Welcome to the Critical Path Blog
Where each Tuesday and Friday I will release free lessons from my latest book, The Critical Path Manifesto: How “Knowing-What-To Do” Separates Winners from Losers. In the midst of the COVID-19 pandemic, the critical path is more important than ever: when you and your organization connect to the critical path, you can better position yourself for success.
One of my goals is to build a community of support for readers along the Critical Path: an ongoing dialogue where we can share with each other questions, ideas, and examples—a place where we can learn from and help each other. I invite you to join The Critical Path Slack, where you can ask me and the community questions about critical path lessons, work, life, anything (well, almost anything :-) ).
Please join the conversation and let’s help each other along the critical path, together.
The Critical Path Manifesto
How “Knowing-What-To Do” Separates Winners from Losers
PART Six: Launching Yourself on the Critical Path
Lesson 61: Deep Work on the Critical Path
Knowing about critical path work and actually doing critical path work are two different things. People trying to contribute to the critical path often find themselves diverted by being swamped with emails, interruptions, make-work, or other distractions…
Lesson 60: What Every Employee Should Know about the Critical Path
It’s up to you if you want to be a major player on the critical path. To do so, use the guide below which was summarized from the first four parts of the book to gather current knowledge of the following:
PART FIVE: THE CRITICAL PATH MINDSET
Lesson 59: Understand the Definition of “Value-adding”
Creating more value for your employer than it costs to keep you is just the beginning. That is more of a “break even” way to think about your job. Instead, think about how your net value to the company is the difference between the money they can make off of you and your cost to them. The higher the profit margin on you, the more valuable you are to the organization.
Lesson 58: What about Passion?
Employees and students often ask where the “passion” is in this definition of jobs. After all, they say, if I’m passionate about the job, isn’t it more likely that I’ll be more interested, happier, and do better work?
Lesson 57: You Are Part of Money Making Mechanisms
Your value to any organization is as a potential asset that is worth more than your cost to the organization. For most business organizations, their simple goal is to make money by providing a service or product. For political organizations, it is to raise money to gain power (and oftentimes to use their power to raise money…
Lesson 56: Who Is Leveraging Whom – Mergers and Acquisitions?
Now let’s return to the example of Rupert Murdoch, who seems to have overpaid for a newspaper and two sports teams.
Murdoch is doing the equivalent of the consulting firm leveraging Corinne, only using companies rather than people. Plus, his end game is different. To understand why he would pay an additional $2 billion for the Wall Street Journal, we need to analyze past deals.
Lesson 55: Who Is Leveraging Whom – Employers or Employees?
Now let’s return to one of our examples in the previous Lesson and take a closer look.
Corinne, our 26-year-old MBA graduate, is thrilled with her $180,000 salary. Not only is it well above the average of her graduating class, it will help her pay down her $120,000 MBA debt more quickly. On top of all this, she will work for one of the premier firms and get great experience across multiple industries. So, we know what she’s getting from the deal, and on its surface, it sounds pretty good.
Lesson 54: Leverage: The Physics of Business
Let’s consider a few case studies:
Corinne, a 26-year-old MBA graduate from Carnegie Mellon’s Tepper School of Business, received a starting job offer of $180,000 at one of New York’s leading consulting firms. This is about three times what her roommates who did not go to graduate school are making. Who in their right mind would pay a 26-year-old $180K?
Lesson 53: Your Value Is in What You Do
At this point, many career advice books suggest that you take an inventory of what you bring to the world of work in order to figure out what you have and what is unique to you. Many career coaching books will tell you to list your skills, abilities, the disciplines that you are expert in…
Lesson 52: Dreams versus Assets
Most of us think about pursuing our dreams, as well we should. Dreams are powerful motivators. Equally important to consider is the reality that results from pursuing the dream. Once you have your unique assets in place, what are the chances for success?
Lesson 51: You are a Unique Bundle of Assets
You are a unique human being. No one else is even close. No one thinks or sings or laughs or even gets mad like you. Your many talents, the variety of your life experiences, and your range of emotions make you one-of-a-kind.
Part Four: Designing Organizations Around the Critical Path
Lesson 50: Organizational Structures for Knowledge-Driven Companies
If your critical path is driven by knowledge, then you might consider an organizational structure that leverages that knowledge for the critical path. The classic article “Leveraging Intellect,” by James Brian Quinn, Philip Anderson, and Sydney Finkelstein looked at organizations where knowledge provides key value to the customer, ranging from airline operations and brokerage firms to medical practices, software companies, education, and professional firms.
Lesson 49: Tying Organizational Structure to the Critical Path
Another powerful lever that affects the critical path is the organization’s structure; that is, how it organizes itself to create value for its customer. For too many organizations, management structures the company to meet their own psychological comfort. If the CEO is a control freak, she sets up a command-control structure with clean lines of hierarchical authority.
