Stakeholder Perceptions

“Perception is all there is. If the customer thinks that he’s right, then he is right” said Tom Peters (remember him?) many years ago. Of course what Peters was seeking to draw out was that although reality – the facts – might suggest that the customer is not always right when he or she thinks they are, in practice we all make decisions based on our perception of situations – our view of them – in which our emotions, rather than solely our heads, play a very significant role. This is of course true of all the stakeholders of any organisation. Although we may identify and describe some of these stakeholders as entities – corporate customers, regulators, institutional shareholders and so on, in reality an entity consists of people, and it is those people who have perceptions and make decisions, some critical to us, based on these.

So the perceptions of our stakeholders are absolutely critical to our organisations. Negative perceptions – whether in our view accurate or inaccurate – can have a substantial, prolonged and devastating effect on our business if not understood and addressed. Likewise positive perceptions, if sustained, can have a really good effect over time – on our brand, reputation, ability to retain customers and so on.  Not surprisingly, the latest 2020 version of the EFQM Excellence Model with which some readers of this post may be familiar, retains from earlier versions a key focus on stakeholder perceptions in the Results section of the Model.

But…. and there is a very big BUT…..one of the most difficult tasks is obtaining reliable insights into stakeholder perceptions. Many organisations carry out, or have carried out for them, perception surveys of some of their stakeholder groups, particularly customers and employees, and attach a lot of importance to using these to identity improvements and track progress over time. But in my experience I have never ceased being amazed at the naive idealism that characterises many of the users of these surveys. In far too large a proportion of them I’ve observed that the focus is almost entirely upon the results of these surveys and how they can be used, and hardly any focus on the methodology used to obtain them, and the confidence that can be placed in them.  Keeping in mind that surveys of stakeholders – whether they be investors, regulators, customers, employees, suppliers, communities etc – will always be of people – and hopefully having some level of self-awareness ourselves, then we can immediately start to identify some of the things which may affect those people when they engage in surveys – or indeed in any form of perception based feedback.  The list is almost inexhaustible. Examples include when they are asked, how much time they have available to respond, how they are personally feeling at the time they are asked, whether they attach any value to the process in which they are asked to engage, whether or not they have confidence that the organisation asking them for feedback will actually use it, what messages they really want to send, the nature of the relationship they have with the organisation and how they might want it to play out in the future. And so on and so on…. And that is just related to situations where those being asked for their perceptions are the right people to ask, e.g. in a corporate customer organisation, etc.

So if perception data is to be useful and actionable, then it is important that we can put a high level of confidence in the accuracy of it, that is that it represents the true perceptions of those we ask or from whom we receive unsolicited feedback. In terms of surveys, possibly the ones in which the highest level of confidence can be placed are those for employees conducted independently and largely anonymously for large organisations on a regular basis, where the questions asked represent not just what is important to the employer but also to the employees, where people are allowed time and space to engage in the survey, and where it is clear to them that the employer takes the feedback seriously and acts upon it. At the other end of the scale, in my experience, are supplier surveys where the respondents often feel that potentially they have a lot to lose by providing negative feedback, and from institutional investors who often only care about providing feedback where they consider the form of it that they chose to use may result in influencing a development or change that they want, irrespective of the effect upon others.

So in conclusion my plea to any engaged in designing or operating processes aimed at gaining feedback from stakeholders in a systematic way, is that they spend considerable time in considering the methodology to be used, understanding the risks and shortcomings attached to any process used, and that they also ensure that those risks and shortcomings are taken into account when perception results are received, analysed and acted upon.

 

 

EFQM Model 2020

Yesterday saw the launch in Helsinki of the new EFQM Model 2020. Revolutionary in structure and presentation compared with the model it replaces, yet evolutionary in content, it is well worth having a look at it to determine if and how the use of it might benefit your organisation.

