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20-70-10

Excerpts from Winning, by Jack & Suzy Welch

Jack_suzy_welch If there is one of my values that really pushes buttons, it is differentiation. Some people love the idea; they swear by it, run their companies with it, and will tell you it is at the very root of their success. Other people hate it. They call it mean, harsh, impractical, demotivating, political, unfair - or all of the above. Obviously, I am a huge fan of differentiation. I have seen it transform companies from mediocre to outstanding, and it is as morally sound as a management system can be. It works.

  • Companies win when their managers make a clear and meaningful distinction between top- and bottom-performing businesses and people, when they cultivate the strong and cull the weak. Companies suffer when every business and person is treated equally and bets are sprinkled all around like rain on the ocean.
  • Differentiation defined: Differentiation is a way to manage people and businesses. It holds that a company has two parts, software and hardware. Software is simple - it’s your people – and that’s the more controversial of the two. It’s a process that requires managers to assess their employees and separate them into three categories in terms of performance: top 20 percent, middle 70, and bottom 10. Then and this is key - it requires managers to act on that distinction. I emphasize the word “act” because all managers naturally differentiate - in their heads. But very few make it real. 
  • When people differentiation is real, the top 20 percent of employees are showered with bonuses, stock options, praise, love, training, and a variety of rewards to their pocketbooks and souls. They are the best and are treated that way.
  • The middle 70 percent are managed differently. They are the majority of your employees. And that’s the major challenge, and risk, in 20-70-10 - keeping the middle 70 engaged and motivated. That’s why so much of managing the middle 70 is about training, positive feedback, and thoughtful goal setting. If individuals in this group have particular promise, they should be moved around among businesses and functions to increase their experience and knowledge and to test their leadership skills. 
  • To be clear, managing the middle 70 is not about keeping people out of the bottom 10. It is not about saving poor performers. That would be a bad investment decision. Rather, differentiation is about managers looking at the middle 70, identifying people with potential to move up, and cultivating them. But everyone in the middle 70 needs to be motivated and made to feel as if they truly belong. You do not want to lose the vast majority of your middle 70 - you want to improve them.
  • As for the bottom 10 percent in differentiation, there is no sugarcoating this - they have to go. That’s more easily said than done; it’s awful to fire people - I even hate that word. But if you have a candid organization with clear performance expectations and a performance evaluation process, then people in the bottom 10 percent generally know who they are. When you tell them, they usually leave before you ask them to. No one wants to be in an organization where they aren’t wanted. One of the best things about differentiation is that people in the bottom 10 percent of organizations very often go on to successful careers at companies and in pursuits where they truly belong and where they can excel.

Driving service at Enterprise

Excerpts from Driving Customer Satisfaction
Andy Taylor, in Harvard Business Review

  • Satisfying customers is a challenge for any service company. It's one thing for people toAndy_taylor believe in providing superior service and quite another to ensure that busy, ambitious, and largely autonomous managers stay focused on delivering it.
  • The problem was, the operating managers who were driving our growth (and who were being richly rewarded for that) didn't believe we had a serious, systemic problem. Building a consensus that something really was broken, then focusing the team's full energy on fixing it, proved to be a long and complicated process.
  • How did we improve the consistency of our service? We started by developing a solid method for measuring customer satisfaction. And we involved the full organization in the process, rather than just hiring consultants to handle it.
  • By letting the operating managers help build the questionnaire, we encouraged them to own the measurement.
  • Then we worked hard to make the index as actionable as possible. At first we reported scores by region or group. But the regional managers wanted to zero in on individual branch performance; that way, the branches that were having service problems couldn't hide behind the high aggregate scores.  We agreed to it, because the end result was a tool that would help hold branch offices accountable.
  • In the process, we exploded the myth that good managers already know where they need to improve.
  • Similarly, we found that "complete satisfaction" doesn't mean perfection. Our customers, we learned, care most about friendly service. Some of our "completely satisfied" customers had experienced glaring problems with their rentals, but what they remembered most was how quickly and courteously our people resolved the problem. That message gave branch managers a concrete target to shoot for. And it led us to focus the survey on those "completely satisfied" customers, who we learned were three times more likely than "somewhat satisfied" customers to choose Enterprise again.
  • As the index gained legitimacy, we made a big deal about it. We posted the scores prominently in our monthly operating reports - right next to the net profit numbers that determined managers' pay. The operating managers were able to track how they were doing, and how all their peers were doing, because we had ranked everybody, top to bottom.
  • Two years into the process, everyone generally understood the scores and accepted their validity. But we were still missing something: a sense of urgency. We got the message that it was time to put teeth into our efforts. We revamped our criteria for promoting employees: Field managers couldn't move up without achieving customer satisfaction scores at or above the company average. This big gun wouldn't have worked at the start, but with the ground carefully prepared, it was effective.
  • Finally, in the late 1990s, the scores began to rise. After being stuck in the high-60% range for years, the company average for "completely satisfied" reached the high-70% range in 2001 and it's still climbing, along with our market share. More important, we've narrowed the gap between the top- and bottom-performing branches - from 28 percentage points when we began to 11 percentage points now, a key indication that we are delivering more consistent service.
  • We certainly could have done a better job of preparing people for what became a long and highly experimental process. But we don't regret the process itself. We learned a lot about our customers and ourselves - including the lesson that quick-fix solutions won't work when it comes to delivering something as vital as high-quality customer service.

