Effectiveness is deciding what to do better.”

Source: Peter F Drucker

I used this subject at a presentation to the 7.45 Breakfast Club this week.  Given that the club has members from a very broad spectrum of businesses, including sole traders, I wanted a subject that would be equally relevant no matter how big your business.

I use the Efficiency and Effectiveness matrix as a discussion tool to help businesses identify where they may need to focus their efforts.  It is a good way of prioritising ideas for change and focusing on the areas that will achieve the maximum benefit.

To explain the model I typically use the following examples:

Effective & Efficient = ‘Thrive’

Organisations that implement the right strategy, efficiently tend to thrive. Sometimes they are so effective and efficient that they rapidly outgrow strategies, by meeting  their targets earlier than planned. The best will then go on to define and achieve more challenging strategic targets, thus increasing their ability to thrive.

Effective & Inefficient = ‘Survive’

A lot of organisations get by, ‘surviving’, forever showing potential, but never meeting their growth targets. Such organisations include public sector services, operating to a clear brief, that never quite achieve the levels of service to match the investment that is made in them. Private sector organisations with poor management or inefficient practices also fall into this category.

Ineffective & Inefficient = ‘Die Slowly’

These organisations do not have the right strategy to achieve what they are aiming for.  They also suffer from poor management and / or badly managed process discipline.  Many small family run businesses fall into this category and exist in an almost permanent state of decline.

Ineffective & Efficient = ‘Die Quickly’

Organisations that are highly efficient at doing the wrong things fail heroically; unless emergency action is taken to redefine their strategy.  Although they may have invested heavily in modern and efficient processes and systems, they share a lack of management awareness that they are headed for danger. Basically the vision driving their strategy, does not match the realities of the marketplace.

So where do you services fit within the matrix?

Are you as efficient and effective in all the product or service areas you provide?

If not what are you going to do about it?

If you are still not sure, drop me a line and we can discuss further.

The above statement articulates one of the key challenges facing those responsible for managing risk – that the risk landscape is changing.  As well as ‘known risks’ and ‘emerging risks’ organisations need to be able to prepare themselves for ‘unknown unknowns’ or ‘black swan’ events as they have become to be known[1].

What is clear is that the risk landscape is changing. Today’s fast changing world creates more uncertainty for organisations – and makes it harder for them to understand where new risks are going to come from[2].  Stephen Platt stated at a recent conference[3] “we value achievement not prevention, and laziness means we don’t measure the value of disasters averted; instead we merely measure the cost of controls and business lost”.

Changing this mind-set is not easy, particularly when most Risk & Compliance Officers are swamped with demonstrating compliance through form-filling, producing checklists and carrying out reviews.

To give the Compliance Officer capacity to address these issues and re-focus on proactive risk management they need tools that will help with the regulatory compliance.  Senior managers also need reliable information to make informed decisions on risk issues.

The problem in most companies today is they look at risk from a one sided perspective to meet their regulatory compliance needs. Risk management is viewed as a fixed cost to help the company avoid financial penalties, litigation and/or bankruptcy.  This recognition of the cost of managing risk provides a good base to build and leverage a framework for proactive risk and compliance.

Governance, Risk Management & Compliance (GRC)

Governance, risk and compliance activities are increasingly being integrated and aligned to some extent in order to avoid conflicts, wasteful overlaps and gaps. GRC typically encompasses activities such as corporate governance, enterprise risk management (ERM) and corporate compliance with applicable laws and regulations.

Interest in GRC was initially sparked by the US Sarbanes-Oxley Act. However, the focus of GRC has since shifted towards adding business value through improving operational decision making and strategic planning. Integrated approaches to GRC will also assist in meeting the requirements of Anti-Money Laundering legislation. This is a mandatory requirement of all regulated businesses in the fight to combat the financing of terrorism.

To remain competitive, companies must have a GRC strategy in place that keeps pace with new legislation and stakeholder expectations. An associated framework will aid strategic decision making by clearly defining risks and opportunities.

What is still needed is a near real-time proactive monitoring process that will minimise unexpected incidents by providing the right information to the right people.

An integrated approach – without spreadsheets

]]> http://paulevery.me/2012/01/31/proactive-risk-management/feed/ 2 49.214439 -2.131250 49.214439 -2.131250 paulevery http://paulevery.me/2012/01/27/the-changing-times-january-2012/ http://paulevery.me/2012/01/27/the-changing-times-january-2012/#comments Fri, 27 Jan 2012 11:07:57 +0000 Paul Every http://paulevery.me/?p=292 ]]> For this month’s edition of  ’the changing times’, the bi-monthly newsletter from my consultancy network The Lamberhurst Corporation, click here.

