ERP

Your Digital Resolution for 2017

Is your company ready to absorb what you're going to throw at it this year - more customers, higher sales, lofty revenue targets, and elevated customer service expectations?

Embracing a "digital" mindset will not only help through the tools it brings - better analytics, big data, mobile, and cX (customer experience) tools - but can transform an entire company's culture to be more customer-centric and better able to execute quickly and accurately.

Middle market companies want to understand how to evolve into this new paradigm and avoid the cost, disruption, and risk of jumping in all at once. To that end, here are three simple things you can do in 2017 to get your team ready for digital transformation:

1. Focus on creating a culture of execution

Why

A organisational culture that is not built for speed or set up for continuous improvement will impede the successful delivery of digital projects,
— Kapil Bagga, GROW-Strategy.com

Digital is all about execution - constantly improving how you serve your external and internal customers and constantly innovating, implementing, and iterating. Achieving small execution victories will build a culture that prioritizes action and will serve as an example for long-time employees about the value this mindset brings.

Just as importantly, an execution culture knows how to fail small and move on. This is difficult for historically risk-averse environments and takes strong leadership to change.

How

  • Execute a project in Q1. Pick a project, a small project. Assign it to someone. Ask them to create a plan. Assign a team. Meet for status weekly. Make sure it's adopted by the business. Simple!
  • Do at least one technology project. No matter what industry you are in, software will be a major driver of your capacity to execute over the long-haul. Bring in the right people to help decide on the project, choose how to do it, and manage it through to execution.
    • Simpler projects can include reorganizing your inventory, improving how people are quoting, or rolling out a new sales tool to your staff.
    • If the business is ready, extend yourselves by touching a large system and more people - inventory control, time and expense tracking, order management, or even a full-blown ERP or CRM project.
  • The goal should be to get someone in your company to plan and execute a project, to improve one very specific area or solve a specific problem, and to prove to your people that not only can changes make things better for them, they can be done with little disruption and be led by people you have.

2. Start a mentoring program

Why

Digital requires collaboration towards the goal of total company achievement. Succeed together on small things that mean something big for the company. This means everyone in your organization needs to support each other and be vested in one another's success. Mentoring relationships send a strong message about how you intend to grow people internally, allow them to develop over time, and how your most experienced people need to invest in the next generation. The best encourage open and honest dialogue without fear of retribution. They also serve as arguably the strongest way to retain and grow young talent.

(C) 2016 Ronan Consulting Group, LLC

How

  • Start small - assign one or two junior staff members to experienced staff who have the mentality of a mentor
  • Create a simple list of topics you expect them to work on (avoid developing a complex framework of expectations). Examples could include career counseling, identifying key skills to develop, helping them network within the company, or exposing them to more of the marketplace. They could even include 360-degree elements with the younger staff member expected to teach the experienced staff member something specific.
  • Set aside budget for them to go to lunch occasionally 
  • Meet with both every 6 months to see how it's going. Don't ask for a formal report - just make sure they are talking about important topics for both the company and the junior staff personally. Contrary to popular theory, I do NOT advocate measuring the program off the bat. Evaluate it qualitatively first, then move towards a more structured program later on.

3. Start planning your digital IT function

Why

Effective digital tools require a number of foundational capabilities - a strong ERP/CRM and enterprise systems platform; a level of consistency with your business processes, and baseline technology skills throughout the organization. The odds are, you have some deferred maintenance in these areas. You may not be able to dive in right now, but you can plan the specific steps to prepare your organization to get there over the next 12-18 months.

For example, a central piece of your analytics strategy will be analytics. In their 2016 Tech Trends report, Deloitte called out "information acquisition and curation" and "information delivery" as two key elements of an analytics program. These items require strong underlying enterprise systems, disciplined processes, and well-established integration between your systems. These are all items you can work on now before you make the investment to dive into the latest and greatest analytics tools.

How

  • Create a roadmap to get to the digital future you want. The right consultant will ensure the roadmap is aligned with your overall strategy and contains the foundational elements required to quickly evolve into a digital model.
  • In the little projects we discussed in point 1, make your people accountable not just for implementing, but for monitoring success and improving the systems once they are being used by the business; and second, focus on agile development - constantly rolling out small improvements that add up to something substantial over time
  • Start vetting vendors who may offer long-term relationships to help build your digital capabilities. Make sure they are selected in a way that aligns with your roadmap long-term 

Even if you are just starting to think about digital, that's still a huge step in the right direction. Commit to spending the next year setting the stage for digital and beginning to evolve the organization in that direction.

