Insight and Innovation
Volume 25 | Fall 2014
Latest News from The Hill Group:
Message from the President
Chris W. Brussalis, President & CEO
The articles in this newsletter highlight the importance of understanding an organization’s capacity, meaning its core strengths, core weaknesses, and how to leverage that to create or satisfy market demand. This edition’s three articles touch on these elements.
The articles in this newsletter highlight the importance of understanding an organization’s capacity, meaning its core strengths, core weaknesses, and how to leverage that to create or satisfy market demand. This edition’s three articles touch on these elements.
“In “Unlocking Strategic Advantage through Organizational Capacity,” our Vice President Jordan Pallitto makes the case to not ignore and, instead, provide as much diligence to an internally-focused, resource-based approach to planning as you might an externally focused one. Both are equally important. Too often, organizations focus on their external environment but do not consider the internal capacity and resources that it can bring to bear to differentiate and distinguish itself in the market.
“The Bridge to Success: Resource Development” describes how to identify an organization’s resource gaps and the approaches you might take to address them in order to optimize performance. A good understanding of the gap between resource needs and an organization’s current capacity will inform an organization on the requirements necessary to fulfill a plan, as well as the ability to assess and manage risk.
The final article, “Increase Value from your Data Dashboard,” provides guidance on how to appropriately measure and evaluate key performance indicators in order to ensure appropriate leverage of organizational capacity. It is difficult to manage what is not measured; therefore, measurement and evaluation of KPIs is critical to managing any plan.
Enjoy these articles as you and your families, both at home and work, celebrate the year and your successes and begin to think through the great possibilities for the year ahead. On behalf of The Hill Group team, I wish you the happiest of holidays this year and a prosperous 2015!
Unlocking Strategic Advantage through Organizational Capacity
Jordan Pallitto, Senior Consultant
An alternative approach to planning – one that begins with an internal focus – may actually bear more fruit and help define and develop competitive advantages. Internally-focused, resource-based strategy formulation guides an organization to develop future plans based on its current infrastructure strengths and assets.
Most strategic planning starts with an external focus, articulating what the company’s leadership team envisions as its place in the market five or 10 years in the future. There is good reason for this. An external focus provides context (where are we in comparison to competitors? What is happening in the world that might impact us and our customers?). An external focus provides inspiration for aspiration (We want to be recognized for changing the world. We will be better than all of the others). There also are drawbacks. Externally-focused planning is wrought with assumptions (We expect the market to perform in a certain way. We suspect our competitors will move in a particular direction). Externally-focused planning may even lead an organization to “bite off more than it can chew” (Our vision is to be the single best in our field in the next five years). For some organizations, especially those in more volatile markets with high costs of capital, an externally-focused planning process may become a better paperweight than guide for strategy and operations.
For these types of organizations and many others, an alternative approach to planning – one that begins with an internal focus – may actually bear more fruit and help define and develop competitive advantages. Internally-focused, resource-based strategy formulation guides an organization to develop future plans based on its current infrastructure strengths and assets. The theory suggests that existing company resources such as technology, people, or processes (1) define and build company capabilities, (2) are the foundation for competitive advantages, and (3) drive organizational strategy. Instead of trying to wrap minds around a world of possibilities, this resource-based view appraises the value of resources, documents how combined resources translate into actions, and demonstrates how those actions set a business apart from others in the marketplace. In short, organizational capacity drives organizational strategy.
According to economist Robert Grant, who argues that a company’s internal resources and capabilities can better inform business strategy, there are several high-profile examples of organizations that have developed and sustained competitive advantages through an internal approach to planning. Honda, for example, understood that its resources led to the creation of world-class technical capabilities in four-cycle engines. Recognizing this as a competitive advantage, Honda leveraged its technical expertise in a broad range of motors and engines to build products from cars to lawnmowers to jets, three markets that might not intuitively fit together or come together in an externally-focused planning process.
