CFO Magazine’s 2011 Conference on Corporate Performance Management (CPM)

I am pleased to announce that I have been selected by CFO publishing to officially blog on their Corporate Performance Management Conference to be held in Dallas, Texas, September 11-13, 2011. The focus of the conference will be improving business analysis and bottom-line performance. As you know, both topics are near and dear to my heart, so I look forward to hearing what the great line-up of speakers will have to say on the topic.

Speakers will include:

• Thomas Davenport, President’s Distinguished Professor of Information Technology, Babson College; author, Competing on Analytics and Analytics at Work
• Wayne Eckerson, Founder and President, BI Leadership Forum; author, Performance Dashboards: Measuring, Monitoring, and Managing Your Business
• Eric Lundberg, SVP & CFO, ALM
• Steve Player, North America Program Director, Beyond Budgeting Round Table (BBRT)
• Robin Washington, SVP & CFO, Gilead Sciences Inc.

If your business could benefit from better understanding the processes, structures, tools and people required to achieve the kinds of changes necessary to make you more profitable tomorrow than you are today, then this conference could be just the ticket for you or some members of your management team. By clicking here, on the picture above, or the CPM icon in the column to the right of this post you can register now. Better yet, by entering the code “BLOG” along with your registration, you can save $400 off the normal registration price! Don’t delay your registration. Do it today.

This is your opportunity to learn from real movers-and-shakers about how to leverage dashboards, budgeting, planning, and forecasting toward improving your firm’s bottom-line. Even assessing the performance of  your supply chain and the inherent risks you might face are covered.

See you there!

The Dangerous Dichotomy - Part 1

Far too many business executives have created an artificial dichotomy within their own organization that is potentially dangerous to their firm's survival and almost certainly destructive of profits. What is that artificial dichotomy, I hear you ask?

The answer is simple: Businesses all too frequently put the responsibility for increasing revenues into the hands of one part of their organization, while putting an entirely different group--usually most of the rest of the organization--in charge of reducing costs.

While, on the surface, this may seem to make sense; it really does not.

Here's why.

The Revenue-Increasing Group
The folks in the organization put in charge of increasing revenues--usually the sales and marketing departments--generally are measured only on the things pertaining to revenues. Because it is not a part of their reward metric, the folks in sales and marketing are, therefore, wont to make decisions that may:

1. Increase the costs of production
2. Drive inventories up
3. Increase operating expenses
4. Reduce output

Now, they don't do these things intentionally. They are just trying to do what they have been mandated to do by management and senior executives.

But, if increases in revenue are stymied or shrunken by, say...

1. Failures to meet delivery-time promises
2. Out-of-stock conditions on finished goods or components
3. Lay-offs or cut-backs in production, warehousing or elsewhere

Then, the revenue-increasing group has an "out" for not performing up to expectations or forecasts. Their excuses are generally based on the performance of the other part of the organization.

The Cost-Cutting Group
The other part of the organization is, as I said, usually all the rest of the organization. These folks have all been instructed and, frequently, are being measured based on "keeping costs down." There interest is in doing everything they can to...

1. Keep the costs of production down
2. Holding inventory levels as low as possible
3. Making sure that operating expenses are minimized

These parts of the organization's management also want the organization to succeed. But they are not being measured based on the organization's (the "system's") success. They are being measure on their performance against budgets for costs and expenses.

The folks working in these other departments have no malice of intent, but when sales and marketing brings a request to engineering or production that is going to increase the costs of production, they are not likely to look too kindly upon the idea. When sales tells these folks that they could sell more if they just had more inventory, they may nod their heads in affirmation, but the are not likely to take affirmative action because they aren't rewarded for that effort. To the contrary, they are more likely to be rewarded for holding inventory levels down and increasing inventory turns.

So, the battle rages
And, of course, the battle does not end there. When cost-cutting fails to make the firm more profitable, this group is just as willing and able to point fingers at the "sales guys," and point out how their frequent interventions, their calls to change production or shipping priorities, and their demands that end-of-period orders "get out the door" prevent serious cost-cutting by...

1. Driving overtime expenses up
2. Increasing requirements for both raw material and finish goods inventories
3. Reducing production by breaking up shop floor production runs with new priorities on a daily basis

 Hence, these two separate factions--who should be working toward a single end--are first formed by management and then each becomes the excuse for the other for non-performance. Meanwhile, the firm as a whole suffers reduced profits, higher operating expenses, and--generally speaking--too much inventory (made even more unbearable by having too little of the things that the customers want when they want them).

To be continued...
If your organization is not presently experiencing this warfare--even if subtle or boiling just beneath the surface of a "mask" of "team work"--then you are a fortunate one and, more likely than not, you know a firm or have worked in a firm where this is or was true.

This internal conflict is evidence of the lack of "system thinking." When executives give different directives to different parts of the organization--in the hope of squeezing some profit out of "local optima," rather than global metrics that encompass the goal of the whole system--the whole organization--this is what one must expect.

There is an answer.

[Continued next post....]

Are IT Vendors Driven by the Business Results of Their Customers?

Writing for CIO UK, David Henderson suggests several reasons “Why IT vendors must raise their game”. The second major point he mentions is that “IT vendors tend to be driven by their portfolios rather than business outcomes” for their customers. Henderson points out that IT vendors “continue to make significant investments in their portfolios but aren’t prepared to make the same investment in understanding how these apply to their customers’ businesses,” which can “lead to huge inefficiencies” once implemented at the customers’ sites.

As a result, Henderson continues, “vendors… tend to give poorly defined generic presentations that bear only passing relevance” to the challenges faced by the customer or prospect at hand. Henderson goes on to berate the ERP vendors for “me, too” solutions and their inability to “connect the dots” between their product offering real value for the firm that buys the technology.
I agree that IT vendors need to change. The economic picture is vastly different in 2010 than it was even three years ago.

Where I disagree with Henderson’s writing, however, is who should know what.

Starting off on the wrong foot

Computer-based technologies really were not available to any significant number of SMBs (small-to-mid-sized businesses) until after the introduction of the personal computer (PC) in 1981. Prior to that, computing power available from mainframe and mini-computers was available only to larger firms with significant capital for investment in such technologies.

So, in the early days of the computerization of the SMB market, almost every new prospect was anticipating moving off a system dominated entirely by paper and the necessary manpower to keep the paper flowing. As the price of PC-based technologies fell, more and more companies made the switch. This movement dramatically increased productivity and return on investment (ROI) for such a move was almost a certainty. As a result, many ERP salespeople came in the door talking about increasing productivity and providing rapid ROI for almost every SMB they approached. And, almost without exception, the implementation of that first round of technologies provided consistently rapid payback for the firms.

