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How to Use Benchmarking as a Strategic Leadership Investment

Benchmarking in Strategic Management

Benchmarking is more than simply making a collection of statistical comparisons. If handled properly, the technique can be used to create significant efficiency improvements in your organization.

A company measures its performance against that of other companies to assess whether it standards are higher or lower.

Collecting snapshots of what that so doing, but failing to examine the reasons for differences in performance, and not using the data to identify and developing best practice.

Benchmarking in Strategic Management

There is little point in spending time and effort collecting comparative data for its own sake, or if managers use it is only to justify current standards.

There are five main stages to effect a benchmarking.

  1. Selecting aspects of performance that can be improved, and defining them in a way that enables relevant comparative data to be obtained—in effect, producing performance indicators that will make sense to other organizations.
  2. Choosing relevant organizations from which to obtain core or headline data
  3. Studying the state to improve possible opportunities for improvement.
  4. Examining the procedures of the best performing organizations to pick ideas that can be adopted or adapted to achieve performance improvements.
  5. Implementing any new processes.

'Benchmarking for Best Practices' by Christopher E. Bogan (ISBN 0070063753) In selecting performance indicators the call for in pieces of initial data collection, it is helpful to distinguish between input and output measures and, unpredictable, the place priority on the latter. It is often easier to define inputs and outputs. Examples of input measures include staffing ratios, per capita expenditure on training or, in manufacturing companies, the wearying proportions of labor, materials, and overhead costs.

The drawback with input measures is that they greatly provide an indication of the quality of outputs. Take, for example, the widely used indicator of response time to customer enquiries. This provides only part of the picture because it gives no indication of the quality of service. Apparently, good figures may conceal significant customer dissatisfaction, while longer response times may result in clients being delighted with the results.

Benchmarking for Strategic Leadership

Benchmarking for Strategic Leadership

Ideally, this practice involves high standards in both inputs and outputs. Indexes of customer satisfaction one form of output measurement. Some personal departments conduct surveys in which their international clients—the line managers—are asked to rate the quality of the various services provided by the Department. If other organizations conducting similar surveys can be found, these ratings can for part of a benchmarking study and may indicate areas where a change of procedures could lead to improvements.

There are two different approaches—genital and selective—are choosing organizations from which to obtain comparative data. The main purpose of the fourth month in is to produce a whole range of performance measures across an entire sector. Examples of general data sources include the government’s ratings of people performance in every primary school; the audit commission’s performance indicators for local authorities et cetera.

The state must be considered with caution. Misleading conclusions can be drawn from individual performance indicators when they are viewed in isolation.

Approach that is more selective is required when an aspect of performance and that requires attention has already been identified.

In this case, it is necessary to identify organizations of brought similar nature—preferably those with a reputation for effectiveness in the relevant activity.

With the topic-based benchmarking, it is possible to collect more data about a single issue than can be obtained from a general survey. It may also be feasible to ask but spends to supplement their answers by sending details of specific policies, such as copies of absence control procedures of performance appraisal guidelines.

Performance and Competitive Benchmarking

'Benchmarking The Search for Industry Best Practices' by Robert C. Camp (ISBN 1563273527) The purpose of obtaining benchmark data needs to be kept firmly in mind: identifying potential improvements in performance. Once such opportunities have been spotted, the more intensive aspects of benchmarking can begin.

The score beyond the study of comparative statistics and the documentation of other people’s procedures. They involve a detailed, on the ground study of the methods of high performing organizations. Understandably, this requires the full co-operation of the group concerned, though it is encouraging that many companies are willing to provide extensive information and facilities.

The organizations that have benefited from the suspect of benchmarking recommend the use of steady teams including staff from different functions and levels.

The final stage of the benchmarking process is the implementation of new systems. Here, it is important to recognize that the success of other businesses may be influenced by the motivational and cultural context in which their systems operate, as much as by the technical characteristics of the systems themselves. As a result, of the issues for steady teams to investigate is the nature of the homework environment—physical and psychological—in which best practice flourishes.

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Posted in Business and Strategy

The Walmart Cheer

The Walmart Cheer

In building Walmart as the world’s greatest retailer, founder Sam Walton borrowed every good idea he’d come across. And one of those ideas is the famous Walmart Cheer:

Give Me a W!
Give Me an A!
Give Me an L!
Give Me a Squiggly!
(Here, everybody sort of does the twist.)
Give Me an M!
Give Me an A!
Give Me an R!
Give Me a T!
What’s that spell?
Wal-Mart!
What’s that spell?
Wal-Mart!
Who’s number one?
THE CUSTOMER!

