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Cohesive response  based on your analysis ...See attachment for detailed instructions   Cohesive response No plagiarism  APA citing ** Due 48 hours or ASAP **** 1 Social Media 1 Week 2 Discussion 1: To prepare for this Discussion: Please select the links below to open and view this weeks lecture:  · Reading – Chapters 2 and 3 of The Performance Consultant’s Field book “See attachment” · Lidinska, L., & Jablonsky, J. (2018). AHP model for performance evaluation of employees in a Czech management consulting company. Central European Journal of Operations Research, 26(1), 239–258. https://doi.org/10.1007/s10100-017-0486-7 ·  Lu, X., & Guy, M. E. (2019). Emotional labor, performance goal orientation, and burnout from the perspective of conservation of resources: A United States/China Comparison. Public Performance & Management Review, 42(3), 685–706. https://doi.org/10.1080/15309576.2018.1507916 Assignment – Cohesive response The AHP Model Using the articles; AHP model for performance evaluation of employees in a Czech management consulting company by Lidinska & Jablonsky (2018) and Emotional labor, performance goal orientation, and burnout from the perspective of conservation of resources: A United States/China Comparison by Lu & Guy (2019), please review the analytic hierarchy process (AHP) that is outlined for performance consulting. · Develop a summary on your agreement or disagreement with the AHP model · Support your viewpoints by addressing the key elements of application, in which you agree or disagree within the AHP model for performance evaluation of employees · Discuss the important elements of innovation, evaluation, and a general decision-making approach · Discuss how emotional dissonance, goal orientation, and burnout are critical factors to consider within the organizational culture and how you can correlate this to the AHP model · Support your viewpoints on the critical difference between the changes in performance consulting overall from the required reading · APA citing · No plagiarism · 4-5 paragraphs Chapter 2 The Transition Some training and HRD departments find the transition to performance consulting difficult. There are a number of reasons that the journey is not a simple one. For example, it requires changing how you operate, learning a different set of skills, and revisiting your own premises about what you can and cannot do.  FIELD NOTES: FALSE STARTS Doug changed the name of his department from Training and Development to Training and Performance, but he made few other changes. When people asked him what was now different about what his department did, he had difficulty answering. Doug lacked a clear picture of what performance consulting is and a plan for making the transition to it. As a result, nothing in his department really changed. Doug’s situation is common. Training departments often try to move into performance consulting simply by changing their name. Although a name change can help, it is not enough. You have to be able to explain what performance consulting is, why you are moving to it, and how you will operate differently as a result. You have to offer the products and services a performance consultant provides, measure what you do and how you do it, and promote your new services. You need a plan. EXPERIENCES FROM THE FIELD: PLANNING When I’m asked about how to make the transition to performance consulting, I talk about the importance of having a plan. The plan should include: · A destination. It is hard to arrive anywhere without a destination in mind. Defining performance consulting and preparing a vision and a mission statement will complete your picture of where you are headed. A vision describes how your world will be once you have completed your mission. A mission statement explains what you are all about, what you do, and the business you are in. · A list of available resources. Every trip requires resources. In this case, resources include your consulting processes and procedures, your current products and services, your skills and knowledge, and your relationships. · A strategy. This is the game plan for getting to your destination. Your game plan might be to leverage your resources or to get out of what you are doing now so that you can redirect your resources toward performance consulting. Another game plan might be to build strategic alliances. · Measures. Measures will help you prove that taking on the new role of performance consultant has been a benefit to your organization and your clients. The process of developing and carrying out a plan is not particularly linear, but having a destination in mind at the beginning helps. Once you have decided on a destination, you can think about how you will get there, what resources you will need to get there, and how to measure your success once you’ve arrived. For example, if your strategy is to leverage your resources, those resources have to be well established. If your strategy is to build strategic alliances, you may not have to do anything to your resources. If your strategy is to stop what you are doing now so that you can redirect your resources, then you may have to find someone else to take over what you no longer want to do. If your strategy is to expand your services, you may have to develop your skills so that you can take on new responsibilities. What is important is to look at where you are now and decide on a reasonable course of action. You can’t always finish one step before going on to the next. As you learn and gain success, you may have to circle back and pick up some steps you passed by earlier.  FIELD TECHNIQUES: MAKING THE TRANSITION TO PERFORMANCE CONSULTING Here are some ways you can move from your current role to that of performance consulting (notice that the topics covered in Chapter One, making definitions and mapping out processes, occur early in the plan): Choosing a Destination · Define the role of performance consulting. · Develop a vision and mission statement. Identifying Your Resources · Define and describe your process for how you will do business (that is, how you will work with your clients). · Identify the products and services you now offer, those you want to offer, and to whom you want to offer them (this is covered in this chapter). · Develop tools and techniques to help you build skill and confidence in your new role (this is covered in Chapters Three and Four). · Refine your processes for and approaches to discovery, diagnosis, treatment, and measurement (you will find models you can use and modify for this purpose throughout the fieldbook). · Identify the resources you will require to be effective (additional processes, skills, systems, and so on). Developing a Strategy · Continue to learn about the dynamics of organizational and people performance, what organizations can do to improve performance, and how to measure performance and results. · Build strategic alliances with key staff (such as finance, legal, and marketing managers) and line personnel from the organization’s core business. · Identify a willing customer with a need, and build your confidence by taking on projects that are just at the edge of your comfort zone. · Manage your relationships and image. · Market and promote your services and successes. Defining Measures · Establish your performance standards. · Measure the results of what you do and the interventions you recommend. · Measure your own efficiency and effectiveness. It is important to start with your destination; however, you will probably move back and forth from resources to strategy to measures and back to resources again. For example, this chapter jumps ahead to measures (setting performance standards) and then goes back to resources (defining your products and services).  FIELD NOTES: MAKING THE TRANSITION Kelly was head of a centralized training department at a large insurance company. The company had experienced layoffs in the past, and training was one of the first departments to be eliminated. Kelly did not want to go through that again. She believed that by limiting her department’s services to training, she and her staff would be at risk for future layoffs. She wanted to expand their services to include consulting on how to improve people performance. She knew the transition would not be easy: her staff were all trainers, her line managers asked only for training, and her students wanted only classroom training. Yet the cost of training was increasingly under attack. Neither she nor her clients could show how training made a difference to the company. She had to change what her department did and how it operated so the value they added to the company could no longer be questioned. She began by redefining what her department did and how it would do business. She and her staff built a new vision and mission for the department. They changed the name of the department to Learning and Performance Improvement. They expanded their list of products and services to include analysis, coaching, and consultation on evaluating performance. The process of building a plan gave everyone a much deeper understanding of what they did, what they wanted to do differently, who they wanted to serve, and what they had to do to make the change. Their next step was to learn more about assessment and measurement. They defined their processes and added new tools to help them operate more efficiently. They found a friendly and willing client. They tried out their processes and tools. They became known as performance consultants. ESTABLISHING YOUR OWN PERFORMANCE STANDARDS About the same time that you are working on your plan, you should begin to think about how you want your work to be evaluated. There will come a time when someone will ask you about the value of performance consulting, and you will be in a better position if you have already set up your measures of success. Your consulting process and plan should help you come up with some performance standards. Otherwise, you