Becoming a best of breed organisation

THE EXECUTIVE FIELD GUIDES

A MANAGEMENT ACCOUNTINGINDUSTRY SPECIAL EDITIONCONTENTS OVERVIEW AND EXCERPT

Dr. W. Edwards DemingFounder/Creator of the Japanese And Western Quality Movements

Becoming a best ofbreed organization

In association with

Leslie L. Kossoff is, quite simply, one of the bestat implementation.

Commendations for Leslie L. Kossoff “Leslie is direct, honest and accurate.”

Kenneth Romans Senior Vice President Fidelity Investments

“Inspiring and highly practical. Leslie has exactly what it takes to identify those crucial success factors and put them to work in any organization.”

Leon D. Rizio Vice President IBM

“She is almost prescient in her ability to identify and address what is in store. Listening to her message is a must.”

David Preimesberger Chief Financial Officer The Doctors Company

"Leslie Kossoff has the rare ability to effectively combine the objective elements of a situation with the passion of today’s business environment to create a success orientation that is uncommon in the day-to-day stride of management. Her ability to leverage individual strengths and views to stimulate the group raises synergy to a higher level.”

Wayne Kimball Senior Vice President Infonet

“Even as long as two years after Leslie had completed her work with us, I found myself thinking as issues were raised, ‘This is what Leslie was talking about. This is what she wanted me to be prepared for.’ And, because of her uncanny ability to see and understand what was to come, I was prepared.”

Donald Antenore Senior Vice President Kraft Foods

“Leslie’s elegant thinking and advice is stimulating, thought-provoking and immediately challenged and motivated us all to scrutinize how we are leading.”

Mark Goldring Chief Executive Officer Voluntary Service Overseas

“By bringing her considerable and wide ranging global experience across private and public sectors, Leslie helps Board Members discharge their fiduciary duty and address complex, difficult and sensitive issues – always with a mind to maximising performance and steering the strategic agenda to implementation and delivery.”

Dr. Isobel Simpson Non-Executive Director UK National Health Service

“Leslie’s concepts and expertise present existing and emerging executives not as much a “how-to” but more of a “what’s next.” Leslie provides challenge and support in appropriate measure, ensuring that each operational obstacle encountered is smoothed out via honesty, strategy and measurement – and that innovation, from all areas of the organization, is integral. This is a must-read for those who are pursuing the leadership path.”

Penni Wells Director, Business Programs California State University, Long Beach

“Leslie has redefined leadership for all with skills that are vitally important now and in the future.”

Richard Bulot Senior Vice President Seiko/Epson Corporation

“Leslie is a beacon of executive leadership, management and insight to even the most seasoned professional.”

Bernard Janov Commander United States Navy (Ret.)

“It was as if she reached into my brain, crystallized and put into words all the things I was never able to articulate myself. She spoke my dreams – and then told us how to make them come true.”

Takeo Minomiya Corporate Vice President Sony Corporation

"Leslie defines the essential qualities that all great leaders have and makes them available to each of us.”

Hon. William Huss Los Angeles Superior Court (Ret.)/ President, IVAMS Mediation and Arbitration Service

Published by The Kossoff Group, 2443 Fillmore Street, No. 501, San Francisco, CA 94115; 415 789 7285. The Management Accounting Industry Special Edition is published in association The Chartered Institute of Management Accountants, 26 Chapter Street, London SW1P 4NP. The Executive Field Guides are for individual use only. Licenses and special discounts are available to corporations, professional associations and other organizations. For details, contact The Kossoff Group by telephone at 415 789 7285 or by email at [email protected]. Copyright © 2010 by Leslie L. Kossoff. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without written permission of the publisher, except in the case of brief quotations embodied in critical articles or reviews. The Kossoff Group website: www.kossoff.com ISBN 0-9630724-7-1

www.kossoff.com/cima 4

BECOMING A BEST OF BREED ORGANIZATION

Table of Contents FOREWORD BY CHARLES TILLEY, CEO, CIMA 7 GETTING THE MOST OUT OF THE EXECUTIVE FIELD GUIDES 8 INTRODUCTION TO THE MANAGEMENT ACCOUNTING EDITION 11 PART ONE: CREATING A HIGH QUALITY ORGANIZATION

