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Insight

Will Your Acquisition Deliver the Growth You Need?

By Adriano Allegrini

Mergers and acquisitions are central to most companies’ growth agendas. And while a sub-par acquisition will still deliver growth, it will likely not be profitable growth: more than 50%  (Forbes) and up to 90%  (HBR) of all mergers and acquisitions fail to perform as planned. This either destroys value or yields less value than originally planned. 

All mergers and acquisitions are formally or informally priced based on a set of assumptions: revenue growth, margins, etc., usually codified into a 5-year P&L acquisition model, and measured by either Internal Rate of Return or Net Present Value. When a transaction fails to generate its expected value, it points to the possibility management (and the Board) has made the wrong decision. At some point during the M&A process this project was chosen over other capital allocation options based on the set of assumptions that has just been proven wrong.

The reasons why so many M&A deals fail to achieve their profitable growth potential can be divided in 3 recognizable groups:

1 – Target Specific Reasons: “Now we need to grow into the valuation.”

Either the acquired company failed to grow as planned or did not achieve the expected margins. These can be driven by reasons such as:

  • Competitors take advantage of the disruption created by the transaction to capture clients / market share
  • Acquiring company ends up generating additional financial burden through “big company programs” that can be onerous to the P&L of the target (sometimes called “reverse synergies”).
  • Too little investment in the months leading to the transaction, creating a dry pipeline. This is relatively common and difficult to fully capture in due diligence.
  • Talent: either the management team is weak or will not adapt to working under the culture of the acquirer. Not hiring or slow hiring for key positions is also common.
  • Management distraction: slow new product / client development, some managers disengage due to “life-changing” bonuses and cultural shock
  • Integration leadership often is assigned to the person who leads the deal. While this may make sense in theory as “they know the deal and the players best”, corporate development or the CFO usually lack the operational knowledge to conduct an effective integration without losing track of their core responsibilities. Smart companies create integration teams and dedicate someone with an operations background to lead them.

2 – Segment or Secular Reasons: “We did not see this one coming.”

Sometimes the growth shortfall is driven by external circumstances:

  • A major economic event happens: it is rare to see an acquisition model with built-in accommodations for a potential recession. However, recessions happen about once a decade. If the business is cyclical, there is a significant likelihood that a recession will happen during the planning horizon, testing the target’s resiliency. While most advisors would not advocate building a recession into the acquisition model, trying to understand how the target performed during the last recession should be a key part of the diligence effort.
  • Some systemic or secular risk comes to play. If one invested in for-profit education or coal mining in 2009-10 it is very likely that the transaction did not perform as planned. This happened regardless of how conservative the acquisition models were, as these sectors underperformed any reasonable projection available at the time.
  • The market projection is just too optimistic and the target growth rate starts to decline sooner than predicted, heading to maturity. This is relatively common in high-growth markets, early stage businesses, and developing countries. It is common for these valuations to build in expectations of significant growth for a long period of time. There are plenty of pitch books for $10M operations forecasting to reach $200M in 5-7 years. Some will. Most will not.

3 – Inability to Capture Synergies: “We can’t really cut that, boss.”

Cost synergies are relatively easy to predict, identify and capture at a high level. For these reasons, there are many acquisition models heavily anchored on cost synergies. Unfortunately, achieving goals tracked at a high-level may become much more complicated during the post-merger phase, when new information becomes available and it is necessary to dive into details and implementation plans.

Failure to reach the synergies target tends to happen due to either loss of focus during the integration process or due to shortcomings in the due diligence process: the assumption that the acquirer will be able to eliminate parts of the acquired company structure and execute them centrally at a lower cost may not always be reasonable or feasible.

Also, it is common to see cost synergies captured in the immediate aftermath of the transaction followed by selling or administrative expenses creeping back up in the following years. This highlights the importance of tracking acquisition performance for several years after the acquisition.

On the other hand, revenue synergies are trickier to capture from the very beginning. These are built under assumptions like:

  • Accessing the target’s sales channels / customers / resources the acquiring company will be able to sell more of its current portfolio
  • Adding the target’s products to the current portfolio will increase its penetration / sales / market share
  • Accessing the acquirer’s resources (e.g.: capital, sales force, marketing, R&D) will remove barriers for growth in the acquired organization
  • New or unproven products will generate additional revenues

Revenue synergies are usually a contentious area during the negotiation. The acquirer is cautious about its ability to capture them, the target is aggressive in their growth assumptions. On the other hand, revenue synergies are very tempting. The acquirer wants to believe they can be achieved, as they can be source of profitable growth.

This is normally a difficult (or impossible) gap to bridge, making revenue synergies one of the leading reasons why transactions are structured with earn-outs or performance clauses. A performance clause can be described as acquirer and target “agreeing to disagree.”

How can the risk in executing an M&A program be mitigated?

Don’t be daunted! Even with all these risks, M&A tends to be a very important tool in a CEO’s toolkit to deliver on growth expectations, rapidly acquire new capabilities, or penetrate new markets. A

n approach for mitigating the risks in M&A is to ask yourself questions around three areas: Corporate Strategy, the M&A Process itself, and the Tools and Structure needed to source, negotiate, and integrate an acquisition. These questions will help you diagnose where your organization is regarding M&A readiness and take the corrective actions before a major transaction fails on your watch.

1 – Is the Corporate Strategy well defined and understood?

Corporate strategy must be well understood in multiple fronts:

  • Capital: What are the capital allocation priorities? What is the desired capital structure? How much capital is available to invest in M&A (vs. organic growth or direct return to shareholders)?
  • Risk Profile: making an honest assessment of the organization’s appetite for risk will help define how far out of the comfort zone you can venture, balance the appetite for small vs. large acquisitions, and if a transformational merger / acquisition should be considered or not.
  • Role of M&A: What role M&A plays in your organization? Typical roles include: Life cycle management (need to replace declining products); geographic expansion (need access to new geographies); or diversification (need to diversify into adjacencies due to identified weakness in the core business).
  • Talent: Is there an M&A team in place? Are there relationships with external advisors (consultants and bankers)? Do you have the team in place to prospect potential deals and build relationships with owners? Is your team ready to project-manage an acquisition process? Can they handle multiple processes concurrently? Is the investment committee in place and with a clearly-defined charter? Is the team ready to perform a successful integration?
  • Culture: Is there a clear understanding of the corporate culture and a good assessment of how the target culture will fit?

2 – Is there a well-defined M&A process?

A well-defined M&A process should include:

  • A clearly defined “deal flowchart”: a process with clear “go / no-go” gates where the decisions are incremental and aim to minimize “bad” M&A spend. It is all about aborting processes early, before too much time and and too many resources have been invested.
  • A clear process to charter, select and deploy diligence teams. These are usually exciting activities but are also added workload, high pressure and tight timelines. Ideally, people selected need to be able to dedicate a good part of their time for the diligence program.
  • A process to communicate with multiple workstreams during diligence and integration. The M&A team usually plays a project management role here.
  • The knowledge to execute or the resources to outsource initial market scans and target selection
  • A process and systems to manage, fill, and refill the deal pipeline

3 – Are there good tools and structure in place?

