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Ogie Oglethorpe
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Marietta, GA
Dec 1999
time: 05:19
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quote:
Originally posted by GP
I don't just look at profits, I look at the rest of the balance sheet/income statement as well. [/cute]. To be serious, I also look at items like growth possibiliites. (do they have good R/D...defined as MORE than just are they spending money on it.) Also will look at things like how good is the management. How responsive is management to stockholder concerns. (Do they run the company as the stockholders representative or do they think it is their little fiefdom). Does the company have liability issues (wether justified or not, is not my concern. All i care is if they will have judgements against them.) Does the company have labor problems (airlines, auto companies). Is the company not laying off people when they need to or conversely laying off too readily. (Both can hurt you.)
RE: TOPIC OF FUZZIES
Agreed. As well, I think it is instructive to look at the failure of their life science strategy and to THINK about why it appealed to management...as well as why it didn't work in execution.
Science/engineering/line management followed by an MBA and management consulting.
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At the risk of being squashed  , let me try to redirect this into some topic matter prolly more interesting to both of us.
Before I do that let me latch onto one of your comments. Firstly, I appreciate now your background a bit better and although you are a consultant (bane to the managers of companies that actually live it, implement and do it ) you appear to have life/work experiences that lend themselves to real world solutions.
That being said the above and following quote have both merit but also require discussion.
quote:
No disagreement. And the interesting thing with the fuzzies is to try to decide how they fit in and what direction they push the solution. FASCINATING. Not an excuse to stop thinking though. Or to hide behind fuzzyness.
Don't anticipate my remarks. I've never advocated profit only metrics for manager compensation. For one thing, profits are only a measure of time now performance. They don't assess growth issues. I have no problem with having other performance metrics to assess managers other than the bottom line. And I agree that there are other metrics which will eventually affect the bottom line. I do disagree with incentives for behavior that is not eventually connected to the bottom line. For instance, lets say we have one company (say a software developer) where worker job satisfaction has a strong link to company performance (financially). And you have another company (chemical plant) where worker satisfaction has a weak link to company performance. In that case, I would be more interested in incenting the first manager to improve marale than the second manager. That's what I mean about THINKING through the fuzzies.
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First off aplogies for anticipating your remarks an assumption that is not always valid. In general after reading your views on companies, I believe we agree more than we disagree. However, in the first quote you clearly state your intentions to evaluate not only profit generation ability but also future growth potential taking into account liabilities etc. In the second quote you give reasons as to why certain "fuzzies" in this case worker satisfaction/morale have strong and weak dependencies on company performance. To a certain extent that is true. One can clearly see a software house with motivated individuals is going to maximize creativity and productivity. But one also needs to understand that at some threshold poor morale works the other way. You are correct in that high morale will likely have quickly diminishing returns on the evil chem/pharma/ag chemical industries. OTOH abysmmal morale in any of those same industries can have profound implications. I've had the fortune/curse of bieng in or closely associated with both. I would say there is a high degree of correlation to morale and overall operational efficiency. I've seen first hand the effects of poor morale and its effects manifest themselves in terms of:
- High turnover rate of workers
- Poor worker training
- Poor quality
- Poor inventory control and distribution resulting at times in huge inventory write offs
- Higher accident rates
- Poor facility maintenance
- Poor environmental performance
- Work stoppages
etc. etc.
It prolly nitpicking regarding the comment but it is a generalization that needs some thinking through.
quote:
Also the incentives for a middle manager have to be more related to his work center than the incentives for a CEO. The middle manager should have more fuzzy metrics in his incentives than the CEO. (Since the middle manager can not directly control profits as well as the CEO.) The CEO should have a significant (more than 1/2 for most companies) of his incentives be stock based. This gives him more of a long term outlook than making his compensation based on profits alone. (You do understand that 90% of the value of a stock is based on earnings after the current year, right?)
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Agreed that middle managers require more tactical accountabilities. My prob is that more often than not the strategic accountabilities get simply translated through all parts of an organization. So a metric such as R.O.C.E. while more valid for mature businesses is not a valid metric for startup/fledgling businesses.
I have seen many instances of bad business decisions by simply running the company in order to meet numbers/ratios and not thinking through the effects on a case by case basis.
