The Humanization of Data

While technology has given us the ability and tools to peer into the smaller spaces of our organizations, the ubiquity of data has remained a constant for as long as organizations have existed.  Data in this context is the raw, unrefined existence of information available to be harnessed to better relate the story of where we came from, who we are today, and what we are capable of becoming tomorrow.  Now, more than any time in our history, we have the ability to gain a balanced and objective definition of our existence.

Data is a living, breathing, being; it needs to be nourished, tended, and trained.  Effective analysis of that data is a combination of science and art:  logical, objectively based systems and tools used in combination with innovation, sensitivity, and human subjectivity.  Data becomes the paint and our tools the brush to depict the reality or sense of reality we decide to portray.  In perfect balance, data transcends both and becomes a vessel in which we can purposefully navigate towards idealism.

The impact of true analysis can be seen in its ability to prove or disprove hypotheses as much as its ability to create action.  Lacking either not only takes the art from it, but keeps it from developing into a productive member of your organization.  When developed properly, data is the catalyst for improvement and productivity.

Much like any members of your team, information must be treated as an integral part with emphasis placed on its development and ongoing benefit to the organization.  Like the others, it must be kept engaged through continuous development and an ongoing dedication to its growth. Data has its own personality, and like any other employee can be impacted by cultural, social, and economic issues.  When given autonomy, it can help create harmony, when stifled it will only tell us what we want to hear.

Not all data is beneficial, and in some cases unnecessary.  Working through the process to determine the value of your information capital is similar to the process of determining effectiveness of your human capital:  consistent feedback, coaching, and evaluation.  Focusing too much on non-productive data has the possibility of draining resources and creating vacuums in your organization. 

Data is prevalent in every organization.  The more successful ones have an understanding and deep appreciation for need to listen to it, nurture it, collaborate with it, and ensure that it receives the free reign to be an effective part of the team.   Your data is an asset and should be treated with respect.  Data should never be a CEO, CFO, CTO, CIO, or even a VP of any organization, but I would argue that it fits very well as the Chief of Staff or Aide-de-camp of every organization.

Sharing Your Market (Part 1)

If your business relies on customers to be successful, understanding your potential customer base, your conversion rates as well as your retention is a key to sustainability.  As technological advances continue to increase market sizes, competition and the need for innovation, staying on top of your key market variables has never been more important.  In this age of sometimes overwhelming amounts of data, it becomes increasingly more critical to develop a deep understanding of how your product is performing or is capable of performing in your chosen markets.  The effective utilization of data becomes paramount to sustainable success.

In any market, for any product, there are three distinct but equally important control variables that must be understood in order to gauge the potential of your product, the impact your product has, and the value your organization adds to it.

In any organization, for any product, there exist hierarchies necessary to align your products, processes and people with the market and your customers.  Fitting these hierarchies within the confines of the different shares of the market creates a consistent approach to identifying risks and rewards as well as hand-off points and the definition of organizational process and measurement.

The table below briefly identifies each share of the market, a basic description and the ideal department its success is attached to.

SHARE	DESCRIPTION	DEPARTMENT	A.S.K.
Mind Share	% of Market that is familiar with your product	MARKETING	Attracting the Customer
Market Share	% of Market buying your product	SALES	Satisfying the Customer
Wallet Share	% of Individual Customer Spend being spent on your product	CUSTOMER SUCCESS	Keeping the Customer

Mind Share –

For this purpose, Mind Share is defined as a percentage of the number of those potential purchasers that are aware of your product divided by the number of potential purchasers of your product.

i.e. – If you have determined that there are 10,000 potential users of your product and that 2000 of them are familiar with your brand and your product, your Mind Share is 20%.

Of the three shares, this is the first part of developing a growing business, without it, you can’t obtain the other levels. Mind share is about the customer knowing and understanding what your company does, how it does it, and most importantly, how what you do can benefit them.  Until you get out there, you have no idea which customers know and understand what you can do for them.  While you can make assumptions about who knows you and who doesn’t, asking the customer and sharing information directly with them is the only way to know for sure.

