Niels Pflaeging[ BBTN Associate & Presidente MetaManagement Group  Niels Pflaeging ]BetaCodex Diálogo CFO wwwbetacodex.org...
90% Peter Drucker
Industrial age ends:                         Knowledge economy advances:  high               ”Supplies have the power“,   ...
“command and control“                        •  Too centralized                        •  Too inward-looking              ...
Periphery                                                Center                           Information     Decision        ...
One cannot talk sensibly about leadership, or peoplemanagement, nor design decent management processes,unless we clarify b...
Theory X    vs.Theory Y  Douglas McGregor
Theory X                                              Theory Y                                         AttitudePeople disl...
© BBTN – All rights reserved
Beyond Budgeting (1998-2002)          Beyond command and control (2003-2007)                      Beyond incremental chang...
Sciences:                                                                        Practice:Thought leaders           Staffo...
Industry               Retail             ServicesGovernments.  & NGOs                        © BBTN – All rights reserved
The BetaCodex: The 12 new laws of Leadership§1    Freedom to act        Connectedness not Dependency§2    Responsibility  ...
Traditional model (supports efficiency)                           New model (supports complexity)                         ...
The BetaCodex:  Thinking and workingon the model,                 not       in the model.
Sustaining and                                                                                    deepening of the        ...
•  Consistently successful, for more than 40 years                        •  “Most innovative company in the U.S.“        ...
Apertura                                          30           © BBTN – All rights reserved
Apertura                                          31           © BBTN – All rights reserved
Fixed Targets – the “blue pill“!           Relative, self-adjusting targets           Target: absolute ROCE in % (here: 15...
Bonus        Variable      BonusCommon practice:                                  hurdle         area         limit       ...
1 very simple principle:Always disconnect compensation from targets.Always.                                               ...
Pay-for-performance is an outgrowth of behaviorism, which isfocused on individual organisms, not systems - and, true to it...
1 very simple principle:Never use bonuses and incentives.Apply profit sharing and/or shareholding conceptsfor community.  ...
Companies.  Don´tNeed.   Planning.AperturaEine Konsequenz aus dem Kodex.   39
Strategy                      “Fixed” performance contract                                                           •  Pe...
Apertura                                          42           © BBTN – All rights reserved
The most important objective                                                                                              ...
Principles                         Customers                    Customer intimacy             A large network of self-mana...
Strategic „cascade”                                               Bank to bank                                           R...
Headquarters/                                                        Region                                               ...
Better to invest in                                                   Better for society       Better to do business with ...
Whatwe  arewaiting
© BBTN – All rights reserved
“I don´t know if it is possible.                            What I know: It is necessary.“                                ...
© BBTN – All rights reserved
Make it real!www.betacodex.orgA selection of associates:Niels Pfläging                  Silke HermannMetaManagement Group ...
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)
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Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)

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Leading with Flexible Targets: How to Create the Performance Revolution - Keynote, University of Bergamo (Bergamo/IT)

  1. 1. Niels Pflaeging[ BBTN Associate & Presidente MetaManagement Group Niels Pflaeging ]BetaCodex Diálogo CFO wwwbetacodex.org Econique – Network 18/19 de Mayo 2009
  2. 2. 90% Peter Drucker
