Chapter 9
Keeping the Focus on Growth

How to measure growth

Why growth stops

Success sets up failure

What is organization?

Samsung's CEO school

What really counts?


What about culture?

Never change just one thing


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Chapter 9

Keeping the Focus on Growth

Excerpt from Go For Growth

By Robert M. Tomasko


A few years ago bread lines were common in a well-off Washington D.C. neighborhood. But they had nothing to do with the recession or cutbacks in federal jobs. Politicians, bureaucrats, lawyers and the occasional media celebrity lined up daily outside a small store on Connecticut Avenue, a few miles north of the White House. On Sundays the crowds would reach 250-300, and Art Buchwald was known to stop by and entertain the patient shoppers.

The store was called Marvelous Market, and the wait was for an opportunity to purchase one of its speciality breads. Its baguettes, boules and sourdough loaves were the talk of the city. Made from a special, time consuming process involving fermented dough paste starter and imported ovens, the store's products were praised by every Washington food critic. The town's then-top chief, Jean-Louis Palladin, allowed only Marvelous Market breads to be served in his elite Watergate restaurant. Demand was so strong that customers were rationed, Soviet Moscow-style, to no more than two loaves a visit.

The bakery was the dream-come-true of its owner, Mark Furstenberg, but its rapid growth was to become his worst nightmare.

Meeting high demand with high capacity
Furstenberg coped with high demand the way most business people do, he added capacity. Additional retail stores were opened throughout the city and suburbs, one even in Baltimore, fifty miles away. One hundred new employees were hired, and an 11,000 square foot building was leased in a nearby industrial park and converted to a bakery. A fleet of colorfully painted trucks were acquired to shuttle the bread from ovens to stores and downtown restaurants. More people were added to drive the trucks.

In 1993 Game Player Starbucks began to saturate the Washington area with coffee shops and, naturally, wanted Marvelous Market to supply all their breads and pastries. A million dollar plus deal was signed that, in retrospect, was probably the straw that broke the camel's back. Furstenberg was initially skeptical, but the Starbucks business proved necessary to provide the level of sales needed to keep the central production facility running economically. Growth tends to breed the need for more growth. Soon Furstenberg started feeling as though he was running a trucking company, not a bakery, and began worrying about the vast quantities of cash all this growth was consuming.

In addition to managing a mini-logistical empire, Furstenberg - a stickler for total quality - spent every available hour in the centralized bakery, brooding over the vagaries of his customized baking processes. The result of these preoccupations, no time to visit stores or keep in direct contact with customers (the original store featured ovens just behind the sales counter). Furstenberg once wrote a chatty, recipe-filled newsletter welcomed by his customers almost as much as his bread. But the demands of growth left no time for it, either.

A "marvelous bankruptcy"
Finally, with links to loyal customers strained, quality slipping and a severe icy winter keeping customers away, cash ran out. Less than four years after opening, Marvelous Market filed for bankruptcy protection. Furstenberg immediately scaled-back operations. The central bakery was abandoned, all but a handful of stores closed, and both trucks and employees downsized. Deliveries are now made in trucks leased from Ryder.

Furstenberg has no illusions about his situation. In a mea culpa newsletter to customers, he confessed to being drawn-in to premature expansion. What was not realized, he admitted, was how much that growth would change the character of the company. "Business failure," he wrote, "is a powerful teacher. Nothing succeeds like failure." Now Furstenberg's efforts are directed "to the principles on which we started this business." He calls it "a great step backward." I call it real growth.

Four growth paths in five years!
In only a few years Marvelous Market changed from:

· Rule Breaker (no bread anything like their bread existed east of California), to

· Expansion-driven Game Player, to

· Improvising survivor.

And, most recently, the business is showing signs of settling down as a Specialist, focusing on selling a limited range of breads and (higher margin) prepared foods to eat with them. Had it started on this path to growth originally it most likely would have met escalating demand with higher prices and only gradually expanded its scope, probably including bread baking ovens in each new store, paid for out of the increased margins.

Marvelous Market's experience is a near classic example of growth getting out of hand, which is probably why so many other businesses have had similar rapid expansions followed by even more abrupt declines. An almost identical story could be told of People Express airline, with a less hopeful ending. It was merged out of existence into Improviser Continental Airlines, never making it to the Specialist stage.

No path goes on forever
Neither Marvelous Market, nor Microsoft, has reason to expect its growth path to continue indefinitely. The marketplace equivalents of potholes, fallen power lines and detours are unpredictable, but inevitable. Travelers on a path need rest stops, roads require routine maintenance and periodic repaving.

Similar dynamics characterize business growth strategies. Some end because they are successful: companies following them reach their growth objective, and need to find another. In other situations the path is less fruitful because of an unexpected shift in market dynamics, or the business lacks the requisite skills to successfully continue in that direction.

