility study you review. If they are not clear in the financial analysis document, do not be afraid to ask for clarification from your sponsor.

Partnership status may take months or years to establish. Regardless, you will not be able to “link project management to corporate strategies and position project management as a solution to problems” if you do not understand the driving business strategies. This article helps you start—now, it’s up to you to go deeper!

* from an article by Bill Richardson, PMP, senior consultant and trainer www.iil.com

A Strategic Approach to Managing Project Stakeholders

What does it take to manage the stakeholders of a project and why is it so important? More than ever, the most challenging part of a project isn’t the budget or the time constraints but rather the politics in play. Keeping stakeholders happy is no easy task, and when they are not happy, bad things can happen to projects, project managers and their teams.

The problem is that far too many project managers see stakeholders as necessary evils, and in so doing create their own demise. Project stakeholders can make or break a project. When happy they can provide support, resources and slack, but when unhappy they can create stress, micromanage, sabotage efforts and wreak havoc. So what does it take to manage project stakeholders? Perhaps the answer can be found in the approach use to evaluate how they are most likely influence that success.

Those who have a vested interest in the outcome of a project are stakeholders in that project. Life would be great if every stakeholder was supportive and enthusiastic about every project and the changes that would occur upon successful completion.

Unfortunately, reality paints a different picture. Therefore, it only stands to reason that we need a way to create stakeholder profiles that objectively indicate how each stakeholder should be managed. This article presents a profiling technique that evaluates a stakeholder across a number of dimensions, resulting in a rating of the stakeholder that identifies the management strategy most likely to be successful.

Under this approach, project stakeholders get classified into one of the following categories:

Destructive: Stakeholders who have a high stake in the project, can assert strong influence, intend to be highly involved but do are not supportive of the goal and have a negative attitude about the effort.

Passive/Neutral/Shaky: Stakeholders who have a low to moderate stake in the project, have minimal influence, need only moderate involvement are reasonably supportive of the goal and have a healthy attitude about the effort.

Constructive: Stakeholders who have a high stake in the project, can assert strong influence over its conduct and success, intend to be highly involved in the process, are demonstratively supportive and have a positive attitude towards the effort.

Of course, given the number of dimensions there are many permutations (2,625 to be exact) that fall in-between these rankings, and each brings with it nuances as to the management strategy to be deployed. The good news is that you don’t need that many strategies to be effective. The concept boils down to two basic elements: the stakeholder’s power over the project and their intention (their heart, how they intend to use their power).

The analysis will show the combinations that could be used to arrive at a rating and then the recommended strategies for managing the related stakeholder. Keep in mind that these are general strategies and need to be augmented by the data collected in a Stakeholder Expectations Analysis Worksheet.

In order to get a complete view of the stakeholder it is important to understand any gaps between what we expect from that stakeholder, what we need from that stakeholder and what we want from them.

Once the expectation ranking has been assigned, the PM needs to assess whether or not there is a need and a way to work with the stakeholder to close any gaps arising from this phase of the analysis. For example, if a stakeholder has a negative attitude about the project yet has high influence and interest then turning the stakeholder into an ally could yield positive benefits. In this situation, the PM would need to understand the motivations behind the negativity toward the project and seek a way to persuade the stakeholder to a different point of view; usually through some form of facilitation and collaboration.

Notice that the strategies are broken down into the following major groups:

Containment: Be cordial and supportive of the stakeholder knowing that they are an opponent of the project and could become destructive to the process and the outcome given their high power ratings.

Comfort: This strategy is for stakeholders with low power ratings and who are needed to make the project successful. Typically these are line staff who are integral to the workflows effected by the project. For these stakeholders, consistent and easy-to-digest status updates and sometimes face-to-face support works best.

Embrace: This strategy is for high-power rated stakeholders who have strong interest in seeing the project completed successfully. They are demonstratively supportive and have a positive attitude toward the effort. These stakeholders are the lynchpins to the project’s success and need the highest levels of attention. They should be frequently consulted for their ideas and engaged as much as possible to for guidance and on issues that require executive intervention to resolve.

Once a stakeholder has been rated, it is relatively easy to look up the recommended strategy based on their TFVSA rating (see red letters in dimensions above). Gaps between the PM’s expectation for the stakeholder and what they need/want from them in terms of their participation in the project are areas of misalignment and must be addressed within the overall strategy.

Once the all the stakeholders have been rated and the various strategies derived, their ratings can be summarized onto a Project Expectations Worksheet. This is useful for getting an excellent overview of the quality of stakeholders involved in the project. Too many high power/low intention ratings could spell big trouble for the project.

The secret is to work the low intention stakeholders with the goal of improving their point of view while pampering the high intentioned stakeholders, reinforcing their commitment to the effort, meanwhile giving just enough attention to the middle so-as-to make them feel positive and included in the effort.

Cleary, these assessment tools are for the private use of the PM and are most likely best kept confidential. They are intended to provide the PM with insights on how to “best manage” each stakeholder’s relationship throughout the project in a way that best serves the interests of the organization.

* from an article by Michael Wood on www.gantthead.com

Project Management and Continuous Improvement

A project is an organized method for reaching specific goals and planned benefits within a target schedule and defined budget. Project management methodology provides an organization with powerful tools that improve its ability to plan, implement, and control its activities. Up to recent times organizations considered project management processes as an optional tool for planning and implementing business activities.

But today this mentality has changed drastically and organizations believe Project Management methodology as something mandatory to maintain the competitiveness of the firm. The number of projects is increasing rapidly and they manage most of their activities through projects. Therefore project management has become an integral tool of an organization.

The goal of an organization that uses PM methodology is to achieve excellence in project management. Excellence can be defined as the ability to complete projects successfully and continuously. Excellence in project management is achieved through best practices. The use of best practices ensures ability to deliver projects predictably, constantly, and successfully. Therefore identifying best practices and improving them continuously is an important exercise for any organization that aspires to achieve excellence in PM.

‘Good practice’ means there is general agreement that the correct application of these skills, tools, and techniques can enhance the chances of success over a wide range of different projects, in other words, something that works well on a repetitive basis or something that leads to a competitive advantage. Best practices can be in the form of templates, guidelines, procedures, policies, or processes which everybody has agreed to follow. Lessons learned documented by the project team throughout the life cycle can be a source of best practice for an organization. Best practices are very dynamic; they are reviewed, updated or removed over time.

This is known as continuous improvement. For example conducting continuous project management training in the organization, or establishing a formal change control system with defined change control procedure can be best practices of an organization. The best practices are made up of capabilities.

Capability is a specific competency that can be sued to implement projects. Each best practice should have its associated capabilities that help to perform the best practice. Organizations can have their own best practices or they can be industry standards. The best practices can be at different levels; Professional Standards, Industry Specific, Company Specific, Project Specific and Individual level Listed below are some best practices organizations use to maintain high performance in projects.

All the organizational decisions are made considering the interest of the stakeholders

Organization ensures all the projects are strategically aligned

Organization follows a standard set of project management processes and procedures

Formal performance management system is used to manage the performance of all involved in the project

The organization uses a process to select and prioritized projects

The organization uses risk management processes to asses and control risks

The organization has a process for capturing, storing and sharing lessons learned” The organization uses benchmarking techniques to improve project performance

Programme management processes and standards are established

Portfolio management processes and standards are established The org continuously takes steps to develop project managers

Training plans for all levels of project employees are established and implemented

Project management processes are integrated with all the other processes in the organization

The org measures project effectiveness using project delivery methods

It is mandatory for organizations that use project management methodology to have a best practice process to discover, evaluate, classify and store best practices, so that they can be used for effective project management and continuous improvement.

