SOLUTIONS

Executing strategy and delivering the results it promises is something that many organisations struggle with. The causes are multiple as are the proposed solutions.

The chain of command from boardroom to marketplace is lengthy, and along the way strategic intent can be distorted. Efficient and effective strategy execution, business management and corporate governance depend on everyone having a clear understanding of what the organisation needs to deliver, how they can contribute, and how their contribution will be recognised and ultimately rewarded.

In today's world, all organisations need to change rapidly and effectively, identifying and exploiting synergies between their component units, continually optimising their use of resources and allowing employees to realise their potential. To try and achieve this, most organisations focus on the improvement of operational processes rather than the leadership, governance and management processes themselves.

The Perendie platform^® implements strategy, increases productivity, reduces cost, satisfies stakeholders and makes governance effective by

providing leaders with a way to communicate the strategic outcomes and their relationships on one page
inspiring people

to volunteer to contribute to any outcome on the platform
to define the activities and resources required to produce their
outcomes
to stop any current processes and products which don’t deliver the required
outcomes

creating and displaying to all stakeholders a single picture of everything the
organisation is aiming and likely to achieve, do and employ.

Please browse the topics below or search for a topic which particularly interests you.To see a demonstration of the Perendie platform^®, please click the Perendie icon at the top of the page and scroll down.

Solutions

Leadership

Leadership is the action of leading a group of people or an organisation. Leadership involves:

establishing a clear vision
sharing that vision with others so that they will follow willingly
providing the information, knowledge and methods to realise that vision
co-ordinating and balancing the conflicting interests of all members and stakeholders.

A leader steps up in times of crisis, and is able to think and act creatively in difficult situations.

An organisation’s processes and systems are based on historical requirements. Requirements change but the organisation’s processes and systems change more slowly and reactively. Consequently there is always a time lag, often long, between the changed requirements and what is done to meet them. Attempting to improve what exists and how things currently work means continually playing catch-up. Furthermore, change of what exists is always incremental, never transformational, because the complexity and proximity of what is happening now removes perspective and inhibits imagination of what could be.

It is impossible to predict the future fully, and the satisfaction of today’s demands has to take precedence. The pressures of the competitive environment mean that often we are reactionary, responding to the symptoms of a problem rather than an underlying cause The situation is exacerbated in a volatile and threatening environment. Despite the difficulty, such an environment requires an attempt to anticipate the opportunities and threats which will appear in future because cost-cutting is an unsustainable response.

Most organisations have given thought to the future, but sometimes this thinking is vague and has little effect on operations or behaviours. Other organisations are content with continual improvement, or with repeating tomorrow what they did yesterday. A few, such as Alphabet, Amazon and Apple, make tomorrow come today. More organisations could emulate these companies by taking time to think about the future and their place in it.

The biggest dangers to an organisation are the ones they don’t see coming. Understanding these threats – and anticipating opportunities – requires peripheral vision. The Scanning the periphery questionnaire helps an organisation’s leaders to assess their ability and propensity to think beyond current organisational and temporal boundaries.

Future-proofing then improves peripheral vision by answering the questions:

What will the world be like in future, in general?
What will the consequences of this scenario be for the organisation?
How should the organisation prepare for this world?

from the perspectives of the natural and economic environment, the customer segments and value propositions, the core business processes and value chain, and the learning and growth enablers.

We call the answers to these questions a Future-Proofing Benchmark because they are a way of comparing an organisation with what it needs to become, instead of comparing itself with the present situation.

The more specific an organisation’s definition of its future, the more likely it is to realise it.

Strategic outcomes are derived from the Benchmark, and displayed in a strategy & risk map.

The Perendie platform^® is a way of increasing the objectivity of acquisition selection and the probability of realising an acquisition’s business plan

Start with the future

The Perendie platform^® evaluates a potential acquisition’s business plan by drawing an integrated picture of its planned outcomes, activities and resources. It also identifies the causes of success, providing a more objective means of answering the following questions:

Does the company have potential for sustained growth?
Does management have the ability to exploit this potential and control the company through the growth phases?
Does the possible reward justify the risk?
Is this company a more or less attractive opportunity than others we are considering?

Commit everyone to their contribution to success

The platform also measurably defines what each set of stakeholders – investors, customers, employees and suppliers – will get out of the transaction and contribute to it. It enables and encourages them to align around the shared objective of a successful venture. The comparison of what could be with what is reveals opportunities to make quick and sustainable increases in productivity and profitability.

The consequences of using the platform

The platform delivers:

Integration – everything the acquired organisation needs to do and employ to deliver its required outcomes, at all levels, is linked
Predictability – the causes of success are identified, and the probability of the required outcomes being delivered is objectively predicted, mitigating risk
Transparency – anyone internally and externally can see what the acquired organisation intends to employ, do and deliver, and the progress being made and expected

These deliverables enable the acquisition’s management team to

stick to what they know
encourage a common philosophy of shared business goals and quality standards
communicate the objectives and results throughout their organisation
concentrate their management information systems on what is critical to success
build their team
anticipate problems
keep their investors, bankers and advisers fully informed

Increase the probability of success

The platform does not replace due diligence and financial analysis. However, the additional use of platform before a transaction would help with the identification of potential targets, more effectively coordinate the work of the other advisers, and increase the probability of the shareholders and other stakeholders deriving value from the transaction. In turn, this would increase trust in the company funding the transaction, enhance its reputation, and extend its business development capability.

Secure the benefits

Successive studies of mergers and acquisitions have found that the long-term value added by a deal is less than the value expected, in most cases. The problem usually occurs after the integration of organisational structures and the removal of duplicate functions. Separate cultures, attitudes, behaviours, processes, systems and data survive the structural integration. People remain uncertain about the future of the company and their own jobs. Consequently productivity declines and prevents the realisation of full value.