Sam Walton's 10 Rules

Excerpts from Running a Successful Company: Ten Rules that Worked for Me
Sam Walton, in Made in America

I didn't expect to find "get taxpayers to pay for your health insurance" on this list, and I didn't. Still, it's a pretty good list.

Sam_walton This isn’t the first time that I’ve been asked to to come up with a list of rules for success, but it is the first I’ve sat down and done it. I’m glad I did, because it’s been a revealing exercise for me.

I do seem to have a couple of dozen things that I’ve singled out at one time or another as the “key” to the whole thing. One thing I don’t even have on my list is “work hard”. If you don’t know that already, you probably won’t be going far enough to need my list anyway. Another thing I didn’t include on my list is the idea of building a team. It almost goes without saying that you absolutely must create a team of people who work together and give real meaning to the overused word “teamwork”. To me, that’s more the goal of the whole thing, rather than some way to get there. 

  1. COMMIT to your business. Believe in it more than anybody else. If you love your work, you’ll be out there every day trying to do it the best you possibly can, and pretty soon everybody will catch the passion from you – like a fever.
  2. SHARE your profits with all your associates, and treat them as partners. In turn, they will treat you as a partner, and together you will perform beyond your wildest expectations. Encourage your associates to hold a stake in the company. Behave as a servant leader in a partnership.
  3. MOTIVATE your partners. Money and ownership alone are not enough. Constantly think of new and more interesting ways to motivate and challenge your partners. Set high goals, encourage competition, and then keep score. If things get stale, cross-pollinate – have managers switch jobs with one another to stay challenged.
  4. COMMUNICATE everything you can with your partners. The more they know, the more they’ll understand. The more they understand, the more they’ll care. Once they care, there’s no stopping them. Information is power, and the gain you get from empowering your associates more than offsets the risk of informing your competitors.
  5. APPRECIATE everything your associates do for the business. All of us like to be told how much somebody appreciates what we do for them. We like to hear it often, especially when we have done something we’re really proud of. Nothing can substitute for a few well-chosen, well-timed, sincere words of praise. They’re absolutely free – and worth a fortune.
  6. CELEBRATE your successes. Find some humor in your failures. Don’t take yourself so seriously. Show enthusiasm – always.
  7. LISTEN to everyone in your company, and figure out ways to get them talking. The folks on the front lines – the ones who actually talk to the customer – are the only ones who really know what’s going on out there. You’d better find out what they know. To push responsibility down in your organization, and to force good ideas to bubble up, you must listen to what your associates are trying to tell you.
  8. EXCEED your customers’ expectations. If you do, they’ll come back over and over. Give them what they want – and a little more. Let them know you appreciate them. Make good on all your mistakes, and don’t make excuses – apologize. Stand behind everything you do. The two most important words I ever wrote were on that first Wal-Mart sign: “Satisfaction Guaranteed”.
  9. CONTROL your expenses better than your competition. You can make a lot of mistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient.
  10. SWIM upstream. Go the other way. Ignore conventional wisdom. If everybody else is doing it one way, there’s a good chance you can find a niche by going in exactly the opposite direction.

Those are some pretty ordinary rules, some would say even simplistic. The hard part, the real challenge, is to constantly figure out ways to execute them. You can’t just keep doing what works one time, because everything around you is always changing. To succeed, you have to stay out in front of that change.

