Category: Change Management

I still covet Issue 1 of the first magazine launched in the UK to cover the Internet. It was a free supplement to an edition of ‘What Personal Computer’ which unfortunately I have now lost. Dated October 1994 and appropriately titled ‘INTERNET’, at 34 pages it is rather thin to say least, much of it advertisements. Page 7 describes the following three and half pages as ‘the most extensive ever published in a magazine’ and includes descriptions of sites such as ‘The BBC Networking Club’, CERN and a handful of corporate sites such as Microsoft, ‘Lotus Development’, Novell and Dell. It’s a fascinating snapshot of the genesis of a technology ten years before it really caught the imagination of the wider world.

Roll forward to today and we could be seeing the start of something equally revolutionary, Blockchain technology. The Blockchain is the enabling platform for the better known Bitcoin cryptocurrency. While Bitcoin attracts most of the interest of writers and news columnists it is almost certainly the Blockchain which is more important. Indeed like the Internet it has the potential to fundamentally and structurally change the way economies work and how transactions take place.

So what is it?

Just a matter of months after the collapse of Lehman Brothers in 2008 a rather mysterious character calling himself Satoshi Nakamoto released a White Paper ‘Bitcoin: a Peer to Peer Electronic Cash System’. The first sentence in the document introduces the concept of Bitcoin: ‘A purely peer to peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution’. With that the Blockchain and its first application, Bitcoin, was born. Its launch has effectively removed the need for any middlemen involvement in a transaction, hence the growing interest of governments and financial institutions.

Bitcoin is potentially significant but is still just a Blockchain application; a bit like relationship between email and the Internet. The Blockchain itself is effectively a database but one with a number of features that don’t necessarily appear in more conventional environments.

There are four elements usually associated with the Blockchain. It is ‘Encrypted’, ‘Distributed’, ‘Public’ (nobody owns it) and ‘Synchronised’. It works in a different way to traditional databases and incorporates a number of principles which are reflected in the features referred to earlier.

It is decentralised. In other words data is validated across a virtual network rather than in one particular centralised place. This allows its nodes to continually and sequentially record transactions on what it calls a ‘public block’. The ongoing chain of these transactions on the ‘block’ is where the description ‘Blockchain’ originates. Each block is distinguished from others by a ‘hash’, the encrypted signature which authenticates the transaction, and the combination of the ‘hash’ and the block ensures that it is not replicated.

The robustness of the Blockchain and its associated encryption and authentication processes facilitate another associated concept, that of ‘trusted computing’. If the Blockchain is the ultimate arbiter of the validity of a transaction then you don’t need an intermediary. You don’t need a bank, corporate or government to establish transaction safety. The rules of trust are embedded in the way the Blockchain itself works.

A third concept is that of the semi-public nature of any transaction taking place via the Blockchain. The fact that you have made a transaction is available to the public but the details of that transaction are opaque to anyone but the person making the transaction. The Blockchain’s encryption technology also ensures that the transaction cannot be hacked for any value that it may hold. It may be that your Blockchain holds Bitcoin and yet no one can access that information, not governments, corporates or other financial institutions.

‘Smart contracts’ are basically a set of instructions associated with a store of value, say a Bitcoin. To enable a transaction to take place without an intermediary the rules of the transaction and any associated transfer of value need to be established between the parties transacting. Once agreed and recorded the Blockchain governs the progress of the transaction automatically and in accordance with the conditions established at the outset.

‘Proof of work’ is a fifth and foundation concept of the Blockchain. It has been described as ‘the right to participate’ in the Blockchain system and effectively prevents users from changing records. Once a transaction has taken place it cannot be undone; it is protected by encryption and the ‘hashes’ that validates its authenticity.

Given the Blockchain is basically an encrypted database that facilitates peer to peer transactions without an intermediary the more interesting aspects are what you can actually do with it. Early applications have generally been financially based, notably Bitcoin, but there are other applications starting to emerge outside of the financial world. Listing those that are (slightly) better known is a bit like looking at that early Internet magazine listing of websites. It’s currently a very small list and the apps themselves are clearly at a very early stage in development.

Actual applications of Blockchain technology are few at the moment, less even than the numbers listed in that first internet magazine in 1994. A few that have caught my eye include ‘Lazooz’, ‘UjoMusic’ and ‘OneName’. Believe it or not if ‘Lazooz’ gains any traction it could be the successor to Uber. Billed as ‘social ridesharing’ it basically links people who have space in their vehicles directly with end users without the involvement of an intermediary. In its raw format it looks and sounds like a winner but perhaps there are still security and logistics issues that will need to be addressed. ‘UjoMusic’ positions itself as ‘a home for artists that allows them to own and control their creative content and be paid directly for sharing their musical talents with the world.’ I can see artists liking this site and certainly users, especially if they would like to establish direct contact with artists. ‘Onename’ is something different. It is essentially a means of establishing an identity on the internet, secured and supported by Blockchain technology. In time it could effectively become a digital signature, a method of authorising a transaction: ‘Blockstack is the global database for people, companies, websites and more.
Decentralized, privacy-centric, and blockchain-secured.’

Potential uses of Blockchain technology are extensive and range from applications in the financial services space to public and private and personal records, physical keys and other uses involving unique identifiers. For example voting could be undertaken via the Blockchain, security access facilitated both physical (keys) or as replacements for unlock codes. Land and property transactions could be authorised, medical records secured and loan agreements processed. The list easily runs into dozens and could reach hundreds or even thousands once the technology becomes ubiquitous and trusted.