Tolerate small failures, learn as a team, and generate lots of new ideas. Learn the digital marketplace - webinars, conferences, vendor demos are all great, easy ways to do this.

And have fun. Digital capabilities are exciting - enjoy the journey!

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How do we decide whether to keep, replace, or enhance our systems?

Great systems can add tremendous value to your business. They make processes more efficient, control risk, deliver a better customer experience, and produce superior data and insight. Poor systems are inconvenient and sometimes devastating – demoralizing employees with red tape, offering a difficult and frustrating user experience, leaving data fragmented and inaccurate, and creating confusion with customers.

If your systems aren't adding the value they should, what should you, as a leader, consider when making decisions to keep, replace, and enhance your systems that maximize the possibility of success?

Systems are a lot more than just technology and business processes. They are behavior patterns, incentives for collaboration, institutionalized cultural norms, and tacit expectations for how your people should be efficient and effective. Successful systems account for:

  • Psychology - why do people think this way?
  • Sociology - how are groups of people behaving?
  • Tools - what do we use to do things better?
  • Management science - how do we measure what's happening?

They are of course also rooted in business science, mathematics, and core technology.  They amplify both desirable and undesirable behaviors and, in turn, either accelerate or hold back your business growth.

The success of your business systems will be determined by three main factors:

  1. How well the technology and processes fit your business strategy
  2. The quality and capabilities of the technology
  3. How well your users adopt

Understanding where your business stands with each of these will help you choose the best path forward.

For purposes of this article, “systems” refers to both the business processes and the technology used to support them.

Fit to the business

The basic question is: did you choose a reasonable solution up front? There are few legitimately bad software packages and also few that will exactly fit your business processes without modification. The question is not “Is the system perfect?” but rather “Did we make the right trade-offs and decide to change the right processes when we selected (or designed) the software?”

To be clear – if a system failure is because of a major deficiency in this area, you will probably need to replace it. If the deficiency is minor, see section 2 for a few ways to address it.

How do you ensure business fit?

A rigorous system selection will force your team to collaboratively decide on the most important requirements up-front and agree on major process changes. Systems projects are a litany of trade-offs – what needs to be perfect, what areas can you change your process to fit the system, and what processes are worth spending more effort and money on (e.g. customizing the system or purchasing a separate bolt-in). The thoughtfulness of these trade-offs are what will set the implementation up for success.

Do not skimp on the selection process. Some of the most expensive implementations are the result of the cheapest selections. Analyst reports will tell you general quality and focus of products, but not how appropriate they are for your business. You need to get inside your business, uncover its operating priorities and biggest value drivers, and match them with the systems you are considering. This takes a little bit of money and a lot of time from your best people – but it’s worth it.

Technology and Functionality

The base technology is usually fine – if it doesn’t “work” it can usually be fixed with some professional help. Custom software can be more challenging or more expensive, but these systems can be fixed as well. The good news is that in the new world of enterprise technology, there are many more options than those offered by your primary vendor to support your most valuable areas, mitigate major risks, or make a challenging system more palatable for your users.

Example: ERP

ERP systems are sprawling technologies that do a lot and ask a lot of their users. The accepted approach to ERP used to be to standardize business processes to the functionality of the package, adjusting only when absolutely necessary. This maximized the vendor’s ability to support the solution and tried to concentrate investment in the most important areas.

This isn’t necessarily the case anymore. There are more niche solutions, software is easier to build, and most platforms play nicely with each other. It’s more important to choose the right ecosystem of technologies that give your business flexibility and in the aggregate add the most value than it is to standardize on a specific package.

If your platform is mostly successful but failing in a small number of critical areas, is it possible to simply plug those holes with secondary applications? This is often easier, less disruptive, less expensive, and more effective. Odds are good that you can avoid a wholescale replacement.

In these cases, you should perform selection processes for add-ons where the base system doesn’t fit the business. This can include features like subscription billing, customer support, portals, analytics and reporting, or workflow applications. Not all packages do these things well, but there are many third-party products that will play nicely with your other systems and dramatically improve these areas.

User Adoption

Your users will ultimately determine the success of the solution. Assuming you made acceptable trade-offs, made reasonable assumptions, and have a fundamentally sound, supportable ecosystem, your users are responsible for the consistency, efficiency, and innovation the new systems drive.