cannot compare your performance today with what you did in the past and what you will do in the future. You do not have to know what your assignment is to set your performance standards. Instead, set standards based on your process and the tools and techniques you will use to carry out your assignments. Figure 2.1 lists the standards I use. Figure 2.1 . My Consulting Process Standards With these standards as my guide, I can measure how well my processes, tools, and techniques have enabled me to develop the qualities I need as a performance consultant: Efficiency · How quickly did I scope out a job and determine what it would take, in terms of time and money, for me to deliver the requested product or service? · How long did a project actually take? (What was the cycle time?) Even if the cycle time for a project is longer than it should be because of events beyond my control, measuring it gives me information that will help me improve how I handle what is under my control on the next job. Responsiveness · How long was it before I got around to meeting with the client to find out what the request was? · How much time passed before I got started on the assignment? Delays may be beyond my control, but they still add to my costs. Tracking this information puts me in a better position to negotiate for faster turnarounds on approvals, reviews, and so forth in the future. Accuracy · Did my estimate of how much of my time the assignment would take differ significantly from what it actually took? · Did I acquire an accurate understanding of the job in the beginning, so that my surprises were few? Every job brings with it the possibility of unanticipated complications. It is only by comparing what I thought at the beginning of a job with what I knew at the end that I can improve my process for qualifying jobs and clients. Effectiveness · Did I gain the client’s commitment to proceed? Did I secure the client’s cooperation throughout the project? Did I build the client’s confidence in what I did and how I did it? · Did the solutions I suggest work? Again, a lot of variables can come into play when it comes to implementing a major program. If I don’t measure my results, though, I’ll never know how well I managed the variables that were within my control or helped the client manage those within its control. Cost-Effectiveness · Did the client feel that the investment in my services was worth it? · Did the benefit gained from the solution or intervention exceed the cost? When clients get my bill, I want them to think only about the value they received. Even internal consultants should be sensitive to cost-effectiveness. Your services did cost your client: whether you are an external or an internal consultant, you want your clients to feel that their needs were met and that your involvement was worth what it cost them. You can use the following suggestions to develop standards that will help you measure how effective your processes are and how well your suggestions meet your clients’ requirements.  FIELD TECHNIQUES: MEASURING WHAT YOU DO NOW 1. Create a process for meeting with the clients to discuss each assignment or request. 2. Create a mechanism (a time log, calendar, or project plan, for example) for tracking how long it takes you to develop an understanding of the client’s request, put together a proposal or work plan for a client, execute each step of the plan, and measure the results. 3. Track your time over one month or for at least one assignment. 4. Classify the time you spend on each phase or specific step of your process in terms of efficiency, and use this information as a point of comparison for future work (that is, as a baseline). 5. Identify phases or steps for which you think you could develop better procedures or improve your skills to reduce your cycle times or make better use of your time. 6. Set standards for yourself in terms of how efficient or effective you want to be. 7. Continue to track your time, and compare it to your standards or baseline. 8. Continue to identify the phases in which you think you could work more efficiently. 9. Redesign your process or improve your procedures in ways that help you become more efficient.  FIELD NOTES: MEASURING THE CONSULTING PROCESS AND RESULTS Because each of Mike’s subteams (training, finance, IS, logistics, and word processing) now followed a common consulting process, Mike could develop a way to evaluate everyone’s performance. To do this, he developed a table of consultant behaviors and results (Figure 2.2). The column heads list the five areas of performance Mike wanted to evaluate. The first column lists different levels of consulting proficiency, starting with least proficient (the bottom row) and progressing to most proficient (the top row). The examples in column 2 illustrate how consultants at various levels of proficiency use processes, from not at all (in the case of the least proficient consultants) to systematically and expertly (in the case of the most proficient ones). Columns 3 and 4 deal with how well a consultant estimates the resources required to fulfill a request and then assesses his or her estimates against what is actually required. The last two columns are about how effective a consultant’s subprocesses are at measuring customer satisfaction and determining cost-benefit ratios for the work performed. Figure 2.2 . Mike’s Expectations for Consulting Proficiency   The rows list behaviors and outputs that Mike used as baselines to measure performance. The first three rows list behaviors and results that reflect inadequate performance. The fourth row lists behaviors and results that Mike would accept as evidence of meeting expectations. The last row lists behaviors and results that indicate the consultant exceeds expectations. To exceed Mike’s expectations, a consultant has to use well-defined, efficient processes that result in services that meet customer needs and add value to the system. The operational definition that the team came up with based on Mike’s definition of consulting (Figure 1.8), the picture of the consulting process they produced (Figure 1.10), and Mike’s list of performance measures (Figure 2.2) gave everyone a better understanding of the behaviors and results Mike was looking for. ALIGNING YOUR PRODUCTS AND SERVICES WITH YOUR NEW ROLE Once you have a destination in mind and a plan drawn up, take a hard look at what you do and compare it to what you want to do. I find that people who work in training and HRD have usually inherited what they do. They may have initiated and developed some of their programs, but for the most part their department’s programs were in place when they were hired. I also find that people often don’t know why they do what they do. The reasons, or business drivers behind a program, have long been forgotten. The business driver is the reason that organizations agree to fund the development and delivery of programs and services. Most programs and services are created in response to a business need or because someone in the organization wanted them and got the funding under the guise of meeting a business need. Programs and services that are created in response to a business need include these examples: · Job-specific training that is implemented because there is no other cost-effective way for people to learn the job. These programs are offered to new employees and people who are transferred or internally promoted because the job or task is not easily learned through traditional academic or on-the-job programs. · Mandated programs that are in place because there is no other cost-effective way to satisfy a regulatory requirement. These programs are offered so the organization can comply with a particular law or regulation. Examples are safety programs and other programs used to certify or maintain a certification. · HR programs initiated because they are an integral part of a process, such as orientation for new employees, performance appraisals, and performance management. · Programs used to support or deploy an organizational strategy. Examples are new technology efforts, applying quality improvement principles to work processes, shifting work away from individuals and toward cross-functional teams, and working with customers to identify their requirements. · Skill-building programs offered in response to an identified skill deficiency, such as in financial analysis, coaching, or developing standards. Career development programs are in this category too. · Product or market support programs created to support the selling of new products or the servicing of new markets.  FIELD TECHNIQUES: IDENTIFYING BUSINESS DRIVERS Before you can align your products and services to the needs of the organization, you need to examine why the organization maintains the programs and services it now has. Start by asking these questions: · Why is this program or service offered? · Has the need been satisfied? If not, is there a better way to satisfy the need? If yes, then why is it still being done? · Who would be affected if the organization no longer offered the program or service? How would they be affected?  