Becoming Systematic, NOT Bureaucratic: A Roadmap for Avoiding the Entrepreneurial Crisis

© 2011 Service Excellence Partners

Becoming Systematic, NOT Bureaucratic:

A Roadmap for Avoiding the Entrepreneurial Crisis

Ed PowersService Excellence Partners

Revised October 2013


About….Ed Powers

• 26 years in operations, quality, sales, marketing, and consulting

• 12 years at Hewlett-Packard• Operations leadership in 5 early-stage

companies and 3 start-ups• Examiner, Baldrige National Quality Award• Rocky Mountain Performance Excellence

Examiner and board member• Lean Six Sigma Black Belt


Hitting the “Wall”

Series1

START-UP



Series1

START-UP INITIAL GROWTH



Series1

START-UP INITIAL GROWTH CRISIS!

~ 50 Employees$1M-$5M Revenue

• Slower sales• Key staff defections• Quality and delivery issues• Greater stress!


Examples

Sources: Edward Lowe Foundation; A. Davila, G. Foster, and N. Jia “Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator” California Management Review, 459, May 2010


Causes

• Span of control exceeds Founders’ reach• Degradation in alignment, communication,

and coordination between groups• Insufficient knowledge on how to grow and

scale … leading to an entrepreneurial crisis

Sources: Edward Lowe Foundation; A. Davila, G. Foster, and N. Jia “Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator” California Management Review, 459, May 2010


A Need for Structure

“The evidence in our study supports the association between growth and the presence of management systems… Having no systems (chaos) is as damaging to a company as having too many (bureaucracy); and startup companies more often suffer from the former rather than the latter.”

Sources: A. Davila, G. Foster, and N. Jia “Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator” California Management Review, 459, May 2010


Systematic vs. Bureaucratic

• SystematicAn approach that is well-ordered, repeatable, and uses data and information so learning is possible.

• BureaucraticA system of administration marked by officialism, red tape, and proliferation.

Sources: “Criteria for Performance Excellence 2011-2012,” Baldrige Performance Excellence Program, NIST; Merriam-Webster (www.m-w.com)


The Challenge

Is it possible for companies to be systematic without becoming bureaucratic?

YES! Provided senior executives add just enough structure at the right time, right place, for the right reasons, and prune the system to keep proliferation at bay.


Fundamentals for Success

• People• Planning• Execution• Learning




Jim CollinsGet the right people on the bus … and the wrong people off the bus.





Dwight D. EisenhowerPlans are nothing. Planning is everything.






Larry BossidyExecution is … rigorously discussing how’s and what’s, tenaciously following through, and ensuring accountability.






Larry BossidyExecution is … rigorously discussing how’s and what’s, tenaciously following through, and ensuring accountability.

Peter SengeThe only sustainable competitive advantage is an organization's ability to learn faster than the competition.


Strategic Management Systems

Continuous Improvement

Results

Environmental Awareness

Leadership

Work SystemsPeople

Planning and Review

System of Measures


Hendricks and Singhal Study

Operating Income

Sales Total Assets Employees Return on Sales

Return on Assets

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Award Winners

Control Firms

Per

cen

t C

han

ge

Source: K. Hendricks and V. Singhal, “The Impact of Total Quality Management (TQM) on Financial Performance: Evidence from Quality Award Winners” DuPree College of Management, Georgia Institute of Technology, March, 2000


Essential PracticesPractice What it is What it does

Value Propositions

Refined statement of target customers, benefits, and costs/tradeoffs

Sharpens and simplifies the product or service to the most important attributes to design, market, sell, and deliver

Enterprise Dashboards

Interlinked system of metrics for each manager

Focuses management and staff on the most important activities and results

Hoshin Kanri Japanese breakthrough planning, deployment, execution, and review system

Focuses and aligns the entire organization on a short list of goals and strategies

Process Management

Definition and documentation of key workflows and their relationships to key metrics

Uncovers disconnects and identifies improvement opportunities

© 2011 Service Excellence Partners19

Example Dashboard

GREEN YELLOW RED Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1.1 30-DAY Overall Occupancy Monthly <65% 65-70% >70% 52% 65% 67% 58% 48% 62% 62% 62% 46% 45% 49% 53%1.2 90-DAY Overall Occupancy Monthly <50% 50-60% >60% 60% 54% 52% 50% 53% 53% 45% 40% 40% 40% 49% 61%1.3 Avg. Utilization (nts/cert yr) Quarterly <30 30-34 >341.4 Cancellation Rate Monthly <15% 15-20% >20% 28% 21% 25% 15% 13% 14% 13% 11% 9% 12% 10% 12%

