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What is RACI?

RACI is an acronym for the four major headings in a responsibility chart:

  • Responsible – this position does the work to ensure that the action is completed
  • Accountable – this position is ultimately responsible for ensuring completion of a function, activity or decision, but may delegate responsibility to another.  Only one position should be accountable for every action or decision
  • Consulted – This position is involved prior to a decision or action taking place
  • Informed – This position is told of an outcome of an activity or decision afterwards

RACI Guidelines

  • Focus on the position, not on the individual currently occupying the position
  • Ensure the level of detail is appropriate to the positions on the RACI.  Organizations should have cascading RACIs from the senior team down to the individual contributor level
  • The RACI should be revisited and tested regularly as business conditions change
  • The first RACI will be an iterative process, and may not 100% accurate at first.  Further refinement is encouraged
  • Place accountability (A) and responsibility (R) at the lowest feasible level
  • There can be only one accountability (A) per activity
  • Minimize the number of Consults (C) and Informs (I)
  • Avoid listing mundane activities like ‘attend meetings’

Horizontal & Vertical Analysis

Once the RACI chart has been populated, it is important to review and analyze the work to ensure that the tasks, decisions and functions will be properly executed.  View the chart horizontally to ensure that each action or decision is properly supported.  View the chart vertically to ensure that workload is properly distributed amongst a team or work group.

Using a RACI to enhance or validate job descriptions

After a RACI has been conducted with a group, it is wise to cross-check the data on the RACI chart with what is written in the job description.  In some cases, items from the job description should be noted on the RACI.  Most often Accountabilities and Responsibilities from the RACI chart are used to update job descriptions.

Using a RACI to enhance KPIs or Scorecards

A good use of the output of a RACI chart is to note what KPIs, data and other management information is required for an incumbent to successfully execute his or her accountabilities and responsibilities.  In many cases the RACI can provide a solid guide as to what should be on a scorecard for the positions featured in the RACI chart.

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‘RACI – Responsibility Charting’

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What Gets Measured, Gets Mismanaged

Well, that title should upset a few people – particularly the folks in finance that love their spreadsheets more than they do their children.  Don’t get me wrong… I like the idea of measuring things so you know where you stand.  My problem is the way in which some organizations execute their metrics.

Performance metrics often provide an excellent illustration of how a really good idea can be made difficult and useless by poor implementation.  It’s a lot like watching your favourite sports franchise consistently snatch defeat out of the jaws of victory.

Usually it goes down like this:  someone in some position of authority will read the first fifteen pages of a book about measurement.  Without reading the following 250 pages, he concludes that his organization needs to get everyone on the measurement bandwagon.  Then he strikes a committee, or hires a consultant to go forth and make this happen.

Fast forward in time six months, and a significant portion of everyone’s work week becomes dedicated to counting the number of paper clips they have consumed since last week, and calculating the annual impact of that paper clip consumption.  They then have a meeting to discuss how to reduce paper clip consumption, thereby reducing annual operating costs by $48.50, or roughly 1/100th the cost of the first meeting about paper clip consumption.

OK… that might be a bit harsh.  But here are some actual examples of performance metrics gone horribly wrong:

  • The technology company that measured sales success exclusively on dollar volume at the end of each quarter.  THE RESULT:  A whole bunch of clients went somewhere else because they were tired of being sold things they really didn’t need.
  • The grocery retailer that measured check-stand effectiveness by calculating the frequency of cashiers using customers’ names.  THE RESULT:  the customers went to stores where they measure how much time was spent waiting in line – something the customer actually cares about.
  • The restaurant owner that attempted to reduce cost by reducing the number of paper napkins provided to each customer.  THE RESULT:  I don’t know… probably sticky fingers and dirty tables – this one just seemed really silly to me
  • The lumber manufacturer that measured how much fibre it recovered from each log, as opposed to how much money they made on different dimensions of lumber.  THE RESULT:  Very few wood-chips, but a yard full of garden stakes that no one would buy (and a whole bunch of trees unnecessarily harvested)

Some people will tell you all that matters at the end of the day is how much money you make.  Not true – if you focus exclusively on this, you are in a never-ending cycle of sub-optimized decisions that forbid any long term success.  Most obviously, if you ignore safety while focusing exclusively on how much money is make, it is only a matter of time before you injure or kill someone, which beside being ethically reprehensible, is very expensive.

Here’s the bottom line about measurement:  The great thing about measuring performance is that people will adjust their behaviours to affect the outcome of the measure.  Unfortunately, the really scary thing about measuring performance is that people will adjust their behaviours to affect the outcome of the measure.