  3. 3. Industrial age ends: Knowledge economy advances: high ”Supplies have the power“, ”Customers have the power“, Evolution of mass markets: strong competition, individualized demand: Taylorism as the superior model decentralized and adaptive model is superior! Now, all these factors are equally important! Here, only efficiency Competitive mattered, really! Characteristics success factors (CSF)Dynamics 1.  Discontinuous change - Fast response and 2.  Short life cycles - Innovationcomplexity 3.  Constant pressure on prices Operational excellence - Characteristics •  Incremental change 4.  Less loyal customers - Customer intimacy 5.  Choosy employees - Great place to work •  Long life cycles •  Stable prices 6.  Transparency, -  Effective societal pressure governance •  Loyal customers   High financial -  Sustained superior •  Choosy employers expectations value creation/fin.perf. •  „Managed“ results low 1890 Most organizations still use a management model that was designed 2030 1980 1990 2000 2010 2020 for efficiency, while the problem today is complexity. © BBTN – All rights reserved
  4. 4. “command and control“ •  Too centralized •  Too inward-looking •  Too little customer-oriented •  Too bureaucratic •  Too much focused on control •  Too functionally divided •  Too slow and time- consuming •  Too de-motivating •  … © BBTN – All rights reserved
  5. 5. Periphery Center Information Decision Command Impulse Centralist command and Reaction control “collapses“ in increasingly complex environmentsSource: Gerhard Wohland © BBTN – All rights reserved
  6. 6. One cannot talk sensibly about leadership, or peoplemanagement, nor design decent management processes,unless we clarify beforehand our beliefs with regards to whatpeople in organizations are like.We have to arrive at a shared understanding of humannature and of the consequences of that for our organizations. Leadership e obiettivi flessibili © BBTN – All rights reserved
  7. 7. Theory X vs.Theory Y Douglas McGregor
  8. 8. Theory X Theory Y AttitudePeople dislike work, find it boring, People need to work and want to takeand will avoid it if they can. an interest in it. Under right conditions, they can enjoy it. DirectionPeople must be forced or bribed People will direct themselvesto make the right effort. towards a target that they accept. ResponsibilityPeople would rather be directed than People will seek and acceptaccept responsibility, which they avoid. responsibility, under the right conditions. MotivationPeople are motivated mainly Under the right conditions, people areby money and fears about their job motivated by the desire to realize theirsecurity. own potential. CreativityMost people have little creativity - Creativity and ingenuity are widelyexcept when it comes to getting distributedround rules. and grossly underused. Source: cited from Douglas McGregor, ‘The Human Side of BBTN – All rights 1960 © Enterprise’, reserved
  9. 9. © BBTN – All rights reserved
  10. 10. Beyond Budgeting (1998-2002) Beyond command and control (2003-2007) Beyond incremental change (2008-) © BBTN – All rights reserved
  11. 11. Sciences: Practice:Thought leaders Stafford Beer Industry leaders Margareth Wheatley(selected) Niklas Luhmann (selected) W. Edwards Deming Kevin Kelly Ross Ashby Joseph Bragdon … Douglas McGregor Chris Argyris Complexity Jeffrey Pfeffer Reinhard Sprenger theories Industry Stephen Covey Howard Gardner Social Viktor Frankl … sciences and Retail HR Peter Drucker Tom Peters Leadership & Services Charles Handy change John Kotter Peter Senge Thomas Davenport Strategy & Governments Peter Block Performance & NGOs … management Henry Mintzberg Gary Hamel Jeremy Hope Michael Hammer Thomas Johnson Charles Horngren … © BBTN – All rights reserved
  12. 12. Industry Retail ServicesGovernments. & NGOs © BBTN – All rights reserved
  13. 13. The BetaCodex: The 12 new laws of Leadership§1 Freedom to act Connectedness not Dependency§2 Responsibility Cells not Departments§3 Governance Leadership not Management§4 Performance climate Result culture not Duty fulfillment§5 Success Fit not Maximization§6 Transparency Intelligence flow not Power accumulation§7 Orientation Relative Targets not Top-down prescription§8 Recognition Sharing not Incentives§9 Mental presence Preparedness not Planning§10 Decision-making Consequence not Bureaucracy§11 Resource usage Purpose-driven not Status-oriented§12 Coordination Market dynamics not Commands © BBTN – All rights reserved
  14. 14. Traditional model (supports efficiency) New model (supports complexity) Centralized Decentralized hierarchy, network, “command “sense and control” and respond“ The old model is not aligned with today’s Critical success factors and it does not support ‘Theory Y’. > We need a new Relative strategy model to cope with performance complexity contracts > We must change the whole model! Fixed performance contracts Dynamic coordination Fixed processes Dynamic processes control © BBTN – All rights reserved
  15. 15. The BetaCodex: Thinking and workingon the model, not in the model.
