Musings on Strategic Investigation, Performance Improvement, and Rhetoric

Good Goal Habits – Moving from Vision to Now



In a previous post I wrote about how goals can help us in almost any endeavour.  But we need to take moment to put together a proper framework for these goals, covering the short, medium and long-term.  If we don't take an hour to do this up front, we're missing a big opportunity.
Distant Goals Are Useful, But Only If We Break Them into Pieces
Wherever people have studied goals of different time-scales, the best results have come from a very particular approach: start with an important, inspiring longer term vision, and break it down into a series of intermediate and short term goals.  
Long-term goals, no matter how inspirational, consistently result in no benefit whatsoever if they aren't combined with near term targets.  Alone, they raise morale, but do nothing for performance or productivity; those Big Hairy Audacious Goals, by themselves, are a Big Hairy Audacious waste of time.  In some studies, long-term goals have even been shown to produce worse performances than simply saying, “Do your best.”  In contrast, long term visions broken down into short-term goals and intermediate evaluation stages are very effective indeed; they consistently make performance better, with proven results from business and sports to military training.
All of us do this breaking-down naturally when faced with big or complex tasks.  When skiing down a mountain, we have an end-goal: to get to the bottom upright and maybe skilfully.  But we just take one section of the mountain at a time, and focus our attention on that.  In business and personal target-setting, we take a long-term aspiration and work back to goals for this year, quarter, month, week, and, for some situations, day and hour.
The benefits of breaking down goals apply even to very short term goals.  In two studies, athletes were asked to run 1600m or 3200m as quickly as possible.  Then they were told to run it again, this time breaking the distance down into 4-8 equal segments, with target times for each segment.  This breaking down increased the speed of all but one of the runners, with a time saving of between 1.1% and 6.5%.  In the 2008 Olympic 1500m final, 1.1% was the difference between the gold medal and eighth place.
The US Navy Strike Fighter Tactics Instructor Programme (TOPGUN), uses this approach on missions, and calls it “compartmentalising.”  Leading sports scientists use it with potential Olympic medal winners, and call it “segmenting."
One thing that distinguishes teams and people who are good at making their visions happen is their dedication to this goal-setting process.  They are rigorous and deliberate in setting long-term goals, and breaking them down into short-term components.  They attach at least one goal to every relevant activity.  They break down even short-term performance goals into smaller components.  Finally, they practise constant goal-re-setting, based on feedback and results.
I’ll describe one way to do this below.
Setting a Goal Framework
Before describing how to set a goal framework, I need to make two critical qualifications.  
First, the whole goal setting process should only be used for your most important areas of focus, probably fewer than you'd wish.  Goals are for directing your attention and effort.  That's how they work.  So it’s just as important to have no goals elsewhere.  The most ferociously competitive world class athletes are unbelievably laid back outside their theatre of performance; world class business leaders don’t spend their entire time creating and fulfilling a cottage industry of meaningless targets; everyday people like you and me can achieve an awful lot by resisting the temptation to dilute our attention beyond the two or three things we really care about.  
Second, you need to have goals that you're confident will get you to your end-point, or that you can alter quickly if they don’t.  It’s all too easy to set goals that either don’t move you closer to where you want to go or take you inadvertently in the wrong direction – read the newspaper about centrally-planned government targets for plenty of evidence of this.  Getting this confidence is the subject for a whole new post, which is later in this series.
Given these qualifications, setting up a good goal framework requires at least four timeframes, each of which has a different purpose.
Long Term Goals –Vision Timeframe
Long-term goals don’t by themselves help us improve our lot.  But an exciting, visionary long-term goal has four invaluable benefits.  First, because it’s a long time away, we can target something inspirational.  Inspiration ignites people’s commitment and dedication.  Second, a common long-term goal gives teams a common purpose, helping people align their individual shorter-term goals with each other, and avoid unplanned conflicts.  Third, it gives us a gauge to assess performance and progress, i.e. are the shorter-term goals doing their jobs and getting you where you want to go?  Finally, we can use the long term vision to pull ourselves out of the mud of the day-to-day, and remind ourselves what’s important to us and what’s ultimately irrelevant.
Such a visionary goal needs to be sufficiently far in the future that you can achieve something that would be impossible with today’s capability.  Depending on circumstances, this could be as near as a year and as far away as a decade.  For athletes, a visionary goal could be Olympic qualification; for businesses, becoming the world’s obvious go to provider of a service.  
Medium-Long Term Goals – Target Timeframe
Armed with our inspirational long-term vision, we need a hard performance target against which we can monitor progress.  Where the long-term goal was visionary, intended to inspire commitment to the cause, the corresponding performance target is tangible, measurable and as within our control as possible.
Six-time World Ironman champion Dave Scott’s visionary goal was to win it again in 1989 – exciting but not a target he could use to measure progress.  His performance target was a time of 8 hours 10 minutes (25 minutes faster than last time he won it) – a very tangible target indeed.  He missed his target by 15 seconds and came second, by a whisker, in the greatest Ironman race ever.
Intermediate Goals – Progression Timeframe
Adding intermediate targets makes the long term target much more achievable, and this is again supported by overwhelming evidence.  Targets are more immediate, which raises their priority and focuses our attention on them.  Our ability to hit them tells us whether our current effort and approach is getting us to the longer term goal – or if we need to try harder or find another approach.  The very presence of an intermediate goal, like a weigh in at a diet club, prompts us to be consistent in good habits we want to generate but are tempted to put off.
These are the good reasons why sales managers use frequent pipeline reviews as intermediate targets, and why athletes have monthly performance progress goals before the competition season.
Immediate Goals – Performance Timeframe
The goal framework then cascades all the way back to the performance itself.  Evidence overwhelmingly supports the benefits of using well-set goals for performance and practice, in fields ranging from negotiations to cycling ergometer trials.  If you or I go into any arena – a meeting, sales pitch, or practice session - with a well-set goal, we will perform better against it than if we simply try to do our best.
Putting this all together, we have a long-term goal that lights our fire, converted into something tangible that we can target, cascaded back through intermediate steps - this year, this quarter, this month, and week (even day and hour for some activities) - to our very next performance or practice.  
Recalibrating
Top performers, and people who use goals well, don’t just adhere mindlessly to the pre-set framework, stressing out when they’re miles behind plan, or coasting and sandbagging if they're ahead.  They constantly reset targets, upwards or downwards, based on performances and progress to date.  The Radioshack cycling team realised part way through 2009’s Tour de France that they wouldn’t win their target yellow jersey, so they reset their target onto the prize for fastest team, which they won.  The principle is the same for anyone from salesmen to rugby teams – if you’re well behind your goal, it’s worth recalibrating to something more achievable; if you’re well ahead, you may want to up it to something that's a pleasant challenge.

This investment in a well-designed goal-setting framework seems pretty large, and it does take a little time.  But it’s an investment that, done rigorously, pays for itself many times over.  It saves lots of distraction and wasted effort.  Most importantly it frees us to focus all of our attention where it counts: on doing a fine job of the task at hand.

Sources
Botterill, 1977.  Goal-setting and Performance on an Endurance Task.
House, 1973.  Performance Expectancies and Affect Associated with Outcomes as a Function of Time Perspective.
Locke & Latham, 2002.  Building a Practically Useful Theory of Goal-Setting and Task Motivation.
Umstot, Bell & Mitchell, 1976.  Effects of Job Enrichment and Task Goals on Satisfaction and Productivity.
Rushall, 1996.  Some determinants in human competitive performances: A psychological perspective.