Unfortunately, as the market changed (i.e., SMBs’ next round of technology purchases were not taking them off paper-based systems but, more frequently, moving them into a comprehensive suite of application modules or moving some SMBs off the high cost of maintenance associated with mainframe and mini-computer systems), the sales approach of most technology vendors did not change. The technology vendors’ salespeople continued to make the same claims about productivity improvements associated with the first round of ERP implementations and the executives and managers at the customers’ sites continued to drink up the claims like Kool-Aid. In many cases, the SMB management was spurred on by the impending arrival of the year 2000 and the Y2K epidemic of fear. Many executives felt they needed to spend the money to upgrade their systems and took little thought as to the ROI of such an expenditure.

Nobody grew up and nothing changed

By the early 2000’s the ERP market had changed yet again. By 2005 or so, almost every CEO or CFO of every SMB had been through at least one – and usually two or three – implementations of new software (or other technologies) in their business environment. Add to that experience the fact that they now had easy access to the Internet by which to explore and make inquiry regarding almost any ERP software on the market, and the ERP-buyer had changed dramatically over a bit more than two decades.

When ERP was starting to be sold (20-plus years earlier), when the technology salesperson first met a prospect, the prospect was hungry for information about products and capabilities. Furthermore, these green-horn technology buyers were more than willing to make the salespeople their de facto “instructors” in the purchase and application of new technologies in their businesses.

In addition, as previously stated, ROI was pretty easy to achieve. Almost any SMB moving off labor-intensive paper-based processes or coming from costly mainframe or mini-computer technologies was bound to reap savings in operating expenses, and was almost equally likely to achieve increases in Throughput. However, by the middle of the first decade of the 21st century, all the easy ROI from traditional ERP – Everything Replacement Projects – was gone and not likely to return. Sadly, much of the technology salespersons’ product positioning remained unchanged and the sales rhetoric and promises from a good many ERP vendors still harkened back to days gone by – without, of course, actually mentioning that fact.

This unwillingness to face the change in the marketplace was not entirely one-sided. As the traditional ERP sales hype continued to make sweeping “rule-of-thumb” claims about delivering ROI for the ERP-buying executives and managers, these executives and managers proved themselves equally willing to accept the claims without taking the time and effort to discover for themselves what they really needed to know about their particular organization and its potential for reaping ROI from any particular foray into new or upgraded technologies.

What every executive and manager needs to know

As Eliyahu Goldratt has put it so well, there are three – and only three – things that every executive and manager needs to know to make effective decisions in every situation. These are they:

1. What needs to change
2. What the change should look like
3. How to effect the change

If, before making the leap to buy technologies based on “rules of thumb” and sales-speak, executives would just take the time to figure out the answers to these three questions, there would be far fewer stories about traditional ERP implementations failing to deliver expected business results.

IT vendors are not necessarily driven by business results for every client. And, as executives and managers, you should be aware that rules-of-thumb may not apply to you and your enterprise – and the ERP vendor or VAR is not responsible for your business’s not fitting the rule-of-thumb by which other enterprises may have achieved return on investment.

As executives and managers in your organization with your particular circumstances and requirements, you – not the technology vendor or reseller – need to know what needs to change in order for your firm to start making more money tomorrow than you are making today. You – not your vendor or reseller – need to know what the change should look like in your particular organization. (The vendor or VAR may help you understand how new technologies may be part of what that change should look like, but you need to understand the precise need in order to effect your desired ROI. (Read more in many articles found right here at GeeWhiz To R.O.I.)

And lastly, as executives and managers it is your responsibility to understand how to effect the change within your enterprise. (Here again, the technology vendor or reseller may help you understand the technology-related components of the change, but you and your team need to take full responsibility for creating a roadmap for change.)

Need help?

Contact me at rcushing(at)GeeWhiz2ROI(dot)com and I can show you a way to unlock your firm’s “tribal knowledge” to discover what needs to change so you can start making more money tomorrow than you are making today, and you won’t spend money needlessly on technologies that don’t bring almost immediate ROI.

©2010 Richard D. Cushing

ERP Vendors and Customers: The Blind Leading the Blind

Writing in CIO UK magazine online, David Henderson’s article entitled “Why IT vendors must raise their game” makes several salient points. Not least among the points raised is the fact that “too many IT vendor sales personnel don’t really understand my underlying business processes and investment criteria….”

For me, however, the issue is somewhat stood on its head. Far too many business enterprises with which I have been involved have precisely the same problem internally. CEOs, CFOs and CIOs in many businesses buy new technologies without understanding their own underlying business processes and by what criteria they should invest.

What executives and managers should know

Executives and managers seeking ways to improve their business enterprises (read: make more money tomorrow than they are making today) too often buy new technologies out of “hope” or “desperation,” rather than with a clear and concise understanding of

1. WHAT needs to change in order for the business to begin making more money tomorrow than it is making today;
   
2. What the change should LOOK LIKE; or
   
3. HOW to effect the change (including what role any new or upgraded technologies might play in delivering the improvement).

Since they do not have the tools to concisely analyze what needs to change in order to make more money tomorrow, then they cannot know what the change should look like or how to bring about the change effectively. So, in the absence of clarity, they grope about in their darkness hoping that some change – any change – will bring them their desired end of higher profits.

Blind leading the blind

Like the blind leading the blind, the technology vendors and resellers who do not fully understand their prospects’ underlying business processes or appropriate criteria for investment (in fact, they understand them less clearly than the executives and managers, in many cases), console the yearning executives with platitudes and “rules of thumb” about how their latest and greatest “gee-whiz” technology will “reduce costs by X percent” and “improve sales by Y percent.”

Of course, this is precisely what the executives want to hear. Like the Sirens of old, the vendors and resellers lead many to spend. Even if they don’t fully believe what they are hearing from the vendors and VARs, the executives and managers frequently do not take time to calculate with any precision just how or why the new technology should, could, or would produce a return on investment (ROI) in their particular organization and circumstances. Instead, they close their eyes and ears to any negative thinking and, In the absence of any better ideas, these executives take out their checkbook to purchase the latest and greatest of new technologies. Of course, the correct general ledger account to which this “investment” should be charged is “Hope and Earnest Expectation.”

Serendipity

Sometimes good things come of this method. According to the industry literature, we can say that about one out of three such “investments” lead to noticeable improvement. Many times, however, the measure of improvement cannot be known with certainty. A growing company that shows improvement after some implementation cannot know which results may have occurred even in the absence of the new technology. A far greater share of SMBs (small-to-mid-sized businesses) simply assume they are “better off” if they are not clearly “worse off” following the deployment of some new technology. Some merely breathe a sigh of relief after some trying implementation period and, like a good Calvinist, say, “I’m glad that’s over,” without ever looking back to measure their return on investment.