Lesson 48: How Organizational Culture Gets You Off the Critical Path
Now that we’ve covered rewards, let’s return to our earlier discussion of the levers that organizations have at their disposal to promote the critical path.
Another major lever is the organization's culture. Culture is made up of the values, norms, beliefs, and behaviors that define what the organization is about and how it gets things done.
Lesson 47: A Final Word about Rewards
Reward systems are complicated and getting them right is not easy. Over the years, I have heard several objections to my framework that I’d like to share with you.
First, not all jobs are easily translatable into value-added outcomes. Some have long lag times, like R&D and Strategy, before you will know if those jobs produce any value-added outcomes.
Lesson 46: Office Space: A Special Case of Non-Monetary Rewards and the Critical Path
I’m always amazed at how people covet and fight over offices, regardless of how much money they make.
Offices become a manifestation of the occupant’s self-worth and social status. Very seldom are office size, location, and furnishings tied to the critical path. Most C-Suites are hidden away in citadels far away from the critical path.
Lesson 45: Non-Monetary Rewards and the Critical Path: Social and Psychological Rewards
Most experts on reward systems will tell you that money isn’t everything. In fact, it isn’t even the first thing. In my work with companies and their employees, I’ve found that the top 3 motivators are…
Lesson 44: Tying Economic Rewards Together
Let's now tie these economic rewards together within the framework.
Let's begin by comparing two examples as we did in Lesson 36, but this time with different splits. Consider Ben, our most conservative, risk-averse employee with the 90 - 10 - 0 profile and our value-added, outcomes-oriented employee, Arriya, with the 20 - 30 - 50 split.
Lesson 43: Applying the Critical Path Rewards Framework: Organizational Level
inally, we can look at organizational-level value-added outcomes rewards on the framework on page 139 in Chapter 37. All the employees who helped create the overall bottom-line results of the company should be given rewards that increase in value as your organization increases in value. This would typically be stock ownership.
Lesson 42: Applying the Critical Path Rewards Framework: Team Level
Returning to the framework on page 139 in Chapter 37, at the team level of value-added outcomes, companies can use gainsharing to reward teams that produce the gains. Bob Doyle, who pioneered the concept of gainsharing and wrote the seminal book on the topic, saw the benefit of the organization sharing bottom-line results with the employees who created them.
Lesson 41: Applying the Critical Path Rewards Framework: Individual Level
This approach to offering employees rewards also gives us a way to re-think how to structure an individual employee’s monetary compensation.
Looking at the framework on page 139 in Chapter 37, at the individual level, for example, a company can give a share of product royalties to those employees who create value-added outcomes.
Lesson 40: Applying the Critical Path Rewards Framework: The Baseline
Companies often ask how much they should give to their value-producing stars.
Let’s look ahead to the definition of a job (which we will cover in much greater detail in Part 6 of the book). A job is an opportunity to create more present or future value than it costs to employ you.
Lesson 39: Economic Rewards by Type of Performance
Neymar, the Brazilian born soccer star, is the most expensive player in soccer’s history with a salary reported at $38 Million Euros. In 2017, his pro team, Paris Saint-Germain, paid a $220 million transfer fee to obtain him. The problem is that he has under-performed since his arrival and sits the bench much of the time.
Lesson 38: How Weighting Rewards Affects the Critical Path
As a counterexample to the 90-10-0 weighting preferred by Grace, we can compare two other employees below. Rian is a novice TV writer who doesn’t know if his show will get picked up by a broadcast network, let alone be successful.
Lesson 37: Weighting Rewards for Desired Performance
Weighting rewards is a balancing act. Employers focused on the critical path will want to tie more rewards to value-added outcomes and less to effort inputs and throughputs. The company’s survival and success are totally dependent on those value-added outcomes.
Lesson 36: What Most Pay Systems Really Reward
Most companies pay most people for individual effort. If you show up on time, dress and act appropriately, and then do what you are assigned to do, you are very likely to get your weekly paycheck. As we saw earlier, once a year or so, you will be evaluated against a PE system that measures and rewards competencies, attitudes, and behaviors—not results and outcomes.
Lesson 35: Individual, Team, and Organizational Critical Path Rewards
When designing rewards, it’s also important to look at the level of the behavior that you want to influence and what any worker can contribute at that level. People most often work at the individual level, doing their work within the appropriate schedule, budget, and work specifications.
Lesson 34: A Critical Path Rewards Framework
When I work with companies, I suggest that they compare their reward systems to a critical path–linked framework. In keeping with the exhortations of Steve Kerr, author of “On the Folly of Rewarding A, while Hoping for B,” rewards need to: 1) incentivize exactly the behavior that you want; and 2) be correctly appropriate for that behavior.
