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The Second Key: Rapid Improvement of Existing Businesses

The Second Key: Rapid Improvement of Existing Businesses

I proposed that management innovation requires seven keys to unlock at the same time. Let me discuss the Second Key in some detail.

While working on “Change Vision and Strategy, and Let Everybody Know,” we must re-examine the existing businesses on zero basis. To turn things around as fast as possible unconstrained by past successes, CEOs must set bold policies for management innovation and break it down to specific action plans and targets.

The business unit heads with long history of profitability take pride in being the bread-and-butter business of the company, and may not be able to even dream that their approach was the problem and they could not adapt to change. CEOs must dig hard to expose the real problems and push forward with determination.

Management people with history of successes, with all good intentions, tend to believe in back of their mind that they can recover business performance. They believe “they will contribute in a big way again if they stick to it long enough.” It keeps them from taking management innovation seriously. Even if one tries, many subordinates are protégés that tend to be protective. Conservatism prevails in this environment making it difficult to think flexibly.

CEOs that value consensus cannot override such opposing forces, and suffer setbacks before getting started with management innovation. If the CEO believes things are truly serious, don’t put on a good face for people around you. It’s time for brave demonstration of leadership. Overvaluing agreements and consensus in turbulent times can be fatal.

After deciding the action plans and targets, the CEO will conduct weekly and monthly status review meetings, and strictly and personally manage the progress. Whether or not management innovation will make solid progress depends on the CEO’s ability to not compromise and properly drive the conservative management, and directly communicate one’s intentions to majority of middle managers in existing business units. It’s about the will to fight and overcome the opposing forces rather than worrying about the right approach.

Develop Bold Policy for Management Innovation

Creeping problems can advance obscurely in profitable existing businesses and when you realize this, the conditions may have become too vulnerable and it’s too late to recover. Sales level may not have declined too much, but when customer royalty has been disrupted and pillar for profitability have broken down, things happen fast.

For example, when sales of high margin product line rapidly decrease, but sales of other smaller margin products are somewhat increasing, much time may pass without a sense of impeding danger if you just look at the top line. When the profit levels really decline, not having a good grasp of profit level by segment, or delays in grasping so will get you into deep trouble.

When you run into these situations, only course of action is bold management innovation—fixing things on the surface will simply not work. Business unit leaders have pride and will attempt a quick fix to recover, but often it will result in making things worse because the business assumptions upon which the existing businesses were built has fundamentally changed, and treating the symptoms does not cure the cause.

The problem with quick fix is it’s not sufficient. Even more serious problem with quick fix is the comfort of having done something could largely delay fundamental measures. Getting started early may have saved the business. The delays could be detrimental. Insufficient measures make things worse.

Checking to see if the management innovation policy is bold enough is actually not that difficult. One criterion for determination is: Is it very painful measure? No major surgery is painless. So if the measures do not accompany pain, it’s likely to be lukewarm quick fix.

To avoid failure from the start, it is absolutely essential for CEOs to set bold management innovation policies. Even if the company has an in-house company system or business units, CEOs must not leave it entirely up to the company and business unit heads, and must make sure surgery is sufficiently large. The heads might be contemporaries or even senior to the CEO in age. Out of respect, CEOs are often reserved in their approach, and are inclined to rely on and relegate to the heads of companies and business units. This creates breeding ground for problems.

There is another criterion to check if it is bold enough management innovation: Does it feel like it is too bold and overkill? That is how it should feel for it to be sufficiently drastic. If not, the measures will inevitably result in incomplete and lukewarm improvements. If you don’t swing the pendulum all the way once, it will not go as far as you wanted.

Develop Detailed Action Plan

NBold management innovation requires detailed action plan. It is a clear breakdown of what actions will be executed by when for each execution leaders in charge of the actions.

For example, if a principle policy is to fix the overdependence on distributors by strengthening the direct sales force, you need to develop a detailed plan such as:

– Hire sales people, shift locations
– Revamp sales training programs and implement
– Revamp marketing collaterals for sales
– Hold distributor meeting, explain and convince them of the changes
– Re-examine distributor selection, negotiate agreements
– Upgrade the website

and specify the details on who will do what by when.

The CEO will decide the responsible executive who will develop the action plan. You cannot expect one to fully commit to action plan written by others. A newly formed executive office for management innovation, reporting directly to the CEO, will check if the level of details is appropriate based on two criteria.

First, would a new employee be able to basically understand it without misinterpretation? This level of care is just right. If not, the content becomes too sketchy to determine its appropriateness before getting started, and targets become fuzzy.

Second, could a third party understand the specific activities, and imagine it being executed? It is wrong to think this is not important because “it’s a plan by the person for the person in charge to execute it.” It is necessary to examine consistency and progress from company-wide perspective. Some actions will require more details. Higher-level statements could be sufficient for others.

The executive office for management innovation will play a key role in this process. The CEO should appoint the very best director class person in the company as its leader to show the CEO’s commitment within and outside the organization. If the CEO appoints a second rate personnel to the position, everyone will see right through CEO’s lack of commitment.

Set Targets for Each Action Plan

Each action plan requires very clear targets.

