During good times, if an employee is compensated fairly, has good working atmosphere, and has the ability to grow in their career, the employee will probably continue to be a valuable employee during difficult times.
I think that the same is true during difficult time.
As the company or other companies are forced to make cuts in either salaries and/or jobs, the employee will be accepting of the financial changes so long as the compensation is inline with what other companies are paying for the same work and that they can see that it was done consistent with the business survival.
Even during challenging times, there is an opportunity to learn. These business cycles happen on a regular basis and thus it is essential to learn how to navigate through them. So it is important that you explain to employees what you are doing and why you are doing them to help the company survive the challenging times. So working for a company that is in trouble during good times is good practice for dealing with challenging times in a good company.
It's maintaining the good working environment that is key during challenging times. First, if you have to cut jobs and lay people off, remember that these are human beings and they have done nothing wrong. So treat them with respect. Also, you need for people to get through the grieving process. Let everyone take a day to absorb and morn the losses. But to get them beyond this point, you need to have a plan that shows why you did what you did and who is going to cover what and what this will mean for the future including delaying or cancelling projects/programs to be consistent with the resources available. Note that if you just keep your buddies around in positions that they don't excel at for the sake of keeping them employed, your employees will notice and have far less respect for you. Also remember that acknowledging each person specific contribution either in front of their peers or privately has major motivating powers and costs you nothing. It 's ok to even acknowledge the hard work of the people who left and how there contributions live on in the company that survives. Still take time to celebrate the groups and individual accomplishments even with a scaled back budget. And above all else be positive yourself without being unrealistic. The culture of a company usually prervades from the top down. Avoid saying things like "You are likely to have a job." since this implies that they can't get work elsewhere and they should leave.
If you start an employee satisfaction survey during good times, you can see how effective you are managing through bad times. If you don't have an employee satisfaction survey, ask your HR person how many discussions per week they are having with employees how are unhappy about the situation. If you did a good job explaining the action then the HR person should be able to work on other issues otherwise they are going to spend their time explaining what you didn't say or do.
Monday, February 23, 2009
Thursday, February 19, 2009
What Globalization means to a business
Globalization is here to stay so you need to plan for what this means to your business.
Normally when a company starts, it doesn't go international day 1. Usually, a company starts in a regional area with clients near its location. This is normally referred to as the "home" advantage. This helps to keep costs low. Travel costs for requirements gathering and sales can be kept low until customers are more than 250 miles away. Support costs increase as the customers are more time zones away. Advertizing and Marketing costs grow as you grow the territory that you sell and service. Eventually, a company gets a "home country" advantage and then looks to expand their services outside of their home country.
But now welcome to the modern world where the playing field is being leveled among countries and dominations by a few countries is slowly falling away, allowing any firm in any country to some day be able to be a major player in the world markets.
So when a firm has achieved its home country advantage, how should it play on the world stage. If you are only considering offshoring for cost cutting for a functional area, this is only a temporary fix. Cost advantages are diminishing as salaries increase and infrastructure costs grow in other countries while deflation of costs and devaluation of the currency is happening here in the US. There is a really overhead of offshoring parts of the business especially by functional area, resulting from communication delays. Communication must be much more detailed and clear as well as followed up on to counteract the effects of queuing delays. Note that there is a lot of research that says that putting workers together in a "pod" increases productivity of the team [http://en.wikipedia.org/wiki/Cell_production][http://www3.interscience.wiley.com/journal/118487242/abstract?CRETRY=1&SRETRY=0]. When workers are a part, communications have a tendency to get queued (e.g., email) vs being direct and immediate. This queuing effect introduces delays into the process and overhead due to setting work aside and shifting to other work until you get the information you need to continue your work. In addition, use of email for queuing makes it difficult for management to see items stuck in the queue that have not be acted upon. So offshoring for reducing labor rates is only a temporary fix, you really need to find a long term solution to your company's cost and revenue issues through innovation. Real gains are made because of either disruptive technology or disruptive business models.
Globalizing the business based on market differentials and cost differentials makes more sense. For example, since each country has its own financial system and financial reporting requirements, it make sense to have an entity in each country to handle the financial requirements using staff from that country. The other advantage of this is that the staff is based on local human capital rates in that country which will be more inline with prices that can be charged in that country. Additionally, if you have to support customers in that country having support personnel in that country who know the local customs and holidays as well as the local language can add significant value. By using resources from that country, the support costs would also be more inline with local costs and pricing. There are probably also local localizations or requirements that don't exist or are low priority in the US market that must be developed locally in that country. Again the cost of doing this localization by using personnel from that country helps to keep the price more inline with what can be charged in that country. Additionally, marketing in that country may require knowledge of the customs as well as the language to be effective. The marketing costs in that country would be more inline with the the prices that can be charged in that country. So if you can move the country specific parts of the business to run from a country for which it markets, sells, and supports, this makes more sense than having each function distributed around the world for partial cost savings on just a labor basis by maximizing the profitability per country.
