Tag: management

What to consider when setting marketing objectives

When you read the business pages of your daily newspaper or watch the business news on television, news of company performance is dominated by financial statistics be they increased turnover, growth in profits or an increase in share value.  This is to be expected as the primary role of a company’s board of directors is to maximise the returns to stakeholders.

Financial data, particularly in the UK where the vast majority of company directors come from banking or accountancy, is familiar, comfortable ground.

This creates a problem for marketers where many metrics do not easily fit with the concept of shareholder value.  You do not see company’s reporting that they dominate media share of voice; or that they have increased customer retention rates.

And so the focus of company boards is often skewed towards the minimisation of costs and the maximisation of financial returns to ensure the shareholder value target is met.

In some companies, this financial focus is so dominant it leads to incorrect marketing objectives being set or defined.  For example, many firms will set the increase of sales volumes as a marketing objective.  This relates strongly with the concept of the ‘Sales and Marketing Department’; a silo approach where marketing is a function of sales rather than sales being a function of marketing.  Some organisations even set the increasing of profits as a marketing objective ignoring the effect of cost minimisation on that target.  All too often objectives are set for an organisation’s marketing team which focus on the short-term ignoring longer-term aims.

That said, marketing objectives do need to be set within the financial resources and expectations of a business.

Marketing objectives need:

  • Financial Rigour,
  • A Strategic Focus (but not limited by annual targets),
  • Resource allocation aligned to business growth (digital marketing projects and internet-based customer service should not be seen as cost-cutting exercise
  • Segmentation to be driven by customer needs and wants.  This should be in line with marketing best practice.  You should not simply rely on easily obtained demographic data but look to psychographic data on customer attitudes.
  • Profitability should be assessed by the examination of individual accounts
  • Customer retention analysis.  There is a lot of research available on customer retention but it is rarely used by businesses.  This ignores the fact that the longer you retain a customer, the more you will earn from them.

In the UK it is a fact that company boards are dominated by directors with a background in finance.  In Germany, boards are often dominated by engineers (Germany also has a large number of family-owned firms).  Across the EU, around 700 million euros is spent annually on market research.  That sounds a lot but compare that figure to engineering research where upwards of 70 billion euros is spent.  One large oil firm recently spent 700 million euros on a single financial IT system.

No company would make a major purchase without carrying out detailed and serious financial due diligence.  Often this will involve the introduction of external expertise, auditors and consultants. Yet often firms will create marketing campaigns and targets based on poorly reviewed research and strategies.

There are two levels to marketing due diligence:

  1. The strategic zone where metrics are defined.  This is where the target market is described and the value proposition created.
  2. A measurement zone where value is calculated and the value proposition delivered.

When creating marketing objectives you align them with shareholder value over three levels:

  • Level One: Marketing Due Diligence:  define your strategy, segment you market, define target customers and create your value proposition.  Does your marketing strategy create or destroy stakeholder value? How can your existing strategies be improved?
  • Level Two: Marketing Effectiveness:  What tactics do you employ in each of your target market segments? Do those tactics create a differential advantage compared to those of your competitors?
  • Level Three:  Promotional Effectiveness:  Are marketing communications meeting targets such as share of voice, consumer recall and product awareness?

You must remember that measuring marketing output is not like measuring factory output.  In factory output you measure the difference between what goes into the production line (e.g. effort and raw materials), compared with what comes out (finished products, wastage).  The effect of marketing activities can only be assessed long after products have left the factory floor.

To properly consider marketing; doing marketing due diligence properly; you must measure the risk associated with a chosen marketing strategy and therefore its potential to affect stakeholder value.

Dealing with Crises

In the past week, UK retail has seen the collapse, for the second time, of the music retailer HMV and, following a significant corporate fraud, the collapse of the café chain, Patisserie Valerie.

Both of these businesses could be considered as being in crisis for a significant period of time.

In the last blog entry we discussed economists views of risk and the variety of risk attitudes businesses and individuals may have.  Whatever, the risk profile, it is likely that at some time in its lifespan, a business will face a crisis.

