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Question: How can our organization either sustain change initiatives, or avoid wasteful spending?
I am the controller of a mid-sized, very high-energy professional service organization. My boss, the CFO and I have both spent considerable time in this well respected company which gives a lot of flexibility to its leaders. Though our company is very innovative, I do feel that we waste a lot of money in half-baked initiatives.
Typically, one of our executives champions an idea early on. Then, as the idea reaches a stage where other departments need to get involved, it either loses steam or the original champion moves on to the "next big thing." The end result is we have too many useless software packages, too many vendors and too much confusion.
How can I (finance department) moderate such behavior to focus our energy and investment dollars?
Too many companies, including I suspect yours, focus their energies on how to do things, whether it is the latest software package, managerial trend, vendor, etc. Being in finance as you are, I think you are really well positioned to help the company refocus to what it needs to accomplish. This is the essence of what I have been doing with over 350 companies in the past 20 years. Often referred to as open book management, this common sense approach to management revolves around making the economics of the business clear to everyone, aligning interest through team based incentives and letting the team figure out how best to drive results. The more successful they are, the higher their incentive pay and the more money the company makes.
I have seen this work with small to medium sized privately held companies, to very large publically traded companies, such as Southwest Airlines, Capital One and BHP Billiton.. The difference with larger companies is that you need to break the company down into all the smaller companies that make it up to apply this managerial discipline. Over the past 20 years, I have simply refined my coaching based on what repeatedly works. If you would like to discuss this or get an overview / case study, feel free to contact me. I hope my comments were helpful...
Before making a suggestion I feel compelled to point out that innovation is always a very risky venture. A key element of the innovation process is to have a process in place to examine the failures and harvest the lessons that are there for those who look.
Finance folks always have a hard time influencing the strategy of innovation. The phrase you have undoubtedly heard is, "You finance guys are the score keepers, just keep to that."
Approach this problem from your natural strength - the numbers. Do a global analysis that shows what all of this product proliferation is costing: engineering resources consumed; customer service overhead; vendor management; confusion in marketing and sales, and so on. I bet that if you talk with the heads of these departments you can add more data from each of those perspectives to enrich the story. Others in the company see the same things you see.
Do you have an innovation (product) strategy? Do you have a robust project management process that provides useful data about the time, energies, and financial resources consumed by the various projects? Is there an innovation (product development) budget in place? Is this budget reviewed regularly? Is there an end of life strategy built into the product development? Do you have a supply chain (vendor) strategy. If the answer to some or all of these is no, you have a place to begin to work.
Besides the challenge of the politics of the situation is the built in notion that anything that constrains innovation, slows development down, is bad for the company. Many think of strategy and structured processes as the land of fat cat management consultants and bureaucracy. Deal with this up front by learning something of lean product development or other techniques used that provide structure, multi-functional involvement and simplicity.
I understand your frustration - spending money needlessly isn't a good thing. Sounds to me as though the process for approving and owning projects is broken.
Let's face it - given two choices - operations normal or change, what is going to win out? The ops normal. This is what keeps the lights on, what people are evaluated against, etc. To make a change happen (and this is change management 101), there needs to be a dedicated team to make this happen. Some basic questions must be answered?
Is the project THOROUGHLY vetted through a process that both requires justification (operational necessity and finances), and alignment with the strategic goals of the organization? Does the approval process require all impacted departments to sign off on it? Do you have a program office that takes ownership for a project and sets the priority as well as coordinates across departments? Is a project manager assigned with adequate resources to ensure its success? These are just a few of the questions that must be asked and answered to ensure success in projects.
the Project Management Institute says that 80% of project fail because of lack of planning. The above questions are just some of what must be answered before a project is given a green light.
Yes, there are going to be projects that fail - that is part of innovation - but if they are properly researched and owned by an executive (who will be held accountable for results), you give them a much better chance at being successful.
Reading "between the lines," I suspect that the organization may not actually be all that innovative, but rather, undisciplined without a clear sense of purpose and principles upon which to make good decisions that everyone can align and engage with.
IMO, the 80% project failure rather, isn't caused by a lack of planning, but a lack of deep foundational principles upon which culture, innovation, decision making, and plans of action stand. Discipline is about adherence to principles and those principles are much more than just profit -- they are about value generation in all it's forms and for all stakeholders.
There is a story about SW Airlines (not sure how true it is) that helps illustrate the point. SW airlines has a 'guiding question' that EVERY employee is taught that goes something like - How will this idea/choice/action help SW Airlines be 'the low-fare airline that people love to fly'?" If an idea or action can't be defended in this context, that's the end of it. The question turns a simple "guiding principle' into an action-value inquiry. Everyone, top to bottom, is held to account for their choices and actions against this simple question/principle.