How do you measure growth?
Understanding what is behind these failures can provide good clues about what is needed to sustain growth. Success at growing a business has multiple definitions, depending on which path is being followed:

· For Rule Breakers, growth is measured in revenue increases from new products. These businesses take an "us against them" approach to their markets, with success frequently defined as how big a mark they leave, how much new demand they create.

· Game Players are more straightforward: growth implies market share gains, relative success against like competitors. Game Players grow in turbulent, high growth markets. Absolute targets mean less than ones that reflect relative standing.

· Rule Makers - the undisputed industry leaders - focus on a range of objectives, especially profit growth and expansion of their dominion. But often their most important goals are defensive: success at fending off rivals who want to destabilize or dominate the market.

· Some Specialists are like mini-Rule Makers in their particular domain, and have similar performance measures. Many more are concerned about the extent they have penetrated their particular niche. Most Specialists judge themselves through a rear view mirror: doing better than they did last year is what counts most.

· Most Improvisers are just glad to be able to wake up each morning and find themselves still alive. Positive cash flow bears heavily on the minds of some, while all should be equally concerned about their performance in learning and generating new insights about rapidly changing customer needs.

No single measure of growth is appropriate for all businesses. Growth in size can be counterproductive for Improvisers, some of the most successful are ones that have cut revenues. Large sales increases can give false comfort to a Game Player if its peers are enjoying even larger revenue growth. Obsessive attention to profitability can easily stunt a Rule Breaker's growth. Considering this need for variable measures of success, what can be safely said to apply across all growth paths about why some companies fail to thrive?

Why does growth stop?
Growth slows when either of these happen:

· A company's outside world changes in ways that what the business is especially good at no longer provides significant advantage.

· A company's inner world, its organization, looses its sharp external focus.

Both reasons go back to the relation between a business and its environment, its customers, suppliers, technologies and competitors. Thinking about a company without simultaneously examining its surroundings is pointless.

Growth stumbles when companies become over adapted, either to yesterday's market realities or to the internal struggles that take place within every organization. In the words of Canadian business professor Danny Miller:

"Organizations lapse into decline precisely because they have developed too sharp an edge. They amplify and extend a single strength or function while neglecting most others. Ultimately a rich and complex organization becomes excessively simple - it turns into a monolithic, narrowly focused version of its former self, converting a formula for success into a path toward failure.

"Firms whose performances are poor or whose intervals of
success are interrupted by occasional shocks of
disappointment are more apt to preserve a healthy balance of
doubt, debate, and diversity."

Success sets up failure
Success, as Mark Furstenberg observed, leads to failure. Professor Miller came to the same conclusion, something he calls the "Icarus Paradox" in his studies of the track records of several hundred companies. His research finds success sets up failure by fostering:

· overconfidence,

· intolerance,

· a "culture of busyness" not open to distraction and new inputs,

· ego-centric managers, only able to see the world through their own perspective, and

· programmed behaviors, the ability to shock a competitor with surprise is lost.

Eventually companies with these "early warning signs" become rigid and myopic. They gravitate to market segments where they are most comfortable, not necessarily the segments riches in growth opportunities.

Both Furstenberg and Miller have the right diagnosis. The important issue, though, is what to do about it.

Anticipating, and then avoiding, growth stoppage requires a degree of courage, and the foresight and strength to know when to stop plunging ahead with the success formula of the past. Instead the particular bottlenecks or limiting factors to growth must be identified early, company-by-company, situation-by-situation. These are the points of greatest leverage in the business.

Growth is a juggling act
Companies with the special skill of sustaining growth first expand in place, then they change course.

The purpose of the descriptions in the past five chapters was to lay out alternative paths to growth, ways to expand in place. Each has pros and cons, each requires certain kinds of people and organization, and each is best in differing types of markets. After a path is chosen, the issue becomes how to run with it. For this, the business organization has to be internally aligned with the growth strategy.

Some markets situations do not fit neatly into one of the five paths, and some individuals are able to contribute to more than one growth strategy. For these companies a blending of paths provides the best match to reality.

Eventually, with either a "pure" or "hybrid" strategy, - for the reasons outlined earlier - growth slows. This is a signal that either the elements of the "blend" need adjustment, or the time to change course completely is at hand. Skill at managing on a hybrid path can be very useful when the time comes for a complete change of direction. This is how seeds for renewed growth are planted.

Growth failures frequently occur when rather than moving toward other paths, a company meets adversity with a renewed commitment to do more of the same. Short term growth can also cover up serious underlying weaknesses. Many companies have multiplied their size and earnings through aggressive acquisitions, while at the same time allowing these new streams of profits mask management's inability to continue growing the core business. These situations ultimately unravel, but often not until serious damage has already been done to the company's capacity for continued growth.

