Archives for June 2011

Expert Behavior Models and Competency Management

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Competency Management defines and facilitates the management of the “way” work is to be done.  It touches multiple organizational elements within a company or other entity.  These range from operational units to training to human resources and hiring to essentially anywhere that people do or support the work of the entity.
 
A good Competency Management system captures the details of work based on how “the best” people do their jobs.  When optimally used, it becomes the “system” for increasing skills and know how among all people and positions included within its scope.  In some organizations it can become the key to a big “pay off” from sometimes major investments in training.

The Purpose of Competency Management

The purpose of a Competency Management system is to maximize organizational performance.  It defines the methods and techniques of top performers and provides a vehicle to systematically communicate and develop “Best Practices.”  It helps to focus training on its greatest opportunities either based on gaps uncovered in the development of the system or through the use of the system.  It also helps to focus supervisory attention to those areas needing that attention.

The Method of Competency Management

The development of a Competency Management system starts with the official core processes for the areas within the included scope of the system.  For each process, the next step is to identify all key activities within that core process.  These key activities should be the focus of attention with respect to that process.  The non-key activities must also be identified buy, as non-key activities, their impact and the opportunity for performance improvement is less significant.
 
Experts for each process and activity must be identified based on their performance (measurable results, not feelings) and on management input.  Each identified expert needs to be interviewed with respect to what they consider to be the keys to their performance success.  Then, each “expert” needs to be observed, a minimum of ten observations, for the detail of how they do their work and because most people do not necessarily remember even critical detail.

The focus should be on key opportunities for performance improvement. 

First, the focus should be on the identification of the core processes, activities and key competencies.  The best practices will follow from this initial focus.

Experts for specific core competencies not always top people in measurable performance, but the top people in measurable performance should be a starting point.  Focus groups of experts will help drive expert model development.

Never select experts with poor performance numbers; they simply will not have credibility with their peers and with management.  However, if there is an opportunity to learn from anybody, even those who are not top performers, take that opportunity and have the top performer-experts validate the proposed “best practice.”
 
Expert Models

The Expert Model is the key element of a Competency Management system.  An Expert Model provides a comprehensive guide, by position, of what that position does (processes and activities), how the best performers do it, and what tools are available to improve one’s performance.

Structurally, a basic Expert Model is a matrix consisting of the following columns:

  • Process
  • Activity
  • Best Practice
  • Resources

In some cases, a Description column may be helpful to those not intimately involved in the process in understanding exactly what the process and activity include.  An additional column or heading category can be added to provide a further level of organization to the Expert Model.  Categories for Expert Model in a sales environment, for example, would include:

  • Selling Skills
  • Product Knowledge
  • Technical Knowledge
  • Activity Levels/productivity

Competency Evaluation Matrix
 
The Competency Evaluation Matrix (CEM) is the second key element of a Competency Management system.  A CEM provides an organized approach to assessing each employee’s capability with respect to each process and activity.  As a reference, the Expert Model then provides a guide to the employee as to what is meant, how the best performers do it, and what tools are available to improve one’s performance.

Scoring

Scoring should be kept as simple as possible.  The purpose of a scoring system is simply to help employees and supervisors and trainers focus their attention on the areas most in need.  While a five-point scale can be used, in most environments, a simple three-point scale should be used:

  • 3 (expert),
  • 2 (competent),
  • 1 (training needed)

Employees score themselves and supervisors score the employees separately.  After the scoring is completed, the supervisor meets with each employee one-on-one to review the scores for each item  During this meeting, the supervisor and employee should come to an agreement or consensus as to the an appropriate true score.
 
For each employee, the lowest scored areas should be the first target for training.  In aggregate, the lowest rated activities should be the subject of review and reengineering of the training practices associated with those activities.
 
However, a low aggregate score does not necessarily reflect training impact.  To maximize training impact, pre-select key competencies based on results and on “promise” associated with return on investment in organizational performance.

The other consideration with respect to training impact is to ensure that selected training priorities match identified organizational goals.
 
Personalized Training Plans
 
The outcome of the scoring is not simply a score for each employee.  The outcome should be the creation, after each “round” of scoring, of a specific training plan for each individual covered by the Competency Management system.  This plan should be derived from the identified needs of the individual.
 
Management and supervision must first prioritize the identified needs.  In many cases, there will simply be too many needs to address all of them simultaneously.  The priorities will generally be based on the likelihood of impact on organizational performance.  The primary reference for these prioritized training plans will be the “Resources” column of the Expert Model.  The purpose of that column is to point employees, supervision, and management to the resources that are known to be available to improve performance in that specific activity and process.
 
