It’s Not For the Money

Shannon was staring at her desk. She didn’t look depressed, but certainly not happy.

“What’s up?” I asked.

“Not much,” she replied. “I was really ready to come back to work from the holidays, but yesterday was a barn burner. Ever since I was promoted to manager, things have been different around here. It was so much simpler when I just came to work and punched a clock.”

“So, why did you want to become a manager?”

Shannon furrowed her brow. “I don’t know. I just got promoted.”

“Why didn’t you turn it down?”

“I never thought about. It was a promotion, I got a raise.” I could see in her face that she had never explored this question before.

“That’s the reason most people become managers,” I said, “for the money. But if that’s the case it never lasts. The second reason is ego, you know, all the authority to push people around. But that doesn’t last very long either. Management is hard work, times get tough and if you are going to survive, you have to discover why you are drawn to be a leader.”

And so I left Shannon to struggle with the same question I am asking you. Why are you drawn to be a leader?

To All, a Good Night

Originally published Dec 2005.

As Matthew looked across the manufacturing floor, the machines stood silent, the shipping dock was clear. Outside, the service vans were neatly parked in a row. Though he was the solitary figure, Matthew shouted across the empty space.

“Merry Christmas to all, and to all, a good night.”

He reached for the switch and the lights went dark. He slid out the door and locked it behind.

We hope you all have a wonderful holiday. Management Blog will return on January 4, 2023.

Merry Christmas and Happy Holidays. -Tom Foster

Willie Sutton Strategy

Why did Willie Sutton rob banks? Legend says Willie robbed banks because that’s where the money was.

We’ve talked about strategy over the past couple of weeks because many of you are engaged in strategic planning. Successful companies bring their (right) product or service to the right market at the right time in the right way.

Strategic planning is not to create tactical goals for the following year, but to examine those external systems that will have an impact on your long-term success. Willie Sutton may lack moral turpitude, but he knew where the money was.

The Trend is Your Friend

“But these regulations are designed to stifle business,” Rory complained. “The government rules that we play under are political initiatives designed to drive us under.”

“Then, what are you waiting for?” I asked.

“What do you mean?” Rory replied.

“Are you waiting for the next political election, hoping for a new regime that will return your operating climate back to the way it was?”

“That would be nice,” Rory’s face lit up.

“Nice is like hope,” I said. “Ain’t gonna happen. Even if you do win a political victory, the likelihood of a return to the good old days will not happen. Instead of fighting or waiting, figure out how to take advantage. The trend is your friend.”

Leveraging External Systems

“I am sick and tired of the government putting things in the way of our growth,” Rory said. “We’ve got a good business, but all the regulations are killing us.”

“Indeed. I see that,” I replied. “So, why did you decide that this was the business to be in?”

“Because we are good at it,” Rory beamed trying not to show too much pride.

“May I use some exaggeration?” I asked, then continued without waiting for a response. “If you were good at manufacturing music CDs with the highest quality, at an operating cost lower than any of your competitors, would you choose that as a business model?”

“Your example is absurd,” Rory smirked. “An operating cost lower that any competitor is ridiculous, there would be no competitors.”

“And, why is that?”

“Because nobody buys CDs anymore,” he explained. Then stopped. “I wouldn’t be in that business, it would be a poor choice.”

“Rory, the most strategic decision you make is to decide what business to be in. Your market, market demand is an external system in which you have little control. Government regulation is an external system over which you have little control. You are fighting the headwinds of your market, fighting the headwinds of regulation. Pick (or adapt) your business model that doesn’t fight these external systems, but takes advantage of them.”

External Systems that Impact Internal Systems

From the Ask Tom mailbag –

Question:
When I look at our strategic plan, it is mostly a mathematical increase in revenues over last year and some projects to cure some of our operational problems. If that is all it is, why is there such a focus on strategic planning?

Response:
Unfortunately, for most companies, your observation is correct. Most strategic plans are not strategic, they are tactical. Tactical planning is important, but it is rarely strategic.

Your question is why plan. If we were successful in identifying our competitive advantage and effective efforts to operationalize that advantage, why pow wow to come up with a new plan?

We have to periodically pow wow because of this one factor, change. Change requires us to reexamine our assumptions, understand our marketplace, revise our thinking, adapt our internal systems and track our progress in the face of that change.