As for the CEO having 50% or more of the compenstion being tied to the market, while I understand that philosophy I also understand the temptations and implications of the CEO trying to artificially influence the share price in order to maximize his compensation. There needs to be balance.
Finally the real meat and what I hoped we could have meaningful dialogue upon.
It has been my experience that effective organizations are typified by management who try desperately to break down empire builds and silo mentality. I have had the good fortune of working in an environment where the lines between operations/R&D/marketing & sales blurred. Each manager had sets of responsibilites that made sure they had other organization intersts in mind and consequently the best interests of the company as a whole.
I would be very interested as you have organizational consulting experience to your backgorund on hearing the hows and whys, best practices to create a nimble effective operation. Hopefully this also something Vel would appreciate info on as well.
I would suppose that best practices for orgs tend to be function of organization's size, complexity, function, market served etc,
I know its a nebulous topic, but to me fascinating as I have seen orgs that work very well and orgs that are completely disfunctional. I have a few thoughts on what works and what doesn't but I'm sure nothing to the extent of your own observations.
Course this means you'ld be providing consultation for gratis unless you can work out a fee arrangement .
Og
Last edited by Ogie Oglethorpe on 03-06-2002 at 20:35
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Capt Dizle
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Is it soup yet?
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TCO
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Richmond, VA
Jan 1970
time: 00:19
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quote:
Originally posted by Ogie Oglethorpe
It has been my experience that effective organizations are typified by management who try desperately to break down empire builds and silo mentality. I have had the good fortune of working in an environment where the lines between operations/R&D/marketing & sales blurred. Each manager had sets of responsibilites that made sure they had other organization intersts in mind and consequently the best interests of the company as a whole.
I would be very interested as you have organizational consulting experience to your backgorund on hearing the hows and whys, best practices to create a nimble effective operation. Hopefully this also something Vel would appreciate info on as well.
I would suppose that best practices for orgs tend to be function of organization's size, complexity, function, market served etc,
I know its a nebulous topic, but to me fascinating as I have seen orgs that work very well and orgs that are completely disfunctional. I have a few thoughts on what works and what doesn't but I'm sure nothing to the extent of your own observations.
Course this means you'ld be providing consultation for gratis unless you can work out a fee arrangement .
Og |
I have a decent amount of "org experience". You should be very wary of asking for consulting advice on an issue like this. It's such a fuzzy topic (and such a hard one...to be honest) that you are likely to be sold some fluffy buzzwords and some overly trendy advice. Oh they will dress it up and will do their best to make it look scientific, but it's a harder issue than evaluating a business case for entry to a new market or what have you. The other porblem is that this issue speaks much more to practical leadership and people handling issues than to technical business issues. Consultants are likely to be weaker in this area than in others based on their training/experience.
WRT the issue itself, we can talk about it. I think that you should value your own experience, academic writings (many old and not trendy...thus better), and consulting advice. In about that order.
Some of the different things that can affect this issue.
1. Amount of interaction of the workers
-size of the org (smaller better)
-physical proximity of the people (closer better)
2. Leadership
-inspirational (not necessarily rah, rah...but the kind who attracts good people. Like a top principal at a high school attracting the best teachers. For a tech company, it may be market vision or technical ability that attracts people to the leader...at least in part.)
3. "Culture"
-professional ethic (examples: USMC, McKinsey, top law firms)
-explicit discussion of cooperation as an ethic (One firm concept)
4. Incentives
-commision sales, etc, need to be examined to see the amount of disincentive for cooperation. (Not an easy solution on this one...but something to examine.)
5. Explicit goals which require cooperation
-for example growth venture, or a "save the plant venture". The obvious issue is that steady state businesses just don't have this. So don't try to make them behave like something they are not. Realize that they will be different.
Interesting question. But another thing to ask yourself (like the morale issue) is how important is cooperation/nimbleness? It will differ from situation to situation how much time/money you want to spend on this. Not something you can just push for regardless. So, for instance if having your salesmen NEVER cooperate but incenting them hard with comissions makes you more money than the reverse, go ahead and let the ugly incentives remain. Key thing is rather than "trying to make the org nimble", think about how nimble you really need to be. Than you can consider the most effective ways to get there in terms of high effectiveness, low downsides.
Last edited by TCO on 04-06-2002 at 04:23
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03-06-2002 09:46
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