Executives and the High Quality Organization 15 The Four Quality Realities 19 Integrity and the High Quality Organization 21 Increasing Profitability Using the Three Pillars of Quality 22 Zero-Staging – The Fastest Way to Profitability 26 Process and Customer – Understanding the Voices of Quality 28 A Quick Quality Analysis – Who’s the Competition? 30 The Listening Executive 31

PART TWO: CREATING A HIGH QUALITY CULTURE

Intellectual Curiosity and the High Quality Culture 34 Culture as Behavior – The Foundation Stones 37

Challenge 38 Transparency 40 Synthesis 42 Accountability 44 Excellence 46 Resilience 48 Respect 50


PART THREE: STRATEGIC CONSIDERATIONS FOR INNOVATION

Adopting Innovation as Strategy 53 Ground Rules for Innovation Strategy 57 Balancing Competing Thinking Processes 61 Currencies 65 Monetizing and Strategizing Errors 69

PART FOUR: INNOVATION EXECUTION OPTIONS AND CHALLENGES

Risk 73 Complexity 76 Adjacencies 80 Disintermediation 86 Making Innovation Work 91

PART FIVE: THE FUNDAMENTALS OF DELIVERING PROFITABLE CHANGE

A Reality-Based Definition of “Change” 96 Strategy and Infrastructure 98 Speed, Expectations and Stealth 104 Balancing Activity and Results 109 Cost, Revenues and Profit 116

PART SIX: EXECUTIVE AND MANAGEMENT ROLES IN EXECUTING PROFITABLE CHANGE

Getting Past the Blah-Blah-Blah 121 Management, Employees and the Three Pillars of Quality 124 Bonus, Reward and Recognition Systems 127 The Management Fear Factor 129 The Employee Waiting Game 132


PART SEVEN: DELIVERY MODEL FOR EXECUTING PROFITABLE CHANGE

A Macro- and Micro- Execution Structure – The Three Phase Approach 137

Evaluation 141 Execution 147 Expansion 152

PART EIGHT: TROUBLESHOOTING CHANGE – AVOIDING THE COMMON FAILURES

The Troubleshooting Mindset – Using the Three Pillars of Quality 157 Avoiding the Most Common Failures 162 Diagnosing and Curing Failure 165

Misalignment 165 Disconnects 166 Imbalance 168 Asphyxiation 169 Sabotage 170 Sociopaths 171

ON BEING BEST OF BREED

Success and the Executive 174 DISCUSSION GUIDE FOR THE MANAGEMENT ACCOUNTING EDITION 175 ACKNOWLEDGEMENTS 183 ABOUT THE AUTHOR 184


Foreword

Charles Tilley, Chief Executive CIMA

Leslie Kossoff, the author of this Field Guide, worked alongside Dr. W. Edwards Deming, founder/creator of the Japanese and western quality movements. She has a track record of implementing these initiatives successfully. As Leslie says, when implementing a quality initiative, “You are investing now to ensure your legacy both now and later by creating a thriving enterprise that satisfies all your current and future stakeholders – both internal and external to the organization.” This reminds me of something said by the late Sir Brian Pitman, chief executive and later chairman of Lloyds Bank. Sir Brian was a pioneer of shareholder value maximisation in the mid 1980s. Contrary to what critics might say, properly executed, this not a short term approach. Sir Brian noted then that the challenge is to deliver superior returns while at the same investing to build what he, too, termed ‘a legacy’: “It requires delivering outstanding current performance while building a legacy for the future.” This concept of ‘legacy’ is very relevant today. The companies with the best prospects of emerging successfully from this recession are those who can balance reducing operating costs with continuing to invest to develop their competitive position. Likewise, the public sector will have to balance delivery of the outputs required today with investing to improve efficiency and effectiveness so as to be able to deliver more for less in the future. Achieving this balance requires a keen understanding of the drivers of cost and value in the business. Financial accounting is about recording outcomes. Using those accounting measures to manage current performance is only 'painting by numbers.’ Long term value creation is an even greater challenge than delivering budgets and meeting outcome targets. Achieving both at the same time is an art that requires a management accountant’s combination of financial skills and business understanding. Management accountants already have the tools for this task; they need to gain the influence. The learning to be gained from this Field Guide could be invaluable. Charles Tilley Chief Executive The Chartered Institute of Management Accountants