Currently the UK is approaching the deadline for Brexit.  If your business is not making contingency plans for the various potential outcomes of the Brexit process, you may be facing a potential crisis.  In fact it is highly likely that the UK will face some form of national crisis, particularly if a withdrawal agreement cannot be reached.  The UK government preparation papers give some idea to the level of crisis the nation may experience.  For example, the Department for the Environment, Food and rural affairs, it is rumoured, is planning a mass slaughter of one-third of the UK’s sheep in the event of a no deal Brexit as a measure to maintain stock prices.

Mintzberg et al. in The Strategy Process: Concepts, Contexts and Cases (Prentice Hall International, 1988) described organisations in crisis as like ‘living in collapsing palaces’.

These palaces are built of tightly interlocking beams and stone blocks.  They are filled with fine and elegant components.  But these palaces are built atop crumbling mountains.

The rigid, cohesive structure of the palaces look completely rational to those existing inside them.  Indeed they look beautiful.  However viewed from the outside, the palace has foundations that are rapidly eroding away.

Such a position is shown by the collapse of HMV.  For decades, HMV was the model of how to sell music.  It easily survived the movement of music sales from vinyl to compact disc.  It easily coped with the shift in physical technology.  It was an elegant palace.  However, it didn’t foresee the arrival of digital downloads and the rise of streaming services.  The movement to digital music files eroded the foundations of HMV’s palace.

The management of HMV continued to shore up their elegant palace despite clear warnings.  it was obvious to those outside that HMV was operating a declining business model.  Some competitors, such as Our Price Music and Tower Records went bankrupt.  HMV’s main competitor, Richard Branson’s Virgin Megastore was sold off as Branson divested much of his music empire shifting his business into areas such as airlines and train services.

Often the more elegant the palace, the less able it is to cope with a crisis.  Its rigid components mesh together so tightly that it cannot react appropriately. The organisation’s perceptions, goals, capabilities and methods of working are beams and blocks tightly aligned and preventing flexibility.  The elegant palace is rigid, solid, stuck and unable to flex.  Such movement is necessary to cope with the shifting foundations.

However in many crisis, despite flexibility, the foundations fail and the organisation begins to crack:

  • Top managers are viewed as making faulty predictions
  • Doubts arise as to the ability of managers to make crisis decisions
  • Managers as a result are seen as incompetent liars
  • Idealism and commitment to goals fade
  • Cynicism and opportunism thrives
  • Cuts and reorganisation lead to power games and empire-building.  Cooperation is undermined
  • The processes of disintegration feedback on themselves and are reinforced.

An organisation’s ability to achieve often depends on the expectations of its stakeholders.  If stakeholders expect failure, failures become more likely and other expectations of failure multiply.  The organisation enters a downward spiral of failed expectations

Achievement often relies on ability and effort.  If people expect failure, they leave, and they take their ability, expertise and effort with them.  As a result the level of ability in the organisation falls.  This is particularly the case if potential candidates outside the organisation see it as failing and therefore do not consider joining it.

As a result, job performance falls as staff take on unfamiliar roles.  Staff begin to receive proportionally less reward for their efforts.  Job satisfaction slides.

Conflicts and power struggles develop between managers and teams. Some in the organisation become cynical opportunists.  They make unreasonable demands which elicit exhortations from senior management.  This may result in these manages, in turn being seen as opportunistic cynics.

Such conflicts could be seen across UK industry in the 1970s as nationalised industries suffered crises and unions made increasingly exaggerated claims for pay rises.  It got to the stage where the most minor of disputes ended with all out strikes which hobbled productivity.

Such power struggles often ended with the centralisation of power and responsibility.  In the nationalised industries this meant the appointment of figurehead senior managers who micro-managed.  Senior managers often grabbed powers even though they had little knowledge of how to use them.

In such positions, for an organisation to move forward, it must allow the disintegration to take place.  Take HMV as an example.  When the firm first collapsed, there was an opportunity for its new owners to change its business model; to move into downloads, internet sales and music streaming.  However, the new owners retained the old business model whilst taking significant levels of cash out of the organisation.

In retaining the old business systems the ‘rescuers’ of HMV failed to learn the lessons of the original administration process and it once again failed.

