How to measure an Organization’s knowledge

On an earlier post I was arguing about the importance of collective intelligence for any Organization, in this post I will go over two different KPIs from the Gartner's Business value Model – BVM

According to Gartner:

The Employee Training Index shows the commitment of the organization to invest in its employees as the changing demands of its customers require new knowledge and skills.

The skills Inventory Index show the ability of the organization to fulfill its employee skill needs in order to complete its business activities. Outsourced business activities are not considered part of these skill requirements.


Knowledge management and the management of collective intelligence are significant factors in determining business value. Attracting and keeping superior talent will require the evidence of commitment on the part of the organization. The measurement of this indicator in coordination with other business indicators will bring deep insights about the influence of collective intelligence in the overall success of the Organization.


Employee Training Index=Total training days/Amt of Emp * 225

The Skills inventory index is an indication of the organizations ability to move into new lines of business. It is measures as


Skills Inventory index=Total skills filled by existing employees /Total number of skills needed


With the help of these two indicators any Organization should be able to measure their collective intelligence and its influence in business value generation. The question that still remains is how to leverage this asset? That will be the theme of a new post.

Keep tuned.

Metrics, HR and the value of measurement

On my previous blog titled: Why technology is important to save HR costs and affect the bottom line I tried to explain the importance of metrics in the HR function to better position a company in the recruitment process.
I am not by any means an HR technologist, the reason of my interest is that at a previous place I worked for, it was announced that the Company goal was to grow their revenue up to 1.2 billion dollars in the next 5 years, and I wondered back then how a goal like this would trickle down to the different business departments like Human Resources, IT, Cost, Estimating, etc. It would seem to me that to achieve a goal such as this, all stakeholders should have a clear understanding exactly what would be the way to get there.

It is understood that you will find the measure of the success of any business by looking at financial indicators, but these are trailing indicators, the history after the facts. In the other hand performance key indicators are leading indicators, they will help you better position yourself for the task ahead, and by effectively measuring what is going on any business department will be able to position themselves to achieve the goal ahead. Remember: You cannot manage what you don't measure

For example If the company goal is to hire 50 new employees a year with a delta of 20% increase a year for the next 5 years, and the hiring process is occurring at a 40% recruitment effectiveness index (look at the chart below), it will means that the time to hire and the total recruitment cost must be decreased to reach the company's recruitment goals to be able to achieve the forecasted growth. Obviously like I mentioned earlier, HR is just one indicator in the mix, there are many other stakeholders in the mix.

The Recruitment effectiveness index (REI) is measured as follows (as per Gartner's Business value Model (BVM))

REI=ART*ARC
where:
ART = 1-(Time to hire/365) – Average relative recruitment time
ARC = 1-(Total recruitment cost/1^st year compensation) – Average relative recruitment cost

To conclude, it is important that analytics are included as part of any decision making process.
By measuring you will arrive to better decisions


 

Why technology is important to save HR costs and affect the bottom line

When working in fast growing Companies, where growth depends highly on the quantity and quality of new hires needed, it is paramount that HR processes are automated. Without these technology solutions Human Resources will be contributing to increased opex costs instead of working with a highest efficiency to targeted goal of growth.

It has been proved that Organizations that have introduced technology solutions for key HR areas like the ones shown below will improve the bottom line.

• Talent Management
  
• Staffing
  
• Compensation
  
• Performance Management
  
  

Solutions like Self Service, HR-oriented help desk solutions, HR data warehousing and other will definitely help achieve better results.HR Managers will bring more value to their Organizations by conducting business cases and cost justifications for the introduction of these technologies.
There are a few approaches that HR managers use to determine the value of HR technologies:

1. Process savings
   
2. Headcount changes
   
3. Metrics
   
4. Other
   

All these approaches are well documented on HR literature. I will try to focus on metrics

There are very important metrics available for the HR function that any HR Manager should follow in order to properly align HR goals with the overall business goals. As I stated at the beginning of this post for fast growing companies HR Managers should understand what the right mix of personnel and automated processes is required to:
Deliver the right amount of talent, with the right quality in the right time.

