The Third Principle
Chapter by Chapter Guide

Chapter 1 - The Third Principle

Almost all management theory is based on two organising principles - efficiency and effectiveness. All most all organisations achieve no more than 80% of what is possible. This is not a coincidence. There is a a third organising principle - optimisation. This chapter outlines optimisation as a concept, and provides some of the diagnostics that can be used to show how businesses can be optimised.

Chapter 2 - People Optimisation Diagnostics

Very few organisations come close to truly optimising people performance. This chapter contains diagnostics which can be used to show how close your organisation comes to the optimum.

The optimisation diagnostics cover the following areas:

  • Individual performance
  • Team performance
  • Middle management performance
  • Cultural fit with business needs
  • Morale
  • Leadership performance
  • Selection
  • Skills and knowledge
  • Promotion

Chapter 3 - Optimising Managers

This chapter examines the manager's path to sub-optimisation and what needs to change. There are five fundamental changes that need to be made and these are discussed in depth.

They are:

  • eliminate pretend managing
  • eliminate pretend managers
  • eliminate pretend working
  • escape from non-productive models
  • introduce a better way

This chapter introduces a new model - the Pathfinder model - to help mangers to find solutions and to go forward with a purpose to stimulate extraordinary performance from ordinary people.

There are four aspects to the Pathfinder model discussed in this chapter and they are:

  • Reconnaissance - the Pathfinder as a research engine
  • Finding the way - the Pathfinder as the designer
  • Clearing the path - the Pathfinder as a barrier clearer
  • Taking people on the journey - the Pathfinder's role in enabling people to act

Chapter 4 - Human Resource Management

This chapter begins by describing the three sources of sub-optimisation that are evident in almost every human resource department. They are: specialisation, cost function and customer disconnection. This chapter stresses the need for HR departments to change so that they can stimulate and support optimum people performance.

These are:

  • overall design
  • process integration
  • leverage of key processes and concepts

This chapter emphasises the need for HR professionals to properly analyse the value adding aspects of what they do so that they can optimise the business and survive into the future. The HR department should be designed to be specific in quantifying the dollar implications of the programmes they run and it is now time for HR professionals to report not just process costs but process outcomes. Human resource professionals have a number of powerful tools to use as pathways to business optimisation. These tools can help to reposition the HR department so it has the credibility to perform at the highest level in the organisation.

The four most important of these tools are described in this chapter and they are:

  • profiling
  • selection hurdles
  • career development
  • executive coaching

Chapter 5 - a Productive Culture

If a business is prepared to make the investment in sustaining a culture that compels optimum performance then there is a substantial reward to be gained. This chapter uses models, formulas and stories to describe how culture can be a business driver.

Chapter 6 - Customer optimisation diagnostics

Businesses that provides products and services need to understand an overstimulated, well-educated, fickle and increasingly demanding pool of customers. Virtually no business extracts the optimum value from their customers. Those businesses that truly understand the size of their sub-optimisation and who can recapture what is potentially theirs will not only extend the size of the market, but also take a larger portion of the most lucrative sections of that market. The diagnostics in this chapter will give some useful data to uncover the sub-optimisation in your business.

Chapter 7 - Selection of the Right Service Approach

The biggest reason for customer service sub-optimisation is copying the wrong models and examples. The approach that works for one business is wholly inappropriate for another. The trick is to choose the right one for your business and in this chapter three key drivers are examined thoroughly to provide you with the profile of your business and to help you to determine your service approach. These are:

  • the intensity of the customer relationship
  • power and choice
  • clarity

Chapter 8 - Complete Research

Customer behaviour changes more subtly and more rapidly than virtually anything else that is measured in business. It is really easy to waste effort offering a product or service that is no longer interesting while missing the opportunity to chase an emerging demand. This chapter describes the ways you can collect good, solid information by using both conventional and unconventional tools. The chapter shows how to use the data collected through research in a meaningful and useful way so that businesses can stop doing what is no longer valued and start doing what customers truly value. This kind of research needs to be collected regularly and acted upon quickly.

Chapter 9 - Service Strategy

This chapter begins by showing you how to optimise your business through the development of a service strategy.

It describes the two ingredients to a service strategy that will support the optimisation of customer service:

  • support from the top
  • a framework for defining the key decisions that need to be made to deliver the right service

The chapter then goes on to show you how you need to answer six questions to get the best possible customer mix for your business.

The questions are:

  • Who are the customers?
  • What are the different customer groups?
  • Which are the most important customer groups?
  • What are the needs and expectations of each group?
  • What level of performance is important for these groups?
  • What do you do that is unique for each of these groups?

Chapter 10 - The Service Interaction

The defining moment for customer service is when an employee interacts with a customer. This chapter details how the defining moment can be optimised by three conditions that need to be right.

They are:

  • the right front line
  • front line empowerment
  • front line information

Chapter 11 - Process Optimisation Diagnostics

Most businesses contain unwanted fat, unnecessary waste and a collection of useless activities that represent between 20 - 40% of the effort invested. This chapter describes diagnostics you can use to find the wasted effort in your business. These are:

  • waste
  • number of process steps
  • rework
  • cycle time
  • standardisation
  • overstocking
  • quality
  • continuous improvement
  • change management

Chapter 12 - Changing Processes

Business optimisation is only possible when processes are continuously pruned and improved. This chapter details ‘the big intervention’ and ‘steady improvement’ which are the two different ways to improve processes. The chapter describes firstly how there are necessary ingredients that must be present if the big intervention is to succeed.

