I suppose when one spends a few years in Industry and receives an MBA from a good school, they would find it relatively easy to look at business cases and pinpoint the problem after some deliberation. Revenue is up but profit is down? Most likely a cost problem. No change in Operational Expense but Working Capital is still skyrocketing? Could be an inventory issue. Not enough sales? Must be a marketing problem; maybe we are targeting the wrong segment or demographics, maybe we overestimated the demand.
But is it that simple, across the board, for all organizations?
To make a point at the expense of gross generalization, I’d say that most problems faced by startups as well as small & medium enterprises are, usually, one dimensional. There is a simple cause-and-effect relation that needs to be understood before relevant corrective actions can be taken and the problem can be resolved. Whether it’s a cashflow issue, a market segmentation issue, or a general competitive strategy issue. Sure, a few variables will always link back to each other in unpredictable ways, compounding the problem. But what one needs to remember, I suppose, is that the corrective action will also have a domino effect, much like how the original problem cascaded to different aspects of the company in the first place.
But what about large companies where the problem is not so easily discernible. What about the fact that your sales are up, profits are soaring, but still something is missing? What happens when you correctly estimate your market, identify your edge, and execute your key activities perfectly, but you are still not able to find that satisfactory synchronization between the departments and within the organization? Veteran managers would know what that synchrony feels like—some consider it akin to listening to a good symphony or spectating a well-choreographed dance. It’s the hum of a smoothly running, well-oiled machine.
Most of the time, you don’t find that deep understanding between departments and people in the company. Sometimes they are not even working to achieve the same goal. What happens when the dreaded “people” problems arise? After all, every corporation is comprised of people. Human Resources is the very heart and soul of any organization. What happens when different people want different things and the leader is not to be found or effective leadership is not so apparent. What happens when there are misaligned incentives? Or when the entity is so huge that problem identification itself becomes a problem.
At IESE, we spent a good 3 months on a module that explained this very phenomenon. Management Control is an issue that goes beyond just finding the pain area in the organization and taking corrective actions. It boils down to understanding the motivations behind each group, understanding what the corporation stands for, and whether actions are being taken to go in that direction and work in line with those values or not. But that doesn’t happen just by going for a corporate retreat to a fancy resort and having a round table conference.
Thousands of man-hours and millions of dollars are spent yearly on finding the right people and tools to facilitate change in organizations that reflects their strategy and values.
Also, having been fortunate to work in boutique consulting firm that helped with Performance Management & Review issues, I had some further perspective to add.
We came across an organization that comprised of both sales and manufacturing divisions—as is the case in most firms—wherein the divisions found it hard to see eye-to-eye on almost every imaginable issue. Sales didn’t care what Manufacturing thought and vice versa. As a result, sales were dropping, as was the quality of service and the list of their clientele. What’s more, it was a top-heavy organization where the managers didn’t know what the frontlines men were thinking and the people at the bottom of the chain didn’t know what their bosses wanted.
We used a plethora of tools including Strategy Maps, Quality System implementation, Balanced Scorecard implementation, RACI Matrix & Service Level Agreement (SLA) development, Department’s Incentives Restructuring—along with some of the more traditional, infallible methods like good old-fashioned, one-on-one information interviews with key stakeholders—to get to the bottom of the problem and find a viable solution. Our team was good; the clients were more than happy with the result.
I was successful in attaining permission to write a white paper detailing the entire consulting engagement. For those interested, I will attach it as pdf below. Please note that the identity of the organizations involved, and all the locations, have been changed for legal reasons. Also, there will be copyright issues if any person reproduces the case herein without permission for any reasons, commercial or otherwise.
The work I did with that firm and the Management Control course at IESE re-enforced an obvious yet oft-overlooked point: It’s impossible to get what you want—as an individual or an organization—when you don’t rightly know how to get it, or even if it will be remotely good for you! Many organizations are guilty of chasing after objectives without thinking whether it's in-line with their mission and values.
And, finally, it all boils down to execution!
Here is the report, for the strategy geeks amongst you:
"Strategy is a commodity, execution is an art."- Peter F. Drucker