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.
A few months back I introduced a concept that I called "Total Value Management" (TVM). To review:
"Total Value Management is the process of delivering superior value to stakeholders in a balanced and sustainable way. TVM places the proper emphasis on the often competing needs of owners, customers, employees, strategic partners and community."
The TVM Assessment tests how well an organization is structured and positioned to deliver sustainable and balanced value to its stakeholders. A TVM Assessment is a process that starts with a stakeholder analysis and a review of strategic business objectives for operational measurability and level of alignment with stakeholder needs. TVM also includes a review of policies and practices to see if there are any anomalies and misalignments within the culture that would detract from a value-driven model. Those reviews will also identify the end-to-end processes that need to be reengineered for proper alignment with the organization's strategic objectives.
This article will provide a basic overview on how to conduct a TVM Assessment. My goal is to provide you with a sense of the process and why it can lead to helping an organization transform how it does business and delivers value to stakeholders.
Organizations adopting TVM take a long-term view of how their actions will impact sustainable growth. These organizations understand that continued success requires that strategic partners and employees must prosper, that customers must have continual experiences that are superior to the competition and that owners must receive returns that encourage continued investment and support.
The TVM Assessment Process
Step 1: Develop Stakeholder-Driven Strategies
The first step is to develop stakeholder-driven strategies. Each strategy must be directed at improving the value delivered to one or more stakeholder groups. Each strategy must also be structured so as to not 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.
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Step 2: Develop Strategically Aligned Improvement Initiatives
Step two 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 their 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 their cars by building a car that:
1. gets 50 miles per gallon (not 30)
2. seats six passengers comfortably (not four)
3. can withstand a 20 mph crash without damage to the cabin (not 10 mph)
4. comes with a 10-year full service warranty (not 3-year)
5. sells for under $30,000 (not $45,000)
6. has a margin of 15% (not 8%)
7. all within five years.
The management might organize a team of knowledge workers who 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, change policies, innovate, etc., to achieve the goal.
Step 3: Develop Real-Time Metric Measurement Systems
Step three is to develop real-time feedback systems and supporting metrics to measure the company's effectiveness in achieving its strategies. Here we look to the value gap defined in the strategies. The current state of the value delivered to stakeholders becomes the baseline to improve against. The future state of value that is desired to be delivered to stakeholders is the target to improve towards. The feedback system needs to be as 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 an 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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"My sole inspiration is a telephone call from a producer." - Cole Porter |
