Michael R. Wood is a Business Process Improvement & IT Strategist Independent Consultant. He is creator of the business process-improvement methodology called HELIX and founder of The Natural Intelligence Group, a strategy, process improvement and technology consulting company. He is also a CPA, has served as an Adjunct Professor in Pepperdine's Management MBA program, an Associate Professor at California Lutheran University, and on the boards of numerous professional organizations. Mr. Wood is a sought after presenter of HELIX workshops and seminars in both the U.S. and Europe.
We have all heard of TQM (Total Quality Management). It started with Edward Deming and has taken many twists and turns since then. After chairing the conference on Meeting Project Stakeholders’ Requirements, I realized that it is all about VALUE. I also realized that meeting a single stakeholder group’s requirements is not very hard. The trick is to strike a balance between all stakeholders; thus TVM, Total Value Management.
Total Value Management would then be the process of delivering superior value to stakeholders in a balanced and sustainable way. This means that the proper emphasis needs to be placed on the often competing needs of owners, customers, employees, strategic partners and community. Finding the right mix becomes the challenge. For example, if too much focus is given to ROI for owners, then we might tend to discount service levels to customers to save money, or we might discount growth opportunities to employees, or disrupt long-standing vendor relationships by driving too hard a bargain. In the short term this looks good, but in the long term it spells disaster. So sustainable value is the key.
Look what has happened in the airline industry over past 10 years. Service levels have declined, customer loyalty has all but disappeared, and profits are harder to find than ever. Yet airplanes are packed full of uncomfortable travelers who hate the whole experience of flying. What happened? My guess is that the value provided to stakeholders is out of balance and misaligned. This is somewhat borne out by the success of smaller regional airlines that provide a total first-class experience for about the cost of normal coach fares. In the case of one such carrier, the profits are high, the customer loyalty outstanding and the staff appear to be quite happy.
Getting to TVM
Total Value Management implies that an organization must look to the long-term implication of its actions. It means that its focus must be on sustainable growth not short-term stock price pressures. It means that it must allow strategic partners and employees to prosper, it means that customers must be provided a superior experience with each interaction and transaction. So how does this happen and how can it be tested?
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Step 1: Strategies
Each strategy must be directed at improving the value of one or more stakeholder groups. Each strategy must also be structured so as not to diminish value to other stakeholders. And each strategy MUST be stated in operationally measurable terms that clearly identify the value-gap between what is delivered to stakeholders now and what should be delivered.
Step 2: Improvement Initiatives
The next step is to develop improvement initiatives that tightly aligned to the strategies developed. This means they must contain measures and outcomes that link directly to the measures and outcomes stated in the strategy. To do this, management must look inward to its knowledge workers for solutions. This requires that management communicate its strategies and objectives in a nuts-and-bolts fashion. It requires management to view the organization in terms of how its processes function and to pose challenges to cross-functional groups that represent those processes.
For example, a car manufacturer might have a strategy to improve customer satisfaction with its cars by building a car that gets 50 miles per gallon (not 30), seats 6 passengers comfortably (not 4), can withstand a 20 mph crash without damage to the cabin (not 10) and that comes with a 10-year full-service warranty (not 3) for under $30,000 (not $45,000), a margin of 15% (not 8%), all within 5 years. The management might organize a team of knowledge workers that represent the car design and manufacturing process. They could pose the challenge to that team and allow them to propose ways to achieve the goal. The team would comprise engineers, designers, assembly-line workers, etc. Collectively they would explore how to reduce materials weight, streamline production, develop engines, etc., to achieve the goal.
Step 3: Feedback and Metrics
Next, develop feedback systems and supporting metrics to measure the company’s effectiveness in achieving its strategies. Here the we look to the value-gap defined in the strategies. The current state of the value delivered to stakeholders becomes the baseline from which to improve. The future state of value that is desired to be delivered to stakeholders is the target of that improvement. The feedback system needs to be as close to real-time as possible. The metrics should be limited to only those things that measure progress (or lack of progress) toward the future state. Thus performance is measured in terms of the progress made toward achieving the future states defined in the strategy and supported by the improvement initiatives developed by the cross functional teams.
Much of this approach should seem familiar and yet it is not done well in practice. Total Value Management is an idea that I believe is yet another refinement to and endless search to build and sustain organizations that deliver quality and value to its stakeholders.
Take some time to ponder and reflect on this concept of Total Value Management. Give us your feedback, pro and con to the idea. Let’s knock it around in the discussion groups.
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"How far that little candle throws his beams! So shines a good deed in a weary world." - William Shakespeare |
