Zero-basing the center

Zero-basing the centerAt the most recent DM100 meeting in Jakarta, as members discussed the “Monday morning” actions they would take when they returned to their companies, one member said he needed to “zero-base” his center.

This thought came as he reflected on the westward winds that were killing his business— the lost voices of the front line and the erosion of accountability. A lot of zero-basing exercises start with the ideal and then add complexity to address obstacles to this ideal. Let’s examine these two items.

The ideal

In his wonderful book, Upside Down Management,  John Timpson, chairman of the family-owned company Timpson, sets out a provocative view of “the ideal”: The ideal company empowers its frontline managers to deliver great service to its customers and then gets out of the way. The CEO makes sure the management team (this includes inevitable span breakers, such as area and regional managers) puts the right personalities in the frontline jobs and is prepared to get rid of those that don’t “get it.” Moreover, the CEO then spends his or her time in the field finding out what is going on with managers and customers and takes three primary sets of actions: 1) deciding if the manager is the right person for the job, 2) providing coaching and feedback to managers on the spot and 3) deciding what actions should be taken at the group level to make the lives of the managers and customers better. Most often, this isn’t about more intervention or group “value added,” but about good strategy. Strategy is the CEO’s job.

It’s tempting to dismiss this ideal as overly simplistic—after all, Timpson is in a relatively simple business, a franchise model of British shoe repair and key cutting, mostly. There are no vast, multinational empires, no matrices of products and brands vs. markets, no enormous supply chains to operate. But, even within the seemingly simple world of shoe repair, Timpson describes a massively turbulent industry where few survive. And he suggests that even in this simple business, his competitors have created overly complex organizations.

Obstacles to the ideal

Rather than ask, is this too simplistic? I think the better question is, if this is the ideal, what gets in the way—and what can we do about it? In his book and in subsequent interviews, Timpson suggests some common obstacles, which I’ve listed in items 1‒5 below. I’ve added an additional five that have come up in our work with the DM100. It’s a useful exercise to look at each of these and ask, can I address this issue without creating more complexity for my front line―and, ultimately, less accountability?

