Trindent Consulting

Business Negotiation Success

Negotiation is usually dreaded because of lack of understanding.

Negotiation Overview

Negotiation is a part of everyday life, but in today’s complex business environment, it is critical to organizational success.  Effective negotiation is a skill often mastered by a few and misunderstood by most employees in any organization.  However, whether or not they realize it, employees at all levels of an organization enter into negotiations on a frequent basis.  Reconciling differences, influencing others, managing conflicts, closing deals, and reaching business agreements are positive ways of structuring the communication process and all fall under the negotiation umbrella.

by Trindent Consulting

Leveraging Technology for Productivity

Technology can be a double-edged sword, if not employed strategically.

Increasing Technology Integration with Business

Technological advances in computer intelligence and memory has allowed for improvements in streamlining and automating tasks while increasing the output volumes and accuracy levels in all types of business environments. Technology has come to play a vital role in the operation of all organizations, particularly in Financial Services.  However, along with the increased use of technology there are also a variety of risks that needs to be scrutinized.  By planning ahead to develop the best possible solution to mitigate technology risks, the company will increase competitiveness, productivity, efficiency and save costs in the long run.

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Private Equity Turnarounds

This article discusses the proven turnaround strategies that leading Private Equity firms use to turn around businesses.  PE funds are sticking with their winning formula for generating big returns from dramatic improvements in operations. The results speak for themselves: The top 25% of North American funds raised from 1987 and 2006 have earned internal rates of return above 20%, through good and bad markets. Upper quartile overseas funds have performed even better. Private Equity masters follow six disciplines that any senior executive can employ for similar results.

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The Challenges of Standardization

Standardization is an important concept in lean methodology. It is the concept that everyone who processes the same thing should do it in the same best way. This helps to reduce variability in quality and process time. This is especially important in an operating environment where variability is frowned upon. As such, many organizations come up with numerous tools such as process maps, step maps, standard operating procedures (SOPs) and other such documents to outline how something should be done. Furthermore, some come up with standardized templates that employees should use during the process. Up until this point, organizations seem to be doing all the right things to ensure process standardization. So, why is it that the following things are so commonly observed?

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Project Management

Today businesses manage projects within increasingly complex environments driven by changing customer/business needs and organisational restructuring. New product development, post M&A integration, outsourcing and policy changes, system development and implementation, are amongst the key project initiatives organisations must manage.

In our current fiercely competitive and ever changing business world it’s impossible to imagine an organisation that is not engaged in some type of project activity.

The incidence and cost of failure is high. How can we ensure we manage projects to successful implementation?

What Is Project Management?

“Project management is the discipline of planning, organizing, motivating, and controlling resources to achieve specific goals.” Wikipedia

“Project management, is the application of knowledge, skills and techniques to execute projects effectively and efficiently. It’s a strategic competency for organizations, enabling them to tie project results to business goals — and thus, better compete in their markets.” Project management Institute

Project Management is a simple concept to; analyze a problem define a solution, identify the cost and secure funding, make a project plan, assign resources, track the project against the plan.

The concept of project management seems simple enough, however the rate and cost of failure is incredibly high.

The High Cost of Failure.

A study by PricewaterhouseCoopers (PWC), which reviewed 10,640 projects from 200 companies across 30 countries, found that 97.5% the companies did not successfully completed 100% of their projects. A study published in the Harvard Business Review, which analyzed 1,471 IT projects, found that the average overrun was 27%, but one in six projects had a cost overrun of 200% on average and a schedule overrun of almost 70%. And we all have heard about large construction projects — the Channel Tunnel, Euro Disney, and Boston’s “Big Dig” — that ended up costing almost double their original estimate.

The cost of failure for these large infrastructure projects often comes down to time and money, however there are other costs that are far harder to quantify;

The seven deaths resulting from the Columbia Shuttle disaster have been attributed to organizational problems, including a weakened safety culture at NASA.

The failure of the FBI’s Virtual Case File software application cost U.S. taxpayers $100 million and left the FBI with an antiquated system that jeopardizes its counterterrorism efforts.