Sustaining growth over the long haul, across decades for example, requires skill at changing course. The company's structure will most likely go through several transformations to keep pace with its markets. Growth during the medium term, a stretch of time ranging from three to seven years, can be accomplished for many companies through a combining of paths. In the short run, over the next year or two, assuming a good match has been made between path and situation, the primary growth issue is one of focus. Here is when it pays to ignore Danny Miller's advice and get simple.

All three of these times frames must be managed simultaneously if future growth is to be assured. This is a difficult juggling act. The ability to pull it off is what has made "built to last" companies like 3M, Hewlett Packard, Joihnson & Johnson, and Proctor & Gamble a breed apart from their competitors.

Keeping the eye on the ball
As important as legendary performance over decades is, the future will be unreachable if the business has no way to keep attention focused on the needs of the here and now. Change over the long run is something best seen in retrospect. Managing is something, even when directed toward future aims, that only happens in the present.

A company's growth path is largely shaped by market demands. Employees - the only real driver of growth a company has - are a product of genetic make-up, past experiences, current knowledge and skills, social environment, and ability to adapt as circumstances change. In the short run, neither path nor people are easily changeable.

What can more easily be manipulated is the link between the two, a company's organization.

What is organization?
The word "organization" is used with increasing frequency in discussions about competitiveness and growth, but its nature is still commonly misunderstood. Ask an executive about his organization and most likely he will show you some sort of chart with boxes representing people, and lines connecting them indicating who is accountable to whom. If you probe for more detail, he may hand you a fistful of job descriptions.

Talk to a more perceptive manager and she might try to describe the rich array of informal relationships within every company: who talks to whom, who likes whom, who trusts whom. These are the all-important "glue" that really holds a business together, and often determines what can or can not happen.

Or meet with a leading edge academic, like University of Chicago's Ron Burt. He is likely to quickly engage you in a discussion of "social capital." This is his unique way of measuring the ability employees have, through the networks they belong to, to get real leverage from the "human capital" they represent.

More cynical business observers see organization as what gets in the way of people otherwise trying hard to do their jobs. Organization, they feel, is an overhead cost, something to be minimized. It reflects history more than promise, and showcases past strategies instead of today's basis of competition. Organization, according to some wags, is what blinds a company's to its future opportunities. Few structures seem to be effective power bases for the capabilities critical to future growth.

Organization is a vehicle for business growth
Each of these perspectives adds to our understanding, and each is also incomplete. Growth-oriented managers shy away such conceptual formulations and theoretical debates. They prefer simple, action-oriented ideas. They like to talk about what they can directly manipulate. For them, if a growth strategy is a path, then organization is what they will use to travel along it.

Organization is the vehicle for a businesses' growth ambitions.

That's all.

It is a vehicle that travels somewhere, not a machine that runs. When it works, it focuses everyone's efforts toward growth. Organization is what links employees with the company's growth path.

An organization works the same way a vehicle does. It perform three critical functions:

· sets a direction,

· has a means of propulsion, and

· provides a sense of stability.

There are many kinds of vehicles, just as there are many types of companies. But they all have these three attributes. Reduced to its simplest from, a sail boat has a sail for propulsion, a rudder for steering and a hull and keel for stability. Planes and autos have their counterparts to these: steering wheels, engines, fuselages and the like. What about businesses....

1. Organization provides direction
Corporations set direction through their top management group and the planning process these executives put in place to involve the rest of the company in the process. Setting a course is more that a one-time event. Just pointing a vehicle in the direction intended is no guarantee it will reach there. Control and information systems must be in place to monitor forward movement, and provide timely information about deviations from the plan so adjustments can be made to either the company's actions or plan. These three components of business organization need to operate in a tightly coordinated fashion for the business to effectively proceed on any of the five growth paths.

One leader is not enough
The idea of a "group" setting direction is vital. No single chief executive, regardless of talent or past performance, is able to set a sustainable growth course unaided. Never. Just as a company is prisoner of its past successes, any individual's ability to see into the future comes along with that person's unique set of biases and blinders. It is just part of the territory of the human psyche. These limitations can never be entirely eliminated, but they can be balanced and supplemented by others on the team. Strong growth company executives surround themselves with a broad range of personalities and perspectives. Court jesters, devil's advocates and iconoclasts abound.

The best defense against myopia is diversity. Systems theorists have developed what they call "the law of requisite variety " to explain why this is so important. This principle implies that, if a company is to grow in anything but a monolithic marketplace, there must be at least as great a variety of perspectives inside the organization as there are a variety of complications in the market.