My argument, however, is that “hope” and “serendipity” are not strategies and, while a few companies come to excel and even to dominate some markets for a short period of time based on little more than serendipity, it is not a sound strategy for long-term growth in any enterprise. For executives and managers return on investment should be seen as a primary responsibility. This responsibility should not be handed over to the technology vendor or VAR (value-added reseller). Neither should it be left to chance.

As W. Edwards Deming said so clearly: “It is management’s job to know.”

It is management’s job to figure out WHAT needs to change in order to start making more money tomorrow than the firm is making today. It is management’s job to come to a clear understanding as what that change should look like when it occurs. And, it is management’s job to define an unambiguous roadmap to effecting the necessary change. Then, it should be management’s job to measure and report on the return on investment yielded by their own keen insight.

Need help with this? Contact me at rcushing(at)GeeWhiz2ROI(dot)com and let’s talk.

©2010 Richard D. Cushing

Decision-making about ROI and your technology spending

Dan Gilmore wrote in “The ‘Probability’ of Supply Chain ROI” propounds properly and rationally the fact that any “forecast,” including forecasts of ROI (return on investment) should not be a single number. Rather, as anyone properly trained in statistical methods will tell you, it should be a range of numbers. The range of numbers would generally be calculated based on a single calculated value plus and minus values that represent the confidence intervals or, simply put, how likely the statistician believes his estimates the calculates will approximate reality. A larger range indicates lower levels of confidence and a smaller range higher confidence levels.

Now, while Gilmore is mathematically correct, the fact remains that most small-to-mid-sized businesses (SMBs) simply do not have anyone trained in statistics on their payroll and they are not likely to go out and hire a statistician to produce ROI forecasts for their IT projects – since this would, by definition, automatically reduce the ROI of the enterprise as a whole in the short term.

Back on a growth trajectory

Gilmore makes another comment in his article with which I wholeheartedly agree: “[T]here is some evidence that companies are in fact looking at investments that can help them to get back on a growth trajectory (read: increasing Throughput) without having to add much in the way of head count (read: Operating Expenses) by achieving productivity gains.” Given the world-wide economic malaise that is showing some signs of lessening (for the moment, at least), Gilmore’s description probably suits the vast majority of SMBs across the U.S. and beyond.

Furthermore, many others besides me have written that a firm stand on return on investment will be the hallmark of technology spending in the 2010 and beyond. So, I can hardly fault Gilmore for suggesting that SMB executives and managers need to become increasingly sensitive to and realistic about ROI for every kind of investment in their firms’ futures.

Too much complexity already

Despite my agreement with Gilmore on theoretical grounds regarding forecasts – including ROI forecasts; and despite my agreement with him regarding the goal of companies to get back on a growth trajectory through wise investment of capital resources, I must disagree with him on the matter of adding useless complexity to the return on investment forecasting process.

Allow me to explain why I use the harsh term “useless” to describe such an effort in the development of a ROI forecast for an IT project.

First  of all, let me say that statistical methods ought to be applied where they make sense. Statisticians generally agree that a valid statistical sample must contain at least 30 members. This works great where you have 30 dogs, 30 cows, 30 houses, 30 automobile, 30 miles of roadway, and so forth for comparison. Then, of course, you need to factor for environmental differences. Thirty or more cows all in the same pasture, eating the same foods, and enjoying the same climate would make a pretty good statistical sample for some studies of cows. On the other hand, three Holstein cows in northern Minnesota, two long-horns in west Texas, 15 black whiteface cows in eastern South Dakota, and ten mixed-breed cows in central Florida are not likely to constitute a good “sample” for cow studies.

Why?

Simply because there are too many environmental dissimilarities surrounding the cattle. By the time these factors were accounted for, (generally speaking) any results would have such a large confidence interval as to make any prediction almost meaningless.

When considered as a whole, a typical SMB has tens of thousand of variable at work within the enterprise. Any number of those variables are likely to dramatically separate it any “sister” enterprises in a sample group used to forecast ROI outcomes.

Of course, the fact that traditional ERP – Everything Replacement Projects – are going to affect the whole enterprise is a big part of the problem of predicting ROI outcomes. With tens of thousands of variables at play, picking the winning number is far more challenging than winning the lottery.

Reducing the scope reduces the complexity

First of all, a good many SMBs today have a “pretty good” ERP system in place – regardless of its brand. Unless there is some pressing reason to undertake a traditional ERP – Everything Replacement Project, it is probably a far better idea to consider a New ERP – Extended Readiness for Profit project instead.

Narrowing the scope of the project reduces the complexity. And, reducing the complexity increases the likelihood that your ROI forecast will be more on-target. Allow me to give you a couple of examples:

• Warehouse automation – Suppose your Current Reality Tree (CRT) shows you that, in order to increase Throughput, you need to enable your warehouse to be able process 80 to 100 shipments per hour, rather than the present 30 to 40 per hour. Furthermore, you need to do this while holding the line on Operating Expenses.
  
• Business intelligence – After reviewing their Current Reality Tree and laying out a Transition Tree (TrT), your marketing and sales team has assured you that, if they are provided tools with which to better understand customers and markets, they will be able to segment the market and create UROs (un-refusable offers) and increase Throughput by 130% in two years. No additional staff or other increases in Operating Expenses would be required.

If your executive management team were to elect to pursue either of these projects – or both – the goals are specific and measurable – as would be the expected outcomes. ROI calculations become simple:

Where T = Throughput (Revenues less Truly Variable Costs), OE = Operating Expenses, and I = Investment.

Simple. Elegant. And ROI calculations are far more likely to be right than any calculation around traditional ERP – Everything Replacement Projects.

©2010 Richard D. Cushing

Business Processes and Real Management – Part 3

Simply put: If there is no process, it – whatever “it” is – cannot be managed.

The key point here is to separate mere intuitive decision-making from the act of “management.”

Management implies the existence of “a process,” – that is, an understood cause-and-effect relationship in a sequence of dependent events leading to a predetermined goal. There are three critical elements to this definition of “management” and “a process”:

1. The “process” must have a goal or outcome. If there is no goal or outcome that can be stated in advance, then there is no point in attempting to “manage” it, for to manage it would be to somehow affect the outcome of the process (e.g., improvement). If the goal or outcome of the process is not understood or has not been articulated, then there is little need for the act of “management.”
2. The “process” must include more than one step or event, and the steps or events must be related by their sequential dependence. One cannot manage, for example, “the big bang.”
3. The “manager,” in order to manage effectively must understand both the goal of the process and the process itself.

