CONDUIT

What to do during a recession

Are we heading for a recession? The textbook defines a recession as two consecutive quarters of declining gross national product. However, practical business executives with PNL responsibility may see a true recession as an anticipated downturn in forecasted business activity. By that definition most people feel we are in the midst of one now and some executives have begun reducing their recognition efforts and/or trimming their sales incentive investment as way to weather the anticipated dip in earnings.

An economic slowdown should prompt a collective belt tightening across the corporate midsection, right? Think again. Smart businesses approach forecasted soft patches as an opportunity to get aggressive. The objective; swoop in and seize market share, strengthen customer equity and ignite employee innovation. 

During a recession, customers hold the power. While they still have needs, they are also more cautious, risk averse and cost sensitive. Progressive firms are recalibrating their selling propositions constantly, but during a recession, the smartest ones make an extra effort to applaud consultative selling behaviors that satisfy the buyer’s desired for added value.

Want meaningful incentive measures that protect share and drive incremental revenue during down periods? Try rewarding for increased sales penetration across key accounts. You may also SPIFF the strategic bundling of products or services across key customer segments. Consider adding a customer satisfaction qualifier and/or an internal peer nomination element to the program. Why? During down times you want to stress steps-to-success as much as the outcome itself. “Doing it right” counterbalances any lost momentum that may occur with longer sales cycles brought on by cautious customers.

Short on funds? Explain the behavioral component to your marketing team and sell the notion that your program actually reinforces the behaviors that set the brand apart. They may see your program as a cost effective complement to their customer acquisition and retention initiatives.  

Speaking of employee behaviors remember this. Recessions affect employee confidence too. Left unchecked restlessness, ambivalence, and a yearning to try something different can percolate. Businesses run the risk of losing employee mindshare at a time when they can least afford it.  Companies that recognize innovation, promote best practices and nurture front line leadership are aligning employee values even during the toughest of times. They are literally leveraging the most important source of competitive advantage—people.

No one wants a recession of course. They can be long and difficult drains on wealth. But challenges also present opportunities. Properly designed reward and incentive programs can protect your standing in the category, chip away at a competitor’s weakness and put you in the position to ramp up quickly once the economy begins to hum again.      

Global award delivery systems simplify recognition

    We live in a increasingly global economy characterized by growing interdependence, integration and interaction among people and corporations around the world. The number of multinationals (corporations that operate in more than one nation at a time) has jumped from 7,000 in 1970 to 40,000 in 2000 to an estimated 50,000 today. Both the challenges and opportunities for multinationals are of course larger, exasperated by the sheer size and complexity of a worldwide marketplace.

    It can be argued that Human Capital asset management is the critical challenge in any business model. In the global arena, employee and channel optimization is especially important. Brand image, increased customer equity and incremental expansion are at stake.

    To offset the administrative complexities of recognizing employees across the world, smart firms  are getting help from providers that have implemented (and tested) global award fulfillment delivery systems. The most successful method offers separate in-country award offerings that are culturally appropriate and reflect cost of living coefficients for employees in any nation. An in country solution manages taxes, shipping and service support at a localized level. Companies that use this solution are uniquely positioned to support award issuance in all global regions but in a cost effective and efficient manner. In effect by using this solution, they gain an aggregated and integrated answer for each of the countries they do business in without having to manage each country separately. This advantage helps them gain (and keep) the upper hand in the global battle for talent.

"The Valley of Despair” and recognition

When a new business system or model is implemented something like a learning curve happens, but on a much larger scale. The phenomenon is often called “The Valley of Despair." It gets its name from the visual representation in charts and graphs that track productivity and other key metrics enterprise wide.  "The Valley of Despair” describes a early but steep decline in performance metrics, followed by an anticipated rise to previously established performance levels which then go on to exceed previous conditions.

The "Valley of Despair" is a natural reaction to a major change when a new business model or system is implemented. This negative impact can be exasperated by confusion and social resistance expressed in the actions of individuals across key work groups. It can foster a culture of competition and/or resistance vs. cooperation. It can compromise engagement and can create barriers to information sharing and work place innovation. The condition is common enough that it is generally factored into the economic business case that financially justifies the new venture. However, it can be proactively managed and thus shortened providing a source of incremental net revenue for the firm. The use of recognition is a valuable tool for companies looking to accelerate positive outcomes.

Devices that communicate the rational for change, set expectations that align values, recognize individuals or work groups who adoption to change are valuable tools in humanizing performance expectations. Thru recognition individuals begin to see first hand how the change benefits them personally and helps them understand their role in helping the enterprise and its stakeholders archive their goals.

