MOVING FORWARD - Strategic Frameworks and Organisational Roadmaps.

Moving ForwardSTRATEGIC FRAMEWORKS & ORGANIZATIONAL ROADMAPS

Moving ForwardSTRATEGIC FRAMEWORKS & ORGANIZATIONAL ROADMAPS

VERSION 1.4

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FOREWORD

The impetus and rationale for commissioning this Report is born out of a simple need to position Yayasan Danamon Peduli strategically and shape its future evolution appropriately so that it truly lives up to its constituents’ expectations.

As any other organization, Yayasan Danamon Peduli’s journey had gone through several phases of changes, triggered or driven by both internal and external factors. From ad-hoc, event based activities in the early days of our establishment; we gradually evolved them into more systematic programmes. We have also fostered broader and deeper partnerships with other entities to maximize the results and benefits of our support. As such, our programming mechanisms have also adopted a development-oriented approach to ensure their effectiveness.

Essentially all these changes were made to ensure that the organization would be able to serve and deliver what is expected of it. And this is where this impetus for this quest started and in some ways have also marked the organization’s journey since its inception - what is Yayasan Danamon Peduli expected to deliver? Whose expectations is it supposed to deliver, and what are their expectations? These questions led to further questions, such as, what do we stand for, how do we identify ourselves distinctively from similar entities? How should we evolve in the future, what kind of capabilities should we cultivate and nurture? These are questions that, whether explicitly or implicitly, color Yayasan Danamon Peduli’s progress over the years as evidenced among others by the programmes it carries out.

Three key considerations spurs this quest and define the rationale for the preparation of this Report. Each complements and are intrinsically linked to each other: (i) positioning of Yayasan Danamon Peduli vis-à-vis the corporate; (ii) growing trends on corporate responsibility within the country and globally; and (iii) the development context in which Yayasan Danamon Peduli operates in.

The establishment of Yayasan Danamon Peduli in 2006 by its founders, PT Bank Danamon Indonesia Tbk and its subsidiary, PT Adira Dinamika Multi Finance signaled the commitment of both companies in ensuring that the vision “We care and enable millions to prosper” can be realized most effectively. But apart from the shared vision, what part of their DNA does Yayasan Danamon Peduli share with its parents’ organization? How does it represent the name that it bears? Yayasan Danamon Peduli continuously seeks to meet what it perceives as the parents’ expectations. This is truly an utmost challenging feat given the largeness of the family with its various interests and priorities – especially

in the absence of formal mechanisms to align ourselves with the corporate’s interest. Apart from the Article of Association, there is an absence of a guiding framework for the organization’s endeavors on strategic stakeholder engagement that addresses both sides’ needs, i.e. internal and external stakeholders.

At the same time, evidence from the field and many studies over the years indicate the increasing influence of corporations’ social activities on stakeholders’ and clients’ behavior and loyalty. Nationally and internationally, there is also a growing trend that brings convergence and alignment of corporate’s social responsibility into their business strategy and practices. Since the Millennium Summit in 2000 and the launch of the UN Global Compact that follows, corporations around the world had been spurred on to take action and lend their support in meeting the goals by 2015, primarily through their CSR programmes as well as other channels of contributions. Parallel to this, companies also started to take stock of their corporate responsibility’s efforts and results, which led to the conception of several global initiatives and alliances.

What these schemes demonstrated is the growing need of corporations to better align its corporate responsibility with its core business and ensure effectiveness of their programmes and impact positively on their business. A decade or so after its inception, the UNGC model is now much more strengthened to better guide corporations in meeting their sustainability commitments that also provides value to their business as well as society. Interestingly, in country, the most recent GCG Guidance for Banking Sector (2012) stipulates the imperative that CSR should be integrated with the company’s business strategy and that these programmes should impact on the business development.

We are also cognizant of the fact that Yayasan Danamon Peduli is an organization that works and operates in a country that is still undergoing development in many parts, with vast needs that have yet to be met fully by government and other development stakeholders. In such a condition, each contribution and support, irrespective of their labels, matters if development goals attainment is to be accelerated. It is for this reason, that Yayasan Danamon Peduli positions itself as a Development Partner, shaping its support squarely within the country’s development priorities. This choice of role has been embraced by our local government partners and testified by their commitment in placing local development budget to synergize with our programmes. Furthermore, in the last 3 years, increasingly

KNOWLEDGE IS VITAL, BUT KNOWLEDGE IS NOTHING WITHOUT UNDERSTANDING

The Chinese character for ‘Prosperity’ is a treasured sign that many people place on their door to encourage prosperity to enter their home. But when you learn to turn the character upside down and understand that the word for ‘turning’ sounds similiar in Chinese to the word for ‘arrives’ you will be much closer to bringing wealth into your home.

Knowledge

Understanding

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more and more regions are issuing local regulations and by laws that aim at CSR coordination and utilization, striving to bring them closer to support local development priorities. This growing phenomenon signals the growing awareness of CSR as an important source of development support.

The key question is how can all these key concerns and phenomenon be effectively addressed by Yayasan Danamon Peduli? Is there a suitable business model that would help us shape our organizational development and performance in the future, ensuring our effective deliverance to meet all our constituents’ expectations?

The main objective of this Report is to provide options of business models that would best address Yayasan Danamon Peduli’s concerns and its founders and provides us with evidence-based considerations as the basis for the choice to take. The Report covers a comprehensive research of various frameworks and models in the area of corporate responsibility and sustainability issues. Over the last decade, companies over the world have also strived, shaped and re-shaped their social responsibility actions. Their endeavors had met various results, which we also need to understand and learn from in making our own choice.

As the Report will illustrate, the global experience has further cemented the private sector’s role in contributing to sustainable development, and as such it is imperative for the private sector to place their support within the local development context through their social investment. Although the forms may be diverse, Social Investment is defined as “The practice of commercially motivated organizations aligning and leveraging business practices and resources by making voluntary financial or non-financial contributions that demonstrably help local communities and broader societal objectives to address their development priorities - pivotal to sustainable development”.

This finding lends support to and gives Yayasan Danamon Peduli the confidence that our steps are very much in keeping with the general trend of sustainability commitment. The Social Investment concept provides the glue that aligns Yayasan Danamon Peduli and the corporate. While the two are separate entities, both are aligned through their shared vision and common goal towards sustainable development. Under this approach, commercial and social development goals are no longer separate and opposing. On the contrary, the approach calls for the greater alignment of commercial investment and social investment as a unified strategy to attain sustainable development. As such, the role that Yayasan Danamon Peduli can effectively play within the corporate family is as the social investment instrument (vehicle).

The first of this Report’s follow-up action is the preparation of the Yayasan Danamon Peduli Policy Framework which will formalize key tenets and principles of the organization, i.e. mission, positioning, roles and programming strategy that are in line with the Social Investment Principles. The Policy Framework contains the organization’s overarching policy approach that provides a common reference and the corridor within which Yayasan Danamon Peduli can shape other derivative policies and guidelines. It will consistently guide the organization’s actions in ways consistent with the principles and values embedded in it.

ABOUT THIS DOCUMENT

This document is classified into a high-level document, named MOVING FORWARD - STRATEGIC FRAMEWORKS & ORGANIZATIONAL ROADMAPS. It is carefully prepared and evolved through broad research and consultative interviews with YDP’s Board of Management and Supervisor members - Mr. Manggi Habir, Mr. Muliadi Rahardja, Mr. Willy S Darma, Mr. Ali Yong, and Mrs. Dini Herdini as well as in-depth discussions with Executive Director of Yayasan Danamon Peduli, Ms. Bonaria Siahaan.

The purpose of this document is to concisely summarized all necessary findings of every principal base, rationale, theoretical frameworks and strategic actions which all have to be taken into consideration for understanding the complex knowledge of Corporate Responsibility [CR], Sustainable Development, Knowledge Management and Learning Organization.

The frameworks and roadmaps presented in this document also intended as a benchmarking tool to help guide YDP transformation towards a Professional Development Organization, that simultaneously becoming a trusted, accountable, and credible non-profit organization that is on par with international standards. It provides means of assessing information about the internal factors and external influences that interact to determine the overarching approach, as well as elaborates all identified steps for creating a process-focused organization.

To establish a strategic direction and strong process capability, YDP process management must be directly linked to organizational objectives; it helps the organization see the connections and points of alignment between actual work processes and strategic objectives. Process management as a management practice or approach, defines the governance of specific business processes and operational performance.

Creating a process-focused organization not only requires time and resources, but most importantly, it requires a fundamental shift in thinking about how each individual contributes to the organization’s outputs.

Until now, there is no global consensus on a single definition of Corporate Responsibility. Definitional approaches tend to differ according to the specific focus (i.e., environmental or social issues).

To avoid definitional problems, this document uses the term Social Environmental Responsibility, “Corporate Responsibility (CR)”, and “Corporate Social Responsibility (CSR)” as synonyms.

This shift helps each contributor think about what occurs upstream as well as downstream from his or her individual activities within the process. This horizontal view of work provides a more holistic understanding of how work is accomplished and the requirements to effectively execute the process end-to-end.

To serve its purposes, the frameworks, roadmaps and rationale are aimed to satisfy the following criteria:

• Be as simple as possible but no “simpler” than is required for understanding and communication.

• Be dynamic and prescriptive, not static and descriptive. Monitoring of the present and past is static unless it connects to policies and actions and to the evaluation of different futures.

• Embrace uncertainty and unpredictability. Structural change is inevitable in systems of people and nature.

To be a profound reference in the future, necessary to give understanding the extent of Strategic Social Investment, and to operationalize its process, this document also specifically accompanied by Digital Library that consists of published documents from global leading organizations, that had been contextually selected.

This document is dynamic in nature and should be reviewed periodically and amended if necessary, to maintain its relevance.

While we are gratified to arrive at this conclusion, we also acknowledge that we have yet a long way to go to truly play our role and deliver high quality and impactful social investment programmes. YDP recognizes that to be effective, we need to be agile, competent and up-to-date in an era that is increasingly marked by the constant flow of ideas and people across national and even regional boundaries and knowledge enhancement. As an organization, Yayasan Danamo Peduli needs to continuously improve and shape itself to a level that is on par with prevailing quality standards and best practices. Maintaining quality of our performance is not a choice but a matter of must. Quality lends us credibility, opens the door for partnerships, and provides us with the recognition that is well-earned which in turn will positively impact on the corporate.

It is for this reason, the Report comes together with an Organizational Roadmap that is meant to chart out the necessary steps to be taken in meeting the standards that are required to bring the organization as a quality social investment organization. Naturally, we are not starting from scratch – but will build on the progress to date. The Roadmap will help Yayasan Danamon Peduli together with the corporate in setting priorities and strategic social investment choices to select in the future, steps that it needs to speed up, and measure and evaluate the progress made towards achieving the desired outcome.

The Roadmap is a living document – it is not meant to be static and applied in isolation from surrounding developments. It is meant to be used as the common reference from which we select our actions in shaping the organization but is subject to review from time to time to ensure the relevance and as the basis to monitor our progress.

At the end of the day, the development and evolution of Yayasan Danamon Peduli is not only meant to enhance our quality but also to ensure our continued relevance and do justice to the trust placed on us to deliver quality and meaningful services. In this respect, we are most grateful to all our constituents since their views and voices are our guidance to keep us on track as we journey forward and gives us the confidence to make inroads that hopefully, through this Report, will contribute to shaping the face of social investment in Indonesia in the future.

Finally, on behalf of the Board of Management and Executive Office allow me to convey our deep and sincere gratitude to our Board of Trustees, Board of Supervisors and network of stakeholders for their continued support to Yayasan Danamon Peduli.

Bonaria Siahaan

Executive Director, Yayasan Danamon Peduli

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1. Yayasan Danamon Peduli, 2011 Annual Report.

This has produced a new set of challenges for non-profit organization like YDP, who must now navigate through a complex web of performance metrics and standards and decides which are the most valuable in helping YDP to achieve those requirements, and mobilize resources to deliver on those commitments which carry resource, operational and reputational implications.

To address this challenge and opportunity, while progressively grow its programme portfolios, YDP stated its commitment to work towards sustainability by redefining its roles in the society as the Catalyst, Development Partner, and Knowledge Hub.1

YDP also started its journey to become an Intelligent Organization by initiating Knowledge Management (KM) programme and its support system that includes social studies and researches, as well as building database analytics across key programmes for ensuring its continuous performance improvement. YDP implements KM Programme to institutionalizes and promotes knowledge-sharing practices and nurtures it to enables and strengthen its strategic roles. This KM programme is centralized, organization-wide effort to standardize best practices and help the employee to excel in the areas YDP operates.

YDP also planned to continue develop a Proven KM Approach- Community of Practice, named “Komunitas Sejahtera Indonesia or KSI” to formalize and enable knowledge sharing to a broader audience as one of community engagement forms.

One of the keys to long term success is the clarity of YDP initial KM strategy. It is hard to develop such strategies without thinking through what critical knowledge that will serve YDP strategic goals. The resulting strategy is to create standardized methods and practices so that work could be consistently conducted with the same high level of excellence and enhancing the flow of critical knowledge.

But, these all requires “plan of action” to defines intention and sends a clear message of guidance to those responsible for achieving the results. To succeed, YDP needs a well-thought-out strategies to overcome any foreseeable challenges. YDP should follow further reasonable adjustments and development of the organization policy framework and take the next steps to streamlines the operations and other areas of management.

Through these activities and approaches, YDP aims to:

• Facilitate and promote knowledge sharing community.

• Connect stakeholders to the actionable information and enrich the knowledge.

• Connect experts with those who need it.

• Create a collaborative environment for employees to help them excel at their jobs.

• Continuously refining programme design process

• Creates long-term values for its key stakeholders.

Although it is important to develop KM Programme and approaches that connects employees and promote knowledge sharing practice, but in order to create, retain and transfer the right knowledge YDP needs to be able to articulate specifically what knowledge required for those activities and approaches. YDP should identify and prioritize which knowledge assets are the most critical so it could best deliver its purpose to continue to meet stakeholders expectation and project commitments such as technical knowledge, regulatory knowledge and work process-related knowledge.

RATIONALE

EXPLICIT KNOWLEDGE (also known as formal or codifies knowledge) comes in the form of documents, formulas, contracts, process diagrams, manuals, and so on. Explicit knowledge may not be useful without the context provided by experience.

TACIT KNOWLEDGE (also known as informal or codified knowledge), by contrast, is what we know or believe from experience. It can be found in interactions with employees and customers. Tacit knowledge is hard to catalog, highly experiential, difficult to document, and ephemeral. It is also the basis for judgment and informed action.

Connecting Critical Knowledge Type

TACIT KNOWLEDGE

Socialization

Creating tacit knowledge through shared direct experience

Externalization

Articulating tacitknowledge through dialogue and reflection

Internalization

Learning and acquiring new tacit knowledge by practice and simulation

Combination

Sytematizing (collecting, reviewing, editing, connecting) explicit knowledge and infor-mation

EXPLICIT KNOWLEDGE

The 2008 global financial crisis has created higher expectations for organizations- Governments, and Private Sectors alike to redefine their roles and responsibility in addressing Environmental, Social, and Governance (ESG) issues. Yet, it still lacks an overarching frameworks that are simple enough to understand for guiding these efforts, and most of the organizations remain stuck in the old “CSR” mind-set in which environmental and societal issues are at the periphery, not the core.

The policy framework in this context is a logical structure that is established to organize policy documentation into groupings and categories that make it easier for employees to find and understand the contents of various policy documents. This policy framework can also be used to help in the planning and development of organizational policies, guidelines and procedures to protect the organization legally by ensuring compliance with applicable law and responsible practices.

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Foreword /iAbout this Document /iiiRationale /ivTable of Contents /vi

Chapter 1 - SUSTAINABILITYA GLOBAL IMPERATIVE

• Global Overview (Introduction) /2• Understanding Sustainability Landscape /7• The Global Compact Management Model - UNGC /12• Leadership Blueprint - UNGC LEAD /14• Realizing the Blueprint: Corporate Action Plan - UNGC LEAD /16• Post-2015 Business Engagement Architecture - UNGC /18• Understanding the Impact of Your Investment - UNPRI /20• Setting Standards For Social Responsibility and Sustainable Development - AccountAbility /22• Maximizing Social Responsibility and Sustainable Development Contribution - ISO 26000 /24• Sustainability Reporting Framework - GRI /28

Chapter 2 - STRATEGIC SOCIAL INVESTMENTBEYOND VALUE CREATION

Global Compact for Development - UNGC /34Principles for Social Investment - UNPSI /36Strategic Social Investment and Philanthropy - UNGC LEAD /38Redefining YDP Organization Concept and Strategic Framework /40• Roles, Approach and Programming Strategy /41• Social Investment Business Model /44• Roles, Approach and Programming Strategy /43• Integrated Strategic Framework /46The Global Standard for Measuring Social investment - LBG Model /48Sustainability Commitment Roadmap - AccountAbility /52

TABLE OF CONTENTS

Moving Forward

Strategic Frameworks & Organizational Roadmaps/Chapter 3 - KNOWLEDGE MANAGEMENTTHE EMERGING PARADIGM

• The Knowledge Centered Organization /64• Understanding Knowledge Management /66• A Necessary Unity-People, Purpose, Process, & Data /70• KM Maturity Framework /72• Knowledge Map & Process Map Overview /74• Capacity Building Framework /76

Chapter 4 - A KNOWLEDGE LEVERAGING COMMUNITYDRIVING CONVERSATIONS TO KNOWLEDGE DISCOVERY

• Knowledge Hub Ecosystem /80• Principles of A Knowledge Leveraging Community Infrastructure /82• Selecting & Designing KM Approaches Portfolio /85• Stakeholders Engagement Framework /86• Community of Practice (CoP) Framework /88

Chapter 5 - ORGANIZATION EVOLUTIONTHE CREATION AND SUSTAINABILITY OF A LEARNING ORGANIZATION

• The Effective Organization /92• Leadership & Management - Structural & Systems Perspectives /97

Chapter 6 - STRATEGIC ALIGNMENT FRAMEWORKLEVERAGING PROCESSES AND ORGANIZATION CAPABILITY

• Seven Tenets of Process Management /106• Why Leveraging APQC PCF Can Help Create Organization’s Capability Model /108• Strategic Alignment Framework /110

Methods of Preparation of This Document /122References /124Acknowledgement /130

1Chapter 1 - SUSTAINABILITY - A Global Imperative

“Sustainability is a global imperative. It is my top priority as Secretary-General and the United Nations believes investors are

essential partners in achieving it.”

H.E. BAN KI-MOONUN Scretary-General

CHAPTER 1

SUSTAINABILITYA GLOBAL IMPERATIVE

2 3Chapter 1 - SUSTAINABILITY - A Global ImperativeMoving Forward - Strategic Frameworks & Organizational Roadmaps

On the other hand, only in this subsequent two centuries of the human history, people of the world have fundamentally altered the face of the earth in a massive scale and disrupt the balance of ecosystem. We have exploited almost everything, until some reached its extinction. Even at the atomic level, molecule by molecule, we have been altering the earth and its living creatures without knowing where all of these will lead us.

The trees of the primary forests provide the habitat for three quarters earth biodiversity. We could say that covers all lives on the earth. But today, deforestation is clearing Earth’s forests on a massive scale, often resulting in damage to the quality of the land. Although forests still cover about 30 percent of the world’s land area, the world’s rain forests could completely vanish in a hundred years at the current rate of deforestation.

Indonesia forests are cut down for many reasons, but most of them are related to economy growth or to people’s need to provide for their families. The biggest driver of deforestation is agriculture. Biodiversity bonds air, water, earth, and the sun. In Kalimantan where the earth largest biodiversity last reserves, these bonds had been broken. This catastrophe was provoked by economic decision to produce palm oil, towards become the largest palm oil supplier in the world. For the companies and local population it becomes profit and employment, but for ecology, it is disaster. It critically endangered “Orang Utan” population to the brink of extinction.

The Earth’s climate has changed throughout history. Only in the last centuries, large changes in climate happened very rapidly; in ten of years, not in thousands or even millions. Average temperatures have climbed 0.8 degree Celsius around the world since 1880 , much of this happened in recent decades. In fact, according to the National Oceanic and Atmospheric Administration (NOAA), the decade from 2000 to 2010 was the warmest on recorded history.

Instead of any positives, global warming contributes seriously negative impacts on agriculture, health, environment, and economy. Such as contamination or exhaustion of fresh water, increased incidence of natural fires, changes in migration patterns of birds and other animals, and extensive harvest failure due to droughts.

GLOBAL OVERVIEW

3. Press Release European Parliament: Climate Change – Call for new climate diplomacy (10/02/2010)

4. BBC News. “Key powers reach compromise at climate summit”. 19 December 2009.

5. UNGC - Bertelsmann Stiftung (2010) - “The Role of Governments in Promoting Corporate Responsibility and Private Sector Engagement.

It also influences ocean complex ecosystem by sea acidification, sea level rising,increased risk of coral extinction, explosion of oceanic invasive species (giant jellyfish), disruption to food chains and species loss.

More over, we’ve seen more frequent news about disasters and tragedies impacted by climate change and its ramifications, that causes catastrophic economic impacts and overall pattern of economic distress, disruptions to global trade, transport, and energy supplies.

Governments and Business Have to Redefine Their Roles and Responsibilities In Society.Climate change is one of the greatest challenges of the present day and profound actions should be taken. However, in 2009 United Nations Climate Change Conference (COP15) produced a mixed outcome that clearly demonstrated the limited ability of state intervention to address global challenges on its own, An unnamed US government official was reported as saying that the agreement was a “historic step forward” but was not enough to prevent dangerous climate change in the future.3 Governments alone are unable to effectively address “problems without national boundaries” such as climate change, poverty or human rights violations.4 The mixed result of the Copenhagen Summit in 2009 -have had game- changing consequences for businesses and governments alike, calling them to redefine their roles and responsibilities in the society.5

Taking responsibility for the sustainable and future-oriented development of our society and its common goods is more important now than ever. This holds especially true for our global development that depends on a stable and healthy social and economic environment.

It is not too late to make a significant impact on future climate change and its dangerous effects on us. But, commitment and leadership are needed to harness private sectors unique capacity and capabilities in research, technology, innovation and capital to meet these challenges. Private sectors have the creative nature that can strike a balance between the need to meet societal expectations and explore business opportunities while transforming global challenges into competitive advantages.

The centuries of global economic development after industrial revolution have been bringing wealth and prosperity, by putting unimaginable pressures on earth. Researchers argued that in the last 60 years mainly contributes to multiplying income per capita in many countries and almost tripled the population of human in the world, with a projection to reach 9 billion souls in 2045.


Recent CR Public Policy Developments In ASEAN RegionCorporate Responsibility has become a topic of great political interest. Governments have become increasingly proactive in promoting corporate responsibility by adopting a variety of policies to promote responsible business activities.

Many of these initiatives echo the principles outlined by different international organizations such as the UN Global Compact, the OECD and the European Commission, in which the role of public administration and public policy initiatives are identified as key to a more sustainable and inclusive economy.6

Progress in adopting the CR public policy agenda at the 2009 Association of Southeast Asian Nations (ASEAN) Summit, member States endorsed a CR agenda for the region as outlined by the ASEAN Socio-Cultural Community Blueprint.7

The ASEAN member States aim to:

• Develop a viable policy or legal CR framework by 2010 in order to ensure that businesses integrate corporate responsibility into their operations, and to contribute toward building sustainable economies.

• Engage the private sector in the corporate responsibility activities of the ASEAN Foundation.

• Encourage firms to adopt and implement international standards on social responsibility.

• Increase the awareness of corporate responsibility within ASEAN member States, particularly about relations between businesses and communities, and support community-based development.

6. Bertelsmann Stiftung (2006): “Government as Partner CSR Policy in Europe”

7. ASCC Blueprint adopted by the ASEAN Leaders at the 14th ASEAN Summit (01/03/ 2009) in Thailand.

These CR public policy had been followed up with regulatory mechanism to set this commitment into motion in Indonesia.

• LAW No. 40/2007 - About Limited Liability Company Consideration - whereas the national economy, which is operated on a basis of economic democracy with principles of community, efficiency, justice, sustainability, environmental awareness, independence and safeguards for balanced progress and national economic unity, needs to supported by firm economic institutions in the context of creating prosperity for society; Chapter V - Stipulates about Corporate Environmental and Social Responsibility

• Republic of Indonesia Government Regulation No.47 /2012 “Corporate Social Environmental Responsibility” Previous CSR implementation based on social awareness, (voluntary based), also began to turn into compulsory through regulatory mechanisms (compliance based). With the issuances of Government Regulation No. 47/ 2012 about “Corporate Social Environment Responsibility” confirms that the company must make CSR as part of its business operations and the company must set aside part of budget for CSR program implementation. Social and Environmental Responsibility in this context also emphasizes that every company as a form of human activity in the field of business, morally committed to remaining responsible for the creation of the Company’s relationship harmony and balance with the environment and local communities in accordance with the values, norms, and their culture.

• Guideline GCG Indonesian Banking 2012 As part of the five principles of KNKG 2012, in particular responsibility, the banking company should be able to comply with laws and responsibilities towards society and the environment that can be maintained long-term business continuity and compliance of the legislation.

YEAR INDONESIA/REGIONAL GLOBAL

2015 ASEAN Economic Community

2014 System of Integrated Environmental and Economic Accounting (SEEA) 2012 Apply

2013 APEC Summit, Bali

2012 Indonesian Banking GCG Guideline UNCED Earth Summit, Rio de Janeiro

Indonesia Gov. Regulation no. 47/2012

2011 Presidential Regulation No. 32/2011 Masterplan for Acceleration and Expansion of Indonesia’s Economic Development 2011-2025

UNGC LEAD

2010 China–ASEAN Free Trade Area UNGC Leaders Summit, New York

Principles for Social Investment Secretariat (UNPSI)

ISO 26000 launched

2009 ASEAN Socio-Cultural Community Blueprint COP15 Copenhagen Summit

2008 Global financial crisis

2007 Indonesia Law no. 40/ 2007 - LLC COP14 Bali Summit - Bali Roadmap

2006 Bank Indonesia Regulation no. 8/4/PBI/2006

GCG Implementation By Commercial Banks.