Like Honda, your organization likely uses or has access to resources that you harness and already do (or could) deploy in a way that builds your unique capabilities. While you may not be acutely aware, you may already have the organizational capacity to set your business apart from others, yielding unparalleled success. For example, imagine a manufacturing firm that has built and nurtured incredibly strong relationships with its suppliers and sources of raw materials over the past several decades. One byproduct from this relationship could be that the team of employees from the manufacturer and the supplier, when combined, know more about the sourcing and use of a particular material than any other team in their part of the country. This could be a significant asset to both companies. In an externally-driven planning process, however, this could be overlooked in favor of new trends within the manufacturer’s existing core market. Identification of this unique and differentiating capability through a resource-based planning process could open up broad new possibilities, markets, and revenue sources for both companies, leveraging their combined competitive advantage in materials sourcing and knowledge.
Exclusive reliance on internally-focused planning poses grave disadvantages, of course. If an organization or company never or rarely worries about new issues in its core industries or markets, it may quickly become obsolete. If any organization fails to envision an inspiring and exciting future for itself or set ambitious goals, it may never achieve its full potential. In the end, a strong strategy development process considers both internal and external environments using data and research to inform planning teams about each. For a balanced approach to planning that accounts for the external environment while emphasizing resource-based competitive advantages, consider the following steps as part of your traditional planning methodology:
- Form a diverse, cross-functional, and multi-level planning team within your organization. If only board members, only executives, or only front-line employees plan for your organization’s future, it won’t be very bright. Critical to discerning your true resources, capabilities, and competitive advantages is having team members from all aspects of your operation engaged in strategic dialogue.
- Assess, map, and truly understand your internal environment. Invest in surveys, assessments, process inventories, and other tools that are needed to help your planning team grasp the organization’s breadth and depth. Enumerate all of your company’s resources. Identify and dialogue how your company combines those resources in unique ways. Discern your company’s capabilities that make it different from any other organization. Articulate your competitive advantages.
- Understand the external environment. Gather data on trends and issues outside of your company that may impact you and your clients. Read and synthesize relevant journals and market research so your planning team can understand what is happening in the world around your organization. Engage a consultant or two who can help you to understand what other companies, competitors, or best-practice organizations are doing within your industry and geography. Define new places to use your competitive advantage.
- Consider augmenting the way you describe your company. Instead of defining your organization by who or what types of clients you serve, define yourself by your unique capabilities and competitive advantages. While this may seem like a marketing gimmick, it can actually help both internal and external stakeholders better understand who you are, what you do, and why you are better at it than the competition.
As you think about your organization’s future, be sure to think about your capacity and infrastructure – not only because it is critical to what you are doing, but because truly understanding it and how it makes you different and better than others in your market could be the key to unlocking new, otherwise unexplored, opportunities.
For more information on how your organization can define its competitive advantages and leverage them into new opportunities, contact Jordan Pallitto, Vice President at The Hill Group, at 412-722-1111 or firstname.lastname@example.org.
The Bridge to Success: Resource Development
Matthew Howell, Business Analyst
Even the most inspiring vision and the finest strategic plan will fail if not supported by the correct mix of resources. Having the right people, technology, financial capital, physical resources, or organizational capacities in place is critical in today’s competitive marketplace. For your organization to find success, it’s important to build a bridge between the requirements of the external environment and your own internal capacity.
Figure 1. Strategy and Resource Requirements
How can you determine if your organization has the right mix of resources for success? A comprehensive strategic planning process can help you identify any existing gaps. Part of that process is a critical assessment of your organization’s capacity against its external opportunities and threats. This type of assessment not only provides your leadership with necessary insight into the magnitude and type of resources needed but also their availability, methods for obtaining them, and the timing or priority of need for each.
To effectively assess your current resources, start by identifying and classifying your assets into six major categories: financial, physical, human, technological, reputation, and organizational resources (i.e. process). This discipline of listing all of your resources, including those not found on a balance sheet, will enable you to clearly appraise the assets of your organization. This exercise may sound elementary, but an honest inventory of your current resources can provide a true picture of your organization and allows managers to begin asking if there are any opportunities to economize, are there better and more effective ways to use your resources, or if there is a need to acquire new resources.
When you are ready to take the next step, a strong strategy to augment, replace, refresh, and upgrade resources and capacities is critical for success in the marketplace. Traditionally, capacity development is pursued through internal development, mergers and acquisitions, or strategic alliances. Simply put, firms have the choice to build, buy, or ally to attain the resources they need for strategy execution. Each has its own benefits and drawbacks:
Build. The choice to develop a resource internally provides firms the opportunity to internalize the ability to develop additional new resources. Internal development also provides full ownership of intellectual property and delivers a full return back to the organization. The risks of building resources internally include the uncertainty of outcome, substantial internal investment, and long development periods.
