|
|
|
executive
management
|
|
|
|
|
Rightsizing
Your Association - Four Proven
Alternatives Every Association Executive
Should
Know
by Peter Meyer for Dateline
No matter how good an association
manager you are, the time will probably
come when you either want to or will have
to downsize. There are better and worse
ways to do it, which one you chose will
matter. Let's briefly look at the pros and
cons of four proven alternatives through a
real example. You might choose any of
these and be in great company. One may be
more right for you than another, but
consider them all.
The Problem at the International Health
Care Association
Careers are on the line. At the
International Health Care Association (not
their real name), revenue was up - but not
up to plan. Costs unfortunately were at
plan.
In July the Chief Executive told the board
that cuts would occur. The questions:
How should IHCA cut, and how
deeply?
They looked at these alternatives.
The Cheese Slicer Alternative
Used in either blunt axe or thin slice
versions this model slices costs evenly
from every department. IHCA chose this
method earlier when it asked each Vice
President to cut his or her expense budget
by 10%.
The concern with the slicer is cutting
people and functions without regard for
their value. If one group is performing
outstandingly, it gets the same penalty as
one that has not. The perceived inequities
and inefficiencies that come out of this
can and do cause even more damage to
morale than layoffs.
By delegating responsibility for
individual cuts, you are in a no win
situation. You will face charges of
refusing to make hard decisions, refusing
to get involved in the business. But, if
you take the decisions back, you are
interfering and indecisive.
The advantages of the model are that it
acts to empower the management. They own
the responsibility and the authority to do
what they think is right.
The Challenge Alternative -
Re-engineering
This model calls for your team to
challenge every activity of your
organization. However, successful
challenging of work is difficult to carry
out. It's difficult to get so far into
operational issues and to bypass the
clearly political boundaries that
exist.
Recognize that this is a dangerous tool.
Friends of mine have crippled businesses
by ignoring the pervasiveness of
re-engineering. Don't try to restructure
the whole organization at once unless you
have a safety net to cover the disruption.
IHCA bypassed this option.
On the positive side, when it works, it
works very well. There are cases of even
large industrials such as Ford cutting
departments by 80% while increasing their
productivity.
The Save the People Alternative
The Save the People Model calls for
cutting any expense except people. They
are immune. This model works on the
principle that people are your greatest
asset. When it is time to cut, you cut
capital expenditures, discretionary
expenses, even R&D. People are the
last to go. Several divisions of IHCA used
this model in 1990.
The risk is ineffectiveness and potential
paralysis. Since payroll is one of the
largest items in your budget, you may be
left with no choice but to eliminate
critical tools. This gives people
assignments that are almost impossible to
achieve. That may paralyze them. This
happened at IHCA. Productivity plummeted
as people tried to do their jobs without
critical tools. Worse, they felt that they
had been set up to fail.
Even so, you might choose it for good
reasons. Protecting people can have very
positive morale aspects. Employees tend to
respond well if they feel valued.
Additionally, if you are looking to
recovery, you should be protecting the
resources that you will need first. For
many associations, this resource is your
people.
The Jigsaw Management(TM)
Alternative
This alternative is a blend of the others,
using jigsaw puzzles as a simple memory
tool. In use, you ask each manager to
pretend that their job is like a
complicated jigsaw puzzle. The manager has
more pieces than will fit, and a time
limit to finish by.
The first step is to look at the "boxtop."
This is to learn what pieces they can
afford to ignore. The second step of
assembling is to throw out the pieces that
do not fit. To set the boxtop, you can ask
yourself and your team to answer these
questions:
When we are done with this
reorganization:
- Who
will our members be?
- What
will they want from us
immediately?
- What
skills will we need to deliver
that?
- What
tools will we need to deliver
that?
- What
will the members want from us in the
near future?
- Can
we get the tools and skills for that
just in time for
delivery?
- What
possible reason is there for keeping
any additional skills or
tools?
- Chart
- Jigsaw Questions for
Downsizing
Place the emphasis on identifying
the minimum necessary skills, tools,
and expenses necessary to serve your
members or customers. If your
management team can succeed in
brutally, honestly, and privately
identifying these skills, you can then
look to see if you wish to afford the
luxury of other expenses.
There is a risk here, and that is that
you will discover that someone's pet
idea is an extra piece. It could even
be yours. Jigsaw Management has the
advantage of bringing your team to the
best use of resources with at the
smallest cost in time, people, and
money. You get your biggest leverage
for expense.
Where to Cut, Where to Invest - an
Example
One of IHCA's projects is a $20M
revenue group. With clever controls,
they are ahead of their profit target,
but cost cutting will be necessary. The
controller and the operations manager
suggested cutting two unfilled sales
positions. There are five key, equally
weighted objectives for the group. They
are:-
- Profitability,
- Member
satisfaction,
- Financial,
- Market
share, and
- Account
control.
