SURVEYS AND DIAGNOSTICS

Posted on May 11, 2014 by Garth Holloway

There is a significant body of management science behind the formation, delivery, management, and interpretation of surveys, sufficient to fill a series of books in its own right. The intent of this article is only to provide the layperson with some guidelines for preparing and administering a survey, suitable for use within a company or the customer base.

There are three truths that underpin any change initiative. The first two are:

1. If you can tell me how you are measured, I will show you how you behave. The principle is that measurement (including the absence of measurement) drives behaviour. So only measure criteria you can change. If you can’t change it, don’t measure it.

2. People only change when their discomfort is high, caused by “pain” or unrealised “pleasure.” These two points are on opposite ends of the spectrum. If people are experiencing any point in between, then they are unlikely to change. Choose questions that will measure where the respondents are on the spectrum.

A survey is a quick and easy means to measure the survey populations position relative to both points with the second point being easier to measure than the first. The most important feature of a survey is that it is only a snapshot of people’s perceptions at a specific point in time. This brings me to the third truth:

3. General statements do not define the specific and the specific does not define general statements.

A survey provides a snapshot in time on general statements only. For example, a survey on customer satisfaction may indicate that customers are highly satisfied with the service they have received. This does not mean that every single customer is happy and it would not be difficult to find a single customer who was unhappy. All you can conclude from the survey is that generally customers are happy. Equally, just because you found one customer that was unhappy, that does not invalidate the survey.

The biggest mistake in surveys is measuring what you cannot change. This issue typically manifests itself through broad questions. The less specific the question, the more it is open to interpretation by the respondent. Consider the question: “Are you happy? Answer yes or no.” This may seem like a specific question due to the binary nature of the answer, but it is actually a very general question. What is “happy?” How do I know when I am happy, or do I measure my happiness the same way as the next person?

Assume a 60/40 split in responses, yes to no. At best, given the inherent vagueness in the concept of happiness, the most reliable insight that can be inferred from the study, is that, at the time of answering the question, 60% of the respondents were not unhappy. It does not predict if the same people will be happy one minute or one hour later. If your objective was to make everyone happy, then this survey offers no insight into what is making people happy or unhappy. It provides no clue as to what needs to change. In summary, this style of question is a waste of time.

A better approach is break the concept you wish to measure into its component parts, ensuring that no matter what the answer, you will be able to introduce a change that will improve the result. Assume you wish to survey management’s perception of the quality of information they receive. The first hurdle is to define the concept of “quality.” As per the happiness example, it would be futile to ask management if they considered the information they received to be of poor or good quality, as you would not know what to change if the answer was that the quality of the information was poor.

To resolve this issue, I define quality information to be information that is complete, accurate, and timely. In other words, I get all the information I want, when I want it and without errors.

Using this definition the first question could be: “Do you consider the information you receive to be complete?” It is substantially easier to resolve issues around incomplete information than it is to fix issues of poor quality. A further refinement of the question can be to ask “How often are you required to request additional information for use in the decision-making process?” as it may not be possible to be confident that everyone defines “complete” the same way.

The survey is further improved by moving away from using binary answers (yes/no) to using a scale. A scale allows the respondent to be more specific in their answers. The Likert scale is my preference. The primary characteristic of a Likert scale is that it considers all responses to be equal. To set it up, the survey author should write down the question and then, at a minimum, define each side of the scale. Ideally each response point in the scale will also be labelled.

A Likert scale should comprise at least five choices. The ideal number is eight as it allows the respondent to show a higher sensitivity in how they respond to each question. I prefer using an even number of choices as it forces a decision from the respondent. Using an odd number provides a natural midpoint that can become the easy choice for respondents not wishing to commit themselves. There is no midpoint with an even number of choices.

The question on completeness now looks like this:

How often are you required to request additional information for use in the decision-making process?

Constantly Seldom

1 2 3 4 5 6 7 8

The results are presented by totalling the number of times each point is selected, as each point on the scale is equally valid.

I also recommend asking the question twice. The first question is to evaluate the current position and the second is to determine the ideal or desired position.

The results graph could look as follows:

The current position is in front and the ideal position at the back.

