Linggo, Enero 29, 2012

The Taste of Strategy by Jolito Ortizo Padilla



Twenty years ago I was talking to my son Jol, a young entrepreneur selling homemade sweets to his friends. "So what is your strategy son?" I asked. "And how do you ensure the quality of your sweets? "Strategy? Quality?" shrugged Jol. "Dad! That's all Greek to me. Uncle Toto makes them , I sell them. Simple."

Well Jol was half right. Strategy is indeed Greek in origin being derived from Greek word strategies, meaning general or army leader. Quality, however, is not Greek, being derived from Latin word qualitas being an attribute or property. And Job had a strategy -albeit a simple one- but his grasp on quality appears somewhat more tenous.

So what impact would Jol's limited grasp of strategy- and even more limited grasp of quality- have on the success of his enterprise? Is it set to be a roaring success or a dismal failure? And what does it mean for Toto. With Jol's simple strategy Toto could make biscocho one week and pinasugbo the next. She could make round ones , square ones, fat or thin ones packed with flavoring or using natural fruits. He could wrap them in tin foil, clingfilm, or expensive gift wrap. Does it matter?

In pondering this scenario, let's start by thinking a bit more detail about these words, strategy and quality, and their importance to an organization. In the context of its Greek military use, strategy is distinct from tactics: while tactics are concerned with the conduct of an engagement, strategy is concerned with how different engagement are linked. How battle is fought is a matter of tactics; the terms and conditions that it is fought on. Whether the battle should be fought at all is a matter of strategy.

Strategy is therefore, directional in nature. It describes where your organization want to get-its vision or desired future state-and how it intends to get there. Quality, being an attribute or a property, more closely relates to the tactical and operational aspects of an organization-how effectively and efficiently the operations work to achieve the strategy. So does that mean that leaders should only concern themselves with the strategic aspects of management? Is Jol right to gloss over the details of how pinasugbo will be made? Should Toto concentrate purely on making pinasugbo or should he take an interest in who Jol wants to sell them to, why and how?

In the 1930's Haribo's aim was to "make children happy." This was changed in the 1960s to: "Kids and grown -ups love it so; the happy world of Haribo." What difference does a few words make? And how important is this statement of purpose? For a start , the change in Haribo statement would have stopped Toto using chemical flavorings because strategy defines the terms and conditions the battle is fought on. The statement could also influence perceptions of the appropriate values and behaviors associated with the organization.

In fact, having a clear statement of purpose underpinned by measurable objectives and the defined strategy for achieving them is one of the most fundamental responsibilities of any management team. When these are "right" they are often so elegant that they seem obvious -but this can belie the effort required to get to even this stage. A real understanding of the organization, its stakeholders, their needs and expectations and how they can balanced can be anything but easy.

It is only when this strategy can be stated and commonly understood that the more traditional aspects of quality can add real value. Quality can ensure that appropriate products and services are developed and offered at prices that provide value to all stakeholders, that processes align to achieve the agreed purpose, that working practices are effective , efficient and consistently implemented and that organization has the capability to deliver with people who have the appropriate skills and knowledge to undertake their roles with sufficient and suitable resources.

In essence it is the leader's role to ensure that the strategy is defined and the infrastructure to support this is in place. However, it is the skills of quality professional that can ensure strategy's effective and efficient implementation. The two fit hand in glove and both are essential for a fit and healthy organization.

I

Huwebes, Enero 19, 2012

Focus on Hospitality

2012-The year of the Dragon..
The hospitality sector is huge, encompassing hotels, restaurants, caterers and event organizers. It employs a massively diverse workforce and the pressures of the economic downturn have had a substantial impact , especially for those in tourism. In Bahrain , hotel occupancy is down by 45% due to political crises and hotel prices in prime locations such as Caribbean and Far East have dropped to their lowest level in decade. In such a tough times keeping a focus on quality will help businesses in the sector differentiate themselves from the competition.

Food Safety
No organization working in hospitality can afford to be the cause of illness of any customer so food hygiene and safety standards are of ultimate importance. Caroline Mortimer, director of Metropolitan Police Force in London caters for  50,000 people. "We employ one person internally who does nothing but check food hygiene standards within each of our catering facilities and also within our suppliers as well. Nobody is procured without having their food safety systems audited in full."