Some of these Metrics are:

1. 
   
   Cost metrics
   1. HR Cost per employee
      
   2. HR admin labor cost per employee
      
2. 
   
   Headcount metrics*
   1. HR Admin ration
      
   2. Payroll admin ratio
      
   3. Staffing headcount ratio
      
   4. Other HR functions ratio per total employee count
      
3. 
   
   Cycle Time
   1. Time to hire (in days)
      
   2. Time to complete transfer or solution
      
   3. Time to complete salary action
      

These metrics are not difficult to collect and should be part of the HR department business dashboard, only them HR should be able to proactively determine whether it's positioned to achieve the company's business goals.

I will follow up this post with other very important HR metrics like

• Recruitment Effectiveness Index
  
• Skills Inventory Index
  
• Employee Training Index
  
• HR Total Cost matrix
  

Stay tuned.

A shared single vision of the future

Formulating the IT Architecture for any company is about strategy not technology. Business owners and IT folks have to come together and unify behind a vision that will drive business value for the company.
If there is a common consensus as to where the Organization is going, it will be easier to plan how to get there, but this is a lot easier said than done. Often times Companies don't have a clear and defined strategic plan and/or they don't involve their IT office on the discussion. I think this is a recipe for failure.

A few months ago, after doing some research, I presented an idea to the CFO to invite Gartner to help the Organization in creating an Enterprise Architecture that would focus in putting together a strategy for IT that would drive value for the business in the short and long term. The idea was simple, get every decision maker together and make sure that everybody has the same goals and the same vision and start building an IT strategy from that point. Although the idea was rejected at the end, the premise is the right one, for IT to succeed a shared vision for the future has to exist between the business leadership and IT.

Without a proper Architecture you will not be able to address increasing system complexity, The IT function will not be funded properly, and the IT systems will not be aligned with business strategies.

Why you should consider updating to Contract Manager V13.

Oracle Contract Management version 13 introduces new features out of the box that will help both users and administrators.

As mentioned on Oracle's release value proposition for CM v13, some of the new functionality and enhancements are within the following areas

• LDAP
  
• Content Repository
  
• Web Services
  
• Version control
  
• User Interface
  
• Configuration Utility
  

I will briefly describe some of them below as per Oracle's document.

LDAP

This functionality will allow administrators to connect to LDAP Servers and import or update users and their attributes into Contract Manager.
In my opinion this is a great new feature and long due in the software. It will reduce the administrative time managing users and also reducing the amount of username and passwords that a user has to maintain.

Content Repository

Contract Manager V13 now offers two different ways to store documents: the original way which is selecting a location on the file server and the new feature that will give you the ability to connect to a content repository like

• Jackrabbit
  
• Microsoft SharePoint
  
• Oracle Universal Content Management
  

Connecting to existing document repositories have a few advantages, like more secured access, the ability to search for documents using the repository tools and the ability to leverage and integrate those repositories with Contract Manager. The question is whether Contract Manager will also allow interfacing with other Content Management systems like EMC Documentum or Columbiasoft Document Locator trough native APIs.

Version Control

Version 13 will offer the ability to automatically version documents upon each save or on demand from the menus. This feature will give us the ability to store snapshots of the document's history providing an audit trail over the life of the document.

Web Services

Web Services have not been introduced as of yet, may be with the release of Service Pack 1. This feature should extend the data exchange between different applications like your Estimating or Accounting Systems, and also be able to automatically input data into Contract Manager. This feature will introduce a new series of integration possibilities.

That said, if you planning to upgrade, and Contract manger is part of an ecosystem of integrated applications, you have to do your due diligence. I have been looking all over the Web and I haven't been able to find out any Architectural document of the new release, to see if they were any changes on the DB schema or in the APIs.