System Maintenance
 
Each Expert Model needs to be regularly upgraded.  Processes are dynamic.  Activities associated with processes are dynamic.  Best practices are dynamic.  Improvement resources are also dynamic.  The timeframe for upgrading will vary across operating environments.
 
Management and supervision must take all necessary steps to settle disagreements tactfully.  These disagreements can be related to scoring of individual employees.  These disagreements will also be related to the identification of best practices.
 
System Impact
 
The use of a Competency Management system should be translated into quality and productivity results and improvement efforts.  As the management of competency moves into the culture of the organization, measurable performance improvement should be seen.

An additional outcome that will be observed is a multi-dimensional, multi-faceted, individual, team and organization, plan for training.
 
The long-term impact will be directly related to the organization’s commitment to long-term use.  To the extent that it is possible, the organization’s Executive management should provide visibility to the Competency Management system and reinforce its use.

Other keys

When seeking to improve overall organizational competency, the focus should be on observable and measurable behaviors.  Behaviors that are otherwise will be difficult to manage.  The adage “you can’t manage what you can’t measure” applies.
 
As with any scoring or grading opportunity, all steps should be taken to avoid scoring inflation by pointing to results.  There should always be a correlation between competency and results.  People without measurable top results should generally not be scored as an “expert” with respect to competency.
 
Despite the increased focus on training, there should be no training for training sake.  The priority for training efforts should be those areas that are aligned with organizational goals.

Tactical Considerations
 
It is important to stress improving both personal and overall human resources development and performance improvement in the development and use of the Competency Management system.

For several reasons, it is important to pull the training department into the Competency Management development process early.  For one, there can be a tendency, in some environments, for the training department to take the outside development of a training-oriented tool as a criticism of their effectiveness.  Additionally, the more involved training is and the earlier they are involved the more ownership training will take of the new set of tools.  This ownership should not take away from the fact that, unlike some pure training programs, supervision and management are intimately involved in the use of the Competency Management system.  Supervision and management does the scoring (with the employees).  Supervision and management works with the employees to arrive at a consensus score.  Supervision and management prioritizes the elements of the individual employee training plans that result from the system.  But, training will be the focus for the development of new training programs for both new and continuing employees.

Expert Models should also be used in selection of employees and in training design.  The Expert Model will ultimately be viewed as a much more detailed view of the expectations of the employee than a job description has historically been.  It will, therefore, present a much clearer picture for the prospective employee than a job description.
 
Success Criteria

The two most significant success criteria are measurable performance improvement and noticeable improvement in competency.  Closing identified skill gaps will become a big driver of supervisor behavior but this is likely to be a gradual change.  A noticeable change in supervisor behavior is a good indicator of the integration of the Competency Management system into the organizational culture.

It should be noted that measurable improvement in competency levels should not simply be based on the scoring by the supervisors.  There should be some independent verification by the training staff and a corresponding improvement in organizational performance to assure that the measurable “improvement” is not simply a relaxation of the scoring standards.
 
Summary

The concept and use of Expert Models and a Competency Management system is relatively new, dating to the 1990’s.  It provides a systematic method for capturing the work that needs to be done and the best practices associated with that work.  It also provides a ready reference to the resources an employee or supervisor or trainer might consider when seeking to improve performance in a specific activity or process area.
 
It’s primary purpose, however, is to drive improvement in organizational performance through helping employees take more responsibility for their own training and development and through helping supervisors and managers also take more responsibility for the training and development of the members of their teams.  The format of the Competency Management system helps reduce the temptation to provide training for the sake of training and helps focus all training efforts on performance improvement.

Insurance Cash Flow Management and Improvement

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With the president of the client organization the primary contact person, an 8-month engagement reviewed the work processes associated with generating and managing the client’s cash flow. 

Overview of the Client

The client was a non-General Fund, quasi-governmental agency which serves as the provider of last resort of workers’ compensation coverage for employers within the state. Although a state agency, the client competed freely with and conformed with all the regulation of conduct of other insurance companies. It insures approximately one-half of the eligible employers and between one-fourth and one-fifth of the eligible workers in the state. 

Included within the scope of the Cash Flow project were five Home Office departments and the 24 field offices. The Home Office departments included:  Insurance Services, Credit and Collections, Data Processing, Fiscal Services, and Underwriting/Marketing. These departments perform such functions as premium determination, premium billing, payroll report processing, payment processing, and cash management. At the time of the engagement,  the client had 1,660 staff, supervisory, and management personnel assigned to functions or departments associated with cash flow (of 7,174 total non-Executive staffing). 

