Measuring Intagible Assets - Increase Performance while Gaining Competitive Advantage

Editor's Notes

• #3: My name is Susan Lesser. I am a co-founder of the Susan Lesser Group. We are organizational diagnosticians. By that I mean that we use diagnostic assessments to determine the root cause of an organizations’ underperformance. You are in for a treat today. I’d like to welcome you to this different view of measurement. Different because while you probably have given thought to all of the topics presented, you most likely have not put them together quite in the way that I will suggest this afternoon. Rules for this session are simple: 1 Ask questions as they arise. 2 No need to take notes. This entire presentation will be available via email. 3 Just open your mind to new ideas and models for optimal operation. And with that, let’s jump right in...
• #4: What are intangibles? Intangibles are commonly considered to be Leadership, Communication and Teamwork. The Leadership of people by people. The Communication between people. The teamwork amongst people. You wouldn’t be wrong to say that PEOPLE are the embodiment of your intangibles. So why do we care? Why do we want to measure these intangibles? Measurement drives action — and in this case we measure to drive: 1 an increase productivity/performance 2 a greater competitive advantage Intangibles are your competitive edge. Think about it. If you measure and then work to enhance the qualities that each of your people bring to your organization—what a dynamic, unstoppable competitive force you will be. Especially because “the other guy” isn’t doing that. And is an expansion of this same competitive advantage if we take this idea a step further: it is the uniqueness that is created by the synergy of these “enhanced” people working together that is unable to be imitated. I don’t want to explore these reasons in depth right now, but it is important for you to understand them at a very fundamental level. Measuring intangibles has a positive impact on critical parts of your business. By the time this presentation is over, you will understand exactly how this happens. Right now, let’s explore each intangible in a bit more detail.
• #7: Let’s start by looking at LEADERSHIP Stepping outside of the dictionary definition of LEADERSHIP, let’s first consider management guru Peter Drucker’s definition of a leader as someone who has followers . Pretty succinct, and you should note that the implication here is that folks who have followers do so because of their character. But let’s look a little bit further. In the 21 Irrefutable Laws of Leadership, John Maxwell sums up his definition of leadership as " influence - nothing more, nothing less ." So now we have moved beyond the position and the person to the interaction of that person with his or her followers and other external entities. This is a step in the right direction, but come with me just one more step. BioTech superstar Alan Keith states that, " Leadership is ultimately about creating a way for people to contribute to making something extraordinary happen .” The person, role and influence combined. Here is where we will sit for the duration of this conversation.
• #8: Self-awareness is one hallmark of a good leader. To be a good leader you need first to understand yourself, to have an understanding of your own leadership style and how it impacts on others. One way to discover yourself is to complete a type of self-assessment and the second is to ask colleagues for feedback on your leadership abilities. The Situational Leadership Model developed by Paul Hersey of the California Centre for Excellence is based on the amount of direction (task behavior) and the amount of support (relationship behavior) the leader must provide, given the situation and the readiness of the follower or group. The follower’s readiness is defined as the ability and willingness of a person to take responsibility for directing their own behavior. People tend to have varying degrees of readiness, depending on the specific task, function, or objective that a leader is attempting to accomplish through their efforts. Their level of readiness frequently determines their level of commitment to the job and the organization.   The four levels are: Unable and unwilling or insecure Unable but willing or confident Able but unwilling or insecure Able and willing and confident
• #10: Not long ago, we did some work with an ESOP outside of Philly… an employee-owned company. The work we did there had to do with creating a leadership culture. This meant helping every single person at this particular manufacturing company understand that, regardless of his/her position at the company, s/he was contributing to its mission, its vision, … its success. We were also increasing morale. In your communities, perhaps morale is what keeps you strong when you have to put an employee whom you like very much on probation for chronic tardiness. Yeah, it is a hard, but if you believe in the reason behind this action, you maintain the strength required to pull it off. Perhaps morale is what motivates a group of nurses to innovate a more effective method of medication distribution.
• #11: First of all, let’s consider the notion of measuring. Tell me, what sorts of things do you measure in your non-work life: Weight Phone calls from your significant other Distance to the nearest ice cream shop Amount of money you are spending eating out Don’t measure how much I love you– in fact lots of arguments about that Are you a good parent?
