Monthly Archives: August 2011

Effective management of Nonprofits

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Drucker writing in Managing for the Future:

In the early 1990s, people sentenced to their first prison term in Florida, mostly very poor black or Hispanic youths, were paranoid  into the Salvation Army’s custody–about 25,000 per year, Statistics showed that if these young men and women had gone to jail, the majority would have become habitual criminals. But the Salvation Army was able to rehabilitate 80 percent of them through a strict work program that was run largely by volunteers. And the program cost a fraction of what it would have to keep the offenders behind bars.

Underlying this program and many other effective nonprofit endeavours is a commitment to management. Forty years ago, management was a dirty word for those involved in nonprofit organizations. It mean business, and nonprofits prided themselves on being free of the taint of commercialism and above such sordid considerations as the bottom line. Now most of them have learned that nonprofits need management even more than business does, precisely because they lack the discipline of the bottom line. The nonprof its are, of course, still dedicated to “doing good”. But they also realize that good intentions are no substitute for organisation and leadership, for accountability, performance, and results. Those require management and that, in turn, begins with the organizations mission.

 

Steve Denning and Radical Management

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Steve Denning has done a great job of understanding the new world of  business. He has understood the principles behind agile and scrum and the way projects work. He has taken these principles and have called them radical management but at its core they are simple.

This is the kind of thinking that is absolutely necessary to get innovation in the social sectors happen. When you think about it a lot of the work of the social sector is around knowledge work, providing a service and in the best cases changing lives. These are not easy tasks. In my work in Families SA I see how social work, residential care and
child protection are some of the most knowledge intensive work that can change children’s lives. This means that the management innovation required for this is much greater than normal business management stuff. I think this is where some of the work from Steve will be quite valuable.

He is writing extensively on his blog and on the Forbes network.

For example, this is his take in government.

The Leader’s Guide to Radical Management: A genuine Sputnik moment means thinking bigger thoughts

Reinventing government:
No one loves the government and efforts are under way to change it.
“Government 2.0” has been much talked about as the application of
technology to government as we now know it: the use of social media by
government agencies, government transparency assisted technology. As so
conceived, Government 2.0 has much in common with the Fortune 500 of
yesterday. It’s grinding out existing services with somewhat better
technology.

Reorganizing
government, as proposed by President Obama, is even more problematic.
Vast amounts of energy will be spent rearranging the deck chairs, while
the ship continues to sink. Jokes about smoked salmon can’t hide the
fact that reinventing government means changing the way it functions,
not re-arranging the bureaucracy and reporting arrangements.

As
properly conceived by Tim O’Reilly, reinventing government is much more
than those things. It is a government stripped down to its core,
rediscovered and reimagined as if for the first time and focused on
delighting its primary stakeholders. It is government aided and abetted
by technology, but technology is a means, not the end. It means
shifting the idea of government from shaking the vending machine to get
more or better services out of it, and over to the idea of government
building frameworks that enable people to build new services of their
own. Again, we know how to do this.

Overview of the five principles of radical management

The Leader’s Guide to Radical Management: The Death—and Reinvention—of Management: Part 1

In reinventing management, five fundamental and interdependent shifts need to occur:

1.  The first shift stems from a monumental transition in the power balance
between seller and buyer: to management’s astonishment, the buyer is now
in the driver’s seat. As a result, the firm’s goal has to shift to one of delighting clients: i.e. a shift from inside-out (“You take what we make”) to outside-in
(“We seek to understand your problems and will surprise you by solving
them”).

2. The second shift stems from the first transition, as well as the epochal
transition from semi-skilled labor to knowledge work. Again to
management’s astonishment, traditional hierarchy suddenly doesn’t work
anymore. The role of the manager has to shift from being a controller to an enabler, so as to liberate the energies and talents of those doing the work and remove impediments that are getting in the way of work.

To support and sustain those two shifts, three other shifts are necessary:

3. The mode of coordination shifts from hierarchical bureaucracy to dynamic linking, i.e. to a way of dynamically linking self-driven knowledge work to the shifting requirements of delighting clients.

