Value: Vital But Complex
We can all agree that “value” is important. We espouse and adhere to corporate values, we want to deliver value to customers, we want to create shareholder value, we care about brand value, value for money, quality, value-adding, and more besides.
Value is important, so we feel that we must measure it. But here’s the thing: value is easy to identify when you see it, but with evidence to review it’s harder to define and therefore measure. Value is not return, not price, not quality, not customer satisfaction, not speed, not other things; it’s some or all of them, when and where appropriate, almost on a case-by-case basis.
Analyse most successful firms (in any industry) and a common feature will be its agility – its ability to deliver, compete, change and grow. This agility is a product of defining value and alignment, since the alignment of strategy, outcomes, purpose and ways-of-working gives an organization a clear view of what to do at any time to win and gives a foundation for entrusting staff to all move together along the right path. These organisations are able to spend less time thinking about and deciding what to do, and more time actually doing.
Most measures of value relate to whether commitments have been met. Did we deliver what we said? Did our customers or clients feel that we met their expectations? Were we also efficient and effective in our delivery? Each of these is very different. Most organisations prefer broad quantitative measures that can be benchmarked and compared. Yet with the absence of any single measure and the fact that value is so subjective – situational, contextual, personal – assessing value is challenging. Assessment is needed almost for each interaction or transaction, and not so broadly that you can’t see the trees for the forest
To understand how to measure value, you first need to define it. You’re setting the context for measurement – not only for what you will assess, but also for what you intend not to assess.
Notwithstanding the difficulty in defining value because it is attached to so many different concepts, some of which are not connected, what also makes it hard to define value for some organisations is that many people don’t fully understand their organisations. They may understand the operating model, the products and services, they may understand customers and competition. However, they probably do not understand at a sufficient level of detail exactly how products and services are made, tested, marketed, sold, distributed, administered, supported, nor how all the disparate functions and teams work together to create and deliver value.
Most people, if asked, typically represent their organisation by drawing a picture of the functional model, the chart showing the vertical reporting relationships between functions. These pictures do not include details about customers, nor set out the services or products, nor value. There is no depiction of the flow of activities between, across, and through functions and layers. If this is how they perceive the organisation, then it is no surprise that they do not fully understand value.
One advantage of Operational Resilience (OR) is the foundational requirement that organisations need to identify (and then map and test) the “critical and important business services” ignoring the traditional view of vertical and functional silos. OR highlights the need to identify those services and map out the flow of activities between, across, and through functions and layers. OR requires that organisations define those services regarded as critical and important and the value provided by those services to customers and users. This enables the organisation to take steps to protect and continue to deliver that value in the event of shocks and disruptions. This approach will create a different view of the organisation that is better aligned to value.
Benefits of Alignment to Value
When organisations align themselves to core values, they are empowered to do more and do it better.
Leading firms achieve successful and sustained growth because they define a clear purpose, supported by high levels of shared understanding, commitment and focus. Lack of alignment creates friction. Friction hurts. Friction hurts performance, weakens outcomes, creates tension, and leads to unnecessary waste and cost.
There is a lot of academic research into the effects of alignment on organizational performance. One study found that 51% of the difference in organizations’ performance can be explained by alignment, with another 38% delivered by consensus – in other words people aligning behind a common goal. Another study found that by aligning business goals and IT goals, as just one example, the level of overall performance was lifted by 20%.
In the book (The Progress Principle – Amabile and Kramer) research found that the strongest organizations were those that created an environment that was both operationally and structurally aligned and which also nurtured employees “inner working lives” to allow them to make progress in meaningful work. They made strong links between vision, strategy, goals, structures and activities and in so doing instilled a sense of achievement that, in turn, enabled their people to achieve more and more.
Alignment to values avoids the top 10 frictions (below), which are shown as a grid of impact (of the friction) and complexity (to solve):
Morae can help with these assessments. We have expertise in strengthening operating and organization models so that they become aligned to strategies, while also removing gaps and interactions. We also help by creating smart and cost-effective ways of working, whether focused on process or control improvements, behavioral change or using technology. And we make those changes stick by ensuring the drivers for change are clear and understood and that change initiatives are well designed, mobilized and delivered.
I invite you to connect with me if you believe your organization could benefit from a discussion on Operational Resilience with a focus on value realignment.