Know Your Stakehdolders

They may not be your customers or your boss, but if you do not have an understanding of how your stakeholders feel about your company/project/initiative or the level of influence they could have in the outcome, they could make life more challenging than it needs to be.

Consider what a stakeholder is - individuals or groups that impact, or could be impacted by an organization.  They may or may not have monetary stakes in the relationship, but they have something, and consequently they have a vested interest or stake in a company's operations.  Further, these stakeholders may be internal to the organization, such as your employees or outsiders such as the public, the competition, or the government looking in.

Ponder the many possible ways in which they can appear, and the possible combinations they could take given a situation:

• Government
• Communities
• NGO
• Suppliers
• Contractors
• Creditors
• Customers/Clients
• Employees
• Stockholders

Depending on the issue they may not remain on the same side.  The alliances may shift and new coalitions develop depending upon the issue at hand.  For example, your company might have a manufacturing facility that is not performing to the required standards set forth by the company's leaders, and the desire is to shut this underperforming unit down.  The employees who work at that facility have a strong desire to keep it open or else they are out of a job.  The local government too  has an interest in it remaining open as it is a source of tax revenue.  On the other side of the issue, the company stockholders and creditors are probably more inclined to close it to improve the company's financial situation. Each side has reasons to pick a side and the potential to form coalitions.  Understanding the drivers for the various stakeholders will help leadership address the concerns of all parties, and perhaps lessen or remove roadblocks that might otherwise delay or derail the efforts they deem to be the best for the company.

Some examples of stakeholders taking a stance that many not have been expected or at least was probably not considered when putting forth the plans include:

housing plans rile Disney

immigration reform and Silicon Valley

Mitsubishi, the Mexican Government, gray whales, environmentalist and global consumers

To prepare for responses to a certain event such as the opening of a new factory in Iowa, or a decision to move operations from China to Vietnam it helps to prepare a stakeholder analysis.

The analysis should answer the following questions:

• what is the event on which the analysis is based?
• who are the stakeholders? (remember they can be internal to the organization as well as external)
• what are their concerns?
• what are their interests?
• what is their desired output from their relationship with your company?
• what other stakeholders align with at least some of their interests?

I generally do this analysis in a spreadsheet.  I keep a master list so that I do not miss potential stakeholders and related insights then I update the categories to capture pertinent stakeholders and related information for the analysis.

Further I might identify any existing partnerships between the stakeholders or which of them may be likely to form an alliance based upon the alignment of objectives.

A picture is worth a thousand words, so I suggest developing a stakeholder map.  In my version the x-axis corresponds to the stakeholders position on the issue (are they for or against, or somewhere in between), and the y-axis relates to their ability to impact the company.  For added perspective I scaled the circles representing each stakeholder to correspond to their impact.  In the chart I developed, employees and shareholders have the most impact.  I also added some "sub" circles in my employee circle to breakout union employees and the management team as their views might not necessarily align and it may be a mistake to lump them together.

diagram developed by LouAnn Conner, SagaciousThink

This analysis of the situation and how it impacts your stakeholders will help you in change management - it will help in the message planning for each stakeholder.  What are some concerns they might have, and how can they be addressed before they turn into problems?

Examples where this analysis is useful:

• mergers and acquisitions
• expansions or contraction of business
• new products
• changes to policies or procedures
• eliminating underperforming products
• modifying products
• somethings gone wrong - a botched product release
• changes to services

Try it and see if helps you look at the activity in a different light.  As I said, I keep a master list with all stakeholders and it helps to keep the list current and then select as appropriate from the list the parties that are potentially impacted by specific activities of the company.  Good luck and let me know what you think.

Stress Testing Your Business

The start of the new years is invariable time for reflection on lessons learned.  The past few years have offered some doozies for companies seeking to understand the challenging and shifting landscape.  Along with that reflection, managers are resolving to find ways to improve in the new year, and ensure their companies are equipped to cope with whatever might come their way.  The following article appeared in Open Forum - Why You Should Stress Test... and I thought the wisdom it provided bears repeating.  Ask the last few years bore witness, events beyond a company's control (and beyond its borders for that matter) can have direct and lasting impact to the company.  To help mitigate disastrous consequences, companies should understand what impact potential events might have on them.  An easy and direct way to see the impact is to perform a stress test.

The goal of a financial stress test is to determine how your business will react under simulated strains while under the protection of a controlled environment. The effort offers rich data as to the true health of the business and reveals underlying problems before they become acute crises. A stress test also helps leadership determine where resources should be allocated to prevent future problems from occurring.