From the graph it can be seen that of the 160 respondents (managers within the business), 40 rated the current completeness of information as 2, 20 rated it with a 3, 0 rated it with a 4, 30 rated it with a 5 and 20 rated it at each of 6, 7 and 8.

The important point is that there is no trend line. It is only a series of discrete scores.

From the graph it can be extrapolated that the vast majority of managers consider the information they receive to be incomplete. This is an easily accepted result. What is unexpected is that approximately 60% of managers have an ideal score of 4, 5 and 6. That is, over half of the survey population do not consider it important to have complete information to do their jobs. (Not all managers responded to the question for the ideal position).

These results can be further enhanced with follow-up interviews to better understand them.

And further insight can be gained through cross-referencing their responses to the demographic information about the respondents such as seniority, gender, location, function etc.

Once you have established the gap between the current and the ideal position, the question of how to close it arises. My experience is that the gaps are closed through a combination of changes to policy, behaviour, process, and technology. The following table illustrates how this can be worked through:

On the left are the criteria measured by the survey. On the right are the four change drivers of behaviour, policy, process, and technology. The numbers represent which of the four drivers need to be addressed to close the gap and are in decreasing order of priority. (1 is highest priority and 4 lowest.)

It can be seen that substantial improvements across all measures can be made by changing or introducing policy supplemented by changes to behaviour and process. Frequently companies jump straight to changes to technology. In this case, changes to technology will help, but they are not the place to start.

A survey can act as a catalyst for change and can provide a baseline prior to making changes. But it is important to keep in mind that it is only a snapshot in time and it only provides answers to the specific questions that you ask.

STRATEGY DEVELOPMENT WORKSHOPS

Posted on March 29, 2014 by Garth Holloway

This article covers the basics of developing a business strategy. My favourite maxim on strategy management is “The bus that runs over the pedestrian is never the bus the pedestrian is watching.” This maxim reinforces the point that the value of a business strategy is directly related to the assumptions that underpin it.

When establishing a strategy, the first assumption is that the management team formulating the strategy all frame the conversation the same way.

Invariably this is not the case and the book “Reframing Organisations” by Boleman and Deal describes this phenomenon very well.

In their book, they describe four frames through which a manager can view the organisation and environment they work in.

The structural frame: a focus on how groups and teams are structured.
The human resource frame: a focus on human resource management and positive interpersonal dynamics.
The political frame: a focus on power and conflict, coalitions and dealing with internal and external politics.
The symbolic frame: a focus on organisational culture.

Recognising that managers may not be aware that they view the organisation differently as do their colleagues, it is important to agree the frame or frames the team will use through the strategy development process. It is acceptable that different managers explicitly adopt different frames to enrich the conversation and ensure groupthink is mitigated. It is only important that everyone knows which frame each person is using through the course of developing the strategy.

The strategy management process is depicted as follows:

Simplistically, the purpose of a strategy workshop or process is to answer five questions:

1. What business are we in?

a. What is the corporate culture?

b. What is the risk appetite?

2. What is the endgame or, in other words, what does success look like?

a. Asset sale

b. Public listing

c. Family business hand-down

d. Stop investment and take the money in annual dividends.

3. Why will we succeed?

a. Analysis of the operating environment

a. How is value created?

b. Who are the competitors?

4. How will we succeed?

a. S.W.O.T. analysis

b. What is the business model?

c. What is the style and structure of management?

d. What are the priorities?

5. How will we manage success?

a. Organisation structure

b. Compliance management

c. Performance management

The strategy workshop should open with confirmation of the nature of the business, the company culture, and the risk appetite. The nature of the business is to answer the question: “What business are we really in?” Often the answer will revolve around business models such as treasury or risk. These models are then placed in the context of the business they operate in. For example, supermarkets are generally in the treasury business and construction companies are in the risk business. Understanding the company culture will inform the strategy process as to the nature of the risk the company is willing to take on. For instance, a conservative company will not endorse a high risk strategy.

It is difficult to develop a strategy if there is no consensus on the nature of business, culture and risk profile.

The strategy workshop can now move to an analysis of the endgame. The purpose is to establish agreement on the exit strategy. The exit strategy is a statement of how the owners will turn their investment in the asset into cash. Options include: sell it, list it on the stock exchange, or take the cash in billings without actually building the asset. An equally acceptable option is to give it to the kids.