If you don’t think your current systems are adding value, ask yourself: How much is due to poor technology and how much is due to employees resisting using it correctly?

Fixing user behavior is challenging. Most of it is set in motion during the implementation itself. When a system has been deemed a failure, it can be hard to recover. Good project managers will help manage these user expectations in the immediate aftermath of an implementation but this can only last for so long. If things spiral in the months following a go-live, sometimes this can be a lost cause.

So what do you do?

It depends on how bad it is. Sometimes a few loud user groups end up coloring the organization’s perception of the entire system. You need to put a laser-focus on these groups, solve their problems while giving them ownership, and slowly bring them back into the fold. At the same time you need to roll-out incremental improvements demonstrate momentum to improve the business.

If the system isn’t being adopted because people don’t understand it, this can be easier. Start with aggressively pursuing stakeholder buy-in from senior leadership. They need to re-inforce with their staff how important it is to use the system as intended and to identify additional training requirements. This needs to be combined with a rigorous enhancement process that uses stakeholder feedback to improve the system.

If this is the core problem, have an independent professional work with your users on assessing the source of the system’s weaknesses. They will cut through the noise and the politics and be able to tell you the heart of the problem. This is very difficult for anyone who had a stake in the original process.

And remember that the users’ complaints may be right: Maybe the system was the wrong choice or was not implemented well. Given that they have the most detailed view of the solution, they may have valid points in this area. In these cases, the details matter. Understand the specific issues instead of the broad complaints and have someone help you understand if they can be resolved or not.

Remember: it doesn’t matter what the users should be doing, it matters what they are doing. Blaming users doesn’t accomplish anything while giving them resources, listening to them constructively, and supporting them accomplishes a great deal.

In Summary

If you feel your business needs technology changes, look at your systems holistically. Understand the processes, the system possibilities, and the cultural needs of your users. Ensuring all of these elements directly support your growth strategy will greatly improve your business and ensure you can be successful as you grow over the long-term.

Most of all, get an independent opinion. It may end up saving you a lot of money and aggravation, and will certainly help confirm your best path forward.

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System Selection and the Future of Enterprise Software

Today's entry will be (uncharacteristically) brief because Gartner produced an excellent report on this topic that says much of what I want to convey about the future of enterprise tech.

Gartner's point of view on what they are calling "post modern ERP" can be found here. It is worth your time. (h/t to @John_Hoebler for bringing it to my attention) 

I fully agree with Gartner's view on this topic and it meshes with my experience in many of my full-lifecycle enterprise software implementations. For a few clients, the monolithic model has worked reasonably well, but for many - particularly in software, high-tech, services, and media - monolithic ERP has been a clumsy fit for substantial pieces of their business.

Now organizations have more options available to them. The enterprise software landscape is much more distributed than it used to be. The cloud has enabled many new, innovate enterprise tech companies to deliver products that are highly tailored to a single purpose or function (keeping in the spirit of the weather here in the Northeast, "snowflake systems", if you will). There are great solutions that now cover your most strategic functions. Some examples:

  • If you offer bundled services and the billing module of your ERP solution can't do the revenue recognition required, you can now use Zuora
  • If you have a customer service division that now needs to handle both products and services, there are options like Zendesk that can be used for all your call center operations regardless of the product or service that's stored behind the scenes in your inventory or order management systems.

Your ability to reduce the operational overhead of running these solutions - largely by hosting them in the cloud (usually public) - and turn your investment and people to more value-added activities like managing more integrated ecosystem of solutions and systems will be a greater determinant of your future success as an IT organization.

My point is this:

Software selection and project visioning is more important than ever for new ERP solutions as well as new software that supports any major business function.

New federated ERP models will force companies to carefully select the solutions to bring into their ecosytem based both on their fit to the business and their ability to seamlessly integrate with the core of the enterprise. My advice: don't short-change yourself on the selection process.