What's your organization's, guiding principle?
Being the controller of a for-profit company, you and the CFO are in a unique position to help drive a more disciplined approach. Get the CEO on-board by showing him/her how the much the current situation is costing the organization both directly (profits) and indirectly (culture, engagement, lost productivity, etc.) and how little real value is being created by the current circumstances. Then explain how, establishing a clear set of core principles and guiding questions can help focus and foster good decision-making, innovation, teamwork, and cost-effectiveness.
All of the previous answers are spot on for me...I would add some questions and two observations. The observations first.
1. "Behavior that is perpetuated is the behavior that's being rewarded. " And so from that frame, somewhere in your company, everything that is going on, in a repetitive pattern and broad spectrum is either unconsciously or consciously being rewarded.
2. "Creativity/innovation happens best when there are structural constraints" Creative people don't like to acknowledge the truth of this but consider it this way....A painter, no matter how creative they want to be is supported by the constraints of the materials they use. If it's canvas, it has limits, if it's oils, they are bound by what oils can and can't do, watercolors won't do what oils do etc.
Which brings up some questions:
A. What is the consequence for a 'failed project'? (by failed, I mean one that is ill conceived or one that is simply not followed through)
B. What conversation is not happening with the initiators of the projects that needs to happen? (i.e. 'we're losing money hand over fist on projects that get green lit and then stalled or lose sponsorship')
C. What has some team members working just to satisfy themselves vs see the big picture of how their contribution impacts the overall team (read company) results?
Lastly, how about posing this problem to your 'innovators' to solve, and let them come up with the system to make it happen. then it will be a better fit than one you impose on them that they may resist. When they come up with their own solutions they are much more likely to follow self imposed constraints than other imposed constraints.
To address the issue you raised, argue for a more rigorous “front end” of the process to ensure there is a clear vision of the future (successful change is all about shifting the energy of people to a different way of thinking, doing, and working).
Next, require that each new initiative has a strong business case; requiring a strong case for change is essential, complete with expected outcomes, benefits, ROI, etc.
Then make sure the plan is to get people involved early in the process; it helps provide greater ownership and commitment for the change (especially key when executive support may diminish over time).
Last, since it is all about leadership demonstrating commitment to the change and engaging the hearts and minds of the people, consider a placing greater expectations on executive champions through implementation and transition as well as linking this work to their performance and compensation.
It sounds like your organization doesn't have a compelling purpose or a strategic plan for its accomplishment. By purpose, I mean, the difference in the world that the organization was created to make. It's mission is then how it will contribute to the accomplishment of this purpose. Then cultural values (guidelines on behavior seen as required to accomplish the Mission), Strategic Goals, strategies, and milestones are needed to produce a Strategic Plan. Done this way, a strategic plan generally covers decades and is used as a decision tool for what initiatives and innovations would be useful and adopted, and which should not even be started.
An initiative must be consistent with the strategic plan, and owned by and supported by the entire workforce (not just a bright idea of management). Then, various tools like displays and periodic reporting (like quarterly) to the workforce on progress keeps the good ones alive.
I have dealt with this issue many times in my professional and consulting career. I facilitated a 2 day session for a large company with the most recent re-surfacing of a similar problem. That company had a gated approval process that had several go / no-go points that an executive committee would use to manage the pipeline of "pet projects" that were mostly initiated by other executives. Their problem was that they did not follow their process and their process was not robust anyhow and easily circumvented. I helped them to make it more robust.
It sounds like you do not have any formal project pipeline approval process in place that is monitored by an executive approval committee. Your company appears to be a great and empowered place to work but you have described the chaos and negative financials inherent to such a culture. Gated product and project pipeline management systems have been around for a long time. That type of disciplined system with a peer-review process could help you to manage unwanted efforts, supplier proliferation and expenses.
What gets measured gets managed so here is a brief checklist for completion of initiatives:
1. establish performance metrics for the entire planned "life time" of implementation
2. have a clear project implementation timeline with key progress points; for each progress point make sure the appropriate people have those progress points reflected in their individual performance goals and rewards
3. depending upon the scope of the initiative have regular progress reports and discussions with the proper level of management
4. for each initiative there should be a senior level in-house champion who has sufficient influence and leverage to remove barriers and sustain momentum; that person should have the successful implementation of the initiative incorporated into his/her performance and rewards
5. in the early stages of planning the implementation, engage people in creating a visual that shows the internal and external factors that exist which will: 1) support success; 2) are or could become potential barriers to success; for the 2nd group of factors, agree on how those factors will be managed, who is responsible for managing and ARE YOU WILLING TO ADDRESS THOSE FACTORS because if you aren't, you probably shouldn't undertake the initiative in the first place.