Ensuring that suppliers have the correct systems in place is where standards such as FSSC 22000, newly benchmarked by the Global Food Safety Initiative, come in. Caroline says: "All of our suppliers have to be certified against recognized safety systems such as ISO 22000. Without an internationally recognized certification, suppliers will not be able to win contracts with global or international businesses.

Service with a smile
To encourage the best in Hongkong  Hospitality, The Grand Hyatt Regency- Hongkong has launched the "Smiles of Hyatt" campaign. Running until the end of summer the scheme asks members of the public to take photographs of the nation's most welcoming smiles and then shares them online.

Michael Ato Chan says. " We want to shine a light on those in our sector who are leading the way in customer service . And because excellent customer service invariably starts with a smile,  we started this campaign".

The future is green
Sustainability is crucial in the hospitality sector for not only surviving these times but thriving in them, according to Michael "Ato" Chan."People focus on green issues and think that they can't afford to be green but sustainability is about more than just environmental factors: economic and social factors are equally important."

"The first step is to look at elements such as venue, transportation , accomodation and food stuffs and ask questions about their sustainability. There is a wealth of resources online from organizations such as the department of environment , food and rural affairs that can help a business starting out."

Another important development in this sector is BS 8901, the environmental management systems standard for event organization. "Standards such as BS 8901 offer businesses a great framework to start addressing their sustainability. The future holds positive things for this industry. We have the scope to do something great.


Huwebes, Enero 12, 2012

What Jolito Ortizo Padilla say about Strategic Alliance

A strategic alliance is a relationship between two or more organizations that falls somewhere between the extremes of an arm's length sourcing arrangement on the one hand and a full blown acquisition on the other.

In general there are two types of strategic alliance: a bilateral alliance (between two organizations) and a network alliance between several organizations). They have many advantages:they require little immediate financial commitment, they allow companies to put their toes into new markets before they get soaked and they offer a quiet retreat should a venture not work out as the partners had hoped. However, going into something knowing that it is (literally) not a big deal, and that there is a face saving exit route, may not be the best way to make those charged with running it hungry for success.

The most popular use for alliances is a means to try out a foreign market. Not surprisingly there are more alliances in Europe and Asia (where there are more foreign markets nearby) than in the US. In some cases, alliances are used by companies because other means are closed to them.

One thing crucial to a successful alliance is the degree of cultural compatibility. Companies are advised, for example, to pick on someone their own size. Alliances between very big organizations and very small ones are hard to operate not least because of the different significance that the alliances asumes in each organization's scale of things.

Strategic alliances grew at a phenomenal rate during the 1990s. Some companies, such as General Electric , set up several hundred. But alliances have not always been successful. In 1998 BT and AT&T agreed to bundle their international assets into a single joint venture that started off with annual revenues of $11bn, annual operating profits of $1bn , and some 5,000 employees. In 2001 the two companies agreed to unwind -at considerable cost.


Huwebes, Enero 5, 2012

The Organizational Competence Techniques by Jolito Ortizo Padilla

The financial meltdown and Toyota's problem are clear examples of systematic failure. Disastrous events in the Philippines such as the death of 1,116 victims brought about by  typhoon Sendong in Cagayan De Oro and Iligan City  again highlighted system failure. Although the root causes of these failures are varied, a common theme is the inability of management to act sufficiently quickly to prevent system failure or under performance. Auditing is needed such lead indication.

It is clear that management needs a mechanism that provides indicators of any looming crisis, a measurement of real risk that can be acted upon. This can't include tools such as key performance indicators, traditional compliance based auditing or in process measure because , while useful, they are backward looking, recording what has already happened. They tell us little about what  is likely to happen in the future.

Compliance auditing focuses on the tangible-what can be seen and touched-meaning outputs and the quality of these in terms of conformance. It operates at a transactional level. But in the real world it is not just outputs that count. More important are outcomes -what these outputs mean to customers and other stakeholders- because this is what is really delivered. It is the organization's culture and how people behave together that deliver its results. Traditional compliance auditing misses many of these usually intangible issues and therefore only gathers part of the picture.