  • The decision on your systems will no longer be about the level of fit of every module of an ERP solution to your business processes and how much customization will be required. If it's a clumsy fit to order management but supports the rest of your business, try to find a better order management option.
  • Your should not automatically take a "no customization" route to your enterprise software implementation just because it creates IT complexity. If processes will be substantially sub-optimized by a clumsy process to fit an ERP platform, you should look to see if there is another solution available
  • More native integrations will be available and figuring out which systems and which cloud providers work best together will not be an important part of the selection process
  • Long-term TCO is no longer an adequate measure of a system's costs. If you are sub-optimizing business processes and making people's jobs more difficult to do, you are understating your TCO by ignoring the opportunity cost in these areas. (e.g. forcing data management responsibilities on a sales force because they are the entry point for customer master data)

Systems selection will be about the business goals you are trying to accomplish through ERP and how the systems will integrate with and support the best solutions for every other part of the business. It cannot, fundamentally, be just about the needs of the core area owning the implementation: it needs to also consider the relationship with the rest of the business and their systems.

Elegance used to be defined as the single solution or smallest set of solutions that can enable your business. Elegance now means the ecosystem of solutions that fit your business so well, they can truly help drive your strategy forward.

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Evaluating Your Finance Function

Does your finance function stack up to your scale?

One of the early functional areas that businesses outgrow is their finance function. The processes, systems and skills that are required to track, maintain and report on organizational finances as companies grow change dramatically. Think of finance as the core of your enterprise – not most critical, but certainly most foundational. Absent a strong finance foundation, it is very difficult to scale, grow and integrate your other functional areas and it makes your management of the business enormously more challenging and less discrete.

Today we will examine three common challenges within your finance function. This is not intended to be an exhaustive list of every problem you may encounter. Instead, these are some of the most common issues that occur and, more importantly, the issues that are most visible to non-finance executives. The solutions may be simple, they may be wide ranging. But once you know where your challenges are, it becomes much easier to establish a clear path to resolving them.

1. Your business makes a lot of manual journal entries

Why it’s a problem

Manual journal entries are error-prone, are not recorded on a timely basis and do not provide adequate control over your books. Since most categories of journals should be automatically generated during the course of business, they often indicate underlying issues with your systems and processes.

Other forms of this problem

a) you have non-accountants submitting requests for journal entries; b) your accountants are doing a lot of offline calculation (probably in Excel) to generate the journal entries (revenue recognition and asset depreciation are common areas for this); c) when something doesn’t look right in the general ledger, it is hard to locate the backup documentation

Common manual journal entries:

Revenue recognition, asset depreciation, lease payments, payroll, purchasing accruals, inventory valuation, receivables backlog

How to diagnose

Look at your previous three months of manual journal entries. If the number of entries is relatively limited, then you probably do not have a major issue. If there are many entries for the same category, you have an isolated problem that you can probably address on its own. If the entries are spread across multiple categories or there is not a distinct pattern for why the entries are occurring, then you have a bigger issue to address.

Possible Solutions

For one, you should evaluate your chart of accounts and make sure it is structured appropriately for your business. Many companies start with a simple chart of accounts and then grow to the point where it no longer provides enough data or structure for accurate reporting. Then, evaluate the integration between the general ledger and your various sub-ledgers (receivables, payables, fixed assets, project accounting, inventory, etc.). If there is manual intervention required during the transfer of financial data between these systems and the GL, then you have a systems issue you need to address. Finally, evaluate your overall finance strategy. If the system is not able to generate the accounting entries you need, it’s probably time to start looking at alternatives.

2. Reporting takes a lot of time and some desirable reports aren’t possible

Why it’s a problem

Reporting and analytics should be your easiest, most accessible tool for managing your business. If you can’t review your key metrics on a regular-enough basis, your ability to effectively manage your business suffers. Lots of time generally equates to lots of effort which means lots of error-prone, manual work.

Other forms of this problem

Let’s briefly distinguish management reports from operational reports. Operational reports are used by your managers to execute the operations of the business on a day-to-day basis and are not what we are addressing here. Management reports are used by leadership to make decisions about how to run the business and these are what we are discussing here. If your set of monthly or quarterly reports is variable (i.e. the exact same reports are not generated every month/quarter/year), if your reports change in form or format based on monthly or quarterly activity, if your finance department needs more than a few days to close the books and generate reports, or if you want to see some new types of reporting but they cannot be generated with your systems or numbers, then you have a problem that should be addressed promptly.

Common problem areas

Profitability and margin reporting is a common pain point for growing businesses - it’s fairly complicated and requires highly structured underlying data. Budget-to-actual reporting tends to maturate later on for many businesses and forecasting is often cobbled together from several imperfect sources of data (note: forecasting usually matures faster in manufacturing environments while lagging in professional services). It is unusual for basic P&L and balance sheet reporting to be an issue – most businesses have this down pretty well. If you have issues with this type of reporting you should probably address them immediately. In addition to being your only true source for good numbers, it probably means something unpleasant lurks beneath the surface.