Note that US and other "advanced" countries have been exporting "know how" to other countries for years at the same time taking advantage of the resources of other countries. For example, manufacturing "know how" was moved offshore to Japan many years ago and then car design. But now, the US automakers are struggling to stay a live and have lost the leadership here. Similar is true of the consumer electronics business. Similarly, we hear stories now about this happening for India in its production of cars and now computers. Note that US requirements don't always dedicate global requirements. An example of this is cell phone technology. Cell phone technology grew faster in other countries because the cost of adding land line infrastructure was higher than cell phone technology. Other technologies based on cell phone was developed outside of the US because it had a "low" priority in the US market. For example, the use of SMS was strong outside of the US and was used in various applications including acting like a credit card in countries like South Africa. So success in the US market doesn't guarantee success in the global market and in fact may cause you to miss out on the global market.
So get your home country advantages solid but think and analyze carefully how best to utilize global resources to service the global markets.
Normally when a company starts, it doesn't go international day 1. Usually, a company starts in a regional area with clients near its location. This is normally referred to as the "home" advantage. This helps to keep costs low. Travel costs for requirements gathering and sales can be kept low until customers are more than 250 miles away. Support costs increase as the customers are more time zones away. Advertizing and Marketing costs grow as you grow the territory that you sell and service. Eventually, a company gets a "home country" advantage and then looks to expand their services outside of their home country.
But now welcome to the modern world where the playing field is being leveled among countries and dominations by a few countries is slowly falling away, allowing any firm in any country to some day be able to be a major player in the world markets.
So when a firm has achieved its home country advantage, how should it play on the world stage. If you are only considering offshoring for cost cutting for a functional area, this is only a temporary fix. Cost advantages are diminishing as salaries increase and infrastructure costs grow in other countries while deflation of costs and devaluation of the currency is happening here in the US. There is a really overhead of offshoring parts of the business especially by functional area, resulting from communication delays. Communication must be much more detailed and clear as well as followed up on to counteract the effects of queuing delays. Note that there is a lot of research that says that putting workers together in a "pod" increases productivity of the team [http://en.wikipedia.org/wiki/Cell_production][http://www3.interscience.wiley.com/journal/118487242/abstract?CRETRY=1&SRETRY=0]. When workers are a part, communications have a tendency to get queued (e.g., email) vs being direct and immediate. This queuing effect introduces delays into the process and overhead due to setting work aside and shifting to other work until you get the information you need to continue your work. In addition, use of email for queuing makes it difficult for management to see items stuck in the queue that have not be acted upon. So offshoring for reducing labor rates is only a temporary fix, you really need to find a long term solution to your company's cost and revenue issues through innovation. Real gains are made because of either disruptive technology or disruptive business models.
Globalizing the business based on market differentials and cost differentials makes more sense. For example, since each country has its own financial system and financial reporting requirements, it make sense to have an entity in each country to handle the financial requirements using staff from that country. The other advantage of this is that the staff is based on local human capital rates in that country which will be more inline with prices that can be charged in that country. Additionally, if you have to support customers in that country having support personnel in that country who know the local customs and holidays as well as the local language can add significant value. By using resources from that country, the support costs would also be more inline with local costs and pricing. There are probably also local localizations or requirements that don't exist or are low priority in the US market that must be developed locally in that country. Again the cost of doing this localization by using personnel from that country helps to keep the price more inline with what can be charged in that country. Additionally, marketing in that country may require knowledge of the customs as well as the language to be effective. The marketing costs in that country would be more inline with the the prices that can be charged in that country. So if you can move the country specific parts of the business to run from a country for which it markets, sells, and supports, this makes more sense than having each function distributed around the world for partial cost savings on just a labor basis by maximizing the profitability per country.
Note that US and other "advanced" countries have been exporting "know how" to other countries for years at the same time taking advantage of the resources of other countries. For example, manufacturing "know how" was moved offshore to Japan many years ago and then car design. But now, the US automakers are struggling to stay a live and have lost the leadership here. Similar is true of the consumer electronics business. Similarly, we hear stories now about this happening for India in its production of cars and now computers. Note that US requirements don't always dedicate global requirements. An example of this is cell phone technology. Cell phone technology grew faster in other countries because the cost of adding land line infrastructure was higher than cell phone technology. Other technologies based on cell phone was developed outside of the US because it had a "low" priority in the US market. For example, the use of SMS was strong outside of the US and was used in various applications including acting like a credit card in countries like South Africa. So success in the US market doesn't guarantee success in the global market and in fact may cause you to miss out on the global market.
So get your home country advantages solid but think and analyze carefully how best to utilize global resources to service the global markets.
Sunday, February 8, 2009
Managing in Challenging Times
The reality is that surviving challenging times is based on how well a company has been run during good times. Unfortunately, there are companies that should not survive challenging times because they bent or broken laws to have a strong balance sheet.
