• Looking at Activity- vs. Outcome-Based Organizations

    March 1, 2007
    Years ago, I received a call from a consulting firm that suggested they would like to stop by my business and see if I had any problems they could help

    Years ago, I received a call from a consulting firm that suggested they would like to stop by my business and “see if I had any problems they could help me with.” Without hesitation, I said, “Sure … come on.” I had problems. Actually, the biggest problem was I didn't know what my problems were. I just knew that what had been working, for some reason, seemed to stop working.

    I really didn't know what to expect from this “consultant.” When he arrived, he had the gray hair and peaceful manner that exuded confidence to me. I invited him into my office and closed the door. I said, “Where do we start?” He stood up and said, “By opening the door so I can go work. I will get back to you after visiting with your people.” Late that afternoon, he returned to my office. As best as I can remember, it felt like sitting down with the principal, and I feared that what he was going to tell me would not be good.

    It took the consultant no time at all to say, “I can't help you that much; you have great people. The problem is you're organized around them and not their function.” The way he said it was, “You have a great gal out there doing a great job; it's called ‘Jackie's Job.’ She absolutely knows what she is doing. The problem is that no one else knows what she is doing. If you had to replace her, you would be stuck with running a classified that said ‘Opportunity: Someone needed to do Jackie's Job.’ Your business is growing, and the same great people that helped you grow it are handling it now. They are working harder than ever, and now things are beginning to slip through the cracks. These things going through the cracks are what you are calling problems; but they aren't problems, they are symptoms. The solution is for you to sit back and figure out the functions of the business and organize the business around that. If you need my help, here is my card.” Wow. Did that ever hit home all those years ago.

    Now that I have gray hair, I have picked up the flag of that fine gentleman of many years ago. I am invited to visit businesses to “see what I think may be wrong.” The symptoms are nearly always the same: “Our communications have gotten really poor;” “People act like they don't know what to do;” “We are making way too many expensive mistakes we never made before;” and so on. Once on the scene, I typically find out very quickly that all of these things are true and, more importantly, they are unintentional. I know they are “unintentional” because invariably the employees that create them are very hard-working, caring people who really want to see the business succeed. As we all know, identifying the symptom is the simple part. Symptoms are the “trees” of the business. The challenge is in finding the “forest” of the business. There is always one problem that creates all of the symptoms. Finding that one problem is what I call “finding the forest among the trees.”

    Most “closely held” businesses have grown up around one or two key people who started the business with a “founding skill” at which they excelled. In our world of HVACR distribution, these “founding skills” vary from sales to purchasing, with a lot of things in between. Most HVACR distribution businesses have taken on the long-term flavor of those founding skills. This was great in the early days when the “founding hub,” the person(s) who started the enterprise, was well-connected to those key people who made the business function. It was great in the early days when these “connected people” knew clearly by association the vision for the business. How did they know? Simple … they watched and listened to the “founding hub.” The mind-set is, if the founders live out the “vision,” we will, too, if we simply just do what they do.

    If you are beginning to see the formation of a problem with this scenario, you are on the right track. Success was dependent on the “followers” being able to clearly see what the “leaders” were doing and emulating those behaviors. As the business grew, the ability to “see” became more difficult. The “leaders” had to be able to communicate what was to be done. Enter the “job description.”

    The “job description” is typically a formal document that communicates to the person what to do and how to do it. Its intent is to document activity. It is the next logical progression beyond “Jackie's Job.” Back in those old daze (pun intended), Jackie handled the purchasing and billing functions, both perfectly. Remember the consultant who said, “You're organized around your people and not the function.” My first attempt to organizing this function was to produce “job descriptions.” My job description for Jackie was “purchasing/billing clerk.” Wow, pretty neat, so I thought, and I was now fully utilizing my business degree. Thank goodness I never gave the job description to her.

    Early on, I developed a habit of “sitting on something” until I was “comfortable with it.” My job description for “purchasing/billing clerk” was not getting comfortable; in fact, it was getting more uncomfortable each time I read it. What was wrong? Finally, it hit me that there were two functions involved, and I had crammed them together into one. Why? Because I was still trying to organize around people… “Jackie's Job.” So I created two job descriptions, one for purchasing and one for billing. I gave them both to Jackie and said, “When we grow a bit more, you will have to give one of these up and train someone else how to do it.”

