Competitive advantage through people has always been a goal of modern leadership and becomes more critical as product and price differentiation narrow.  Traditionally, the role of creating more skilful and focused people has been given to HR and training.

Research tells us that classroom training (whether it be real or virtual) is only appropriate for 15% of development needs  (Rummler 1995).  Not only does this cause concern about the use and abuse of training events, it also raises the tantalising question of what is appropriate if training is not?

The broad answer is workplace rather than classroom development.  To explore this more closely, the researchers seem to indicate that regular interaction, rather than one off events, leads to enhanced skills and increased performance.

The diagramme above has been created as a result of applying a range of performance improvement techniques to varying organisations over a 20-year period (www.prosell.com).  It indicates that with a “clean sheet of paper” (i.e. no preconceptions or bad habits, as with new starters or new roles), people can more easily accept, in a training environment, that specific skills and approaches are correct and need to be mastered.

With individuals that already have a perception of what is right and wrong and in some cases extremely entrenched opinions, a different approach needs to be used.  Not only do we need to explain why new skills are needed, we also need to sensitively reassure people that they and their (old) skills are not redundant, but need to be adapted and updated.  If we are attempting to change behaviour, as opposed to initiating it, coaching is shown to be a more effective tool.

In order to develop further the rationale for this model and the positioning of coaching, we need to be familiar with the relationship between management intervention and performance/behaviour change.

The US organisation Technikron conducted research into the level of intervention needed to drive behavioural change.  (Technikron work with performance measurement and feedback systems in contact centres.  The research was conducted in 1997.)

They concluded that to change behaviour the manager needed to interact with the individual, on average, 2-3 times a week.  This raises serious concerns about the effectiveness of more traditional performance management tools, such as annual appraisal and performance reviews (Appraisals – A Good Investment?  Prosell Research, 1993).

Whereas we accept that most good managers talk to their people more often than just at appraisal time, our experience tells us that this is not a series of regular interactions which are carefully planned to reinforce changes in behaviour and provide input (coaching), when needed.

Coaching also has greater impact in terms of immediacy of resolution and as such, should be a primary development tool.

Danger of re-training 

There seems to be growing evidence that organisations accept that people will go through the same training (level and subject matter) at regular intervals (apart from compliance training).  This implies a number of unhealthy traits within the organisation:

• there is no consequence for not applying skills in the workplace; and

Once this becomes accepted practice it also has an impact on the quality of training delivered.  If people are not measured in their application of what they have learnt, then the training does not need to ensure comprehension, let alone competence.

The other major implication is centred on who is nominated for training in the first place.  Research suggests that the primary reason for training is performance discrepancy or skill weakness.  Those with skill weaknesses or areas for obvious development are not those who implement training well and willingly in the workplace.  There is clear evidence that, “those who need it most use it least” (Dettaman and Steinberg, 1993).

Questions must therefore, be raised about both the economics of re-training and the validity of the practice.

The Skill Development model and its implications

The model opposite shows that individuals go through three stages when acquiring skills.  Typically, the first and last stages, those of awareness and application, are workplace activities and in the main, management responsibilities.

The two figures on the left hand side of the model above illustrate important points.  The 35%-40% marks the point where people end up after training (on a competence scale of 1%–100%).  This means that the majority of the acquisition of competence takes place in the workplace.

This is broadly accepted within the training fraternity.  Whereas training allows people to explore new ways of doing things and hopefully exposes them to “best practice”, it does not create experts.

If expertise is acquired in the workplace and not the classroom, then we must accept that specific things need to happen in the workplace.  Primarily, people need to be coached and given feedback on their competence.

Our 20 years experience tells us that, proportionately, the following time and effort needs to be expended to successfully take an individual through the skill development process:

• Awareness     25%
• Practice         35%
• Application     40%

The second figure (5%-9%) is where the research tells us people end up if nothing is done in the application phase.  This is typically between unconscious incompetence and conscious incompetence.  This typically happens with 4 – 5 months.  This is a startling figure and perhaps explains why many people in business have a cynical view of the value of training.  It seems they are right.  Without specific application strategies, companies are wasting between 91 and 95 cents of every dollar they spend on training.