The Perendie platform^® translates a post-merger vision into what needs to be produced, done and employed to realise the vision. Putting the platform in place before the merging starts gives everyone clarity about the end game and an opportunity to say how they could make it happen, even though some will not be required. It collects and connects every outcome, activity and resource required to achieve the organisation’s purpose, encouraging collaboration across organisational boundaries. It lets anyone contribute to the outcomes the organisation needs, increasing diversity and productivity. It identifies people who can’t contribute to the organisation’s future, saving money. It motivates people to cooperate by showing what everyone’s doing and what’s likely to happen. It challenges current deliverables, ways of working and resourcing, stimulating innovation and reducing cost. It measurably defines the required benefits of a merger and commits everyone from the combining organisations who can contribute to their realisation.

Governance

We are here confining governance to corporate governance, which is the action or manner of governing an organisation, particularly a business.

Corporate governance is the framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its all stakeholders (financiers, customers, management, employees, government, and the community).

The corporate governance framework consists of

explicit and implicit contracts between the company and the stakeholders for distribution of responsibilities, rights, and rewards
procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles
procedures for proper supervision, control, and information-flows to serve as a system of checks-and-balances.

The Parliamentary Commission on Banking Standards’ report Changing banking for good says that “audited accounts conspicuously failed accurately to inform their users about the financial condition of banks”.

Parliamentarians and the public expect auditors to prevent disasters like the banking crisis. The many governance failures since the banking crisis may indicate that the expectation is unrealistic even when an audit is carried out correctly because of the way in which audits are carried out.

Although audit has improved since the financial crisis, it is still retrospective, dependent on people behaving properly, subjective and unsystemic. It examines what has happened, and the past is an unreliable guide to the future. It can’t provide assurance.

Even if the expectation is unrealistic, it’s unlikely to change. It’s an opportunity for audit firms because many organisations and people would like auditors to prevent financial disasters.

Influence the future

To move from examining the past to influencing the future, audit would need to change from focussing primarily on finance, the end of the value chain and what has happened, to look also at the root causes of success and what will probably happen. It would need to become predictive.

Make corporate reporting predictive

The digital Perendie platform^® allows and requires successive levels of the organisation to say what outcomes they will contribute to the delivery of the strategic outcomes, what they will need to do to achieve those outcomes, and what resources they therefore need to employ.

Consequently, the platform gradually collects and connects every outcome, activity and resource required to achieve an organisation’s mission. It integrates all the causes of success and leads people to challenge their current deliverables, ways of working and resourcing.

The information on the platform is open to inspection by any stakeholder at the touch of a button, which encourages ethical behaviour, predicts delivery and prevents problems by showing what everyone’s doing and what’s likely to happen, incidentally making audit part of everyone’s day job.

Transform assurance

The Perendie platform^® would close the gap between the public expectation that audit should prevent problems and the reality that audit is primarily retrospective.

It automatically and objectively determines whether a fact or circumstance would affect the ability of the entity to generate or preserve value in the long term, the relative importance of a matter to the entity’s development, performance, position or future prospects, and the probable impact of its activity.

The platform enables interested parties to assess the likelihood of an organisation delivering the outcomes it has decided to deliver, and whether directors have performed their duty under section 172 of the Companies Act 2006.
It explicitly and transparently links remuneration to the delivery of outcomes, exposing unfair and excessive remuneration.

It provides, current, transparent and predictive Integrated Reporting.

Supporting data analytics, it pre-determines meaningful patterns in data, providing a business-driven taxonomy to grasp data, make sense of it, make it useful, and view it from a leadership perspective.

Application by auditors

The Perendie platform^® is applicable to any organisation. Its application is a consultancy service which can legitimately be delivered by an organisation’s auditor because the current, complete, transparent and predictive information it provides would improve the quality of the audit. It would also increase the chance of smaller firms obtaining work from large organisations because the platform would simplify and expedite data gathering.

Most people avoid change unless it is clearly in their interests; and even more resist radical change. Therefore the platform is applied gradually, starting with the leaders developing a strategy & risk map to communicate their strategy succinctly and powerfully.

Support the FRC’s five pillars

“The Financial Reporting Council (FRC) has announced plans to enhance its monitoring of the six largest audit firms to avoid systematic deficiencies within firms’ networks, disruption in the provision of statutory audit services and instability in the financial sector.
The FRC will focus its attention on five key pillars that are critical to the stability of the audit firms and quality of audit work. These are:

Leadership and governance
Values and behaviours
Business models and financial soundness
Risk management and control
Evidence on audit quality, including from the FRC’s annual programme of audit quality reviews.”

Objective assessment of the proposed five key pillars would be a significant improvement on the FRC’s current assessments of audit quality which are wholly subjective. Moreover, the skills and technology required to assess the five pillars differ from those of a regulator like the FRC, and their assessment would be useful only if it was objective and systematic. The Perendie platform^® would fill these gaps by:

providing leaders with a fast and efficient way of communicating their strategy, engaging people in its implementation, and assuring compliance with it
increasing the visibility of peoples’ behaviour and performance and explicitly, objectively and transparently linking remuneration to the delivery of outcomes
creating a completely integrated business model covering every aspect of the business
predicting the probability of failure in time to take corrective action, and incorporating risk management into the business model
facilitating audit quality review by providing a single joined-up view of everything an organisation is aiming and likely to achieve, do and employ.

Management

Management is the organisation and co-ordination of the activities of a business in order to achieve defined objectives.

Management is often included as a factor of production along with machines, materials, and money.

The cost structure of an organisation is defined as the distribution of costs among the processes an organisation uses to deliver its products or services. An outcome is defined as the result and benefit of achieving an objective, or a desired future state.