This share directly relates to attracting the customers.  In order to gain mind share, a conscious effort must be made to inform as many of your customer base as possible the entire solution that your organization can offer them.  Don’t assume that a customer knows what you can do for them unless you are sure that they have been thoroughly informed.

Organizational Hierarchy

From an organizational sense, mind sense is for the most part a Marketing function.  The ability to reach out to the masses to inform them of what you do, how you do it and what value you add can be done most effectively through a proactive marketing effort.  While your Sales Force can be led based on information and feedback from your marketing campaigns, their role in developing Mind Share is relatively limited and driven by the Marketing Department.

A Marketing Department serves multiple functions in an organization.  In regards to Mind Share, their responsibility is creating product awareness within a defined market for potential consumers.  Once that awareness has been confirmed, it creates a natural and effective hand-off point to the Sales Department.

Importance

A business survives based on getting people or organizations to purchase their products which makes understanding what your market consists of.

The value of Mind Share can be seen in its ability to quantify your market from an overall potential as well as a way to identify which part of a larger market you can focus your sales efforts on.  

The feedback given from potential customers at this phase can be crucial to making changes to your marketing efforts, your potential customer base and even your product.  Understanding who you are targeting gives you the opportunity to omit people or entities who aren’t good fits for your product and allows you to focus on just the ones that have potential of becoming a customer.

Measurements

Total Market Base(MB) – This measurement can be based on a number of variables utilizing demographics and geography.  The Total market base should be defined by counting all people or entities with the ability to spend money on your product.  In order to get this number, an organization must first identify its product targets.  This identification must be consistent and comprehensive.  Having gray areas will only serve to dilute your market base number and your marketing strategies.

Total Knowledge Base(KB) – This measurement is based on the number of people or entities in your identified market base who are knowledgeable about your product.  In a rather simplified form, this number can be derived from the assumption that members of your identified market that aren’t using your product aren’t familiar with it.  As your organization evolves, it becomes easier to identify the effectiveness of your mind share marketing strategy, and that data can be used to better identify your targets.

Product vs. Brand - If your organization has multiple product offerings, this knowledge base should be confined to single products as brand recognition and product recognition are not the same. Mind share should be based on product.  Some products may be more popular than others, but you shouldn’t make the assumption that because someone is using one of your products they are aware of others you may carry.

Mind Share Penetration – This measurement is based on the previous two variables and is the product of your total knowledge base divided by your total market base.       Mind Share = KB/MB

I admit that this is a very simplified explanation of a much more complex process.  That being said, the importance of understanding your Mind Share and utilizing that information to create an executable action plan is the first major step to identifying your customer journey.

Conversion Visibility = Healthier Organizations

Businesses are about converting something into something else.  Whether it is converting revenue into cash, prospects into customers or subscriptions into relationships, knowing how well you are doing is a key to having sustainable success.  Successful conversion rates are defined by their downstream impact on the health of the business.  If your conversion rates aren’t visible to you, their sway will be in the form of cash flow issues, declining sales or higher levels of customer attrition. 

Many of the organizations I have worked with could guess at best as to what their conversion rates were.  Those that could guess weren’t sure what information was available to confirm their estimation.  All of them were aware of problems in regards to cash flow, customer satisfaction, new customer growth, revenue stagnation and process issues.  Increasing the visibility to conversion metrics allows for the correlation of organizational concerns to the visibility of the root problems and viable solutions.

Because for so many businesses, CASH IS KING, we can use cash conversion rates as an example.  The first step is defining when the process starts.  In most cases, the process starts when the sale starts, i.e. when the customer commits to a purchase.  Once that starts, there are a series of events that occur including but not limited to:  Order Placement, fulfillment, shipping, billing, collection and deposit.   In this case, there will be a time period between each step. 

Adding up all of the time periods will give you the amount of time it takes to convert a sale into cash.  The average of those transaction times will give you your average conversion rate which can be compared to the amount of time it takes you to pay for your COGS.  If it takes you longer to get your cash than it does for you to pay for to goods, you have a negative conversion balance which means you are floating the money for your business.  Unless you are a bank and can charge interest on these transactions, you have an unbalanced scenario which leaves your business holding the bag.

