The Management Mythbuster E-Book

David A. J. Axson

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 571

Veröffentlichungsjahr: 2010

Beschreibung

Become a better manager by challenging the myths of commonlyaccepted management wisdom A humorous review of current management practice with a veryserious message, The Management Mythbuster makes anentertaining case for questioning much of the conventional wisdomthat pervades the corporate world today. Through contrarian and provocative points of view, real worldexamples and deep analysis, author and management thought leaderDavid Axson offers over a dozen short, pithy commentaries on theimportant issues in management today: * Short chapters on popular management practices, theories, toolsand behaviors * A humorous review of current management practice, with anunderlying serious message * The fallacies of conventional management wisdom revealed andrefuted * Exposes the fallacies of standard management thinking If you are brave enough, this concise, easily read book is foryou, returning a sense of common-sense perspective to the practiceof management.

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Acknowledgements

About the Author

Preface

About This Book

Introduction

Strategic Plans Are of Little Use in Times of Great Uncertainty and Volatility

Operating Plans and Budgets Provide a False Sense of Security

Management Reporting Is Driven by an Obsolete View of the World

Incentive Compensation Rewards Poor Performance and Penalizes Outstanding Performance

Investments in Staff Education Have Been Inadequate and Misdirected

Technology Has Failed to Improve and in Many Cases Has Reduced the ...

What I Really Think!

Notes

Chapter 1 - Missions, Visions, and Other Expensive Pastimes

Fiction: Meeting Room at an Exclusive Country Club, Northern New ...

Facts: “We Are on a Mission from God”

So What?

Notes

Chapter 2 - Strategy and Other Confusing Stuff

Fiction: The Four Seasons Hotel, Nevis—Early May 2007

Facts: Yes, We Are Very Strategic

Fatally Flawed

So What?

Notes

Chapter 3 - Gurus, Consultants, and Other Snake Oil Salesman

Fiction: Henry’s Office—October 2008

Facts: Are You Renting Bodies or Brains?

Objectivity and Independence—No, Not Really!

So What?

Notes

Chapter 4 - Forget Success, Focus on Failure

Fiction: Sustained High Growth in Revenues and Earnings

Facts: Accept Failure, Fear Success

Success Can Be Dangerous for Your Health

The Perils of Being Number One

Forget “In Search of Excellence,” How About Excellence Lost?

Preparing to Fail

New Coke—A Lesson in Management Excellence—Honestly

IBM—From Survival to Leadership

So What?

Notes

Chapter 5 - Budgeting—A Modern Vision of Hell (Well, Purgatory at Least)

Fiction: Henry Pritchett’s Office—Early September 2007

Facts: Not Just a Waste of Time

Detail Does Not Equal Accuracy

Why Do We Plan the Wrong Stuff?

Are You on the Road to Hell?

Learn to Love the Budget

So What?

Notes

Chapter 6 - The Futility of Forecasting

Fiction: September 2007

Facts: Forecasts—The Only Certainty Is That They Will Be Wrong

The Extraordinary Is Now Ordinary

Not One Size Fits All

Are Long-Term Forecasts an Oxymoron?

Restoring Credibility

So What?

Notes

Chapter 7 - Total Quality, Six Sigma, Process Re-Engineering and Other ...

Fiction: Quality Is Job 1—April 2006

Facts: The Scourge of Management Communism

Cheap Is Not Always Good

Too Much Process, Not Enough Product

So What?

Notes

Chapter 8 - New Risks for a New World

Fiction: The Boardroom—April 2007

Facts: Risk Is a Four-Letter Word

Learn from Tiger, Phil, and the Rest

They Were Going to Change the World

Beware Irrelevance

Different Customers, Different Connections

Beware the Noncompetitive Threat

Remember—Stuff Happens

Revenue Volatility Means Down as Well as Up

Reputation Is Everything

So What?

Notes

Chapter 9 - Pay for Performance? Failure Pays Very Well These Days

Fiction: January 2010

Facts: The Great Incentive Scam

So What?

Notes

Chapter 10 - Lies, Damn Lies, and Performance Metrics

Fiction: Strategic Alignment—May 2007

Facts: Measurement Mania

Metric of the Month

Single Version of the Truth

The Balanced Scorecard—Yet Another Illusion

Reporting What or Why

Windshield or Rear View Mirror

Beware EBITDA

Traffic Light Syndrome—Should I Stop or Should I Go?

So What?

Notes

Chapter 11 - Leveraging Technology for Competitive Advantage

Fiction: On Time, On Budget—But Irrelevant —February 2008

Facts: Automating Inefficiency Just Gets You Bad Data Faster

Death by Spreadsheet

IT ROI—An Oxymoron

Hype Versus Reality

Cool but Pointless

Whatever Happened to Real-Time Processing?

Breaking Down the Barriers

Why Do We Fix Costs in a Variable Revenue World?

Centralized or Decentralized? What a Dumb Question!

Outsourcing—the Myth and the Reality

So What?

Notes

Chapter 12 - Why Accountants Rule the World

Fiction: Closing the Books, October 11, 2007

Facts: Death by Accounting and Other Fatal Diseases

Accounting—An Alternative Reality

Accounting Irrelevance

The Myth of Cost Allocations

Making the Numbers or Making The Numbers Up?

An Accounting Conspiracy Theory

So What?

Notes

Chapter 13 - The Synergies Will Be Massive!

Fiction: The Myth of Synergy—August 2006

Facts: Synergy—Much Touted, Rarely Realized

Private Equity—It’s Really Just a Corporate Enema!

So What?

Notes

Chapter 14 - Talent Matters

Fiction: A Corner Office on the 15th Floor of Cruciant’s Headquarters—April 2008

Facts: Talent Factories

All GE Managers Are Gods

Retaining Talent—Not Always a Good Thing

The Illusion of Competence

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me

The MBA Myth

What Makes a Successful Leader?

So What?

Notes

Chapter 15 - Ask The Dumb Questions

Fiction: May 2007

Facts: Keep It Simple

Isolating Management Stupidity

Follow the Herd

The Parable of the Leaky Valve

So What?