  16. 16. Sustaining and deepening of the Integration decentralized model, Evolution phase through generations within the decentralized model (culture of Transformation empowerment and trust) through radical decentralization of decision-making Differentiation Stagnation phase within the tayloristic model Low degree of decentralization/ Bureaucratization empowerment through growing hierarchy and functional differentiation Pioneering phase High degree of decentralization/ empowermentFoundation Time scale: organizations age Several decades old
  17. 17. •  Consistently successful, for more than 40 years •  “Most innovative company in the U.S.“ (Fast Company) •  For the 8th year in a row among the 100 best employers in the U.S. (“Fortune“ – best medium-sized employer). Best employer in England for the third consecutive year. Among the best companies to work for in the EU and Germany. •  All employees participate in the firm´s success and become “virtual“ shareholders. •  No job titles. Little hierarchy. No job descriptions - instead: “job sculpting“. •  Highly empowered teams. “Temporary leadership“•  “Since 1958, Gore has avoided traditional hierarchy. Instead, we have practiced a team-based environment that stimulates personal initiative, innovation and communcation between all our Associates.”•  “The fundamental belief in the people in our organzation and in their ability continues to be the key to our success.“ © BBTN – All rights reserved
  18. 18. Apertura 30 © BBTN – All rights reserved
  19. 19. Apertura 31 © BBTN – All rights reserved
  20. 20. Fixed Targets – the “blue pill“! Relative, self-adjusting targets Target: absolute ROCE in % (here: 15%) relative ROCE in % (to Market) Target Plan Actual comparison: comparison Target: „ROCE Market-Actual Most Plan-Actual in % better important than market Marketcompetitor average” Actual (25%) (28%) Plan (21%) [independent (15%) [expected from expected market Ø] market Ø: 13%] •  Interpretation within the plan-actual-comparison: actual-actual comparison: Performance was 4 percentage points below Plan was outperformed by 6 percentage points > positive interpretation interpretation competition! > negativeApertura •  Better ROCE of the market average and the most don´t Absolute assumptions at the moment of planning matter. important competitor remain unnoticed! •  Targets always remain updated and relevant! 32 © BBTN – All rights reserved
  21. 21. Bonus Variable BonusCommon practice: hurdle area limit “Ceiling”„Pay for performance“compensation Salary/ Reduction Maximization Reduction incentive:profile with fixed bonus incentive: Lower incentive: Anticipate postpone results toperformance contract: result even more results next periodCreates maniuplationincentive in any situation! Base salary 80% 100%: 120% Performance as % of target target of target of target realization Linear compensation curve without breaks:A better model: Result variable compensation becomesoriented compensation decoupled from targetsprofile with relative Salary/ Free fromperformance bonus incentive to manipulatecontracts:No incentive tomanipulation. Actual Actual Actual Performance inSource: Michael Jensen result #1 result #2 result #3 relative evaluation © BBTN – All rights reserved
  22. 22. 1 very simple principle:Always disconnect compensation from targets.Always. © BBTN – All rights reserved
  23. 23. Pay-for-performance is an outgrowth of behaviorism, which isfocused on individual organisms, not systems - and, true to its name,looks only at behaviors, not at reasons and motives and the people whohave them.I tell Fortune 500 executives (or at least those foolish enough to ask me)that the best formula for compensation is this: Pay people well, pay themfairly, and then do everything possible to help them forget about money.How should we reward our staff? Not at all! They are not our pets.Pay them well, respect and trust them, free them from disturbance,provide them with all available information and support to performon the highest possible level. Alfie Kohn, Sociologist1.  Pay people well2.  Pay people fairly3.  And then do everything possible to take money off peoples minds!All pay-for-performance plans violate that last precept! © BBTN – All rights reserved
  24. 24. 1 very simple principle:Never use bonuses and incentives.Apply profit sharing and/or shareholding conceptsfor community. © BBTN – All rights reserved
  25. 25. Companies. Don´tNeed. Planning.AperturaEine Konsequenz aus dem Kodex. 39
