|| Control Your
|| Business Workout Regime
"No organisation ever financed anything that it did not get control of. You
cannot separate responsibility and power. If an organisation hands out a
dollar, with it goes the implied responsibility of how it shall be spent and
some influence on the life of the recipient."
- Dr Alfred Haake.
young man working in an overseas subsidiary office brought down one of the
oldest, most venerable investment banks in the world. Nicholas Leeson, a
futures trader in Barings Plc's Singapore office, ran up losses of
$1.3-billion on Asian markets. The debt forced the bank, which had traded
for 233 years, into bankruptcy.
It shouldn't have and couldn't have happened.
But it did.
Barings found out too late that maintaining the right balance of different
philosophies and cultures is the key to organisational management. In the
bank's Singapore office, trust and instinct ruled uncontested. But
management controls were totally absent.
The result was disastrous: a spectacular example of why no manager can
afford to ignore the philosophies of management.
A different de facto meaning
"Philosophy" is a word bandied around like confetti at a wedding when
associated with the words "management" or "business". It implies wise
solutions to every problem after calm appraisal of the current situation.
However, at the coal face it takes on a different de facto meaning.
Organisations of all types, even business organisations, are typically
bureaucratic. The key feature of a bureaucracy is top-down management
control. And despite all the talk of flattening hierarchical corporate
structures, organisations are in one sense under pressure to become even
A business, like any other organisation, tries to grow and become bigger,
because the bigger it gets the less dependent it is and, in theory, the more
flexible it becomes. For example, in a sprawling conglomerate, a loss
sustained in one area can be offset by profits in another.
Consider the huge South African monolith, Anglo American. Its gold division,
Anglo American Gold (Amgold), performed badly during the first six months of
1996/1997 financial year. Net earnings dropped from R264-million to
R229-million. Against the background of the plummeting rand value - it
plummeted by more than 30% during the period under review - qualified
observers said Amgold's profit should have soared by as much as 70%.
But it didn't.
However, a vigorous performance by the coal division, Amcoal, saved Anglo's
bacon when it raised its per share earnings from 1 283,6 cents 1 680,4
cents. The performance by Anglo American Industrial (Amic) also helped wipe
the egg off Anglo's corporate face.
The business environment has never been more volatile. Change is rapid and
constant. To survive, flexibility is a must. But building bureaucratic
structures isn't always the answer.
Indeed, it seldom is.
The copies-in-triplicate syndrome
Bureaucracies that suffer from the make-copies-in-triplicate syndrome, such
as those so beloved by governments, are invariably staffed by more over-paid
chiefs than Indians. Here's an example: A report, focusing on a government
department in the UK, noted that 24 supervisors oversaw the work of 25
clerks. When this was brought to the attention of a certain Civil Service
head, he was horrified. "Imagine such a situation!" he said. "Which
supervisor was absent?"
Then there's the story I heard in Pretoria, South Africa's bureaucratic
jungle. Although I can't swear to its veracity, it appears that an assistant
department head was instructed to reduce the amount of storage space
occupied by redundant files.. So he told his secretary to get rid of them.
"But," he warned her, "see that you make a photocopy of every piece of paper
before you destroy it."
Work to a formula
Working without deviating from a rigid formula is the
hallmark of every bureaucratic structure. In the context of business today, for example, information technology
dictates that all departments use the same forms and language. Government
regulations and accepted methods of bargaining with trade unions also result
in internal consistency across the organisation.
The larger your business grows, the more controls, rules and procedures
you'll be tempted to implement. Controls, rules and procedures demand
consistency. And consistency implies standardised method, fixed reporting
methods and so forth.
"Consistency," as Oscar Wilde observed, "is the last refuge of the
The more you expand your business and the more consistency you insist on,
the more bureaucratic your business becomes and the more tightly defined its
| In any bureaucratic
organisation there is one person who know what is going on. This
person must be retrenched
|| Yet, despite the avalanche of business technology that churns out
information like a sausage machine, businesses still require people to
keep them afloat. As psychologists point out so often, all people have
one thing in common: they're all different. This means that they're
consistently difficult to pigeon-hole with any degree of consistency.
So what about the people?
Today, the people who work for you want more from their jobs than just a
wage packet or pay cheque. They want you to recognise them as thinking
assets, not mere machines.