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Performance Goals – Great If You Use Them Wisely


 

Goals are as Valuable as the Care You Put Into Them

Goals can be powerful things.  When used well, they can produce startling increases in performance; used badly, they can damage and destroy; used half-heartedly, they typically have hardly any effect at all.

The evidence of the benefits of well-set goals is hard to ignore.  Studies comparing goal-users against those with no goals or “do your best” instructions show consistently better performance by the goal users.  This is true for individuals, teams, and enterprises.  Studies of athletes regularly show improvements of 50-100% in the best responders.  Locke’s original landmark review of goal-setting studies in enterprises showed that 90% enjoyed material performance improvement from using goals.  The same review identified an average 40% performance improvement when goals were combined with monetary incentives.

The disastrous effects of badly-set goals are also hard to ignore.  Ordonez et al’s “Goals Gone Wild” gives an attention-grabbing selection of negative case examples of gaming, conflict, irresponsibility, and issue blindness from poor goal-setting.  These include Sears’ auto repair sales goals, which resulted in company-wide behaviour of overcharging and making unnecessary repairs.  The paper also includes the inevitable Enron example of sales targets that ignored profitability measures, with results that we all know.

Goals applied half-heartedly are just a waste of time.  Long-term goals have no performance enhancing effect if not combined with more immediate goals.  Goals, of any time frame, have no material performance-enhancing effect if not combined with feedback on results.

In a nutshell, the effort and thought you put into goals is rewarded in proportion.

How Goals Work

A major effect of goals on the mind is to focus the attention, something I’ve talked about before (here) as being critical to performance improvement.  Done well, goals help you direct your attention to what’s important, at the expense of what’s unimportant.

Studies that record multiple aspects of performance consistently show improvement in the aspects with goals, and little or none for areas where no goals are set.  This is as true in day-to-day life as in corporates: one study of collegiate rugby players showed between 26% and 118% improvement in pre-selected goal tasks over a season with negligible improvement in non-selected tasks.

Done badly, goals direct your attention, possibly inadvertently, onto damaging or unproductive work, which Goals Gone Wild illustrates at length.  

Without goals, you don’t just flounder; but you are more likely to get drawn into a range of nice-to-haves and ought-to-dos, with no prompt to choose how to prioritise your limited time, money and energy.

A second effect of goals on the mind is mobilising increased effort and persistence.  In observed field experiments, when people are allowed to control time, they prolong effort to hit goals.  When faced with tight deadlines, they increase work pace.  

Hard goals produce higher effort even than people’s self-directed attempts to work as hard as they possibly can.  In a study of cyclists, participants given hard goals actually performed at higher levels than those asked to cycle until they literally couldn’t pedal any more.

A third observed effect of well-set goals is to stimulate use of new or more productive strategies: prompting the mind to work smarter as well as harder.  This is a characteristic of planning, which I’ll cover in a separate set of future posts.

My favourite characterisation of the extremes to which focused attention and persistence exhibit themselves in pursuing a critical goal, and how ingenious strategies become, is from the documentary March of Penguins.  Natural world examples aren’t for everyone, so I’ve summarised this separately here.

Good Goal Habits

Given the enormous potential benefits involved, it’s worth investing some time to set and use goals well, taking on board the lessons that enterprises, sportspeople, scientists and others have learned and captured over the years.  The commonly-espoused SMART (Specific, Measurable, Attainable/Agreed, Relevant/Realistic, Time-based) goal-setting protocol is a good start; but it misses some critical steps, without which you’re wasting your time.

I’ll therefore use the next series of posts to lay out some Good Goal Habits, which summarise much of the accumulated knowledge of what works and what doesn’t.

Areas I’ll cover include: whether and how to use longer-term and shorter-term goals; how difficult should goals be; whether to use outcome goals or process goals; where to use multiple goals, and how to manage them; how explicit goals should be; the role of feedback and evaluation; the importance of goal commitment, and how to increase it; who to include in goal-setting; special characteristics of group and visionary goals; and characteristics of a top goal-setting and goal-hitting environment.

Next post, starting with the big picture: using long- and short-term goals together for an excellent goal structure.

Sources

Locke & Latham, 2002.  Building a Practically Useful Theory of Goal-Setting & Task Motivation
Ordonez et al., 2009.  Goals Gone Wild
Locke & Latham, 2009. Has Goal Setting Gone Wild, or Have Its Attackers Abandoned Good Scholarship?
Mellalieu et al., 2006.  The Effects of Goal Setting on Rugby Performance
Dimitrova, 1970. Dependence of Voluntary Effort Upon the Magnitude of the Goal and the Way it is Set in Sportsmen
Botterill, 1977. Goal-setting and Performance on an Endurance Task

Copyright Latitude 2011. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk


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Penguins & Performance






How Goals Work (Briefly)

This post is an add-on to my introductory post [here], which was about the consistently major benefits of well-managed goals, and about how goals work.  Well-set difficult goals work because they (1) focus attention onto what’s important and away from everything else, (2) motivate greater effort and persistence than simply doing your best, and (3) stimulate use of better strategies to reach them.

These characteristics are personified in the extreme by the stars of the documentary “March of the Penguins”.

A Difficult, Important Goal – Keep the Chick Alive

Emperor Penguins choose a breeding ground on ice that is solid year round.  At the beginning of the Antarctic summer, the breeding ground is only a few hundred meters away from the open water where the penguins can feed. By the end of summer, the breeding ground is over 60 miles away from the nearest open water, and gets further away every month.

The female lays a single egg each breeding season, and the goal is to keep the chick alive for eight months in one of the most hostile environments on earth, miles from food sources, until it can fend for itself.

Focused Attention – Chick First; Food and Everything Else Second

The males and females are together on the breeding ground for two months after mating until the eggs are laid.  If the egg is to survive, it needs to stay warm.  So after the female lays the egg, she transfers it to the feet of the waiting male, minimising exposure to the intense cold that would kill the developing embryo.  The male tends to the egg while the female returns to the sea, now even farther away, both in order to feed herself and to obtain extra food for feeding her chick.  For an additional two months, while the female make the return trip to the sea, the males huddle together to stay warm enough to incubate their eggs.

(Just Unbelievable) Persistence

The females have not eaten in two months by the time they leave the hatching area, and have lost a third of their body weight. They then need to travel 50 miles to reach the open ocean.  The males meanwhile endure temperatures approaching −62 °C (−80 °F), with falling snow their only source of water. By the time the females return, the males have lost half their weight and have not eaten for four months.

When mother penguins come back and feed their young, the male penguins take their turn to go to the sea, now 70 miles away, to feed themselves. 

The parents continue this shuttling back and forth to the sea for an additional four months, until finally the parents can leave the chicks to fend for themselves.

Ingenious Strategies to Survive and Keep the Chick Alive

The Emperor penguins have devised a multitude of ingenious strategies to keep the chick alive in this crazily hostile situation.  In addition to the female-male-female tag game and the keep-warm huddle, memorable strategies include the males taking turns on the cold outside of the huddle and, in desperate near-starvation circumstances, feeding eleventh-hour nourishment direct from the father-penguins' throat sacs.

Here’s my point in this example.  If an important goal can stimulate this phenomenal focused attention, persistence and ingenuity in a penguin, I would hope that goals can be helpful for us too.