Buy. Mergers and acquisitions are the heart of the buy strategy. Resource acquisitions enable firms to quickly gain access to critical resources (i.e. knowledge, new technology, talent, or intellectual property). On the other hand, buying can lead to higher costs, disruptions in process and routines, potential misalignment related to current resources, low reversibility, risk of overpayment, and potential cultural clashes.
Ally. Acquiring resources through partnerships, joint ventures, alliances, and licensing agreements benefit firms by providing shared risk across partners, access to new knowledge with low transaction costs, and the flexibility to enter, commit, or exit these relationships. Risk associated with partnering include a lack of control, relationship risks, threats of opportunistic behavior, potential competition between partners, and the necessity to shared returns.
While it’s important to understand the strategic implication of how you will acquire a resource, it is also important to understand how your new resource will affect your organization, especially in terms of your competitive position. To evaluate the value of new resources, consider using the “CAT Test.”Complementary, Appropriable, and Transferable. By answering the three questions below, your leadership will have a better understanding of the current and future importance of new resources and can prioritize the operationalizing of new assets and capabilities:The CAT Test evaluates a resource or capability on whether it will be
Complementary. Is the new asset or capability complementary to the current resources and capabilities that serve as the basis for your firm’s competitive advantage in the marketplace?
Appropriable. Can you appropriate enough value from a new resource or capability to justify the upfront cost and opportunity cost associated with its acquisition?
Transferable. Can your company effectively or efficiently integrate the new asset or capability to other divisions or geographic locations without sacrificing the value to your organization?
Once you understand the implications of resource acquisition and move to purchase the new asset, the challenge becomes turning it into a competitive advantage for your organization. Competitive advantage, at its essence, is a coordinated set of resources and capabilities which enable a firm to compete in a market. Companies operationalize their resources and capabilities in a firm-specific manner which provides for the greatest return. This return ideally is in the form of a sustained competitive advantage.
A multitude of business case studies describe, in languishing detail, the missteps and misdeeds of managers related to capacity building and its implementation in the pursuit of competitive advantage. You can mitigate these risks during the development process by focusing on intermediate outcomes critical to capacity development and the change process required in building organization competencies. These measures should be selected based on the outcomes that will provide the most meaningful report on change, sustain stakeholder support, and align with objective outcomes.
The Hill Group has extensive experience providing firms across sectors with the expertise and insight into resource development and strategic planning. For more information, contact us at 412-722-1111 or email@example.com.
Increase Value from Your Data Dashboard
Stephanie Mancine, Business Analyst
Many organizations take on capacity-building activities like strategic planning, succession planning, technology implementation, and employee recruitment without a mechanism to appropriately measure their effectiveness. By augmenting decision-making strategies with data collected, your business can improve performance and inform sound capacity buildling activities. The best way to ensure that your business is collecting, presenting, and utilizing the right data is by perfecting the use of a data dashboard.
For an organization to sustain itself and adapt to an ever-changing business climate, capacity building is vitally important. Capacity building activities can enhance and improve an organization’s ability to achieve its mission and vision. But many organizations take on capacity-building activities like strategic planning, succession planning, technology implementation, and employee recruitment without a mechanism to appropriately measure their effectiveness. By augmenting decision-making strategies with data collected, your business can improve performance and inform sound capacity building activities. The best way to ensure that your business is collecting, presenting, and utilizing the right data is by perfecting the use of a data dashboard.
A data dashboard is a tool that delivers real time or just-in-time metrics around critical success factors of an enterprise. In business, these critical success factors are often stock price, revenues, quarterly earnings, and market share. In higher education, job placement rates and academic outcomes are compared across institutions. For nonprofit organizations, community impact is measured to clarify the overall effect an organization has on the populations its serves. By tracking metrics around these kinds of critical success factors with a data dashboard, a business can analyze and use the data to make optimal choices while planning business operations, logistics, financial planning, and other activities that bolster capacity building. It can support decision making and make the process faster and easier by allowing a wide variety of business users to interpret and interact with the data, not just well trained analysts. Users can immediately see whether targets are being met, understand performance issues, identify opportunities and threats, and pinpoint issues that require further research.
