Annualised Savings

I am at a project in Germany right now and had to explain the concept of annualisation of savings. I actually quite liked what I wrote and want to keep it on my blog, for future reference: 

There are 2 kinds of savings - some can be annualised, those are recurring ones that get regularly consumed. This can be raw materials, planned maintenance, discount (Skonto), and some cannot be annualised, such as one-off repairs, or a sell-off of old stock. 

If we do NOT annualise we would start every year from 0 and count up savings till the year is over. And then back to 0.

Any non-annualisable saving would count as as one off. All other savings count for the rest of the year from the date of when the saving initiative started to take effect. 

The concept of annualisation is more like a speed test in order to show that savings, once they have reached a certain level, remain on that level. It is an extrapolation and it should show confidence that once you have reached a certain speed or level of saving, you will not lose it. 

It is like driving a car. If you need to drive a distance of 50 km in 30 mins you will need to accelerate for a bit and then keep the accelerated speed on a certain level, something about 100 km/h. And this is annualisation. Your annual target is those 50 km. But "annualised" it is 100 km/h. 

Let's look at the one work stream of ours, the price discount where you agreed on € xxx. This is an annualised saving, adding to your annualised target. We assume, once the CFO letter and all the other tasks are done, from then on we can assume, that for the running time of a year (52 weeks) we have € xxx savings. This is the speed for this workstream so to speak. If you do NOT annualise those € xxx, you would only be able to claim a fraction of it.  

So, going back to our project, by mid September you should be at the speed of € yyy and by mid November at a speed of € zzz. This does not mean you need to have the cash in the pocket by then, it only shows a confidence level that your initiatives will be worth € zzz after one year if you keep on going like you did getting those savings. 

I am a Scrum Master. What now?

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My Way to Scrum Master Certification

Why become a Scrum Master?

When you work as management consultant in areas such as Operations Excellence and Process Improvement, the interface to IT becomes more and more prevalent. In my last project at the German Stock Exchange this trend has finally reached me, someone who was never really overly interested in software development or anything that had something to do with IT.

At the stock exchange we improved processes, hence SAP workflows had to be changed and all sorts of other IT systems that were affected by them. After having sorted those processes, I got in touch with IT and told them about our desire to “add things” to the SAP environment and they gave me a change request form to fill in. A change request form – I have never seen anything like this.  

This was a very useful experience for me, as I realised that whatever we wanted from an operations point of view needed proper translation into “IT speak”. It’s literally like translating from one language to another. It gave me an insight into the minds of programmers and how they see the world. It is very structured, but also very different.

The rest of the project remained very IT focused. I had to deal with more change requests and also with testing and finally implementing our solutions. I realised that I am actually interested in this kind of work; not so much in programming, but being the (translating) link between Operations and IT.

One day, the German Stock Exchange had an internal training session about the Scrum methodology and I happened to take part. I realised that this was something I was interested in and put it on the backburner. About one year later or so I finally became a Scrum Master.

What Kind of Training is available?

I had a look to see what’s out there in the market. Ideally, I wanted something cheap and quick where I could do everything from home; or maybe some course in and around London.

Classroom based courses are usually around 2 full days and cost anything in excess of GBP 1000. Some of them had no certification attached, just lectures. Online courses were less expensive and usually around GBP 800. All prices were net, without VAT. So basically, when not having a big corporation behind, it is quite an investment with a certain degree of risk involved, as one doesn’t know what one gets.

I got in touch with one training organisation that offered lots of degrees and courses. I got the sales person on the phone and she offered me an online course for GBP 795 plus VAT. Six weeks later I negotiated her down quite a bit. Bingo, when she quoted a new and acceptable price, I agreed and the day after I started my online seminar.

The course was very good and basically a narrated slide show, with questions in between and quizzes at the end of each module. I cannot complain, it was all done very professionally. It took me 2 days to go through the training. But mind you, I have been a project manager and management consultant for 20 years and this was not something overly new, hence I did not need too much time to think things through.

As advice I can only say, negotiate a training package; and if you have time, like I had, take this time to get into the better negotiating position. Time works for you!

Training Contents

The training was delivered in 3 modules. The first module was about the history of Scrum within Agile, the second module taught Scrum as a methodology, and the third module was the Scrum methodology applied.

What was interesting for me, scrum is quite rigid in its application (i.e. daily meetings, regular review meetings, strict roles and responsibilities for all people involved, charts, etc) but also quite flexible, because the outcome of the project is not fixed at the beginning (like when using the waterfall methodology). And especially me, who has grown up in ‘waterfall’ this was a really great insight and I can see how and that it works. So yes, I am all bought in.