If we return to the examples given, whenever an executive must deal with sales operations as mystical mojo that is carried out in some seemingly inexplicable way by certain persons who were hired because they have a demonstrated facility for working this “mojo,” then that executive cannot be said to be “managing” the “sales process.” He or she may be managing many things related to sales, like the expenses related to sales, the number of salespeople, the sales territory assignments, and more. But he or she cannot be managing “the sales process” any more than he or she would be said to be managing a group of witch doctors in the work they do.

Let me go further to say, that even though the executive may have a “prescribed sales process” that includes a number of “steps,” even if those “steps” are canonized in some CRM (customer relationships management) or other software application; and even if the salespeople are required to “check-off” against these prescribed “steps”; if such “steps” are subject to frequent manipulation by the salespeople or sales managers or if a near-constant series of concessions are being made to the demands of salespeople or sales managers in accommodation to their claims of “mojo,” (or something equally nebulous) then no real “sales process” exists in such an organization. Also, if management is repeatedly kowtowed by what amounts to little more than “threats” that “bad things will happen” if salespeople’s and sales managers’ demands are not met in this matter or that, then I would allege that no “sales process” exists.

Now, I hear you asking: “What difference does it make if we have a ‘sales process’ as long as we are making sales and surviving?”

To that question, too, there is a simple answer: If, as an executive, you do not have a real and manageable “sales process,” then you are at the mercy of the economic winds and the fickleness of fate. In the absence of a manageable process, you cannot know what actions will lead to improvement. Despite your title as “executive,” your only recourse is to try this or try that, because you have no comprehension of the actual cause-and-effect dependencies that lead to more sales or better sales.

Is that really how you want to run what is arguably the leading edge of your business enterprise?

Suggested Reading:

Reengineering the Sales Process

©2010 Richard D. Cushing

Business Processes and Real Management – Part 2

1. (continued) In the second scenario, the owner or chief executive is not in charge of the sales team. In fact, the firm has generally hired an experienced “sales manager” based on this persons history and background of producing sales at some other firm in the same or a similar industry. This person has then hand-selected a team of salespeople, the sales manager often doting over them making certain that each is uniquely satisfied with their particular arrangements. This is a variation on the same prima donna theme, but with a layer of middle management.
   
   In both of these cases, however, the general attitude of top management at the firm is that, while they may give lip-service to something they call their “sales process,” when one digs deeper, it becomes abundantly clear that the “sales department” is really surrounding by mystique. Each hand-picked salesperson has his or her own mystical mojo that is performed in a somewhat ritual-like fashion. This mojo, when properly carried out and when not too much interfered with management and administration produces a life-stream of sales to support the rest of the company.
   
   In these situations, the rest of the company’s executives and managers are under the implicit understanding that “I must not mess with the salespersons’ mystical mojo or things will go badly for the whole company.” Frequently, even top executives fear treading too much on the mojo, for fear there will be bad repercussions.
   
   
2. The second matter is that comes to mind is “sales commissions.” On numerous occasions I have asked executives, “How do you calculate and pay commissions?” A simple question?
   
   To this simple question, I am not infrequently given a simple answer: something along the lines of, “We pay commissions based on gross margins.”
   
   Simple enough, don’t you think? Until you begin to dig into the details. Then one starts hearing things like this: “Well, yes, we do pay commissions based on gross margins. But, if our buyers get a special deal on a purchase, we pay commissions on the ‘regular’ gross margins, not the actual gross margins of the sale of those special purchases.” Or, “Yes, we do pay commissions based on gross margins but, because the contract we signed with salesperson X is different from the deal we reached with salespersons Y and Z, the way we calculate ‘gross margins’ is different for each of salespersons X, Y and Z.”
   

So, I hear you ask, “What is the similarity between my daughter’s situation and the two examples I just mentioned?” The similarity is this: In each case the executive in charge called their decision-making a “process” (or, in the academic world, a “rubric”) or suggested that they were managing “a process” (i.e., “the sales process”). However, close inspection revealed that each decision was being made on a case-by-case basis without reliance upon a process or rubric, at all.
Note, my objection is not to the case-by-case decision-making – although I offer that this is likely not a sound approach to managing a growing SMB. Rather, my objection is to the managers’ beliefs that they are actually managing to a “process” or by “a process.”
(To be continued)
©2010 Richard D. Cushing

Business Processes and Real Management – Part 1

I had a conversation with one of my daughters on the way to the airport today. She was telling me about something that went on with regard to management decision-making at her work. (She works in the field of education, but the principle I wish to discuss applies everywhere, in every type of organization.)

The scenario is something like this: An executive (and here I use the term “executive” in the broadest sense, meaning any manager in a position to not only choose, but also to execute upon the decision made) states that he or she is going to make a management decision based upon a process (or, in this academic environment, a rubric – a process for scoring an otherwise subjective decision). However, upon further discovery and discussion, it becomes apparent to all involved that whatever “process” or “rubric” is ostensibly being applied is purely subjective and intuitive to the manager alone. That is to say, what is pretended to reduce an otherwise purely subject and intuitive decision to a “process” – a “rubric” – is merely that, a pretense. The decisions being made remain purely subjective and intuitive and are not correlated to a “process,” at all.

Now, let me be clear. I am a free-market guy. I believe that business owners and their executive agents should be able to hire, fire and make other management decisions at will. I am fully committed to the fact that they may do as they please so long as their actions do not include coercion or deceit. In this scenario, it is not the executives decision with which I take issue – which is why the decision itself is not discussed herein.

What I wish to discuss is how many times executives and managers are themselves deceived as to the presence of a “business process” or any kind of rubric by which they manage. From my experience, if I spent time cogitating, I’m certain that I could come up with a large number of examples. However, for brevity’s sake, let me just toss out a couple.

1. Foremost in my mind are the numerous discussions I have had with executives over the years regarding so-called “sales management.” I say, “so-called,” because I have too many times been faced with one of two variations on the same theme in this regard. The first is where the owner of the small-to-mid-sized business (SMB) was the companies first salesperson (which is quite natural, as the organization was likely an outgrowth of some entrepreneurial venture) and remains today as the firm’s sales manager. He or she has, over the years, created a sales team of hand-selected folks, and the executive is convinced that each of these salespeople is unique and each requires special handling – a sort of prima donna approach.
   

(To be continued)

©2010 Richard D. Cushing

Fractured Planning Processes

In a report entitled Retail Merchandising: Buckling Down in a Tough Economy, authors Paula Rosenbaum and Steve Rowen of Retail Systems Research (RSR) tell us that nearly half (47% on average, but 55% of performing laggards in the survey) of respondents to their survey said that their leading business challenge was “fractured [inventory] planning processes.”

Unfortunately, in the published report to which I have access, Rosenbaum and Rowen do not elaborate on just what the respondents consider to be a “fractured planning process,” although the accompanying prose tends to suggest that this description relates to business processes tied to inventory planning that are not unified or even in good end-to-end communications across the enterprise and beyond.

