Tag Archives: Change

How Do You Make the Most of Changing Your BHAG? Eight Points

Situation: A company recently changed their BHAG (Big Hairy Audacious Goal) to focus on premium customer acquisition, but as a small-to-medium sized company has a 3-year focus instead of the typical 10-20 year focus of a larger company. They want to make this a company-wide effort. How do you make the most of changing your BHAG?

Advice from the CEOs:

  • First, it is measurable and specific – grow to 10 times your premium current customer base in 3 years. Your marketplace is changing quickly, so a shorter-term BHAG makes sense. Call it your 10/3 Program or 10/3 Challenge.
  • Is it too shallow? No – this is something that people can rally around. It represents significant company growth.
  • What happens when you achieve the goal? Celebrate in a big way, and then set the next BHAG.
  • How do you create excitement? Every time you hit a milestone, bring in pizza, or conduct a special event. Celebrate.
  • Success = Change. What does that next milestone mean for the company and your capabilities? This isn’t just about new clients, but also includes scaling your delivery systems and customer service. Rally your non-sales staff around these important tasks.
  • Create milestones not just around sales numbers but also around timelines. Tie incentives to achievement of BHAG milestones.
  • Conduct a company meeting to announce the BHAG, and announce progress in future company meetings.
    • Progress against milestones.
    • Share pipeline data to maintain excitement.
    • Develop scale-up programs and share progress of non-sales departments as they ramp up services.
  • Think about building a competition around the goal. As long as this fits your culture it can add excitement to achieving both milestones and the BHAG itself.

Note: The term ‘Big Hairy Audacious Goal’ was proposed by James Collins and Jerry Porras in their 1994 book entitled Built to Last: Successful Habits of Visionary Companies.

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How Do You Manage Customer Change Orders? Three Suggestions

Situation: A mid-sized company has taken over management of the supply chains for several large customers. The products that the company manufactures have long lead times both for sourcing materials and manufacturing customer orders. Sometimes customers either ask for additional production on an existing order in process, or ask for deliveries to be spread beyond contracted timelines. Either situation has a significant impact on the cost of producing the order and company profitability. How do you manage customer change orders?

Advice from the CEOs:

  • The issue is one of managing contracts and customer expectations. Because this is hurting the company, prime the customers now that things will need to change in the future. Depending upon the level of comfort the response can be reactive or proactive.
  • A proactive response: because this happens with some frequency, establish a change order schedule and share this with the customers. Your message will be that you are happy to accommodate changes in orders, but you need to recover the cost of these changes in order to be able to continue supplying the customer. Include the change order schedule in future customer purchase contracts. This may cause them to have second thoughts about requesting changes in orders.
  • A reactive response: the next time a customer makes these demands the response can be: “We’ll take care of you this time but when we draft our next contract we have to adjust the terms of the contract so that it is a win-win.”
  • The appropriate response depends on value of each customer’s business to the company – both revenue and profit – and your confidence in the relationship with the customer.

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How Do You Overcome Resistance to Change? Five Suggestions

Situation: A CEO manages more than one company and is overcome by the complexity of the task. The biggest challenge is the oldest of the companies which is increasingly resistant to change. How do you overcome resistance to change?

Advice from the CEOs:

  • Regardless of the age or experience of any company, meeting on-going performance objectives is critical. The fact that strategic imperatives have led to the formation of spin-off entities does not change this. Managers and key personnel are expected to perform to reasonable expectations, whether in a family or non-family business.
  • Resistance to change may be a symptom of more fundamental issues. Is the older business receiving adequate attention from upper management? Are they receiving sufficient funding and resources to complete their objectives? Do they have the latitude to make decisions necessary to achieve their objectives? If the answer to any of these questions is no, then address this first.
  • Presuming that the answers to the questions mentioned above are positive let the key personnel in this company know that they remain a critical business entity. Telling them this 1-on-1 is not enough. They need to hear this in public forums within the company. They need to be clear on the opportunity that the company enjoys, and what this means both for the company and for them as employees.
  • You cannot over-communicate the vision, mission and opportunity. They already know that you are juggling multiple balls and need ongoing assurance that they remain important.
  • Make sure that you have a right person handling day to day matters in the core company and in each of the other entities so that as they grow that they can support themselves.

