Quarterly Journal on Management
From the publishers of THE HINDU BUSINESS LINE
Vol. 2 :: No. 1 :: March 1998
And All the King's Men...
When anyone talks of bureaucracy, what follows is a discussion on how to reform the organisation; How to change it? It's also a question of challenging an establishes system or model and to change, we need to challenge certain assumptions within the system and without. One book that does challenge assumptions in business is ``Just Don't Do It!'' by Joel Brandon and Daniel Morris, published by McGraw-Hill.
Why is there an unprecedented level of doubt concerning the ability of business to manage its affairs effectively? The authors declare, ``1) today's managers do not have the tools to do their jobs, and, 2) business today is encumbered with yesterday's baggage.'' There is much skepticism about the first reason because of the range of tools now available, especially in terms of information technology. The basic question is this: The tools are available but are the craftsmen using them properly? Now, the second reason is something that holds true in most organisations: One of the most repeated negation statements is, ``It has never been done before!'' It is also the primary reason for bureaucratic organisations finding it very difficult to change.
``The essential issue in business is success: How can a level of excellence be achieved and sustained?'' Well, first, by going back to the basics and second, by questioning assumptions. The first real chapter that challenges assumptions is ``Just don't tolerate business as usual: Challenging the assumptions of general management.'' One major assumption is `Nothing really gets done -- no one will notice whether I do a good job or not.' One can well imagine what this sort of attitude will lead to. However, is the problem with the people? `No!' say the authors: ``The actual problem is the culture that allows this unproductive practice.'' This is also one assumption that really aggravates problems in a bureaucratic set-up.
One step that most ``Change now!'' propagators take is to sit down with the organisation chart and slash the number of levels in the hierarchy and also downsize purely for the sake of downsizing. There is an assumption that ``Process improvement is just another fad.'' The problem here is that process is an important component of business (remember, processes add value, and unnecessary processes diminish value) and whatever change takes place should take place with respect to processes. Put in another way, change with respect to effectiveness, not efficiency.
Another assumption that poses great danger to managers is ``Sweat the details, and the rest will take care of itself.'' The danger is actually in the second part of the assumption. The saying that flashes across the mind is about being penny-wise and pound- foolish. The point is that the more senior the manager, the more he has to think about the future and one cannot sweat the details for some time into the future. The details will have to be looked after by the people in the field, the people in operations. It is important to remember that ``Tactics concern details, but strategy does not.'' As the authors say, ``It is certainly a poor approach to change. Indeed, the details can hide larger issues.''
The authors then go on to discuss various assumptions held in different functional areas of management such as customer relationship, measurement, the human asset, business planning, information technology and assumptions on cost and value. One realisation that hits managers after a few years in any organisation is that systems alone do not run a business successfully. An example of this is the fact that ``just measuring quality does not improve it.'' What does come through in the book is the fact that all over the world, human beings, their feelings, their sufferings, are really the same. This book reads like a consultant's checklist; and depending on your point of view, you will either take it with a pinch of salt, or totally disregard it.
``The nearest thing to immortality in this world is a government
Talk about living! The next book in this report is exactly about that: The Living Company. Written by Arie De Geus, and published by the Harvard Business School Press, `The Living Company' is a book that studies the `Habits for survival in a turbulent business environment.'
``In some countries, 40 per cent of all newly created companies last less than 10 years. A recent study by Ellen de Rooij of the Stratix Group in Amsterdam indicates that the average life expectancy of all firms, regardless of size, measured in Japan and much of Europe, is only 12.5 years.'' Why does this happen? As de Geus writes, ``Companies die because their managers focus on the economic activity... and they forget that their organisations' true nature is that of a community of humans.''
Then, one may ask, how did bureaucracies survive for so long? Well, the answer is simple: Essentially, bureaucracies are not focussed on economic activity, but they do realise that a bureaucracy is a community of humans. Then why the antipathy towards the system? The problem is that the top people's view of the community is still old-fashioned and they are not willing to alter the system. One more reason why bureaucracies survive is because of the fact that at most times that they are backed up very well in terms of resources; There is also the will to sustain the system. As de Geus puts it: ``Like all organisms, the living company exists primarily for its own survival and improvement: to fulfill its potential and to become as great as it can be.'' And here is a gem: ``The profitability of a company was a symptom of corporate health, but not a predictor or determinant of corporate health.''