Copyright Latitude 2011. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk


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Want To Be Excellent? Then Stop Doing So Much


Miss Melbury's view of the doctor as a merciless, unwavering, irresistible scientist was not quite in accordance with fact.  The real Dr. Fitzpiers was a man of too many hobbies to show likelihood of rising to any great eminence in the profession he had chosen, or even to acquire any wide practice in the rural district he had marked out for the present.
The Woodlanders, Thomas Hardy
One critical characteristic of individuals and companies who excel in their fields is their ability to focus every bit of their attention on what they yearn to do extremely well.  Part of this deal is that they do less of everything else.  This is the decisive step for many of us: not doing more of this or that, but removing the innocent-looking things that rob our attention.
In my investigations into this, I’ve noticed two reasons for our inability to shut out the non-essential.  First, we find it hard to say no to additional things that seem valuable or interesting.  Second, we don't understand the massive hidden damage that the distractions and dissipation ultimately cause to our potential.

Damage Caused by Distraction
Evidence abounds of this damage caused by distraction.
At a high “where should I focus my business/career/talent” level, spreading talent across a wide range of activities is shown time and again to result in lower performance.  Examples range from the excellent Billy Beane’s disdain of under-performing baseball all-rounders, through to regular academic reviews showing the negative effects of business diversification.
Distraction is damaging at a day-to-day level too.  Studies of multi-tasking individuals reveal consistent reductions in performance, versus control groups who are forced to focus.  This is true even where the multi-tasking is intended to help performance.  One study of students showed that those allowed to look up recommended online information during lectures fared considerably worse than those only allowed to listen to the lecturer.
The distraction doesn’t even need to be present in the room to hurt performance.  Damage to performance by life stress is well-reported, with evidence even extending to performance deterioration in teenage ice-skaters caused by issues at home.
But the most worrying result I have found from research into distraction is this - people don’t realise how much it damages them.  In one study of medical students, participants were distracted with questions during simulated surgery, and had a consistently higher miss rate than a control group that worked in silence.  The frightening insight from this study is that only 9.5% of these under-performing students thought the distraction had affected them!

An Everyman Path of Focusing
There is a well-trodden path for achieving this ability to focus, and free ourselves from distraction.  This is to transport the person or team to an environment where everything is already set up for single-minded focus.  These environments can be permanent, for example elite academies and institutions, or temporary, like training camps and business war rooms.
Most of us can’t practically transport ourselves from our families to these tailor made centres of excellence, other than the odd trip to La Santa or business off-site.  A more realistic option is to do the hard work of transforming our own environment, company or working day.
“How-to”s aren’t to everyone’s taste, but if you’re interested in a basic exercise as a starter-for-ten in deliberating what to cut out, here are some simple questions:

What is the minimum I need to do, to be as good as I want to be at (...)? 
This minimum includes not just today’s work and output, but the development needed for tomorrow’s capability.
If you don’t know what this minimum amount is, then it’s a critical and sobering step to understand just how much this is.  Even if you think you know how much attention you need to commit as a minimum, it’s worth reviewing anyway, because you’ve probably under-estimated it.  One way to do this assessment is to identify a person, company or team whose performance sets the benchmark for you.  Then investigate how much accumulated time, effort and resource they have put in over days, months and years to get down the experience curve to where they are.
If you’re ambitious about how good you want to be, and investigate thoroughly what it takes, the minimum you need to do will be a very great deal indeed.  It will possibly be more than your entire available time or budget.  You’ll likely realise that your initial target was too broad or too soon; and you will need to focus further, to cut your minimum down to something feasible.

What are the distractions to my time and attention, which stop me getting down to this and doing it consistently?  How much of this could I take away if I really needed to?
I’m asking this question at both a high level and a day-to-day one.  High level distractions include non-core lines of business, passing interests, peripheral talents to practise, and major obligations.  Day-to-day distractions include everything that takes away your attention, time or hunger to perform, from the task at hand – elite performance academies are spartan places with clear tables and no pop-up email alerts!

What do I need to add, so that I can focus my attention properly?
The critical things to add in here, from which high performers really benefit, are relaxation and support systems.  I’m not aware of any real-life high performers who aren’t also great at making time to relax and reflect.  I’m not aware of any high-performing individuals or management teams that don’t also have great support systems.  As with many important and non-urgent things, we need to set aside time to invest in these, so they don’t get lost in the melee.  If we ignore them as peripheral, we can count on their consequences to come back to bite us very hard later.

Have I got plenty of slack left for the inevitable changes, delays, surprises, crises and over-runs?
If not, return to “1”.  If you think you’ve got too much slack, see how things go for a week.

If you try the exercise and have a look at what you’re giving up as a result, my guess is that it will consist of a lot of things that previously seemed useful, or at least harmless, but ate away silently at your potential by stealing your attention:
·         Interesting projects that have genuine potential, but are peripheral to where you’ve chosen to focus
·         Profitable projects or sidelines that aren’t critical to your core business
·         “Ought-to-dos” and “nice-to-dos”, which if you’re honest are more about being polite or following form than providing or receiving something of value
·         Other people’s priorities that you have just reacted to, without working through whether or how they fit in your plans
·         Tasks that any number of people could do just as well as you could, or services that any number of companies could provide
·         A plethora of regular day-to-day background distractions
Now look at what you’re adding to replace it, which will be more of this:
·         Much more time and resource to devote to the small number of things you want to be extremely good at
·         Activities that build your future capability
·         Time to reflect and even relax
·         Investment in your support systems
·         Slack time, so that inevitable sidewinders can be accommodated without chaotic triage
In summary, we now have a lot more time and attention spent in and around what’s really important, and a lot less to distract us from it.
Here’s a couple of tests I use with clients and observe in others, to see if this chosen focus is sustainable.  First, the prospect of focusing so much of attention on one or two things needs to be exciting, so exciting that it can fuel countless hours of relentless commitment.  Second, other people – customers, sponsors, backers and supporters – need to value it sufficiently to pay more than enough for the performance we’re providing in return.
How other people have got to this sort of exciting focus, one that is also productive and sustainable, is part of a whole new subject.  But I’ll cover that another time.  I want to stop this article from doing too much.

Copyright Latitude 2010. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk


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Florence Nightingale - A Case Study in Excellence




If I were to choose a list of great people who embody what it takes to be excellent, Florence Nightingale would rank above every single living person I can think of.

The commonly-held view of her is romantic, the archetypal nurturing carer; someone "called upon by God" in her own words to spend her life in nursing despite expectations of feminine nobility.  But beneath this velvet glove, there was a tough and practical nature; which supplemented her passionate side to make her a case study in excellence.

I'll describe her less recognised side in terms of the attributes of high performance I’ve introduced previously.

Constant feedback and measurement of progress

Nightingale was absolutely systematic and rigorous in using measurement to track improvement.  In addition to being a nurse, she was an accomplished statistician, and in her time pioneered graphical representation of information.  She is credited with developing the polar area diagram, which she used to analyse progression of Crimean War conditions.  Examples of these elegant and insightful charts are shown here:



She later used a statistical study of sanitation in India to recommend improvements in public health, and was invited to become the first female member of the Royal Statistical Society.

Honest diagnosis of what is and isn't working, what works best and what to change

When Nightingale first arrived in the Crimea, she was convinced that high hospital death rates - ten times greater than death rates from combat - were caused by poor nutrition and supplies, and by over-working.  In the first year of her presence, despite her efforts, mortality went up to the highest level of any hospital in the region.  Only after analysing evidence that indicated the benefits of sanitation did she turn her focus to this, subsequently pioneering sanitary living conditions in the army and then other hospitals.  Compared to the improved survival rates from Nightingale-inspired changes, the benefits of modern drug developments are a rounding error.

Pursuit of challenging boundaries, constantly reviewing them to be just right versus capabilities

Nightingale started as a nurse with the challenge of cleaning hospitals in the Crimea, but stretched her boundaries consistently over time.  After Crimea, she founded the first school of nursing; she then wrote the first textbook on nursing, then introduced trained nurses into the workhouse system, and then launched trained nursing to the US through her mentorship of Linda Richards, ultimately founding the nursing profession in both the UK and US.

