Monday, July 13, 2009

Success Following Ego Check-In

This year marked the 113th Credit Conference. Although the venue was perfect, it appeared that attendance was down on both the vendors and the participant’s side. As always, there were a host of great educational and networking opportunities. However, I was seeking the secret answer. The answer that no one seems to have right now; how do I get my bills paid before the other vendors waiting in line? Instead I received insight into all of these ‘tools’ which I could use to get more information on my customer. Although knowledge is power, I came away not knowing how to navigate this economic storm so as to ensure the continued viability of my organization.

It wasn’t until the closing night party, the Luau, that some of my questions got answered. Interestingly enough, it was those feeding me with corporate viability solutions that were completely unaware what they were doing. Even more ironic, they were liberally sharing the solutions for corporate viability while their organizations where sputtering along. How is it these who have the answers are not saving their organizations? The answer to this question, I believe, is the problem with Western business models and this will ultimately position Asian business models as the global first.

The industrial revolution made a profound effect on societies and cultures across the globe. Since then commerce flourished and profits were tied to production output. Then as with any model, the process hits the glass ceiling. It is at that time when the ‘same old’ methods simply don’t produce any increase in output. For the industrial revolution, the refinement came as we continued to lubricate the process. An examination of each step in production to make the overall process better and reduce waste so as to increase output and therefore profits.

Since World War II, business processes have flourished. Today anyone who has been in a commercial entity for more than a year feels they are able to pen the next great management book. With all of this ‘knowledge’ abound I wonder why North American enterprises are floundering while those in Asia are growing and thriving. The separation, I believe, comes down to management style and culture.

During dinner at the Luau, Greg proceeded to tell me how his company, a national food supplier, continues to undertake the ‘dumbest’ processes. As background, the company ABC ltd has diversified holdings in other consumer goods, much more than their competition. According to Greg, the executive management team is a well seasoned team and makes corporate decisions from their marble empire hundreds of miles from the ‘line’. Greg, a 20 year veteran of the company, was not shy in sharing the lunacy of the internal reporting and many of the company’s policies. Listening to his dissertation of how disconnected his staff is and how they fill in the little boxes in the reports to satisfy head office. Through the questioning it became clear that the elite management wasn’t interested in what was happening at the front lines, they were more interested in their modeling and their reports.

Miles, the chief credit officer of a global building material supplier, quickly chimed in with his views on corporate management of his company. His company, XYZ Inc, based in Europe simply fires off mandates to their various offices and awaits reporting. The XYZ mantra is more sales with more margins or more terminations. Their pseudo-Viking mentality of beat the peasants for more sales until they are dead or the sales come in is their mission statement. Miles was quite vocal in sharing how the company orchestrated a round of terminations, followed by pay cuts and then furloughs. Throughout which, human resources made it clear that anyone speaking about their actions will be terminated immediately.

Basically these two gentlemen shared the inner workings of their companies, which are classical top-down management. Essentially decisions are made in some cherry embossed boardroom and then the peons in the field have to follow the process. Interestingly enough, Greg knew what his company should do to increase their cash flow. The sad part is the management structure above him had all the answers and didn’t need input from below. Here are two companies that have embraced so much of ‘in vogue’ business practices while continuing to struggle like their competition. Amidst their ‘processes’ they simply fail to recognize their purpose and more so where hides their key to success.

The key to corporate success, I believe, comes down to knowing the corporate purpose and having a culture that allows for the free flow of ideas. There are two basic mantras in business management; top-down or bottom-up. The top down models are shared by those I met with at the credit conference. In these models, executive management outlines the strategy and everyone has to follow in lock stop. The bottom-up model contends that line personnel have an intimate knowledge of the customer and their feedback is vital in decision making. From my readings, these two models seem to be mutually exclusive. I feel a hybrid model is the ideal. Key stakeholders define the direction and vision of the enterprise. The information is diced up and disseminated through the ranks. However, in the hybrid model, those being closet to the customer and their transactions should have the confidence and value to share, upward, those changes that need to be made to fine tune the corporate vision.

This freedom to flow ideas upward through the corporate hierarchy is culturally rooted. If line people feel their information isn’t of value, critical information will not be received that could determine the fate of the organization. This is an area I think most western corporations fail; the cherry boardroom executives feel they have all the answers and they don’t foster teamwork with those who are in direct view of the customer. It is this failure to meet the customers’ needs that cripples companies. A wonderful book that addresses how corporate decisions fail to meet the customers’ needs is, The Milkshake Moment by: Steven Little

Mr. Little attended the Credit Conference and shared, in an open address, how so many companies simply fail to listen to their customers. Since customers communicate with their wallets, these companies suffer. To share one of Mr. Little’s many stories. Mr. Little ends up at a very upscale hotel after traveling all day. He quickly picks up the phone and dials for room service. To the young gentleman who answers the call he requests a vanilla milkshake. The response which he received was, Mr. Little we don’t have milkshakes on our menu. Steven, through a series of questions, realizes that the kitchen has all the ingredients for a milkshake; they simply don’t have the option on their computer room service ordering system. The story ends, with Mr. Little getting all the ingredients and making his own milkshake in his room. The take-away, the organization has failed the customer.

Corporations all too often fail the customer, by simply not listening to the customer’s request. Whether it is the decisions of the cherry boardroom, or the limitations of the customer request system, the customer is essentially ‘hog-tied’. Companies need to wake up and realize that within an industry, sales represent a zero sum game to all the players in the industry. Only one company will get the sale, make sure your ego doesn’t get in the way of winning the deal.