As with the internet in the early 1990s it’s all about ‘potential’. Blockchain technology could take off or it could hit the wall along with lots of other equally promising technologies. Robotics, AI, IoT, ‘Big Data’ and the Blockchain are all starting to happen now. The internet has been the big news story of the last twenty years but the next twenty are likely to see much more technology driven change, and at an even faster pace.

The organisational change implications of this technology wave are enormous.

I’ll take a look at this archived blog in 2036, maybe via a Blockchain enabled identity…

Blockchain sites:

http://www.lazooz.net/

http://ujomusic.com/

https://onename.com/

Discrimination is never an acceptable form of selection behaviour although based on some recent research it would appear that some types are more acceptable to recruiters than others. A couple of recent surveys undertaken by TCMO, a career management organisation, seems to indicate that age discrimination at executive level is the most dominant type of discrimination in senior management recruitment. Link to the surveys are included at the bottom of this post.

The initial survey was not particularly clear on whether it is older managers being discriminated against because of their seniority or aspirant younger managers seeking their first senior management appointment. Some further analysis is provided in their more recent survey with additional gender related insights provided.  It also must be stated that they are surveys, and that being surveys they are a collection of perceptions of treatment rather than totally objective evidence on whether age discrimination is actually taking place. There may be some contributors who are able to support their opinions with something concrete although in most cases it may well be more suspicion based. However, perceptions are a reality to those who feel they have been discriminated against so we have to treat the exercise seriously and at face value. Recruiters also do not help matters by aligning to the growing trend of refusing to explain the basis of decisions. This lack of transparency is bound to breed suspicion in candidates, more so in the final stages of a selection process.

The initial survey suggested that nearly 46% of people at an interview stage felt that had been discriminated against on the basis of age, usurping gender at 21% by quite a wide margin. This pattern of age discrimination being the most prevalent form was repeated in the other survey questions to a lesser amount but it was still the dominant type.

As with other types of discrimination age discrimination is illegal, and as the summary comments rightly points out it is important to follow the rules to avoid potential penalties and corporate reputational damage. Perhaps it should also be added that not only should the rules be followed but they should be seen to be followed. In other words more transparency in the hiring process and less litigation ‘risk avoidance’ actions.

It does feel something of a stretch to believe that anywhere near 46% of recruiting managers and Human Resources staff have an inherent age prejudice, although the current domination of agency involvement in the hiring process might well be a problem. HR people are professionals who generally have a sound understanding of the law, exercise good judgement and usually provide sound advice and guidance to hiring managers. The more established recruitment agencies may also fit into this category although the volumes of start-up agencies entering the hiring industry must inevitably attract individuals who are far more interested in generating commissions than in providing sound customer service and a fair and transparent filtering and selection process. It must be frustrating to the truly professional agents to see masses of new entrants with a limited or absent pedigree in recruitment entering the industry and arguably tarnishing its reputation with cowboy practices and other reputation damaging behaviours.

The first survey covered later stages of the recruitment process although it would be more than interesting to see results for the initial stages of recruitment including the CV filtering mechanisms used by agency staff and corporate recruiters. We can only guess at these at this time although I suspect the numbers of recruiters requiring a declaration of age, for whatever reason, as an integral element of the application process will do little to allay suspicions.

Age prejudice is also a major change management challenge. The demographics of many Western states suggest an ageing profile which many organisations have yet to take on board. In 2016 it may still be fairly easy to recruit people with a broadly younger profile but in the coming decades it will likely be far more difficult and probably damaging to an organisation’s reputation to avoid hiring older people. It is interesting to note that skill shortages are still promoted as a reason for lower productivity and yet we see limited enthusiasm by businesses for hiring and retraining older people. There may now be less propensity to ‘let go’ of older people simply because of their age but there still seems to be a perception that age is a barrier to learning.

Many organisations seem to adopt a policy of employing older people but not actually hiring them, especially in more senior positions. A sixty year old can be a prime minister and a seventy year old an American president but an over fifty year old being recruited into a middle or senior management position in business seems to be a completely different proposition. This perception of people in their fifties simply looking for roles that allow them to ‘coast into retirement’ is going to have to change, especially as state retirement ages are heading for seventy in the coming decades. Discriminating against the very groups that are likely to be the backbone of your customer base will not be good for business and the sooner this is recognised the better.

In searching for some legitimacy for these unwritten hiring policies it may well be that older people are staying with organisations for extended periods are effectively ‘blocking’ progress for younger managers who aspire to more senior positions (the career version of ‘bed blockers’?). Perhaps by filtering out older candidates recruiters believe that they are ‘levelling’ the ground for candidates in other age groups. Then there is the view that older workers are more expensive than younger ones. Without sifting through volumes of data, this would nonetheless make some sense given that on the whole older workers are more likely to have progressed into higher paying senior positions. Thus the premise that on average they are probably more expensive may well be true although why it should be used as a generic reason for filtering out candidates for what are likely to be roles with a specified salary band is unclear.

