In order to help those to whom this may be a new experience, I will relate the results of my observations of the predictable steps that top level managers make that help a company along the path to destruction.
Step 1: Destroy the Information System
It is a scary fact that many managers are unfamiliar with the advantages and sheer power good information can provide. Sometimes this is the fault of the knowledge workers, the controllers, the accountants, the analysts. Sometimes it is superstition with regards to the computer, with the manager being afraid of the ghost in the machine. Either way, the result is the same. The manager will avoid leveraging the information systems at his or her disposal to help prevent the incumbent disaster. At best, this will produce lop-sided, potentially lucky decision making. At worst, this will be a means to stroke the ego of a manager who feels that "I can do it better than anyone."
The problem doesn't stop with existing information systems either. In my experience the first action any company will take when presented with a financial loss due to an information crisis is eliminate the solution to the crisis. I have witnessed a company hemorrhage cash due to two different sales people in the company undercutting each other in the same city, yet management would not spend the $4,000 required to prove that this was happening. (In all, it cost the company well over $500,000 in lost sales revenue and two years of market development. In the end it took a staff of three people devoted to sales reporting to produce the same reports the system would have.) For some reason, management feels that information systems and infrastructure spending is the most discretionary spending of all. This is folly. As in so many different avenues of life "he with the best information the fastest will win." This is as true for sales, finance and cost control as it is for anything else.
There is, however, a worse situation than even this. If a company decides to implement a solution, but doesn't wish to spend the money to set it up properly. Too often in this technological age, people presume that a computer will solve all of their problems, and will implement a piece of software claiming "it's only $4,000." They have failed to take into account that the software may be that much, but the cost to set it up properly, change the business processes to interact with the software, train the staff, and learn to operate the system to the requirements of the manager will likely cost easily twice as much as the software. If any of these steps are missed, the software will disrupt the functioning of the company at worst, or leave the staff feeling powerless to save themselves at best.
The problem doesn't stop with existing information systems either. In my experience the first action any company will take when presented with a financial loss due to an information crisis is eliminate the solution to the crisis. I have witnessed a company hemorrhage cash due to two different sales people in the company undercutting each other in the same city, yet management would not spend the $4,000 required to prove that this was happening. (In all, it cost the company well over $500,000 in lost sales revenue and two years of market development. In the end it took a staff of three people devoted to sales reporting to produce the same reports the system would have.) For some reason, management feels that information systems and infrastructure spending is the most discretionary spending of all. This is folly. As in so many different avenues of life "he with the best information the fastest will win." This is as true for sales, finance and cost control as it is for anything else.
There is, however, a worse situation than even this. If a company decides to implement a solution, but doesn't wish to spend the money to set it up properly. Too often in this technological age, people presume that a computer will solve all of their problems, and will implement a piece of software claiming "it's only $4,000." They have failed to take into account that the software may be that much, but the cost to set it up properly, change the business processes to interact with the software, train the staff, and learn to operate the system to the requirements of the manager will likely cost easily twice as much as the software. If any of these steps are missed, the software will disrupt the functioning of the company at worst, or leave the staff feeling powerless to save themselves at best.
Step 2: Get Lost in Cost Minutiae
If you were to hire an employee to oversee the manufacture of wood stoves at a price that exceeds anyone else in the company, yet he spent the majority of his time sourcing a supplier to wash the mirrors in the bathroom, you would likely discipline him or fire him, would you not? Yet, this is happening every day in most companies in one fashion or another. Face it, managers are expensive. They are the more flexible people in your organization, usually blessed with a plethora of skills that go beyond the mere performance of the job. They are the multi-function tools, and the higher up on the food chain they are, the more skills they possess. Why, then, do these people spend their time going through the most minute of costs to save a dollar?
The truth is that in order for these managers to "save money", they usually don't have the guidance necessary to understand that if it takes them hours to save the company $20, the company isn't getting a good deal. I have seen managers pore over telephone bills for three or four hours, only to scream "eureka" when they find a $15.00 error. Their time would be better spent standing still in front of the staff; at least the staff would have the illusion that their manager cares about them. The sad truth is that managers that engage in this kind of activity haven't separated the idea of personal finance and business finance in their head. A $15.00 saving might be worth a labourer's time who gets $8.00 an hour to look into on his personal phone. It is not the case when the company spent $300 of the manager's time to save the $15.