As Peter Drucker stated, “The most serious mistakes are not being made as a result of wrong answers. The truly dangerous thing is asking the wrong questions." An effective stress test measures your company’s ability to respond to plausibly acute situations. The “acute” part is important because the scenarios being stress tested could significantly impact your company, and as usually is the case, they do not offer ample warning.  The article also emphasizes the fact that the plausible part of the requirement is equally important, as these sorts of efforts cost time and money, and you want both resources focused on potentially critical challenges.   Remember these are ideas to get you thinking; ask your team what keeps them up at night.

The article offered a few good examples based on recent events:

Global stressors

• The Euro as a currency collapses, leading to a global disruption of financial markets, a significant increase in interest rates and a severe credit crunch as U.S. banks rigorously try to compensate for their exposure to European sovereign debt.
• China decides to suspend its purchase of U.S. Treasury securities, favoring instead domestic investment to prevent a severe recession.
• A flare-up in political tensions in the Middle East sends oil prices skyrocketing

National stressors

• An inability to reach a consensus on appropriations due to political tensions leads to a major (but not complete) shut down in government services.
• As the budget deficit reaches unprecedented ... levels, corporate income tax marginal rates increase significantly.
• After another financial shock wreaks havoc among large banks, business credit completely freezes while a deadlocked Washington, D.C. fails to agree on a solution.

Industry stressors

• In an effort to placate organizations and movements deemed anti-business, the Executive branch of government significantly expands regulations and slows down the permitting process for your industry.
• After failing to reach a consensus on a new collective bargaining agreement, your factory workers go on strike.
• A raw material used in the development of your product is found to contain hazardous materials and its use is banned by Federal regulators as a result.

Company-level stressors

• An unexpected earthquake in California destroys your main source of raw materials with no expectation of the company returning to operations in the near future.
• A routine audit discovers that several managers and employees colluded to defraud your company of $3 million while also falsifying financial statements that were subsequently used by investors to evaluate an investment in your company.
• After a new technology launches, your company is forced to compete with a solution which offers customers the same results for one fifth the cost of your solution.

Some good pointers identified in the article include:

Record everything for internal training purposes. Similar to a case study, stress tests provide great learning opportunities for future managers at your company. Make the copies available as part of a formal management training process and as a resource on your company’s intranet.

Use a cross-functional team.  You want to have a broad of a perspective as possible, and to make the results realistic, and inclusive.

Remove the org chart from the team so everyone feels free to participate, and not hold back, or only speak if it puts them in a good light.  If its not a complete effort, the results are not much better than if it had not been done in the first place.

Consider making this at least an annual exercise and add new people to the mix.  New people = new ideas,  so that the process does not get into a rut and more people continue to think of the business in terms of these risk mitigation tactics.

May the results of these exercises and the subsequent responses your company has allow you to sleep better in the new year!

Premortem - Drive Out Risk and Raise Team Buy-In

Premortem is one of those common sense tools, that as soon as you understand what it is, the response is generally, "but, of course", and while it sounds a bit morbid, it is definitely useful.  Premortem, to put it simply, is the act of assuming the project is dead (before that awful event occurs) and them determining what killed it, all prior to execution.

The failure rate of projects is high, unseemly so, and one of the key reasons is that people are often reluctant to share their concerns.  So in a premortem, the leader gathers the team, and announces the unthinkable - the project has fail miserably, and they must determine the plausible reasons for why the project "failed".  This sort of thinking, called "prospective hindsight"  - imaging that an event has already occurred increases the opportunity of correctly identify reasons for future outcomes by a whopping 30%.

Gary Klein describes a typical premortem  as beginning after the team has been briefed on the plan. The leader (not the project manager) starts the exercise by informing everyone that the project has failed spectacularly. Next, everyone takes a few minutes to write down every reason they can think of for the failure—every off the wall idea is encouraged, no holding back for PC reasons, just a dump of ideas.  Some examples include lack of support with the sponsor retires, and another identified failure when the government agency revised its politics as a result of a resent election.

Next the leader asks each team member, starting with the project manager, to read one reason from her list; everyone states a different reason until all suggestions are recorded. After the session is over, the project manager reviews the list, looking for ways to strengthen the risk management plan.

Examples Gary used included:

In a session regarding a project to make state-of-the-art computer algorithms available to military air-campaign planners, a team member who had been silent during the previous lengthy kickoff meeting volunteered that one of the algorithms wouldn’t easily fit on certain laptop computers being used in the field. Accordingly, the software would take hours to run when users needed quick results. Unless the team could find a workaround, he argued, the project was impractical. It turned out that the algorithm developers had already created a powerful shortcut, which they had been reluctant to mention. Their shortcut was substituted, and the project went on to be highly successful.