I am not going to say more about training contents, as the Internet is full with this information.

Exam and Certification

I passed the exam easily and am now holding my certificate as Scrum Master. I am proud of that. But I am also happy that I did not pay the full price for it, as this would have been a rip off for a 2-day online course.

The exam consisted of (I think) 35 questions and one needed 24 to pass. I was somewhere in the 30ies. Questions were multiple choice, sometimes tricky, but generally very fair.

Lessons Learned

My first thoughts after having completed were: I’ve unknowingly already been a Scrum Master. Of course I learned something new, as described above, but I have used major parts of the scrum methodology throughout all my professional life.

When managing projects I always have short daily review meetings with the same agenda as a daily scrum meeting. I also implement those daily review meetings with my clients as part of Lean Management when on any Operations Excellence project.

The Sprint methodology is also not new. I call it Gate Management and is more or less similar. One can only pass from gate to gate after having successfully completed all tasks. One difference is, sprints are generally of the same time period, whereas gates can be more flexible.

I have used something similar to a burn down chart at my first project as management consultant back in 1997 when measuring achievements and savings in a purchasing department in Switzerland.

As project manager I usually take on tasks from and for my consultants to help them achieve their targets and deadlines. I also coach them regularly and train them in consulting methods.

But then, what’s new is the fact that I know now why waterfall doesn’t work. I also learned the benefits of self-organising teams and many other principles of Scrum and Agile. I am looking forward to my first experience of fully using Scrum as methodology.

How to go forward

So where does this leave me now? The day after I got certified I went online in order to look for Scrum Master projects. There are actually quite a lot. But as usual, there are problems; in fact there are two:

1) Everyone wants a scrum master with tons of completed IT projects; and obviously my projects only ever touched IT.

2) Everyone wants an IT expert who understands programming, etc; and obviously my background is not IT.

But then, I do feel it was good to have this new competency. I remember when I became a Six Sigma Black Belt I did not have an immediate Six Sigma project either and it will probably be similar this time and pay back over time.

Also, I want to specialise as “translator” from business/operations to IT and lead a Scrum Team from that side of the coin. I do feel this is a good niche to start from. The only thing it takes now it to look around and have a bit of luck.

Case Study: Customer Service Centre

The Case Study

The director of the Customer Services Division of a bank asked for help. In the invoicing department of his middle office he is facing several problems which he would like to get solved. The invoicing manager of the area doesn’t see any fault in himself. Everything is always fine when asked about problems or how the area is performing; in fact, his standard message is: “We always manage our workload”. Upper Management heard that customer satisfaction went down quite a lot recently and would want to get a grip of it.

Invoices are produced monthly, always towards the end of the month. The manager says this is important so they can all focus, even though some invoices don’t need to be dealt with that way. Staff is highly specialised in their work streams of producing invoices. Their responsibilities reach from creating LANFs, printing and sending of invoices, customer services in regards to invoicing, dunning.

The team is scattered across various locations, which is the reason why the manager installed a monthly meeting. The meeting is scheduled for 2 hours and every participant reports what he or she did and what the issues were. The team consists of 15 people.

The director is only on site once a month for 2 or 3 days. He has heard that there seems to be a problem with invoices, but he can’t prove anything. The site director is there daily, but doesn’t have a lot of time for the invoicing manager. He thinks the latter is long enough in the company to be able to manage the workload without big interrogation.

When asking the employees, their main problem seems to be the impossibility to go on holidays as there is no one around to cover for them. Their sickness rate seems higher than usual, also staff turnover. Employees range across all ages and seniority. Their interfaces are usually customers, the operations team for whose services they produce the invoices, the sales department, IT, and other specialist areas.

When looking at their Explorer environment, it seems a total mess. Procedures are everywhere and nowhere, and various versions float around erratically, if there are procedures at all.  

The director wants you to make his life easier and come up with a Six Sigma project.


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The DMAIC Cycle

Six Sigma Projects follow this cycle. The letters mean and show phases of the project: Define, Measure, Analyse, Improve/Implement, Control/Follow-up. Personally, I don't like the terms Improve and Control, so I came up with my own. I have run a similar project and changed the case study to a degree to keep matters confidential.