They simplify decision-making and ensure that the focus on the strategic objectives is never lost

  • The initial diligence leads to the initial acquisition model. Usually built with imperfect information, it will lead to the first key gate of the acquisition process, a “go / on-go” decision on pursuing the target: “should we invest the capital and bandwidth to pursue this target further?” Investing the right amount of time, talent, and capital in this phase of the process is critical: too little and you will either pass on good opportunities or worse, spend a lot of time and capital pursuing an acquisition you will give up later in the process.
  • A well-established and chartered investment committee is the forum for all key decisions during the M&A process. It needs to meet regularly to discuss ongoing transactions, enabling the team on the front line to move forward in the diligence / negotiation.
  • If M&A is an integral part of your corporate strategy, a strong target scoring tool can help focus the discussions in the investment committee. A scoring tool helps steer the investment committee into the data on the target and prevents the conversation from becoming unfocused or emotional.

Conclusion

Just because most mergers and acquisitions don’t deliver on their potential, doesn’t mean that yours shouldn’t. By understanding the three core reasons transactions fail and ensuring that corporate strategy is well-understood, tools and structures are in place and key processes are well-defined, you’ll be well on the road to success.

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Why Lateral Hiring Often Fails (and Why Yours Doesn’t Have To)

Lateral Hiring That Truly Drives Growth: Four Critical Building Blocks 

By Mark Masson

Lateral hiring, in concept, is a key driver of a profitable growth strategy – yet, in practice, it fails more often than it succeeds, costing firms and the industry billions every year.  Firms have revolutionized how they approach client growth – most notably by leveraging advanced analytics to mine the massive amount of data available on client needs and buying proclivities.

But stunningly, despite the lateral hiring failure rate that plagues professional services firms, most firms have followed the same general approach for decades: search firm engaged, a dozen partner interviews to test that the candidate is “one of us,” and leaders trying to validate if a self-touted book of business is real.  Some firms have evolved the process over time (e.g., adding a leadership role in charge of lateral partner hiring), but none appear to have the disciplined and comprehensive approach that decisions of this magnitude require.

It’s clear that firm leaders need to think differently to maximize the potential of lateral hiring and turn it into a successful part of a profitable growth agenda.  Though law firms suffer most given the inability to legally enforce non-competes, accounting, consulting and other firms struggle mightily as well.  As a provocative example, let’s consider the legal industry:

                   1,000    laterals per year (note there are well over 2,000 annually in the top 200)
                     46%    failure rate [1]
              $1,160 k    average annual partner compensation [2]
                   300%    typical cost of attrition [3]
        = $1.6 billion  potential annual cost associated with failed lateral hires

And this doesn’t even include the hidden costs such as increased cost of defending malpractice that is elevated with lateral hiring[4]. With results like this, you might reasonably think “Why bother?”  While ideally a firm disproportionately hires at junior levels and develops a significant percentage into productive and accretive partners, it just isn’t possible to get this right all of the time.  There are also situational reasons why a lateral strategy is important, namely:

  • Entering a new market without an option to acquire or merge in a firm or office
  • Entering a new industry or practice area when developing depth would take too long and put a firm at risk for lagging in the market opportunity
  • Shoring up a practice, industry or office after unexpected attrition

Even when lateral partner hiring is approached for these reasons, and not just to add “star power,” creating a successful lateral growth platform requires the strength of four critical building blocks.

1.  Align your lateral program directly with firm strategy
Obvious, right?  Perhaps, but the opportunity to hire big names, especially from a close competitor, is tempting, even if the link to your strategy is weak or nonexistent.  Consider a strategy focused on two prominent private sector industries and deep technical expertise in several areas.  Suddenly, a well-known federal government official with a completely different set of capabilities calls to say she’s interested in joining the firm.  The scenario is all too common and becomes a high-stakes chase that often ends without bettering anyone involved.  Not reconciling your lateral hiring activities with your strategy, jeopardizes the entire value of pursuing laterals at all – and therefore this must be where the process starts.

To ensure a strong link with strategy, it is important to build a type of alignment “check” into the process for every potential candidate. A dispassionate and credible partner should lead the vetting by seeking answers to such questions as: 

What strategic objective would we accomplish if this hire were successful?  What options are we foregoing by investing resources in making them successful?  Are there other ways we can achieve the same outcome without the cost and risk of a lateral hire (e.g., developing current talent, implementing a strategic client initiative)? 

What’s more, such questions should be considered very early in the process – doing so late risks biased thinking as supportive voices have put their credibility on the line and naturally will seek to confirm their perspectives.

2. Leverage analytics to predict successes and failures
Assuming a candidate’s capabilities, experiences and interest are strongly aligned with the stated strategy, much can be learned from a broader data set.  What characteristics form the profile of lateral hire successes and failures at your firm?

  • Undergrad and law schools attended?
  • Previous firms worked for?
  • Come in on their own or as a group with team members?
  • Practice areas and specialties?
  • Match of leverage model in current firm relative to yours?

There are hundreds of potential variables that can form a fact base which advanced analytics (e.g., predictive algorithms) can translate to insights to predict which laterals are more likely to succeed and even where to find the next ones, dramatically improving your success rate. (And, by the way, a large, portable book of business doesn’t need to be one of them.)  Yet, despite the tremendous potential upside, seemingly no one is using data and analytics like this to help solve the lateral hiring equation.  They certainly should be.

3. Evaluate four critical areas for every candidate (and do it efficiently)
Despite the power of predictive analytics, there will be parts of the picture where data is incomplete or nonexistent.  If you want a complete picture of a potential lateral hire, you’ll need to leverage a streamlined process where every interview peels back a layer of understanding in four areas – General athleticism, client relationship development, developing others, and alignment of firm and candidate interests.  Unstructured interviews are highly biased and often point to the wrong candidates (evidenced by the low lateral hiring success rate).  Interviews need to be structured around specific areas and competencies, and complement and build on one another.  The interviews themselves won’t be enough though.  You will be much more successful if you pair the interviews with an effective assessment tool.  The right unbiased assessment can highlight proclivities in new environments and challenging situations much better than traditional interviews and can add significantly to understanding a candidate’s “general athleticism.” 

General athleticism:  A candidate’s book of business will likely be meaningfully less once they join. Clients can love individual lawyers, consultants and accountants, only to hesitate at the moment of truth when considering the challenge of dealing with the bureaucracy of a new firm.  It is helpful to know if a candidate is entrepreneurial, has the ability to be insightful and think on their feet in front of a client, and can commercialize new relationships effectively.  Assessments can better identify these characteristics and prepare you to probe even further in interviews and reference checking, lessening the burden on verifying the touted book of business.

Client delivery and business development relationship building:  Traditional vetting of technical skills and a business generation track record should still be a focus, yet with a twist.  Rather than look to vet sales numbers and revenue crediting (which is self-professed and impossible to fully check), vet their client relationship building skills.  Rather than raw revenue numbers, understand how they collaborated with other partners to broaden and deepen client relationships over years.  Find out how the individual went about introducing colleagues, if they involved associates, and whether they were successful in delivering an institutional client relationship.

Ability to develop others:  Isn’t this about the individual’s capabilities?  Yes, but properly leveraging others and the proclivity to do so in service to developing stronger capabilities of their team indicates an ability to focus on highest and best use.  Once a partner, it is more difficult to get someone to change their behavior on leverage and development – doing so with a lateral partner hire is usually near impossible.  Often a candidate who is disinclined toward development attempts to do lower value-added work themselves and focuses inward rather than out to the market often underperforming on business generation expectations.

