Corporate measure selection: 3 dilemmas

Choosing corporate measures is not a simple process. It involves a lot of dynamics that play off of the subconscious mind of the leaders of the organization. As you go through the process of choosing or retooling your scorecard, you’ll probably notice that some of the change resistant behaviors are motivated by healthy desire to create a safe, engaging environment for employees, but we always need to provide a check-point for individuals to self assess where the hard decision to shake things up becomes more important than the desire to maintain stability.

Here are a series of dilemmas you will encounter when you seek to up the ante on measures used:

1) When measures are tied to everything from variable comp to executive performance plans, AND the organization want to start tying metrics more closely to the actual strategy (not just a series of safe and generic business metrics) a dilemma occurs. How do you motivate employees to engage the new, more challenging measures from ones they know they can safely deliver on today (that no longer represent a performance gap)? It’s clearly the right thing to do, but is not without significant risk.

2) This links to a very similar dilemma. Organizations who link variable comp to corporate metrics, often subconsciously react to the threat that more challenging measures create to employee variable comp. This can shift the focus from forward focused, leading measures to a desire to maintain lagging measures – justifying past behavior rather than creating predictive information about the future. Measures should be linked to the objectives on your strategy map, which speak to what an organization is creating.

3) People want to do a good job, but we ultimately want to look for information that supports our existing view of the world. Some emerging measures, like net promoter score (NPS) are far more telling than many generic customer satisfaction scoring systems, because it’s so simple. It’s so to the point, that there’s nowhere to hide from the truth about what it’s telling you. Companies with an 80% customer satisfaction score often have a 10% NPS rating. This can be like a big slap in the face, because no one associates 10% with a warm and fuzzy feeling. The opportunity here is to find out what the data is telling us, and to be willing to discover where your company’s performance isn’t as solid as you thought it was. The dilemma is the tendency to want to continue to believe what we thought was true, vs. the opportunity to actually fix problems in your business by discovering what is actually true. The ultimate question to be asking your customers is first “What is the likelihood you’d refer us to a friend of colleague” and secondly, “What would it take to shift your score from what it is to a 9 or 10/10?” Once you know what that gap is, you’re armed with everything you need to start making better decisions.

The hard questions begin when your organization has to decide whether it’s going to go through the motions, or step up to the plate. Discussing these dilemmas up front will allow you to manage avoidance behavior by letting participants confront their own motivations and not just react.

The key to all of this is leadership. Compelling leadership goes a long way to suppressing fear-based behaviours.

Four of the most important questions…

What percentage of your employees are aware how your organization is working to differentiate itself in the market?
How often does it cross their minds?
Have they really thought about their role in making it happen?
Is this consistently understood across the employee base, or are you leaving it to chance?

Corporate strategy management is ultimately about putting structures in place to:

1) ensure the company is positioning itself in the long-term
2) ensure that every resource is working to enable a model that works in the short-term

Before you dismiss these questions, consider this:

1) Your corporate brand (perceptions and feelings about your organization held in the hearts and minds of consumers within your market) is completely determined by first and second hand experiences with all touch-points of your organization.

2) Every employee that is customer facing is perceived as “the company” by your customer, from the coat check to the main act.

3) It’s likely that your entry level employee spends more time with your customers than your management team does.

Now, back to those questions…

The issue of price and value

I hear a lot of people talking about how customers feel they are too expensive, and for some… the immediate response is to believe that they need to drop the price. In some cases this is true, but determining whether that’s the case usually isn’t that simple. It’s a question of the degree of value creation, rivalry within your market and how you want to position your brand within that mix of factors. This blog isn’t intended to be a business 101 discussion, and yet there are some folks in key positions of your organization whose go-to position is to focus on pricing without considering overall brand positioning implications.