• #12: OK great. And now, how about listing those things you measure at work: Number of empty beds/number of full beds Number of meals served Different amounts of meds distributed Absenteeism Nurse : resident ratio And why do you measure these things? Is it the same purpose for all of them or is the reasoning different for each?
• #13: And finally, let’s list those things that you do not measure at work. Why don’t you measure those things? What do you think the consequences are of not measuring these things? Keep that in mind as we proceed.
• #14: How can you afford not to be certain that this asset is working at peak performance? At maximum capacity? This is not about measuring individual performance, per se, but understanding the greater whole. Think about it for a minute... What would it mean if you were operating with a staff that worked at 60% of its capacity. In a somewhat absurd way, imagine your nurses only giving residents 60% of their meds, or kitchen staff cooking food 60% of the way, or rehab professionals being satisfied with their clients doing only 60% of their exercises. Crazy right? It would never happen that way, right? Probably not. But what could happen would be that with a staff operating at 60% of capacity, you might be forced to spend money hiring additional personnel to pick up the slack. You might have a few outstanding workers stretched to the breaking point because they are covering the workload of others. You might just have work that is not getting done. Now, flip that vision. What would it look like if people were working at 90% or more of their capacity? A much more pleasant vision, no?
• #15: So, knowing that these intangibles can have such a profound impact on your businesses, we need to be certain of what we are measuring and how we are measuring it. Consider Results-Based Measurement. Results-based Measurement is a method of quantification that focuses on the ends, not the means. -It is not about measuring/counting how many reps your rehab patient did, but how well her knee is feeling this week. -It is not about measuring/counting the number of contacts you have with your residents’ families, but how comfortable the families are with the living situation. -Instead of counting the hours of training that your nurses have, consider what the results of that training should be (more competent workers) and look for ways to measure the increased competency. When you look for these measures: Be clear on your goal What is all this measuring about anyway? What are you trying to prove? Will these measures actually provide you the results that you seek? This is not as simple a question as it appears (give example) Is it realistic to obtain these measures? Why or why not? How can you work to make “why not” a “why”? GET AN EXAMPLE(S) OF SMART AND NOT SMART… AND WHY? What you need are metrics that are S pecific , M easurable , A ctionable , R elevant, and T imely or SMART objectives. "Specific" Is it clear and well defined? Provide enough detail so that we can effectively translate it to the troops. This means that instead of saying 'Significantly increase sales volume' we should say 'Double the sales volume over three years'. A specific goal has a much greater chance of being accomplished than a general goal. To set a specific goal you must answer the six "W" questions:*Who:      Who is involved? 
*What:     What do I want to accomplish? 
*Where:    Identify a location. 
*When:     Establish a time frame. 
*Which:    Identify requirements and constraints. 
*Why:      Specific reasons, purpose or benefits of accomplishing the goal.EXAMPLE:    A general goal would be, "Get in shape." But a specific goal would say, "Join a health club and workout 3 days a week." ABSENTEEISM – ONE THING AND ONE THING ONLY AS OPPOSED TO A BASKET OF THINGS. "Measurable" in that you can collect data that is accurate and complete. Your objective should be such that it should have defined measures and standards (for those Measures) to clearly define not only when you have succeeded, but also when you have failed. Know if the goal is obtainable and how far away completion is To determine if your goal is measurable, ask questions such as......How much? How many? How will I know when it is accomplished? Know when it has been achieved BLOOD PRESSURE vs. EMOTION ” Attainable" When you identify goals that are most important to you, you begin to figure out ways you can make them come true. You develop the attitudes, abilities, skills, and financial capacity to reach them. You begin seeing previously overlooked opportunities to bring yourself closer to the achievement of your goals. You can attain most any goal you set when you plan your steps wisely and establish a time frame that allows you to carry out those steps. Goals that may have seemed far away and out of reach eventually move closer and become attainable, not because your goals shrink, but because you grow and expand to match them. When you list your goals you build your self-image. You see yourself as worthy of these goals, and develop the traits and personality that allow you to possess them. . "Relevant" simply means don't measure things that are not important. A common downfall of process professionals or standards groups is to measure everything, which produces many meaningless measures. "Timely" metrics are those for which you can get the data when you need it. Enough time to achieve the goal, is there a time limit Not too much time, which can affect work performance Objective should have the time frames for achievement and if possible, interim milestones as well. A goal should be grounded within a time frame. With no time frame tied to it there's no sense of urgency. If you want to lose 10 lbs, when do you want to lose it by? "Someday" won't work. But if you anchor it within a timeframe, "by May 1st", then you've set your unconscious mind into motion to begin working on the goal.