In this edition we have some articles which include:-

• New Mergers and Acquisitions Group
• An Overview of the Lamberhurst Corporation
• Case Studies
• Consultant Profiles

I was reminded of this last night as I reached the half way point of reading Steve Jobs, the biography by Walter Isaacson, which is an excellent read and is definitely to be recommended.  When comparing Jobs early years at Apple and his time running NeXT you can can’t disagree that he was a visionary, he was certainly passionate about what he did (some would say too passionate) and there was a huge amount of action.  Despite this it wasn’t enough to prevent both Apple and NeXT failing to deliver what they had set out to do.

This doesn’t mean that Vision, Passion and Action are not relevant, on the contrary; what is vital is that the passion and action must be directed towards achieving the Vision.  This sounds fairly obvious, but how many leaders or their teams get sidetracked and spent time and energy on things that are not directly related to their vision for the business?

The answer lies in Leadership, but I don’t mean just a charismatic person at the top of the business.  Leadership needs to be displayed at all levels in the organisation and in all directions – managing your boss, your colleagues and yourself through the use of personal power and not relying on the authority power given to you by your position in the company.

Going back to Steve Jobs, he certainly was able to use personal power to influence those around him.  This power was so strong though it became manipulative and did not always bring out the best in people.  He also failed to listen to feedback so did not get the benefit from the talented people around him.

Having said that he was hugely successful and really did change the world.  Bear in mind I am only half way through the book so far and this is my opinion just on his early years in business, I am sure it will change over the next few chapters!

To summarise my new mantra for successful business, which I intend to use to help both my own business. Solitaire Consulting and the organisations I help is being extended to:

Vision, Passion, Leadership, Action

Most businesses today invest heavily in Information & Communication Technology (ICT), but often this is only seen as a necessary cost of doing business.  Business leaders need to be asking themselves:

What Value do we gain from investment in ICT?

From the perception of the ICT Department this is likely to focus on the nearly 100% uptime, speed and accuracy of transaction processing, or the ability to provide staff with instant access to email and office systems from anywhere they choose to work from.

Whilst this is very important the real value of ICT must go further than this if it is to help enable the business to develop and compete.  In order for ICT to provide this next level of value companies need to focus on the use of technology to enable:

•             Process optimisation and improvements in efficiency

•             Innovation and improved decision-making

•             Collaboration and interaction with customers, suppliers and partners

This is not just about the acquisition of new technology, which on its own is not enough to drive meaningful business change.  It is about how that technology is deployed and used across all levels of the business.

Technology as an enabler for efficiency

In most businesses technology is embedded in almost every business process. It is at the core of a company’s cost centre, and in particular sectors is inextricably linked to productivity and a company’s core value proposition.  But in how many of these companies is this technology being used to its full potential?

ICT implementation projects have a reputation for attempting to deliver too much too quickly, with the inevitable result being the project overruns in both time and cost.  Projects are scaled back to deliver minimum functionality and commitments made to deliver the additional value in later phases.  How often do these phases get postponed indefinitely?  The result is a business which is operating sub-optimally, using short-term workarounds that become part of ‘business as usual’.

The most successful ICT projects aim to deliver 80% of the benefits for 20% of the cost. This can only be achieved with a very strong link between ICT and business people.

Technology to improve decision-making

Businesses generate and store a mass of data.  Data needs to be transformed into knowledge to make it useful to decision makers.  This value-adding process relies on technology to:

•             Aggregate, manipulate and organise data;

•             Carry out analysis and evaluation; and

•             Report the information in proper context for human use.

A business’s ability to do this better than its competitors gives it a strategic advantage, particularly in the context of innovation and development of new products and services.

Technology to develop strategic relationships

In the global economy the ability of a business to take advantage of new ways of communicating and transacting business can drive value and lower the cost of interactions between a company and its suppliers, partners and clients.  Technologies such as social media, open source, cloud etc can challenge the traditional ICT Department and require new ways of working.

Increasing the benefit from investments in technology

In many cases companies already have access to the technology, but there is a lack of co-ordination between the business and ICT, and a lack of innovative thinking to make the most of these opportunities.  Left to their own devices staff will serve their needs first and a plethora of mini-systems will evolve across the business.  The culture of the company and a disciplined ICT department will ensure systems serve the company and its customers first.

The key to making more use of the technology present within the business is to harness the creativity of the staff that use this technology.  They know the frustrations of inefficient processes, they know what data is collected and they know how their own jobs can be improved.