Notes

Chapter 16 - The Business of Spin

Fiction: Steve Borden’s Office—January 2008

Facts: The Business of Spin

What Planet Were They On?

Spin Cycle: Citigroup 2006-2009

Southwest Airlines: Succeeding Despite the Market

Tall Poppy Syndrome

Nice Work If You Can Get It

Beyond Spin: Sometimes It Is All Smoke and Mirrors

Spot the Crook

So What?

Notes

Epilogue

INDEX

Copyright © 2010 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data

Axson, David A. J.

The management mythbuster / David A. J. Axson.

p. cm.

Includes bibliographical references and index.

eISBN : 978-0-470-58663-1

1. Industrial management. 2. Strategic planning. 3. Employee motivation. 4. Success in business. I. Title.

HD31.A97 2010

658—dc22

2009031698

To Mervyn Axson

Acknowledgments

The origins of this book emerged in the late 1970s at a time when I had matured enough to have sensible conversations with my Dad. As I sought to peer through the fog of cigar smoke that was ever-present in his study, we would endlessly debate the truth behind so many commonly accepted “home truths” that were in reality absolute rubbish. My Dad was a curmudgeon and a cynic and never once apologized for it. I guess the apple doesn’t fall far from the tree.

The material for this book has come from many sources and for that I thank all my former colleagues at Lloyds Bank; Deloitte, Haskins & Sells; A.T. Kearney; The Hackett Group; Bank of America; and the more than 200 organizations that I have had the privilege of calling clients over the last 25 years. I also thank those fellow cynics, curmudgeons, and anti -management communists who have allowed me to debate the myths of management with them. Thank you—you know who you are. Thanks to the team at John Wiley for guiding me through the publishing process yet again.

Most important of all is family. My wife Donna puts up with my angst, fake writer’s block, and inexhaustible caffeine addiction; Eleanor and James occasionally remember that when Daddy is in his office he is not just playing on the Internet; and finally, Monty and Baxter who are my constant companions and serve to prove that a dog and cat can be inspirational aids to the creative process!

About the Author

David Axson is an author and consultant specializing in strategy, finance, and management. His previous books include Best Practices in Planning and Performance Management (John Wiley & Sons, 2007) and Half the World Away (Countinghouse Press, 2009).

David was a cofounder of The Hackett Group, a leading benchmarking and business advisory firm, and during his eleven years with the firm, he was responsible for developing a number of the firm’s market-leading benchmarks. He has also served as Head of Corporate Planning at Bank of America on a one-year assignment during 2003. Prior to moving to the United States in 1991, David was affiliated with A.T. Kearney; Deloitte, Haskins & Sells; and Lloyds Bank in London, England. He has degrees in accounting and computer science from the University of Leeds in England and is a Member of the British Computer Society. David lives with his wife and two children in Bath, Ohio.

Further information can be found at www.davidaxson.com.

Preface

My son James is a big fan of the Discovery Channel series Mythbusters during which various common myths, rumors, and accepted “truths” are tested for validity. It makes for good entertainment. In almost thirty years of observing managers in action I have encountered more than my share of commonly accepted wisdom that gets passed down from generation to generation without question. From “the customer is always right ” to “we pay for performance,” the list of management philosophies that are more honored in the breach is long. So as the world was rocked by the near collapse of global financial system in 2008, it seemed like a good time to take a look at many of the practices and processes that govern much of modern management behavior yet have been found wanting. So here is The Management Mythbuster, a serious but irreverent (i.e., seriously irreverent!) look at some of the myths that drive mediocrity in modern management.

DAVID A. J. AXSON

December 2009

About This Book

When I started to write the first draft of this book, it looked like so many others: a series of chapters that tried to make a few useful points using real -world examples for illustration. In short, it had the potential to be really boring. I didn’t want that—there are enough earnest tomes out there already. So I did two things. First, I tried to make this book entertaining. Could I really make people smile when considering the merits of budgeting? Would people laugh at the absurdity of modern financial statements? I don’t know, but it’s worth a try—so forgive my irreverence, and if my attempts at humor fail, at least admire the effort.

The second change I made from that first draft was to blend fact and fiction. I always love stories that illustrate a point. In my speeches I liberally sprinkle in metaphors to help my audience understand the points I am making. So I decided to take a risk. Why not tell a story as well as offer a guidebook to some of the absurd management practices that are obsolete in today’s turbulent, but very exciting, world? To that end, you will follow the trials and tribulations of the management team of Cruciant Inc. throughout this book.

Cruciant is a fast-growing, $3 billion, global company specializing in delivering highly innovative services for both the corporate and consumer markets. Note that I don’t actually tell you what Cruciant does, but as you will see, that is part of the point. The saga of Cruciant will help illustrate the destructive power of many of the management myths that continue to govern decision making in today’s uncertain world.

After each episode in the Cruciant story, I will look at the real - world lessons to be learned and end each chapter with a section entitled “So What?” that seeks to capture the sound bites you should remember.

As we embark upon our journey through the maze of management myths, you will quickly see that in today’s turbulent world, fact really is stranger than fiction.

Introduction

There are only two problems with the theory and practice of management today. We take the topic far too seriously, as the rows of earnest tomes in the bookshop testify, and we are too trusting. The body of commonly accepted wisdom is huge, and most of it is junk. Homilies such as pay for performance or using technology for competitive advantage are convenient and politically correct but rarely true. My aim with The Management Mythbuster is to take a seriously irreverent look at some of the more popular myths.

The genesis of this book can be traced back to September 5, 1983. On that day a somewhat arrogant, egotistical, but, in truth, incredibly naïve 21-year-old began work for a bank in the City of London. Sometime during that first day I asked myself a question that has been repeated thousands of times since. The question was, “Why do we do it that way? It doesn’t make sense.”At first, I thought it was just ignorance on my part and that over time the mysteries of management practice would be revealed in all their glory. But that time never came. Today I have little to be arrogant or egotistical about—marriage, children, thinning hair, and a thickening waist made sure of that, but I still find myself asking the same question many times a day. For a long time my questioning (or is it cynicism?) simply served to help me in my chosen career as a management consultant where asking obvious questions that others deem beneath them is actually a valued skill—and then came 2008. Within the space of a few months much of the framework of modern management practice came crashing down. Corporate titans were humbled, strategies were abandoned, budgets became obsolete on a daily basis, and the only certainty about any forecast was that it would be wrong. Add in the failure of long-established compensation practices, the inability of markets to set prices for assets, and the almost complete absence of credit for months at a time, and the world was irrevocably changed.