* from an article by Duminda Weeraratne – Project Management Solutions www.pms.lk

Books

Dr Paul Gardiner: Project Management: A Strategic Approach – Palgrave McMillan, 2011.

E Larson, C Gray: Project Management: the Managerial Process – McGraw Hill, 2010

Jeffery Pinto: Project Management: Achieving Competitive Advantage – Pearson, 2009

Bruce Barkley: Project Management in New Product Development – McGraw Hill, 2007

D Cleland, L Ireland: Project Management: Strategic Design and Implementation – McGraw Hill, 2002

Quotes from the Gurus

Project managers make extraordinary things happen by drawing on the knowledge and skills of every team member – Jim Kouzes

The most valuable and least used phrase in a Project Manager’s vocabulary is “I don’t know, but I will find out” – Colin Williams

The more you plan, the luckier you get – Unknown (but very wise) person

As project manager, to be at the end of a project and to report that the project plan has been fully met, on time and on budget, is a significant achievement, whatever the project size and complexity. The mix of skills required is such that good project managers can manage anything – Drucker

Useful Study Links

www.pmforum.org

www.pmworldtoday.net

www.gantthead.com

www.businessballs.com/project.htm

www.projectsmart.co.uk

www.method123.com

www.practical-management.com

www.webpronews.com/strategic-project-management-a-competitive-advantage-2006-05

www.microsoft.com/project/en-us/community.aspx

www.1000ventures.com/business_guide/spm.html

www.techrepublic.com

Contributions from you, our students, are very welcome – if you have information, advice, website links, or ideas that may be of help to other students, please send them to us.

Personal & Career Development - Tip of the Month

In line with this month’s theme of Internal Customer Service, and against the background of recession that is continuing to affect organisations in many parts of the world, our tip is to adopt the approach found in this quote:

“In business you get what you want by giving other people what they want” Alice McDougall

When applied to personal and professional development, this translates into:

gain the necessary knowledge and expertise, needed to do your job, perform your role and responsibilities, to the highest standard

identify your internal customers – your team, your managers, your line manager, your colleagues in other departments, those who expect you to supply them with information, or resources, or completed tasks – analyse their needs, their requirements, and make every effort to provide them with what they need from you

learn about: the organisation as a whole, the sector that it operates in, its suppliers, its customers, its competitors, and the external environmental factors that affect it

if you become self-employed, do all of this for your own business

continue to do this throughout your working life, in every position that you hold

You will then be seen as knowledgeable and valuable, and highly attractive to organisations or clients seeking people who can help them to be successful.

The Importance of Internal Customer Service

Internal Customer Service

Explanation and Case Study

Recently the term Internal Customer Service has become a buzz phrase. We hear that great customer service (for the external customer) depends on excellent internal customer service. But what does that mean? Let’s start with some definitions.

The external customer is someone who signs a check, pays our employer, and ultimately makes our pay-check possible. External customers have choice, and if they don’t like your product or service can take their business elsewhere.

An internal customer or internal service provider can be anyone in the organization. An internal customer can be a co-worker, another department, or a distributor who depends upon us to provide products or services which in turn are utilized to create a deliverable for the external customer. In general, internal customers don’t have a choice. For example, if the sales department doesn’t like accounting’s credit policies, they can’t fire that department and hire another.

Great (external) customer service creates customer satisfaction, customer loyalty, and customer retention. So why all the fuss about internal customers, especially when retention isn’t an issue?

Outstanding internal customer service is simply good business. Internal customer service can flourish only in high communication environment.

To create positive internal customer service, all departments work together cooperatively, agree on processes and procedures, and negotiate expectations. Like gears meshing in sync, interdependent business units meet each others’ needs, work productively together to meet common goals, and deliver high quality products and service to the external customer.

The focus on developing effective internal customer service helps organizations cut costs, increase productivity, improve interdepartmental communication and cooperation, boost employee morale, align goals, harmonize processes and procedures, replace interdepartmental competition with interdepartmental cooperation and deliver better service to the external customer.

Excellent service to the external customer is dependent upon healthy internal customer service practices.

Internal Customer Service Case Study

The customer advocate for a large manufacturing company was concerned about the organization’s reputation for excellent products, but terrible customer service.

The view of most employees was that “Customer Service is just a department!”

When an external consultant investigated the situation, many expensive lapses in the company’s internal customer service came to light.

One example of this involved Engineering’s lack of response when Customer Service reps required an engineer’s input. (In this case Engineering is the internal service provider and the Customer Service reps are the internal customers).

The Customer Service reps were responsible for problem solving and taking orders for highly technical, often customized parts. Sometimes the reps needed clarification from an engineer to process a customer order for the correct part. Engineers viewed information requests from Customer Service reps as low priority, uninteresting, and annoying.

It was calculated that the cost to the company of one incorrect shipment alone was approximately $125,000 in wasted labor, materials, and other expenses. Many such shipments had been processed in this way.

In addition, the cost of frustration and delayed deadlines to the external customer was damaging to the company’s reputation.

Due to this and other discoveries, retraining and awareness sessions were introduced at all levels, and it was eventually accepted that a high standard of internal customer service was a priority and was essential to the future success of the company.

The company went on to be successful, and still thrives today.

* from an article by Donna Earl at www.helpdeskcoach.com

How to Provide Outstanding Internal Customer Service

The foundation for outstanding internal customer service is excellent interdepartmental communication and cooperation.

Dialogue between internal customers and internal providers must include agreements about the following topics: Clear expectations An internal provider of service is responsible for setting clear guidelines about what internal customers can reasonably expect. Some organizations implement Service Level Agreements (SLAs) defining what internal customers can expect from internal service providers. Even without formal SLAs, internal customer service can be exceptional IF the internal service provider has clarified to internal customers what expectations are reasonable. Customer also must communicate expectations regarding timeline and quality in advance of request. Last minute requests are typically due to poor planning on the part of the internal customer. Expecting the internal provider to ‘hijack’ priorities to meet unreasonable needs is inappropriate, and should be dealt with on a case-by-case basis, with involvement by upper management. At no time should this become the norm, or the internal customer will become ‘trained’ to expect the unrealistic.

Customer Responsibilities To meet expectations, internal provider of service is responsible for clarifying what is needed from the internal customer, and also clarifying service provider processes and timelines necessary to meet quality requirements of customers. The phrase “Help me help you” from the movie “Jerry Maguire” applies here.

In order to provide the best customer service, internal providers need the cooperation of customers in allowing enough lead time and providing information and materials necessary to fulfill customer request. This is a communication responsibility of the internal service provider to let the customer know ‘what I need from you in order to meet your request is ….’ It’s essential to have an understanding with customers about realistic timelines and quality expectations. Internal providers who find they’re constantly working on customer ‘emergencies’ must clarify to customers the strain this causes to provider. Constant emergencies diminish provider’s ability to give good service to all internal customers, and create a stressful working environment (not to mention interdepartmental animosity).