Getting the Most Out of the Executive Field Guides It’s not easy being an executive – particularly not now. Whether your company is a start-up, small or medium sized business, cash rich multi-national or a public sector entity that is on the verge of brutal cost-cutting, no one is doing business the way it was done before. No one can. And that’s not going to change. The business model is changing around you. In each sector and industry, things are changing – with the only constant being that whatever you did before, it’s not enough. Nor will it be. So, instead of hiding from it – which you don’t, because that’s not what executives do – you need the tools (and weapons) in your back pocket to see the competitive landscape for what it is, make your determination of what’s next and then put the best, most dedicated brains you have around you to the task. The good news is, you can do it. The better news is, everyone working with you wants it too. The challenge is going to be consistency and continuity – because the distractions are and will be legion. What I know – because over the years I’ve worked with executives from start-up entrepreneurs to CEOs of multinationals, from small business owners to public sector and charity Chief Execs, from volunteer Boards to Boards with compensation and perks that don’t quit – is that you can. Decide what you want. Keep it clear and consistent in your mind. Don’t let anyone try to convince you otherwise. Of course, you will pay attention to what they have to say. You want to be challenged. You want the best brains giving you the best ideas – even when they seem to be in direct contrast with yours. You want to learn and grow – giving them the opportunity to do the same – while you are working together to build your dream. Your vision for what your enterprise not only can be – but what you know it should be and will be. Not based on anyone else’s definition. Yours. Then, along with your definition and vision, it will become the shared vision of everyone involved. Why the Executive Field Guides Throughout my career – both as an executive and as an executive advisor – I’ve had the reputation of being anti-consultant. That’s true and not true.


Consultants, when they are targeted narrowly, managed closely and given finite assignments, can bring great value to your organization. It’s when organizations fall into the consultants’ business model that that changes. That’s because the business model for consulting firms is based on two things:

1. Follow-on contracts and 2. Using as much of the client’s internal knowledge base as possible without letting the

executives know they’ve used your own resources to solve your problems. Yes, you could have done it on your own at no cost to the organization. It’s not a pretty picture – but it’s an honest one. That’s why the Executive Field Guides exist. So that you, the executive – on your own, with your executive and management teams and with your Board of Directors – can access and direct the knowledge and capability that exists in your organization already. It just needs to be pointed in the right direction. The Executive Field Guides get you there. Clarity Comes First The saying, “if you don’t know where you’re going, any road will take you there” is not only true, it has terrible, exponential implications for organizations. So, to keep you from that mystery – and usually unwanted – destination, clarity comes first. You know where you want your organization to go. You may not always believe that you can get it there, but, somewhere inside you is a picture – a dream – of what your organization would be in the best of all possible worlds. That’s the world I live in. Taking that dream – your dream – and working with you to determine how to get your organization there. Fast. Smart. Cheap. And in such a way that your competition doesn’t know what hit them. That’s why the Executive Field Guides are designed the way they are. It is the same logic as if I were sitting in a room with you doing the work I do to guide you toward taking your organization wherever you want it to go. Because you can – and together, we will. From Foundation to Fast-Track You’ll always find the foundational information at the beginning. It may seem slow – sometimes tedious – to have to read that part. Tough. Read it.


It will help you clarify exactly where you’re going – to your specifications – and give you the information to know exactly what you need to do and how fast you can get there. As well, you will find yourself solving lots of your problems along the way. The early sections are also designed to help you – and, eventually, your team – build on what you already have. Because you are never starting from a deficit position. You’re simply building on your achievements and fixing the rest. That’s why the Executive Field Guides are designed to work both for strategic direction and turnaround. Whether it’s new directions or a fix for your current trajectory, the Guides will give you what you need to get there. Because, very quickly, you’ll find that these babies are moving. Fast. And the way they move is through questions. Lots and lots of questions. You’ll start by asking them of yourself then extend the questioning to include your Board members, executives and management teams. In some cases, the questions will be asked at your front-line level. Because they should. And don’t worry if it feels like you’re losing traction or direction, going too fast or too slow. This is a conversation - and I’m with you every step of the way. You’ll be able to access my guidance throughout – no matter how many months or years you use the Guides to get you where you’re going. Because that’s the other thing you’ll find about the Guides. They are not static. As a result, once you’ve achieved the first levels you targeted (most likely faster than you expected) and it’s time to figure out what’s next – the Guides will still be there. In your hands. Ready to help take you to the next level and beyond. So you start by becoming best of breed. Then you grow from there – because there’s always more growing to do and opportunities to achieve. It is my pleasure to help you get there. Because you can. And you will.