A common problem

While this survey deals with retailers and inventory specifically, it does highlight a problem in small-to-mid-sized businesses (SMBs) that I have observed for nearly 30 years: that is, the lack of “planning” at all. For sure, most SMBs do develop plans for special projects. If they are going to purchase new or upgraded technologies, build a new or extend existing facilities, open a new location, or add a new product line, then they do prepare and plan in a more or less formal way.

What executives and managers do not do on a regular basis is develop a plan for making more money – both now and in the future. Most executives tend to get their business rolling and then set the “cruise control.” Then, with the vehicle barreling down the road, they spend their time fighting fires and trying to keep up the organization’s momentum with little or no thought about how the terrain (read: business environment) has changed until something big hits (like a recession or big competitor appears on the horizon).

So, what keeps executives from “planning” more frequently and more effectively for business improvement?

My experience suggests the some blend of following key components comprise the answer:

1. Many executives developed a business plan once, and now they have a business. It never occurred to them that planning for “improving” the business is required or would even help. Being entrepreneurs, they tend to manage by the seat of their pants and trust their “gut” for what will bring improvement.
2. You can’t drain the swamp when you’re up to your neck in alligators. Many executives spend the bulk of their time being reactive, rather than proactive. There time is spent taking care of things that others don’t get done or fighting fires so people can return to doing what they need to do to keep the business running.
3. Unless something big is happening, most executives don’t think time spent in “planning” – rather than “doing” – is a good investment.
4. Far too many executives do not know of – or know how to apply – a good “tool” for effective planning. In the absence of a good tool, most executives feel that time spent in planning is not going to be effective anyway.
5. Things are changing too fast. We just need to do the best we can to survive, right now. Of course, in good times, or when things were not “changing too fast,” these same executives used other excuses for not planning.

A POOGI: A Process Of On-Going Improvement

In times like these – challenging economic times – it is more important than ever for executives and managers in companies that hope to survive despite the economic upheaval to make a concerted effort at ongoing improvement. That is, to start a POOGI within their firm.

Why?

Because it is becoming increasingly difficult to compete for the consumers dollars.  If you are not improving your value proposition in a process of on-going improvement, then day-by-day your products and services are losing out. Dollars that used to come your way are now going to other businesses – and I don’t mean just businesses that you see as your competitors. I’m talking about dollars that consumers used to spend for your goods and services are now going, instead, to buy groceries, fuel, or pay off credit cards – anywhere but into your bank account. That’s why you need a plan to increase the value of your offerings in an on-going way.

How to begin

How should you begin a POOGI?

You should begin by figuring out your present situation. You need to unlock your organization’s “tribal knowledge” and understand your current reality. Naturally, the right tool for doing this is called the Current Reality Tree (CRT).

For more information on Current Reality Trees, including step-by-step information on how to begin constructing one, click here. If you would like to have help unlocking your firm’s “tribal knowledge” effectively and in constructing your CRT, then contact me directly.

Next steps

Once your CRT has given you and your management team a clearer view of what needs to change, the next step is to decide what should the change look like. In other words, if you and your team took steps to reduce or eliminate Un-Desirable Effects (UDEs – pronounced: YOU-dee-eez) revealed by your CRT, what would your organizational cause-and-effect flow look like? The Thinking Processes tool used to expose this future state is called the Future Reality Tree (FRT).

Other of the Thinking Processes may also be applied, including:

• Evaporating Cloud
• Prerequisite Tree
• Negative Branch Reservations

However, for your “planning roadmap,” the tool that will you and your team move from where you are today (your CRT) to your planned future state (FRT), you will want to build a Transition Tree (TrT).

Again, if you’d like to have assistance in effectively applying the Thinking Processes and in creating a POOGI in your organization, then feel free to contact me directly. But, whatever you do, do not sit and do nothing and let the recession drive one more enterprise out of business.

©2010 Richard D. Cushing

Collective Fixation on Short-Term Profits

Vivek Sehgal brings up an important point in the post Putting Your Money Where Your Mouth Is (3 March 2010) here at Supply Chain Expert Commnity. Even though, at GeeWhiz To R.O.I. I talk a lot about the the goal of business being to make more money, I generally add ...tomorrow than you are making today. Making more money "tomorrow," should not be predicated on actions that will diminish the long-term prospects for making more money. Nevertheless, a lot of companies -- especially publicly traded companies -- have a fixation on short-term profits that is damaging to the long-term health of the enterprise.

W. Edwards Deming diagnosed this issue early and brought it to our attention about 30 years ago. He called it "paper entrepreneurialism." The investing relationship of real entrepreneurs looks like this:

Entrepreneurs sitting in this relationship have a vested interest in the ability of the firm to produce profits over the long term. Such investor-entrepreneurs seldom intentionally make decisions to reap short-term profits at the expense of the long-term prospects for the business.

Speculative investors have a slightly different relationship with the firm(s) in which they take stock. That relationships looks like this:

The most connected investors are those that hold a relationship similar to that of the real entrepreneurs. They invest in shares directly with the company (or at least have an more intimate relationships with the firm and knowledge of its management, even if they must make their stock acquisitions through a broker). However, most of the investors agreed to buy stock in the specific firms based on the advice of their broker. They may know little or nothing about the firm or the firm's management directly. They trust the advice of their broker.

The intervention of the broker/brokerage house makes buying and selling of stocks easier, and the brokers are typically incented to produce results (return on investment) for their customers (the shareholders) over both the short-term and long-term. The focus of the broker and the guidance given to the investors will vary based on personal preferences. Nevertheless, it is easy to see that the investors are abstracted from their investments by the borkers and management at the publicly held companies must satisfy the short-term expectations of the brokers or, in the interest of their customers, the brokers are likely to shift investment away from companies performing poorly in the short-term in favor of those with better short-term returns on investment.

Paper entrepreneurs are even further abstracted from their holdings as shown in the following diagram:

With the introduction of mutual funds and government-incented retirement plans, more capital has moved into the markets, but at the price of having the investors abstracted from the companies in which their dollars are invested by three or four layers, which layers tend to be focused entirely on short-term performance and profitability. By a huge factor, a majority of the investors in today's capital markets do not even know the names of the companies in which they hold stock. How can they be anything but "paper entrepreneurs"?  They seek the highest return on their investments without any concern for the long-term viability of the companies providing the returns.


Consider that the mutual fund manager. He care not one whit for the companies in which the fund he manages invests beyond the companies' ability to provide solid growth for the mutual fund over the next reporting period. He will gladly shift millions from company A to company B at the hint that company B's short-term return will outstrip company A's performance.