Practice and Feedback

It is commonly understood that people develop skills through one primary mechanism, practice and feedback.  Conventional training tends to be squeezed for time and it is inevitably the practice sessions that are sacrificed.  Too much content and not enough practice creates uncertainty in application, through issues of confidence and competence.  If a person cannot, through practice, feedback and practice again, achieve a point of competence (“I have practiced this to the point where I feel competent to do it in the workplace”), they have no confidence in applying skills.  The implications of this are that many people (over 75% in one study) actually avoid applying skills trained because they have no confidence that they will be effective.  Those organisations that use coaching as a development tool do not seem to face these issues.

Near and Far Learning

Noted behavioural scientists, Detterman and Steinberg, published a book in 1996 entitled Transfer on Trial.  The book focused on the issue of learning transfer (the measurable transfer of learning and skills from classroom to workplace).  Their research had concluded that 86% of training did not transfer effectively.  There were a variety of reasons for this – measurement, support, feedback (all key components of coaching).  They also spoke about the difference between near and far learning as a critical issue.

Far learning means completing exercises which are broad, generic and explore our understanding of principles.  Detterman and Steinberg’s research concluded that people found it difficult to relate broad principles to specific work situations – and as a result did not apply skills effectively.

Near learning produces significantly better results.  Near learning is practicing the specific skills needed, through customised and intelligently constructed exercises, so that the individual is practicing exactly what they are being asked to do in the workplace.  Coaching is the ultimate example of near learning – it says to the individual, “We are going to practice this until you feel you are doing it effectively and then evaluate as you do it live”.  As a result it is significantly more effective in ensuring learning transfer.

Performance Management and Coaching

Performance management practices (appraisal, review, goal setting, etc) all become uncomfortable, bureaucratic exercises if those responsible cannot add value and direction through coaching.  If neither party feels value is being added by the other, then both parties view the process as lacking in worth and tend to avoid it.

This also is reflected in a more serious deficiency that is commonly observed in management practice.  If a manager cannot rectify a performance deficiency they seem to imply that this is not their responsibility but solely that of the individual.

These situations end up with a management style of “I point out your weaknesses and you have to fix them”.  If one considers the fact that research tells us that the main reason people leave jobs is dissatisfaction with the way in which they are managed (Institute of Directors, UK survey, 2001), then managers’ inability to coach and develop may be having a much more serious impact.

Conversely, a good coach does more than just coach.  In order for a coach to be effective they must have a reasonable grasp of:

• Performance management;
• Motivation;
• Counselling;
• Development and support;
• Evaluation and feedback;
• Performance measurement;

Feedback also tells us that competent coaches add value to staff and have much better relationships with their people.  Creating a competent coach therefore, also creates competency in a number of essential areas.

Edward Johnson, one of the founding members of the Johnson and Johnson empire, was famously quoted as saying, ‘Leadership is cause, all else is effect.’  Leaders of people must all be aware that it is their behaviour, not the training department, which determines whether your people will out-perform the competition.

References

Douglas Detterman and Robert Steinberg, Transfer on Trial: Intelligence, Cognition and Instruction, Ablex Publishing, 1993

Geary Rummler and Alan Brache, Improving Performance: How to Manage the White Space in the Organisation Chart, 2^nd ed, Jossey Bass, San Francisco, 1995.

Source:

Peter Fullbrook, Founder, Prosell

The Total Executive Marketing & Sales Newsletter #1 has been released.

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It has Interviews, Tips and Knowledge about:

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Jeffrey Koser & Chad Koser "The Zebra concept itself is simple. Create the profile of your perfect prospect and measure all other prospects against perfection. Zebra score every prospect, decide your tipping point and don’t go over it. This is the hard part. Saying no for sales people is very hard. Yes is in their vernacular. No isn't even in their DNA. So when we tell you that part of the success of this process is to say 'no,' you'll understand this process will take some inspection to ensure it succeeds. Someone once said you can't expect what you don't inspect. Inspection is necessary for the Zebra way to succeed. You can drag a Zebra to water... you get the idea."