So measurement (like other recreational drugs) should be used cautiously and in moderation.  Second, you should never have only one number you are tracking.  And finally, you need to understand why numbers are trending the way they are, as opposed to (over)reacting to one data point.

Let’s be careful out there.

Implementing the Balanced Scorecard Approach

There’s an entire micro-industry out there called The Balanced Scorecard.  It is simultaneously one of the most simple, and therefore effective tools in business, as well as an incredible waste of time and resources in some organizations based on how they implement it.  Join us this week, as we discuss how individual managers can effectively use the concepts of the Balanced Scorecard to make better decisions, and better run their businesses.

Monday’s Tip: Have metrics from at least four different perspectives. If you’ve only got “one number”, you run a serious risk of damaging your business.  Use the four standard Balanced Scorecard perspectives as your starting point: Financial, Customer, Internal Process, Learning/Innovation.

Tuesday’s Tip: Don’t ignore your leading indicators. Most companies do well with lagging indicators like those often found in the financial perspective.  Make sure you attempt to measure leading indicators, like how well your organization learns and innovates.

Wednesday’s Tip: Link your leading indicators to firm performance. How do your indicators (or those of your department) contribute to the larger business?  If you can draw this link clearly for people, they are much more like to embrace performance metrics.

Thursday’s Tip: Tell people their score regularly. A Balanced Scorecard that is never referred to or kept secret is a waste of time.  Put performance metrics where people will see them, and encourage them to better understand them.

Friday’s Tip: Allow your metrics to change over time. You should start by measuring something.  Over time, you will figure out what measures are meaningful, and which ones are not worth continuing to track.  Don’t be afraid to change them over time.

The Balanced Scorecard Approach

What is the Balanced Scorecard and how can you use it in your own organization?  Learn the basics in this podcast.

Watch ‘The Balanced Scorecard Approach’ video (14 mins 2 secs):

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The Balanced Scorecard Approach

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The Balanced Scorecard approach is a system of measurement, that when implemented properly is brilliant in its simplicity.  Below we discuss the four standard perspectives of the Balanced Scorecard approach, and how you can implement it in your organization or department.

About the Balanced Scorecard Approach

The Balanced Scorecard approach was created by Robert Kaplan and David Norton in the early 90s.  Kaplan was a professor at Harvard with a background in accounting and finance, and Norton was a consultant that worked primarily in the Information Technology field.

The original article on the Balanced Scorecard approach, “The Balanced Scorecard – Measures that Drive Performance” was published by Harvard Business Review in 1992, and was voted one of the ten most influential articles of all time.  Several more articles and books followed entrenching the Balanced Scorecard approach into standard business lexicon.

The Four Standard Perspectives of the Balanced Scorecard Approach

There are four standard perspectives to the Balanced Scorecard approach:

  1. Financial Perspective:  How do we look to shareholders?
  2. Customer Perspective:  How do customers see us?
  3. Internal Business Perspective:  What must we excel at?
  4. Innovation and Learning Perspective:  Can we continue to improve and create value?

Examples of Each of the Four Perspectives of the Balanced Scorecard Approach

The Financial Perspective of the Balanced Scorecard Approach

  • Financial perspective does a lot with profitability, growth, and shareholder value
  • Tends to look “backwards”
  • Shareholder Value Analysis is an attempt to help financials look forward
  • Such things as:
    • Return on capital
    • Cash flow
    • Profitability
    • Reliability
    • Sales
    • Return on equity

The Customer Perspective of the Balanced Scorecard Approach

  • A complete blend of time, quality, performance and service, which are of more concern to the customer
  • Benchmarking is sometimes used for industry comparison
  • Ensures your business is not excelling at something that has no value to the customer
  • Such things as:
    • Quality
    • Service levels
    • Timeliness
    • “Walletshare” of key customers
    • % of sales from new products (proprietary products, etc.)

The Internal Business Perspective of the Balanced Scorecard Approach

  • Business processes that have greatest impact on customer satisfaction
  • Often measures are “deconstructed” to a local level
  • This is where information systems and tracking become critical
  • Such things as:
    • Cycle time
    • Unit cost
    • Yield
    • Efficiency measures
    • Schedule versus plan
    • Safety
    • Risk Management
    • Loss control

The Innovation/Learning Perspective of the Balanced Scorecard Approach

  • Incorporates notion of continuous improvement
  • Setting targets for improvement and continual learning
  • Measures company’s ability to innovate, learn, and improve
  • Such things as:
    • Time to innovate next product
    • Time to market
    • Employee retention
    • Employee satisfaction
    • Employee skill levels