For the sake of discussion, there are three major types of customers…

1) Dollar store: Those willing to pay next to nothing and don’t care about the quality of what they get
2) Ford: Those willing to pay for a solid product and expect good value
3) Premium: Those willing to pay a premium for something unique or exceptional

Your options for relevance, prominence and leverage (hence, pricing) can be understood through tools like Porter’s 5 forces analysis. This will provide you with a pretty solid understanding of your leverage within your market. If you have a lot of control and power within your environment, and the likelihood of new entrants is low, you have the option to float higher margins provided that you’re not building up latent resentment in your customers which will eventually motivate them to find alternatives. For reference, Porter’s 5: Rivalry equals:

* The threat of the entry of new competitors
* The intensity of competitive rivalry
* The threat of substitute products or services
* The bargaining power of customers (buyers)
* The bargaining power of suppliers

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Once you’ve got a solid view of both of these factors, you can begin to make choices about value proposition (customer needs met + type and degree of value created)… and to the original point, how you want to price.

Sometimes people want to buy a premium product. They want to pay premium cash, because it’s not a luxury without being out of the reach of the common man. To others, getting “the deal” is more important that what they’re actually buying. The more accurate your understanding of your desired customer, the better you can position yourself to fulfill the specific needs they have. Not just the product type, but the need you’re fulfilling through the buying experience.

Trying to up-sell any of these products to a customer with another preference is a mistake, without having done the groundwork to first sell the problem that a more complete solution can provide. Over time some customers may change camps, but it’s not usually something you can change in the moment.

When a customer complains about price, the real question is what went wrong:
– Is their perception that you aren’t following through on the quality for the price they paid?
– Did you sell a premium or semi-premium product to a dollar store customer?
– Did you sell a Ford to a premium customer?
– Does your business model support your value proposition – are you structured in a way that you can consistently deliver on this desired market position?

The next time you hear someone complain about price, remember that it’s a combined issue of whether you have sold the product to the right customer, their perception of the price/value mix as well as how well you have structured your business model to deliver on the promise. When the buying experience is truly aligned with your customers, everyone wins.

Analyze the artifacts of your performance: Finding and removing corporate scotomas

WIKIPEDIA DEFINITION OF SCOTOMA: A scotoma (Greek for darkness; plural: “scotomas” or “scotomata”) is an area of partial alteration in one’s field of vision consisting in a partially diminished or entirely degenerated visual acuity which is surrounded by a field of normal – or relatively well-preserved – vision.

A scotoma is also known as a blind spot. The thing about MENTAL and corporate blind spots is that you can’t see them. They are the incorrect assumptions about your world that aren’t accurate and are holding you back. Now the side effect of being sane is that we tend to look for information that supports what we already believe, this is why blind spots often carry on for lifetimes without being identified. In order to change, we have to first be open to the possibility that our current assumptions may not be true and may be holding us back from greater levels of performance.

Start by comparing the artifacts of your performance, how your customers react to you, the net promoter score, your relative market share, against your current beliefs and see if it all lines up. Once a problem is identified, it can be fixed. Until that time, it will continue on, business as usual.

Where might your organization have blind spots?
Where do you think you’re better than you actually are?
Where is the data conflicting with your beliefs?

Once you accept that possibility, you have opened the door to moving your business forward.

Why go there?

Organizations go to very different levels of depth when it comes to defining their overall direction. The assumption behind not going to more depth can stem from a lack of knowledge of how to go further, but some leaders simply don’t understand what benefit is created by doing this work.

What I saw as I drove down the main thoroughfare in our city the other day seemed the perfect illustration of what progressively clearer definitions of strategy do for organizations. The street was recently repaved, and no lines have been painted on yet, just small marker squares every few meters or so. If you look carefully, you can see where the lanes will go, but when they’re dirty or a skiff of snow obscures the view, the lanes begin to shift. Here’s the correlation: People are generally still going in the right direction, but the rate of progress slows because the boundaries aren’t clear. People become apprehensive and tend to slow down. In some cases, three lanes become two lanes and the rate of progress slows even further. Confusion related to direction slows down the decision making progress, occasionally creates counterproductive results, and in many cases creates risk.

Will your organization continue to make progress without clearer definitions of strategy? Probably. Unfortunately progress needs to be considered relative to that of your competition.

Clear direction always creates greater potential for your organization and it’s always worth the time you spend working on it.