According to de Geus, long-lived companies had four factors in common: One, they were sensitive to their environment; two, they were cohesive, with a strong sense of identity; three, they were tolerant of activities on the margin; and four, they were conservative in financing. What is, however, even more important is the organisation's ability to learn, because the basis of success today is leveraging knowledge more than other physical resources.
Also, people in typical organisations tend to take decisions that will reflect positively on their performance as seen by outsiders rather than make decisions that should turn the company into a living company. In this process, they to forget a little about a future in which they may not be around and tend to delegate such matters naturally. Now, de Geus believes that's an abdication of managerial responsibility: ``dealing with the future can never be delegated.''
The fact that all managers need to understand and accept is that decision making is a learning activity: ``Every act of decision is a learning process.'' In this book, de Geus refers to Jean Piaget on two kinds of learning: assimilation and accommodation. In assimilation, the learner processes the information in an existing mental models, beliefs, ideas and attitudes and the information fits and the learner understands and learns. Accommodation requires the learner to change some of the structures in his or her mental models and `accommodate' the new information and learn. Successful companies learn by accommodation, which is necessary to take a lead.
De Geus asks the question: ``why was so much time spent at university in understanding systems and figures and so little in understanding humans?''and then goes ahead and explains why most companies don't survive their infancy or adolescence: companies need to learn to survive and to learn one has to recognise that ``Companies can learn because they are living beings.'' One of the important characteristics that does qualify companies as living beings and also enable them to learn is a faculty known as `introception'. William Stern described this as ``the ability to be aware of one's own stance and position vis-a-vis the rest of the world.''
Living companies acquire and develop their own persona. What is even more interesting is the fact that however large or small the membership, the need for cohesion between the members exists in all organisations and what mergers and downsizings in the recent years is to ``tear companies apart precisely because they confound the need for cohesion.'' In the chapter ``Managing for Profit or for Longevity'', de Geus asks: ``Is there a choice?'' He defines two kinds of companies: the first, the economic company, is something that operates basically for profit; and the second, the river company, is organised around the purpose of perpetuating itself as an ongoing community (in which profits play a part; an organisation can have this purpose only when they have something viable at hand).
De Geus quotes his mentor: ``If you want to be a leader, you must realise that a manager is not God. A manager does not create people -- certainly not in his own image. As a manager, you take people as they come, the way God created them, and you learn to work with them.''Bureaucracies certainly don't subscribe to this, though the effort to make everyone uniform is made by a set of rules and procedures rather than a single individual.
The author then goes on to discuss ecology in organisations. He met Prof Allan Wilson, a zoologist/biochemist based at the University of California at Berkeley. Wilson theorized that ``accelerated anatomical evolution took place in species with three particular characteristics: Innovation... Social propagation... and Mobility.'' Again, bureaucratic organisations tend to suppress all three of this characteristics, which is one reason why bureaucracies are not very aware of nothing but their immediate environment.
One major question that the book raises in the reader's mind is whether the concept of core competence -- generally defined as a bundle of skills and resources that cannot be replicated -- is at all applicable. The concepts and cases that are presented in this book all show that probably the only `core competence' a company needs is the attitude to be a `river' company, a company that perpetuates itself so that it can be a great one. One of the factors that was common to all the living companies in the book is that they had a tremendous level of tolerance for all activities at the margin and were not averse to experimenting. There is also the factor of conservative financing, but that is not in terms of not investing, but in terms of having a surplus in hand and then investing. But the question remains in the reader's mind: ``What `core competence' does an organisation need to be a `Living Company'?''
Companies that do need to debureaucratise themselves suddenly find themselves out on a limb with respect to the strategy for the entire enterprise. "Wharton on Dynamic Competitive Strategy" edited by George S. Day and David J. Reibstein with Robert Gunther is a book that looks at strategy from an interdisciplinary perspective.
In a bureaucracy, events seem to happen in a kind of suspended reality, a reality that takes quite some time to reach the people at the top. They are also insulated from the environment to an extent where decision-makers are looking at events as an observer rather than as a participant. However, to become effective organisations, they need to understand the interplay between the organisation, its competitors and the larger environment. As the introduction to the book declares: ``The strength of a given strategy is determined not by the initial move, but rather by how well it anticipates and addresses the moves and countermoves by competitors and shifts in customer demands over time.''
