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Ron Baker - 07/24/2009
The recent book review of Reinvent Your Enterprise has sparked a fantastic discussion on the difference between efficiency and effectiveness, especially in a Professional Knowledge Firm (PKF).
Senior Fellow Paul Kennedy, of OBK fame in Great Britain, joined the discussion in an email to me explaining the obk simple management system™.
As OBK is a true Firm of the Future, I was excited to share Paul’s methodology. I only wish more PKF leaders understood the difference between knowledge and manual/service workers, efficiency and effectiveness, and a measure vs. a judgment.
Obviously Paul Kennedy does. Study the following. If you’re smart, implement it, or something similar to it.
Thanks for [the book review] Ron.
I have been giving this some thought about efficiency vs. effectiveness and I will send you some notes. However, the underlying issue if I have read the article correctly is how to manage a knowledge worker (KW) or can KW’s be managed?
I had thought that this debate had ended. That is—KWs are more led than managed. At obk we have developed the obk simple management system™ which is laughingly simple but seems to work. It is about aligning the skills of a KW to business objectives and then coaching them. It goes like this:
Step 1. Everybody has a job and every job has a body. This involves designing a functional organisation chart with a “position contract” in each box ([Michael] Gerber style). This is business object orientated.
Step 2. Each position contract describes desirable outcomes, qualitative performance expectations and cross refers to an assessment form (see step 3 below).
Step 3. We design an assessment form for each KW. This is a short list of judgement criteria that assesses how well the function is being discharged. Against each criteria (usually between 5 and 10 headings) is 2 columns. One for self assessment and one for manager assessment. The KW and their manager score how well the criteria point is being done / performed / achieved, using 1 = low and 5 = high. The criteria headings can be anything you like but in our case includes:
- Development of relevant Human Capital
- Contribution to firm’s structural Intellectual Capital (IC)
- Consistency with firm’s core values
...Among others
Step 4. The KW and their manager have a 15 to 20 minute chat about their scores on a regular basis (sometimes weekly, sometimes monthly)
We have been experimenting with this system in the obk lab for some time and we have a number of clients using this system. What we have learned is:
- When you present a position contract describing desirable outcomes and with qualitative performance expectations some KW don’t want the position! (This may explain why management has been so frustrated with this KW for so long)
- Others say “to get to that standard I need help” (also good because its management’s job to provide help in terms of inspiration, tools and training).
- When assessment forms are completed we have observed a number of things:
- When a KW scores themselves low but their manager scores them high—the KW is pleased and their work is recognised (A good thing according to Blanchard’s One Minute Manager and Baker see Page 64 of The Firm of the Future—the 4 reasons why people go to work).
- When a KW scores themselves high but their manager low—also good because it means we are now at stage 1 on the progress ladder. Most managers never get to this stage with their KWs and can therefore never make progress.
- Whenever a score is less than 5 the conversation is about how can we get you to a 5? In other words this becomes a coaching process.
- The coaching chat plans and monitors the KW’s personal development.
At obk we have badges (Boy Scout style). We use these badges to define and test competence in skills required to create value for our customers. These badges may be technical or may relate to personal skills such as listening or speaking. Our KWs target and acquire these badges as part of their development. Their personal development is therefore aligned to our business needs.
This system works for us and for others where it has been introduced. In getting clients to use this system we have to educate them to make judgements. To get them to tell their KW’s how they feel without the need for justifying why they feel the way they do. We do not use measurements unless they can be directly related to KW performance, e.g., a salesman picking up new customers.
I think the key to making this system work is the environment in which this management system sits. This environment of course is the function of leadership and this is the key to getting more from KWs.
In my opinion, this is a far easier framework than the one laid out in the Reinvent Your Enterprise book. I can always count on Paul to shave with Occam’s Razor.
We’d love to hear what others think of the obk simple management system™.
Ron Baker - 07/19/2009
Ron Baker - 07/17/2009
I received this email from John Chisholm, a consultant from Australia whom I will have the pleasure of working with next month during my visit Down Under.
How many times have we heard this story:
Ron
This may interest you.
