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4.19.2006

Competencies

As discussed in yesterday'’s post, best practices are the characteristics of superior performing organizations. Our context for best practices @AKL is growth so our research into best practices focused only on those organizations that were industry leaders for sustainable growth.

Within that context, "what does a best practice look like when practiced by individuals?" is the question we are addressing today. The following items represent common definitions and a random search of goggle news on the topic.

http://en.wikipedia.org/wiki/Four_stages_of_competence
Four stages of competence
In psychology, the four stages of competence relate to the psychological states involved in the process of progressing from incompetence to competence in a skill:
1. Unconscious incompetence: the individual neither understands or knows how to do something, nor recognizes the deficit or has a desire to address it.
2. Conscious incompetence: though the individual does not understand or know how to do something, he or she does recognize the deficit, without yet addressing it.
3. Conscious competence: the individual understands or knows how to do something. However, demonstrating the skill or knowledge requires a great deal of consciousness or concentration.
4. Unconscious competence: the individual has had so much practice with a skill that it becomes "second nature" and can be performed easily (often without concentrating too deeply). He or she can also teach it to others.

http://www.ncrel.org/sdrs/areas/issues/methods/assment/as7scans.htm
Skills and Competencies Needed to Succeed in Today's Workplace
Because the world of work is changing, the U.S. Departments of Labor and Education formed the Secretary's Commission on Achieving Necessary Skills (SCANS) to study the kinds of competencies and skills that workers must have to succeed in today's workplace. The results of the study were published in a document entitled What Work Requires of Schools: A SCANS Report for America 2000. A summary of the findings are provided in the tables below

http://www.cs.state.ny.us/successionplanning/workgroups/competencies/
competencies1intro.html

Definition of a Competency
A competency is a characteristic of an employee that contributes to successful job performance and the achievement of organizational results. These include knowledge, skills, and abilities plus other characteristics such as values, motivation, initiative, and self-control.

Why Competencies?
Competencies are a critical tool in workforce and succession planning. At a minimum, they are a means to:
* Identify capabilities, attitudes, and attributes needed to meet current and future staffing needs as organizational priorities and strategies shift, and
* Focus employee development efforts to eliminate the gap between capabilities needed and those available.

http://www.forbes.com/technology/2006/04/15/derek-bok-university
_cx_db_06slate_0418bok.html

The New 'U'
"…tools are already available that can help campuses assess such important competencies as critical thinking, writing, quantitative reasoning and proficiency in foreign languages...universities have not yet become "learning organizations"--at least not in the sense that the term is used in other well-run institutions...

Although we did not start 25 years ago with the goal of identifying competencies for fast growth, we assessed a wide range of public and private organizations as well as across industries when building competency-based training programs, performance management systems, and compensation packages.

We built many models for the individual contributor (individuals without responsibility for others - just themselves) and the leader. When combining all of these models -– we found three common themes for Leader Model:

  • Self-Knowledge: This cluster of competencies looks at the basic values, motives, self-concept, and perceived social role of individuals in an organized environment. At its very core is the conflict between organizationally imposed constraints (job description, performance evaluation, compensation, etc.) and the individual with all their idiosyncrasies.
  • Problem Solving: This competency cluster focuses on how a leader searches and processes information, solves problems and makes decisions. Considered the most elusive of the three clusters, it has the strongest relationship to leadership and managerial performance. Although the process is not linear, it can be viewed within a logical sequence.
  • Relationships: This competency cluster represents how a leader relates with others in the work environment. Although predominately interpersonal and intragroup, this cluster also takes into account how a leader relates to everyone inside and outside the organization. It is how a leader executes their business strategies through others to build corporate value.

Using the same process for Individual Contributors, this model trades Problem Solving (still important but not as critical) for Technical Expertise:

  • Self-Knowledge: This cluster of competencies looks at the basic values, motives, self-concept, and perceived social role of individuals in an organized environment. At its very core is the conflict between organizationally imposed constraints (job description, performance evaluation, compensation, etc.) and the individual with all their idiosyncrasies.
  • Relationships: This competency represents how the individual relates with customers, team members, other internal personnel, and their managers. Unlike the leader model with the emphasis on Problem Solving, this where the individual performs in broad daylight for everyone to see.
  • Technical Expertise: This cluster focuses on the technical side of a job, how well the individual performs the specific functions of a job or role within the organization.

What is the importance of reducing the best practices of your business down to the individual level?