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Can Bonus Plans Differ Between Departments? Four Thoughts

Situation: A CEO wants to build a new bonus program for the company’s professional services team. He wants to include a customer satisfaction component, because the group is historically weak in this area. Does it make sense to have a different bonus plan for professional services personnel and managers than for product development personnel and managers? Can bonus plans differ between departments?

Advice from the CEOs:

  • Many companies have different bonus structures for different departments. This is natural because different departments have different functions. For example, Sales may evaluated for bonuses based on a combination of revenue and gross margin achievement, while Finance is evaluated on profitability and Product Development is evaluated on hitting product launch schedules and new product sales.
  • Changing bonus structures can be a sensitive matter. If the team impacted is not included in the process of drafting the new plan, changes may be perceived as negative. If this is the case, it’s better to frame the new program so that you limit your commitment to it to just one year, and let the team know that this may change this next year.
  • How do you go about including customer satisfaction surveys as a component of bonus calculation?
    • If you want to use customer satisfaction as part of the plan, benchmark customer service satisfaction before you launch the plan. If you don’t benchmark, how do you know whether performance improves?
    • Survey response rates will be an issue – you won’t get 100% and may get a survey response rate of 10% or worse. Be prepared for this and make sure that data with a low response rate will support your objectives.
    • A survey is a lagging metric. If you can find a measurable leading metric to use as well this is better.
    • Be careful of how the survey is drafted and who conducts it. Both can bias results.
  • As an alternative to making customer satisfaction part of a bonus plan, consider starting a customer satisfaction or loyalty program. The most important question to ask will be: would you recommend us to your peers?  Any low response guarantees a follow-up call from the company.

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How Do You Negotiate Milestone Contracts? Three Suggestions

Situation:  A company’s contracts are based on milestones versus time and materials. This is common for their industry.  However, end products are poorly defined at project outset and product requirements frequently evolve and change, making milestones squishy. How do you negotiate milestone contracts and payment schedules?

Advice from the CEOs:

  • In addition to payment schedule, there are four elements to a project negotiation – specifications, schedule, project flow, and budget. Tell the client that to hit their budget target, they need to give you control of any two of the other three factors. This means that if they want to specify budget and schedule, then they have to yield you control of the specs and project flow. Any change to these means that they have to be willing to change budget and/or delivery date. Finally, to keep the project going on a timely basis, they must make milestone payments on time and on schedule.
  • Try to transform the project, as much as possible, to time and materials. Here’s your talk line:
    • To give you 100 hours of effort on a fixed bid basis, we have to budget 110. Time and materials, in the long run is less expensive because you only pay for what we need to deliver your product.
    • Your credibility to deliver on a time and materials basis will be based on past performance and the relationships that you have developed with your clients.
  • Milestone contracts are especially difficult in low margin industries because of project variability. One solution is to bid 130 hours cost for 100 hours work. The challenge is that this looks uncompetitive, especially compared with offshore resources. Therefore, an option is to develop offshore capability so that you can deliver your projects using a variety of resources with variable costs. Price everything based on domestic prices, but use offshore resources to improve your margins and your ability to cover project overruns without killing your profits.

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How Do You Manage Change? Four Perspectives

A company is experiencing change in both organizational complexity and culture as it grows. Employees feel that the company doesn’t have the same team atmosphere that it had when it was smaller. How do you manage change associated with growth and new opportunities?