How to diagnose

Look at your management reporting and see how replicable it is. Talk to the accounting department about how and on what platform they generate these reports. Talk to an expert about what reporting you should, reasonably be able to generate for your type and size of business and ask your managers to put them together. If you can report on most of what should be required then you’re probably in good shape; otherwise it is likely you have some technology/talent/process issues to address.

Possible Solutions

Solving your reporting issues may or may not require changes to your software. Many business actually possess the necessary tools but need to resolve issues in underlying business processes or data structures. This is less expensive to fix and can often be executed in-house, although you probably need some basic outside guidance on structuring the project. If you do not have a strong reporting platform and your finance systems are very old, then you may need a multi-step roadmap to fix the underlying systems and processes before implementing a more robust reporting platform. The good news is this can be done along with better operational reporting and sometimes real analytics so you won’t be fixing just one problem – you’ll be setting yourself up for more exciting management tools as well.

3. You don’t really trust your numbers

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Why it’s a problem

I probably don’t need to elaborate on this one

Other forms of this problem

a) If you have questions for the accounting department after reviewing your monthly/quarterly/semi-annual reports, the answer is frequently an adjustment in the ledger and reissuance of the reports that is required. b) It is not uncommon for your summary financials and the expected numbers from each department to not match up (inventory levels don’t seem in the ballpark of what your warehouse manager expects; PO accruals don’t seem to match what the purchasing manager thinks they bought this month, etc.). c) Your outside accountants have a hard time figuring out your numbers each period from the materials you provide.

Common problem areas

This could happen anywhere in the business, but start by looking at areas that a) have an offline process and toolset; b) Have a high monthly volume of transactions; or 3) Have the most people touching the transactions

How to diagnose

Have departments sign-off on the final accounting numbers for each period. If you currently only “close the books” annually or semi-annually, begin to move towards monthly or quarterly close cycles. Although they will be more frequent, they will also be less work and it will be much easier to perform a root cause analysis on any issues you find. After doing this, then start to see how many discrepancies you have on a regular basis.

Possible Solutions

This is more than likely going to start with a systems solution. The hardest part of performing root cause analysis on questionable numbers is finding all the data you need to back it up. The transactions for those numbers are the result of a process somewhere in your business and having a platform for that process that integrates with your finance systems will make your numbers more reliable, generate them with less effort, and cut overhead.

Closing Guidance

One thing to note on finance systems in general: the number of technology solutions available, level of automation that is now considered “normal,” and leading practices that have emerged over the past 4-6 years have substantially changed the expectations of a “corporate” finance department. The next tier of possibilities for your business are more exciting than anything in the recent past – real, insightful analytics, understanding customer profitability based on social media data, operational and sales automation. These are all tools that can dramatically improve how your business grows and can allow your best people to add more value than ever before. Start by improving your core finance operations and then understand how you can begin taking advantage of the new technology available to your business.

Have you encountered any other major problem areas in your finance area? Post them in the comments!

It’s always valuable to get a new perspective on your finance function and Ronan Consulting Group is here to help. Contact us today at info@ronanconsultinggroup.com or (203) 313-9480 to talk about what challenges you are facing in your business and understand what your assessment, diagnosis and improvement options are. 

 

 

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Dear Tech Buyers: The Customer Experience Matters!

It’s a new day in enterprise technology buying!

Today, Dion Hinchcliffe, Chief Strategy Officer at Adjuvi, tweeted a brilliant WSJ post authored by Bain partners Chris Brahm and Michael Heric [WSJ subscription required - find the link on my twitter account to read for free]. In my mind, it should be required reading for anyone with influence over a technology buying decision. Their point basically boils down to this: The average enterprise software user experience is lousy, big software vendors don’t really care because they have strong relationships with analysts and IT buyers, and they lock customers into long-term contracts on solutions that have crazy high switching costs. But this is changing rapidly. Now, it isn’t just IT making software decisions. Business executives and non-IT users are gaining more influence over buying decisions – one Bain survey that suggested that an entire third of this purchasing power has moved out of IT.

