Wednesday, October 13, 2010

Accountability

Introduction



Today there is a lot of talk about accountability in business, as well there should be. The term has become a business buzz word. Consider the stock market crash, who was ever judged as the accountable party for the crash? From my perspective, no-one was held accountable. The theory of accountability is very pertinent today; corporations should be responsible for their actions and the results which follow those actions.


Explanation


Corporations should not only be accountable for their financial performance, but also should be ethically responsible. Ethics cannot be legislated, they must be voluntarily pursued. Financial performance is governed through the stock market or through pay and bonuses. However Ethics can only be monitored by the corporation stakeholders (Board of Directors, Stock holders, Institutional Investors, Vendors).


Management’s job is to clear the path to success of obstacles, so that their subordinates can succeed in their role in the company. This is a major change over how businesses were managed historically, but think of it, if the employees are hindered in their tasks, how will the company succeed. Employees are not lazy, they desire good incomes and they realize that the better the company performs the higher their reward. Responsibility increases as one progresses up the corporate ladder, the reason is that more and more personnel are supervised.


Employees should be accountable, but only if they have the authority to be responsible. This means that in order to hold employees accountable they must be empowered.


Misunderstanding of the Concept


There is a great deal of misunderstanding surrounding the term “accountability”. What is a desirable trait for corporate behavior has been modified and interpreted as a culture for employees. Managers tend to use the term to fulfill their needs and unfortunately this leads to a perversion with negative impacts.


A type X manager feels that he is in control, and that people are vehicles for him to accomplish the task. The term Top Down decision-making is an accurate description. He uses coercion to enforce his decisions in many instances. In this environment people are not willing to accept accountability, nor can accountability be forced on them. All decisions are his, hence all results are his, thus he is the accountable party, and any consideration that his people are accountable is foolish.


Conversely, a type Y manager understands that employees will accept accountability if they are empowered to effect results of their process. In a theory Y environment employees are encouraged to participate in the decision making process, thus they have a stake in the results.


Micro-managers


How can a Micromanager be concerned about accountability, this is a real stretch. A Micro-Manager is the purest form of a Theory X manager. Think about what accountability means. First employees must be empowered to be accountable. Does a Micro-manager empower anyone? No, by definition a Micro-manager controls all aspects of his employee’s processes. The old conundrum about being responsible without having authority absolutely pertains. For those of you unfamiliar with the situation, if you make a person responsible without giving them authority you are setting them up for failure. You are also creating an intolerable workplace. Hence how can a Micromanager who does not empower people hold them accountable?


Benefits of “Accountability”


An empowered accountable employee will stick to an issue until it is resolved. This is a good thing; employees who stay engaged will persevere.


A culture of accountability is created, it cannot be imposed. People willingly become accountable when they have pride in their work, people take pride in their work when complements are paid and good work is rewarded. A negatively based manager does not have a prayer of creating this culture. Instead he will create the polar opposite; he will create a culture of blame and secretiveness.


A good application of accountability is in corporate governance. Corporate governance is the title of methods of controlling a corporation by means of a Board of Directors and stockholders.


“Insider loading” is the result when the President or other operational authority loads the Board of Directors with persons sympathetic to his causes. The Board of Directors then becomes a rubber stamp for any programs the President wants to initiate. There is no one to hold the operating officers responsible for the company’s performance or ethical behavior. This defeats attempts at instilling a culture of accountability.


Institutional investors are perhaps the only means that a corporation can be governed, hence held accountable. Institution investors have large blocks of voting stock and have the power to pull their stock if the corporation is not behaving in accordance with the mission, ethics and goals which have been stated. Institutional investors are a good means of enforcing accountability.


Creating an environment of “Accountability”


Deadline v. target v. stretch target


A deadline is a milestone that must be achieved for other actions to remain on schedule. In reality there are few deadlines, those who thing in terms of all tasks being deadlines subject to punishment are rigid project managers who are unable to conceive that plans should be fluid to yield the best results. A target is a milestone goal which is the expectation for completion. A stretch target is an optimal milestone for achievement. Milestone forecasting should be achievable using normal effort and considering there could be problems along the way which might delay the accomplishment of the task. Stretch goals are the result of extra exceptional effort and not encountering alterations to the plan which would delay it. It is important that Deadlines, targets and stretch goal be understood and utilized appropriately. If deadlines are consistently difficult to achieve then the initial planning of programs will not have any risk, but will include extra time to account for any delays that might occur.


Expectations


Expectations are what drive accountability. Reasonable expectations and a culture which does not blame, but seeks to resolve the occurrence of future issues will encourage accountability


Expectations should be defined for each of the three levels of management (Operational, Tactical, and Strategic). Consideration should be given that the appropriate goal is given to the appropriate level of management, for example you would not give a front line manager a goal of expanding the company through acquisition, you would want him aware that the executive had that as a goal, but it is not a goal he achieve.


The SMART goal concept should be used to define expectations. SMART is an acronym which means, Specific, Measurable, Appropriate, Realistic and Time based. Specific means the goal is well defined. Measurable means that goal is not subjective, but is something which can be measured. Appropriate to the situation or role of the individual. Realistic goals are achievable, not “walk on water”. Time based insures the goal is achieved in such that a benefit will be realized.


Watch what you measure, because you get what you measure. It an old adage, if you measure a given performance, people will focus on that process. It is probable that by focusing in that manner other important features of the business model will suffer. For example if you measure sales volume and desire higher volume, that is what you’ll get, profitable or not, you will get sales volume, it is possible you will bankrupt because prices are cut in an effort to generate more sales, perhaps to an unprofitable level.


Summary


Accountability is good concept when properly applied. Creating a culture of accountability requires changing believes and systems which lead to a culture of blame. A culture of blame does not advance an organization rather it hinders progress with fruitless and upsetting wasted effort. Theory X managers should be given the opportunity to adapt or be moved into support roles where they cannot impact the organizations culture.


An accountable culture will encourage perseverance and innovation both of which are assets an organization desires to survive in today’s business climate.