Exploring Validation - The Validation Grid
Validation has a critical role for involving people in organisational life. Its role is often overlooked or misunderstood. Some people find tracking, measuring and reporting a burden rather than a resource that improve things. Customer feedback or complaints are sometimes seen as nuisances rather than assets. Performance measures can be experienced as a source of stress. What people miss is that validation is critical for credibility and longevity in stakeholder relationships.
The function of Validation is to reassure stakeholders and to build commitment to the organisation with its products and services. It does this by demonstrating to people that the organisation is reliable and effective at what it does. It also shows that the organisation’s products and services create the value stakeholders are after. This is true for any organisation, whether it supports frail and disabled people through to fashion houses that can make you look cool.
The function of validation is important for all the stakeholders described in the Engagement function (investors, suppliers, distributors, customers, neighbours, regulators, community) as well as the people described in the Integration function (leaders and teams).
Basically, if you want people to commit and continue doing what is needed, then this involvement must be validated. For example, customers need to be confident about the value and quality of the products and services. For suppliers its about your reliability as a bill paying customer. Neighbours want to see that your business does not interfere with theirs. Investors want to know their resources are not being wasted but are generating value. In other words, people want more than promises and aspirations. They want results and want to see them verified.
Key Validation Areas
Here we use two dimensions of validation.
The first is what people value. This is typically expressed as a financial value or a quality value. Financial value is what it says it is - the monetary result. Quality value is about the attributes of what is produced and how well they match the attributes people want and value.
The second dimension is the process of creating the value. This begins with inputs and ends with outcomes. Inputs might be the ideas, materials or skills people invest in creating value. Outcomes are the value result that people get. It is important to recognise the difference between outputs and outcomes. Outputs are the objects or services produced, which may or may not help create the outcome. For example, a beverages company can output many bottles of drink but not achieve its desired outcomes if nobody buys them. The drinks may be very affordable, which meets a financial value outcome for customers but they were not very tasty, which is an important quality outcome for the customer. There were many outputs but neither the customer or the company got their overall value outcome.
Using these two dimension we can easily focus on four key areas for demonstrating value and validating the effectiveness of the organisation. What stakeholders are looking for will vary. An investor might want financial efficiency, a CEO organisational effectiveness, a customer either value for money or a specific set of attributes or both. The four key areas are:
The function of Validation is to reassure stakeholders and to build commitment to the organisation with its products and services. It does this by demonstrating to people that the organisation is reliable and effective at what it does. It also shows that the organisation’s products and services create the value stakeholders are after. This is true for any organisation, whether it supports frail and disabled people through to fashion houses that can make you look cool.
The function of validation is important for all the stakeholders described in the Engagement function (investors, suppliers, distributors, customers, neighbours, regulators, community) as well as the people described in the Integration function (leaders and teams).
Basically, if you want people to commit and continue doing what is needed, then this involvement must be validated. For example, customers need to be confident about the value and quality of the products and services. For suppliers its about your reliability as a bill paying customer. Neighbours want to see that your business does not interfere with theirs. Investors want to know their resources are not being wasted but are generating value. In other words, people want more than promises and aspirations. They want results and want to see them verified.
Key Validation Areas
Here we use two dimensions of validation.
The first is what people value. This is typically expressed as a financial value or a quality value. Financial value is what it says it is - the monetary result. Quality value is about the attributes of what is produced and how well they match the attributes people want and value.
The second dimension is the process of creating the value. This begins with inputs and ends with outcomes. Inputs might be the ideas, materials or skills people invest in creating value. Outcomes are the value result that people get. It is important to recognise the difference between outputs and outcomes. Outputs are the objects or services produced, which may or may not help create the outcome. For example, a beverages company can output many bottles of drink but not achieve its desired outcomes if nobody buys them. The drinks may be very affordable, which meets a financial value outcome for customers but they were not very tasty, which is an important quality outcome for the customer. There were many outputs but neither the customer or the company got their overall value outcome.
Using these two dimension we can easily focus on four key areas for demonstrating value and validating the effectiveness of the organisation. What stakeholders are looking for will vary. An investor might want financial efficiency, a CEO organisational effectiveness, a customer either value for money or a specific set of attributes or both. The four key areas are:
- Operating Costs
- This is about finding the most financially effective way to create value. Cost reduction is a typical way for organisations to achieve this. In business the operating costs are offset against market position or profit. In government they are offset against taxes and revenue. In the not-for-profit sector the operating costs are offset against the organisation’s capability to deliver services to those in need, especially in areas of unmet demand. Investors are a key stakeholder group with a concern here, whether they are owners, community institutions or governments purchasing program delivery.
- Processes and Results
- Processes are one factor for reducing costs but they are also very important for quality. Even good materials can be ruined by poor processes that undermine the result. Stakeholders wanting confidence in the way organisations produce value may be very interested in processes. In a business to business customer relationship the purchasing business will want confidence that the supplier’s processes are reliable, produce quality results and can manage just in time delivery. General retail customers may be very concerned with processes, regardless of the quality of the final product, based on social justice concerns about factory workers, environmental impacts or the impact on traditional community lifestyles.