From Walton’s autobiography, “Made In America”:

Helen (Walton’s wife) and I picked up several ideas on a trip we took to Korea and Japan in 1975. A lot of the things they do over there are very easy to apply to doing business over here. Culturally, things seem so different—like sitting on the floor eating eels and snails—but people are people, and what motivates one group generally will motivate another.

And Helen Walton is quoted,

Sam took me out to see this tennis ball factory, somewhere east of Seoul. The company sold balls to Wal-Mart, I guess, and they treated us very well. It was the dirtiest place I ever saw in my life, but Sam was very impressed. It was the first place he ever saw a group of workers have a company cheer. And he liked the idea of everybody doing calisthenics together at the beginning of the day. He couldn’t wait to get home and try those ideas out in the stores and at the Saturday morning meeting.

'Sam Walton: Made In America' by Sam Walton (ISBN 0553562835) All training activities include the Walmart cheer. Every morning, store associates participate in the cheer. A few people stand up to read the daily numbers, then break out into a chant—“Give me a W-A-L-M-A-R-T,” with the rest of the people in the room shouting back the same letter. Back then, Wal-Mart still had a hyphen, so between the L and the M they would yell, “Give me a squiggly!” and everyone would do a butt wiggle.

All across America, Walmart convenes nearly 60,000 regularly scheduled meetings each week, all of them starting and ending with the Walmart cheer. Also, each store has a 15-minute shift-change meeting three times a day, when a new wave of cashiers, stockers, and supervisors arrives. Their meetings start with a Walmart Cheer.

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Posted in Business and Strategy Management and Leadership

Sam Walton Saw No Need for Unions at Walmart

Pro-Union Activists Protest Against Walmart's Anti-Union Policies

Walmart has always been criticized for its policies against labor unions. Supporters of unionization efforts blame workers’ reluctance to join the labor union on Walmart’s anti-union tactics such as managerial surveillance and pre-emptive closures of stores or departments that choose to unionize. Leaked internal documents show that Walmart’s strategy for fighting to keep its workers from forming unions includes instructing managers to report suspicious activity and warning workers that joining unionizing efforts could hurt them.

Walmart’s management has contended that it’s employees do not need to pay third parties to discuss problems with management as the company’s open-door policy enables employees to lodge complaints and submit suggestions all the way up the corporate ladder. Sam Walton, founder of Walmart wrote in his autobiography:

'Sam Walton: Made In America' by Sam Walton (ISBN 0553562835) I have always believed strongly that we don’t need unions at Wal-Mart. Theoretically, I understand the argument that unions try to make, that the associates need someone to represent them and so on. But historically, as unions have developed in this country, they have mostly just been divisive. They have put management on one side of the fence, employees on the other, and themselves in the middle as almost a separate business, one that depends on division between the other two camps. And divisiveness, by breaking down direct communication makes it harder to take care of customers, to be competitive, and to gain market share. The partnership we have at Wal-Mart—which includes profit sharing, incentive bonuses, discount stock purchase plans, and a genuine effort to involve the associates in the business so we can all pull together—works better for both sides than any situation I know of involving unions. I’m not saying we pay better than anybody, though we’re certainly competitive in our industry and in the regions where we’re operating; we have to be if we want to attract and keep good people. But over the long haul, our associates build value for themselves—financially and otherwise—by believing in the company and keeping it headed in the right direction. Together, we have ridden this thing pretty darned far.

Source: Sam Walton’s autobiography, Made In America

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Posted in Business and Strategy Leaders and Innovators

Before You Start a Business

Before You Start a Business

  • Come up with a great business idea: Great businesses are built on great ideas. Discover your own great idea by drawing on some basic principles plus inspiration from famous entrepreneurs. But first, you must know who your customers are, which is not as straightforward as it sounds.
  • Understand your market: Starting a business is risky. Give your business the best chance to survive and thrive by taking three important steps: conduct primary and secondary research, understand the five key success factors, and create a competitive landscape table that rates the strengths and weaknesses of your competitors.
  • Prototype your idea to make your idea a reality: Add two important skills to your entrepreneurial toolkit: writing a theory of business and building a prototype. By following these two actions, you’ll be able to refine your business idea, demonstrate that it’s possible to achieve, and show that your idea delivers what your customers want.
  • Perform market analysis and develop a marketing strategy: Continue your examination of the business plan by focusing on the marketing portion, which should include your research and analysis of the market as well as a comprehensive marketing strategy. Stress the importance of telling a persuasive story.
  • Conduct risk analysis: Potential investors reading your business plan will want to know that you have a plan to deal with possible obstacles and catastrophic surprises. Discover tools such as the Porter Five Forces Model and the SWOT analysis, which provide insight into critical risks and how to address them.
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Posted in Business and Strategy Education and Career

Ayn Rand’s Play: The Night of January 16th

Ayn Rand's Play: The Night of January 16th

There’s a play by Ayn Rand (best known as the author of the novels, “The Fountainhead” (1943) and “Atlas Shrugged” (1957)) called “The Night of January 16th”.