So how do you avoid crises:

  1.  Avoid excesses:  Excessively sticking to processes and prescriptions for management.  This is the ‘computer says no’ response.  It often leads to contingency plans being ignored and issues being oversimplified.  Crises caused by environmental change can be exacerbated.  Such excesses can result in complacency i.e. plans become annual events not continually evolving processes and documents.  To avoid such excesses, employ critical friends, carry out both marketing and market research, benchmark, allow dissenters to speak out, don’t become an organisation of ‘Yes Men’.  Plan to employ strategic strengths and eliminate strategic weaknesses through developing SWOT strategies. Have a Plan A, and a Plan B, and a Plan C,…….
  2. Consider Replacing Top Managers:  Often this is a move needed to end or avoid a crisis.  However competent the existing top management, they can build up an existing ‘group think’.  replacing them gets rid of personal enmities and old assumptions.
  3. Reject Implicit Assumptions:  which underlie existing managerial perceptions and behaviours.
  4. Experiment with Portfolios:  Invest in new products, enter new markets, develop new technologies, develop new operational models and employ new people.  Look at Ansoff’s methods of business growth, market expansion, new product development, brand extension and diversification.
  5. Managing Ideology:  Top management are often seen as the villains of a crisis.  They can exacerbate a crisis by delaying action.  They can steer their organisations into crises.  See Fred Goodwin at RBS or the board of Carillion.  However, if they successfully drive the organisation through the crisis, they can become the organisation’s heroes, for example, Steve Jobs at Apple.  By managing organisational ideology, managers can define their status. Crisis are times of danger but they are also times of opportunity.  Shaping ideology can nurture enthusiasm amongst stakeholders.  Let the language and actions of senior managers mould the organisational ideology.  Let managers become the heroes of surviving the crisis.

 

More on Organisational Culture

A few blog entries ago, I discussed the issue of organisational culture and how business and marketing planning can be affected by the culture of an organisation.  Organisational culture is a critical element in the success of business plans so I have no reservations in returning to the subject.

So how do you recognise the dominant culture in your organisation?

Well, as discussed in previous blog entries, there are several factors to an organisation’s culture including:

  • Organisation’s purpose and goals;
  • The external environment;
  • Organisational policies;
  • Rules and procedures;
  • Organisational structure;
  • Employees skills and attitudes:
  • Use of technology:
  • Decision-making mechanisms:
  • Communication channels:
  • Societal norms.

Organisations get into difficulty when they try to impose an organisational culture over pre-existing cultural norms.  A good example is when American banks opened offices in Spain.  The banks tried to enforce the American working day (usually 8 am to 6 pm) on their Spanish employees.  They ignored the Spanish tradition of the siesta.  The banks soon found that employees were falling asleep at their desks.  This had nothing to do with the staff being lazy.  In Spain, the working day is different.  Most people in Spain start work at around 7am.  They stop work at noon and go home for the siesta.  They then return to work at 4pm and work through to 7pm.  Most Spaniards eat their evening meal at around 10pm.  Then they socialise, either with friends or at a local club or bar.  They usually don’t retire until after 1am.

The Spanish pattern of life means that the hottest part of the day is avoided.  The workers at American banks worked an eight to six-day, but outside work they continued the hours expected in Spanish society.  Not having the siesta meant they were collapsing with tiredness.  The American banks had to change their working hours to meet Spanish culture.

In creating business and marketing plans, you need to ask some probing questions:

  1.  Is your organisational culture represented in your mission statement; the over-riding statement on the direction of your business and its purpose?
  2. What are the symbols of your organisational culture?  Who/what are your organisation’s heroes, rituals, values?
  3. What are the core values that define your organisation?
  4. Do your managers have cultural awareness? Do managers know the likely effect of organisational culture on the rules, procedures and technologies you want to implement?