Hard evidence of discrimination of any nature tends to be difficult to come by. We know it does exist but the legalistic nature of today’s hiring conventions appears to have increased the difficulty of promoting transparency during the recruitment process. Candidates are often required to complete on-line surveys during the application part of the process recording age, ethnicity, gender and many other potential discriminatory attributes. Positioned as a method of ensuring that there is no overall discrimination they are then asked to ‘trust’ that these details are not used in the initial filtering process. If an interview follows hiring managers are instructed to be very careful about what they write down about candidates, and if positions are not offered the reasons given often rank amongst the blandest of the bland. ‘Another candidate was better qualified’ or perhaps deemed more ‘suitable’ but no actual analysis of why ‘X’ was preferred over ‘Y’. How exactly was ‘X’ more qualified than ‘Y’? The reasons for a lack of detail are no doubt associated with a lack of time and an unwillingness to invite a challenge. This may be entirely reasonable from a hirer perspective but it is unlikely to promote a sense of respect or trust among prospective candidates. If anything the recruitment process is even more opaque than it was a few decades ago. The discriminatory practices that were once more overt seem to have gone underground and may well be masked by the implications of fifty years of anti-discrimination legislation. Perhaps the law of unintended consequences is in force.

Steps to combat age and other forms of discrimination are typically framed in terms of legal and regulatory frameworks. This is understandable in that politicians react to the pressures of social change by introducing laws which recognise that the boundaries of what is and is not acceptable have shifted. They need to be seen to ‘do something’ and that ‘doing’ generally manifests itself as a law, or set of laws that redefine the rules under which we must all operate. Laws help define the rules but do not necessarily change essential behaviours. Discrimination moves out of sight and hearing often hidden behind spurious and uninformed prejudices, inter –generational rivalry or basic misunderstandings. It is only when fundamental cultural change has been attained can a perception of fairness and reasonableness be achieved. When we look at age discrimination the story is really about what each generation has to offer. It is often presented in generalised terms: older people offer experience while younger workers provide enthusiasm and perhaps more technology literacy. The reality will differ from person to person but even within the context of generalisations it is clear that the obvious answer to any recruitment challenge is to hire the best person for the job and don’t allow a general perception of an age group to evolve into a prejudice. Older workers can be enthusiastic and just as technically aware and younger ones need to be given a chance to progress, and perhaps be allowed to make the odd error.

Beyond legislation the steps that socially responsible organisations might include the following:

• Promoting retraining initiatives particularly targeting older age groups.
• Increasing transparency publishing an age profile of current employees and those hired in the previous years.
• Encouraging mentor schemes, pairing older with younger workers.
• Developing and issuing educational notes for recruiters and hiring managers on the implications of a steadily ageing population and what that means for the workplace.
• Actively promoting the concept of age diversity and ‘balanced teams’.

The TCMO study clearly suggests that there is still a problem of age discrimination in the hiring process despite several decades of legislation and its application. More laws are unlikely to be the answer. It will be far more helpful to work with what we have and promote age education and diversity through increased transparency and carefully designed anti-discrimination initiatives. Senior hiring managers must also step-up and ensure that their own decisions are an example of the sort of behaviours they expect others in the organisation to follow.

What shadow does your leadership cast?

 

TCMO Research: Discriminating Executives

http://www.tcmo.co.uk/discriminating-executives/

TCMO Research: Age, gender and flexi-working discrimination at executive level

http://www.tcmo.co.uk/age-gender-flexi-working-discrimination-executive-level/

In late 2014 during a ‘quiet’ period I set myself the task of writing what I thought would be a short deck on change management. Perhaps about 30 or so slides positioning a 60 to 90 minute presentation and discussion; something I could potentially use in an early client meeting.

It didn’t take long to fail on that one.

Four or five weeks and around 250 slides later it still felt like an incomplete work. The 30 or so slides had evolved into a two module seminar covering aspects of both change management and business performance improvement. No longer 90 minutes it would take a couple of days to go through it, and even with this amount of time the topics could really only be covered in a cosmetic, overview sense.

The problem is that change management is such a vast subject. Where exactly do you start? An academic or general management consultant might use John Kotter’s work as a logical point of origin, but I have my own ideas. For my part you can’t really make sense of change at the micro-organisational level without a pretty robust understanding of the macro-economic, financial and social factors extant at the moment. I have a firm belief that the ‘big’ issues and trends in the world have a pretty direct and causative link to what happens, or should happen, at organisational level. Organisation strategy, or the considered reaction to these elements, then becomes the link between your work as a senior transformation agent, your industry context and the world as a whole.

So that becomes a starting point in designing a transformation programme. We need to understand what is going on within the organisation’s industry, and the relevant macro factors before diving head first into the detail. Digital is clearly one of the most important trends around at the moment but there others also in the arena. It makes sense to undertake a strategic review of all of them, and perhaps prioritise by impact before attempting to position a corrective change in direction.

With a broad understanding of the global and industry factors we can take a more informed look at the organisation itself. It could be that some immediate action is required. Certainly with many of the companies I have worked with there has been a need to react quickly to a shift in market conditions. Technology changes have become particularly important in recent years as new entrants and competitors have identified and exploited cutting edge capabilities and functionality. The net result has been that revenue streams are often negatively affected for those that fail to recognise the opportunities. They have not reacted quickly enough either operationally or strategically. Thus, we are left with the classic situation of a cost base being out of step with a revenue base: costs must therefore be reduced.

A ‘transformation programme’ is a common reaction. Most organisations have not yet become used to the idea that transformation is now a perpetual need and that improvement should be continual. Operational line managers don’t generally raise a cheer when transformation programmes are launched due to a combination of ‘me’ issues and their disruptive effects on business as usual activity. My view is that they can live with them because they still see a transformation as an ephemeral activity; in other words it will go away at some point, at which point life can resume as before….

Putting the cultural reactions to one side, how should a transformation programme be approached? Fifteen to twenty years ago I entered the world of change management through a senior strategy role. The concurrent integration of four telecoms companies had created opportunities for cost saving synergies and a need to reduce the recurring cost base. There was no need to explore broader market factors or global trends; that had already been done. What we needed to do was to work out how to cut the organisation’s costs without impacting service levels.