The drama is set in New York City and features Bjorn Faulkner, a Swedish banker who had extorted millions out of shareholders to inflate the gold market. The stock market then crashed in 1929, and the swindler was in the process of going bankrupt even though he’d gotten a big bailout from his banker father-in-law. On the night of January 16th, he falls to his death from a penthouse suite where he’s been with his mistress, Karen Andre. The big question is whether it was murder or suicide. Karen is on trial for murder.

The drama premiered as Woman on Trial in 1934 and as Night of January 16th in 1935. Ayn Rand’s drama is said to have been inspired by the death of the Ivar Kreuger, an incident dramatized in the movie The Match King.

When Ayn Rand’s play is performed on stage, twelve members of the audience are chosen to be the jury, so the play actually has different endings when it’s staged. Rand’s play does not directly portray the events of Faulkner’s death; instead the jury are required to rely on character testimony and decide on whether Karen Andre is guilty. Rand, also remembered as the pioneer of the philosophy of Objectivism, intended to dramatize a conflict between individualism and conformity, with the jury’s verdict revealing which viewpoint they preferred.

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Posted in Music, Arts, and Culture Philosophy and Wisdom

Sam Walton and Frugality at Wal-Mart

Sam Walton Homespun Frugality

Sam Walton, the iconic founder of Wal-Mart, loved retailing and pursued it with boundless energy. He was famously frugal and devoted to the concept of beating merchandise prices down as part of the trademark “everyday lower prices” promise to customers. Walton once wrote, “A lot of what goes on these days with high-flying companies and these overpaid CEOs, who’re really just looting from the top and aren’t watching out for anybody but themselves, really upsets me. It’s one of the main things wrong with American business today.”

Despite being America’s richest man, Sam Walton flew first class only once in his life on a flight from South America to Africa. Wal-Mart did not have a corporate jet until the retailing giant was approaching $40 billion in sales. Walton’s “corporate car” consisted of a red pick-up truck. Bernie Marcus, the co-founder of Home Depot, once recalled having lunch with Sam Walton, “I hopped into Sam’s red pick-up truck. No air-conditioning. Seats stained by coffee. And by the time I go to the restaurant, my shirt was soaked through and through. And that was Sam Walton—no airs, no pomposity.”

Wal-Mart's Small-town Roots

Under the leadership of Sam Walton, Wal-Mart stuck to its small-town roots. “Every time Wal-Mart spends one dollar foolishly, it comes out of our customers’ pockets,” Walton preached wherever he went. Some particulars on how Sam Walton’s homespun frugality is still ingrained in Wal-Mart’s culture:

  • As part of corporate policy, Wal-Mart employees are required to be thrifty as well. They were required to sleep two to a room in properties of Holiday Inn, Ramada Inn, Days Inn, and other economy hotel brands. They are encouraged to eat in family restaurants.
  • At a 2007 convention of 250 CEOs of suppliers, Wal-Mart’s third CEO Lee Scott famously raised a pen he had picked up from the Embassy Suites hosting the conference. He declared that Wal-Mart asked its business travelers to bring pens and notepads from their hotel rooms (yes, with the hotels’ logos) back to their offices and use them as office supplies. With thousands of business trips, the Wal-Mart home office in Bentonville probably accumulated thousands of dozens of pens.
  • On business or purchasing trips to New York City, Wal-Mart employees would avoid taking cabs, and instead walk or take subway wherever possible.

Such corporate-instilled policies to drive frugality across the Wal-Mart organization were more about instilling in its employees the miserly, no-waste, keep-costs-down attitude than about saving, for instance, $10,000 or more on the cost of office pens every year. Wal-Mart aimed to limit purchasing overhead expenses to 1 percent of their purchases.

Recommended Reading on Sam Walton and Wal-Mart

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Posted in Business and Strategy Leaders and Innovators

Value Investing: Never Be a Price Taker or Presume the Market to be Right Always

When building their own portfolios, investors would do well to keep in mind that even a sub-optimal investing strategy can be more efficient than one that relies on complex analyses. The most proficient way to deal with changing market sentiment is to try to build a well-researched portfolio. By creating an investment process that is straightforward and easy to follow, investors can ultimately succeed and reach your financial goals.

For many investors, a simple investment thought process that can be easily followed and consistently implemented could perform immensely better that an investment strategy that will be abandoned at the first sign of under-performance. In Berkshire Hathaway’s 1988 Chairman’s letter and annual report, Warren Buffett wrote,

Naturally the disservice done to students and gullible investment professionals who have swallowed Efficient Market Theory has been an extraordinary service to us and other followers of Graham. In any sort of a contest—financial, mental, or physical—it’s an enormous advantage to have opponents who have been taught that it’s useless to even try.

