Employees Love a Success Story
1 March 2007 Alex Knight
Alex Knight tells Jim Banks how the Goldratt theory of constraints can drive a company's success sky high.
The challenge of retaining valuable employees, especially at executive level, is crucial for any business. Resolving the problem has become a focus for senior management, who often find themselves addressing issues that were once the preserve of the HR department.
The key question that senior executives must grapple with is simple: what kind of business do people want to stay in?
Alex Knight, CEO of the Goldratt Group, says: "Over the last decade, organisations have been sorting this out. Some have struggled and others have failed, allowing those remaining to become stronger. The challenge is to deliver constant growth so that your business can be the kind of place where more people want to work to be part of your success story."
Knight is familiar with such issues, having brought the innovative methodology put forward by business consultancy Goldratt Group to bear on companies in many industries, including BAE, Balfour Beatty, Boeing and Lucent Technologies.
This methodology, the Theory of Constraints (TOC), helps organisations focus on growth rather than downsizing, cost-cutting and efficiency drives. A business that sheds staff and outsources large numbers of jobs does not, believes Knight, set the right tone for growth. An organisation that fuels growth will find that executive recruitment becomes far easier.
TOC suggests growth comes largely from two factors. Firstly, organisations must develop a decisive competitive edge, otherwise they cannot grow; but this must be achieved without working people into the ground.
Secondly, organisations must relate strategy to everyday tactical decisions. Knight believes organic growth is achieved if the responsibilities of individuals within an enterprise are clearly understood within the overall strategy.
Knight explains: "Lack of such alignment has been a key problem, particularly in regard to staffing issues. Achieving it removes the headache and the heartache by delivering stable resources. Change is an inevitable part of growth, but people also want security, so organisations must create the right environment."
It may at first seem paradoxical that change increases security and stability, but on closer analysis it makes sound sense. Knight says: "Successful organisations prove that their approach to change and growth deliver success, which increases the security of everyone within the company. Growth offers more opportunities for personal development. Growing companies can recruit more from within and people will want to join the company."
To address staffing and recruitment issues, therefore, CEOs should not focus on the nuts and bolts of the HR process, but instead devote their efforts to fuelling growth.
A CLEAR STRATEGY
To achieve a solid platform for growth, CEOs must find the right culture for their organisation and define the decisive competitive advantage that improves business performance. They must create a vision for the future, and then make sure that this is viable.
Achieving this requires a close alignment of strategy with tactics. Knight explains: "People talk about strategy and how to link that with tactical activities, but often they avoid the difficult questions. They need to ask why a particular tactic is the best way to achieve their strategic goals and they have to be able to tell people what to do and why they are doing it.
"They also need to explain why things won't happen on their own, and why a particular tactic is needed to achieve their aims. Only by answering these questions can they help people within their organisation understand what they are in the business for. There needs to be a clear link between the vision and the to-do list underneath. Organisations are often not explicit enough about this."
Linking the high-level vision with day-to-day staff activities is possible only when a business develops an internal culture that suits the industry in which it operates and which, therefore, underpins sustained growth.
Knight adds: "It is necessary to build the supporting culture to continue to grow. That requires a relentless effort to build processes and systems that drive the organisation. When an organisation gets it right, the culture screams at you. When you develop the specific culture your organisation needs, you find that some people fit in and others want out as quickly as possible."
The right culture will attract the right workforce, and will encourage employees to remain in an organisation. Sustained growth maximises their opportunities for career development and increases their sense of worth within the overall system.
Different businesses require different cultures, which will sometimes be tough and ruthless; but with the right culture in place, it will quickly become clear whether an employee is suited to the business.
The next logical question is how to become a dynamic organisation that achieves significant growth, but which also achieves the level of stability that improves staff retention and encourages key talent to stay. TOC is what Goldratt Group puts forward as the solution, though at first it appears to offer growth potential that is too good to be true.
TOC was conceived by Dr Eli Goldratt almost 20 years ago and has become a respected approach to stimulating corporate growth. A physicist by training, Goldratt views any business as a complex system within which significantly better performance is always attainable. His 'viable vision' suggests that an organisation should be able to turn its current level of sales into profits in four years.
Take an example, and it looks like a fantastic claim. A company with sales of $100m and profits of $10m should be able to see profits of $100m in four years – a level of growth that any organisation would welcome with open arms.
No amount of cost-cutting could achieve this growth. Instead, TOC suggests that by focusing resources and efforts on identifying bottlenecks within a business, eliminating constraints and finding its decisive competitive advantage, any company can experience this level of growth.
This vision is convincing a growing number of senior executives. Knight says: "TOC is about understanding how to achieve change. There is an assumption that people do not like change, so the bigger the change the greater the resistance. However, if you explain the change then it becomes easier to accept, just as problems with staff retention can be resolved by explaining how each individual's activities relate to the company's strategic goals."
TOC relates to staffing issues in that it fits with CEOs' need to focus on growth. He adds: "TOC talks about growth and stability in the same breath; that is what we want to achieve. It is not about high risk, but stable growth, and in forthcoming seminars we will see organisations that are well down the road in achieving that."
TOC promises that growing organisations with stable resources will face fewer problems with staff retention and succession at the senior executive level, as well as delivering greater profits. A proposition no CEO would turn his nose up at.