Management Crisis and Business Revolution

John Harte

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351507394
• Topic: Business
• Subtopic: Business General
• Index: Business

Management Crisis and Business Revolution describes the enormous gap between business theories on the one hand, and the realities of the workplace and uncertainties of the marketplace on the other. In place of reasoned management and disciplined organization John Harte depicts daily disorder, vagueness, and confusion; instead of the logical processes of classroom case histories with rational solutions. He provides tales of an abundance of irrational judgments, personal foibles, and business follies. Once a top operational manager with multinational organizations, Harte applies his hands-on knowledge of the business world to a realistic examination of workplace conditions. He describes methodically how to handle human limitations in the average business enterprise, as well as how to develop management strengths.The author observed superior and inferior management firsthand, and therefore witnessed the painful demise of many companies'some of which, in his opinion, could have been saved. With thirty years' experience to draw on, he analyzes why so many businesses and products fail, while others succeed. He examines the amazing progress of Japan and other Pacific Asian countries; explains the decline of German, Canadian, British, and French management practices; and provides strategies for the marketplace.The business sectors described in this all-encompassing book include: high-technology, fast-moving packaged consumer goods like detergents; manufacturing and retailing consumer durables like furniture and appliances; soft goods; fashion products; service sector industries; manufacturing, wholesaling, and retail trade; and a whole range of new service industries. Harte stresses that while management and trade are timeless, dedication in the West has declined. The challenge is how to manage change by innovating, and replacing senile customs, systems, and institutions with more progressive ones suited to the new business environment. This unusually tough

I
Principles

“Our ‘Age of Anxiety’ is, in great part, the result of trying to do today’s job with yesterday’s tools—with yesterday’s concepts.”

—Marshall McLuhan

1
The Marketing Evolution

The public’s perception of a business executive has long been influenced by the fictions of Hollywood’s dream factory. The suave man in the grey flannel suit mixed easily with those glib hucksters talking customers into buying things they didn’t need, and cynical admen increasing their bank balances at the expense of naive clients. More recently, TV and movies regaled us with ruthless entrepreneurs propelled to the top by single-minded greed. Whenever such larger-than-life individuals do become prominent in the world of business or finance, the media is quick to spotlight them as stereotypical characters with whom we have already become familiar through show-biz. But that is very far from being a true picture of business managers in the real world.

Popular books on business management, of the self-improvement genre, have lent credibility to those distortions by describing success stories of what have become known as “excellent companies.” But how many really excel? Statistics show that 80 percent of North America’s workforce is now employed in small companies. We also know that between 97 percent and 99 percent of businesses are small (depending on whether we use statistics from the UK, Canada, or the U.S.). But the number of truly outstanding performers must remain a matter of conjecture, since “excellence” is a purely subjective designation unless we use clear definitions like annual growth, profits, or assets, or R&D in the pipeline, which can be measured. But we don’t have to be that exact when less that 3 percent of companies can be described as “big.” If we generously praised a quarter of those as being excellent, then over 99 percent of all business enterprises would differ vastly from the media’s and the public’s misconception of them.

That would most likely include erroneous perceptions of university and college graduates in business administration who continually study case histories about companies like Bell, General Motors, IBM, 3M, HP, Matsushita, Texas Instruments, P&G, Eastman Kodak, and other such market leaders. Big performers are news. The ordinary, smaller enterprise is unlikely to be spotlit by the media unless it performs so well that it becomes extraordinary. Such businesses have become known as GSMEs, or Growing Small and Medium-size Enterprises. The outstanding performers among them probably represent less than 3.33 percent of the total, and we rarely hear about them. But when we do, the chances of their demise within ten years is considered to be 50 percent.

Nor do we hear much about the absurdities or ineptitude of top managers in the average successful big companies, unless they have been previously praised and saluted as “excellent” ones for some time. Then, when poor judgement tarnishes their reputation and their shares drop in value or they declare huge financial losses, the media pounce on them. Such are the ups and downs of companies in the media spotlight that we might well wonder if any company can succeed just from upward momentum of an economy. But if that were the case, then, similarly, we should expect to see most of them failing during economic recessions. In essence, there are only well-managed companies and badly managed ones. Or if we wish to focus more closely on their marketing skills, we might place them in three categories, as follows: (1) those that are propelled by a top-down marketing philosophy—like Unilever companies, General Foods, Matsushita, or P&G; (2) those that possess marketing departments instead of top management and staff motivated by marketing principles and practices; and (3) those that do not practice or even understand what marketing is or what it can do to improve their balance sheet.

The first type appear to be always successful over the long haul. The second appear to have been successful in a limited way until intense competition began to humble or tumble them during the past two decades. And the third kind suffer from an extraordinarily high failure rate, year after year.