Lesson 33: Tying Rewards to the Critical Path
A major lever to get people on the critical path is the reward system. But companies often waste the power of this lever by misaligning their rewards, which pushes people off the critical path.
Lesson 32: A Word for Those Who Enable the Critical Path
Some employees don’t make critical path contributions directly. Instead, they enable others to make better contributions than they would without this person’s influence. For example, they are such good motivators that the critical path people with whom they interact turn out even better work. According to them, their “intangible” inputs and throughputs improve other people’s outputs and outcomes.
Lesson 31: Getting Performance Evaluation Right
I once consulted to a very large oil company. It determined the exploration department’s success by counting how many wells they drilled each year. After 5 years, they had more new wells operating than any of their competitors. Success!
Lesson 30: Tying Performance to the Critical Path
Kimberly-Clark Corporation, the maker of Kleenex, Huggies diapers, and toilet paper, was known for not measuring performance. Tenure in the company is what mattered and the company prided itself on a no-layoff policy. Employees had a job for life, and the company tolerated low performers.
Lesson 29: What Is Your Value? How Do You Define It and How Do You Measure It?
F. Scott Fitzgerald, the American author of The Great Gatsby and The Last Tycoon, said that “Action is character.” By this he meant that you know who someone is by what they do, more than by what they say. (We will return to Fitzgerald in Part Five, when we consider what the critical path means for the individual employee.)
Lesson 28: Hiring for the Critical Path
Too many companies do not use their levers to promote the critical path. Instead, these levers push people in directions that undermine it. For example, many performance evaluation systems rate behaviors that are not related to the critical path. This wastes a lever and causes employees to wonder if management knows what it is doing.
Part Three: How Companies Get off the Critical Path
Lesson 27: Putting the Critical Path at the Center of Employees’ Work
As you should know by now, the critical path is the guidestar for every worker and the entire company.
This need not be a mere abstraction. Below are just a few ways to keep the critical path before you at all times, and thus avoid wandering off it:
LESSON 26: Make-Work: How Companies Get Off the Critical Path in Small Ways
Companies don’t just create major detours off the critical path. They also create lots of potholes that make employees slow down or lose track of the critical path altogether. The most common cause is “make-work.”
Lesson 25: How Companies Get Off the Critical Path in Big Ways
To paraphrase Lewis Carroll in Alice in Wonderland, “If you don’t know where you are going, any road will get you there.” When employees are not driven by the company’s critical path, they will often take other, unproductive paths. Sure, they will be busy, but they will not be productive.
Part Two: The Critical Path Starts with Your Customer
Lesson 24: Know Your Competitors
Just as you try to build and strengthen the critical path between you and your customers, your competitors are building their own critical paths…to those same customers. In fact, they want to destroy your critical path and have your customers all to themselves.
Lesson 23: Detect before Your Customers Defect
So the question becomes how to detect before too many customers defect.
First, you need to keep your attention focused on your best customers—the ones you really want because you can serve them well and profitably over a long period of time. They are your lifeblood.
Lesson 22: Know Why Your Customer Defects
Over 10,000 fans showed up for the grand opening of Planet Hollywood’s New York restaurant. Stars like Demi Moore, Bruce Willis, Arnold Schwarzenegger, and Whoopi Goldberg had invested in the company, and they showed up regularly to promote the handful of initial restaurants in Chicago, Los Angeles, Washington, D.C., and London.
Lesson 20: Know your Customer’s Customer’s Critical Path
So, if you are an aluminum company, you should know the whole industry value chain and the part you play in it. When you view yourself along this chain, you see that your revenue is actually a cost to your customers, the fabricators. If your revenues increase at the fabricator’s expense, then their costs go up. In turn, they either:
Lesson 19: Know your Customer’s Critical Path
From a critical path perspective, you must understand the value you add for your customers. But if your company’s business relies on selling goods and services to other firms and companies, there’s another consideration you must take into account.
Lesson 18: Know How Your Customer Buys – The Customer Journey
As the Swiffer example in the previous Lesson shows, we need to understand the customer experience from their perspective. What steps do they go through to buy and use your company’s product or service? While they are doing so, what are they both doing and feeling?
Lesson 17: Know Why Your Customer Buys—the Underlying Problem
Occasionally, the problem that the customer is trying to solve is linked to another problem that the customer needs to solve. Recognizing and solving that unstated problem can be a tremendously powerful way of connecting with customers along the critical path.
Lesson 16: Know Why Your Customer Buys – The Problem with Sales Data
Some companies fool themselves into believing they know what their customers want by looking at their sales data. After all, it stands to reason that if people buy something, it is a strong signal that they want it.
