FOCUS
The Bottom Line November 2012
15
Tired companies need to stretch
O
By JOHN GARDNER
ne of the movie releases in
the summer of 2012 was
Hope Springs, starring
Meryl Streep and Tommy Lee
Jones, who portray a couple whose
30-year marriage could best be
described as tired.
H ow m a ny c o m p a n i e s i n
today’s environment could be classif ied as tired? Or, more to the
point, how many companies today
have a tired management team and
what are the telltale signs that
identify one?
Tired management is synonymous with having a weak culture within the organization. The
more obvious signs of a weak culture include:
• Sales growth, gross margins
and operating costs well below the
industry norm
• Staff turnover, including the
loss of key employees to the competition
• High health and safety costs
• High absenteeism
• High re-work or warranty
costs
• Late job execution
Tired management spends a lot
of time storytelling about “the
good old days when sales grew at
…” They believe in myths about
the way business should be conducted, what the competition
looks like, or what customers are
demanding — rather than knowing
what is truly happening in the current marketplace. Tired management does not live the organization’s values and tends to be slow
with decision making. Unfortunately, in many cases, lethargic
leadership fails organizations to
the point where they lose their
competitive advantage.
Management is charged with
creating value for shareholders in
a sustainable manner. Sustained
value creation requires disciplined
choices that will drive performance along three dimensions:
• Creating a sustainable competitive advantage
• Achieving expected returns
on capital
• Sustaining growth
The sequence is important.
Without first creating a sustainable competitive advantage, the
drive to achieve expected returns
on capital will eventually lead to
further erosion of whatever advant a g e t h e c o m p a ny c u r r e n t ly
enjoys. Subsequently, any growth
built on this type of flimsy foundation will simply not be sustainable.
When the board or the CEO
has determined that they may have
a tired management team, what
should they do first? Examine the
metrics.
The best advice for organizations
with tired management teams:
Don’t wait to fix things.
John Gardner, chartered accountant
Successful companies have
very good metrics regarding their
own company as well as their
competitors. They make it a part
of their daily routine to review
these metrics and set improvement
targets. Companies run by tired
management either do not have
good metrics or they simply
ignore those that they do have.
Great metrics include not only an
overview of your own company’s
activities but the equivalent metrics for your competitors. An
honest assessment of the metrics
should reveal whether a management team is tired or not.
Following the review, the next
steps involve charging the CEO
with renewing and driving the
organization forward, which will
require a tremendous amount of
hard work and discipline. At this
point, the key questions to be
asked and answered include:
• Is the external environment
constantly and effectively monitored?
• Does the company’s mission
statement build commitment or
cause confusion?
• What is needed to ensure that
the people inside the organization
live its values?
• Is the company moving fast
enough?
• Are the company’s vision and
the values supported by its cultural architecture?
• Is the company measuring
and rewarding the correct things?
• Does the organization have a
winning, outward-facing proposition with employees talking about
the company with pride to customers, suppliers and everyone
else they meet?
• Does the company have a
winning, inward-facing proposition with employees talking
among themselves with the same
pride and confidence?
• Does the company have a
compelling story?
• Does it have the right leadership?
An organization will likely
need to review, adjust and quite
possibly rebuild its strategic plan
to ensure it supports renewal.
Tired companies generally have
“forgotten” to do their strategic
plan over the past several years or
have simply paid lip service to the
process.
Successful strategic planning
processes start with the development of a strong and meaningful
mission statement that is fully
understood by all employees. The
strategic plan must include a
strong definition of the company’s
brand and how it will be protected
and grown over the foreseeable
future.
This strategic plan needs to
have a full section on key metrics
and measurements, not only on
the company’s activities but similar activities of its competitors.
The plan should have a full
section on staffing, including what
talent is needed, how to get that
talent and most importantly, how
to keep it. Reward systems will
play an important part in attraction and retention. Talent is not the
exclusive domain of management,
so don’t focus only there. Talented
revenue-generating employees are
a vital part of any successful strategic plan.
All great strategic plans have a
great story, one that can be told
with pride by all employees. To be
most effective, they need to know
who they are working for and,
importantly, be able to describe
their organization succinctly and
accurately to others.
Over the past couple of months
there have been two very high
prof ile cases of boards recognizing and reacting to tired management. At Canadian Pacif ic,
several members of the board
were able to make dramatic
changes in both the members of
t h e b o a r d a n d t h e C E O. A t
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Continued from page 15
made a very high profile change
in the CEO position. In both cases
the stimulus for change was the
fact that the company was falling
behind its competition and their
respective boards reacted in a textbook and quite appropriate
manner.
The best advice for organizations with tired management
teams: Don’t wait to fix things.
Successful companies that recognize that a change in management
is necessary act very quickly. Secondly, the organization’s leadership must make sure that its best
people are deployed to take advantage of the biggest opportunities,
not just the biggest problem. A
All great strategic plans have a great story,
one that can be told with pride by all employees.
To be most effective, they need to know who they are
working for and, importantly, be able to describe their
organization succinctly and accurately to others.
John Gardner, chartered accountant
g ardner
sure-fire way to tire out a great
employee is to constantly assign
them to problem solving.
The ultimate throttle on growth
today is not markets, foreign competition or the like. It is the ability
to get and keep enough of the right
people. The challenge today for
most companies is not asset productivity. The true challenge is
people productivity. It pays not to
let a management team get tired.
John Gardner, FCA, MBA,
Cdir, is a consultant focusing on
the creation and execution of stra-
tegic business plans. He teaches
“Managing and developing your
own Management Team” at the
Institutes of Chartered Accountants of Ontario, British Columbia,
Alberta, Manitoba and Nova
Scotia. He can be reached at jm.
gardner@sympatico.ca.