Whether it is cash or any other conversion variable, understanding your metrics is the key to coming up with action plans to address any misses.  In the cash example, if you aren’t able to track the time between each step, you aren’t able to confirm your conversion rate.  This creates an inability to effectively improve your process or your results. 

The first step, as it is so many times, is admitting there is a gap in your information.  Once you have done that most difficult step, the next ones come much easier. 

Step 1. – Determine the key components of conversion.  Make sure they are quantifiable and consistent across the majority of your transaction scope. 

Step 2. – Once you have determined the individual components of your transaction ensure that you have a consistent way of tracking each one.  Make sure that your information is quantifiable and can be gathered in an efficient and consistent way.

Step 3. – Collect your data.  Depending on the size of your organization and the number of transactions you complete, the period before you have usable data may take a while.  It is important that you exercise patience here and understand that pushing the issue or trying to affect the data before it has time to come in may have a detrimental effect on the outcome.

Step 4.- Organize and analyze your data.  By placing the date in a consumable format that is easy to read and understand, you will have a simpler time creating your roadmaps for success.

Why does this matter?  Beyond the financial and organizational impact of not knowing what your conversion rates are, if you can’t see them, you can’t fix them. 

Having the information is only the first part, but now that you have it, you can create actionable plans to improve the results.  The beauty of having good information is the ability to create good plans from it.  Taking each section of your conversion process, you can determine which parts need more work than others.  In the case of the cash example, if it is taking you 15 days to create an invoice after the product is ordered, that might be an example of an area of opportunity.  From there, you can look at your process to figure out how you can create more efficiency in order to have a more positive outcome.

Organizing your action plans to address one or two issues at a time will have a better long term impact than trying to fix all of your issues at once.  I have found that picking two at a time is usually the most efficient.  Take one of the biggest areas of improvement and one of the smallest and tackle those first.

By creating a data driven matrix, you have given your organization the clear visibility to where you are currently (actuals), the ability to determine where you should be (benchmarks/goals), the variables you want to track (KPIs), and the possibility to create a clear path to improve them (action plans): all of the things a successful organization needs to be efficient and sustainable.

Why Revenue Based Forecasting Models Fail

Having been a part of numerous business planning and budgeting sessions for a number of industries, I have been able to see firsthand the failure of revenue based business models.  When budgets, forecasts or entire business plans are developed based on the increase or decrease in revenue, the end result is often times an inability to reach revenue based goals.  Those instances where the goals are reached or exceeded can be attributed more often than not to single point market contributions that may not be able to be continued or sustained.

Revenue is not a controllable key performance indicator, but rather a result of multiple controllable indicators.  Basing a forecast or budgeting model on growth in revenue without making the proper determination of which indicators can have the most impact and utilizing them to determine possible growth goals will most often result in an inability to grow in a sustainable and profitable manner.

Assuming first that a forecast will by nature include growth in revenue and profitability, basing either growth on an increase in revenue without diving into what creates it will leave an organization with shortfalls, or the inability to consistently recreate any standard of sustainable revenue enhancement. 

There are four basic flaws to revenue based budgets and forecasts:

1.       Revenue is a product of multiple indicators and therefore cannot be derived without considering the impact and ability of the other indicators to produce. Revenue is always the sum of number of transactions multiplied by the average dollars per transaction.

a.       Attempting to forecast growth in terms of a percentage becomes a guessing game that few people are able to predict accurately. 

b.      Top down forecasting (Revenue to COGS to Expenses to Profit) creates the inability to develop margin based indicators or track to results using anything but a P&L.

2.       Revenue based forecasts do not take into consideration the impact of change in the workforce.  Attrition, addition or reallocation of resources designed to create revenue streams will have an impact on the final number and must be taken into consideration when forecasting.

a.       Each member of a revenue production department will have an impact.  Change in workforce, workforce efficiency or lack of individual non-revenue based goals/quotas will lead to a declination of margins or inconsistent ability to grow.

3.       Revenue or revenue growth is not a sign of a healthy organization.  Using revenue as an indicator without understanding the effect and nature of its growth can be detrimental to organizational profitability.  

a.       When growth goals exceed carrying capacity, the result is either anemic or unprofitable growth.

b.      Growing revenue without understanding its makeup can dilute gross profit margins and require unbudgeted expenses to attain.