Close to the customer

Excerpts from In Search of Excellence
Tom Peters & Robert Waterman Jr, Chapter 6: Close to the Customer

  • The best outside analysis of the close-to-the-customer-through service concept that we have come across was performed by Dinah Nemeroff.
  • Nemeroff finds three principal themes in an effective service orientation: (1) intensive, active involvement on the part of senior management; (2) a remarkable people orientation; and (3) a high intensity of measurement and feedback.
  • As we have found over and over, it starts with senior management. Nemeroff neatly calls it “Service statesmanship". Senior executives exercise that statesmanship through personal example.
  • Their commitment starts with a company philosophy. With service as their top goal, they said that “profitability naturally follows”.
  • Nemeroff found that top management directly intervenes in decisions about service. These mangers have frequent regular meetings with junior professionals who respond to customer mail. They pen “marginal notes on customer correspondence.” And “engage in dramatic service delivery gestures to increase visibility to customers.” (And, we would add, to reinforce this service message throughout their own organizations.)
  • Of another aspect of top management style, Nemeroff makes a crucial and surprisingly subtle point: “Interviewed executives believe they must maintain a long-term view of service as a revenue builder.” This point is all too often missed in big American companies.
  • Profit objectives, while very necessary, are internally focused and certainly do not inspire people by the thousands way down the line.
  • Service objectives, on the other hand, are almost without fail meaningful to down-the-line employees. A strong sense of personal accountability among down-the-line employees is crucial. And one knows that has been accomplished when someone in the field says “Each one of us is the company.”
  • Nemeroff makes the important connection that “customer relations simply mirror employee relations.”
  • Inseparable from the way the service-oriented companies manage their people is the intensity of measurement and feedback systems. Perhaps her most significant finding in this regard was that new rewards and incentive programs are in continuous preparation.
  • This really struck us in all aspects of the work of the excellent companies. Programs for people - incentive programs, training programs, or simple hoopla - undergo continuous retuning, much as product development does. No practice is expected to have impact forever, and programs for people have life cycles just as products do, maybe even shorter ones.

The revolution begins with you

When I started this blog, one of my concerns was that the customer service literature mainly tends to treat those of us who actually provide the service as objects to be manipulated (see "That's a good doggie"). I argue that for any customer service program to succeed, providers must turn that bias on its head. We must exercise leadership, and take personal responsibility for our success. While trying to develop that theme, I recalled this article by Peter Drucker, who died in November 2005, after having devoted 70 of his 95 years to the hope that he could make us better people, as well as better managers.

Excerpts from Managing Oneself
Peter Drucker, in Harvard Business Review

Peter_drucker We live in an age of unprecedented opportunity: If you've got ambition and smarts, you can rise to the top of your chosen  profession, regardless of where you started out. But with opportunity comes responsibility. It's up to you to carve out your place, to know when to change course, and to keep yourself engaged and productive.

To do those things well, you'll need to cultivate a deep understanding of yourself -- not only what your strengths and weaknesses are but also how you learn, how you work with others, what your values are, and where you can make the greatest contribution. Because only when you operate from strengths can you achieve true excellence.

What Are My Strengths?

  • A person can perform only from strength.
  • We need to know our strengths in order to know where we belong.
  • Most people think they know what they are good at. They are usually wrong.
  • The only way to discover your strengths is through feedback analysis. Whenever you make a key decision or take a key action, write down what you expect will happen. Nine or 12 months later, compare the actual results with your expectations.
  • Several implications for action follow from feedback analysis.
  • First and foremost, concentrate on your strengths. Put yourself where your strengths can produce results.
  • Second, work on improving your strengths.
  • Third, discover where your intellectual arrogance is causing disabling ignorance and overcome it. Far too many people -- especially people with great expertise in one area -- are contemptuous of knowledge in other areas or believe that being bright is a substitute for knowledge.
  • It is equally essential to remedy your bad habits -- the things you do or fail to do that inhibit your effectiveness and performance.
  • One should waste as little effort as possible on improving areas of low competence. It takes far more energy and work to improve from incompetence to mediocrity than it takes to improve from first-rate performance to excellence.

How Do I Perform?