A short time ago I attended a meeting with the CEO, CFO and General Counsel of a largish company. The CEO had invited me to see if I could assist them obtain better value from their legal panel.
It was pretty obvious from the outset that the CEO was not so much concerned about the cost of the company’s legal spend (although to be fair he would have liked it to be less) but moreover the fact that he and his CFO could never BUDGET accurately for the legal spend. There always seemed to cost overruns. There were always reasons for the legal costs overrun explained the CEO. “Valid” reasons corrected the General Counsel.
It was also pretty obvious from the outset that it was not the General Counsel’s idea that I be there at this meeting. As the conversation progressed it was also apparent that the General Counsel found himself increasingly “defending” the position of the law firms. We talked about how we might work through a model whereby we sit down with their law firms and try and agree on the work to be carried out by the law firms and how we could agree on some fixed prices up front with those firms.
Alas the General Counsel always seemed to have some reason or another why fixed fees would not work, why the law firms would not and could not go for them, how the company would not be able to keep track of what the firm was doing, and that in fact such fixed prices might well be detrimental to the company and result in an increase not a decrease in external legal expenditure!!!.
After 30 or so minutes of a discussion that was going round and round in forever decreasing circles the CEO slammed his fist on the table turned to his General Counsel and exclaimed “....look I am after a solution to this but the more I hear you seem to be if not the problem at least part of the problem? Whose side are you on?”
I relay this story not to embarrass any in house counsel but just to highlight how wedded we are to, and how ingrained into our thinking, has become time based billing. It was not that the General Counsel was deliberately being difficult its just that quite genuinely he believed that he could have much greater control over external lawyers by negotiating and monitoring their hourly rate and their monthly invoices than he could in agreeing to a fixed fee. “How would I know if the fee I agreed to was the right fee or not?” he postured. Furthermore he felt trying to extract a fixed fee from the firm could seriously damage the relationship with the firm.
What unfortunately this General Counsel failed to grasp as we all know was of course there is no right or wrong price...never has been never will be.........there is only the price someone is willing to buy at and the price someone is willing to sell at. This is how business in the real world operates. This is how the CEO and the CFO of his company operates. Indeed it was how the company he works for operates.
What the General Counsel also failed to understand was that his CEO was not after the cheapest legal spend he could get away with.......he just wanted some CERTAINTY of the legal spend.
John
I remain unclear why it’s so hard to understand that what customers want is certainty in price—just as most people select a fixed-rate mortgage rather than a variable-rate mortgage, and pay a premium for the risk reduction. Jay Shepherd recently wrote about this very topic on his blog.
Firms need to reduce the risk for their customers. They are in a far better position to do this than the customer, since they can spread risk over many customers.
There’s another analogy I heard this week about why the billable hour sucks. I’ve used the following shopping analogy I don’t know how many times.
Imagine going to the grocery store, filling your cart with items that have no price on them. This is the stupidity of the billable hour.
But someone told me it’s actually worse that that. Rather, it’s like having your professional fill up your shopping cart with items they like.
How long will it take for professionals to kill this beast?
Ron Baker - 07/16/2009
Ed Kless - 07/15/2009
In addition to the blood pressure pills I take from stressing out over changing the business model for professional firms (kidding, it is hereditary), I take a few vitamins and supplements on a daily basis. Since I like to take them on a full stomach, after dinner seems to work best for me. However, because I am usually doing several things at once I sometimes forget if I have taken the pills or not.
After debating about it for a few weeks, I finally broke down and bought one of those weekly pill organizers. (Shown at left.) OK, before you start with the comments, there were not many choices.
In any case (pun intended), I loaded it up on Sunday and thus far it is working flawlessly. Coincidently, it has also led to an unintended benefit - I only have to unscrew the child protection lids once a week now, and not once a day.
I got to thinking about it and there is a lesson here for professional firms. Notice that the original problem was one of effectiveness - I could not remember if I had taken the pills. In solving the effectiveness problem I also increase my efficiency - I only open the bottles once a week now. It was through increase my effectiveness that I also increase my efficiency. I submit that this could not have worked the other way. No amount of increasing my efficiency of the original task would have increased my effectiveness.