Introduction to the Management Accounting Edition It’s a dilemma. There you are, with all your knowledge and experience, knowing the importance of what you do in taking your organization to its next levels of profitability and success; in helping build and execute strategy that creates new worlds; in funding operations that bring satisfying experiences to customers locally and globally; in creating future possibilities for the organization and all its stake holders…and what do you get? If you mention you work or have a background in finance or accounting you’re faced with one of two sets of questions: The external set:

Are you one of those people who caused the meltdown? And even if you weren’t, you’re in finance. You have experience with numbers. How could you people not have known that it was going to happen? You’re supposed to know things like that.

Or the internal set:

Why won’t you give us the funding we need? We’ll get the results. You just need to give us the cash! We know it’s not in the budget – but how could we have known that we’d need the [equipment/staff/technology/fill in your own blank here] so many months ago? Now we know – so why won’t you free up the money?

In the vernacular, it’s a tough room when you have anything to do with finance. People just don’t get what you do and the value you bring. That’s because, as a specialization, you’ve not done a great job in promoting that value It’s time for that to change. The good news is, you know what the perception is out there. The better news is with that knowledge and your skills and smarts, you’re in the perfect position to change the face of management accounting – to show its value – now and going forward. It’s not that you’re going to be able to answer everyone’s questions about the downturn or give everyone who comes to you the cash they want. That’s not the thing. That’s not what you’re there for – and now have the opportunity – to do. It’s that, whether you’re practicing your profession in Finance, HR, IT, BusDev, Marketing or any other function, you can, by changing the way your and your people’s skills are seen and valued, not only reverse those perceptions, but help drive your organization to greater success than ever before. It’s time for management accounting to come into the open – with all the logic, elegance and understanding that the area provides – so that the rest of your organization can benefit from what you bring to the table.


Changing the Role of Management Accounting Smart, successful companies are filled with smart, successful people. And one of the smartest things anyone in any organization needs to do to create success is understand how the numbers work. Organizations operate based on metrics. The old adage, “You manage what you measure” is absolutely true. But the reason that what is measured is managed is because that’s what’s visible. That’s why the skills that come with a background in management accounting are so important when applied throughout the enterprise. Especially now. Think about it. If everyone in every area knew and understood what it costs to run their area – in effect, if they were thinking as mini-CFOs or business owners responsible for making sure that every penny in every currency is wisely spent – they’d look at what they do and how they do it far differently than they do now. They’d be finding profit and market opportunities. Seeing how staff could be better utilized or training targeted for better results. Creating innovations in how they do business and what the business offers. They’d be changing their worlds – which means they’d be helping you and the rest of the executives change the world in which your organization resides. And it’s not as if those skills aren’t already resident in every employee to a greater or lesser extent. They are. Every person in the organization – before they walk in the door and immediately after they walk out – is dealing with his or her own finances. What to invest. What to spend. What to buy. What to sell. How to pay the least taxes – and still be legal. How to send their kids to college. Whether they can pay for their next family vacation. The predisposition to think in terms of finance is part of everyone’s life. It has to be. It’s a money-based, global economy. The trick is to engage all those minds in thinking about the finances of the organization. And that takes it back to you. It doesn’t matter in which function you reside. You have the ability to bring a level of understanding – and, by extension, commitment and improvement – to the organization simply based on your ability to communicate what they need to know. Because the other outcome is that the more information you share, the more they will feel part of the enterprise and in control of their own destinies. You will be empowering them to do more and to be more. And that makes you more. Strategy, Execution and Finance