So what business performance measures are most effective? What data should be collected to build capacity and achieve mission? Business performance data should focus on more than the typical financial measures such as ROI, cash flow, and cost of sales. Although these are necessary and valid measures, they are lag indicators; they show what has happened but provide no predictive power.Additionally, these measures do not allow organizations to pinpoint the origination of problem areas or the process, operations, or strategy that must be addressed to correct them. However, these measures are important to include in monitoring your progress toward desired outcomes and strategies.
In order to pinpoint the factors driving success or causing problems, Key Performance Indicators (KPIs) should be included in your dashboard. KPIs are metrics that are tied to a strategic objective and enable you to evaluate progress, either in an ongoing manner or upon completion of an event, against desired performance levels. For example, in a sales organization, you could keep tabs on the pace of sales revenue or the ratio of sales opportunities to a target. Some lead indicators for a marketing organization might be an email marketing engagement score or a measurement of the engagement levels in your social media campaigns. Depending on your industry, there are always the stalwarts of current ratio, quick ratio, accounts receivable turnover, inventory turnover, as well as net and gross profit margin. The important thing is to measure what is critically important to your business. To decide what KPIs to include, take a look at your strategic plan—what are you trying to accomplish and what truly drives your business? Choose five or six of your most important objectives and best metrics to operationalize them.
A specific and commonly used mechanism for measurement and presentation of data reflecting the health of your organization is a Balanced Scorecard. Originally introduced by David Norton and Robert Kaplan in a 1992 Harvard Business Review article, the Balanced Scorecard has become an essential tool for managers in measuring their intangible assets. The complexity of managing an organization today requires that senior leadership and management view performance in several areas at one time. The Balanced Scorecard allows you to look at the business from four different perspectives:
- Financial Perspective: Do your actions contribute to greater financial performance?
- Customer Perspective: How well do you serve your costumers?
- Internal Perspective: Do work processes add value for customers and stakeholders?
- Learning and Growth Perspective: Are you learning, growing and improving as an organization?
A data dashboard or Balanced Scorecard forces your focus on the handful of measures that are most important to your organization. A scorecard brings together, in a single report, many elements of an organization’s competitive agenda including: becoming customer oriented, shortening response time, improving quality, emphasizing teamwork, reducing new product or program launch times, and managing for long term success.
Effective dashboards consist of concise, informative data points that are valid and reliable and help direct actions that are in alignment with organizational goals. Of course, it is possible to create a meaningless dashboard that does nothing to further decision-making and organizational improvement. A few concepts can help your organizations to avoid this pitfall and develop an effective and valuable data dashboard that provides your leadership with useful information to identify opportunities and increase your organization’s competitive advantage:
- Develop a strong understanding of your data sources, including business rules, latency, and how information interrelates
- Create a data repository to management historical and real-time data that is able to identify trends and forecast
- Define metrics and targets to achieve the organization’s mission and work toward the vision
- Collect high quality data to ensure accuracy and validity
Taking the time to develop a simple but effective data dashboard for your organization can provide your leadership with a solid launching point for critical decision making. It can make access to data easier and provide insight on how well you are performing and improving towards your goals. A dashboard enables you to focus the complexities of decision making on what is truly important and impactful to your organization.
Hill Group consultants are experts at analyzing data to help your organization improve performance. Contact us at 412-722-1111 or firstname.lastname@example.org for more information about how we can help you gather the right data to make critical decisions.
Pallitto Elected Chair of The Consortium for Public Education
Hill Group Vice President Jordan Pallitto was elected Chairman of the Board of Directors of the Consortium for Public Education. The Consortium is a nonprofit organization working with school districts across western Pennsylvania on initiatives strategically designed to strengthen and broaden school leadership, engage community, and empower students.
Hill Group Vice President Jordan Pallitto was elected Chairman of the Board of Directors of The Consortium for Public Education. The Consortium is a nonprofit organization working with school districts across western Pennsylvania on initiatives strategically designed to strengthen and broaden school leadership, engage community, and empower students.