Compliance auditing should not be disbanded, but it is clearly not enough for the 21st century where identifying the risk to outcomes is becoming vital. The practice of auditing needs to identify not just what is visible but also to understand the importance of what is currently invisible, before it is too late.

The Project Structure
Recognizing the need for change the High Performance Group has intitiated a project to define the ways in which the apparent shortcomings of auditing could be addressed. a key part of the tool kit was a behavioral assessment methodology with the aim of:
- Creating an auditing method to assess the real-world, based on what people actually do.
- Showing how system and process risks can be scored , benchmarked and managed consistently.
- Determining how significantly more evidence can be gathered and how this could be analyzed to the delivery of outcomes.
- Determining the effect of this on audit process and the role of the auditor.
The ongoing project involves the inclusion of a number of large and small organizations using the approach and providing valuable feedback. As a focus , the University of Canterbury in New Zealand has also been using the approach in a carefully controlled environment whereby students studying for a Master's in Business Administration could apply techniques as part of their studies and provide critical validation. UKAS has also reviewed the approach as part of the requirements 4 and 5 and it has been used to gather evidence for certifications.

The university runs an MBA in Quality Management in which students study management systems and business processes as living entities , culture and behavioral indicators and auditing and assessment techniques. External validation of the behavioral assessment approach took place as an integral part of this course and in the last four years 18 very different organizations have taken the assessment, including:
- Hospice/hospital/medical care providers
- A financial services company
- Educational establishment
- Food producers
- Manufacturers including those of aeronautical , mechanical components and electronic components.
There are several factors behind the rationale for using the behavioral assessment technique. Once we move away from considering transactional compliance -type issues , organizations are complex. At the compliance level it is simple; evidence exists or it doesn't and  often it is invisible. There are huge number of interactions that take place between people in an organization, each affecting the other in different ways and with different levels of importance . When this complexity is understood , it is quickly realized that collecting the amount of data required , analyzing and reporting risks to outcomes and objectives is beyond the auditor; they need help.

As a result, an online assessment tool was used to:
- Gather more evidence
- Reduce intrusion for the organizations concerned.
- Ensure confidentiality and therefore be potentially more revealing
- Be more cost effective
- Consistently collate and analyze results
 - Reduce the students /auditors time in data collection
This web-based approach is not a survey, but a sophisticated assessment technique that tests organizational competence based on behavioral science , with an outcome and risk focus. It places conformance as a step in the maturity towards effectiveness and efficiency.

The assessment
While it is belived that the underpinning science and assessment logic applies to any subject, the university wanted a control subject where the results could be benchmarked across the target organizations. For this reason ISO 9001 was chosen as the subject.

The online assessment was designed in UK with the behavioral indicators established as description of business-as -normal , as experienced by those who would be participating. The assessment were planned by the students by identifying the internal and external stakeholders who are impacted by or take part in the scope forming the basis of the benchmarking activity from which risks can be identified.

Organizations were invited to take part over a four week period with each auditee contributing about ten minutes of time. The assessment system collected the data for the students and analyzed its importance , automatically providing a technical report against clauses of the standard.

The data was then analyzed against the eight quality principles contained in ISO 9000 series and the other factors associated with process management.

To validate the results the students and auditors reviewed the findings determining:
- Areas of potential risk , by department, function or group , using the scoring system where 40% represents acceptable performance. Scores above 40% represented increasing levels of effectiveness in the subject and it being embedded in the whole organization management system. Scores below suggest increasing levels of risk.
- The areas that would be specifically targeted for compliance auditing. The logic was that if the behavioral assessment was itself an effective auditing technique then there is no point re-auditing the same thing twice.

Each organization was then visited by the students/auditors to:
- Validate the results of the behavioral assessment against the reality of the organization
- Look closely at the targeted areas identified
- Compare the results with those that the certification body reported if one had been recently involved.
- To gather feedback on general accuracy and use of the approach.