If you're a keen student of the latest developments in the science of human
resources, you'll know about the value of fulfilling your employees' desires
in terms of increased motivation and productivity. That's why, if you're
wise, you've jettisoned management command-and-control philosophies in
favour of employee empowerment and participation programmes. You've replaced
the management versus labour hierarchies of bureaucracy with independence
and problem-solving teamwork.
In summary, the forces of modern business are pulling you in two opposite
directions: to be at once more and less bureaucratic. As a business owner or
senior executive, you're involved in a tug-of-war between the laissez-faire style of management and the bureaucratic approach.
You have to live with boundaries, but ...
Let's face it, despite what management gurus preach about the benefits of
flat, business structures without borders, there will never be an
organisation that is completely without boundaries. Because people employed
by a business or any other organisation have different levels of authority
and influence, there will always be hierarchical, or vertical boundaries, to
distinguish them from the rest. And because people specialise in different
tasks, there will always be boundaries between functions - horizontal boundaries.
Other boundaries you'll encounter are external -
boundaries that separate the work you do from the work done by your
suppliers, customers and other outside companies, geographic - boundaries that separate work
done in different places, different time zones and, sometimes, by different
You can't eliminate these boundaries. But you can make them permeable so
that they allow information, ideas, resources and energy to flow freely
throughout your company.
Relegate the thick, unyielding walls of the past
to the rubbish heaps of corporate history.
If you don't encourage fluidity in your company, it could lose its
competitive edge. The reason? Factors for success in business have shifted
size to speed in responding to customers requests or bringing new
products to market;
clearly define, separated roles to flexibility by employing people who
can do multiple jobs, constantly learn new skills, and who will
willingly shift to different locations and assignments;
the division of specialised tasks to integration by bringing different
competencies together to find solutions for customers, and
the control of activities to innovation by encouraging and rewarding the search for the new, the different ...
even the unthinkable
. The vertical, horizontal, external and geographic boundaries of
traditional organisations constrain the new success factors of speed,
flexibility, integration and innovation.
So uunshackle your company from these
Follow my three guidelines:
- Loosen vertical boundaries.
- Rewire the system.
- Take action on four dimensions
Think of the structure of your company. If you're like most of us, first and
foremost you think vertically ... you think pyramidal. The chief executive
officer (CEO) occupies a place of honour at the top. Below we find the
middle managers, with the workers and administration even lower down in the
corporate pecking order.
| How-to management books, which pour from mainly American publishers with
unrelieved tedium, discuss almost exclusively the befits of eliminating
the hierarchical organisation structure. Unlike Hollywood movie
starlets, they reckon that flat is best. What you need, they assure you
if you bother to listen, is a horizontal structure that is network or
| In any traditionally
structured corporate bureaucracy, the rate of pay varies inversely
with the unpleasantness and difficulty of the task.
Now read a definition of teamwork by American businessman and political
leader Russell Baker: "A team is a mutual protection society formed to
guarantee that no one person can be held to blame for a botched committee
job that one person could have performed satisfactorily."
Ignore the self-appointed management gurus and Mr Baker.
Human social interaction
Hierarchies are basic to human social interaction from family to religion to
school to work to government. Therefore they will and must continue to
exist. Without hierarchies, human groupings of any kind would fall into
So what can you do about your company's inefficient and outmoded
Make it healthy.
This means you have to enhance your organisation's
speed, flexibility, task integration and ability to innovate. You won't do
this by clinging to the factors that ensured success in the past. If, in
your quest for continued corporate prosperity, you adhere to old-fashioned
recipes of size, role, clarity, specialisation and control, you'll
- slow response times as decision-making travels laboriously up and down
the hierarchical ladder;
- rigidity towards change because traditional hierarchies reinforce a
"we've always done it this way" attitude;
- internal frustration because employees feel under-used and
- customer alienation because they become dissatisfied with slow
responses and unprepared personnel.
Not entirely convinced? Check out what happened to Xerox back in 1973. In
that year the company's Research Centre in Palo Alto developed the world's
first personal computer. That was three years before Apple put its first
product on the market.
However, Xerox research boffins were unable to sell their idea up the chain
of command. Those at the pinnacle of the corporate pyramid myopically
recognised only developments related to photocopier technology. In essence,
vertical boundaries stopped Xerox from reaping the rewards of being first in
a field that was to take the world by storm.
