Next Practices – A Need and a Method to Move Beyond the Status Quo

Early June is typically a time of reflection and analysis of what worked and what did not in terms of your strategy and execution. Many of our clients are now planning their Fall 2016 strategy retreats and/or team development sessions. A word of caution- in today’s markets of light speed change, yesterday’s tactics to running a business or applying outdated management techniques to contemporary problems will quickly make you vulnerable. In this “Uberized” economy, moving beyond the status quo has never been more important. For those reasons, we’ve continued to put a focus on the concept and methods that represent “next practices”.

Next Practice development isn’t necessarily about making something more efficient – it entails a fundamental transformation of the core business culture and mindset to ensure that all the moving parts of a business are aligned and effective.

Some of the key elements necessary to understand and build Next Practices are:

Best practices are past driven – repetitive formulas for tactical business problems. (By the way, they’ll often get you to the same level of mediocrity as your competition.)

Next practices are future-driven strategic solutions that enable you to better anticipate, plan and respond to changing market and internal needs.

Here is the framework, and in our subsequent articles and live C-suite forums we will continue to showcase individuals and companies who are reaping the benefits of this thinking:

The Need: Every organization needs to get past legacy thinking in order to create transformation and change that will enable it to effectively respond to challenges and obstacles to its growth. “This is the way we have always done it” remains the biggest obstacle to real breakthroughs.

Beyond Best Practices: Conventional Best Practices tend to be proven, locked down business techniques that can be re-executed successfully on demand at the middle management level. There are few such “Best Practices” for C-level executives who face a constant flow of new challenges, unforeseen problems and marketplace conditions beyond the reach of conventional thinking.

Business Intelligence: A Next Practices approach offers flexible tools, frameworks and situational analysis methods that enable executives to get a clear view of the current situations they face and frame intelligent responses to it. Seeing the unseen and often “covert” trends is the objective.

Moving Parts: This approach includes policies, practices, behavior models and performance techniques, used in combination with highly collaborative and cross-functional communication between people. Taken as a whole, this approach enables leaders to be exponentially more effective in directing change.

Metrics: Next Practice methods are designed to be measurable so that their effectiveness can be understood and assessed.

Cross-Functional Focus: Next Practice thinking requires a cross-functional focus in which problems are addressed by stakeholders from all areas related to a given topic or problem area. The Next Practice philosophy considers it essential to have people of different perspectives working on a challenge simultaneously, in a holistic way, to effectively and successfully arrive at a solution.

Collaboration is Key: Next Practices assume a high level of collaboration between stakeholders at all levels – from senior executives to management to staff – in working on any business initiative or challenge. Power derives from the diversity of ideas and collaboration around those ideas- and, the ability to converge and act on those ideas in a market timely fashion.

Strategic Planning with your team should not be an annual event. We look not only to build a strategy that is adaptable, but also build the internal capability of the team to recognize emerging trends in customer preferences, market dynamics, technology enablers, and eliminate non-value added activity.

Our business advisory group, Nextworks Strategy( www.nextworksstrategy.com), supports the ENP Forums, which is comprised of hundreds of top executives and thought leaders has for several years been focused on the concept of “next practices”. Join us there to explore this new approach at one of the meeting or other keynote events where we will be speaking- please refer to the links www.enpinstitute.com/events or http://scotthamiltonnext.com/speaking/

 

Contact the author at scott@scotthamiltonnext.com or 888.857.9722

Boards, Don’t Obsess Over Shareholder Value

Directors need to focus on building a great business
By Scott Hamilton and Larry Cabaldon

Scott Hamilton is the CEO of the Executive Next Practices Institute (ENP) and Larry Cabaldon is the CEO of the boardroom performance group and the board practice leader for ENPI.

Many directors have been CEOs or significant investors, so they know company value is really what creates shareholder value. They enjoy the accomplishment of building the enterprise, not just complying with the law or getting more fees or stock. Therefore, most would prefer to move from the compliance board model to the value-creating model.

But the transition between these two oversight models can be more complicated than many directors realize, as certain habits of the traditional “compliance board” model can be hard to break.

To evolve successfully, directors must participate in developing the criteria for value creation. They must also examine new ways of generating growth and efficiencies throughout their businesses, and to encourage management to achieve alignment between departments. Half of effective transitioning will come from taking assertive, proactive measures, and the other half will come from avoiding unproductive behavior that is tied to the past. Below are the dos and don’ts that are crucial to making the move from the “compliance board” to the value-generating board.

Don’t Overemphasize Corporate Governance

In the post-Sarbanes-Oxley Act environment, directors have been conditioned by regulators, accountants and lawyers to focus on governance. Board members attend seminars, briefings and risk conferences and subscribe to various publications, all stressing the need for more board governance oversight. Internally, the nominating and governance, risk, audit and compensation committees have become the board watchdogs for good governance. But despite all the “improved governance,” we still experienced a severe financial meltdown.

Directors must ask if they are doing the right things to create value, or just robotically following governance rules and responding to outside pressures.

Don’t Buy Into the Myth of Shareholder Value

In her book The Shareholder Value Myth, Cornell University professor Lynn Stout provides compelling arguments against obsessing over shareholder value. A director’s main duty is to the corporation, not shareholders, she argues. Most compelling is her thesis that, despite all the focus on shareholder value, shareholder value has not been enhanced.

Overall, most directors can do a better job of avoiding the distractions that come from focusing on shareholder value at the expense of other priorities, such as reinvesting in businesses and penetrating new markets.

Directors Must Define Value Creation

Too many companies focus on financial engineering and manipulation, not building great products. In contrast, Steve Jobs knew Apple needed to produce new products that could change the world. He ignored the stock price as his main objective because he knew great products would create company — and, eventually, shareholder — value.

Board members must understand what it takes to build a valuable company. It takes new products, talent, strategy, motivation of employees and a high-performance culture. Directors who are focused on these goals and can properly define them will build business for the future. Boards must ultimately step up and recapture the satisfaction of actually building something great, not just creating market value.

Build a Culture of High Performance

Technology company boards will usually have CEOs from the technology industry, former senior executives and board advisors, who understand the industry and have proven track records of success. They are careful not to overpower the CEO, but know when to offer advice and make changes. Hewlett-Packard’s board struggled with the changes an inaptness of its CEOs over the last few years. However, these same directors understood HP’s culture, where it had been and where it needed to go. This is an example of a value-creating board, not a compliance board.

Indeed, all directors should take a closer look at their board composition, strategic oversight processes, succession planning efforts and CEO evaluations and ensure they are in line with larger value-creation goals.