A few doors down from Mark Furstenberg's Marvelous Market on Connecticut Avenue is another Washington institution, the Politics and Prose Bookstore. This store, founded by his sister, celebrated its tenth anniversary the year the bakery declared bankruptcy. Politics and Prose has had a less meteoric path to growth, but it is nonetheless a business that has thrived with a history of near-steady progress. And it has done so in the face of strong challenges to the ongoing existence of other independent bookstores, the rise of the Game Playing superstore chains likes K-Mart's Borders Books and Barnes & Noble.

Cultivate diversity of opinion
Facing these challenges Politics and Prose, a store already well stocked with comfortable arm chairs and staff who actually read what they sell, refined its approach to Specialization. Book groups, interactive CD-ROMs and arguably the cities' best coffeehouse were added. And when Marvelous Market was pruning back its bread selection to regain a high quality focus, Politics and Prose expanded by taking over the retail space next door.

The bookstores' growth direction is set by a team of two, founder Carla Cohen (nee Furstenberg) and store manager Barbara Meade. Together they model the blending of perspectives that is just as essential in a growth-minded Fortune 500 company as in their 30 person business. They are both very different, and they know how to use these differences to the store's best advantage. Barbara is a morning person, coming in before the store opens to review the previous day's sales and process book reorders. Carla comes in later, and stays in the evening to host the store's frequent author talks and readings.

This team does not quarrel, but they frequently disagree. Business issues are seldom left unaddressed, according to Barbara. Their personalities complement each other in ways that contribute to each other's growth as well as the businesses. Barbara likes being an expert, and is an experienced avoider. Carla is more direct, and a skilled confronter. In spite of contrasting styles their staff seem to continually call each by each other's name. They have no visible physical resemblance, so this is most likely a symptom of the cohesion their skill at diversity management has brought to the store. (Both Coca-Cola and Disney's greatest growth periods also occurred when these companies were led by similarly complementing duets)

As in businesses of any size, the personal values of top management play a big part in direction setting. When the large chain booksellers refused to carry Salman Rushdie, Politics and Prose's owners put a big poster of Satanic Verses in the front window, reminding customers what an independent book store is really all about.

Laying the groundwork for growth
Preparing a top team for their direction-setting task is also essential. Large businesses encourage individual senior executives to independently commission partially overlapping consultant studies of future prospects. Then the team takes it upon itself to pool the outside insights with their own.

Korea's $54 billion growth giant Samsung is led by a chief executive with a strong sense of personal direction and a keen ability help his top managers develop their own. Lee Kun-Hee knows how to encourage individuality in a culture rife with Asian consensus and conformity. When he became aware of how many American retailers were not taking Samsung's products seriously - something only vaguely appreciated by his inward-looking management team - he flew the entire group to Los Angeles so they could see for themselves how poorly the products were positioned. Then the group returned to Seoul to debate a problem they all now knew first hand, rather than meeting to devise a strategy to respond to their "bosses' problem."

Samsung's CEO School
Lee is good at aiding others share his perspective by setting them up to learn for themselves. Recently he launched what is dubbed "CEO School" for Samsung's 850 top managers. Abandoning the two-day, come-if-you-have-time, golf resort, motivational speech pump-up approach to executive education favored by his Western competitors, CEO School lasts for six months. Half this period is spent in classes in Korea, the rest abroad. Ground rules for the time overseas include no air travel. His executives must use car, bus or train transportation so they better see the human side of the countries they visit. One executive criss-crossed the U.S. learning about leadership by studying the American revolution. Others have backpacked through Egypt and Jordan, and explored rain forests in Malaysia.

Why is Lee going to so much trouble to "organize" the experiences of his management team? He wants Samsung to grow, and he knows - traditional Oriental logic aside - that growth has little to do with chance or luck. "Any attempt to strength one's competitiveness," he says, "by making temporary adjustments without having the fundamental in place is similar to building castles in the sand."

Avoiding self-management
Effective top management teams cannot be self managing. Their ability to cast far and wide for creative approaches to growth, and their ability to confront current problems is highly dependent on the strength of the leadership provided by the chief executive. No strong leadership, no good growth plan. Sound plans are the result of intensive fact-based debate about alternative course of action. The confrontation this requires, the willingness to bring forth information that may not flatter the status quo, the generation of "out-of-the-box" thinking about future possibilities all tend to generate heated conflict. Containing and channeling this conflict is one of the most important things a chief executive can do to promote growth. The absence of this kind of leadership ability results in teams that either join in passive lock step behind the chief executive's solo vision, or behave like warring feudal kingdoms.
Too important for techies and bean-counters
Information systems are far to important to any business to be the responsibility of the computer technology department. Likewise, control systems that only serve the needs of the accountants and their auditors are unlikely to promote business growth. Both mechanisms for feedback and midcourse correction must be guided by the group responsible for setting the corporate direction.

2. Organization provides propulsion
Once a direction for it growth is set, energy must to be marshaled to move the business forward. This is the second critical role of every organization. Companies have a variety of ways to motivate action. They can:

· Appeal to employees sense of identity and idealism by using a widely shared common vision of where the business is and is going.