Implementing a Balanced Scorecard Approach

Organizations make a few critical mistakes when they first attempt a Balanced Scorecard approach:

  1. Don’t make it more complicated than it needs to be.  Start with the data you have on hand, and refine it as you go along.  If you are spending more time measuring your work, than you are doing your work, you’ve got it wrong.  The Balanced Scorecard approach is most effective when it is clear and simple.
  2. Adjust the perspective to meet the needs of your department or organization.  The Balanced Scorecard approach should be tailored to your situation, however the standard perspectives are an excellent starting point.
  3. Don’t forget about “leading” indicators.  When implementing the Balanced Scorecard approach, many organizations have no problem with the financial, and service measures, but when they get down to the innovation and learning perspective, it becomes much more difficult for them.  Do your best to find predictive indicators as well as lagging indicators.

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Can’t Decide? Flip a Coin

Part of what makes my job so much fun is being exposed to a variety of organizations in a wide variety of industries.  The culture of these organizations vary widely, and is probably best manifested in how people make decisions.  In some places, people gather as much information as they can, they discuss possible courses of action, and then they pull the trigger on a decision.

Other organizations have rambling, unfocused discussions, refer things to subcommittees, defer decisions seemingly indefinitely, and then wonder why their organizations consistently fail.

People can argue whether the greater evil is in making decisions to quickly or too slowly, and you can probably guess which side of equation I will argue for with the following list:

Things that delay decisions:

  1. Needing perfect information before committing.  It would be nice if you had all the available information at your disposal, but by the time you gather and process all that data, it’s possible your decision won’t matter anymore.
  2. Being too risk adverse. When people are deathly afraid of making a mistake, they will hesitate to make decisions.  What is not part of their calculations is that their delay carries a certain amount of risk too.
  3. Trying to keep everybody happy all the time.  Making decisions usually means having to make trade-offs of some sort.  By saying yes to one course of action, you are saying no to another, and in the process, you are going to upset someone.  This is a key reason why the public sector often fails to make timely, quality decisions.
  4. A top-heavy or micro-managed business.  In this case, only one person, or a small number of people are permitted to make any decisions, and as such become a bottleneck.  Organizations that push decision making down the hierarchy to the most appropriate level are much more agile, and ultimately perform much better.
  5. Poor decision-making process. Sometimes, people fail to recognize a decision point when it appears in front of them.  If they don’t recognize the fork in the road, they certainly won’t know which turn to take.
  6. Fear: Contrary to popular belief, it is sometimes better to make the wrong decision today, realize it tomorrow and then correct your course of action, than it is to delay a decision for weeks or months.

Now I’m really having a hard time deciding which video clip to include this week.  One of the candidates is a Monty Python bit (People’s front of Judea) that contains foul language that might offend some.  The other is a clip of George W. Bush talking about being a decision-maker, that may offend some American viewers.

I could ask everyone to weigh-in, and then make my decision, or I could just flip a coin, but I can’t decide which decision making process is better.

 

 

 

Structured Decision Making: The Six Factor Analysis Method

Some people flip a coin, others use a crystal ball to make decisions.  The more important the decision, the more important it is to have some process by which you arrive at your decision.  Join us this week, as we discuss structured decision making.

Monday’s Tip: Brainstorm a list of several possible solutions. You need to have options to evaluate.  Get your group together, and put as many alternatives together as you can think of.  Evaluate them after the fact.

Tuesday’s Tip: Decide on a clear criteria on which you will base your decision. Some standard criteria are effectiveness, feasibility, cost, time, capability, acceptance (or enthusiasm).  Adjust these criteria, or add more to best address your situation.

Wednesday’s Tip: Not all criteria are create equal. Weight your criteria for your situation.  In some cases cost may be paramount.  As such, give it a higher weighting than the others.

Thursday’s Tip: Objectively score each alterative on each criteria. Being objective is hard work, but if you look at each criteria individually, it is easier to get a complete evaluation of each alternative.

Friday’s Tip: Move to action once your decision has been made. Do not second guess.  Once you’ve made your decision based on more objective criteria, take action on that decision.  Only reopen a decision if more or better information has come to light.

Structured Decision Making: The Six Factor Analysis Method

Faced with a complex problem involving several possible solutions?  Use the Six Factor Analysis Method to assist with your decision making.

Watch to the ‘Structured Decision Making’ video (12 mins 3 sec):

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Structured Decision Making - Slides

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Structured Decision Making: The Six Factor Analysis Method

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There are many different methods and processes for structured decision making.  Below we discuss the Six-Factor Analysis method.  Six factor Analysis is a method of structured decision making that is neither difficult, nor complex, but can greatly assist at arriving at a higher quality decision, and taking the emotion out of the process.  This structured decision making tool is best used when you need to compare several possible solutions or improvements.  No structured decision making method will completely remove subjectivity, but the six factor analysis will certainly help.