Next in line come the brokers and the brokerage houses. They are willing to recommend mutual fund C over mutual fund D on the basis of their likelihood of producing short-term returns to the investors. The brokers and brokerage houses are incented to provide this kind of advice without consideration for the long-term survivability of the companies which their investments ultimately reside.

Then, of course, for the vast majority of investors, there are the corporate retirement and pension fund managers. They, too, have only one incentive: to see good performance in the funds they manage. They, like the investors themselves, quite often have no knowledge -- ultimately -- about the companies in which their investments ultimately are put to use.

All of this leads to the boards of directors in publicly-held companies providing incentives to their chief executives to provide short-term profitability so as to keep market capitalization up -- which is almost entirely based on stock prices. So, how do CEOs and CFOs react to all of this? They are willing to sacrifice the long-term prospects of their own organization for short-term performance during the particular CEO's or CFO's term in office -- and their successors will do the same.

This constitutes a grave danger to publicly-held companies in the U.S.  What is the answer?

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The Right Cost-Cutting Formula

The formula above is the only real formula that should be considered by companies considering cost-cutting during this recession.

Here is what the formula means.

The upper-case Greek letter delta (the triangle-shaped character) is used in mathematics as a symbol meaning “the change” or “difference.” Therefore, we read this formula as follows:

The change in P = the change in T minus the change in OE,

where P = Profit, T = Throughput and OE = Operating Expenses.

Throughput (T) is defined as Revenue (R) less Truly Variable Costs (TVCs), and TVCs are further clarified as only those costs that vary directly with incremental changes in Revenues. For example, raw materials probably vary directly with changes in unit sales of a manufactured item. However, production payrolls do not vary directly with changes in Revenues. If your firm produces 1,000 widgets this week and only 850 next week, but 1,200 last week; chances are the production payroll was substantially the same for each of these weeks.  Therefore, production payroll cannot be classified as a TVC.

Substituting for T

Since T = R – OE, we can substitute into our formula and make it read like this:

The change in P = the change in R minus the change in TVC minus the change in OE

Thinking about cost-cutting

Based on this formula, we can safely state the following:

• An increase in R will result in an increase in P, provided there is no change in TVC or OE
• A decrease in TVC will result in an increase in P, provided there is no change in R or OE
• A decrease in OE will result in an increase in P, provided there is no change in R or TVC

Where executives get into trouble during recessions

Pay attention to the “no change” clauses in the three statement above. These are critical, but all too frequently overlooked by executives and managers in making cost-cutting decisions. We just saw a terrific example of this with Toyota.

Some executives at Toyota thought that they could increase P (profits) by reducing TVCs through the purchase of lower-priced components for their automobiles. For a while, it probably worked. However, in February 2010, Toyota’s year-over-year sales for the month were down 43%, and for the first time in several decades, Ford Motor Company sold more units than Toyota in a calendar month. This is not to mention the fact that some billions of dollars will be expensed by Toyota over the coming months and years due to the recall.

So, what were the affects of Toyota management’s decision to reduce TVCs in order to increase Profits?

1. Revenues down 43% year-over-year
2. Several billion dollars added to Operating Expenses (OE) due to recall effort
3. Lost customers, which will require additional expenditures in OE (marketing) to reclaim
4. Additional expenditures in OE (public relations, legal, etc.) for damage control

Think it through

It is a simple thing for executives in a firm facing recessionary pressures think, “We will cut our operating expenses (OE) by laying off some people,” without considering the long-term affects that the move may have on customer satisfaction, for example. How many customers will be lost due to the cut-back in staffing? How much more will need to be spent in OE (sales and marketing, for example) to maintain the same levels of revenue as a result?

Use the formula

If, as an executive, you are considering cost-cutting, then consider the whole formula. Go over it with your management team. Carefully consider any short-term and long-term impact on Revenues and Operating Expenses. Do not simply assume that you can change one factor and the others will remain unchanged.

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©2010 Richard D. Cushing

Change comes through people - Part 3

We are continuing to revisit the Key Points raised in the Webinar on “Emotional Intelligence.”

Middle managers need to implement change while managing their employees’ emotions – anxiety, resistance and inappropriate behavior

Notice the tone of this statement and the mandate it sets for middle managers: middle managers need to implement change while managing their employees’ emotions. Here are a couple of questions I raised with the presenters during the Webinar:

1.       How much time, energy and money should a company spend in “emotion management”?

2.       At what point should executives stop and re-think their plans when their top-down actions raise anxiety and resistance from middle management and below to such a level that additional resources must be deployed just to “manage emotions”?

This statement amply demonstrates just how out-of-touch executives and managers in some organizations must be with the rest of their enterprise – i.e., middle management and below on the organization chart. Not only so, but it also shows that these same executives have no idea the damage that their distance from the organization’s “heartbeat” is likely to cause. And, I am not talking about damage to the “peons’ egos or sense of self-worth.” I mean sincerely the damage that is done to their enterprise in measurable terms with which CEOs and CFOs should be concerned – namely, lost Throughput and profits.

Interestingly, when I raised the question regarding when executives should stop and re-think their plans, the presenters of the Webinar pretty much told me that in the face of ego-driven ERP, once the enterprise gets far enough down the traditional ERP path to start raising anxiety and resistance from “the masses,” there is no turning back. It is the rare, rare exception that executive management would dare to stop and rethink the project underway.

This is a sad state of affairs and emphasizes just why traditional ERP – Everything Replacement Projects have such a lousy success rate when it comes to delivering return-on-investment.

Middle managers face the challenge of grasping a change they did not design and negotiating the details with others who are equally removed from strategic decision-making

This seems to get more ridiculous the further we drill-down on the details, doesn’t it? This statement reminds me of a combat situation. Here’s the scenario (in metaphor):

The generals (executive management) have come up with a battle plan – apparently with little or no consultation with the boots on the ground. The generals, in their wisdom, have passed this battle plan down from “on high” and told the lieutenants (middle management) in the field just how they are going to “take that hill.” The lieutenants – many of them being 90-day wonders, fresh out of college and with little practical experience – are now tasked with convincing chief master sergeants, master sergeants, gunnery sergeants and ground troops – some of whom have 15, 20 or even 30 years of “boots on the ground” experience that the plan promulgated by the generals is a good plan and ought to be carried out.

The problem is, the lieutenants do not necessarily understand all of the implications of the plan for those who must carry the weapons and bring the plan to success. They do not comprehend what it takes in day-in, day-out hand-to-hand combat to actually “take the hill.”

Nevertheless, it is the lieutenants’ job to “sell” the plan and “negotiate the details” with the seasoned front-line personnel who actually know the risks that they will be taking.

I think you get the picture. Is it any wonder that a firm operating in this way might experience some problems with their traditional ERP – Everything Replacement Project? Is it any wonder that fewer than half the firms undertaking efforts like this achieve any measurable net benefit from their traditional ERP effort?