Strategy is not a one time process, a one time decision. It is continuous, one needs to check with the environment and one's customers frequently and steer the company by taking the right decisions at the right time. The key here is the timing. A bureaucracy can make a good decision but the decision that's made late is of absolutely no value when one considers the speed of response of the competitor, the market and the customer. ``Strategy is complex... The ripples of strategy are sent out across customers and competitors and are then reflected back to the firm.''
This book, in a way, proves how valuable Michael Porter's industry analysis model is to strategy formulation. This model forms the basis of most works in strategy including this one. This book is different from Porter's own works on strategy in its approach to strategy from so many different perspectives. For instance, the book looks at strategy from the resource and structure perspective, from the game theory and behavioural views, the public policy and technology perspective and most interestingly, from the perspective of scenarios, war games, simulations, and signalling.
This book is not a textbook, nor is it a book of personal experience. But what it is, is that it is one of scholarship and profound study. It is conceptual, and illustrates its concepts with small case studies that make the point. It is a book for all managers (and bureaucrats) with an interest in strategy.
Management philosophies and strategies for the enterprise apart, the practical thing is to look at where bureaucracy creeps in. That is either at the shopfloor level or at the field level. One of the worst things that can be said of bureaucracies is that they waste valuable resources. In Public Sector Units across India, there is a lot of wastage in the shopfloor itself, due to a variety of reasons: obsolete technology, bad maintenance, lack of quality in raw materials, lack of quality processes, and general wastage because of delayed decisions. One book that tells managers how to deal with wastage in the shopfloor is "Gemba Kaizen" by Masaaki Imai. This book is not just about reducing costs through cutting wastage, but about continuous improvement, kaizen, at the shopfloor, gemba.
The book is a practical guide to applying kaizen to the workplace. As the author declares: ``This is not a book of theory, but a book of action.'' Again, in this book, we come across the term `learning organisation' and the general tendency of companies to disregard ``group learning of fundamental values derived from common sense, self discipline, order and economy. Imai then goes on to lay the ground rules for gemba kaizen: Housekeeping, muda (waste) elimination, and standardisation.
Good housekeeping requires self-discipline and a pride and commitment to the workplace. Now, that is something that does not happen in bureaucracies because one is not motivated and disillusioned as a result of the all-too-familiar ``It won't work here'' outlook. Now, muda elimination has more to do with decisions rather than anything else: decisions regarding maintenance, inventories, modernisation, etc. It also depends on whether the individual at the shopfloor wants to actually eliminate waste. Again, the nature of bureaucracy itself delays decisions or indulges in compromise with regard to key issues and the battle is lost before it has begun. The last ground rule is standardisation that looks at the quality aspect of the whole process and this again is a decision making problem rather than that of self-discipline and common sense.
The most important points on which bureaucrats and people in bureaucracies can learn from the book are: ``When a problem arises, go to the gemba first; check the gembutsu (relevant objects; take temporary countermeasures on the spot; find the root cause; standardize to prevent recurrence.'' The book then gets into the details of how to apply gemba kaizen: it is more of a handbook for practising managers than a management concept/philosophy book. As Edward C. Johnson, III, Chairman and CEO, Fidelity Investments, writes in the foreword to the book: ``Objective measurements are the best way to determine where you need improvement and whether or not you've improved. In itself. measurement is a very simple concept. Yet, sometimes finding the right standard isn't easy.''
The book that should teach bureaucrats a thing or two in the field is ``Market Driven Strategy'' by George S. Day. Now, this book is almost in the middle, leaning towards concept/ philosophy as against the extreme practicality of Gemba Kaizen. But this book is one that any manager, bureaucrat or otherwise, should go through, especially if he or she is already in or preparing to take charge of the marketing function.
People already familiar with writings in marketing may have come across the textbook-style writing of Kotler, and Blanton and also across the pop-style writing of Ries and Trout. Market Driven Strategy is a book that discusses both marketing principles, concepts and `strategies' as in Kotler or Blanton, and also the `strategy for war' and `action' as in Ries and Trout.
The book is peppered with cases and examples that illustrate any concept or principle that the reader has just learnt. Day has not written a textbook, yet the reader gets an idea of just about everything there is in marketing; the book is not racy, yet is compelling, and makes the reader wants to get everything.
The point, though, is this: that one can read and learn is true; but the learning is reinforced and becomes part of one's life only when the learning is experienced or applied, as the case may be. As George Bernard Shaw once said: ``Every complex problem has a simple solution and that is wrong.''