 

 

When bad politics affects company performance

Wikipedia defines office politics as follows:

 "Is the use of one's individual or assigned power within an employing organization for the purpose of obtaining advantages beyond one's legitimate authority? Those advantages may include access to tangible assets, or intangible benefits such as status or pseudo-authority that influences the behavior of others. Both individuals and groups may engage in Office Politics."  Office politics has also been described as "simply how power gets worked out on a practical, day-to-day basis"

What happens when bad politics is affecting company performance?
How do you deal with company 'yes-men' in senior leadership positions that are more concerned with self-promotion than fulfilling company goals and how to influence changes on those behaviors without risking your own career ?

These are questions that I have asked myself in multiple occasions, and although I do not have the answers, I think it should exist mechanisms inside every company that would avoid bad politics to stay in the way of reaching higher goals and better performance.

I would like to know your thoughts ?

Why the Estimating process should be modernized

The top priority of the Estimating process is arriving at the accurate Job Cost. In this era of increased competition, uncertain economy and tight profit margins, the better the accuracy margins, the more changes to be successful during the bidding process.



Most Construction companies use Estimating Software will handle Estimating mechanics like:

• Centralized estimate management
  
• Third party cost Items
  
• Historical work estimates
  
• Cost escalation factors over project life cycles
  
• Real-time cash flow analysis
  
• Detailed earned-value reporting
  
• Team collaboration
  
• Standardized best practices and much more.
  

But the use of Estimating Software is not enough to produce winning bids. In order to produce a good Estimate some of the following key items should be tracked:

• Job labor Costs
  
• Equipment, Material and Subcontractors cost
  
• Learning curves
  
• Estimated costs vs. Final Project costs
  
• Historical activity cost
  

Without the proper mechanisms to gather these Job Cost metrics and feed them back into the Estimating process, it will very difficult to guarantee close to 100% accuracy levels.


 

Foundation for execution – A case Study

Foundation for execution is defined as the IT infrastructure and digitized processes automating a Company’s core capabilities*. In order words the collective use of business processes, technology, infrastructure and governance that will support a Company’s strategic goals.

You cannot have a good foundation for execution if a tight alignment between strategic business outcomes and IT capabilities are not in place. IT will continue to be a Cost Center and value will not be generated through the implementation of Technologies.

In this and subsequent Blogs, I will try to focus mainly on midsize Construction Companies (anywhere from $75 M to $ 500 M in annual revenues) and attempt to build the architectural framework for a Foundation for Execution.

Typical midsize Construction Companies have a framework somewhat similar to the one I show on the Figure below where a set of core business processes are supported by technologies, applications and data silos that all seat on top of the Corporate Infrastructure.

This approach seemed to work fine in the past, but with recent advances in technology and organizations trying to gain competitive advantage through innovation and the leverage of smart business aligned IT solutions, companies are looking into building better and more advanced architectures that will allow for more agility and effectiveness.

Some of the flows of this Model are as follows:

- Applications work fine individually , but they do not interact between each other

- Company’s data is located in information silos, is error-prone and not up-to-date

- Strategy is not clear to act upon

- Company builds IT solutions to solve certain business needs instead of building IT capabilities based on sound strategy.

The next step towards a Foundation for Execution is shown on the figure below

This model is similar to the one above with the advantage that attempts have been made at integrating the different applications and technologies that support the underlying processes and the data with an integration middleware, and the data have been somehow warehoused.
Although this approach is a step above the previous one, still have some flows as are depicted below:

- The Data warehousing is only useful as a reference

- There is no real-time data transfers across applications

- After the fact integrations are always complicated , costly and prone to errors

- Integration depends on actual and future releases of the different applications used, so the bigger the application pool the most complicated the integrations becomes.

Despite these flaws, this Architecture still brings value to companies that are using it due to the fact that

- It will allow reporting across multiple processes, thus being able to track compound Performance Indicators that are dependent not just on one process but on multiple ones.

- Efficiency will increase due to the fact that multiple key entries are practically eliminated.