The endgame question informs the investment decision. For example, it is very difficult to sell a professional services business and if the principles wish to exit the business, then investing in the business may not be the best way for them to get value from it. Rather they should maximise their billing and take out the value in dividends over the next few years, then simply close the business and walk away.

The endgame question is equally valid for a public company, but the alternatives are different. There is only one objective for the directors of a public company and that is to maximise shareholder value. This reduces the directors’ endgame to the alternatives of selling the entire company or selling the shares they hold in the company. There are a few additional complex options that are not included in this article.

If the business is saleable, or it is a public company, then the exit strategy will always be to sell the shares for the highest value possible. The business strategy must therefore focus on activities that increase share value in a sustainable manner.

The longest practical time horizon for a strategic plan is three years and many would argue that this is too long, but this depends on the market the company operates in. Developing a three-year strategic plan does not imply that the owners will exit in three years. The time frame is only to provide context for the strategy workshop and if the strategy development process is conducted annually, then the three years becomes a rolling three years. For some markets such as infrastructure development, the investment period is well over ten years.

At the beginning of this article I mentioned the need to manage assumptions. Through the course of agreeing the endgame, a number of explicit or implicit assumptions will have been made and the next stage of the workshop is to expose and critically examine these assumptions and answer the question: “Why will we successfully achieve the endgame?”

The intent of the question is to force an examination of the assumptions made about the market the business operates in (external environment) and the business’s ability to operate in that market (internal capabilities).

There is no right or wrong order in which to approach these two mini workshops. My experience is that workshop participants need to discuss their internal environment before they can properly consider the external environment. The problem with this approach is that it can become very myopic and the thinking becomes constrained to considering what is known, rather than including what is unknown. If the workshop sequence does start with an analysis of the internal environment then it should include a reconfirmation of the results after the external analysis concludes. This will ensure the capabilities considered in the internal analysis adequately address the opportunities and threats identified through the analysis of the external environment.

For the internal analysis workshop to be successful it is important that there is agreement on the core business. That is agreement on the question: “What business are we in?”

Understanding what business you are in, tells you what you must be competent in and, by inference, what the business must be capable of.

Many capabilities create a competency.

Source MGSM

The internal analysis is therefore a review of the existing capabilities against the nature of the business. It is a review of what exists now and what capabilities need to be introduced or enhanced. To guide the identification and classification of capabilities I recommend the B.T.O.P.P. model. It is a simple but practical model for structuring the analysis.

It is important to keep the analysis at a high level to avoid getting mired in conversation on the nitty-gritty. The following table provides a good structure for collating the results.

Source MGSM

Column A can be renamed “business objective” or “core competencies” or similar. The last column is important. It captures the group’s opinion on what needs to be resolved to close the gap. I recommend using the B.T.O.P.P. model here again to check for completeness. This is in addition to using it for the capabilities analysis. For example, if the desired capability is to be able to establish a “multi-local” distribution chain or to be capable of transacting in multiple currencies, then the issues will be multi-faceted. Using the B.T.O.P.P. model creates a common vocabulary for recording the issues.

There are many models that assist with the analysis of the external environment such as Porters Five Forces (shown below), the P.E.S.T. (Political, Economic, Social and Technological), and P.E.S.T.E.L. (PEST + Environmental + Legal) frameworks.

Source: Porters 5 Forces

The results of the analysis can be captured in a table as shown.

Column A describes the nature of change anticipated in the market.

While the table is simplistic, care should be taken to include as much detail as possible when describing the anticipated change. This may require adding additional columns. Depending on the depth of the analysis, a different table may be used for each analysis topic, or one table for all. The table is intended only to collate the issues, not to solve them so there is no column for mitigation actions.

The internal and external analysis addressed questions 3 and 4 (referred to at the start of the chapter) and provided the raw data required to answer question 5. The workshop is now ready to consolidate the issues and prioritise the actions for the next 12 months, 3 years, 5 years etc. The critical issues framework can assist with this process.

Source MGSM

The methodology is to use the grid to “sift” the issues gathered through the two analyses to determine the critical issues. It is important to treat the grid as a “relative” analysis in the sense that all the issues are important, but some are more important than others. This means that you should be able to place an issue in all nine cells. Placing an issue in the low priority cell does not mean it is not important. It only means that, of the raised issues, it is of a lower priority. The critical issues are then further analysed as shown.