Principles for Responsible Investment (UNPRI) established

UNCED Earth Summit, Johannesburg

2001 ENRON Scandal

2000 MDG Summit UNGC - Established

Genuine Saving Rates of Indonesia Provinces (BAPPENAS)

1997 Asian Financial Crisis Kyoto Protocol, United Nations Framework Convention on Climate Change

System of Integrated Environmental and Economic Accounting (SEEA) by BPS-Statistics Indonesia

GRI established

1995 AccountAbility - Established

1994 Bogor Goals, APEC Summit

1992 UNCED Earth Summit, Rio de Janeiro

UNEP Finance Initiative - Established

1989 Environmentally Adjusted National Income (World Research Institute for Indonesia)

CERES - Established

EXXON VALDEZ Oil Spill

1987 World Commission on Environment and Development published a landmark action plan for environmental sustainability

1972 Sustainable Development internationally recognition in UN Conference on the Human Environment, Stockholm

CONVERGING TRENDS

7Chapter 1 - SUSTAINABILITY - A Global Imperative

The real value of taking part in rankings, standards and awards is in improving core performance. Entering initiatives can help to engage colleagues, streamline data collection and improve performance – provided with select the right initiatives and manage the processes effectively.

Corporate has to know what’s the real value that offered. Just getting in the competition or bias recognition. These category can be the module for organization to considering how it will be act in strategic manner. This framework can help companies understand the range of different schemes that may be relevant to them.

For the corporate responsibility practitioner, the landscape can seem overwhelming. There is often a nagging doubt about the real value of such schemes. What are the real benefits to the business? How effective are the schemes at getting your company recognised? And do stakeholders really care?

Differing approaches taken by each scheme can make submissions complex and time-consuming. Before entering a ranking, standard or award, it is crucial to understand the range of different initiatives that exist.

Corporate needs to prioritise. To do this effectively, Corporate needs to identify the schemes that will deliver greatest value to the organization, in terms of both reputation and core performance.

Rankings, standards and awards are often seen to be about enhancing reputation. This is one benefit, but in many ways it is the least important – recognition is likely to be temporary, confined to specialist audiences and vulnerable to attack if things go wrong.

UNDERSTANDING SUSTAINABILITY LANDSCAPE

The sustainability landscape is crowded with schemes offering companies recognition for their efforts. Each initiative is unique, with different issues and audiences – from global indices to national awards and industry rankings.


The complex and shifting nature of the landscape means that companies should take a strategic approach to entering rankings, standards and awards that best meet their needs from year to year. There are five key steps to obtaining maximum value from taking part:

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5

4

3

1 Identify objectivesWhat value do you want to get out of the process? Different schemes serve different purposes and every company has unique issues and drivers that will determine which schemes are most relevant to them.

Make a winning submissionThe process of entry is the key to unlocking value. The real prize is not in winning, but in deriving benefits to the business from your submission.

Review the outcomesUse the knowledge gained during the entry process to evaluate your policies and strategy, and drive future improvements. This might include gaps identified in the issues addressed, lessons for internal engagement, and insights into competitor performance and stakeholder expectations.

Choose your targetsAll schemes demand time and resources, and many also come with an entry cost. Whether you manage the process internally, or with the support of an expert third party, effective engagement requires prioritising initiatives and selecting those that will best help to meet your objectives.

Map out your landscapeRelevant schemes will be different for every company, depending on its industry, stakeholders and geographic location. Companies need to find credible schemes which address their most material issues with a focus on improving core performance.

AWARDSAwards provide recognition of a company’s performance at a given moment in time, usually judged by an expert panel. They are often focused on headline intitatives or achievments.

RANKINGSRankings score companies relative to others. This means they are often more focuses on processes and steady improvement-coming top of a ranking means that you meet or exceed current best practice, but may not do so next year.

STANDARDSStandards certify companies, products or raw materials based upon “in/out’ criteria. To be included, companies must meet a minimum level of perfromance or disclosure, which usually remains static from year to year.

ABSOLUTE “BEST IN CLASS”

STATIC

FOCUS ON REPUTATION

RELATIVE PERFORMANCE

DYNAMIC

FOCUS ON PROCESS & IMPROVEMENT

The specific benefits vary from scheme to scheme, but may include the following:

Addressing The Material Issues

Many initiatives, especially rankings and standards, require a focus on processes and systems. recognising and defining these is the first step to improving them. The criteria for rankings, standards and awards provide an understanding of how stakeholders such as investors, NGOs and other sustainability experts think that organizations should be run.

This opens the door to new ways of thinking and fresh management approaches. Some initiatives can also help companies to stay on top of emerging trends and predict new potential flashpoints.

Strengthening The Case Internally

Making submissions can involve issue-owners from across the business, including senior management, raising awareness of the issues and strengthening initiatives for improvement. Performance in rankings, standards and awards can also provide a platform for wider engagement with employees.

Benchmarking With Peers And Competitors

Comparing performance with others can serve as an impulse for improvement, especially if other companies are consistently at the top of rankings and winning awards. however, companies should be wary of “benchmarking to mediocrity”: making incremental improvements on less important issues at the expense of greater, transformational change in the core business.

Improving Core Performance

Regularly capturing data from across the business, streamlining processes for reporting and assessing performance in key categories can help to improve corporate performance. By embracing schemes that provide a systematic and standardised measurement framework, we find that companies can improve their performance year-on-year


For more information see http://unglobalcompact.org/docs/issues_doc/development/A_Global_Compact_for_Development.pdf

The UN Global Compact is a leadership platform for the development, implementation and disclosure of corporate policies and practices that are responsible and sustainable. Endorsed by chief executives, it seeks to align business operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption (see the Ten Principles at the end of this report). The focus in this report is on these four global challenges, although examples from other issue areas are also included. The Global Compact describes itself as follows: “The initiative seeks to combine the best properties of the UN, such as moral authority and convening power, with the private sector’s solution-finding strengths, and the expertise and capacities of a range of key stakeholders. The Global Compact is global and local; private and public; voluntary yet accountable.”

The Global Compact was first announced by the then UN Secretary-General Kofi Annan in an address to the World Economic Forum in 1999 and was officially launched in 2000. The initiative is a platform for companies to support the UN goals of achieving a more peaceful, sustainable and fair world society. It collaborates with the UN system and its agencies while building on broadly ratified UN conventions. Today, the Global Compact has more than 10,000 participants from business and more than 3,000 from NGOs, universities, cities, etc. – spanning over 135 countries. In terms of membership, it has become the largest voluntary corporate responsibility initiative in the world.


COMMIT

ASSESS

DEFINE

IMPLEMENT

MEASURE

COMMUNICATE

Leadership commitment to mainstream the Global Compact principles into strategies and operations and to take action in support of broader UN goals, in a transparent way

Assess risks, opportunities, and impacts across Global Compact issue areas

Define goals, strategies, and policies

Implement strategies and policies through the company and across the company’s value chain

Measure and monitor impacts and progress toward goals

Communicate progress and strategies and engage with stakeholders for continuous improvement

During this step, company leadership publicly signals its commitment to stakeholders. Specifically, leadership commits to supporting the Global Compact and making the ten principles part of the strategy, culture, and day-to-day operations of the company, with oversight provided by transparent governance structures.

Equipped with a commitment to the Global Compact and in support of UN goals, the company assesses its risks and opportunities-in financial and extra-financial terms-as well as the impact of its operations and activities on the issue areas, on an ongoing basis in order to develop and refine its goals, strategies, and policies.

Based on its assessment of risks, opportunities, and impacts, the company develops and refines goals and metrics specific to its operating context, and creates a roadmap to carry out its program.

The company establishes and ensures ongoing adjustments to core processes, engages and educates employees, builds capacity and resources, and works with supply chain partners to address and implement its strategy.

The organization adjusts its performance management systems to capture, analyze, and monitor the performance metrics established in the Assess and Define steps. Progress is monitored against goals and adjustments are made to improve performance.

During this step, the company communicates its progress and forward-looking strategies for implementing its commitment by developing a Communication on Progress, and engages with stakeholders to identify ways to improve performance continuously.

THE GLOBAL COMPACT MANAGEMENT MODEL

8. For more information, see the UN Global Compact Management Model, Framework for Implementation. http://www.unglobalcompact.org/docs/news_events/9.1_news_archives/2010_06_17/UN_Global_Compact_Management_Model.pdf

The Global Compact Management Model is a practical yet comprehensive tool to help companies evolve their sustainability efforts. Comprised of six management steps, it guides companies of all sizes through the process of formally committing to, assessing, defining, implementing, measuring and communicating a corporate sustainability strategy.

The model draws on widely accepted and understood management practices, and is designed to maximize corporate sustainability performance. When employed on a consistent and periodic basis, the six steps of the model form a circular process by which companies can continuously adjust and improve alignment with the Ten Principles, as well as local and international regulations.8

COMMITLeadership commitment to mainstream the Global Compact principles into strategies and operations and to take action in support of broader UN goals

and issues, in a transparent wayASSESS

Assess risks, opportunities and impacts across Global

Compact issue areas

DEFINEDefine goals, strategies and

policies

IMPLEMENTImplement strategies and

policies through the company and across the company’s

value chain

MEASUREMeasure and monitor impacts and progress

towards goals

COMMUNICATECommunicate progress and

strategies, and engage with stakeholders

for continuous improvement


9. For more information see http://www.unglobalcompact.org/HowToParticipate/Business_Participation/blueprint_for_corporate_sustainability_leadership.html

1. Local Networks and Subsidiary Engagement

2. Global and Local Working Groups

3. Issue-Based and Sector Initiatives

4. Promotion and Support of the UN Global Compact

Taking Actionin Support of BroaderUN Goals and Issues*

Implementing theTen Principles into

Strategies and Operations

Engaging withthe UN Global Compact

1. Core Business Contributions to UN Goals and Issues

2. Strategic Social Investment and Philantrophy

3. Advocacy and Public Policy Engagement

4. Partnerships and Collective Action

1. Full Coverage and Integration Across Pricnciples

2. Robust Management Policies and Procedures

3. Mainstreaming into Corporate Functions and Business Units

4. Value Chain Implementation

CEO Commitment and Leadership

Board Adoption and Oversight

Stakeholder EngagementTransparancy and

disclosure

Leadership BlueprintUnderstanding the Blueprint

Key Dimensions and Components of Leadership

The Blueprint offers UN Global Compact participants a model for achieving higher levels of performance and generating enhanced value through the UN Global Compact. It allows companies and their stakeholder to assess progress with respect to their commitment, strategy and implementation and to communicate effectively as they ascend the learning and performance curve.

In the context of the Blueprint, corporate sustainability is defined as a company’s delivery of long-term value in financial, social, environmental and ethical terms. It thus covers all principles and issue areas of the UN Global Compact.

The Blueprint is grounded in the two core commitments made by participating companies. It includes aspects of leadership that are considered key to maximizing results with respect to these commitments, including active engagement with the UN Global Compact locally and globally.

The Blueprint encompasses three distinct but overlapping and synergistic dimensions. They are:

1. Implementing the Ten Principles into Strategies and Operations

2. Taking Action in Support of Broader UN Goals and Issues

3. Engaging with the UN Global Compact Each dimension contains a number of key

Components. In addition, several cross-cutting Components of leadership were identified as a crucial overlay to the three dimensions.

The opposite page contains the visual representation of the Blueprint, encompassing the three key dimensions as well as, at the centre, the cross-cutting Components. Each of the Components within the Blueprint contain associated Action Items. These are fully detailed in the Corporate Action Plan on pages 12 and 139.

“Broader UN Goals and Issues” refers to an array of global issues – based on the most acute or chronic global challenges – including Peace & Security; the Millennium Development Goals; Human Rights; Children’s Rights; Gender Equality; Health; Education; Humanitarian Assistance; Migration; Food Security; Sustainable Ecosystems and Biodiversity; Climate Change Mitigation and Adaptation; Water Security and Sanitation; Employment and Decent Working Conditions; and Anti-Corruption.

This is an illustrative list of issues covered “Broader UN Goals and Issues”, and there are obviously considerable overlaps between individual elements. The order of this list does not indicate any prioritization of issues. For a list of further Global Issues that are relevant to the work of the UN as well as business, please refer to http://business.un.org/en/browse/global_issues.


Corporate Action PlanEngaging with the UN Global Compact

Local Networks and Subsidiary Engagement

Contribute to the building and operating of at least one UN Global Compact Local Network and help elevate performance of other companies through training, mentoring, COP peer review, etc.

Encourage subsidiaries to engage with UN Global Compact Local Networks and to participate actively in events and activities.

Publish sustainability information related to each individual subsidiary separately or reference it explicitly in the Communication on Progress of Corporate Headquarters.

Global and Local Working Groups

Participate in relevant global or local working groups and share experiences, networks, tools and good practices with other UN Global Compact participants.

Take active part in defining scope and objectives of new working groups when relevant.

Issue-Based and Sector Initiatives

Join and help advance one or more existing UN Global Compact initiatives, e.g. Caring for Climate, CEO Water Mandate, Women’s Empowerment Principles, and Global Business Initiative on Human Rights.

Spearhead need-driven development of new issue-based or sector initiatives within the UN Global Compact and the wider United Nations.

Promotion and Support of the UN Global Compact

Advocate the UN Global Compact to business partners, peers and the general public.

Encourage suppliers and other business partners to join the UN Global Compact, and take on mentoring role on issues related to the initiative.

Participate in activities to further develop and strengthen the UN Global Compact.

The Cross-Cutting Components

CEO Commitment and Leadership

CEO publicly delivers explicit statements and demonstrates personal leadership on sustainability and commitment to the UN Global Compact.

CEO promotes initiatives to enhance sustainability of the company’s sector and leads development of industry standards.

CEO leads executive management team in development of corporate sustainability strategy, defining goals and overseeing implementation.

Make sustainability criteria and UN Global Compact principles part of goals and incentive schemes for CEO and executive management team.

Board Adoption and Oversight

Board of Directors (or equivalent**) assumes responsibility and oversight for long term corporate sustainability strategy and performance.

Board establishes, where permissible, a committee or assigns an individual Board member with responsibility for corporate sustainability.

Board (or committee), where permissible, approves formal reporting on corporate sustainability (Communication on Progress).

Stakeholder Engagement

Publicly recognize responsibility for the company’s impacts on internal and external stakeholders.

Define sustainability strategies, goals and policies in consultation with key stakeholders.

Consult stakeholders in dealing with implementation dilemmas and challenges and invite them to take active part in reviewing performance.

Establish channels to engage with employees and other stakeholders to hear their ideas and address their concerns, and protect ‘whistle-blowers’.

Transparency and Disclosure

Share sustainability information with all interested parties and respond to stakeholder inquiries and concerns.

Ensure that Communication on Progress covers all aspects of the Leadership Blueprint and utilize, where appropriate, the Global Reporting Initiative framework.

Integrate Communication on Progress into annual financial report or publish them together.

Secure external verification of Communication on Progress or seek other methods for legitimization by external stakeholders.

** For companies without a formal Board, other governance or ownership body

assumes these responsibilities

Realizing the Blueprint:Implementing the Ten Principles into Strategies and Operations

Full Coverage and Integration Across Principles

Implement all the ten UN Global Compact principles into strategies and operations.

Design corporate sustainability strategy to leverage synergies between and among issue areas and to deal adequately with trade-offs.

Ensure that different corporate functions coordinate closely to maximize performance and avoid unintended negative impacts.

Robust Management Policies and Procedures

Assess risks and opportunities on an ongoing basis at both enterprise and product level and undertake due diligence to ensure that the company identifies any negative impacts caused by its operations and activities.

Develop strategies and policies specific to the company’s operating context – as well as scenarios for the future – and establish measurable short, medium, and long term goals.

Engage and educate employees through training activities, the development and adjustment of business processes, and sound incentive schemes.

Implement a system to track and measure performance based on standardized performance metrics.

Mainstreaming into Corporate Functions and Business Units

Place responsibility for execution of sustainability strategy in relevant corporate functions (procurement, government affairs, human resources, legal, etc.) and ensure that no function is operating in conflict with sustainability commitments and objectives of company.

Align strategies, goals and incentive structures of all business units and subsidiaries with corporate sustainability strategy.

Assign responsibility for corporate sustainability implementation to an individual or group within each business unit and subsidiary.

Value Chain Implementation

Analyze each segment of the value chain carefully, both upstream and downstream, when mapping risks, opportunities and impacts.

Communicate policies and expectations to suppliers and other relevant business partners.

Implement monitoring and assurance mechanisms within company’s sphere of influence.

Undertake awareness-raising, training and other types of capability building with suppliers and other business partners.

Taking Action in Support of Broader UN Goals and Issues

Core Business Contributions to UN Goals and Issues

Align core business strategy with one or more relevant UN goals / issues*.

Develop relevant products and services or design business models that contribute to UN goals / issues.

Adopt and modify operating procedures to maximize contribution to UN goals / issues.

Strategic Social Investments and Philanthropy

Pursue social investments and philanthropic contributions that tie in with the core competences or operating context of the company as an integrated part of its sustainability strategy.

Coordinate efforts with other organizations and initiatives to amplify – and not negate or unnecessarily duplicate – the efforts of other contributors.

Take responsibility for the intentional and unintentional effects of funding and have due regard for local customs, traditions, religions, and priorities of pertinent individuals and groups.

Advocacy and Public Policy Engagement

Publicly advocate the importance of action in relation to one or more UN goals / issues.

Commit company leaders to participate in key summits, conferences, and other important public policy interactions in relation to one or more UN goals / issues.

Partnerships and Collective Action

Develop and implement partnership projects with public or private organizations (UN entities, government, NGOs, or other groups) on core business, social investments and/or advocacy.

Join industry peers, UN entities and/or other stakeholders in initiatives that contribute to solving common challenges and dilemmas at the global and/ or local levels with an emphasis on initiatives that extend the company’s positive impact on its value chain.

*For an illustrative list of UN Goals and Issues, please see bottom of page 10.


4 Transparency and Accountability

Building on more than a decade of experience of engaging business around UN priorities, it is clear that the Architecture must incorporate a set of robust accountability measures in order to make business commitments transparent and to ensure that progress towards them is real. The availability of public repositories for commitments, relevant standards and certification schemes, and appropriate reporting mechanisms will be important in order to transparently and accurately track progress.

5 Platforms For Action And Partnership

An especially promising component of the Architecture is the Platforms for Action and Partnership, which can help optimize and scale up corporate sustainability efforts as well as contribute to corporate participation in the broader multi-stakeholder efforts to achieve UN goals. These supporting elements include various forums and platforms that enable companies and other stakeholders to work together – by geography, sector and/or issue. Such initiatives are key to facilitating the type of partnerships and collective action without which systemic challenges cannot be overcome. Country-level sustainability networks and initiatives, are growing rapidly (the UN Global Compact now counts 100 such Local Networks and 65 WBCSD Regional Networks exist), offering compelling engagement opportunities and facilitating collective action at the local level where many sustainability challenges play out.

6 Progress Review

To keep the Architecture dynamic and relevant, it will be important to periodically review the achievements made by the business community, identify gaps and redefine priorities and strategies with respect to all the main building blocks.

1 Drivers and Incentives

The “business case” for corporate action on sustainability issues has been significantly strengthened over the last decade, driven by very important developments in a number of areas. These include the strengthening of society-based drivers, reflecting changing norms and expectations for responsible business transmitted through community groups, Governments and business education initiatives, for example. Similarly, market-based drivers have been strengthened as sustainability increasingly impacts a company’s ability to attract and retain customers, investors, employees and business partners. A new global development agenda provides opportunities to further enhance the interplay of drivers that are fostering enlightened business leaders genuinely motivated to formulate and implement new-era corporate sustainability strategies.

2 Corporate Sustainability

Central to the Architecture is a new corporate sustainability philosophy and orientation rooted in three dimensions – i) respecting universal principles; ii) taking action to support broader UN goals; and iii) engaging in partnerships and collective action at the global and local levels. Maximizing the business performance in these three domains will require a level of corporate leadership and governance not yet realized. This new global orientation for business also encompasses an expanded definition of corporate sustainability to mean a company’s delivery of long-term value in economic, social, environmental and ethical terms.

3 Sustainable Development Goals and Long-Term Business Goals

Businesses contribute to the advancement of sustainable development goals by implementing corporate sustainability strategies that advance inclusive economic growth, social equity and progress, and environmental protection. Those same strategies and practices are increasingly understood to contribute to revenue growth, resource productivity and the mitigation of operational, legal and reputational risks. Consequently, businesses that integrate sustainability into their strategies and operations are increasingly finding themselves in positions of long-term strength. Enhancing this understanding of the overlap between public and private interests is key to motivating more companies to engage and take action.

1

2

3

4

56

The Post-2015 Business Engagement Architecture illustrates the main building blocks necessary to enhance corporate sustainability as an effective contribution to sustainable development, creating value for both business and society. Each of these building blocks must be further strengthened and connected through a comprehensive and collective effort if they are to help take corporate sustainability to scale and turn business into a truly transformative force in the Post-2015 era. Individual companies, corporate sustainability organizations, Governments, investors, business schools, civil society, labour and consumers all have a role to play in scaling up business action, and should be able to identify those areas in which they need to do more.10

10. For more information see http://www.unglobalcompact.org/docs/about_the_gc/Architecture.pdf

POST-2015 BUSINESS ENGAGEMENT ARCHITECTURE


Until recently, the implications of sustainability issues for investors and financial markets were poorly understood and largely overlooked. The Principles for Responsible Investment Initiative (PRI) has helped correct this oversight by illuminating the financial relevance of environmental, social and governance (ESG) issues and providing a framework for the global investment community to contribute to the development of a more stable and sustainable global financial system.

UNDERSTANDING THE IMPACT OF YOUR INVESTMENTS

11. http://d2m27378y09r06.cloudfront.net/viewer/?file=wp-content/uploads/Understandingtheimpactofyourinvestments.pdf

12. PRI, February (2013) - Building The Capacity of Investment Actors to Use Environmental, Social and Governance (ESG) Information

Launched in 2006, the Principles are a set of global best practices for responsible investment. Rising numbers of institutional investors – from all regions of the world – are embracing them. Signatories to the Principles are incorporating ESG factors into their investment decision-making and ownership practices in order to enhance financial returns, reduce risk and meet the expectations of their beneficiaries and clients. At the same time, they are directly influencing companies, policymakers and other market participants to improve their performance in these areas. This is delivering tangible benefits to the environment and society as a whole.

The Principles complement the UN Global Compact, which asks companies to embed in their strategies and operations a set of universal principles in the areas of human rights, labour standards, the environment and anti-corruption. They are also a natural extension of the work of the UN Environment Programme Finance Initiative, which has helped sensitise capital markets to the importance of environmental and social issues. Together these initiatives are helping us achieve the future we want11.

The Six Principles for Responsible Investment1 We will incorporate ESG issues into investment analysis

and decision-making processes.

2 We will be active owners and incorporate ESG issues into our ownership policies and practices.

3 We will seek appropriate disclosure on ESG issues by the entities in which we invest.

4 We will promote acceptance and implementation of the Principles within the investment industry.

5 We will work together to enhance our effectiveness in implementing the Principles.

6 We will each report on our activities and progress towards implementing the Principles.

Building The Capacity of Investment Actors on ESG IssuesThere are various reasons for investors to pay attention to ESG issues. From an investment perspective, the analysis of ESG issues is required to make a full assessment of the risks and opportunities associated with particular investments. This should enable investors to make better investment decisions and should facilitate more accurate valuations of businesses by the investment markets. Greater investor focus on ESG issues should also contribute to a higher quality dialogue between companies and their investors on drivers of long- term value creation, should incentivise companies to improve their governance and management of these issues, and should encourage investors to proactively seek out opportunities presented by these issues. These actions should, in turn, result in capital being directed towards better governed and better managed companies, and towards companies that are better positioned to contribute to the goals of a sustainable society.

The Five Elements of Capacity12

Underpinning these discussions around roles and influences is the idea of capacity. A central premise of this interest is that the effective functioning of the investment system requires that all relevant actors have the capacity to play their proper roles. In broad terms, capacity comprises the elements as follows.

ATTITUDES, VALUES AND BELIEF SYSTEMS,

specifically that individuals and organisations recognise the importance of ESG issues to companies and to investors, and accept that they have a responsibility for (as relevant) company or investor performance and action on these issues.

SKILLS, KNOWLEDGE AND EXPERTISE,

specifically that individuals and organisations have sufficient knowledge and expertise to analyse the ESG information that is available, to make sense of this information in the context of their roles and their organisation’s goals, and to make informed decisions about the actions that they should take.

RESOURCES,

specifically that individuals and organisations have sufficient human resources, financial resources and organisational/institutional support to take appropriate action on the ESG issues that are relevant to them.

ACCESS TO INFORMATION,

specifically that individuals and organisations have access to the tools, data and information that they need to deliver on their ESG-related goals.

AN ENABLING ENVIRONMENT, specifically that approaches to investment focus on long-term financial returns and the factors – including ESG – that will deliver them.


The AA1000 AccountAbility PrinciplesThe AA1000 AccountAbility Principles are primarily intended for use by organisations developing an accountable and strategic approach to sustainability. They will help such an organisation understand, manage and improve its sustainability performance.

In addition, users of other standards in the AA1000 Series use these principles according to the requirements of the relevant AA1000 standard.

The AA1000 AccountAbility Principles provide the basis for understanding and achieving sustainability assurance according to the AA1000AS (2008) and accountable stakeholder engagement according to the AA1000SES (2005).

There are three AA1000 AccountAbility Principles, one of which is a foundation principle.

• The Foundation Principle of Inclusivity

• The Principle of Materiality

• The Principle of Responsiveness

The foundation principle of Inclusivity is necessary for the achievement of Materiality and Responsiveness. Together the three principles support the realisation of accountability.

Inclusivity is the starting point for determining materiality. The materiality process determines the most relevant and significant issues for an organisation and its stakeholders. Responsiveness is the decisions, actions and performance related to those material issues.

These actions provide the basis for establishing, evaluating and communicating accountability. The AA1000 AccountAbility Principles set out in this standard drive these actions.