  26. 26. Strategy “Fixed” performance contract •  Period [Fixed] Strategic learning cycle •  Targets [Fixed] •  Compensation [Fixed] Annual plan Fixed •  Plan [Fixed] Performance •  Resources [Fixed] Contract Budget •  Coordination [Fixed] •  Control [Fixed] Management •  Agreed through [Negotiation] control cycle •  Signed by: [Manager/Director] ControlApertura Tayloristic management works like this: As centralistic-burocratic hierarchies, held together through a regime of fixed performance contracts! Source: BBRT 41 41 © BBTN – All rights reserved
  27. 27. Apertura 42 © BBTN – All rights reserved
  28. 28. The most important objective within Handelsbanken Group: “Higher Return on Equity than the average of comparable banks in the Nordic region and Europe.” Made real through: •  Radical decentralization, which in turn leads to… •  Best customer service •  Lowest cost Alexander V Dokukin   Consistently – over a period of 30 years – one of the most successful banks in Europe, measured by almost all key performance indicatorsApertura (e.g. ROE, TSR, EPS, Cost/Income, customer satisfaction, …) ROE = Return on Equity, TSR = Total Shareholder Return, EPS = Earnings per share 43 © BBTN – All rights reserved
  29. 29. Principles Customers Customer intimacy A large network of self-managed 600 branch managers teams with full responsibility for (Profit Centers) customer results Freedom and capability to act “Winning“ culture, combined 12 regional managers Fast, open with the freedom (Invest Centers) information and ability to act systems Governance and transparency Framework for decision making CEO, with clear values, limits and product firms, treasury, IT etc. relative targets, plus transparencyApertura Leads to maximum customer satisfaction! Source: BBRT 44 © BBTN – All rights reserved
  30. 30. Strategic „cascade” Bank to bank Return on Equity (RoE) Region to region Principles 1.  Bank D 31% Return on Assets(RoA)etc. 2.  Bank J 24%1.  Branch to branch Region A 38% Cost/income ratio etc. Relative targets and relative 3.  Bank I 20%2.  Region C 27% compensation 4.  Bank B 18%3.  Region H 20%1.  Branch J 28% 5.  Bank E 15%4.  Region B 17%2.  Branch D 32% Continuous preparation/ 6.  Bank F 13%5.  Region F 15%3.  Branch E 37% social control 7.  Bank C 12%6.  Region E 12%4.  Branch A 39% 8.  Bank H 10%7.  Region J 10%5.  Branch I 41% 9.  Bank G 8% 8.  Region I 7% 6.  Branch F 45% “On demand“ flow of 9.  Region G 6% 7.  Branch C 54% resources/ 10.  Bank A (2%) dynamic coordination 10.  Region D (5%)8.  Branch G 65% 9.  Branch H 72% 10.  Branch B 87% Result & value contributionApertura Leads to lowest operational cost! 45 © BBTN – All rights reserved
  31. 31. Headquarters/ Region Branches acquire resources through internal markets Resources Customer Branch (IT, HR etc.) demand Branches decide Branches alone are Branches over necessary responsible for efficient observe resource levels use of resources customer demandApertura Leads to eradicating and avoiding waste! Source: BBRT 46 © BBTN – All rights reserved
  32. 32. Better to invest in Better for society Better to do business with 6. Sustainable value – 5. Ethical & social standards – Beats peer group every year 4. Customer intimacy – Highest Support the long term interests of on ROE and cost-to-income (independent) customer satisfaction the bank and society. ratio; highest total scores in sector year-after-year; shareholder return in sector; lowest customer complaints; devolved adaptive monitors customer acquisitions/ organization is key driver of defections. success. 3. Operational excellence – Lowest costs of any bank in Europe; lowest bad debts; cost reduction Better to work for culture; flat organization (half a 1. Best people – SHB is first head office person per branch choice financial services versus five for rivals); internal company in Sweden for market exerts constant pressure on graduates; employee central services. turnover is lowest in sector; 2. Innovation – SHB voted joint challenge, personal responsibility and freedom to best Internet bank in Europe in run their part of the 2000; any competitive products and business; group-wide profit solutions are fed back from sharing scheme.Apertura branches to product development. Text relates to Svenska Handelsbanken 47 © BBTN – All rights reserved
  33. 33. Whatwe arewaiting
  34. 34. © BBTN – All rights reserved
  35. 35. “I don´t know if it is possible. What I know: It is necessary.“ Tom PetersToday we already know for sure it is possible.And we have also learned how it can be done. © BBTN – All rights reserved
  36. 36. © BBTN – All rights reserved
  37. 37. Make it real!www.betacodex.orgA selection of associates:Niels Pfläging Silke HermannMetaManagement Group Insights Group DeutschlandAl. Santos 1.991 Luisenplatz 1BR - 01419-002 São Paulo D - 65185 Wiesbadenniels@metamanagementgroup.com silke.hermann@insights-group.deSkype: npflaeging Skype: silkehermannwww.nielspflaeging.com www.insights-group.de

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