To get a brief overview visit http://www.efqm.org

To purchase a printed version of it visit http://www.shop.efqm.org/publications/the-efqm-model/

The Stakeholder Value focused Business

During a recent ‘clean up’ of the files on my laptop, I came across a presentation I gave to a group of business leaders 10 years ago. It struck me that the message I was trying to get across to them then is probably just as relevant today. So I’ve produced some of the content from it below……

Have you ever addressed Charles Handy’s famous question “What’s a company for?” in terms of your company? Is the answer vague? Is it something to do with making money?

In the old order in Business:

  • the investors were the real ‘kings’;
  • customers, employees etc. were largely ‘there’ in order to serve the prime purpose of making money;
  • there was almost universal buy-in to the economist Milton Friedman’s assertion that “There is one and only one social responsibility of business – to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”.

This way of thinking dominated business thinking throughout the world until the 1990’s and many business leaders still think this way. Is it the way you think?

But major developments in technology, particularly IT, over last 25 years have resulted in seismic changes in the world:

  • the development of global markets;
  • political orders and landscapes are changing irretrievably;
  • the movement of goods & services is becoming much easier, cheaper & faster;
  • communications are becoming ‘instant’;
  • the effects of social media are growing exponentially;
  • travel is quicker and cheaper;
  • a global data and information rich society is emerging;
  • people of all nations, religions and cultures are becoming more and more informed about political, social and environmental issues;
  • significant advances are being made in addressing some of the big issues of education, poverty, health in the world;
  • etc…..

These changes generate consequences and challenges, both positive and negative. Some of the consequences for business that we experience include:

  • investors are becoming more informed, demanding, vocal, aware of risk, likely to readily reposition their investments as they see opportunity;
  • customers are becoming more informed, demanding, vocal, likely to move their custom elsewhere for varied and sometimes conflicting reasons;
  • employees are becoming more mobile, educated, informed, demanding, likely to move job and change career several times during their working life;
  • society is becoming more aware of issues, vocal, demanding, influential, powerful;

Information is power; expectations are growing exponentially; loyalty is diminishing.

How should businesses respond? Doing nothing is not an option….the old order is dying fast. But there is a solution: Shift from a Shareholder to a Stakeholder value generation focused approach to business. This requires a fundamental shift in mindset with the key decision makers.

There is proof that in recent years this is gradually happening, often forced upon companies by external events.  Examples include:

  • US owned motor companies brought to brink of collapse, global banks going bust – previously focused almost exclusively on making money
  • Tata, DHL, Unilever, Lego, Coca-Cola, Walmart …. all succeeding in challenging markets – focused on addressing stakeholders needs & wants.

So ask yourself and your peers these questions:

  • Do we really focus on consistently delivering high levels of value for all our stakeholder groups?
  • Is this reflected in our goals, objectives, strategies and detailed plans?
  • What can we do to improve both our stakeholder focus and the value we deliver to them?

Leadership vs Management

Current public events across the world relating to government have highlighted once again that the significant difference between leadership and management is not always readily understood, even by highly responsible persons in public office. But we don’t have to be involved in those;  understanding the difference and the need for both is essential for any organisation, however small and humble it may appear to be. Often persons need to be competent in both, but not always.

So what is the difference between the two? It’s easy enough to quote from textbooks and academic articles and these can help. But I prefer to keep things simple and based on my observations and practical experience.

Often we can instinctively identify someone as being a good leader but find it difficult to clearly articulate why. That’s largely because, in my view, leadership is primarily about an individuals character, their beliefs and values, their conviction as to these, the way they communicate them and convince others of the rightness of them. In business we often speak about “vision” and that lies at the root of effective leadership. As has been said many times before, leaders have followers.

On the other hand management is easier to define because it is largely about getting the job done through planning, organising, monitoring, reviewing, training, coaching and so on. Managers largely turn a leaders “vision” for the future, their beliefs and values into reality. Managers therefore have subordinates, people who are responsible to their manager for the delivery of activities, tasks etc allocated to them.