No, of course there is no wonder.

Complexity rises for middle managers of change as work demands are modified and multiply, thus creating conflicts

This is a traditional ERP – Everything Replacement Project – after all. Executives have decided to tear the guts out of the entire organization and transplant new technological “guts” in the name of “improvement” that the executives themselves have likely not quantified. To say that “Hope is not a strategy” is an understatement at this point.

Executives have, more likely than not, promulgated a technology “strategy” based on little more than “hope” and the so-called “promises” of the vendors or resellers. Then, these same executives have largely left execution in the hands of lieutenants (see above) and third-parties (e.g., the vendors, resellers and consultants). Then, by some inexplicable stroke of magic executive management expects improved profits to be the result at the other end of this journey. Why else would you spend millions of dollars to disrupt virtually every operation in your enterprise virtually simultaneously and continuously for upwards of 18 months?

Of course “work demands are modified.” A “strategy” (falsely so-called) has been set forward and most of middle management have no idea what that strategy will actually mean for the “boots on the ground.” (See metaphor in previous section.) In this case, it is not “the enemy” forcing a change in plans. As Pogo once said, “We have met the enemy, and it is us.”

Lack of clarity renders new demands uncertain and frequently misunderstood; without clear understanding, managers can be seen as taking wrong actions or no action at all

Given our discussions up to this point, does anyone have an difficulty in understanding just why there might be “lack of clarity” in the traditional ERP – Everything Replacement Project?

Maybe it is because, while it is necessary to understand the operation of your organization as a whole – that is, as an integrated “system” – it is not possible to “focus” on the whole organization all at once.

If executives ask themselves the question, “What needs to change in order for our company to start making more money tomorrow than we are making today?” How likely is it that the answer that would come to mind would be, “Everything!”?

My guess is that the answer would never be everything! Typically, the number of things that need to change to begin making more money tomorrow is very small – say, fewer than a half-dozen. And, even if there are a half-dozen, they need not all be undertaken at once. Then, add to that, the fact that among those half-dozen things that need to change, it may probably be found that half or fewer of those things actually require a change in technologies to support the change.

Yet, purveyors of traditional ERP- Everything Replacement Projects will try to convince executives that what needs to change is everything – and then the company will make more money. Unfortunately, many executives are all too willing to believe this is actually “the solution” of which they have always dreamed. “Just pour it in and everything will run smoother, faster, longer and we’ll get better mileage, too.”

Summary

As W. Edwards Deming said, “You do not install knowledge,” and “Knowledge comes from theory.” These executives go far afield from actually helping their organizations improve because they lack a valid “theory” about how their “system” – their enterprise – actually functions in carrying out the customer-to-cash chain of inter-dependent functions and events.

Virtually all of what they need to know lies resident within their own organization in what I call “tribal knowledge.” But such executives as would seek to manage their employees’ emotions through “Emotional Intelligence” – read: manipulation – will never reap the benefit of unlocking the treasure of “tribal knowledge,” because, it seems, this knowledge comes from “the working class” and it is beneath their dignity to learn from “the man that runs the machine.”

It is the executives with such a mind that are the losers as a result. But their employees lose, too. Firms under such management will never be as profitable or durable as they otherwise might be. Employees cannot be paid as much, because profits are too low. Some employees will lose their jobs because the company cannot compete.

This is all too senseless.

©2010 Richard D. Cushing

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Change comes through people - Part 2

If, as we have shown, people do not willy-nilly resist change, let us take a look at just what might be happening in traditional ERP – Everything Replacement Projects – where management feels the need to bring in emotional management specialists to help smooth the way. We will step through the list provided in the Web presentation.

Only 30% of “change initiatives” succeed

Of course, in the context of the presentation, the presenters made it clear that a major contributor to the failure of “change initiatives” is the changing organization’s failure to properly apply emotional intelligence (EI) management to the reactions to change coming from “middle management” and below in the organization’s hierarchy.

One of the things that surprised me about the attitudes expressed in the whole presentation was the us-against-them sense, where it was executives and top managers pitted against the unruly emotions of the lower classes (e.g., middle management and below). With the help of EI, the ruling elite could, in fact, learn to foist things upon the “lower classes” and make them like it – or least squelch outright rebellion in the ranks.

Sadly, in my limited contact with folks from “Big ERP,” their attitudes frequently have reflected this same elitism. Their snobbery seems to be rooted in a sense that “the ruling class has chosen us, so you – the masses – must listen up and fall in line.” I am certain that they are not all this way, but I have no doubt that some are.

I soundly reject this kind of management. I am confident that no one knows more about running the machine than the one who runs the machine day-in and day-out. The people who know best what needs to change in each part of “the system” – the entire organization – are those in the trenches. Most people really want to do a good job and really want the company they work for to succeed. These people frequently fight an uphill battle against poorly thought-out policies, procedures and assumptions promulgated by executives and managers trying to make things “work.”

Apparently, EI dumps on these people, suggesting that what is needed is for the elite to learn how to “manage” the emotions of the working class rather than learn from the wealth of “tribal knowledge” carried about in the hearts and minds of those who “run the machine.”

Is it any wonder, then, that only 30 percent of change initiatives succeed? It is quite likely, if what we are seeing and hearing is, in fact, the attitude of executive management, that only 30 percent of what they promulgate as change is worthy of success. Perhaps only 30 percent of “change” handed down from on-high will really have any positive effect on the ability of the organization to achieve more of its goal, and “the masses” know it better than the executives do.

It takes about five years to see ROI from a typical ERP implementation

No wonder!

The organization we have just seen depicted in the us-versus-them, the executive elite versus the common man, cannot possible be working as an integrated “system.” Not only it is very likely that there are departmental and functional silos within such an organization, having high and nearly impenetrable walls between them; it seems apparent that there is an even higher and more impenetrable wall between “management” and “the workers.”

In such a situation, there cannot be “integration” and the organization cannot possibly be managed as “a system.” When a business enterprise is not managed as a system, the symptoms are consistent:

·         Lower than expected overall performance

·         Sometimes overwhelming challenges in securing or maintaining a sustainable competitive advantage in their markets

·         Financial difficulties

·         Nearly constant fire-fighting by management

·         Rarely meeting customer service expectations

·         Chronic internal conflicts

Not managing the organization as “a system” is a management and cultural issue that cannot be remedied by installing “integrated” software. Technical integration does neither mandates nor assures functional and interpersonal integration across organizational silos. And it certainly does not create integration vertically in the chart of accounts.

With only 30 percent of change initiatives succeeding and the organization continuing to experience all of the symptoms associated with the failure to manage the organization as “a system,” it remains no mystery that it takes five years or longer to see return-on-investment from a traditional ERP – Everything Replacement Project.