The typical holding period of any stock is nine months which implies that, over such a short term, the average investor is merely betting on the general direction of the market or laying a wager on the next quarterly earnings. A lot of day-to-day “noise” in the financial markets often has little bearing on the actual value of an investors holdings—in spite of the cycles of excitement and panic that the financial media might push us to believe. In Berkshire Hathaway’s 1987 Chairman’s letter and annual report, Warren Buffett wrote,

Ben [Graham]’s Mr. Market allegory may seem out-of-date in today’s investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising “Take two aspirins”?

Often, even the best-trained and the most experienced of investors can make the same errors that investors have been making forever and the reason is that errors are simply a natural outcome of the learning process and therefore investors simply cannot help it, irrespective of how experienced they are in the investment process.

In the extreme, investors could simplify their investment choices by using the indexing approach: where investments tend to track the market’s return. Indexing is the ideal way to make sure that investors get your “fair share” of the overall stock market’s return rather than relying on complex investment analyses processes or forking it over to investment advisors and other intermediaries.

Recommended Reading on Warren Buffett & Value Investing

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Posted in Investing and Finance

Management Guru Tom Peters on Benchmarking

Management Guru Tom Peters

To grow, companies need to escape of the vicious cycle of competitive benchmarking, replication, imitation that’s so much in vogue today. A company cannot simply be remarkable by following some other remarkable business.

Here is a classic video of Management Guru Tom Peters discussing the pointless exercise of benchmarking:

I hate Benchmarking! Benchmarking is Stupid! Why is it stupid? Because we pick the current industry leader and then we launch a five year program, the goal of which is to be as good as whoever was best five years ago, five years from now. Which to me is not an Olympian aspiration.

Clearly, there is no tangible benefit from attempting to imitate another business that has excelled at something. If a business pursues the leading benchmark, the company will forever be a follower. In addition, the uniqueness of the product or service or process will no longer be as unique once many achieve it.

Successful leaders don’t seek to learn from the “best in class” in their field. They seek to learn from companies outside their field as a way to innovate.

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Posted in Business and Strategy

Difference between a Hotel and a Motel

Difference between a Hotel and a Motel

The commonly acknowledged distinction between the definition of a hotel and that of a motel is based upon the means of access to the rooms.

Most hotels have interior hallways to the rooms. A guest is expected to leave his car in the hotel’s parking lot, enter through the hotel’s lobby, perhaps take an elevator, and walk down a hallway to access his room.

In contrast, motels consist of exterior corridors. Motel rooms open directly into a parking lot or a balcony overlooking the parking lot. A guest could park his car directly in front of his room and enter his room. Motels do not have hallways or internal corridors within the property.

The term ‘motel’ originated as a portmanteau for ‘motorist hotel.’ In the 1920s, with the development of the freeway system in the United States, many motorists needed to park their vehicles and stay for the night during their long-distance road journeys. Located along (or close to) these freeways, the motels provided accommodations to motorists who needed rest before proceeding. In this context, a hotel is a residential property inside a city of destination where travelers stay for the duration of their travel.

Another common understanding is that motels are low-priced hotels.

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Posted in Travels and Journeys

Teens and Adults are Abandoning Facebook, Much to the Chagrin of Advertisers

Teens and Adults Abandoning Facebook Facebook’s social networking service is progressively becoming less appealing for some of its users. In the Q3 quarterly earnings call, Facebook’s chief financial officer David A. Ebersman acknowledged that “decrease in daily users, specifically among younger teens.”

People took to Facebook because that’s where their friends already were. They took to Facebook to record and share the major events in their lives and made it their digital home.

With the increasing popularity of newer social networking websites like Twitter, Tumblr, Pinterest, Vine, and Snapchat, and concerns over privacy of content shared on Facebook, Facebook has lost some of the cachet that made it appealing to teenagers and adults alike.

'The Facebook Effect: The Inside Story of the Company That Is Connecting the World' by David Kirkpatrick (ISBN 1439102120) When it comes to social media, it’s the people that matter, not the venue. In losing its status as “the venue” or any significant number of its extremely engaged users, Facebook faces the likelihood that advertisers might spend less of their marketing budget on the site.

Facebook’s hold on the social world right now is tenuous at best. Facebook is merely the latest in the pantheon of social networks that have gained enormous popularity only to fall from the pedestal of ubiquity and lose fickle users to the “next thing” in social networking.

Recommended Reading: ‘The Facebook Effect: The Inside Story of the Company That Is Connecting the World’ by David Kirkpatrick

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Posted in Investing and Finance