Size is not all that material as far as success is concerned, since success is relative—except in the case of new SMEs, whose failure rate is far higher than that of GSMEs or the major multinationals. The major reasons for their failure have been found to be inexperience in marketing and management skills, and those same risks that are inherent in the launch of new products. Most new products don’t even get off the ground. But some new SMEs are fuelled by capital that should never have been provided for them: they become airborne for a fleeting moment before crashing. In most cases of new SME failures, start-up capital derives from personal savings of a former corporate executive who has become unemployed through company downsizing and restructuring. His or her motivation is usually either desperation or delusion. The odds on failure seem to be about 90 percent.¹

Does management style play a significant role in success or failure? Clearly styles will differ according to the size or complexity of an organization, where requirements and skills differ. There are industry differences too. But perhaps the biggest differences in management style are found where cultures and values differ. As a general rule, in the West, corporate executives tend to be more disciplined because their organizations are more structured, while entrepreneurs tend to flexibility. But in Germany there is little difference between the style of entrepreneurs and corporate managers: both tend to be organization persons in accordance with rigid systems and structures on which they prefer to depend. In Latin countries, on the other hand, corporate executives seem more like entrepreneurs.

The dichotomy might be described loosely as a difference between Northern and Mediterranean characteristics; as between Paris and the Midi, Barcelona and Madrid, Milan and Rome. But the style differs in Munich from Hanover. And anyone who has taken a business trip to Johannesburg, on the highveld, knows how different it is from coastal cities like Cape Town or Durban, or from government cities like Pretoria or Bloemfontein. And top executives in India find it hard to delegate authority and spend too much time on minor details. That forces business people to deal only with the highest ranking executive. Despite a North American propensity for believing or wanting to believe that everyone is the same, attitudes and style differ because cultures and, therefore, values are different. American CEOs and VIPs were to discover that fact with some bemusement on meeting their Japanese counterparts for the first time. American management appears to be as perplexed today as at that first encounter, because that other industrial culture works very well, and perhaps the North American one does not work well enough.

Cultural characteristics appear to confuse because of the different uses of communications, different bundle of values, different approaches to economics, different interpretations of customs, different organizational structures, and different priorities of management. While northerners tend to be more methodical, technological, or skilful, southerners lean more toward subtlety and ambiguity, flexibility or impulsiveness. It is no wonder that the West has been bewildered and confounded by the Japanese. They are quite different again, because they respect another set of values and customs than those of the West. The paradox is that they immediately understood and realized the need for a management philosophy exported from the United States by Drucker, Juran, and Deming in the 1950s, that is only now beginning to be emulated in North America. Meanwhile, other Pacific Rim countries like Taiwan, Hong Kong, and Singapore found that Total Quality Management combined well with their own natural tendency to the marketing philosophy and their own work ethic.

But the business style of Third World economies differs again, although they too are environments where purposeful vagueness and ambiguity minimize the effects of confrontations that are part of the political and religious fabric of those regions. Mexico, Central and South America, and southern Africa’s attitudes are related to the low living standards of their mass populations, over 50 percent of whom are likely to be under the age of fifteen; hence an acceptable hourly wage of forty-five cents for unskilled labor in El Salvador in 1992.

Similar demographics illustrate the Third World economy of part of South Africa’s society with an unemployment rate of over 45 percent. But it can tap the resources and infrastructure of the developed industrial part of that dichotomy and is doing so. Having seen what the white middle classes used to earn, they are holding out for something better for themselves. But the pie is smaller and has to be shared between many more people. Nevertheless, the management culture is still marketing oriented and poised for growth. Its style can be described as “modest, despite achievements.” That assessment is equally applicable to establishment conglomerates like SA Breweries or Dr. Anton Rupert’s Rembrandt/Remgro (second biggest company on the Johannesburg Stock Exchange after Anglo-American De Beers), or new entrepreneurs like Herman Mashaba (a former door-to-door salesman who is now managing director of his own multi-million rand cosmetics enterprise called Black Like Me). He was chosen as Marketing Person of the Year in 1994, Rupert in 1962. In this new “rainbow society,” as Nelson Mandela describes it, the dichotomies of old money versus new money possess none of the old connotations that once existed in Europe and in North America, because of the widespread opportunities for new black entrepreneurs in a largely untapped market of some 30 million blacks.

Conflicts between management and labor in developing economies resemble nineteenth century ones in the U.S., when an abundance of poor immigrant labor was forced to work for low wages in undesirable factories and the sweatshops of the garment industry, with their environmental hazards.

If we accept the fact that the excellent companies naturally attract the best managers, then the converse would be true of the majority of companies that are obliged to take whatever personnel they can get. That includes many who never bother to study management principles, or even borrow books on management from a public library. If they are so little interested in developing themselves to provide value to an employer, they are really no more than hired hands, and not managers at all. They just do whatever the boss tells them to—just like other employees in the packing department, the warehouse, loading bays, accounts receivables, or the sales floor. And since they are treated as labor for the boss to order around, they never learn how to manage. Even those who might have some potential would be unlikely to be given an opportunity to take initiatives, to show responsibility, or to provide added value to the company—because the problem is often at the top.