Of the 670 organisations we have researched, few ever rethink their cost structures, though all frequently look for cost reductions. The relationship between money and outcomes is largely unknown, and there is no way of ensuring that money is converted into the desired outcomes. They believe that more money will produce better outcomes – but it won’t because they don’t have a system to turn money into outcomes. They think that reorganisation will reduce cost – but reorganisation de-motivates people, and doesn’t change what they do or how they do it.

So what is to be gained from rethinking cost structures, and what is lost by restricting attention to cost reduction?

Drawbacks to current cost reduction strategies

The conventional approach to cost management is to start with the costs and find ways to prevent or reduce them. Well of course, what else could you do? Seems obvious, doesn’t it?

Current cost reduction strategies include outsourcing, category management, process standardisation, leverage of purchasing power, low cost market procurement and some Internet sales models. These strategies work and are very successful in reducing costs.

However, they have defects in common:

They don’t help you to rethink your cost structure – they reduce costs within the existing structure.
They don’t tell you which cost reduction strategy should be applied to which area of the business and when.
They don’t tell you why you’re spending what you’re spending on what.
They threaten product / service quality.
They don’t deliver value for money and the outcomes you need to deliver.
They potentially deprive strategy of the resources required for implementation.
They don’t make optimum use of resources.

Looking at cost from a different perspective

Here’s a different way to look at it. Instead of letting your cost structure determine your outcomes, let your outcomes determine your cost structure. Instead of starting with cost reduction strategies, start with an outcome delivery strategy. Such an approach lets you have your cake and eat it. You get all the benefits of conventional cost reduction strategies but you also:

Rethink your cost structure.
Find out which cost reduction strategy should be applied to which area of the business and when.
Discover why you’re spending what you’re spending on what.
Increase product / service quality.
Deliver value for money and the outcomes you need to deliver.
Align resources with the strategy.
Make optimum use of resources.

Consider an analogy

The Titanic had a double-bottomed hull that was divided into 16 watertight compartments. Because four of these could be flooded without endangering the liner’s buoyancy, it was assumed unsinkable. Shortly before midnight on 14th April 1912, the ship collided with an iceberg; five of its watertight compartments were ruptured, causing the ship to sink at 2:20 AM on 15th April.

What lessons can be applied from the Titanic to rethinking cost structures?

Firstly, take a unified approach. Instead of relying on watertight compartments, treat the organisation as a whole. Instead of operating like a ship, whose purpose is to resist its environment, operate like a fish which lives in and co-operates with its environment.

Secondly, look ahead. The pace of change continually increases and so does the need to rethink cost structures. Thinking ahead to what the future outcomes will and should be gives you the ability to define the required cost structure.

Thirdly, use your picture of the future to challenge assumptions and convention. Starting with outcomes gives you a cost structure from which to challenge existing practices, procedures, processes, programmes and even products.

Former GE chief Jack Welch called the budget “the bane of corporate America”. For most organisations, the annual budget process is a painful, distracting exercise that consumes an enormous amount of time and energy and quickly becomes outdated.

Budgeting today

The financial budget is a way of allocating financial resources and controlling their use – functions that it performs with some effectiveness.

Critics of traditional budgeting argue that it’s slow, cumbersome, expensive and hinders effective management during rapid change. Operation of the current budgeting process sometimes requires the persuasive powers of Attila the Hun!

Inflexibility

The fixed-period of the budget inhibits organisations from adjusting priorities as conditions change. Innovation and competitors do not work to an exact calendar year. Also the budget year often does not necessarily coincide with the business cycle of the organisation. Consequently, most budgets are misaligned with the outside world from the outset.

Another problem with traditional methods of budgeting is that they are protracted, involving preparation by many departments, followed by collation and review by senior management before final approval. This increases the gap between the budget and ever-changing market and regulatory environments.

Most financial and performance management systems are designed around the annual budget, focusing attention on short-term finances only. While this is a necessary part of management, it’s not enough. To survive, the organisation also needs to change itself for the future.

Once the budget is approved, the organisation works within its confines, reconciling results to the original flawed numbers. Budget increases are hard to achieve. Thus the budget reduces the organisation’s ability to adapt to changing conditions.

Cost reduction

Since few organisations systematically derive their budgets from the outcomes they need to achieve, budgets can only be based on the previous year’s budget, increased for inflation. Consequently, there is no way of challenging budgets logically.

Doing the same things takes the same resource, regardless of management dictates. Prescribing budget cuts harms outcomes and reduces productivity. The key to efficiency gains is doing things more simply.

With conventional budgeting, evaluation of the cost of support services such as Finance, HR and IT requires benchmarking but, at best, this only makes your support services as cheap as your peers’ – it doesn’t align these services with the required outcomes.

Disconnection

Usually budgets are produced by individual departments in isolation. However outcomes – for example, innovative products and satisfied customers – are hardly ever produced by a single department alone, creating a mismatch between resources and outcomes.

Most budgets are formed bottom-up. The lowest level organisational units are asked to submit their estimates of expenditure for the next year. Senior management meanwhile have made a forecast of the income they expect to receive. There is a negative variance between the forecast revenue and the sum of the departments’ budgets. The variance is resolved by lengthy discussions or arbitrary decisions, both of which cause dissatisfaction and demotivation.

The fundamental problem with the current approach to budgeting is its lack of an explicit connection with strategy, outcomes, processes and customers. There are causal relationships between them, yet these relationships are rarely used explicitly to produce budgets. The disconnection between what is needed and what is spent results in the setting of financial targets which are at odds with the intended outcomes of the organisation. This leads to the use of more resources than necessary, or a failure to produce outcomes of the best possible quality.

A different way of budgeting

A more effective budgeting process exists, one that turns traditional budgeting on its head by starting with the outcomes to be achieved, rather than the money to be saved.