Alignment of candidate’s – and firm’s – wants:  It is easy to get so focused on whether the candidate is right for your firm that you plain forget to consider whether your firm is right for them.  This is a two-way contract – literally and figuratively.  Everyone loses when there isn’t a realistic preview of the culture, systems and expectations.  Have a direct and open conversation about what a lateral candidate is looking for and be sure you can provide enough of it before bringing them aboard.

4. Onboard with purpose
Too many firms spend significant time, money and effort to hire high-potential laterals only to let them languish for months on end without formal guidance or support.  Some may hold the “trial by fire” method up as the way they learned or the best way to pay your dues, but such an approach makes little sense when so much is at stake and simple actions can lead directly to growth.

Drive accountability for productivity and affiliation through expectations of Partner Sponsors.  This means someone familiar with firm processes, people, and resources has skin in the game and, if nothing more, shortens the timeframe over which a lateral becomes productive.  Six, 12, and 18-month evaluations should be directly linked to the business case the sponsors of the lateral hire put forward, and the sponsors should be evaluated on the individual’s success as well as their own. 

Getting new laterals immediately involved in a client project where they have expertise helps – nothing like learning through doing, and doing so in an area of strength makes it more likely the individual will win deserved respect from colleagues.  Additionally, getting the individual involved in firm-building activities (such as marketing, developing new technical approaches, or firm strategy discussions) speeds integration.  Many argue that new hires wouldn’t have much to add, but the fresh perspective is often critical to such discussions.  More importantly, the lateral connects to another set of colleagues and collaborators on a meaningful endeavor.

Focusing on only one or two of these areas is certain to significantly diminish the benefits and may leave you losing more than you win in the lateral market.  True success (profitable firm growth) comes when every part of the endeavor is linked to executing the stated strategy; data and analytics are thoughtfully leveraged; every candidate is thoroughly considered across the four critical areas.  The work isn’t finished when a hire is made – productive laterals are onboarded with purpose. 

Lateral hiring can be an important part of a firm’s growth agenda, but it must be executed with focus, discipline and stamina, just as any other core part of the strategy.  Getting lateral hiring right is within reach and there’s opportunity to lead the market by thinking differently.

Contact Mark Masson.

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How DLA Piper Used Analytics to Drive Profitable Growth

Even the biggest firms can have trouble retaining and growing revenue from clients. That was the issue facing DLA Piper in 2014. Out of 20 clients that the firm had placed in its key partner program, 18 had revenue to the firm stay flat or decrease over the previous year. And in the firm’s market­ing department, many were at a loss why this decrease was happening, let alone how to reverse it.

The answer they found was in ana­lytics—but not just in looking at the numbers, but rather forming a data action plan focusing on specific (and perhaps unexpected) metrics that the firm found influenced retention rates more than others.

The marketing team, alongside ana­lytics partner Axiom Consulting Partners, revealed the results of this endeavor to a standing-room-only crowd at the “Harnessing Predictive Analytics to Drive Client Growth and Retention” session on Monday at ILTACON.

The idea for the project came from an article Kim Rennick, director of sec­tor marketing at DLA Piper, read in Time magazine. The article explained new and interesting ways Big Data was being used on college campuses, such as utilizing influential metrics to identify students most at risk of drop­ping out, then giving them extra care and tutoring. Rennick saw numerous applications to the law: “You could say that’s client service for the student,” she explained to the conference crowd.

However, firm leadership was not yet on board. Rennick explained that they were “not as excited as we might have wanted” at the proposal from DLA Piper chief marketing officer Barbara Taylor. But the marketing team was allowed to take on the project as skunkworks.

Building the Model

To actually launch the project, DLA Piper undertook a four-step process. The first key step, said David Kuhlman, partner at Axiom Consulting Partners who helped spearhead the initiative for the firm, was to establish the foundation of what the data was looking to solve. “It’s not important to set up a ques­tion at the beginning. You just have to know the direction you’re going,” Kuhlman said.

For DLA Piper, that meant find­ing out more about client retention.

Heather Reid, director of practice mar­keting at DLA Piper, explained that this meant the firm would “single out what we did differently with clients that grew vs. clients that shrunk.”
Second, the team actually had to build a data model, which Kuhlman described as “70 percent of the work.” In this case, that meant combing through four years of data and about seven million records to find the insights the firm wanted.

Third, those analyzing the data needed to examine the relationships between variables and see what made sense. This is because some variables that seem statistically significant can actually have nothing to do with what you want to find out (such as geo­graphic location of clients) or can draw distracting and incorrect conclusions.

Finally, the team would build the predic­tive model with the variables it deemed worthwhile. Here, Kuhlman had two piec­es of advice. The first was to find “the big­gest impact on the least number of things in the least number of places”—in other words, reducing the number of variables so you actually have something action­able to take to firm leadership.

His other piece of advice was to pick a model that works well, but perhaps not best—it’s more important to have something that’s easy to explain and adoptable. “Unless people take action on the result, it’s all useless.”

The DLA Piper Results

Ultimately, the firm settled on four key variables that its data model found directly affected client retention:

• Reducing the size of matter teams to five or less and increasing time per team member proportionally where possible
• Introducing one new professional to the relationship
• Adding one more industry expert to the team (which could coincide with point two)
• Running a focused, relevant mar­keting initiative for each client.

Using the model, Axiom helped DLA Piper identify 1,200 at-risk clients that could be a target for the strategy, which the firm then pruned by considering the partners involved with the client, client size, and industry.

Now, DLA Piper had its list, but it still needed attorney buy-in. The marketing team learned through analyzing past data that focusing on these variables could see a 75 to 80 percent retention increase, but actually convincing part­ners required a lot of legwork.

“This was the signature project of the three of us here [from DLA Piper on the panel],” Taylor explained. We understood how cool it was … and were available at a moment’s notice to give advice when needed.”

The team also set up a teleconfer­ence every other week with partner attorneys to monitor progress and talk about how the variables were being carried out. As Taylor said, “The team got the sense that this wasn’t one and done. We kept at it, hammering away.”

That hammering occurred through successes and failures. The DLA Piper members of the panel all said they were forced to be more flexible than they originally had anticipated, even kicking members of the project team off if they weren’t being accountable. Rennick also adjusted her sales strategy to partners partway through, going from talking about “at-risk” clients to clients “primed to grow.”

In DLA Piper’s case, the project turned out to be a massive success. When comparing a control group to a group focused on improving those key variables, DLA Piper was able to pre­vent 85 percent of fee loss on a year-over-year basis. The actions started to take effect within about six months, and the team found that the more variables that were acted upon, the better reten­tion would be.

That translated into hard dollars for DLA Piper: The firm estimates an increase in revenue of $37.6 million for the firm, given the high-leverage clients involved in the process. That means that not only was this project a massive success, but it’s likely to be expanded in the future—Taylor explained that the firm is now updating its client and inter­nal partner lists and securing increased capacity for the project.

Download a PDF copy of this article.

Authored by Zach Warren as “Inside DLA Piper’s Client Retention Data Analytics Program” and reprinted with permission from the August 17, 2017 edition of LAW.COM © 2017 ALM Media Properties, LLC.  This article appears online only. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com. # 087-08-17-03.