Source MGSM

The final step in order to conclude this stage of the workshop is to perform due diligence. The approach is to cross-reference the priority actions captured in the previous table to the business objectives discussed at the start of the workshop, or the required competencies highlighted through the capabilities workshop. Using a simple light/dark analysis provides an easily understood summary. Dark shading represents a closer match between the objective and priority.

Cross-references that are overly dark should be examined for completeness. Is the underlying issue fully described and understood? Is the priority correctly applied?

The priorities are then associated with a high-level timeline and the workshop is now ready to answer question 5: “How will we manage success?”

On the basis of “a journey of a thousand steps starts with the first step,” the purpose of question 5 is to ensure there is agreement on the tactical changes or projects required to execute the strategy. The timeline provides the priority.

I close with the observation that managers frequently do not allow enough time for everyone to fully consider the points being discussed.

The commonly heard statement is, “Let’s just get something down on paper and we can refine it over email.” This approach may improve efficiency but it destroys the debate. It is recommended that each activity in the workshop is addressed twice, if not three times. If it is a two-day strategy session, then repeat Day 1 on Day 2 to give people overnight to really think about the issues. Then hold a further review a week or two later.

DRAW THE PICTURE

Posted on March 15, 2014 by Garth Holloway

Two of the biggest difficulties in the work environment are a) being able to quickly understand and contextualise difficult concepts and then b) being able to convey these complex concepts to colleagues or managers. These skills are almost mandatory for uninterrupted career advancement.

There have been many studies on the way people assimilate knowledge and no one shoe fits all. Depending on who you are you will prefer written text, audio, or graphics. My view is that if you can’t draw it, you don’t fully understand it. A graphic forces you to summarise your thinking, to organize it tightly into a visual object. Both written and spoken words allow you to describe the same concept from a few different angles and to really elaborate on the idea. A picture is static. Everything you want to say has to be summarised in the graphic and you are limited by the size of the page.

To get a picture right means that you really have to understand the concept you are drawing and the interrelationships within it.

There is no right or wrong way to draw a picture. You can use blocks and lines, symbols or a mind map. Once you get the picture right, you will be able to talk to it for an extended period of time.

Sometime back I was wrestling with how strategy was related to a business. I drew the following picture.

I look at the picture today and while I still agree with it, there are parts of it I would change. But at the time I drew it, that was how I understood the world. It summarised a few hundred pages of text. Once I had the picture clear in my head I was confident that I could take any question on the topic and be able to answer it in detail and in the context of how it worked with the rest of the business.

There is no formal methodology for drawing a picture and you need to be patient with yourself. It may take a few days to get the picture to a point where you are comfortable with it.

The underlying assumption of this approach is that any message you receive, be it a written text, a verbal instruction or lecture, or even a visual event will only contain a half dozen important points. It is these points that you must include in your picture. The trick is identifying the points in the first place. My recommendation is: don’t try too hard. Use an A4 size piece of paper and draw your understanding of what you have just read or heard or seen. Make the picture rich in detail. The more detail, the better. Once you believe you have all the concepts on the page and you have related them to each other, take a new A4 and fold it in half. Now draw the same picture in half the space. It will force you to summarise your first picture. If you can, repeat the exercise with a one-quarter size piece of paper.

Then reverse the process. When you can draw the summarised picture from memory, then draw the next level of expanded picture and when you have that right, draw the very detailed picture again. When you can do that, then you will find you really have internalised the concepts and you will be able to talk about them fluently. Then, depending on who your audience is, you can produce the appropriately summarised picture on the white board without notes and speak to it with confidence.

The following is another example of a picture I have used for years to describe the business architecture.

This picture conveys a significant amount of detail without being overly busy. It describes the elements of the business architecture and the context in which they exist. I now know this picture so well I can speak to it for over an hour if needed. I have also prepared pictures for each of the nine points (shown as blocks). This allows me to drill down into additional detail if necessary.

I have mentored a number of entrepreneurs who have come to me with an idea and the passion to start a business. They will all have prepared detailed business plans, but when asked to describe their idea they invariably battle. My recommendation is always: write up a brochure of one page only with a picture. The potential client must be able to look at the picture and understand your business. The text is supporting detail only. When you can do that, you understand what you are selling.