The worst-case scenario of this is when the manager in question engages the services of the accounts payable clerk, or even more laughably, a lower manager to collect and collate the data for this kind of activity. This takes the problem, and in fact, compounds it. Now, instead of the opportunity cost of the manager performing such a banal task, there is the opportunity cost of the whole staff involved in the project. Unless and until there is a sustained benefit that exceeds the cost of this analysis, this should be avoided at all costs.
The truth is that in order for these managers to "save money", they usually don't have the guidance necessary to understand that if it takes them hours to save the company $20, the company isn't getting a good deal. I have seen managers pore over telephone bills for three or four hours, only to scream "eureka" when they find a $15.00 error. Their time would be better spent standing still in front of the staff; at least the staff would have the illusion that their manager cares about them. The sad truth is that managers that engage in this kind of activity haven't separated the idea of personal finance and business finance in their head. A $15.00 saving might be worth a labourer's time who gets $8.00 an hour to look into on his personal phone. It is not the case when the company spent $300 of the manager's time to save the $15.
The worst-case scenario of this is when the manager in question engages the services of the accounts payable clerk, or even more laughably, a lower manager to collect and collate the data for this kind of activity. This takes the problem, and in fact, compounds it. Now, instead of the opportunity cost of the manager performing such a banal task, there is the opportunity cost of the whole staff involved in the project. Unless and until there is a sustained benefit that exceeds the cost of this analysis, this should be avoided at all costs.
Step 3: Blame Those Who Work for You
During wartime, the only time that a soldier ever questions his superior's orders is when he is either a) unclear, or b) in violation of ethics and morals. Why is this? Because the lowest private in an army knows that he is responsible for his ethics, morals, and the orders he's given. You don't put a private on trial for war crimes (unless he alone did something atrocious), you put the chain of command on trial. The chain of command is what makes the decisions, and ultimately should take responsibility for them. Running a business is not remotely similar to running a war, with the exception of the chain of command. Without a leader, a company is nothing more than a group of people that get together for eight hours a day to hang out. The leadership is what makes the company run, gives it direction and guides its path.
Sadly, when things are going poorly in a company - and the management is poor - this is where things get out of hand. The manager in question will blame those who for him for the failures of the company. From the fact that it's losing market share to the fact that its costs are out of control, this manager will tell anyone who is concerned (usually either his manager, or the shareholders) that it is the staff creating the problem, and they should be disciplined/relocated/fired. Although this may seem extreme, I have personally witnessed this more times than I care to admit. It is around this time that the staff will start ducking for cover, sick time will skyrocket, and people will get grumpy with each other.
The main problem is that when a customer is dealing with someone who doesn't want to be at work, they know. The customer is sensitive to your business environment, unless the customer is too remote to know of you. The customer isn't necessarily the consumer, either. It could be another subsidiary of the same company, or even the parent company itself. Either way, when the staff of this manager are afraid to come to work, it creates more problems than it solves. It will obfuscate the real causes of the downturn in business, it will cloud the judgement of anyone who needs to make a decision (to the point of total intellectual paralysis), and it will confuse any attempt to determine cause and effect.
Sadly, when things are going poorly in a company - and the management is poor - this is where things get out of hand. The manager in question will blame those who for him for the failures of the company. From the fact that it's losing market share to the fact that its costs are out of control, this manager will tell anyone who is concerned (usually either his manager, or the shareholders) that it is the staff creating the problem, and they should be disciplined/relocated/fired. Although this may seem extreme, I have personally witnessed this more times than I care to admit. It is around this time that the staff will start ducking for cover, sick time will skyrocket, and people will get grumpy with each other.
The main problem is that when a customer is dealing with someone who doesn't want to be at work, they know. The customer is sensitive to your business environment, unless the customer is too remote to know of you. The customer isn't necessarily the consumer, either. It could be another subsidiary of the same company, or even the parent company itself. Either way, when the staff of this manager are afraid to come to work, it creates more problems than it solves. It will obfuscate the real causes of the downturn in business, it will cloud the judgement of anyone who needs to make a decision (to the point of total intellectual paralysis), and it will confuse any attempt to determine cause and effect.