To make the
boundaries in your organisation more porous, set each of your employees the
task of redefining his or her role in producing a result.
I often ask people
what they do. The replies are pretty standard. "I'm a doctor," she
proclaims, wearing the obligatory bade of office: a stethoscope and white
housecoat. "I'm a chartered accountant, " he says with all the enthusiasm of
a dried tomato.
That's not what
they do. That what they qualified as at university..
Doctors try to
make sick people better - that's what they do.
counts numbers, and sales reps makes sales. That' s what they do.
titles. Work on results. Replace the titles on everyone's business cards
with a description of what each individual does in customers' terms. Change
from descriptive titles to prescriptive statements.
And don't stop
Make everyone in
your organisation responsible for producing a measurable result, whether
he's the officer cleaner who has undertaken to keep the premises clean or
the managing director who's responsible for producing long term profits.
The way to go: get
each person to define their result. Then ask them to write down exactly what
functions they should perform to produce that result.
If you follow this
route, chances are that you'll need to ...
Rewire the system
Many organisations in the public and private sectors attempt to pry loose
hierarchies with powerful-looking, impressive-sounding change programmes.
And they're often disappointed when results come nowhere near matching
Back in the early AD's, Roman satirist Petronius noted: "We trained hard.
But every time we were beginning to form up into teams, we would be
reorganised. I was to learn later in life that we tend to meet any new
situation by reorganising - and a wonderful method it can be for creating an
illusion of progress while producing inefficiency and demoralisation."
The more things appear to change, the more they seem to stay the same. The
crux of the problem: implementing change without first creating a systematic
framework for the change.
| The greater the cost and
hardship of putting a programme of change into operation, the less
chance there is of abandoning the change, even if it subsequently
|| With out careful pre-planning, ringing in changes spells disaster.
Flip through the company news pages of any newspaper of business
magazine. Managements of companies big and small constantly chant
slogans about the benefits of employee empowerment. And then they don't
do anything about it. Power remains concentrated at the top
But how do you loosen traditional hierarchy's vice-like grip without
floundering around in chaos?
| You develop an appropriate systematic frame work. Granted that it's a
lot easier to say or write than it is to do. But it can be done. And do
it you must.
Here are four guidelines that will help your design the framework you need:
- Align change initiatives to business strategy. If you don't, they'll
be irrelevant to line managers facing day-to-day business pressures.
For example, don't loosen a hierarchy to empower workers. Do it to
improve customer service. Focus on the result, not the process.
- Once you've decided on a programme of change, fully commit management
to its implementation. Your employees will dismiss the change
initiative as yet another "flavour of the month" if they perceive only
limited commitment by the corporate top brass.
- Do everything possible to instil the company's values and beliefs in
your work-force. If they share these values and beliefs, they'll
choose to do the right thing at the right time in the right way. This
means that you can eliminate costly layers of supervision. Encourage your colleagues to do things right,
rather than do the right things.
- See organisational initiatives as evolutionary, not revolutionary. If
you treat each new initiative as the final answer to all your
problems, your workforce will soon become jaded. Instead, demonstrate
how each new initiative builds on previous initiatives - how, for
example, a new re-engineering programme builds on the success of a
previous Total Quality Management (TQM) effort.
There is a fifth factor you shouldn't overlook in your
rewiring operation: the corporate rule book. Even if you don't have a formal
tome of do's and don'ts like some of the huge conglomerates, I'm willing to
bet that have a web of rules and procedures that govern your modus operandi:
dress codes, time sheets, authorisation checks - things like that.
Write them down. All of them that regulate actions in
your company right now. Ask your staff to help you. It doesn't matter how
absurd they are. Just write them down. Then get hold of a big bag, fat red
marker pen and put lines trough any rules or procedures that are not
directly linked to producing the required results.
You still haven't finished rewiring.
Your next move: get every member of the staff to write
down - step by step - the functions they must perform to get their results.
This servers two purposes:
- it's useful for new employees who join the
- it helps identify steps that have become
obsolete in producing a result.
Okay, so you've decided to rewire your corporate system. What do you do now?
Take action on four dimensions
The four dimensions outlined below are vital if you want to kick-start your
business into new-found prosperity.