It is said, a picture speaks a thousand words. This is true and when you have your picture, you will have a thousand words at your fingertips.

BUSINESS OUTCOME MANAGEMENT

Posted on March 5, 2014 by Garth Holloway

One of the greatest challenges for any company is the execution of strategy or the realisation of benefits from the implementation of large change programs. Frequently, the reason isn’t organisational resistance to change, a difficulty that is commonly referred to. Rather it is for a more serious reason: managers and management teams focusing dogmatically on what they are doing rather than what they want to achieve. This causes managers to narrow their thinking and, in effect, operate at a more junior level. They “can’t see the wood for the trees” and the return on investment from their time is diminished.

The more senior a manager, the more they need to work within a team to achieve the business objectives. Irrespective of how siloed the organisation is, the silos have to come together eventually. The lower in the organisation that this cross-departmental engagement occurs, the better.

A major inhibitor to cross-departmental engagement is the absence of common purpose. Frequently managers believe they are working cooperatively but when pushed they have difficulty explaining the interdependencies between the initiatives they are all working on. This is because they are working towards completing initiatives, rather than delivering outcomes.

Initiatives are the activities managers and staff are engaged in. Outcomes are the result of one or more initiatives.

Consider the technology salesperson. Their role is to approach prospective customers and convince them that their technology solution will improve the prospects’ business operations.

For example, a CRM (customer relationship management) salesperson will state, “Buy my CRM software and you will have happier customers and improved revenues.”

Anyone who has implemented a major piece of software will know how flawed this scenario is. The truth is that once you implement a technology solution, all you have is a database of names and files.

To achieve the benefits promised by the CRM salesperson, the company must implement a range of complementary initiatives. The collective output of these initiatives will deliver the desired outcome.

The approach of interlinking initiatives and outcomes is known as Business Outcome Management. It is fundamentally different from traditional approaches to project planning in that the emphasis is almost entirely on the outcomes required.

The principle is the same as it is for ball sport players in the sense that it is better to be where the ball is going to be rather than where it is.

Business outcome management is a methodology that assists management teams to establish a common purpose. It produces two deliverables. The first is a two-dimensional mind map that graphically displays the outcomes and initiatives and the second is a document that transposes the map into a business plan.

The importance of having a two-dimensional mind map cannot be overestimated. When discussing the importance of business outcome management with my clients they generally point to a range of documents or a single thick document and say they have it covered. At this time I ask them what the relationship is between their various documents, or how page x relates to page y in a single document. The point is that documents are “three-dimensional,” making it exceptionally difficult to know or visualise the multiple many-to-many interrelationships that exist in a single document, and between documents.

A two-dimensional mind map surfaces the interrelationships and explicitly reveals how a single business outcome is dependent on multiple initiatives. It highlights relationships that are not immediately obvious in a document. The following is a simple example of the concept. Initiatives are represented as a square and outcomes as a circle. Risks can be included as a different shape.

The graphic details the basics of implementing a change program. The entire “island” is labelled change management.

For larger projects and programs of work, the map will comprise of multiple “islands,” each representing initiatives and outcomes of similar intent and strategic focus. They provide an additional dimension to the map and assist the process of aggregating the relationships found in traditional documents into an easier-to-read format. Each “island” is labelled to provide context for the outcomes within the island, and collectively these labels are the executive summary of the program of work. Each island will have its own owner, a manager who is responsible for ensuring all the outcomes in the island are achieved.

Initiatives are written in the format: verb/noun. For example: “document the business process” or “administer a customer survey.” Outcomes are written in the past tense. “Staff morale has improved” or “customer requirements are understood” or “shareholder value has increased.” Using the past tense is important as it assists managers to clearly articulate the desired outcome.

Focusing on achieving the outcome encourages the manager to avoid tackling a project with a checklist mentality, as it is almost impossible to document all the initiatives required to achieve an outcome.

If you were focusing on initiatives you would work on “review and agree upon the business plan” and once completed you would consider that the business plan was reviewed and agreed.

However, if you take a broader view, then you could only consider the business plan to be “reviewed and agreed upon” once all the indirect contributing initiatives were taken into account.