• #17: I said earlier that measuring intangibles increases productivity. I explained what the intangibles are. We talked about measuring. But what do I mean by productivity? Productivity is the rate at which an individual performs his/her job function. Many programs that are designed to increase productivity were created to fit in a manufacturing environment. It was about doing more, faster and for less. The focus was on streamlining the process for consideration of output, But with services, it is different. Take for example, the case of a CNA who has to change a patient’s bed linens. Is it more important for him to zip through his appointed rooms in an alloted amount of time or would it be a better if he were to slow down a bit a chat with Mrs. Schwartz about her granddaughter and Mr. Miano about his time in the service? So this definition doesn’t work too well. Instead, let’s talk about performance.
• #18: Performance can be defined as: the accomplishment of a given task measured against preset standards of accuracy , completeness, cost , and speed. For our purposes, this is a more advanced notion because it considers the quality of how you do your work in addition to the speed. But the notion of performance is not equal across all organizations. It will change by function area and by department.
• #19: You may have noticed that I continually refer to intangible assets in the plural. That is because their interconnectivity forces us to consider them as a whole. One view of this interconnectivity is in the chart seen here. Follow their dependencies...
• #20: For this second view, I would like to take a page out of my nephews college economics book. With the advent of the information age, a ripple started in the world of economy that was eventually labeled the Law of Increasing Returns or the Network Effect. Simply put, this theory states: “The more you sell, the more you sell” or put another way, the value of a product increases because more and more people use it. This of Microsoft Word. Now, back to our topic, no one is buying any of these intangibles, but if you would indulge me, I would like to warp this law a bit to illustrate a key point. LCTM each grow in strength and organizational impact in direct response to one or more of the other intangibles strengthening. Leadership strengthens with greater communication. Teamwork performs better when morale is high. Leadership is valued more because of the high quality of current and potential organizational leaders. Take a look a this image: Communication impacts teamwork and teamwork affects communication. The outer ring demonstrates the reality of leadership as the essential driver that sets the tone permitting both teamwork and communication to flourish or wilt.      Morale interacts bilaterally with the combination of all three drivers, meaning: high organizational morale can elevate the combined results, while reduced morale will create a lower reflection of the status quo. Morale cannot be tackled directly. It is only influenced by working through these other intangibles. Although it is possible to isolate each intangible for the sake of conversation, the fact remains that they are impossible to disentangle in practice. To focus attention in one area, you will involuntarily affect the other three. That is pretty much the end of the ASK MR SCIENCE part of this presentation. No more definitions or theories. But before I put this into practice, are there any questions?
• #21: 360 degree feedback is a method and a tool that provides each employee the opportunity to receive performance feedback from his or her supervisor and four to eight peers, reporting staff members, coworkers and customers. Most 360 degree feedback tools are also responded to by each individual in a self assessment. The feedback provides insight about the skills and behaviors desired in the organization to accomplish the mission, vision, and goals and live the values. The feedback is firmly planted in behaviors needed to exceed customer expectations. The purpose of the 360 degree feedback is to assist each individual to understand his or her strengths and weaknesses, and to contribute insights into aspects of his or her work needing professional development. Debates of all kinds are raging in the world of organizations about how to: select the feedback tool and process, select the raters, use the feedback, review the feedback, and manage and integrate the process into a larger performance management system. Improved Feedback From More Sources: Provides well-rounded feedback from peers, reporting staff, coworkers, and supervisors. This can be a definite improvement over feedback from a single individual. 360 feedback can also save managers’ time in that they can spend less energy providing feedback as more people participate in the process. Coworker perception is important and the process helps people understand how other employees view their work. Team Development: Helps team members learn to work more effectively together. (Teams know more about how team members are performing than their supervisor.) Multirater feedback makes team members more accountable to each other as they share the knowledge that they will provide input on each members’ performance. A well-planned process can improve communication and team development. Personal and Organizational Performance Development: 360 degree feedback is one of the best methods for understanding personal and organizational developmental needs. Responsibility for Career Development: For many reasons, organizations are no longer responsible for developing the careers of their employees, if they ever were. Multirater feedback can provide excellent information to an individual about what she needs to do to enhance her career. Additionally, many employees feel 360 degree feedback is more accurate, more reflective of their performance, and more validating than prior feedback from the supervisor alone. This makes the information more useful for both career and personal development. Reduced Discrimination Risk: When feedback comes from a number of individuals in various job functions, discrimination because of race, age, gender, and so on, is reduced. The "horns and halo" effect, in which a supervisor rates performance based on her most recent interactions with the employee, is also minimized. Improved Customer Service: Especially in feedback processes that involve the internal or external customer, each person receives valuable feedback about the quality of his product or services. This feedback should enable the individual to improve the quality, reliability, promptness, and comprehensiveness of these products and services. Training Needs Assessment: 360 degree feedback provides comprehensive information about organization training needs and thus allows planning for classes, cross-functional responsibilities, and cross-training. Exceptional Expectations for the Process: 360 degree feedback is not the same as a performance management system. It is merely a part of the feedback and development that a performance management system offers within an organization.Additionally, proponents may lead participants to expect too much from this feedback system in their efforts to obtain organizational support for implementation. Make sure the 360 feedback is integrated into a complete performance management system.