At its simplest, money is fuel. It propels the organization toward its goals. But to make sure that the money is being used in the best possible ways requires that finance, budget and economic thinking is strategically applied from the inception of strategy development through the innovations the organization pursues to the last details of execution leading to exquisite customer experience. Management accounting, as a result, has to be involved at every step in the organization’s progress toward its goals. For you, at the senior level, it means that you can leave no stone unturned in the ways that you work with your colleagues to ensure that they have the information they need. But to give them that information, you need to extend yourself to understand their operations and requirements. Remember, too, that you have knowledge that they don’t have. You see things differently. And that’s where your even greater value comes in. Because you can see the things that others can’t, you are in a position to add depth and breadth to the strategic planning process. You can identify markets and market opportunities which you can help grow. If you’re global, you can bring an international understanding to the table which can be factored into strategic decisions – whether for manufacturing products, service provision or customer access. If you’re local, whether you’re manufacturing or service, you can bring a broader supply chain understanding using finance as one of the determinants of how best to make your supply chain work. And, if you’re part of someone else’s supply chain, you’ll know how to add your perspective so that you can negotiate the best deals possible. It is also your expertise that will expand external relationships. That, too, creates opportunities. And, as a result of all that, you expand the vision of the enterprise so that it not only sees what you see – but also understands even better how your function and your people will help the larger organization get there. Then, by virtue of their expertise, your people become the organization’s best resource and first line of defense in figuring out why things are the way they are and how to make them better. Finance and management accounting thinking drives the organization to achieve its vision – profitably and quickly – only for that vision to be exceeded again and again over time. Then, when people talk about you having a background in management accounting, it will be with the respect the specialty deserves. And they’ll be able to do so because they will see you clearly – as the visionary, ethical executive and leader you are.


About the Author Leslie L. Kossoff, internationally renowned executive advisor, writer and speaker specializing in strategy and corporate turnaround, was cited by About.com as “one of the most intelligent and perceptive voices on executive and managerial leadership today.” For over 20 years, she has assisted clients in the public and private sectors in the United States, United Kingdom, Europe and Japan. Her clients, ranging from start-ups to multi-nationals, include Sony, Kraft Foods, the UK National Health Service, Fidelity Investments, Seiko/Epson, 3M and others. During her association with Dr. W. Edwards Deming, the quality management expert credited with turning around Japanese and Western industry during the latter half of the last century, he declared Leslie “Quite simply, one of the best at implementation.” As well as enjoying an outstanding reputation as an invited speaker at conferences around the world, she is the author of two books, including the award-winning Executive Thinking, writes the blog “The Thinking Executive” (www.thinkingexecutive.biz), is the business expert for Horticulture Week writing on strategy and management issues in the agricultural sector, is a Best Practice Contributor to Business: The Ultimate Resource and Q-Finance

, a joint venture between Bloomsbury Publishing and the Qatar Financial Centre Authority. Having written over one hundred articles in journals including the Financial Times and CEO Magazine, she is frequently quoted in Entrepreneur, Investor’s Business Daily and is a regular guest on the syndicated “Small Business Advocate” radio program. Jim Blasingame, its host, cites Leslie as “one of the top organizational thinkers for executives and business owners.”

Leslie is a former executive in the aerospace/defense and pharmaceutical industries, has provided testimony to the Parliament of the United Kingdom on manufacturing and small business issues, is the founder and former Director of the Institute for Quality and Productivity Improvement at California State University, Long Beach, a founding Board member of the Global Women’s Leadership Center at Santa Clara University Leavey School of Business, serves on the Advisory Boards of The Enterprise Trust, Cordville Capital Ltd. and the Russia Research Network, has been a member of the Judges Panel for the Sterling Award for Quality in California and is included in the Who’s Who Registry of Global Leaders among others. She is a Fellow of the Royal Society for the Arts, a member of the Reform Club and a Freeman of the City of London.

SAN FRANCISCO LONDON 2443 Fillmore Street 17 Ensign House Suite 501 Admirals Way San Francisco, CA 94115 London E14 9XQ Tel: (+1) 415 789 7285 (+44) 020 7863 1733

www.kossoff.com www.thinkingexecutive.biz


THE EXECUTIVE FIELD GUIDES MANAGEMENT ACCOUNTING EDITIONS

Becoming a Best of Breed Organization Becoming a Best of Breed Organization – Assessment Guide Coming Soon

Strate-Cution: The Financial and Operational Secrets Behind Japanese Strategic Management Alignment: A New View of Organizational Structures and Restructuring Corporate Legacies: A New Definition of Organizational and Executive Succession Girl Games and Steel Balls: An Alternative View of Organizational Culture Buying Consultants: Targeting and Managing External Support for Highest Return and Profitability Successful Off-Sites: Designing Executive and Board-Level Planning Meetings for Immediate and Long-Term Success

FOR MORE INFORMATION AND TO PURCHASE COPIES OF THE EXECUTIVE FIELD GUIDES GO TO

WWW.KOSSOFF.COM/CIMA

Becoming a best of breed organisation

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