In traditionally rigid hierarchies, management hoards information, releasing
it only on a need-to-know basis. To overcome the problem, encourage the free
flow of data. Sharing information throughout the company will enhance the
business's response speed and encourage innovation.
It's usually pretty easy to share good news. But don't keep the bad news to
yourself., either. If members of your workforce know the difficulties you're
facing, they'll react more sympathetically to your proposals, even though
they may be tinged with bitterness.
And when you communicate, which should be often, develop the ability to use
simple catch phrases that focus the message without hiding the complexity of
the task or tasks behind it.
| It was writer Robert Louis Stevenson - remember Treasure Island? - who
wrote: "Mean is a creature who loves not upon bread alone, but primarily
To make information available across corporate functions, encourage the
sharing of databases or publish cross-functional newsletters that are
interesting and easy to read.
| Traditional Verbal
Corporate Communication Speech which fills the function of reducing
silence without growing out of a productive thought.
A company structured along inflexible, hierarchical lines splits skills
along different levels. In the characteristic pyramid formation, leadership
skills are concentrated at the top while technical skills sink to the
bottom. Healthy hierarchies are different. They allow competencies to
develop wherever they're needed, without regard to rank, position or status.
To slice through the bureaucratic red tape generated by pyramidal
hierarchies, determine the technical and cultural competencies required by
employees at every level of the business. Then fill the competence gaps
through training or by hiring qualified people. For example, you can enhance
the speed of response to customer requests simply by training salespeople to
do their own credit checks. The process doesn't require the cerebral
capacity of a rocket scientist.
Build up speed
In the nanosecond
90's, speed is of essence. Look at each employee's self-stated result and
determine how long the functions take to produce it. Then insist that the
length of time be halved within four weeks.
It can be done.
Sure, you may have
to update and upgrade your existing systems. Decide on which systems
produce the results you desire and keep them. Dump the other systems or
replace them with ones that keep your results up to speed.
Develop across-function competence
| Many Corporate
"Universities" Institutions of higher yawning.
|| Also eestablish a corporate "university" to
develop competence across functions. Invite experts, both in-company and
outside, to address and show "students" about how various skills
dovetail to produce a seamless whole. But ensure that the knowledge you
impart is relevant and up-to-date. Heed the two warnings issued by the
doyen of international management consultant Peter Drucker:
- "In the business school classrooms they construct wonderful models of
- "When a subject becomes totally obsolete we make at a required
Urge competent members of your workforce to constantly challenge established decision-making assumptions. In which book is it inscribed that factory workers can't stop assembly lines to meet customers' specific needs? And what legislation forbids retail workers from making special arrangements without management approval to keep customers happy?
Even if the die-hards in your boardroom proclaim it a heresy, insist that more decisions are made by the lower echelons - at the rock face, so to speak. But be prepared. It's going to rock the boat and lead to far-reaching changes, particularly in middle management. Direct supervision will become less important than guidance and motivation.
How much does each employee cost ?
Make each person
in your organisation an entrepreneur by asking them: "If you were
freelancing, how would you do your job differently?"
how much each person costs the company in terms of wages and salaries,
office or factory rental, medical aid, pension, stationery, telephones, etc.
Then ask them to calculate the profit on their jobs. A minimum of three
times cost is an acceptable norm. For example, if a secretary cost you R10
000 a month in total - including 13th cheque, office space, salary, etc -
she should be providing you with the value worth R30 000 a month. In other
words, if you sub-contracted the services she provides, your bill would be
30 grand a month.
Adapt your reward system
Employees are often rewarded more for their position on the hierarchical ladder than for their performance. If this is the system you have adopted, you're in essence rewarding people for their past achievements - achievements that got them promoted to their current positions.
To get the best out of the people you employ, revamp your company's reward system.
Reward performance and skill, not position.
One way of accomplishing this is performance-based pay. The better they do, the more they get.
You can also spread rewards across vertical boundaries through such things as employee stock option plans. With these in their pockets members of your workforce will feel they have a greater stake in how the company performs.
I spoke to a worker at a factory in Wadeville.
He'd taken the opportunity of taking up a stock option offered to him by his
employers in recognition of a job well done. "Now," he said, "I have to
worry about the lousy work I'm turning out."
And to keep motivation on the constant boil don't just reward individuals.
Offer rewards across functions by giving teams who do well a share of the