- Data can be are manipulated, rearranged and presented to the knowledge users with the use of the Integration middleware without user input, saving costs due to data manipulation or moving it between different systems

- Information needed to make key decisions is more easily available, and less difficult to find.

I think that there is still room for improvement, and I will continue in the quest of exploring a more effective Foundation for Execution.

*Enterprise Architecture as a strategy. Creating a Foundation for business execution by Jeanne W. Ross, Peter Weill, and David C. Robertson

Measurements of Optimal Supplier Performance

Supplier and vendor management is a key requirement to the health of construction projects; it impacts Project costs, schedules, and quality of the deliverables.
Tracking these processes is a big priority for Construction Companies and usually is included in Quality Control Procedures like ISO 9001: 2008 Quality Management Systems QMS . But sometimes even though the process is well documented, Contractors don't go the extra mile to make sure that these systems are properly implemented and followed.

 

Below are key factors that in my opinion are important for the proper implementation of a supplier evaluation system

 

• Who should do the evaluations
  
• Accurate Metrics
  
• The right technology
  
• The right audience
  

 

There are established metrics in the Industry to evaluate vendors and suppliers on different indicators like

• Cost
  
• Delivery
  
• Service
  
• Quality
  

 

Some of these metrics are

• On time delivery
  
• Quick response time in case of emergency, problem or special request
  
• Quality performance
  
• Quantity precision
  
• Service performance
  
• Cost of product
  
• Communication systems
  
• Flexibility to respond to unexpected demand changes
  
• Willingness to change their products and services to meet the firm's changing demand
  
• Use of advanced technology
  
• And many more
  

 

Senior management should understand what key indicators are vital to the success of their operations and invest in right technologies that will allow the dashboarding of these key indicators and create an adequate visibility so that key decision makers can have the most up to date information when selecting vendors and suppliers.

 

There are many vendors that have developed applications that address Supplier Management and integrate with existing ERP or other financial applications; also if you have developers on staff you can create your own custom applications.

The cost of wasted ideas

Collective Intelligence is one of the biggest assets that any Organization might have, and Companies due a very poor job harnessing it. Recently I was reading Simon Moore's book about Portfolio Management and the author argued that there is a cost associated with wasted ideas.

Companies do not have the mechanisms to gather all that information and ideas through the pipeline into the people in position to take them and put into practice, even though there are multiple technologies that will allow that interaction including all the Web 2.0 social media technologies.

But sometimes good technologies are just not enough. Often Management does not to take advantage of the resources available to them and fail to leverage them, most of the time because of egos and politics.

If you want to stay competitive, you must drive innovation…..

Communication should exist both ways up and down , Management should keep the Employees well informed as to what the business goals are and they are planning to get there, they have to make the employees part of the decision making and allow them to contribute to the pool of ideas that will contribute to innovation.

Customer Satisfaction and ISO 9001 certifications

Customer Satisfaction is a business driver in any industry. In the Construction Industry such pursuits are channeled through Quality Management Systems. One of the mechanisms that Construction Companies use to introduce QMS is through ISO 9001 standards. The ISO 9001 standard introduces a quality management system that has been widely claimed would reduce the costs of business. One of the ways it does this is through a reduction in quality costs. The ISO 9000 quality management system establishes work procedures that reduce deficiencies and defects.

Some of the of the characteristics a Quality Management System (QSM) are as follows

• Set Quality Goals
  
• Ensure customer requirements are understood and met
  
• Train employees
  
• Control your production processes
  
• Purchase from suppliers that can provide quality product
  
• Correct problems and make sure that they do not happen again
  

Being ISO registered is not just a Marketing plot, a logo that you put on your stationary; it is constant work and dedication.

Having an ISO 9001 program in your organization means having an effective QMS leading to many improvements to the Organization, but the question is:

1. How are these improvements being measured?
   
2. Are there technologies in place to allow these measurements?
   
3. Are employees being trained regularly?
   
4. How do you manage your suppliers, vendors and subcontractors?
   

 

I don't have all the answers, nor do I consider myself an expert on the issue, I but I think that if in fact customer satisfaction is a business driver, it should be on the Senior Management's Agenda to monitor the successful implementation and the constant monitoring of QMS, and make everyone at the Company a key element of it.