FIELD TOOLS: PRODUCT PORTFOLIO WORKSHEETS Before you can become something different, it helps to examine what you do now and assess the demands it places on you. There are two worksheets here for doing that. Product Portfolio Worksheet 1 (see Figure 2.3) gives you an overall picture of your current products and services, that is, the business you are in today. Product Portfolio Worksheet 2 (see Figure 2.4) gives you a picture of how well your current and future products and services will perform. Together these worksheets help you better understand:   Figure 2.3 . Product Portfolio Worksheet 1   Figure 2.4 . Product Portfolio Worksheet 2 · Your current and future products and services · The business reason, or driver, behind each product or service you provide · The people who depend on your product or services · The resources required to deliver those products and services · What, if any, products and services you can eliminate or devote fewer resources to · What, if any, products or services would bring greater value if they were delivered differently · Where you can develop a business case for changing what you do or improving how you do it Both worksheets help you identify opportunities to modify and improve what you do. With them, you examine your current products or services and any new ones you add as a result of moving into performance consulting. Product Portfolio Worksheet 1 Use Product Portfolio Worksheet 1 to: · Clarify and gain consensus on what you do now, for whom you do it, why you do it, and the resources required to deliver your current products or services · Reach consensus on what it is you want to do in the future, for whom you want to do it, why you want to do it, and the resources your proposed products or services will require · Communicate to clients what you do today and what you want to do in the future The worksheet is a simple matrix that you can modify to meet your needs. The column headings I find most useful are (1) a description of the product and service, (2) a description of the customer or user, (3) a definition of the business driver, (4) a description of how the product or service is currently delivered, and (5) an account of how many resources it requires. You can modify the columns to meet your own needs. Here is how to use the worksheet: 1. List the program, product, or service you currently offer. Be sure to include services like contracting, managing projects, screening and selecting vendors, preparing documents of understanding, training trainers, qualifying trainers, registering students, administering student files, producing and maintaining course materials, scheduling, and managing facilities and equipment. 2. List the customers for your products or services. 3. List the business driver behind each product or service. For example, is it mandated, connected with turnover, or required for certification? 4. Briefly describe how you deliver the product or service. For example, is it delivered one-on-one or in a classroom setting? Is it delivered electronically, or is it self-administered? Is it offered at a local college or outsourced to a vendor? 5. List the resources required to deliver it. Be specific about the number of people required and the amount of time they spend. For example, who does the work required to deliver the product or service? How much time do they spend doing it? Which and how many are qualified to do it? Once you have a picture of what it is you do and why, discuss these points with your colleagues or clients: · Whether it is appropriate to continue delivering this set of products or services. You might ask, for example, whether there is still a business driver behind each service or what the consequences would be if we stopped providing a certain service or committed less resources to it. · How you might reduce the amount of resources it takes to deliver your current set of products. For example, you might ask where there are opportunities to outsource or make better use of technology, whether the client could do this instead of doing it ourselves, and what the consequences would be if others did it. · Which of your current services you would not provide if you were in the business of performance consulting. · What services you would add if you were in the business of performance consulting. Include the things you wish you could do but do not now because you lack the skills, customer relationships, or resources to be successful. · How you would have to operate differently if you were performance consultants. · What internal support systems and processes you would want to add or improve so that you could be effective as a performance consultant. For example, can you track your costs now? Do you have a way to value your time? Do you have a formal process for doing needs assessment? If you get stuck because you are thinking about how you can offer new products and services instead of what you want to offer, consider how you might leverage your current set of products to support your transition to performance consulting. For example, you might ask which of your current products or services give you legitimate access to influential people, which ones allow you to develop the skills and confidence required to move more into consulting, or which ones give you access to critical information that a consultant should know. Create a new worksheet that lists the products and services you want to offer in the future. Include potential clients, the business drivers behind what you would like to offer, the resources that will be required, and whether you have those resources now. Depending on the number of programs or projects you are responsible for, you may want to fill out different worksheets for each program type (training, facilitation, consulting, services), each client, each different curriculum, or each delivery mechanism.  FIELD NOTES: ALIGNING PRODUCTS AND SERVICES Deborah was hired to be the new director of training at a national communications company. The company wanted her to change the focus of the training department from technical training to performance improvement. She started by learning more about her staff, what they did, and what their capabilities were. Next she met with key line managers from the field and found out what they expected of her and her people. She asked the staff directors at the home office staff what they wanted from her department. Learning what her field and home office customers wanted gave Deborah a lot of ideas about how her department could better contribute to the company. For example, she saw the need to adopt a more efficient delivery system; work with managers to reduce turnover; propose a more effective, targeted selection program; coach managers on how to support new employees better; and develop expert systems to accommodate regulatory changes more efficiently. To make these changes, she would have to find out what resources the department had and how it used them. Deborah and her staff decided to take a closer look at exactly what it is they did. Together they created a worksheet and recorded what they did; their customers, stakeholders, and sponsors; the drivers behind their services; how their services were delivered, and the amount of resources their services consumed. Figure 2.5 shows what they came up with. Figure 2.5 . Deborah’s Portfolio of Current Products and Services   It was clear from the exercise that Deborah’s trainers were consumed with supporting customer service training to new employees (note the resources devoted to the first two services). The few people who were left were dedicated to coaching managers, delivering technical training beyond what was covered in the program for new employees, and participating in corporate projects. Deborah and her staff then reviewed what their field customers wanted. They had learned that the managers at the call centers wanted more competent trainers, more sales training, shorter learning curves for new employees (it was taking them from four to five months to get up to speed), and a more efficient way to keep customer service representatives current on product changes, regulatory changes, and competitor information. Managers from home office functions like finance, IS, and quality assurance wanted reduced turnover (it was as high as 30 percent in some departments); help with message design, to reduce the risk of lost revenues and fines from giving inaccurate billing information to customers; an expert system that would reduce the time to train call center personnel; advice on designing procedures and help screens; and ways to get information to the front line faster, at less cost, and in a form that could be understood and readily accessed. Deborah and her staff then created a second worksheet. This time they listed the products and services they thought they must offer to get customers to accept them in the new role: · Developing tools clients could use to improve performance (such as a process for supporting sales, a model for coaching, standards for trainers, and a better hiring process) · Developing cost models that they and their clients could use to determine current costs and do cost-benefit analyses · Serving as subject matter experts in learning, performance, message design, electronic delivery systems, and expert systems · Administering and monitoring (through new technology) training registration, schedules, and learners’ course completion · Serving as team leaders for major corporate initiatives Figure 2.6 lists their new products and services. Figure 2.6 . Deborah’s New Products and Services Product Portfolio Worksheet 2 Product Portfolio Worksheet 2 is well suited for evaluating programs and services from Worksheet 1 that you want to examine in greater detail. Depending on how many different client groups or curricula there are, you may want to fill out different worksheets for each. The worksheet will help you: · Decide what programs or services still bring value · Identify what you can do to improve those programs or services or reduce the cost of providing them · Better manage the life cycle of your programs and services · Identify which programs or services are worthy of additional time or money for improvement Product Portfolio Worksheet 2 (Figure 2.4) has three parts. Part 1 lists some variables or factors to consider for each product or service you offer or plan to offer. This includes some of the same information in Worksheet 1. Part 2 has space for you and the other people who support your products or services to rate them based on their quality, cost, and other criteria. Part 3 lists measures used in evaluating the products or services, the resources they require, and comments from anyone involved. You can customize the first two parts to meet your needs. Part 1: Variables The first time you use the worksheet, be sure to record the appropriate information for each of the variables or factors listed (see the numbered list of questions at the bottom of the figure). Part 2: Ratings Use a Likert scale to rate the program or service according to those criteria. A Likert scale is a five-point scale used to rate something. What distinguishes it from other scales is that it allows people to give neutral or noncommittal ratings (by selecting the midpoint, or 3, on the scale). When you create the scale, be consistent as to which value is positive (the 1 or the 5); do not switch back and forth. Part 3: Evaluation and Resources Part 3 is about evaluation and resources. On it you can indicate: · How you evaluate each program now (for example, using Kirkpatrick’s levels 1, 2, 3, and 4, or some other method). Level 1 measures learner’s reactions to the program and how it was delivered. Level 2 measures how much people learned by testing them on the content of the program. Level 3 measures the degree people’s behavior on the job changed or the frequency with which they applied the information covered in a program. Level 4 measures the impact or results gained from people having attended a program. · The amount of resources you must commit to it (for example, equipment, space, administration, testing, setup, materials, instructors, and other qualified personnel) Part 3 also includes a space for general comments.  