To make matters all the more interesting, it all happened against a background of a volatile and fast-changing global order: terrorist attacks in Mumbai, China becoming the world’s second largest economy, oil rocketing to $147 a barrel and then falling just as fast to $35, a small flu outbreak in Mexico becoming a global pandemic in less than seven days, a changing of the political order in the world’s largest economy, and the emergence of environmental consciousness as the defining issue of the new millennium.

When historians look back on the first decade of the twenty -first century, they will almost certainly mark it down as a period of transformational change in the world of commerce.

I also suspect that the year of 2008 will be remembered as the date when the management practices that governed the world of commerce for over a half century were found to have failed hopelessly. Perhaps the one good thing to emerge from these tumultuous times is that questioning the effectiveness of long-established management practices has gone from being interesting to imperative. Managers everywhere are finding that the traditional rules and processes that have governed planning, forecasting, budgeting, reporting, accounting, and risk management are obsolete.

The world has been transformed from a series of loosely connected economies with reasonably predictable flows between them to a complex web of relationships where the global impact of local events is felt almost instantaneously. While the crash of 2008 may have started in the financial sector, exposing yet again the flaws in that industry’s sophisticated but ultimately flawed risk management model, the impact hit all sectors of the economy and all corners of the globe within weeks. As Russian Prime Minister Vladimir Putin observed during his speech at the World Economic Forum in Davos, Switzerland, in January 2009: “The world is now facing the first truly global economic crisis, which is continuing to develop at an unprecedented pace.”

In quieter, gentler times the impact of events in one part of the world on another would have been limited to an item on the news. In today’s instantaneous, globally connected world the ripples have become a tsunami.

This raises some interesting questions. In this turbulent world where have all the re -engineered processes, balanced scorecards, six sigma processes, self-directed work teams, and core competencies got us? Are managers in a better position to manage risk and uncertainty? Based on recent evidence, the answer must be no.

Over the next few years there will be numerous postmortems seeking to explain how all this happened. The usual suspects of greed, stupidity, overregulation, underregulation, all things American, and probably even global warming will be earnestly analyzed for their culpability. We should add the basics of management practice to the list. Corporations are saddled with a rigid set of discrete management tools that are incapable of working effectively in times of uncertainty and rapid change (i.e., now and the foreseeable future). The bedrock of the management process is built upon multi-year strategic plans, annual budgets, quarterly forecasts, monthly reports, and most dangerous of all, a compensation philosophy that is as likely to reward failure as it is success. The implications are significant. These relatively static processes upon which organizations have relied for decades will no longer get the job done. The litany of business failures and shareholder value destruction driven by unprecedented volatility and historic shifts in economic behavior should confirm to managers that their management processes are irretrievably broken. Actually, it’s worse than that: Many of the long-established practices that managers rely upon are downright dangerous since they provide a false sense of security that masks the realities of doing business in today’s volatile and uncertain world. Tried and trusted techniques of planning, budgeting, forecasting, reporting, and analysis have simply failed to cope with the speed, volatility, and complexity of today’s markets. We are managing twenty-first-century businesses with twentieth-century processes.

The first cracks appeared in the 1990s as the potent combination of globalization and technology drove the redefinition of markets (who needs a bookstore to buy a book?) and supply chains (why own a factory in Ohio? Let’s just contract it out to someone in India, China, or Vietnam). Technology coupled with a relatively loose regulatory environment also spurred exponential growth in the variety and complexity of financing and securitization options that could be continuously traded on a global basis. The accountants struggled to keep up, never mind the managers tasked with making decisions.

It Really Is a Different World!

I sat listening to Putin’s speech back in January 2009 and was struck by two things. First, he was dead right. Second, as someone who grew up during the Cold War, it was certainly different to hear economic insight coming from a Russian! I well remember visiting Soviet Russia in 1977 as a 15-year-old high school student. In order to make the trip somewhat educational (although bartering ballpoint pens for bottles of vodka outside the Kremlin taught me a lot about economics), we attended a lecture on the Soviet economic miracle. One chart showed the rate of inflation in the USSR since the end of World War II—it was a horizontal line at the zero percent level on the y-axis. At the time, inflation in the UK was running rampant, so this was an impressive statistic. Not long after the lecture we visited Moscow’s premier department store, Gum, which is on Red Square opposite the Kremlin. It was easy to see why inflation was nonexistent—there was nothing to buy! With that as a backdrop, I found it hard to believe that a Russian (and a former Communist and KGB official) could offer accurate economic insights on the subject of managing in a world of turbulence? But Putin’s words made perfect sense. First, he nailed the economic downturn of 2008, and he went on to liken the events to a perfect storm and offered sage advice to managers trying to cope in such an environment: “Responsible and knowledgeable people must prepare for it.” He went on to outline some of the failings that resulted in a singular lack of preparation: weak regulation, greed, and a failure to acknowledge risk. However, to a Cold War baby like me, his most startling statement of all was “Excessive intervention in economic activity and blind faith in the state’s omnipotence is another possible mistake.” Wow! We’ve certainly come a long way in the last twenty years when a Russian warns America against excessive government intervention.

As a postscript I returned to Moscow 32 years after that first visit in 1977 and returned to Gum; it is now stocked to the rafters with designer goods—inflation is higher, but at least you can now find a good Gucci purse.

Traditional management processes were neither designed nor suited to operate in a diverse and fast -moving environment. The pain increased as organizations struggled to adapt to a series of events that rocked the status quo: the Internet bubble, 9/11, the aftermath of Enron and Sarbanes-Oxley, Hurricanes Katrina and Rita, the Asian tsunami, and then the housing market/subprime meltdown/credit crisis of 2007- 2008. Volatility became the norm and predictability flew out of the window, yet companies still slaved over detailed budgets and forecasts that described in mind-numbing detail exactly what they would do long into a, by now, very uncertain future. Of course, the only thing all this wonderful detail achieved was to create even more variances. The problems are systemic but thankfully there are only six of them!