Service Provider Responsibilities Most internal customer service problems are a result of the ‘silo’ mentality where people and departments work in isolation, consider only their own priorities, and think others are sitting around twiddling their thumbs with nothing to do until an internal customer screams “Jump!” in a last minute panic. This is sure to guarantee lower levels of quality, resentment from provider, and a reputation for lack of professionalism on part of customer. Customers must take responsibility for understanding how their request fits into overall workflow of organization and internal service provider’s workflow. Internal service providers are responsible for explaining their workflow, so the customer will understand he or she isn’t the only priority.

Negotiated Priorities While most customer priorities are ‘urgent – must have right away’ this is counterproductive to any process. A clear communication between internal customers and service providers is essential. With internal customer service, most customers believe the provider should intuitively understand priorities because they all work for the same organization. This is false! A discussion about priorities must be part of the expectation-setting talk.

Advice for internal customer service providers

Always know your customers’ expectations, and be a part of their expectation setting. If they have false or unrealistic expectations, explain your workflow, priorities, processes and timelines in providing top quality service for them.

To help your customers utilize your services better, explain how they can be ‘good customers.’ Be explicit about what you need from them in order to meet their needs. Define timelines and quality levels. Let them know what they can expect from you. As an internal provider, tactfully tell the customers how they fit into your workload, and listen to their delivery needs. Negotiate delivery dates and quality levels.

Always keep customers informed on project progress. Nobody likes to be blindsided by delays or last minute requests for additional information.

Get out of your ‘silo’. Take a break with co-workers from another part of your organization. Talk to them during lunch about what’s happening in their department. We all work so hard we can become myopic, lack perspective and be ignorant about how other functions operate.

Open your vision to the big picture. When talking to co-workers from other departments, develop an understanding of how the whole organization works. How does your contribution fit into the big picture? What do other departments need from you to meet their goals? Think outside your function and department, and think holistically.

Advice for internal customers

Discuss your expectations with your service provider. Make sure your expectations regarding timelines and quality levels are realistic. Ask your internal service provider what you must provide so they can meet your needs. Ask what their process is, and understand what is involved in delivering your request on time, and meeting your quality standards.

Use effective time management practices. Once you understand your service provider’s process, develop your time line for delivering the request. Certainly ‘emergencies’ happen, and service providers can be pressured to meet tight deadlines. However, customers who consistently expect providers to ‘bend the rules’ to meet emergency deadlines strain their service providers and disrupt everyone’s priorities. Customers who operate in ‘emergency’ mode have a negative impact on the workflow as a whole, and cheat others who have planned more realistically.

Provide all information needed to fill your request. In your original request, include sufficient information to allow the provider to adequately estimate the time and resources needed. Be prepared to provide additional information requested by the provider.

Always be professional. Honor the provider’s priorities, workflow, and processes. Do not expect ‘exceptions’ to the rule, especially if poor planning has created your urgency. If your work were delayed due to another customer’s ‘crisis’, how would it impact your goals?

* from an article at www.helpdeskcoach.com

We’re all marketers now

* this is a comprehensive, strategic-level article, but important in the context of this month’s theme, as it describes the dramatic business changes which are driving the need for employees at all levels to focus on internal as well as external customers

Engaging customers today requires commitment from the entire company – and a redefined marketing organization.

For the past decade, marketers have been adjusting to a new era of deep customer engagement. They’ve tacked on new functions, such as social-media management; altered processes to better integrate advertising campaigns online, on television, and in print; and added staff with Web expertise to manage the explosion of digital customer data.

Yet in our experience, that’s not enough. To truly engage customers for whom “push” advertising is increasingly irrelevant, companies must do more outside the confines of the traditional marketing organization.

At the end of the day, customers no longer separate marketing from the product or service – it is the product or service. They don’t separate marketing from their in-store or online experience – it is the experience. In the era of engagement, marketing is the company.

This shift presents an obvious challenge: if everyone’s responsible for marketing, who’s accountable? And what does this new reality imply for the structure and charter of the marketing organization?

Companies of all types and sizes must not only recognize that everyone is responsible for marketing but also impose accountability by establishing a new set of relationships between the function and the rest of the organization.

In essence, companies need to become marketing vehicles, and the marketing organization itself needs to become the customer-engagement engine, responsible for establishing priorities and stimulating dialogue throughout the enterprise as it seeks to design, build, operate, and renew cutting-edge customer-engagement approaches.

As that transformation happens, the marketing organization will look different: there will be a greater distribution of existing marketing tasks to other functions; more councils and informal alliances that coordinate marketing activities across the company; deeper partnerships with external vendors, customers, and perhaps even competitors; and a bigger role for data-driven customer insights. This article provides some real-life examples of these kinds of changes.

Marketing’s cutting edge is being redefined every day. While there’s no definitive map showing how companies can successfully navigate the era of engagement, we hope to help senior executives—not just marketers—start to draw one.

The evolution of engagement

More than two years ago, our colleagues unveiled the results of a research effort involving 20,000 customers across five industries and three continents. Their work showed how collaborative the buying process has become and how difficult it is to influence customers by relying solely on one-way push advertising. In the words of American Express chief marketing officer John Hayes, “We went from a monologue to a dialogue. Mass media will continue to play a role. But its role has changed.”

Over the past two years, that evolution has only accelerated. More and more consumers are using digital video recorders to fast-forward through TV commercials and are consuming video content on Web sites such as YouTube and on mobile devices. Billboards alongside train lines and bus routes struggle to capture the attention of people absorbed by the screens of their smart-phones.

Meanwhile, today’s more empowered, critical, demanding, and price-sensitive customers are turning in ever-growing numbers to social networks, blogs, online review forums, and other channels to quench their thirst for objective advice about products and to identify brands that seem to care about forming relationships with them. Individuals even are posting their own commercials on YouTube. In short, the avenues (or touch points) customers use to interact with companies have continued to multiply.

The problem for many companies is that the very things that make push marketing effective – tight, relatively centralized operational control over a well-defined set of channels and touch points – hold it back in the era of engagement. Many touch points, such as calls to customer service centers and interactions between the sales force and customers, sit outside the traditional marketing organization, which has little or no permission to reach into other business functions or units. Companies have traditionally divided responsibility for touch points among functions. But a comprehensive strategy for engaging customers across them rarely emerges and, if one does, there’s often no system for executing it or measuring its performance.

More pervasive marketing

To engage customers whenever and wherever they interact with a company – in a store; on the phone; responding to an e-mail, a blog post, or an online review—marketing must pervade the entire organization. Companies such as Starbucks and Zappos, for which superior engagement has been a critical source of competitive advantage from the beginning, already exhibit some of these traits. But these companies aren’t our focus, which instead is the kinds of actions everyone else can take as they strive for world-class customer engagement.

The starting point is a mind-set shift around customer interaction touch points. Companies typically think of them as being “owned” by a given function: for instance, marketing owns brand management; sales own customer relationships; merchandising or retail operations own the in-store experience.

In today’s marketing environment, companies will be better off if they stop viewing customer engagement as a series of discrete interactions and instead think about it as customers do: a set of related interactions that, added together, make up the customer experience. That perspective should stimulate fresh dialogue among members of the senior team about who should design the overall system of touch points to create compelling customer engagement, and who then builds, operates, and renews each touch point consistent with that overall vision. There’s no need to worry about traditional functional or business unit ownership: whoever is best placed to tackle an activity should do so.