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Why They’re Growing (And Why You’re Not)

 

By Garrett Sheridan

A question on the minds of most organizations today—and an item that continues to be high on their agendas—is deceptively simple: “How do you drive profitable, organic growth?” Why is it that some companies tend to excel at driving growth while others struggle?  What are they doing differently?

To start with, organizations successful at driving and sustaining organic growth do several key things fundamentally better than their competitors.  

They use data to determine the addressable market.
Understanding which products are going to be drivers of growth is critical. But effective organizations also take a very data-driven approach to growth, investing in building a detailed understanding of sales potential for every customer and customer segment, including their existing customer base and prospects.
 
If an organization fails to accurately assess the addressable market, any number of issues can arise that will sidetrack its plans for growth, including a sales force that is too large or, worse still, too small.

They build sales teams aligned with growth targets.
Organizations with impressive track records when it comes to growth know that it is critical to design the sales organization appropriately to deliver on growth strategy and are adept at thinking through the technology and processes (e.g., CRM, or account planning) required to effectively manage the sales process.
 
They excel at determining what “footprint” is required to build the right sales organization to execute the strategy by answering the following questions: 

How many “hunters” are needed to go after new customers?
 
How many “farmers” are needed to manage existing accounts?
 
What number, type and quality of people do we need and where can we get them if they don’t exist in the organization today?
 
How do we get the right metrics in place and the right compensation to drive the behaviors and results that lead to profitable growth?

They avoid the innovation “trap.”
Another thing high-growth companies do better is innovate. A recent Harvard Business Review article explored the four different types of innovation and how they can be successfully deployed to address specific organizational needs, concluding there was no single true route to innovation, and the chosen route must fit the problem or issue being solved.
 
The trap that many companies understandably fall into is assuming that innovation must be of the disruptive or breakthrough type—product overhauls, new operating models, major strategy shifts or a nebulous, “out of the box” solution to shake up the status quo. After all, innovation must be new, bold, groundbreaking and an about-face from everything we have ever done or known, right?
 
Not so fast—you don’t need to change the world just yet. Companies that drive incremental or “sustaining” innovation year over year have figured out that it can be very profitable, especially when it’s customer-driven and grounded in the ability to translate customer needs into products and services that deliver significant value.  To do this, you will need two things: an innovation engine and a disciplined process (as well as a disposition to take a few risks).

So how does this incremental innovation actually work?  Take the example of a large medical supplier with over $100 billion in annual revenues and a services line broad enough to incorporate everything from toothbrushes to large diagnostic equipment used in healthcare. Their innovation charter? To better understand how their customers were using their products and increase user efficiencies.

To do this, they spent considerable time in hospital operating rooms where they quickly sized up how typical surgeries were using their products. To their surprise, it turned out that an average surgical procedure needed upwards of sixty instruments, and nurse practitioners were selecting each one individually, essentially rebuilding the wheel each time they prepared for surgery.

How did they innovate? They bundled the instruments into procedure-appropriate packages, creating a far more efficient process for the nurse practitioner.  While this may seem like an obvious solution, it created a more on-demand, as-needed inventory aligned with customer needs, reducing preparation time for surgery.
 
They understand which business capabilities are priorities.
One frequently seen dynamic in high-growth companies is that while leaders are adept at focusing on the revenue side of the equation, they also spend time thinking through the capabilities required to support growth.  As a company grows, not all areas experience growth the same way. Highly effective companies think through the organizational-level capabilities that differentiate them and are truly critical to execution.

Consider a company like Apple. One could argue that the most valuable capabilities at Apple are product design and marketing.  Consequently, organizations like Apple continue to invest in those capabilities ahead of, and then in support of, growth.

Also, to the earlier point about understanding the needs of customers and innovating around them, Apple managed the neat trick of not only understanding the current needs of customers but anticipating their future needs and, like only a handful of companies, shaping those future customer needs by creating products that addressed needs customers didn’t know they had—opening up a whole new addressable market for the business.

They get rid of walls.
All organizations—without exception—that achieve effective and sustained results have removed formerly existing barriers or silos which were preventing growth.

What happens if you don’t?  Take, for example, Sony, a massive global behemoth that many agreed, during the 2001 launch of Apple’s game-changing iPod, had the requisite capabilities to come up with the next revolutionary music player.

So, why didn’t they? Because those capabilities remained locked, stuck within individual business units across the company and unable to synergize into an innovative, competitive product.

Lesson learned. Sixteen years later, many companies that have similar issues have now implemented growth and innovation “councils” to promote collaboration and help foster cultures that are better able to integrate capabilities and harness technologies across functions and business units.
 
It’s within reach.
Profitable growth is within reach for organizations that effectively integrate their customer needs, market dynamics and capabilities.  Easier said than done, right? Yet by doing many of the same things you may currently be executing, but doing them in a more focused, integrated and customer-centric manner, you too can drive and sustain a growth engine just like your competitors.

Now you can answer the question of how to drive profitable growth—but will you?

Contact Garrett Sheridan.

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Keeping Strategy Execution on Track (Five Measurement Mistakes and How to Avoid Them)

By Donncha Carroll and Sean Williams

While 80% of leaders feel their company is good at crafting strategy, only 44% believe this is true for implementation.  According to Harvard University, a recent survey of more than 400 global CEOs found that executional excellence was the number one challenge facing corporate leaders in Asia, Europe, and the United States, heading a list of some 80 issues. 

Business intelligence (BI) solutions—in particular, dashboards developed using those tools—are often designed to support the execution of strategy. These dashboards provide a means of monitoring internal and external factors that influence success, providing insights on how execution is progressing.  This information is invaluable because it enables the redeployment of resources to maintain focus on the activities and invest in the capabilities that make the biggest difference to results.  These benefits are exactly why according to Gartner, global spending on BI and analytics will approach $18 billion in 2017.  And yet despite all that investment in Business Intelligence, executional excellence is still the top challenge for CEOs.

During the execution phase of any strategy, it’s crucial to provide leadership with visibility to the factors that are driving or influencing success.  Good measurement and reporting can highlight progress on the initiatives that influence results and provide the management team with critical insights that support more agile execution.  Agility is important because it allows the team to more quickly change focus as new information comes to light.  Of course, becoming more agile is not easy because it demands a higher level of comfort with change, and leaders and managers need focused, actionable and fast information to support efforts to make those changes. 

Unfortunately, many companies are getting lost in the complexity of getting their arms around the big data revolution by taking a bottoms-up approach to data management and analysis.  This approach results in data-related initiatives that are too large in scope, take too long, have a higher risk of failure, and deliver a lower ROI.  The leaders that embark on this journey will find that prioritization pays higher dividends and delivers real value on an accelerated timeline.

In our experience, companies with good measurement and execution tie their efforts directly back to the strategy, and focus on the critical few areas where they can identify, understand and react to changes quickly.  Some years ago, Jeff Bezos communicated the Amazon retail strategy to his team by sharing three very simple customer preferences: lower prices, bigger selection, and faster delivery.  Each customer preference can be addressed by pulling on certain organization levers that can be readily measured—and that’s exactly where organizations like Amazon set their priorities for measurement.