Change fosters significant confusion for middle managers, which can spur anxiety and stress, thus impeding or paralyzing decision-making

The change that “confuses” middle management (and below) is the change for which they are not yet convinced of the true benefit to the organization. Intuitively, most managers understand that “good” decisions in a for-profit organization are those leading to actions that will tend to help the organization make more money tomorrow than it is making today. Such actions, naturally, lead to stability and increasing job security.

If executives and managers have really thought through their traditional ERP – Everything Replacement Project – and are well aware of just how (in measurable terms) ripping the guts out of the organization’s infrastructure and replacing it with something that is promoted as being “newer,” “faster,” or “better” will really help the firm make more money tomorrow than it is making today, then let them come forward and explain those details to “middle management” (and below), and the confusion, anxiety and stress will largely be assuaged.

The fact that executives and managers are not forthright with middle management (and below) when a traditional ERP project is undertaken is, for the most part, the executives and managers do not, themselves, know (in measurable terms) just how ripping the guts out of their organization and replacing it with “newer,” “faster,” or “better” will – in reality – help the firm make more money in the future than they are making today. Instead, their decision is likely predicated largely on hope and generalizations supplied by promises from the vendor or reseller of the new technology.

It is, then, no wonder that middle management remains confused, anxious, and full of stress.

[To be continued]

Stay tuned.

©2010 Richard D. Cushing

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Change comes through people - Part 1

Today I attended a Webinar on applying “Emotional Intelligence” or “EI” in the implementation of ERP systems. The name of the organizer and presenters shall go undisclosed because it is not they who are the target of my disagreement. Rather, my disagreement is with the thrust of the application of EI.

Definitions

In the presentation, the following definitions were given:

·         ERP Change Management (CM) – refers to identifying, assessing and managing the elements that are needed to move an organization from its current state to a future state when ERP software is the transaction engine.  The goal is to realize ROI of the project.  The areas addressed include change strategy, leadership, envisioning, project team building, change history and readiness, benefits realization, stakeholder management, communications, approach to handling reluctance and sustaining commitment, Knowledge transfer, organization and business impacts, new skills and ways of working, organization restructuring, roles and responsibilities, alignment with HR processes and the enterprise strategy. [sic]

·         Emotional Intelligence (EI) – refers to the ability to recognize and understand emotions and the skill to apply this awareness to manage ourselves and others through transitions.  Emotional Intelligence is made up of 4 unique skills that cover how one recognizes and understands emotions, manages his or her behavior, and manages relationships.  These skills are self-awareness, self-management, social awareness, and relationship management. [sic]

Key points

Some pertinent points were brought in the course of the presentation, not the least of which were these:

·         Only 30% of “change initiatives” succeed, while 70% of “change initiatives” fail

·         “It takes about five years to see ROI from a [typical] ERP implementation”

·         “Change can foster significant confusion for middle managers, which can spur anxiety and stress that impede or even paralyze decision-making”

·         “Middle managers need to implement change while managing their employees’ emotions, including anxiety, resistance and eager but inappropriate behavior”

·         “These managers face the challenge of grasping a change they did not design and negotiating the details with others, equally removed from the strategic decision-making”

·         “Complexity rises for these managers of change as work demands are modified and multiply, which can create conflicts”

·         “Lack of clarity renders new demands uncertain and frequently misunderstood; without clear understanding, managers can be seen as not taking action or taking the wrong action”

These points all raised many, many questions in my mind, and I hope to speak of them in this article. However, here was the real kicker that came in response to a question at the end of the presentation:

"A lot of ERP decisions are made on the basis of executive ego.... [Therefore], there are a lot of cases where the ERP [software selected] is a mismatch [for the firm]."

Mind you: these statements – and, most notably, this final statement – is coming from two professionals serving companies of all sizes in industries including finance, health care, education, and manufacturing. And the presenter’s statement did not stop there. Examples were given in terms of “being the first in an industry,” or “having the biggest Peoplesoft implementation ever,” and more.

Notice also that the presenter did not say, “Sometimes” or “occasionally”; rather, the statement made was that “[a] lot of ERP decisions are made on the basis of executive ego.” And, frankly, my own experience confirms this – if not the original purchase decision, at least the decision to carry on with a project even when the evidence may be almost overwhelming against the net result being a positive one for the firm undertaking a traditional ERP – Everything Replacement Project.

It’s got to work

At an international trade show I attended some years ago, I became involved in a conversation with an executive from a fairly large firm. I asked him if they were considering a new ERP system, at all. His response was, “Oh, no! We are just wrapping up an SAP implementation now – after a little over two years.”

So, I said, “Well, you’re to be congratulated, then. There just aren’t a lot of companies that ever actually ‘wrap up’ a SAP project. It seems that they so frequently become ‘evergreen’ projects for SAP developers and DBAs.”

To this, he chuckled. Then, with renewed earnestness he said, “Well, there are still a few things that aren’t quite right, but we’ve spent so much money already that it’s got to work!”

This is telling, don’t you think? If ego did not initiate this ERP implementation, ego was certainly going to see it through. No executives in that company were going to admit that – after spending some millions of dollars – the ERP solution they selected was not going to work for them!

Dispelling an old myth

Who do you think started the myth that “people hate change” and “people resist change”? Do you think it was started by the people being accused of “resisting” and “hating,” or do you think it was started by those in power – monarchs, politicians, generals and executives – who wanted certain changes to occur, but were having some difficulty in getting “the people” to accept the changes set forth?

I think you will agree with me that it was, most likely, the latter group and not the former that leveled the charge and created the myth.

The following should dispel that myth once and for all – at least for my readers:

The Change	Scope of Change	Comments
Getting married	Monumental	Most people embrace and look forward to this change. They do not resist it. In fact, they dream about it and even plan for it.
Having children	Monumental	Here again, even though this is a huge change in their lives, most people look forward to having children and many even lay out plans in advance for childbearing.
Announcement that one’s salary will be doubled starting next month	Big	This change will likely bring significant lifestyle changes, yet I doubt that many would be found resisting this change.
Announcement that one’s salary will be cut in half beginning next month	Big	The magnitude of this change is equivalent to the magnitude of the change for doubling of one’s salary, yet this change is likely to bring screaming resistance.

The point is, people do not resist change. What people resist are changes about which they are not yet convinced the result for them will be positive. For example, in getting married – even though most candidates for marriage recognize that there may be some down-side to the marriage compact – they are convinced that the change will be a net positive for them in the long run.

With this in mind, in our subsequent posts in this series, we are going to revisit the Key Points raised in the Webinar on “Emotional Intelligence.”

Stay tuned.

©2010 Richard D. Cushing

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