In clarifying her thoughts on the profession, she wrote what would be a seminal work in the progression of feminism.  In applying them, she undertook to statistical studies and lobbied for sanitary reform that supported a quartering of the British Army death rate in India.

Focus only on relevant actions and outcomes that are within your control

She couldn't do much about the Crimean war that caused men to be hospitalised, or the medicines available, but could she sort out the sewers.  Following the Sanitary Commission’s work, death rates fell from 42% to 2%.

She couldn’t do much about the insanitary living conditions of the British poor, but she could send nurses to the workhouses, a precursor to the National Health Service.

De-cluttering of everything else that distracts, and creating support systems to allow such dedication

Nightingale was as single-mindedly dedicated to nursing as Hannibal was to toppling Rome, or as Wylie Coyote still is to catching Road Runner.

She rejected her first high profile marriage suitor, with an explanation that marriage would interfere with her calling to nursing, and rebuffed other approaches regularly through her life.  She had the education, privileges, opportunity and backing to take up legion other causes, particularly the growing feminism movement of which she was in a position to be a leading light; but she chose to focus her time and attention on nursing and the improvement of the conditions of the sick.

She was also fortunate to have support systems that allowed this commitment.  She was from a wealthy background, and her allowance from her family was large enough that she was not distracted by worry about making ends meet.

Relentless continual mindful application for hours and hours and hours

Nightingale was “called by God” to nursing at 17.  She used her time before she could become a nurse to study hospitals, producing her first work on treatment of the sick at 21.  She announced her decision to enter nursing when she could, at 24, which was then the focus of her attention for the rest of her life.

It is hard to think of a more intensive, unremitting, immersion in any profession than the Scutari military hospital of the Crimea where Nightingale made her name in 1854, as far from society as could be conceived, and where 4,077 soldiers died in her first winter.  Her obsession with hospital conditions was relentless throughout her life; even when bedridden with severe brucellosis, she did pioneering work on hospital design that was implemented around the world.

I wouldn’t invite her to my ideal party, because she wouldn’t turn up to anything that wasn’t about improving the conditions of the sick.  But that doesn’t make her less of an inspiration.

To many people, she’s the magical, caring lady-with-the-lamp.  To me, she’s the intrepid, forensic, challenging, realistic, relentless, hard-as-nails, make-it-so Flo.  Today’s performance gurus couldn’t hold a candle to her.

Copyright Latitude 2010. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

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Loving that Performance


"But, tell me, why should your leader—why should you all—spend your money and risk your lives—for it is your lives you risk, Messieurs, when you set foot in France—and all for us French men and women, who are nothing to you?"

"Sport, Madame la Comtesse, sport,"

The Scarlet Pimpernel, by Baroness Orczy

The performance improvement world now possesses some myth-busting evidence and fascinating case studies about what it takes for anyone to do something really superbly well.  I've been spending time researching this subject, and reviewing its application, and will cover it in a series of forthcoming posts.  As a pre-view, a simplified how-to-be-excellent list from this research is as follows:
  1.  Challenging standards, which are constantly reviewed to be achievable but not too easy or difficult
  2.  Focus only on relevant actions and outcomes that are within your control
  3.  Constant feedback and measurement of performance and progress
  4.  Honest diagnosis of what is and isn't working: what works best, and what to change
  5. Removal of everything else that distracts, and support systems that allow you to do this
  6.  Relentless continual mindful practice or application, intensively, for hours and hours and hours
As you can imagine, in order to pursue this relentless, repetitive process, you really do need to love what you're doing.  This apparently ethereal issue is what I want to cover here – let’s talk about love.

Here’s what I don’t mean by love of what you’re doing.  I don’t mean the pursuit of a lofty goal.  I don't deny there's a part of each of us that feels the need to do something worthwhile; and I’ve no doubt that rousing ideals provide genuine motivation.  But, by themselves, they don’t make us good at whatever we’re doing.  We’ve all heard the jaded inspirational anecdote about a sweeper at NASA saying he’s putting someone on the moon.  Was he a satisfied sweeper?  Was he actually any good at sweeping?  The anecdote runs out of steam on those points.  Anyway, for many of us it's pretty hard to find the ultimate external benefit in much of the work we all do, to understand how everything comes together in the multifaceted interactions of society.

When I talk about loving what you’re doing, I mean the love of doing the thing for its own sake; the total absorption in process that you see in a great cook, scientist, bike mechanic, musician, orator, or athlete.  Racking my brains, it’s hard to think of any examples of human excellence that don’t display this absorption.  Neither does it seem to be confined to celebrated, world class performers; in my world, that same absorption is a hallmark of the top performing individuals and teams with which I have the pleasure to work.

So how do you or I access this love of doing something for its own sake, which underpins all this excellence?  There's a received wisdom that stage one in becoming excellent and satisfied is to "follow your passion"; simple as that.  Taken in isolation from the reality of what your friends, customers, team mates, and family all value, I think this advice is downright dangerous and destined to end in tears most of the time; but that’s a subject for another day.  My point for today is that the world is not so linear: passion doesn’t just lead excellence, it also follows.

Even casual everyday evidence seems to show that our enjoyment and passion in doing something emerges and grows from excellence and application – the better we get at it, as long as we’re improving, the more we enjoy it.  Did Tiger love golf the first time he swung and missed with the giant plastic golf club his dad bought him before he could walk?  Did Becks immediately love curling in free kicks at the local park; or was that swerving, match-saver against Greece a bit more satisfying than the early ones?  Did Tolstoy get passionate about prose in his first one-pager about his family cat; or did his passion become a little stronger with the development of an art that produced Anna Karenina?  At a lower level, watch any celebrities-have-a-go-at-new-skill type show, and see how much they’re enjoying themselves in their first class or test, compared to the end of the series when they’ve developed a degree of mastery.

So my view is more emergent than the "start with your passion, something that stirs your loins, and watch good things follow" view of excellence.  Fair enough, it’s smart to start with something that we enjoy, which works for both us and the others we care about commercially and socially.  The key step for me is the next one: do all the things that it takes to do the thing really superbly well, and immerse ourselves in the process.  With that, we’ll see the passion grow with our growing excellence, and we’ll enjoy the sport.

Some relevant links:

A simple experiment showing that performance increases with relevant challenge, and that enjoyment increases with performance, even in the most apparently meaningless task.
Alain de Botton talks with Russ Roberts about people’s absorption in the process of their jobs.
The Scarlet Pimpernel

 
Copyright Latitude 2010. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk
Comments

Put Some Emotion into Your Decision-Making and Analysis


I’m a firm believer that emotion plays a cornerstone role in any decision-making. What’s more, I also believe that strong emotion should be used to stimulate much better analysis about how to improve performance or solve a problem.

While my wife picks herself up from the chair she’s fallen off, making unflattering comparisons between problem solvers, analysts, consultants, coaches, philosophers, scientists and Mr Spock, I’ll give you some context and take some time to explain what I mean by the heresy above.

I was listening last week to a podcast featuring a German philosopher called Sabine Doring. Her area of interest is the philosophy of emotion, and its role in decision-making. In her interview, she provided three insights that got me thinking:

1. Emotions are by definition directed at something, which makes them different from moods. For example: feeling sad is a mood; feeling aggressive towards your cheating former lover is an emotion. So I can’t be an emotional or unemotional person, but I can be emotional or unemotional about a particular concept, person or decision.