- Value for Money
- Most transactions outside of the investment sector are not about money. They are about how the products or services enhance the customer’s life. However, monetary value is always a part of most transactions and financial necessity make prevent a customer buying something they otherwise value. Value for money is a critical factor for facilitating people’s access to the benefits they want. The financial impact of your organisation can also be a factor for neighbours or communities if the presence of your business triggers other costs for them. For example, increasing traffic noises in a streetscape could force neighbours to invest in sound proofing and air conditioning. They would experience this as a cost that only restores a functionality they had prior to your arrival unless you can demonstrate that your presence opens up greater benefits for them.
- Benefits and Outcomes
- These are about confirming for people that your products and services get them what they value. This is done in many ways because the qualities people value vary. The primary way value is confirmed, of course, is their experience of your product and service. But this might need to be supported in other ways. For example, a claim of fuel efficiency or low environmental impact will need to be backed up with evidence. People will scan web reviews to test your claims, whether you are operating a retirement facility or producing washing machines. Your documents and commitment to consumers are also signals of quality, such as the length of the warranty you offer as an indicator of what you believe about the quality of your products.
Various small examples were given in the description section above. Here we can look the range of validation needs that one organisation has to address. There are, of course, even more than these.
- Operating Costs
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- Shareholders - evidence that the CEO is keeping costs down.
- Employees - justification for cost cutting and its impact on employees.
- Customers - concerns about local economy and sending jobs offshore.
- Regulators - maintaining financial reserves to meet financial obligations.
- Suppliers - ability to provide components at the negotiated price.
- Processes and Results
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- Employees - stress levels, job safety, training and ability to care for customers.
- Shareholders - ethical and legal liability of the company.
- Regulators - legal, environmental, competitive, fiscal and other responsibilities.
- Suppliers - deadlines, technical compatibility and stability of processes and requirements.
- Community and neighbours - emissions and external impacts of operating procedures.
- Distributors - availability of products and services, delivery times and marketing resources.
- Value for Money
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- Customers - cost proportionate to value and market competition.
- Shareholders - investment generates a return that maintains share value.
- Employees - remuneration is proportionate to the cost of living and skills required.
- CEO - results are proportionate to salary and wages paid.
- Suppliers - the effort of doing business is proportionate to the value of the account.
- Community - the public cost of infrastructure and regulation is proportionate to the value it brings the community.
- Benefits and Outcomes
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- Customer - the product or service gets them the outcome promised to them.
- Investors - the organisation generates the predicted income stream.
- CEO - the organisation functions efficiently and effectively.
- Employees - quality of life and professional satisfaction are achieved.
- Community and neighbours - their lifestyle and local economy benefit.
Reinforcement actions are events or processes to strengthen your people and organisation. They help people learn and develop effective outcomes for the organisation.
Some actions that can help reinforce the capacity for validation are:
Some actions that can help reinforce the capacity for validation are:
- Generate and Publish Data
- A lot of information is produced as a by-product of operational activity that is only used for supervisory reports or quality control. Collect data relevant to stakeholders and publish it. This can be done via internet, media releases, advertising, sales activity or tender submissions.
- Strategic and Business Planning
- Include review and analysis of validation activity and date in planning sessions. Make validation a priority activity to keep stakeholders involved with your organisation. Set targets and measures linked to Engagement function activities.
- Team Development
- Work with teams to develop ways to help customers and other stakeholders recognise and appreciate the value they get from your team, organisation, products and services.
- Continuous Improvement
- Improvement projects, consultation events and management programs can gather evidence from staff and stakeholders to help find and implement improvements. Embrace feedback and criticism as a form of data that validates what you do or points you to the path to more effective value creation.
The description section above introduced you to the key areas of validation. The questions in this exercise can help you explore them further.
Operating Costs
Operating Costs
- Legacy
- How can you show that existing operational practices either demonstrate their value or get questioned or changed?
- Innovation
- How can you demonstrate that you adapt to technological, methodological or market trends to develop better ways to run your operations?
- Deviance
- How can you show that you listen to voices in your organisation that are critical of current practices? How can you demonstrate that they are taken on board and improved practices are developed?
- Improvement
- What is your history of implementing improved processes and your schedule for future improvements?
- Efficiency
- What are the measures that show you are working with efficiency and high productivity?
- Results
- What is the evidence that people and processes are focused on getting results?
- Inputs
- How can you demonstrate that you reduce the cost of inputs, consumables and red tape when you produce your products and services?
- Market
- How can you show that your products and services meet market expectations and that the value created for customers is greater that the purchase cost? How can you demonstrate that your products and services are better value for customers that the alternatives available?
- Ratio
- How can you show the price of your products and services are proportionate to the value of the outcomes they get for your customers and investors?
- Quality
- How can you demonstrate that you make sure the quality (attributes) of your products and services match the expectations of your customers/investors?
- Time
- What is your record for getting products and services to customers on time?
- Awareness
- What information can you gather from customers and stakeholders that demonstrates their awareness of the benefits of your products and services?
Like the Engagement function of the Involvement Axis, validation is multidisciplinary. Finance, time and motion, engineering, sales figures, media monitoring and investment trends can all provide validation of your performance. There are also more subtle sources of information that a linked to the likelihood of effective performance. These are measures of staff and customer engagement, brand reputation, leadership performance and organisational cultures. Regardless of the technical or financial data, these latter indicators can show the dynamics that will make or break your technical efforts.
Other disciplines that can help generate useful information for validation are project management, quality management and performance management.
Other disciplines that can help generate useful information for validation are project management, quality management and performance management.