It's Good Business

By R. Keith Mobley, Principal SME, Life Cycle Engineering

Business success is far more than the science of managing scale and cutting costs. An organization focused single-mindedly on cost cutting, minimizing costs through scale, and doing the same things more cheaply, will too often ignore opportunities that would yield sustainable improvement.

Successful corporations have rediscovered and put back to work the old tradition known in my generation as good old American business sense. They see the role of companies as understanding the needs of customers and meeting those needs in a distinctive way by innovating on the customer’s behalf. Successful companies realize that consumers know that they get what they pay for. They also realize that their customers are smart enough to realize that there are no free lunches. That is why virtually all of the winning companies compete based on value, not price. That is why they often command premium prices, even in price-sensitive markets.

Innovation requires champions, unconventional thinking, and willingness to risk failure. The keys to success include:

Turn Employees into Entrepreneurs: No one is more likely to think like an owner than an owner is. Instead of imposing systems on their employees, the winners let them earn an actual piece of the action. Managers and other employees of successful corporations own about 30 percent of their company. This is about six times the employee ownership among the country’s largest corporations. Tangible ownership is important, but it is more than that. Top performers fully involve the entire workforce in the business. Everyone has and understands their role, their responsibilities and their expected contribution.

Eliminate Traditional Management Overhead Functions: Successful companies have the most creative and practical business strategies, but do not have a corporate planning function. Instead, the line organization, including the entire workforce, develops their business strategies. The winning performers are convinced that planning, personnel, communications, and similar staff tasks are too important to delegate to isolated staff specialists. These companies frequently regard such functions as an explicit responsibility of every line manager, supervisor and employee. The winners let general managers be general managers.

Eliminate Bureaucratic Behavior: Only senior management can control corporate bureaucracy. Successful companies have strong leaders who clearly will not tolerate bureaucracy or bureaucratic behavior. Corporate politicians do not survive long in this environment and these companies are much more effective as a result. Bureaucratic behavior is one of, if not the primary, limiting factors in today’s business world. Top performers have virtually eliminated it, because as the level of bureaucracy increases, the level of performance decreases.

The Bottom Line is More than Profit: Everybody except for the truly successful company knows that making a lot of money is the sole measure of success.  When asked about corporate credos and philosophies, most business leaders will parrot literate, concise statements of their corporate values. In each case, these credos set forth vividly the company’s guiding principles. They define the ways value is created for customers, the rights and responsibilities of employees, and an overall affirmation of “what we stand for.” A statement of beliefs alone will not make a successful enterprise. Credos are an articulation of culture, not a substitute for it. Top performers strive to create true value for their customers, to do the right things the right way and thereby assure long-term success. Even when it means lower short-term profits, top performers focus on value, not the bottom line.

When we have conversations like this with executives, they sometimes have difficulty grasping the real meaning and a compelling reason for change. With continued discussion, most will eventually grasp the logic of involving employees and eliminating bureaucracy and unnecessary infrastructure. But they seem to have a difficult time grasping the why. Conditioned by years in corporate America, they keep trying to quantify the reason in terms of increased profit, lower costs and other bottom-line values. While all of these benefits are resultants of these attributes, the real reason one should adopt them is quite simple—it’s just good business.

“Doing Things the Right Way is Just Good Business."

Thank you for taking the time to read this month’s letter. Hopefully, it has raised a few thoughts that will help you take the next step in your journey to excellence. I welcome your feedback and am happy to respond to specific questions. You can reach me at [email protected].

Best regards,
R. Keith Mobley
Principal, Life Cycle Engineering, Inc.

Keith Mobley has earned an international reputation as one of the premier consultants in the fields of plant performance optimization, reliability engineering, predictive maintenance, and effective management. He has more than 35 years of direct experience in corporate management, process design and troubleshooting. For the past 16 years, he has helped hundreds of clients worldwide achieve and sustain world-class performance. Keith can be reached at [email protected].

© Life Cycle Engineering, Inc.

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