I worked as a junior operational strategy director at the time but had already come into contact with the rigours of management consulting. As a senior manager I had been seconded into a number projects and programmes led by a succession of the big management consultancies. All were useful and have helped shape the approach I now take towards transformation work.

A simple and obvious concept soon adopted was that of finding ‘method improvements’ to help address the challenges of restructuring. Even today the boards of companies and other organisations in distress will simply apply an arbitrary reduction to current budgets. In the desire to remove cost there is often little thought applied to the implications for service quality, of a reactive and often ill thought out directive. On the face of it a 20% cut in costs looks like it will directly translate into a 20% saving in cash. This is rarely the case. Work cannot simply disappear without some consideration about where it will go. Method improvements are the necessary means for eliminating the work that will still be needed in order to deliver goods or services. It is vital to identify the required method improvements or a transformational restructuring will not be sustainable. In the absence of careful planning, people whose jobs have previously been made redundant will need to be re-hired to address the inevitable backlogs and customer complaints that tend to arise when service levels are not effectively maintained. Cost savings are therefore at risk of becoming transitory.

Method improvements addressing the removal of work can include all sorts of initiatives. A decision to withdraw from a market because it is no longer profitable will clearly destroy work, thus the removal of any associated resource becomes a rational and justifiable action. Cost savings relating to removing these activities will be sustainable. Process improvements can also remove unnecessary work. Lean Six Sigma techniques eliminate both the steps in processes and improve the efficiency of those steps remaining. After undertaking such exercises lower levels of resource are usually needed to undertake the work. Likewise, automation has clear and obvious advantages. Manual labour is reduced and work can usually be undertaken at a faster pace and with improved quality. Digital thinking can foster an environment where the end customer can be persuaded to undertake some of the required work, and its presentation can often be an improved customer experience. Centralisation and outsourcing are likewise options which can often help rationalise a proposed reduction in budgets. The need to match resource capacity with demand has also increased in recent years. A reduced down time or increased utilisation does not necessarily destroy any work but it can help an organisation work with a lower level of resources.

The key from a transformation perspective is to undertake a comprehensive review of the challenges ahead and options available before attempting to build that MSP plan. A transformation programme could include multiple initiatives ranging from developing demand/capacity plans, establishing shared service centres, outsourcing, manual process improvements or a comprehensive digital/IT project. An initial analytical and evidence based review should set the scene, the options, benefits and preferred route to achieving the objectives. Only then can the actual transformation programme be designed and later implemented with any confidence of success. First analyse, then implement.

By definition a transformation programme is finite. It has a beginning, middle and an end. However, the process of transformation is not finite. Organisations have always changed but the difference today is the pace of change: when one programme stops another one is usually around the corner. The real challenge at the moment is to get organisations to think in terms of continuous and unavoidable transformation. It will never stop, nor will the pace slacken. Whether led by a ‘Chief Transformation Officer’ or a ‘Chief Digital Officer’ the goal must be to force the pace at which the organisation moves from 20^th Century approaches towards addressing 21^st Century imperatives. This means a cultural shift in thinking, a move from dealing with change as a ‘one-off’ initiative needed “every three or four years” (a quotation from a CEO whose programme I was once assigned to) to something that will always be there. At programme level the disciplines of analysis and then implementation will still be required, but the whole process of transformation needs to become a business as usual production line.

There is little choice if organisations are to survive and thrive.

I listened to an HBR webcast not too long ago which posed the question as to whether larger organisations should now be appointing a ‘Chief Transformation Officer’ (CtrO), or a ‘Chief Digital Officer’ (CDO). It’s an interesting subject for a couple of reasons. A ‘C’ level title obviously has gravitas and seniority associations with it but it also might suggest something of a more permanent nature, somewhat distant from the project or programme director nomenclature more commonly used in transformation leadership. Somewhat more important is the discussion about the function and role a CTrO or CDO might fulfil. Where exactly would it fit in the panoply of organisational structure, governance and control?

Many organisations still see ‘transformation’ as something ephemeral, a project or programme which moves the organisation from an old paradigm to something shiny and new. It could be anything from an organisational restructuring exercise to launching a new operating model, or developing and rolling out a new IT platform. In the past it has often been seen in a project context with a beginning, middle and an end. A concept is developed, business case funding and objectives approved, a plan created and implemented, and the whole thing is handed over to operational ‘business-as-usual’ people. Job done; transformation complete!

This is no longer a tenable approach. Transformation is now a continual challenge. Not only is it perpetual in nature but it is occurring at an ever-shifting and accelerating pace. Business models that have worked for years or decades are at risk of being blown out of the water by competitors that are more fleet-of-foot, and who have a better grasp of the benefits of the latest technology and customer experience requirements. Organisations must therefore embed a culture of transformation into their DNA to survive. Leadership and direction is now a constant need, which does indeed suggest some single unifying force is required to help pull together the vision, strategy and execution on an ongoing and constant basis.

So what exactly would the function of a CTrO or CDO be?