  1. The public markets. The demands of equity analysts for quarterly reports and forecasts create a vast bureaucracy to feed the reporting machine. There are several questions to ask here: Have we worked with the markets to measure the right things in our performance, or is part of the problem that we’re reporting out on the wrong things? Have we considered reducing the cadence and extent of reporting? Do we actually have to provide every input or output metric at the intervals demanded by data-hungry analysts?
  2. The hyperactive, inquisitive CEO. This is the CEO who wants to read reports on every detail of the business and is constantly probing into how the front line is doing its job. Here, Timpson is clear: There is nothing wrong with an inquisitive CEO relentlessly visiting the front line. That is the best way to gather facts and doesn’t burden the organization. But there is something wrong with a CEO stuck behind a desk, requiring an army to report endless statistics. A simple question to ask is, how much of our complexity can be reduced by putting the burden of information flow on the CEO—that is, make it the CEO’s job to go to the source for information—rather than requiring all the sources to report all possible answers to questions a CEO might ask?
  3. The span breaker and roll up. Span breakers—the area, cluster and regional managers put in place to help a CEO manage a vast network of frontline offices—create a lot of complexity. If there is no reporting, what is their job? If the right answer for the CEO is to be in the field working with the front line, then surely that is also the right role for the span breakers. So other questions to ask are: How much of our complexity is driven by a desire to give our span breakers something to do and information to look at about their region? How much do we roll up information to fit a span breaker’s job, even though looking at that aggregation doesn’t add value?
  4. Benchmarking desires married to IT capabilities. IT systems that can collect useful information exist, but as Timpson points out, this often becomes a problem because the information collectors are at the center. They start using the information to second-guess the actions of the front line and ask follow-up questions that create complexity. The response is to ask yourself this question: Although it might ostensibly be cheap to collect, what are the hidden costs of endlessly collecting more and more data from the front line?
  5. The bad apples. Thieves, cheats and underperformers demand that Big Brother catches them out. This is the last of Timpson’s observations that I will mention, but to me, it’s the most insightful. He argues that a huge number of corporate systems are built to catch out the 2% of staff that are bad apples, rather than empower the 98% who are great. The questions here are, How much complexity do we build into frontline jobs because we’re trying to catch a thief? Couldn’t we deal with the bad apples in a different way that wouldn’t erode the lives of the 98% who are good apples?
  6. The matrix for functions. Frontline employees don’t just do their jobs; they are key to someone else’s job. The matrix is here to stay because companies have multiple tasks to do. Functional heads will argue that it is impossible for them to do their jobs without some dotted-line reporting to the front line and some additional information flow back. You might hear: How can I manage a supply chain without knowing what is being sold and where? How can I be confident we aren’t taking on too many risks unless frontline employees and managers are constantly updating me about the risks they are taking? On the face of it, these seem like reasonable questions. But if the CEO needs to be in the field to do his or her job, shouldn’t the same apply to the other roles of the center? What are these jobs if not the sum of front-office needs? Does the company have the right understanding of who is the king and who is the court? The questions here should be, What is the minimum reporting needed from the front line for a function to do the job? How much insight is collected from relentless visits?
  7. The matrix for products and brands. Big companies don’t just run market P&Ls; they also manage global brand and product P&Ls. This is a tougher issue than the functional matrices. In most organizations, there is a market lens and a product or brand lens. The market lens is multiproduct and multibrand, and the product or brand lens is multimarket. Both organizations rely on the front line to execute their agendas, so surely each has the right to visit relentlessly and collect information to do their jobs better? In general, the answer is, in fact, no. Why? It comes down to time horizons. With few exceptions, most multinationals are market led in-year and product led over three to five years. In other words, the markets are responsible to one boss for in-year P&L performance. That boss is one of the span breakers on the market side who report to the CEO. Within guidelines, they must be free to choose which products to push each day to deliver revenues, profits and cash. Over the long term, they must also work with the product or brand organizations to think through the longer-term market potential for each product. But the simple questions are: How much of the overload of central demands on the front line is due to a lack of clarity about time frames? Are product or brand P&Ls also monitoring in-year performance? If so, why?
  8. Initiative overload. In addition to functional or product burdens on the front line, there is the other question of strategic or operating initiatives. Markets are frequently asked to pilot various initiatives. Frontline individuals are on steering groups, focus groups and working groups to provide input to initiative leaders at the center. A simple question for this is, who’s in charge of the burdens being placed on our front line? Product or brand issues and strategic and operating initiatives should all be rolled up and allocated at the same time as budget targets, with the frontline manager able to say no and force trade-offs between revenue now and initiatives now. But this seldom happens, and no one adds up the total complexity created by the center that expects the front line to do both the frontline job and multiple center jobs.
  9. The apparent laws of gravity from scale. Einstein discovered that mass has a constant relationship to energy. And we have discovered that mass has a negative impact on organizations. The bigger organizations get, the less time the senior leadership spends with customers―and the less customers like the company. Scale delivers some wonderful benefits to companies, but not always to their customers. It’s perplexing: When a company is small, there are all sorts of good reasons senior leaders can’t be with customers—they’re doing a half-dozen jobs, from marketing to fire safety to making bank deposits. Surely scale should liberate leadership from such back-office duties. Instead, it seems that scale sucks leadership into the deep corners of the back office. Some simple questions to ask: Why isn’t scale making our jobs simpler and more focused? How do we liberate time to get back in the field? How do we stop reporting on our reporting?
  10. Behaviors. People are rewarded for doing things other than supporting the front line. The questions here are obvious: Are we rewarding people for interfering with the front line or for getting out of the way? Do we reward those who control or empower? Do we reward those who collect facts to judge or stay in the field to coach? Do we reward folks who get stuff done or those who say intelligent things that stop things from getting done?

Perhaps this is a good Monday morning action for everyone: Use Timpson’s ideal and this obstacle list to start a conversation about zero-basing the center. And bring along the “seven types of yes” list. I bet you’ll hear all of them.

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