Firms, and the managers within them, are always looking for that next source of advantage over the competition, while at the same time struggling to address current internal inefficiencies, conflicts, and performance issues. Having one foot in the present to address the issues of the day, while planning and preparing for a successful future, is a constant dilemma facing today's manager.
Historically, transparency has been seen more as an ethics practice for third party analysis of an institution's finances and practices; however, the more widespread study of business ethics and organizational behavior is pointing to operational transparency as a management practice that can both address those daily management issues, and also become an internal source of sustainable competitive advantage that is difficult for competitors to imitate.
This article will explore the concept of operational transparency and suggest management practices in the areas of strategy development and implementation, decision-making, and performance management to achieve transparency, improve performance. and create a source of sustainable competitive advantage.
Operational Transparency - A Business Ethics Path to Competitive Advantage
Transparency
Transparency is a trust building mechanism generally used to "open up" the books or practices of an organization to stakeholders with a "right to know". Much has been written about transparency in public companies and governments, but even with the importance of trust in all business transactions and relationships, little is published about how to use this trust building mechanism to improve organizational performance at the operational level. When employees know the true how and why behind organizational strategy, decision-making, and performance management, they generally feel more trust toward the management of their organization and thus can become more committed and engaged in their work.
Although fear of strategic information falling into competitors' hands from internal sources can limit the potential for complete transparency, strategic sharing and coordination of key internal operating information can create trust in the system and a knowledge of how each player contributes and is impacted by the system. The creation and requirement for transparency and sharing of information in strategy, decision-making and performance management establishes an environment where goals, and the resources and behaviors used to achieve them, can be aligned for greater cooperation and performance.
Transparency in Strategy
Drawing from the resource-based view of strategy (See Barney 1991) and the concept of strategic leadership (See Ireland & Hitt, 2001), managers can build a competitive advantage by doing a better job of choosing between competing alternatives and aligning internal resources than their competitors. At a high level this breaks down to openly communicating and aligning organizational priorities, visibility to functional area contributions to those priorities to those who need to know, and a visible connection between each employee's work activities and those organizational priorities.
However, this is not solely an executive concern, but instead, each manager and employee is critical to this strategy's success, and it can be implemented solely at the functional or team level in the absence of organizational support. However, when each manager and employee understands the organization's priorities and has specific information about how they contribute to them, and those contributions are directly aligned with related contributions firms, can achieve improved teamwork and performance.
Transparency in strategy can be achieved at any time, but the best starting point is during the annual planning and budget creation cycle, specifically when executives and managers are submitting goals to be eligible for quarterly bonuses. All too often, this critical time passes with a rush of activity, but little sharing of information or coordination from above or among functional area managers. The worst case result is a broad range of unrelated or conflicting goals that do not reflect the organization's stated or unstated priorities.
A best case scenario would have executives outlining the key priorities and performance objectives as a team, and then negotiating each functional area's contributions to those outcomes. Critical to the success of this negotiation is single ownership of goals and firm commitments from each manager about the inputs they will provide to the others as a result. A general example of this would be an organizational priority of increasing sales by 20%, a sales goal of 1000 units per month, and operations committing to processing the requisite number of sales files to a set standard each month. The same process is followed for projects falling outside the core business operations, and these commitments become the foundation for bonus goals and budgets. This information is then becomes the strategic operations plan shared across the organization to those who "need to know", and becomes the core performance management and accountability agenda for regular (weekly/monthly) management, team, and employee meetings and a key measure for evaluating alternatives in the decision-making process..
Transparency in Decision-making and Change Management
The visible outcomes of decision-making at all levels are very telling about the firm's and individual managers' values and priorities. Although not all strategic decisions can be played out in a public forum for competitive and confidentiality reasons, the outcomes of those decisions (changes to organizational structure, design, resource allocation, product direction etc.) should be communicated as thoroughly as possible including the rationale and criteria behind the decision to help employees understand the decision and make a better connection between the firm's espoused values and those used to make important decisions. Additionally, those decisions related to changes to organizational policy, procedures, and systems should be folded into a change management process that provides transparency to how the decisions are made, provides for functional area input, and thus builds stronger trust and commitment to both management and the decision outcomes.
A best practice in transparent change management systems begins with executive support and devotes an administrator to act as a conduit for proposed changes and facilitate a monthly meeting with leaders of the various functions (internal stakeholders) to review executive summaries of the proposed changes and approve or deny the proposed changes based on the business merit and impacts on internal and external stakeholders. The approved changes then move to a more operationally focused group of internal stakeholders to discuss at a more detailed level how the changes would impact their function and identify the tactical plans and resources necessary to schedule and implement the changes as smoothly as possible. The executive summaries and outcomes are communicated to the internal stakeholders and maintained on an internal website that provides employees with a quick glance summary and detailed information about coming changes and plans. This type of system demystifies the origin, rationale, and content of change, ensures involvement and coordination and in essence makes change management a transparent process rather than an unpredictable event.
Transparency in Performance Management
The translation of high level strategies into cascading goals and performance management has been addressed in models such as Management by Objective (MBO) and the Balanced Scorecard. However, a primary goal of transparency in performance management is to achieve visibility, alignment, and accountability across the organization's goals and objectives. This is achieved through the strategy process above where the quality and quantity of inputs and outputs required by each of the internal stakeholders to make their contribution to the overall firm goals are negotiated and translated into single owner outputs. These negotiated goals form the basis for performance evaluation and goal vs. actual outcome become a priority agenda item at the weekly management, team, and one on one employee meetings so that issues threatening the agreed upon output can be addressed proactively and teams can work internally and across functions to address both challenges and opportunities related to meeting and improving the related performance. The transparency to the specific goals and outcomes and active management and communication of those results reduces role ambiguity and negative conflict and creates a high performance environment where employees can feel that their contributions are being fairly evaluated against their performance expectations, and those of their colleagues.
Conclusion
Leaders who can build trust and commitment among their employees through effective management practices have a definite source of competitive advantage. This article briefly discussed some actions firms can take to make their key value creation processes more transparent and effective. Through the creation of transparent systems and processes for strategy development, decision-making, and performance management, firms can not only achieve higher levels of performance through alignment and accountability, but also achieve higher levels of trust and commitment from employees who will be able to better understand and participate cooperatively in the pursuit of the firm's values and priorities in daily operations.
Operational Transparency - A Business Ethics Path to Competitive Advantage
Check For The New Release in Health, Fitness & Dieting Category of Books NOW!
Check What Are The Top Cooking Books in Last 90 Days Best Cheap Deal!
Check For Cookbooks Best Sellers 2012 Discount OFFER!
Check for Top 100 Most Popular Books People Are Buying Daily Price Update!
Check For 100 New Release & BestSeller Books For Your Collection
William Carroll, DBA
Owner, Pachamama House & Bungalows
http://pachamamacaribe.com
mobile phone watches Buy Auburn Gear 5420113 High Performance Series Differential Cheap Deals Mason 5C025 Pad Anti Vibration Buy Bern Berkeley Winter Snowboarding Helmet