Strategic Plans Are of Little Use in Times of Great Uncertainty and Volatility

At many companies, strategy has become mechanical and inflexible, witness General Motors’ stubborn focus on trucks and sport utility vehicles as the source of profitable growth or Kodak’s reluctance to acknowledge the rise of digital photography.

All too often strategic planning has been reduced to a multi-year financial planning or budgeting exercise that produces some arbitrary financial results rather than a roadmap for the achievement of a tangible objective that clearly defines success. The result is that any material variation from the expected course results in a loss of confidence and creates tremendous uncertainty that can paralyze decision making.We need to revisit the original military origins of strategy to regain some perspective. B.H. Liddell Hart in his classic book Strategy1 described eight axioms of strategy, five of which provide a valuable test of the quality of any business strategies:

1. Adjust your end to your means. Match your desire with your capabilities.

2. Keep your object in mind while adapting your plan to circumstances.The recession of 2007-2009 has clearly changed the pace and tactics that companies can follow, but it does not have to change the end game. Some have seen it as an opportunity: Disney, Johnson & Johnson, Pfizer, Oracle, and IBM all took advantage of the opportunity to acquire assets at attractive prices.

3. Take a line of operation that offers alternative objectives. Both General Electric and IBM have successfully transformed themselves from primarily product companies to add in a portfolio of service - related offerings that complement their historic core at higher margins and with more attractive growth prospects.

4. Ensure both plan and dispositions are flexible. The inability of U.S. automotive makers to rapidly adjust their product portfolios to changing consumer and economic conditions, reduce labor costs, (particularly healthcare and retirement costs), or rationalize bloated dealer networks drove two of the big three into bankruptcy.

5. Do not renew an attack along the same line (or in the same form) after it has once failed. How many times has someone tried to compete with Southwest Airlines? We have had Continental Lite, United’s Ted, and Delta’s Song. Kmart spent thirty years trying to compete with Wal-Mart before succumbing to a merger with another fallen giant, Sears. Meanwhile, Target was able to succeed by offering a differentiated approach that allowed it to thrive in a Wal-Mart world.

Operating Plans and Budgets Provide a False Sense of Security

“It’s O.K., it’s in the budget ” is a comforting response to any question; however, what if the budget was based upon a flawed set of assumptions about the future? How many budgets developed in the waning months of 2007 projected oil prices rising to $147 a barrel and falling to less than $35 just a few months later, or anticipated a 20 percent decline in car sales or an 8 percent decline in consumer spending over the 2008 holiday season?

The traditional approach to planning and budgeting assumes a “business as usual” view. Past performance is seen as an accurate predictor of the future and for half a century that worked—most of the time. Rarely do plans contemplate seismic economic, political, or social events, nor do they spend much time discussing the impact of changes in customer and competitor behavior on the business. Operating plans and budgets provide an almost completely internal view of how the business is expected to perform in the future. You can find out precisely how much a company plans to spend on travel but try finding out how much it plans to invest in keeping its best customers. Plans and budgets describe the accountant’s view of a business, not the manager’s view of the business. In today’s world, that’s a joke.

Management Reporting Is Driven by an Obsolete View of the World

Management reporting follows the same format as the budget and it is about as useful. How many companies can tell you how much they spend on air travel and can also tell you how much of the total travel spending generates incremental revenue? Very few. We have an accounting and reporting model that is driven by what we spend money on, not why we are spending the money. Despite investing billions in data warehouses, data marts and management information systems, few managers have access to just the right data they need to make effective decisions.

Incentive Compensation Rewards Poor Performance and Penalizes Outstanding Performance

Most organizations base their bonus and reward systems on meeting the plan or budget. In light of the difficulty in creating a credible budget (see above), how smart is it to base rewards on a meaningless set of numbers? Actually, it is much worse than that. Managers are often richly rewarded for sub-par performance and penalized for truly heroic performance simply because the budget comes nowhere close to predicting what actually happens.

Investments in Staff Education Have Been Inadequate and Misdirected

CEOs are always going on about how people are their organization’s most valuable resource, yet at the first sign of trouble the cuts in training are swift and deep, revealing the true value most organizations place on staff development. Beyond the volatile level of investment, the focus of much of the investment is flawed. Training and education has not adapted to the skills that determine success in today’s world—managing uncertainty and ambiguity, leveraging new technologies to gain competitive insights, adapting to a global business environment, and working collaboratively across borders are rarely part of the curriculum. We continue to train people to use Microsoft Excel but spend little time helping them understand the story behind the numbers they are playing with.

Technology Has Failed to Improve and in Many Cases Has Reduced the Effectiveness of Management

Organizations have invested billions of dollars, pounds, euros, and yen in technology over the last half-century. The impact has been significant, and yet in terms of the management process, all too often the result of automation has simply been more data, not better information. Organizations are also locked into a calendar-driven cycle of reporting. Information is reported on a weekly, monthly, or quarterly cycle regardless of what is happening in the real world. All too often reports cannot be made available until the accountants have closed the books, which can take 5-10 days.

If we are to adapt to a turbulent but very exciting world, we cannot keep managing real-time businesses with batch processes. We need a new set of practical tools that are tuned to a world where:

• Volatility will remain high due to the ever-increasing interdependence of customers, suppliers, regulators, and markets.

• Events formerly viewed as extraordinary are now part of the normal course of business. All companies need to be able to understand how they will respond to unexpected material events, both positive and negative.

• Opportunities for competitive advantage and differentiation will increasingly depend upon an organization’s ability to lead markets (e.g., Apple’s purposeful obsolescence of its own products to maintain market leadership) or exploit opportunities (McDonald’s and Wal-Mart’s ability to capitalize on consumer’s renewed focus on low cost).