2. It is ultimately your emotions that determine what matters to you when making a decision. In the most mechanical and number-driven decision-making, we still choose and give weight to different factors based on such aspects as risk-aversion (worry), time-horizon (impatience) and reward (greed). And the vast bulk of decisions, being much less mechanical, require some major value judgments. In fact, if you don’t care about your decision-making criterion, then the whole thing doesn’t matter, is irrelevant and doesn’t require a decision.

3. Recent studies by her colleagues showed that people are generally more creative when happy (counter to the art-house dogma), and more rational and analytic when depressed.

So, contrary to the truism that emotions cloud reason and need to be shoved to the backs of our minds when trying to be rational, Ms Doring’s musings lead me to a list of insights that I hope can help us become better decision-makers:

1. The better we understand ourselves, the better decisions we can make. I’m not advocating self-indulgent soul-searching here, but I am proposing being alert to and honest about the emotion that motivates each decision (and, yes, greed counts if maximising reward is number one).

2. The more we care about something, the harder we will look to find a solution or make it work. There’s a downside to this of course, that we’re tempted to overlook things that run counter to our desired result. This why one of my few personal rules is to be as emotional about finding the truth as I am about anything else.

3. Playing good cop/ bad cop, or happy cop/ depressed cop, about a decision will help you get first into the creative to search for possibility in making something work, and then into the rational in testing it. Some of the best management teams I know have permanent happy and depressed cops to create this productive balance.

So there you are: a rationale for more emotion. Hopefully, my photo above shows how emotion fits into my performance.

Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk
Comments (2)

The Flip-side of Focus

I’m going to talk about focus.

Here’s a typical concluding paragraph from a business article or interview about improvement in any area of performance:

“It takes commitment from the top. Every member of the top team, from the CEO downwards, needs to be a champion and role model of [fill in the gap – customer service, efficiency, health and safety, etc.]. It needs to be recognised as a top priority, measured, monitored and rewarded. Every organisation/individual that has taken this approach has improved its [customer service, efficiency, health and safety, etc.] performance by a factor of …”

You can read and hear similar advice and claims from gurus and advisors of personal development, public policy, sports and fitness, hobbies, interests and a host of other areas where people seek performance improvement. In a nutshell, if you focus on something, you get better at it.

This is a fine approach with great merits, but brings up in my mind an awkward compromising question: “What about everything else; everything you’re not focusing on?” Is there a risk that by focusing so much attention on X, then Y will get worse, or at least not improve as much as it would if it got more attention?

One UK insurance company I know spent one year putting customer service above absolutely everything else, and grew that year to market leadership. But it saw its profits turn negative and created chaotic complexity as every front line person did what was necessary to delight every individual customer. The following year saw a focus on process simplification; the next, a heavy focus on waste reduction. Each year saw improvement in that year’s particular area of focus, but standstill or decline elsewhere. After three years, the company was several places down in the market league table, and was subsequently acquired by the new market leader.

Ben Franklin established a set of thirteen personal virtues in his 20s, which he famously, and successfully, practised for the rest of his life. He would focus on one at a time, making each habitual before moving onto the next. The first and foremost of these virtues was, of all things, temperance. The reason he chose such an uninspiring virtue to lead all the others was that he needed to practise temperance in order to have the presence of mind to put the right effort into his twelve other important virtues.

The lesson from all this? Of course we need to focus our attentions. Of course we need to choose where we improve or excel: we can only do one thing at a time and we can’t be all things to all men. But we need to have the thoughtfulness and wherewithal to take things in the round, think through where we choose to focus, and we need to pay attention to the full consequences. This includes an acknowledgement that we are likely to go backwards in areas where we aren’t paying attention.

With this in mind it’s unlikely that one area of focus for performance improvement will capture everything we need. There are good precedents for multiple areas of focus. Franklin had thirteen in a carefully selected order; Jesus had a Golden Rule of two parts, the Lord’s Prayer, and a gospel full of other rules and stories; everyone I speak to from Tesco gives a different combination of reasons for its success.

People from management science backgrounds might call this approach a balanced scorecard. Life-hackers might call this priority management. To me it’s just about looking past the claims and clichés, and paying proper attention to the complete picture.


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk
Comments

Business turnarounds - troubleshooting performance problems (3/3)

In our last post we looked at our two most fruitful areas of analysis when an under-performing company has issues with sales (or gross profit) growth. In this post, we look at the two areas of investigation that we find most useful for companies with profitability problems.

Again, the most useful analyses are the ones that are rarely done. Board packs, management KPIs and performance measures often track return on sales and total profit by line and by customer group. These analyses ordinarily have value, but don't add to what the Board already knows, and so do not provide insights to a performance problem that the Board has to date been unable to address.

The analyses we find most useful are related to lifetime profits:

1. Analysis of profit contribution of assets over their lifetime
2. Analysis of profit contribution of customers over their lifetime.

Profitability analysis of asset usage

Capital constraint is a critical issue in turnarounds. However, profitability numbers in Board KPIs often either ignore asset usage or treat amortisation uniformly for each product line, not distinguishing asset-intensive versus asset-light customers.

Accounting for each customer group’s asset usage often highlights major cash sinks. It can overturn previously held understanding of customer profitability and often reveals where companies have historically focused time and resource on what turn out to be loss-making or value-destroying customers.

Example – gaming machine operator turnaround

Profitability had declined for five consecutive years in a highly capital intensive sector, resulting in low return on investment and ultimately covenant breach.

The business had focused on maintaining high machine rents, by targeting sales on high end managed pubs and by rapid and continuous new product introductions. The business deprioritised lower end free trade customers that required lower rates of introduction and paid correspondingly lower rents.

Using a simplistic assumption for machine depreciation, managed houses appeared profitable, free houses unprofitable.



Correct accounting for machine asset depreciation showed the historic focus on managed pubs to be value-destroying.



The business consequently renegotiated its managed pub contracts to reflect the accurate understanding of cost structure, grew profitability and has successfully refinanced.

Customer acquisition cost and lifetime value

Management accounts and monthly KPIs can hide the true cost of acquiring customers, and the payback over the customers’ lifetimes. This can be particularly true for larger deals or new services where the customer contributions appear large, but the time and cost taken to acquire these customers can make them loss-making over their lifetime. This is further exacerbated when accounting for a high time value of money in distressed situations: a large initial sales cost outlay and delayed incoming cash flows can generate large negative net present values and heavy cash requirements for some major prospective customers or ambitious new services.

Example – telecoms reseller turnaround

A corporate telecoms reseller had operated at low scale and with heavy losses for several years, and faced closure by its financing parent.

The business perceived greatest potential from large corporate customers and focused sales efforts on these accounts.

Analysis of customer lifetime and acquisition cost arising from low hit rate, resulted in the conclusion that the business was incorrectly focused on loss-making large corporates and under-investing in sales to highly-profitable SMEs





The business refocused onto SMEs and subsequently achieved trade exit in excess of £150m.


So, there we have it, four rarely-used but commonly insightful analyses to perform on struggling businesses, when the usual KPIs and Board packs have not given any productive clues to the causes of decline.

Given the recent trend for debt holders to delay taking control of breached or distressed companies, we believe that management and equity now has greater breathing space to diagnose financial issues. And we believe that a rigorous understanding of such issues is value-adding for everyone involved.


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments

Business turnarounds - troubleshooting performance problems (2/3)

In our last post we pointed out that the most fruitful areas to investigate for unaddressed causes of performance problems are, by definition, those that aren't covered in standard KPIs or Board packs.