Keys to building dashboards

So, what are the keys to building dashboards that’s useful? Developing a performance dashboard is not as difficult as one might think as long as you follow some simple guidelines.

1. Don’t just track measures that you care about; collect data that influences (directly and indirectly) your business case. 

2. Provide a frame of reference. Use charts and other illustrations to compare measures to a benchmark or standard.

3. Make it visually compelling. Remember other stakeholders will want to access and use the tool. Incorporate bright colors and symmetrical shapes in the dashboard design. The goal is to ease the interpretation of complex data even for the first time user.

4. Tell a story. Create comparison that pinpoint trends and identify performance improvement opportunities. 

How can you make the data more actionable? Consider the establishment of “sector managers”. These managers on your team hold clear responsibility for any one metric or a cluster of measures. This will ensure action by creating performance accountability. While it’s not practical to suggest that each manager owns the outcome for any measure, it is worthwhile to charge them with tracking trends and issues and make each responsible for identifying isolated events that may impact the larger business case. 

The importance of a strong business case

    In our hyper-competitive global economy all business assets are called upon to do more. Reward and recognition resources are no exception. If firms are to continuously outperform a growing crowd of existing and emerging challengers they must optimize the impact of their programs.

    The business case is a decision support tool used by used by management to evaluate and rank projects. Used to ascertain the likely financial costs and outcomes and/or consequences of a particular business investment, it is changing as a business tool because decisions are becoming more macro in nature and are integrating the entire value chain into consideration.

    The term business case is analogous to a legal case. The presenter is making the case for his/or her request for funding buy applying evidence or reasoning to his conclusions. Like a lawyer presenting a case, your must connect all the evidence (findings) to a conclusion that is compelling and financially sound. The evaluation involves financial techniques that economic executives use to put requests for funding into a context that is "apples to apples" against other requests for capital and evaluates your request again others in the context of economic gain.

    But thats not the only consideration. While every business case has financial elements there is no one tried and true way to formulate it. You will find many established standards for business case content and structure already in play. Check with other members of your senior management team to determine what formats they have used and follow that template.

    You will probably notice that the onces that stand out (and get approved) address the business issue in a holistic manner and propose a project that is philosophically consistent with the strategic direction of the organization. Successful cases rationalize both alignment and the ability to make money above and beyond existing hurdle rates.

Rewarding the little things that make a BIG difference

When a tree falls in the forest and there's nobody there to hear it, does it make a sound?  Likewise, when a good employee does great work, or goes outside the scope of her job description, do your managers take notice?  And if they do, do THEY make a sound about it?  Do they draw attention to, acknowledge, celebrate, and recognize that employee?  Are they capitalizing on this opportunity to communicate such an example of excellence to that employee's peers and teammates - thus reinforcing the values that drive the organization's culture?  Herein lies a critical touch-point between a company's brand and its most important constituent - the internal stakeholders.  Is it being leveraged to its fullest potential?

And I'm not just referring to the big things, such as selling above quota or shattering safety records.  Those are, of course, the obvious (and expected) situations that probably are already and should continue to be rewarded.  What I'm specifically talking about are the little things that collectively make a BIG difference to your firm's overall performance and operation - those "above-and-beyond" behaviors that truly indicate that this employee is fully on-board.

There's no better way to foster a culture of recognition than by influencing the normative behaviors of "how things are done here."  When people start seeing those values lived and enacted in the office, then their likelihood of "getting on the bus" will drastically improve (see Getting the Right People on the Bus from 11/21/06).  Formal and frequent recognition that is visible to all employees ignites an engaged workforce.

A recent book, The Carrot Principle by Adrian Gostick and Chester Elton, follows our logic.  It proposes that the most effective managers go out of their way to learn about their employees' interests and lives outside of work, and customize rewards based on what makes their people tick.  Calling them 'carrots,' these formal recognitions appeal to intrinsic drivers, and should be practiced regularly to maximize motivational impact of any reward and recognition program.  We wholeheartedly agree.  And so would motivation guru Victor Vroom, who's Expectancy Theory states that employees will be motivated when they believe that increased effort will yield better job performance, which in turn leads to additional rewards that are valued by the employee.  This is the type of positive cycle that sustains exceptional performance.

But how often does this recognition need to occur?  Well, even though we're talking about rewarding everyday behaviors, the good news is that it need not be carried out every day.  For example, Gostick and Elton propose a tiered schedule of recognition, with a (free, "thank you" note) formal acknowledgment of good work be performed every 7 business days, with more substantial rewards interspersed at less frequent intervals throughout the year.  This should be doable, right?