Step 1 – Brainstorm Options

The first step in structured decision making is to develop a list of several possible solutions or improvements to your question or situation.  Brainstorming is most effective when ideas are generated without judgment.  A structured decision making process will help you to judge your ideas afterwards.  For now, just get down as many ideas as you can relevant to your situation.

Step 2 – Decide on the Criteria by Which to Evaluate Ideas

Regardless of what process you choose for structured decision making, it is important to adjust the criteria to suit your individual situation.  These will vary widely, based on the circumstances, but here are the six generic factors in this structured decision making process:

  1. Effectiveness – How much will the solution improve the situation?
  2. Feasibility – How “do-able” is the solution?
  3. Cost – How much expense will be incurred in implementing the solution?
  4. Time – How soon can the improvement be implemented?
  5. Capability – Does your group have the time, skills, knowledge, and authority to make the improvement?
  6. Enthusiasm – how enthusiastic are your team and other stakeholders about the improvement?

Again, any structured decision making process is best used when the criteria are added to or adjusted appropriately to the situation.

Step 3 – Weight Your Criteria

Not all criteria in a structured decision making process should be valued equally.  For example, in your situation, cost may be of paramount concern, and therefore may be weighted heavier than the others.

Consider the weights of your criteria in terms of percentage.  For example:

Effectiveness              25%

Feasibility                    15%

Cost                             30%

Time                            10%

Capability                    10%

Enthusiasm                 10%

If you are having difficulty determining weights for your structured decision making process, you can compare each criteria to every other one individually, putting a check mark beside the most important one in each comparison, and then counting up the checkmarks to arrive at a percentage.

Step 4 – Put Your Solutions and Criteria in a Table, and Score

To make your structured decision making process easy to use, put your criteria as column headings, with your possible solutions or alternatives in the left hand column:

Effectiveness25% Feasibility15% Cost30% Time10% Capability10% Enthusiasm10%
Option 1
Option 2
Option 3
Option 4

 

Work your way across the table assigning a score to each empty box.  You can score each one on whatever scale you choose, as long as you use the same scale.  We would suggest to assign a score of 1 – 5, with 5 being the highest or best score.

Next multiply your score times the weight to come up with a number for each criteria of each option.  When you add all the weighted scores together, you come up with a total score for that option.  The option with the highest score should become what you move to action on.

HINT:  A structured decision making process such as this is much easier if it is done on a spreadsheet that can automatically do the math for you.

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If HR Sucks, it’s Your Fault

Here’s a quiz:  In my organization HR is/are:

a)    A highly professional service provider that partners with managers to maximize shareholder value through effective people management practice.

b)   The people who organize our Christmas parties and picnics

c)    Where people who couldn’t make it in the core business go to be marginalized to the point where they do a minimum of damage.

OK – maybe HR’s an easy target in many organizations, but if beating up HR is a fun way to relieve some tension mid-day at the water cooler, you really won’t like what comes next:

If your HR group truly sucks, then your organization most likely sucks, too.

Yep, that’s right.  I’m suggesting there is a direct correlation between highly effective HR, and a highly effective organization.  Furthermore, I’d suggest that organizational managers get the HR departments they deserve.  If your HR group is solely administrative in nature, and generally not very high performing, then that is exactly the quality of service you as a manager, or an organization has asked for.

You may like or hate Jack Welch, but it would pretty hard to argue that GE wasn’t a high performing organization when he was running it.  Just about any time you heard Welch speak, he would talk about what he was doing, and he’d also talk about Bill Conaty – his HR guy.  For GE, the HR portfolio was extremely important.  Some other Jack Welch quotes about HR:

“A high quality senior HR person is as critical as the CFO”

HR should “get out of the picnic business”

And his advice to HR people:  “Don’t be a victim”

Every organization has its version of the “People are our most important asset” speech, but Welch actually lived it.  People will jump all over this, because Welch had an impressive record of firing people.  But valuing people necessarily means that you remove barriers to a team’s success, and sometimes this means removing people.

The strongest organizations I have worked with have highly-competent, business-focused HR people.  They also insist that every manager in the company is an HR manager.  HR is not something that is delegated to a central group – it is actively managed by every leader, every day.  The HR group’s role in these high-performing organizations is to set organizational leaders up to be outstanding managers of the human asset.

Picnics and Christmas parties need to be assigned elsewhere – perhaps the marketing department isn’t busy.

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