But that is not the only reason for inferior management.

Said a manager in a company that went from one crisis to another and spent most of his time putting out fires, “We have a union problem.”

“No,” said the shop steward, “We have a management problem.”

Said a lawyer at the 1985 annual convention of the Retail Council of Canada, “The reason that employees join a union is because of poor management.”

He elaborated as follows; “Employees join unions because management fails to respond to employee concerns, or because management makes rash decisions with which employees strongly disagree.”²

That lawyer specialized in advising management on solving trade union problems. He listed eight fundamental reasons why employees join unions.

1. Unfair treatment (favoritism, discrimination, inequities in discipline);

2. Failure of management to respect employees’ contributions to the business;

3. Failure to listen to employees’ suggestions and complaints (lack of two-way communications);

4. Failure to keep employees informed of important decisions or trends that affect the company and, therefore, their work;

5. Insecurity from lack of information, or from management aloofness;

6. The feeling of not being in control of their own destinies;

7. Dissatisfaction with their physical surroundings (while management creates a pleasing atmosphere for customers at reception, or the front of the showroom, or in the executive suite, the back of the store or workshops or the factory are often neglected);

8. Frustrations because of incompetent or lazy managers (who are responsible for all of those things).

Despite a recent fashion of empowerment, many employees need and want direction, so that they can at least understand their company’s attitude to particular situations, and what is expected of them. In spite of academic theories to the contrary, even superior creative people in knowledge industries want to know that at every step of the creative process, because they wish to know the parameters in which they can work. It is one of the hallmarks of the best employees that they want clear answers to those types of questions. And having their needs addressed by top management without having to ask is a mark of recognition, as opposed to commonplace symptoms of indifference. And yet the most common lapses encountered in business organizations are lack of leadership, an absence of formalized planning, and poor communications.

A consequence of those omissions is that managing in many organizations is an unsatisfactory and unsatisfying round of confrontations. Management is continually confronted by unnecessary problems and mistakes, frustrations and argument, disorganization and waste. All of that results in loss of time, cancelled orders, lost contracts, and lost opportunities. That is neither a constructive nor a creative way to manage a business enterprise.

Several meetings took place between elected employees and top management, but workers’ problems were left unsolved again and again. In fact, they did not start off as problems, but only as questions. They became problems when the questions were left unanswered. The result of such indifference by management was that the Teamsters were invited in and the company was unionized.

Employees who are genuinely involved with their work often have real contributions to make, in the form of suggestions, fresh ideas, new proposals, and constructive improvements. If management makes important decisions that involve them, they want to be involved before the decisions are finalized. They do not want to be dragged along against their will, kicking and protesting. They would rather be invited to the decision-making process, and go along willingly with the final decision. Obviously it is also to the advantage of management for that to happen.

It boils down to a matter of trust. If management trusts its staff, it can only benefit from inviting them to participate. And if it does not trust them, it should not have employed them.

Procrastination is a valid and fairly common management style. And sometimes when there is serious doubt, it is better to do nothing. But problems rarely disappear of their own accord—more often they breed further problems. And even a decision to do nothing is a decision. It affects the management of a business as much as a positive decision, but it affects it negatively. It can create frustration now, and frustration can lead to impulsiveness in the future.

A manager, like a doctor having diagnosed the cause of an illness, should never wait until complications develop before taking remedial action. And just as a responsible and conscientious doctor will make every attempt to ensure that he has all the facts before diagnosing and curing an illness, so a manager finds himself in similar situations almost daily.

The best way for a manager to sense problems, before they become serious, is by keeping physically in touch with every facet of a business organization. Management By Walking Around has become known as MBWA. It is the best way for a manager to feel the pulse of every employee and every activity, from time to time—and even every machine in the plant.

A manager cannot know what is going on in a business enterprise if his time is spent behind the closed door of his office. Old family department stores used to employ someone called a floor walker who was the eyes and ears of the owner. Since other employees looked upon him as a spy, his existence created a continual adversarial relationship between management and labor. The use of such an intermediary by management is a cop-out. It is a poor substitute for leadership by a CEO who does not possess leadership skills.

Management by walking around involves intermittent reviews of all aspects of a business enterprise by watching, asking questions, listening, and analyzing. Good managers develop a sixth sense, as it were, by using all their other senses as they walk around offices, warehouses, factories, workshops, assembly lines, quality control, receiving and shipping bays, customer service departments, and the like. For example, a manager of a furniture factory will instinctively run his hand over panels of wood to check their quality and ensure that sanding machines are working properly, knots have been filled in, or cracked and warped timber has been re...

Table of contents

• Cover
• Halftitle Page
• Title Page
• Copyright Page
• Contents
• Preface to the Paperback Edition
• Foreword
• Introduction: The Management Jungle
• Part I: Principles
• Part II: Practices
• Appendix
• Notes
• Index