need more people?

EPISODE #241 TRANSCRIPT

When you’re seeking the support of your organization for additional resources of any type, you have to be able to sell the case. I released an episode a long time ago, in fact, well over two years ago, that many of you may have missed. It was Ep.126, Selling Your Proposal.

This episode is a hidden gem. In around 20 minutes, I cover off exactly what you need to do to construct a winning investment proposal, in a way that enables you to communicate the business case to the people who make the decisions.

I really think it's worth having to listen to Episode 126. But for purposes of this episode, I just want to go over some of the basics, so that we’re all on the same page. If you're going to present a proposal or business case, you need to understand the language of a business case.

No matter what you're asking for, you need to be financially literate: at least enough to talk about investment and returns. Now, I'm a simple man, so I like to focus on five main elements that should be addressed in a good investment proposal: strategic fit, financial benefits, non-financial benefits, assumptions, and risks.

5 MAIN ELEMENTS FOR A GOOD INVESTMENT PROPOSAL

1. Strategic fit

Your proposal will be asking for resources to deliver an outcome. How does that outcome fit with the overall strategic direction of your organization? You need to be able to demonstrate how it's going to contribute to the broader strategy.

You also have to be able to show why this investment is a better bet than any of the other available options. Investing is about making choices. You can't do everything, so you have to fund the best opportunities. Why is your opportunity better than anything else?

2. Financial benefits

You can't describe value unless you speak the language of finance. So, ideally, you'd understand things like return on invested capital, the time value of money, internal rate of return, discounted cash flow, and so forth. Even non-finance people can get a broad understanding of these terms and use them intelligently. Investopedia is your friend.

This is all about communicating what the organization needs to invest, and what you can expect to see as an outcome from this investment.

3. Intangible benefits

Not all value is financial. Sometimes it isn't even quantitative. I've seen fantastic proposals in the past for all sorts of things that deliver no direct financial benefit. For example, we ran a project once to create an employee value proposition for the company, to assist in the recruitment and retention of top talent. Value comes in all shapes and sizes, and it's not all about money. You need to use your experience and judgment to describe these intangibles.

4. The assumptions

Every investment proposal is driven by assumptions, and the expected benefits in a business case are sometimes incredibly sensitive to some of these assumptions, so make it clear what they are.

For example, your proposal might involve a contract in a foreign currency, and it carries exchange rate risk. The revenue might be in Australian dollars, say, but a large part of the cost could be in US dollars. So look for scenarios and sensitivity analysis.

The investment proposal might be underpinned by an assumption that the exchange rate is going to be say USD 0.75c to the Australian dollar. But what if that exchange rate drops to USD 70c, as it can really easily do? How does that affect the expected returns of the arrangement?

5. what are the risks that may impact on your proposed outcome?

Risk is a combination of two things, the likelihood that something will happen, and the consequences if it does. And these combine to give you an overall risk rating. What happens if a risk actually materializes?

Most proposals grossly underestimate the primary risk factors. And this is a result of the often wild optimism bias of its authors. So be as exhaustive as you possibly can in your risk analysis. Because if you don't identify them, your boss may well!

YOUR CONDUCT SETS THE EXPECTATIONS

When you think you might need more people, you need to ask yourself, why? And saying “we're all overworked” isn't really a good enough answer. You need to go deeper on this one. But let's start there, because it's real, and it's important. We're all overworked and it's taking its toll on the team.

A range of factors has led to many teams being short-staffed, compared to where they were pre-pandemic. Some of this has been forced by the labor market through lack of available skills, but there are also many cases where people were laid off to meet a drop in demand. And even though demand has now picked up, the staffing capacity hasn't been rebuilt.

This is awesome for profit margins, but it's not great for the people working double-time to make it all hang together. You've got to be aware of a very important principle before you take this one on: course of conduct.

This expression, which is sometimes called course of dealing, describes the pattern, the habits, and the expectations that are set in every working relationship. If you look at it from the perspective of a supplier and their customer, the course of conduct can override a signed contract that specifies completely different terms and conditions.

Regardless of what's written on the paper, if the two parties have a well-established way of dealing with each other, this takes precedence over anything else… even the agreed contractual terms.

How is this relevant to what we’re talking about?

Well, if you've been making something work okay with your existing complement of staff, then no matter how difficult it's been, you've established a course of conduct. Your boss may well be forgiven for thinking, “Hey, you've been working like this for 12 months. You've clearly shown that we can do the job with x number of people. So why are you now telling me that you need x plus 50%? I just don't believe you.”

This is why it's really important for you to be able to articulate the impacts. Start with the personal toll, and of course, attrition rates can help here… talk about the work you can't do, because everything's being held together with spit and gaffer tape… talk about the long-term consequences of not doing the things that protect your future earnings, or your license to operate.

Explain how you've been able to keep things together to this point… some of the corners you've cut… some of the compromises you've had to make… and why that isn't sustainable in the medium-to-long term.

Putting a logical investment case forward to your boss in these circumstances will enable you to communicate the cost and benefits involved in rebuilding your team capacity, the same way any other business case would.

That covers the case where you’re asking for more people because you’re struggling to keep up with the current workload. The next case though, which is much more common: adding people to deliver additional value.

WHEN MORE PEOPLE CAN CREATE A VALUE MULTIPLIER

Quite often, as a CEO and senior executive, I'd be approached by my direct reports to ask for additional resources. I had a standard response that would help me to sort out fact from fiction. But more on this shortly…

If you’re seeking additional resources, the number one rule is that you have to be able to demonstrate the value that will be created. Simply matching resources to workload is a mug’s game. You've got to be able to articulate the value creation opportunity, bearing in mind that value comes in many different forms.