Design

Designing a great customer-engagement strategy and experience depends on understanding exactly how people interact with a company throughout their decision journey. That interaction could be with the product itself or with service, marketing, sales, public relations, or any other element of the business.

When the hotel group Starwood sought to enhance its engagement with customers, for example, the company pored through data about them and identified clear demographic groups staying at its more than 1,000 properties. In 2006, the company unveiled a specific new positioning for each part of its brand portfolio, ranging in affordability from Four Points by Sheraton to its Luxury Collection and St. Regis properties.

Each brand seeks to deliver a different customer experience, on dimensions ranging from how guests are greeted by staff to the kind of toiletries offered in rooms. Crucially, for each type of property, Starwood sought to design not only the desired experience but also how it would actually be delivered. It therefore had to decide what coordination would be necessary across functions, who would operationally control different touch points, and even what content customers wanted in the company’s Web site, in loyalty program mailings, and other forms of communication.

Starwood’s experience underscores the fact that, despite the growing impact of digital touch points such as social media, effective customer engagement must go beyond pure communication to include the product or service experience itself. “At the end of the day,” says Virgin Atlantic Airways chief executive Steve Ridgway, “we fly exactly the same planes as everybody else. If we get our customers off the plane happy, and they go on to talk about that and get others to come and then come back again themselves – that’s a huge marketing tool.”

Build

Once a company designs how it will engage with customers, it needs the organizational capabilities to deliver: adding staff, building a social-media network infrastructure, retooling customer care operations, or altering reporting structures. Functions far removed from marketing often have important roles to play, so one or more marketing teams at the center may have to build skills in other parts of a company. A global energy company took that approach and then largely dissolved the group when those capabilities were in place.

Allocating responsibility for building touch points is increasingly important because of the degree to which Web-based engagement is requiring companies to create “broadcast” media. Some have built publishing divisions to feed the ever-increasing demand for content required by company Web sites, social media, internal and external publications, multimedia sites, and coupons and other promotions. Many luxury-goods companies, for example, have built editorial teams to “socialize” their brands: they are transforming the customer relationship by producing blogs, digital magazines, and other content that can dramatically intensify both the frequency and depth of interactions.

Content-oriented strategies like these require creative employees who can feed the customer’s ever-increasing need for timely, relevant, and compelling content across a variety of media. They also provide an opportunity for productive dialogue within companies about the role of marketing versus other functions in building critical touch points that drive engagement.

Operate and renew

For companies in industries as diverse as consumer packaged goods and financial services, digital technology has upended the engagement expectations of customers, who, for example, want one Web site to visit and a relationship seamlessly integrated across touch points. Meeting such expectations requires extraordinary operational coordination and responsiveness in activities ranging from providing on-the-ground service delivery to generating online content to staying on top of a customer care issue blowing up on YouTube.

Behind the scenes, that new reality creates a need for coordination and conflict resolution mechanisms within and across functions, as well as budget procedures that allow flexibility and rapid action should the need arise. PepsiCo, for example, has sought to provide a single point of contact for its digital-marketing efforts by creating the role of chief digital officer: an executive without line responsibility who drives the application of best practices across the beverage group’s global digital efforts.

Companies also need a clear approach for monitoring touch points and renewing them as needed. At one major hotel chain, for example, a single group circumnavigates the globe acting as a “monitor and fix” SWAT team. It meets with hotel licensees, educates them about the company’s customer-engagement approach and management of key touch points, demonstrates new behavior, and trains the staff in new operational processes. Given the speed of information sharing today, constant monitoring and adaptation—indeed, continuous improvement of the sort that came to the operations world long ago—is bound to infiltrate marketing and grow in importance.

The marketing organization’s new look

As the chief marketing officer collaborates with the chief executive and other senior-team members to nail down a shared approach for designing, building, operating, and renewing customer touch points, he or she also will require a new kind of marketing organization. For marketing to truly become the customer-engagement engine that orchestrates the delivery of the end-to-end customer experience, it must evolve along four critical dimensions.

Distribute more activities

As marketing becomes more pervasive, the marketing organization will increasingly be defined by a core set of tightly held responsibilities, such as branding and agency relationships, and a set of responsibilities distributed among the functions and groups best placed to manage and use the information generated by customer interactions. Procter & Gamble, for instance, has created a group within the purchasing function to buy digital-media advertising space. The group spans geographic boundaries, reflecting the global nature of the medium, and while it sits within purchasing, it is staffed by people with marketing experience.

At companies where the marketing organization’s responsibilities will be split between core and distributed activities, CMOs will increasingly be held accountable for the performance of groups that don’t report solely to them. When CEOs ask for the marketing-org chart, they will see a complex web of solid- and dotted-line relationships showing the roles that marketing plays in designing, building, or operating touch points across the whole organization.

The chart will also show where marketing activities have been embedded in other functions. One major logistics company, for example, puts marketing resources within each sales district to adapt corporate-level marketing initiatives to local circumstances. This approach mutes complaints from sales reps who feel bombarded with marketing pushes from the head office by giving them simple, customized ideas for driving sales within their regions.

More councils and partnerships

While leading companies have long used marketing councils to boost management coordination, the new marketing organization will require many more of them, with greater representation from other functions. One global financial institution, for example, has created a digital-governance council with representatives from all customer-facing business units. The company’s goal was to ensure that data and analytics are shared, that customers receive the same experience regardless of channel (such as Web sites, branches, call centers, or automated teller machines), and that IT systems meet the customer’s digital-engagement needs.

More robust formal and informal external partnerships will be critical too. Customer forums, such as the one Virgin Atlantic Airways used to create a taxi-sharing app for smart-phones, are one example. More structured relationships with distribution partners also can enhance engagement. The consumer-packaged-goods company Nestlé, for example, manages its relationship with retailer Wal-Mart Stores via what it calls the Nestlé–Wal-Mart Team. This unified cross-business, cross-functional group is responsible for everything from in-store activity to promotion, logistics, innovation, and product design. As a result, Wal-Mart has a single point of contact with one of its largest suppliers, Nestlé enjoys a stronger relationship with the retailer, and, critically, both companies gain a better understanding of, and engagement with, packaged-goods consumers.

Elevate the role of customer insights

Generating rich customer insights, always central to effective marketing efforts, is more challenging and important in today’s environment. Companies must listen constantly to consumers across all touch points, analyze and deduce patterns from their behavior, and respond quickly to signs of changing needs.

One implication is that the types of talent required to derive such insights will change. A premium will be placed on problem-solving and strategic-marketing skills, rather than on traditional market research capabilities such as designing surveys and commissioning focus groups. Some organizations also may need help from external partners, a pattern that’s already apparent at several insurers and health care payers that have neither the time nor the budgets to build the necessary data-gathering and -analysis capabilities in-house and at scale.

The insights group’s position in a company could even change. At one high-end hospitality business, for example, responsibility for generating customer insights has moved out of the marketing function entirely. The group now reports directly to the head of strategy, who uses information from it to redesign core business elements such as pricing, sales targeting, and the selection of properties for development.