The value of these principles lies in their comprehensive coverage and the flexibility of their application. They demand that an organisation actively engages with its stakeholders, fully identifies and understands the sustainability issues that will have an impact on its performance, including economic, environmental, social and longer term financial performance, and then uses this understanding to develop responsible business strategies and performance objectives. As principles rather than prescriptive rules, they allow the organisation to focus on what is material to its own vision and provide a framework for identifying and acting on opportunities as well as managing non-financial risk and compliance.

SETTING STANDARDS FOR SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

AccountAbility’s AA1000 series are principles-based standards to help organisations become more accountable, responsible and sustainable. They address issues affecting governance, business models and organizational strategy, as well as providing operational guidance on sustainability assurance and stakeholder engagement. The AA1000 standards are designed for the integrated thinking required by the low carbon and green economy, and support integrated reporting and assurance.

The standards are developed through a multi-stakeholder consultation process which ensures they are written for those they impact, not just those who may gain from them. They are used by a broad spectrum of organisations -multinational businesses, small and medium enterprises, governments and civil societies.13

13. For more information see http://www.accountability.org/standards/index.html

The AA1000 AccountAbility Principles Standard (AA1000APS) provides a framework for an organisation to identify, prioritise and respond to its sustainability challenges. The AA1000 Assurance Standard (AA1000AS) provides a methodology for assurance practitioners to evaluate the nature and extent to which an organisation adheres to the AccountAbility Principles. The AA1000 Stakeholder Engagement Standard (AA1000SES) provides a framework to help organisations ensure stakeholder engagement processes are purpose driven, robust and deliver results.

Aims and Benefits of the AA1000 Accountability PrinciplesAccountability is acknowledging, assuming responsibility for and being transparent about the impacts of your policies, decisions, actions, products and associated performance.

It obliges an organisation to involve stakeholders in identifying, understanding and responding to sustainability issues and concerns, and to report, explain and be answerable to stakeholders for decisions, actions and performance. It includes the way in which an organisation governs, sets strategy and manages performance.

The basic premise is that an accountable organisation will take action to:

• establish a strategy based on a comprehensive and balanced understanding of and response to material issues and stakeholder issues and concerns;

• establish goals and standards against which the strategy and associated performance can be managed and judged, and

• disclose credible information about strategy, goals, standards and performance to those who base their actions and decisions on this information.


Not for certificationISO 26000 is not a management system standard. It is not intended or appropriate for certification purposes or regulatory or contractual use. Any offer to certify, or claims to be certified, to ISO 26000 would be a misrepresentation of the intent and purpose and a misuse of this International Standard. As ISO 26000 does not contain requirements, any such certification would not be a demonstration of conformity with this International Standard.

Holistic approach

Interdependence

ORGANIZATION

governance

6.2* Organizational

6.8*

Community involvement and

development

6.6*

Fair operating practices

6.7*

Consumer issues6.4*

Labour practices

6.3*

Human rights

6.5*

The environment

Social responsibility : 7 core subjects

An organization’s performance in relation to the society in which it operates and to its impact on the environment has become a critical part of measuring its overall performance and its ability to continue operating effectively. This is, in part, a reflection of the growing recognition of the need to ensure healthy ecosystems, social equity and good organizational governance. In the long run, all organizations’ activities depend on the health of the world’s ecosystems. Organizations are subject to greater scrutiny by their various stakeholders.

Who can benefit from ISO 26000 and how?14

ISO 26000 provides guidance for all types of organization, regardless of their size or location, on :

1. Concepts, terms and definitions related to social responsibility

2. Background, trends and characteristics of social responsibility

3. Principles and practices relating to social responsibility

4. Core subjects and issues of social responsibility

5. Integrating, implementing and promoting socially responsible behaviour throughout the organization and, through its policies and practices, within its sphere of influence

6. Identifying and engaging with stakeholders

7. Communicating commitments, performance and other information related to social responsibility.

ISO 26000 is intended to assist organizations in contributing to sustainable development. It is intended to encourage them to go beyond legal compliance, recognizing that compliance with law is a fundamental duty of any organization and an essential part of their social responsibility. It is intended to promote common understanding in the field of social responsibility, and to complement other instruments and initiatives for social responsibility, not to replace them.

In applying ISO 26000, it is advisable that an organization takes into consideration societal, environmental, legal, cultural, political and organizational diversity, as well as differences in economic conditions while being consistent with international norms of behaviour. The perception and reality of an organization’s performance on social responsibility among other things:

• Competitive advantage

• Reputation can influence,

• Ability to attract and retain workers or members, customers, clients or users

• Maintenance of employees’ morale, commitment and productivity

• View of investors, owners, donors, sponsors and the financial community

• Relationship with companies, governments, the media, suppliers, peers, customers and the community in which it operates.

MAXIMIZING SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT CONTRIBUTION

14. For more information see http://www.iso.org/iso/discovering_iso_26000.pdf

Organizations around the world and their stakeholders are becoming increasingly aware of the need for and benefits of socially responsible behaviour. The objective of social responsibility is to contribute to sustainable development.


ScopeGuidance to all types of organizations, regardless of their size or location

Two fundamental practices of social responsibility

Social responsibility core subjects

Integrating social responsibility throughout an organization

Bibliography: Authoritative sources and additional guidance

Annex: Examples of voluntary initiatives and tools for social responsibility

Terms and definitionsDefinition of key terms

Understanding social responsibilityHistory and characteristics; relationship between social responsibility and sustainable development

Principles of social responsibility• Accountability

• Transparency

• Ethical behaviour

• Respect for stakeholder interests

• Respect for the rule of law

• Respect for international norms of behaviour

• Respect for human right

Clause 1

Clause 2

Clause 3

Clause 4

Clause 5

Clause 6

Clause 7Understanding the social

responsibility of the organization

Voluntary initiatives for social responsibility

Stakeholder identification and engagement

Recognizing social responsibility

Organizational governance Related action and expectations

Related action and expectations

Communication on social responsibility

Maxim

izing an organization’s contribution to

Sustainable development

Enhancing credibility regarding social

responsibility

Reviewing and improving an organization’s actions and practices

related to social responsibility

The relationship of an organization’s

characteristics to social responsibility

Practices for integrating social

responsibility thoughout an organization

The environmentLabour practices Fair operating practices

Consumer issues

Community involvement and

developmentHuman rights

Schematic overview of ISO 26000The following graphic provides an overview of ISO 26000 and is intended to assist organizations in understanding relations between the various clauses of the standard.


G3 Reporting Framework

How to Report

Wha

t to

Repo

rt

Sector Supplements

Reporting Framework

Standard Disclosures

Pr

inciples and GuideancePro

toco

ls

The GRI Reporting FrameworkAll GRI Reporting Framework documents are developed using a process that seeks consensus through dialogue between stakeholders from business, the investor community, labor, civil society, accounting, academia, and others. All Reporting Framework documents are subject to testing and continuous improvement.

The GRI Reporting Framework is intended to serve as a generally accepted framework for reporting on an organization’s economic, environmental, and social performance. It is designed for use by organizations of any size, sector, or location. It takes into account the practical considerations faced by a diverse range of organizations – from small enterprises to those with extensive and geographically dispersed operations. The GRI Reporting Framework contains general and sector-specific content that has been agreed by a wide range of stakeholders around the world to be generally applicable for reporting an organization’s sustainability performance.

The Sustainability Reporting Guidelines (the Guidelines) consist of Principles for defining report content and ensuring the quality of reported information. It also includes Standard Disclosures made up of Performance Indicators and other disclosure items, as well as guidance on specific technical topics in reporting.

Indicator Protocols exist for each of the Performance Indicators contained in the Guidelines. These Protocols provide definitions, compilation guidance, and other information to assist report preparers and to ensure consistency in the interpretation of the Performance Indicators. Users of the Guidelines should also use the Indicator Protocols.

Sector Supplements complement the Guidelines with interpretations and guidance on how to apply the Guidelines in a given sector, and include sector-specific Performance Indicators. Applicable Sector Supplements should be used in addition to the Guidelines rather than in place of the Guidelines.

Technical Protocols are created to provide guidance on issues in reporting, such as setting the report boundary. They are designed to be used in conjunction with the Guidelines and Sector Supplements and cover issues that face most organizations during the reporting process.

The GRI was formed by the United States based non-profits CERES (formerly the Coalition for Environmentally Responsible Economies) and Tellus Institute, with the support of the United Nations Environment Programme (UNEP) in 1997. It released an “exposure draft” version of the Sustainability Reporting Guidelines in 1999, the first full version in 2000, the second version was released at the World Summit for Sustainable Development in Johannesburg — where the organization and the Guidelines were also referred to in the Plan of Implementation signed by all attending member states. Later that year it became a permanent institution, with its Secretariat in Amsterdam, the Netherlands. Although the GRI is independent, it remains a collaborating centre of UNEP and works in cooperation with the United Nations Global Compact.

SUSTAINABILITY REPORTING FRAMEWORK

The Purpose of a Sustainability ReportSustainability reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance towards the goal of sustainable development. ‘Sustainability reporting’ is a broad term considered synonymous with others used to describe reporting on economic, environmental, and social impacts (e.g., triple bottom line, corporate responsibility reporting, etc.).

A sustainability report should provide a balanced and reasonable representation of the sustainability performance of a reporting organization – including both positive and negative contributions.

Sustainability reports based on the GRI Reporting Framework disclose outcomes and results that occurred within the reporting period in the context of the organization’s commitments, strategy, and management approach. Reports can be used for the following purposes, among others:

• Benchmarking and assessing sustainability performance with respect to laws, norms, codes, performance standards, and voluntary initiatives;

• Demonstrating how the organization influences and is influenced by expectations about sustainable development; and

• Comparing performance within an organization and between different organizations over time.


Why Investors Look at ImpactInvestors who make E&S themed investments will want to measure the social and environmental impact of their investments, for a number of good reasons:

• To communicate the social or environmental performance of investments to external stakeholders. For example, investment managers may need to respond to reporting requirements from clients with specific preferences regarding the use of their capital. Asset owners may want to respond to interest and demand from their beneficiaries and external stakeholders.

• To ensure their funds are not supporting poor practices that could lead to reputational risk, for example, over-indebtedness among end users of microcredit.

• To improve the environmental or social impact of their investments. Measuring impact enables investors to set targets for the companies or funds in which they invest, providing a basis for engagement to improve performance over time.

• To create positive social or environmental impact as an integral part of their mission. Such investors may want to evaluate the social and environmental impact of their investments to assess and improve their performance against these objectives.

Outputs, Outcomes and Impact Investors interested in understanding the environmental and social impact of their investments will require additional information from the companies or funds in which they invest. The impact chain shown in Figure above is commonly used to frame the different stages of measuring environmental and social performance, for which data could be collected.

• Inputs are the resources, both human and capital, that are invested in the company’s activities.

• Activities relate to the core product or service of the company, or to the company’s policies and procedures, such as staff training or water management. Activities lead to outputs, outcomes and impact.

• Outputs are the directly measurable results arising from a company’s activities. These could include greenhouse gas emissions, water consumption, number of employees or workplace training programmes.

• Outcomes are the ultimate changes in a system, intended and unintended, that result from these outputs. For example, the contamination of a river, workforce retention or an improvement in the standard of living of employees.

• Impact is the proportion of the total observed outcome that can be attributed to a company’s activity, above and beyond what would have happened anyway. For example, to show an improvement in employees’ standard of living would require evidence that this is due to employment with the company and not a result of other factors.

Measuring impact requires counterfactual analysis and is therefore rarely feasible for investors. It is more common to track outputs and outcomes, using indicators that imply rather than prove impact. This is a justifiable way of simplifying the process and making it manageable, particularly where there is evidence that such indicators relate to the desired impact.

Overview of Environmental and Social Performance Measurement From Risk Mitigation To Impact

Many responsible investors seek information on environmental, social and corporate governance (ESG)performance from the funds and companies in which they invest. From an investment perspective, analysis of ESG issues is required to:

• assess fully the risks and opportunities associated with particular investments;

• help investors make better investment decisions; and

• generate more accurate valuations of businesses.

Understanding ESG issues can help mitigate the risk of potential negative outcomes that can affect a business. For example, fair pay and good working conditions may reduce the risk of high staff turnover and strikes; good water management can help avoid local water contamination and the possibility of associated fines.

Greater investor focus on ESG issues can also lead to a higher quality dialogue between companies and their investors on creating long-term value. It can

motivate companies to improve their governance and management, and encourage investors to proactively seek out opportunities presented by these issues. For example, fair pay and good working conditions can result in higher employee productivity and retention; good water management can result in cost savings in times of water scarcity. These actions should help direct capital towards better governed and better managed companies, and towards companies that are better positioned to contribute to the goals of a sustainable society.

Some investors are actively looking beyond the positive impact for the company itself to the environmental and social impact that may be felt locally, regionally or even globally. Continuing the labour conditions example, beyond understanding the risks of strikes or high workforce turnover, and the opportunities for increased employee productivity and retention, such investors may focus on changes in the standard of living for the workforce. Typically, such investors are investing in environmental and social (E&S) themed areas 1 where the investee companies provide a product or service that is expected to result in environmental or social benefits. These evolving approaches to incorporating ESG issues in investing are summarised in the previous page (see figure below).

The spectrum of investment approaches. Source: Adapted from Bridges Ventures (2012)

Traditional Screening ESG integration Themed Impact-first Philanthropy

Limited or no focus on ESG factors of underlying investments

Negative or exclusionary screening and positive or best- in-class screening, based on criteria defined in a variety of ways (i.e. by product, activity, sector, international norms.)

The use of qualitative and quantitative ESG information in investment processes, at the portfolio level, by taking into account ESG-related trends, or at the stock, issuer or investee level.

The selection of assets that contribute to addressing sustainability challenges such as climate change or water scarcity.

Environmental or social issues which create investment opportunities with some financial trade-off.

Focus on one or a cluster of issues where social and environmental need requires 100% trade-off.

• Ethically- screened investment fund

• Best-in-class SRI fund

• Long-only public equity fund using ESG integration to create additional value

• Clean energy mutual fund

• Emerging markets healthcare fund

• Microfinance structured debt fund

• Fund providing debt or equity to social enterprise or trading charity

Targeted social and/or environmental impact

Competitive returns

Responsible investment

EX

AM

PL

ES

FO

CU

S

Impact investing

Inputs

Resources (capital, human) invested in the activity

Amount of capital invested, number of employees etc.

Activities

Concrete actions of the organisation

Development and implementation of programmes and products etc.

Outputs

Tangible products and results from the activity

Items sold, number of people reached etc. and greenhouse gas emissions, number of employees.

Outcomes

Changes resulting from the activity

Contamination of a river, workforce retention, standard of living of employees.

Impact

Outcomes that can be attributed to a company’s activity, above and beyond what would have happened anyway

Attribution to changes in outcomes, effect of alternative actors and activities.

FO

CU

SE

XA

MP

LE

S

IND

ICA

TO

RS

32 33Chapter 2 - STRATEGIC SOCIAL INVESTMENT - Enabling Millions to ProsperMoving Forward - Strategic Frameworks & Organizational Roadmaps

“We believe that shared challenges are best addressed through collective action, and therefore partnership is at the heart of our Skills to Succeed

initiative. Taking a long-term approach, and working with strategic community organizations that share

our vision, means that we can play to our respective strengths to deliver more through partnership than

either of us could have delivered alone.”

Camilla DrejerHead of Corporate Citizenship, Accenture UK and Ireland

CHAPTER 2

STRATEGIC SOCIAL INVESTMENT ENABLING MILLIONS TO PROSPER


GLOBAL COMPACT FOR DEVELOPMENT

Why Business Should Support DevelopmentCompanies increasingly recognize that advancing broader societal objectives are necessary for ensuring the growth and stability of their own business operations.

The Business Potential

In many countries, particularly those that have remained at the bottom of the economic pyramid, the company’s deep commitment to infrastructure development, local capacity building, education, health, job creation and disaster relief can be critical to advancing the national development agenda as well as helping the company to build new markets.

Corporate efforts that contribute to United Nations development goals are critical to growing sustainable and inclusive markets world-wide. Working toward UN objectives has a positive influence on a business’ reputation and credibility. Enlightened businesses also recognize the valuecreation potential. The UN Millennium Development Goals (MDGs), which aim to improve the livelihoods of

billions of people around the world, are an entry point for business to engage in development. The MDGs have a particular emphasis in 2010, as the UN reflects on progress made in the first 10 years and looks ahead.

Successful development requires sufficient private sector investment to enable broad- based sustainable growth. Responsible investment can assure the longevity and robustness of UN interventions. Governments and the UN can benefit from the financial, logistical and practical support provided by the private sector. More than ever, businesses are needed to contribute, invest, and partner15.

15. For more information see http://unglobalcompact.org/docs/issues_doc/development/A_Global_Compact_for_Development.pdf


RESPECTFULDefinition Respectful social investment has due regard for the local customs, traditions, religions, and priorities of pertinent individuals and groups.

Operating Guidance

• treat program participants and host communities as valued partners and invest in understanding their aspirations, perceptions, and capabilities. Work to ensure that funding goals align with local circumstances and priorities.

• Proactively develop trusting and productive relationships with project stakeholders, securing their active interest and willingness to collaborate before embarking on projects that affect them.

• enable partner organizations, host communities, and program participants to take part in the design, goal-setting, implementation, evaluation, and ongoing refinement of social investments.

• social investment efforts should align with and build on existing capacities and initiatives, and be sustainable to the greatest extent possible.

• empower host communities, program participants and partner institutions to carry on the benefits of the investment, recognizing that capacity strengthening is a key component of sustainable social investment.

ETHICALDefinition ethical social investment is a reflective practice that employs only legitimate and constructive means in order to achieve its proper ends, in accordance with applicable laws and accepted international norms of behavior.

Operating Guidance

• operate in a manner that is consistent with international frameworks for ethical conduct with a particular emphasis on the Global compact’s ten principles.

• support, institute, and uphold high standards of governance.

• Prevent or resolve conflicts of interest.

• establish mechanisms that facilitate and protect the reporting of unethical behavior.

ACCOUNTABLEDefinition Accountable social investors take responsibility for the intentional and unintentional effects of their funding, and embrace the concepts of transparency and self assessment.

Operating Guidance

• throughout the grant lifecycle, monitor progress toward clear and measurable impact goals and objectives, evaluate the effectiveness of initiatives, and develop responsible exit strategies and funding contingencies.

• ensure that partner organizations have the capacity to safeguard and apply contributed resources effectively.

• use an accepted framework for measurement to record contributions completely and accurately; institute controls to protect assets, manage investment risk, and audit accounts.

• Regularly communicate information on grant-making intent, practices, and contributions in an accessible and clear manner that sets stakeholder expectations appropriately.

• Address misinformation or unintended consequences arising from social investments in a complete and timely manner.

• Seek ways to contribute to the ongoing dialogue on best-practice with other funders and partners, and engage in relevant benchmarking exercises.

PRINCIPLES FOR SOCIAL INVESTMENT

PURPOSEFULDefinition Purposeful social investment is grounded in a limited set of priorities about which the funder is knowledgeable and committed, and for which the funder is reasonably assured to play a positive role and does not negate or unnecessarily duplicate the efforts of other contributors.

Operating Guidance

• clearly define your social investment strategy, objectives, and criteria against which all investment and activities will be screened and evaluated.

• create a funding mission and portfolio that reflects your organization’s capacity, and aligns with the resources and strategies of your organization and those of your chosen partners.

• ensure that all partners have well defined roles and responsibilities, and that they understand your organization’s grant-making mission, practices, and goals.

• Apply high standards of due diligence and strategic planning to the funding selection process.

• Investigate whether opportunities exist to coordinate efforts with other parties who are linked to your priority funding areas

Social investment is the practice of making voluntary financial and non-financial contributions that demonstrably help local communities and broader societies to address their development priorities.

Principles for Social Investment are:

• Purposeful

• Accountable

• Respectful

• Ethical

With the introduction of the PSI (Principles for Social Investment), the UN Global Compact seeks to offer guidance for organizations pursuing

responsible social investment practices, including companies and their foundations, community foundations, private foundations and non-governmental organizations16.

In December 2011, the UN Global Compact launched the PSI Secretariat (PSIS) in Melbourne with the purpose to:

• Communicate the practice and goals of social investment;

• Champion research that advances the theory and practice of social investment;

• Distribute resources that help social investors to hold themselves accountable; and

• Facilitate international collaboration and promotion between social investment practitioners.

Leaders of corporations and grant-making institutions increasingly recognize the importance of responsible social investment, ensuring not only the optimal impact of their contributions, but also their alignment with broader societal goals in the sustainable development.

16. For more information see http://www.unglobalcompact.org/docs/issues_doc/development/PSI.pdf


RecommendationsIn executing diverse forms of strategic social investment and philanthropy, the lessons learned by Global Compact LEAD companies have enhanced the efficiency of their initiatives, ultimately allowing them to make a bigger impact. The problems encountered on the ground, the specific strategies implemented and the causes they have chosen to address may vary. However, the principles and practices they have applied to these activities provide examples of good practice that are highly relevant to any company wanting to embark on a social investment strategy or boost the impact of existing initiatives. Global Compact LEAD companies recommend the following:

Strategy

Companies should consider carefully an appropriate “point of entry” for their social investments and identify initiatives in which they can make the most of their investments of money, time or skills and use their core corporate competencies to maximize impact. And while initiatives with short-term returns may seem attractive, companies that want to support genuinely sustainable change should seek to go further.

To do so, they need to align social goals with corporate business strategies and core competencies. They should also seek to secure leadership support for social investment goals and objectives. Both strategies support the sustainability of an initiative over time. Moreover, companies need to make a provision for the fact that, unlike traditional investment strategies, social investment efforts require the allocation of sufficient time before their impacts can materialize.

Execution

Strategic social investment and philanthropy are no different from any business activity—success demands that any project should be professionally managed. This means setting out a project plan with appropriate timelines for deliverable outcomes. Resources should be correctly allocated and measures put in place to guarantee financial sustainability across the project time frame.

Before embarking on any initiative, companies should execute rigorous due diligence, investigating the operating environment and relevant potential partners and stakeholders. To avoid duplicating others’ efforts, it is important for companies to find out what projects addressing their chosen issue—if any—are already in place.

Collaboration

When considering where to invest, companies should look at where they can make an impact not only through their own investments but also by supporting civil society and the public sector. Choice of partners is critical. Companies should select trusted and tested business and NGO partners that provide stability and give continuity to projects.

Conducting due diligence on potential collaborators before formalizing any partnership agreement is essential. And once partners have been selected, the next steps are to set out clearly shared goals and targets and to put in place a measurable accountability framework.

As the project develops, all partners need to build trust among themselves, learning how to understand each other and “speak each other’s language”. Different partners’ views, experiences and needs can vary widely, so, for the partnership to be a truly productive one, partners must listen to and learn from each other. Diversity of knowledge and experience of economic, social and environmental problems can lead to innovative approaches and results that individual actors would not be able to achieve alone.

Furthermore, fostering knowledge exchange among practitioners—both internally, within a company, and externally, with partners across relevant stakeholder groups—is essential. Cross-pollination of ideas, which means partners can benefit from each other’s expertise, is key to ensuring the success of current and future initiatives.

Measurement

Measurement of results takes many forms. One aspect of this involves seeking regular feedback from local communities to ensure that activities are on the right track and necessary implementation improvements can be made (this also builds trust among relevant stakeholders).

From the outset, companies and their partners need to define the mechanisms through which to measure the impact of planned initiatives (and recognize that measuring comes with a cost that should be factored in at an early stage). As projects are implemented, companies should ensure that measurement is actually being conducted.

To effectively convey the impact of initiatives—both internally and externally—it is important to agree on a communications framework from the outset. Sufficient time should be allowed for an impact to materialize before announcing any results (communications may backfire if results are not being achieved as quickly as anticipated). If expectations are managed effectively, communications provide a critical tool in securing buy-in from local communities and partners externally and leadership support internally—which in turn helps guarantee a long-term impact.

Of course, the recommendations set out here are not mutually exclusive. When embarking on social investment programmes, companies may place more emphasis on some strategies than others, depending on the focus and scope of the programmes they are planning to execute. Nevertheless, to varying degrees, all of them should be at least considered if companies are to turn their social investment programmes from charitable to strategic.

Throughout 2011-2012, a subgroup of UNGC LEAD companies came together to tackle one of the Blueprint’s 16 components, specifically Strategic Social Investment and Philanthropy17. One aspect of this work involved feeding into the development of The Reconceptualization of Business18 report produced by the Global Compact and the Global Compact’s Principles for Social Investment Secretariat (PSIS).

The Reconceptualization of Business sets out models covering the full spectrum of corporate responsibility and describes various ways responsibility towards society and environment can align with business approaches and ideals. At one end of this continuum is “Core Business”, while at the other is “Philanthropy”. In between these points on the spectrum, the paper identifies five organizational models:

CoreBusiness

ResponsibleBusiness

InclusiveBusiness

SocialBusiness

SharedValue

StrategicSocial

InvestmentPhilanthrophy

17. Strategic Social Investment and Philanthropy is an important complement, and not a substitute for, actions such as robust management policies and process to implement the Ten Principles.

18. The Reconceptualization of Business report, launching during Rio+20, maps and defines different approaches to corporate responsibility to facilitate and improve the impact of social investment by Global Compact signatories, and thereby contribute to measurable and sustainable improvements in the quality of life for communities in need.

These organizational models should not necessarily be seen as distinct and mutually exclusive. Nor is the list definitive. Indeed, one of the central arguments in The Reconceptualization of Business is that it is increasingly difficult to treat economic and social development objectives as completely separate and distinct. The blurring of typical philanthropic and business boundaries is becoming a common practice.

STRATEGIC SOCIAL INVESTMENT AND PHILANTHROPY

SHARED VALUE

CoreBusiness

ResponsibleBusiness

SocialBusiness

StrategicSocial

InvestmentPhilanthrophyInclusive

Business


REDEFINING YDP ORGANIZATION CONCEPT AND STRATEGIC FRAMEWORK

Good Governance

Social Progress Environ

men

tal

RolesYDP realizes that in order to be fully effective; it needs to carve out its niche among other similar entities in the Corporate Social Responsibility (CSR) arena while at the same time strives to ensure collaboration with a broad range of partners. It is for this reason, that in its endeavors YDP adopts the following roles.