We find four analyses particularly insightful, depending on the area of underperformance. The first two are suitable for understanding issues of sales (and gross profit) growth/decline, and we cover them in this post. The third and fourth are more suitable for issues with profitability; we will cover these in our next post.

To diagnose issues with sales or gross profit growth/decline, the two most commonly insightful analyses are:

1. Reviewing market and competitive benchmarks, in order to understand whether the company's product mix matches market growth areas and if gross margins are in line with peers, or if, more likely, the company is working hard to hold back the tide by growing share in a low margin segment

2. Analysing the year-on-year sources of business, to understand the reliable base line of secure business, and whether the company's underperformance is a result of issues with customer acquisition, customer retention, or both.

Review of market and competitive benchmarks

A market and competitive review generates rapid and useful benchmarks of reasonable growth expectations for a company’s services and expectations for gross margin. Problems with revenue and gross margin can often be simply the result of a poor business mix, skewed towards the low growth, low margin market segments.

Plans to exceed market benchmark growth or margin are too unconservative for a sound turnaround plan. Changing business mix to higher growth, higher margin segments, achieved by reprioritising marketing and sales investment, is almost always a more pragmatic path to follow.

Given the generally strong positive relationship between gross margin and market growth, such a reprioritisation kills two birds with one stone.

Example – technology services turnaround

Sales had slowed below historic rate in the previous 18 months, and gross margin shrinkage caused impending covenant breach.

Rapid analysis of market growth and competitor margins showed that business had focused excessively on a low growth, low margin segment. This growth in excess of market had depressed margins even further. A return to sales and margin growth was possible from rebalancing business mix to higher growth segments.



The refocus took 8 weeks to implement and resulted in business returning to full-year budget performance within 4 months. The business refinanced successful with all solvent banks retaining participation and is now the most profitable player in its sector.


Analysis of new versus retained business

Understanding a company’s reliable base of recurring business is clearly important in the context of turnaround financing and planning. In addition, a review of new versus retained business over months or years illustrates whether the revenue problem is one of acquisition or retention, each of which has very different restorative actions.

Example – tour operator turnaround

Sales had declined for three consecutive years in a steadily growing niche, resulting in declining total profit, with trend rate threatening covenant breach.

The business had cut unprofitable discounted lines but maintained traditional efficient distribution in an unsuccessful attempt to reverse profit decline.

Analysis of sources of yearly bookings showed a strong stable base of regular customers but a continual annual decline of new customers, resulting in steady decline of volumes.

Cumulative bookings from previous customers show consistent annual spend



Cumulative bookings from new customers show ongoing annual decline





Evidence of reliable loyal booking provided a solid baseline for a successful refinancing.

The business refocused on new customer acquisition through a successful new online channel, regional departures to reflect changing travel patterns and the launch of lower-cost introductory products to capture new customers.

Of course, there are limitless other analyses that can be used to address the underlying causes of sales underperformance, but the two in this post are the ones we find most useful and under-used.

In our next post, we will cover our two most fruitful approaches to understanding profitability issues.


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments

Business turnarounds - troubleshooting performance problems (1/3)

Turning around an under-performing company has one major characteristic in common with fixing your central heating - unless you work out what went wrong, you'll never fix it, at best you'll patch it up, keep your fingers crossed and sit there shivering next time the weather turns cold.

We have worked with hundreds of companies with performance problems. Only a handful of these had a clear and accurate picture of what went wrong to get them into trouble. With the exception of one (extremely fortunate) company, we have not seen any recover from distress without knowing the problem that got them into it.

There are occasional examples when the problems are obvious to everyone. In these cases, the decline is often rapid and can be associated with something specific, such as loss of a key contract, a change in legislation or a change in the market or competitive environment. Handling a potential turnaround in such a situation is usually straightforward, requiring brutal but obvious decisions. However, these sudden-dive situations are uncommon.

The majority of financially-troubled businesses that bring us in have experienced an extended decline, one that current or previous management has worked unsuccessfully to reverse. In these situations, management can often identify some areas of underperformance through various KPIs. However, without a clear and correct diagnosis of the underlying causes, management is shooting in the dark. It cannot possibly address business underperformance and more usually makes decisions that worsen the situation. As a result of such flawed or incomplete understanding of customer or service profitability, we have witnessed heavy targeting of loss-making customer groups, withdrawals from profitable, cash-generative business lines, proliferation of product into areas of marginal or negative return, together with a long list of progressively desperate gambles as performance deteriorates.

In a turnaround situation, the two major constraints are time and capital, and management needs to know where to direct them. To achieve this, we believe that a business needs to undertake a complete diagnosis of where it is making and losing money, and the underlying causes of performance problems. Only once it does this can it identify which areas of the business to protect, which to cut, and where to address scarce time and resources in performance improvement.

The most fruitful areas to investigate are, of course, the ones most commonly over-looked - ones that by definition do not appear in the Board pack or management accounts. In the next four posts of this series, we outline the four most common problems we see, and the ways to identify them.


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments

What makes a market leader? (7/7)

In the last three posts in this series, we covered the common and unique characteristics of market leading companies in our research that enabled them to make breakthroughs in performance and cope with rapid growth without losing momentum or focus. In this final post of the series, we describe the characteristic shared by only the market leaders that stayed ahead – the ability to stay uncomfortable.

Participants highlighted two big areas of concern once they were ahead of the field.

The first concern was being exposed to changes in customer demand: with a large share of the market, you inevitably rise and fall with it.

The second concern was complacency: once ahead, companies faced temptations to concentrate on reaping the financial benefits of their strong position, and to stick with winning ways. But the dangers of this “defend and reap” attitude were considered by leaders to be enormous: from outside due to targeting and copying by competitors, and from inside due to the departure of ambitious people lacking new challenges. Indeed one PLC leader attributed its slow demise to the spawning of competitors from within the company.

The most consistent solution that successful leaders gave to both big concerns was to stay uncomfortable and deliberately take the business to the next challenge.

Staying uncomfortable

This wasn’t about asking for more of the same, which is demanding without being challenging at all. It was about challenging where and how the company did business. To achieve this was difficult and needed discipline, and as with previous themes, different organisations achieved it in different ways. For example:

Raising the stakes by increasing the size of the arena the company played in, for example one payroll services company designed its next generation of further services to address the broader challenge of improving the workplace and the productivity of clients’ employees

Moving a local business into dominant positions in new geographical areas

Incorporating a challenge of “Is it brave? Is it original?” in relation to all market-facing and planning activity

Sustaining the challenge by splitting the business into smaller, more focused components every time it became too unwieldy

Establishing restless, constant change as a deliberate policy driven from the top


There was no common individual solution, other than the underlying requirement to stay on the edge of management’s comfort zone.

The common theme however was deliberately to raise the bar rather than to look back and focus on defending an established position, even though this often meant losing key members of the original senior team, who weren’t willing to get back on the tightrope.


So, in summary, we have now covered the common characteristics of market leading companies from Latitude research that were missing in their more mediocre counterparts.

First, relentless focus on a cause based on a combination of passion for that cause and a firm grip of market and commercial reality.

Second, tough action to get the right team in place, based on the right attitude, even at the expense of talented or experienced team members who aren’t up for the challenge.

Third, creation of breathing space so that management can concentrate on important actions for the business and are not continually distracted by urgent firefighting.

Fourth, clear, tangible behaviour boundaries, inside which there is room to perform, but the crossing of which is simply not tolerated.

Fifth, and finally, the continuing challenge from the senior team to keep the business on the edge of its comfort zone in terms of where and how it does business.