The indirect initiatives that contribute to “business plan reviewed and agreed” are:

Induct work package resources in project approach
Agree activities in scope and document approach to each
Establish change management program to mitigate risk
Review and agree risks to project
Agree approach to business planning
Socialise business planning approach
Prepare business plan
Review and agree business plan

These initiatives are part of two different strategic groupings (islands) but they all still contribute to the outcome and the manager who is signing off the business plan will expect to see contribution from all of those initiatives.

An important insight is that if a decision is made to delete or not complete an initiative, the impact of its absence can now be traced to those outcomes that relied on the initiative being successfully completed.

To prepare a business outcomes roadmap requires a workshop of four parts.

Part one is to agree the “endgame”—the flag on the hill. This is the medium-to-long term objective for the company or, if it is for a major project, then it is a statement of what the project will achieve. It should be a “big statement” but equally one that is achievable.

Example: “A culture of delivering excellence is implemented and a collaborative unified management team that is the envy of the industry is established.”

The second part of the workshop is to discuss the current issues facing the business. This is because managers and staff frequently cannot discuss the future without first explaining the problems they face in doing their job. You have to give them the chance to “put their baggage down.”

Part three of the workshop is to capture intermediate outcomes, those outcomes that must be realised in order to achieve the end game.

Part four is to capture the initiatives collectively required to deliver the sub-outcomes.

The methodology for collecting the data is important and it starts with the room selected for the workshop. The room should be set up without a table and the chairs should be arranged in a semicircle or similar. This assists people to “open up” in the workshop.

Each person is given a felt-tip pen with a broad point and a pack of post-it notes. Part one of the workshop can be completed on a white board through normal facilitation techniques.

Parts two to four will follow the same approach. The facilitator requests that the participants write one issue, outcome, or initiative (depending on the session) on a post-it note and to keep producing post-it notes until they have exhausted everything they have to say on the topic.

While the participants are writing down their thoughts, the facilitator should walk between them collecting the completed post-it notes and placing them randomly on a wall or window. As the notes are placed, the facilitator should read aloud a selection of the notes. This will stimulate the thinking of the participants.

When everyone has written down everything they have to say, and the facilitator has stuck all the notes on the wall, then the participants will be asked to sort the notes into groups. The rule for this part of the workshop is that the participants must work in silence. They cannot discuss their thoughts on the grouping. Once everyone is happy, the participants take their seats. At this time the facilitator will review each group and agree on a title for the group. These groups will later influence the “islands” in the mind map.

When all three mini workshops are complete, the workshop is over.The facilitator types up the workshop and prepares the business outcomes mind map. This will include de-duping the lists. The issues list does not make the map. Rather it is used to validate that everything that is included in the map will address the issues. Microsoft Visio is a good application for preparing the mindmap.

An important feature of this approach is that the outcomes are collected independently of the initiatives. This means there is no direct link between the outcomes and initiatives. When the map is prepared, the author must draw their own conclusions on which initiatives are related to which outcomes.

Once the map is prepared, it is critiqued by all or a subset of the participants from the original workshop. It may take two or three iterations until the map is agreed upon by all.

Viewing the map for the first time can be quite confronting for the participants. The best personal example of this was when I presented a map to a group of executives in the aviation industry. When they first saw the map, the room descended into chaos as each manager tried to find their department or function in the map. When they couldn’t, they turned on me. I explained that each of their functions was spread out through the map and that they had to work as a team to deliver the endgame. It was a significant moment and once the emotion died down, they really embraced the concept. Later the managing director wrote to me to say that they were 27% up on the budget as a direct result of the workshop. He was ecstatic.

Once the map is agreed upon, it needs to be turned into a document. This document has two parts.

Part 1 focuses on outcomes and part 2 on initiatives. The layout is as follows.

For outcomes:

The idea is to list all the initiatives that contribute directly or indirectly to each outcome. The “person accountable” refers to the outcome, not the initiatives.

For initiatives:

This table relates all outcomes to a single initiative. This is important as it informs the owner of the initiative about which outcomes are dependent on their activity being successfully completed. The R.A.C.I. table describes who will own the initiative (accountable), who will deliver the initiative (responsible), who will contribute to the delivery, and who should be informed of progress.