 

This diagram, called a “value tree,” can be further developed to the right depending on how deep you want to go (e.g., local inventory on-hand requires warehousing facilities that are close to population centers, which in turn requires the efficient build-out of each facility).  Unfortunately, organizations often start with the data they have or the infrastructure they think they need and not the business problem they’re trying to solve.  In our experience, the five most common mistakes organizations make in building out their measurement infrastructure are:

1. Focus on too much too soon.  Organizations often start by seeking to measure everything that can be measured in order to satisfy all needs.  This introduces unnecessary complexity not only to the project, requiring higher levels of resourcing, but also to the dashboard itself, making it much less useful.

2. Develop the wrong measures. The infrastructure is created from the bottom up instead of starting with the essential needs of the business.  Starting from the bottom almost guarantees that the process will be exploratory rather than strategic, and much less efficient.

3. Allow data quality to overly influence the approach.  Data is never perfect, and few organizations have everything they need to measure with perfect accuracy.  Some analytics leaders use data quality challenges to explain why dashboards don’t effectively support decision-making, or to stop measurement development altogether, rather than seeing an opportunity to identify and address what’s broken in the measurement process.

4. Emphasize technology at the expense of value and impact. Real-time data, embedded analytics and self-service enablement are incredible business intelligence technologies.  But displaying data faster or better is not what dashboards are built to do.  If they are not closely tied to what a user needs to make good decisions, these technologies can be expensive distractions.

5. Choose cool displays over useful information.  How the measure is defined, the types of charts used to display information, data filters applied and the timeframe for presentation can all influence the utility of the dashboard.  Many organizations spend a great deal of time iterating on data visualizations that provide interesting views of the data, but do not tie those visualizations to the decisions they need to make.

Strategy development and execution is all about making decisions on the future direction of the organization; business intelligence is about providing insight to inform those decisions.  If these things are not tightly connected, then dashboards at best become an unnecessary complication and, at worst, a misleading distraction.  But there is a relatively simple, five-step process that is both efficient and delivers high-impact results.

1. Start with the business strategy.  Whatever the organization’s strategy, start by identifying the specific things the organization will need to achieve in order to execute against it.  Both dashboard developers and business users must be prepared to frame their interactions in terms of how the organization will get there.

2. Identify the critical drivers of value.  Build a value tree by determining which capabilities you need to have, or the activities you need to perform well, in order to execute effectively.  Then determine which of those are most important.  This exercise of unbundling the organization’s strategy establishes a direct link to the strategy and prioritizes what leadership needs to monitor.

3. List related questions and decisions.  Focusing on the critical drivers, list the most important questions that need to be asked and answered and the key decisions that will need to be made.  Taking the time to understand how leaders and business users will actually use the dashboard is critical to getting the focus and design right. 

4. Define the measures that matter.  Identify the measures that will provide the information needed for each question and decision, and then determine the primary data source and format required.  This is the opportunity to identify and address gaps in data availability and quality.  Again, everything you do here ties back to the strategy so investments made at this point will be highly targeted and impactful.

5.  Develop designs that present information in ways that draw out key insights and address a number of different business scenarios.  Review and iterate designs with leaders and users and constantly test for utility. Develop a design that supports decision making. 

Applying these five simple steps will give your team the information they need to more effectively monitor and adjust the execution of your strategy, leading to higher growth, profitability and realization of organizational goals.

Contact Donncha Carroll and Sean Williams.

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Making Change Stick: Align, Equip, Sustain

By Don Ruse

In this new SHRM Executive Network/HR People + Strategy white paper available for download, author and Axiom Partner Don Ruse explores the dynamics facing today’s leaders who must creating lasting change with their organizations.

The pace and scale of change facing many organizations today is daunting, even before you consider that most leaders and managers are much better and more comfortable during “steady state” than during periods of transformation. For leaders, a simple but powerful guiding principle to live by during periods of change is that “it’s not about you, it’s about them”. This is because at its core, leading change is really all about the many conversations that leaders have every day with the people who must do things differently in the future. Conducting the right conversations, at the right time, in a manner that is thoughtful and transparent, is paramount.

In our experience, leaders successful at executing a new strategy or large initiative gear every activity towards 1) aligning everyone towards the new direction; 2) equipping the organization and its people with the required capabilities and skills; and 3) sustaining the change through formal shifts in measurements and rewards, and through leadership that is both supportive and steadfast as the change unfolds. Each of these is absolutely necessary, although insufficient on their own. Each must take place in parallel at all times, albeit each to varying degrees at different stages of the change. Together, they provide the means to manage risk and execute with greater effectiveness and confidence.

The Case for a Better Way of Leading and Managing Change

Research cited in McKinsey Quarterly (November 2016) indicates that only a fraction of strategic plans are effectively executed and that “the reported failure rate of large-scale change programs has hovered around 70 percent over many years.” We believe that most changes in strategic direction fail because leaders fall short in three key areas.

Lack of alignment to the change. Senior management underestimates the time and effort required to achieve clarity about the new future, and to translate that clarity into urgent commitment throughout the organization. Too much emphasis is put on forcing compliance; too little on earning commitment. Too much energy is put into hammering hard on facts and rational arguments to the exclusion of the candid dialogue that can transform fear into heartfelt commitment.

Lack of success in equipping people with competence, and the organization with capabilities. Even seasoned executives are rarely called upon to contribute to a major change initiative. Executing a new strategy calls for significant attention to building the organizational capability and individual competence to lead and manage change. Band-Aid approaches—required reading of an HBR article, a one-day seminar, or a CEO webcast—will not suffice here. Even if clear and committed, the people expected to lead the change cannot succeed if they are depending on an outdated organizational design, and lack sufficient skills and experience to lead and manage change confidently. The resulting uncertainty among key managers drains the energy of those who look to them for leadership.

Lack of focus on sustaining change. You can’t declare victory at the starting line. The temptation for leaders to return to habits that work during stable operation is strong, and doing this too soon will snuff out the fragile early attempts at the new way, and poison any glimmers of ownership among key people. At the same time, as the change moves past the middle stage, lack of toughness in rooting out people and processes that are in the way will destroy momentum.

For example, at one large payments processing organization leaders struggled to take decisive action to address a glaring lack of performance accountability, which was a strong aspect of their culture over many years but a prerequisite to address in order to truly deliver on their new vision and strategy.

Align: Creating Clarity and Commitment

Alignment includes both clarity and commitment. Clarity without commitment gives you informed resistance. Commitment without clarity gives you blind loyalty. The work of alignment decreases across the change, but never ends. Creating alignment requires candid, repeated two-way conversations to translate the strategic plan into action at successively increasing levels of specificity to every person, their unit, and the company as a whole. Keeping these three things in mind will help you stay the course:

Effective communication is not efficient. Count on having to repeat your message several times. Why? At least two reasons. You don’t yet communicate with perfect clarity or in a way your listener can hear. Second, your listener will hear what they want to, even if they listen well.

Be prepared to re-align people weeks and months into the change. When people finally understand what the strategy really means to them, you are going to hear something like “I didn’t know that was what this means to me. I am not on board.”

Be aware that changing habits takes time. Encourage even the smallest signs of people doing things in a new way.

At the early stage of a change initiative, the work of alignment can include any and all of the top team listening to final input from key stakeholders inside and outside the organization, making the few big choices needed at the outset, and holding the first meetings to engage the organization in conversation about the change.