4.       Revenue based forecasts require a P&L to determine results and accuracy.

a.       Using a P&L to record results creates multiple issues including:

                                                               i.      Accuracy of the P&L.  P&L is based on accounting which is based on accurate recording of events throughout the course of a specific time period.  If there are adjustments in accounting in that time period or coming from previous time periods, the accuracy of the P&L will be impacted.

                                                             ii.      Timeliness of the P&L.  P&L statements record history not as it happens, but as it is accounted for and are not intended to be used accurately track critical variables.  When the P&L statements have been completed, it is too late to impact the results of what has already happened and not enough information to adjust what will happen during the next period.

Revenue based forecasting models are perhaps the easiest to use and explain to departmental or divisional managers when it comes to providing forecasts.  They are also innately more simplistic than other forecasting models based on critical variables and thus create less of a need to utilize additional time or resources.  In this case, easier is not necessarily better.  Taking the time to understand your carrying capacity, what your strengths and weaknesses are compared to your competition, developing real-time critical variable or KPI metrics that can be utilized to measure your success and more accurately forecast your future is definitely a longer and more difficult road, but at the end of it, you will have developed a blueprint to create better trained managers, more engaged employees and most importantly a path to repeatable and sustainable success.

Are you Holding up Change?

There are a lot of things in an organization that can hold up the change process.  The first and most important is commitment.  If you are not committed 100% to doing everything within the power of your organization to planning and executing changes, don’t do it.  Going into the process without that level of commitment will frustrate you, your stakeholders and make changing in the future much more difficult.

 It is more than acceptable to go into the change process without knowing anything.  I little fear and a little apprehension are good things and will actually help you along the way.  If you are too afraid to move forward, don’t.  While a little fear is natural and can serve to protect your organization, too much will make you tentative and incapable of being adaptive or agile within the process. 

 

Objectivity is the key to success.  Some might call it pragmatism, but either way, having an open mind and looking at things in a sensible and realistic manner will keep the process flowing and keep emotion out of it.  Emotion is a great tool when celebrating victories or acting as a cheerleader for a process, but no matter how you are attached to an organization or the outcome of a change plan, infusing emotion into your decision making or management process will usually result in bad decisions and bad management.

 

The beauty of a well-crafted and executed change plan is in its simplicity.  While the process seems complex, it follows a rational thought process.  Complex problems only seem complex until a solution is found.  Breaking things down to their most simple form not only allows a wider understanding of the solution, but gives an organization a wider range of resources to use for the execution of a change plan.  If you run up against a difficult problem to solve, break it down into smaller pieces and then eat one at a time.

 

Pervasive actions and thought processes that retard or derail the progress of organizational change:

 

1.     Time – Thinking you don’t have the time to do it.

We make time to do the things we feel are important and try to find time to do those things we don’t.  If you can’t make time to plan or execute your changes, you are not placing the amount of importance on them that needs to be there.  The other time issue is the difference between doing work and doing your job.  If you are spending more time doing work than you are doing your job, you need to focus on ways to switch that around.

2.     Ego – You don’t think you need it or think you have all of the answers.

There is a considerable difference between being confident and having an ego.  Confidence is the ability to make a decision with the humility to realize when someone else has a better idea.  Ego is about thinking you do or should have the answers based on your role or title.   Ego is a business killer.  Leadership ego kills morale and discredits the organization and its leaders.  Ego is also not trusting the people your surround yourself with to do the job you hired them to do.

3.     Unrealistic Expectations – Setting goals and expectations that aren’t planned within the process, or being unwavering when the process pushes expectations in a different direction.

Determination of goals can be a precursor to a change plan, or can be discovered during its development.  Either way, the plan should push the goals and goals should be adjusted based on what you determine as realistic within the scope of the plan.  Expectations for results should be based in possibility not estimation.   Attainment of a goal is based on modifying the behaviors that affect the

4.     Misplaced Loyalty – Thinking it is more important to make your employees happy than to make needed changes.  You can have both, but you have to do it the right way.