Lesson 15: Know Why Your Customers Buy – Their Underlying Need
Understanding the customer’s problem is no easy task. Just as with the critical path as a whole, this understanding begins with the customer, not your product or service.
Lesson 14: Know Why Your Customer Buys – The Problem to Be Solved
Customers look at your company the same way that your company looks at you as an employee: are your company (and you) adding value, and is that value worth the price?
Lesson 13: How a Tech Company Got to Know Its Customers
We can go a step further than we did in the previous lesson. It’s not only important for executives to know the company’s customers. It’s actually the job of everyone in the company to know the customers—and not just the current ones, but potential customers as well.
Lesson 12: To Increase Revenues, Know Your Customer
The critical path does not start with the company’s product or service. It starts with the customer. The movie Field of Dreams popularized the fantasy that “if you build it, they will come.” But it rarely turns out that way. If you start out at the wrong end of the critical path, you are handicapping your chances of success.
Part One: The Critical Path
Lesson 11: A Shareholder’s Cautionary Tale – The Heinz Example
If you or your company do not focus on the critical path, sooner or later, someone will do it for you—with the result that you could be out of a job. So, start thinking like you own the company. Better yet, think like a hedge fund activist who is eyeing your company as a potential takeover target.
Lesson 10: Cost, Revenues, and Value on the Critical Path: The Financials
Reducing costs and generating revenues are not abstractions or things a company does just to do them. Both actions must be documented carefully, in hard dollars and cents, to determine and verify the effects on the critical path.
Lesson 9: How You Add Value to the Critical Path: Increase Revenues
The most important side of the critical path in most organizations is the revenue side. You can’t grow a company through cost reductions. You can only do it by increasing revenues. This requires an intense focus on the customer. In this sense, every worker must be working for the customer.
Lesson 8: How You Add Value to the Critical Path: Reduce Costs
LeBron James is arguably the most famous and popular basketball player in America, perhaps the world. When he first left the Cleveland Cavaliers and headed to the Miami Heat, season tickets for Miami sold out quickly for the next two years.
Lesson 7: Supporting the Critical Path: Support Services’ Role
Support Services include everyone in the organization who is not on the critical path or managing it. These include Accounting, Human Resources, Legal, etc. Their job is to provide tools and services that enable critical path workers to be more productive in the organization’s competitive and regulatory environment.
LESSON 6: Supporting the Critical Path: Management’s Role
If you are not directly on the critical path, then you’d better be supporting someone who is on it. After all, as the old saying goes, “If you are not making or selling it, then you’re an expense.” If you want your salary paid, the critical path employees have to generate the money to pay you.
Lesson 5: Today's vs Tomorrow's Critical Path
Companies actually have two critical paths: today’s and tomorrow’s. Today’s path deals with meeting current customers’ current needs. Its product is available to customers now, and customers are buying it. This process creates the cash flow and profits that keep the enterprise afloat. It pays the bills and the salaries of the workforce.
Lesson 4: The Value Chain on Your Organization's Critical Path
The most important thing you can do for yourself and your company is to get on the critical path.
Think about what your organization actually makes or does for your customers. Do you provide them with: Cars? Accounting Services? Electricity? Vegetables? Software? Transportation? Healthcare? Mortgages? Music? The Promise of salvation?
Lesson 3: The Value Chain on the Critical Path
While the concept of the critical path may be simple, there are a number of steps along the way. The critical path consists of all the steps it takes to get your product or service to your organization’s customers. No matter the industry, the path is strikingly similar from organization to organization.
Lesson 2: Get on the Critical Path
I learned another very important lesson about the critical path while working in our family gas station. In the winters, cars parked outside sometimes had trouble starting during extremely cold temperatures. The batteries just did not have enough energy to start cold engines containing sluggish oil. Throughout the winter, our customers would call us to come jump-start their cars. I’d often be out in the early mornings in minus 20-degree cold jumping car batteries to bring life to those cars.
Lesson 1: Understand the Definition of a “Job”
My high school economics teacher, Mr. Thallamer, assumed that all his students were going to have to work for a living. So, he asked us: “What is a job? What does a job mean to you?”
Introduction
The Report That No One Read
Claire, an internal consultant at a Silicon Valley high tech company, was recently brought in by the CEO to lead an organizational change effort focused on driving down the escalating number of customer complaints. To tackle this problem, she put together several task forces, each one devoted to a particular part of the problem….
Lesson 21: Know Where You Stand vis-à-vis Your Customer
Hospitals face difficult patient decisions. For example, inner-city emergency rooms are used as a typical doctor’s office where people show up with colds, the flu, or earaches. The patients go there because they don’t have a regular doctor.