  • Amazingly few people know how they get things done. Indeed, most of us do not even know that different people work and perform differently. Too many people work in ways that are not their ways, and that almost guarantees nonperformance.
  • Like one's strengths, how one performs is unique. It is a matter of personality.
  • Just as people achieve results by doing what they are good at, they also achieve results by working in ways that they best perform. A few common personality traits usually determine how a person performs.
  • Am I a reader or a listener? What’s the best way for you to get information? The first thing to know is whether you are a reader or a listener. Far too few people even know that there are readers and listeners and that people are rarely both. Even fewer know which of the two they themselves are.
  • How do I learn? There are people who learn by writing. Some people learn by taking copious notes. Some people learn by doing. Others learn by hearing themselves talk.
  • Do I work well with people, or am I a loner? And if you do work well with people, you then must ask, In what relationship? Some people work best as subordinates. Some people work best as team members. Others work best alone.
  • Do I produce results as a decision maker or as an adviser? A great many people perform best as advisers but cannot take the burden and pressure of making the decision. A good many other people, by contrast, need an adviser to force themselves to think; then they can make decisions and act on them with speed, self-confidence, and courage.
  • Do I perform well under stress, or do I need a highly structured and predictable environment?
  • Do I work best in a big organization or a small one?.
  • Do not try to change yourself -- you are unlikely to succeed. But work hard to improve the way you perform. And try not to take on work you cannot perform or will only perform poorly.

What Are My Values?

  • To be able to manage yourself, you finally have to ask, What are my values?
  • Organizations, like people, have values. To be effective in an organization, a person's values must be compatible with the organization's values. They do not need to be the same, but they must be close enough to coexist. Otherwise, the person will not only be frustrated but also will not produce results.
  • A person's strengths and the way that person performs rarely conflict; the two are complementary. But there is sometimes a conflict between a person's values and his or her strengths. What one does well--even very well and successfully -- may not fit with one's value system. In that case, the work may not appear to be worth devoting one's life to.
  • Values are and should be the ultimate test.

Where Do I Belong?

  • Most people, especially highly gifted people, do not really know where they belong until they are well past their mid-twenties. By that time, however, they should know the answers to the three questions: What are my strengths? How do I perform? and, What are my values? And then they can and should decide where they belong.
  • Or rather, they should be able to decide where they do not belong. The person who has learned that he or she does not perform well in a big organization should have learned to say no to a position in one. The person who has learned that he or she is not a decision maker should have learned to say no to a decision-making assignment.
  • Equally important, knowing the answer to these questions enables a person to say to an opportunity, an offer, or an assignment, "Yes, I will do that. But this is the way I should be doing it. This is the way it should be structured. This is the way the relationships should be. These are the kind of results you should expect from me, and in this time frame, because this is who I am.”
  • Successful careers are not planned. They develop when people are prepared for opportunities because they know their strengths, their method of work, and their values. Knowing where one belongs can transform an ordinary person -- hardworking and competent but otherwise mediocre -- into an outstanding performer.

What Should I Contribute?

  • Knowledge workers have to learn to ask a question that has not been asked before: What should my contribution be? To answer it, they must address three distinct elements: What does the situation require? Given my strengths, my way of performing, and my values, how can I make the greatest contribution to what needs to be done? And finally, What results have to be achieved to make a difference?
  • It is rarely possible -- or even particularly fruitful -- to look too far ahead. A plan can usually cover no more than 18 months and still be reasonably clear and specific. So the question in most cases should be, Where and how can I achieve results that will make a difference within the next year and a half? The answer must balance several things.
  • First, the results should be hard to achieve -- they should require "stretching," to use the current buzzword. But also, they should be within reach. To aim at results that cannot be achieved -- or that can be only under the most unlikely circumstances -- is not being ambitious; it is being foolish.
  • Second, the results should be meaningful. They should make a difference.
  • Finally, results should be visible and, if at all possible, measurable.
  • From this will come a course of action: what to do, where and how to start, and what goals and deadlines to set.