Both leadership and management are needed. Miss one out and things can go horribly wrong. The current situation in the UK with regard to Brexit is a potent example. Objective, serious observers of the current Prime Minister, Mrs. May, speak of her as a conscientious and hard working manager, but a very poor leader. For nearly three years she has been attempting to ‘manage’ the delivery of a plan, (something incidentally that she had the substantial resource of the British Civil service to do for her!), but failed to realise that to be successful her prime role and responsibility was to convince people that what she was attempting to achieve and the way she was going about it was right.

So what about you, and what about your organisation? Are you a leader or a manager, or both? Do you have high calibre leaders and managers in your organisation? Does your organisation recognise that people of influence in ‘high places’ must be effective leaders? It is less important, and in some cases hardly important at all, that they are effective managers provided they have people who are and who are convinced that their “vision’ is right. These managers will make it happen for them!  Often in much smaller organisations those in key positions of responsibility have to effective as both leaders and managers, not only setting out and convincing others of their vision but managing the achievement of it.

Dealing with, and preventing problems

The recent crash of an Ethiopian Airlines Boeing 737 Max 8 aircraft with the loss of the lives of all on board has once again focused considerable attention on airline safety. The main reason for this is, of course, because in the vast majority of cases when an aircraft crash occurs,  many people lose their lives in that one incident.  But whilst I don’t want in any way to suggest we try and reduce the seriousness and sadness of such tragedies, it is perhaps important to recognise that the proportion of lives lost through flying on commercial airlines relative to the number of people flying is considerably and significantly less each year than, for example, the proportion of lives lost of patients undergoing medical or surgical procedures in national health services around the globe. Yet the latter seldom receives a lot of publicity since these deaths primarily occur on an individual basis at different points in time.

Now of course, it could be said that it’s foolish to try and compare safety in the airline industry with that in the health services; so many things are different that a comparison is unfair and unreasonable.  Although there is some truth in that, although possibly not quite as much as most people assume, there are two things which the airline industry do with very strict adherence, which sadly national health services either do not do or do nowhere near as rigorously and thoroughly. These relate to the prevention of problems and the addressing of problems when they do occur.

The first of these is the use of the ‘black box’. Introduced as a mandatory requirement across the globe in the late 1960’s, each commercial aircraft carries two of these virtually indestructable boxes that record all important data from the aircraft’s systems as well as the voices of the officers in the cockpit. Following a crash the recovery of one, preferably both of these boxes is vitally important. Why? Because the content is analysed to the minutest degree by experts to try and establish the root cause of the crash, and to identify long term solutions that will as far as is humanly and technologically possible, prevent it ever occurring again, rather than to try and simply point the finger of blame at individuals or organisations. Solutions can cover many aspects and not solely technical. Sometimes, for example, weaknesses in crew training or briefing are identified and addressed. People are encouraged to come forward and to contribute to the whole process in, as far as is possible, an open and honest way. It is reckoned by air industry experts that the invention and vigorous use of the ‘black box’ has contributed significantly to the excellent safety record that the industry now has. Contrast this, if you will, with the health sector. As far as I’m aware no hospital operating theatre anywhere in the world has the equivalent of a ‘black box’, recording from beginning to end of each surgical procedure all data produced by operating and monitoring machines, video of the procedure and the verbal communications between the operating theatre staff.  On the contrary in some authorities, certainly here in the UK, far from everything being recorded in a full and transparent way, there appears to be a culture of fear in which mistakes are covered up and lessons are seldom learnt from them. This is so prevalent that the National Health Service (NHS) has introduced a policy to safeguard ‘whistleblowers’. What sort of culture is one that needs a formal policy to encourage people to come forward and tell the truth without fear of recriminations?!  Of course in the absence of any form of independent recording mechanism, reliable statistics on preventable deaths due to surgical errors are hard to come by; those stats that do exist depend upon the people responsible recording/reporting them. In a culture where blame and recrimination appears rife it is hardly surprising that not a lot of confidence is placed in the stats available, but even the estimates that exist, which must surely under-represent the true situation, are staggering. A report in 2017 estimated that in NHS England alone there were up to 9,000 deaths in hospitals each year caused by failings in NHS care. That’s the equivalent of having FIFTY fully loaded Boeing 737 crashes with NO survivors each YEAR in England alone!