In future Blogs I will attempt to answer the questions that I asked earlier, stay tuned.

 

Is the Construction Industry ready for the Cloud?

Probably most of you have heard the term: "The Cloud" in the last few months in all technology related web sites or Blogs, and publications. The Cloud is the latest technology buzz, like virtualization was couple of years ago.
Before we start talking about it can be used in the Construction Industry, let's define what it means:

If you google the phrase "Computer Cloud", you will probably get hundreds if not thousands of hits with a lot of different definitions, for simplicity sake let's define it as: Delivering IT computing and services over the Internet

Now if we perform the same search, this time using the words "Cloud" and "Construction Industry" you will not find more than a few hits, probably because of the slow adoption of newer technologies in this Industry. Cloud computing is composed of many different components and offerings, I will refer in this post to SaaS

SaaS – (Software as a Service) - one of the components of Cloud Computing is being adopted at a very high pace in the following technology spaces

• Customer Relationship Management (CRM)
  
• Business Intelligence (BI)
  
• Email
  
• Collaboration.
  

And companies are leveraging Cloud Computing frameworks as a strategy for growth, higher scalability and agility although there are still some issues to address like security threats and control of the systems.

Some of the major players in the Cloud Computing space are:

• Amazon.com
  
• Google
  
• Microsoft
  
• Salesforce.com
  
• VMware
  

Major adoptions of the Cloud that I see emerging in the near future for the Construction Industry are Project Management Applications, which will allow in my opinion better collaboration between all the stakeholders of the construction process thus guaranteeing agility, productivity, predictability and efficiency.
Some governmental Agencies like the NYCT are implementing this Approach with the introduction of Constructware and making sure through contractual obligations that Contractors also use these tools.

There are some other mission critical applications that I think will get moved to "The Cloud" like Messaging Systems, HRIS and others. Also many companies will adopt services like Google Apps and Microsoft with ample offerings in the Cloud space.

Check this article on Constructech to read for about SaaS in the Construction Industry

Keep tuned, I will keep blogging about this.

 

Has the Construction Job Site gone mobile?

The Construction Site has a very mobile work force. Project Engineers, Superintendents and Labor foremen are practically never at the Field Office but at the work site making sure that the work gets done within budget and schedule, unfortunately in the modern construction era, this is almost impossible, there is an enormous amount of information that has to be sent back on a daily basis to Construction Headquarters like for example:

• Daily reports
  
• QA/QC Reports
  
• Time Sheets
  
• Production Reports
  
• Etc.
  

Depending on the size of the Job, must of this Information is collected by the Superintendent, or the foremen and then pass it along to a Project Engineer, QA/QC Engineer or Cost Engineer to be interpreted, reformatted and transmitted back to headquarters in electronic format in the best case scenario, or via emails, faxes, etc.

This way of doing business is very ineffective, here some of the reasons:

• Productivity Loss
  
• Multiple Data Entry Scenarios
  
• Higher Costs
  

In order to reduce cost, improve productivity and have a competitive edge, contractors have to embrace mobile technologies, and introduce efficiencies in the Work place based on them.

There are few Software vendors in the Industry that have introduced Applications for Mobile Devices like Palm, Windows Mobile, Blackberry and others that capture data like quantities, time cards, daily reports and other and wirelessly sends it back to Headquarters, others allow GPS tracking, or scanning, and the list goes on. Also mobile devices have different form factors, not just mobile phones, but also tablet PCs and probably new devices like the iPhone and the iPad that soon will have Application written for them

Introducing these technologies in the Field Office and going Mobile in my opinion is the way to go.

