A while ago I attended a panel discussion at London Business School hosted by the UK Turnaround Management Association. On the panel were experts from the various professions brought in to deal with distressed companies – legal, operational, financial, advisory, banking and the CRO (Chief Restructuring Officer). While I am, as I have said repeatedly, a great fan of turnaround professionals, to me there was a glaring ingredient missing. No one was focusing on management or the employees!
Some of you out there are already rolling your eyes and muttering – “It was management that got the company into trouble in the first place! The best thing to do is restructure the mess and replace the old management team with people who can get the job done.”
A little harshly worded on my part, perhaps, but a point of view that seems to be widely held. In fact, when I asked the question: “How do you evaluate and value the management team when you are brought in to execute a turnaround?” the reply I got was very similar. It went something like this: “If you’ve been in this business long enough you develop a nose for good talent, and bad talent.”
Doesn’t it seem odd that we business professionals have numerous sophisticated analytical models and various spreadsheet templates for evaluating cash flows, use of capital, debt and risk models, sales projections, company value formulas, and sophisticated measures like EBITDA, EVA, and weighted cost of capital, but when it comes to evaluating the capability of the management team we have to resort to “the nose”?
Yes, it is more difficult to accurately evaluate people and teams than to evaluate risk ratios and cash flows, and maybe we shouldn’t really try. What I mean is maybe the solution to a successful, sustainable business is less about the people (whether they are good or bad managers or leaders) and more about the “management processes” (or lack of them) in place.
“If you can’t describe what you are doing as a process, you don’t know what you’re doing. – W. Edwards Deming
What if the poor behavior and dismal results of the management team was in large part a result of poor business management processes? What if improving the management processes (and by this I mean processes such as meetings, product planning, budgeting, hiring, induction, promotions, performance reviews) helped the management team focus on more productive business activities? As I’ve said many times, systems and process drive behavior, which in turn creates culture. If you have a company with a poor leadership culture, look at the leadership/management processes and you will probably find a major cause of poor business performance.
First we shape our insititutions, then they shape us. – Winston Churchill
Some of you are now probably saying: “But isn’t it the job of executives to develop and implement effective management processes?” Yes, and here lies the problem: most executives don’t know how to evaluate the effectiveness of their own management processes. And often they lack the courage to change them. Let me ask a question, how many of you have worked in a company where you thought the management processes and systems were world-class? Not many I suspect.
I am convinced one of the reasons for the dramatic turnaround at Ford is because of the world-class business and management process that Alan Mulally, the CEO brought in from Boeing; replacing the old Ford systems of micro-management and cost cutting.
There have been very few studies on leadership processes. Each executive and CEO seems to have their own favorite business process for getting things done; how to run a meeting, how to review people, how to establish budgets, etc. And to be honest, most of them are crap (that’s a technical term). How do I know? Ask their customers – middle management. They will tell you what they have to put up with in terms of unproductive meetings, redundant requirements, reports that take additional manpower to prepare and are not even reviewed. The list goes on and on.
If we would spend just a little effort on gathering and evaluating world-class leadership processes we could easily come up with several best practices that when implemented with consistency, would allow good, solid executives to lead and run effective organizations. After all, not everyone is a superstar, a born natural leader with the DNA of Jack Welch or Carlos Gosen. We need to develop leadership processes and management systems for the rest of us who want to run a good business, provide jobs for the nation and deliver real value to customers.
Written and Posted by: John R. Childress
Senior Executive Advisor on Leadership, Culture and Strategy Execution Issues,
Business Author and Advisor to CEOs
Visiting Professor, IE Business School, Madrid
John also writes thriller novels!