If your objectives are to double sales this year or double margin in the next quarter by reducing costs, there must be a clear picture of what must happen. Just focusing on the best practices becomes a daily management problem, most of those measures take a long time to record. In order to manage growth on a day-to-day basis it must be broken down to the individual performer level. What must this person do today, this week, this month to achieve the goal?

Remember you can only manage what you measure, and day to day is about what people are doing now.

Tomorrow: How do I measure organizational, team, and individual performance.

4.18.2006

Best Practices

Over the past 27 years, I have tried to find some universal components of business - some way of comparing companies regardless of size, industry, and nationality. I did not find one but several universal laws of business that allowed us to compare and therefore build a model of the ideal. One such model was "Best Practices" where business operations can provide a competitive advantage over the competition. Before we start, let us define best practices and how does a company develop business operations that make them distinctive from the competitions:

http://en.wikipedia.org/wiki/Best_practices: in business management, a best practice is a generally accepted "best way of doing a thing." A best practice is formulated after the study of specific business or organizational case studies to determine the most broadly effective and efficient means of organizing a system or performing a function. Best practices are disseminated through academic studies, popular business management books and through "comparison of notes" between corporations.

http://en.wikipedia.org/wiki/Benchmarking
: benchmarking (also "best practice benchmarking" or "process benchmarking") is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within their own sector. This then allows organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to challenge their practices

And a quick review of today's news on best practices:

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_
view&newsId=20060413005010&newsLang=en
: Growth Strategies for Software Companies - Featuring Best Practices on Software Company Management Strategies. This collection of over 3,600 pages of best practices material is the definitive resource for software executives and an incredible resource that will have a direct financial impact on successfully growing your software business - and all major events you face along the way such as management team compensation, valuations, exit strategies, product development, working with financial partners and more

http://biz.yahoo.com/prnews/060417/clm008.html?.v=39
: The Best Practices Toolkit for Improving Quality Assurance in the Pharmaceuticals Industry
CHAPEL HILL, N.C., April 17 /PRNewswire/ -- as the cost and risk associated with Pharma R&D and drug launches rise, companies are faced with conflicting needs to reduce costs and ensure quality. Whether it is in the lab, clinical trials or a manufacturing facility, a lack of Quality Assurance can delay or destroy a successful drug launch. To assist executives in their strategic growth plans, analysts at Best Practices Research and Consulting have recently put together a toolkit for improving R&D Quality Assurance based on several recent studies with 10 of the top 20 Pharma companies. To view this toolkit please visit: http://www3.best-in-class.com/de286.htm

OK, so what does this common definitions and a random sample of news?
  1. Most large (and very successful) companies have invested considerable time and energy into establishing an internal set of best practices as part of their operational DNA
  2. This process usually entails some benchmarking to ensure their identification and development of best practices are not insular; a series of opinions with no basis in reality
Our approach to the benchmarking/best practices issue is to present you with a generic set as a starting point. One could argue that starting with 75% right is not sufficient, but as most business owners know – making progress on something "‘good enough"’ will always beat waiting for perfection. Moreover, startups and micro businesses need processes to benchmark against. When you are in the early business stages, you do what is necessary right now and worry about the future tomorrow.

We present you with a starting point and as the company grows, the best practices you develop will become unique and part of brand offer.

For more details on our 34 Best Practices, clink on our glossary.

4.15.2006

Sustainable Growth

As I began the first of 44 articles on Business Growth, Growth that is Fast and Sustainable, what struck me is how this topic is a major economic concern for countries, but there is almost nothing on the subject as a business issue.

A quick review today’s news:
KARACHI: Minister of state for finance and economic affairs Omar Ayub Khan has said the government is focusing on the development of infrastructure, energy and human resource development to sustain and further improve the GDP growth rate of 8.4 percent achieved in the previous financial year.

Brussels: Competitive and Sustainable Growth is one of the four thematic programmes of the Fifth RTD Framework Programme (1998-2002).
Conceived to help solve problems and to respond to the major socio-economic challenges facing Europe, the Programme, with a budget of Euro 2.705 million for the period 1998-2002, has clear targets: to increase economic growth and create new jobs in Europe, by sustaining the innovation effort of European industry towards improved competitiveness and to support Community policies that enable competitive and sustainable development.