While it is important to take people’s feelings and emotions into consideration when planning or implementing a change plan, having that as the sole reason to stall execution or excuse someone from completing a required task will make your execution inconsistent.  Loyalty in an organization needs to be to the whole and not to the part.  Worrying about not doing the right thing for your business because it might upset one of its parts is another example of ego-centric leadership (see #2).

5.     Mistrust – Thinking that you have people who will fight the changes or aren’t capable of making them.

If you hired employees that you think are incapable of changing, that is much more your problem than theirs.  Much of the mistrust that happens in an organization comes from an ego-centric leadership (See #2).  People will follow a plan they understand and are prepared for.  The duty of an organization is to provide support to their employees prior to, during and after any change plan is implemented.  More often than not, poor employees or poor employee morale is due to lack of support and understanding much more than to the quality of the person.

6.     Inconsistent Execution – Sometimes you hold people accountable, sometimes you don’t.

There is no room for hierarchy in the execution of a change plan.  Yes, there needs to be people to lead the process, but the rules have to apply to everyone from the top down.  If you allow people to circumvent or ignore the process based on their role or title, you either have too rigid of a process, or a bad management philosophy.  Execution must be consistent to work.  Without consistency, you can’t determine the difference between a mistake and an issue.  This takes away any intended agility within the process.

7.     Structural Issues – Not having something in place to keep the process moving and allowing for adaptive changes to take place within the timeline and flow of the changes.

No plan should be set in stone.  That being said, if you don’t have a structure in place to ensure the process continues to move, or allows it to adapt, you will spend a lot more of your time planning than doing, and results don’t come from a plan, they come from its execution.  Ensure that you have ways to inspect your expectations through a consistent management process. Moving ahead with a change plan before you have the internal structural integrity to support it will magnify its lack and cause undue stress on the process and the people involved in it.

8.     Lack of Autonomy – Expecting people to do their job without having the ability to make necessary decisions to get it done correctly.

An effective organization gives it employees the information they need to make decisions, the authority they need to follow through with those decisions and the autonomy to correct any complications arising from them.  Expecting employees to perform their job duties or execute a plan without all three of them will be an exercise in futility.  Not every employee needs full autonomy, but once the parameters are set, they need to be allowed to work within them.

9.     Obstacle Paralysis – Giving up, giving in or not moving forward when obstacles present themselves.

 

No plan is perfect in either its inception or execution.  As soon as begin its implementation, you will encounter obstacles.  No matter their size or scope, they can stall or stop the change process.  How you react to them will determine their net effect on the results and the process in general.  Thinking that because you hit an obstacle means your plan is flawed is not the right way to look at it.  Thinking that your people aren’t capable because mistakes happen is also a sure way to derail your plan.

 

10.            Reactive Hierarchy – When your people, especially managers spend more time working than doing their job.

People are led though changes, not managed around it.  If your culture is one where your managers react to problems when they occur instead of foreseeing potential problems, you will have a difficult time with any change process.  The intent of a change plan, and its underlying ability to be nimble is to curb the necessity to react to obstacles.  Mistakes need to be coached around and issues resolved.  Treating every issue like the world is ending is a reactive and detrimental course that should not be traveled.

Luck is not a good business strategy

The word success is a ubiquitous part of every businesses vocabulary.  Unfortunately the reality of success is becoming more of a rarity.  When a business talks about success, what are they really talking about?  More often than not, they are referring to the attainment of company goals, which in some respects can be a barometer of successfulness, but without the knowledge of how you reach them and the ability to sustain and repeat your success, attaining your goals would be based on luck.

In my experience, I have seen two basic types of corporate strategy with some organizations caught between the two in one form or another:  Luck based and Success based.

While it is nice to be lucky once in a while, trying to build a sustainable organization based on being lucky will eventually result in its downfall when the luck runs out. 