More data rich and analytically intense

Reinforcing the importance of all these changes is an exponential increase in the volume of customer data and the intensity of the analysis required to process and act on it effectively. Without cross-functional collaboration and a clear delineation of roles, it will be impossible to gather, collate, gain insights from, and disseminate data that streams in from every customer interaction. The sheer volume of data is extraordinary: social-media gaming company Zynga, for example, generates five terabytes (the equivalent of about 1.5 million song files) of data on customer clicks every day. What’s more, “Marketing is going to become a much more science-driven activity,” says Duncan Watts of Yahoo! Research. In the trenches, this change suggests a shift toward sophisticated data analytics similar to the revolution that has already taken place in industries such as financial services, as well as in airlines and other industries where yield management is important. Some marketing organizations are already making their moves: to send targeted e-mails to customers, retailer Williams-Sonoma, for example, analyzes an integrated database that tracks some 60 million households on metrics including income, housing values, and number of children. These e-mails obtain response rates 10 to 18 times as high as those sent randomly. Such capabilities don’t necessarily have to be built in-house: many companies will enter into creative arrangements with outside parties to exchange data and run joint tests of alternative marketing tactics.

The major barrier to engagement is organizational rather than conceptual: given the growing number of touch points where customers now interact with companies, marketing often can’t do what’s needed all on its own. CMOs and their C-suite colleagues must collaborate intensively to adapt their organizations to the way customers now behave and, in the process, redefine the traditional marketing organization.

If companies don’t make the transition, they run the risk of being overtaken by competitors that have mastered the new era of engagement.

* from a McKinsey Quarterly article by Tom French, Laura LaBerge, Paul Magill

Study Resources of the Month

Harris – Customer Service: A Practical Approach (Pearson 2009) ISBN: 978-0135109311

Timm – Customer Service: Career Success Through Customer Loyalty (Prentice Hall 2007) ISBN: 978-0132236584

Ziethaml, Bitner, Gremler – Services Marketing: Integrating Customer Focus Across the Firm (McGraw Hill 2002) ISBN: 978-0072471427

Ahmed, Rafiq – Internal Marketing: Tools and Concepts for Customer Focused Management (Butterworth 2002) ISBN: 978-0750648387

Quotes from the Gurus

Customers will not love you if you give them poor service, but your competitors will – Kate Zabriskie

Before the internet an unhappy customer might have told 10 friends about it – today, an unhappy customer might tell 1000 contacts, and those contacts might tell another 1000 … each … – Jeff Bezos

Big or small, you can’t give good customer service if your employees don’t give each other good customer service – Penny Handscomb

If you keep giving poor service, you’ll keep getting what you’re getting – less customers – Stephen Covey

Useful Study Links

www.organizational-skills.net

www.customer-service.com

www.bized.co.uk

www.businessballs.com

www.mindtools.com

www.americancustomerservice.com

www.theacsi.org

www.serviceinstitute.com

Contributions from you, our students, are very welcome if you have information, advice, website links, or ideas, that may be of help to other students, please send them to us.

Personal & Career Development – Tip of the Month

The Personal and Career Development tip of the month is that no matter what position you hold, nor what stage you are in your career, nor which sector or specialist area you work in, it is essential to keep yourself up to date with developments, emerging trends, forecasts, and predictions.

The articles in this month’s newsletter are from McKinsey Quarterly, a highly respected business journal which is also available as a free subscription newsletter. Although this newsletter is aimed at strategic level managers, it is a good example of an easy and in this case cost-free way of receiving a regular flow of information, ideas, concepts, discussions and case studies, relevant to your role, responsibilities, and career development stage.

Finding newsletters to subscribe to is an easy task. For example a Google search using management+newsletter+hospitality or leadership+newsletter or quality management+newsletter will produce many dozens of links to very useful, mostly free, newsletters.

Other valuable sources are journals and newsletters received as part of the membership benefits of joining an appropriate professional organisation.

Our team here strongly recommends that you follow this advice, and make keeping up to date with business and management developments a regular feature of your professional development activity.

Strategic Management

This month’s newsletter offers some insights into the roles and responsibilities of the strategic manager, and how managers at this level evaluate and test the strategies for which they are responsible, and upon which the future of their organisations depend.

Applying the Right Strategy – the Ten Tests

The tests of a good strategy are timeless in nature. But the ability to pressure-test a strategy is especially timely now. The financial crisis of 2008 and the recession that followed made some strategies obsolete, revealed weaknesses in others, and forced many companies to confront choices and trade-offs they put off in boom years. At the same time, a shift toward shorter planning cycles and decentralized strategic decision making are increasing the utility of a common set of tests.

All this makes today an ideal time to kick the tires on your strategy.

Test 1: Will your strategy beat the market?

All companies operate in markets surrounded by customers, suppliers, competitors, substitutes, and potential entrants, all seeking to advance their own positions. That process, unimpeded, inexorably drives economic surplus—the gap between the return a company earns and its cost of capital—toward zero.

For a company to beat the market by capturing and retaining an economic surplus there must be an imperfection that stops or at least slows the working of the market. An imperfection controlled by a company is a competitive advantage. These are by definition scarce and fleeting because markets drive reversion to mean performance. The best companies are emulated by those in the middle of the pack, and the worst exit or undergo significant reform. As each player responds to and learns from the actions of others, best practice becomes commonplace rather than a market-beating strategy. Good strategies emphasize difference—versus your direct competitors, versus potential substitutes, and versus potential entrants.

Market participants play out the drama of competition on a stage beset by randomness. Because the evolution of markets is path dependent—that is, its current state at any one time is the sum product of all previous events, including a great many random ones—the winners of today are often the accidents of history. Consider the development of the US tire industry. At its peak in the mid-1920s, a frenzy of entry had created almost 300 competitors. Yet by the 1940s, four producers controlled more than 70 percent of the market. Those winners happened to make retrospectively lucky choices about location and technology, but at the time it was difficult to tell which companies were truly fit for the evolving environment. The histories of many other industries, from aerospace to information technology, show remarkably similar patterns.

To beat the market, therefore, advantages have to be robust and responsive in the face of onrushing market forces. Few companies, in our experience, ask themselves if they are beating the market—the pressures of “just playing along” seem intense enough. But – playing along can feel safer than it is. Weaker contenders win surprisingly often in war when they deploy a divergent strategy and the same is true in business.

Test 2: Does your strategy tap a true source of advantage?

Know your competitive advantage, and you’ve answered the question of why you make money (and vice versa). Competitive advantage stems from two sources of scarcity: positional advantages and special capabilities.

Positional advantages are rooted in structurally attractive markets. By definition, such advantages favor incumbents: they create an asymmetry between those inside and those outside high walls. For example, in Australia, two beer makers control 95 percent of the market and enjoy triple the margins of US brewers. This situation has sustained itself for two decades, but it wasn’t always so. Beginning in the 1980s, the Australian industry experienced consolidation. That change in structure was associated with a change in industry conduct (price growth began outstripping general inflation) and a change in industry performance (higher profitability).

Understanding the relationship among structure, conduct, and performance is a critical part of the quest for positional advantage.

Special capabilities, the second source of competitive advantage, are scarce resources whose possession confers unique benefits. The most obvious resources, such as drug patents or leases on mineral deposits, we call “privileged, tradable assets”: they can be bought and sold. A second category of special capabilities, “distinctive competencies,” consists of things a company does particularly well, such as innovating or managing stakeholders. These capabilities can be just as powerful in creating advantage but cannot be easily traded.