For example, “increase direct sales force from 5 to 15 people” or “develop a sales training program to be held monthly.” You might specify hiring criteria for sales to be more than 3 years experience.

There are targets for results and targets for actions. “Book five new orders” is a target for results. The target for action might be “list up 100 potential customers and contact them”, “visit 40 qualified prospects with your superior”, and “post visit, submit a formal proposal for qualified prospects with greater than 50% chance of winning the business.” These targets for action become barometers for progress towards the target result.

Without clear targets, actions will be just going through the motions and they get watered down. You can’t determine if actions have been completed in a progress review meeting.

Host a Kick-off Meeting and Confirm Commitment

As soon as actions plan and targets are ready to go, host a kick-off meeting with the CEO, division heads, and execution leaders in charge of actions.

There the CEO will communicate expectations. The executive office for management innovation will share an overview of measures, action plan, and targets. The division heads and execution leaders will declare their determination to meet targets.

The success depends three critical factors: How serious the CEO is committed to execute the plan no matter what, and to exceed the targets; the majority of the management team must believe in CEO’s commitment; and how well the culture and code of conduct can be built in to unite the entire organization together to accomplish this objective. This is the true mission of the CEO.

Of course, this cannot be achieved overnight; it would take at least a few months after the CEO embarks on this. It’s kind of like teaching discipline. Loosely managed companies are high-spirited at the kick-off meeting, and then quickly lose momentum. It is a perfect test for how well the company is run, and the CEO’s seriousness, consistency, and persistence weigh in most.

Whether it looses momentum or persists depends 90% or more on the action by the CEO. If the CEO is the kind of leader who finishes what they started no matter what, the employees will behave the same way. If the CEO does not follow-up on progress, the employee will appear to play along only when necessary. If the CEO is easily swayed, the subordinates will never come through by themselves.

Weekly Progress Review Meeting to Manage Progress

After the kick-off meeting, conduct a weekly progress review meeting. For management innovation to make progress, management ranks on the ground must change all their daily routine. Otherwise, nothing will change. This is why weekly reviews are necessary to share what action plans have progressed to what extent by everyone involved and generate positive pure pressure.

There will always be know-it-all critics across management ranks that will insist that, “We are all grown-ups and we should be self-motivated to get things done. Progress reviews show distrust of employees and they are waste of time.” CEOs cannot be bothered by such opinions. If they are really grown-ups and self-motivated to get things done, they would not be in this difficult situation. Weekly meetings should be done in 30 minutes without mishaps. There should be little wasted time and no reason not to have one.

It is more easily said than done, and it’s common to see only partial progress in the beginning. Organizations have inertia and there are unfinished jobs, so agile change of direction is not so easy.

Therefore, its inevitable from week one to for all execution leaders to share what problem they encountered, how they dealt with it, and resolved issue as they come up. The executive office of management innovation must closely communicate with the CEO—this is continuous dedicated effort and there is no grandstanding.

Strictly Monitor Progress Weekly while Acting on Organizational Challenges

In addition to the weekly, there are monthly reviews where progress from kick-off is reviewed and problems resolved. Without onslaught of checks and confirmations, the action plan will quickly be watered down and undercut. It is not that someone is trying to sabotage the effort, but little by little, the initial commitments can be withdrawn. If everyone is short in progress, there is safety in numbers.

Looking at progress in longer timeframe sheds light on organizational challenges and this is the reason for having monthly review in addition to the weekly. Challenges areas may be: raising the direct sales force skill levels to shift away from dependence on distributors; human resources; or organization cultural issues like speed and customer orientation. As they become apparent, device new action plans as required to prevent it from being bottlenecks in the process.

Success Hinges on the CEO’s Ability to Push Management Team to the Limit

Fundamental reform of existing business hinges on CEO’s ability to push to the limit the management team wallowed in history of successes. Regardless of the CEO’s marching orders, they may be saying, “That’s what the CEO says, but what we have been doing is right. Give it a while and the CEO will be off to something else.” The CEO should consider it the rule rather than the exception that something like this is repeated behind the scenes and it undermines and delays management innovation. This type of sabotage happens and it may be ill intended, or it may be from good intentions to protect the company.

With the understanding that this is the nature of organizations and people’s feelings, the CEO must persuade, support, follow, and push to the limit everyone in his management team, one by one. This is decisive for the success of management innovation.

 
For any suggestions or questions, please feel free to send me a mail to info@b-t-partners.com. I will get back to you right away.
Linkedin: http://www.linkedin.com/in/yujiakaba

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▼ 7keys to accelerate Management Innovation
The Seven Keys to Accelerate Management Innovation
Need to Unlock Seven Keys to Start and Accelerate Management Innovation
The First Key:Change Vision and Strategy, and Let Everybody Know
The Second Key:Rapid Improvement of Existing Businesses
The Third Key:Developing Multiple New Businesses
The Fourth Key:Management Innovation Team
The Fifth Key:Human Resource Development Committee
The Sixth Key:Innovation in Boss-subordinate Relationship
The Seventh Key:Positive Feedback and Active Listening