Companies that are well run can create a stronger balance sheet and most importantly a strong cash position. During challenging times as we have seen, assets can change value rapidly and only cash properly protected can be counted on. During these challenging times, companies with strong balance sheet can continue to build out their long term assets including new products and services while companies with weak balance sheet don't have the resources to compete and will most likely go out of business as they should. Think of it as "natural selection" in the business world. But it is ESSENTIAL that there be a level playing field including respect for laws and regulations and enforcement of laws and regulations for those companies that don't respect them. If not, companies obeying the laws and regulations will ended up having to bent and break laws to compete and then the "rule of law" becomes meaningless. By how should these companies spend (or save) their assets in challenging times?
The worst approach is to just cut 10% across the board because the CEO's golf buddy just did or just spend on short term and ignore long term investments for the future. Making an across the board cut may significantly damage profitable investments or leave holes in the organization that prevent any successful delivery to market. The appropriate strategy might be to cut deeper in some areas or redistribute workers to another project while making cuts to existing staff on the higher ROI projects. If the 10% cuts are left to the functional areas to make and not coordinated carefully across the company, you can end up in a situation where each functional area assumes that the other will pick up the slack for the same cross-functional people and end up with a huge gap in the company level processes.
For those companies that are well run, it means that they are just taking in their normal process the future economic changes . They would already take into account that sells of various products and services would be slowing and thus less positive income can be used to cover costs and be reinvested into the company. But the same process for prioritizing and balancing the investments between short and long term is still used. As previous works had stated, well run companies need a balance between short and long term investments.
Even long term investments may have "must have", "should have", or "nice to have" requirements. The "nice to have" investments can be postponed to make sure that the "must have" requirements get to market. Similarly, client/consumer investments must be balanced between "new", "related", and "exist" client/consumer investments. Having a good mix or balance is key regardless of the economic conditions for a company to survive long term.
Consideration should be given to the cost to completing a project but also need to consider how that cash could be used on other higher ROI projects. Consideration should also be given to the cost of shelving a project for possible later restart or the costs of debooking from a product line or business including debooking future revenues. This is all a part of good portfolio management [http://en.wikipedia.org/wiki/Project_Portfolio_Management]
This article is based on a discuss at a PMI PMO breakfast meeting with additional insights and references to previous work. The true job of a PMO is to provide proper, unslanted information for management to make well informed, good decisions from. http://www.pmi.org/
Companies that are well run can create a stronger balance sheet and most importantly a strong cash position. During challenging times as we have seen, assets can change value rapidly and only cash properly protected can be counted on. During these challenging times, companies with strong balance sheet can continue to build out their long term assets including new products and services while companies with weak balance sheet don't have the resources to compete and will most likely go out of business as they should. Think of it as "natural selection" in the business world. But it is ESSENTIAL that there be a level playing field including respect for laws and regulations and enforcement of laws and regulations for those companies that don't respect them. If not, companies obeying the laws and regulations will ended up having to bent and break laws to compete and then the "rule of law" becomes meaningless. By how should these companies spend (or save) their assets in challenging times?
The worst approach is to just cut 10% across the board because the CEO's golf buddy just did or just spend on short term and ignore long term investments for the future. Making an across the board cut may significantly damage profitable investments or leave holes in the organization that prevent any successful delivery to market. The appropriate strategy might be to cut deeper in some areas or redistribute workers to another project while making cuts to existing staff on the higher ROI projects. If the 10% cuts are left to the functional areas to make and not coordinated carefully across the company, you can end up in a situation where each functional area assumes that the other will pick up the slack for the same cross-functional people and end up with a huge gap in the company level processes.
For those companies that are well run, it means that they are just taking in their normal process the future economic changes . They would already take into account that sells of various products and services would be slowing and thus less positive income can be used to cover costs and be reinvested into the company. But the same process for prioritizing and balancing the investments between short and long term is still used. As previous works had stated, well run companies need a balance between short and long term investments.
Even long term investments may have "must have", "should have", or "nice to have" requirements. The "nice to have" investments can be postponed to make sure that the "must have" requirements get to market. Similarly, client/consumer investments must be balanced between "new", "related", and "exist" client/consumer investments. Having a good mix or balance is key regardless of the economic conditions for a company to survive long term.
Consideration should be given to the cost to completing a project but also need to consider how that cash could be used on other higher ROI projects. Consideration should also be given to the cost of shelving a project for possible later restart or the costs of debooking from a product line or business including debooking future revenues. This is all a part of good portfolio management [http://en.wikipedia.org/wiki/Project_Portfolio_Management]
This article is based on a discuss at a PMI PMO breakfast meeting with additional insights and references to previous work. The true job of a PMO is to provide proper, unslanted information for management to make well informed, good decisions from. http://www.pmi.org/
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