In a session assessing a research project in a different organization, a senior executive suggested that the project’s “failure” occurred because insufficient time had been given to prepare a business case prior to an upcoming corporate review of product initiatives. During the entire 90-minute kickoff meeting, no one had even mentioned any time constraints. The project manager quickly revised the plan to take the corporate decision cycle into account.

While most project teams engage in preparatory risk analysis, the prospective hindsight approach offers superior benefits in that it doesn’t just help teams to identify potential problems early on, it also reduces the "full speed ahead" attitude of an emotionally invested team.

Guy Kawasaki also mentions premortems in his book Enchantment, where he identifies five benefits of this approach, which I agree with, but I'd suggest a sixth should be added.

1. Identification of a problem in advance, rather than after they occur
2. Reduction of the likelihood of premature embarkation
3. More creative and organized approaches to the challenges faced by the teams
4. Heightened sensitivity to early warning signs
5. Participation by more team members because of the less political environment
6. Greater acceptance of the project as the nay sayers have had the opportunity to voice their objections - lack of buy-in can be a risk in itself.

Gary identifies a seventh

7.  Team members feel valued for their intelligence and experience, and others learn from them

I've used this approach and found it valuable.  One example that comes to mind is a construction project where I was the project manager (so in the exercise I was both the leader and PM), where we had an ominous gap to the network we were building.  We discussed what would happen if we were not able to achieve the permits we needed and what the alternatives would be  - none of them were pretty.  We determined an alternative material might be the best option for the pipe we were placing, but that it had never been approved for this use before - only steel had been approved previously.  To cut to the good stuff, not only were we able to sell the permit authority on the new material, but it offered us greater flexibility so we reduced the project's cost by about a million dollars.  Just the kind of result you want when you plan to fail.

Further Reading:

Preforming a Project Premortem - Gary Klein's 2007 article in the Harvard Business Review.

Preempting a Communications Crisis

The news is full of real world examples of good and bad planning.  Case in point, the latest issues facing PG&E, which is facing serious fines ($1,000,000/day) for failing to turn over documentation requested by various regulatory authorities.  Reading the newspaper articles leaves a lot open to interpretation but from what I gather, PG&E did not, or does not have a communications plan in place and consequently is feeling the heat to provide information to clarify details around the San Bruno gas explosions.  The dearth of information has forced Federal investigators to rely in the memory of an80 year retired PG&E  employee to recall specific incidences in the installation of a project that occurred over 50 years ago (may I be as sharp as this gentleman when I am 80).  This lack of information is causing angst for the permitting authorities.

For those folks that are not familiar with the incident, let me set the stage:  A PG&E pipeline running through the City of San Bruno, California exploded and resulted in the tragic loss of life and the destruction of several homes.  The exact cause of the explosion remains under investigation, but interest is around the welds in the pipe and the amount of pressure that PG&E allowed the gas to run through the pipes.  As part of the search for answers, a natural desire is to examine the details around the construction of the pipeline some fifty years ago.  The problem is that PG&E cannot locatecritical documentation, such as details on the quality of the plant involved, reasons for variances in construction.  They have  a vast number of banker's boxes possibly filled with the required information but no system in place to locate it.  Note that some of this documentation is required by law to maintain; it is not a matter of choice. PG&E's resulting inability to deliver the information has resulted in some significant bad publicity, loss of confidence by local and federal authorities, loss of productivity, time and money as a result of diverting employees to search the boxes to try to find the information.

I've written before on the necessity to set up a plan to control communication so employees do not get inundated and as a means of mitigating risk, but I thought that this latest real world example was a worthy reminder of what happens when poor controls exist.  To be clear, when I refer to communications plans here I am speaking about what sort of plan the company has in place to capture critical data it may need at some point in the future:

How will it store the data?

How will this data be protected?

How will the data be accessed?

How long will it retain the data?

What data is required by law to be kept and for how long?

Who has access to the data?

How does your company determine what information is still relevant and has not been superseded?

Because now, PG&E is moving massive amounts of documentation to an outside facility to shift through the data.  Any ideas what this costs them in terms of productivity?  Confidence of the regulators, ...the public?

3 Suggestions from Harvard Business Review to Protect Old Data

The first one, I've written about in a previous post.

1. Develop a policy. Decide what information you should keep or discard based on a set of criteria. Remember that data storage costs are dropping all the time, so lean toward keeping things whenever possible.
2. Make data future-friendly. Create accompanying technical documents that explain how the data is used and describe any gaps or limitations.
3. Convert when necessary. No one can predict the future, but be thoughtful about what format you use. Try to keep data in formats that will be readable in 10 or 20 years.