Solitaire Consulting can help unlock this potential within your people and technology systems.  Large gains in productivity and process efficiency can often be achieved without having to resort to high cost, high risk IT projects.  The aim is to help you achieve 80% benefit from 20% of the investment.

I was first introduced to the Change Equation by Peter Duschinsky in his book of the same name.  Since then I have had the pleasure to meet Peter on several occasions to share and debate our views on organisational change.

The key premise of Beckhard’s Change Equation is that meaningful change can only be achieved when people’s natural resistance to change can be overcome.  This is represented by the following equation:

D x V x F > R

Where:

D is dissatisfaction with the present

V is the vision of how things could be

F is knowledge of the first practical steps i.e. a plan, and

R is the resistance  to, or cost of, change,

In other words, people’s natural resistance to (imposed) change will only be overcome by the combined force of dissatisfaction, vision and knowledge of the first steps to achieve the change.   By multiplying the three factors the model implies that if any one factor is zero or missing then change will not happen at all.

How many times have you worked in an organisation that has a really good vision for change, has developed pragmatic plans to achieve the change, but it still doesn’t happen?  This is usually because there isn’t the sufficient will in the organisation or people aren’t dissatisfied enough with the status quo to change.

This ties in to one of my previous posts where I talked about complacency as being a barrier to change.  Complacency and dissatisfaction are very similar in this context.

The strengths of the model are its simplicity and that it draws attention to the fact that a lot of change projects fail because they fail to overcome the internal ‘resistance’.  Most people do not like to be moved from their comfort zone, unless of course they are initiating the change for themselves – or to put it another way “I love change except when it is happening to me!”

If you haven’t used The Change Equation just try it and see if it helps explain why your project isn’t achieving the traction you originally hoped for.  And please let me know what you think.

In times of economic uncertainty organisations generally become very cost-conscious.  Lots of time and effort can be spent on ‘efficiency programmes’; extracting as much cost as possible from the production of products and services.

Whilst this internal focus on getting things right is an important element of running a successful business, just being efficient is not good enough.  Whether your organisation is in the private, public or third sector you must also operate effectively if you are to succeed.

Effectiveness is “doing the right things”

Effectiveness is critical to the success of every organisation. The key is having a good strategy; one that is well thought out and well executed.  An effective business has the ability to produce the right products or services and introduce them to the market at the right time.

In order to be effective the objective or end goal must be met, therefore effectiveness must take into account any variables or parameters that may change during the course of production or delivery.

Efficiency is “doing things right”

Technically, efficiency is defined as the ratio of outputs to inputs and focuses on achieving the maximum output with the minimum resources.

An efficient process is one that can be repeated time and again with little or no variation.  This focus on repetition can lead to inflexibility and an inability to be able to react to change.

This dichotomy between efficiency and effectiveness can be illustrated with an example based on an IT services company.  The company decides it is taking too long to carry out routine maintenance tasks and engineers are getting backlogs of work orders.  Following a review an additional testing by a co-worker was removed from the maintenance process.  This change certainly makes the process more efficient; maintenance jobs are turned around quicker and the backlog disappears.  However, the change results in more jobs going out with other faults that result in the customer having to log another support call.  This creates more administration work and customers are dissatisfied because they would reasonably expect all issues to be resolved.

This illustrates how ‘doing the right thing’ can often be overshadowed by ‘doing things right’.  Organisations need to find ways of becoming more efficient without compromising customer service, quality and innovation.

The Efficiency / Effectiveness Matrix

Most businesses do not operate at these extremes; those that do show brilliance in either their strategy or delivery often only do so temporarily.  Very few organisations thrive for sustained periods, particularly in dynamic environments.

So where does your business sit within the efficiency / effectiveness matrix?  Is your strategy as effective as it should be?  Are you operating efficiently in all areas?  If not then Solitaire Consulting can help.

This month the main feature is an article by Rod Hare on “How to find growth in a flat market”, which provides some useful tips for all types of business.

There are also articles of Efficiency and Effectiveness, Lean Philosophy and some interesting case studies by members of the network.

It’s all about Flexibility, Capability, Agility, Compatibility!

The term ‘freelance’ can mean different things to different people, but as far as I am concerned includes independent consultants (me!), contractors, sub-contractors and interims – basically anyone who isn’t employed in the conventional sense and provides a service to others.

To find out more, including research and free webinars go to the National Freelancers Day website by clicking here.

If you want to hear first hand how the use of  freelance services can add value to your business contact me for a free no obligation appointment.