Joined-up thinking

In order for an organisation to use its resources to the greatest effect, budgets need to be explicitly linked to the required organisational outcomes. This link to strategy not only avoids waste but also makes the achievement of long term goals more likely. Rather than thinking in the past or even the present, organisations focus on the future outcomes that they need to achieve.

Business Alignment defines the specific measurable outcomes and targets to be achieved, re-engineers what needs to be done to deliver the outcomes, and encourages radical thinking about the skills and facilities needed to carry out the re-engineered activities. Consequently, the outcomes define the money required, rather than the money constraining the outcomes delivered.

Outcome-driven Budgeting

Outcome-driven budgeting provides a framework for prioritising expenditure. By definition, the top level outcomes are the top priorities. It also evaluates support services in terms of the contribution they make to strategic outcomes.

By setting targets for the number of outcomes required and estimating the duration of the activities needed to produce them, an organisation can calculate the full-time equivalent employees and facilities needed to carry out the activities. Thus, outcome-driven budgeting replaces departmental budgeting.

An example

Let’s use a London council as an example. One of its required outcomes is Being well led, well managed, ambitious and clear about our goals. The people with prime responsibility for delivering this outcome are the 30 directors of the council, and they are therefore the cost driver of this outcome.
The top level activities required to deliver the outcome are:

Future-proof the council
Define the required outcomes and their relationships
Define measures and set bases and targets
Assess risks and allocate rewards at the corporate level

We know from previous experience that it will take each director, individually and with other directors, the following time to carry out each of these activities:

Activity	Duration
Future-proof the council	10
Define the required outcomes and their relationships	15
Define measures and set bases and targets	20
Assess risks and allocate rewards at the corporate level	10
Total	55

We therefore need 55 x 30 = 1,650 directors’ days to deliver the outcome. Assuming 228 working days per annum, that means we need 7.24 full-time equivalent directors. The average total cost of a director including facilities such as accommodation, information technology and travel is £175,000 per annum. Therefore the budget for the outcome is £1,266,447.

Most organisations make operational budgetary calculations of this sort. However, as this example shows, outcome-driven budgeting budgets for intangible outcomes as well. It also enables rolling budgeting because it’s unconstrained by the calendar.

If the organisation is required to produce an annual budget, this is derived by estimating the period required to deliver the outcome and allocating the outcome budget proportionally over the period. For example, if the directors are available on average two days a month, then the outcome will be delivered in 55 / (2 x 12) = 2.29 years. The annual budget will be £1,266,447 / 2.29 = £552,631 in the first two years and £552,631 x .29 = £161,184 in the third year.

My research within 670 organisations has revealed an untapped source of productivity which the generally-accepted means of improving productivity are unable to tap.

The key to productivity is the knowledge, skill, flexibility and creativity of people, supported by technology. However, organisations tend to inhibit these capabilities rather than tap into them to increase productivity.

To extract the latent productivity, leaders and organisations need to:

Think ahead systematically
Clarify the strategy
Release innovation and flexibility
Make procurement encourage instead of inhibiting innovation
Encourage self-fulfilment
Work less, achieve more
Cross organisational boundaries
Walk the talk

Think ahead systematically

The pressures of daily life tend to focus a person’s attention on the here and now. Consequently, most organisations will repeat tomorrow what they did today. Doing the same things produces the same results. For instance, most business planning and budgeting processes reuse the previous year’s plan and budget. The productivity opportunity here is to use a systematic process to develop a balanced and measurable strategy looking ahead ten years or more since this provides perspective and inspires people to let go of the past.

Clarify the strategy

Most strategies contain generic aspirational statements. However, people can’t translate generic statements into specific actions. The productivity opportunity here is to give everyone a clear understanding of what the organisation needs to deliver, how they can contribute and how their contribution will be recognised and rewarded, since this helps people to challenge existing outputs and ways of working.

Release innovation and flexibility

Change is risky and threatening. Therefore, organisations are reluctant to consider radically new ideas, focus on cutting costs rather than adding value, and have too many incremental initiatives resulting in a lack of fundamental change. At the same time, excessive regulation stifles the will to innovate. The productivity opportunity here is to implement holistic risk management and make people accountable for the delivery of self-defined outcomes, since this will embolden and motivate people to leave their comfort zones.

Make procurement encourage instead of inhibiting innovation

Procurement processes are tender-driven and so exclude unique innovations like the Perendie platform ^® because buyers won’t know about them and therefore won’t request them. There needs to be a way to bring unique innovations to the attention of buyers in order to permit innovation.

Encourage self-fulfilment

Despite claims to be flat and empowered, the organisations researched were invariably hierarchical. Key decisions are made by a few people, while narrow job specifications and contracts are used to compel others to implement those decisions, inhibiting self-fulfilment. This practice deprives the organisation of most of the capability of the people they interact with – internally and externally – and frustrates their attempts to do their best. The productivity opportunity here is to empower employees, suppliers, partners and customers, which dramatically increases motivation and productivity.

Work less, achieve more

Hard work within organisations is expected and respected. However, there is little connection between hard work and the outcomes the organisation needs to achieve. Manager and peer pressures, as well as organisational constraints, distract most people from working effectively. The productivity opportunity here is to encourage and allow people to focus on their outcomes and control their environment since this causes them to work less and achieve more.

Cross organisational boundaries

The compartments into which organisations are divided – operations, production, customer services, information technology, human resources, finance etc. – act as functional silos. They inhibit internal and external co-operation, acquire their own cultures and loyalties and focus on the achievement of their own objectives, thereby reducing their contribution to the corporate goals. Restructuring and transformation merely replace one set of compartments with others. The productivity opportunity here is to put in place a leadership and management system which works across organisational boundaries.

Walk the talk

Most of us have at some time said one thing but done another. Such behaviour is common in organisations with detrimental effects, particularly cynicism, demotivation and resistance to change. The transparency of the Perendie platform^® increases honesty and trust.