The
controller argued that maximizing profit
outweighs all of the other objectives. If
so, cutting the unfilled spots is the
correct move.
So why did they choose something else? In
the project's boxtop, two of the five
objectives (market share and account
control) focus on sales. They need the
sales positions to support that. So to be
true to the goals and strategy, the
management team's decision was to invest
there.
An Alternative for Recovery
With the economic upturn, rightsizing
decisions are even more critical. By
defining your organization, they define
your preparation for recovery. Using these
alternatives, you can lead your team to
make those decisions correctly. You can
keep resource usage to a minimum,
including the most expensive resource -
your time.
Peter Meyer speaks worldwide and writes on
practical management and strategy issues.
A principal in the Meyer Group of Scotts
Valley, he invites you to see him on the
podium at the ASAE Annual Meeting in San
Francisco. He also tells us that he truly
welcomes any questions you may have from
this brief article, and that you should
feel free to call him at (831) 439-9607
for more details.
This article appeared in similar form
in Dateline in September, 1994. It is
copyright, all rights reserved, by the
Meyer Group.
Side Bar
Should You Lay People Off?
This year you may face a decision to
shrink your association management team.
It may come with warning. It may not. You
may have a choice although many won't. In
fact the decision to reduce your work
force could be your idea. You might cut
staff because you have a healthy operation
and you want to keep it that way. Doing so
may be the example of the future.
Just before Christmas Paul Allaire (the
CEO of Xerox) announced that his company
would release 10,000 employees. What made
this interesting in a year of large
company layoffs is that Xerox is strongly
profitable. His rationale? "To compete
effectively, we must have a lean and
flexible organization." Cutting heads
is no longer tied to losing money. Now it
is a tool to make more.
Look at downsizing independently of
recession. The sense of lushness and
marginal capacity that we felt in the
1970s and 1980s is gone. Between September
1 and the Xerox announcement, fifteen
major US corporations announced reductions
totaling 88,000 people. Until recently,
only organizations that were losing money
or markets would lay people off. Now
things are changing. Of those fifteen
companies, at least eleven are profitable.
What does this mean to associations?
We are entering a phase of true leanness,
which will be good for us all. Mistakes
that were hidden before are more obvious
now, and we can deal with them. That is an
advantage the instant that you start to
face the future. Finding and dealing with
excesses now will improve your ability to
deal with the end of the recession. It
will also save you untold time, money, and
people problems that might otherwise
cripple you as you grow.
Assembling the Puzzle
Let's extend the model a little. If
you were the executive of IHCA starting to
look at the problems, you might first try
to find the boundaries of the issue. That
gives all of the people doing the puzzle
an obvious starting point. It provides a
boundary to work within and a reference
point for the next pieces of the puzzle.
If the people putting the puzzle together
can see the boxtop, the easiest, quickest,
and most accurate decision in the world
may be whether this piece of sky fits next
to that clump of cloud.
For every situation there are a number of
questions to answer before you settle
anything else. Using Jigsaw Management an
executive team can create the frame by
setting the boundaries for the decision
first. This also establishes a framework
for future decisions. A good decision
meets two criteria. First, the answer fits
the overall plan of the organization.
Second, it uses the fewest resources to
get the result.
IHCA's Example
For IHCA to use the Jigsaw Model, you
would first ask what IHCA should "look"
like when the cost reduction is done. What
does the team see as its results? They
looked at questions 1, 2, and 5 from the
chart and started to answer them. Will it
be an airline specializing in certain
kinds of travelers? Will it be a company
that supplies certain kinds of disk drives
or fasteners to five large customers or a
particular industry? Will it be a hospital
that hopes to attract regional doctors by
becoming famous for heart transplants?
Will it be a premier service company in a
commodity product market, like IHCA wants
to be? What do our customers want and need
from us?
The answer to this is the beginning of the
frame. The questions in Chart X add to the
frame. They need not be back to the basics
type of answers, but they do need to be
clear.
If you are running IHCA, you have some
questions to answer. Will IHCA be
centralized? Decentralized? Flexible?
Empowering? Autocratic? These are more
pieces of the frame. Will it use direct
sales? Who are the top three customers by
name or type? Competitors? More pieces of
the boxtop.
Clarity and comprehensibility are the key
concerns. You may be tempted to say "both
distributed and centralized, both direct
and distributor sales" in answer to some
of these questions. But it is not
something that managers can lead their own
efforts and teams by. They need a clear
and compelling boxtop to do their job.
top
of
article
index of articles
Articles
Business
Growth
Executive
Management
Marketing
Consultant
Support
Technology
Management
List
of All
Articles
The Meyer Group
883 Cadillac Drive
Scotts Valley, CA 95066-3303
(831) 439-9607
fax (831) 461-0211
|
|
|