Core	Luck Based	Success Based
Knowledge	Tribal Knowledge where infrastructure is built on the way things have always been done.	Legacy knowledge where infrastructure is built on written documentation and consistency of content
Strategy	Business strategy is based on historical data and basic underlying needs.  Strategy is determined by a few individuals and pushed to stakeholders.	Strategy is simplistic in its design and based on future needs.  Strategy is determined based on the needs of the stakeholders and is pulled from them.
Data	Data is either limited in nature or over abundant without clear intention or attention to it integrity.  Data is used to determine results instead of driving changes.	Data is concise in nature, being vetted before being presented.  There is a culture of data integrity and data is used as a predictive tool instead of a reactive one.
Goals	Goals are developed on a macro-level and are often limited to financial milestones or results.  Goals are also limited in scope and when quantitative are difficult to adjust within the flow of the business.	Goals are developed on a micro-level with each person knowing and understanding their role.  Goals are designed based on the modification of behavior instead of affecting results.
Leadership	Management is developed to maintain the status quo and given limited power of information, authority and accountability.	The roles of a leader are more clearly defined, and each is given the ability to build their part of the business without limitations on information, authority or accountability.

 

Being truly successful is a sum of everything you do.  Success is an understanding of not just the attainment of goals, but an in-depth knowledge of what it took to get there and what it will take to sustain it.

Success isn’t something we sit back and get, it is something we have to go after and hunt down.

Keys To Success

“Action is the foundational key to all success.” – Pablo Picasso

1.    Reaching a Goal

2.    Tracking your Methods and Progress

3.    Repeating what you did

 Setting a Goal

The ability to understand what your goals should be is the first key in being able to reach them.  There is a difference between a goal and a dream.  A dream is something you desire if everything falls into place and you get to sit back and watch it happen.  A goal is a tangible desire you can attain if you understand what the goal is comprised of and are willing to work to reach it.

“Aim Small – Miss Small”

Goals should always be quantifiable and be simple to understand.   Every goal should have a date of completion, and in some cases, this date may serve as the quantifiable part of that goal.  Goals should also be seen as a part of a bigger picture and each goal should lead to a larger one.

Reaching your Goals

 Once you have set your goals, it is time to get to work on reaching them.  Reaching your goals is dependent upon all of those involved knowing and understanding the following items:

1.       What are the goals? – each individual within a group must know and understand exactly what the goals are.

2.       What are their roles? – once you have established the goals and communicated them to everyone involved, they need to know and understand what they can do to help with the attainment of those goals.  Specific expectations must be laid out to each member of the team responsible for reaching the goals.

3.       How are they doing? – make sure to give consistent and regular feedback to the people involved in reaching the goals.  Everyone needs to know on a regular basis if they are meeting their expectations and tracking to their goals.

 Communicate Expectations

So much of what we do as people and as employees revolves around communication.  We utilize this word so often that sometimes it begins to lose some of its luster and a lot of its meaning.  Communicating expectations in regards to being successful is about ensuring that each part of your team not only has a responsibility in reaching a goal, but understands thoroughly and completely what they must do to do their part.

Communication is an ongoing process.  Just because you wrote it down and handed it out doesn’t mean everyone can or will stay on task.  Continue to provide information and feedback.  Let them know that all of the work you put into coming up with a plan wasn’t just words on a piece of paper.

Empower your Team

Now that you have come up with a plan and communicated the plan and each team member’s responsibilities and expectations, let them do their part.  Empowerment is about trust and without that trust, you can’t hope to be successful.  Everyone who has a part in your success needs to feel that their actions matter, and that they have some control over their involvement and outcome.  Be there to teach, mentor, and assist, but trust the people you have to do what you need them to do.

One of the biggest obstacles to the success of any business is to have parts of your team feel like they don’t have any control of their destiny or don’t feel like they are an important part of the big picture.  A company should be led from the top, but powered from the ground up.

Negotiate Obstacles

No plan, or nobody involved in a plan is perfect:  understanding that basic truth is a key to being able to negotiate obstacles.  There will be speed bumps or obstacles along the road to success.  Each time you reach one of these, you must determine the crucial piece of information to move forward.  Did the obstacle stem from a mistake or from an issue?

Mistakes – Yes, people make mistakes, and the only way to avoid that is to hire perfect people.  If an obstacle arises because someone made a mistake, the best thing to do is to use it as a learning and coaching example so that those mistakes can be abated going forward.  If someone continues to make a mistake, then you have the decision on what to do with the employee.  A periodic mistake doesn’t a bad employee make.  Mistakes are a great way to show your support to your people, your reaction ability to your customer and a way to determine the quality of your process.