Define

In the definition phase I'd look what the key themes are, the headlines of work streams that would go on a project plan. In that phase the project structure would also be decided upon - project manager, team members, steering committee, meetings, risk analysis, ...; a project charter would be written. 

The themes from this case study are pretty classical. The major one is Operations Excellence and particular work areas seem to be invoice cycles and planning, flexibility of staff, processes and interfaces, meeting structures, KPIs. Other themes are management coaching, the organisation (locations and team structures), and Customer Service Satisfaction. All in all, it is mainly an Operations Excellence project.  


Measure

2 things need to be measured - project success and operational performance. They don't necessarily mutually exclude one another, but in theory it can be said that the latter measurements are for and will continue after the project. 

What would be interesting to know and have measures about may be the following:
- Amount of invoices per invoice cycle
- How many kind of different invoice types there are (and whether they are comparable in terms of effort to produce)
- Customer service satisfaction data and how it is compiled
- Worked hours of the invoicing team, with over-time.
- Outstanding dunning items (receivables)
- Customer queries: the amount per day, worked hours, also query types
- Staff sickness rates
- Error rates of invoices (pre- and post-sending to customers)
- current KPIs to see what is already regularly measured
- etc.


Analyse

In the analysis phase it would be good to get some thorough data analysis from the measurement phase (above). It helps to understand the nature of the business and also hopefully shows patterns of seasonality, peaks and troughs, etc. 

Further or analysis would be:
- Processes. It would be good to understand the invoicing process(-es), how those LANFs are created, till they are sent to the customer. This includes interfaces to other departments. 
- Management training records. It is important to see what the managers and directors already know and whether they apply their knowledge. There might be a confidentiality problem with HR, but management can be asked directly what kind of training they have received.
- Staff training records. There seem to be flexibility problems with staff filling in for one another.
- Meetings. Joining operational meetings and see how they are conducted and whether they are any effective and efficient.
- Customer Satisfaction. Root cause analysis on customer queries. Maybe customer interviews.
- Organisational effectiveness. Analyse locations and communication between teams of the current organisation
- Work procedures. How are they written, if at all. 
- IT infrastructure. What IT systems and how well they are installed. 


Improve/Implement

It is difficult to predict what exactly will be implemented. But the following can be said:

- Balanced Scorecard to include measurements of customer service, staff flexibility and satisfaction, financials and processes. This is especially interesting because the department seems to have problems in the first 2 areas. The other 2 are pretty standard.
- Flexibility Matrix of staff. Cross-training of staff and making the more flexible to cover themselves. 
- Standardised and efficient invoicing processes, including all interfaces. Also dunning processes. This has the potential for big change requests in the IT infrastructure, which needs extra time to implement usually. 
- Writing procedures for those processes that can be used as training manuals for new or existing staff.
- Management coaching.
- Create smaller teams, maybe manage to move teams together into one location.
- Implement efficient and effective daily or weekly planning and review meetings with action plan and KPIs.


Control/Follow-up

The follow-up phase is very essential, as in this one all implemented improvements will be fine-tuned and more important, behaviours aligned. This phase is one of intensive coaching. It must be ensured that staff and management are not falling back into old behaviours. Audits will be undertaken, not only by consultants but also by staff and management; these are so-called compliance tours. 

Recycling Breakfast

Two days ago I returned from 12 days of holidays to the US. I had a most fantastic few days off and more or less discovered one national park or monument a day, if not two. I am now the proud owner of a National Park Annual Pass. My daily target hike was 10,000 steps (I have this step counter on my phone) and I was very good indeed, with the highest step count on one day with 18,958. This equates to 14.79 km or nearly 10 miles. All in all, I felt very "green" and environmental. I breathed in fresh air every day, felt healthy, caught some sun and even got a nice tan. 

Of course, my carbon footprint was dramatic, as I flew in from London and rented a car and drove thousands of kilometres. And there was something else which turned my "green experience" rather grey - my daily breakfast. 

I booked my holidays with hotels from the IHG Group, my all time favourite hotel chain; those are basically all sorts of Holiday Inns, Intercontinentals, and other brands they have. This time, the first 2 nights I spent at Candlewood Suites and from then on in Holiday Inn Expresses. The latter offer a free breakfast, so I thought it was perfect, as when going on a long road trip, a quick breakfast downstairs gets you started nicely for the day. 