Design Process Downfalls: Often, a 360 degree feedback process arrives as a recommendation from the HR department or is shepherded in by an executive who learned about the process at a seminar or in a book. Just as an organization implements any planned change, the implementation of 360 degree feedback should follow effective change management guidelines. A cross-section of the people who will have to live with and utilize the process should explore and develop the process for your organization. Failure to Connect the Process: For a 360 feedback process to work, it must be connected with the overall strategic aims of your organization. If you have identified competencies or have comprehensive job descriptions, give people feedback on their performance of the expected competencies and job duties.

The system will fail if it is an add-on rather than a supporter of your organization’s fundamental direction and requirements. It must function as a measure of your accomplishment of your organization’s big and long term picture. Insufficient Information: Since 360 degree feedback processes are currently usually anonymous, people receiving feedback have no recourse if they want to further understand the feedback. They have no one to ask for clarification of unclear comments or more information about particular ratings and their basis.

For this reason and for the points listed in the several bullet points following this one, developing 360 process coaches is important. Supervisors, HR staff people, interested managers and others are taught to assist people to understand their feedback. They are trained to help people develop action plans based upon the feedback. Focus on Negatives and Weaknesses: At least one book, First Break All the Rules: What The World's Greatest Managers Do Differently, advises that great managers focus on employee strengths, not weaknesses. The authors said, "People don't change that much. Don't waste time trying to put in what was left out. Try to draw out what was left in. That is hard enough." Rater Inexperience and Ineffectiveness: In addition to the insufficient training organizations provide both people receiving feedback and people providing feedback, there are numerous ways raters go wrong. They may inflate ratings to make an employee look good. They may deflate ratings to make an individual look bad. They may informally band together to make the system artificially inflate everyone’s performance. Checks and balances must prevent these pitfalls. Paperwork/Computer Data Entry Overload: Need I say much more here? Traditional evaluations required two people and one form. Multirater feedback ups the sheer number of people participating in the process and the consequent organization time invested. Ask instead, how your entire performance management system supports your desire to create a customer serving, motivated, accountable, reliable, creative, dedicated, and happy workforce. ______________ So, what tools exist to measure intangibles? Many. And They fall into two categories: those with a individual person focus or those with a company-wide orientation. Most assessment tools in the area of leadership, look exclusively at the individual and his/her fit to the position or possibly the organization. I have listed some of the most popular ones here. Communication assessment tools work similarly… most look at an individual’s ability to communication; although at least 2 of which I know examine the communication scheme of your organization with the goal of ferreting out gaps and creating a more efficient process. Teamwork assessment tools tend to investigate individual’s ability to work in teams or the efficiency/effectiveness of a particular team. And a few tools, as I mentioned, examine the entire organization as one organism.
• #24: The Balanced Scorecard is a strategic planning and management system used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals.  It is different for each organization. The four "perspectives" examined are: -Financial; -Customer; -Internal Processes; -Innovation and Learning. The "financial perspective" encourages the identification of a few relevant high-level financial measures. In particular, "How do we look to shareholders?" The "customer perspective" encourages the identification of measures that answer the question "How do customers see us?" The "internal business perspective" encourages the identification of measures that answer the question "At what must we excel?" The "innovation and learning perspective" encourages the identification of measures that answer the question "Can we continue to improve and create value?". Go over chart.