We need a new generation of informed, skeptical, risk -aware, and decisive managers. As Alfred P. Sloan commented half a century ago: “The rapidity of modern technological change makes the search for facts a permanently necessary feature ... ”2

What I Really Think!

Enough of polite and reasoned argument, here is what I really think:

We’ve finally lost it! All sense of perspective has disappeared from the practice of management, buried under the overwhelming weight of methodologies, theories, best practices, models, tools, systems, processes, benchmarks, scorecards, competencies, mission statements, and value propositions. Today’s increasingly competitive, volatile, and uncertain world should be causing every executive to challenge conventional management wisdom. How can something as simple as delivering a product or service that someone wants, at a price they are willing to pay, while providing a reasonable return to investors have become so complicated? Common sense has been subjugated by nonsense. It’s all “BS” and its time to fight back.

The Berlin Wall fell more than twenty years ago, but communism is alive and well in the corporate world. Companies have spent billions on standardizing almost every aspect of their operations. Repeatable processes and global standards are the name of the game. We increasingly live in a one-size-fits -all corporate world where conformity and uniformity are prized. Over the past few decades, corporations have charged herd-like after each new management fad. It is a long list: strategic business units, zero -based budgeting, activity-based costing, core competencies, total quality management, six sigma, lean manufacturing, balanced scorecards, shareholder value added (SVA), rolling forecasts, re - engineering, best practices, outsourcing, off-shoring, enterprise resource planning (ERP), web-enablement and virtualization, to name but a few. Each promised to revolutionize corporate operations and turbocharge the bottom line; yet while substantial gains have been made in productivity, quality, cost, and other key measures, are today’s companies better able to navigate today’s turbulent world? Up until 2008, many thought the answer was yes, but not now.

It is interesting to note that the companies that stand out from the crowd do so for one very simple reason—they do something a little different. Think Apple, Google, Southwest Airlines, Toyota, Nintendo, Disney, or Wal-Mart. Sure they standardize where it makes sense, but they also understand that differentiation equals innovation. You know what these companies stand for, and they provoke a reaction from you. Now when was the last time you walked down High Street or through the mall and thought—that’s a really distinctive shoe shop; or name a real estate agent that sets your heart aflutter by the uniqueness of the service he or she provides? How about a network news show? A gas station? An accountant?

The war on management communism starts now and here is the manifesto. “Root out pomposity and egotism, isolate management stupidity, ask the dumb questions, sacrifice all the sacred cows, and above all, keep it real.”

It is time to introduce some common sense. It doesn’t have to be that complicated. Unfortunately, many academics, gurus, consultants, and technology vendors profit from complexity, but I know that in the back of your mind, you are just a teeny -weeny bit skeptical. You know most of it is absurd, but how do you break out of the straitjacket? After all, it is almost heretical to question the wisdom of so many people—many of them your teachers, professors, and bosses. Are you brave enough?

Notes

1 B.H. Liddell Hart, Strategy (London: Faber and Faber, 1967).

2 Alfred P. Sloan, Jr., My Years at General Motors (New York: Doubleday, 1963), p. xxi.

Chapter 1

Missions, Visions, and Other Expensive Pastimes

Mission and vision statements are now organizational imperatives—which in plain English means that no self-respecting organization would be seen dead without them. No business dares venture into the marketplace without a pithy statement of its mission and vision. Any study of high-performing organizations will identify the pervasive presence of these “softer” strategic elements. Southwest Airlines, General Electric, Microsoft, Johnson & Johnson, Nordstrom, and Toyota all have distinctive styles, cultures, and values that are at the heart of much of what they do. Unfortunately, any list of failed entities will also contain a high proportion with crisp mission and vision statements. As Johnson & Johnson’s CEO, William Weldon, commented, “Some of the best business principles ever written were Enron’s. It’s just an extraordinary document.”1

So what’s the difference between success and failure? It is pretty simple really—you must walk the talk. Missions and visions must guide behavior and decision making; otherwise, they are just empty words. Mission and vision statements that exist only on paper are a great leading indicator of an organization that will struggle in times of great opportunity never mind times of stress. Of course, there is no chance that Cruciant’s mission and vision statements will be empty promises.

Fiction: Meeting Room at an Exclusive Country Club, Northern New Jersey—February 2007

Three consultants from Innovisions, a firm specializing in the “innovative articulation of corporate missions and visions” are leading the Cruciant executive team through a facilitated workshop to craft new mission and vision statements that “clearly represent everything Cruciant stands for to all stakeholders.” After an opening presentation that describes the role of mission and vision statements in inspiring customers, associates (the politically correct term for employees), and other stakeholders, the management team is divided into three groups to brainstorm possible elements of Cruciant’s mission and vision. An Innovisions consultant leads each group through a discussion of the “words or phrases that capture the essence of Cruciant.” After 45 minutes the teams reconvene and share their ideas. A sampling of the words and phrases resulting from the exercise includes innovative, responsible corporate citizen, inspiring, ethical, insanely great, global, technologically advanced, respectful, respected, people-centric, empathic, authentic, growth-oriented, a great place to work, talented, exciting, customer-focused, and trusted.

For the next two hours there is considerable, sometimes heated, debate about many of the attributes during which a number of the executives reveal a previously hidden passion for lexicography. This is highlighted by a rather distracting argument about whether the correct word to use is empathic or empathetic, during which an online dictionary and thesaurus are consulted. (Author’s note: At a nonprofit on whose board I sit, we had this precise debate; it consumed the best part of three months over two board meetings and numerous email exchanges.)

Eventually, the consultants manage to bring some order to the proceedings and lead the management team through a prioritization and ranking exercise to come up with a short list of mission and vision attributes. As the meeting draws to a close, Innovisions undertakes to take the “great output” from the session and develop a few “drafts, or straw-man mission and vision statements” for the management team to consider.

As the meeting breaks up, four members of the management team duck into the locker rooms and emerge a few minutes later on the first tee, while the others head back to the office.