The sociologist Charles Handy describes four generic types of organisational culture:

  1. Power Culture: Control emanates from the centre. Organisations can be very political but also very entrepreneurial.  Power from the control of resources and personal power predominate.  Often power is in the hands of a figurehead (who may not be the nominated head of the organisation).
  2. Role Culture:  This is the classical organisational culture and can it can be bureaucratic in nature.  Roles are more important than people.  Position power predominates; expert power is tolerated.  Culture serves the power of the structure.
  3. Task Culture:  The focus is on completing the job at hand.  Expertise is valued and predominates.  Personal and positional power is also important.  A unified focus on the task means collaboration and teamwork is highly valued.
  4. Person Culture:  The organisation is a loose collection of individuals, usually professionals, who share common facilities.  The individuals own goals dominate.  Power is not an issue and the culture serves the need of individuals.

We can all think of examples where the four organisational cultures described by Handy exist.   His power culture reminds me of many UK businesses in the 1970s where power over the organisation’s direction existed with union and staff representatives rather than nominated managers; Many local authorities and central government departments exhibit role culture;  The arrival of Japanese car makers in the UK shifted the industry to a task culture; an organisations such as medical practices, barristers’ chambers, architectural practices have a person culture.

Following Handy, there has been significant subsequent research into organisational cultures.  Hofstade found that cultural differences were often exhibited within the practices of competing organisations rather than the values of those organisations.  He found that cultural practices had six dimensions:

  1. On an axis between process orientation and results orientation where culture is focused on means at one end of the spectrum and the culture is focused on results at the other.
  2. On an axis between employee orientation versus job orientation; where the concern is for people at one end of the spectrum as opposed to task results at the other end.
  3. Parochial versus professional: do the members of the organisation see themselves as individual professionals or are they simply another cog in the machine, part of an organisational group?
  4. Open social system versus a closed social system: Is the organisation open to newcomers or does their arrival raise suspicions? Is the organisation inward-looking or does it have an external view.  Is the organisation secretive or is information open to all?
  5. Local control versus tight control from the centre:  Are strict observance to matters such as costs and timelines required or is there a more relaxed attitude to such issues?
  6. Do you have a narrative or pragmatic approach to customers?  Do you always require strict adherence to rules or will you bend them to meet the needs of customers.  Do you impose a strict code of ethics or is it flexible to meet the wants of customers?

Turner (1997) described four organisation types based on person focus or task focus; egalitarian attitude or hierarchical structure:

  • Incubator:  Such organisations are person orientated and egalitarian.  These organisations dislike hierarchies and prefer role equality.  Spontaneous relationships develop and creativity is engaged.  This equates to Handy’s person culture.
  • Family:  These organisations are people-oriented but hierarchical.  |There is a culture of paternalism and power is exercised through members of the organisation rather than over them.  This model equates to Handy’s power culture.
  • Guided Missile:  Egalitarian but task-orientated.  Such organisations thrive on successful teamwork and problem-solving.  Members of the organisation have pride in themselves and their professionalism. Equates to Handy’s task culture.
  • Eiffel Tower:  Bureaucratic where tasks and roles sit within a defined hierarchy. Hierarchical but task-orientated.  Relates to Handy’s Role Culture.

“The organisational architect must take account of the informal culture; the norms, values and behaviour patterns that employees collectively support and believe in” (Mumford)

Cultures evolve over time and therefore they can be shaped.  Culture is often a response to organisational problems.

If you are intentionally trying to change an organisation’s culture leadership is key.

To successfully change an organisational culture the following tactics are key:

  1.  Recruit like-minded people
  2. Socialise to instil and sustain ideologies
  3. Use cultural communications in your internal marketing
  4. Use resource allocation the mould culture
  5. Set clear criteria for rewards and discipline
  6. Examine your structure.  Is it a good fit for your desired culture?
  7. Look at your building design.  Are staff in an open plan office or are they hidden away in separate offices creating a silo culture.  Do managers sit amongst the staff or are they hidden behind security doors on the fifth floor?
  8. Describe your desired culture in your mission and goal statements.  Use these statements to form a belief system which provides basic values and a common direction for the organisation and its employees.

 

Office Politics

If you work in an organisation with other people, you will encounter organisational politics.  It is inevitable.  If you are planning new strategies or organisational change, you will have to cope with organisational politics.

It is an extremely naïve position to expect the members of an organisation and other stakeholders to exist in an environment which is bereft of organisational politics.  Office politics are a fact of life and they must be coped with.