2.1 Monthly Escapes Workload (Calendar Year) Monthly <=240 241-300 >=301 179 212 241 200 190 216 237 230 205 210 224 2192.2 Monthly Over-time Hours per planner Monthly <5 5-10 >10 3.25 5.18 5.25 7.50 3.56 5.54 8.85 3.7 3.44 1.25 4.85 3.15

3.1 Overall Satisfaction Monthly >4.75 4.5-4.75 <4.5 4.70 4.83 4.78 4.80 4.81 4.81 4.82 4.79 4.82 4.86 4.87 4.853.3 IRS Planner Scores Monthly >4.87 4.76-4.86 <4.76 4.84 4.93 4.96 4.95 4.95 4.94 4.93 4.95 4.95 4.97 4.94 4.953.4 Service Recovery Percentage Quarterly <2% 2-3% >3%3.5 Service Excellence Scorecards Overall Monthly >90% 85-90% <85% 90% 92% 92% 88% 86% 91% 87% n/a 89% 93% 93% 93%

BUSINESS FUNDAMENTALS PROGRESS TABLE

Target, Goal & Limits

Revision: 4.0Q1

Entity: Private Escapes Dept.: OperationsOwner: Ed Powers

ITEM

24.0

Review

1.0 Delivery

Q3Q2 Q4Key Bus. Process: Member Services

26.8 23.7

2.0 Responsiveness

23.3

2.1% 1.3% 2.1% 0.8%

\\Escapes1\shared documents\Operations\[Ops BFTs 2007.XLS]BFT

3.0 Quality

A “Balanced Scorecard” comes from:• Financial and non-financial metrics • Leading and lagging indicators


Essential PracticesPractice What it is What it does

Process Improvement

Systematic problem solving method (Lean, Six Sigma, PDCA, etc.)

Addresses root causes to ensure maximum results and permanent improvement

Leadership Process

Definition of the organization’s Mission, Vision, and Values

Creates alignment and engagement throughout the rank and file

Strategic Planning and Review

Definition of 3-5 year goals, strategies, and major investments.

Ensures the organization effectively manages long-term change

Performance Management

Three documents that define key tasks, outcomes, and continuous learning for all employees.

Provides context, focus, and encourages learning and development

Strategic Scenarios

Listening posts and triggers to modify the strategic plan.

Increases organizational agility by quickly responding to market shifts


Example Performance Management SystemPosition Requirements and Goals

Company Function Individual

Performance Review

Development Plan

Results Strengths Opportunities

Objectives

Tasks

Timeline

Description


What’s a Good Roadmap?


Start-up Genome Project

• 2011 study of 3,200 start-ups• UC Berkeley and Stanford • 90% of start-ups fail, due primarily to self-

destruction and not competition• Founders who learn are more successful • Marmer Stages define phases of development

Source: M. Marmer, B.L. Herrmann , E. Dogrultan, R. Berman, “Start-up Genome Report Extra on Premature Scaling,” March, 2012


Linkage to Start-up Genome Findings

Source: http://blog.startupcompass.co/tag/lean%20startup

http://blog.startupcompass.co/tag/lean%20startup




Linkage to Start-up Genome Findings

Source: http://blog.startupcompass.co/tag/lean%20startup

Value Propositions

Enterprise Metrics

Value Propositions

Process Management





Typical Early Stage Roadmap

1. Business Plan

2. Financial Reporting



1. Business Plan


3. Value Propositions



1. Business Plan



4. Enterprise Dashboards

5. Hoshin



1. Business Plan




5. Hoshin6. Process Management

7. Process Improvement8. Leadership Process



1. Business Plan




5. Hoshin6. Process Management

7. Process Improvement8. Leadership Process

9. Strategic Planning10. Performance Management

11. Strategic Scenarios


Prune the Tree• Focus on fewer customer

segments• Simplify your product• Review no more than 10

metrics at any level• Pursue only one major

breakthrough each year• Run the entire company on 10

pieces of paper• Send single page reports• Conduct no more than one

standing meeting per week• Reduce sign-offs

Less is More!


Ed PowersPrincipal

Service Excellence [email protected]

970-235-0078

mailto:[email protected]