Most planning is an attempt to resolve operational issues with our internal systems, that is still a noble goal. Strategic planning is an examination of those external systems that have an impact on the way we organize and operationalize our internal systems. Here are five important external systems you might consider –

  • Market (external system). This external system includes your best customer, different customer segments, your best competitor, second tier competitors, vendors and suppliers.
  • Regulatory (external system). This could be financial regulation, like taxes, environmental regulation, tariff regulation, permit regulation.
  • Finance (external system). As companies grow beyond the resources of stockholder investment, reliance on external sources of capital becomes more important. This includes simple revolving lines of credit, institutional term debt, private equity. All come with strings that have an impact on the way you internal organize. Banks call these covenants. Access to capital markets is seeing an extraordinary shift with increased interest rates depending on market risk.
  • Labor (external system). We used to look at unionization and unemployment statistics to get a handle on our access to labor. Now we have to include governmental intervention, student loan forgiveness, cultural impact on employment conditions (unlimited vacation, virtual roles) and accountability in those conditions. It’s all part of your business model.
  • Technology (external system). Technology has changed the way that we work. Meaning, technology has changed the way we make decisions and solve problems. Every business model is shifting to incorporate technology and make it effective with a constant eye to the next technology which will bring the next change to the way we organize.

It is these external systems that will have the most impact on your change in strategy. This is where I always start. What’s changed?

Casual Opinion

From the Ask Tom mailbag –

Question:
You appear somewhat down on SWOT analysis as a planning tool?

Response:
It’s not the analysis part, it’s the opinion part. Most SWOT exercises are not analysis, but rather opinions, not tested by reality. Chuck Bamford, in his book Strategy Mindset tells the story. He was able to teach his eight year old son the SWOT methodology and asked him to conduct an “analysis” of his third grade class in school. Shockingly, his son declared the strengths of recess and lunch.

In our companies, we make million dollar bets on strategy. That strategy has to have some relationship to reality and requires a much harder examination than casual opinion.

List or Analysis?

“Of course, we are doing strategic planning this year,” Allison smiled. “Each year, we go off-site, the central exercise is our SWOT analysis.”

“But, you said you were disappointed over the past few years with your planning efforts?” I asked.

Allison nodded her head. “You are right. Sometimes it seems our planning is a rote exercise to build some SWOT lists and call it a day. The effectiveness of the exercise, though completed and compiled in our single page business plan, isn’t very helpful when the firefighting of the day kicks in. Sure, we pull the plan out every quarter and walk through its initiatives, but at the end of the year, we are still firefighting in spite of the plan’s guidance. Becoming the premier provider of goods and services to our targets markets seems like more bluster than planning. I mean, we wanted increases in revenue, gross and net profit, but it appears to be more intention that a methodology.”

“But, SWOT is a tried and true exercise,” I observed. “Why do you describe it as lackluster?”

Allison was quiet. “SWOT is supposed to be an analysis. Seems like more of a list than analysis. We are comfortable making the list, not so much on the analysis. And what we are really comfortable with, is the firefighting of the day.”

We Improvise

“Not one plan, but four plans?” I wanted confirmation from Roberto.

He nodded. “I was in the Marines. We had a saying, ‘We don’t plan. We improvise.’ But, improvisation only works if you are prepared with a plan. What’s the first part of every plan?”

“Purpose,” I replied. “We all have intentions, mostly unspoken. A plan is created when intentions become a documented purpose.”

“Improvisation only works when there is a commonly agreed-to purpose,” Roberto continued. “Without a purpose, improvisation becomes chaos. The chaos may be interesting, but it accomplishes little. Purpose drives the next step.”

“Visualization,” I replied.

“Everyone on the team must agree to the purpose and hold a similar vision of what that future state looks like,” Roberto explained.

“How do we know the picture each holds is close to the same picture of their elbowed teammate?”

“Simple,” Roberto grinned. “They talk to each other. It’s a discussion. It is the necessary work of improvisation. When all hell breaks loose, we have to be prepared to make the micro-decisions of the moment, in concert. Serendipity doesn’t happen by random chance. Serendipity is all about our intentions.”

“And?”

“And only then can we create the mile markers to chart our progress, the goals, objectives of our micro-decisions. What looks like serendipity only occurs when we create the context of a plan in which to operate. It may appear we are winging it, but our actions require preparation to be effective toward our purpose.”

Scenario Planning

“You had a pretty good year, last year,” I said. “What was your secret?”

“It was a solid plan, flawlessly executed,” Roberto flatly stated with a smile.

“I know that’s not true,” I replied. “I mean, I know you had a plan, but, that’s not what happened.”

Roberto’s smile turned into a grin. “Your observation is correct. We didn’t have a plan. We had four plans. We took the two largest variables that would impact our business and played them out in four quadrants. We played each variable up and each variable down in combination. At the time, what we thought would happen was very far from what actually happened. If we had not had three alternate scenarios, we would have been sunk.”

“And this next year?” I asked.

“Same. We thought we were finally getting back to normal, then Ukraine, protests in China and Iran, now a looming rail strike. You have to plan for contingencies, not just what you think will happen.”

A tip of the hat to Gideon Malherbe.