Your challenge is to break the natural mental paradigm of cost control. In a couple of weeks’ time, I'm going to take on the topic of short-termism, and give you some ideas for how to overcome it.

This is particularly the case if you work in a functional, or staff role (so think HR, finance, IT, risk management, etc). The natural tendency of the leaders at the top is to simply try to minimize cost. It'll always be this way for non-revenue generating functions, and this is entirely appropriate.

But I spent most of my career in these types of roles, and I really got good at selling the case for investing more people and money into better outcomes. You've got to break people's focus on cost, and encourage them to think about the whole investment lifecycle. Which is why I started this episode with a fly over the top of how to put an investment proposal together.

To demonstrate the different approaches I took as a chief information officer: I used to separate the investments that the business made into IT into three separate categories:

1. The provision of essential services

Hardware, software, and telecommunications. And that is about delivering a fit-for-purpose service at the lowest possible cost. Doing more with less is absolutely the mantra here. Seeking additional resources in this category is a big ask, unless there's an imminent identifiable risk (e.g. a known cybersecurity vulnerability).

2. The delivery of information that enables the business lines to better understand their performance, and manage the business accordingly

This includes things like financial reporting software, and ERP-style services (like accounts payable, inventory control and asset management).

Resource investment here was much more common, but came down to the business needs. I was always at pains to make sure these investments were driven by a business sponsor who identified the need and owned accountability for the results. Some of this spend would've been considered discretionary, and some would've been non-discretionary.

3. The delivery of innovative technology that provided strategic advantage to the company

Despite what many CIOs would tell you, this type of investment is quite rare. I was involved in one excellent example of this, at National Transport Insurance almost 20 years ago.

We outlaid a huge investment to replace all the core systems: underwriting, claims, fleet management, and workflow. It was all replaced with custom-built software. This type of investment is usually owned by the CEO, and has to have board support. It's a huge bet, because you're investing for competitive advantage, and that's a really difficult state to achieve.

But at NTI, this provided competitive advantage for a specialist insurer that the larger general insurers could not compete with. Talking to our chief executive, Tony Clark, many years later, he told me that the new system underpinned NTI's growth, profitability, and competitive advantage for more than a decade.

Each of these types of investment had to be carefully considered. And any request for additional resources was in the context of the type of value that would be returned. Was it the essential infrastructure that supported our business-as-usual operations? Was it the systems that drove the day-to-day business? Or was it a big strategic play? The conversation you need to have is very different, depending on which of these investment types you’re pushing for.

Okay, let's get back to the main game. You think you need additional people, which equates to additional money. And you want to maximize your chances of having the request accepted. So, as you might expect me to say, you have to start with value. If you want to break that ‘cost-only’ mentality, never talk about cost on its own. Always talk about the value creation opportunity.

If you can't articulate this in a compelling way, well, maybe there's something in that, and you need to listen. It's highly likely that there isn't sufficient value to warrant the investment if you can't describe it clearly. The moral of the story is, get your ducks lined up before you have the conversation with your boss.

Now, let's say you can prove out the value case. The next step is to do your own work to demonstrate creativity in minimizing the cost of the investment. For example, if you bring on more permanent staff, you increase the fixed overheads, the cost of doing business. These costs have to be paid for somehow, either by increasing revenue or accepting a reduced net margin.

So, it might be worth your while to think about using temporary resources, instead of bringing on more permanent staff.

SO, YOU THINK YOU’re ready?

If you do end up thinking you've got a value proposition that could be accepted, and you're going to ask someone like me for more people, then you should know how I think.

Whenever my executives came to me with a request to increase their headcount, I would always ask three questions. And I'd say to them, look, I don't want you to answer this now. I want you to go away and consider it, and come back to me if you think you can meet these three criteria.

The first question was, “Can you put your hand on your heart and tell me that everyone on your team is working on the highest value things?”. So in other words, there's no fat: there's no unnecessary activity going on that doesn't drive unique value.

The second question, “Can you put your hand on your heart and tell me that everyone on your team is performing to the minimum acceptable standard?”. If you have passengers on your team, there's no way I'm going to compound the felony by hiring more people for you to mismanage.

The third question, “Can you put your hand on your heart and tell me that everyone on your team is working at the right level ,and not over functioning for other people in other teams who aren't doing their jobs?”. This is, of course, a variation on the theme from question two. But it does scrutinize individual performance on a cross-team basis, which is particularly important for staff roles that support the business units.

These questions were designed to make my execs think about the other options they had for getting a better outcome, without just mindlessly adding more resources. There's very few problems that get solved by throwing money at them. Needless to say, I didn't get them circling back to me very often to revisit their request.

THE HARD PART IS JUST STARTING: NOW FIND THE PEOPLE!

Just knowing that that's the way I think about the concept, those are probably questions that you want to be able to answer for yourself before you go to your boss with a request for additional resources.

If you do manage to get it over the line, you then open the door to your next problem: Once you've got the green light to bring people on board, how do you find them in the current job market?

And that, my friends, is a completely different proposition!

RESOURCES AND RELATED TOPICS:

• Ep #126: Selling Your Proposal - Listen Here

• Investopedia - Check It Out Here

• Buy the NO BULLSH!T LEADERSHIP BOOK - Here

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