I spent 10 nights in HI-Express hotels and had 10 times breakfast there. The IHG-Group is one of those chains that runs on a franchise basis - everything is standardised and participating hotels have hardly any chance of being individual. The advantage obviously is that one knows what one gets and so, as a guest, one can mostly rely on a pre-defined good quality. BUT, and that's the catch, when it comes to breakfasts it can be ever so dull. Every day one gets to chose from the absolutely same breakfast buffet. It is a copy/paste activity from hotel to hotel. After day 2 or 3 I got so bored with breakfast; I tried everything, found what I liked and disliked and even the stuff I liked got dull, as it was always the same - literally the same. Yoghurt was from the same brand, jam was the same brand, EVERYTHING was the same. 

In European HI Express hotels this is different. They also have to offer a certain range, but within that they are free to chose the provider, a concept which I much prefer. There is also another thing us Europeans do much better, I think, and that is the choice of cutlery and dishes. This leads me right back to my oh so carbon-green/grey holiday. 

After I had my first breakfast I sat in front of that heap of plastic, styrofoam, and cardboard. I was appalled. Plates are made of styrofoam or cardboard, cutlery is made of plastic, apples were individually wrapped in clingfilm, jam, butter and honey was portioned in little plastic containers. Bowls were made of styrofoam, yoghurt was in plastic containers with aluminium lid, bagels were individually wrapped in plastic foil, my coffee cup was a mix of styrofoam and paper with a plastic lid, the coffee stirrer was of plastic. Sugar was individually packed, so was the coffee milk and sweetener. Milk for my cereals came in small tetrapaks, my juice was served in a plastic cup. Porridge (oatmeal) was individually packaged, so was cream cheese, ketchup, sauces, literally everything. 

I remember my first trip to the US in 1996 and even back then in the recycling dark ages, I found all this plastic to eat from disgusting. Nothing has changed. 20 odd years on, and people in the US are still eating from plastic and styrofoam and nobody complains. And what's even worse, no hotel (chain), as all the others in the market are probably exactly the same culprits in the waste department, have discovered that "going green" could be a worthwhile and moneymaking market niche to discover. 

Anyway, to prove my point, I took photos of every single breakfast I had every day. Just to show what amount of rubbish I produced. I think this is an outrageous amount of which I am not very proud of. 

Yes, it was convenient. I did not have to go out every day to get myself breakfast somewhere. It was also good because on some days I just had to get out quickly and hit the road first thing in the morning. 

This leads me back to my first 2 nights at the Candlewood Suites, one of their hotels that don't offer breakfast at all. I had to go and get myself some elsewhere. And so I did. And I will leave the question open what I enjoyed more. I know, I can't expect Eggs Benedict in a HI Express, but hey, I had metal cutlery, drank coffee from a real cup and ate from a proper plate. That was a real holiday experience. 

For those who want to see my trip through the US, here the link: My Travel Blog

Brexit and Parliaments - a Panel Discussion in Europe House

Today I went to Europe House in Westminster where they held a panel discussion about the roles of parliaments during the Brexit process. There were several people on the panel: 

- Baroness Ludford, LibDem (House of Lords)

- Tasmina Ahmed-Sheikh, SNP (House of Commons)

- Seb Dance, Labour (MEP)

- Jeff King, Professor of Law at UCL

- Davor Jancic, Lecturer for European Law.

- Maxine Mawhinney, Moderator of today, BBC News

Each of the candidates presented their cases initially, and then they jointly answered questions. All of them were overly sceptical about Brexit, so at least one did not have to listen to political scum like Farage and the likes. 

Here a few points from today that I found extremely interesting and noteworthy:

1) Baroness Ludford: "The EU Parliament has the nuclear bomb of being able to reject he final Brexit deal."

2) Baroness Ludford: "People voted for departure. People did not vote for destination." This means, there is no mandate for leaving the Single Market, as this was never on the table.

3) Baroness Ludford: People should be able to vote for the final deal. The process started with a referendum, it should end with one, too (My personal point of view: one referendum was quite enough. I am not sure if I can cope with another one).

4) Tasmina Ahmed-Sheik: "We must always acknowledge contributions EU migrants make, not just financially, but also culturally."

5) Tasmina: "I am not ready to put my faith into this government to negotiate any deal, let alone a good deal."

6) Jeff King: "European Parliament is the gold standard of parliamentary involvement in international treaty negotiations."

7) Jeff: "Parliaments need to be listened to. To rely on executive grace in a time like this is almost unbearable."

8) Jeff: "The EU scrutiny committee ought to have scrutiny reserve power. It would improve accountability function."