The ingredients are:

  • A strong mandate
  • Customer value
  • Preparation
  • A free rein
  • The right kind of people
  • The right kind of team models
  • An iterative model
  • The right parameters
  • Finding and publicising early wins
  • Understanding of the personal consequences
  • Courage

The chapter then goes on to describe how the need for a big intervention means that managers have not fulfilled their basic function in the business which is to systematically improve processes. Steady improvement is a gift to the business that is not often delivered. It can be achieved by using the same tools and techniques used in the big intervention. The chapter describes in detail the conditions that need to be present if steady improvement is to happen and they are:

  • The mathematics of process improvement is part of everyday language
  • QA is charged with dollar value improvement, not just audit success
  • Managers are clearly accountable for process improvement
  • Waste is unacceptable at all levels

Chapter 13 - Basic Ways to Analyse Processes

There are many tools that can be used together to achieve optimisation. This chapter begins by asking four fundamental questions and then provides the tools and techniques to answer them.

The questions, tools/techniques are:

  1. “What is the process?” can be answered using Process mapping and Customer Feedback
  2. “How is the process performing?” can be answered using Run charts; Control charts; Histograms; Service standards and Customer satisfaction
  3. “What is important?” can be answered using Pareto; Cost analysis; Core business analysis and Customer research
  4. “What is wrong?” can be answered using Fishbone (Ishikawa) analysis and Customer feedback

Chapter 14 - Process Improvement

There are two different ways to improve processes and both of these can be used during the big intervention or as part of steady improvement. The chapter begins with the first way which involves applying some basic rules and principles to the way that work is designed and completed. The rules/principles described are: manufacturing principles (production wastes); some customer service principles(customer feedback) and some idiosyncratic principles (Al Dunlap’s rule of 55) These are described in detail.

The chapter then goes on to describe the second way to improve processes which is to redesign the concepts that underpin the work using external information. Two ways are described in great detail to challenge the fundamental concepts that are used in organisations. They are benchmarking and the deliberate use of ‘creative thinking’.

Chapter 15 - Organisation Structure

The right kind of organisational structure is critical for business optimisation. The chapter begins by describing the false assumptions made by organisations when designing their structure and then goes on to describe how different approaches can be used when designing organisational structures.

Five principles are used and they are:

  • Work should be organised around basic transformations in order to form whole tasks
  • The basic organisational unit should be the Primary Work Group
  • Each group should have a designated leader
  • Each group should track its performance and evaluate success against a set of agreed standards
  • Each person should be able to plan, do and evaluate at least one significant transformation and be able to say, ‘I did that’

The chapter then goes on to describe how businesses need to organise into hierarchies.

Chapter 16 - Measurement Optimisation Diagnostics

You need to look at your part of the business and think about and list what makes it successful today and what will make it successful in the future. The items on your list are the key drivers for your success. They should dominate your thinking, drive your pay and promotion and form the basis of how you are measured. This chapter is about the need to design good, relevant measures as a critical concept for business optimisation and provides diagnostics to help you achieve this.

Chapter 17 - Measures as Instruments of Attention and Information

Business is a complex system and no single measure or single dimension is going to be able to express numerically what happens in reality. To achieve optimisation businesses need to properly categorise measures so that the right headings exist under which information can be gathered. This chapter describes in detail the three different sides to measures.

These are:

  • Type
  • Hierarchy
  • Complexity

The chapter goes on to discuss the different models used by businesses to develop measures. Among the models discussed are ‘The balanced scorecard’, ‘Intellectual capital’ and ‘optimisation’. It concludes with a discussion of three of the most important measures.

These are:

  • simple measures
  • compound measures
  • comparative measures

Chapter 18 - Measures as Guides for Different Parts of the Business

Within a business one department will affect the performance of their colleagues in another and personal performance can be affected by the system. It is critical to separate personal impact from system variation and it is vital to allocate measures to people so that they understand what is within their control and they understand what is beyond their scope. This chapter emphasises the importance of allocating the right measures for business optimisation. It describes in detail the two issues that need to be addressed.

They are:

  • who receives which measures, and what they are supposed to do
  • how the data is presented

The chapter continues with detailing the different measures that should be used by the CEO, middle managers, supervisors and the front line in a business. How to present data is described including maps and graphs. The chapter concludes with the discussion of how frequently the information needs to be presented and why it is important to find the right frequency.

Chapter 19 - Using Measures to Drive Behaviour

The primary job of measures is to focus attention on the drivers of success - how they can be used to shape and drive individual or group behaviour. This short chapter illustrates this point with the use of stories and exercises.

Chapter 20 - Using Judgement

There is always the need for judgment in decisions about the future. The further into the future a decision reaches the more judgement is required. This chapter describes in detail the four ingredients needed to make good judgements.

They are:

  • the right person
  • the right decision models
  • accurate information generated within the business
  • access to information that provides insights into the external drivers that affect the business

Chapter 21 - Stepping Stones

This concluding chapter presents under four headings the case you may deliver to a peer or senior management group to optimise your business.

The headings are:

  • broad context
  • business case
  • the opportunities
  • the next step