When it comes to change management projects the cost of failure although hard to quantify flows into all facets of the business. A failed project can significantly impact; the business culture, the talent pool as dissatisfied employees leave or simply lose faith in the business, the customer base as employee morale overflows into the service of our customers.

Ensuring Success Isn’t Easy.

There is plenty of information out there regarding projects that fail, identifying a set of criteria for success is a lot harder than it may seem.
The major certifications like PMBOK and PRINCE highlight the main skills required in project management. They provide framework and guidelines across both process steps and knowledge pools:

Process Steps: Project Start Up, Planning, Execution/Directing, Control, and Closing.

Skills: Integration, Scope Management, Time Management, Cost Control, Quality Control, HR Management, Communications Management, Risk Management, and Management of Stakeholders.

These skills are essential for a successful implementation, however as we saw earlier even with all the advancement in Project Management techniques and knowledge there are still significant project failures.

Gartner’s study found that the length and complexity of a project significantly increases it’s risk. They found that IT projects over $1m are 50% more likely to fail.

Other success factors include; tight budget control, ensuring schedules are realistic, and regular project status reviews.

PWC have in their comprehensive global study identified that Project Management Maturity is a key component of success. Organizations with qualified, experience project management staff, following a mature methodology, and have strong development programmes for project managers are almost 80% more likely to succeed.

One of the main components that is often overlooked in the academic studies of project management is PEOPLE.

We must remember that all projects = change, and often change = fear. Engagement of people affected by the project is crucial for success. (For more on engagement see our previous blog Promoting a Value-Added Culture)

Managing people’s attitudes throughout the change cycle is crucial to success, whether it be the communities’ expectations in a large new shopping complex development, or customers’ expectations during a Merger and Acquisition, or employee expectations through a new system implementation, the successful management of these expectations will make or break a project.

Managing the emotional cycle throughout change.

Set Yourself Up For Success

1. Set a clear success criteria that can be measured in very short intervals (weeks rather than months)
2. Assess your organization’s Project Management Maturity
a. If your organisation does not have a great track record of successful projects of this type find a business partner that does
3. Choose your Project Manager carefully
a. Ensure they are adequately trained and experienced for the type of project you are running. If not supplement with external business partners.
b. Ensure they have adequate soft skills
i. People person / Influencer
ii. Time management
iii. Team player
iv. Conflict management
4. Invest in your PMO – ensure they are adequately skilled and are learning from each project’s successes and failures
5. Plan the people aspect of the project. “People will make it happen”.
a. Who will be impacted
b. Set expectations of all affected
c. Communicate regularly
d. Identify influencers within the impact groups and ensure you bring them on the journey
6. Ensure sponsors have the right skill and authority to push the hard decisions when they do come up. Make sure they are fully engaged.

If you can do all 6 of these things well the execution of your project is much more likely to succeed.

Resources:

PWC Global Project Management Survey – Insights and Trends: Current Programme and Project Management Practices* http://www.pwc.com/us/en/operations-management/publications/pwc-global-project-management-survey.jhtml

PMI PMBOK www.PMI.org

http://thisiswhatgoodlookslike.com/2012/06/10/gartner-survey-shows-why-projects-fail/

http://businessjournal.gallup.com/content/152429/cost-bad-project-management.aspx#1

by Trindent Consulting

Retail Supply Chain Challenges

What is Supply Chain Management?

Supply Chain Management (SCM) is the management of a network of interconnected businesses involved in the provision of product and service packages required by the end customers in a supply chain. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.

Simply put, supply chain management within the retail sector involves the flow of goods from origin (the vendor) to the hands of the end customer.  In a retail setting, this chain consists of 4 critical points; the vendor, the distribution center, the store level, and the end customer.

Supply Chain Management for Retailers

Retail SCM is a complex system; it requires information input and the flow of information between all points of the chain.  It needs to include an understanding of customer needs, store inventory levels, distribution center’s capacities, and vendor requirements.  It is essential that a fine balance exists between all critical points of the supply chain in order to minimize costs, avoid stock outs, and meet ever changing customer demands.  Retail SCM gets complicated further because this understanding needs to be obtained for all the SKU’s in a store (a typical store can carry upwards of thousands of different SKU’s), it needs to be tailored to each individual product in terms of season, business cycle, and other fluctuations, it has to be further refined to each individual store, and most importantly, it needs to be reflective of customer demands.