4.            There is a shift from value to values; i.e. a shift from a single-minded focus on economic value and  maximizing efficiency to instilling the values that will create innovation and growth for the organization over the long term.

5.            Communications shift from command to conversation:
i.e. a shift from top-down communications comprising predominantly
hierarchical directives to communications made up largely of
adult-to-adult conversations that solve problems and generate new
insights.

Individually, none of these shifts is new. Each shift has been pursued individually
in some organizations for some years.However when one of these shifts is
pursued on its own, without the others, it tends to be unsustainable
because it conflicts with the goals, attitudes and practices of
traditional management. The five shifts are interdependent.

When the five shifts are undertaken simultaneously, the result is sustainable
change that is radically more productive for the organization, more
congenial to innovation, and more satisfying both for those doing the
work and those for whom the work is done.

The practices to implement the five principles:

Reinventing Management: Part 2: Delighting the client

Reinventing Management: Part 3: From controller to enabler

Reinventing Management: Part 4: Coordination: From bureaucracy to dynamic linking

Reinventing Management: Part 5: From value to values

Steve uses the traditional tool of share price
appreciation as an example. However, we need a different tool for the
social sector.

Technology and software to revolunize

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From Inc:

It all started in 2007. After working for years in preventative medicine and pediatrics, the then-31-year-old Parkinson had just finished a residency at Johns Hopkins Center for Innovation in Quality Patient Care.

“I got to see the back end of health care, why it is the way it is and why it costs what it costs,” he says. “I saw how broken everything is.”

He watched doctors treat up to 40 patients a day and have at least four staff members each to handle the nitty-gritty paperwork.

“It’s around 70 percent overhead,” he says. “It wasn’t like this decades ago. Doctors served their neighborhoods, took cash, and didn’t charge a lot because there was so little overhead. So I designed a process that went back to this model, looking at it from the patient’s perspective, and just injected a little technology.”

With $1,500, he set up a house-call-only practice in his Brooklyn, New York, neighborhood, serving only two zip codes. He created a website through Apple’s iWeb that featured his resume, and posted his schedule on a Google Calendar so patient’s could enter in an appointment time online.

He also opened a PayPal account for payments, and used Formstack to create forms for gathering patient medical histories and to create specific questionnaires for particular ailments. (Get tips on super-charging your documents suite.)

Whereas most practices deal with significant costs in office management, Parkinson’s start-up costs went to getting his license and buying tools, such as an otoscope and doctor’s bag.

Who pays corporate taxes?

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Australia is having a big debate regarding corporate taxes on mining companies and then there is the carbon tax. These are generally aimed at companies. But who actually pays the corporate tax? Who better than Greg Mankiw, an economics Professor at Harvard explain it.

But before deciding that the corporate income tax is a good way for the government to raise revenue, we should consider who bears the burden of the corporate tax. This is a difficult question on which economists disagree, but one thing is certain: People pay all taxes. When the government levies a tax on a corporation, the corporation is more like a tax collector than a taxpayer. The burden of the tax ultimately falls on people—the owners, customers, or workers of the corporation.

Many economists believe that workers and customers bear much of the burden of the corporate income tax. To see why, consider an example. Suppose that the U.S. government decides to raise the tax on the income earned by car companies. At first, this tax hurts the owners of the car companies, who receive less profit. But over time, these owners will respond to the tax. Because producing cars is less profitable, they invest less in building new car factories. Instead, they invest their wealth in other ways—for example, by buying larger houses or by building factories in other industries or other countries. With fewer car factories, the supply of cars declines, as does the demand for autoworkers. Thus, a tax on corporations making cars causes the price of cars to rise and the wages of autoworkers to fall.

The corporate income tax shows how dangerous the flypaper theory of tax incidence can be. The corporate income tax is popular in part because it appears to be paid by rich corporations. Yet those who bear the ultimate burden of the tax—the customers and workers of corporations—are often not rich. If the true incidence of the corporate tax were more widely known, this tax might be less popular among voters.

via Greg Mankiw’s Blog: Corporate Tax Rates.