Too often, companies are cavalier about claiming special capabilities. Such a capability must be critical to a company’s profits and exist in abundance within it while being scarce outside. As such, special capabilities tend to be specific in nature and few in number. Companies often err here by mistaking size for scale advantage or overestimating their ability to leverage capabilities across markets. They infer special capabilities from observed performance, often without considering other explanations (such as luck or positional advantage). Companies should test any claimed capability advantage vigorously before pinning their hopes on it.

When companies bundle together activities that collectively create advantage, it becomes more difficult for competitors to identify and replicate its exact source. Consider Aldi, the highly successful discount grocery retailer. To deliver its value proposition of lower prices, Aldi has completely redesigned the typical business system of a supermarket: only 1,500 or so products rather than 30,000, the stocking of one own-brand or private label rather than hundreds of national brands, and superlean replenishment on pallets and trolleys, thus avoiding the expensive task of hand stacking shelves. Given the enormous changes necessary for any supermarket that wishes to copy the total system, it is extremely difficult to mimic Aldi’s value proposition.

Finally, don’t forget to take a dynamic view. What can erode positional advantage? Which special capabilities are becoming vulnerable? There is every reason to believe that competitors will exploit points of vulnerability.

Assume, like Lewis Carroll’s Red Queen, that you have to run just to stay in the same place.

Test 3: Is your strategy granular about where to compete?

The need to beat the market begs the question of which market. Research shows that the unit of analysis used in determining strategy (essentially, the degree to which a market is segmented) significantly influences resource allocation and thus the likelihood of success: dividing the same businesses in different ways leads to strikingly different capital allocations.

What is the right level of granularity? Push within reason for the finest possible objective segmentation of the market: think 30 to 50 segments rather than the more typical 5 or so. Too often, by contrast, the business unit as defined by the organizational chart becomes the default for defining markets, reducing from the start the potential scope of strategic thinking.

Defining and understanding these segments correctly is one of the most practical things a company can do to improve its strategy. Management at one large bank attributed fast growth and share gains to measurably superior customer perceptions and satisfaction. Examining the bank’s markets at a more granular level suggested that 90 percent of its outperformance could be attributed to a relatively high exposure to one fast-growing city and to a presence in a fast-growing product segment. This insight helped the bank avoid building its strategy on false assumptions about what was and wasn’t working for the operation as a whole.

In fact, 80 percent of the variance in revenue growth is explained by choices about where to compete, according to research summarized in The Granularity of Growth, leaving only 20 percent explained by choices about how to compete. Unfortunately, this is the exact opposite of the allocation of time and effort in a typical strategy-development process. Companies should be shifting their attention greatly toward the “where” and should strive to out-position competitors by regularly reallocating resources as opportunities shift within and between segments.

Test 4: Does your strategy put you ahead of trends?

The emergence of new trends is the norm. But many strategies place too much weight on the continuation of the status quo because they extrapolate from the past three to five years, a time frame too brief to capture the true violence of market forces.

A major innovation or an external shock in regulation, demand, or technology, for example, can drive a rapid, full-scale industry transition. But most trends emerge fairly slowly—so slowly that companies generally fail to respond until a trend hits profits. At this point, it is too late to mount a strategically effective response, let alone shape the change to your advantage. Managers typically delay action, held back by sunk costs, an unwillingness to cannibalize a legacy business, or an attachment to yesterday’s formula for success. The cost of delay is steep: consider the plight of major travel agency chains slow to understand the power of online intermediaries. Conversely, for companies that get ahead of the curve, major market transitions are an opportunity to rethink their commitments in areas ranging from technology to distribution and to tailor their strategies to the new environment.

To do so, strategists must take trend analysis seriously. Always look to the edges. How are early adopters and that small cadre of consumers who seem to be ahead of the curve acting? What are small, innovative entrants doing? What technologies under development could change the game? To see which trends really matter, assess their potential impact on the financial position of your company and articulate the decisions you would make differently if that outcome were certain. For example, don’t just stop at an aging population as a trend—work it through to its conclusion. Which consumer behaviors would change? Which particular product lines would be affected? What would be the precise effect on the P&L? And how does that picture line up with today’s investment priorities?

Test 5: Does your strategy rest on privileged insights?

Data today can be cheap, accessible, and easily assembled into detailed analyses that leave executives with the comfortable feeling of possessing an informed strategy. But much of this is noise and most of it is widely available to rivals. Furthermore, routinely analyzing readily available data diverts attention from where insight-creating advantage lies: in the weak signals buried in the noise.

In the 1990s, when the ability to burn music onto CDs emerged, no one knew how digitization would play out; MP3s, peer-to-peer file sharing, and streaming Web-based media were not on the horizon. But one corporation with a large record label recognized more rapidly than others that the practical advantage of copyright protection could quickly become diluted if consumers began copying material. Early recognition of that possibility allowed the CEO to sell the business at a multiple based on everyone else’s assumption that the status quo was unthreatened.

Developing proprietary insights isn’t easy. In fact, this is the element of good strategy where most companies stumble. A search for problems can help you get started. Create a short list of questions whose answers would have major implications for the company’s strategy—for example, “What will we regret doing if the development of India hiccups or stalls, and what will we not regret?” In doing so, don’t forget to examine the assumptions, explicit and implicit, behind an established business model. Do they still fit the current environment?

Another key is to collect new data through field observations or research rather than to recycle the same industry reports everyone else uses. Similarly, seeking novel ways to analyze the data can generate powerful new insights. For example, one supermarket chain we know recently rethought its store network strategy on the basis of surprising results from a new clustering algorithm.

Finally, many strategic breakthroughs have their root in a simple but profound customer insight (usually solving an old problem for the customer in a new way). In our experience, companies that go out of their way to experience the world from the customer’s perspective routinely develop better strategies.

Test 6: Does your strategy embrace uncertainty?

A central challenge of strategy is that we have to make choices now, but the payoffs occur in a future environment we cannot fully know or control. A critical step in embracing uncertainty is to try to characterize exactly what variety of it you face—a surprisingly rare activity at many companies. Our work over the years has emphasized four levels of uncertainty. Level one offers a reasonably clear view of the future: a range of outcomes tight enough to support a firm decision. At level two, there are a number of identifiable outcomes for which a company should prepare. At level three, the possible outcomes are represented not by a set of points but by a range that can be understood as a probability distribution. Level four features total ambiguity, where even the distribution of outcomes is unknown.

In our experience, companies oscillate between assuming, simplistically, that they are operating at level one (and making bold but unjustified point forecasts) and succumbing to an unnecessarily pessimistic level-four paralysis. In each case, careful analysis of the situation usually redistributes the variables into the middle ground of levels two and three.

Rigorously understanding the uncertainty you face starts with listing the variables that would influence a strategic decision and prioritizing them according to their impact. Focus early analysis on removing as much uncertainty as you can—by, for example, ruling out impossible outcomes and using the underlying economics at work to highlight outcomes that are either mutually reinforcing or unlikely because they would undermine one another in the market. Then apply tools such as scenario analysis to the remaining, irreducible uncertainty, which should be at the heart of your strategy.

Test 7: Does your strategy balance commitment and flexibility?

Commitment and flexibility exist in inverse proportion to each other: the greater the commitment you make, the less flexibility remains. This tension is one of the core challenges of strategy. Indeed, strategy can be expressed as making the right trade-offs over time between commitment and flexibility.

Making such trade-offs effectively requires an understanding of which decisions involve commitment. Inside any large company, hundreds of people make thousands of decisions each year. Only a few are strategic: those that involve commitment through hard-to-reverse investments in long-lasting, company-specific assets. Commitment is the only path to sustainable competitive advantage.