Here are my favorite quotes from the post:

for software, they [end users] complained of long and complex installations, poor integration and generally clunky functionality and interfaces.
Another common mistake we see is telling sales teams just to extend their IT sales efforts to business buyers…
IT buyers are accustomed to evaluating a technology’s features and functionality…Business buyers are more focused on outcomes…

Traditional enterprise software packages have a number of knocks against them: long implementations, middling fit to a number of business processes, massive infrastructure requirements, complexity that is very hard to change once it’s in place, and most of all bad end-user experience.

The reality is that newer software vendors (Think @NetSuite, @Workday) are now ahead of the big guys in terms of user experience. Big vendors have long-term contracts in place that still go out many years into the future and they have multi-year product lifecycles for major releases. They have not been incented until very recently to address many of these areas. In fairness, the large vendors are now rapidly catching up, but only after facing stiff competition from fast-growing competitors.

So what does this mean for those running selection processes - particularly when the sponsor is outside of IT? This has particular relevance for companies too small to have a fully mature internal IT capability and who have been making buying decisions without a strategic IT executive for years. 

It means there are substantially more good options in the marketplace to choose from and you should look at them carefully. You probably want to bring in someone to help you navigate the complexities and nuances of all the products that are available and come up with a good short list. The cost of doing this up-front will be easily offset by the money you save on licensing and implementation and downstream integration costs.

It means that there is no reason to rate big vendors higher than small ones just because of size. I would recommend setting a minimum threshold in terms of user base or longevity in the marketplace and give no additional credit to companies who exceed it. Scale in this area does not mean as much as it used to, and it may actually begin to damage the quality of your experience.

It means that you really need to understand the length and complexity of implementations. If an implementation seems too long (after you add 20-30% to the initial estimates) or too resource intensive, be sure to use it as a point of comparison with your software options. Newer, more agile packages and some of the most recent offerings from the big guys have addressed this. It really is possible to put together good solutions out of many small projects now, and integration is much less problematic and much less costly than it used to be. Don’t be afraid to go more best of breed either.

It means the buzzword “cloud” should really just be a given at this point. There are small, specific niches of the market that still need on-premise solutions, but the vast majority of companies have no reason to host their own software or to deal with upgrades. For more on this topic, take a look at John Hoebler’s excellent posts here on major cloud benefits and here on why you want to avoid upgrades.

It means you need to get real users in the room to help choose new software and do not allow them to de-emphasize the importance of the user experience. If the software is hard to use; if it makes people’s lives harder and complicates how you do business, the savings on IT maintenance and licensing will not amount to much. Research like the article references shows you’re not alone and the software vendors are being forced to catch-up. Choose partners who are showing a real effort to improve in this area.

Finally, it shows that the difference between business and IT continues to diminish. Your technology folks need to talk in terms of business strategy and operations and your business folks need to be fluent in technology. If you don’t yet have people who can tie these together, you will need to find someone who can help in the short-term and who can help you build these capabilities internally within you existing organization. While it may be an area you can hire consultants for on a project-by-project basis now, your long-term effectiveness will depend on your own people being able to sort through the complexities and priorities of these decisions on their own.

Thanks to Chris Brahm and Michael Heric for the great article and thanks to Dion Hinchcliffe for bringing it to my attention. As I said at the beginning, this should be required reading for any executive with influence over technology buying decisions.

 

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Three ways to think differently in 2015, Part 3 of 3: Technology and Talent

Technology and Talent: The under-rated link between simple tools and employee happiness

In the running of a company of whatever size, the hardest thing to manage is usually this: the delicate balance between the necessity for centralized control and the equally strong need for employees to have enough autonomy to make maximum contributions to the company and derive satisfaction from their work. To put it another way, the problem is exactly where within the company to lodge the power to make different kinds of decisions.”
— Thomas McCraw, American Business, 1920–2000: How It Worked

The tools organizations use have a direct impact on the quality of life of their employees. Good tools make people’s work lives better; bad tools make them much worse. Yet, hard-to-use tools continue to take center-stage for a significant portion of companies’ users. Why are we still accepting poor usability as a matter of course in the enterprise? Today we will discuss some of the reasons for this and look at several techniques to help you and your peers in leadership prioritize their people when making technology decisions.