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Source: Change This

Sharpening Your Skills dives into the HBS Working Knowledge archives
to bring together articles on ways to improve your business skills.
Questions to be Answered

* How does the Balanced Scorecard (BSC) improve corporate governance?
* Does customer profitability increase using the BSC?
* Can BSC measures reduce the gap between strategy and execution?
* Does the BSC work in testing strategy?

How can the Balanced Scorecard improve corporate governance?

Working Paper: Improving Corporate Governance with the Balanced Scorecard

The authors review the key roles of corporate boards and recommend a
Balanced Scorecard approach to help boards work smarter, not harder.

Key concepts include:

* Reforms such as Sarbanes-Oxley have increased the amount of work
that boards need to do. A Balanced Scorecard approach can help boards
use their limited time effectively.
* An enterprise strategy map and enterprise Balanced Scorecard
should be the primary documents distributed to the board in advance of
meetings.

Does customer profitability increase using the BSC?

A Balanced Scorecard Approach To Measure Customer Profitability

Happy customers are good, but profitable customers are much better. In
this article, professor and Balanced Scorecard guru Robert S. Kaplan
introduces BSC Customer Profitability Metrics. From Balanced Scorecard
Report.

Key concepts include:

* In their zeal to delight customers, some companies actually lose
money with them by becoming customer-obsessed rather than
customer-focused.
* The BSC adds a metric that summarizes customer profitability.
* The ability to measure profitability at the individual customer
level allows companies to consider new customer profitability metrics
such as "percentage of unprofitable customers."

Can BSC measures reduce the gap between strategy and execution?

The Office of Strategy Management

Many organizations suffer a disconnect between strategy formulation
and its execution. The answer? HBS professor Robert S. Kaplan and
colleague Andrew Pateman argue for the creation of a new corporate
office.

Key concepts include:

* There is a persistent gap between the strategic goals that
organizations set for themselves and the results they achieve.
* An office of strategy management is intended to close that gap.
At the corporate level of an organization, it oversees all
strategy-related activities—from formulation to execution. It is
typically an outgrowth of a Balanced Scorecard program.
* The purpose of an OSM is to unlock value by making strategy
execution a distinct and recognized competency in an organization.

Does the BSC work in testing strategy?

Working Paper: Testing Strategy with Multiple Performance Measures
Evidence from a Balanced Scorecard at Store24

To what extent do Balanced Scorecards provide useful information for
testing and validating an organization's strategy? Analyzing Balanced
Scorecard data from Store24—a privately held convenience store
retailer in New England—this study investigates whether, when, and how
information about problems with the firm's strategy was captured in
the multiple performance measures of its Balanced Scorecard.

Key concepts include:

* Store24's Balanced Scorecard contained useful and timely
information for detecting problems in its strategy.
* The results also suggest that Store24 executives eventually
learned about problems with the strategy despite a lack of reliance on
such formal analysis.
* Analysis of the Balanced Scorecard could have yielded more
timely information as well as more detail on why the strategy was not
working as planned.
* Multiple measures in a Balanced Scorecard might systematically
be used to test how well different drivers of performance are working
to achieve strategic objectives and superior financial performance

Editor's Note: Harvard Business School professor John Quelch writes a
blog on marketing issues, called Marketing Know: How, for Harvard
Business Online. It is reprinted on HBS Working Knowledge.

When driving these days, do you look at the prices every time you pass
a gas station? Do you notice yourself paying more attention to the
prices of everything you buy? You are not alone. Consumers everywhere
are more price aware. People who've been indifferent to price
increases for years are suddenly amazed at what things now cost. How
can marketers cope not just with inflation but with consumer sticker
shock?

1. Understand Your Customers. There are at least four ways in which
customers can respond to higher gas prices: downgrade from premium to
regular; take fewer trips by car, consolidate errands, switch to
public transportation; take the same number of trips but reduce the
miles driven per trip by, for example, vacationing closer to home;
drive more economically and less aggressively to improve miles per
gallon; and buy a specific dollar amount of gas rather than filling up
every time, even though this may mean more visits to the pump. Some
consumers may even trade in (at a loss) the SUV for a hybrid, an
example of how price inflation on one product can cause demand shifts
in a second, related, category.