Groupon Doomed by Too Much of a Good Thing

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The company asserts that it will be profitable once it reaches scale but there is little reason to believe this. The financial results of Groupons traditional business continue to deteriorate, especially in mature markets, and new ventures such as Groupon Now also have failed to drive profits. And unlike the very few successful companies that scaled before they were profitable think Facebook or Amazon, Groupons business model does not benefit from significant network effects. The companys product is not more valuable to users as more people adopt the platform. If anything, the fact that Groupon is witnessing decreasing revenue per merchant and fewer Groupon purchases per subscriber in its maturing markets suggests that growth may actually decrease Groupons value to its customers. Yet, Groupon maintains a blind faith that growth will be its salvation. As Pets.com learned in the last bubble, such a strategy works just fine until you run out of other peoples money to spend on growth.

The real cause of Groupons problem is that it had too much of a good thing. With over $1 billion of venture capital money to invest in growth, what manager has time to worry about profitability? Groupons “bad money” — investments that were patient for profit but impatient for growth — did not instill the discipline needed to enable the company to emerge as a successful standalone venture. Now, the venture capital markets cannot supply more capital and the company must depend on the IPO market to finance its money-losing operations. Eventually, investors will be unable to sell their shares to a greater fool and Groupon will be added to the list of companies that had immense potential but died because they did not find a successful profit formula in time.

via Groupon Doomed by Too Much of a Good Thing – Rob Wheeler – Harvard Business Review.

Three things clients and customers want

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Not just the first one.

And not all three.

But you really need at least one.

1. Results. If you can offer a return on investment, an engineering solution, more sales, no tax audits, a cute haircut, the fastest rollercoaster, a pristine beach, reliable insurance payouts at the best price, peace of mind, productive consulting or any other measurable result, this is a great place to start.

2. Thrills. More difficult to quantify but often as important, partners and customers respond to heroism. We are amazed and drawn to over the top effort, incredible risk taking on our behalf, the blood, sweat and tears that (rarely) comes from a great partner. A smart person working harder on your behalf than you’d be willing to work–that’s pretty compelling.

3. Ego. Is it nice to feel important? You bet. When you greet us at the door with a glass of white wine, put our name in the lobby of the hotel, actually treat us better than anyone else does (not just promise it, but do it)… This can get old really fast if you industrialize and systemize it, though.

via Seth’s Blog.

Is Strategy Lego or a Puzzle?

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A “puzzle” is usually something with a “known solution”. The “jigsaw puzzle” is a picture which has been cut into pieces and our “task” is to “fit” all the pieces together in the original way. Assembling an engine from components is a similar task. Crossword puzzles are slightly different in that we need to “recognise” words from two pieces of information (the description and some letters). The best puzzles are those where we don’t know the “end result” but need to somehow “recognise” the end point.

By contrast, a “lego” is a set of components where we have no idea of the end result. We usually “envisage” or “muddle throught” an end result. (Insight: Lego as a company has been very clever in gradually expanding components from civil engineering to mechanical engineering to electronic engineering). A lego model is usually a more “creative” process than a puzzle (though there are lego model diagrams which are more like puzzles).

When we use “generic” strategies (e.g. Michael Porter’s low cost, differentiation and niche strategies) we use the Five Forces model to identify situations in which one of these “generic” strategies is a “best fit”. That’s like “solving a puzzle”. It’s pattern recognition. 

A lego set is more like a set of ingredients used in cooking. We need to develop a “recipe” in order to create the “dish” we envisage. Using the same ingredients, different chefs/CEO’s use different recipes/strategies to achieve dishes/outcomes. Slight variations (omissions of certain ingredients, adding others, the order of mixing) can create very different outcomes. This is science and creativity combined!

In my view, it’s not so much when to use either approach as the degree of skill, knowledge and creativity we can apply.

As a “strategy teacher”, it is much easier to teach “generic strategies” and pattern-recognition approaches to strategy initially and then progress to recipe-making approaches in advanced strategy courses. 

Professor J.C. Spender introduced the idea of strategy as a “recipe” many years ago. It’s worth reading his papers.

Lambros Karavis on LinkedIn.