Compensation & Recognition

Many things can be said about how people behave, but recognition and compensation make many people do the right thing. So, the fundamental question is how we distill the right collaborative behaviors through the use of compensation and recognition. In the area of compensation, we obviously refer to variable financial compensation in one way form or shape. This is often called bonuses, and frankly these days that word does not have a very good press. Measuring people on collaboration, as referred to in the previous entry, and combine the achievement of appropriate goals with rewards help distill behaviors. However, there are a couple elements to keep in mind:

• First the objective needs to be achievable and the person needs to have the feeling he/she can influence the objective
• Second, the reward needs to be significant enough it gives the person the impression he/she is valued. Never forget that in many countries reward is taxed, resulting in the beneficiary absolutely not receiving what you pay.

Most people are in great need of recognition. According to Maslow’s Hierarchy of Needs, once people have addressed their physiological and safety needs, they are looking for a belonging and esteem. Recognition helps them feel part of a group and being respected. In today’s environment where most people in business have their physiological and safety needs covered, belonging to a group, being respected and growing their self-esteem covers their needs, and prepares them to unleash their creativity, their problem solving capabilities and all those other elements that maximizes their value for the business.

Recognizing somebody is often easy. But I am so astonished it is regularly overlooked by managers. Saying to somebody “Job well done”, pointing out the value he/she added, congratulating her/him in front of people should be a natural to management. It is a major aspect of leadership, one that helps getting the best out of people and increases their loyalty to the company and to management.

Compensation complements this as it is a more tangible way to recognize. It complements recognition, and should, in my mind, be kept for great achievements. It should not become a given. In my mind, the current bonus discussion demonstrates that compensation needs to be managed very carefully, or things are getting out of hand. The team and collaboration aspects should always be included. I remember my frustration when selling projects that the sales person received a lot of recognition and a big bonus, while myself, the project manager, and my team, who really had established the credibility in front of the customer, barely received a thank you.  That does not foster collaboration.

So, in a nutshell my rules are simple, recognize and say thank you, reward when truly remarkable, but always look at the core team as one, not a bunch of competing individuals.

Collaboration and Measurement, the best enemies

We started this journey on collaboration in large enterprises discussing how organizational structures can stand in the way as far as collaboration is concerned. Today I would like to focus on a second aspect and this is measurement. To make it simple and to quote Dave Packard, a great west coast entrepreneur, “Tell me how you are measured and I will tell you how you behave”. And he is so right.

Indeed, people are willing to work together, naturally they have a helpful attitude. But in the end, the “what’s in it for me” question comes up. And frankly, if the measurement do not line up, bad luck. When times are good and the measures easy to achieve, there is not too much of an issue, but in the current environment, where the recession (officially ended though) is making achieving numbers difficult, it often is lonely out there.

I have seen companies giving sales people numbers by product lines, resulting in those numbers being achieved at the detriment of what is right for the customer. In particular, when the business units are strong, when they are the profit centers, developing an integrated approach to customers may be difficult. Top management should spend valuable time engineering a simple, but at the same time compelling measurement system to ensure they achieve the behaviors they want their company to portray. And it is that behavior that will foster collaboration.

Calculating bonuses on the success of the company (e.g. achieving objectives, profitability) may be seen as a way to foster this integrated approach, but it is important to think about how the individual contributor can influence the numbers he is measured on. If he is one of 300.000 employees to take a number, can he really influence the objective he is given? And so, will he act to improve this measure?

For sales people in particular, it is key to balance the measures that are part of the variable pay and the ones that provide bonuses. variable pay ones have the tendency to be the first ones to focus on, while the bonus ones are nice to have.

In a nutshell, developing a measurement framework fostering collaboration is feasible. However it requires a good dose of sound judgment and engineering at top management level, which ids often unfortunately forgotten.

Organizational structures often hinder collaboration

Large enterprises often have complex organizational structures based around business units and product lines. Customers on the other hand are looking at them as one organization and are astonished of the difficulty they have to collaborate amongst business units. The first of the 5 key elements I highlighted in my previous post is the organizational structure. The revenue generating entities are typically supported by shared service centers such as finance, human resources, marketing, IT and others. Each BU (business unit) has its own budget and is supposed to manage its own environment.

Many companies use an allocator key to spread the costs of the shared services over the business units. And here starts the debate. What key is used? For example, HR costs are often shared by headcount and this makes sense. But in my company, IT costs also got allocated by headcount, arguing that the more people were working in a department, the higher the IT costs. This worked well till some BU’s started to outsource production, using important IT resources to track operations with partners. They increased IT, but their headcount reduced, resulting in lower allocations. This obviously does not improve collaboration between the BU’s as some feel they end-up paying for others.