Twice in my career I have worked in organisations where organisational politics have either prevented the achievement of stated goals or caused damage to the organisational purpose.  Managers ended up spending more time on petty disputes than getting on with the job at hand.  However, it is equally naïve to expect an organisation to exist in a political vacuum where everyone is expected to ‘just get on with the job’.

In developing plans and strategies, you will no doubt be dealing with a level of organisational change and during that change organisational politics will be evident.  In developing plans, you must be cognisant of potential political eventualities.

Whilst people in an organisation will work towards a common goal; they will collaborate; they will also compete, for reward, for advancement and for power. This competitive imbalance leads to organisational politics.

Power is a major driver of organisational politics.  This can be those with power exercising it; or those craving power trying to achieve it.  For some obtaining power is an end in itself.  The more power a person obtains, the more political they become, and perhaps need to be.

Organisation politics can arise from both internal and external pressures on an organisation.  They can develop vertically within an organisation through layers of management; or horizontally between department and peer groups.

Much of the organisational strife of the UK in the 1970s was caused by demarcation disputes between various peer groups in an organisation.  One strike at the BBC was caused by an argument over the Play School clock.  Play School was a programme for toddlers which opened with a musical clock which displayed an item which was the episode’s theme.

The union for the scenery shifters argued that the clock was a piece of scenery therefore it was their responsibility to look after the clock.  However, the electricians union argued that the clock contained electrical components and as a piece of electrical equipment it was their responsibility.  The inability of BBC managers to solve this demarcation dispute ended up with both the Scenery shifters union and the electricians union going on strike.  This stopped all studio recordings at Television Centre and several programmes, including the Doctor Who serial Shada, had to be scrapped.

The Play School clock affair is a clear example of a minor dispute being used as a trigger for power games between different peer groups and management.

External organisational politics can include legal action, whistleblowers and unofficial leaks.

Internal organisational politics can arise from obstructive behaviour, grudges, covert lack of support, the bypassing of superiors, favouritism, outstanding obligations and favours, informal groups and cliques, badmouthing and rumour-mongering.

Some people enjoy playing organisational politics, others, like me, hate it.  To some playing politics in an organisation can be an enjoyable game.  I recall one former colleague who could be best described as a barrack-room lawyer.  They would deliberately play opposing groups off one another as they enjoyed the resulting chaos.

However, organisational politics can have unpleasant consequences, especially where threatening tactics are involved.  They can lead to bullying and increase stress levels.

People do not act rationally or logically.  They act emotionally. That affects an organisation’s political environment.

So how do you deal with office politics?  Here is a short checklist of issues to consider:

  1.  People are People, not just organisational animals:  Which is one reason I hate the term Human Resources; it has evolved from the 1970’s concept that people are an organisational input similar to power of raw materials.  It infers people are part of the machine, not free-thinking individuals.  It is therefore important that managers developing strategies and organisational change get to know the people in the organisation beyond their work status.
  2. Learn to Listen:   Organisational grapevines are not just malicious rumour-mongering.  Listen to what is discussed in your organisation but also learn t evaluate what you hear.
  3. What are the Rules?  How are people expected to communicate in your organisation and how do they actually communicate.  Do you have a shared, open culture of communication or a strict hierarchical communication model.  Are members of the organisation expected to stick to strict protocols or is individualism encouraged? How is influence enacted?
  4. Criteria for Success: What has worked well in the past? What hasn’t? How have senior managers behaved when placed in a similar position? And what was the outcome of their actions? What did senior managers do to get to their position and how much is this reflected in people’s reaction to them?
  5. Alignment:  How do personal ambitions fit with those of the organisation?  The closer the fit, the greater the likelihood of successful strategic change. Are personal ambitions consistent with the values and beliefs of the organisation?  I know of a charity where it appears senior management are more concerned with personal reward and status as opposed to the defined charitable goals.
  6. Build Relationships:  Link with information and power brokers across functions and departments.  Be prepared to trade information.
  7. To thine own self be true:  You have to be able to sleep at night and face yourself in the mirror.  Don’t abandon your personal values.  Instead use your behaviours and actions to become what you want to see.