The McCraw quote above is a broader expression of why companies often choose to implement technology: the need to establish control over business processes. This is most transparent in ERP implementations where the very concept is rooted in establishing more controlled business processes. Something we used to say about ERP systems is that even though they make some individual jobs more difficult, there is benefit to the overall organization that outweighs it. This type of thinking is still used to justify avoiding customizations or third-party bolt-ons that would make an individual’s job easier. These turn into “process fixes” which, translated to normal human language, means shifting unpleasant burdens away from the tool and onto the people doing the work. [I redacted an Uber joke that was here – we’ll open that can of worms another day]

Big technology implementations are really hard and take an enormous amount of people’s personal attention and effort. The reason people are generally ok with this is because they think they will benefit from the changes. But too often, when you look at less successful implementations, you see that things actually became more difficult for a substantial number of people.

The Problem with Complexity

Making people's jobs harder, of course, creates problems with “efficiency” and “effectiveness” and “productivity” – the pinnacle of talent management insight. All of these certainly suffer as a result of lackluster tools. The nice thing is that all three can be measured and discretely improved and they’ve been discussed extensively in research related to technology projects. In my mind, they also are only important to a point. Many companies who are focused on these metrics have reached a point of diminishing returns by now anyway.

There is an outcome that you cannot really measure: the connection between the tools and people’s happiness in their jobs. In most situations, people will not draw a direct connection between the clumsiness of their jobs and why they aren’t terribly happy performing them.

There are many reasons for this. Job happiness doesn’t represent a single factor – there is a complex matrix of factors that are weighted differently for different individuals. There are personal and professional reasons, tangible and abstract; physical and metaphysical; social and individual. Talent surveys do their best to pinpoint the source and quality of employee satisfaction, but even the people who create those surveys will tell you that establishing causality through them is an inherently flawed science. Fundamentally, most research agrees that a primary source of people’s job happiness (“satisfaction” is a loaded and misleading buzzword that I try to stay away from) is their feeling of personal connection to the overall mission of the company, and their belief in that mission.

Rosabeth Moss Kanter (@RosabethKanter), a professor at Harvard Business School, has done some wonderful research in this area. Among my favorite of her quotes is the following from a 2011 article called “How Great Companies Think Differently” (which won the McKinsey award for best business article that year). Kanter posits:

…people can be trusted to care about the fate of the whole enterprise—not just about their own jobs or promotions—and to catalyze improvements and innovations without waiting for instructions or sticking to the letter of a job description.
— Kanter, “How Great Companies Think Differently”

She prefaces this with a lengthy examination of why self-organization is desirable and why you don’t want to pigeonhole your people into overly rigid work structures. When the tools and processes people are using consume most of their time, they do not have capacity to accept change, let alone drive it. When those activities become visibly disconnected from the overall institutional mission, we need to expect they will lose a feeling of connection with the enterprise, experience less happiness about their jobs, and this will likely snowball into a number of symptoms of disconnected employees.

Arguments in Defense of the Status Quo

There are common responses to this critique I have had client leaders use as an argument against disruptive change. None of them are focused on the user. 

  • “Our retention rates are above industry averages, therefore our employees’ job satisfaction is acceptable.”

This is an incorrect attribution of causality. The assumptions in this statement include a) industry average retention rates are acceptable. Industry benchmarks can be directionally helpful, but some industries are way behind when adopting change; b) there is adequate mobility in the local market for people to change jobs at will. This is not true for many areas. Retention rates are important for a lot of reasons, but unless your tools are so bad that they are driving people away (which at this point in history would mean using UNIVAC-cards), they don’t really indicate satisfaction with tools one way or the other.

  • “Our HR surveys say our satisfaction rates are high!”

Great! This is important. It also probably means you’re compensating for your weaknesses in other areas. Like you’re giving lots of compensation and a whole bunch of PTO to people may be masking the fact that they really don’t like their jobs. The dimensions these surveys measure tend to move as a group. This doesn’t discredit the importance of the surveys and your ratings, but we need to recognize there are limits to measuring human attitudes. 

  • “Our leaders have many years of experience at our company – we promote from within so they understand the complexity truly required in our business.”

This is also great for many reasons, but it doesn’t really speak to the potential problem. This can also mean that people have accepted your processes and tools as “normal” even more and may be less likely to think changing them is feasible.

What do we do about it?

In general, enterprise technology is too complicated. There are young companies trying to change that (@Netsuite, @Zuora, @Zendesk, @SlackHQ, @Asana just to name a few), but solutions that are currently used at most organizations are overly complex. The complexity of those solutions is made up of three factors:

  1. Business processes
  2. System capabilities (including their relationships with each other)
  3. The cycle of inertia

Business process and system capabilities are complexities that most business leaders understand well. The cycle of inertia is harder to grasp and what, in my experience, leads to the least user-centered enterprise systems. Paradoxically, it’s often the users themselves who advocate for this cycle and their leadership that promotes it. 

