Thursday, 11 December 2008

Fragile Giants

When I looked up "Business Management" on the Amazon web site, I was greeted with more than 171,000 titles. How do you decide which ones are worth while? What I do is wait. Most of the management books I read are five or six years old. If they are still recommended by my friends after the buzzwords have died away, then I will crack the cover. Using this system I completely avoided TQM. Don't even ask me what it stands for!

My latest read is Good to Great by Jim Collins (2001, Harper). It is a rigorously researched study into what creates lasting success in companies. Now, here's the other reason why I read old business books: you get the benefit of 20/20 hindsight when looking at the company examples they use. For example, the companies cited in Good to Great include Fannie Mae, Freddie Mac and Circuit City. Just take a look at their share prices now!

I know that sounds like a cheap shot, and I don't mean to pour cold water on Collins' excellent research. The fact that some of his examples would no longer be classified as great companies does not invalidate the research. No, for me the lesson is that companies, even the huge great companies, are fragile. Their golden towers can be breached, and all it might take is a string of bad years, a major lawsuit or a technological innovation in a competitor's hands.

Value Your Values

Collins goes to great lengths to identify the keys to a great company. I'm not going to repeat them here, because they are meaningless without the accompanying analysis, but he does say that corporate values are one of them. He is careful to say that different great companies have achieved success with different values. For example, not every great company is customer centric or believes in a high quality product.

My point is that once you've found that sweet spot, hang onto it for dear life. Train everyone in it. Guard it with your whole corporate existence, because what the experience of the fragile giants shows is that once those values are lost, the slide from greatness can be fast.

Creative Conflict

A friend recently quoted these words to live by: "if two people always agree, then one of them is redundant." I firmly believe that there is a role for conflict in every organization. If I, as the accountant, am the steward of the organization's financial resources, then I have to be sure that they are well deployed. Inevitably that will lead to my asking probing questions of other company managers. We will probably disagree on major points, but if we continue to respect each other and listen to each other's arguments, then the result will be a better company.

Risk

How many companies really assess the risks they face? These days, "risk management" has become a euphemism for insurance, but business risks go far beyond the perils that insurance companies are willing to write policies for. For example, did the big 3 North American automobile manufacturers assess the business risk of their product line decisions? If they did, then clearly their analysis was faulty.

I am reminded of the words of Thomas Carlyle, "To the blind, all things are sudden", as quoted by Marshall McLuhan. The position of the big 3 has been being challenged for years by smaller, more efficient foreign cars. Despite the words of the top executives when they went, cap in hand, to the Senate, the only thing that we couldn't predict was exactly when the dam would burst.

Are we accountants fulfilling our role as the voice of prudence and financial stability? Are we still respected members of the senior management team? Or are the deals being made behind our backs?

Like a Marriage

Marriage relationships mature and change over time. In the early years, you have the excitement of facing obstacles together. Even though they may have been poor and struggling, if you ask people who have been married a long time when they were happiest in their marriage, many will point to those early years. I believe working at a company that is striving for greatness can be like that. The early times are exciting. You see yourself as the proverbial David, slaying the giant. Later on, when the goals have been met, how do you keep complacency from seeping in? Apple has been accused of eating its young, by launching new products that compete head to head with the existing product line. Maybe this is to keep the managers sharp as well as the technology.

Bottom Line

At the Church, we spend a lot of management, staff and volunteer time discerning what our ongoing purpose is in the world. Why are we here? What principles and priorities should guide our actions? Whom should we help? What are we being called to do? Even if you are not a church, you would be wise to ask those questions and live by the answers.

2 comments:

Giovanna Garcia said...

What you said are very true. My favorite is where you said business is like a marriage. That is how I treat all my partnership like a marriage.

Thank You,
Giovanna Garcia

Bill Kennedy, CA said...

Hi Giovanna,

Thank you for visiting. I like your approach to imperfection!

Bill