· Select appropriate growth-oriented performance measures and couple them tightly to the incentive and reward programs that are in place. Managers who enjoy making things happen through carrots and sticks tend to like this approach.

· Ensure the "rules of the game," both written and unwritten, are in accord with the business' growth plan. This approach works for both managers that are comfortable with the more Machiavellian side of organizations, as well as those who believe that most employees want to do what is expected of them but often find expectations unclear or conflicting.

The vision thing
Getting what President George Bush called "the vision thing" right was a challenge for him, many other presidents, and most corporations. Consider the struggles of Prudential Insurance Co. In 1988 the Prudential's vision statement was revised to state its first priority the Rule Maker-like intention of remaining the number one life insurance company in the nation. The next year rival Metropolitan Life pushed Prudential out of first place with the industry's greatest amount of insurance in force.

In 1991 Prudential stressed to employees and customers alike that it was the strongest insurance company in the U.S. The Moody's rating service disagreed, taking Prudential's top rating away because of too many investments in junk bonds and real estate.

The next year the company promulgated an update of company values. Topping the list was the importance of the Pru being "worthy of trust." Within months the securities arm of the company found itself embroiled in its worst-ever scandal involving sales of oil, gas and real estate limited partnerships. And to add insult to injury, the company's symbolic logo, featuring the "rock," was revealed to be a sketch of an outcropping in the Jersey Meadowlands, not the Mediterranean's famous Rock of Gibraltar.

Vision statements should be aspirational, but they also need to be strongly grounded in current reality. Consider the zig-zags Xerox took to become more realistic about its corporate identity.

From "designing the information age" to "processing documents"
During its golden age, the 1960's, Xerox was the Rule Maker of the copying industry and every investor was searching for "the next Xerox." The business was moving so fast that growth seemed to be in the air breathed by every employee and the business purpose was strong and implicit. Then disaster struck. Japanese competition stole the low end of the copier market, Kodak briefly rediscovered its Rule Breaking roots and introduced the first plain-paper copier, and Xerox product quality plummeted. Market share in 1970 was 95% of copier units produced; by 1982 it had fallen to 13%.

Xerox initial response, a new mission statement. The company would become, CEO Peter McCullough declared, a business built around a vision of "the architecture of information," a company dedicated to providing products for the vaguely-defined "office of the future." Catchy phrases, but only loosely linked to Xerox's market reality. McCullough launched a Rule Breaker-like attempt to invent new technologies in a Silicon Valley-based R&D center. To fund the effort, several cash-rich insurance businesses, with minimal relationship to Xerox's core operations, were purchased.

Soon bad turned to worse. The ideas Xerox's collection of brilliant researchers developed found easier expression in other company's products, especially Apple Computer's Macintosh. The financial service companies ate more cash than they threw-off.

Several reorganizations and two chief executives later, Xerox narrowed its focus to a more achievable mission: "to be the preeminent document company," signaling that a heavy dose of reality had returned.

Stirring people to action
Missions are only worth having when they are able to stir people to action, the equivalent of the cry of nineteenth century French revolutionaries, "Aux Barricades!" Spirited feelings of a shared mission spurred Komatsu's growth plan to dethrone the one-time Rule Maker of the tractor and construction equipment industry, Caterpillar. When Martin Luther King led a civil right revolution, he understood well the ability of language to mobilize activity. He never announced: "I have a strategic plan." Instead he said: "I have a vision."

When a business is able to couple employees' personal values with those of the company, an incredibly strong motivator is created (and a very cost effective one, also, considering all the money wasted on expensive executive compensation programs that provide generous rewards for middling, dispirited performance). Employees are much more willing to give up some of their autonomy, and make some personal sacrifices, when they feel bound through a leader in a shared enterprise. The less this is felt, the more concerns about individual welfare and personal entitlements become paramount.

Put missions in writing only when it's time to change them
It is possible, even preferable, for employees to feel a widely shared sense of common purpose, without any mission statement ever having been drafted. This often occurs during a Rule Breaker's start-up period - everyone there knows what the company is trying to achieve, why waste scarce time writing it down? As businesses mature, writing it down has more utility, as long as the purpose of the codification is to allow the mission's relevance to be questioned.

Never carve a mission statement in stone. Companies that have made especially effective use of these tools, Hewlett Packard and Johnson & Johnson for example, have reviewed and revised them many times. The J.& J. "credo" is subject ot periodic "challenges" by thousands of J.& J. managers. The statement of the "HP Way" originally penned by the company's founders has been revised at least four times. The purpose of these confrontations and changes is not so much to craft an "optimum" statement (words seldom get a business anywhere), but to generate energy and excitement about the course revision the company is about to take.