These aren’t rationalised steps to success. Rather they are a series of characteristics that should look obvious to experienced managers of high-performing businesses. By presenting them here, our hope is that they provide a nudge to make a decision that the manager already knows he should be making anyway.


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments

What makes a market leader? (6/7)

In our last two posts we covered the most critical actions that market leaders from our research took in order to achieve a performance breakthrough. In this and the next post, we will describe the two characteristics that determined whether these same companies continued to thrive, or if they saw their leadership positions fall away.

CEOs of companies that made performance breakthroughs described an interesting challenge that will be familiar to anyone from a fast-growth company. With a breakthrough in performance, came rapid growth and an influx of talented people. The challenge facing a CEO in this situation was how to maintain direction and momentum, and avoid dilution or chaos, whilst giving new people space to act with minimal needless constraint. In our research, we expected strategic planning to be the answer to this problem. But every company we talked to, good and bad, used strategic planning, and this didn’t distinguish the higher performers

The answer to this challenge from the CEOs of successful, sustained market leaders was to employ very clear behavioural boundaries. If people stayed within these boundaries they were given responsibility and room to perform. Stepping outside them, i.e. behaving in a way that was not acceptable to the company’s culture was never tolerated.

A clear “our way” of behaving with uncompromising boundaries

Leaders were very clear that the setting of behavioural boundaries was the key that enabled them to get the most out of people, to generate growth in their team and their business, but at the same time maintaining clear focus and discipline. This delegation of responsibility with clear conditions meant that senior people had space to look forward and focus on important decisions, rather than becoming caught in an operational bottleneck; it also meant that capable junior people took responsibility for solving their own problems and as a result developed and stayed with the business.

There was no universally applicable code of behaviour that distinguished the successful from the unsuccessful companies – there were no magic behaviours. Indeed, behaviour codes were very different in equally successful companies: the absolute requirement to “mix it” in the locker room style of one leading computer games company was essential for people in that business; but this would have been totally unacceptable in the conservative environment of a market leading recruitment consultancy that emphasised respect and professionalism as an essential part of its behaviour code. What was common to the successful companies was that the behaviour code was very clear, very simple, was right for them and was something that the CEO could describe with countless real examples of good and bad. To give a common example, whereas a follower might state “integrity” as a defining value (as did about three-quarters of our sample), a leader would say “we keep our promises”. Simple.

There was also no common pattern to how successful companies in our study came up with these behaviour codes in the first place. There was no magic exercise. Some went through very inclusive approaches, some pushed things down from a strong and inspirational leadership team, for others it was just obvious and there was no discovery exercise at all. What was universally consistent in the leaders was the strength of dissemination of the behaviour code – in particular how the “way of behaving” wove its way into the day-to-day expressions and language of the business.

Of course, there is another side to the behaviour boundary coin – for our leading companies not behaving appropriately was fatal. CEOs described this in very dispassionate terms – “if they don’t behave our way then they’re out” – as simple as that.

In our next and final post of this series, we cover the final characteristic of market leading companies, and probably the most important factor in staying on top – the ability to stay uncomfortable.



Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments

What makes a market leader? (5/7)

In our last post, we covered the first action market leaders from our research took to make a performance improvement - tough decisions to get the right team in place. In this post, we cover the second activity required to make a breakthrough: creation of breathing space.

Every company that made a breakthrough found a way to create breathing space so that management could get away from piles of day-to-day matters and take time to reflect properly on the business. The leaders emphasised how criticalit was for their senior people to be able to spend time thinking about important, but non-urgent issues without distractions and the need to engage in permanent fire-fighting.

Dominant external factors that stole managers’ attention and intruded upon proper breathing space were cash flow pressures and customer servicing demands.

Deliberate and successful means of dealing with the distraction of cash flow issues were varied. The two most prevalent that didn’t rely on rich parents were, firstly, tough internal decisions to take the costs of the business below ongoing revenues; and secondly focusing deliberately on generating continual rather than one-off revenue streams, which could mean taking a lower margin to buy revenue continuity.

Customer servicing demands were also an unhealthily large day-to-day management distraction for companies struggling to break through. When entering into relationships with clients, leaders consciously took care not to overstretch themselves. For example one leader limited the number of new clients it engaged with every year because the additional servicing needs of new clients could affect performance with existing clients. Another leader used a series of financial and non-financial pre-contract tests upon which it needed to be satisfied before accepting new business.

Though finance and customer service were the biggest external assailants of breathing space, most problems were essentially self-inflicted. As one MD said: "we were the arsonists as well as the firefighters".

MDs of successful companies talked of ways of achieving breathing space that were simply means of ring-fencing time for managers to take their attention beyond the day-to-day. These included simplifying management structures so that responsibilities were clear; giving managers enough time and ownership to work out how to achieve their objectives before interfering; hiring personal assistants; and taking regular team away days. It was always simple stuff that gave managers room and a separate time to work on the important as opposed to the urgent.

Creation of breathing space was the second critical step that our breakthrough performers took. After breakthrough to leadership positions, our market leaders faced some new challenges that required new disciplines to address them. We'll cover these two disciplines in our next two posts.


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments

What makes a market leader? (4/7)

In this fourth post of the series we cover the most critical and painful step taken by all the market leaders in our research - getting the right team in place.

Every company that made a breakthrough in performance ascribed it to making significant changes to the team, at the top level and at the level below it. This did not necessarily mean wholesale changes, and all companies emphasised the importance of retaining experience, but it did mean changes in important management positions.

A typical story involved losing one or two senior people who were strong, talented individuals who nevertheless caused problems in the team. For smaller companies this was often the original entrepreneurs, for bigger organisations it was senior directors and managers.

In many circumstances CEOs perceived a high level of risk in losing an individual, such as the fact that they were high performers or that losing them might mean losing other people that respected them or worked for them.

However, although the decision was always a tough one, it was invariably seen as an obvious one. In fact the biggest regret that successful companies had was not making changes to the team more quickly.

And this is not wisdom in retrospect. Everyone we spoke to who made changes to the team said that at the time they knew what they should do but delayed taking the painful step.

In contrast to some established theories we did not see a clear pattern of “first who, then what”. The new team did make changes but never to the cause. All of the companies who made a breakthrough had the same basic and underlying cause before and after the team was in place. The changes that came with the new team were primarily in the culture and capability of the business. Changes to the product or service on offer were about focusing and refinement rather than fundamental redirection.

Finally, the right team did not always mean a completely balanced team. We saw a clear pattern among the leaders of skewing attitudes and skills of senior people towards what was distinctive about each company. For example, one successful software business deliberately skewed its team towards developers and away from marketers. And in many cases it was deliberately left to the support people to supply the capabilities to balance their leaders’ skill gaps and deficiencies. The common and essential precondition for the team was its alignment to the cause.

In our next post, the other major action market leaders took to make a performance breakthrough - creation of breathing space.

Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments

What makes a market leader? (3/7)

In this series we cover the characteristics of market leading companies, actions and practices that distinguish them from their more mediocre counterparts. This is determined from direct research with CEOs of more than 100 companies.

In this post we look in more detail at the first of these characteristics: relentless focus on the cause.

The most striking common characteristic that distinguished the leaders in our research was their almost religious focus on the purpose of the company, or the "cause". The cause was something the leaders were passionate about, what they knew they were good at and it was always simple, specific and easily described.

This wasn’t a blind following of faith. These leaders were very sensitive to and aware of customer needs, and many researched and responded to customer needs very actively, but only within the confines of the cause. The commitment didn’t waver but was informed by rational testing and ego-free listening. We like to make a comparison here with the (now maligned theory of the) two sides of the brain. A person (read business) is only able to fulfill her potential if she uses the full capability of her brain (read senior team): she needs to engage both the right (passionate, creative) side and the left (analytic, rational) side. Right-only may deliver short term buzz but is unsustainable and leads to disaster; left only leads to sustainable mediocrity, which is probably worse.