The specific areas of study were: 

  • Applica­tion and initial premium processing in the districts, including sales and underwrit­ing.
  • Premium and payroll report processes in the Credit & Collec­tions and Insurance Services.
  • Payroll audit processes in the districts.
  • Payroll audit processes in Insurance Services.
  • Policy cancella­tion and collection activi­ties, districts, and Home Office. 

Project Overview

The project’s charter was to thoroughly review current processes to develop a comprehensive flow chart of cash flow activities; identify all related activities, including time requirements and annual frequency; evaluate all pending improvement efforts related to cash flow; and analyze potential untapped opportunities which could either reduce costs associated with administering the cash flow or improve the cash flow itself. 

The primary tools used in this project were flow-charting, interviewing, and observation. Activities were iden­tified as to the flow of work, the reasons for the work, the frequency of the work and the time required to perform the work. 

Project Results

Deliverables consisted of both tangible products and actions recommended to improve cash flow or its associated cost. 

A flow chart consisting of over seven hundred separate activities was presented to management as a tool for evaluating future improvement opportunities. This flow chart began with activities prior to underwriting and issuing a policy and concluded with collecting and investing premium payments, cancelling policies for non-payment, issuing of dividends, and collecting delinquent accounts. 

During the project the flow chart was used to identify fifteen specific recommendations with aggregate savings of $4,765,303. These recommendations included: 

  • automating the collection of payroll data (essentially through electronic data interchange);
  • increasing the number of scanable documents (rather than documents requiring keying of data);
  • eliminating special handling through enhanced automa­tion;
  • eliminat­ing the need for the client’s personnel to rely on paper documents by electroni­cally transferring data which could be transfer electron­i­cally to user software;
  • replacing manual sorting with computer sorting of output;
  • electron­ically linking numerous inter-related sets of databases;
  • reengin­eering specific processes;
  • basing staffing on measur­able work volumes;
  • shortening the lead time for evaluation of process improve­ment recommenda­tions;
  • pursuing direct deposits to claimants bank accounts; and
  • working in cooperation with others in the state’s workers’ compen­sation industry to combine payroll reporting for workers’ compensa­tion insurance purposes with payroll reporting for payroll tax purpos­es. 

In addition, the complete automation of those processes which are already semi-automated would allow the client to reduce its total staffing by approximately 4% (its cash flow-related staffing by 17.5%) representing a savings of over $8 million annually.

Living beyond our means

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The May 23, 2011 issue of Time magazine presented data on the national debt of 10 major economies. The presentation by Josh Sanburn includes an assessment of the risk of each country defaulting on its national debt,  based on Moody’s credit ratings, which seem to be based first on the portion of debt held outside the country and second on the size of the debt compared to the country’s Gross Domestic Product (GDP). Japan and the United States are the only two of the ten countries not in Europe.

The level of debt combined with the significant foreign ownership, except in Japan, of that debt may indicate a tendency for these Westernized economies and cultures to live beyond our means. As individual nations, we have increasingly chosen to spend more than we earn or produce. At some point, this becomes unsustainable. When the United States may reach that point has been a subject of debate in recent weeks as the U.S. Congress considered, and has now chosen, to raise the debt ceiling.

Reports that the debate has simply been political grandstanding are disturbing. The issue is serious and significant. Resolution is feasible.

The United States and other nations can reduce current spending levels, a decision which is politically challenging in an era of near-perpetual campaigning for national and local elected office. The alternative most discussed is raising taxes to bring budgets more in balance, another politically dicey proposition. A third alternative, which receives little attention, is to raise GDP. The lack of attention may result from the difficulty in achieving this.

Raising GDP requires increased production, which requires increased demand and increased disposable income at a macro level, which, on average, requires the same at the personal level. The months, now years, since the fanfare-accompanied stimulus packages in many of these same economies suggests that legislators and their staffs know how to write legislation but know very little about job creation. They know how to create public-private work programs and how to buoy failing companies until those companies regain sustainability, but seem to know little about stimulating innovation, creation of sustainable jobs, and growing GDP.

Elected representatives in the United States and elsewhere seemingly need a wakeup call in the form of a dose of reality. Leadership does not require legislation or legislative expertise, but effective legislation seems to require leadership. Regardless of ideology, philosophy, or party affiliation, if the current course is unsustainable, then somebody needs to change something. Academically and pragmatically, leaders are agents of change; maintaing the status quo requires no leadership. In representative forms of government, citizens elect other citizens to lead the community or nation in the right direction. All elected representatives assume the role of change agent. The direction and scope of the change is the significant variable.

If we, whoever we may be, do not like our current direction or it’s consequences, we need leadership. We do not need rhetoric or politics or slogans or grandstanding. We need change, feasible, sustainable change. We need leaders who define and collaborate and negotiate a new direction that most of us can accept, if not embrace. Then, those of us who elected people to positions of leadership need to follow, to let our leaders lead, and to hold them accountable to lead as we elected them to do.