Over the next few weeks there are a couple more sessions during which the wordsmithing debate reaches new heights. The empathic/ empathetic debate continues, and one of the team members even consults his former English college professor to seek an opinion. Unable to reach consensus, the group finally decides that being empathic or empathetic isn’t really that important after all (the same conclusion we reached at our nonprofit). Finally, they agree on the following mission statement:

“Cruciant creates insanely great products that inspire our customers to become our strongest advocates. We measure our success by the value we deliver to our customers and shareholders and the loyalty of our hugely talented associates. We will always adhere to the highest ethical standards in everything we do and will be acknowledged as an outstanding corporate citizen.”

The accompanying vision statement reads:

“Cruciant will be one of the most respected companies in the world, recognized as a great place to work, a source of breakthrough innovations and a leader in environmental sustainability.”

CEO Steve Borden is happy the process is complete and he is anxious to get on with growing the company; however, at the next management meeting he cautions his team that “Now the hard work starts. We have to live and breathe the mission and vision in everything we do. It is your job as leaders to ensure that all our associates buy into what we are trying to accomplish.” Everyone nods his or her head.

A few weeks after signing off on the mission and vision statements, large posters start to appear in every company facility and all employees—sorry, associates—are given a handy laminated card with the mission and vision statements printed on one side. On the other side is a list of actions that every associate can take to “Walk the talk at Cruciant.” It includes such penetrating advice as “be respectful to all your fellow associates” and “always ask yourself, is this in the best interests of Cruciant?”

A comprehensive series of mission and vision briefings are held across the company at which teams of associates discuss what the statements mean to them and how they can “live the mission” on a daily basis. A new catchphrase pops up on bulletin boards, t-shirts, and coffee mugs, “Is it insanely great enough?”

A few weeks later, Henry, Cruciant’s CFO, scrawls his initials on Innovisions invoice for $375,000 to signify its approval for payment.

Facts: “We Are on a Mission from God”2

Scott Adams, through his comic strip creation “Dilbert,” defined a mission statement as “a long awkward sentence that demonstrates management’s inability to think clearly.”3 Like most humor, it is painfully close to the truth.

The first problem with mission and vision statements is trying to understand the difference between them. While researching an earlier book of mine, Best Practices in Planning and Performance Management (John Wiley & Sons, 2007), which has achieved some renown as a cure for insomnia, I spent quite a bit of time seeking a clear definition of the difference. At the time, I failed. The best I could come up with was the following from William Drohan:

“A vision statement pushes the association toward some future goal or achievement, while a mission statement guides current, critical, strategic decision making.”4

I am not sure this helps much, so here is my own humble attempt to differentiate between them:

• Vision: Describes a dream or goal.

• Mission: Describes a way in which you would like to fulfill the vision.

Despite the tremendous investments of both time and money that organizations make, most mission or vision statements are worthless. The supposed objective is to create a short, pithy statement that, in the words of one nameless commentator, “motivates the type of individual behavior that maximizes the probability of achieving strategic objectives.” My own unscientific research indicates that maybe one in twenty associates can accurately recite his or her employer’s vision and mission.

Despite my cynicism, there are mission and vision statements that work well. I hate to be yet another Google sycophant—after all, it is well on the way to becoming the Microsoft of the twenty-first century—but I love its mission statement. No one is left in any doubt as to the company’s modest aspirations!

“Google’s mission is to organize the world’s information and make it universally accessible and useful.”5

This is what a mission statement should be. It is ambitious, unambiguous, and to geeks like me, exciting.

Mission and Visions Twenty-First-Century Style

In recent years, mission and vision statements have become as much about marketing and strategy as they are about motivating employees. A great example is Lululemon—where do they get these names? Lululemon is a fashionable retailer focused on the yoga lifestyle. Founded in 1998 with a single store in Vancouver, British Columbia, it has grown to over 100 outlets around the world. Lululemon is the latest in a long line of health and fitness brands that probably started with Nike’s waffle-iron-soled running shoes in the 1960s. Being cool also means that the company is rather full of itself, as its website demonstrates.

On the day I first looked at the site, it was touting that one of the key advantages of shopping online was being able to do so in the nude. The mental image this created confirmed that I was not their target demographic. The site went on to explain Lululemon’s growth strategy: “Although the initial goal was to only have one store, it was soon obvious that to provide a fulfilling life of growth, family, salary, and mortgage for our amazing staff, we would have to provide more opportunities. It was really a matter of grow or die because active minds need a challenge.” In a strange way, it is very honest—Lululemon is saying that it is in business to make money and have fun—customers and products are merely means to that end.

Lululemon’s mission is described as “creating components for people to live a longer, healthier, more fun life,” and one of their core values is described this way: “Fun—When I die, I want to die like my grandmother who died peacefully in her sleep. Not screaming like all the passengers in her car.”6 Are we supposed to take this seriously? I don’t know, but it certainty grabs your attention.

The site also offers up The Lululemon Manifesto, offering such pithy homilies as, “Friends are more important than money” and “Dance, sing, floss, and travel.” This is not a lifestyle brand but a cult. But at its heart, Lululemon is all about marketing. In a March 2009 interview, CEO Christine Day invoked the first commandment of modern marketing when she described the company’s secret for success as, “If you want to be successful in this industry, it’s about being authentic.”7

Being authentic appears to be the most important attribute for anyone seeking a place in today’s branded lifestyle world; although being customer-centric and environmentally responsible follows close behind. At Lululemon everyone takes authenticity very seriously; the company’s community director emphasizes the importance: “Your job is pretty easy when you are authentic with people.” I guess authenticity is very important when selecting your $54 Basic Yoga Tote; after all, no authentic Indian yogi would be seen dead without one.

Lululemon has successfully wrapped its relatively humble products, workout tops, bras, and hoodies, in a lifestyle of calm and vitality. While I may make fun of them, Lululemon’s performance is no joke. During 2008, not exactly a banner year for retailers, the company increased its sales by 30 percent to more than $350 million and its earnings by 10 percent to $56 million. So beneath all that authenticity is a well-run business.