    Over time, I looked more and more at the business functionally. As I did, the business became progressively clearer to me in terms of what it did. I found that the people seemed to respond well to understanding the functions of the business and what their role was in the scheme of things. The business grew, and the people performed well and understood their roles. What could be better?

    People growing. That was what could be better. Nearly everyone was clear on task but not clear on outcomes. Oh, sure, they knew the company needed to make money, but in their minds that was more about “other things” than about them specifically. Their focus was that they “needed to do their job really well,” and if, at the end of the day, the company made money, then that was good. Many years went by before I had the epiphany “that to grow a business long term, you have to grow people long term.” A job description will not grow people. I had a clear understanding of the functions of the business and clear tasks outlined to achieve those functions. The people were performing those tasks well. But something was still wrong.

    My epiphany came through a simple source … the question “Why?” What a great way to learn about your business. Just start asking yourself, “Why?” What started emerging for me out of “my trees” was a picture of organizing business around the intended outcome, or result. “Why are we doing that?” became the operative question of the day. I once heard a great story about “The Christmas ham.” A young girl was watching her mother prepare Christmas dinner for their large family. She watched her mother cut off each end of the Christmas ham before she seasoned it and put it in the oven. Wanting to learn, she asked her mom, “Why do you cut off the ends of the Christmas ham?” Her mom said, “That's how your grandmother taught me to prepare the Christmas ham … she's in the living room, ask her.” The young girl asked her grandmother who said, “That's how my mother taught me to prepare the ham … she is in the den, go ask her.” The young girl went to her great-grandmother and asked, “Why did you cut the ends off of the Christmas ham?” Her great-grandmother replied, “We had a small oven.”

    What I love about that story is that it is such a great metaphor for understanding the difference between activity (task) and outcome (result). Activity organization is what causes someone to cut off the end of the ham. Cutting off the end was on the job description. The desired outcome? “Prepare a delicious Christmas ham.” Imagine a business that is designed around outcomes versus activity. Then answer this question: Which design would most likely produce an environment for growing people?

    My fundamental premise is, you cannot successfully grow a business long term without growing people long term. If you don't agree with that, then it will be hard to buy into my position of organizing the business around desired outcomes (results) vs. the activities (tasks).

    I had a recent case that brought this home so clearly for me. A client asked me to “review” a business and “see what I could find.” Not so different from those many years ago when I had said, “Sure … come on in.” Typically, in a “review,” I interview a lot of people. I ask them all the same questions and look for patterns in the answers. The pattern that began to emerge in this case was of a clear understanding of “what they do” but not a clear understanding of “why they do it.” My favorite examples were people who described themselves as being “inside sales” vs. “counter sales.” The “inside sales” people said, “I work at a desk mostly and I can call out to customers when I'm caught up.” The “counter sales” people answered in similar words, only related to “working at the counter.” When I asked them what they were “responsible” for, the answers always became a litany of what their “tasks” were. They did not know what they were responsible for. In other words, they didn't know the “why” of what they do.

    In a follow-up with management, I shared this example of “task/activity-based organization” vs. “outcome/result-based organization.” As we hashed out the questions around the job descriptions and how one might become organized around outcomes, I suggested that as a supplement to job descriptions, people should have what I describe as a “responsibility statement.” Using the example of inside sales and counter sales, I said what if they all had a responsibility statement that said, “cause customers to return and buy more.” One of the managers looked at me and said, “Can't do that.” I asked why not? He said, “It's too damn simple.”

    People often describe business as simple but not easy. I have found that to be so true over the years. I don't think we need to make business simple. It already is. We need to uncomplicate our businesses. We need to find good people who prefer responsibility over task and let them flourish. Grow your people, and you will grow your business.

    Naturally, we are here to help if we can.

    Reflection Network addresses the “organizational” side of the HVACR distribution business and Systematic Selling addresses the “selling” side of the HVACR distribution business. Phil Garrett and Dave Gleason are former presidents of NHRAW. For more information, please call either Phil Garrett at 336/574-1484 or Dave Gleason at 800/447-7355 for your “organizational” and “selling” needs.