This is a powerful methodology and the results will improve with practice.

POLICY AND RULES – SIMILAR BUT DIFFERENT

Posted on September 11, 2013 by Garth Holloway

Recently I was asked what I considered to be the difference between rules and policy. I gave my stock answer – rules cannot be changed, policy can. There was a group of people listening and they almost unanimously said – “what, of course you can change a “Business rule”.

I went on to defend my position by stating – you can repeal a rule and issue a new one. The original rule has not changed; rather it is no longer in force. A new rule has been issued and it is separate from the previous rule. Conceivably the original rule can still be reissued and both rules will be in force at the same time.

Policies by contrast can be changed and the ‘edges’ of policy are not as defined as a rule.

Policy and rules are similar in that they both set out to guide behaviour. They differ to the extent that they allow the individual to make the final decision as to how they will behave.

The key attribute of a rule is that is must be precise. You are either complying with it or not. Consider the rule – you must stop at a red traffic light. There is nothing ambiguous about this rule. You either stopped or you didn’t. You are not allowed to interpret the rule. When the fire alarm sounds above your desk, you do not get to decide whether you leave or not; you get up and go. (I admit that when it comes to fire drills, I frequently break this rule).

Policy is often written up in an equally prescriptive manner. Most companies have a policy on bribes along the lines of; no employee will accept or offer a bribe. This statement is as prescriptive as a rule. In fact I would call it a rule that is frequently called policy.

Policy sets the parameters that define how you will behave in a given situation. An example; staff are permitted to dress in business casual on Fridays. This policy does not explicitly define what business casual is leaving it up to the individual to decide what is appropriate. A further example is – sales managers may spend $XX a month on business expenses. The policy does not define how the allowance should be spent, or on what.

In both examples, it is assumed that the individual will – do the right thing- and will behave in accordance with the values and objectives of the company. With rules, this freedom is removed and the individuals’ behaviour is prescribed.

This distinction is important when establishing organisational procedures. A procedure tells you how to do something. Typically a policy covers the entire procedure and provides the parameters of permissible decisions on what’s appropriate behaviour when executing the procedure. Rules generally apply to specific tasks within the procedure and cannot be interpreted.

Despite the implication of the oft used phrase – policies and procedures – both policy and rules exist separately from procedures and have a one to many relationship with procedures. This means that individual policies and rules can be associated with multiple procedures and procedural steps respectively.

Establishing rules is reasonably straightforward as the language of rules is ‘native’ to managers. We are all comfortable expressing constraints on behaviour in terms of single statements. “You will….”, “You must…”, “You cannot….”. Even when we intend to establish policy statements we typically express them as a rule.

There is no easy methodology for establishing policy. As a guideline, the role of policy is to:

translate values into operations
reinforce compliance with legal and statutory responsibilities
set standards, and
improve the management of risk.

A good place to start is with rules. Write down the rules that will apply to the area you wish to establish policy for. Then bundle similar rules into groups. These rules become the parameters of the policy statement. Read each rule in a group and write a business statement that covers all the rules in that group. This is your policy statement. Given that the statement is trying to cover all the rules in the group, it will by necessity, be appropriately vague.

Another method is to take a specific problem area in the business that you wish to manage with improved policy and establish a table that aligns policy with procedures and rules. Having these three items in one table quickly surfaces issues where policy is written as a rule and rules as policy.

By way of example.

The business issue is to reduce the risk of poor decision making on tender submissions.

The first policy statement uses the word ‘accurate’. This is a relative term. The rules define how accuracy should be interpreted.

The second policy statement uses the word ‘complete’. This is also a relative term. The rules define how completeness should be interpreted.

Completing the table should deliver relevant and useful policy statements.

In closing I will say; the real difficulty is managing the policies and rules once they are published. The last column in the table is ‘consequence’ … when it comes to rules and policy, if you are not prepared to manage them, do not bother establishing them.

Garth Holloway

New Words for Old Ideas

Tag Archives: strategic planning

SURVEYS AND DIAGNOSTICS

STRATEGY DEVELOPMENT WORKSHOPS

DRAW THE PICTURE

BUSINESS OUTCOME MANAGEMENT

POLICY AND RULES – SIMILAR BUT DIFFERENT

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