As few, if any, actually exist at this time we need to define exactly what need such a function would address. We already know a lot about the broader issues it would face but we still need to work out exactly what the role it would play in resolving these challenges. Central to the role would be leadership in the vision of how organisations are able to adapt to the challenges and opportunities of technological change. It is not however purely strategy, nor is simply an extension of IT or entirely focused on the change management implementation aspects of transformation. It is a blend or synthesis of all three. Leadership and vision is required but a good understanding of technology is also required, as are some sound capabilities in the execution area. A CtrO would need to work with IT, strategy and senior functions to both contribute and help translate the broader longer term strategy into actionable plans. It would need to help source new ideas, internally and externally, and leverage the capabilities of IT and other support functions in constantly re-imagining and helping shape and re-build the operating model, using the best technologies available. Above all it is a unifying force, one that strives to help strip away silo thinking and working. In fast track world of the second decade of the 21^st Century, it could well be the most important role that doesn’t exist.

I am writing this listening to the latest Radiohead album, streamed on the Amazon Prime service. The hard copy CD version is not due out for another month but the tracks are already available, for a fee… Amazon are a pretty solid case study of how end to end digital thinking has managed to improve the digital customer experience. It is a far better service than I have had in the past and it started me thinking about what exactly is meant by a ‘digital transformation’.

‘Digital transformation’ is something of a misnomer as it’s really about far more than the IT aspects of digital. It is about speed, vision, capability, culture, change management, working together, unification and integration. It is about technology stretching into all parts of the organisation with the objective of creating an agile, continuous improvement focused culture, one which strives to create the ultimate customer experience. But it is also even more than this. It can also be about process improvement, perhaps achieved by digitising processes, enhancing the ability of employees to work, or general performance improvement. ‘Big Data’ and robotics are likely to play an increasing role in this space as will the ‘Internet of Things’.

Organisations who master the art of perpetual incremental transformation will naturally evolve their business operating models as their markets and customer requirements change. Digitally constructed organisations will constantly re-shape their internal control structures. New products and possibly whole business areas become far easier to identify, develop and launch. The technology platforms are the glue that binds together the vision with operating model and customer delivery experience. Decisions become easier in the sense that they become more data driven rather than trial and error guesswork. Organisations who successfully integrate discrete systems into single seamless delivery platform have a far greater chance of meeting the ongoing threat of market challengers. Not only are they able to defend themselves but the development opportunities are almost endless. The challenged become the challengers.

Which brings me back to Amazon. Having crushed competition in the consumer goods space what is there to stop them making some serious inroads into the world of services? They epitomise a digital leader and clearly have the skills, vision and capability to exploit an obvious world class fulfilment platform. Amazon Prime TV may be an early example of what is to come. What, for example, would stop Amazon applying for a banking licence, making inroads into insurance services or having another go in the travel area? How would these sectors respond?

Technology is constantly offering both opportunities and threats, but it is how quickly organisations are able to adapt that will define an incumbent’s chances of survival. Perhaps above anything else digital transformation is about the speed organisations can adapt to changing and more demanding customer requirements.

I am always on the lookout for subjects that might have an impact on my professional world of business performance improvement and change management. The ‘Management Control Cycle’ or ‘Management Operating Framework’ refers to the way in which organisations forecast, plan, undertake work and report on work. Most operate the cycle although more from an intuitive approach rather than structured method. I tend to think of it as a four quadrant cycle, linked but with a specific theme and application in each.

The ‘Reporting’ quadrant is where performance is measured and it’s here you find the KPIs (key performance indicators) and what I like to term OPIs (Operational Performance Indicators). OPIs are essentially useful indicators that help manage the business but which are not the main drivers i.e. they are not the high impact KPIs. Reporting is obviously of critical importance to any organisation because as we all know, if you can’t measure it you don’t really have much control.

Enter the EU.

A couple of years ago a new EU sponsored ‘Non-Financial Reporting Directive’ (the ‘NFR Directive’) was approved targeted at businesses with more than 500 employees. The intention is that in December this year it will be passed into UK law with a view to its regulations taking effect from January 2017. The directive basically creates an obligation for these larger entities to provide additional information to the ‘extent necessary’ for an understanding of the undertaking’s business, its social, employee and environmental circumstances, bribery and anti-corruption related matters and human rights.

A ‘non-financial’ statement will be incorporated into the management report and will include information on the company’s business model, policies, outcomes and risks relating to the NFR Directive and any relevant non-financial key performance indicators. Additionally listed entities will be required to outline their diversity policy relating to age, gender, education and professional backgrounds, and explain the absence of a policy if relevant.

To some extent parts of these requirements have been in place under various bits of law for some time but this looks like a kind of aggregation or consolidation regulation. Its implications are obvious in the sense that organisations are going to have to find ways of improving their tracking of a new set of ‘relevant’ KPIs and they don’t have much time to work it out. Creating appropriate policies may be a fairly straightforward process but developing meaningful KPIs on bribery, anti-corruption, human rights, ‘social and employee’ related matters and the environment are not without challenges. Some organisations may have been recording this data for some time but the difference between the past and next year is the formality of regulation and of course the fact that the results (currently) look like they will need to be published in the annual report.

There might be a debate on whether some or all these new KPIs can be published on a website, or secondary report, rather than within an annual report but until that is resolved we probably have to assume that the rigors and accuracy standards of financial statements will apply.

This may not be a performance improvement issue in the productivity sense but it’s certainly part of the ongoing impact of regulation on the change management environment. At organisational level the accountabilities for tracking and reporting on this data need to be determined as do the associated processes, formats and data capture mechanisms. It’s yet another example of how macro-level drivers affect the micro-world of change.

Ref:

http://ec.europa.eu/finance/company-reporting/nonfinancial_reporting/index_en.htm#legal-framework

Towards the end of 2015 I was asked to undertake a review of the sales incentive framework of a large international organisation. The review extended into most of the world’s geographic regions and covered almost 650 sales account managers and specialists. In retrospect it was probably one of the most interesting and challenging reviews, and brought back memories of the time I spent in B2C and B2B sales environments in the mid-1990s and early 2000s.