DEVELOPMENT PARTNERIn recognition of the development context of the country in which it operates, YDP believes that it needs to position itself as a development partner that focuses on developing and implementing programmes that contribute meaningfully to development priorities at the national and/or local levels. Such an approach also placed their contribution no longer as mere donation, but as a development input that matches the local development resources.

CATALYSTAs a development partner, YDP will complement development priorities by designing and developing models that can be adopted widely by others. This catalytic approach is aimed to accelerate the expansion of benefits to a wider range of stakeholders. As such, it strives to complement existing programmes by crafting innovative approaches and models that complement or fill in gaps, in the areas that YDP works in.

KNOWLEDGE HUBYDP has its fair share of trials and errors in experimenting different approaches as evidenced by the evolving nature of its programmes. Through the experience and lessons learned including that of other institutions; YDP has gained a better understanding which guided its future work programme. Therefore, by taking the lead on sharing actionable knowledge, YDP hopes can jointly build a body of knowledge in the area of social investment and programme implementation that can benefit wider stakeholders and lends credibility to YDP.


ApproachAs a development partner, YDP needs to be in sync in programme planning, design, and implementation with relevant systems. It is for this reason, that in our endeavors, YDP adopt the following principles in the approach:

COALITIONNow, where development dynamics is much more complex, the imperative to overcome conventional methods and galvanize broad-based support is greatly needed to ensure sustainability but also to gain sense of ownerships and commitment. Key to this commitment is recognition and appreciation of the need to place all stakeholders, in the broadest sense of the term, as equal in importance. YDP believe that shared values and mutual interests create a powerful coalition of diverse stakeholders (Governments, private sector and civil society) work as an effective driving force for making a significant progress. Such a powerful coalition can be a catalyst for inspiring innovative approaches and advancing the implementation and commitment.

COMMUNICATIONSYDP believe that the effectiveness of any scheme lies in effective communication by engaging in a constructive dialogue. It is for this reason YDP programmes emphasizes on comprehension about the urgency of development issues with the aim to enable key stakeholders to take positive actions and make the improvements that is needed. YDP fully aware of the need in building awareness, trust and increased commitment of the policy makers that are necessary to create an enabling environment to implement its programmes effectively in terms of regulations, facilities, funding, and manpower. On the other hand, social progress can only happen when the community takes charge on their behavior and act out of their own volition.

CAPACITY BUILDINGYDP conducts activities on a long-term and sustainable basis, on a foundation of relationships that are mutually advantageous and capable of enduring beyond a single project. In addition, YDP strives to ensure a sense of ownership, financial and institutional capacity necessary to sustain long-term social and economic development. Capacity building is a critical factor to ensure sustainability. It gives programmes and organizations fluidity and flexibility to adapt in an ever changing environment. As programmes evolve over the years, YDP emphasizes more and more on building local capacity to allow continuity and lasting impact in its joint efforts. Hence, YDP support spans from direct physical support, technical assistance to elaboration of structures and processes that are intended to improve programmes achievement and empowering institutions and communities to progress together.

COHERENT ACTIONYDP realizes that the success in implementing the vision and strategy will very much depend on keeping the focus and priorities are clear. The only way to do that is by a coherent and holistic approach in all areas of work. The focus on ‘coherence’ is in recognition of the pressing need to bring efforts together in a logical and consistent manner. Coherence reflects the need to go beyond simply integrating existing measures to achieve more fundamental reorientations of perspectives, relationships and actions within and across sectors. Without such fundamental assessment across sectors, it is unlikely that the adoption of YDP supported initiatives will be effective enough to make a real impact in the long-term. YDP believes this approach keeps all key stakeholders on track, focused, and measured for further improvement in its joint progress.

Holistic ApproachYDP’s support must be linked and contributes to local and/or national development priorities. Such is the complexity of most development issues that no single endeavor is isolated from other inter-linked issues. Therefore, YDP’s support programmes will ensure their proper linkages to upstream and downstream issues that will guide the design of YDP’s contribution.

Integration to Existing SchemesIt is essential that, as part of the programme design and implementation, supported programmes are interlinked with existing schemes that would be able to adopt, continue and sustain the activities after the support phases out.

Ownership and Engagement of the StakeholdersThe success and sustainability of any development schemes depend greatly on the sense of ownership of the key constituents. This can only be done through active engagement of the programmes’ stakeholders as the means to gain their views, inputs and participation and eventually commitment to implement the programme.

Broader and Wider Support and ParticipationThe magnitude of most development programmes requires the involvement of many partners, and it is essential to form partnerships and coalitions with a broader range of stakeholders to gain their support and active participation. Such a broad- based support would help to accelerate the expansion and impact of YDP’s support programmes.

Resource and Knowledge SharingIn keeping with the spirit of partnerships and collaboration, YDP strives to cultivate collaboration with like-minded partners by sharing of resources and knowledge through which it will gain leverage to its resources.

Mobilization of Corporate ParticipationProgrammes will provide room for corporate participation, allowing them to realize a shared vision and strengthen their engagement with the stakeholders.

Programming StrategyThe development of Yayasan Danamon Peduli’s work programme will be guided by the following key strategies:


19. Principles for Social Investment (2012) Discussion Paper: The Reconceptualization of Business. The Principles for Social Investment.

Using the Reconceptualization of Business Models developed by Principles for Social Investment Secretariat (PSIS) on Strategic Social Investment and Philanthropy19, we map the business models that is most relevant to BDI and YDP circumstances, both which would serve in translating the shared vision “We Care and Enable Millions to Prosper” to contribution toward Sustainable Development goals.

“WE CARE AND ENABLE MILLIONS TO PROSPER”

SHARED VISION

TRANSLATE TO

TO A

CH

IEV

E

TRANSLATE TO

Good Governance


men

tal

SUSTAINABLEDEVELOPMENT

CONTRIBUTE TO CONTRIBUTE TO

PROFIT ORGANIZATION

Core BusinessResponsible Business

Inclusive Business

NON-PROFIT ORGANIZATION

PhilanthrpohySocial InvestmentSocial Business

ENGAGEMENT

COMPLIANCE

REPUTATIONRELATIONSHIPS

COORDINATEDEFFORTS

SOCIAL INTELLIGENCE

SHARED VALUE

CoreBusiness

ResponsibleBusiness

SocialBusiness

StrategicSocial

InvestmentPhilanthrophyInclusive

Business

Social Investment Business ModelThe Reconceptualization of Business sets out models covering the full spectrum of corporate responsibility and describes various ways responsibility towards society and environment can align with business approaches and ideals. At one end of this continuum is “Core Business”, while at the other is “Philanthropy” in between these points on the spectrum. These organizational models should not necessarily be seen as distinct and mutually exclusive. Nor is the list definitive. Indeed, one of the central arguments in The Reconceptualization of Business is that it is increasingly difficult to treat economic and social development objectives as completely separate and distinct. The blurring of typical philanthropic and business boundaries is becoming a common practice.


VS

DOCUMENT MANAGEMENT

CONTACT MANAGEMENT

PROJECT MANAGEMENT

FINANCIAL MANAGEMENT

HUMAN RESOURCE

MANAGEMENT

IPIMSUNIFIED

COMMUNICATION

MANUFACTURE RESOURCE PLANNING

SUPPLY CHAIN MANAGEMENT

CUSTOMER RELATIONSHIP MANAGEMENT

FINANCIAL MANAGEMENT

HUMAN RESOURCE

MANAGEMENT

ERP

SINGLE REPOSITORY HYBRID CLOUD REPOSITORIES

DYNAMIC V

ISU

AL

DAT

A R

EP

ORTING FOR KEY PERFOR

MA

NC

E M

EASUREMENT DYNAMIC

VIS

UA

L D

ATA

REP

ORTING FOR KEY PERFOR

MA

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E M

EASUREMENT

Solutions Integration Model

To support these efforts and attain the intended outcome in measurable ways, YDP embarked on developing a management system which would allow integrated, efficient and effective management of YDP’s programmes, resources (both financial and human) and boost the organizational credibility. This integrated system, named IPIMS (Integrated Programmme and Information Management Systems) helps streamline everyday tasks, communications, increase organization management capability and productivity, as well as a reliable decision support mechanism. In addition, IPIMS is an important asset for YDP’s intention to gain certification of quality management in accordance to international standards.

IPIMS Deployed as a hybrid platform (Cloud & On Premise) that enables broad accessibility for YDP team to collaborate better in higher mobility and get the work done anytime, anywhere and virtually on any device (PC, Tablet, and Smart Phones). Integrating secured and proven technologies that have been utilized by leading businesses and organizations worldwide, such as:

• Unified Communications (Email, IM, Voice, Video Conference, and Many more),

• Document Management,

• Project Portfolio Management,

• Human Resources Management,

• Programme Workflow Management,

• Custom Database Applications, and

• Executive Analytics Dashboards

The system has been developed in stages, taking into account the priority needs of YDP, flexibility and adaptability of the system to the fast-changing technology, and ensuring that the resources are strategically invested within YDP’s overall budget allocation.

To date, through IPIMS, YDP has also managed to bring together the aspects of the sustainability strategy of the organization and operationalized and benefits the organization in the following ways:

• Enhances the quality and effectiveness of the programmes through the consistent feedback received from various sources.

• Constant feedback from our own programmes as well as from others’ are captured into the system and forms the body of knowledge that strengthens our informed decision making processes, as well as contributes to public knowledge development.

• Quality of programme delivery is also further enhanced from the efficient and simplified business process and operating system.

• The openness and accessibility of the system ensure transparency and accountability of our operations.

• Allows open communication among staff and enables learning process within and outside the organization.

• Systematic adoption of go green and cost-efficient practices and operations

GOALS

Tactical Speed access to information, answers to questions, and business process acceleration.

Strategic Facilitate the creation and sustainability of a learning organization.

Good Governance


men

tal

YDP Organization Framework

Since its establishment in 2006, Yayasan Danamon Peduli (YDP) has consistently placed continuous improvement as the cornerstone of the organizational development which corresponds to emerging situations and demands and external trends.

Integrated Strategic Framework

Following its first 5 years, YDP had taken a set of concerted consolidation steps that cut across all divisions: programme, operations and communications – with a view of moving the organization towards internationally-accepted organizational best practices.

The intention is so that YDP can remain relevant, professionally competent, and able to take advantage of emerging opportunities. The consolidation plan consisted of the following areas:

• Sharpening of YDP’s niche and role in the CSR arena, as: Catalyst, Development Partner, and Knowledge Hub.

• Greater emphasis on process and development orientation in its programme design and implementation.

• Streamlining of internal business processes.

• Enhancement of networking and partnerships in its work strategy to ensure wider collaboration, sharing of knowledge and resources.

The ultimate outcome expected of the combined efforts are effectiveness, quality, efficiency and positive recognition.

As a result, in order to deliver these expectations, YDP’s business process had to go through vast changes, particularly in the following ways:

1. The importance of process in all stages of programming demands a much more intensive planning and consultative approach that in turn demands and affects directly the YDP team in terms of how they conduct their work and time allocation.

2. The diversity of the programmes with their respective features requires a much more efficient and effective method of tracking and monitoring in order to ensure timely and quality delivery.

3. Efficiency and effectiveness demand greater collaboration among divisions (Programme- Operations-Communications) which will ensure synergy, timeliness and rapid support.

4. To ensure continuous improvements, every lesson learned from past and ongoing experience must be captured and documented properly, so that it can serve as immediate feedback to current programmes as well as learning resources for other similar players.


THE BENEFITS OF LBGUsing a consistent international benchmarking framework brings companies many benefits, these include:

• A roadmap for a journey from calculating what they contribute to understanding what this achieves

• Robust data for use in major corporate responsibility indices (DJSI, GRI, CR Index), as well as for internal management decisions and external communications

• Information to benchmark their community investment performance against sector peers and best in class companies by using the consistent framework

• Access to a tried, tested and continually developing methodology

• Learning from international best practice

• Participation in ongoing improvement in community investment management and communications

THE RELEVANCE OF LBG & GRIThe Global Reporting Initiative (GRI) provides companies with a set of principles and indicators on which to base their CSR reporting. LBG data input number is a key element of the GRI’s main economic indicator (EC1) and LBG data is relevant to other indicators under the economic, social and labour practices headings. The GRI approach and reporting principles are consistent with the LBG methodology, which has been endorsed in GRI sector supplements.

In order to measure corporate community investment (CCI), we need first to understand what is meant by the term.

Companies engage in activities that can have a positive impact on society every day. They create wealth and jobs, pay taxes, deliver goods and services, drive innovation, and so on.

Over and above, and occasionally overlapping, these core activities companies often contribute to charitable organisations to help address a range of wider issues in the communities where they do business.

The type of organisations supported can vary greatly and include charities, non-profits, non-governmental organisations (NGO’s), third sector, civil society and so forth. This specific voluntary engagement with charitable organisations that extends beyond companies’ core business activities is broadly what is meant by CCI.

The types of support that companies provide to these organisations can also vary considerably, from one-off donations to good causes to sustained long-term partnerships with community organisations that address a number of core issues of importance to both the companies and the communities where they operate. Companies can also engage in a number of commercial activities that directly support community organisations. Because of this range of activities it is important to identify which, or which elements, of them can be correctly identified, and thus reported, as CCI.

It’s perhaps also worth thinking about what CCI is not. It is not about doing ordinary business responsibility. So broader CSR activities such as using less energy, protecting the health and safety of employees, or enabling access to services or products to disabled or other disadvantaged people are not CCI, but part of the core business activities of a socially responsible company.

WHAT IS CORPORATE COMMUNITY INVESTMENT?

THE GLOBAL STANDARD FOR MEASURING SOCIAL INVESTMENT

In this report, the terms “Corporate Social Investment”, “Strategic Social Investment” and “Corporate Community Investment” are interchangeable.

A robust and credible framework for organisations that are serious about community investment. The LBG framework enables members to measure the totality of their contribution to the community, and then assess that in the light of the results achieved: the benefits that the contributions actually generate for both the business and the community.

A network of member companies, run by members for members, that demonstrate a continued commitment to society and a drive to move measurement forward. By working together, members achieve more. They can benefit from shared experience, best practice and new ideas. This results in a continued uplift in overall contributions with almost £1.7 billion worth of resources committed to community activities in 2011/12.

A consistent approach for benchmarking amongst peers, competitors and sectors, aligned with key corporate responsibility indices. Ultimately, LBG is the shared knowledge of more than 300 companies that use the approach around the world to better understand the difference they make to the communities they reach. Members created the framework and defined the core measurement principles on which it is based. By applying the framework they can report information that is consistent, comparable and credible.

WHAT IS LBG?


Guidance and support1. LBG Guidance Manual provides further information on how companies use the model to calculate

their investment into the community.(http://www.lbg-online.net/media/5595/lbg_guidance_manual_vol_1_inputs.pdf)

2. The Making a Difference report outlines the LBG approach to calculating the achievements of companies community programmes. (http://www.lbg-online.net/media/13256/making_a_difference_management_report.pdf)

3. All the guidance notes can also be accessed via the glossary in the members section of the LBG website here: http://www.lbg-online.net/index.php/lbg/manual/getting_started/glossary

• is the contribution in response to an appeal or initiated by a charity or employee on behalf of a charity?

• is it worthwhile but does not fit with the community investment strategy?

• is it unlikely to be repeated on a regular basis?

• is reliance placed solely on the charity’s good faith that the money is well spent, rather than through defined alternative systems to measure outcomes?

• is the contribution one of the three or four target areas for community action chosen because of their importance to the business, thus part of the strategy?

• is it part of a longer term partnership with one or more community-based organizations?

• is it linked into some sort of systematic reporting of outputs?

• is it a major commitment of resources?

• is the contribution from a line management budget, such as marketing or human resources, and subject to VAT, rather than from the community budget?

• is it targeted at an issue of immediate commercial importance to the interests or image of the business or industry?

• does it seek a competitive or other form of advantage for the company?

IND

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IND

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23 The LBG model does identify a fourth category, mandatory contributions, which includes community activities which a company undertakes in response to the requirements of law, regulation or contract. As these are not voluntary, the LBG requires the cost of these contributions to be reported separately from voluntary contributions.

There is also the category of business basics, which includes all core business activities involved in delivering products and services which are critical to the business, but not motivated by community benefit. The manner in which these activities are managed has a significant social and environmental impact and is often reported alongside CCI in many company reports, but, again is outside the measurement scope of the LBG model.

CHARITABLE GIFTSCharitable gifts include intermittent support to a wide range of good causes in response to the needs and appeals of charitable and community organisations, increasingly through partnerships between the company, its employees, customers and suppliers.

Charitable gifts tend to be reactive in tha)t they respond to appeals for help either directly from charities or through requests from employees (including matched funding or payroll giving) or in response to natural disasters or other short-term or one-off events. They tend to be contributed, not because of any strategic aim, but essentially because it’s the right thing to do.

COMMUNITY INVESTMENTCommunity investment describes the long-term involvement in community partnerships to address a limited range of social issues chosen by the company in order to protect its long-term corporate interests and to enhance its reputation.

Community investments tend to be more proactive and strategic than charitable gifts and centre on a smaller number of large scale, long-term projects, often run in partnership with a community organisation, that address a social issue or issues identified by the company as being of relevance to both the company and the community in which it operates.

COMMERCIAL INITIATIVES IN THE COMMUNITYCommercial initiatives in the community refer to commercial activities, usually by departments outside the community function (e.g. marketing, R&D), to support directly the success of the company, promoting its corporate brand identities and other policies, in partnership with charities and community-based organisations.

The most common example of commercial initiatives in the community is cause-related marketing. These are primarily marketing campaigns but which involve a contribution from the company to a charitable cause.

When reporting commercial initiatives in the community as community contributions it is important to only include those costs that directly benefit the community

WHY CONTRIBUTIONS ARE MADE - MOTIVES FOR CONTRIBUTIONThe LBG Model enables community activities to be categorised according to three23 categories of motivation. This provides an indication of the strategic level of the community programme and the degree to which it is aligned with wider business goals.

• Charitable gifts;

• Community investment;

• Commercial initiatives in the community;


Adopting The UN Global Compact Commitment • A tool to enhance compliance, whereby company

policies, processes, systems, and initiatives can be continually reviewed against the four UNGC principles areas to ensure alignment with their aspirational nature, and identify areas of potential risk or concern that may result from non-consideration.

• An educational tool that provides resources and opportunities to collaborate with and learn from peers, benchmark progress against one another, and engage on global and local levels with a diverse group of stakeholders.

• A planning tool to think about long-term sustainability issues from a variety of different perspectives and create both external and internal buy-in for sustainability efforts.

• A community of interest that presents an opportunity to contribute, share best practice, build networks, and add value to sustainability activities that are of importance to a company.

• It can serve as a strategic management and education tool, while encouraging actions that strengthen a company’s accountability to its corporate responsibility and sustainability goals.

• The UN Global Compact commitment can be viewed as a long-term “shared investment”: an investment in collaboration for the common good and shared value.

SUSTAINABILITY COMMITMENT ROADMAP

In recent years, the global sustainability development context is changing with a dramatic rise in the number and scope of voluntary sustainability commitments and standards. As a result, it has created a new set of challenges for companies who must now navigate through a plethora of different performance standards, metrics, and reporting requirements. Companies have to decide how they can best select, engage, participate, and deliver in these commitments, which carry resource, operational and reputational implications.

20. For more information, see the AccountAbility - Growing into Your Sustainability Commitments: A Roadmap for Impact and Value Creation. http://www.accountability.org/about-us/publications/growing-into-your-commitments.html

To help explore this issue, AccountAbility, in partnership with the UN Global Compact (UNGC), conducted research to identify best practices on how companies are managing and extracting value from the sustainability commitments.The findings informed a framework, the Sustainability Commitment Growth Curve (SCGC), that maps the opportunities and challenges companies face with voluntary sustainability commitments. It also provides practical and actionable insights as a way to help companies meet sustainability standards and their related corporate objectives.

To achieve the greatest value and return on investment from voluntary sustainability commitments, a company should drive all of its voluntary sustainability commitments up the SCGC. A company can refer to the range of characteristics plotted along the SCGC as a roadmap to navigate the way forward for enhanced integration and value creation20.

The UN Global Compact Commitment is a voluntary commitment that can help build both internal and external credibility. The UNGC can be an effective and efficient compliance and policy-adherence tool. When signing up to the UNGC, companies are encouraged to consider whether the ten principles are already addressed within their policies and decision-making processes.

Policy reviews and gap analysis can identify areas of material risks and therefore encourage the development of new risk management systems for the company. For companies starting out in their CR and sustainability journeys, the UNGC principles can be used as framework to help shape policies, guide decision-making, and explain what CSR and sustainability mean to the company. These considerations should be a core part of risk management in the first stage, followed by a deeper commitment involving the strategic lens to enhance business opportunities.

The UNGC commitment can be viewed and used in a variety of ways, such as:

• A governance framework to help shape policies and explain why and how corporate responsibility and sustainability are important to the company. The UNGC principles can be viewed as the bedrock of a company’s code of conduct and companies should take advantage of the plethora of guidance documents, such as the guidance on human rights and the guidance on responsible business in conflict-affected and high-risk areas.


Sustainability Commitment Growth Curve (SCGC) The SCGC provides a powerful framework that enables companies to:

• Determine why and how it makes a voluntary sustainability commitment to optimize participation.

• Map where their voluntary sustainability commitments currently function to provide impact and value.

• Identify and implement actions that generate increased return on investment and impact from these voluntary commitments over time.

• Utilize voluntary sustainability commitments as a strategic governance and management tool.

• Utilize voluntary sustainability commitments to achieve improved business and sustainability performance.


The UN Global Compact commitment should be viewed as a learning and engagement opportunity with the objective to both gain value from the commitment, and to add value to the commitment. It can serve as a strategic management and education tool, while encouraging actions that strengthen a company’s accountability to its corporate responsibility and sustainability goals.

When a commitment both relates to core values and helps create value, and is aligned with the most relevant material issues, a company can climb up the learning curve and will progress to deeper integration and better corporate responsibility and sustainability practices and performance.

The implementation of a commitment can create value by:

• Adopting performance management systems that increase organization

efficiency, set metrics, and establish incentives for advancement. The implementation of commitment requirements or commitment aspirations can be a catalyst for inspiring or advancing management and compliance processes and systems.

• Engaging in more constructive dialogue with all stakeholders. A commitment can add value as a framework to support stakeholder activities.

• Improving reporting processes and external accountability. Reporting on commitment progress can add more color to existing sustainability reporting efforts, and companies can use commitment progress reports to communicate with stakeholders.

• Enhancing human capital through education and training of employees. The internal promotion of a commitment can function as an educational opportunity to promote material issues within a company and educate employees on sustainability and corporate responsibility activities

A maturing CR strategy with goals to align core business strategy & operating activities

Companies with a mature level of sustainability performance may find the UN Global Compact commitment and principles to be aligned with existing policies and practices. UN Global Compact resources, such as working papers and working groups, can be leveraged as educational tools for employees. Participation in local networks can motivate employees to take sustainability efforts to the next level.

Commitment Implementation Phase

II

IMPLEMENTATION

Mobilization around a Commitment

The adoption of a commitment should promote continuous improvement in sustainability efforts. Adoption can create value by:

• Building internal and external credibility. The adoption of a commitment can act to build a business case around other sustainability activities a company would like to pursue. For those just starting out in their sustainability journeys, commitments can be used as a framework to help shape policies, guide decision-making, and explain what corporate responsibility and sustainability mean to a company.

• Improving risk management processes and systems. Through performing a policy review and gap analysis a company can identify areas

of risk and opportunity to develop new performance management systems that increase revenues while reducing costs.

• Enhancing brand reputation. Adoption signals to internal and external stakeholders that sustainability is a part of a company’s agenda and long-term management growth plan.

• Identifying new business opportunities. A company can build and leverage networks around a commitment, seeking out opportunities for collaboration and shared value.

• Developing innovative practices and policies. The adoption of a commitment can provide a roadmap to shape and develop policies and practices, as well as identify and mitigate areas of risk.

• Attracting and retaining talent. According to Net Impact’s Talent Report: What Workers Want in 2012, “58% of those surveyed would take a 15% pay cut to work for an organization whose values are like their own; 45% would take a pay cut for a job that makes a social or environmental impact; and 35% would take a pay cut to work for a company committed to corporate social responsibility.”

A newly formed or emerging corporate responsibility (CR) approach & strategy

Companies at an early stage of sustainability performance can look to the UN Global Compact commitment and principles as a roadmap. They can be viewed as aspirational guides and can serve to shape and influence behavior, and explain what corporate responsibility and sustainability means to a company.

Commitment Adoption Phase

I

ADOPTION

Identification with a Commitment


Focusing Your Sustainability CommitmentsCompanies can organize their commitments by keeping an inventory or “scorecard” arranged in a hierarchical manner. First, commitments can be classified into three groups: those that are 1) Global and overarching, 2) Issue based, and 3) Industry specific. Second, companies can distinguish within each of these groups those commitments that are narrow in focus and metric driven versus those that are broad and principle-based. And furthermore, alongside each commitment companies can identify and update commitment goals and key performance indicators.

SUPPORT WITH SUSTAINABILITY COMMITMENTS

Identification of Material

Issues

Global Overarching Global overarching commitments such as the UNGC principles

that span multiple areas: labor, human rights, environment, anti-

corruption.

Broad Commitments (principle-based)

—vs—

Narrow (specific, measureable)

Established Goals and KPIs

Issue Based Issue based commitments such as Climate Disclosure Project, CEO WaterMandate, Women’s Empowerment Principles, WWF, etc.


—vs—



Industry Based Industry specific commitments such as the Equator Principles, PRI, etc.


—vs—



Materiality DeterminationThe first step to making effective choices around what voluntary sustainability commitments a company should join is to look at the nature of the business and systematically define the issues that are “material” to the success and sustainability of the company. A material issue is an issue that will influence the decisions, actions and performance of an organization or its stakeholders. To determine what is material requires a materiality determination process. Much has been written about defining materiality and there is growing interest in achieving greater precision around the definition of materiality. AccountAbility laid the foundation for this work with the AA1000 Principles Standard (AA1000APS)21 which defines the principle of materiality. AccountAbility’s materiality framework, designed for organizations seeking to apply a rigorous, yet practical approach to materiality determination, can be further explored in AA1000APS, as well as in AccountAbility’s “The Materiality Report.”22 AccountAbility’s framework remains widely recognized and applied by hundreds of companies today. In the last two years there’s been heightened attention around materiality in global initiatives, including the efforts of the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB).