And to take the onus off management and improve the likelihood of organization-wide adoption, the responsibility can and should be spread throughout the company.  Allow everybody to participate in the act of recognizing positive behavior.  Distribute the power of handing out spot awards to all your employees by formalizing peer-to-peer recognition as part of the non-cash incentive strategy, and you will see your employee engagement levels increase.  No doubt about it.

Also, keep in mind that those rewards need to be commensurate with the level of impact to the organization; if they're not, they can actually be de-motivating.  That's part of Vroom's theory, too.  And we definitely don't want to create that effect through our incentive initiatives.

This is quite an undertaking, huh?  It sure is, but employee engagement is a 2-way process.  When employees see and feel that the organization takes notice of all their contributions - big and small alike - they will reciprocate.

Employee recognition as a competitive advantage with Generation Y

We've been talking a lot about the aging workforce here at CONDUIT, and the role recognition can play in retaining key talent.  But there's another side to this story.

Much has been said about Generation Y in the workplace - namely their sense of entitlement, relationship to authority, insistence on autonomy, and flexibility.  A recent NPR feature highlighted how important recognition and acknowledgement of accomplishments is to them.  And there's a lot of research out there to support these claims, including Jean Twenge's book Generation Me.  In essence, she states that the pampered upbringing of this segment of 32 million (born between 1976 and 1989) rendered a sense of self-importance which translates into an aversion to criticism, and a yearning for constant praise.

This recognition can take many forms, from supervisor-to-direct report, peer-to-peer, team-based, or organization-wide.  The more creative, the better the impact.  In all, ongoing recognition provides the extrinsic motivation that can sustain employee performance and engagement across an organization's value chain.  And, it's a key ingredient to Gen Yer's sense of self-fulfillment - which is a big deal for them.  But perhaps it's even a bigger deal for compaines, as Gen Yers tend to question their employers (norms, values, and culture) as much as they question the life decisions of their parents (behaviors, values, and practices).  As a consequence, the implications for retention and morale are quite significant.

Therefore, a company's people strategy should incorporate different types of recognition, and with greater frequency.  It behooves managers and the larger system in which these employees exist to acknowledge this tendency and relate to these workers accordingly.  Yet, we're finding that there's often a disconnect between knowing and doing.  Few firms are actually putting this practice to work, but the ones that do are realizing significant gains.  And the best part is that it doesn't cost much money.

So why isn't recognition being used more?  Well, it's hard to point the finger at anybody in particular, because it's really nobody's fault; yet, herein lies the source of the problem.  Traditionally, this responsibility has not resided within any one function in an organization.  But by formalizing, consolidating, democratizing, and promoting their recognition and reward programs to all-employees, companies are laying the foundation for a culture of recognition to be adopted and, most importantly, supported by every employee.  This inclusive, empowering spirit is what has fueled the popularity of sites such as myspace.com.

This trend is not only here to stay; it's on the rise.  Not only are Gen Yers the future of your organization, but this high-performing, high-maintenance group also values companies that are committed to their personal and professional development.  So firms that visibly exhibit such principles will become more attractive to prospective and current employees alike.  This helps boost brand equity to all internal and external stakeholders (including the all-powerful customer...see Can recognition help the CMO? blog from June 7), resulting in a true competitive advantage.

CHANGE INITIATIVES ARE MORE LIKELY TO COST MONEY THAN SAVE IT

While change can involve information technology management, strategic management, and/or business process, change initiatives generally fail to live up to their expectations. According to survey only 15% of the executives polled felt that their change initiatives were completely successful. 37% said programs were only moderately successful while 33% said the change program failed to deliver the economic expectations and could be deemed a complete failure.

Failure has no bias and is ubiquitous across the organization and is just as likely to compromise the effects of cultural or operational initiatives. Several studies confirm that change successes is the exception and not the norm; Only 20% of all reengineering projects succeed just 23% of all mergers and acquisitions make back their costs, about 43% of quality-improvement efforts make satisfactory progress and only 9% of all major software development applications make up their costs. Its also worth noting that 31% of all change initiatives get cancelled before completion and more than 50% result in cost overruns by189%. 90% of all "cultural" initiatives fail to meet expected results, including a whopping 70% of all mergers and acquisitions which failed to create the desired new business culture. This depressing record is consistently dismal in large scale efforts (enterprise wide) as it is at macro level (regional, territorial, or work group related).

Failure is costly on all levels. The majority of change initiatives examined failed to live up the incremental economic gains projected in their original business case used to request and justify funding. Perhaps more disturbing to the firms long term economic outlook is the impact on human capital. Employees who resist not only reject or minimize the use of the tool but their overall performance also declines. In the midst of change employees may reduce their commitment to the organization, have lower job satisfaction and higher absenteeism and eventually may leave the company but not before they socialize their dissatisfaction with coworkers and customers.