“I am proud to serve as chairman during this important time for The Consortium,” said Pallitto. “Next year, we are celebrating our 30th Anniversary. While we have had a long, successful history of advocating for excellence in public education in Pennsylvania’s schools over the past three decades, I believe our future is even brighter than our past. We are at an extremely exciting place as we prepare to launch new initiatives, like our eMaps tool that uses technology to help students prepare and plan for life beyond high school. Through our innovative programs, The Consortium is making an impact in our region and beyond as we continue to work to ensure that all children have access to the high quality learning experiences that are critical to future success.”
The Consortium will mark its 30th Anniversary with the Champions of Learning Awards Dinner on March 28, 2015. The awards dinner will be the first of its kind for The Consortium and will recognize teachers, administrators, business leaders, and community leaders who have contributed significantly to public education.
Pallitto is a Pennsylvania Association of Nonprofit Organizations (PANO) Standards for Excellence Trained and Approved Consultant. He earned a Bachelor of Arts degree from Allegheny College and a Master of Science degree from the Heinz College at Carnegie Mellon University.
Pallitto also serves on the Board of Directors of the Community Foundation of Westmoreland County (now part of thePittsburgh Foundation), Pennsylvania Association of Nonprofit Organizations, the Hempfield Area Education Foundation, and on the Robert Morris University Health Services Administration Advisory Board. He is a graduate of Leadership Development Initiative XV, a program of Leadership Pittsburgh, Inc.
CARNEGIE, Pa. — Chris W. Brussalis, President and CEO of The Hill Group, Inc., a national management consulting firm, was re-elected by the membership of Phi Delta Theta International Fraternity to a third term on the organization’s General Council. The General Council is the governing board of directors for the Fraternity. It serves 11,000 undergraduates at colleges and universities across the United States and Canada and 175,000 alumni worldwide. Brussalis will serve a two-year term as the Reporter (secretary) of the board.
“In the past few years, Phi Delta Theta has experienced double-digit growth in both membership and new chapters,” said Brussalis. “We are so proud of our undergraduates and their accomplishments on and off campus. As a result, we have a great value proposition for our alumni, allowing us to grow our foundation 140 percent over the last four years. I am looking forward to building upon our recent successes to impact more lives through Phi Delta Theta’s values-based leadership model.”
Brussalis was initiated into Phi Delta Theta’s Pennsylvania Delta chapter at Allegheny College in Meadville, Pa. in 1984. Over the past 30 years of his membership, Brussalis has served the Fraternity in a variety of roles, including Phikeia Educator to Pennsylvania Delta chapter, Chapter Advisor to Illinois Eta chapter (University of Illinois), House Corporation Trustee for both Pennsylvania Delta chapter and Pennsylvania Gamma chapter (Washington and Jefferson College), and most recently, as Upsilon Province President, overseeing six chapters and two alumni clubs in western Pennsylvania and West Virginia.
“I am honored to continue serving my Brothers on the General Council. One of the best decisions of my life was joining Phi Delta Theta. As an undergraduate, I had a great experience, but I am getting even more out of the Fraternity now as a volunteer. Thank you for allowing me the opportunity to live out the Phikeia Oath and ‘to transmit the Fraternity to those who may follow after, not only not less, but greater than it was transmitted to me’,” said Brussalis.
In addition to volunteering for Phi Delta Theta, Brussalis also serves on the boards of the national ALS Association,American Society for Competitiveness, Regional Learning Alliance, Leadership Pittsburgh, and several university advisory boards. Brussalis is also Adjunct Professor of Management and Policy at the Heinz College of Carnegie Mellon University.
The Hill Group welcomes Matt Howell to the firm. As a business analyst, Matt provides support for various projects focused on strategic planning and market research.
Matt earned a Bachelor of Arts in Political Science and Economics from La Salle University in Philadelphia, Pa. He has professional experience in local politics from his time with State Senator Jay Costa and has also worked for the Philadelphia Industrial Development Corporation. Among his interests are international relations and global economic development, particularly in third world countries. In addition to his professional experience, Matt also spent time working with service groups in Philadelphia as well as with the Village Mountain Mission in the Dominican Republic.