Step 4: Blame Those for Whom You Work
Don't laugh. It happens. This will usually take the form of complaining about a "lack of support" or that the [upper management/shareholders] "don't understand the business." It is this managers job to ensure that the people to whom he or she reports know and understand the business from that perspective. Anything less is a total failure on the manager's part, and an abdication of his or her responsibility. The manager will turn the blame-thrower up the line, claiming that he or she isn't being given the necessary resources to solve the problem. Of course, this isn't the problem. The problem is - as yet - undefined, because there is no staff willing to admit that they can't report on the minutiae because the information system has been shattered. The manager claims, wrongly, that the situation is beyond their control, that it can't be fixed.
The plain truth of the matter is that the manager could have solved the problem at the outset by changing his or her behaviour, and not embarking on the 5 steps to oblivion. When presented with an information-related crisis, the correct action would be to identify the problem first. Unfortunately, because of the competitive nature of today's workforce and society in general, few people feel that they are allowed to take the time to consider a problem first. They feel that the only justification they have is in action, not strategy. Whether or not the pressure is there from the people to whom this manager reports is irrelevant. The manager will be convinced that they must act regardless of consequences, and take off in a direction no one knows, at an unknown speed for a vague destination.
The punishment of upper management (or the shareholders) will continue until either a) the problem solves itself, or b) the manager runs himself or herself out of a job.
The plain truth of the matter is that the manager could have solved the problem at the outset by changing his or her behaviour, and not embarking on the 5 steps to oblivion. When presented with an information-related crisis, the correct action would be to identify the problem first. Unfortunately, because of the competitive nature of today's workforce and society in general, few people feel that they are allowed to take the time to consider a problem first. They feel that the only justification they have is in action, not strategy. Whether or not the pressure is there from the people to whom this manager reports is irrelevant. The manager will be convinced that they must act regardless of consequences, and take off in a direction no one knows, at an unknown speed for a vague destination.
The punishment of upper management (or the shareholders) will continue until either a) the problem solves itself, or b) the manager runs himself or herself out of a job.
Step 5: Obtain Free Financing From Your Accounts Payable
Step 5 isn't really chronological, it merely represents the death rattle of a company breathing its last. Some managers (particularly the more cunning ones) will skip steps 3 and 4, thinking that if they keep the blame-thrower to themselves, no one will know that they really have no better an idea of the problem than anyone else. In order to save money, they decide that it's best to hold off on paying some of the payables. That way, they can save some interest cost, and everyone is happy. (I have no idea where people get the impression that interest cost is discretionary. That viewpoint is simply illogical. Money must come from somewhere, it's that simple.) The first expenditures that get left off the list are usually those that are a) large and b) not directly related to production. Who is it? We have a winner: government.
For some odd reason, many people seem to think that if you owe the government money and don't pay it's okay. Trust me, it's not. I've been an unfortunate victim of showing up to work to find chains on the door, and a lovely man wearing a blue uniform, carrying a gun and holding a seizure warrant asking me if I was the owner. Apparently, when one doesn't pay the government in a vain attempt to save the business, the effect is opposite.
To avoid certain regulatory problems, some managers will pick other services or goods on which to hold payment. Ultimately, this "free financing" is a fallacy, as in the end, you will have no suppliers left willing to deal with your company on your terms. There is but one way that this story ends, and that is in receivership.
For some odd reason, many people seem to think that if you owe the government money and don't pay it's okay. Trust me, it's not. I've been an unfortunate victim of showing up to work to find chains on the door, and a lovely man wearing a blue uniform, carrying a gun and holding a seizure warrant asking me if I was the owner. Apparently, when one doesn't pay the government in a vain attempt to save the business, the effect is opposite.
To avoid certain regulatory problems, some managers will pick other services or goods on which to hold payment. Ultimately, this "free financing" is a fallacy, as in the end, you will have no suppliers left willing to deal with your company on your terms. There is but one way that this story ends, and that is in receivership.
The above scenario details action with no identification of problem. The problem remains undefined through the bitter end of the company, with the company dead, the manager left wondering what he or she could have done if fully supported with a staff that would do what they're told to uncover minute details from a broken information system. It is important to remember as you watch them walk away that through their end of days, it was never their fault.
All of the above take place in a progression that may not be immediately visible to the owners or upper managers of the company. The first people that will notice a problem are the people who work for this poisonous manager. Sadly, the people who should listen to those employees likely never will. They rely upon the poisonous manager to report what those same employees have to say. The only thing that can be done to avert the inevitable disaster is to follow the progress of the company during times of crisis, and determine if the information system is still intact.
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