• #25: The Sigma Score Program (not to be confused with Six Sigma) takes a holistic view of the intangibles and measures them in a vacuum discounting all of the external factors that may be polluting or corrupting them. The resulting score for each intangible is then measured against the total potential capacity for the organization. A visual representation of where you should be focusing your efforts. Not each area is equal in importance because of its potential to impact the company... the order of weight, let’s call it, is Critical, Communication, Synergetic. -The Critical Driver includes the intangibles of leadership, mission, vision, goals and ethics. -The Communication Driver is pretty much what it appears to be--a measure of how effective the company is in terms of it means and modes of internal communication. -And the Synergetic Driver is about teamwork. How much do folks in the organization work with one and other to strengthen the whole or is the organization riddled with silos and the politics they create. Talk about the specifics of this company. --weakest area is teamwork. The Satisfactor measures morale. It does not mean 6/10 people are happy, it means that on average, everyone is only 66% satisfied with the atmosphere at the organization. The Sigma Score is designed to be implemented annually, meaning that after year one, you re-assess the organization, get new figures, and compare them to the starting benchmark year.
• #26: This is what a company will look like if it measures intangibles and does something about it. Measuring intangibles alone will not do anything unless you have a framework that fosters, nurtures and allows LTC to grow. Let’s quickly take a look at a company with a culture and a management style that permits this growth.
• #27: I am particularly fond of the Shared Management Model, which espouses the behaviorally-based approach to managing behavior. Here’s a story about how the model works: There is a story about a CEO who was working with an independent consultant in the hope of getting his/her company productivity higher. It was the fall of the year, and one day as the CEO and the consultant were heading out the door, they spied an employee raking the lawn with a rake that only had 7 of its 12 tines. Obviously the employee wasn’t doing a very good job, going over ground previously raked several times, and still leaving behind a lot of leaves.   The CEO became enraged. “Why would a supervisor let an employee rake with such a poor rake? No wonder we have such poor results!” The consultant said, “Are you sure the supervisor is the only one to blame?” and the CEO said, “No, of course not. You’re right. It’s my fault for not making sure that all supervisors understand that the company will support the notion of having proper tools. I will meet with them this afternoon to make sure they understand how important it is that workers have the right tools.”   However, the consultant said, “Is there not someone else who must shoulder some responsibility?" But the CEO didn't understand. Who else could be at fault? “What about the employee?” said the consultant. “Where is the employee’s responsibility to make sure he/she has the right tools?” ... and that is the Sharing part of the Shared Management Model. Both the supervisor and the supervisee are responsible for the actions of the supervisee through a cycle of goal setting and performance review.  
• #28: The Shared Management Model divides the load of responsibility between the manger/supervisor and the employees. Pay careful attention to the second row! Preparation… quantifiable goal setting for the employee Activation/implementation… the work being done Evaluation/feedback… how did the work get done and what needs to be improved BOTH PARTIES NEED TO BE READY AND WILLING TO ACCEPT THIS RESPONSIBILITY.
• #29: Preparation isn’t a once-a-year function, nor a once-a-season function, but an ongoing critical responsibility belonging to the external manager/supervisor.
• #30: Activation is about the work that is being done not the work that is to be done. The only person who can manage immediate performance is the only person always present—the employee, the self-manager. It is the self-manager and the self-manager alone who has the authority, the opportunity, and the primary responsibility for the managing of immediate performance—the ultimate focus of all performance management systems. This is about walking the talking of employee empowerment.
• #31: Before we continue... think for a minute about how powerful an organizational like this could be. How formidable. If it was measuring its intangibles in an organizational framework or culture that supported the development of these assets... can you feel it?
• #32: If you need to increase your bottom line, you can do it in only one of two ways. You can decrease expenses or increase sales. Decreasing expensive, although painful, can be done quite quickly: you can cancel bus trips to local museums, you can serve lower quality food in the dining hall, you can cut staff. Growing the top line take more time… you can’t just run out “buy” more residents and increasing the price of residency will potentially have a negative impact on the revenue stream. In your industry, one of the most certain methods of increasing profitability is to invest in your people. In a service business, the people ARE your product. Consider it your R&D. If the company has sound strategies and if the intangible assets are well aligned, then the intangible assets are able to create value for the organization.