Responsibility for Relationships

  • Very few people work by themselves and achieve results by themselves. Most people work with others and are effective with other people. Managing yourself requires taking responsibility for relationships. This has two parts.
  • The first is to accept the fact that other people are as much individuals as you yourself are. This means that they too have their strengths; they too have their ways of getting things done; they too have their values. To be effective, therefore, you have to know the strengths, the performance modes, and the values of your coworkers.
  • Bosses are individuals and are entitled to do their work in the way they do it best. It is incumbent on the people who work with them to observe them, to find out how they work, and to adapt themselves to what makes their bosses most effective. This, in fact, is the secret of "managing" the boss.
  • The same holds true for all your coworkers. Each works his or her way, not your way. And each is entitled to work in his or her way. What matters is whether they perform and what their values are. As for how they perform -- each is likely to do it differently. The first secret of effectiveness is to understand the people you work with and depend on so that you can make use of their strengths, their ways of working, and their values.
  • The second part of relationship responsibility is taking responsibility for communication. Most conflicts arise from the fact that people do not know what other people are doing and how they do their work, or what contribution the other people are concentrating on and what results they expect. And the reason they do not know is that they have not asked and therefore have not been told.
  • Organizations are no longer built on force but on trust. The existence of trust between people does not necessarily mean that they like one another. It means that they understand one another. Taking responsibility for relationships is therefore an absolute necessity. It is a duty.

Conclusion

The challenges of managing oneself may seem obvious, if not elementary. And the answers may seem self-evident to the point of appearing naïve. But managing oneself requires new and unprecedented things from the individual, and especially from the knowledge worker. In effect, managing oneself demands that each knowledge worker think and behave like a chief executive officer. Further, the shift from manual workers who do as they are told to knowledge workers who have to manage themselves, profoundly challenges social structure. Every existing society, even the most individualistic one, takes two things for granted, if only subconsciously: that organizations outlive workers, and that most people stay put.

But today the opposite is true. Knowledge workers outlive organizations, and they are mobile. The need to manage oneself is therefore creating a revolution in human affairs.

Blanchard on recognition

Notes from Customer Mania
Ken Blanchard

  • The real bread and butter for effective managers and leaders is the day-to-day monitoring and feedback of people’s performance.
  • The key to developing people and creating great organizations is to accentuate the positive, that is to catch people doing things right.
  • Focus on what you want people to do, not on what they did wrong. People want to know when they are performing well, and if they are not, they want to be helped back onto the right path.
  • One caution about praising and recognition: don’t wait to acknowledge people’s efforts until they have done it exactly right; otherwise you might wait forever. Remember: Praise Progress.
  • Have an Employee of the Moment program. If you see someone going the extra mile for an internal or external customer, recognize her on the spot.
  • Praising makes people and relationships strong.
  • People love to be caught doing something right. When it comes to catching people doing things right, and reinforcing the importance of your values, it doesn’t hurt saying it over and over and over again. How many of you are sick and tired of all the compliments you get at work? We can never get enough.

Peters & Waterman on recognition

Notes from In Search of Excellence
Tom Peters & Robert Waterman Jr

POSITIVE REINFORCEMENT

  • Negative reinforcement will produce behavioral change, but often in temporary and undesirable ways. Positive reinforcement causes long-term behavioral change in the intended direction.
  • Reinforcement must be specific, with detailed information on the act that deserved praise.
  • Reinforcement should be immediate.
  • What is being reinforced must be achievable—the system should reward small wins. Good-news swapping is common in excellent companies.
  • Intangible reinforcements, such as recognition from top management, are powerful incentives.
  • Frequent small rewards are more effective than rare large ones. Big bonuses often become political. The small reward, the symbolic one, is a cause for celebration, not a cause for envy.
  • The manner in which a reinforcement is applied is more important than the magnitude.

INTRINSIC MOTIVATION

  • While external motivation produces better performance, it is self-motivation that yields the highest performance.
  • Lasting commitment to a habit, a value, or an organization comes from a person’s belief that it is inherently worthwhile.

That's a good doggie

Many of the readings on customer service that I will summarize in this blog deal with how to improve customer service, and develop a customer service culture in organizations. In customer service literature, the emphasis tends to be on doing things to people, such as "engaging", "empowering", "recognizing", "incentivizing" employees.

That's all very nice, I'm sure, but whatever happened to personal responsibility? Why wait to be engaged, empowered, recognized, incentivized, or in any other way manipulated? Are we at best cute little puppies to be trained to turn tricks for treats? I would like to think that there are people out there who need no masters but themselves, who find that serving others is inherently good, and intrinsically rewarding.

But back in the real world, I suppose the experts recognize that such people are rare, or not likely, if they're that good, to be working in customer service. Still, one can dream. Nice doggie.