Sunday, October 7, 2007

Accountability - They Are Still Missing The Point

Many in Government are talking about accountability in business as a result of the accounting and stock market scandals. President Bush signed the Corporate Fraud Law, which was supposed to make CEO's accountable. They are still missing the point about accountability. What they are really talking about is responsibility to the law, not accountability! In addition, they are talking about accountability as if it were something that can be legislated or directed - it cannot!

What then is accountability? Accountability is a combination of responsibility and standards (ACCOUNTABILITY = RESPONSIBILITY + STANDARDS). This implies a definable and measurable commitment to deliver a specified result. In other words, to paraphrase Harry Truman, it defines where the buck stops, which is at every level of responsibility. A great part of the confusion comes from a lack of distinction between responsibility and accountability. Responsibility refers to the duties to be performed, describing what should be done without specifying how well or how timely tasks should be performed. Responsibility is an action, accountability is a result (compared to standards).

The next logical question is: Who are we accountable to? Responsibility and accountability by their nature infer a relationship. The answer to the question is; our stakeholders. Stakeholders are individuals or organizations who are involved in or may be affected by the activities of the enterprise. There is a diversity of stakeholders within any enterprise or organization. Each stakeholder has a different and unique need that must be met by the organization. For example, an employee has a need for security, a paycheck, and a safe working environment. On the other hand, an investor has a need for a reasonable rate of return on their investment. A customer has a need for a quality product or service that provides value. The local government has a need for tax revenues and so on.

The business community has failed at the point of the stakeholder, because it has taken an unbalanced approach to meeting stakeholder needs. For business to be successful, it must be accountable at all levels to all of the various stakeholders. For many years, business has focused on meeting the needs of the investors rather than meeting the needs of all of the stakeholders. For example, a company decides to cut costs to drive up its perceived value to investors, and lays-off 1,700 employees. What is the impact on the stakeholders? Investors see improved cash flow and reduced liabilities, thereby making the perceived value of the company stock greater. The CEO realizes increased value to their assets (stock and stock options). The laid off worker is out of a job and realizes diminished value to their assets. The retained worker realizes greater demands on their time, decreased quality of work life and home life, greater stress, etc.

The impact on the organization is greater turnover (voluntarily and involuntarily) which drives costs up, increases waste, reduces effectiveness, and in many cases loses customers. The myopic view of stakeholders is threatening the long-term viability of the enterprise or organization.

Business needs a fresh look at how it is conducting itself in order to re-establish the trust of its stakeholders. A few arrests wont do, new laws wont do, and the words of our politicians wont do. We need to re-think our business structures in terms of true accountability to our stakeholders ALL of our STAKEHOLDERS! This requires reinvent our business in such a way that it is accountable at all levels. Accountability must be linked throughout the organization to its strategic purpose, its vision and values, and to all of the stakeholders.

Accountability requires a commitment from all parties. That commitment must be based upon an obligation to obtain predetermined results in a given activity. Such commitment will only come when both parties have a say in building the accountability. Such accountability does not just happen, it requires a system.

Any such system must take into account the obligations that all enterprises or organizations have to their stakeholders. Without an obligation, there can be no accountability. In business there are five fundamental obligations, they include:

Survival obligation

Essential work obligation

Principal markets obligation

Principal product obligation, and

Principal territory obligation.

These obligations exist at all levels of the organization, though they may be stated a bit differently at each level or from department to department. They drive the companys mission as well as its strategic purpose. The five fundamental obligations provide the basis for defining the work in terms of Continuing Vital Activities. These activities, which if not performed according to certain standards, could impair overall operating results.

Continuing Vital Activities (CVAs) are the framework within which realistic and achievable objectives are developed. They help focus the work so that objectives reflect what needs to be done (results based objectives), rather than what will ensure that bonuses are obtained (permissive objectives).

We need to change from the system of permissive objectives that many organizations have fallen victim to one that links concrete results to the obligations that the organization has to the stakeholders. These objectives require that standards be applied to ensure that the necessary results are obtained. The greatest barrier to effective results oriented objectives is a resistance by managers and subordinates alike to define appropriate standards. Standards development must be a part of any accountability system if it is to succeed.

There is a program available for building a true accountability system within an organization - it is called the Accountability Focused Management system provided by The ALERA Consulting Group, Inc. The Accountability Focused Management system provides a systematic structure built upon the five fundamental obligations. It creates an atmosphere of mutual commitment to those obligations by both management and personnel. It helps organizations analyze work to identify Continuing Vital Activities necessary for the success of their day-to-day operations. Once the CVAs have been identified for a position, the Accountability Focused Management system requires managers and subordinates to sit down and discuss the nature of the work in terms of the results the manager needs to get from the subordinate. The subordinate then defines the standards he is willing to, or capable of, achieving in the required time frame. The discussion between manager and subordinate produces a Results Commitment for each of the identified CVAs.

The Accountability Focused Management system changes the focus from responsibility to accountability.

Brice Alvord has over thirty years experience as an internal and external performance improvement consultant. He holds a BA in Sociology/Psychology from Central Washington University and an MBA degree from City University of Seattle. He is the author of over two dozen books on continuous improvement and training. http://www.AleraGroup.com