Advice from the CEOs:

  • Change is an inevitable part of growth. Employees need to understand this simple fact. Change is tied to: age and stage of growth, changes in leadership, performance challenges, changes in customers and competition, and changes in the working environment. For example, the simple addition of Millennials to the employee pool will change the nature of a company.
  • What else do we know about change? That it is: an opportunity, filled with uncertainty, complex and disruptive.
  • Typical responses to change from staff are: denial, resistance, anger, fear, confusion, being divided about the impact of change, and chaos. It is important to understand this and to communicate to employees that their reactions are normal. They will also get over these reactions as they adapt to new conditions.
  • Denison Consulting has developed a model that represents four factors – Mission, Consistency, Involvement and Adaptability – with measures under each factor. The model provides a visual representation of how the organization currently measures up in each of the twelve factors, and provides a clear and understandable map of where the organization needs to focus to make the changes required to survive and thrive.
  • Special thanks to Paul Wright of Denison Consulting for his input to this discussion.

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What are the Keys to Successful Strategic Change? Six Foci

Situation: A company wants to execute a strategic shift in direction – taking it into a new business which will diversify its offering to customers. The CEO needs to assure that everyone is on-board to both speed the shift and minimize cost. What are the keys to successful strategic change?

Advice from the CEOs:

  • Be front and center with your vision. State the vision clearly, in terms that everyone will understand. Focus on the benefits of the change for the company and employees and be realistic about the challenges involved.
  • Be enthusiastic. This is critical to all change efforts. Be cheerleader as well as leader.
  • Plan ahead and begin to communicate well in advance of the anticipated change. Plant seeds and encourage the team to generate options or solutions. Give all levels of the organization the opportunity to become involved and participate in both design and implementation of the change.
  • Be consistent in messaging and support across the team. Don’t vacillate or promise what you can’t deliver. Employees will watch for the presence or absence of consistency. If it’s absent, they won’t join in.
  • Conduct scenario analyses. This enables you to try out different futures and implementation options.
    • Identify critical issues. Look at possible results – first consider the “most likely”, then “best” and “worst” possible outcomes. Considering best and worst generates new alternatives, and improves the perspective on the most likely outcome.
  • Conduct visioning exercises. Create a graphic vision of possible futures.
    • This increases group participation and sparks creativity.
    • It improves group function, thereby enhancing results.
    • Visual representation is more memorable than standard bullets and lists.
  • Special thanks to Jan Richards of J G Richards Consulting – jgrichardsresults.com – for her insight on this topic.

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How Do You Respond to Market Changes? Three Options

Situation: A company has a successful product, but the market is changing. Previous customers were savvy, but the market is shifting to more naïve customers who don’t understand how to use the product. How so you respond when the market for your product changes?

  • What you are seeing is a typical market evolution. (See Clayton Christensen’s book Crossing the Chasm.)
    • When a new product is introduced, early adopters are typically savvy users who quickly grasp the utility of the product. They don’t mind some inconvenience provided the product is useful.
    • As the market matures and starts to attract mainstream customers, new users will not be as sophisticated and expect the product to be easy to use.
    • If you don’t adapt to these new customers your product will languish as new competitors enter the market with user-friendly adaptations.
  • The path is clear. Figure out how to make your product easy to use. If you use a GUI (graphic user interface) make the GUI intuitive. Allow customers to get what they need with as few choices or clicks as possible.
    • These changes may alienate more sophisticated customers, but they usually only represent a small segment of your potential market.
  • Add a customer-friendly service component. This builds a service income base around the product. You have different options.
    • Align the customer with appropriate level of resource – you may not require high level resources to assist the customer, particularly if the product is one where the service consultant only needs to be one page ahead of the user.
    • Outsource the service component to a partner or use independent contractors.
  • Consider a remote monitor system:
    • A dashboard interface with easy to read visuals or messages that tell the customer when service is needed. This will enable them to perform simple maintenance using your tools, or alert them when they need to contact you for service.
    • An example is Norton’s evolving system of products that enables an unsophisticated home computer user to either use Norton tools to perform routine maintenance, or directs them to the Norton web site for assistance or more sophisticated solutions.