In a world of uncertainty, strategy is about not just where and how to compete but also when. Committing too early can be a leap in the dark. Being too late is also dangerous, either because opportunities are perishable or rivals can seize advantage while your company stands on the sidelines. Flexibility is the essential ingredient that allows companies to make commitments when the risk/return trade-off seems most advantageous.

A market-beating strategy will focus on just a few crucial, high-commitment choices to be made now, while leaving flexibility for other such choices to be made over time. In practice, this approach means building your strategy as a portfolio comprising three things: big bets, or committed positions aimed at gaining significant competitive advantage; no-regrets moves, which will pay off whatever happens; and real options, or actions that involve relatively low costs now but can be elevated to a higher level of commitment as changing conditions warrant. You can build underpriced options into a strategy by, for example, modularizing major capital projects or maintaining the flexibility to switch between different inputs.

Test 8: Is your strategy contaminated by bias?

It’s possible to believe honestly that you have a market-beating strategy when, in fact, you don’t. Sometimes, that’s because forces beyond your control change. But in other cases, the cause is unintentional fuzzy thinking.

Behavioral economists have identified many characteristics of the brain that are often strengths in our broader, personal environment but that can work against us in the world of business decision making. The worst offenders include overoptimism (our tendency to hope for the best and believe too much in our own forecasts and abilities), anchoring (tying our valuation of something to an arbitrary reference point), loss aversion (putting too much emphasis on avoiding downsides and so eschewing risks worth taking), the confirmation bias (overweighting information that validates our opinions), herding (taking comfort in following the crowd), and the champion bias (assigning to an idea merit that’s based on the person proposing it).

Strategy is especially prone to faulty logic because it relies on extrapolating ways to win in the future from a complex set of factors observed today. This is fertile ground for two big inference problems: attribution error (succumbing to the “halo effect”) and survivorship bias (ignoring the “graveyard of silent failures”). Attribution error is the false attribution of success to observed factors; it is strategy by hindsight and assumes that replicating the actions of another company will lead to similar results. Survivorship bias refers to an analysis based on a surviving population, without consideration of those who did not live to tell their tale: this approach skews our view of what caused success and presents no insights into what might cause failure—were the survivors just luckier? Case studies have their place, but hindsight is in reality not 20/20. There are too many unseen factors.

Developing multiple hypotheses and potential solutions to choose among is one way to “de-bias” decision making. Too often, the typical drill is to develop a promising hypothesis and put a lot of effort into building a fact base to validate it. In contrast, it is critical to bring fresh eyes to the issues and to maintain a culture of challenge, in which the obligation to dissent is fostered.

The decision-making process can also be de-biased by, for example, specifying objective decision criteria in advance and examining the possibility of being wrong. Techniques such as the “pre-mortem assessment” (imagining yourself in a future where your decision turns out to have been mistaken and identifying why that might have been so) can also be useful.

Test 9: Is there conviction to act on your strategy?

This test and the one that follows aren’t strictly about the strategy itself but about the investment you’ve made in implementing it—a distinction that in our experience quickly becomes meaningless because the two, inevitably, become intertwined. Many good strategies fall short in implementation because of an absence of conviction in the organization, particularly among the top team, where just one or two nonbelievers can strangle strategic change at birth.

Where a change of strategy is needed, that is usually because changes in the external environment have rendered obsolete the assumptions underlying a company’s earlier strategy. To move ahead with implementation, you need a process that openly questions the old assumptions and allows managers to develop a new set of beliefs in tune with the new situation. This goal is not likely to be achieved just via lengthy reports and presentations. Nor will the social processes required to absorb new beliefs—group formation, building shared meaning, exposing and reconciling differences, aligning and accepting accountability—occur in formal meetings.

CEOs and boards should not be fooled by the warm glow they feel after a nice presentation by management. They must make sure that the whole team actually shares the new beliefs that support the strategy. This requirement means taking decision makers on a journey of discovery by creating experiences that will help them viscerally grasp mismatches that may exist between what the new strategy requires and the actions and behavior that have brought them success for many years. For example, visit plants and customers or tour a country your company plans to enter, so that the leadership team can personally meet crucial stakeholders. Mock-ups, video clips, and virtual experiences also can help.

The result of such an effort should be a support base of influencers who feel connected to the strategy and may even become evangelists for it. Because strategy often emanates from the top, and CEOs are accustomed to being heeded, this commonsense step often gets overlooked, to the great detriment of the strategy.

Test 10: Have you translated your strategy into an action plan?

In implementing any new strategy, it’s imperative to define clearly what you are moving from and where you are moving to with respect to your company’s business model, organization, and capabilities. Develop a detailed view of the shifts required to make the move, and ensure that processes and mechanisms, for which individual executives must be accountable, are in place to effect the changes. Quite simply, this is an action plan.

Everyone needs to know what to do. Be sure that each major “from–to shift” is matched with the energy to make it happen. And since the totality of the change often represents a major organizational transformation, make sure you and your senior team are drawing on the large body of research and experience offering solid advice on change management—a topic beyond the scope of this article!

Finally, don’t forget to make sure your ongoing resource allocation processes are aligned with your strategy. If you want to know what it actually is, look where the best people and the most generous budgets are—and be prepared to change these things significantly. Effort spent aligning the budget with the strategy will pay off many times over.

As we’ve discussed the tests with hundreds of senior executives at many of the world’s largest companies, we’ve come away convinced that a lot of these topics are part of the strategic dialogue in organizations. But we’ve also heard time and again that discussion of such issues is often, as one executive in Japan recently told us, “random, simultaneous, and extremely confusing.” Our hope is that the tests will prove a simple and effective antidote: a means of quickly identifying gaps in executives’ strategic thinking, opening their minds toward new ways of using strategy to create value, and improving the quality of the strategy-development process itself.

* from an article in McKinsey Quarterly www.mckinseyquarterly.com by Chris Bradley – a principal in McKinsey’s Sydney office, Martin Hirt – a director in the Taipei office, and Sven Smit – a director in the Amsterdam office, assisted by Nick Percy, Head of Strategy, BBC Worldwide.

Strategy Testing

Four experienced leaders share their approaches to testing strategy.

Gail Lumsden is group head of strategy and planning at SABMiller, a leading global brewer.

Where are we in our strategic journey?

It’s very easy to get blinkered and complacent, particularly when you’re in a successful business: the tendency is to extend the past into the future and assume that your success will continue. The challenge is to watch out for and take signs to the contrary seriously and to use them as a catalyst to further develop your strategy.

Winning is a journey, not a destination, and that means understanding where you are in your strategic journey as a business.

For example, we’ve significantly outperformed our peers over the last ten years in terms of total returns to shareholders (TRS), which demonstrates that we’ve had a differentiated strategy: we were ahead of our competitors in acquiring undervalued and underperforming local brewers in emerging markets with strong volume growth and in applying a distinctive business model based on operational and performance-management excellence. In some of those markets, though, per capita consumption growth is now leveling off, and if you look at more recent history, you see that our outperformance in terms of TRS has been abating. So one of the big challenges for us now is how we define and redefine the markets in which we compete.

Are we properly balancing growth and risk?