With the help of another member of the team undertaking a survey, some external benchmarking and data analysis, the review was delivered and recommendations broadly accepted. During my tenure in performance improvement consulting I have produced quite a number of reviews and, at least for me, a key component of a review is to have a good understanding of best practice, or my new preferred term: ‘sound and reasonable practice’. In other words if you are to undertake a review you really need to undertake it against some form of exemplar framework. This may not always be possible, as proved the case a few years ago when working on a local council strategy report. In the absence of a tried and tested exemplar framework defining sound and reasonable practice, researching and reaching an understanding of alternative options, or how others work might be a second best approach. But I digress.

The most interesting part of the review was in fact validating my understanding of what sound and reasonable practice in sales compensation actually is. With some background in both business and consumer sales functions, and indeed having had accountability for a sales commission function I did think I knew a bit about it. This proved to be only partly accurate. In the last ten to twenty years some aspects have in fact changed but others have not, and it is also necessary to consider the context of the sales function, its size and industry.

The premise of the review was that sales performance could be improved and costs potentially reduced by identifying changes to the incentive framework. Over time it had evolved and become more complex than it needed to be and more challenging to effectively manage. Its market had also moved on. Many opportunities to improve were identified and the client was provided with a roadmap towards evolving the incentive framework in a direction that was more likely to meet its cost objectives and market needs.

This particular client was far from unique in omitting to validate its sales incentive framework on a fairly regular basis. In the ten years I spent in sales functions I don’t actually recall any external review of the sales commission schemes. Changes were made regularly but usually originated from the ‘good ideas’ department of the sales function or imported by sales people joining the organisation. Costs were certainly challenged by Finance but these challenges were often fought-off by germinating fears about sales performance. In other words cut incentive costs and sales performance will fall. A growing sales force and increasing scheme complexity had to be met with automation. One member of the support team’s role was just to develop the sales commission scheme. His Excel modelling was first class but I’m afraid there was probably far more trial and error than there ought to have been.

My recent foray into the world of best or sound and reasonable practice has established that these ‘exemplar’ reference points are available. As suggested earlier, due consideration should be made of nature of the sales function (B2B/B2C), the industry within which it operates and, to a degree, its size. I qualify this last point because all sales functions, no matter what their size, ought to have a good grasp of good practices one of which is to ensure that the schemes in operation are written down, as simple as possible and easily communicated and understood by the people to whom it applies.

This is not exhaustive list but some other sales incentive areas to look at would include thresholds, quota, pay-mix, upside potential, payment frequency, complexity, caps, performance measures and eligibility. Then of course there is the administration, system and cost aspects to consider. Governance and change control are also important. How do schemes change, why and who actually authorises these changes? We are now far further forward than we were twenty or thirty years ago and sound and reasonable practices are better defined than they used to be.

In conclusion, it may already be self-evident for those working within sales but the incentive framework and schemes adopted are not the only driver of sales performance. Sales culture and leadership both play their parts as do the standard of communications, training, coaching, data quality and general leadership. However, the right approach to remuneration is still key. You can have the best of everything else but if the incentives don’t work for the sales teams or it is too costly for the organisation then there probably isn’t a long term future for the business. Both cost and ‘sales excitement’ objectives need to be met.

Feel free to get in touch if you think your organisation might benefit from a review of its sales incentive framework against internationally recognised sound and reasonable practices.

A couple of weeks ago a Harvard Business Review article appeared in my inbox which contended that ‘resistance to change’ was a myth because ‘people like change’. People do indeed like change but the logic was a little specious in that the connection between change resistance in corporate environments is not really related to change we create ourselves.

A vacation is a pleasant change of scenery, something most of us look forward to as a change of routine. A new car, gadget or an entertainment experience are all changes we enjoy. They are the sort of change we have control over and actually seek to create. Thus people do like this sort of change and it is highly unlikely that there will be any ‘resistance’ to what are intended to be pleasant experiences.

We contrast change situations which we have created ourselves and where we have some control over with the sort of change which does typically invoke active or passive resistance. I have encountered some form of resistance in all of the many change and transformation programmes I have been involved in. A change in organisational structure or the introduction of new processes is always disruptive in some way. Fear of the unknown is a natural response and employees will seek ways of mitigating personal risk to their status or power base. Imposed change is rarely seen as a positive at an individual level. What may be seen as a necessary response to changing financial and market conditions at a corporate level often translates into a personal threat at an individual level. This sort of change is not typically something we have created ourselves and not likely to be a pleasant experience. People generally don’t like this sort of change and will frequently seek ways of resisting it.

Overt change resistance is not something you tend to come across very often. Managers know that if they are seen as not following the programme there is a fighting chance that a target will be placed on their back. A reputation as a trouble-maker is not something you want in an environment where changes have to be made, especially if those changes involve organisational restructuring.

Resistance to change is far more likely to be covert and disguised. Lip service may be paid to the goals of the corporate change but underneath the ‘words of support’ there is no real drive or energy behind making things happen. Meetings are delayed or poorly attended. Key issues may be deferred or the implementation plan poorly designed. Agendas can be hijacked by items that are peripheral to the core challenges and less ‘streetwise’ team members might be encouraged to generate ‘issues’ which delay an implementation or distract attention. Targets can be made unrealistic in their ambition, virtually ensuring failure before the programme has really got underway. Business-as-usual can be prioritised drawing essential team members away from their change programme tasks and back into daily routines. There are dozens of ways a programme can be set-up to fail and all of them add up to the kinds of change resistance we see in both minor and major transformations.