Even boring businesses can seem more attractive with a pithy mission or vision statement. Federal Express makes package delivery sound sexy with its vision: “By accelerating global connections, we provide access to new opportunities and empower people and businesses with more choices and greater confidence.”8

Other companies are less direct, opting for vision statements that give little hint of what the company actually does. For example, BMW promises, “The uncompromising pursuit of the superlative,”9 and Alcoa modestly strives “to be the best company in the world—in the eyes of our customers, shareholders, communities and people.” Tesco, the UK supermarket leader, seeks “to create value for customers to earn their lifetime loyalty.”

Such statements do not limit a company strategically; as long as BMW is both uncompromising and superlative, it can fulfill its vision. Similarly, Tesco can pursue many diverse lines of business and still fulfill its core purpose of creating value for customers. However, such statements offer little insight and, frankly, appear vacuous. No doubt we can expect BMW to launch an uncompromisingly, superlative line of toasters, while Tesco will no doubt expand into a range of highly effective erectile dysfunction treatments that will put a smile on the face of all its customers, thereby securing a lifetime of gratitude and hence loyalty.

Mission statements can be boring and yet still effective. Cemex, the Mexican building materials company, is clearly not as sexy a company as Google, and its mission is consequently more mundane:

“Our goal is to serve the global building needs of our customers and create value for our stakeholders by becoming the world’s most efficient and innovative building materials company.”10

Despite its lack of glitz it works. It is simple and focuses on the basics of business—efficiency and innovation.

I suspect that deep in the bowels of a consulting firm somewhere a couple of nerdy programmers are developing a neat little computer program that takes all the politically correct words that can be used in a mission and vision statement and automatically generates a random set of three possible statements based upon a few simple inputs in an effort to corner the market. Unfortunately, their effort will be wasted. A company called Kinectic Wisdom already offers a product called Mission Expert, which promises to help you in “creating effective organizational mission statements” all for less than $25.

At this rate, the whole exercise will be reduced to checking a box on some form that simply confirms that your organization conforms to the world’s first globally applicable mission statement, which will be something along the lines of:

“We will be authentically innovative while being insanely focused on our customers and operating in a socially and environmentally responsible manner in pursuit of superior stake-holder returns.”

As you will no doubt have discerned, my cynicism knows no bounds and I’m only just getting started. Despite this, I am a believer in the value of mission and vision statements (I am also a hypocrite). Used correctly, mission and vision statements can serve as an effective communication vehicle both internally and externally, but it is important to keep things in proportion—a great mission statement does not make a great company, nor is the absence of one an indicator of impending demise.

Some companies have spectacularly failed to live up to the aspirations contained in their mission or vision statements. AIG in its 2006 annual report assured readers that “Financial strength is the bedrock of AIG. By putting strategies into action that enhance our strong capital position, we create value for our shareholders and investors.” Enron promised to “work with customers and prospects openly, honestly and sincerely.”

UK mortgage lender Northern Rock described the secret of its success in terms of a virtuous circle that embraced cost control, enhanced earnings per share growth, improved returns, enhanced capital efficiency, high-quality asset growth, competitive products, innovation, and transparency. Clearly, the virtuous circle collapsed during 2007, leading to the company’s eventual bailout by the British government.

Mythbuster Wisdom: The Best Mission Statements of All Time

In second place, but only by a whisker, is John F. Kennedy’s challenge to America made in a special address to Congress in 1961: “I believe this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to earth.”11 It has all the attributes: It’s short, just 29 words; heroic; unambiguous; and above all, inspiring. It probably should be number one, but I have a soft spot for a mission statement that has echoed across four decades. It first appeared in a not-very-successful, two-season television show in the late 1960s. Today, forty years later, it still resonates. In the immortal words of the organization’s CEO, Captain James T. Kirk: “Space, the final frontier. These are the voyages of the Starship Enterprise, its five-year mission to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before.” Now isn’t that an organization you want to work for?

So What?

• Keep it simple: If a fifth grader gets it, you are probably okay.

• You have to walk the talk and that starts at the top.

• Results prove words: If you say you will be innovative, you’d better deliver.

• Avoid clichés: Everyone wants to be authentic, innovative, and socially responsible—we get it.

• An enemy helps: For years Pepsi’s mission was succinct—Beat Coke; in the 1970s Honda set its sights on Yamaha in the motorcycle market and rallied behind the cry of “Yamaha wo tsubusu,” which apparently means we will crush, squash, slaughter Yamaha—not much ambiguity there.

Notes

1 Geoff Colvin and Jessica Shambora, “J&J: Secrets of Success,” Fortune, May 4, 2009.

2 Elwood Blues, The Blues Brothers, 1981.

3 Scott Adams, The Dilbert Principle (New York: HarperCollins, 1996).

4 William Drohan, “Writing a Mission Statement.” Association Management, vol. 51, 1999, p. 117.

5Google.com, September 2009.

6Lululemon.com, April 2009.

7 Danielle Sacks, “Lululemon’s Cult of Selling,” Fast Company, March 18, 2009.

8Fedex.com, April 6, 2009.

9BMWGroup.com, April 2009.

10Cemex.com

11 John F. Kennedy, Special Address to Congress, May 25, 1961.

Chapter 2

Strategy and Other Confusing Stuff

Confuse or clarify? Complicate or simplify? Strategic planning has been one of the biggest growth areas in management over the last fifty years. Today everything has to be strategic. No project would ever dare to describe itself as not being strategic. Managers pride themselves on their ability as strategic thinkers who can see the big picture by taking a holistic view of the business. It has become one of those essential attributes along with being a team player and a good communicator with exceptional interpersonal skills. Yet for many, strategy has ceased to be an effective tool. As early as 1990, Fortune magazine commented:

“At too many companies, strategic planning has become overly bureaucratic, absurdly quantitative, and largely irrelevant. In executive suites across America, countless five-year plans, updated annually, solemnly clad in three-ring binders are gathering dust—their impossibly specific prognostications about costs, process, and market share long forgotten.”

For Cruciant, strategy is seen as incredibly valuable while also providing the perfect excuse for an executive offsite meeting.