Making visions work
Visions can be tricky tools to use well. Most corporate mission statements are, at best, verbal platitudes. Many companies would be better off with no formal statement than one whose primary impact is to encourage growth-defeataing hypocrisy. "If you don't have something to say, don't say it" is probably the best operating principle here. Be patient, wait until the right time comes.

The best time to draft a corporate mission is immediately after a major business victory. Significant growth-inducing events - the launch of a new product, the upset of a longtime rival, the receipt of a sought-after quality certification from a big customer - can anchor the aspirational tone of the vision to a concrete reality experienced throughout the company. Write the mission when the taste of victory is still fresh. The mission-setting process can then foster learning aimed at discovering:

· what was done right and how can the company keep doing this,

· what went wrong, and what can be learned from that.

Missions don't set direction, people do
Mission statements are not tools for setting direction. If a business needs to keep returning to its statement of purpose to resolve questions about future strategy it may find itself in the same trouble Walt Disney Company's managers got themselves into by, after Disney's death, constant asking "What would Walt do now?" instead of getting in practice thinking for themselves.

Visions come alive the easiest when they reflect an emerging or existing consensus throughout the company. Mission statements can be most effective for communicating and reinforcing a direction already chosen. Even more effective, in many circumstances, can be a company's compensation system.

Compensation is too important to be left to experts
Like mission statements, pay is frequently mismanaged. Harry Pearce, a General Motors executive vice president, once observed that GM's managers were always grateful when they received large bonuses, but they seldom knew what they did to earn them. Pearce called it a system set up to distribute gratuities to those in most favor, not necessarily to reward those most contributing to growth. At GM, and many other major companies, compensation has been for too long the concern of professional experts, rather than a tool used by managers to propel growth. Discussions about pay have long centered on questions such as:

· How much is appropriate - an issue on which many hours and dollars are spent in exhaustive surveys (the net result of which is to drive industry pay levels higher - few companies want to pay at or below "average."

· How fairly it is it being doled out - an important concern that if not addressed will lead to internal dissension and distraction from the real purpose of the business. Establishing pay equity, a threshold requirement for every company, however will not by itself drive growth.

· What forms of pay are best - an issue that can never finally be resolved, but leads to countless study as innovative forms of compensation keyed to the latest tax law changes or newest management fads.

Unfortunately, from a growth perspective, all the heated debate that has gone into issues like these has distracted attention from a more strategic concern - what is the tangible impact of compensation on the people the business depends on for grow? Managers have for too long become the prisoners of their compensation experts.

Look at the impact of incentives, not the techniques
Incentive and reward systems need to be "read," not from the perspective of technical or legal requirements, or concerns of administrative ease, but to answer the questions:

· What are they actually encouraging people to pay attention to?

· What are they actually encouraging people to do?

Keep the technical experts far away until managers are comfortable with their understanding of these issues, and can also clearly articulate:

· What will the business need attention directed toward if it is to grow?

· What actions will growth require on the part of employees and managers that are not currently happening?

The gap between answers to these sets of issues should, then, set the agenda for the most productive use of compensation professionals.

What really counts?
Despite all the clutter from feuding top management groups, technician-driven systems and off-the-mark vision statements, most employees eventually find some way to sort things out and get on with their day-to-day jobs.

After a few months in a new job most alert, career-minded people have some fairly good idea of what it takes to survive, get things accomplished, and gain - should they want it - influence or advancement within their new employer. This understanding may be based on what is read in the company's official policy statements or what is heard in orientation and management development programs. But it is more likely gleaned informally from personal experiences and interactions with new colleagues and friends.

These "are the secrets that everybody knows." Decoding them is the first step to any successful change effort. This involves talking with the people most essential to the businesses growth plan, and understanding:

· What is most important to each,

· How do they feel they need to behave to get what they want.

Propel growth by changing the unwritten rules
Uncovering the conflicts and mismatches between the dictates of a company's growth path and the "real" unwritten rules that guide employees is an aspect of organization that is usually neglected, or only considered after problems arise. The "rules of the game" lie just under the surface of most businesses. Pull them out, weed out the conflicts, and make use of an under leveraged tool to remove barriers to growth.

Samsung changed the official rules to deal with an unwritten rule that limited its employees ability to be productive and grow. As in Japan, typical office work hours in Korea are from nine in the morning to eight at night, followed by the unofficial practice of rounds of late-night drinking with work colleagues. Now employees start work at 7 a.m. and must finish by 4 p.m. Morning productivity has soared, and employees looking for early-evening activities are "informally" expected to spend their freeded-up time in foreign language or self-improvement courses.

3. Organization provides stability
The third attribute of all organizations, stability, is the one that usually first comes to most people's minds. This is the realm of organization charts, head counts and committees. This is what is to be given DIRECTION, what needs to be PROPELLED.