Research Findings
The MBA student reviewed the findings of the validation activity , which the university summarized as follows:
" The evidence collected over the late four years shows that the approach has been consistently accurate, as well as time-and cost -effective.It addressed well-documented and inherent weaknesses associated with surveys and more traditional assessment approaches. While nothing is foolproof and more traditional auditing activities should not be discarded , the approaches would, for various reasons, find extremely difficult to achieve without significant cost."

" The main strength of the approach is  that it collects tactical data based on the outcome of behavior as experienced by different stakeholder groups. The ability to automatically and therefore consistently analyze the importance of each piece of tactical information is the key elements that makes the assessment tool very valuable. The findings provide a profile of potential risks leaving the user to determine which risks are the most important on which to base improvement solutions that best support the delivery of objectives."

Audit fatigue
The same audit data can be used in different ways to report against standards, outcomes and objectives as is required. Using the same data more than once cuts the costs of auditing auditor intrusion and, at the same time, it adds value for the organization.

The changing role of the auditor
Auditing is now required to act in a new paradigm . The inclusion of other audit techniques means that auditors system in terms of how open , closed and mature it is and select appropriate audit techniques.

As the audit takes place , the different techniques will yield different levels of evidence and the skills is to build this together to demonstrate conformance and the risk to outcome/objectives. Thse auditing practices require changing the role of the uditor in all areas of understanding , planning, analyzing and reporting.

Audit planning is a core competence
Audit planning should not simply be about creating an agenda or meeting schedule to ensure each clause is covered; it should be much wider. It is about understanding:
- The outcomes the system or process has been designed to achieve
- The balance of effectiveness and efficiency outcomes measures
- How to use a range of techniques that will make visible the inherent risks in the organization
- The factors that will increase or decrease risk and apply these to the audit scope
- The requirements of the specific standard or governance requirements and the range of audit techniques that may be used in assessing them
- How the use of technology and non-human based activity not only saves costs but is desirable to increase value.
Every standard organization, system or process is different therefore so must be the audit programme.

Compliance and conformance
There is sometimes confusion between compliance and conformance. Compliance is an auditing technique with weaknesses if used alone. A reliance on compliance can drive in risk and rarely achieves the outcome- driven audit reports now needed or measure of effectiveness.

The need to assess the real world and what actually happens
The culture of an organization or business process is determined by the interaction of different people. The complexity of an organization at a behavioral level means that traditional compliance- based techniques are not really effective.

This is because questions frequently condition the response , confidentiality becomes an issue, issues raised can be sensitive, there is no hard evidence to check and the large amount of data needed to assess behaviors makes consistent analysis very difficult. Consistency is often difficult at a compliance level and this is only magnified at a behavioral level.

What is needed to assess behaviors
The research shows that to assess behavior we need to collect a lot more information in order to give the level of confidence that is required by organizations and develop a 360- degree approach , involving as many of the stakeholders as possible.

Using audit evidence
Traditionally a piece of information is used as evidence that a requirement is or isn't being met. This is a one-to-one relationship. When assessing behaviors there are many sources of evidence and each has a different level of importance dependent upon how critical it is to the delivery of one or more objectives. It is a many-to- many relationship The increase in evidence makes using the auditor's judgement almost impossible. This means that an IT solution is inevitable as an aid.

Where next?
Organizations are recognising the need for change because they:
- Understand it is how people behave that drives results.
- Need to manage risk to the future delivery of objectives
- Need to balance transactional  techniques (such as compliance , key performance indicators and control charts) with lead indicators
- Need to present strategic information to management using graphs, numbers and benchmarks
- Need to focus on what outputs mean to stakeholders in terms of outcomes
- Understand the desire to move on without throwing out the past.
The project has shown that our challenge as auditors is to develop strategically in the way that we plan and deliver audit programmes. We have to think more about outcomes than we have one in the past. We cannot be satisfied with just looking back and saying this or that was wrong- that's easy. It is more of a challenge to help stop the event from occuring in the first place.

It is difficult to audit a process where documented evidence isn't available and then work out if it conforms to a requirement. It is to measure the risk to achieving something. We need to embrace new tools -that is about audit management.