FIELD TECHNIQUES: EVALUATING THE WORTH OF WHAT YOU DO NOW Using Product Portfolio Worksheet 2, follow these steps to evaluate the worth of your current products or services: 1. Ask yourself what you want to know about what you do now. (Use your answer to come up with the variables you want to consider.) For example, do you want to know: · Which products or services consume the most resources? · Which products or services cost more to deliver than the value they generate? · Who your customers are for each product or service? · Whether you have exhausted the market for a given product or service? · If there are other customers for a product or service? · If your customers really value a certain product or service? · What percentage of your customers use each product or service? · What the driver was behind each product or service, whether that need has been met, and whether that product or service is the best way to meet that need? How to find out this information? 2. Based on your answers, create a worksheet and include a column for every variable. 3. Fill out the portfolio as best you can. Solicit input from customers where appropriate. Pay attention to what you do not know about a specific program or service, especially if you do not know how much it costs to deliver or support. 4. Ask others who are directly involved in supporting the service to rate it according to the variables you have selected. 5. Ask them to add any comments they want. 6. Once you have gathered the information, question the worth and value of each program and service. Look for indicators that the worth or value is less than it might be. For example, is it costly to deliver? Is the link to the organization unclear or weak? Is the number of cancellations and no-shows high? 7. Identify the products and services that would benefit from changing the delivery system, the number of offerings, when the product or service is offered, how it is offered, and so on. 8. Identify the products and services you can stop offering or outsource.  FIELD TECHNIQUES: FINDING A WILLING CLIENT You may find that you already offer many of the products or services listed in your new product portfolio. However, if there are some that you have not offered or lack experience with, think of a client who might be willing to give you that experience. This is what Kelly, who worked for the insurance company, did. You probably already have well-established relationships with your clients. If you do: 1. Select a client you think will be responsive to your assuming the new role of performance consultant. 2. Begin by explaining what you want to accomplish. 3. Explain why you think the client would benefit from your doing this or participating in some way. 4. Ask if there is an issue or problem the client would like to have a better understanding of. 5. Ask if there is an initiative, team, or problem where your skills in analysis, measurement, or facilitation would be of value. 6. Negotiate for your involvement. 7. Develop a charter for the assignment, and clarify what the deliverables might be. A charter describes what a group has been commissioned to do and by what date. 8. Identify or develop some measures for your performance and the deliverables. 9. If appropriate, develop a project plan, with a time line and milestones. 10. Fulfill the request. 11. Evaluate the results and how you went about completing the assignment. 12. Share the results with your own colleagues so that you can improve. Share them with other potential clients so that they can see the possible value to them of your products and services. USING THE PRODUCT PORTFOLIO WORKSHEETS WITH CLIENTS You can use the techniques described so far not only to help yourself be more effective in your practice but also to help your clients be more effective in what they do. The processes of defining what they are all about and how they do business, measuring their performance and that of their products or services, and so on are the same. For example, I use the operational definition to help my clients and their customers come to a shared understanding of their respective roles, responsibilities, and practices. The definition serves as a reality check for all concerned. It can help both you and your clients tell others who you think you are and what you are all about. Your customers can then judge whether this description is supported by your behavior and the results you produce. You can modify the product portfolio worksheets for use with your clients as you see fit. To use the worksheet with a client, follow a similar process as you would use for yourself. For example, help the client come up with a list of questions about its products and services, such as these: · Who are our customers? · Is this the business we want to be in? · Do our customers value these products and services? · What other products and services do our customers want? · Are we cost-effective and competitive? · What do we want on this list that would allow us to add even greater value to our organization?  FIELD TECHNIQUES: BUILDING YOUR PLAN To make the transition from what you do now to performance consulting: · Look at the elements of the plan. Identify the elements you want to act on, and give yourself a deadline to do so. Add other steps you think will help. How far along do you expect to be one year from now? What will you accept as evidence you are making progress? · Review the standards and measures in Figures 2.1 and 2.2. If you were to evaluate yourself against any of these criteria, where would you fall today? What do you have to do to begin exceeding your clients’ expectations? How might you use these measures to support your plan to move to performance consulting? How would you change these measures to better reflect your situation? How easy would it be to start using measures like these? · Look at the product portfolio worksheets (Figures 2.3 and 2.4). How might you modify these worksheets to capture the information you want about what you do now? How might you use the insights you gain from these worksheets to build a case for becoming a performance consultant? Are you currently offering services that you should not be or services that should be provided by someone else? What resources would be freed up if you were to change what you do and how you do it? The act of evaluating your current products and services, assessing their worth against some predefined criteria, and questioning the reason for them are the kinds of things a performance consultant does. If you don’t think so, review the list in Chapter One of the four things that distinguish performance consultants from other consultants. Congratulations! You are now on your way to becoming a performance consultant! SUMMARY It takes more than a name change to make the transition to performance consulting. You have to mold a plan, define measures of success, and develop the kinds of products and services a performance consultant offers. Most important, you have to start acting like a performance consultant. The easiest place to start is with yourself. In the process, you will increase your skills and better understand your new role. WHERE TO LEARN MORE Block, P. Flawless Consulting. San Francisco: Jossey-Bass/Pfeiffer, 1981. Block presumes consultants operate from a position of power whether that be based on expertise or position. Fuller, J. Managing Performance Improvement Projects. San Francisco: Jossey-Bass/Pfeiffer, 1997. Lippitt, G., and Lippitt, R. The Consulting Process in Action. (2nd ed.) San Francisco: Jossey-Bass/Pfeiffer, 1986. Ranshaw, J. 101 Tips for Marketing Your Services. Chicago, IL: hoosierjanebooks, 2005. This update of the 1995 edition includes tips for marketing on the Internet along with original tips for novice and seasoned consultants, and it has a new section on pricing. Reddy, W. B. Intervention Skills: Process Consultation for Small Groups and Teams. San Francisco: Jossey-Bass/Pfeiffer, 1994. This is a classic. Ukens, L. (ed.). What Smart Trainers Know. San Francisco: Jossey-Bass/Pfeiffer, 2001. This is a collection of tools that successful consultants  Chapter 3 Costs One of the most overlooked prerequisites of effective consulting is the ability to understand the economics behind poor performance. Unlike trainers, consultants must be able to qualify the costs of a client’s processes and practices as well as determine the cost benefits of their own recommendations. Here is what happens when neither the client nor the consultant understands costs and what drives them.  