Effective Management Capability – what does it take to build it?
New Sam Wilko Advisory Blog by Peter Wilkinson
Over a 30-year career in Engineering and Construction I’ve experienced first-hand the challenges that bid consortia, project teams and businesses corporate and smaller face in building effective Management Capability.
The circumstances may differ – for example bids and projects are all about time pressure and having to hit deadlines come what may, whereas in business it’s the ebb and flow of growth that most requires effective steerage. How this plays out every day though is pretty much the same:
- dealing with the pain of pulling proposals together without descending into blind panic as deadlines loom
- coercing client submissions through multiple steps and (sometimes multiple document management systems
- chasing weekly timesheets and invoices to report on job progress
- closing out Corrective Actions prior to the next Quality audit etc etc…
In short, it’s the little things rather than the big issues that generate the bulk of business pain and frustration.
But why is this fundamentally a Management Capability issue?
Before we delve into the answer to this question, you might be interested to know that effective Management Capability, along with Vision, is one of two key elements that experienced business investors look for when evaluating where to bet their money (that’s right – the typical 80-page / 120 slide deck Corporate Business Plan, in most if not all cases being filled with good news and heroic projections – is given scant attention). In the investor’s mind Management is the engine room of the business, being the means by which organisations get things done and deliver the work for which they’re paid for.
So let’s look in more depth at what comprises Management Capability in a business.
Management Capability has traditionally considered to be all about:
- having the Right people
- in the Right roles
- with the Right skills and experience.
Gone are the days though when a business or project could just rely on great people to “muddle through” and get the job done. The modern business environment is almost totally reliant on IT systems to perform and enable tasks that are central to producing outputs. Increasingly, smart companies are harnessing common data platforms and process automation to optimise “end-to-end” business processes. What in the not-so-distant past felt like a string of disconnected systems is becoming increasingly unacceptable (and if you’re still questioning whether your people are still prepared work to around clunky systems, take the time to have a chat about this with some of your younger staff or project colleagues….)
So, effective Management Capability also requires fit for purpose IT systems as well as aligned business processes. Just like people though, IT systems and business processes need to be maintained, nurtured and – on occasion – transformed. Consequently, businesses need capability in effective systems implementation and associated change management skills.
What does this look like in practice? From a strategy perspective, organisations need to know when to make a “big bang” investment in improved IT products and when to adopt a more “steady as she goes” approach. Interestingly, Japanese business has bespoke names for each of these methods:
- “Kaizen” which refers to continuous incremental improvement; as opposed to
- “Kaikaku” a less-well known term meaning revolutionary change or transformation.
When each respective approach is employed as well as the interaction between each methodology needs to be given careful consideration. To further explain and as explored in Paul Stringleman’s article “From Kaizen to Kaikaku” in Engineers Australia (Sept 2018), businesses need to avoid falling into the “kaizan” versus “kaikaku” paradox trap. An organisation with a track record of smaller improvements may find it difficult to justify a “kaikaku” leap forward on a Return on Investment (ROI) basis. In this way, a series of small improvements can often hold an organisation back and perhaps even stifle significant development. By focusing exclusively on small improvements, the business may miss an opportunity to gain a competitive advantage by jumping ahead of competitors.
Implementation of each approach also requires a different style of project management.
“Kaizen” type continuous improvement lends itself to a project methodology known as Agile. This approach uses short development cycles called “sprints” that focus on the implementation of a stand-alone system or process improvement. The approach was codified in 2001 with the publication of the Agile Manifesto, a “formal proclamation of four key values and 12 principles to guide an iterative and people-centric approach to software development”. As you might gather from the Manifesto, Agile has grown from the software development space and is an alternative to the more traditional “Waterfall” development model which originated in manufacturing and construction industries. “Waterfall” reflects the relatively linear sequential approach as progress flows largely in one direction (“downwards” like a waterfall). In highly structured physical environments – think Engineering and Construction – design changes typically become prohibitively expensive much sooner in the development process and accordingly the methodology lends itself to “Kaikaku” type business transformations.
Agile’s more recent emergence in Engineering and Construction businesses reflects the increasing importance of managing the health of business systems. Unsurprisingly though, Agile may not work as intended if the desired outcomes are unclear, the project manager or team is inexperienced, or if they do not function well under pressure.
As a final observation, you may recall a previous article that drew on a 2010 McKinseys Global Survey “Building organizational capabilities”. The survey explored the extent to which organisations concentrated on building capabilities that are most critical to an organisation’s business performance and why businesses focus on the capabilities they do.
The results highlighted the fact that companies whose training programs are effective in maintaining or improving the drivers of business performance, said their companies pay more attention to tools that support or enable capability building, such as standard operating procedures, IT systems, and target setting and metric tracking. In essence, strengthening an organisation’s Management systems is widely recognised as a key enabler of capability development.
However, many businesses did not typically focus on day-to-day activities that could maintain or improve capabilities such as project management, lean operations and leadership skills that contribute most to their business performance. For example, only 41 percent of survey respondents whose companies focus on supply chain management spent time defining roles, responsibilities, and decision rights for key positions, and just 39 percent set targets and tracked metrics.
In the eight years since the McKinseys survey was published, my anecdotal evidence drawn from Engineering and Construction suggests that not much has changed. My sense of what’s missing is this: Leadership’s ability to remain sufficiently informed and/or immersed in the business to really understand how the – increasingly complex – business works – an ongoing challenge!