At the middle stage, alignment becomes the work of translating the strategy into increasingly detailed answers to these questions: “What does it mean to me?” and “What does it mean to us?” Here the first instances of “Oh, well, if that’s what this means, then I’m not so sure” begin appearing and must be addressed. And, at this stage, effective change leaders begin to widen the circle of communication to include other groups inside and outside the company.

At the late stage of the change, alignment is a continuous reinforcement of the key aspects of the strategy, thus ensuring new employees consistently hear the right messages. However, the majority of late-stage alignment is the work of aligning customers, suppliers, joint venture partners and other outside groups with the new direction.

Equip: Closing the Gaps Between What We Should Do and What We Can Do Today

The purpose of the second stage—equip—is to close gaps the new strategy has created between the company’s aspirations for tomorrow, and what can be achieved today.

As alignment increases, people accept being part of the required retooling and reengineering of the structures, processes, and policies of the organization. But they also become concerned about their own skill set gaps and their ability to survive, never mind prosper, in the world of the new strategy. They may be excited or concerned about the change in behavior required by the new culture. Whether leaders or individual contributors, they now become more willing to invest time in the learning and organizational re-tooling they and others need.

That said, when it comes to the competence that people need to achieve a new strategy, we have found that the leadership group, however it is defined, must be the first to acquire a toolkit for leading and managing change. In addition, a mindset of candor, transparency, curiosity, patience, passion, empathy, and tough-minded determination is required. After years of trial and error and increasing success, we believe this mindset has three essential components:

  1. Recognize that the distinction between leading and managing is less about optimizing scarce resources within a known business model (managing), and more about getting people to follow to a place they have never been before (leading).
  2. Accept that everyone has three choices in the thousands of conversations that lie ahead—to fight, to flee, or to engage. When in doubt, engage.
  3. Embrace specific skills that are required to stay engaged in conversation with those being led—to keep others from fighting or fleeing, to increase and cement their alignment, and to use the full power of all their people.

Danger: If any of these seem obvious, elementary, or skills relatively senior leaders would have acquired years ago, then prepare to be surprised. Leadership of change fails not because leaders cannot practice advanced and sophisticated analytic and strategic thinking, but because they cannot demonstrate the fundamentals of engaging another person in a way that results in the other person following them with determination to an unfamiliar place.

By ensuring leaders acquire and apply these individual competencies first, while helping others get on board, they show others what it looks like when someone is learning to do something new, and that it’s not just okay to be imperfect, it is expected. If you aren’t making mistakes during a change, you aren’t risking enough.

The remainder of equip is the action required to understand, plan, and implement shifts in two areas: 1) the rest of the company’s talent, and 2) the wiring of the formal and informal organization itself. Many senior HR executives are experienced in driving necessary shifts in the workforce once “strategic” competence has been redefined. They should ensure that the rest of the management team understands that a redefinition can affect every talent process, from recruiting to development.

As to the formal and informal organization, leaders often face and need to resolve issues such as:

Governance and decision rights and the way work is done, particularly across organizational groups and departments.

Redesigning organizations, roles, and rewards so that they’re fit for purpose in the new world.

The division of work across increasingly complex resourcing models, including full-time and part-time employees, individual contractors, and external service providers.

The definition of and following through on the consequences associated with acceptable and unacceptable norms of behavior.

In our clients’ experience, during the early stages of equip the leadership team is comparing the organization and its talent to the strategy, establishing the size and importance of the gaps created by a different strategy, and launching the initiatives required to close the gaps.

In the middle stages, initiatives are underway, and the extra work is beginning to take its toll, as leaders further down in the organization feel the additional load above and beyond their day jobs. In addition, in the middle stage, designs are approved for implementation, and suddenly conversations shift from “I’m on board!” to “Oh, I didn’t know you meant that.

In the later stages of the implementation of a new strategy, those leading the “equip initiatives” face the fact that many of the original plans for accelerating the development of new competence, and the designs for the new organization that sounded so good at the time, are not fulfilling their promise. A second effort is needed, or people will return to the original ways of getting things done.

Sustain: Making Change Stick

How do successful leaders sustain momentum during times of change? The foundation for sustainability is laid in the early stages, when leaders agree on what success looks like in all areas of the change. This clarity is needed to mark changes in financial, customer, and employee outcomes. It is also needed to see, understand, act on, and learn from both the changes in formal mechanisms such as redesigned processes, and shifts in the stream of daily behavior and decisions that make up the informal organization. No surprise here, formal metrics and the regular forums to consider, interpret, and act on them are needed.

Just as, if not more important, however, are the countless informal moments among people where leaders can—if they are not careful—avoid issues of underperformance, tolerate wasteful practices and structures, or worse, extinguish the fragile beginnings of self-confidence in the new world. Instead, leaders can stop, look a team or a person in the eyes, and have a candid conversation that makes them stand up straighter and smile, change their ways, or—in some cases—start to consider moving on to another place to work.

The essence of these leadership actions in sustaining a change is a difficult but powerful combination of encouraging well-meaning and imperfect efforts by people moving in the new direction, and—especially as everyone enters the later stages of the change—pulling no punches with those who can do what’s needed, but won’t. In both cases, HR can play a critical role in guiding others toward transparency and candor, particularly among managers who have difficultly conducting the tough conversations.

Incidentally, that’s one half of “sustaining” leadership action. The other half is that effective leaders treat processes, structures and policies just as decisively as they do people, based on whether something is helping or hindering the change. Leaving what isn’t working in place—whether a person or a process—poisons progress and demotivates those making good-faith efforts in the new direction.

Leading change

No two major change efforts are ever exactly alike, even within the same organization. Going in, a leader never fully knows the risks ahead, or how and when priorities will shift over the life of the journey. However, what is certain is that successfully executing new strategic initiatives in any organization demands leaders who are adept at leading and managing change with candor and transparency. In summary, before undertaking major change, the HR leader should raise three fundamental questions:

  1. How will we create the necessary alignment of our people with our new goals and what it will take to achieve that alignment?
  2. How will we equip our people with the capabilities to operate in the new way, and how will our leaders learn the skills required to get them there?
  3. How will we ensure that our peoples’ efforts will be sustained until we attain a more durable state in the new world we want?

Once the leadership team can definitively answer these questions, the chances of success will increase dramatically and the organization will look back on the journey with pride, and will be even more open to further strategic change, knowing next time will be even better.

Contact Don Ruse here.

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Fix It Now—and How: Improve Company Reputation by Empowering Your Best Brand Ambassadors (A.K.A., Your Employees)

With lifelong customers cutting up United Airlines’ affiliation cards, politicians introducing new legislation, and cable news pundits vigorously debating the company missteps in the wake of the recent passenger removal incident, a firestorm of questions have been raised about how a high-profile global company both treats loyal customers and should best respond to a such a reputation-damaging incident.

But there is an additional and perhaps equally important question being given little airtime: what if there was a way to avoid such blunders altogether by creating a culture of employee empowerment uniquely attuned with your customers’ needs? In other words, what if United Airlines had taken a different tack—one of allowing their front-line employees to use their good judgment as opposed to strict adherence to policy? 

Make no mistake, the ambassadors of your brand are everywhere in your company. Consider your last hotel stay. Did the bellman assist with your baggage? How did the front desk handle check-in?  Was the concierge correct with the coordinates of your meeting?  Did housekeeping respond to your request for a turn down?  Was your room service order correct?  Each of these individuals is charged with delivering the hotel’s brand, and any of them can influence your stay as well as your opinion of their property.