FIELD NOTES: COST OF SALES The vice president of finance at a large corporation confronted the vice president of sales over the rising costs of sales at their company. Until then, no one had ever talked about the cost of sales. Everyone knew the sales cycle: down in the first two quarters, up in the third quarter, and way up in the fourth quarter. The company didn’t launch its sales campaigns until the end of the third quarter, and it based its sales reps’ bonuses on their fourth-quarter sales. But sales reps were expected to entertain clients, take them to lunch, and travel to their offices all year long. The subject of cost of sales had never come up before. Sales reps were never even given any information about what it costs the company to make a sale. The vice president of sales turned to the director of training and demanded that he provide a workshop on territory management at the next regional sales meeting. He specified what the content should be and how the success of the program would be measured. But no one asked why he thought that poor territory management was the reason behind the “high” cost of sales. Because the training wasn’t budgeted, the director of training argued that the cost of the session should go in the budget for sales, not the budget for training. The circumstances described in the story did not emerge overnight. The company’s sales costs were driven by business practices that had been considered quite acceptable for years. Unlike Mark in Chapter One, who wondered how he could best improve the financial performance of his Midwest plant, the vice president of sales at this company seems uninterested in finding out which costs are high and by how much, if they are high for all sales staff or just a few, or even what the real problem is. The director of training seems interested only in not having the cost of the workshop show up in his budget. EXPERIENCES FROM THE FIELD: UNDERSTANDING COSTS When I speak on the subject of evaluation at national conferences, the questions I’m most frequently asked concern how to prove return on investment (ROI) and how to do Kirkpatrick’s level 4 evaluation (that is, how to prove that the training solved the business problem or improved performance). Just like performance consultants, clients often must struggle with how to estimate the value of a product or service or prove its worth. My experience is that trainers, HRD professionals, and consultants and their clients often face similar problems: they don’t understand how to value, or quantify, the problem they want to solve in economic terms, and they don’t have the systems in place to isolate costs and determine what causes them. These problems are compounded by the fact that people think they are supposed to know these things, as if this information were just hanging around waiting for someone to notice it. It’s not that easy. Here are some things I’ve learned that I’ve found very valuable when working with clients: · Organizations classify their costs depending on their unique needs; they don’t all do it in the same way. Furthermore, organizations vary significantly in their ability to isolate costs and identify what caused them. Find out exactly how your clients identify and classify their costs. · Not all costs are valued the same. Some are looked on less favorably than others (specifically, indirect, fixed costs). · Costs don’t just happen; they have a cause. The customers, business practices, processes, or people who cause them aren’t necessarily the ones charged with or held accountable for them. Find out what or who caused the cost you’re investigating, not just who gets blamed for it or is held responsible for reducing it. · Cost management is about managing the causes of costs. You have to manage the cause, or cost driver, to reduce, avoid, or eliminate the cost. · Most efforts to reduce costs don’t; they just shift the cost to someone else. Find out what the implications are on others before you claim your program reduces costs. · The cost to develop and launch a solution is not the same as the total cost of ownership or sustaining a change. Encourage discussions about the effort required to sustain an initiative over time. A simple example is the cost to keep training content current or administer multiple offerings in multiple formats in future years. The discussion should be about who will bear these costs and whether the organization is committed to funding the solution over the long term. · The cost of the infrastructure (facilities, systems, and equipment) required to actualize a solution is frequently assumed or undervalued, yet the long-term effectiveness depends on it. You should encourage discussions about what exists or will exist if it is necessary for the solution identified. How Organizations Classify Costs There are different types of costs, yet we often talk as if all costs are the same. There are some universal rules and guidelines for classifying costs, yet how an organization classifies specific costs depends on its unique needs. You need to understand how your organization or client classifies costs so that you can isolate which costs your services are expected to reduce and compare the cost of doing something with the cost of doing nothing. This information is key to being able to quantify a problem and justify recommendations for change. Organizations classify costs depending on the type of business they are in and what they want to do with the information. For example, they typically start by distinguishing product or service costs from the cost of selling the product or service, the cost of support services, and management costs (that is, the costs of running the business; see Figure 3.1). Figure 3.1 . Major Cost Classifications Organizations further classify their costs within each of these major categories. The headings or labels under which a company or business unit classifies costs usually represent its larger cost components. For example, service organizations almost always distinguish salaries from overhead. Capital-intensive businesses almost always separate out depreciation costs. Manufacturers separate the cost of making their products from the costs of selling, servicing, warehousing, and shipping them and the costs of managing the business (see Figure 3.2). Figure 3.2 . Manufacturers’ Major Cost Components Organizations pay attention to the costs that affect profits, pricing, and bonuses. For example, manufacturers pay attention to the cost of these components: · The raw materials used to make their products, because raw materials are frequently the largest part of a product’s cost. Manufacturers want to know when the cost of raw materials changes and what causes the change, as this cost directly affects their ability to price products competitively and make a profit. They also pay attention to whether the raw materials add hidden costs because they require extra handling. · Processing or assembling the raw materials (specifically, the costs of labor, equipment, materials, tooling, and testing). Labor can be a significant part of a product’s cost; therefore, companies pay attention to how much they are paying employees. Poorly scheduled or untrained people can add unnecessary costs. · Their plants and facilities (specifically, the cost to acquire, operate, and maintain them, including depreciation, utilities, insurance, and taxes). Because facility costs are significant, companies pay close attention to what percentage of their facilities is dedicated to producing products. Underused space can increase the overall cost of a company’s products and services, forcing an increase in its prices or a lower profit margin. · Warehousing and shipping the product (specifically, labor, depreciation, fuel, utilities, insurance, taxes, pallets, and refrigeration). These costs, too, get added to the price or reduce the profit margin. All companies are particularly concerned with the cost of sales and the cost of service. Figure 3.3 shows what is typically thought of as the cost of sales, and Figure 3.4 shows the items that usually make up the cost of service. Your clients may include other or different costs, however. Figure 3.3 . Cost of Sales Figure 3.4 . Cost of Services Determining the cost of running the business (see Figure 3.5) is more complex, because what is included depends on the type of organization and its reason for tracking some costs and not others. Figure 3.5 . Cost of Running the Business How Organizations Value Costs Businesses do not treat all costs the same. They look on some costs more favorably than others. The kinds of costs most look on more favorably are those that are easier to isolate, control, or pass on to customers; these are generally incurred in direct proportion to the amount of business being done. The kinds of costs that businesses look on less favorably are those that are harder to isolate, control, and pass on; these are usually incurred independently of the amount of sales. Rule No.1: Find out how your clients classify their costs and how they distinguish direct costs from indirect costs. Organizations pay attention to: · Direct and indirect costs. Direct costs are easier to isolate and can be linked (and charged) to a specific customer, product, or service. For example, the cost of raw materials, fuel for delivery trucks, and technicians who make service calls are all direct costs. Indirect costs, frequently referred to as overhead, are harder to isolate and link to a specific customer or product; therefore, they are spread across products and customers. Indirect costs include sales, marketing, management, human resources, and administration. · Variable and fixed costs. Variable costs fluctuate based on the volume of work being done (raw materials costs are variable, for example); therefore, they are somewhat controllable. Fixed costs, such as depreciation, do not fluctuate and are thus less controllable. Some costs are partially fixed and partially variable. The cost of electricity is an example: companies use electric power all of the time (the fixed portion), but they use more