Businesses derive their stability from the ways jobs, teams and departments are structured. This is usually a process of dividing the labor.

Pulling the business together
These divisions, usually necessary to allow for a measure of specialization and focus, then need to be pulled back together through a repitoire of coordinating mechanisms. Some of these linking pins are easily apparent:

· Cross-functional teams and special coordinating groups

· Permanent brand or project manager jobs

· Temporary trouble shooter or "czar" positions

· The management structure itself

Other forms are "organizational glue" are less obvious, but just as effective:

· Training and other forms of managed socialization - especially effective when customized and done internally, with "role model" managers as the faculty.

· Shared incentives and bonus pools between employees, members of functional departments that need to collaborate, or among team members.

· Information networks (interconnected personal computers are one approach, traditional bulletin boards and large charts indicating progress toward goals can also serve this purpose well)

· Planned rotation of key employees to spread new techniques and perspectives.

None of these structures and techniques will, by themselves, promote growth. For that to happen, programs must be in place to invest in people.

Invest in growth by investing in people
Samsung, the 120,000 employee Korean conglomerate that put almost a thousand executives through a grueling six-month CEO School, does not limit its investment in leadership to those currently in positions of authority. Every year the company selects from among its employees with at least three years of service 400 to be sent overseas for a year, all expenses paid The assignment: do whatever they want, but be sure to return armed with an intimate knowledge of the culture and language of wherever they went. After returning, they spend several years in assignments in Korea, readjusting to Samsung, and then are sent back to the country they visited, this time to sell their company's products. This effort will involve at least two thousand employees and is expected to cost over $100 million.

Many companies talk about preparing employees for globalization, and the challenges of find future growth in off-shore markets. Samsung is one that is doing something about it. This company knows what many other growth-minded businesses keenly appreciate: the more people there are in a company who can imagine what it can become, the more likely it is to get there.

Eskimos seldom buy refrigerators
It is not enough just to train people and send them overseas. They have to be listened to back home, also. Kids 'R' Us, the clothing offshoot of retail powerhouse Toys 'R' Us, was prepared for rapid growth when it opened its first three stores in Puerto Rico. It expected sales to be propelled by back-to-school clothes purchases, and its New Jersey-based centrally run marketing operation shipped thousands of these garments to the Puerto Rican stores. To headquarters great surprise, almost none sold. Had Kids 'R' Us involved its local store managers in the stocking decisions they quickly would have found that all Puerto Rican children wear uniforms to school! By the time this information reached the home office, the damage was done, the Puerto Rican growth plans were shelved, and the existing stores had to be closed.

Most of the best business growers recognize the vital importance of people in the growth mix. Some, like Federal Express and Southwest Airlines, go so far as to make sure management recognizes that most of its time, after setting a direction, is to be spent supporting the development of human resources. This is another job that in growth-companies is too important to be left to the experts. Herbert Kelleher, Southwest's CEO, says his philosophy is that "our employees are the customers of our management, and that we are here to serve them," not the, too common, other way around. Managers need to behave more like coaches if the quarterbacks are to do their quarter backing.

What about culture?
An organization is defined by how it handles the basic tasks of direction-setting, motivation and providing needed stability. The idea of "corporate culture" is missing from this definition. Why? Culture is something that managers can not put their hands around. It is not something that can be directly managed.

Recall business meeting of a decade or two ago. Most likely, more than half of those attending were smokers. By the meeting's midpoint, a cloud of smoke filled the conference room. The cloud was real. It was visible, it could be smelled (and inhaled). But it was not something anyone could directly manipulate, or "get their hands around." Its nature was do elusive for direct management. But it could be changed. Windows and doors could be opened, an exhaust fan turned on. But these, like many contemporary change management programs, were only temporary in effect. Turn off the fan and the cloud quickly returns.

The only way to change, in a lasting way, the nature of the smoke cloud is to change the nature of what is being smoked. Substitute, say, pipes for cigarettes and cigars. Ban Gaulois and issue sweeter smelling Kentucky tobacco. Or, prohibit smoking all together.

The same is true with corporate culture. Its nature is like a cloud that surrounds a business. It is real. It does effect behavior. Corporate culture is a good indicator of the inner working of the business. But it seldom succombs to a frontal assult. Changing culture, in a lasting way, requires changing the nature of what produces it - the structures and managemnet practices that direct, motivate and stabilize the business.

Get your ducks in order
Direction, Propulsion and Stability: vehicles require all three. Forward motion, though, also requires these functions to work in reasonably close harmony with each other.. Otherwise ships go around in circles, planes take nose dives, and corporate structures become very inefficient.

A ompany is positioned for growth when its people are. A growth-oriented organization is one in which its three functions are working in tandem to focus employee's attention on and direct actions toward the requirements of the path it has chosen.