The Bullwhip Effect

The bullwhip effect comes from ordering and holding too much inventory.  The bullwhip effect happens when there are inconsistencies in demand that get magnified as the information moves backwards in the chain.  The information gets magnified due to incomplete information for each party within the chain, which results in a higher inventory order to respond to all parties’ needs.  Increased inventory levels can result from a variety of sources:

• Increasing unit costs – retailers will order large amounts in order to get a product at a lower cost
• Inflated orders due to expected customer demand
• Vendor requirements – minimum orders or higher lead times can result in a higher than needed order
• Use of Demand Forecasting – optimal inventory levels are maintained due to uncertain customer demand

Managing the Bullwhip Effect

In order to effectively manage the bullwhip effect to minimize the costs associated with holding excess inventory, the following methods should be done:

• Reduce the level of uncertainty – this can be achieved with centralizing demand planning.  The information should be in real time and kept up to date
• Reduce the level of variability – this can be achieved by maintaining consistent pricing so that variability is based on customer demand and not based on promotional sale prices
• Reduce lead times – this can be achieved by using electronic data interchange
• Strategic partnerships – this can result in sharing of crucial information so that inventory is better managed within the supply chain

How are Retailers Dealing with their Supply Chain?

Retailers need to closely scrutinize all facets of their supply chain, but most importantly, retailers need to ensure that their data is integrated and being driven accurately.  This involves ensuring that derived metrics are reflective of actual needs, it needs to address current business processes and practices, and that staff is knowledgeable about available resources and tools.  Actions that can be taken to better manage a supply chain are as follows:

• Collaborative efforts, including planning, forecasting, and replenishment
  • This involves working with independent companies/vendors to jointly plan and execute on the supply chain.  Ideally, this should result in holding lower amounts of inventory throughout the chain, better anticipation of customer demands, and absolute fulfillment of customer demand.
  • Working with an independent company can better a supply chain by reducing lead times, auto replenish points in the supply chain, or a reduction of inventory throughout the chain
  • Buying Optimization
    • This involves maximizing on bulk purchases, lowering administrative costs, and better managing groups of vendors
    • Buying activities, policies, and practices need to be streamlined
    • Integrating Technology
      • There are several tools and technologies that are being introduced to better equip a retailer with visibility into all critical points of the supply chain
      • Data Synchronization
        • Synchronization allows data to be accurate and up to date, and more importantly, it is information that can be shared among a variety of staff and potentially vendors
        • Synchronization allows for reconciliation of purchase orders and invoicing.  If efforts are collaborative, it can also allow for repurchasing
        • Increasing Visibility at all points of the Supply Chain
          • Increased visibility gives the retailer better insight into the supply chain as a whole to identify bottlenecks and other inefficiencies.  Tools and technologies have been introduced so that all the supply chain can be seen as a whole

Conclusion

As retailers become increasingly global, the management of supply chains needs to be closely reviewed and scrutinized.  There is a fine balance of all critical points involved in a supply chain.  That balance is governed by the accuracy of information, the flow of information within the supply chain, and responsiveness to the information.  Mismanagement of supply chains can be costly mistakes, resulting in inaccurate forecasting, lost sale opportunities, bottlenecks in operations, and unmet customer demands.

by Trindent Consulting

Making Human Resources More Resourceful

With the constant stream of lay-offs and unemployment news, now is a perfect time to energize the performance of human resources departments. Whether preparing to downsize, looking to upgrade talent, or preparing for the next upturn in hiring needs, HR departments can work now to be a truly valuable resource to the organization it supports.  Key initiatives may include defining turnover TAKT times, aligning the organization on hiring funnel conversion rates, and setting usable absenteeism planning rates.

