If you can’t get the basics right…..

Recently I needed to order a new garage door. I contacted 3 garage door suppliers via email to come over and take the necessary measurements and give me a quote.

This was the experience.

Supplier A: They called me a few minutes after I sent the email and gave me an appointment for the following day. They just did not turn up at the agreed time and I had to call to enquire. They ended up coming some seven hours later than the agreed time. The representative took no sketch or drawing, just quickly measured the garage door width and gave me a price on the fly.

Supplier B: Emailed back on the day saying that a representative will contact me in a few days to set an appointment. A few days later a representative called and an appointment was set. The representative came on time and reviewed the garage in detail, giving his advice of what type of garage door would be best and why. A detailed measurement was taken and a sketch was drawn. By the following day an email with a detailed quote was sent.

Supplier C: Emailed back on the day, saying a representative will contact me to set an appointment. After 10 days no one ever contacted me. I emailed them back reminding them that someone had to contact me. They have not replied to my 2nd email.

So now I have placed the order for the needed garage door. It does not take much brain power for you to conclude with which garage door supplier I have placed my order. All I had to do is chose the supplier that just got the basics right. The rest just failed from the word GO!

If you look at all the data and research in the world, it becomes clear that core management practices can’t be taken for granted. There are vast differences in how well companies execute basic tasks and these differences matter.

Businesses with strong managerial processes perform significantly better on all metrics such as productivity, profitability, growth and longevity. In addition, the differences in the quality of those processes—and in performance—persist over time, suggesting that competent management is not easy to replicate.

Please do not get me wrong. In my past articles I have written on the importance of thinking strategically and not always getting engulfed in operations. However I never argued that operational excellence doesn’t matter. My view is that operational excellence should be treated as a crucial complement to strategy—and that this is true now more than ever. After all, if a firm can’t get the operational basics right, it doesn’t matter how brilliant its strategy is. On the other hand, if firms have sound fundamental management practices, they can build on them, developing more-sophisticated capabilities—such as data analytics, evidence-based decision making, and cross-functional communication—that are essential to success in uncertain, volatile industries.

Achieving managerial competence takes effort, though: It requires sizable investments in people and processes throughout good times and bad. These investments, represent a major barrier to imitation.

There is a tonne of research on operational excellent, or the lack of it, out there. If one where to really summarise the conclusions of the various research studies on how business organisations use (or don’t use) core management practices, one can derive the following general conclusions.

Around 11% of firms are extremely weak in setting and monitoring operation, with little or no effort to identify and fix problems within the organisation, almost no targets for employees and promotions and rewards based on tenure or family connections. At the other end of the spectrum around 6% of firms are the clear management superstars – these are the businesses that in other words have rigorous performance monitoring, systems geared to optimise the flow of information across and within functions, continuous improvement programs that supported short- and long-term targets and performance systems that rewarded and advanced great employees and helped underperformers turn around or move on.

This shows that achieving operational excellence is still a massive challenge for many businesses. This isn’t really surprising: According to various estimates, the costs involved in improving management practices are as high as those associated with capital investments such as buildings and equipment.

What is also a constant finding in all the research on operations is that the level and quality of managerial practices are directly linked with the overall business performance. Data clearly shows that better-managed firms are more profitable, grow faster, and are less likely to die. Better-managed firms also spend 10 times as much on R&D —which suggests that they’re not sacrificing innovation to efficiency. They also attract more talented employees and foster better worker well-being.

So all these findings raises a major question: If the benefits of core managerial practices are really so large and extensive, why doesn’t every company focus on strengthening them?

Research indicates that a surprisingly large number of managers are unable to objectively judge how badly (or well) their firms are run. A variant of this problem is that managers may overestimate the costs of introducing new practices or underestimate how much difference they could make. In other cases, managers may be fully aware of the need to improve their practices but pass on this opportunity for fear that change may jeopardize private objectives.

I am always amazed as to why family businesses are so reluctant to embrace strong management processes. One explanation—which finds support various research projects—is that their adoption may have significant personal costs to family members. New practices may require hiring or delegating authority to talent outside the family circle. In addition, family executives—and especially owners—should understand that introducing new managerial capabilities within the firm does not necessarily entail a loss of control. It is more likely to create a different role for them—but not necessarily fewer responsibilities.

Good management practices require capabilities (such as numeracy and analytical skills) that may be lacking in a firm’s workforce. Even when top managers correctly perceive what needs to be done, are motivated to make changes, and have the right skills, the adoption of core management processes can be a challenge due to the inherent culture within the business.

As we know change is difficult. However managers have a strong weapon at their disposal, which can be very effective. It’s their presence. The successful adoption of sound management practices often takes place in business organisations where someone very high up signaled the importance of change through personal involvement, constant communication, message reinforcement, and visibility i.e “Walking the talk”

Though core basic management practices may appear to be relatively simple—in that they often rely on non-technological investments—they are not light switches that can be flipped on and off at will. They require a profound commitment from the top, an understanding of the types of skills required for adoption, and—ultimately—a fundamental shift in mentality at all levels of the organisation. Core management practices, established thoughtfully, can go a long way toward plugging the execution gap and ensuring that strategy gets the best possible chance to succeed.

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