Fiction: The Four Seasons Hotel, Nevis—Early May 2007

Steve Borden strides into the meeting room just after 8 AM. He is dressed in typical executive retreat-style clothes: logoed golf shirt, from Pine Valley no less; khaki chinos; tasseled loafers worn without socks, and a Hart Schaffner and Marx blazer. His management team is already seated around the table along with a couple of consultants from the White Hot Strategy Group. Steve takes off his jacket and hangs it over the back of his chair and sits down. He opens the meeting: “Good morning, it’s great to have you all here today. First, let’s switch all Blackberries and cells off; I want one hundred percent attention throughout our sessions.

“Last night I met with The Board over dinner and they love the strategy we put together. With continued rapid growth in Asia and sustained strong growth in North America and Europe, the next three years will be the time for Cruciant to emerge as a true leader with growth in revenues and earnings that far outstrips the competition. I am looking for the stock price to hit $75 a share by the end of 2008, up from the current $32. The Board loved the focus on innovation and emerging markets. They particularly liked the opportunity to steal share from Global Local and Transoceanic as customers increasingly buy into our value proposition and the global economy moves in the direction of our value-priced, high-touch offerings.

“The only concerns they expressed were over the size of the capital investments required and the pace at which those investments start to generate meaningful earnings in today’s markets. The bottom line—it is all about cash flow. Over the next two days we need to revisit the financial model and translate the five-year view into one-year planning targets that can be used to kick off the annual planning process. Remember, 6 percent revenue growth and 11 percent earnings growth are non-negotiable targets for the next two years if we are to hit the long-term incentive payout threshold. I’m sure you agree that’s one target none of us can afford to miss!”

Steve turns to the two consultants: “I’ve asked Tom and Mitch from White Hot to join us for the next two days. As you know, they led all the work that went into the strategy and have already worked up a couple of scenarios for me around targets for the next fiscal year that can get us started.”

Turning back to the group, Steve continues, “So let’s get on with it. We will break at 3 PM today for the spa sessions; cocktails are at 6 PM followed by dinner at 7 PM. Tomorrow we start early at 7:30 AM so we can be on the first tee by 1 PM.”

The meeting starts with the consultants spending a couple of hours taking the management team through the strategy, discussing the implications for next year’s plan and reviewing the detailed market research that White Hot has completed. Not surprisingly, the research strongly supports the argument for aggressively investing in developing innovative new products specifically targeted at emerging markets. The 110-page PowerPoint presentation is well organized, in full color, and sits in front of each member of the management team in a nice leather binder embossed with each executive’s name and the White Hot logo. At the end of their presentation, Tom and Mitch suggest a break before the team splits into two sub-groups to review the two financial scenarios that they prepared for Steve.

By lunchtime the team has reconvened, and discussion centers on which scenario works best for the company. Debate is fierce. Rich (Marketing and Product Development) and Sarah (Sales) argue forcefully that scenario A is the best answer. Sarah sums up their point of view: “Scenario A is the only one that makes sense. It lays out a steady ramp up in marketing and sales efforts tied directly to the development and launch of new products. By making the proposed cuts in operations and the back office, we can hit the long-term incentive targets without too much risk of missing product launch dates. It will also allow me to make sure we hire and train the very best sales teams for each new market. As you know, when you enter a new market with new products, it is imperative to take enough time to ensure the sales force can make the case to the prospective customers. I know scenario A means we do not hit the full run rate until year three, but the overall risk is much lower.”

As Sarah finishes, Martin (Operations) starts to make the argument for scenario B: “I understand Sarah’s concerns about ramping up too fast and the risks of missing launch dates, but if we really want to own the market we must move fast. I know for a fact that Transoceanic is already gearing up production in the region, and their advance marketing team is ahead of ours in creating awareness among the target demographic. As for relying on cost cuts to make the numbers, that strikes me as a very negative approach. If we really believe the numbers in White Hot’s report, this market is enormous. We must go for it aggressively—now.”

For the rest of the day the team debates the merits of each scenario but struggles to come to closure. Steve moves in and out of the meeting—he is the only one allowed to make phone calls or check his Blackberry. During the afternoon, he does a quick interview with the Wall Street Journal where he talks enthusiastically about the company’s strong performance and exciting growth prospects. As the meeting breaks up, debate is still raging. In an attempt to bring some closure to the day’s events, Tom and Mitch offer to “take a cut” at a third scenario that seeks to balance the need to aggressively capture the new market opportunities with the risks of moving too fast. The group quickly agrees and heads off to the spa.

As they leave, Steve takes Tom and Mitch aside and says: “OK, so you are going to introduce scenario C in the morning. That’s the one we worked up last night after the board dinner?” Mitch replies, “That’s right. It should make everyone happy.”

Next morning, the group reconvenes around 8 AM, a little later than planned as the post-dinner nightcaps and cigars ran well past midnight. As soon as everyone is suitably caffeinated, Tom and Mitch bring up the slides of the spreadsheet showing scenario C. As they walk through the details, each member of management team begins to nod. There is little debate about the overall scenario; the questions now focus on detailed elements such as Rich’s: “Do you think the phasing of the marketing budget over the second and third quarters accurately reflects the ramp up in advertising?” Steve sits back in his chair with a slight smile on his face. By 11 AM the group has reached a general agreement on scenario C. As CFO, Henry Pritchett says, “This scenario provides a sound baseline for budget development and gives plenty to work with in terms of detailed tactical planning.”

After Steve outlines the next steps, it is off to the first tee before heading out to the airport to catch the company jet back to headquarters. All agree that it has been a very productive couple of days and that the downtime has been good for bonding and team building. On the way out of the meeting, Mitch, from White Hot, hands Henry an envelope; inside is the latest invoice for White Hot’s monthly retainer—it is for $275,000 plus expenses.

Facts: Yes, We Are Very Strategic

The whole subject of strategy has become too confusing. It seems that everything is strategic; otherwise, it is not really that important. Even one of the most renowned strategy gurus, Michael Porter of Harvard Business School, confessed to the dangers: “Strategy is a word that gets used in so many ways with so many meanings that it can end up being meaningless.”1 He is right.

Mythbuster Wisdom

One academic paper began, “We investigated whether the memorability-based strategy, a process supporting the rejection of non-experienced event occurrence, could be promoted through training.”2 Got that?