21. http://www.accountability.org/about-us/publications/aa1000.html

22 http://www.accountability.org/about-us/publications/materiality.html

The UN Global Compact commitment can be viewed as a long-term “shared investment”: an investment in collaboration for the public good and shared value.

Achieving sustainability and corporate responsibility in the areas covered by the ten UN Global Compact principles are systemic challenges that require companies to work together. The advancement of the UN Global Compact commitment means going beyond the principles and also advancing broader UN goals around peace, climate change, financial empowerment, etc. UN Global Compact participants can advance these efforts through a variety of activities such as inclusive business models, strategic social investment and public policy engagement, advocacy efforts, and through partnership and other forms of collective action.

Commitments should be dynamic in order to provide companies with continuous opportunity for leadership and innovation. The advancement of a commitment can create value by:

• Setting new industry standards and aspirations. A company can embrace any commitment to demonstrate leadership with various stakeholders around material sustainability issues and activities. Stakeholder engagement can lead to enhanced business opportunities.

• Promoting shared values and collective benefits. A commitment can act as a platform or vehicle to organize around, and to advocate from for specific sustainability commitment activities and efforts more broadly.

• Improving business performance through the creation of new business practices and systems of governance. The creation of an Executive or Board level sustainability committee can help compliance efforts and be a key tool for risk mitigation.

• Engaging in advocacy and policy development to advance sustainability commitment adoption on a regional, national, or global scale.

A mature CR strategy with deep integration into policy, code of conduct, and governance, risk and compliance processes

Companies with high levels of sustainability performance can utilize the UN Global Compact commitment as a global advocacy platform. They can collaborate and organize with other sustainability leaders and peers to promote best practices and further the advancement of sustainability commitments, as well as the United Nation’s goals more broadly.

Commitment Advancement Phase

III

ADVANCEMENT

Leadership around a Commitment


CAN ACT AS A FILTER TO SELECT WHAT OTHER COMMITMENTS TO JOIN

CAN SERVE AS A GUIDE TO HELP COMPANIES MAKE PROGRESS ON THE SUSTAINABILITY COMMITMENT GROWTH CURVE

Through assessment of

corporate material issues and policies

against UNGC Principles

Through networking

and learning opportunities

By identifying potential gaps,

risks, and opportunities

As a gateway into broader UN goals

and issues

To increase the impact of sustainability

practices and create value

The UN Global Compact as Filter And Guide

Companies can utilize the UN Global Compact principles as a filter to review their corporate policies against to identify gaps, risks, and opportunities, as well as areas where they may exceed or fall short in addressing the principles.

When a company becomes aware of these gaps they may consider what other initiatives they may want to join to address these shortcomings. UN Global Compact global conventions and gatherings, working groups, and Local Network events are opportune places to discover what other robust initiatives and commitments exist to support and complement a company’s existing efforts. The Corporate Sustainability Forum in Rio, June 2012, convened and announced a variety of initiatives, serving as a great introduction to both local and global sustainability commitment efforts underway.

HUMAN RIGHTS

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2: make sure that they are not complicit in human rights abuses.

LABOUR

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4: the elimination of all forms of forced and compulsory labour;

Principle 5: the effective abolition of child labour; and

Principle 6: the elimination of discrimination in respect of employment and occupation.

ENVIRONMENT

Principle 7: Businesses should support a precautionary approach to environmental challenges;

The UN Global Compact Principles

Principle 8: undertake initiatives to promote greater environmental responsibility; and

Principle 9: encourage the development and diffusion of environmentally friendly technologies.

ANTI-CORRUPTION

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

62 63Chapter 3 - KNOWLEDGE MANAGEMENT - The Emerging ParadigmMoving Forward - Strategic Frameworks & Organizational Roadmaps

CHAPTER 3

KNOWLEDGE MANAGEMENT THE EMERGING PARADIGM

“You can’t manage knowledge–nobody can. What we can do is to manage the environment

in which knowledge can be CoCreated, captured, discovered, shared, adopted,

adapted and applied.”

CHRIS COLLISON AND GEOFF PARCELL

LEARNING TO FLY“Practical Knowledge Management from Leading and Learning Organisations”

(2004)


Asking how you’re going to get there is also a good question!

That these approaches have helped many organizations sort of goes without saying, otherwise they never would have become fads now would they. Yet, many other organizations just couldn’t figure out how to get the mileage out of an approach so they blamed the failure on the approach and moved on to the next one. Do you get the impression there is something a bit warped in this picture?

We seems to have this passion for formulas, and when an individual, group, or organization experiences extraordinary success there is often an attempt to explain how that success was achieved. Of course, if we did it once then we should be able to do it again, right? All we need to know is the formula. Here’s a paradigm for failure if I’ve ever seen one, but it sells well, as Anthony Robbins, Steven Covey, Phil Crosby, Tom Peters, Michael Hammer, Peter Senge, and a host of others can attest to.

This is not to imply that the formulas don’t have dimensions of merit. They all do. It’s just that none of them are complete. And all of them taken together does not represent completeness either. There are just too many variables to be reduced to some simple n-step formula. And if this is the case, then how is it that success is achieved?

Success happens when a group of capable individuals pursue a well defined objective, continually reassessing things along the way, sometimes even questioning the continued sensibility of the objective, making adjustments based on the feedback, and pressing on. And here’s where knowledge, and knowledge managementv becomes such a valuable component of success.

When we deal with a situation we do so based on all that we bring with us. All the experience real or imagined that makes us what we are. And the extent to which the pattern of the situation connects governs our actions and the timing of those actions. Eric Jantsch25 used the following diagram with regard to communication and I think it also quite relevant regarding how we deal with situations.

Learning

100% Novelty

100% Confirmation

The idea being that situations we experience represent something on the scale from 100% Confirmation to 100% Novelty and it is the situations we deal with between these two extremes from which we learn. Those situations which represent 100% Confirmation provide nothing new and are just dealt with. Those situations which represent 100% Novelty we are completely unable to deal with because we are unable to make any connection.

25 Jantsch, Eric (1980 ) - The Self-Organizing Universe: Scientific and Human Implications. Pergamon Press.

THE KNOWLEDGE CENTERED ORGANIZATIONby Gene Bellinger

A DREAM QUESTOrganizations have but a few basic difficulties. These difficulties just happen to masquerade behind a plethora of facades which ensures that most perceive their number to be legion. The apparent legion of difficulties can be distilled down to just four areas:

• Objectives: well defined, communicated, understood, and committed to

• Demand: commensurate with the level of capacity of the organization

• Capacity: adequate to meet the current and projected demands

• Effectiveness: extent to which the organization promotes demand, and manages capacity to respond to the demand on its journey toward its objectives.

This list may strike you as a bit short, so if you can think of an organizational difficulty that doesn’t fit in one of these categories please let me know and we’ll see if it really should be an addition.

The four areas above map just happen to map quite nicely to Mike Davidson’s24 for areas of organizational concern:

• Mission: What are we trying to accomplish?

• Competition: How do we gain a competitive edge?

• Performance: How do we deliver the results?

• Change: How do we cope with change?

Now if the puzzle is definable in such straight forward and apparently simple terms, why is it that organizations have such ongoing difficulties attempting to put the pieces together? The difficulty stems from a single foundation, or lack thereof, knowledge. The problems people experience within organizations stem from two knowledge dimensions:

• What they don’t know they don’t know, and

• What they think they know that just happens to be wrong.

As for what they know, and what they know they don’t know, the former is the basis for appropriate action, and the latter can be accommodated through learning. As for the two dimensions listed above the first doesn’t create nearly as many problems as the latter because the latter forms the basis for inappropriate action. Inappropriate action which simply leads to more difficulties for the organization to deal with.

Over the years a whole host of approaches, more methodologies if you prefer wordiness, have been developed to assist organizations through their difficulties. The diagram below is my attempt at providing a humorous perspective regarding these approaches.

24 Davidson, Mike (1996) - The Transformation of Management. Butterworth-Heinman.


UNDERSTANDING KNOWLEDGE MANAGEMENT By Gene Bellinger, Durval Castro, Anthony Mills

What is this activity called knowledge management, and why is it so important to an organization? The following offer some emerging perspectives in response to these questions. As you read on, you can determine whether it all makes any sense or not.

DEVELOPING CONTEXTLike water, this rising tide of data can be viewed as an abundant, vital and necessary resource. With enough preparation, we should be able to tap into that reservoir -- and ride the wave -- by utilizing new ways to channel raw data into meaningful information. That information, in turn, can then become the knowledge that leads to wisdom. Les Alberthal 26.

Before attempting to address the question of knowledge management. It is probably appropriate to develop some perspectives regarding knowledge as a concept, which there seems to be such a desire to manage. Consider this observation made by Neil Fleming27 as a basis for thought relating to the following diagram.

26. Alberthal, Les (1995) - Remarks to the Financial Executives Institute, October 23, Dallas, TX

27. Fleming, Neil. Coping with a Revolution: Will the Internet Change Learning?, Lincoln University, Canterbury, New Zealand

Beyond relation there is pattern28, where pattern is more than simply a relation of relations. Pattern embodies both a consistency and completeness of relations which, to an extent, creates its own context. Pattern also serves as an Archetype29 with both an implied repeatability and predictability.

When a pattern relation exists amidst the data and information, the pattern has the potential to represent knowledge. It only becomes knowledge, however, when one can realize and understand the patterns and their implications.

The patterns representing knowledge have a tendency to be self-contextualizing. That is, the pattern tends, to a great extent, to create its own context rather than being context dependent to the same extent that information is. A pattern that represents knowledge also provides, when the pattern is understood; a high level of reliability or predictability as to how the pattern will evolve over time, for patterns are seldom static. Patterns that represent knowledge have a completeness to them that information simply does not contain.

We learn by connecting new information to patterns that we already understand. Wisdom arises when one understands the foundational principles responsible for the patterns representing knowledge being what they are. And wisdom, even more so than knowledge, tends to create its own context. I have a preference for referring to these foundational principles as eternal truths, yet I find people have a tendency to be somewhat uncomfortable with this labeling. These foundational principles are universal and completely context independent.

According to Russell Ackoff, a systems theorist and professor of organizational change, the content of the human mind can be classified into five categories:

1. Data: symbols

2. Information: data that are processed to be useful; provides answers to “who”, “what”, “where”, and “when” questions

3. Knowledge: application of data and information; answers “how” questions

4. Understanding: appreciation of “why”

5. Wisdom: evaluated understanding.

Ackoff indicates that the first four categories relate to the past; they deal with what has been or what is known. Only the fifth category, wisdom, deals with the future because it incorporates vision and design. With wisdom, people can create the future rather than just grasp the present and past. But achieving wisdom isn’t easy; people must move successively through the other categories.

So, in summary the following associations can reasonably be made:

1. Information relates to description, definition, or perspective (what, who, when,and where).

2. Knowledge comprises strategy, practice, method, or approach (how).

3. Wisdom embodies principle, insight, moral, or archetype (why).

Now that we have categories we can get hold of, maybe we can figure out what can be managed.

A CONTINUUMNote that the sequence data -> information -> knowledge -> wisdom represents an emergent continuum. That is, although data is a discrete entity, the progression to information, to knowledge, and finally to wisdom does not occur in discrete stages of development. Each progresses along the continuum as one’s understanding develops. Everything is relative, and one can have a partial understanding of the relations that represent information, partial understanding of the patterns that represent knowledge, and partial understanding of the principles that are the foundation of wisdom. As the partial understanding stage.

INTERACTION REQUIREMENTS FOR KNOWLEDGE MANAGEMENTInteraction Requirement # 1: There must be a motivation for us to interact with the environment to address the situation. As such, one, must believe that the interaction will result in receiving greater value than our inaction. This value may be that the interaction results in the development of an approach that saves time, improves the quality of a product or service, or provides some other perceived value that we wouldn’t accrue if we chose not to interact with the environment.

It is also considered essential that the environment itself continuously evolves over time, so that it can provide more appropriate or expansive guidance in the future. This perspective essentially dictates another interaction requirement, this one in the area of evaluation and feedback.

Interaction Requirement # 2: Interaction with the environment must be such that we are motivated to evaluate the approaches we access and provide feedback. (For example, was a recommended approach clear and easy to follow? Was it too vague?) This feedback will act as a foundation for the continued evolution of the environment as approaches are modified in response to feedback.

28 Bateson, Gregory (1988) - Mind and Nature: A Necessary Unity, Bantam

29. Senge, Peter (1990 ) - The Fifth Discipline: The Art & Practice of the Learning Organization, Doubleday-Currency.

A collection of data is not information.

A collection of information is not knowledge.

A collection of knowledge is not wisdom.

A collection of wisdom is not truth.

The idea is that information, knowledge, and wisdom are more than simply collections. Rather, the whole represents more than the sum of its parts and has a synergy of its own.

While information entails an understanding of the relations between data, it generally does not provide a foundation for why the data is what it is, nor an indication as to how the data is likely to change over time. Information has a tendency to be relatively static in time and linear in nature. Information is a relationship between data and, simply, is what it is, with great dependence on context for its meaning and with little implication for the future.


The approach we seek may not already exist within the environment. This leads directly to the third interaction requirement, one regarding situation capture and resolution.

Interaction Requirement # 3: Interactions with the environment must motivate individuals to define to the environment situations for which approaches do not currently exist. The environment’s continuous collection of situations for which approaches are desired leads to another requirement.

Interaction Requirement # 4: The environment must deliver value to those who interact with it and individuals must contribute approaches for situations that do not yet have them. The environment must facilitate the development and delivery of these approaches in an acceptable time frame.

In conjunction with the preceding requirements, there is an underlying realization that “you can’t be all things to all people.” This leads to the following requirement, which is actually the most appropriate place to begin when designing the environment.

Interaction Requirement # 5: The specific set of situations the knowledge base is intended to support (it’s domain), must be explicitly defined.

If the domain is ill-defined or too broad, it will make it impossible to deliver on the intent . This will essentially end in the failure of the intent as individual expectations will not be met, and individuals will shy away from interacting with the environment.

With these emerging perspectives, Knowledge Management now takes the form of:

“all the activities required to develop, maintain, and evolve the environment described above, and support its interaction with people.”

THE VALUE OF KNOWLEDGE MANAGEMENTIn an organizational context, data represents facts or values of results, and relations between data and other relations have the capacity to represent information. Patterns of relations of data and information and other patterns have the capacity to represent knowledge. For the representation to be of any utility it must be understood, and when understood the representation is information or knowledge to the one that understands. Yet, what is the real value of information and knowledge, and what does it mean to manage it?

Without associations, we have little chance of understanding anything. We understand things based on the associations we are able to discern. If someone says that sales started at $100,000 per quarter and have been rising 20% per quarter for the last four quarters, I am somewhat confident that sales are now about $207,000 per quarter. I am confident because I know what “rising 20% per quarter” means, and I can do the math.

If someone asks what sales are apt to be next quarter, I would have to say, “It depends!” I would have to say this because although I have data and information, I have no knowledge. This is a trap that many fall into, because they don’t understand that data doesn’t predict trends of data. What predicts trends of data is the activity that is responsible for the data. To be able to estimate the sales for next quarter, I would need information about the competition, market size, extent of market saturation, a current backlog, customer satisfaction levels associated with current product delivery, current production capacity, the extent of capacity utilization, and a whole host of other things. When I was able to amass sufficient data and information to form a complete pattern that I understood, I would have knowledge, and would then be somewhat comfortable estimating the sales for next quarter. Anything less would be just fantasy!

In this example what needs to be managed to create value are the data that defines past results, the data and information associated with the organization, its market, its customers, and its competition. And the patterns that relate all these items to enable a reliable level of predictability of the future.What I would refer to as knowledge management would be the capture, retention, and reuse of the foundation for imparting an understanding of how all these pieces fit together and how to convey them meaningfully to the another person.

The value of Knowledge Management relates directly to the effectiveness with which the managed knowledge enables the members of the organization to deal with today’s situations and effectively envision and create their future. Without on-demand access to managed knowledge, every situation is addressed based on what the individual or group brings to the situation with them. With on-demand access to managed knowledge, every situation is addressed with the sum of everything anyone in the organization has ever learned about the situation of a similar nature. Which approach would you perceive would make a more effective organization?

According to Mike Davidson30, and I agree with him, what’s really important is:

1. Mission: What are we trying to accomplish?

2. Competition: How do we gain a competitive edge?

3. Performance: How do we deliver the results?

4. Change: How do we cope with change?

Knowledge management, and everything else for that matter are important only to the extent that it enhances an organization’s ability and capacity to deal with, and develop in, these four dimensions.

30 Davidson, Mike (1996 ) - The Transformation of Management, Butterworth-Heinemann.


A NECESSARY UNITYPEOPLE, PURPOSE, PROCESS, & DATA

By Gene Bellinger

Organization seems to have this relentless effort for seeking one dimensional answers to complex problems. I’m not sure that it’s really one dimensional answers they seek as much as simple easy answers. Business and organization has weathered the last five decades of management fads, each fad proclaiming to be “the Answer” to all that is sought. And yet, in a few short years each fad is declared to be flawed, and replaced by the next fad, in an apparently never ending sequence. All I have to say about this is, “If one looks for the answers in the wrong place then they shouldn’t be surprised if they find the wrong answers.” So where is the right place to look? What follows will provide an elaboration of the meaningfulness implied in the following diagram.

When Alice asked the King of Hearts how to play the game he said, “Begin at the beginning, go until you reach the end, and then stop.” For business the beginning is Purpose. Purpose being the reason why the business exists. As I talk with senior management about purpose I get all kinds of answers such as, to make money, to deliver service, to beat the competition, to be the best, to be number one or two in our industry, etc. Each of these statements of purpose is simply a distinct statement of Theodore Levitt’s definition of the Purpose of any business, “To create and keep a customer.” And this Purpose is fundamentally accomplished through the delivery of customer perceived value. Whatever the business sets out to accomplish is achieved through a specific response to this Purpose.

People should employ Data to create, or define, the purpose of the business. Businesses fail because they have no Purpose, have the wrongPurpose, or are not “on Purpose.” Purpose provides the lens though which all the activity of the business should be focused in order to ensure the effectiveness of action.

People should continue to employ Data to determine if the Purpose is still appropriate. People should also use the Data to ensure the business is on Purpose. On Purpose implying that the actions of the business are in fact aligned with the Purpose, i.e. effective.

As a slight aside let me offer a few words about Data. We have evolved over the years from Data Management, to Information Management, to Knowledge Management, and I’m surprised someone hasn’t started to hawk Wisdom Management by now. Data is the only thing that’s real, information and knowledge are just interpretations of

Data. The establishment of Purpose must be based on “real” Data, not the Data we select or the assumptions, conclusions, and beliefs we form from the Data. We need to focus on the “real” Data.

People should employ Purpose to define the Process(es) which enable the business to remain “on Purpose.” Process(es) here refers not simply to Process(es) such as manufacturing, distribution, etc., but to every Process which defines activity within the business. Process essentially implies the design of the organization. Businesses with an appropriate Purpose fail because they are not “on Purpose.” These organizations are essentially incoherent as activity within the organization is not aligned through the lens of Purpose. For activity to be “on Purpose” it needs to be creating customer perceived value, otherwise it’s just overhead.

Once the Process(es) are defined People should employ the Process(es) to define the Data necessary to support the Process(es). Data which does not support the Process(es) or enable the People to ascertain whether the Purpose continues to be appropriate is simply noise. Noise which detracts the People in the organization from being “on Purpose.”

In conclusion, what the above diagram represents is an identification of the four foundational components which must be integrated if a business is to be successful. The detail of how to integrate them will probably take a book or two.

Spectrum of Knowledge Capture


CHARACTERISTICS AND FOCUS DESCRIPTION

LEVEL 1 - INITIATE GROWING AWARENESS

At maturity level 1, organization is aware that it has a problem retaining and sharing knowledge

Organization has identified a need to asses its situation, and senior leaders support testing a KM proof of concept or creating a KM strategy. At this level, the KM leader will assess the current state in knowledge sharing, potential barriers to sharing knowledge and competing issues, and existing technologies and tools that can be leveraged as needed.

LEVEL 2 - DEVELOP GROWING INVOLVEMENT

At maturity level 2,initial knowledge approaches are in place. The focus is on helping localized knowledge flow and add value

Organization has identified improvement opportunities, and a KM core group is establishing a strategic direction. The group works to identify critical knowledge, conduct a needs assessment with IT and other relevant employee groups, develop key performance indicators for initial KM efforts, and provide knowledge maps to address knowledge needs and gap.

LEVEL 3 - STANDARDIZE ALIGNING PROCESSES AND APPROACHES

At maturity level 3, the knowledge flow processes are standardized and the focus is on meeting organizational requirements, achieving results, and developing a supporting infrastructure

Organization has standard knowledge flow process, replicable KM approaches, and supporting tools. It has begun to see measurable results from its initial KM efforts, which have strategic ownership and a core KM group with defined role and responsibilities. Organization’s infrastructure supports enterprise KM efforts, and a scorecard monitors the health and effectiveness of KM efforts.

LEVEL 4 - OPTIMIZE DRIVING ORGANIZATIONAL OUTCOMES

At maturity level 4, the KM efforts align with organization’s objectives and the focus is on leveraging core knowledge assets across the enterprisew

KM capabilities enable organization to leverage knowledge in support of its mission. KM is treated as a core function. The KM strategy integrates with enterprise strategy, and KM reporting processes align with enterprise reporting. KM responsibilities factor into individual performance assessments and are part of talent management and leader development programs.

LEVEL 5 - INNOVATE CONTINUALLY IMPROVING PRACTICES

At maturity level 5, KM practices are embedded in key processes and the focus is on the competency of organization

Organization’s knowledge flow supports innovation and continuous improvement. KM is part of an enterprise excellence framework, and standard budgeting processes help managers obtain the funding they need to continually improve their efforts. The KM group works with vendors and internal groups responsible for talent management, leader development, process improvement, and organizational learning to develop new uses of KM output that will improve enterprise effectiveness

KM MATURITY FRAMEWORKENSURING ALL IMPORTANT ELEMENTS IN YOUR KM STRATEGY

By Cindy Hubert and Darcy Lemons

Continuouslyimproving practices

Level 5Innovate

Growingawareness

Level 1Initiate

Localized andrepeatable practices

Level 2Develop

Ad hocKnowledge

Common processesand approaches

Level 3Standardize

Measure andadaptive

Level 4Optimize

Applied Knowledge

Enabled Knowledge

Scalable Knowledge

APQC’S LEVELS OF KNOWLEDGE MANAGEMENT MATURITY

Can You Measure the Value of Knowledge Management?Knowledge management (KM) has become a widely adopted business practice, yet many organizations still struggle to measure the gains it promises to offer. Executives are rightly asking, “What investment are we making in KM? Is it enough? Too much? What are we getting for our money?”

The intangible nature of knowledge itself caused some KM practitioners to assume that the impact of KM would also be intangible. APQC has not found that to be the case. We found that firms can and are measuring the impact of KM. In fact, those who invest the most and measure most rigorously are achieving a financial return on investment (ROI) of two dollars for every dollar spent per participating employee—a healthy ROI by any standard.

Why Identifying Levels of Maturity MattersIf the impact of KM is measurable, then how do organizations know that their efforts across the Stages of Implementation are paying off?

APQC’s Levels of Knowledge Management Maturity provide a road map for moving from immature, inconsistent knowledge management activities to mature, disciplined approaches aligned with strategic business imperatives. The Levels of Knowledge Management Maturity are integrated with APQC’s Stages of ImplementationTM so that implementation at each stage provides a foundation for success and a launching pad to the next stage.

Regardless of whether an organization is just getting started, conducting the first implementations of KM pilot projects, or preparing to revitalize or leverage successful KM approaches and tools to other areas in the enterprise, it should have a road map with milestones and checkpoints to guide its efforts.


THE KNOWLEDGE FLOW PROCESSOnce you’ve uncovered the strategic goals, strategies, and processes that drive your organization, it is important to consider how knowledge typically flows through the organization. This knowledge flow process, outlines a conventional continuous cycle of knowledge creation and use. Starting in the upper right of below model.

• Create—The creation of knowledge and information happens everyday in many different ways— new experiments, creative implementation plans for new clients, or tweaks to a standard operating process.

• Identify—Uncovering or highlighting new or existing knowledge or information is a critical step in the knowledge management chain. This may happen accidentally, as part of a knowledge audit, or in a brown bag luncheon.

• Collect—The process of collecting, capturing, and storing knowledge or information in a medium.

• Review—Validation or evaluation of knowledge or information for relevance, accuracy, and use.

• Share—The act of pushing knowledge or information to others. This may happen by storing assets in a database or standard format, or by sending an email, hosting a presentation, or talking in the hallway.

• Adapt—The process of altering knowledge or information one receives or learns to fit local and current conditions.

• Use—The most important step in the process of managing knowledge—reusing the information or knowledge to improve outcomes, processes, and/or activities.

VALUECREATION

Access

USE

Create

Share

Review

Identify

Collect

PEOPLE - PROCESS

CONTENT - TECHNOLOGY

Knowledge Flow Process

KNOWLEDGE & PROCESS MAPPINGTeams begin mapping their knowledge by identifying the core processes that need improvement. Process mapping is a wonderful precedent activity for knowledge mapping because it ensures that knowledge links to the ways people work. As we will discuss, it is not absolutely necessary to map a process when creating a knowledge map, but doing so will help ensure that you are focusing on improving business processes as well as provide a classification system for the knowledge and information you are mapping. A knowledge map can explicitly denote the knowledge needed for successful business process completion, as well as the gaps in knowledge and connections needed to improve. By connecting each phase of a business process to the current knowledge available, a knowledge management practitioner can create a map that traces where knowledge “lives,” and make plans for improving it. Using APQC’s Process Classification Framework can help to illustrate the various areas where knowledge mapping can make a significant difference in terms of process performance.

