The way to establish a connection - 1 -

 The way to establish a connection is a free rendering of a gaucho's expression, which can be simply understood as a way of hiring, with the idea that it is the simplest thing: practical and well conceived - nothing to do with red tape, legal counseling and so on.

The way to establish a connection reminds me of delightful stories, which marvel us with the simplicity and effectiveness of the solution found. The book Freakonomics (Campus) presents some more sophisticated cases about the theme, but equally clarifying.

HEALTH - a hospital hired a city's health care at a fixed price - something like 17 R$ / life/ month. The number of C cuts decreased 20%.

STORE SERCVICE - sales commission is for the group, not the individual. People pressure colleagues to help, instead of trying to surpass them. A client can finally touch products without being annoyed by a sales person. It's the end of the I-am-just-looking syndrome. Client satisfaction grows, and sales value grows with it.

TELEPHONE SERVICE - the contractor receives a fixed value for each connected client. If the number of repairs increases beyond the level agreed on, the percentage decreases drastically. WHen receiving for a service rendered, it was usual for a technician to climb a post and simply exchange the bad line with a neighbor's - who would then complain about it, and so one more service would be needed. With the new rule, the contractor gives their best when building a new line - defects will increase their work and put their percentage gain at risk!

GENERIC - when hiring professionals for jobs, quality must be taken care of - the contractor will care for their own productivity. When hiring by the hour, more attention must be paid to the time the person hired is spending, he/she will take their time to do things with a thought for quality. Good ways of establishing connections avoid this dilemma.

THE ROLLING MILL INTERRUPTIONS - when measuring the interruption time, the team hurries, does things wrong, rates don't improve. When counting the number of interruptions, the team gives their best, does things calmly and well - interruption times decrease!

VOLUNTEER GROUPS TO SOLVE PROBLEMS - if the award is based on the result value to the company, and shared among group members, 3 things happen:

* people don't want dead weight in their group, groups are smaller, with only those who are necessary for members - the boss can relax, the group will take good care of this detail;

* the result value is carefully checked by the cost and accounting area, there are no wild guesses;

* the group chooses SMART - relevant, and reachable - goals. They are not likely to work for nothing.

Rules for Assuring Poor Performance

Imagine I took over the management of a poorly performing organization and wanted to keep it that way. For example, I might not want it to grow so quickly that it would leave me less time to pursue my hobbies and golf. What steps would I take?

First, I would ensure that all of the managers and employees are totally ignorant of the executive team's strategy. That way no one will understand how the work they do each week or each month contributes to successfully achieving the strategy. Next, I would figure out ways to insure that managers and employees don't trust one another. I would discourage dissent and debate. It would be tricky to preserve some level of harmony by not allowing healthy conflict among managers that are already distrustful of each other, but I think I could do it.

I have recently heard about this new trend of “business analytics.” I will stop any employee trying to use software for analysis. My IT department should have some sort of software to detect it.

Next, I would avoid holding anyone accountable. That would be fairly easy because I would disallow reporting of performance measures. Anyone mentioning the phrase “the balanced scorecard” would be summarily fired. I would try to disallow setting of targets, but some managers have a nasty habit of liking them. I think those managers believe that if they could make it appear that they are better performers than others, that I would then reward them with a “pay for performance” bonus system. If I allow people to be motivated this way, performance might improve. I'm not going to fall for that trick.

I would freeze our managerial accounting system to remain in its archaic state. It was probably designed in the 1950s, but our external financial auditors would always be giving us an OK grade. I'd allow managers to hire more support overhead to manage the resulting complexity, but I'd preserve the primitive overhead cost allocations to processes, products and customers using those distorting and misleading broad averages, like product sales volume or number of units produced. Using activity-based costing (ABC) would be forbidden. Most employees would already know that these cost allocations cause big cost errors, but I would want to keep them guessing about which products and customers make or lose money and what it actually costs to perform our key business processes. I don't think my financial controller will correct this, but I need to keep a watchful eye because my accountants are getting much smarter about how to improve operations and serve as strategic advisors to me.

We would need to be careful about how much information we collect and report about our customers. Obviously we'd report their sales volume data, but I would not segment our customers into any groupings. I'd keep sales reporting at a lump sum level. I don't want anyone asking questions like, “Which types of customers should we retain, grow, acquire or win back from competitors?” To keep our company from tanking, I would encourage sales growth by putting big signs in the marketing department saying, “More sales at any cost!” I'd prevent the CFO from any thoughts of measuring customer profitability. But that would be easy because our arcane cost accounting system wouldn't be capable of calculating that information. The marketing people typically spend their budget with a “spray and pray” approach, anyway. Targeting specific types of customers and getting a high-yield payback from our marketing spend would be outside their level of thinking. I'd maintain our advertising spending as the “black hole” that no one understands.

I would, of course, implement an enterprise resource planning (ERP) system. I wouldn't want to be at a cocktail party with other executives and admit I don't have one. That would be too embarrassing, like a teenager without an iPod. Luckily, ERP systems alone won't improve performance; they produce mountains of transactional data for daily control but not meaningful information from which anyone could make wise judgments or good decisions.

Our budgeting system would be another way to assure our poor performance. Since the budget numbers are obsolete a couple of months after we begin the fiscal year, assembling the budget for six months during the prior year would provide a great distraction and prevent anyone from working on more important things. Plus I love sending the budget back down a few times to be redone to lower the budgeted costs. Everyone moans – more assurance for poor performance.

We'd squeeze our suppliers. We could talk about partnering and collaboration, but any attempt to actually do so would be squashed immediately. Never trust a supplier. If you drive one out of business, you can always find another.

I don't think I could stop employees from using spreadsheets. They are contagious. But since every department would have their own spreadsheets, it would be like a Tower of Babel. Employees would waste a lot of time trying to make their numbers match. Those employees with secret spreadsheets might want to use them for forecasting and planning. I'd put a stop to that by calling it gambling and promote our company as being conservative. Gambling is for fools, so I'd set a policy forbidding risk taking.

I know that operating a poorly performing business is an extremely difficult job, but I think I'd be up to the task. Suppressing the efforts of all those employees and managers who want to think, analyze, contribute and make the business successful requires constant vigilance. The business world is full of subversive ideas that could hamstring my efforts to keep the business floundering aimlessly.

I am particularly concerned about this new concept called “enterprise performance management.” Whatever it is, I will stop it from happening. I believe that with hard work and dedication, I could keep any company from reaching its profit-making potential.

Gary Cokins, CPIM (gcokins@garycokins.com; phone 919 720 2718) http://www.garycokins.com

Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and book author in business analytics and enterprise performance management systems. He is the founder of Analytics-Based Performance Management LLC, an advisory firm located www.garycokins.com . He began his career in industry with a Fortune 100 company in CFO and operations roles. He then worked 15 years in consulting with Deloitte, KPMG, EDS, and SAS.