The second thing the airlines now do with considerable rigour to help prevent accidents and major problems occuring is Crew (or Cockpit) Resource Management (CRM). Introduced in the late 1970’s following two major airline disasters, it became a global standard by the 1990’s and is now followed throughout the industry. Focusing on training, leadership and communication, it essentially brought the concept of true teamwork into the cockpit. Prior to this the Captain ‘reigned supreme’. He (and in those days it was almost entirely “He”), made all the decisions, and was assumed to be the expert who knew everything. It would be a brave, and possibly foolish First Officer who challenged a decision or action by the Captain, even in western culture where this was more the norm in other industries. But CRM changed all that and today, as any viewer of “Pilotseye” videos will know, all aircraft  flight deck verbal communications are repeated, every key action taken by a flight crew member is checked by a colleague, every key decision is discussed and agreed by the team.  I was fascinated to observe that whilst Captain Sullenberger was bringing his totalled crippled airliner down onto the Hudson River in 2009, an amazing act of flying skill, he was still ‘doing’ CRM. With less than a minute to go before landing he asked his First Officer “Got any ideas?”! Even though the answer was “None, actually” it demonstrated how well CRM was embedded into his consciousness. Again, as for the ‘black box’, air industry experts consider that CRM has contributed significantly to the excellent safety record that the industry now has, by helping to prevent accidents and major incidents occurring. Contrast this, again if you will, with the health sector. Although I’m sure every member of a surgical operating theatre ‘team’ will assure you that ‘teamwork’ is essential and they all practise it, I suspect that they are largely referring to the distinct roles that each person has and how these roles are all needed in the process, rather than to communications, leadership and team focused problem prevention and solving. There are plenty of anecdotes, backed up by patients observations, that suggest that there are still far too many cases where the consultant ‘in charge’ of a surgical procedure does indeed tend to ‘reign supreme’ with very little allowance for challenge or team based problem solving. How many, I wonder, of those estimated 9000 preventable deaths in England alone, would not have occurred if a rigorous and enforced system such as the airlines CRM, was in place?

So all of this may generate some questions for you, (as you’ve read this far!). Which of these industries, the airline or the health service one, is your organisation most like? Do you have a culture and supporting systems and processes that investigate fully and without attaching blame, each and every serious problem that occurs, with a view to learning from it and taking action that will substantially help prevent it ever happening again? Do you have a truly team based approach to decision making and problem solving?  If not, then maybe there’s an opportunity for you to initiate some improvements!

Good practices…….

For years organisations have, as part of organisational learning, sought to identify “good practices” in other organisations that could be implemented in their own. But they have often found difficulty in doing this. This is in part due to a lack of ready access to high quality, up-to-date repositories of this information. But it is also due, in my view, to weaknesses at source in the identification of these practices. Too often the basis on which such practices are identified is highly subjective. So a few suggestions:

1. If you are trying to identify “good” practices for use in your organisation, firstly be very clear why you are seeking them and what, as specifically as possible, it is that you are looking for. So for example, it could be that your organisation is struggling to improve the level of value you are delivering to a specific stakeholder group. It could be that you’ve looked at the drivers, or enablers, of that value realisation within your organisation and have identified the areas where you consider improvements would generate the increase in performance you are seeking. Armed with a clear identification of the aspects of value delivery performance that need improvement and the specific areas of organisational activity that need improvement you have a good starter for external learning. Then when looking at so called “good” practices in other organisations that relate to your area of interest, always look for empirical evidence that the so called “good” practice does in fact deliver the levels of stakeholder value that you are seeking to achieve in your organisation. Challenge the organisation concerned to fully demonstrate a clear cause and effect relationship between the practice or practices under consideration and clear, accurate data that shows the value delivery related performance they are achieving.