LINKING PROCESS MAPS TO KNOWLEDGE MAPPINGProcesses represent the language of most businesses. In order to simplify the building of a classification system for knowledge, many practitioners agree that knowledge maps should be applied as overlays to process maps. This indicates knowledge flow and gaps in knowledge. Knowledge mapping does not always have to relate to a specific business process; instead, it may be used to link knowledge to strategic goals, competencies, expertise areas, and/or job functions. However, a clear understanding of the business processes that drive those goals, competencies, or jobs is critical to creating a map that allows you to take action. At its core, the knowledge mapping team should look at each process step and ask what knowledge is needed to successfully complete that step, what knowledge exists, and where that knowledge can be accessed. Other questions about the sources, recipients, format, and best delivery vehicles for that knowledge help to flesh out the details that make the map more useful.

KNOWLEDGE MAP AND PROCESS MAP OVERVIEW

By Cindy Hubert and Darcy Lemons

WHAT IS KNOWLEDGE MAP?Much like an explorer who follows a travel map in the wilderness, organizations use knowledge maps to locate key internal knowledge and experts who can point the way. A knowledge map acts as a “snapshot in time” to help organizations understand what knowledge they have and where weak links exist. It also reveals what individual knowledge or expertise is critical to a process or focus area. Just like the road map in your car, however, maps quickly become dated as your organization changes, new employees replace older experts, and new goals emerge.

Knowledge mapping is a dynamic activity, not a static collection of dusty knowledge maps. The process of linking your business goals and strategies together with your knowledge assets is where the power of this tool lies.

Knowledge mapping should start with the business of the business. What are the critical business goals or capabilities that senior management or customers will focus on in the upcoming business cycle? What are the strategies that management is employing to meet those goals or capabilities? What processes link to those goals? Finally, what knowledge assets (either people, expertise, or content) do you have to make those processes work as efficiently as possible?

Where are the gaps in your knowledge that might prevent those processes from making the necessary impact? How does the knowledge landscape help inform business managers about what needs to be added, changed, or improved?

Strategic K Gap Analysis


LEGEND

OutputProcess RemarksOutcomeResources

CAPACITY BUILDING ROADMAP KNOWLEDGE SYSTEMS CLASSIFICATION AND PROCESS ALIGNMENT

KEY BENEFITS• Ensures that everyone understands the shared vision of a process.

• Assists in determining where in-process measures need to be used.

• Provides an accurate snapshot of the process.

• Aids in identifying non-value added tasks.

• Facilitates training path for new employees.

STRATEGIC LEVEL

OPERATIONAL LEVEL

STRATEGIC LEVEL KNOWLEDGE MAPS

ORGANIZATION COMPETENCY REQUIRED TO MEET

ITS STRATEGIC GOALS

IDENTIFICATIONS OF KEY KNOWLEDGE ASSETS IN EACH

DEPARTEMENTS

YDPSTRATEGIES

WWW

UNGCGRI

CERESISO

Best Practices

ADDITIONALBENCHMARKS

BASED ONSTRATEGIC

PLAN

NEWPRACTICES, PROCESSES, &

FRAMEWORKS

STAKEHOLDERSENGAGEMENT FRAMEWORK

CURRENTPRACTICES,

PROCESSES, &FRAMEWORKS

WWW COPTO IDENTIFY SPECIFIC

KNOWLEDGE ASSETS AND CONTENT; KNOWLEDGE NEEDS;

AND THE SOURCES, RECIPIENTS, LOCATIONS

TO LOOK MORE EXPLICITLY ATLEARNING OR COMPETENCY

NEEDED WITHIN VARIOUS PROCESSES

TO IDENTIFY YDP’S INTERNALCOMPETENCY TO PERFORM

SPECIFIC PROCESSES.

COMPETENCY MAP

3 YEARS STRATEGIC PLAN

CONTENT STRATEGYTRAFFIC

WIKI/CONTENT LIBRARYDOCUMENT - EXPLICIT KNOWLEDGE MAP

WIKI/CONTENT LIBRARY

DOCUMENT TAXONOMY DOCUMENT TAXONOMY

IDENTIFY SKILL SETS + COMPETENCIES NEEDED TO ACHIEVE STRATEGIC PLANIDENTIFY SKILL SETS +

COMPETENCIES + TRAINING NEED ANALYSIS

CAPACITY BUILDING MODULES

TACTICAL PLAN

DOCUMENT - EXPLICIT KNOWLEDGE MAP

JOB OR ROLE BASED KNOWLEDGE MAP

JOB OR ROLE BASED KNOWLEDGE MAP

COMPETENCY MAP

Design by DTC_v3.0_Nov2013

78 79Chapter 4 - A KNOWLEDGE LEVERAGING COMMUNITY - Driving Conversations to Knowledge DiscoveryMoving Forward - Strategic Frameworks & Organizational Roadmaps

CHAPTER 4

A KNOWLEDGE LEVERAGING COMMUNITYDRIVING CONVERSATIONS TO KNOWLEDGE DISCOVERY

“A social network platform that enables distributed pool of contributors to connect, share, and develop knowledge assets or information in a managed ecosystem.”

A KNOWLEDGE HUB


CONVERSATION >> COLLABORATION >> CO-CREATION >> PARTICIPATION >> COLLECTIVE ACTION >> KNOWLEDGE EXCHANGE

NATIONAL ISSUESNATIONAL BUREAUCRACY

NATIONAL GOVERNMENT

LOCAL GOVERNMENT

HIGH COMPLEXITY

LOW LEVEL ACTION

LOCAL ISSUESLOCAL BUREAUCRACY

CONFLICTED POLICIES

NATIONAL INTEREST

LOCAL INTEREST

REACH OUT & ENGAGE

SOCIAL MEDIA

KNOWLEDGE HUB - OPEN PLATFORM

COMMUNITY OF PRACTICECONVERSATION >> COLLABORATION >> CO-CREATION

CROWDSOURCE - OPEN PLATFORM

CIVIC ENGAGEMENTCOLLABORATION >> PARTICIPATION >> COLLECTIVE ACTION << SHARE NEW KNOWLEDGE >>

<< SHARE EXPERIENCES >>

<< COLLECTIVE LEARNING >>

<< KNOWLEDGE DISCOVERY >>

<< SHARE IDEAS >>

<< EXPLORE PERSPECTIVE & INSIGHT >>

<< EXTRACT >><< EXTR

ACT >>

<< EXTRACT >> << EXTR

ACT >>

EXPAND NETWORKS

SOCIAL MEDIA

STAKEHOLDERS

CONVERSATION >> COLLABORATION >> CO-CREATION >> PARTICIPATION >> COLLECTIVE ACTION >> KNOWLEDGE EXCHANGE

NATIONAL ISSUESNATIONAL BUREAUCRACY

NATIONAL GOVERNMENT

LOCAL GOVERNMENT

HIGH COMPLEXITY

LOW LEVEL ACTION

LOCAL ISSUESLOCAL BUREAUCRACY

CONFLICTED POLICIES

NATIONAL INTEREST

LOCAL INTEREST

REACH OUT & ENGAGE

SOCIAL MEDIA

KNOWLEDGE HUB - OPEN PLATFORM

COMMUNITY OF PRACTICECONVERSATION >> COLLABORATION >> CO-CREATION

CROWDSOURCE - OPEN PLATFORM

CIVIC ENGAGEMENTCOLLABORATION >> PARTICIPATION >> COLLECTIVE ACTION << SHARE NEW KNOWLEDGE >>

<< SHARE EXPERIENCES >>

<< COLLECTIVE LEARNING >>

<< KNOWLEDGE DISCOVERY >>

<< SHARE IDEAS >>

<< EXPLORE PERSPECTIVE & INSIGHT >>

<< EXTRACT >><< EXTR

ACT >>

<< EXTRACT >> << EXTR

ACT >>

EXPAND NETWORKS

SOCIAL MEDIA

STAKEHOLDERS

KNOWLEDGE HUB ECOSYSTEMDRIVING CONVERSATIONS TO KNOWLEDGE DISCOVERY

COPYRIGHT © 2011 - ANDRE DANIEL



Supporting TechnologiesAs stated, no single technology exists which will facilitate all the interactions required for a community to develop, maintain and evolve a leveragable body of knowledge. It is believed that there are sufficient technology components available, which, when integrated, will produce an infrastructure that will support the community in the manner described.

Because there are multiple types of interactions with differing intended contributions, it seems best to describe the technologies from the perspective of the interactions they must support. In this manner it should then be possible to evaluate a technology based on its capacity to enable and deliver value to the interaction it is supposed to support.

The following section provides some perspectives on particular technology components and their role in the infrastructure.

Interaction PrinciplesThe extent to which knowledge leveraging can occur within a community is dependent on the nature of the interactions within the community and within the larger system. Certain principles must be at the core of these interactions. These principles relate to the following aspects of knowledge leveraging.

• Geographic Distribution - Participants in the system are likely to be geographically distributed. This means face to face interactions will be difficult for most. The system must support multiple modes of interaction to accommodate the preferences and learning styles of the individual members.

• Purpose, Mission, Vision and Values - The community is not likely to begin with a clear and precise shared definition of its purpose, mission, vision, and values. You might say that the community knows only that it needs, but lacks clarity as to just what it needs. The infrastructure must facilitate interactions between members of the community, external contributors, and facilitators to develop a clear and consistent understanding of the purpose, mission, vision, and values of the community.

• Changing Participants - Community members, external contributors, and facilitators will change over time. New participants will enter and existing participants will depart. To help new participants ramp up to the current state of community evolution, the infrastructure must provide concise documentation of the agreements and decisions the community has made to date. This will allow new participants to ramp up without impeding seasoned participants from continuing to move forward. The intent is to avoid a continuous rehashing of past decisions because of issues raised by new participants who are unfamiliar with the decisions of the past and simply don’t know what they don’t know.

• Purpose Challenge - Once the community has established and documented its purpose, mission, vision and values, there must be a mechanism for challenging the established doctrines on a recurring basis. For the doctrine to remain valid and avoid becoming dogma, it must evolve over time.

• Personal Development - In order to support the evolution of the body of knowledge, individual members of the community must personally develop. The infrastructure must enable individuals to assess their capacity to contribute to the effort and provide a basis for personal development. This will enable individuals to develop their capacity to support the evolution of the leveragable body of knowledge.

• Roles and Responsibilities - Facilitated interaction between community members, facilitators, and external contributors serves as the basis for defining the roles and contributions of the facilitators and external contributors. These definitions also need to be documented for future reference by all participants in the infrastructure.

• Feedback - Community members interacting with the leveragable body of knowledge must be able to provide feedback in several critical areas and the feedback mechanism must be supported by the infrastructure.

• Content - Feedback on accessed knowledge must be submitted for review to the appropriate individuals to act on the feedback. This is a basis for continuing evolution of the leveragable body of knowledge.

• Participants - The value of facilitator and external contributor contributions must be evaluated by community members on an ongoing basis.

• Subgroups - Because it is expected that there will be subgroups of community members working in a project capacity, the community needs to provide feedback to the subgroup regarding the value of its contribution. Subgroups must evaluate their own perceptions of the value of their contributions as well as the level of contribution by their participating members.

• Return on Investment - Facilitators and external contributors must be able to continually reflect on their perceived return on investment from supporting the infrastructure. This provides a basis for determining whether alterations are appropriate to adjust the return on investment and the facilitators’ and external contributors’ interactions with the system.

• Support Facilities - Subgroups working together must have multiple support facilities to enhance their interactions. At present there is no known single technology that will accommodate the myriad of interactions required. Interactions of subgroups essentially represent a microcosm of the interactions of the whole system. The infrastructure must facilitate the establishment of subgroup objectives, facilitate their ongoing interactions, provide a repository for what the subgroup produces, enable the group to evaluate itself, and allow the community to evaluate the contributions of the subgroup.

Community implies a common interest and it is the pursuit of this common interest that the knowledge-leveraging infrastructure must support. Whether the common interest is to deal with a situation, avoid something, maintain something, or accomplish something, the common interest serves as the basis for the purpose and vision of the community.

PRINCIPLES OF A KNOWLEDGE LEVERAGING COMMUNITY INFRASTRUCTURE

By Gene Bellinger

The following diagram depicts the flow of interactions within the system. Note that there are no half-loops; every participant is able to interact with every other participant. The participants interact with each other and with the Leveragable Body of Knowledge through various forms of input, and receive feedback produced by each of the other participants and by the system.

A community, however, does not exist in isolation and is part of a larger body or system. The system is made up of the community and those with whom the community interacts. These participants in the system may be temporary or ongoing and are defined as follows:

• Community Members - Those individuals with a common interest who will benefit from employing the leveragable body of knowledge. It is expected that the community members are not entirely capable of creating the leveragable body of knowledge on their own.

• External Contributors - Those individuals outside the community who possess relevant knowledge that the could be leveraged by community members, and as such must become part of the leveragable body of knowledge. Community members must interact with external contributors to clarify and crystallize their purpose, vision, and values. The needs of the community members guide the external contributors.

• Facilitators - It is expected that neither the community members nor the external contributors have the capacity to manage the leveragable body of knowledge. Thus, facilitators are responsible for managing the interactions which create and maintain the ability to leverage body of knowledge and for maintaining the infrastructure interactions.


The Leveragable Body of KnowledgeThe leveragable body of knowledge is all the knowledge available to the community via all participants in the system. The repository for “captured” knowledge, the knowledgebase, must provide feedback in support of its own continued development and evolution. It must also support the following types of interactions from each of the participants within the system.

• Participant Feedback - All participants interacting with the body of knowledge must be able to provide feedback regarding the perceived quality of the knowledge they access. The most important dimensions are perceived to be:

• Findability - Was the user able to find what they were looking for in a timely manner? If what they were looking for didn’t exist within the body of knowledge, it forms the basis for additional content development. If what the user was looking for existed, did they find it in an acceptable time-frame?

• Usability - The extent to which the knowledge was able to be used to serve the user’s intent.

• Relevance - Was the knowledge found appropriate to what the user was looking for?

• Accuracy - Was the knowledge found correct and did it solve their problem?

• Precision - Was the knowledge found of the appropriate level of detail? Was it too general? Was it too specific? Was it just right?

• Content Evolution - All participants interacting with the leveragable body of knowledge must be able to provide foundations for additional content. This may be in terms of:

• Questions - Questions for which appropriate answers were not found in the knowledgebase should serve as the basis for the development of additional content by the facilitators and external contributors.

• Perspectives - As members of the community gain insights from employing facets of the leveragable body of knowledge, the infrastructure must provide a way for this to form the basis of new content for others to access.

• Contributions - As members develop new learning, it must serve as the basis for new contributions to the knowledgebase.

• System Feedback - All participants must receive feedback from the body of knowledge on an ongoing basis. This feedback serves as a basis for corrections to the modes and methods of interaction as well as for the continued development of the content of the body of knowledge. Some of the most relevant components of this feedback are:

• Value - Feedback must be established regarding the perceived quality or value of the body of knowledge. This feedback is based on some combination of the number and frequency of community member interactions with the body of knowledge, in conjunction with the feedback that participants have provided on the knowledge accessed. This feedback is considered valuable to community members, facilitators, and external contributors.

• Knowledge Quality - Based on the comments submitted by community members, feedback should be provided to the facilitators and external contributors as to the perceived quality of the content they have developed. This feedback also provides the basis for developing new content and revising existing content.

Note that from a composite sense, feedback serves to establish the community members’ perceived value of the interactions by the facilitators and external contributors. The infrastructure should also support the community members’ qualitative evaluation of facilitators and external contributors via blind survey. The idea is to balance direct and indirect feedback about the value of interactions.

Facilitating Distributed InteractionIt is assumed that, for the most part, the members of the community will be distributed worldwide. There may be small, co-located groups of community members, yet this will be the exception rather than the rule. In addition to being geographically distributed, it is expected that individual community members will have different preferences as to when and how to interact. Therefore, it is essential that the infrastructure facilitate the interaction dynamics in such a way as to accommodate the time and space differentials of community members.

• Personal Profiling - We seem to interact in a more comfortable fashion with individuals we think we know. We develop this sense of knowing from various interactions with individuals. The system must provide a profiling facility to develop a reference background for the participants. This should include personality types (Myers-Briggs, Adizes PAEI, Human Dynamics MEP, etc.), background, desires and aspirations, and special interests. Profiles must be developed online and be readily accessible to anyone that chooses to use them as a basis for better understanding those they are interacting with.

• Developmental Profiles - The foundation of the system is the common interest of the community, yet this cannot be pursued at the expense of individual aspirations. There is nothing more important to each of us than what we personally desire to accomplish. Therefore, the system must support individual development profiling in a manner which integrates individual development and community development.

SELECTING & DESIGNING KM APPROACHES PORTFOLIOPrimary categories of KM approaches and tools, design principles, and key concerns in selecting the right portfolio. The categories of approaches vary by how much they focus on explicit and tacit knowledge and how much human interaction or facilitation is involved.

Self Service.

This technology-focused category of KM approaches enables access to information and codified knowledge from dialogue and discussion. Think of intranets, role-based portals, people finders, and search tools sustained by comprehensive content management system. The objective of self service approach is to link employees at their desktop or work site to the knowledge assets they need to do their job more effectively. The focus is to enabling the employees to help themselves at the teachable moment while in the workflow. Virtually every enterprise KM program will have a self-service approach in its portfolio.

Lesson learned.

Applied to specific processes and projects, this category of KM approaches helps employees capture, share, and reuse lessons based on their experience. Also known as after-action reviews, lessons learned is a category of KM approaches in which the participants debrief major events to capture lessons, best practices, and understand factors of success or failure so they can take corrective action or avoid making the same mistake again. An additional goal is to share these lessons with colleagues who can benefit in their situation. Lesson-learned approaches can benefit any organization, but they have special power in high-stakes sectors in which mistakes can cost lives such as military, emergency response, aerospace and defense, heavy meaning, and oil and gas

Communities of practice.

Communities— sometimes called networks—consists of employees and stakeholders who come together face to face and virtually around an issue, discipline, or body of knowledge to share and learn from one another. They tend to be formal; have a common goal and a desire to share experiences, insights, and best practices; shepherd a body of knowledge; and professionally develop their members. With the advantage of crossing formal organizational boundaries, communities of practice are probably the most ubiquitous KM approach. They are the foundation of virtually every mature program we have seen.

The facilitated transfer of the best practices.

The facilitated transfer of the best practices involves identifying and transferring successful, demonstrated practices and process among units in an organization. The value proposition in to close performance gaps and bring all similar organizational units up to the same level of high performance. A systematic and robust transfer process usually involves formal facilitation and coaching through a structured methodology. This KM approach provides the highest measurable monetary gains because it focuses on the implementation of proven practices, it achieves especially high gains in organizations whose operating units perform similar activities or where there needs to be a standard global process across all operating units.


Engaging stakeholders in a manner that is ongoing, in-depth, timely and involves all appropriate parts of the organization learning experience. This framework links to Strategic Alignment Framework SAF ( 6.0 Develop & Manage Human Capital and 12.0 Develop & Manage Organization Capabilities.)


STAKEHOLDERS ENGAGEMENT FRAMEWORK INTEGRATING STAKEHOLDERS INTO STRATEGY DEVELOPMENT

CREATE THIRD PARTY TESTIMONIAL

COALITION BUILDING

CREDIBILITYREPUTATION MANAGEMENT

TO DETERMINE DESIRED OUTCOME & TIMEFRAMES

SCENARIO PLANNING

EXECUTION STRATEGY

CAMPAIGN CREATION

COMMUNICATION BALANCE SCORECARD

METRICS (BASELINE)

METRICS (PROGRESSION)

COMM ROADMAP/DNA

PRODUCTION

COMMUNICATION EXECUTION

PRODUCTION EDITORIAL

KM DISSEMINATION (PARTIALLY STRUCTURED)

WHITE PAPER (LINKING TOPUBLIC DOMAIN KM)

MEDIA ASSET EXECUTION

COMMUNITY ENGAGEMENT

VOLUNTEER PARTICIPATION

CAMPAIGN IDEATION / CONCEPT DEVELOPMENT

CHANNEL PLANNING

SPECIAL PROGRAMME (TOOLS FOR JOURNALISM)

PR/PRESS RELATIONS STRATEGY

BASED ON STRATEGIC GOALS

LEGEND

OutputProcess RemarksOutcomeResources

PARTNERSHIP PARTICIPATIONS PROGRAMME

INTERNAL COMMUNICATION

AUDIENCE DIGITAL CHANNEL

EXTERNAL COMMUNICATION

ENTERPRISE WIDE CAMPAIGN

- Key Decision Makers- Internal Stakeholders- External Stakeholders- YDP Staff- Danamon Biz Units

SOFT INCLUSION TO COMMUNICATIONS STRATEGY

VALUE CREATION TO INTERNAL COMMUNICATION

HTML MAILS

STAFF UNDERSTAND KM BETTER

CATEGORICAL WIDGET

RSS FEEDS

APPLICATIONS

LINK TO KM UNDER COMMUNICATION TAXONOMY

LINK TO CAPACITY BUILDINGCOMMUNICATION KNOWLEDGE

COMMUNICATION STRATEGY

WEB ASSETS

KM AMBASSADOR

INTERNET CONTENT DRIVENWEB DASHBOARD


ALIGN TO STRATEGY

Link to KM and Business Strategy

Form De-sign Team

Refine Business

Case

CreateKnowledge

Map

Design Knowledge Sharing Process

Develop Plans Change Management and Com-

munication

Assess Alignment to Business and CoP

Goals

Identify Roles and Resources

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Create Measuresand Indicators

Promote andSustain CoP

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Identify ITCapability

DesignRecognitionand Rewards

Assess Healthand Measure

Outcomes

CreateTraining Plans

Plan CoP Launch

RealignProcess

Assess and Engage IT

CoP Framework

Self-Sustaining CoPs

Effective CoPs with foundation to support business performance

and innovation

Assess Culture and Readliness

Develop Value Proposition for Cop’s

Determine Funding Mod-els to Support CoP Value

Proposition

CoP approach linked to organizational goals and

outcomes

DESIGN AND LAUNCH

PLAN CoP APPROACH

EVOLVE AND SUSTAIN

RESULT

RESULT

RESULT

RESULT

Communities of Practice Implementation GuideAPQC’s CoP implementation guide can help any organization design successful communities in the short term while helping to create a replicable methodology for faster deployment of community knowledge sharing in the future.

To do this communities of practice, it requires well-designed process, measures, and roles and responsibilities to be successful. The most effective community strategies and approaches consider the business goals and the natural flow of knowledge in the organization.

APQC’s communities of practice framework provides a standard and proven approach for design and implementation. This implementation guide will enable organization to achieve the objectives and achieve business results by using a variety of best practices, templates, and tools.

COMMUNITY OF PRACTICE FRAMEWORKPROVEN KNOWLEDGE MANAGEMENT APPROACH

By Carla O’Dell, and Cindy Hubert

Community of Practice (CoP) is an environment connecting employees and stakeholders that encourage the sharing of ideas and experiences by capturing ongoing dialogue. Consider communities to be boundary-spanning units responsible for finding and sharing best practices, stewarding knowledge and helping employees work better.

What CoP can do to your organization?

• Provide the means to translate local know- how into collective knowledge

• Help employees exchange ideas, collaborate, and learn from one another

• Transcend boundaries created by workflow, functions, geography, and time

• Enable the speed and innovation needed for marketplace leadership

• Can integrate into the fabric of organization’s core work and value chains

• Can successfully align with formal governance structure

It is important to note that community of practices can reveal best practices. Tips and ideas come out all the time. Community members can identify the potential and promising one and experts can determine and validate those that should be adopted by everyone. Communities would become the locus for identifying, sharing, and creating valuable knowledge. Among the benchmarked best-practice organizations, communities of practices are viewed as an essential practice that improve employee development, organizational learning, and change implementation.

From many organizations that become success doing their communities of practice with deeply integrated into their respective organization’s cultures. There are a number of characteristics, such as connect employees across regions and have formal approaches to support and sustain community environments. Consistency of KM leadership is also a prevalent theme and an advantage. Leadership of KM and community efforts has been stable almost from the beginning of the community strategy. Also, best-practice organizations have resource structures that support the communities. Finally, among best-practice organizations, communities exist to fulfill a need or objective. These organizations rely on their communities to solve problems, identify best practices, develop solutions, and prevent failures. Organizations such as these often create sublevel communities or special interest communities within the larger communities. Organizational objectives have the clear linkage to community activities, and performance measures track community output to better communicate that value to stakeholders.

Ten Traits of Successful CoP

1. Compelling, clear value proposition for all involved.

2. A dedicated, skilled facilitator or leader.

3. A coherent, comprehensive knowledge map for the core content of the community.

4. An outlined, easy-to-follow knowledge sharing process.

5. An appropriate technology that facilitates knowledge exchange, retrieval, and collaboration.

6. Communication and training plans for members and interested stakeholders.

7. An up-to-date, dynamic roster of community members.

8. Several key metrics of success to show results.

9. A recognition plan for participants.

10. An agenda of critical topics to cover for the first-and next- three to six months of existence.

KM is an established discipline, because of the significant results brought by long-standing approaches. By using proven practices, we will reduce risks and accelerate the implementation.

90 91Chapter 5 - ORGANIZATION EVOLUTION - The Creation and Sustainability of A Learning OrganizationMoving Forward - Strategic Frameworks & Organizational Roadmaps

CHAPTER 5

ORGANIZATION EVOLUTION THE CREATION AND SUSTAINABILITY OF A LEARNING ORGANIZATION

“Productivity and quality improvements is a race without a finish line. Your organization’s future will be determined by how well and how quickly you

learn, adapt, and improve.”