So there are two forms of change. There is the sort of change that we create ourselves, the change that we enjoy and seek to repeat. Then there are the changes that are often imposed extraneously. It is this latter case where both active and passive resistance tends to occur. People do like change but only in a limited set of circumstances. They generally don’t appreciate the change required by corporate needs and will in many circumstances develop innovative ways of resisting it.

Change resistance is not a myth.

As the grey storm clouds of a global economic recession make their slow progress from the East, smarter organisations will already be formulating plans and strategies to combat its implications. Taking steps before a downturn, in the ‘good times’, can help avoid the sort of reactive and damaging decisions many will make when finally forced to do so. It is these reactive and forced decisions that often cause lasting damage to a company’s reputation and can impact its operational effectiveness and financial results for some years.

Having been involved in many transformations and restructuring programmes I have seen a number of approaches for dealing with income shortfalls. A classic mistake that most organisations will make when under pressure is to issue an edict to all budget holders instructing that they cut costs by a set percentage, perhaps 5% or 10%, or in the most severe cases 20% to 30%. On paper it works. The budget is slashed by the desired amount, operating revenues and costs fall into line and all is well with the world.

But is it?

From an accounting perspective, on the ‘plus side’, an organisation will take a one-off hit for restructuring costs but in theory will receive the benefits of a reduction in the overall recurring payroll operating cost. Discounted to present value the net of the one-off cost and ongoing savings should create, or should I say ‘protect’, overall shareholder value. So financially it seems to work but it is at the operational level that we often start to see problems, and hidden costs.

If there has been a structural change in market conditions you have a good argument for suggesting that work has effectively been eliminated and that the restructuring initiative is simply an exercise in balancing the cost base with declining revenues. Work previously required is no longer needed so we need fewer people. A cyclical change in the market which drives revenues lower creates a different kind of challenge. In this scenario you may still wish to maintain an operating capability but at the same time address a short term need to reduce the cost of the payroll.

It tends to be the cyclical changes in conditions where the issues arise. Many organisations will not distinguish between the two situations and will apply the same solution, a uniform % reduction in the budget. If the expectation is that conditions will improve over a two or three year period most organisations will expect their operational functions to maintain their capability but with less staff to do the work. The work has not gone away, it’s simply a case of there being fewer people to do it.

The pattern is always the same in these situations. Budget holders try to shift work around to other functions, work does not get completed or if it does its quality or timeliness suffers. Ultimately, it will impact on the service provided to customers.

It is vital therefore to rationalise a cost cutting exercise. A 10% or 20% reduction in headcount will indeed save ‘hard’ costs but it will likely impact in other ways. It may not be immediate but a poorly executed cost reduction initiative could ultimately impact revenue generation, the transmission mechanism being poor customer service. Operational managers may lay the blame on the cost reduction exercise but drops in revenues 18 or 24 months after the initiative will rarely get much of a hearing as a significant cause.

To cut costs sustainably and to minimise impacts of revenue generation it is essential to create a plan that allows the business to maintain its capability and service quality. The plan should manifests itself as a series of method improvements. These method improvements are designed to either eliminate work or ensure that it can be undertaken with fewer resources. Method improvements could include withdrawing from supporting certain markets. Quitting a market will obviously eliminate the need to support work in that area; in other words work is eliminated. Process improvements ensure that work is undertaken more effectively and efficiently – more work is undertaken by the same or fewer people. Technology can often be deployed to automate work previously undertaken manually. Organisational restructuring does not of itself save costs unless it is associated with another improvement initiative such as the creation of a shared service centre or perhaps an outsource arrangement. A new organisation structure is an output of a considered cost reduction plan; the elimination of work and improvement in the way it is carried out has allowed the organisation to administer itself with fewer managers and staff.

Closely associated with an effective cost reduction plan is some consideration of the impact on customer service. Organisations suffering from a major change in its markets may well be prepared to make some decisions about the service levels it wants to provide in the future. In this case if the method improvements do not in aggregate add up to the required cost reduction then a discussion on service levels must be had in order to address the gap. Though unpalatable, an exercise to define service levels across the operational functions should be undertaken so that senior management can take appropriate actions. Thus the plan for both a specific function and the business as a whole may well consist of a suite of method improvements and possibly an acceptance that certain functions will no longer be able to provide a level of service previously delivered.

Reducing costs is always a challenge. However, it is far easier and far more sensible to undertake a review of the operational cost base before a recession arrives than afterwards. From the perspective of early 2016 we are already being warned by international financial institutions, the BIS and IMF amongst others, about the impacts of a deflationary wave sweeping across the world. Another recession in North America and Europe may not yet be at our door but the leading indicators and forecasts are not encouraging. Smarter organisations ought to be undertaking strategic reviews of their operations today rather than in 2017. Will yours be one of them?

I’ve always had an interest in technology, more from the perspective of what it can do for us and what it will mean for us rather than how it works. Back in 1994 I started to get interested in the potential of the Internet and maintained a Compuserve account for a couple of years. The problem was that few other people had even heard of email, never mind actually having an email address. I also started undertaking a bit of personal research and still treasure the October 1994 edition of the ‘Internet’ magazine, the first ever edition and also possibly the first UK magazine devoted to World Wide Web matters. I worked in the cable industry at the time just as it was about to evolve into the cable telecommunications industry. It seemed right to investigate the potential of a technology that could well help change the industry. The potential was always there but few would have predicted just how much of an impact it would eventually have.

