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Rhian Silvestro

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Is your strategy built on received wisdom or analysis of performance data? – management rhetoric or business reality?

Are you building your business strategy on received wisdom or real data? Corporate strategies are often based on assumptions about what drives business performance rather than data from the company itself. J.W. Marriott (founder of Marriott Hotels) is famous for saying “You’ve got to make your employees happy. If the employees are happy, they are going to make the customers happy”. TNT Express promotes the slogan “Take care of your people, let them take care of your customers and the rest will take care of itself”. The implication is that happy employees make happy customers, which drive profits. But does this really happen in your organisation?

The problem is that often some drivers of performance aren’t measured at all; let alone the correlations between them. For example, you may believe that loyal employees create satisfied, loyal customers, but do you have data which demonstrates that your longest serving staff create the highest levels of customer loyalty? Another assumption is that loyal customers are the most profitable; we’re often told ‘it is five times more profitable to serve existing customers than loyal customers’. It makes sense. The better we know our customers the better we are likely to serve them. And because customer spend tends to increase over time, it may well be cheaper to serve long-term customers than keep attracting new ones. But, can you prove this is the case in your organisation?

Performance topology mapping is a tool that can help with this analysis. The first step is making sure that you’re measuring the right thing. So if your business is built on the assumption that employee loyalty is necessary to create loyal customers, collect loyalty data. Identify your key performance indicators, and then measure the correlations between them in order to build a map of business drivers.

The findings can be astonishing. For example, the link between customer loyalty and financial performance is often regarded as a basic principle of retail management. However when they came to explore the data in their own organisation, the management of one home improvement retail chain discovered that there was no such correlation. They could not prove that the stores with the most loyal customers were the most profitable.

Analysis of the performance topology map of one of the UK’s big four grocery superstore chains also revealed counter-intuitive results. Its management bought into the idea that satisfied employees created customer satisfaction which drove store profitability. But the data revealed negative correlations! In fact the stores with the highest levels of employee satisfaction were the least profitable. The explanation for this lay in the value proposition: customers in these stores did not value contact with staff so much as product availability, price and checkout speed. Therefore their shopping experience did not hinge on the quality of their interaction with employees.

In other businesses, of course, the interactions between staff and customers are likely to be much more critical. Take, for example, the professional services of clinicians or lawyers. Their services are based on more sophisticated interactions between staff and clients, and long-term business relationships may well be an essential part of the value proposition. Therefore employee engagement is likely to be a more important driver of profitability in professional services.

Understanding the performance drivers is crucial. Because failing to understand what drives profitability is to fail to understand why your company has succeeded… or indeed failed. The reality is that your business strategy is based on all sorts of assumptions about what investments will yield increased market share, revenue growth or profitability. To get the strategy right, better start testing those assumptions… surf the data wave!

About the Author

Dr. Rhian SilvestroDr. Rhian Silvestro is Associate Professor of Operations Management at Warwick Business School. Rhian has conducted service management research in a number of large, leading edge organisations including retail companies, banks, transport companies, health services and call centres. She has publications in over ten international journals in the fields of service design, performance improvement and supply chain integration.

StrategyDriven Management Observation Program Best Practice Article

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StrategyDriven Management Observation Program Best Practice ArticleIndividuals naturally become edgy when monitored at work. Observation programs shrouded in secrecy further contribute to this sense of anxiety as observed subjects remain unaware of what is being documented and how it might affect their career.


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StrategyDriven Organizational Performance Measures Best Practice Article

Organizational Performance Measures Best Practice 36 – Performance Measure Development Sheets

StrategyDriven Organizational Performance Measures Best Practice ArticleEffective performance measurement systems consist of high-quality individual measures associated with a strongly interrelated framework. Using this deliberately developed framework, leaders ascertain organizational performance quickly and accurately. The system itself should be economic to maintain and provide readily available updates typically necessitating a degree of automation. Quality systems present the same view of performance to a broad number of individuals within the organization concurrently. To achieve all of these qualities, each measure must be well thought-out and developed individually and then integrated into the collective system.


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StrategyDriven Management Observation Program Best Practice Article

Management Observation Program Best Practice 17 – Paired Observations

StrategyDriven Management Observation Program Best Practice ArticleManagers translate leadership’s vision into the day-to-day actions of the workforce. They do this through their decisions, published standards, and operational procedures. They reinforce desired behaviors through organizational performance measures and management observations.


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StrategyDriven Business Performance Assessment Program Video

Value of Evaluating Business Operational Performance

Does your organization need to improve its performance to remain competitive? Do you have a process to continuously identify the most value-adding improvement initiatives that will keep you ahead of the competition at a cost you can afford?
 
A lot of business leaders recognize a need to continuously improve their organization’s performance but either haven’t established a formal program to do so on an ongoing basis or worse yet, just don’t know how.

At StrategyDriven our experience working with leading companies around the world reveals that a formally defined, well-funded, and effectively executed business performance assessment program is the centerpiece for continuous performance improvement. Through this program, the business leaders we work with have enhanced productivity, reduced costs, and raised revenues by double and triple digit percentages.

Our Value of Evaluating Business Operational Performance video describes how to calculate the financial benefit of having a business performance assessment program that enables you to identify the actions needed to make your organization’s performance rise above the rest.

Business Performance Assessment Programs play a key role in the identification of value-adding performance improvement opportunities that will keep your company on top. If you don’t have such a program or are looking for ways to improve the value of your business performance assessments, register for StrategyDriven’ FREE Maximizing the Value of Business Performance Assessments video series. In this free, five part video tutorial, we’ll show you how to optimally synthesize your organization’s data into actionable performance improvement information.


About the Author

Nathan Ives, StrategyDriven Principal is a StrategyDriven Principal, and Host of the StrategyDriven Podcast. For over twenty years, he has served as trusted advisor to executives and managers at dozens of Fortune 500 and smaller companies in the areas of management effectiveness, organizational development, and process improvement. To read Nathan’s complete biography, click here.