Half a century ago, during the company's first golden age, the founder of Chrysler commented on the nature of the company he created. He thought first of the people that worked with him, not his cars: "When all these minds, through organization, are made to function as a single intelligence, each member of which is a special gifted part, why then you can expect to produce magic." That is a loft aspiration for any organization - all its minds functioning as a single intelligence - but it is a target worthy of a business searching for growth.

Identify the disconnects
Reality is usually a lot more diffuse. Try this: identify a representative sample of your company's employees. Include people at all levels of the hierarchy, newcomers and old-timers, and employees based in each function and division. Ask them: "Where are we trying to get to?" and you are likely to hear a customized version of the old story of what happens when a group of blind men each try to describe the nature of an elephant. Many employees, outside top management, will provide only vague generalizations of what they understand the corporate strategy to be. Most can speak only about the immediate objectives of the work group in which they are a part. Few will be able to clearly relate their job and their department's goals to the overall growth direction of the corporation. There is more to this problem than what C.K. Pralahad and Gary Hamel enjoy pointing out: most companies are over managed and under led. This is true, but improving the growth prospects requires more than stronger leadership at the top.

It is very common to find a tightly focused executive team is trying to move a business in one direction, but the performance measures and incentives motivating employee behavior along a different path. Or, the company's staff share a common vision of growth through global expansion, but its structure dictates functional autonomy and few of the employees have had experience working anywhere outside the U.S. Common visions only come to life when a structure is present to support them. Otherwise they are mere day dreams. Structures alone are confining prisons of daily drudgery when they lack a source of direction and energy to bring them to life.

A phone company with all the wrong numbers
Companies divided against themselves are so common this is often taken for granted as the nature of organizations. Middle managers of one large regional telephone company once complained: "We spend so much time fighting each other that no one has any energy left over to grow the business." What should top management do about this intermural civil war - send all the managers to "culture/teamwork school," as one of its sister companies spent hundreds of thousands of dollars trying? Instead, an astute senior officer used a few staff people to do a quick-and-dirty diagnosis to find the root cause behind many of these conflicts.

Following a good hunch, she had the assistants collect copies of all the management-by-objectives targets each member of the senior executive team was expected to be working toward. When she examined them it was quickly obvious this group was a "team" in name only. The executives as a whole had 58 MBOs. Of this only 6 objectives were shared among the top managers. The remaining 90% were keyed to specific departmental or divisional goals. And, to make a bad situation worse, when the vice president talked to the other officers about the six common targets, she discovered the interpretation of these goals varied widely. When the focus of the group at the top of the hierarchy is this diffuse, it is unlikely those in the middle and bottom will be able to find much in the way of common ground.

You can never change just one thing
Many well meaning, expert-driven change and improvement programs fail because they are intended to optimize one aspect of a business operation - create the best planning process or the most proven approach to performance appraisal, for example. It is never possible to change just one part of an organization. The three functions (Direction, Propulsion and Stability) are completely intertwined in the minds and behaviors of most employees. Making changes in a disjoined manner only sends mixed signals that dilute focus. Improvement efforts, even if centered on a particular aspect of the organization - say devising an effective approach to management development and succession - cannot be carried out without reference to how they will impact every other aspect of organization.

Imagine a house renovation. The master plan may call for a wall to be removed, but before the demolition crew arrives blueprints must be carefully studied, lest the wall be load bearing or contain wiring to be rerouted or plumbing than cannot. Good architects and builders do this instinctively, but many organization change programs are guided more by a narrow engineering mentality. Architects are big picture, master plan-oriented thinkers. Engineers focus on change on component at a time. Architects make the best use they can of the materials they have at hand. Engineers are more attuned to imposing the 'right answer" on the immediate problem. Often, in organization change, the best answer is the one that results in the "best fit" among Direction, Propulsion and Stability.

Building an organization to serve as a growth vehicle starts with an appreciation of the organic, system-like nature of how many effect the people working in it. Create a blueprint first, map out the nature of and the interaction among the businesses' "rudder," "sails," and "hull" as they are now. Then move forward on several change fronts simultaneously.

Marching in lockstep off a cliff
Internal consistency is important, but it is not sufficient. Slippages on growth paths occur for two reasons. Organizations can become unaligned, and most of the company's efforts are wasted dealing with internal conflict. Or, even worse, the forces of Direction, Propulsion and Stability are all aligned, but in the wrong direction. Inefficiency is a serious problem, but a company with all employees marching forward in lock step can be a disaster if they are headed toward the edge of a steep cliff. In 1984 A.T.& T. started down the path of Improvisation with the organization of a Rule Maker. Less than ten years later, Apple Computer approached markets appropriate for Specialists with an organization of Rule Breakers.



© Robert M. Tomasko 2002

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