Lukasz's Blog

The economist in me is always looking for signs and signals in every day life. The twists and turns of correlation & causation have fascinated me for as long as I can remember. Over the years I have honed my skills and have developed almost a ‘instinct’ for indicators - at least I’d like to think so :)

In that vein; here are some signals I’ve observed recently:

• The volume and caliber of jobs being advertised in NZ is lifting - I think we’re starting to see recovery activity and employers need to now (more than ever) make sure their staff are happy or risk a ‘brain drain’.
• The housing market is picking up - this isn’t based on some statement from the media or other bias party but rather on the fact that we’ve had a lot of friends and colleagues recently sell & buy property quickly and for reasonable prices. Property is moving and in a couple of instances people have gotten their asking price before even hosting one open home.
• There are more Porshe cars in Wellington - this week I’ve seen at least one each day whereas in the past they were far and wide between. Quite a number of people we know have also bought new cars recently. I think that we’re seeing household ‘discretionary spending’ picking up which I think re-enforces the belief that the recovery is happening.
• It’s hard to get your hands onto Whittaker’s new Peanut Butter Chocolate - this proves two things for me: households have more disposable income (the chocolate comes in around $6) and social media advertising works (Whittaker’s did a great job of launching the product using online channels to create high demand even before the product hit shelves). Oh, and people love chocolate.

I’m always looking for interesting signals and signs - what have you observed recently that makes you think things are changing?

Most people are familiar with the concept of asset stripping - selling the assets of a business individually, or in parts, at a profit. The financial pressures of recent years has produced, broadly speaking, two types of management behaviour: 1.) really doing things differently to achieve better results, and 2.) thinly veiled cost cutting which, if done year after year results in value stripping.

Whilst the short term impact of the downturn is being felt in cents & dollars the longer term impact will be felt in the value which has been stripped as a result of short-sighted cost cutting. Prudent decision-making is needed now more than ever however too many companies are abandoning their vision/long-term objectives for the sake of meeting some arbitrary cost ceiling.

Organizations should be looking very closely, and critically, at re-balancing their investment in terms of:

1. Transformational Projects - truly doing things differently in terms of business operations and technology. These projects carry many ‘unknowns’ and need to be managed in a more agile manner with a strong focus on getting incremental value delivered as soon as possible.
2. Leveraging Projects - growing and refining services and process which already deliver some value. These projects are based on many ‘knowns’ and should be tightly managed for scope, duration and output.

With many organizations struggling with strategy (and what is actually is) it is just too easy to trade long-term value for short term savings, which is the completely wrong response to the downturn pressures.

The current climate is firmly separating the wheat from the chaff in terms of management and leadership capabilities. Organizations whose leaders have their heads in the sand are going to come out of this downturn in a far worse state than those with progressive, candid leaders who consciously plan more than one financial year ahead.

The difference between good and poor leadership should be expressed in terms of true business value year-on-year - not in terms of cost savings made. Anyone can slash & burn whilst value stripping. Is your organization doing enough to keep value growing? Bearing in mind that in a modern economy if you’re not growing then you’re falling behind.

I don’t usually watch a lot of TV however earlier tonight I happen to catch the ‘Politically Incorrect Guide to Grownups’ show. During the course of the show they showed a pie chart of what determines happiness. The breakdown was as follows:

• 50% - Genetics
• 15% - Circumstances
• 35% - Mindset/Attitude

I did a bit of quick research and found a few bit of research/studies which largely confirm the breakdown of happiness factors. What shocked me was that 50% of happiness was genetic. Still at 35% there’s plenty of room to feel happier just by thinking about things in the right light.

The Peter Principle states that “in a hierarchy every employee tends to rise to his level of incompetence”, meaning that employees tend to be promoted until they reach a position in which they cannot work competently. Whilst often considered to be tongue-in-cheek there is unfortunately a lot of evidence to suggest the Peter Principle is well and truly alive in today organisations.

A mismatch of skills and experience is an issue at all levels of the organisation but the higher up the organisation structure you go the more people - and results - are affected. I have worked both with, and in, teams who feel disempowered and disengaged as a result of having a manager who still behaves like an individual contributor.

In each case there are some common patterns behind the problem.

1. Weak or non-existent succession/progression planning - too many organisations see ‘becoming a manager’ as the only way in which individuals can take a more senior (and higher paid) role. Some people are just not cut out to be managers but excel at being individual contributors or subject matter experts - make sure development plans can accommodate this reality. I have previously created development programmes with a two stream structure - one for  Management and one for Specialists - each offering opportunities to grow and earn more.
2. Limited training and upskilling - many people find themselves in a people management role without any additional training or upskilling. Managing teams requires a different skill set (and mind set) than does working as part of one but many organisations just expect people to magically have these skills overnight without a clear training plan.
3. Only Child Syndrome - too many managers believe their role is to be able to answer all questions, and their team is simply there to make them look good. They disempower their team by harvesting information, picking the bits that suit their take on things and then deliver the result as their own. Taking on a management role needs to come with the acceptance of the fact that its no longer all about you - a large part of your job is to serve and support your team members in succeeding. Individuals who are uncomfortable with that should not be put on the Management development stream (see point 2).
4. Mismatched Performance Measures & incentives- managers need to be evaluated based on a careful balance between both individual and team key performance measures (KPI). I’m a firm believer that the balance should shift sharply in favour of the team KPIs as you move up the organisation structure. Too often that’s not the case. I’ve seen senior managers and executives been measured, and incentivised, based almost solely on individual KPIs. This often lead to the ‘only child syndrome’ (see point 3) and skews team performance. More often than not you end up with generic KPIs that are useful for neither evaluating the individuals true performance nor incentivising them correctly (by that I mean beyond just salary) to grow and achieve improved performance.

Many books have been written about why organisations, and structures, become dysfunctional however I think too many of them over-complicate matters and try too hard to develop a ‘one fits for all’ model which isn’t practical.

There are no shortcuts to doing things properly - organisations need to spend time and brain power on getting their structures, development plans and performance measurement working in their context. I’ve heard people talk about these things as the ‘soft side’ of business but I would suggest to you that that is a very naive, short-sighted view. These are the things which significantly contribute to delivering sustainable, long-term results which will separate you from everyone else in the market.

Accurately costing out projects can be a challenge. IT-related projects in particular can be very focused on the cost of the technology but overlook the cost of the process and people change. Whilst no ‘one fits all’ model exists I find the 20-30-50 rule to be good enough in most cases. 20% for process change, 30% for technology change and the remaining 50% for people change. Most organisations overlook the people change costs which often undermines the actual benefits realisation of doing the project in the first place.