Think about your own most recent day at the office, and try to recall it in some detail. What would hidden observers have been able to learn had they been watching you go through that day? They might have read e-mails you composed, looked over the numbers you put into spreadsheets, reviewed the reports you prepared. They would have noted your interactions, in formal meetings or corridor encounters, with colleagues, subordinates and superiors, and listened in on a presentation you delivered. They would have heard your end of various telephone conversations, perhaps with customers, suppliers, or consultants. Maybe they would have watched you sitting quietly for a while, looking off into space, jotting down a few notes.

But would these observers really understand your inner work life that day? Of course not. In having those conversations and writing those reports, you were not only dealing with the task at hand. As events unfolded, you were also forming and adjusting perceptions about the people you work with, the organisation you are part of, the work you do, and even yourself. You were experiencing emotions, maybe mild states of satisfaction or irritation, maybe intense feelings of pride or frustration. And these perceptions and emotions were intertwining to affect your work motivation from moment to moment—with consequences for your performance that day.

People experience a constant stream of emotions, perceptions, and motivations as they react to and make sense of the events of the workday. As people arrive at their workplaces they don’t leave their hearts and minds at the door. Unfortunately, because inner work life is seldom openly expressed in modern organisations, it’s all too easy for managers to pretend that private thoughts and feelings don’t matter.

This is what the researchers mean by inner work life: the dynamic interplay among personal perceptions, ranging from immediate impressions to more fully developed theories about what is happening and what it means; emotions, whether sharply defined reactions (such as elation over a particular success or anger over a particular obstacle) or more general feeling states, like good and bad moods; and motivation—your grasp of what needs to be done and your drive to do it at any given moment. Inner work life is crucial to a person’s experience of the workday but for the most part is imperceptible to others. Indeed, it goes largely unexamined even by the individual experiencing it.

People perform better when they are positive about their work. This comes about “when they see their organisations and leaders as collaborative, cooperative, open to new ideas, able to evaluate and develop new ideas fairly, clearly focused on an innovative vision, and willing to reward creative work.”

The most important factor in satisfaction, and therefore motivation, is knowing that one is productive in one’s work. This takes clear and connected goals and feedback on progress. Next in importance is being treated decently as human beings.

The value created by knowledge workers in particular is heavily influenced by the emotions swirling around in knowledge workers’ heads. This will not be news to those of us who’ve seen productivity plummet when we encountered stress, depression, or low self esteem.

Peter Drucker, in a 2002 Harvard Business Review article They’re Not Employees, They’re People, wrote, “Knowledge workers are not labour. They are capital. And what is decisive in the performance of capital is not what capital costs. What’s critical is the productivity of capital.”

The Perendie platform^® uses the psychology of the workplace to increase productivity.

SOLUTIONS

Executing strategy and delivering the results it promises is something that many organisations struggle with. The causes are multiple as are the proposed solutions.

The Perendie platform^® implements strategy, increases productivity, reduces cost, satisfies stakeholders and makes governance effective by

providing leaders with a way to communicate the strategic outcomes and their relationships on one page
inspiring people

to volunteer to contribute to any outcome on the platform
to define the activities and resources required to produce their
outcomes
to stop any current processes and products which don’t deliver the required
outcomes

creating and displaying to all stakeholders a single picture of everything the
organisation is aiming and likely to achieve, do and employ.

The Perendie platform^® is a unique digital platform which provides a single joined-up view of everything an organisation is aiming and likely to achieve, do and employ, releases resource for front-line delivery, increases productivity and effectiveness and saves time and money by automating the automatable aspects of leadership, governance and management.

The causal relationships between outcomes, and the order in which things are done, are critical to their efficiency and effectiveness. For example, a better environment and housing improve health, which enables people to learn, which increases prosperity, which reduces crime, which builds communities.

In every organisation, the relationships and dependencies between outcomes, processes, departments, staff, facilities and money are understood intuitively rather than explicitly. Since everyone’s intuition differs, the imperfect and differing knowledge of relationships and dependencies causes rework, error and unnecessary cost, and prevents people ensuring that money is converted into the desired outcomes. The larger the organisation, the greater the inefficiency.

Furthermore, an organisation creates artificial boundaries causing services to be delivered separately by separate organisational units with separate budgets. Separation creates duplication and misunderstandings, and customers have to join up the services themselves to get the outcomes they want.

Better results depend on people knowing whom they need to collaborate with, how to do so, and wanting to do so. It’s also about data relationships. There are so many relationships – between outcomes, risks, performance measures, activities, facilities, finance, customers, producers, society at large and the environment – that information technology is needed to manage them.

By systematically linking everything the organisation needs to do and employ to deliver its required outcomes, the Perendie platform^® makes success predictable and enables preventive action, removing the causes of problems rather than repeatedly dealing with their symptoms. Existing roles, products and processes are simplified by reference to the model, and costs are reduced.

The platform exploits a huge unexploited opportunity to reduce cost and improve outcomes simultaneously by enabling leaders to define measurably what they want the organisation to achieve, and allowing staff to say what they will produce and do to contribute to its achievement.

Everyone is asked to state the measurable contribution they will make to the corporate outcomes. The voluntary approach increases commitment and makes use of unused ability. Everyone sets their own status and reward through the significance of the outcomes they commit to deliver. Consequently, jobs are more fulfilling, delivery is unconstrained by red tape and micro-management, and more is produced for less.

The platform provides:

Integration – everything the organisation needs to produce, do and employ, financially and non-financially, is related and displayed for all stakeholders;
Inclusion – everyone is empowered and required to say what they will measurably contribute to the organisation, and how they will deliver it;
Transparency – any stakeholder, internally and externally, can see what everyone intends to employ, do and deliver, and their progress;
Predictability – the causes of success are identified and the probability of people achieving their outcomes is predicted.