Turnover TAKT Time

TAKT time is a tool often used in manufacturing processes whereby a manufacturing unit defines how often a customer demands a product. As an example, if a customer submits an order for 10 units per week, and manufacturing runs five days per week, the TAKT time would be 5/10 = .5 days. That is, manufacturing needs to produce one unit every .5 days to meet average customer demand.

In human resources, TAKT time can be used to predict employee turnover, and therefore allow human resources to more appropriately plan hiring replacements. To define TAKT time for HR, first look at historical needs. Calculate how many hires were needed at a given position over the last year. Then work with the managers to agree upon a growth or contraction rate for the next year. If 25 people were hired last year and 10% growth is expected this year, it is likely safe to assume 28 hires will be needed this year. Divide 52 weeks by 28 hires to define a TAKT time of  around 1.8 weeks per hire.

By defining the TAKT time along with the department management, there is now a clear expectation to work off of, and HR can manage the recruiting process accordingly. Further coordination between HR and the department can be achieved through an aligned hiring funnel.

Hiring Funnel Alignment

Most managers underestimate the quantity of applicants required to fill a position, and often become frustrated with the amount of time required from requisition to hire. Many HR departments are successful in reducing the frustration by aligning the organization on the typical hiring funnel. The activity of evaluating actual funnel conversion ratios can be telling to the HR group itself, but often come as a drastic surprise to departmental line managers. Very commonly, HR groups work off of a general conversion rate, but regularly are surprised at the actual numbers if they are not regularly measured and reviewed. Look back at the last few hires and count the number of applicants, the number of first interviews, the number of 2nd interviews, the number of offers extended, and the number of hires.

Once actual funnel conversion rates are calculated, spread the word throughout the organization to align everyone on the activity required for a hire. This will often generate a more thorough effort to plan hiring ahead of the need, allowing for a more selective approach. Often the most impactful benefit comes from the surprised manager offering a reference or contact that opens a new highly targeted hiring pool previously untapped by human resources.

Vacation and Absenteeism Planning

Another area where HR can act as more than a hiring resource to the departments which they support is in day to day personnel planning of vacation and absenteeism. This is an area where rough estimates are regularly used, but lead to manpower shortages or idle labor whenever the estimate is off.

Human resources can use historical data to identify how many employees on average use vacation or call out sick any given day of the week, week of a month, or month of a year. Then HR can take an active role in building the staff schedule by forecasting absenteeism and reporting the forecast’s accuracy in tandem with the output results of the department.

Human Resources as a Business Partner

With a positive and productive approach to bringing HR into the fold of everyday business management, the skills and strengths can be used beyond the most common hiring and training. With an emphasis on cooperation and planning, business managers can be rid of their regular frustration with human resources.

by Trindent Consulting

Management vs Leadership

Management Vs. Leadership – Working In Sync

Distinction

Although the terms Manager and Leader are often used interchangeably in business settings to describe someone who oversees a function, area, or organization, they have very distinct and separate skill sets that take on different meanings.  Some Managers fail when it comes to leading, while some Leaders fail when it comes to managing.

Management Characteristics

In most organizations, a Manager is primarily responsible for a group of employees and their performance.  Managers are given their authority based on their role and ensure necessary work gets done, oversee day to day tasks, and manage their subordinates’ activities.  Given the nature of their role and authority, Managers are often more directive, controlling, and tactical in an effort to organize their employees to accomplish tasks and complete deliverables.

Leadership Characteristics

Leaders are often more strategic in their approach and rather than directing and controlling, they place special emphasis on motivating and inspiring employees to drive for exceptional performance.  Leaders have outstanding soft skills and are able to empower, energize, coach, and create enthusiastic work environments to get the best out of their employees.  Good leadership skills are behavioral in nature and subsequently much more difficult to learn than management skills.  Additionally, Leaders, unlike Managers, promote and concentrate on idea generation and change.  Employees represent the ideal opportunity to generate and implement change for continuous improvement and Leaders utilize them to achieve this.