We’re always thinking about opportunities for profitable growth, but we also need to be thinking about the value at risk. Are we protecting our strongholds? Are we adequately thinking about how our competitors will respond to our moves? And in markets where we have a strong leadership position, are we thinking enough about how to create—not just capture—value as the market matures?

Raymond Gilmartin, a professor at Harvard Business School and a member of the board of directors at General Mills and Microsoft, was the CEO of pharmaceutical company Merck from 1994 until 2005.

Does it violate any strategic laws of gravity?

I have been interested in strategy, both at a conceptual level and as a practitioner, since the late 1960s, when I was studying at the Harvard Business School and the transition was under way from talking about long-range planning to thinking about strategy. At that time, many core conceptual frameworks of strategy were emerging.

Having been exposed to these strategic frameworks early in my career, and believing there were certain principles that one should follow in formulating strategy, a test that I found useful was to look for situations where these principles were violated. For example, if you’ve got a 5 percent market share and somebody else in the industry has 40 percent, the idea that you’re going to make dramatic gains in market share within a relatively short period of time is just unrealistic. Equally unrealistic is wanting to introduce a product that’s undifferentiated and expecting to gain market share just because it’s a big market.

I’m using very simpleminded examples, but people do make these kinds of errors. When you see this is about to happen you should respond by saying, “Let’s not introduce that product.”

Do my numbers match my strategy?

A common thing that happens within companies is that people make all of these great strategy presentations, management signs off on everything, and then the world shifts completely to a different mode when it’s time to put together the profit plan. That is the moment of truth for whether your resource allocation is consistent with what you claim your strategy is, and I’m willing to bet that this is where the biggest disconnect usually takes place.

I therefore looked at plans and expenditure requests from the standpoint of what story the numbers told us about our strategy and whether the two matched or not. When we intended to increase our rate of innovation, one test would be what was happening to the level of R&D spending. When we expected to increase our market share, key tests would be: what is happening to spending on promoting our products and the share of capital projects related to new products.

David Speiser is the senior vice president for strategy at SAIC, a scientific, engineering, and technology applications company, headquartered in the United States. He also is an alumnus of McKinsey’s Los Angeles office, where he was a principal.

Will it create value?

As an industry, we attract a lot of engineers and former government and military professionals. Therefore, the very basic test of whether something drives financial shareholder value or not is very useful because many people are not so financially focused.

Is it material?

One of my biggest tests is to explore whether a proposal is material. Some folks will get excited about doing something in a very small market. The challenge we face, given limited managerial resources, is to educate people about what would be material to the $11 billion corporation we are today, which is very different from the $2 billion corporation we were 15 years ago.

Is it differentiated?

This is probably the hardest test to pass because one of the challenges you have in a corporation that has very broadly applicable skills is that people want to apply them broadly. If you’re trying to apply your skills to a broader set of markets, you have to really think critically about what the current competitors are already offering and what you’re going to do that’s different. That can be tough, especially when you combine it with the materiality test. There may be nothing you can do, in a segment where you have deep interest and knowledge, that will be material over and above what you’re doing. But then when you get outside your comfort zone, achieving differentiation is more challenging.

Is it just ‘PowerPoint engineering’?

When it comes to new strategies, a big test is to make sure that the insights and capabilities underlying them are real and not just a result of PowerPoint engineering. We get used to assuming that anything people say they can do, they can do. Because they demonstrate this every day in core markets, proof isn’t required. But if you’re talking about developing a new growth strategy to penetrate a new market, you have to step back and ask tough questions because the proof isn’t being delivered every day. Requiring proof that we’re connected with the market – that we’ve actually spoken to potential customers – that we have the insight we claim to have – is ultimately one of the most important jobs of the strategist, in my view.

Jeffrey Elton is the CEO and vice chairman of KEW Group, a personalized oncology care network he helped found. Previously, he was senior vice president of strategy and global COO at the Novartis Institutes for Biomedical Research and, before that, a principal in McKinsey’s Boston office.

What are the facts?

Pharmaceutical and health care delivery are long-cycle businesses where strategy is about optimizing resource reallocation—getting really straight about what investments are going to drive your future earnings. That starts with getting the facts right: there’s a lot of hearsay and lore, even though the industry is scientifically driven. It’s amazing how much of this is not rooted in fact. So the first set of questions we always spend time on is what’s really working or not working, and understanding what “working” actually means.

Is the problem solvable, and do we care?

Sometimes you have an insight, but that insight is a very small proportion of what’s really required to solve a problem. You need to determine if, based on what we know now, the problem is solvable. Then, even if it is, do we care? We usually are trying to work on things where we think there’s a relatively high unmet medical need. If we work on diseases that impose a high cost burden, this approach helps assure a favorable set of economics, even if we can’t predict all the different aspects of reimbursement.

Who can solve that problem?

We presume that we can’t possibly have all the talent and capabilities needed to solve any one problem, so what institutions—what companies, specifically—should we be trying to collaborate with to solve this problem confidently and remarkably? Of course, we also need to ask what we need inside this company to successfully engage with that external network. If we don’t have people who know a class of problem exceptionally well, we can’t even do a good job on due diligence and access the best talent or partners. So this question could help drive our acquisition, talent, or recruitment strategy.

Why might we fail?

Usually, projects or new therapeutics are going to fail for one or two reasons. Running a killer experiment, focused on likely sources of failure, can actually save a lot more time than a pilot that’s likely to confirm that this is an interesting area to be in, where we may be able to do something.

How can we shape the market?

In any high-innovation area, there’s a heavy dose of “shaping”—both of the market and of the environment you will be walking into—that needs to take place to make this market worth getting into. Getting specific about what you have the ability to shape, and which points of influence you can begin to put in place, is invaluable.

* from an article in McKinsey Quarterly www.mckinseyquarterly.com

Study Resources of the Month

Books

Hugh G. Courtney: 20/20 Foresight: Crafting Strategy in an Uncertain World, Boston, MA: Harvard Business School Publishing, 2001.

Anita M. McGahan: How Industries Evolve: Principles for Achieving and Sustaining Superior Performance, Boston, MA: Harvard Business School Publishing, 2004.

Phil Rosenzweig: The Halo Effect and the Eight Other Business Delusions That Deceive Managers, New York: Free Press, 2007.

Dan Ariely: Predictably Irrational: The Hidden Forces That Shape Our Decisions, New York: HarperCollins, 2008.

Quotes from the Gurus

Strategy without tactics is the slowest route to victory. Tactics without a strategy is simply the noise before defeat – Sun Tzu

The essence of strategy is choosing what not to do – Michael Porter

What counts in global competition is the right strategy – Heinrich von Pierer

Consider the mouse – how wise an animal that it never entrusts its life to one hole only – Plautus

What do you want to achieve? The answer is objectives. How will you achieve your objectives? The answer to that is called strategy – William E Rothschild

When you’re absolutely sure that you know which road to take – don’t sit there looking at it – start walking! – Ayn Rand

Useful Study Links

In keeping with this month’s Personal and Career Development Tip of the Month and Strategic Management Theme, here are some websites that have newsletters related to strategic management:

www.strategyplus.org

www.methodframeworks.com

www.decision-making-solutions.com

www.strategy4u.com

www.oecd.org

www.vision2020uk.org

www.oracle.com

www.cwn.org.uk

www.toolbox.com

www.bigbusinessinsight.com

www.cim.com

www.strategicmanagement.net

www.bus.lsu.edu