Leadership

The platform provides leaders at all levels with a fast and effective way of communicating the strategy. They decide which outcomes the organisation needs to deliver, how their delivery will be measured and predicted, the rewards accruing to each outcome on delivery, and the risks which may prevent its delivery. They set the future direction of the organisation, defining tomorrow today.

Alignment

Successive levels of the organisation are empowered and required to say what they will contribute to the delivery of the higher level outcomes, what they will do to achieve their outcomes, and what resources they therefore need to employ, so aligning themselves with the strategic outcomes.

A holistic view

The consequence is a single joined-up view of everything the organisation is aiming and likely to achieve, do and employ, arranged in a hierarchy of outcomes. Everything the organisation needs to produce, do and employ is causally linked at all levels.

Management

Each outcome has one or more customers and one or more producers. The customers are the people who need the outcome, and hold the budget for it. The producers are the people who are carrying out the activities to produce the outcome, and will receive the reward when it is delivered. The outcome hierarchy replaces the traditional management hierarchy, removing its cost and bureaucracy, and becomes the career path for all employees. It creates self-managing teams, empowering people and releasing managers to be producers. It creates one team, removing organisational divisions.

Remuneration

Remuneration is determined by the level an outcome occupies in the outcome hierarchy. Higher outcomes are remunerated more highly than lower level outcomes. The platform measures delivery objectively, valuing everyone for what they contribute and reducing the risk of prejudice and bias.

Motivation

People are recognised and rewarded for the delivery of their outcomes, which increases motivation. Since the delivery of outcomes is measured objectively, people trust the platform to reward them as they deserve.

Career development

The ability to self-select allows people to further their careers and fulfil their potential by applying to contribute to increasingly important outcomes, which makes the most of their abilities, gives them a ladder they can climb and a career they can develop; facilitates succession planning, and helps to retain the people the organisation needs to retain.

Recruitment

The customers decide whether a potential producer can deliver the outcome s/he has applied to deliver, and recruit people from outside the organisation if there no qualified internal applicants. The platform allows potential recruits to apply to contribute to any of the outcomes the organisation is trying to achieve. The ability to select which outcomes to apply to produce increases the suitability of candidates, and reduces recruitment effort, time, cost and failures.

Transparency

Any stakeholder, internally and externally, can see what everyone’s producing and what’s likely to happen, motivating productivity and increasing the cost-effectiveness of governance, reporting and audit.

Predictability

The platform identifies the causes of success and predicts the probability of failure in time for people to take preventive action, preventing problems instead of reacting to them.

Governance

The transparency and predictability of the platform gives leaders far greater control over the organisation, assurance that the outcomes will be delivered, and the ability to prevent problems. It releases time they used to spend leading, governing and managing, enabling them to focus on growing and leading the organisation into the future.

Savings

The platform leads people to challenge their current deliverables, ways of working, initiatives and resourcing, stimulating innovation, simplifying processes, removing bureaucracy, reducing cost and releasing resource for front-line delivery. It automates the automatable aspects of governance, leadership and management. It integrates all management processes into a single process and platform, reducing cost.

Risk management

Risk is managed by identifying the causes and effects of each outcome, the contributory outcomes, the key risk to each outcome, a predictor indicator, and the activities required to mitigate the risk.

Use the Perendie platform^® to:

Facilitate leadership

Enable leaders to lead, staff to feel more fulfilled, and customers to be better served.
Gain greater control over the organisation.
Increase employee productivity.
Increase profit by at least 10%.

Lead people forward

Combine meritocracy with democracy.
Combine top-down leadership with bottom-up implementation.
Help people journey from the present to the future.
Move the organisation on from where it is.

Engage all stakeholders

Allow people to see what the future holds and say what they can contribute to its realisation.
Create an inclusive culture where the diversity of employees’ talents and capabilities is fully harnessed.
Give people an opportunity to use their full capability to the benefit of the organisation and themselves.
Encourage diversity.
Encourage people to innovate.
Persuade people to declare their accountability and responsibility for the delivery of their outcomes.

Align everyone and everything around the corporate goals

Focus everyone on strategy implementation.
Align business and support units around the delivery of the strategy.
Combine central control with local devolution.
Integrate front and back offices.
Tell people who they need to work with to succeed.

Reward outcomes

Motivate people to produce even while jobs are being cut.
Determine status objectively.
Distribute rewards fairly, objectively and transparently.
Reward the delivery of outcomes rather than the management of resources.
Replace corporate bonuses by outcome bonuses.

Motivate delivery

Encourage good individual performance.
Be proactive more than reactive.
Generate internal competition to deliver.
Give outcome producers time to avoid failure.
Motivate those who are falling behind to catch up.

Stimulate performance

Combine business and individual performance management.
Remove the need for formal performance appraisals.
Move from being activity-based to results-oriented.

Organise around results rather than skills

Bust silos.
Avoid structural change.
Create value-adding, self-governing, self-managing teams.
Bring about voluntary compliance.

Optimise resourcing

Zero-base budgets.
Create rolling budgets.
Specify and justify what needs to be procured.

Co-ordinate business groups

Clarify and communicate the strategic outcomes required, the top-level activities needed to deliver these outcomes, and the sorts of resources required to carry out these activities.
Heal the divisions created by organisational structure.
Increase collaboration and co-operation between business groups and individuals.
Reduce turf battles.
Reveal synergies.
Increase the effectiveness of joint ventures and partnerships.

Merge organisations

Evaluate potential acquisitions, mergers and joint ventures.
Extract the forecast value from acquisitions, mergers and joint ventures.

