Founder and Principal

 

 

January 2015 Vol. 4 No. 1

 

 

 

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Goodrich & Associates
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Last month's newsletter stressed the importance of being positive by telling people what to do or get done instead of what not to do. One reader, however, commented that unless employees are empowered, it won't matter.

Of course, he is right. Why ask someone to get something done if you won't let them? The challenge, then, is in creating an organization in which people have this ability. Some call this empowerment. Others point out that it's mostly about delegation. I think of this as establishing an enabled organization.

So what is an enabled organization? It is an organization where all individuals are enabled to get things done. These are the necessary conditions to enable the employees:

1. There is a mutual understanding of the desired goal, objective or outcome.

2. The charged person has the time to do it.

3. The charged person has or has access to the resources that are needed.

4. The organization understands that the charged person has authority to do what he is charged to do.

5. The charged person knows what he can't do without proper permission or approvals.

Let's talk about these in depth.

1. There is a mutual understanding of the desired goal, objective or outcome. Whether empowering an individual, a team or an organization as a whole, a key first step is ensuring that everyone involved is clear on whatever it is to be done. This requires unambiguous, concrete communication, confirmed (when working one-on-one) with probing questions to test understanding. It is harder and takes more effort to achieve this with a group of people than with just one person.

2. The charged person has the time to do it. As a supervisor, manager or leader, effective empowerment requires an understanding of both how much time is involved and how much time or capacity an employee(s) has. Here as well, a mutual understanding of what can and cannot get done in a resource-constrained environment is critical.

3. The charged person has or has access to the resources that are needed. When I was in the rent-a-car business, I wanted my accounting staff to work with the people in the field. Not surprisingly, that meant leaving the office, getting on a plane (usually), and spending money to go somewhere. No approval was needed to travel. We did have controls, however: My boss's secretary arranged all travel (yes the days of secretaries and travel agents) and I approved all expense reimbursements. She knew where everyone was; I knew what everyone did. Simple and effective.
   
   On a much larger scale, I once met with the Director of Corporate Capital Planning for a Fortune 50 company as part of an exploratory interview. For this capital-intensive manufacturer, I was expecting someone who reviews and approves capital projects from line operations. He didn't do that at all. Line operations could spend up to the amount of their approved planned capital on whatever they wanted, often hundreds of millions of dollars. This Director's job was to coordinate with Treasury to make sure there was cash on hand to pay for it all. Operating groups were held accountable, however, for return on investment - they were expected to have their own review and approval process. The operations strategy and planned capital projects were vetted once a year in the annual planning process. Not having money was never an excuse for poor financial performance.

4. The organization understands that the charged person has authority to do what he is charged to do. Getting things done in an organization requires the help of others, including advice, facilitation, and granting access to resources. If the organization hasn't been told that a given person is charged with a task and is empowered, they won't get the help they need. In my rent-a-car company, everyone knew the staff could travel. In the Fortune 50 company, there were formal plan reviews and approvals.

5. The charged person knows what he can't do without proper permission or approvals. This can be a tricky balance because while people under a tight leash of process and controls are not empowered, the opposite - a lack of process and controls - always leads to nasty surprises. For the enabled company, this means that the need to exceed limits is an exception and not the norm.
   
   A common approach is a formal limits of authority policy within a company - limits on how a check can be signed without an additional signature, for example. To ensure that the barn door has not been left open when it is time to write the check, additional limits on dollar amount and terms of sales contracts, purchase orders and the like are useful too.
   
   De facto limits work as well. In the rent-a-car business, all customer service representatives had the capability to give away the rental to make a customer happy. But, they couldn't issue a credit greater than the rental amount.
   
   Some companies use osmosis. Yes, osmosis. I attended a talk by Bill Taylor, General Manager of the Boston Four Seasons Hotel, on how to deliver exceptional customer service. One of his tools was minimal controls on employees. All were empowered to say yes to any request as long as the request was not illegal, immoral, and the customer was willing to pay for it. Since this talk was to a group of CFOs, there were lots of questions on controls. The basic control, he explained, is well-trained employees. Interestingly, at the Four Seasons, there is limited formal training; employees learn from more senior employees by observing what they do. Osmosis.

A few tips for putting empowerment into practice:

• Empowerment works best with strong, capable management teams and employees. Organizations with weak employees and management need strong business control systems to minimize poor judgment and mistakes. But too tight a control system will prevent employees from getting their jobs done.

• Really mean it. If the individual or group's decisions can be overruled from above, and for whatever reason you need to be able to do that, don't ask them to do something. If you doubt an employee or group's judgment, execution capability, etc., ask them to do something less that you think they can do. Empowerment does need the opportunity to fail.

• Hold status update meetings. In those meetings, validate that you and the employee are on the same page as to the desired outcome, that the situation hasn't changed (and if it has, agree on how it's different), and that the employee still has the time and access to the resources that are needed. Is the effort likely to take more or less employee time and more or less other resources than previously expected? Does it seem the organization understands what the employee is trying to get done, so other employees can facilitate rather than obstruct?

• A strong internal audit function is critical. An independent test of business and financial controls prevents surprises. In the Fortune 50 example, the company had a large internal audit group that vetted the business and financial control systems of the operating groups. By adhering to the principle of "what is expected is what is inspected," those systems and controls underwent a periodic review from outside the operating group.

Empowerment is often thought of as trite buzzword, because while frequently proclaimed, it often leads nowhere. But empowerment doesn't happen with the stroke of a pen; it takes ongoing, focused work, attention and, most important, desire and commitment from above.

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There has been much talk in the popular press about wage stagnation and persistent unemployment in recent years. Two economists explain why the 2009 increase in the minimum wage from $6.55 to $7.25 an hour is the cause of much of this.

Read this very short article here.

Goodrich & Associates is a management consulting firm. We specialize in helping our business clients solve urgent financial problems. Our Founder and Principal, Charlie Goodrich, holds an MBA in Finance from the University of Chicago and a Bachelor's Degree in Economics from the University of Virginia, and has over 30 years experience in this area.

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