The cycle of inertia is as follows:

  • Evolution: Organizations do things in a certain way and change it gradually over time to accommodate immediate business needs
  • Stabilization: Because they are no longer immediate needs, they stop simplifying and innovating how they do these things which eventually leads to an unnecessary amount of complexity in the business. This complexity is absorbed by the people who do the work as it is integrated into their jobs
  • Improvement: When the time comes to evaluate “improving” these things, there is resistance to change because people know how to do the more complex processes really well and they perceive the change as risky to their personal value. The improvement is stripped down to accomplish incremental benefits in the areas of most immediate importance to the users.
  • Inertia: Once the “improvement” is implemented, it ends up creating even more complexity because the incremental improvements add variation to the number of processes, data or systems. Since the organization has convinced themselves it is required for their business, they interpret this complexity as maturation. The cycle starts again.

The bigger the project and more people are involved, the harder it is to avoid this cycle. The only really effective way to overcome fully counteract inertia is by strong leadership support, but there are a few questions you should ask that can make it more likely you will be successful.

Key Questions to Ask

When talking about a prospective project, planning the project, and undergoing design, always ask these questions:

  1. Is this process absolutely necessary for our business? Can any steps be removed or variations be eliminated? The goal is to simplify. Even if the business says they need a certain process, make sure you understand what the intended outcome of that process is. Users are usually correct in insisting they need to do things in a certain way to meet their requirements; the real question is are the requirements important in the first place.
  2. What part of our business mission does this feature, software or process support? If it can’t be easily mapped – if it’s clumsily shoehorned into a part of the mission statement or if its relationship to strategy is heavily assumption driven (e.g. the strategy says we’re growing our services division and we’re assuming those services may be custom products, but that has never actually been established) then it’s not important enough to put effort into.
  3. Is the new system, bolt-on or customization required to make the system easier to use or to support a critical business process? Do not purchase additional software if it doesn’t make things significantly better from a usability or functionality standpoint. If it’s going to be supporting a specific business process, refer to question #1. It it’s critical for the business process but doesn’t make things easier, look for another option. Every additional piece of your ecosystem makes things become geometrically more complex to support. Make sure it’s justified by making the business processes simpler.

And one special question. You know if this applies to your organization. For systems that are replacing Excel or Access: Is the new system going to be easier to use than Excel and/or Access? Excel-intensive operations yield really smart Excel users. People who are great at Excel are not going to want to switch to a system with basically the same functionality they have today but without the flexibility Excel provides. Make sure the system adds value to the user experience – not just to the enterprise.

Technology Characteristics to Prioritize

These three technology characteristics have the most substantial impact on usability and the perception of usability. Weigh these strongly when evaluating a new solution anywhere in the business.

  1. User interface: Does the interface look like something employees use at home? This is too often minimized in the interest of functionality or cost. Make no mistake: for systems, form is function. If the interface isn’t as friendly as Amazon or Zappos or Zillow, it will not be considered user-friendly. Be specific and don’t be afraid to be critical. As a side-note, when working with smaller vendors don’t be afraid to communicate your ideas on how the products can be improved. Many startups will work with you on improving their products and actually rely on that type of feedback.
  2. Mobile: Will the system by available to my employees on more than one platform and does it at a minimum allow, at a maximum encourage mobility? This assumes you have a hardware policy that allows laptops, tablets and smartphones for these employees. If you have any group that is still tethered to their desks, think very long and hard about whether it is truly necessary. Mobility doesn’t just mean working from home; mobility means the ability to work in flexible teams around the office, hold group working sessions and, when necessary, work from home, hotels, airports, etc.
  3. Integration: Do the activities supported by this software interact with other groups or systems? If so, is that integration native or at least buildable? It needs to be. If you are integrating a system that will require users to complete dual entry or run reports to make the data portable you’re purchasing the wrong system.

In Summary

Improve people’s tools and give them a path, a method and a reason to continue to improve them and they will be happier with their jobs. Happy people yield positive results for them and for you and good tools multiply improvement. Strive for simplicity, humanity and continuous real improvement in your tools. Who knows – maybe your job satisfaction ratings will even improve.

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