9) Seb Dance: "We need to have a national discussion that involves everyone - the devolved assemblies, cities, Parliament, everyone."

10) Seb: It's the EU now that holds all the cards in the forthcoming negotiations. "We shouldn't imagine that we're entering negotiations between equals."

11)Seb: "The reality is, once we trigger Article 50, the ball will be entirely in the EU27's court."

12) Davor Jancic: "European Parliament is a serious player: it has right of consent. EP previously rejected agreements struck by EU."

13) Davor: Role of national parliaments in EU27 is greatly neglected & could prove stumbling block in Article 50 deal.

14) Davor: "When the UK leaves the EU, it also leaves a partnership club where international standards are made."

15) Seb: "The UK Youth Parliament should also have their say in the negotiations since young people are the most affected."

16) Tasmina: "Labour needs to get its act together for the sake of unified Hard Brexit opposition."

17) Seb: "The fact that the UK Government has closed so many options has forced the EU to do the same."

18) Seb: "EU institutions unified on the main negotiation points despite some differences between Member States & EP groups."

19) Seb: "If Le Pen wins and we have a fascist government in France, the EU is doomed."

20) Maxine Mawhinney: Representatives from the Conservatives, UKIP, and Labour Leavers were also invited but did either not reply or did not have any interest!! 

You think life is sort of okay, ...

... and then you will suddenly get hit by a sledgehammer.

If someone had asked me last year about my personal long-term plans I would have answered: I will remain in my flat in West Norwood, rent out my other flat in Forest Hill to get some basic income, drastically reduce working on long projects in 2025 and concentrate on short term assignments only. By then I wanted to become an LLM, which is a Licensed Lay Minister in the Church of England, and focus on that area. And that's it. A straight forward and simple plan. To do so, I wanted to work full-time for as much as possible for the remaining 8 years and continue my theology course which I only started last September and which I enjoy thoroughly; one of my best choices I made in life. 

And then came Brexit.

All my friends know how much the Brexit vote last June affected me, especially the ones who are linked with me on Facebook; they had to endure quite a few rants of mine. I have also written a blog entry here about my feelings and got quite a few clicks. The biggest problem for me is, that I don't feel welcome anymore in this country. I take Brexit very personally, even though friends of mine told me to stop doing so. The issue is, I cannot. It reminds me too much of Germany in the 1930ies and I simply cannot accept this. Racism and populism is a total no go for me and my inner value system. But I got on with life and thought that within a certain time, Brexit would hopefully never occur. My sister asked me last year whether I wanted to come back one day and my usual answer was: "No, never!"

And then came Theresa May's speech yesterday. 

I am a freelancing management consultant and have lived in London for more than 20 years. I don't usually work in the UK but mainly in the EU. I take advantage of the single market. I work abroad but pay taxes in England. Usually, I fly out every week and am only staying in England at weekends. I have done this like that for the last 20 years. It works for me. With the single market vanishing I cannot do this anymore; my business model turns obsolete. 

And then came decision time for me.

So I prepared a matrix where I put down cities where I could imagine to live and ranked them: 

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Locations	House price	Friends	Airport	Trains	Scene	Culture	SUM
Berlin	3	5	5	5	5	5	28
München	1	3	5	5	5	5	24
Frankfurt	1	5	5	5	5	3	24
Köln	3	1	5	5	5	5	24
Hamburg	1	1	5	5	5	5	22
Wien	3	3	5	1	5	5	22
Nürnberg	5	3	1	5	3	3	20
Ingolstadt	1	5	3	5	1	3	18
	1 - high	1 - few/no	1 - far	1 - bad	1 - bad	1 - bad/little

Berlin made the race. My hometown came last, even though I like it there. But in the end, I need a big city. Coming from 20 years in London the Bavarian province is not really an option. It would drive me bonkers after a few weeks. 

And then, what's next? 

I think I am going to wait for another 6 months to see what's going on politically. Somehow I still think there is hope and a tiny shining light at the end of the tunnel, even though, deep inside I have started with the process of segregation from the UK. It is bizarre how these things work. I already told my family that I might move back this or next year and they are happy. I told my friends in Berlin and they are ecstatic. Somehow I feel ready to go. 

Maybe it is time for a fresh start? Maybe it is even fate? Or maybe I just have to practice what I usually preach to my clients, that constant change is inevitable? One never knows these days. Deep inside I still hope that our dumb and fascist government will be overturned and the British people get some sense back into their minds and start doing something. 

Only time will tell....!