And a quick review of today’s web search:
The sustainable growth rate is a measure of how much a firm can grow without borrowing more money. After the firm has passed this rate, it must borrow funds from another source to facilitate growth

G* = Earnings Retention × Asset Utilization × Profitability × Financial Leverage

Resource-Based Model
The currently dominant view of business strategy – resource-based theory – is based on the concept of economic rent and the view of the company as a collection of capabilities. This view of strategy has a coherence and integrative role that places it well ahead of other mechanisms of strategic decision making.

Organizational Capability Approach
"An organizational capability approach nurtures three of the most critical factors essential to achieve superior, sustainable results:
  • strategic focus,
  • organizational alignment, and
  • operating discipline.
Conversely, taking action to achieve strategic focus, organizational alignment, and operating discipline develops capability thinking."

Robert Tomasko: "When it comes to business growth, bigger is not always better. The key to achieving growth is to change the way we think about it. Geniune growth has more to do with reaching maximum potential than reaching maximum size."

OK, so what does this random sample of news and ideas represent?
  1. That growth for your business must be clearly defined. Tomasko’s definition that genuine growth is about potential and not size demands that the entrepreneur decide how big are their dreams. This provides the context to analyze the market and identify potential for growth

  2. Investopedia’s definition of sustainable as maximum growth without borrowing money is aligned with all of our research on the impact of growth on working capital

  3. 1000ventures analysis identified two types of growth: resource and capability further narrows the definition to one that is workable for startups, micro and small businesses – given your access to resources, what is the maximum capability your current infrastructure can deliver.
When we first hatched the idea behind Applied Knowledge Laboratories in 2003, our model for sustainable, fast growth reflected the research literature and the reality of North Americans best performing companies.

We kept our scope narrow to the following definition: given the resources available, how does a business maximize everything to grow faster than the market and their industry without securing more money or destroying working capital. This definition leads us to the following

The Growth Equation
Optimum Sustainable Growth = Market Intelligence + Brand Superiority + Talent + Operations

The Components of Best Practices for Sustainable Fast Growth are:

  1. Driven by Market Intelligence to

  2. Build a plan for Brand Superiority

  3. That maximizes your current Talent and

  4. Can be flawlessly Executed NOW
Optimum Sustainable Growth - Double the Sales, Double the Margin
The road to sustainable (and fast) growth is not for the weak of heart. Less than 10% of companies in the North America qualify as a "cheetah." It takes sales twice your industry average with margins meeting the same hurdle.

Market Intelligence - The Driver of Competitive Advantage
In order to design a strategy that achieves growth, the company must excel at understanding and applying market intelligence about customers, competitors, and the economy's impact on their industry
  1. Keep Current Growth - identify and target most profitable customers to retain

  2. Take Business from Competitors - identify their top customers that match your offer - what will it take for them to shift

  3. Anticipate Growth - identify where the market is headed - what will it take to be first

  4. Move into Comparable Markets - identify and target new markets for existing products & services

  5. Invest in New Offers - identify and target new markets to develop new products & services
Brand Superiority - Create a plan for Market Leadership
All successful growth strategies have some common characteristics:
  1. Spread the risk - create a portfolio of complementary initiatives

  2. Take Small Bites - set up smaller growth objectives in complementary areas - rule of 1%

  3. Balanced Initiatives - blend organic growth (existing clients - existing products & services) with new growth

  4. Commit to Superior Value - ensure supremacy in one of three areas - price, quality of products & services, overall experience - avoid being average

  5. Expand Growth Opportunities - management is the constraint, not market demand

  6. Manage for Growth - managing a growth portfolio as a distinct executive function
Talent - Attracting, Developing, Retaining Talent
The challenge is capturing discretionary performance. Performance that is inspired because it is based upon self-management, each of us striving to exceed previous best performance.

Part of the equation is understanding our role in the show; part is having a well-designed job that maximizes our effort, and finally user-friendly methods of tracking performance.
  1. Individual Scorecards

  2. Corporate, Department, Team Dashboards
Operations - Flawless Execution
The challenge for most companies is to strike a balance between defining process, steps, and roles with the need to provide the flexibility for creativity and innovation. Successful processes are designed to create extraordinary results form normal, consistent performance. Imagine what is possible when the talent is extraordinary!
The 6 Critical Processes of Sustained Growth
  1. Delivery of Products & Services

  2. Design of New Products & Services

  3. New Client Acquisition

  4. Organic Growth of Current Accounts

  5. Selection & Development of People

  6. Performance Self Management