One popular management theory is that success comes from listening closely to the needs of one tightly-defined customer group and designing an offer that serves those needs. Our findings were very different on two counts. First, the successful companies started by establishing what they stood for, then found who valued it, and what they valued about it. Secondly, though some leaders had one tightly defined customer group, many others had a variety of customers that differed greatly from one another.

In explaining their propositions, leaders described what was distinctive and beneficial, rather than what was better. Indeed, comparison with and paranoia about competitors was more the preoccupation of the followers. Leaders were conscious of competitors but only as a prompt to keep their thinking “edgy” and to look for the next challenge. No leader described itself unprompted as “best” or “world class”.

Every market leader surveyed had made mistakes and strayed from their cause at some stage. Reasons were always understandable (providing add-on services for a special customer, pet projects of vital people), but straying was always regretted no matter what the reason; leaders learned the lesson quickly and got back on track.

There was no common pattern of how leaders came to define their cause and focus upon it in the first place. This varied from building on personal hobbies and previous experience, through packaging for general use a successful one-off service that the company came across by chance, to more formal market analyses. However, even the leaders that had performed a sophisticated analysis used the emotional (what turns us on) when deciding where to look, before the scientific testing (what is the opportunity and does the business case stack up).

A final word on what focus really means - leaders could tell they were genuinely focused when they were turning away attractive, profitable opportunities – discarding the unattractive is easy; the challenge is turning away attractive business that is outside the focus.

In our next post, we cover the big step people took to make a breakthrough in performance: tough action to get the right team in place.


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
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What makes a market leader? (2/7)

In this seven-post series, based on direct research with more than 100 companies, we review five distinctive characteristics of market leading companies and the common steps they took to get to leadership positions. In this post, we summarise these five characteristics and share some unexpected findings.

All the market leading companies shared an enduring theme that existed at the time they made breakthroughs to leadership and remained thereafter - "Relentless focus on the cause"

Relentless focus on the cause

“Focus” is a cliché that is often taken to mean the dedication of services to one tightly-defined customer group; but for our survey leaders, focus was about what we call “the cause” – the essential function of the company, what it is good at and excited about; literally what the company is for. For Metro, it is digestible news for urbanites; for Innocent, it is tasty, healthy drinks. It needs to be something for which the company has a passion but at the same time can challenge and justify rationally and commercially in the cold light of day.

We think of the cause like the (now maligned) description of the two sides of the brain. It needs a passionate, creative (right) side and a rational, analytic (left) side. Without the rational, the company is destined for disaster, even if it enjoys a flurry of success; without the passion, it is destined for mediocrity.

Leaders have relentless focus on this cause, in that they will sacrifice anything which is irrelevant to it. Every one of them could point to profitable business that they turned away because it wasn't part of the cause.


When asked about the time they made a breakthrough to leadership, our market-leading CEOs described two strong themes: "tough action to get the right team in place" and "creation of breathing space.

Tough action to get the right team in place

When asked for the most memorable action they took just before a major performance breakthrough, one answer came through consistently: "we changed the team". No company in our sample made a sustained breakthrough in performance without changing at least one member of its senior team. In fact, the change was generally two or three people from the senior team, often the CEO himself, and an equivalent proportion from the level below. The team changes had two further common characteristics. First, changes were based on attitude (are we in it together) and not aptitude (are you experienced); second, every CEO regretted not making the change earlier.

Creation of breathing space

The second action successful companies took to make a performance breakthrough, was to find a way to remove the day-to-day financial and time pressure so that management was not continually fire fighting. This was one area where there was a distinctive difference between smaller companies, where lack of breathing space was commonly about cash and customer servicing, and larger ones, where it was commonly about complexity of systems and reporting. In the vast majority of cases, however, lack of breathing space had been self-imposed.

Once companies had made a performance breakthrough, two characteristics were shared by those who sustained it: "clear, uncompromising behaviour boundaries" and "staying uncomfortable".

Clear, uncompromising behaviour boundaries

With a breakthrough in performance, comes growth and an influx of talented new people. To retain control of the business, but still give a larger group of people room to perform, our market leaders employed very clear behaviour boundaries – inside the behavioural boundary people were given room to develop, perform and make decisions, but stepping outside the boundary was, literally, not tolerated.

Staying uncomfortable

Our successful, sustained market leaders perceived their greatest single threat to be complacency. They were conscious of the competitive danger of standing still, but also of the need to provide interest and challenges to their talented middle management. CEOs took it as a personal mission to put their team back on the tightrope and keep challenging the business.

So there we have it, five common characteristics of market leading companies, that we will expand on in turn in the remaining five posts of this series.

Before we finish this post however, it is worth looking at at some findings of the study that we didn't expect, and which are inconsistent with some received wisdom.

1. Listening to customers was vital but it followed, not led, the cause - none of our market leaders worked up their cause by starting with a big customer research exercise. They all took great pains to test market demand for their services, but they only tested the things they were already passionate about
2. Rationality went hand-in-hand with faith. In fact, rationality seemed to be much more dominant in the companies that had always been followers or had seen leadership slip away
3. Leaders were easily understood, sometimes so simple that we thought we'd missed something; followers were more hazy and complex
4. All the leaders made big mistakes along the way and readily acknowledged that they would likely continue making mistakes
5. Everyone performed strategic planning, but leaders went about it in a consistently different way, by being challenging about the future rather than the classic share growth approach adopted by followers
6. MDs of successful companies came across as much less egotistic than their less successful counterparts. We actually counted the mentions of "I" in early interviews, until the pattern became obvious of humility of the leading company CEOs versus almost defensive egotism in the followers.

In our next post, more on the common thread of all of our market leading companies - "relentless focus on the cause".


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments

What makes a market leader? (1/7)

Market leaders make a lot more money than followers. The average return on investment for a company with five per cent market share is 10%, with twenty per cent share this grows to 27%, at forty per cent share RoI is almost 40% (source: PIMS survey of 3,000 US businesses). The personal and career benefits of creating or running a market leading company are equally clear, and go without saying.

Given the attractiveness of market leadership, a number of questions come to mind:

Are there any consistent characteristics that distinguish market leaders from followers?

What do leaders typically do to break through and become the obvious provider in their market?

What big problems do leaders need to overcome along the way?

Once they become leaders, what new problems do they face and what do they do about them?

In this 7-post series, we will answer these questions, based on a two-year piece of direct insider-research with MDs and CEOs of more than 100 companies. Companies include impressive but rarely-covered household names such as Innocent, Expedia and Metro, and cover the full range of sizes, performance and stage of development.

Most of the market leaders we researched had moved from being followers to being leaders or had started from scratch to become the leader in their sector. We therefore captured the changes needed to make the transition. We also covered the other side of the coin: companies that had not managed to make the leap and companies that had seen their previous leadership position start to fall away. The characteristics which distinguished these various groups one from another gave us confidence that the leaders had not simply been lucky.

The output of this research challenges established views about what it takes to succeed, and lays out what is central to success, and what is peripheral. In this series we outline the findings, which dispel some management myths and uncover some surprising new themes.

In our next post: the five common characteristics present in all market leaders that were missing in followers.


Copyright Latitude 2009. All rights reserved.

Latitude Partners Ltd
19 Bulstrode Street, London W1U 2JN
www.latitude.co.uk

For the full text of this series email steve@latitude.co.uk
Comments