For Schaffer, the advice from those who advise managers on how to accelerate the pace of change is incorrect. He disagrees with the standard basic formula for change so favoured by many advisors. For Schaffer, first laying down the foundations that will enable later change to take place is absurd. We are advised, he says, to install the right IT systems, recruit better people, train the people we have, reorganise, create the right culture, develop more innovative products, develop the right long-term strategies and straighten out everything else that needs to be straightened out. But, as he points out, all this takes time and resources. In a rapidly changing and turbulent business environment will this carefully laid out foundation still be relevant when it really counts?
So what, then, is the solution? Based on the experience that underlies his book, Schaffer believes that the “evidence suggests that the most powerful driver of better performance is better performance itself.” In other words, in order to help an organisation perform better nothing is more effective than to “help it experience a tangible success on some of the dimensions it is trying to strengthen.” We often hear, as fundamental to organisation management, that focusing on the short term is always a bad idea but Schaffer makes it clear that “the success of this methodology [based on using better performance itself to drive better performance] exposes [this] as fiction” rather than as truth. In fact, as he says, “we have discovered that short term thrusts can be powerfully beneficial if they are executed intelligently and if they are designed as stepping-stones toward major strategic gains.”
Another problem with the “top-down, big-fix approach to implementing major change” is, according to Schaffer, that it “frequently fails because of the lack of absorption capability throughout the organisation.”
The advantage of undertaking ‘Rapid Results’ projects is that, “[o]ut of big, amorphous goals, short-term targets are set.” Those participating in the projects develop leadership skills. Many more people, at least potentially, can become engaged in these projects so that not only the skills of a few experts are used. A culture of collaboration is built in the process. The key outcome is change that is built on results. And success with smaller short-term projects engenders a way of approaching problems that creates a culture of innovation and urgency. This is true management development in action!
Schaffer’s book is recommended reading for those in organisations who are charged with leading change. It provides examples of successful projects and a useful guide to building the foundations for such change. It points to the use of internal management resources rather than to the use of outside experts.
I have seen this process working over the past 23 years. Rather than setting ‘academic’ assignments for participants on the New Managers Programme at the Wits Business School, I have set projects that require the identification of opportunities to either reduce costs or increase revenue. Participants have been required to undertake a full cost/benefit analysis and prepare proposals to management mapping out the action required. In their proposals participants are also required to identify what the resistance to the proposed changes will be and how the resistance will be overcome: this requires them to identify the human element which is often the greatest barrier to change.
While many managers have a good grip on the operations they manage, one area where knowledge is seriously lacking is in relation to costs. Managers manage resources, be these people, machines, spaces or land. Managers see the results of their management in cost/financial reports. But these report show only results; most managers do not understand cost causation and behaviour. I was recently reminded of this when I was reading an article in Finweek in which an analyst was quoted as saying of one of South Africa’s largest platinum mining companies that “…their cost control has been the worst in the peer group.” I believe that one cannot control what one does not truly understand. And, based on my experience of presenting ‘Accounting and Finance’ modules for more than 30 groups of managers from the mining industry, I know that there are very few managers who fully understand what causes costs, how costs behave and how to effect changes in costs. It is not surprising that the constant call for cost reduction has little effect. This lack of understanding of costs applies not only to the mining industry but also to banking, the motor industry and to the hotel industry. In fact there are few industries where this lack of understanding of costs does not impede cost reduction programmes.
In addition to the above management development programmes I have incorporated into my Operations Finance workshops a process which closely resembles the approach that Schaffer advocates. The process involves creating an understanding of what causes costs and, in turn, an understanding of financial reports. The participants are then required to identify problem areas in which a successful intervention will produce a material saving. The projects are not confined to cost reduction but also involve potential revenue enhancement areas. A key tool – the ‘Profit Triangle’ – is fully explained so that project teams can use it to test their ideas.
Note: Please see picture
Apart from any direct benefit to the organisation’s bottom line from the implementation of project solutions, the above process provides a measurable Return on Investment (ROI) on the intervention and it also provides managers with a new way of thinking about problem solving –solutions to problems should always contribute to the bottom line.
1. Rapid Results! – Robert H. Schaffer - John Wiley & Sons, Inc. Published by Jossey-Bass
2. Dark Forces – Brendan Ryan - Finweek 14 May 2009 Page 15
3. A Business Approach to Operational Finance, Accounting and Financial Management – Mel Brooks - Self
4. Business Accounting & Finance – Bradshaw & Brooks – Juta