Insurance Fiscal and Banking Services Productivity and Cycle Time Improvement

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A program to improve productivity and fiscal integrity for the Department of Fiscal Services of a state’s worker’s compensation insurance fund. The Cash and Banking Services Manager and the Fiscal Services Manager were the primary contacts for this engagement. 

Project Overview

The charter for this engagement included a variety of deliverables: 

  • Development of a process flow chart documenting all banking and cash manage­ment activities of the Home Office Departments.
  • Creation of desk level procedures for all Banking Services positions and activities.
  • Automation of two related, but separate, systems within Banking:  Stop Payments and Cancellations and Unclaimed Property.
  • Implementation of a new data base system for managing Un­claimed Property, Stop Payments, and Cancellations.
  • Automation of the annual escheatage to the State Controller.
  • Streamlining of Banking processes in preparation for the desired installation of a network of personal computers.
  • Conversion of Bank Reconciliation-related spreadsheets from one obsolete format to Lotus 1-2-3 and, later, to Microsoft Excel.
  • Significant hands-on training in the new systems, processes, and procedures.

 The objective was to improve the client’s banking-related processes. The scope included all areas of bank reconciliation, stop payments and cancellations, escheatage of unclaimed property to the State Controller, and communications with the twenty-four field offices, the Home Office Departments, and the three primary banks. 

Project Results

The development of the process flow chart(s) and the desk level procedures was critical to the immediate and future automation efforts. They served as a basis for not only training current and future staff but also for identifying process improvement opportu­nities, including automation. The flow chart and the procedures were each updated as changes were implemented during the project. 

The automation and streamlining efforts were directed at minimizing redundant data entry, eliminating keying errors, automating report creation, and enabling reconciliation of banking documents with general ledger documents. These areas included:

  • converting spreadsheet formats to data base formats to enable on-line status of stopped, cancelled, and unclaimed items;
  • develop­ing detailed archive systems which could be main­tained to provide an audit trail;
  • coordinating with the two primary banks so that the client could be provided banking data via FTP rather than on paper (to eliminate manual keying and reduce cycle time by 67%);
  • generating bank transmittals from the systems’ new data bases rather than relying on manual preparation of these transmit­tals (reducing the cycle time from days to minutes and eliminating several days monthly of manual labor); and
  • creating a annual magnetic tape transmittal of Unclaimed Property to the State Controller’s Office from the new Unclaimed Property system rather than relying on the State Controller’s system (which required re-keying of data with an associated cost of several man-weeks annually).

Results included the ability to balance unclaimed property items to general ledger accounts; a foundation for future implementation of a local area network and for magnetic transfer of data between the client and its banks; and more timely reconciliation of bank accounts and production of banking-related reports.

Creation and review of written procedures resulted in significant operational changes for improved control, efficiency, and effec­tiveness. 

The most immediate impact was in the area of fiscal integrity. However, the automation and streamlining allowed Fiscal Services management to implement and consider area staffing reductions of almost twenty percent with a budgeted dollar impact of approximate­ly $150,000 annually.

Followers leading following leaders

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An article by Omar Waraich, Mark Benjamin, Massimo Calabresi, and Mark Thompson in the May 23, 2011 issue of Time, on the topic of U.S.-Pakistan relations included a provocative quote. The authors quoted Pakistani Prime Minister Yousuf Raza Gilani, a person elected to a position of leadership in Pakistan, as follows: “If public opinion is against [the U.S.], then I cannot resist it to stand with [the U.S.]. I have to go with public opinion.”

In the above quote, the leader seems to be following. When the leader becomes follower, the follower becomes leader. The Prime Minister, admittedly out of context, seems to be saying that his opinion makes no difference. While I believe that leaders in many contexts forego their self interests for the good of the people they serve, disregarding one’s personal opinion to align with public opinion gives the appearance of concern with re-election rather than direction.

Leaders should be mindful of public opinion and not simply or necessarily give into public opinion. Leaders should take people where they need to go and not simply or necessarily where they want to go. Leaders need to make hard decisions about necessary change, changes which may require people to think about the past, the present, and the future in new ways with new consequences. Leaders need to help people embrace a vision for a future different from the present and the past. Leaders who fail to do these basic elements of leadership may be seen as poor leaders.

A leader who embraces prevailing public opinion, who tries to govern and legislate in parallel with public opinion polls, is abdicating leadership. When a leader defers to public opinion, the public effectively is leading and paying the elected representative to follow. When followers are leading the leaders, who are following rather than leading, the people may lack both a rudder and a keel.