You should open you mindset to new approaches and tools in management, so you could successfully move in a rapid changing environment. This includes understanding strategy, psycology and financial management.
Text of New Level in Management Skills: How to Reach it?
New Level in Management Skills: How to Reach it? Alexander Abolmasov Managing Partner NRG Private Equity firstname.lastname@example.org
Problems cannot be solved at the same level of awareness that created them. Albert Einstein . , . .
The General Motors Management Style (1920s - ) Strategy Centralized operational decisions, but decentralized divisional organization Financial management Control by setting quantitative targets for the divisions and reporting back performance metrics Decision making was based heavily on analysis of reported managerial accounting data ROI is the king People Motivation Performance based bonuses Effective enough in a growing economy, but less effective in the crowded or low-growth marketplaces . , 20-
What is effective management? Effective management system keeps organization adjusting to unpredictable, dynamic conditions and satisfying customers Behavioral routine (skill), which helps to handle unpredictable and uncertain situations with confidence and effective action competitive advantage , . , .
Startup management Need practices and principles geared to the startup context of extreme uncertainty In a startup, the product and customer are unknowns. We need a new definition of value for startups: validated learning about customers Case study: Begemot, Sovcombank . . , - , -. & , 45+.
Traditional model (centralized functional hierarchy) New model (decentralized leadership network) Changing leadership and structure + ROI-based decisions + Mistrust and control + Extrinsic motivation + Improvement Kata + Employee development + Intrinsic motivation Change to what? , : 1) 2) 3) .
There are two different ways of working on the model evolution and transformation Time scale: organization's age Low degree of decentralization/ empowerment Differentiation phase Integration phase High degree of decentralization/ empowerment Sustaining and deepening of the decentralized model, through generations Pioneering phase Bureaucratization through growing hierarchy and functional differentiation Evolution within the decentralized model (culture of empowerment and trust) Organizations with traditional models must eventually transform themselves Transformation through radical decentralization of decision-making Stagnation within the tayloristic model , - . . Foundation
Current Condition Challenge Vision Toyota Kata Toyota strategy: Survive long term as a company by improving and evolving how we make good products for the customer , . , .
Non-Toyota thinking: normal daily management + improvement Toyota thinking: normal daily management = process improvement The Improvers Process The Improvers Everything deteriorates over time The second law of thermodynamics Process , , . .
Success depends on your challenge Shinichi Sasaki, former Toyota CEO
Toyotas Vision for Its Production Operations Zero defects 100 percent value added One-piece flow, in sequence, on demand Security for people (no injuries) , , .
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If you think it can be done or if you think it cant be done, you will be right! Henry Ford Challenge Mindset It can be done! Why? Positive line of argument Search for solutions High probability of success I told you: it can be done! It cannot be done! Why? Negative line of argument Search for problems Low probability of success I told you: it cannot be done! . .
Brains are learning organs, so they reward us with joy when we learn (for example by means of serotonin) Brain activity measured using computed tomography, presented by Prof. Gerald Hther at Production Systems 2009 It cannot be done! It can be done!
Through frequent practice more electrical impulses are fired and synapses are trained to perform better Untrained synapse Trained synapse High electrical resistance Low electrical resistance changeable chemical bond
Regular Kata practice and coaching can change a conservative mindset into an open, explorative attitude Certainty Certainty Explorative attitude of a kata novice Conservative attitude (the norm) Certainty Explorative attitude of an experienced kata practitioner I avoid it! Im OK with it! I like it! , . , .
We are what we repeatedly do. Excellence, then, is not an act but a habit. Aristoteles , - , , .
Financial management .
Traditional Budgeting Has Many Weaknesses.... Promotes centralization of decisions and responsibility Motivates gaming the system Conflicting purposes target setting versus financial forecasting Not only a ceiling also a floor for costs Ineffective Inflexible to changes in planning assumptions Absorbs significant resources across the organization Tends to make financial control an annual autumn event .
We Have Separated Performance Measurement From Financial Forecasting Broader Performance Measurement Balanced Scorecard - Financial KPIs - Non-financial KPIs + Rolling Financial Forecast - Rolling 5 quarters - High level, few details Better forecasting with less resources Financial Budgeting ToFrom
We Can Achieve What the Budget Did in a Simpler Way The budget was used for: We achieve the same through: High level financial and tax planning Target-setting Controlling fixed costs Prioritising and allocating investment/project resources Delegation of authority Rolling financial forecasts Balanced Scorecard Trend reporting Cost targets where and when needed Activity approach Small projects - trend reporting Medium - Varying hurdle rates Major strategic projects - Case by case, the budget was never a tool .... Use existing mandates/authority schedules
The New Tools Cover What the Budget Did, but Also a Lot More Controlling fixed costs - Activity accounting and product costing - Improved cost understanding - Product and customer costing - Annual outlook Balanced scorecard - Non-financial targets & measurements - Link to strategy - Financial targets relative to market - Financial targets & measurement - Limited cost understanding - Annual plan BUDGET Rolling Financial Forecast - Quarterly update - Rolling 5 quarters outlook - Annual outlook Investment management - Trend reporting & 5 quarter outlook - Decentralised decisions - Frames if needed
How Does the Managers Job Change ? High degree of freedom in how to achieve challenging relative targets No detailed pre-approval of costs through a budget Cost reports focusing on trends, projects and total cost levels. Less focus on the calendar year as reporting period Increased measurement of non-financial indicators supporting our strategy No heavy budget process in the autumn, but more focus on costs and performance throughout the year Increased responsibility and decision-making More relevant cost information Better but also tougher performance measurement Better use of your time !
Motivation , . .
1. Rewards Punish Incentives are Manipulative Punishment and Rewards are Two Sides of the Same Coin 2. Rewards Rupture Relationships Forces People to Compete For Rewards Damages Relationships Between Managers and Employees 3. Rewards Ignore Reason Incentives Are Easy Fix for Problems Band Aid 4. Rewards Undermine Interest Limits Creativity Intrinsic Vs. Extrinsic Motivation Pay-For-Performance Lowers Enthusiasm Rewards Punish. Punishment blocks creativity. . . . : .
What do you enjoy about work? Typical answers given during brainstorming sessions: - Overcoming challenges - Learning - Variety, trying new things - Team spirit, constructive exchange of ideas, sense of belonging - Recognition and praise, celebrating successes - Seeing progress, improving, making a difference - Helping other people in their work - Scope for development, personal responsibility - Etc. Pay Is Not A Motivator Employees Value Pay Less Than Most Expect Paying More Does Not Mean Better Work
There is no combination of outcome metrics and incentive systems that by themselves will generate continuous improvement and adaptation. And how could it? The people trying to achieve the quantitative targets are not taught or guided by any sort of improvement kata. Mike Rother, author of Toyota Kata .