More customers than usual will be looking out for price
promotions, but don't give away the store to those who don't need the
discount.

2. Invest in Market Research. You must discard your existing customer
segmentation assumptions and segment consumers around product usage
behavior and price sensitivity. You must get out into the marketplace
yourself and talk to consumers directly to understand their pain
points and how they are changing attitudes and behaviors in response
to price inflation. You must then quantify these shifts and develop
product and pricing strategies that balance the need to maintain both
profitability and market share.

3. Redefine Value. Customers buying soft drinks can think about price
in three ways: the absolute cost per can or bottle, the cost per
ounce, and, less common in this category, the monthly consumption
cost. Customers short on cash will focus much more on the absolute
price. They'll go for the 99 cent soft drink rather than the $1.29
container with 50 percent more volume. To motivate cash-poor
consumers, marketers must reverse engineer products and packaging to
hit key retail price points. This may mean downsizing package sizes,
something the candy industry always does in response to inflation.

4. Use Promotions. If you've always passed through raw material price
increases to the end consumer, you don't necessarily need to change
that policy. However, lagging competitors in passing on price
increases can have the same effect as a temporary price promotion.
More customers than usual will be looking out for price promotions,
but don't give away the store to those who don't need the discount,
and cut prices not across the board but only on items selected as your
inflation-busters. For cash poor consumers, these promotions should
hit the key price points on small pack sizes. For cash rich consumers,
encourage multi-unit purchases ahead of the inevitable next price
increase.

Strong brands can hold consumer loyalty while increasing retail
price points.

5. Unbundle. Customers who previously welcomed the convenience of
buying product, options, and services rolled into one may now ask for
a detailed price breakdown. Make it easy for your more price-sensitive
customers to better cherry-pick the options and services that they
truly need by giving them an unbundled menu of options.

6. Monitor Trade Terms. Beware of powerful distributors paying you
more slowly than they turn the inventory they buy from you. In an
inflationary environment, they're making money on the float by
stretching their payables. Manage your inventory on a last-in,
first-out basis to insure that increases in your realized selling
prices do not trail the increases in your input costs.

7. Increase Relevance. You need to persuade customers to cut back
their expenditures on other products, not on yours. In tough times,
consumers more than ever need and deserve the occasional treat. So, if
you are Haagen Dazs, tell the consumer to substitute private label
peas for the name brand but to not forego the comfort of curling up on
the sofa with a tub of her favorite ice cream. Strong brands can hold
consumer loyalty while increasing retail price points. Weaker brands
risk private label and generic substitution.

Clearly, not all marketers are equally affected by price inflation.
Commodities like gasoline, where the manufacturer adds little value
before the product reaches the end consumer, are more vulnerable,
while sales of the most exclusive global luxury brands hold up pretty
well regardless of price. Especially challenged are marketers of goods
and services for which consumers don't necessarily understand the
input costs: decorative candles, for example, are highly sensitive to
oil prices and the purchases are discretionary. The key here is to
educate the consumer, apologize for the uncontrollable price
increases, give price-sensitive consumers some promotional options,
and reemphasize product benefits.

Q&A with: William A. Sahlman
Published: October 6, 2008
Author: Sean Silverthorne
Sean Silverthorne: "How to Write a Great Business Plan" has been one
of the most downloaded articles on Harvard Business Publishing since
you wrote it in 1997. Why do you think you hit a nerve?

Bill Sahlman: Writing a business plan is a seminal moment in the life
of a new venture. Doing so entails committing to paper a vision of the
factors that will affect the success or failure of the enterprise.
People take the exercise very seriously and get emotionally invested
in what they produce.

In that context, the article was written to give insights into how to
think about the role of a business plan and its relation to new
venture formation. I tried to explain that a business plan can't be a
tightly crafted prediction of the future but rather a depiction of how
events might unfold and a road map for change. I emphasized the notion
that successful entrepreneurs constantly seek the right mixture of
people, opportunity, context, and deal. They anticipate what can go
wrong, what can go right, and they try to balance risk and reward.