power when production lines are up and running (the variable portion). The Relationship Between Direct, Indirect, Variable, and Fixed Costs Most direct costs are variable costs—for example, the cost of raw materials and the cost of production labor (regular and overtime wages and benefits). You can attribute these costs to a specific product or service, and you most likely incur them when you have business (you don’t buy raw materials without customer orders, and you can lay workers off when business is down). There are a few direct costs that are fixed. Consider depreciation on the equipment used to manufacture products. You can attribute the cost of the equipment to the product it produces (making it a direct cost), but you still have the cost (depreciation) whether the equipment is running or not (making it a fixed cost). Most indirect costs are also fixed costs, because companies continue to incur them regardless of the amount of sales or production. Changes in the volume of work have minimal effect on them. When organizations want to cut costs, they usually start by looking at their fixed indirect costs, which include management salaries and benefits and perhaps facility costs for management offices, and overhead, or general and administrative (G&A) costs. G&A costs include administrative costs; insurance costs; real estate taxes; the cost of licenses; interest expense; rent and leasing costs; the cost of heat and other utilities; depreciation and amortization of assets not easily linked to specific products, services, or customers; marketing and advertising costs; research and development (R&D) costs; training and HR costs; and accounting and legal costs. (Administration, marketing and advertising, R&D, training and HR, and accounting and legal costs include costs for salaries and benefits, facility use by the specific function, and depreciation on equipment used by the specific function.) Figure 3.6 briefly defines and provides examples of variable direct costs, fixed direct costs, and fixed indirect costs. Figure 3.6 . Examples of Costs Depreciation is a reduction in the value of producing a fixed asset because of wear and tear from normal use. Examples of assets that are depreciated are facilities (buildings) and capital goods (equipment and vehicles). Companies with high depreciation costs (like manufacturers) are more capital intensive. Amortization is the gradual reduction in the book value of a non-producing asset that has a limited life. The original cost is spread over the life of the asset. Examples of assets that are amortized are patents, copyrights, and franchises. What Businesses Include in the Price of a Product or Service The price of a product or service includes its direct costs, plus some portion of the business’s indirect costs, plus some margin for profit (see Figure 3.7). Organizations strive to reduce their costs so that they can maintain or lower their prices (to become more competitive) without reducing their profit margin. Figure 3.7 . Components of Price Rule No. 2: Find out how your organization, department, or client classifies its costs. Find out what costs, if any, are considered direct and what costs are considered indirect. Whether you as a performance consultant are a direct or indirect cost, find out how your time, space, and equipment are valued and thus allocated, or spread.  FIELD TECHNIQUES: LEARNING HOW YOUR ORGANIZATION CLASSIFIES COSTS I’ve presented a simple explanation of costs, but it’s enough for you to begin to have a conversation with your client’s or organization’s finance department. You have to find out how your client or organization classifies costs, why it uses that method, and how well it can isolate its costs. Here is a technique for doing so: 1. Meet with someone in the accounting or finance department and ask how the organization classifies costs. 2. If your client or organization uses broad categories like overhead, management, G&A, and so on, ask what costs go into each category and who makes those decisions. 3. Ask which costs are considered direct and which are considered indirect. 4. Ask which costs are fixed (less controllable) and which are variable (controllable). 5. Ask which costs are the larger cost components. 6. Ask how changes in business volume affect costs and which costs are most affected. 7. Ask how the organization recovers its fixed costs when volume or business is down. 8. If the organization is capital intensive, ask how it allocates and recovers depreciation when volume or business is down. 9. Ask which costs the company attributes to you or your department (salaries, facilities, equipment, and so on) and how it classifies them. If some of your costs are direct, ask which products, services, or customers they are linked to. If some or all of your costs are considered indirect, ask on what basis they are spread across customers, lines of business, or products (that is, equally in proportion to usage).  FIELD TOOLS: VALUING TIME Sometimes consultants and clients do not know how to value their time. Thus, even if they are able to eliminate activities or become more efficient, they don’t know how to assign a value to the time they have saved. Figure 3.8 provides a worksheet for figuring out how much your time and your client’s time is worth.   Figure 3.8 . A Formula for Valuing Time  FIELD NOTES: SPREADING FIXED COSTS Jennifer headed the word processing group in her company’s shared services department. Her group’s costs (salaries, benefits, depreciation of equipment, materials, travel, and space) were treated as fixed indirect costs, classified as overhead, and spread evenly across the seven departments she served. Jennifer decided to find out how much time her group spent working for each department and the nature of the work they performed for each customer. She compiled work records for eight months. She discovered that 33 percent of her work was done for the company’s U.S. product managers, 33 percent for the remaining five departments, and 34 percent for her own department. She also looked at the average number of pages word-processed for each customer group and the extent of the revisions they required. She recommended that the company no longer spread her group’s costs evenly but instead spread them in proportion to each department’s use of their services. Spreading the costs evenly had given the U.S. product managers and the other departments a distorted picture of their true costs. COST MANAGEMENT Cost management is about taking direct action to reduce, avoid, or eliminate costs. The term cost management is actually somewhat misleading. What you manage is not costs but what causes those costs (this is similar to time management, where you manage what you do with your time, not the time itself). Rule No. 3: Find out what drives, or causes, your costs. Here is what causes costs: · Companies engage in activities to create products and deliver services. · Those activities consume resources (time, materials, space, and equipment), and resources cost money. Activities are directed by a product or service’s requirements, the processes used to create the product or provide the service, customers’ requirements, and business practices. By linking resources to an activity, then to the product or service, and eventually to the requirement, process, customer, or practice, you can trace the true source of the product’s or service’s costs. By identifying what drives unnecessary activity (such as an unnecessary requirement of the product or the customer, a poorly designed or executed work process, or poor employee performance), you can find ways to eliminate or reduce the amount of activity and reduce costs. Thus, you can reduce costs by eliminating activities or reducing the amount of resources they consume. Rule No. 4: Look for hidden costs. Hidden costs is the term I use for costs an organization either does not or cannot isolate because they fall outside the system for isolating and tracking costs. Such costs frequently get shifted between groups: the group that gets charged with a cost may not be the group that created it. For example, when sales reps fail to get complete or accurate information about new accounts, the cost of getting that information is shifted to someone else, like accounting or customer service. The failure to get complete or accurate information in the first place increases the cost of sales, but that portion of the cost is hidden or buried in overhead because it shifted to accounting or customer service. This is why Jennifer wanted to track her department’s activities to specific customers. She wanted to know which customers drove her activities and thus her costs. She discovered that five of her customers were paying more than their fair share and two were getting off easy. UNNECESSARY COST DRIVERS You and your clients have unnecessary costs when: · Product or service requirements are excessive. · Processes are not well designed. · The customer’s requirements are not fully understood, and this results in doing more work than required (rework) or doing work the customer doesn’t value. · The information, equipment, space, and tools to do the job are insufficient or inappropriate. · Employees lack the necessary skills. · People’s behaviors force others to incur costs (that is, they shift costs to others). · Jobs or tasks could be done with less costly resources, such as through automation or outsourcing. · Management does not provide adequate direction, resulting in unnecessary activity. Rule No. 5: To manage costs, you must identify and isolate them, find out what they are made up of, and determine what causes them. Once you know what causes a cost, you can change the requirements (product, service, or customer), improve your processes, or eliminate practices that shift it around.  