Issues – Issues are different from mistakes because they stem from the process instead of the person.  You may have a combination where a person makes a mistake that points out an issue or oversight with the process.  If it is determined that your obstacle stems from an issue, it is necessary to adjust the process to keep them from recurring.

Track your Progress

All goals have an 11^th hour or a point of no return.  There will come a time that no matter what you do, or how hard you work at it, there is nothing you can do to reach them.  The way to ensure that doesn’t happen is to know where you are in relation to your goal, how much further you have to go, and what has been working to get you there.

Start Again

This is both the easiest and the most difficult part of the process.  If you have truly succeeded at all of the points before this one, it will be easy to repeat what you did well, and learn from your mistakes.  If you didn’t learn anything, or weren’t able to make a distinction between what worked and what didn’t, you are more than likely doomed to repeat your failures.

Even if you hit your goal, if you weren’t able to track it throughout the timeframe and competently repeat it during the next cycle, you were lucky, not successful.

Needs Hierarchy

Needs Hierarchy

 

Continuous improvement has to start somewhere.  In order to ensure that you are not only starting in the correct place, but that you are moving in a direction that is in line with the needs and desires of the organization and all of its shareholders, you must first understand the basics of what your needs are. 

The above needs hierarchy is based on what research has found to be the main needs for an organization and their stakeholders.  Above all, sustainability is the most important need for any business.

The hierarchy is built in a pyramid to not only illustrate the level of importance for each section to the benefit and well-being of an organization, but because the implementation of continuous improvement projects, company goals, etc. must follow the same structure.  A focus and emphasis on Gain without having the other four sections of the pyramid properly maintained and grown, will result in a top heavy structure that will eventually topple.  Much like the construction of any tall building, you can’t start at the top and then hope to build a structure underneath it in any sort of efficient or effective manner.  You have to make sure the base is solid before you build on top of it.

 

Gain

This is the ultimate goal for any organization. Gain means that you are in a position to continuously move forward.  You have taken care of the basic needs of your business and stakeholders and now can move forward.  While this may be the ultimate goal for any business, it comes at the top of the hierarchy in based on a level of importance for keeping a business alive versus growing it.

Efficiency

Efficiency is the ability to have an efficient and effective operational environment that is capable of supporting and sustaining organizational change through a systematic progression. 

While efficiency is important in all levels of business development, improvement and structure, its importance in the over the others is diminished by the need to maintain first.  Efficiency by its nature is a growth oriented theme.  As it pertains to this hierarchy, while it adds to the basic needs of a business it doesn’t provide a pathway to meet them.  Because the needs for the first three levels must be met first, efficiency needs will be sidelined in favor of them.  Efficiency models seldom work when the other levels have not met the expectation of the ownership or leadership group.

Engagement

In order for a business to become successful, they must have stakeholders that are engaged in their success.  These stakeholders include partners, clients, customers, employees and vendors.  All of which provide a value to the overall organization.  Getting these stakeholders engaged is the third level in the needs hierarchy.  This is the first place where an involvement is required outside the ownership of the business.  For the first two levels, it is about ensuring immediate survival.  This level is where sustainability becomes part of the need.

Risk Management

Businesses must constantly assess their risks in order to ensure that there is no major concern in regards to the health, safety or well-being of their organization or shareholders. This process of risk management includes a desire to maintain a degree of status quo.  In regards to maintaining the physical health of the business risk management is the second level of needs in an organization.  The adage of preparing for the worst but expecting the best is part of this level.  Risk management includes compliance, avoidance of litigious circumstances, insurance, succession planning and other factors in relation to ensuring the overall health of the organization.

Profitability

When it comes down to it, the bottom line is the bottom line.  A business can’t hope to survive without the ability to handle their bills.  Businesses fail when they can’t afford to do business any longer.  Cash flow is the lifeblood of a business.  Like food, shelter and air to their shareholders, profitability is the sustenance that is required for survival.  While an organization can get temporary reprieve from lenders, banks, etc. profitability must at some point be reached and maintained.