Proven recipes for failure

Proven recipes for failure: Experience

In management conversations, the beautiful word “experience” is sometimes used to softly disguise past failures. However, some of these “experiences” lead to failures so systematically and predictably that it is certainly worth reflecting on them.

Part 1: “When everyone sweeps in front of their own door…”

Yes, … then the whole street is clean”. What would be wrong with that? Nothing of course; as far as the intention is to get a clean street. It becomes a bit more difficult if that good sounding spell is also used to claim that the whole organisation achieves good results if everyone in their own department (or island) works perfectly. What does experience teach us?

An example: The CEO of NV AQUIT notices that there is a competitor that is more responsive and snatching customers, while its own company has a strong reputation as one of the oldest and most reliable in the industry. The salespeople report that they often fish behind the net because those competing cowboys are quicker to make an appropriate offer to the customer and score with it. The damage in turnover is already estimated at 5%.

There is a need to react and so our CEO is calling over the managers one by one. It goes without saying that every manager knows how to tell us that everything in his department is going perfectly, that all procedures are followed closely and that he needs more staff in order to be able to react more quickly.

The sales manager is formal: “If we can be more responsive and be a little cheaper, our turnover will certainly increase again”. The CFO is also formal: “Yes, but in order to make the same profit you have to sell a lot more than the 5% we lost! “By the way, in order to be cheaper, we do not have to work with more staff, but with fewer”.

The first recipe

We are now faced with a very recognisable dilemma: More or fewer staff to make more profit? A first well-tried recipe for failure in such a situation is: Get rid of staff immediately. The consequences are then predictable: the internal processes slow down even more, the customer is served even later and a negative spiral effect is created. Our CEO opted for a different solution: Each of the managers is instructed to look at possible improvements in his department; preferably with suggestions from the employees themselves, so that people can support them. This avoids the much feared resistance to change. As an additional suggestion, they are given: "Only look in your own garden! Do not interfere with the other departments, because criticism of the others will degenerate into more criticism and that is not productive".

The second recipe

This is then a second well-tried recipe for failure. After all, what happens then? Every employee feels called upon to make improvements. Some also brainstorm about possible solutions and enthusiasm rises because: finally the management is going to listen! After a few weeks, the proposals will be on the table. Not a few proposals, but 137! What to do now? There is no time or budget to realise everything and choices have to be made. In order to continue the democratic line, the CEO decides, after consultation with the HRM: We will vote which project is tackled first and the majority wins! This too is done as objectively as possible: Each manager is asked to give a ranking to the 137 proposals, all points are then added up and the highest number of points comes out first.

The third recipe

And there is a third well-tried recipe for failure. After all, what happens then? As soon as the result is known, there will be an enormous discussion, because there are many reasons why we should implement proposal 85 or 37 first... Something has apparently been forgotten. - Note Bene: this is what happens all too often in any democracy - there has been a failure to reach a consensus on objective criteria beforehand, and everyone has set priorities according to their own perceptions, pains and benefits. There is a second, perhaps more important, reason: the causal logic between proposals 85, 37 and 137 is not known, or at least not formally considered and laid down. The chaotic discussion is therefore inevitable. At that moment, our CEO has his hands in the little hair left, because there is now a fundamental dilemma on the table: I either follow the democratic path or I decide for myself. After all, he is ultimately responsible.

The fourth recipe

In such a situation, it sometimes happens that nothing at all is decided and 'the list' ends up in the drawer. This may then be used as an excuse for the procrastination: "Yes, but we are not going to start that cinema again, are we? That leads to nothing, and moreover, in order to carry out a thorough and complicated analysis, there is no time and certainly no budget. And there goes a fourth well-tried recipe for failure: wait until something burns, because then there is a good reason to act drastically.

What went wrong? The main fallacy is that there is no reliable technique to identify the root causes (or the most serious “bottleneck”) in a short period of time. And then to draw up a feasible plan that supports the general consensus.

Proven recipes for failure: budgeting

The first recipe

The first tried and tested recipe for failure: Each department has its own budget. This recipe is a variation of what was discussed in the previous newsletter. "If everyone sweeps their own door" and the same tried and tested recipes can also be used here.

The second recipe

Second tried and tested recipe for failure: No deficit no surplus!
That sounds like a very good principle. But when the planned growth comes into view, the budget round sometimes degenerates into tug-of-war in order to get as much of the cake as possible. Let's look back for a moment at the situation of NV AQUIT from the previous newsletter, where the annoying competitor went for a 5% market share. The CEO and CFO are now sitting down together to get everyone back in the ranks at this crucial moment. The earlier list with the 137 points for improvement remains very tactical because the CFO wants to limit the discussion to the next 4 points:

1. I cannot spend the same euro twice because I do not have an infinite budget.
2. The additional budget for sales and marketing did not work out last year.
3. Every manager will say that there are so many other priorities and so there is no time for frustrating grades and follow-up.
4. Every manager takes his or her responsibilities, he or she gets his or her own costs and with that: basta!

The CEO nods yes, because there is nothing against that and in his sleepless nights he had already come to the same decision. So what now? - (If you are interested in the underlying logic, first click on ...) The existence of this underlying logic had apparently not been seen. Nor is it reflected in the classic cost-budgeting system. The common cause of the misery is indeed to be found in the 4th point.

The third recipe

Then there is the third proven recipe for failure: focus only on costs. If the focus is mainly on costs, there is also no insight into the main limitation (the real business train) and the interaction between the components is further denied and made more difficult. The mathematical impact of costs (insofar as these are also real expenses!) on the result is calculated by summing up its elements. The impact of a constraint or - if correctly identified and managed - of a lever is represented by a multiplication. This means that you get much more result with the same effort.

Usually there is a tendency to reduce costs in response to unexpected situations. This panic reaction is better avoided if you have a permanent business diagnosis, for example as part of the CDS2 (Constraints Driven Strategy System). This system helps you avoid the pitfalls and supports your growth with a core budgeting technique by linking market-constraint analysis with internal and financial constraints.

Proven recipes for failure: staff shortagest

No wonder, the economy is picking up and no suitable people are being found for certain jobs. So bottlenecks are arising again!
Do you also have to deal with one (or more) of the following effects? Then it is best to read on.

1. The economic situation is improving.2. Our customers are served (or delivered) later, or
3. More overtime is knocked, or
4. There is more stress and risk of burn-out or
5. We need to put out more and more fires, or
6. There is no time for structural improvements, and
7. The expected surplus profit from additional sales will not be realised.

Whether you deliver goods or services is irrelevant, the effects are the same.


The first recipe

Yes, you may take a moment to read on! -Because this is the first tried and tested recipe for failure: no longer paying attention to structural improvements, which can lead to vicious circles.

The second recipe

A second tried and tested recipe is: not (or do not want to) see the dangerous logic behind it.
Take a look at an example of logic. Perhaps there are parallels.

Logic behind the effects

The third recipe

The third proven recipe is to wait for...Yes, for what? Until you have found the right workers? - Until when there is less demand? - Until when your competitor has cut off some of your market share?

The fourth recipe

A fourth tried-and-tested recipe is: do not include the growth opportunity in your budget for the following year, because: no time for it, it will cost extra money, everyone's money, we don't see how...

By using the TOC techniques and tools, you can avoid these pitfalls by turning these constraints into (profit) growth opportunities in a short period of time.