They are all likely empowered toward the same goal—to make sure their customer-related decisions come from a place of generosity, thoughtfulness and kindness. In other words, treat people “as they would want to be treated.” It seems like common sense, doesn’t it?

It also seems like good advice for beleaguered United Airlines CEO, Oscar Munoz, who should strongly consider the upside (he’s already very familiar with the downside) of empowering his brand ambassadors—all 86,000 employees—to make an immediate shift in this direction while he makes a cultural one within the company.

It wasn’t just the widely-reported passenger incident that has sent United Airlines into this spiral. Recently, there was the soon-to-be-married couple en route to Costa Rica, tossed from their flight because they wanted to sit in (and were willing to pay for) Economy Plus seats. And just a few days ago, a passenger was stung by a scorpion, of all things, lurking in the overhead bin. Flying the friendly skies, are we?

Creating a program or policy—the right kind—that instills a “pay it forward” or “random act of kindness” sense of empowerment in brand ambassadors would go a very long way in putting out the United Airlines fire, which currently shows no signs of slowing with the overbooked flight fiasco that will keep the airline’s general counsel busy, and awake at night, handling the inevitable lawsuit coming their way.
 
What would such a program mean in practice?  Well, for the future newlyweds, why not “comp” them Economy Plus and give them champagne to celebrate their upcoming nuptials?  This action would have cost little, provided a memorable experience for passengers and demonstrated a very different kind of reaction and customer value proposition. And, the individual who was stung by the scorpion—instead of initially saying that the injury was not serious and downplaying the incident, why not offer the passenger a note from the captain extending him complimentary drinks and free entertainment? 

These examples of United Airlines putting themselves in the shoes of their customers would have resulted in positive experiences rather than reinforcing negative ones. While it may be too early to tell what the long-term fallout will be for United Airlines, taking the high road to positivity in all customer interactions may be the most immediate—and relatively easy to implement—way to turn the fleet around.

Any company that finds itself dealing with a reputation issue that has the potential to eradicate its customer base, torpedo its share price, and cause what might be irreparable harm to its reputation has an opportunity to handle the situation in a way that can effectively mediate the events and avoid further damage to the brand. 

Putting yourself in your customers’ shoes is a good place to start.

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Using Customer Insights to Drive Ethical, Profitable Growth

By Sean Williams

The recent Wells Fargo settlement—to the tune of $185 million—has given business leaders pause to examine the contributing dynamics. A combination of aggressive cross-selling strategy, insufficient employee monitoring, and incentives misaligned with the best interests of customers set the stage for a massive employee fraud in the creation of unauthorized accounts driven by the desire to earn bonus compensation.

Hardly unique, Wells Fargo is one of many companies placing aggressive goals on customer-facing employees, most in a direct position to inadvertently do harm, and they must carefully evaluate the strategic, legal, and reputational risks.
 
Clearly, substantial changes are often necessary to remain competitive as employees adjust to new ways of interacting with customers to deliver profitable growth. While post-Wells Fargo activities may include new value statements and requisite hours of training, actual employee behaviors are much more difficult to monitor, and frequently fraught with blind spots.

But how is a leader to know if employees are upholding and reinforcing company policies and standards rather than potentially destroying value by pursuing individual goals at the expense of customers? 

One source of safeguarding against these risks is to employ something many companies already have: a voice of customer program. 

How could a voice of customer program help a bank address its blind spots in employee behavior?  Obviously, customers will not know—at least not immediately—if a bank employee opened an account for them without their permission. But a voice of customer program employing outreach to recently-opened account holders asking for customer feedback on the sales process—a common activity—can illuminate such a disconnect.
 
But such an approach is not foolproof in that this type of feedback is solicited only from the small number of customers who have opened accounts, and many will routinely decline the interview for reasons that have little to do with unethical bank behaviors (e.g., customers commonly believe there was a mistake). Beyond customer declinations however, it may be likely that either the email address or phone number designated to the new account is bogus.

However, if the question was asked of any customer conducting any transaction on an active account, it would provide a broad data sample that could easily be used to monitor and evaluate employee behavior, notably illuminating any discrepancies between the customer’s assertion that they have not opened an account and bank records indicating otherwise. More importantly, these disconnects will reveal potential problems in branch locations where new goals have been rolled out, strategies implemented, etc. 

Such dynamics transcend the financial services industry, certainly, and an effective voice of customer program can be useful for managing risk from employee behaviors in any company. For example, many automobile manufacturers reimburse dealer service departments for the parts sold for repairs, but not for actual car repair. This creates a subtle mismatch between the ideal activities of the service personnel (repairing cars) and the service for which the manufacturer is paying (installation). Such a disconnect creates easy opportunities to “game the system,” which in turn creates clear risk for the manufacturer.  

When a customer returns for the same service on the same vehicle, the manufacturer can safely assume that the repair was not correctly performed on the first attempt. But the manufacturer may be unaware if service personnel created duplicate entries for the same repair, if repairs sold were not required, or if the customer had repairs performed elsewhere.
 
These blind spots can be easily addressed by asking the right questions of customers. For example, inquiring with a customer as to when the last time a specific repair was performed may indicate if service personnel unnecessarily replaced parts not yet past their lifetime expectancy.

In the insurance sector, companies that are increasing pressure on claims can install new processes and due diligence, but the clear potential to harm claimants means that insurance companies should be auditing customers to ensure such processes are being followed. Manufacturers changing warranties and retailers modifying return policies could also better manage risks by more frequently surveying the customer experience.
 
Of course, collected customer data may never be perfect—and will be effective only insomuch as the customer remembers interactions. For example, in the earlier banking illustration, the customer could incorrectly remember opening an account, when such a transaction in fact occurred, or inaccurately recall the bank, if they do business with more than one. 

But this random noise will not change significantly over time or vary much by location, which are exactly the indicators a bank should be seeking. And the voice of customer data can provide vital information exactly where there are few other options for examining employee behavior. To realize monitoring value of voice of client programs, the programs should be integrated into the strategy implementation and risk management processes.  Consider the following five steps:
  
1) Examine the new strategy with the appropriate cross-functional team of leaders from strategy, sales, marketing or human resources. Identify where the new strategy unintentionally incentivizes employee misbehavior toward customers. Eliminate as many of these incentives as possible.

2) Explicitly list any remaining potential avenues for employee misbehavior. The more specific about the different ways this misbehavior could manifest, the better. 

3) Work with the data and analytics function to map out which of these manifestations can be identified today, and which could be monitored through existing infrastructure with some additional work. Think through the analytics and reporting that would be necessary to ensure that what can be seen, will be seen. The remaining manifestations of employee misbehavior are the blind spots.

4) Work with the voice of customer program to shed light on the blind spots, by asking the right questions of the right customers at the right time. Make sure that the voice of customer program and the data and analytics functions work together to produce integrated reporting for the leadership on the manifestations of misbehavior, including rates, trends, and locations.  Establish baseline values of customer responses before rolling out the new strategy, goals or incentives.

5) Make sure there are no remaining blind spots. If blind spots remain, or new blind spots are identified later, consider adding a customer survey or other data collection mechanism as necessary to address the new blind spots.