Over the years, I have received many e-mails from folks trying to
craft a business plan. They want feedback. Actually, they really want
me to say that they are on the right track. I explain that I would
need to get to know them and their opportunity much better than what
is possible in an e-mail and that the written document is not as
important as the people writing it. It's not science—it's art and
craft.

Q: In the decade since the original article came out, business
conditions have changed. If you were writing this piece today, would
you change it much?

A: I don't think the world has changed materially. Successful ventures
still have competent people pursuing sensible opportunities, using
resources that help, in a favorable context. Yes, the context is very
challenging today. But challenges create opportunities.

If gaining access to capital is hard, sometimes that means there will
be fewer competitors. This period is almost the antithesis of the
Internet bubble when everyone could raise money and start a company
regardless of how lamebrained the idea. Also, we have difficult factor
markets like energy, but that simply means that there are great
opportunities for people with ideas for alternative energy.

Were I rewriting the article today, I might emphasize the importance
of controlling your destiny by being conservative about access to
capital. Many great ventures in the Internet era (pre-1999) ended up
failing because they assumed they would have continued access to cheap
capital. Many of those businesses failed, though the underlying idea
was sensible. Similarly, we have seen a period when capital markets
got ugly, which has a negative effect on all ventures, sensible and
nonsensical.

I would also reinforce the idea that entrepreneurship is critical
around the world. We are confronted with many crises from health care
to the environment to global poverty. Solutions are likely to come
from talented private sector and social entrepreneurs.

Q: You wrote in the original article that most business plans "waste
too much ink on numbers and devote too little to the information that
really matters to intelligent investors." Still true today? What
really matters to investors?

A: When there is great uncertainty in the market, investors become
quite risk averse. They will only back proven entrepreneurs with truly
compelling ideas. People make the numbers, not conversely. So, I still
think the people making the forecasts are more important than the
numbers themselves.

Q: More and more entrepreneurial ventures are "born global": They seek
to address a global market and attract funding from global investors.
Should a business plan be tailored in some way for a global audience?

A: We live in a world of democratized access to ideas, human capital,
and money. There are fabulous global ventures being started in every
corner of the globe. These ventures can raise money locally or
globally. They can disperse talent in many countries.

Take a company like Skype. When I visited Skype several years ago, it
had 125 employees from 23 countries. The development team was in
Estonia, and its headquarters in Europe. Skype had raised seed capital
in Europe and in the United States. That's the new model.

Q: On the technology front, software applications such as Microsoft
Word, Excel, and PowerPoint have added many charting, graphing, and
visualizing capabilities. Some business plans are even written as Web
pages. Should entrepreneurs avail themselves of these tools for
business plans, or do they clutter the message too much?

A: On the first floor of the Rock Center at HBS there is a copy of the
original business plan that Arthur Rock wrote for Intel some 40 years
ago. It's only a few pages long, but it describes an outstanding team
pursuing a new technology. I have seen compelling business plans in
the form of a few PowerPoint slides, a couple of scribbled pages, and
a brief video. What matters is having all the required ingredients (or
a road map for getting them), not the exact form of communication.

Q: If you were to update your "Glossary of Business Plan Terms" and
what they really mean ("We seek a value-added investor" really means
"We are looking for a passive, dumb-as-rocks investor"), what current
terms would you include?

A: The glossary holds today. I think entrepreneurs, investors, and
employees need to be suitably skeptical about what they read in
business plans. I have read perhaps 5,000 plans and have only seen
three companies really meet their plan. That sounds like a pattern to
me. If anyone makes a bet based on the company doing exactly as
written, he or she will be sadly disappointed.

At the same time, every player has to be somewhat optimistic about the
possibility of overcoming inevitable setbacks. I think of ventures as
roller coasters, not rocket ships.

Q: Any general advice to entrepreneurs seeking funding in the
uncertain capital markets of today?

A: The best money comes from customers, not external investors. I
think entrepreneurs need ideas that are so compelling they can get
early money from customers. I also believe that great teams with great
ideas can continue to access capital on quite attractive terms from
outstanding investors. If the short term looks unsettled, that often
means that focusing on the long term has a big potential payoff.