JACK GRAYSONFounder and executive chairman of APQC


THE EFFECTIVE ORGANIZATIONBy Gene Bellinger

Balancing Loop

Note: If the mechanics of this diagram are unfamiliar, you can find the basis in Systems Thinking Introduction (http://www.systems-thinking.org/intst/int.htm)

Reinforcing Loop

Objective

Gap

Current State

Current State

+

+

-

+

+ ActivityActivity

A system is an entity that maintains its existence through the mutual interaction of its parts. This is Bertalanffy’s definition, with which I have become most comfortable because of its simplicity and its implications. The key element of this definition is “mutual interaction” rather than “parts”. Systems are more a jumble of relations rather than a pile or a lump. A system is composed of subsystems and at the same time a subsystem of one or more other systems and, it is the interaction of the parts of a system that is responsible for its emergent characteristics. Emergent meaning that the system as a whole has properties one can not find by studying the parts, as wetness emerging from the interaction of hydrogen and oxygen in a system called water. And, as turns out, there are fundamental principles of systems, which, although they may sometimes be violated in the short term, eventually come, to pass. So what does all this have to do with a organizational transformation?

Successful organizational transformation cannot be achieved by just concentrating on one part and trying to design that new part to embody all of the optimal features a system should possess. Unless the barriers to change that exist elsewhere in the system are also identified and removed, sustaining any reforms in the new part will not be possible.

Organizations are systems, and they are subject to the principles of systems. For the most part, because we don’t understand the laws of systems, we continually attempt to violate them and are frustrated when the laws assert themselves and negate our efforts. As a result, we curse the system for its ignorance, as we are unable, or unwilling, to curse ourselves as it would be far too injurious to our own self-concept. I have found that with an understanding of systems has come an understanding of the operation of organizations, and they are most amusing, to say the least. So what are the principles of systems, and how do they apply?

Getting from Objectives to ResultsThere are two basic models of organizational structure, one founded on the concept of management and one founded on the concept of leadership. The former operates from the foundational belief that one controls results by controlling resources. The latter operates from a foundational belief that by giving up control of resources, it is possible to get greater control over results. The two foundational premises are exactly opposite, yet they both work, yet to varying degrees.

From a systems perspective these two perspectives can be represented as follows:

Peter Drucker who first stated, “Management is doing things right and leadership is doing the right things.” The idea being that once leadership figured out which were the right things to do management set about figuring out how to get them accomplished. This may have been an appropriate operative perspective at some point in history, yet with the pace of change today leadership and management must be integrated to operate across all facets of the organization. It is simply not possible for leadership to sit on high and develop the organizations objectives so management can effect the strategies to achieve the objectives.

The Balancing Loop is representative of the old leadership & management paradigm where the objective was established by leadership and it was then management’s task to manage the activity to cause the current state to move toward, and finally achieve, the objective. There are multiple structural problems with this paradigm in addition to the ones stated above. First, as the current state gets closer to the objective the gap becomes smaller and smaller thus providing less motivation for activity. Also, as one becomes more and more focused on an objective the more likely they are to achieve it, and the less capable they become at being able to discern whether or not the objective still makes sense.

The Reinforcing Loop is representative of a new paradigm, which is neither leadership nor management, but rather both in a rather integrated fashion. The implication being that the current state, along with the knowledge of the pattern that is emerging within the current state, provides the foundation for the activity that should be undertaken to alter the current state. Activity founded on the knowledge of the emergent current state ends up being reinforcing, at least to the extent the knowledge of current state is accurate and wisdom is exercised to determine the appropriate action.

Strangely, or maybe not so strangely, the reinforcing loop seems essentially the Taoist concept of non adoo, where the sage though no action leaves nothing undone. Non adoo was not really meant to imply no action, but rather no inharmonious action. The idea being that the sage worked with the system rather than against it. The balancing loop implication is that action be used, to whatever extent necessary, to drive the current state to the objective. The problems associated with this approach are legion, and we are living with the the problems generated as a result of yesterday’s managed solutions.


Productivity

Cost Per Resolution

Performance Drivers

Employee Satisfaction

Proficiency Average Time to Resolution

Customer Satisfaction

Leading IndicatorResults

Learning

ProcessAlignment

Those editor-level engineers who exhibit excellent interpersonal and mentoring skills may be nominated for training and certification as coaches. Coaches are certified editor-level solution engineers who are qualified to coach other engineers on the team to develop solutions; to develop good workflow habits and to write solutions competently.

• Publisher: A publisher is one that has mastered the use of all of their tools and exhibits the highest professional standards in technical, content and process skills. The publisher is certified to publish her or his solutions directly into the solution set (public or internal) without review. The publisher mentors coaches and reviews the solutions presented by editor-level and author-level engineers.

Average Time to Resolution (ATR): ATR is a multi-dimensional indicator that reflects the organization’s response to customer-driven activity (input). ATR includes elements of (a) first call resolution; (b) call closure rate; (c) hold time & abandon rate and (d) backlog. ATR is a leading indicator of Customer Satisfaction and Cost Per Resolution.

Productivity: This is another multi-dimensional measure that considers the staff required to resolve an experienced call volume. Productivity is a bit difficult to calculate for a specific time because calls are closed over a period of time. What makes sense is to calculate the average time to resolution for calls over a period of time, and then to divide that by the average staff available for the same time period of time. This will provide a sense of the average productivity over the period.

Employee Satisfaction is influenced by employees’ perception of their proficiency of performing what is expected of them and the extent to which they perceive that their efforts are productive, i.e., produce meaningful results.

Customer Satisfaction is influenced by employee proficiency at solving customer problems in conjunction with the time it take to create those solutions for the customer, i.e., average time to resolution.

Cost Per Resolution is influenced by the average time to resolution and the productivity associated with the resources which produce those resolutions.

Performance Drivers, Leading Indicators, and ResultsPerformance is the result of activities which are both effective and efficient. In short this means doing the right things and doing them well. The purpose of performance support is to enable segments of the organization to monitor certain aspects of their Solution-Centered Support adoption and determine areas where attention would be appropriate to enhance performance.

As a support organization pursues the primary dimensions of success, i.e., increased Employee Satisfaction, Customer Satisfaction, and lower Cost Per Resolution. It is appropriate for the organization to measure the Leading Indicators for these Results, i.e., increased Proficiency, lower Average Time to Resolution, and increased Productivity.

Generally, The difficulty that arises is that when organizations seek to manage the Leading Indicators it tends to drive the numbers, yet seldom producing the desired Results. The leading indicators, like the dimensions of success, are the direct result of an organization performing the correct activities and continually developing their proficiency at these activities.

For the leading indicators to continue to improve the organization needs to focus on the Performance Drivers, i.e., Process, Alignment and Learning. By continuing to develop the organization’s performance, i.e., effectiveness and efficiency, in the area of the performance drivers the leading indicators will track in the desired direction, as will the dimensions of success.

The short of it is, “One can’t win tennis games by watching the scoreboard. To win tennis game one has to focus on playing the best game possible, while continuing to improve their skill.”

The following diagram presents the relationships between the Performance Drivers, Leading Indicators, and Results.

We’ve defined proficiency for the different levels in the following manner:

• Author: An author is a qualified engineer who is developing technical, content and process skills. Authors require more management, coaching and reviewer time to help them acquire the level of proficiency demonstrated by an editor-level solution engineer. Authors are still developing skills that add value and contribute leverage, both to themselves and to the group.

• Editor: At this level, the qualified engineer has demonstrated technical problem-solving skills; writes good solutions requiring only minimal modification by the reviewer and exhibits good workflow habits. They consistently add value to solutions they use and are sought out to assist in solving difficult problems.

DefinitionsProficiency: Proficiency is a multi-dimensional indicator reflecting staff (engineer) capability and capacity, as influenced by recruiting, hiring, promoting, training, coaching, and management practices. It is a leading indicator of Employee Satisfaction and Customer Satisfaction.

Team Proficiency is a measure of the ratio of Apprentice, Journey and Master solution engineers within each product support group. During SCS start up the ratio will be skewed to the apprentice level until nomination and selection for the next skill level is completed. An organization should have a standardized nomination and selection process requiring peer nomination and certification.

Where to BeginOrganizations tend to focus on those things which are easy to measure, because they’re easy to measure. Generally along with a focus on what is easy to measure, targets are set, and management focuses on the targets. What happens it that teams will reach the targets -- though generally not in a manner that was expected or desired. As we have seen repeatedly demonstrated, and quite painfully, is “What gets measured, gets manipulated.”

In an attempt to avoid this target / manipulation syndrome there are no targets for the leading indicators and results. Teams should begin by measuring the leading indicators. When the measures are presented to management, management should ask the team about the acceptability of the current values, the trends, and inquire as to current plans to affect the desired change in the number. If one focuses on the number they will get manipulated. One must focus on behaviors that are responsible for producing the numbers. The numbers then provide an indication of the extent to which the focus is appropriate or should be altered.

While all the leading indicators are all interrelated Proficiency is the foundational component. Proficiency, being the foundational component, is the most appropriate indicator to measure and develop first. Once a group has established practices around measuring and developing proficiency, the team should then add Average Time to Resolution and Productivity to their set of measures. Once practices for tracking the leading indicators are established the team should begin measuring the final results they are achieving in the area of Employee Satisfaction, Customer Satisfaction, and Cost Per Resolution.

While the leading indicators provide a sense of the direction in which things are going the organization should not attempt to drive the leading indicators. What the organization, teams, and individuals should focus on is continually developing their understanding and proficiency at doing the right things and doing them increasingly well. This attention to effectiveness and efficiency will result in the appropriate trends in the leading indicators and the desired results.

The diagram below identifies the activities which should be the object of focus throughout the adoption of Solution Centered Support.


Individuals Team Organization

• Strategic Framework

• Leading Indicators

• Business Index

• Participation

• SSM

• Biz Value

• Proviency Index

• Training Feedback

• Employee Survey, Coaching Feedback

• Leadership Index

• Monitor Vital Sign

• SM Metrics

• CM Metrics

• Solution Value Index

• Team Feedback

• Knowledge Velocity

• Quality Ratings

• Proviency • Creation

• Reuse

• Quality

• Participations

• Throughput

• Modified

• Review

• Domain Review

• Process

• ATR

• Team Level Practices

• Sampling

• Team Feedback

• Reduce Escalation

• Web Publish

• Productivity

• Organization Vital Sign

• Coaching

• Learning Work

Monitoring Leading IndicatorsAdmittedly Proficiency is the most involved measure for a team to get its arms around. This stems primarily from the fact that this is an aspect of team performance that the team has not addressed previously. Yet, because this component is the foundation of the teams future success it is the most appropriate place to start. And if the team is not profiled how will the manager and coaches understand what areas to focus on for proficiency development and improvement?

Process, Content, and Technology are three dimensions of proficiency. Depending on the extent to which an individual demonstrates and understanding and skill in each of these areas, their proficiency will be characterized as Author, Editor, or Publisher level.

• Process

• Demonstrates a solid understanding of SCS processes

• Demonstrates good problem solving techniques

• Consistently leverages the workflow to solve problems

• Consistently displays effective workflow techniques (participation, capture, clarify & statement match, search, link)

• Manages rework and closes CSRs effectively and within standards

• Content

• Consistently develops solid content that doesn’t require modification to meet content standards

• Captures problem-solving approach within the context of the published solution

• Consistently improves solutions of others when encountered

• Consistently captures the customer experience

• Consistently uses statements & terms to increase relevance and connectivity to solution set

• Technology

• Fully knowledgeable of the product set they support

• Demonstrates effective problem-solving skills for the product set they support

LEADERSHIP & MANAGEMENTSTRUCTURAL & SYSTEMS PERSPECTIVES

By Gene Bellinger

A Structural PerspectiveThe following is an elaboration of an idea which has been kicking around for quite some time and I just wanted to get it roughed out so I didn’t lose it. The idea has to do with a perception that management is essential a push operation while leadership is a pull operation. As I try to think about where the concept originated it seems to be something which emerged from DePree31.

Although there were many things things about this work which were memorable there were two particular ones that have stuck very profoundly.

The first responsibility of a leader is to define reality. The last responsibility is to say, “thank you.” In between the leader should be a servant.

One should think of a leader as a bus driver. If you don’t take people where they want to go they get off the bus.

As I thought about the traditional definition of management as, planning, organizing, directing, and controlling, in conjunction with hierarchical structure it seemed there was a characteristic result associated with the structure I had not previously considered or seen described.

31 DePree, Max (1989) - Leadership is an Art, Dell


Organizations generally tend to pursue objectives of one type or another. From this I decided to view the structure rotated 90 degrees with a management implication.

Management

Now this part may be a bit difficult but imagine this structure made out of toothpicks and gumdrops. And as the management emphasis is applied the structure has a natural tendency to fan out.

Man

agem

ent

As a result of this fan out the organization will have a tendency to be less focused on its objective(s) and less effective in achieving them. As a result of this management effort is not simply applied from the perspective previously indicated. Management effort is applied in from numerous perspectives simply attempting to keep the organization focused on the objective. This management effort is essentially to compensate for the natural fan out tendency of the structure.

Man

agem

ent

Management

Management

Management

Management

It should be readily apparent that all compensating effort is essentially added overhead to the organizational operation. Wouldn’t it be nice if one didn’t have to expend all this additional effort to keep the organization focused on its objective(s).

Think about this structure again made out of toothpicks and gumdrops consider what happens when you turn it around and pull on it, rather than push on it. The natural tendency is for the structure to attempt to come into alignment focused on the direction of the leadership.

Leadership


Now it would appear that I have lead you down a path to consider leadership and management as mutually exclusive alternatives.

LeadershipCurrentManagement

Yet, consider the possibility if the paradigm were changed to consider the pursuit of leadership and management in an integrated fashion.

Current

Management

Leadership

This might be doable if we were to alter the perception of the role of management. If management were a supportive function rather than a directive function the diagram might look somewhat like the following. In this context is seems that management would be a service providing function offering training, development, coaching, mentoring, and the like, rather than performing the traditional planning, organizing, directing and controlling functions.

Leadership

Management

A Systemic PerspectiveIn The Structural Perspective I proposed some thoughts regarding what happens when typical management and leadership approaches are applied to a hierarchical organization structure. Having continued to consider the nature of these two activities I would now like to offer what I consider to be a systemic perspective. A perspective which differentiates the two based on the structures they foster rather than the particular activities they promote.

My contention is that the traditional activity of management, i.e., planning, organizing, directing, and controlling, is essentially the management of balancing structures, while leadership, i.e., challenge the process, inspire shared vision, enable others to act, model the way, and encourage the heart is essentially represents the enabling of reinforcing structures.

Management

Gap Activity

Current State

Desired State

Management is an activity which endeavors to induce resources to migrate something from a current state to a desired state. This migration might be the development of a new product, the resolution of a problem, the alteration of a process, i.e., anything with a defined objective different from the initial state when the effort was started.

The difficulty that arises with this structure stems from the fact that the activity is driven by the gap, i.e., the difference between the desired state and the current state. And, not only is the activity driven by this gap, so is managements involvement. As the current state approaches the desired state the gap gets smaller and smaller. As the gap gets smaller the extent to which management is motivated to stay involved declines. The end result is that the the gap’s, and management’s, promotion of the activity declines. Management’s attention is distracted by other situations with larger gaps, resources are reassigned to other projects, and in time the current state tends to drift further and further from the desired state. This drift continues until the gap gets large enough to attract someone’s attention, and then, probably in a panic, attention is shifted from some other project making progress back to this one. And you can probably guess what comes shortly there after!

Results+

+ Activity


I propose that leadership differs from management in that it fosters the development of a very different structure for creating results. Leadership promotes the development of reinforcing structures rather than balancing structures. In this structure the results produced by the activity promote more the same activity that produced the initial results. In this way the focus of activity is driven by the results which simply produces more results.

Where is leadership in this diagram? In the words of Lao Tzu, “When the sage’s work is done the people will say, ‘We did it ourselves.’” The leaders involvement is in the design and implementation of the structure, not managing the activity in the structure, so there is no explicit representation of leadership in the diagram. Leadership is everywhere and nowhere at the same time. The leaders most valuable contribution once the structure begins to operate is seeking out potential limits to growth and then working to dissolve them before they have a chance to hinder the growth of the results of the structure.

Results+

+ Activity

Perceived Meaningfulness

+

Of course the structure is a not really as simple as described. The real implication is that the results actually add to the perceived meaningfulness on the part of the actors. It is this perceived meaningfulness which represents intrinsic rewards to the actors and promotes the continued increase in focused activity necessary to produce greater results. Intrinsic rewards is very key in the midst of this structure.

Rewards

Activity (1)Activity (2)Results

If the rewards are extrinsic, i.e.rewards provided from outside the structure for the results achieved then, over time, the activity portion of the structure actually splits to create two separate activities develop. The first activity, i.e., activity(1), continues to be the appropriate activity to produce desired results. The second activity, i.e. activity(2), develops driven directly by the rewards. The actors may be initially motivated by the rewards, yet in time their desire for the rewards promotes the actors to produce activity specifically designed to promote even more rewards. The activity is intended to produce rewards, not results. Now if this wasn’t bad enough, the detrimental side effect is that activity(2) focused on generating rewards actually detracts from activity(1) which produces the desired results. This actually serves to reduce the results over time. And rewards become the desired results. Quite simply put, “Rewards create self-limiting and self-destructive structures.”

105Chapter 6 - LEVERAGING PROCESSES AND ORGANIZATION CAPABILITIES - Accelerate Innovation and Improvement Within Organization

104Moving Forward - Strategic Frameworks & Organizational Roadmaps

CHAPTER 6

LEVERAGING PROCESSES AND ORGANIZATION CAPABILITIES ACCELERATE INNOVATION AND IMPROVEMENT WITHIN ORGANIZATION

“Where actions and changes in structures can lead to significant, enduring improvements.

Often leverage follows the principle of economy of means: where the best results come not from large-scale efforts but from

small, well-focused actions”

PETER SENGE

The Fifth Discipline The Art & Practice of The Learning Organization

(1990)

106 107Chapter 6 - LEVERAGING PROCESSES AND ORGANIZATION CAPABILITIES - Accelerate Innovation and Improvement Within OrganizationMoving Forward - Strategic Frameworks & Organizational Roadmaps

STRATEGIC ALIGNMENT

Process management, as a business management approach, must be directly linked to organizational objectives; it must help the organization reach its strategic goals. Effective business leaders integrate process management into the business model.

GOVERNANCE

Governance is probably the most important of the tenets because it assigns accountability for process activities. Governance defines the roles associated with process management and the approach that will be taken, ultimately determining how process ownership and process accountability will be assigned, how budgets will be allocated, and how the process management business case and its policies and procedures will be created.

PROCESS MODELS

Process frameworks and models ignite understanding. By establishing a framework, organizations are better able to understand core processes as well as supporting processes, and they can plainly see how the supporting processes affect the performance of core processes.

CHANGE MANAGEMENT

Without a planned change management approach, organizations are doomed to fail in establishing and internalizing process thinking. The change management plan must include a comprehensive communication strategy to ensure that the workforce understands the new focus. Best-practice organizations repeatedly cite promoting the value of process management as the most important component of their change management strategy.

PROCESS PERFORMANCE AND MATURITY

Levels of performance and maturity within an organization must be evaluated regularly. These factors indicate how processes are performing as well as the overall effectiveness of process managment efforts. If an organization has an accurate picture of how it is performing and where it is in maturing its process strategy, it can determine what it will take to increase the strength and efficiency of its processes.

PROCESS IMPROVEMENT

Naturally, efforts to understand an organization’s performance tie directly to process improvements. As an organization advances in maturity and deepens its understanding of its own performance, it learns new ways to improve processes.

TOOLS AND TECHNOLOGY

Tools and technology enable automation and standardization. This, in turn, improves processes, thereby enhancing performance and potentially leading the organization to a greater level of process management maturity. When tools are created that facilitate the execution of the BPM vision, the work force is better able to contribute to improvement efforts. When an organization implements measurement technology, performance progress can be effectively tracked and cited to gain executive, cultural, and financial support.

2.0Develop

and Manage Products and

Services

3.0Market and Sell

Products and Services

4.0Deliver

Productsand

Services

5.0Manage

CustomerService

1.0Develop Visionand

Strategy

OPERATING PROCESSES

MANAGEMENT AND SUPPORT SERVICES

6.0 Develop and Manage Human Capital

7.0 Manage Information Technology

8.0 Manage Financial Resources

9.0 Acquire, Construct, and Manage Assets

10.0 Manage Enterprise Risk, Compliance, and Resiliency

11.0 Manage External Relationships

12.0 Develop and Manage Business Capabilities

SEVEN TENETS OF PROCESS MANAGEMENTAPQC’S PROVEN APPROACH

Process management is a management practice or approach that defines the governance of specific business processes, enabling improved business agility and operational performance. Years of process-based research have uncovered seven essential tenets on which to establish a strong process capability.

Pillar of Seven Tenets of Process Management

APQC’s Seven Tenets of Process ManagementSM are:

1. Strategic alignment

2. Governance

3. Process models

4. Change management

5. Performance and maturity

6. Process improvement

7. Tools and technology

Creating a process-focused organization not only requires time and resources, but most importantly, it requires a fundamental shift in thinking about how each individual

contributes to the organization’s products or services. This shift helps each contributor think about what occurs upstream as well as downstream from his or her individual activities within the process. This horizontal view of work provides a more holistic understanding of how work is accomplished and the requirements to effectively execute the process end-to-end.

These tenets of process management are seen time and time again in best-in-class organizations and consistently enable the success of process management programs and initiatives.


WHY LEVERAGING APQC PCF CAN HELP CREATE ORGANIZATION’S CAPABILITY MODEL?

A business capability model describes the business in terms of its capabilities and the relationships that are necessary to support an organization’s mission. Business capabilities models are used to map applications, strategies, processes, projects, and programs to a capability. Additionally, the model can be used to develop a capability heat map for the organization. The benefits to using a model include:

• providing a neutral framework,

• evaluating alternative investments,

• identifying what is strategic and what is not,

• identifying gaps and duplication,

• highlighting how well or how poorly the organization is performing, and

• creating easier and repeatable assembly of strategic plans and roadmaps.

First, the significant amount of work has already been done to create such a framework so organizations can greatly benefit from using these established models. Leveraging the APQC PCF will allow YDP to quickly identifies both its most urgent needs and a multi-year roadmap to address gaps. The PCF provided the overall framework while YDP can fine- tuned the model with key departments in its own language.

Second, after changing the framework to fit the organization’s needs, YDP can use the model to find out what areas are most strategic as well as the maturity of the organization’s different capabilities. In turn, the results of these exercises can be used for planning to capitalize on opportunities for improvement or to close capability gaps.

The PCF has a significant number of processes, so YDP will able to use the framework and add in additional processes that were used in its industry. Using this business capability model, YDP will able to create a heat map and the team assigned priorities to different areas that needed improvement.

The visuals and related process, as well as technology needs from these transformation efforts, were used to socialize plans and investment needs for the coming three or more years with senior management and board of directors.

ProjectManagement

KnowledgeManagement

FinancialManagement

Human CapitalManagement

“Model is a simplified representation of reality.”

GENE BELLINGER


PCF Levels Explained

HistoryThe Process Classification FrameworkSM was originally envisioned as taxonomy of business processes and a common language through which APQC member organizations could benchmark their processes. The initial design involved APQC and more than 80 organizations with a strong interest in advancing the use of benchmarking in the United States and worldwide. Since its inception in 1992, the PCF has seen updates to most of its content. These updates keep the framework current with the ways that organizations do business around the world. In 2008, APQC and IBM worked together to enhance the cross-industry PCF and to develop a number of industry-specific process frameworks. APQC would like to acknowledge the contributions of the various member organizations and individual members that have contributed time, content, and expertise in the development of this version of the PCF as well as each of the previous versions. These contributions and suggestions are vital to keeping the framework current and relevant to businesses throughout the world.

OverviewThe Strategic Alignment Framework (SAF) was intentionally developed to illuminates the detail steps in establishing YDP’s redefined concept as a Social Investment Organization and aligning operational processes to continuously improves and grows its capacity and effectiveness. SAF enables YDP to understand their inner workings from a horizontal process perspective, rather than a vertical functional viewpoint. SAF does not list all processes and definitions from APQC’s PCF; only the necessary processes to lay out the foundation that contextually related with YDP current situation.

STRATEGIC ALIGNMENT FRAMEWORKEVOLVING FROM FUNCTION-BASED TO PROCESS-FOCUSED ORGANIZATION

Content OrganizationThe Process Classification Framework (PCF) is an Open Standard and is administered by APQC.

The OSBC is a global initiative to develop a common, standard framework for process definitions, measures, and benchmarks that are available to participating organizations worldwide to improve performance.

• The goal is to accelerate innovation and improvement within organizations.

• Hundreds of global firms are participating.

• Governance includes an Advisory Council of 14 global organizations.

• APQC serves as steward of the Open Standards.

• APQC members serve as voice of the customer to validate process, measurement and benchmarking requirements.

Process Element Numbering SchemeThe PCF identifies each process element using a unique 5-digit reference number following the name of the process element [i.e., (10002), (10014), (10017), (10021), (11117), shown in the above graphic]. This number will always refer to the conceptual definition of the process element. The actual process elements and actual definition may change, but conceptually the decomposition will remain consistent considering the entire scope of the PCF. A new 5-digit number will be assigned to a process element if its definition substantially changes.