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How Do You Shift from Craft to Lean? Four Steps

Situation: A company has an engineering structure which emphasizes function over cost. As a result, there is little collaboration between design and manufacturing, and little design for manufacturability or cost control. This contributes to a last-minute mindset and expensive solutions. How do you shift design engineering and manufacturing from a craft to a lean mindset?

Advice from the CEOs:

  • Changing how people think and act may also mean changing people. Are you prepared for this? If not, then it may be difficult to achieve the change that you desire.
  • Let’s use a mindset change in another area – sales compensation – as an example. In this case, the sales team had previously focused primarily on revenue, with no incentive to drive margin. This impact was continuously eroding margins, though the company realized revenue goals. The mindset was changed by introducing a new system with dual incentives: to retain their position, a sales person had to hit at least 85% of their revenue target, however commission was based completely on the gross margin from their sales, with a bump in commissions when they hit 100% of their revenue target. This system drove both revenue and margin targets and was very successful; however, the company lost a few sales reps who couldn’t make the adjustment.
  • Transferring this lesson to the engineering situation, design an incentive structure that drives both function and low cost manufacturability to achieve both targets simultaneously.
    • Task your VPs of Operations and Manufacturing – and the key managers of your design and manufacturing teams – to create a dual incentive system that meets both function and manufacturability objectives. Measurements may include:
      • Actual vs. initial estimated manufacturing costs.
      • Margin on final product.
    • Once the parameters are developed, clearly communicate these to all affected employees up front to set clear expectations for the future.
    • Incentivize your VPs and key managers jointly on collaborative efforts and their ability to develop joint solutions.
  • Another solution which will speed the process – put design and manufacturing engineering in the same work space instead of separating them. This encourages the teams to work together.

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How Do You Introduce a New Solution Without Asking for a Change in Behavior? An Approach

Interview with Kiran Kundargi, CEO, Apsora

Situation: A company seeks the best way to introduce a novel health monitoring solution. The challenge is that people don’t want to change their routines. If you can creatively fit into existing routines with minimal behavior change this facilitates adoption. How have you introduced a new solution without asking for a change in behavior?

Advice from Kiran Kundargi:

  • As the population ages health care costs rise. A solution that can reduce healthcare costs while allowing more seniors to remain in their homes this can significantly reduce health care costs. The sticky part is making this solution a part of the elder’s and their family-caregiver’s daily routine.
  • Our solution is to seek the low hanging fruit – post-hospital discharge recovery at home. Seniors who have been discharged from the hospital following treatment or surgery often receive strict instructions to take their medication, adjust their diets and engage in regular exercise. This requires changes in the senior’s routine, and non-compliance is a leading cause of readmission.
    • Effective October 2012, Medicare will stop paying hospitals for readmissions that it deems avoidable. This forces hospitals to take a more active role in follow-up care following discharge. Our online health monitoring service, Nclaves, provides a low cost solution.
    • Nclaves facilitates communication between the elder and his or her children and grandchildren using Internet and hand-held technology. This enables family to help their senior comply with post-hospital instructions.
  • We approach this opportunity in four phases.
    • We start by using the Internet. We have made our solution easy for physicians and hospitals to find. Internet activity is supplemented with presentations to monthly meetings in hospitals. By acting as an information resource on the change in Medicare regulations, we can introduce our solution to those who will suggest it to patients. Early adopters will enable us to build case studies demonstrating both technical viability of our solution, benefit provided to patients, and impact on readmission rates and cost of care.
    • Next, we will approach large employers. Employers understand that increases in hospital costs will adversely affect the cost of insurance benefits for their employees. We want them to include Nclaves as part of their employee health and wellness programs.
    • The third step is insurance companies. These companies have the leverage to specify and suggest options to both patients and providers.
    • Our final step is broad market acceptance. Once both payers and providers are on-board, we will be ready to work through alliances, the Internet and broader public relations and advertising campaigns to build market acceptance.

You can contact Kiran Kundargi at kkundargi@nclaves.net

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