FIELD TOOLS: ISOLATING AND MANAGING COSTS Organizations use a number of tools to isolate costs and find out what drives them: · Activity-based costing systems. Not all accounting systems are designed to help manage costs. In fact, most accounting systems are designed only to report costs. Activity-based costing is an accounting system specifically designed to identify costs and support cost management. · Statistical process control (SPC). SPC identifies variance within products, pinpoints what causes it, and suggests ways to improve processes to eliminate all predictable causes of variance. (Variance is the degree to which individual products deviate from a standard. It results in rework, which adds unnecessary costs.) SPC identifies causes of variance: poor employee performance; bad process design; deficient equipment, tools, or materials; inaccurate or incomplete information; and others. SPC helps you focus on how you can reduce variance and not just shift costs to other parts of the company. · Process mapping and analysis. Clients do this to identify and describe all the elements that go into a process (that is, to make the process visible) so that they can identify which elements are unnecessary or contribute to excess costs.  FIELD TECHNIQUES: FINDING COST When you meet with your client’s or organization’s finance or other managers, ask them: · How they track costs · Which cost management techniques they use, why they use them, and how effective they are · Which costs they want to manage (direct, indirect, fixed, or variable) When your clients talk about wanting to reduce costs, ask them: · Which costs they want to reduce and what systems they have in place to determine what those costs are now · If they can effectively isolate costs (product requirements, customer requirements, inefficient processes, poor people performance, and so on) · What departments, work groups, or individuals are doing now that increases indirect or fixed costs  FIELD NOTES: REDUCING THE COST OF NONCOMPLIANCE Deborah’s boss sent her a memo that said her department had to reduce the cost of noncompliance by 35 percent by the end of the year. The first thing Deborah did was meet with her boss and the head of finance to get clarification. She wanted to know: · Whose costs she was expected to reduce. (It turned out to be customer service and field sales.) · What this would mean in dollar terms. (She had to cut out $5 million.) · How the cost of noncompliance was currently calculated. (It was an arbitrary process. The vice president of finance and her boss had added the direct costs [salary] and indirect costs [percentage of overhead] of the customer service reps and field sales reps together and guessed that there was 35 percent waste in the system.) · What the causes of noncompliance were. (They weren’t sure, but assumed it was because people didn’t know how to do certain aspects of their job.) One of Deborah’s first tasks was to get management to better define noncompliance, identify whose noncompliance they were concerned about, specify who would bear the cost of reducing it (the perpetrator or someone else), and what they would take as evidence of improvement. She was told to focus on noncompliance in the call centers and among the customer service reps (CSRs) in particular. The cost of the CSRs was classified as overhead and considered a fixed indirect cost. The customer service centers’ costs were spread across all the products and markets. However, a small portion of their cost was considered part of the cost of sales (for example, when the CSRs took customer orders). This part was direct (it could be attributed to a specific product or service) and variable (it was driven by the number of customers who called wanting to buy). However, no one had tracked what portion of the CSRs’ time was spent taking sales orders and what percentage was spent answering service calls. Deborah began by finding out what percentage of the CSRs’ time was spent resolving customer complaints, correcting billing errors, checking the status of shipments, and other mistakes caused by breakdowns in other departments. The source of this type of noncompliance was not the CSRs. She also wanted to know the percentage of time that CSRs spent on callbacks because a problem had not been resolved the first time; this represented noncompliance by the CSRs. Once she knew the scope of the problem, she could place a value on it and find out the root cause. IMPROVING PROCESSES AND PRACTICES TO REDUCE COSTS Poorly designed (or poorly executed) processes add unnecessary costs. Processes include all the activities, decisions, and resources (equipment, information, time, money, and people) used to take an input (for example, a customer request, a course evaluation, a new training requirement), add value to that input by changing it in some way (engage activities that transform the request into a new product or more useful information), and produce an output a customer wants (a training course, a report with recommendations, or modified materials, for example). Processes vary in size and scope. There are processes within and across departments and functions. Some are considered primary because they are linked to the core business. Examples are receiving, producing, marketing, selling, servicing, and distributing products and services. Other processes are considered secondary because they are performed by departments that are considered part of overhead. Examples are purchasing, HR management and development, and information systems management. Rule No. 6: Understand business processes and practices. Business practices are a business’s regular way of operating. One could argue they are simply part of the business’s processes; however, I consider them separately as practices because they consume excess resources. Poorly designed practices shift costs to other parts of the organization or result in hidden costs. MANAGING COSTS IN PERFORMANCE CONSULTING Before you can help clients manage their costs, you have to understand your own costs and manage them. One way to do this is by describing, evaluating, and improving your processes and practices. When you describe a process, you identify all the activities, decisions, and resources that make up the process. You also find out what drives the process, that is, whether it is performed in response to a customer requirement, a program requirement, or a business requirement. The description communicates what is done and in what order, which resources each activity consumes, and how time is spent. There are different ways to describe a process, but all should capture the following information: · The activities that occur · The resources consumed by each activity · The activities’ relationships to one another (that is, which are done sequentially and which are done concurrently) Once you have described a process you will be in a better position to question: · What the process does, how it does it, and why it does it · What information the process uses and where that information comes from · What information the product produces and who uses it · What technology the process uses, what resources that technology requires, and the cost of those resources A process or practice adds unnecessary costs if it uses too many resources, uses resources that cost too much, or produces products or services that do not meet customer expectations. To improve a process, you must first make it visible; this means you should describe or map it. Then you will be in a position to identify the resources consumed and their cost. You will also be in a better position to identify where and how activities or tasks shift costs to other processes, departments, or suppliers.  FIELD TOOLS: PROCESS OR TASK PERFORMANCE WORKSHEET Use Figure 3.9 to help you evaluate your own processes or tasks. Like the product portfolio worksheets in Chapter Two, this worksheet is meant for you to customize so that it will capture the information you currently do and do not have about what you do and how you do it. Figure 3.9 . Process or Task Performance Worksheet The worksheet will help you determine which processes or tasks you need to formalize so that you can determine if and how they add unnecessary costs. The worksheet drives discussions about: · How well defined your processes or tasks are · How well you measure the costs of your processes or tasks · How many resources your processes or tasks consume · Which resources or costs add unnecessary costs · The value added (or not added) by doing what you do in the way that you do it · How you will measure any improvements you make  FIELD TECHNIQUES: IMPROVING YOUR PROCESSES AND TASKS Create a process or task worksheet of your own, or modify the one in Figure 3.9 to fit your own business. Then follow these steps to complete it: 1. List your processes or tasks. Meet with the people you work with. Together list the processes and tasks you would like to better understand in terms of time, resource costs, output, and value. Look at the product portfolio worksheets from Chapter Two to get ideas about what you do and for whom you do it. For example, some services are processes themselves, and other services require intake procedures to identify the customer’s requirements. All of your services should have a process for evaluating customer satisfaction and your effectiveness. To help you get started, think about how you: · Identify customer needs · Scope out customer requests · Select contractors and vendors · Develop and maintain training courses · Register and administer people who attend your programs · Manage and maintain facilities (meeting rooms, classrooms, computer systems, and so on) · Train and develop your own staff · Evaluate your products and services 2. Identify their drivers or customers. Why are these processes or tasks required? Whose needs are they meeting? You may want to revisit Product Portfolio Worksheet 1, where you listed what you do and for whom you do it. 3. Identify the resources they require. Again, look at what you wrote in Product Portfolio Worksheet 1. Ask how many people (employees or contractors) are engaged in each process. Ask what percentage of their time they dedicate to these activities. 