Management & Leadership – Working In Sync

A commonly used phrase, ‘Managers are people who do things right and leaders are people who do the right thing’ shows the dependence each have on one another for a boss to be fully rounded.  It is imperative to deliver results and complete the day to day activities while inspiring employees and understanding the big picture.  Being a good Manager while failing to motivate, inspire, and drive employees will result in problems obtaining desired results.  Similarly, being an effective Leader without the management skills to support it will result in ideas and results not materializing.

Leadership and Management roles, when utilized in balance, can create synergies that result in optimal employee engagement and business results.  A well rounded and effective Leader and Manager can draw on each skill set in varying work environments or situations to achieve their desired results.

Every organization structures its goals and corporate agendas in anticipation of changes in the economy, industry, or competitive environment.  When an organization achieves these goals, Managers and employees continue sustaining the current system with little emphasis on change.  However, as consumer preferences change, industries evolve, and economies shift on a continuous basis, it is important for every organization’s Leaders to constantly challenge the status quo and current system in an effort to remain ahead of the competition.

Conclusion

Management and Leadership both play integral roles into the success of an organization and directly impact its ability to remain competitive.  Managing employees on a daily basis and ensuring necessary work and deliverables are completed on time are critical to an organizations day to day operations.  Leading and motivating employees for exceptional performance while cultivating an environment that promotes continuous improvement and idea generation will ensure organizations stay in tune with changes in the competitive landscape.  Utilizing both skills sets will create synergies across the function, area, or organization that will play a critical role in the organizations continued success.

by Trindent Consulting

Linking Executive Performance & Pay

Compensation based on the short term, rear-view mirror is getting outdated.

Executive Performance Overview

Many organizations have tried and failed in their attempt to close the gap between Executive performance and compensation.  In most organizations, Executives’ greatest concerns are top line growth and profitability as these are directly linked to overall compensation packages.  Although shareholders tend to look favorably on these factors as share prices appreciate, this type of compensation package promotes negative short term behavior often resulting in questionable activities or long term organizational capability destruction.  Therefore, it is extremely important to ensure the correct indicators are being measured to accurately reflect the overall value of the organization and performance of the Executives.

Executive Performance – KPI’s & Compensation

Key performance indicators play a crucial role in ensuring a business is strategically aligned with the business goals and achieving desired results.  However, most organizations evaluate Executive performance based heavily on financial key performance indicators such as EBITDA, gross profit, and net income and fail to capture other, but equally important non-financial related aspects of the business.

Many organizations utilize lagging financial indicators such as profit and revenue growth while failing to incorporate forward looking leading indicators into Executive performance evaluation.  Although lagging indicators are a very important aspect of any business and show an Executive’s recent performance, they alone show past results and fail to capture what is required to improve or sustain desired goals & results.  Therefore, it is equally important to include leading KPI indicators to ensure Executives are successfully managing the day to day operations of the business while simultaneously focusing on both future long term growth initiatives and profitability.  To achieve this, indicators must address all areas of the business including financial, customer, internal business processes, and learning and growth to ensure the enterprise if performing in all areas and is strategically positioned for long term sustainably growth.

Executive compensation packages that include reasonable incentives for short term performance and higher incentives for long term performance and sustainable growth truly manifest the characteristics required to promote positive behavior and represent the greatest value creation for shareholders.

Performance should be evaluated on achieving financial and non-financial objectives to ensure all facets of the business are performing.  Other factors, such as retention, cost reduction and control, overall productivity, and strategic alignment with corporate goals are important characteristics that also need to be considered.

With stock options representing the fastest growing segment and accounting for over half of Executive compensation at some of the world’s largest companies, it is imperative that corporate boards of directors determine the most important indicator’s and levels of performance on which to evaluate, rather than following traditional, or outdated models.

Otherwise, any increase in the company’s stock price represents positive performance and rewards the Executive (option owner) without distinguishing between positive or negative performance.

Conclusions

Although Executive performance and compensation are areas that will continue to evolve and be the center of great debate, corporate boards who are able install meaningful key performance indicators, structure Executive compensation to promote long term strategic thinking, and reward above average market performance will create lasting value for shareholders.

by Trindent Consulting