Use the Perendie platform^® to:

Future-proof

Stimulate radical thinking about what needs to be produced, done and employed in future.
Set the future direction of the organisation.
Validate, integrate and improve the strategy.
Facilitate the continual review of strategic direction, performance indicators and outcomes make it more joined-up, efficient and effective.
Communicate the strategy more widely and effectively.
Ensure that the strategy is complete, consistent and correct.

Define outcomes

Determine the required outcomes.
Prioritise the required outcomes.
Exclude what the organisation has decided not to accomplish.
Objectively evaluate current objectives and initiatives.

Join up outcomes

Know which order to deliver outcomes in.
Link and align strategy and operations.
Make relationships which would otherwise not be made because of their complexity.
Avoid rework and waste.

Measure effectively

Define what to measure.
Relate existing mandatory key performance indicators to outcomes.
Validate and review the existing KPIs, explain their purpose and relevance, and increase commitment to them.

Discover the causes of success

Say what people need to learn and excel at to deliver the strategy.
Balance long term capability-building with short term delivery.
Turn attention from problems to causes.
Identify root causes of outcomes rather than problems.
Increase the probability of implementing the strategy.

Mitigate risks

Anticipate threats.
Mitigate the risk of failure.
Focus on those risks which are likeliest to prevent the delivery of outcomes.
Integrate isolated risk registers.
Reduce risk.
Promote the values of the organisation.

Increase efficiency

Continuously reveal and remove duplication.
Copy best practice.
Control self-management.
Reduce the need for meetings and paper reports.
Reduce the time spent on administration and in meetings.

Simplify processes

Identify core processes.
Re-engineer processes.
Systematically derive the minimal activities and resources required to deliver the outcomes.
Make processes and ways of working joined up and efficient.
Stop processes and initiatives which don’t lead to the outcomes required in future.
Prioritise work – if an activity directly delivers an outcome on the strategy map, it’s top priority.
‘Health check’ and manage the programme portfolio.

Challenge what exists

Challenge and justify partners’ and support units’ outcomes.
Replace potentially litigious Service Level Agreements.
Empower people to challenge and change current deliverables, ways of working and resource allocations.

Share best practice

Establish future best practice.
Locate best practice and knowledge at the point of use.
Align information technology with the business.
Immediately reallocate the resources associated with redundant activity.

Automate management

Automate, integrate and replace all business management processes including corporate governance, risk management, business planning, job specification, job evaluation, budgeting, procurement, resource allocation, programme management, performance appraisal, performance management, remuneration, information technology management, knowledge management, internal communication, auditing and corporate reporting.
Halve the time, effort, cost and uncertainty of management, saving the time and cost of the most expensive people.
Simplify management.
Remove the need to command and control, and for micro-management.
Make management simpler, faster, more flexible, cheaper and more effective.
Lighten the management workload.
Manage methodically rather than randomly.
Ensure that management is world-class.

Implement strategy

Transform customer service.
Enhance stakeholder value by achieving corporate goals faster.
Rapidly and flexibly change direction, best practice and resourcing.
Implement the strategy.

Neville de Spretter, former Head of Internal Audit at ACCA, describes a new approach being used by ACCA to grasp the holy grail of prevention rather than cure.

INTEGRITY THROUGH INTEGRATION
On 5 October 2005, ACCA’s Senior Management Group (SMG) met at the Waldorf Hotel to review ACCA’s performance over the last year and to set targets for the next year. There was much debate about the past and future key performance indicators and a general feeling emerged that there had to be a better way to lead and manage the organisation.

At the time, the strategic imperatives, initiatives and KPIs were unlinked, disconnected from what actually happens in the business, and had little apparent commitment from staff. Much depended on the attention of the Chief Executive, who knew he needed a robust, efficient and effective management framework and system but rightly dislikes bureaucracy and transfer charging.

In the afternoon a consultant, Peter Bebb of Perendie, presented a strategy map similar to the following:

The SMG, led by Chief Executive Allen Blewitt, immediately saw that the strategy map had summarised ACCA’s 35 page strategy into the 12 outcomes which are most critical to the realisation of its vision. It had also defined the causal relationships between the outcomes, i.e. which outcomes are dependent on which other outcomes. In so doing, it had validated and assured the quality of the strategy.

The SMG also recognised a solution to the age-old problem of prioritisation. Outcomes are prioritised by their inclusion on the strategy map, and actions are prioritised by their relationship to the strategic outcomes. Those actions which directly deliver the strategic outcomes are automatically top priority. Not all actions result in something useful and hard work is not always productive. Relating actions to the strategic outcomes ensures that only useful actions are included.

The SMG also saw that the cause and effect relationships between outcomes provide a means of predicting the delivery of the vision. If one of the prime causes is failing, there is early warning that the vision is at risk of failure. KPIs do not provide this predictability.

The Chief Executive immediately set up a Strategy Implementation Team (SIT) consisting of myself, Peter Bebb, the Head of Strategy Implementation and the Risk Manager, sponsored by himself and led by the Managing Director Operations.

Effective communication of the strategy is a necessary condition of its implementation. The strategy map tells the story of the strategy without additional explanation. It explains how the strategy will be delivered. It is possible, by following the arrows, to understand the chain of cause and effect which will lead to the ultimate outcome which achieves the mission.

A strategy map is simple. It fits onto one page. It provides unexpected insights into the future of the organisation. The outcomes on a strategy map are concrete, specific and measurable. The causal connections between the outcomes give credibility to the story it tells. And the combination of these factors creates understanding of the strategy and gets people on board.

The SMG discussed, amended and agreed the strategy map with Council, ACCA’s governing body. The Chief Executive communicated the strategy map to ACCA’s staff.

In consequence, many more people understand ACCA’s strategy, and there is consensus on what needs to be delivered strategically.