2. If you are trying to identify “good practices” in an organisation because it is part of your job to do so, then apply the same approach as above. In other words ensure that you only identify as a “good practice” one that consistently delivers exceptional results in terms of a specific stakeholder group or groups. Through probing questions check that the connection is clear and strong. Avoid any tenuous links that don’t stand up to proper scrutiny.

And for any seeking to adopt so called “good practices” in their own organisation, avoid the simple mistake of assuming that what works and delivers well in another organisation will do so in your own. The organisations concerned may be quite differenct in many key respects covering the external environment in which they operate, their internal environments, their products/services, culture, size, history etc etc.

Cost of Quality

Quality – delivering customer requirements right first time, every time, comes at a cost. In the days of TQM we used to hear much more than we do now about the “Cost of Quality”.  The concept is better known in manufacturing industries than elsewhere, but it applies to all organisations, manufacturing or service, private or public, large or small. It has three elements, the second and third of which together represent the cost of poor quality.

The first element is “prevention cost”. This represents the investment made in policies, processes, procedures and systems and the continuous improvement of these to ensure that they are, and remain, fit to deliver ‘right first time every time’. It also represents the investment made in recruiting, training and developing the people whose job it is to implement those policies and operate those processes, procedures and systems. Whilst most people would readily agree that this cost is well worth investing and if done consistently well will indeed deliver as close to ‘right first time every time’ as it is humanly possible to do, sadly most organisations do not invest in this as well or to the extent they should. Sometimes existing poor quality, coupled with stakeholder and other pressures, means that rather than investing in prevention, organisations resort to incurring the second element of the cost of quality, “appraisal costs”.

“Appraisal cost”, as the name suggests includes all aspects of inspecting and checking work, either in progress or on completion. Whilst some elements of inspection are required by law or regulations in some industries, for example in those with critical safety aspects such as the nuclear power industry, regrettably “appraisal costs” are often incurred as the ‘norm’.  These “appraisal” costs are incurred largely because of a lack of proper and sustained investment in the “prevention” costs, and often because of pressure to improve in the short term.   With ‘short termism’ the norm in all sectors, and as managers come under increasing pressure to quickly deliver improvement in results, it is not surprising that “appraisal” costs represent a sore that is unlikely to go away soon.  If you doubt this consider how many ‘quality’ departments and professionals there are in the world today….maybe even in your own organisation. Yet the long term consequences are not positive. Financially, “appraisal” does not come cheap, and culturally it can easily lead to a situation where people no longer take personal responsibility for ‘getting it right, first time every time’.  I was until recently involved with a educational establishment where the previous Principal had got rid of the Quality function but had failed to reinvest the savings into true “prevention cost” activities. So not surprisingly quality went down. A new Principal has come in and, under pressure to deliver improved results, has reinstated the quality function! In the short term it may work but long term it does not address the root cause issues.

The final element is “failure cost”. This can be both ‘internal’ and ‘external’. Internal costs are those associated with defects found before the customer receives the product or service, for example scrap, rework, re-inspection, re-testing.  I was astonished some years ago when visiting a well known premium motor manufacturer to discover that a very high percentage of cars coming off the production line of the plant I was in needed re-work of some form or another. Not surprisingly the management of the plant were extremely coy when I asked whether they measured their failure costs and what proportion of their total production costs they represented! External “failure costs” include those incurred after the customer receives the product or service, for example processing customer complaints, customer returns, warranty claims, product recalls. These costs are particularly damaging as, potentially, they have significant negative impact on the organisations brand image, customer loyalty and long term sustainability.

As far as I know there are no reliable figures on the costs of poor quality. Research done some years ago suggested that they (“Appraisal + Failure” costs) could be anything up to 40%, (yes 40%!) of an organisations turnover (income), with 20-30% being quite common.

So lets do our bit to try and ensure that where we invoke quality costs they are of the investment kind, “prevention” ones. This takes belief and patience because investments seldom immediately show a large return, but long term these costs deliver true quality, and thereby a successful and sustainable business.