Which Techniques Should I Use?

CEOs are bombarded to use numerous techniques in helping their organization achieve its goals. However, which techniques should you the CEO use?  Like eating utensils, different techniques have different objectives.  Most organizations will use multiple techniques simultaneously. :

• Activity Based Management (ABM): improves costing and productivity.  Activity Based Costing (ABC) improves profitability analysis of products, services, customers, and channels. Activity Based Management is Planning, Budgeting, Deciding, and Improving Activities and Cross Functional Business Processes.
  
• Balanced Scorecard: creates alignment between organization's strategy and what everyone does in organization.  It has 4 perspectives: financial, customer, process, growth & learning performance measures.  It uses leading and lagging indicators.  It ties compensation to achievement of strategy.
  
• Benchmarking: compares agreed upon measures across different
  • units of your organization
  • organizations in your industry,
  • industries
  to find out best ways to perform an activity and/or cross functional business process. Usually, best ideas come from different industries.
  
• Change Management: is usually part of another initiative.  For example, if you want to change employee's focus from cost elements to activities or you install a new computer system which requires different ways to run your business, change management techniques are necessary to sustain the new way of doing business. 
  
• Core Competencies: are key, cross functional business processes that an organization excels at. For example, Southwest Airlines excels at quick turnaround of airplanes when they arrive.  Amazon. com excels at one click ordering. Once an organization identifies its key core competencies, it needs to constantly improve them so that it will maintain its competitive advantage.
   
• Customer Loyalty: determines
  • increase in revenue due to increasing customer loyalty. Think of cell phones where customer turnover can be 100%.
  • additional cost to increase that customer loyalty.
  • incremental profit to from increasing customer loyalty
    
• Customer Satisfaction Measurement: surveys customers to determine whether your organization is satisfying your customers. Then it works to improve satisfaction for those customers the organization wants to keep.
  
• Customer Segmentation: Your organization should consider firing customers that are not profitable or at least change relationship to make it win-win for everyone. Customer segmentation uses market demographics (customer size, location, industry, how they buy) and Activity Based Costing to determine Customer Segment Profitability.
  
• Cycle Time Reduction: is generic term related to improving processes.  Some specific applications of this technique are Just-In-Time, Fast-time-to-market., Process Management, and Activity Based Management.
  
• Economic Value Added: determines whether organization is adding value to its shareholders after taking into consideration 
Net Operating Profit - Cost of Capital

It can be financial goal used in Performance Management System or Value Based Management.

• Outsourcing: allowing 3rd party to perform usually non-core cross functional processes It differs from consulting in that it is usually long term with specific service level agreements.
  
• Pay-for-Performance: compensation is tied to performance. It can be part of Performance Management (Balanced Scorecard) system.
  
• Performance Management: is a system for creating alignment in your organization.  It helps ensure that all employees understand how what they do contributes to accomplishing your strategy in order to achieve your long term financial goals.  It ties everyone's compensation to achieving those financial and non-financial measures that will achieve your strategy.  Economic Value can be one of the goals and a Balanced Scorecard can be used to determine correct financial and non-financial measures.
  
• Predictive Management: is based on principles of wanting to know how you will do in future rather than managing with after-the-fact historical financial statements. It provides information on:
  • where you create value.  For example, except for a payroll processing firm, your organization does not create value processing payroll.  It creates value because of great customer services (i.e. Nordstrom), quick turnaround of planes (i.e., Southwest Airlines), new product development (i.e. Merck)
  • reducing variation (e.g. where you have quality problems)
  • understanding and constantly improving your cross functional processes
    
• Process Management: focuses on planning, budgeting, and monitoring results of your cross functional business processes.  It
  • selects a senior executive to manage and be compensated based on results of their cross functional process.
  • employees be compensated both for functional and cross-functional results
  • defines major core and support cross functional processes
    
• Reengineering: is radical redesign of business processes.  It should be used when executives realize they have a major problem with key business processes or that they are non-competitive in certain processes.  It is only used every 3-5 years on a business process.  It usually starts with a clean sheet of paper rather than trying to do continuous, incremental improvement like Quality and ABM do. 
  
• Strategic Planning/Mission & Vision Statements: Determining or updating your Mission and Vision Statements are usually first step in creating a Strategy Plan.  Strategic plans are not financial goals. A Strategic Plan tells you how you will accomplish your long term financial goals.  Examples of strategic plan approaches include: grow revenue by selling more to current customers or become low cost provider or have largest market share.
  
• Six Sigma/Quality: Six Sigma is a reformulation of many long term, proven Quality principles.  The largest contribution Six Sigma has made is that it focuses on the bottom line as well as improving quality.  It focuses on improving processes so that they will increase revenue or reduce cost.
  
• Supply Chain Management: Jim Ayers defines Supply Chain in his Handbook as: Life cycle processes comprising physical, information, financial, and knowledge flows whose purposes is to satisfy end-user requirements with products and services from multiple linked suppliers.
  
• Value Based Management: means a variety of things to different people.  Value Based Management focuses on improving results to shareholders by using a combination of techniques above. It gets everyone focused on how can we improve our return to our stakeholders (shareholders, employees, customers, and suppliers) 

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