 

 

 

The CFO and the IT Organization

Recently I was reading a Blog titled: "What makes a CFO uniquely qualified to be heading up IT? - You can read the Blog here

The discussion in that Blog is mainly focused on large Organizations where there is a full spectrum of C-level executives, and although my experience is with medium size Companies where there is not a C-Level structure, I still have the same question:

Who should the IT Organization be reporting to?

Before this question is answered, we have to understand how the Senior Management perceives the role of Information Technology in their specific Organizations

Either

A cost center where IT plays a reactive role and it's not viewed as a Strategic partner

Or

Brings value to the Organization, It's a strategic partner to the business and helps bring value to it.

If Senior Management has a misunderstanding of IT as part of the business, it really doesn't matter who the IT function reports to, IT will never be more that what was stated earlier – A cost center.
On the other hand, if Management understands the strategic place of Information Technology in helping a Company achieve its business goals and generate value, The IT function should report to an Executive that understands that vision.

In conclusion:

- It's very important to have the proper Organization Structure in regards to Information Technology.
- Management has to involve Information Technology with the Company's strategic plans.

Only them you will unleash IT value.

 

 

 

 

You can’t manage what you don’t measure

A close colleague of mine frequently mentioned to me that: "You can't manage whet you don't measure "when he was trying to figure out better ways to manage his business unit…

He is right on the spot, unless you measure something you don't know if it is getting better or worse. You can't manage with an eye towards improvement if you can't measure performance.
This college of mine - his name is Peter Harrow - is always thinking about how to use technology and management practices to automate business processes and workflows to better position his department as a key contributor to the Company overall success.

During our collaboration we created a set of Information Systems and Dashboards where important metrics and benchmarks were published and thus allowed him and his Department get close, instant look at the business.

Peter at that time was in charge of the Procurement Department and because of his business savvy, and inclination for analytics, he elevated that Department to a whole new level.

Below are some of the metrics that Peter and I were thinking implementintg, as well as some other that are of value to the Procurement process.

• 
  
  Cycle Time of a Purchase Order.
  
• 
  
  Average Time to procure.
  
• 
  
  Average number of modification to Purchase Orders.
  
• 
  
  Percentage of Emergency Purchases.
  
• 
  
  Percentage of Suppliers responsible for 80% of spends.
  
• 
  
  Percentage of Payable Invoices without a Purchase Order.
  
• 
  
  Percentage of key stakeholders satisfied with suppliers.
  
• 
  
  Procurement spent per Procurement Employee.
  
• 
  
  Procurement Employees as a total of Employees.
  
• 
  
  Procurement OPEX as a percentage of total spends.
  

In my opinion, Analytics will be one of the most used tools in business in the next few years, and it will require real leadership to start implementing it now.

Can’t see the real picture? – A brief look at EPPM

I have seen many cases in my long years of working for the Construction Industry that Management is working very hard trying to make complex projects work and be profitable, but without the right approach, and the right tools and technologies this task will get more and more difficult to accomplish.

Construction Projects are very complex in nature, and they require Management Systems that can add visibility to the process. It takes a more strategic view to move from a fuzzy view to an Organization that can look across their projects , and spend more time on real project issues, instead of dealing with inconsistent and nonintegrated technologies , inadequate and inaccurate Reporting,

A best approach is to move to an EPPM Model (Enterprise Portfolio Project Management)

Enterprise PPM solutions enable project leaders to plan, forecast and manage the status of all their projects down to
the task and resource level. The solution provides complete and total visibility across the enterprise for project status
and budgets. Budgets are formulated and tracked using fully-loaded schedule data and actual cash flows.
The solution scales to grow with business demands and requirements.

 

EPPM Solutions can help Construction Companies:

• Access, prioritize, and select the best projects to invest in
  
• Manage contingencies and other risk factors
  
• Improve the Management and Integration of the Engineering, Procurement and Construction processes
  
• Improve productivity of internal and external resources
  
• Manage with a limited pool of talent
  

 

In order to better compete in this Industry EPPM should be on the Senior Management Radar. The tools and technologies are already available. I think this is the path to seeing the Real Picture