While the strategy map was being communicated, the SIT started to develop a balanced scorecard to measure and predict the delivery of the strategic outcomes. The balanced scorecard differs from key performance indicators (KPIs). There is a unique measure of the achievement of an outcome which avoids the ambiguity caused by multiple KPIs. There is also a predictor measure, which tells the management team whether they are likely to achieve the outcome. Finally the SIT identified the key risk to each outcome, aligning risks with outcomes.

We discussed and modified the balanced scorecard with the project sponsor, the project leader, the SMG and Council. The Remuneration Committee has agreed that the SMG’s bonuses are determined by the achievement of the strategic outcomes as measured by the balanced scorecard.

Much clarity, objectivity and productivity has been obtained through the strategy map and the balanced scorecard.
Of course it’s not enough to know what you need to achieve. You also have to achieve it.
The SIT next worked out what ACCA needs to do to achieve its strategic outcomes. We deliberately ignored current processes and project in order to get an objective view of what is really necessary, in line with Michael Hammer’s original principle of Business Process Re-engineering. We then compared these with current processes and initiatives to identify those which could stop.

The relationships between the outcomes and the activities required to deliver them have defined outcome-oriented organisational units and teams which successively add value to the stakeholders of ACCA by delivering the strategic outcomes. The skills required by the teams are defined as the ability to carry out the activities needed to deliver the outcomes, and the competences are defined as the ability to produce the outcomes.

Outcome-oriented teams are more productive than skill-based teams such as Marketing or Human Resources Departments because they focus people on the delivery of outcomes rather than operation within a skill silo.

The value chain was discussed, amended and agreed with the SMG. Following this agreement, the SIT derived a service-oriented architecture from the value chain which revealed that the existing portfolio of around 60 ACCA computer systems and fragmented data store could be reduced to just 5 systems and 2 databases, saving million of pounds whilst dramatically improving the service provided to staff and members.

The final step in the alignment of ACCA corporately was to estimate the resources required – the skills and facilities required to carry out the activities. The volume of skills required was calculated from an estimate the time needed to carry out each activity multiplied by the number of outcomes to be delivered. This resource optimisation process identified a potential productivity g ain of 20%.

The SIT next broke the strategic outcomes, activities and resources into their contributory outcomes, activities and resources. We formed lower level business areas from these and agreed them with the SMG, who then formed business area teams to define the areas in more detail.

Successive levels of the existing organisational structure will be invited to say what they can contribute to higher level outcomes. In defining their own contributions, people declare their accountability and responsibility for the delivery of these outcomes. This ‘pull’ approach will create genuinely self-managing teams.

We are producing a lot of information and need somewhere to store it and process it so that we can use it to lead, manage and audit the business. Perendie are developing a business management system for us, which will provide the following benefits:

Integration – everything the organisation needs to do and employ to deliver its required outcomes will be linked at all levels across the whole value chain from customers through staff to suppliers

Predictability – the probability of the required outcomes being delivered will be objectively predicted, enabling risk mitigation

Transparency – any stakeholder will be able to see what ACCA intends to employ, do and deliver, and the progress being made and expected.

We’re talking about changing the whole business management process – about integrating and replacing existing management processes, including corporate governance, business planning, budgeting, risk management, resource management, portfolio and programme management, performance management, reward management, information technology strategy, knowledge management and corporate communication. It is wrong to see business alignment as a programme or project. It is simply a more economic, efficient and effective way of running an organisation. It firstly transforms the organisation and then continuously improves it.

Consequently this isn’t a quick fix though there are quick wins along the way, as described above. But it hasn’t been plain-sailing. As you can see the timescale is longer than anyone would like, but forcing the pace doesn’t work with a programme that is aimed at creating self-managing teams. The main reason for the long timescale is the distraction of the daily crises which business alignment will prevent.

Perendie also had problems producing the business management system. Their first supplier failed to deliver the system required. Perendie appointed a more flexible and productive supplier, and are delighted with the quality of the system they have produced.

I am keen for others to benefit as we have and will be happy to show you what we’ve done. I can be contacted at [email protected].

SOLUTIONS

Solutions

Leadership

Co-ordinating teams and departments

Everything is related

Joining things up

Governance

Management

SOLUTIONS

Solutions

Co-ordinating teams and departments

Everything is related

Joining things up

Start with the future

Commit everyone to their contribution to success

The consequences of using the platform

Increase the probability of success

Secure the benefits

Influence the future

Make corporate reporting predictive

Transform assurance

Application by auditors

Support the FRC’s five pillars

Volunteer instead of being told

Fulfil potential

Build a better working world

Drawbacks to current cost reduction strategies

Looking at cost from a different perspective

Consider an analogy

What lessons can be applied from the Titanic to rethinking cost structures?

Budgeting today

Inflexibility

Cost reduction

Disconnection

A different way of budgeting

Joined-up thinking

Outcome-driven Budgeting

An example

Think ahead systematically

Clarify the strategy

Release innovation and flexibility

Make procurement encourage instead of inhibiting innovation

Encourage self-fulfilment

Work less, achieve more

Cross organisational boundaries

Walk the talk

Leadership

Alignment

A holistic view

Management

Remuneration

Motivation

Career development

Recruitment

Transparency

Predictability

Governance

Savings

Risk management

Know what’s going on

Enable evidence-based leadership

Build trust

Make governance effective

Increase the value of audit

Predict success

Make data analytics useful

Reduce information overload

Facilitate leadership

Lead people forward

Engage all stakeholders

Align everyone and everything around the corporate goals

Reward outcomes

Motivate delivery

Stimulate performance

Organise around results rather than skills

Optimise resourcing

Co-ordinate business groups

Merge organisations

Future-proof

Define outcomes

Join up outcomes

Measure effectively

Discover the causes of success

Mitigate risks

Increase efficiency

Simplify processes

Challenge what exists

Share best practice

Automate management