Shared services are required to ensure consistent operations across the organization at the lowest cost, but ensuring a fair mechanism is used to ventilate the costs of these services across the whole organization is critical to foster collaboration not just between a shared service and a BU, but also between BU’s. In our organization , we have moved away from allocations all together. We rather request BU’s to deliver a given “contribution margin”. The BU now has under its responsibility the management of the costs it controls, while corporate manages all shared services costs and funds those from the accumulated contribution margins. It eliminates the allocation debate, but replaces it with a debate about why one division’s contribution margin should be higher than another.

Another area of friction between BU’s is related to the place of the sales force. As pointed out earlier, customers expect sales teams to represent the whole company. So, should the sales force be a shared service, or should there be sales teams in each BU? Frankly, there is no right answer here. If a central sales force is used, debates about the cost of that sales force and the lack of representation of a particular BU in front of the customer, will be at the center of the debate. On the other hand, if each BU has its own sales force, the representation of the integrated portfolio of the company is lacking. If you are an IT company for example, despite the fact the customer wants his business problem to be resolved, it is difficult to explain the hardware BU the customer is not interested in blade servers for example. He will buy them if the sales person can demonstrate they resolve his problem. They are a consequence, not a selling argument. But frankly, this is heresy for hardware BU people.

There are many other examples where the organizational structure hinders collaboration. This is actually a never ending story and continuous adaption is required to address this. Strong leadership at the top will guide the organization through this. But we will come back to that element in a later post. Have you had experiences like the ones described hear? Share them, we can all learn from it.

5 key elements to promote collaboration

I couple weeks ago, I wrote an entry on this blog titled “Promote Collaboration in large Enterprises” where I pointed out I had been requested to present on the subject. I have progressed my thinking since and found 5 key areas playing an important role in building such collaboration. I’d like to spend the next entries to discuss each of those in a little more details, and do hope this can spur a conversation between us on the subject.

But before doing so, let me highlight which those 5 areas are so you have a structure of what I intend to blog about over the next weeks. Once the presentation has taken place, I also intend to give you some feedback on the discussion. So, what areas did I come up:

• Organization & Finance. Large companies are build around business units or product lines. Does the enterprise architecture, in other words, its organization foster collaboration? How are the budgets set-up and does this push them to competition or collaboration? Where are profits and revenues recognized?
• Measurement. This is the second leg. How are business units or product lines measured? Are those measurements inclusive of collaboration, or exclusive? Are they pushing entities to collaborate or to compete?
• Compensation & Recognition. Business Units or Product Lines work through people. How are those compensated and recognized for their success in collaborating with other BU’s?
• Culture & Leadership. Is collaboration core and center to the culture of the company, or is it a nice to have? How does top management behave? How often is the collaboration subject addressed by management, are they leading by example?
• Tools & Techniques. Tools support collaboration and make it easier for people to work together. Using specific techniques and approaches, collaboration can be made easier. However, it is a myth that tools & techniques on their own push companies to collaborate.

Actually what I discovered is that none of these 5 key elements can foster collaboration on their own. All 5 are required for collaboration to work across business units. Common vision and objectives need to be established and buy-in by the organization as a whole is required. Collaboration is not something that is established once and for all. A continuous reinforcement and effort is required for it to work within a large enterprise. When the economy works well, it’s easier than when times are hard. This might be a reason why the subject is popping up today. So, stay with me. We’ll look at this in more details.

A Cloud Platform for Data Collaboration?

Hewlett-Packard today announced the availability of a Cloud Computing Platform for the Manufacturing Industry on the back of its product recall partnership with GS1. The product recall approach consists in a cloud based service providing access to product track and trace information across the supply chain and is primarily focused at the FMCG and Retail industry. It allows them to collaborate and exchange data across the ecosystem while not having to invest in a private environment to do so. The real interesting part is that, working with GS1, HP immediately secures a consistent identification of the products, as this is precisely what GS1 stands for. Otherwise one could say this has already been done, but not in the cloud neither with GS1.

The benefit for companies is that the service allows a faster and more effective way to identify the products that have to be recalled, resulting in both a cost and a risk (liability) reduction. The service is available on a subscription basis.

Now, could this be a first example of how companies could collaborate in the future? Rebecca Lawson seems to hint that way. I also found a blog entry on the HP site labeled “A Cloud ecosystem for inter-enterprise visibility” that hint into the same direction. What additional services could be delivered, well Mick Keyes hints at counterfeiting efforts and hazardous materials as other areas.

If I understand correctly and the platform consists in a development and runtime environment that provides data, analytics, management and security services, then I can see many opportunities. In a couple earlier blogs I spoke about the need to exchange structured data across companies. This might be the backbone that would allow us to do just that. Let’s dream for a moment and assume we have available a service allowing us to share information across our supply chain without requiring upfront investments, just “pay-as-you-go”. This would allow us to more easily motivate our partners to participate and experience for themselves the advantages of sharing. It would demonstrate how sharing allows to reduce inventory, to optimize capacities etc.

To date it may just be a dream, but definitely worth monitoring how HP will evolve this platform.