4. Determine their costs. Put a value on the resources you identified in step 3. What are your direct costs for each process or task? 5. Rate them. Set some standards or expectations for your processes or task management—for example: how well you describe or document the tasks or processes, how well you understand what and how many resources they consume, how well people use them, or how easy they are to use. 6. Identify opportunities for improvement. Focus your attention on those processes and tasks for which you can identify ways to reduce costs, once you understand them better.  FIELD NOTES: REDUCING FIXED AND HIDDEN COSTS Linda, the director of training and performance improvement at her company, was concerned that so much of her staff’s time was spent marketing training programs instead of consulting on performance improvement initiatives. One day she decided to examine what drove her department to stay in training (selling instructor-led workshops) instead of moving more into performance improvement. She looked at her budget with this question in mind. The company evaluated Linda’s performance based on her ability to recover her costs. Most of her costs were in facilities. Her department owned six buildings, all of which had classrooms set up especially for instructor-led courses. Linda suddenly realized that she was in the real estate business, not the performance improvement business. She was selling classrooms to cover a fixed cost. With this realization, she put all six buildings on the market, sold them, and leased classroom space as needed. She changed her fixed cost for classroom space to a variable one. She also got out of the real estate business, which allowed her to direct her staff’s efforts toward performance improvement. Kelly hired contractors to deliver training to field offices. One day she was looking at her instructor costs (variable direct costs charged to specific programs) and noticed that all of her instructors charged essentially the same fee. All had also received similar evaluations from students. On the surface, it looked as if each instructor added the same amount of cost to deliver a course. When she discussed the instructors with her administrative assistant, however, she discovered that one instructor was difficult to support. This instructor always lost materials, requiring second shipments. She wouldn’t set up the classroom, which meant a local administrative person had to come in early to do this work. She wouldn’t check out the computers, overhead projects, or any other equipment, so a technician had to be on call during her classes. She didn’t have her classes break or go to lunch on schedule, which caused traffic jams in the cafeteria and made students in other courses late in getting back to class. Kelly realized that her direct costs per instructor may have been the same, but her indirect costs were not. This instructor was actually much more expensive than the others, and her higher cost was being borne by others in the company. Kelly decided to rethink her evaluation of this instructor. When Russ’s manager asked him to reduce his operating budget for the coming year, Russ turned to his two largest fixed costs: salaries for full-time staff and depreciation on medical equipment purchased for use during training. He asked that all staff track their time for a month and note what they were doing and who they were doing it for. He discovered that three administrative staff members spent approximately 60 percent of their time rescheduling people for classes, including no-shows (people who didn’t show up for training and later called to get in another class). Russ thought their time could be better spent on activities that added value. He documented the cost of rescheduling students and went to his supervisor with a recommendation on how to reduce this cost. The departments of the no-shows suffered no financial consequences for their behavior, but it increased Russ’s costs significantly. Russ wanted this cost to be borne by the offending students’ departments, not his. Next, Russ looked at depreciation. The company’s business policy stated that when a department used a product the company made, that department had to purchase the product. Therefore, Russ’s technical training group had to buy the equipment it used to train field technicians to install and repair equipment. Some of this training equipment cost over $1 million. Russ couldn’t resell the training equipment because he had to be able to train technicians on all models of equipment. The cost of delivering technical training was charged to the field service department; however, this did not include any costs associated with the training equipment. Russ went to his finance department to discuss the implications of leasing the equipment instead of buying it.  FIELD TECHNIQUES: HELPING CLIENTS IMPROVE THEIR PROCESSES If you participate on a process improvement team as part of your performance consulting services, here are some ways you can add value to the team’s activities: · Facilitate the mapping or describing of processes. Be sure to help the client identify all the activities involved and assign a value to them. Then clarify how costs are classified and assigned (to a department, product, service, customer, or spread among these). · Facilitate discussions about which activities add value and which ones do not. Identify which activities should be eliminated because they are redundant or unnecessary, consume too many resources or unnecessary ones, or cause other processes to engage in activities that do not add value. · Help the client identify where it can use fewer or less-costly resources and still achieve the same or better outcomes. · Work with the client to identify where any false economies might exist because current processes or business practices shift costs to other processes or departments. · Ask if there are any policies, standards, or requirements that result in activities or the use of resources that do not add value, add unnecessary costs, or shift costs. · Ask about the technology used by each process and whether it results in non-value-added activities or the use of unnecessary or too-costly resources. Once you and your client have identified what drives the cost of the client’s processes, you can decide whether to redesign them or better manage their cost drivers. SUMMARY Performance consultants must understand costs, what drives them, and how they become hidden or shift around. Unnecessary costs are the result of poor people performance, poorly designed processes, misunderstood customer requirements, and non-value-adding business requirements. Besides helping your clients, understanding costs will also put you in a better position to define your own costs and prove that your activities add value. If the training director in the story at the beginning of this chapter had better understood costs, he could have helped the vice president of sales isolate the company’s sales costs, identify their causes, and develop a plan to eliminate or reduce them. If the vice president of sales had better understood how to make managing the cost of sales an integral part of his job (and thus a criterion for judging his performance), he could have avoided his confrontation with the vice president of finance. WHERE TO LEARN MORE Since the first edition of this book came out, a fair amount has been written about how to evaluate the impact of specific interventions, training in particular. Here are two books with practical tools: Hale, J. Performance-Based Evaluation: How to Measure the Impact of Training. San Francisco: Jossey-Bass/Pfeiffer, 2002. This book contains over forty-four tools on a CD-ROM that include how to measure the transfer and impact of soft and hard skills, how to determine appropriate sample size, and how to analyze and interpret qualitative and quantitative data. Seagrave, T. Quick Show Me Your Value: A Trainer’s Guide to Communicating Value: Connecting Training and Performance to the Bottom Line. Alexandria, Va.: ASTD Press, 2001. The book comes with a CD with ready-to-use templates. The following books explore how organizations think of costs and business economics. Although some of them were published more than a decade ago, they remain relevant, and all are very readable. Cokins, G., Stratton, A., and Helbling, J. An ABC Manager’s Primer Straight Talk on Activity-Based Costing. Montvale, N.J.: Institute of Management Accountants, 1992. Highly recommended as readable and useful. Cooke, R. 36-Hour Course in Finance for Nonfinancial Managers. New York: Mc-Graw-Hill, 1993. Highly recommended by my clients, who find the ideas informative and useful. Gill, J. Understanding Financial Statements, and Financial Analysis: The Next Step. Menlo Park, Calif.: Crisp Publications, 1990. A practical book about the fundamentals of understanding financial reports. Hawkins, P. The Ecology of Commerce. New York: HarperCollins, 1993. Chapter Nine, on the opportunity of insignificance, brings to life how, in our efforts to reduce costs, we only shift costs and burden others. Levitt, S. D., and Dubner, S. J. Freakeconomics: A Rogue Economist Explores the Hidden Side of Everything. New York: Morrow, 2005. A counterculture look at economics. O’Guin, M. The Complete Guide to Activity Based Costing. Upper Saddle River, N.J.: Prentice Hall, 1991. One of the better books on cost management and very readable. It is particularly useful to help clients understand when they are shifting costs rather than reducing them. Stack, J. The Great Game of Business: Unlocking the Power and Profitability of Open-Book Management. New York: Doubleday, 1992. An insightful book about business economics and how an educated workforce can avoid, reduce, or eliminate costs. Stalk, G., and Hout, T. Competing Against Time. New York: Free Press, 1990. Provides excellent examples of reengineering and process redesign. Be sure to check the rules on pages 76 and 77.