Big Red Car here. The Boss is up in Steamboat skiing again for a couple of weeks, so I am down in Austin by my lonesome except for the SXSW home sitters.
I wonder if The Boss knows they drove me this morning. Haha, serves you right, Boss. They drove the Hell out of me this morning and I was happy to get the work.
So before The Boss left town I was eavesdropping on him visiting with one of his startup up CEOs about the issue of brainstorming.
Now not the kind of the general type brainstorming that one uses to find a “big” idea but the kind of brainstorming that one uses to solve an important issue of some consequence to the company.
An orderly process of brainstorming
The Boss likes to follow a specific, orderly, iterative process that goes along something like this:
1. Mapping or process documentation;
2. Root cause analysis;
3. Key performance indicators;
4. Force field analysis; and,
5. Action plan.
Now don’t panic because the Big Red Car is going to ‘splain each step in the process to you.
Mapping or process documentation
The first step is to create a picture or map of the process that is giving rise to the problem or concern. Words and graphics. Both.
For you public company folks this is akin to the requirements of SOx Section 404 which requires a company to assess the effectiveness of its internal financial controls which often begins with the creation of a graphic and description of the particular control that is in question.
In any event, develop a process graphic showing the issue. If it involves both operational and staff involvement — such as verifying the cash on hand of an operating unit and reporting it to the accounting operation — have it done by both the line and staff participants independently.
You may want to simply whiteboard it and take a picture of it. Again, do it independently to identify whether there is some confusion at work here.
Pro tip: this process often solves 75% + of all problems as it becomes abundantly clear that line and staff are not on the same page or that the process is not “closing” or not otherwise sound. You will find that this is where the problem really shows up. Sometimes it is this simple.
As a CEO, understand that this is where the difference between line and staff views of the world may collide. Don’t be alarmed. Just smile and work it out. The line operators and the staff look at things completely different from each other.
If you cannot get a consensus as to what the problem looks like as a graphic, then know that you have a real problem but one that can be fixed.
Test the premise before proceeding
Before you go to the next step, test the premise. Ask staff folks if this is what they actually do. Don’t take it for revealed truth just because the Controller tells you this is the process. Test it.
The Big Red Car cautions you that even when folks think they know the process, it often has not been communicated adequately or the field folks have not been trained adequately.
It is not unusual to have the field management and the staff understand a process perfectly and have the actual field practitioners not understand it, not be doing it or not have been trained. This happens all the time.
The solution may simply be a bit more training and communication flowing from enhanced documentation.
Root cause analysis
So now that you have taken a look at the graphic of the process and have ascertained that a real problem exists, now you have to identify the root cause of the problem.
What might it be:
1. A flawed process that requires a simple structural fix;
2. A failure to communicate an otherwise perfectly fine process;
3. A lack of training; or,
4. Some combination of the above.
Typically, it is some combination of the above.
Get everyone to agree to the root cause of the problem before moving to the next step.
Known performance indicators
In assessing KPIs, we are really asking — what would success look like? What performance factors could we look to to indicate we have fixed the problem?
Understand that in defining success, you may have to invent or otherwise develop from scratch the appropriate KPIs.
So, as an example, if you are trying to ensure that working capital used in field operations is balanced to the penny on some periodic basis, you may have to develop the specific tests and reports to indicate this is successfully being done.
In this step, we are only identifying the KPIs.
Force field analysis
In this step, we are looking to see how we can definitively improve the process. What are the specific opportunities for improvement and what are specific changes we can make in the process to ensure that we can, in fact, improve the process.
Where can we inject glue into the process to bind it together more tightly?
Identify the critical pivot points and improve their strength or overcome their inherent weaknesses.
Sometimes it is as easy as — measure twice, cut once. Or having a second party check the work of the first party. Or having an independent verification of a critical piece of data.
Now, we are ready to take the final actions — create and execute the Action Plan.
1. We have identified and documented the process in words and graphically. Flaws and all. We have tested the premise.
2. We have smoked out the root causes of the problem or process failure.
3. We have identified what success would look like.
4. We have strengthened the pivot points and strengthened the process.
Now, we document the actual actions required to finalize the process, communicate the changes and train the process back into the company.
This requires a new graphic of the process as well as a plan of communication and training.
Shortly after the process improvement has been made the CEO needs to circle back and ensure that it is being done correctly.
Has the Action Plan been communicated?
Has any requisite training been completed?
Have the pertinent KPIs been measured and are they showing the appropriate improvements?
If you can answer YES to all of these, then you have finished your work.
Real world — likely that it will take a bit more tinkering to get it perfect. Real world is a bit messy.
Speaking of the real world, The Boss confronted such a problem in a public company he was running.
When he identified a problem with the company’s implementation of a company wide conversion to company owned ATMs, he probed and found that while accounting seemingly understood the process perfectly — they had invented it — the field force did not. This became abundantly clear when folks were graphically describing the process. It was all over the board though everyone reported to The Boss that they all allegedly understood it perfectly.
They did not.
What alarmed him was that the cash to replenish the ATMs was not being monitored adequately and there was a huge opportunity for money to go missing. There was about $200,000 in working capital plus another $100,000 investment involved and the potential to increase revenues by almost $200,000 on an annual basis.
Upon drilling down it also became clear that the sanctity of making deposits on a nightly basis was being violated, petty cash was not being used in accordance with his directions and that funds were being diverted from the nightly deposit without appropriate approvals.
This was a garden variety cash management issue whose root cause was really a poorly designed and documented process, inadequate communication and poor training.
The most important KPI turned out to be the timely deposit of operating proceeds on a nightly basis. When funds were not deposited timely, it was a canary in the mine shaft as to other problems.
In any event, the process was improved just as outlined above in such a manner that a periodic “proof of cash” was instituted that smoked out some problems, resulted in a couple of terminations and injected financial integrity back into the company’s management of cash in the field.
The process worked just as indicated above.