The Framework For Process Improvement Experience shows that the potential of benchmarking to drive dramatic improvement lies squarely in making out-of-the-box comparisons and searching for insights not typically found within intra-industry paradigms. To enable this beneficial benchmarking, the APQC Process Classification FrameworkSM (PCF) serves as a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint. The cross- industry framework has experienced more than 15 years of creative use by thousands of organizations worldwide. The PCF provides the foundation for the Open Standards Benchmarking CollaborativeSM (OSBC) database and the work of its advisory council of global industry leaders. Each version of the PCF will continue to be enhanced as the OSBC database further develops definitions, processes, and measures. The PCF and associated measures and benchmarking surveys are available for download and completion at no charge from the Open Standards Benchmarking Collaborative Web site at www.apqc.org/osbc.ww

112 113Chapter 6 - LEVERAGING PROCESSES AND ORGANIZATION CAPABILITIES - Accelerate Innovation and Improvement Within OrganizationMoving Forward - Strategic Frameworks & Organizational Roadmaps COPYRIGHT © 2012 - ANDRE DANIEL

DEVELOP HUMAN RESOURCES STRATEGY

DEVELOP AND IMPLEMENT HUMAN RESOURCES PLANS

MONITOR AND UPDATE PLANS

6.1 DEVELOP AND MANAGE HUMAN RESOURCES (HR) PLANNING, POLICIES, AND STRATEGIES

ESTABLISH HIGH-LEVEL MEASURES AND TRACKING SYSTEM

SELECT AND EXECUTE STRATEGIC INITIATIVES

EVALUATE STRATEGIC INITIATIVES

DEVELOP STRATEGIC INITIATIVES

1.3 MANAGE STRATEGIC INITIATIVES

MANAGE REPORTING PROCESSES

MANAGE EMPLOYEE INQUIRY PROCESS

MANAGE AND MAINTAIN EMPLOYEE DATA

MANAGE HUMAN RESOURCE INFORMATION SYSTEMS (HRIS)

DEVELOP AND MANAGE EMPLOYEE METRICS

DEVELOP AND MANAGE TIME AND ATTENDANCE

MANAGE EMPLOYEE COMMUNICATION

6.6 MANAGE EMPLOYEE INFORMATION

DEVELOP AND MANAGE REWARD, RECOGNITION, AND MOTIVATION

PROGRAMS

MANAGE AND ADMINISTER BENEFITS

MANAGE EMPLOYEE ASSISTANCE AND RETENTION

ADMINISTER PAYROLL

6.4 REWARD AND RETAIN EMPLOYEES

12.6 MEASURE AND BENCHMARK

BENCHMARK PERFORMANCE

CREATE AND MANAGE ORG. PERFORMANCE STRATEGY

MANAGE EMPLOYEE ORIENTATION AND DEPLOYMENT

MANAGE EMPLOYEE PERFORMANCE

MANAGE EMPLOYEE RELATIONS

MANAGE EMPLOYEE DEVELOPMENT

DEVELOP AND TRAIN EMPLOYEES

6.3 DEVELOP AND COUNSEL EMPLOYEES

DEVELOP KM STRATEGY

ASSESS KM CAPABILITIES

IDENTIFY AND PLAN PROJECTS

12.5 DEVELOP AND MANAGE ORGANIZATION-WIDE KM CAPABILITY

DESIGN THE CHANGE

SUSTAIN IMPROVEMENT

IMPLEMENT CHANGE

12.4 MANAGE CHANGE

PLAN FOR CHANGE

LEGEND

PG to PG Feedback

Process (P) P to P PD to PG

Outputs

Process Group (PG)

1.0 Develop Vision And Strategy6.0 Develop & Manage Human Capital12.0 Develop & Manage Organization CapabilitiesAdapted model from APQC’s PCF v6.0

FINDINGS / BASELINEGAP ANALYSIS

OPERATIONAL LEVEL

STRATEGIC FRAMEWORKS & ROADMAPS

1.1.4 ESTABLISH STRATEGIC VISION

ESTABLISH THE ORGANIZATION INTENT AND STRATEGIC GOALS

ALIGN STAKEHOLDERS AROUND STRATEGIC GOALS

12.2 MANAGE PORTFOLIO, PROGRAMS, AND PROJECTS

MANAGE PROGRAMS

MANAGE PROJECTS

MANAGE PORTFOLIO

12.3 MANAGE QUALITY

PLAN AND MANAGE QUALITY WORK FORCE

PERFORM QUALITY ASSESSMENTS

DEVELOP QUALITY STRATEGY AND PLANS

1.2 DEVELOP ORGANIZATION STRATEGY

DEVELOP OVERALL MISSION STATEMENT

EVALUATE STRATEGIC OPTIONS TO ACHIEVE OBJECTIVES

DEVELOP 3 YEARS ORGANIZATION STRATEGY

COORDINATE AND ALIGN FUNCTIONAL AND PROCESS

CREATE ORGANIZATIONAL DESIGN (STRUCTURE, GOVERNANCE, REPORTING)

DEVELOP & SET ORGANIZATIONAL GOALS

FORMULATE OPERATIONAL UNIT STRATEGIES

1.1.3 PERFORM INTERNAL ANALYSIS

CREATE BASELINES FOR CURRENT PROCESS

ANALYZE FINANCIAL POSITIONS

ANALYZE SYSTEMS & TECHNOLOGY

IDENTIFY AND ANALIZE ORGANIZATION CORE COMPETENCIES

ANALYZE ORGANIZATIONAL CHARACTERISTICS

ORGANIZATIONAL MAPPING & PROCESS ANALYSIS REPORT

DEVELOP & ESTABLISH INSIGHTS INTO OPERATING FRAMEWORK

STAKEHOLDERS INTERVIEW

1.1.1 ASSESS THE EXTERNAL ENVIRONMENT

ANALIZE REGULATORY CHANGES & CONVERGING TRENDS

Design by DTC_v1.4_Feb2014

12.1 MANAGE BUSINESS PROCESSES

DEFINE AND MANAGE PROCESS FRAMEWORKS

MANAGE PROCESS PERFORMANCE

DEFINE PROCESSES

IMPROVE PROCESSES

ESTABLISH AND MAINTAIN PROCESS MANAGEMENT GOVERNANCE

STRATEGIC LEVEL

OUTCOMEALIGNED STRATEGY & OPERATION

STRATEGIC ALIGNMENT FRAMEWORKEVOLVING FROM FUNCTION-BASED TO PROCESS-FOCUSED ORGANIZATION



DEVELOP OVERALL MISSION STATEMENT

EVALUATE STRATEGIC OPTIONS TO ACHIEVE OBJECTIVES

DEVELOP 3 YEARS ORGANIZATION STRATEGY

COORDINATE AND ALIGN FUNCTIONAL AND PROCESS

CREATE ORGANIZATIONAL DESIGN (STRUCTURE, GOVERNANCE, REPORTING)

DEVELOP & SET ORGANIZATIONAL GOALS

FORMULATE OPERATIONAL UNIT STRATEGIES


The Develop organization strategy process group encompasses the development of an organization’s overall mission statement, 5 years strategic plan, and organization’s architecture.

Organizational architecture (structure, governance, reporting, etc.) is the process of selecting an organization and operational strategy. This process consists of creating an organizational structure (units, processes); work groups (unit/teams structure); roles (responsibilities, relationships); integrated mechanisms (governance, communications); and performance measurement systems (measurement, reporting).

The process starts with an evaluation of the current structure to establish a baseline. Next, job-specific roles are mapped and analyzed to define their value to the organization’s capabilities and goals. Activity diagrams are created to assess hand-off activities between roles and organizational units. Then, based on the strategic requirements and analysis of the current organization, redesign workshops redefine and develop roles, activities, and processes. After changes are defined, the implications of feasible alternatives are assessed and any required mitigation work is scoped. Finally, changes are implemented and the organization is migrated to the new organizational design.

Develop and set performance indicators to establish key measures. Key measures are developed to steer both individual and organizational behavior towards the defined strategy. Key measures should cover the organization’s operational performance (e.g., process efficiency) and financial performance (e.g., impact and values).

Formulate functional unit strategies consist of developing and setting goals at the department level. These strategies support the execution of overall organizational strategies and follow general principles, industry standards and best practices. This process follows the same general process as 1.2.2 Select long-term business strategy.

1.3 MANAGE STRATEGIC INITIATIVES (10016)

Manage strategic initiatives focus on actions, projects, or programs that enable an organization to realize its strategy and achieve goals. It includes analyzing the operating environment for the development of strategic initiatives. Strategic initiatives are evaluated, and the most appropriate initiatives are selected for execution. It is critical to follow the progress of execution so that the impact of the initiatives is identified. (Refer to APQC PCF 12.2 Manage portfolio, program, and project for additional infomation on managing strategic initiatives.)

Develop strategic initiatives involve responding to organizational performance or changes in the operating environment. The process starts with an analysis of current performance and the identification of conditions that affect it. Based on the analysis, initiatives are developed so that identified issues or exploit opportunities are addressed.

The Evaluate strategic initiatives process involves evaluating proposed initiatives based on the risks and benefits associated with their execution.

Select strategic initiatives involve choosing initiatives, establishing a timeframe, and executing the strategy. Selection is based upon estimated execution risk, expected a size of the opportunity, estimated operational benefit, and estimated impact on performance if the initiative is not executed. Initiatives should be considered based on long-term goals and organizational need.

Establish high-level measures involve monitoring the progress and impact of executed initiatives. It should include the creation of an initiative tracking system.

ESTABLISH HIGH-LEVEL MEASURES AND TRACKING SYSTEM

SELECT AND EXECUTE STRATEGIC INITIATIVES

EVALUATE STRATEGIC INITIATIVES

DEVELOP STRATEGIC INITIATIVES

1.3 MANAGE STRATEGIC INITIATIVES


Assess the external environment involves establishing and developing the organization’s insight into the operating framework. The purpose is to understand competitor moves, market economics, regulatory changes, technology developments, and emerging opportunities and risks, while monitoring the effect on the organization. Industry trends and political/regulatory issues affecting the organization should be identified so that the view of the operating environment is established. It is also important to analyze demographic, social, and cultural changes and to understand their impact on the organization. This insight is then leveraged in management decision making. Next, the organization surveys the industry landscape, which provides insight into improvement opportunities to determine needs and wants.


ESTABLISH THE ORGANIZATION INTENT AND STRATEGIC GOALS

ALIGN STAKEHOLDERS AROUND STRATEGIC GOALS


CREATE BASELINES FOR CURRENT PROCESS

ANALYZE FINANCIAL POSITIONS

ANALYZE SYSTEMS & TECHNOLOGY

IDENTIFY AND ANALIZE ORGANIZATION CORE COMPETENCIES

ANALYZE ORGANIZATIONAL CHARACTERISTICS

DEVELOP & ESTABLISH INSIGHTS INTO OPERATING FRAMEWORK

STAKEHOLDERS INTERVIEW


ANALIZE REGULATORY CHANGES & CONVERGING TRENDS

1.1 REDEFINE ORGANIZATION CONCEPT & LONG TERM VISIONDefinitions and Key Measures

It involves redefining strategy definitions and key measures for the organization concept and long-term goals, as well as developing the organization’s strategic plan and managing strategic initiatives. Processes in this framework focus on creating an organizational architecture (structure, integrated mechanism, and performance measurement systems) to ensure that the organization is moving to the desired direction.

Key Performance IndicatorsTo be defined by YDP Board of Management

Process InsightThese key performance indicators can be viewed per full-time equivalent employee (FTE), in year-over-year growth, or in a way that make sense given needs of the organization.


Third, there is an internal analysis of the organization’s characteristics, which assesses how it matches industry requirements and opportunities; this process results in the ability to define internal core capabilities.


Finally, the organization defines a long-term vision that states long-term vision and the mission it carries to achieve it and clarify the reason or purpose of the organization. This process group forms an organization’s strategic foundation and direction for policy and decision making.


MANAGE REPORTING PROCESSES

MANAGE EMPLOYEE INQUIRY PROCESS

MANAGE AND MAINTAIN EMPLOYEE DATA

MANAGE HUMAN RESOURCE INFORMATION SYSTEMS (HRIS)

DEVELOP AND MANAGE EMPLOYEE METRICS

DEVELOP AND MANAGE TIME AND ATTENDANCE

MANAGE EMPLOYEE COMMUNICATION

6.6 MANAGE EMPLOYEE INFORMATION

DEVELOP AND MANAGE REWARD, RECOGNITION, AND MOTIVATION

PROGRAMS

MANAGE AND ADMINISTER BENEFITS

MANAGE EMPLOYEE ASSISTANCE AND RETENTION

ADMINISTER PAYROLL

6.4 REWARD AND RETAIN EMPLOYEES 6.4 Reward and retain employees (10412)

The Reward and retain employees process group consists of developing and managing reward, recognition, and motivation programs; managing employee assistance and retention; managing and administering benefits; and administering payroll.

Key Performance Indicators:

• Total cost of Reward and retain employees per:– $1,000 revenue– employee

• Number of employees per Reward and retain employees FTE

• Number of FTEs for Reward and retain employees per $1 billion revenue

• Percentage of salary that is performance-related pay

• Average number of vacation days per year per employee

• Number of days absence per employee per year including maternity and paternity leave

• Number of days absence per employee per year excluding maternity and paternity leave

6.6 Manage employee information (10414)

The Manage employee information process group consists of managing HR reporting capabilities; managing employee inquiry processes; managing and maintaining employee data; managing human resource information systems; developing and managing employee metrics; developing and managing time and attendance; and managing employee communications.


• Total cost of Manage employee information per: – $1,000 revenue– employee

• Number of employees per Manage employee information FTE

• Number of FTEs for Manage employee information per $1 billion revenue

• Number of non-routine Manage employee information inquiries per employee

• Number of routine Manage employee information inquiries per employee

• Over head cost of Manage employee information per employee

• Cycle time in days required to resolve an employee grievance.

1 Learning only refers to processes 6.3.4 Manage employee development and 6.3.5 Develop and train employees.

2 Performance and employee relations refers to processes 6.3.1 Manage employee orientation and deployment, 6.3.2 Manage employee performance, and 6.3.3 Manage employee relations.

6.1 Develop and manage human resources (HR) planning, policies, and strategies (10409)

The process group Develop and manage human resources (HR) planning, policies, and strategies includes developing and implementing HR plans and monitoring and updating HR plans at regular intervals.


• Total cost of Develop and manage HR planning, policies, and strategies per:

– $1,000 revenue

– employee

• Number of employees per Develop and manage HR planning, policies, and strategies FTE

• Number of FTEs for Develop and manage HR planning, policies, and strategies per $1 billion revenue

• Percentage of senior management/executives, middle management/specialist, and operational workers/office staff for which a formal succession planning process is in place

6.3 Develop and counsel employees (10411)

The Develop and counsel employees process group consists of managing employee orientation and deployment, managing employee performance, managing employee relations, and managing and implementing employee training and development.


• Total cost per $1,000 revenue for processes:– Develop and counsel employees– Develop and counsel-learning only1

– Develop and counsel-performance and employee relations2

• Totalcostperemployeeforprocesses:– Develop and counsel employees– Develop and counsel-learning only– Develop and counsel-performance and employee relations

• NumberofFTEsper$1billionrevenueforprocesses:– Develop and counsel employees– Develop and counsel-learning only– Develop and counsel-performance and employee relations

• Current number of employees FTE for processes:– Develop and counsel employees– Develop and counsel-learning only– Develop and counsel-performance and employee relations

• Percentage of:– staff that received a formal performance review– management employees that attended management development

programs– CEO and senior leadership time spent on leadership development

• Average number of learning days per employee

• Learning budget per employee (head count)

• Cycle time in days for the formal performance review process

6.0 DEVELOP AND MANAGE HUMAN CAPITALDefinitions and Key Measures

DEVELOP HUMAN RESOURCES STRATEGY

DEVELOP AND IMPLEMENT HUMAN RESOURCES PLANS

MONITOR AND UPDATE PLANS

6.1 DEVELOP AND MANAGE HUMAN RESOURCES (HR) PLANNING, POLICIES, AND STRATEGIES

MANAGE EMPLOYEE ORIENTATION AND DEPLOYMENT

MANAGE EMPLOYEE PERFORMANCE

MANAGE EMPLOYEE RELATIONS

MANAGE EMPLOYEE DEVELOPMENT

DEVELOP AND TRAIN EMPLOYEES

6.3 DEVELOP AND COUNSEL EMPLOYEES


12.6 MEASURE AND BENCHMARK

BENCHMARK PERFORMANCE

CREATE AND MANAGE ORG. PERFORMANCE STRATEGY

DEVELOP KM STRATEGY

ASSESS KM CAPABILITIES

IDENTIFY AND PLAN PROJECTS

12.5 DEVELOP AND MANAGE ORGANIZATION-WIDE KM CAPABILITY

DESIGN THE CHANGE

SUSTAIN IMPROVEMENT

IMPLEMENT CHANGE

12.4 MANAGE CHANGE

PLAN FOR CHANGE

12.4 Manage change (11074)

The Manage change process group includes all processes involved in implementing and facilitating major changes throughout an organization or in a selected unit, department, division, etc. The needed changes are typically identified in process groups 12.6.1 Create and manage organizational performance strategy, 12.6.2 Benchmark performance, or 1.3 Manage strategic initiatives. Process group 12.4 Manage change deals with the activities necessary to plan, develop, implement, and monitor those changes. These are often project-related processes for activities that may have a set start and end date. However, activities in process 12.4.4 Sustain improvement may continue well into the future. In some organizations, monitoring and sustaining improvement takes place within the other process categories specific to the area of the business where the change occurred, and those organizations track change-related processes in those appropriate categories.


• Total cost to create change management strategy per $1,000 revenue

• Total full-time equivalent employees (FTEs) to create change management strategy per $1 billion revenue

12.5 Develop and manage enterprise-wide knowledge management (KM) capability (11073)

The Develop and manage enterprise-wide knowledge management (KM) capability process group comprises processes associated with knowledge flow within an organization (e.g., create, identify, collect, review, share, access, and use knowledge). At its heart, knowledge is information in action. Knowledge management (KM) is a systematic process that enables information and knowledge to grow, flow, and create value. The KM discipline is about connecting people to the information and expertise they need to achieve business results. Various approaches can be used to support this goal, including content management, communities of practice, transfer of best practices, lessons learned, expertise location, virtual collaboration, and social computing.

The specific KM approaches that an organization pursues are determined by the business problems it wants to address. For example, if an organization is seeing similar mistakes repeated across business units, it may implement a lessons learned process so that employees can learn what has and hasn’t worked in other parts of the business. Similarly, an organization that is concerned about knowledge loss due to retirement may consider interviewing senior-level employees who are nearing retirement and making their expertise accessible through documents or videos.

Although technology plays a role in KM, it is critical to implement technology as part of a larger, systematic change initiative. The introduction of new tools will not change behavior unless people understand when, how, and why to share knowledge and are incentivized to do so.


• Total cost of knowledge management per employee

• Total number of participants in KM approaches per knowledge management FTE

• Number of FTEs for the KM program per $1,000 revenue

• Number of unique participants as a percentage of total potential participants

12.6 Measure and benchmark (16436)

Measure and benchmark encompasses the processes required to develop a strategy for monitoring and improving the performance of an organization including creating and managing organizational performance strategy and benchmarking performance.


• Total cost to create and manage organizational performance measurement strategy per $1,000 revenue

• Total FTEs to create and manage organizational performance strategy per $1 billion revenue

• Total cost to benchmark performance and practices per $1,000 revenue

• Total FTEs to benchmark performance and practices per $1 billion revenue

12.0 DEVELOP AND MANAGE ORGANIZATION CAPABILITIES Definitions and Key Measures

12.1 Manage business processes (16378)

The process group Manage business processes encompasses process management activities. Key elements include defining governance, selecting and adapting a framework, defining processes, managing performance, and improving processes. This group offers guidance on defining, managing, measuring, deploying, and supporting processes. It defines how to identify and select opportunities for change and improvement, which makes 12.4 Manage change a key consideration in conjunction with this process group.


• Measure of process compliance

• Volume-type measure of number of processes designed

• Measure of process maturity

12.2 Manage portfolio, program, and project (16400)

The Manage portfolio, program, and project process group focuses on identifying projects and initiatives; initiating, executing, and closing projects; monitoring the overall project performance and status; and making projects visible to organizational decision-makers.


• Allocated budget vs. actual budget

• On-time performance

• Success rate

12.3 Manage quality (16419)

The Manage quality process group creates a quality strategy, plans and supports the staff that oversee quality work force, and conducts quality assessments. Potential key performance indicators (KPIs) may include: customer satisfaction, reliability (e.g., FMEA—failure measurement), defects per million, rework rate, and total cost of quality (warranty costs or scrap and rework costs as a percentage of sales).

Process Insight

Quality is not just about building things. It’s about the entire organization: management, support, and operational functions. Planning quality processes is more than daily work. It includes managing the guiding principles that impact the behaviors of staff, which, in turn, affects quality outcomes. It also concerns policies and procedures and celebrates quality achievements. It is important to consider rewards and recognition for outstanding quality practices within an organization.

Consider quality as both a leading and lagging performance measure. It should be a fundamental part of the entire value chain. This is accomplished when quality is integrated into the daily processes and the culture of the organization.

12.2 MANAGE PORTFOLIO, PROGRAMS, AND PROJECTS

MANAGE PROGRAMS

MANAGE PROJECTS

MANAGE PORTFOLIO

12.3 MANAGE QUALITY

PLAN AND MANAGE QUALITY WORK FORCE

PERFORM QUALITY ASSESSMENTS

DEVELOP QUALITY STRATEGY AND PLANS

12.1 MANAGE BUSINESS PROCESSES

DEFINE AND MANAGE PROCESS FRAMEWORKS

MANAGE PROCESS PERFORMANCE

DEFINE PROCESSES

IMPROVE PROCESSES

ESTABLISH AND MAINTAIN PROCESS MANAGEMENT GOVERNANCE

120 121Moving Forward - Strategic Frameworks & Organizational RoadmapsMoving Forward - Strategic Frameworks & Organizational Roadmaps

Dynamics of Divergence and Convergence after Bela H. Banathy (1996)

Dynamics of Divergence and Convergence

after Bela H. Banathy (1996)Banathy’s model illustrates the iterative nature of the design process, repeating the process of divergence and convergence, analysis and synthesis.

“We first diverge as we consider a number of inquiry boundaries, a number of major design options, and sets of core values and core ideas. Then we converge, as we make choices and create an image of the future system. The same type of divergence-convergence operates in the design solution space. For each of the substantive design domains (core definition, specifications, functions, enabling systems, systemic environment) we first diverge as we create a number of alternatives for each, and then converge as we evaluate the alternatives and select the most promising and most desirable alternative.”

Value Analysis after John Chris Jones (1970)

Value Analysisafter John Chris Jones (1970)Jones described value analysis as a design method, one aimed “to increase the rate at which designing and manufacturing organizations learn to reduce the cost of a product.” He saw it as applying to the design of an element within a larger system. Yet his value analysis process (as he diagrammed it) is itself a sort of design process—albeit with a special emphasis on cost. This example of a design process- nested within a design process nicely illustrates the recursive nature of designing.

PREPARATION METHODS OF THIS DOCUMENT

Rational Unified Process Iteration Cycle after Per Kroll (2004)

Rational Unified Process Iteration Cycleafter Per Kroll (2004)Iteration is a central principle of the Rational unified process. Kroll notes, “Each iteration includes some or most of the development disciplines (requirements, analysis, design, implementation and [testing activities]. Each iteration also has a well-defined set of objectives and produces a partial working implementation of the final system. And each successive iteration builds on the work of previous iterations to evolve and refine the system until the final product is complete. Early iterations emphasize requirements as well as analysis and design; later iterations emphasize implementation and testing.”

Knoll suggests four principles:

1. Build functional prototypes early.

2. Divide the detailed design, implementation and test phases into iterations.

3. Baseline an executable architecture early on.

4. Adopt an iterative and risk-driven management process.

This document is produced by Daniel Tamura Communication (DTC). Since 2006, DTC assists, work specialization in the field of Information Design and Solutions Integration. The field of information design applies interdisciplinary methodologies and evolving design and creative principles to the process of translating complex problems or challenges into valuable and meaningful insights and solutions.

We utilize design development framework that employs “Scenarios-Elements-Process -Context-Concern-Solutions” structured relationship modeling that cover all aspects of the concept making, component building and processes hierarchies. Without necessarily following linear or complete order. The final result, emerging insights of necessary alteration or modification that becomes starting point to the next iteration cycle of design refinement process. DTC also employs various design thinking methodologies that utilize semantics, info-graphics, and context sequencing to deliver information solutions that vary according to the medium used and the intended process and audiences.

However, Our focus simply to deliver an executable designed solutions with clarity and understanding. Because, We believe that clarity and understanding are essentially an enabler to foresee other perspectives and direction to deliver better solutions.


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The Principles for Social Investment is an initiative of the United Nations Global Compact to provide an ethical foundation and guidelines for social investment by companies and their foundations, community foundations and private foundations and thereby encourage an integrated, strategic and sustainable approach to improve long-term ‘returns’ to key stakeholders – including populations benefiting from social investment and the investors.

Corporate Citizenship is one of the longest standing specialist consultancies, working with corporate clients around the world to achieve their commitments to responsible business behaviours and sustainable practices.

LBG is the internationally recognised standard for measuring corporate community investment. More than 300 companies around the world use the LBG framework to measure, manage and report the value, and the achievements, of the contributions they make.

APQC (American Productivity & Quality Center) is a member-based nonprofit and one of the world’s leading proponents of business benchmarking, best practices, and knowledge management research. We follow our mission to help organizations around the world improve productivity and quality by discovering effective methods of improvement, broadly disseminating findings, and connecting individuals with one another and with the knowledge they need to improve.

ISO (International Organization for Standardization) is the world’s largest developer of voluntary International Standards. International Standards give state of the art specifications for products, services and good practice, helping to make industry more efficient and effective. Developed through global consensus, they help to break down barriers to international trade.

AccountAbility is a leading global organisation providing innovative solutions to the most critical challenges in corporate responsibility and sustainable development. Since 1995 we have been helping corporations, non-profits and governments embed ethical, environmental, social, and governance accountability into their organisational DNA. Our unique value proposition brings together leading edge research, widely recognized standards, and strategic advisory services to deliver practical solutions for our clients.

We have converged relevant knowledge from hundreds of published documents produced by global leading organizations and subject matter experts to enrich this document.

Launched in January 2011 to drive innovation an quality among participants of the UN Global Compact, Global Compact LEAD recognizes the critical need for supporting UN Global Compact participants to achieve higher levels of corporate sustainability performance.

The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption and to take action in support of UN goals, including the Millennium Development Goals. The UN Global Compact is a leadership platform for the development, implementation, and disclosure of responsible corporate policies and practices.

PRI Initiative is an international network of investors working together to put the six Principles for Responsible Investment into practice. Its goal is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. In implementing the Principles, signatories contribute to the development of a more sustainable global financial system.

GIZ offers customised solutions to complex challenges. We are an experienced service provider and assist the German Government in achieving its objectives in the field of international cooperation. We offer demand-driven, tailor-made and effective services for sustainable development.

The Global Reporting Initiative (GRI) is a leading organization in the sustainability field. GRI promotes the use of sustainability reporting as a way for organizations to become more sustainable and contribute to sustainable development.

ACKNOWLEDGEMENT

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