The third one reminds me of trying to align my proposed plans on a construction project to an as-built book that was the "bible" for a major US city.  Their as-builts were so old they were on cracking vellum.  Updates were a mind numbing process and often fraught with error and delay.  Making sure that the data your company collects remains in a format that is still relevant is key to maintaining its usefulness, i.e no VHS tapes.  No one wants to run around in a crisis trying to find an outdated technology to find information.

Other relevant reads:

3 Steps to Trusting Your Data - ideas of dealing with the issues of data problem such as practicing effective information governance

Write a Crisis Communications Plan - good tips from the FEMA given the focus on international disasters, and a good reminder of why having these plans in place can relieve anxiety later on.

The point here is that PG&E might have avoided a lot of headache if it had a solid plan to capture and store data.    Many companies do not have such a plan, and only find out when accessing that data is critical. Additionally, having a communications plan in place when a crisis arises can be potentially life saving if not sanity saving, because all the decisions have been made and people just have to follow the plan.

Trim the Fat

With all the talk about companies being lean and reducing cost, an equal number of articles warn companies to focus on trimming the excess and not taking out the "muscle" of the company.  Which, if managers follow the mandate, "we'll trim 10% of budgets across the company," chances are good damaging cuts destroying customer valued operation will happen.  This approach is a copout, a disingenuous maneuver designed to avoid political fallout, or simply delegation without an understand of the issues the company is facing.  So what is a better approach?

A better approach would be to first analyze how the company compares against customer expectations, and the competitors performance.  In the example below, the customers have prioritized, in descending order of importance, the top qualities of the suppliers that are important to them.  Second, the chart shows how the company fares against this measure along with their top three competitors.

The happy faces indicates the company's ranking in each category compared to client expectations and the competition, represented by red hearts, blue crosses and green 4 point shapes respectively.  As might be expected, the results were sometimes good and sometimes not so good, but the chart provides the company with a starting point on which to focus.  Essentially from the price category and moving to the criteria on the right, the company exceeds not only what the customer considers they are willing to pay for but far outperforms the competition.  In project management speak, they have "gold plated" several catagories, and these areas would be good places for the company to consider making cuts, for example "ability to taylor orders" and "product offering breath."

Price - They appear to be selling their product cheaper than the customer is willing to pay (definitely a missed opportunity), but also at a lower cost, by some margin that their competition.  Raising prices improves their margin, but how they do this without angering their customers accustomed to paying the lower costs is another matter.

Special Order Lead Times - The company takes its ability to respond to special orders beyond what is expected by the customer.  It could reduce costs in this area and meet client expectations and still exceed its competition.

Relationship Management - A disconnect exists between the amount of handholding the customer perceives is important versus the company.  This area looks to be a good candidate  to trim cost without negatively impacting the relationship with the customer.  As with the initial review a deeper look at this area will identify specific programs to target and where to refocus resources.

Brand Image - Having a strongly recognizable vendor is not a priority, so a review of the marketing/advertising budget might indicate some possible areas to trim cost.

Product Breath of Offerings: The company considered a wide variety of goods to be an important differentiator, but the customer does not appear to agree, at least to the same extent. Reducing product lines would cut cost without undercutting value, in fact it may add value if some lines were losers for the company.  Also, it may be assumed that complexity is reduced across the organization (improved quality, reduced costs) and R&D process are improved and focused on specific efforts.  The customers may also perceive improved value if the company focuses on components and processes they think are key.

Proximity to the Customer: The company may have falsely believed that having outlets close to their customers was of great importance to their customers, but alas they saw it differently, and do not see the value.  This practice is something to consider especially with services such as Skype becoming increasingly integrated into business.  The company could close many of these outlying offices and consolidate staff, if appropriate.

As stated previously, the items identified are good starting points, but each category is broadly defined so drilling down to get the specifics is advised, before attacking with the cost cutting shears. Having a good voice of the customer (VOC) practice in place is critical to understanding the issues and finding ways to navigate customer expectations.  It also helps insure that the company's performance aligns with the client expectations as demonstrated in this example.

Some of the cost savings could, or more accurately should be applied to the categories where the company is faltering in the eyes of its customers and lagging behind the competition to shore up its reputation.  Unfortunately for this company, these areas for improvement are in the customers' top four categories, so changes must be made to remain viable, especially as the company ranks lower than at least two of its competitors.

Armed with this information, the company has the makings for a roadmap focused cost cutting activities in its operations, where it will not impact customer perceive value plus where the company should focus on possibly adding more funds or further refining those processes where it lags.  Imagine if the company had simply taken the 10% off the top approach, how much further in the hole the company might slide in the view of the customer in areas that were deemed critical and in which it already lagged.  Knowledge is power, and using it to make sound budget choices can be mission critical to a company.