Studies including the findings of Jim Clemmer are largely representative of the prevailing research. Clemmer suggests that companies have too many priorities and that change initiatives are hampered by uncoordinated execution, poor infrastructure and process, a lack of true leadership buy-in, and "fuzzy" employee communications. He goes on to suggest that the lack of success has qualitative ramifications. Underperforming initiatives can compromise employee morale, negatively impact productivity, fuel employee turnover and jeopardize customer satisfaction. It is this list of ancillary unintended consequences that may prove to be the most damaging for an organization looking to gain an advantage in the marketplace.

So why is the track record so disappointing? Read my white paper (under Change Management) for more. Hint it;s the inability of most firms to use recognition as a strategic driver.

Can recognition serve as catalyst for corporate adapability?

Following my promise to comment on the role non-cash incentives can play in helping executives from all disciplines meet their business agendas, I offer the following comments on the issue of change--the importance that companies adapt to remain competitive and the role recognition can play in facilitating that adjustment.

No matter what the business model, change seems to be a competitive corporate reflex. In a rapidly changing global economy where market conditions, buying expectations of customers, competitive forces, new product offerings and supporting business technologies are constantly changing, executive leaders must continuously find new ways to improve their company's effectiveness and efficiency

Organizations must ensure optimum economic performance, rapidly incorporate new systems or technologies, maximize dwindling resources, reduce fix and variable expenses, improve customer service to strengthen the bottom line. All of this translates into more innovative ways of gaining competitive advantage.

Recent surveys confirm that managers are using change initiatives to recalibrate the strategic direction of their organization at an increasingly frequent basis. Change is ubiquitous throughout corporate America with many enterprise leaders addressing strategic imperatives simultaneously; be they cost cutting initiatives, restructuring efforts, operational or marketing adjustments to catch up to rivals, or the dreaded corporate realignments.

The velocity of business in a digital age exasperates the need for speed and/or frequency of change. I'm not the only one who believes all sources of competitive advantage are temporary and companies that fail to adapt to new technology, fickle customer preferences, or shifting competitive influences can easily loose market traction. While many companies enjoy short term bursts of high performance over their lifetime, only a few sustain momentum over the long run.

So with the strategic imperatives so critical and with so much riding on success, why are today's change initiatives more likely to fail than succeed?

Stay tuned.

Can recognition help the CMO?

Non-cash recognition can help support the growth agendas of senior managers acres the enterprise. In my last post I examined how the firm’s financial profile can benefit from a sound recognition strategy. Today I will look at the impact it can have on the CMO.

Your CMO is on the hook to affect marketplace outcomes in financial terms. It’s not enough to design the right products, price competitively, communicate value propositions that resonate, or distribute effectively. The CMO must create a growing level of customer equity that ignite share of spend; shorten frequency gaps between purchases while creating insulators against lower prices and competitive influences.  That's why Integrated branding has gotten a lot of press lately.

We live in an ever expanding marketplace.  The World Wide Web has lowered the barriers to entry by reducing the costs of doing business. The web has spawned competitive alternatives and category substitutions. The web has shortened product life cycles. and made it increasingly difficult to capture customer loyalty. As a result the brand’s lifetime value can be diminished.

Powerful new forces have already changed customer contact and selling strategies and altered the marketing mix. Thanks to the proliferation of information available on the web, today’s buyers (especially those in b-b) sometimes know as much about products or services as the people representing them.

The traditional view of sales people is that they create value by bringing in revenue. But closing a sale means collecting value not creating it. Marketing executives know that the entire customer contact chain must create value and do so in a manner that’s consistent with the brand identity they have invested millions to foster.

Examine the brand attributes of almost every company these days and you will see firms that suggest they understand your issues and have either found or are finding ways in which their product or service will help you gain an advantage. In order to fulfill that promise they must get everyone in the value chain to live the brand and become its ambassador. This is what we mean by brand integration and it is the key to sustaining a brand's value over time.

The ability to listen and relate to the customer’s concerns are more important selling skills than persuasion. Empathy takes precedence over product knowledge. Marketers know they need a sales force and customer care team that creates value in three primary ways: understand customer problems and opportunities in a new or different way; provide better solutions than customers would have discovered themselves; act as customer advocates to ensure that resources are allocated in a timely and effective manner and that solutions truly meet their particular needs.

Companies that recognize supporting employee behavior are pro-actively protecting their brand. Through recognition they strengthen projected values, reinforce customer mindsets, promote ambassadors for the brand, and spread best practices.