This approach helps ensure that problems are identified before they become widespread, which will help put both executives and regulators at ease while minimizing situations where employees may feel encouraged to act against the best interests of the customer, mapping and monitoring such behaviors to course correct when required.

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Are Your Customer and Employee Value Propositions Aligned with Your Business Strategy?

Like the eternal question, “Which came first, the chicken or the egg?” marketers are asking, “Which comes first, the customer value proposition or the employee value proposition?” 

By Aneysha Pearce and Aaron Sorensen

By customer value proposition (CVP), we mean a persuasive statement that captures the reasons why someone should buy a particular product or service. The employee value proposition (EVP) constitutes the most compelling reasons an employee would choose to join an organization and choose to stay.

Best-in-class CVPs and EVPs are distinctive and create the “magnetism” to attract the type of people you want associated with your organization. Both are a critical link to the business strategy and key drivers of long-term profitable growth.
 
GE provides a great example of CVP and EVP alignment. In September 2015, GE launched its “What’s the Matter with Owen?” campaign on late night TV. Andy Goldberg, global creative director at GE, explained to Ad Age: “The goal is to set up the promise of GE being a digital industrial company, bringing this idea of big iron and big data together under one roof.”
 
The campaign positions GE in competition with the likes of Google, Facebook, and others for millennial tech talent. That’s important, because as explained in GE’s 2016 annual report, they are investing heavily in “disruptive innovation.” Each spot includes the taglines: “GE. The digital company. That’s also an industrial company.”
 
That alignment between CVP and EVP is critical because GE needs high-demand talent to execute its business strategy.
 
In addition to alignment, another important characteristic of great CVPs and EVPs is a deep understanding of their audiences. In some instances, potential employees are also potential customers. But for many B2B companies, their audiences are different (millennials building tech solutions purchased by Baby Boomer COOs and plant managers, for example).
 
The last thing you want to do is create uncomfortable cognitive dissonance in the minds of either customers or potential employees. So how do marketing and HR make sure that the company’s CVP and EVP are ultimately serving the strategy? Here are some ideas to consider:

1. Reputation roundtable — At least once a year, get the leaders of marketing and recruiting, and any creative resources, in the same room to discuss creative strategy and tactical implementation.

2. Message assessment — Are there any inconsistencies in your messaging?

3. Channel alignment — Compare notes on the use of channels, particularly social media, and identify areas of overlap.

4. Audience analysis — What are the personas of your respective audiences? How can value propositions be tailored to appeal to customers and future employees without losing the essence of the brand?

5. CVP/EVP messaging playbook — An internal guide that illustrates how messaging is altered between customers and employees so that relevant differences are made without compromising the important connection between the two audiences.

Marketing and Human Resources/Talent Acquisition are key players at the strategy table and coordination amongst the groups is a must in driving alignment between the CVP and EVP.  The reality is that your organization already has a CVP and EVP whether or not you have gone through the effort of documenting it.  This is your reputation and employment brand.

However, the likelihood that the CVP is aligned to and enables the strategy and brand is low if you haven’t taken a close look at it in awhile. Further, an EVP usually has a “shelf life” of 5 years, sometimes less, if your talent portfolio is changing.  Progressive companies look at the EVP before it becomes stale and ensure it is consistent with the CVP.  Many organizations take advantage of a brand refresh to develop or refine the CVP and ensure the EVP is aligned.

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Data Rich, Decision Poor

Awash in data, firms struggle to develop and leverage insights—but getting them right can have tremendous upside

By Mark Masson and Sean Williams

Data is everywhere. Insights? Not so much.

Looking for deep intel on customer or client needs? To target new markets? Understand performance? Any firm or company today pursuing profitable growth may ignore, at its own peril, the role of data in this strategy. If business transformation is the key to your growth model for tomorrow, leveraging your existing data for insights into key drivers should be a mandate.

The availability of data is set to increase at lightning pace. The volume of data created annually is expected to reach 44 trillion gigabytes by 2020, an increase of nearly ten times just since 2013. And yet only a fraction of that data is actually helpful—37% of that 44 trillion gigabytes is expected to be useful, and only after it is analyzed (1).  Inundated by seemingly useless data, you may be wondering whether investing in your organization’s analytical capabilities was worth it.

And you wouldn’t be alone. The majority of big data and analytics-building efforts fail or are never completed. Just because the capabilities are built doesn’t mean they truly add value. One recent study (2) found that three-quarters of businesses extract little to no advantage from their data, including many that have invested heavily in building analytics capabilities.

The problem for most organizations and leadership teams is that simply having more data—or software or even data analysts—doesn’t directly lead to answers. The good news is that our experience shows that nearly any level of investment in analytics can generate surprisingly large value. Realizing that value often requires understanding what barriers leaders are encountering, and then addressing the (sometimes surprising) root causes.

Assessing Your Unique Challenges

Leaders understandably focus on dealing with the most obvious causes—bad data, bad analytics, or even bad analysts—but while these are the most obvious, they are not necessarily the most likely to be the real problem. You should also make sure the business processes that touch analytics are not getting in the way, that you manage the cultural challenges to acting on analytics, and that you align on what is needed, from the C-suite down to the analytics teams.

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To fully realize the value from analytics, leaders must understand and activate all of the elements that support a data-driven firm.

  • Alignment : Aligning leadership (Senior Team and key leaders) on the most critical decisions to be made, and analysts on the knowledge and data required to make them; sizing the gaps between the current level of insights and information provided and the strategic needs 
  • Means : Evaluating the adequacy of means (processes, technology and data-related interactions) that lead to decisions
  • People : Assessing the current type and level of analytic and decision-making capability within the firm 
  • Processes : Measuring whether current business processes enable decision-making from insight or get in the way 
  • Culture : Highlighting and removing cultural weaknesses around or barriers to data-enabled decision-making

Finding Value in Your Data

Unsurprisingly, we find that each organization has strengths and weaknesses among these elements, but few are capable of objectively identifying them or knowing what levers to pull to change the situation. Successful ones, however, do not become data-driven by throwing more data at the problem. Rather, they work to first understand their gaps related to these elements and find solutions to close them, leveraging the natural strengths of the organization.

Complacency around your data will ultimately impede business transformation. But eliminating company barriers, aligning critical elements and making investments in analytics is an assured route to future growth. Every organization today, regardless of size, has potentially game-changing insights sitting right in its very own data, and the value is significant. Understanding and delivering on client or customer needs you’re missing or that other organizations can’t “see” makes getting this equation right worth full percentage points to your firm’s bottom line, competitive advantage and continued livelihood.

(1) EMC Digital Universe Study, 2014

(2) Seizing the Information Advantage, 2015

Mark Masson advises senior leaders of major law, accounting, and consulting firms. He specializes in firm and client growth strategies and effective execution by aligning and engaging leadership teams, boards, and partnerships on strategic growth priorities. His work blends the nuance and experience of professional service firm leadership with cutting-edge business analytics.

Sean Williams helps clients craft insight-based and data-driven solutions to their business problems, with experience in analytics and predictive modelling in a variety of industries, including financial services, hospitality, and manufacturing. He works with clients to build their analytical capabilities and to ensure they closely support strategy, and to help clients overcome their cultural and organizational barriers to realizing the value of their analytics.

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