If I have lined up the bottles and practiced open them with the least amount of effort and streamlined precision of motion, I would have not increased my ability to remember to take the pills each night.
The lesson - I am living proof of Kless’ Second Law - Effectiveness always and everywhere trumps efficiency.
Ron Baker - 07/14/2009
I’m thrilled to announce the Maryland Association of CPAs is repeating my first Second Life Webinar, which will be held this Tuesday, July 28th, 1:00 - 2:00 pm Eastern Time.
You’ll have to be registered for Second Life, as well as the Maryland Association’s CPA Island on Second Life.
For more information on the Webinar’s content, and how to register on Second Life, visit Maryland’s Web site here.
Ed Kless - 07/13/2009
What if you would refuse to accept any new customers unless they were referred to you but another customer? Would your leads dry up? If so, your new business problem is not marketing related, it is your service. FIX IT!
The lesson here is that if you are not getting active referrals from customers, your service ain’t great. The only thing more customers is going to do is put you out of business faster.
Imagine if your new customers, like my dentists, come from 100 percent referral sources. Do you think you could charge a premium? Do you at least think that discounting would go away?
It is time to take some stock and ask - Are we really as good as we think we are? If not, it is time to fix your service.
Ed Kless - 07/10/2009
Yes, you read that headline right, someone at the VeraSage Institute is going to praise the accounting profession, specifically, the Big Four, or is it Three. Ooops, sorry, I forgot this is a post praising the accounting profession.
One thing I have always been impressed with from accounting firms, again, specifically the larger ones I have had contact with, has been their ability to create alumni networks that drive real value for them. Now, it certainly is true that this practice has caused some challenges by creating some possible personal conflicts of interest. However, I think for the most part, this is a great idea.
Too many businesses I have encountered tend to blame the person who has last left the organization for everything that has gone wrong at the firm from the creation of the world (a literary flourish, I believe in the Big Bang) to date. This is especially true if the person is fired, but it occurs with all too much frequency when the employee is leaving of the own volition.
“Oh, that Fred (I always use Fred), I am glad he left. In retrospect, he caused more problems than he solved.” Blah, blah, blah. To me this kind of trash talk is indicative of leadership. If this person sucked fowl ova so badly, why didn’t you get rid of them long ago. I think that what the person is really saying is, “Damn that, Fred, how dare he leave us. We are a great place to work.” Really? Do some soul searching.
Anyway, back to the praise.
Accountant do an outstanding job of placing people with their customers and even to some degree encouraging these types of moves. After all, if the person is unhappy, for whatever reason with your company, isn’t better to have them as a ally in the future.
If you are someone who has been critical of former employees, why not turn over a new leaf and plan an alumni BBQ at your house over the summer.
Ed Kless - 07/02/2009
It has been an interesting week in the world of pricing.
In case you have not heard, Chris Anderson of Wired is set to release his new book Free (the title, not the price), and before it even comes out stirs up a controversy. Surprisingly, the book does not seem to be available on Kindle. Hmmm.
UPDATE: Free is now available for free, at least in audio version. According to a video posted on Wired. Free will be available in most electronic formats for free. The exception is the three hour abridged audio version which Anderson believes has more value than the full-length edition (posted above) because of the opportunity cost trade off of listening to the longer version.
Anyway, first, Malcolm Gladwell chimed in in the New Yorker. Then, Seth Godin responded to Gladwell.
In my opinion, the camp of Anderson/Godin is right and Gladwell is wrong. I think Gladwell misses the idea that free does not mean there is not a business model. He is right that youtube and other free services (Twitter) have yet to create a business model, but that does not mean they never will be able to create one.
Gladwell uses the example of former head of the Atomic Energy Commission, Lewis Strauss’ famous late 1950’s prediction that “our children will enjoy in their homes electrical energy too cheap to meter.” To say that since this prediction has not come to fruition would be shortsighted. Gladwell is right (currently) about that fact that power infrastructure costs are larger that power creation costs, but I can foresee a time when we have personal (or neighborhood) nuclear reactors. This of course will reduce, and almost eliminate, those infrastructure costs.
I would love to hear each of your thoughts on this.
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