So to today, or yesterday, February 23rd 2016. Boston Dynamics, a DARPA funded, Google owned company heavily engaged in developing robot technology released a video on Youtube which depicts how fast the technology is changing.

You really have to see this:

These ‘Atlas’ robots are still slightly awkward in their movements but it is pretty obvious that the wrinkles are slowly but surely being ironed out. Now the military applications are pretty obvious but it also looks like they are also working on commercial applications. Those heavy lifting jobs requiring limited dexterity look like they are now on countdown to being eliminated. I am no expert in the detail but it looks to me like a lot less than ten years before these ‘lifting robots’ are available as ‘off the shelf’ items. Perhaps not as domestic cleaners just yet but even here, once accepted in a commercial environment, we will soon start to see them enter the home.

I continue to read about how fast robots are developing and what they are likely to be doing. It is always good space filling material for news programmes, the middle pages of newspapers and specialist interest groups in the Blogosphere. What there is much less of, is an impact analysis of what happens when it does gain critical mass. How are we going to pay for these robots if the people who might actually buy them have had their jobs displaced by them?

Over time new technologies tend to become an accepted part of our social and economic infrastructure. Despite what could be a fundamentally different change about to be unleashed I am sure that eventually we will be interacting with robots on a daily basis and no doubt consider it an entirely normal and acceptable part of our lives. Though the transition could be painful, more so in that the widespread introduction of robots could take place not over decades but over years.

A general introduction of robots in Western nations will force developing nations to either cut labour costs or adopt the same technology. If we look at the costs of operating in Asia today, China is no longer the low cost manufacturer it once was; look to Vietnam for the lowest labour costs. But even Vietnam will be challenged in competing with a labour force that doesn’t demand higher pay, has low maintenance costs and can work 24/7. We often see the threat of robots as a developed economy issue but in a globalised economic environment it may be that the real impacts will be seen in those nations relying on low labour costs for export muscle.

As nationals of developed nations our concern will be for our own situation. If I’m a shelf stacker and become displaced by a robot what exactly will my future be? Do I retrain, if so to become what? If I can’t find any paid work in my chosen fields, then what? It is quite likely that these are the questions that politicians will be challenged with. How will they react? Will there be robot income tax? Will corporation taxes have to rise to pay for the costs of displaced humans unable to find paid labour? How will pensions be paid for?

Income is obviously high on the list of concerns for any society but it is not the only concern. What exactly are people to do with their time? Is this perhaps the destiny of huge swathes of society? Should we be promoting the education and entertainment sectors far more than today? Perhaps not necessarily as preparation for productive labour but to keep people who would otherwise be employed, occupied. If we adopt this course of action how exactly do we incentivise the people we want to keep on working, the scientists, engineers and medical staff and others who help maintain the fabric of society?

What are the responsibilities of companies and other organisations who plan to introduce robot technologies that displace hundreds of thousands of people? In the past it has been acceptable to simply ‘restructure’ with a redundancy payment and perhaps a bit of outplacement support. This may be far less acceptable in a future where there are simply no human jobs left. A restructuring in this instance really would be the end of the employment road for many people. How should companies adapt their release policies to cater for this new situation? Should expectations be set at the onset of employment? In other words no ‘evergreen’ employment contracts. Should employees be advised far further in advance of their impending release than in the past so that they can prepare? In other words should we be changing our whole attitude to employer – employee relations in a world where ‘robots are our greatest asset’?

When you do start to think about the implications of this technology the questions start to pile-up by the dozen. The worrying part is that there are not many people even thinking about these challenges and even fewer committing pen to paper and suggesting answers. In 1994 the Internet was a single magazine a few thousand basic web pages and a few million email accounts. By 2004 it had taken hold across the developed world and by 2014 virtually all major software applications had been web-enabled and Web had caught the imagination of some of the least developed nations. It’s now everywhere.

Judging by the Boston Dynamics video and some recent statistics I have seen in the growing acceptance of robots I don’t think we will have to wait until 2036 before we see robots everywhere. My guess is that the world of transformation programmes in the 2020s will look somewhat different than those of the last few years. Those skills in project and programme management, Lean Six Sigma, ITIL and other performance improvement initiatives could well become software algorithm re-writes capabilities rather useful certifications for humans. Restructures may well become human organisation elimination rather than a new Visio organogram.

At the moment the government response is to promote software development skills in youngsters going through school. This may work for now but will not be much help when software writing software really takes hold. As libraries of pre-written code are generated and artificial intelligence (AI) start to create algorithms capable of following basic functional requirements the landscape will change again. It’s not HAL that I fear in the world of AI but the more subversive threat of computers removing our ‘thinking’ roles. How then to we prepare our children for work, or non-work as the case may be?

My view is that we need some far bigger thinking than has taken place so far. Robots ad AI will not go away. We need to think through the implications of these technologies before they permeate through our whole social and economic infrastructure. The Internet has created more jobs than it destroyed and perhaps there is an argument that robots and AI will do likewise. However, until we truly analyse and gain a better understanding of their impact we will remain reactive and subject to unpleasant consequences.

After the 2008 banking crisis I often saw comments to the effect that ‘nobody could have seen it coming’. It was totally untrue of course. Similarly, the potential impacts of robot technology and AI are (sporadically) starting to be talked about. Look closely and you can see these robots on the horizon marching towards us.

We have some time to prepare for their arrival but not a lot.