For every business and every manager, there's nearly always a distance between 'where we are' and 'where we want to be'. It's the crucial divide in management, and you won't cross that divide without closing the management gap: that between what needs to be done and actually doing it.
It's a more complex process than it sounds. You must first be sure where you are. Then you choose your destination – your vision. Then you must work out the route, and how to check progress all the way. Then comes the really difficult part: doing it.
The ambitious athlete holds obvious advantages over the manager at every stage. For a start the athlete's ambitions, and thus the performance gap, are much easier to define. When Brian Lara asserted his claim to be the world's most successful batsman, clear targets were involved: among them, the largest test innings and the first first-class innings to pass 500. But when British Petroleum announced its intention to be 'the world's most successful oil company in the 1990s and beyond', what did that 'vision' mean? In many fields outside sports, success is an elusive concept at the best of times. It is especially evasive in business management.
True, business generates more statistics even than American foootball, where every move in a fast-moving game is calibrated. Just as the ultimate statistic on the gridiron is that of touchdowns and goalkicks, so in business the ultimate measure is money. That sounds simple enough: the more money you make, in relation to the opposition, the more successful you are – just like the team that scores more points. Unfortunately, that doesn't resolve the business issue. What's the right measure of money?
How should ambition be scored? Is it the absolute amount of profit, the percentage return on assets or sales, or growth in turnover, or the increase in earnings per share, or the rise in the shares themselves, or the advance in shareholders' equity? Or what? Whatever the choice, it's clear that financial numbers alone are neither be-all nor end-all. 'Best', as in sport, refers to quality as well as quantity: the quality of corporate performance outranks even quantity, just as the long term must outweigh the short.
When a company has been losing money for five consecutive years (averaging about a billion dollars a year), you would expect financial considerations to dominate its strategy. Making a return to profits was indeed very important to Digital Equipment in January 1994, when Vincenzo Damiani arrived to head its European operations in January 1994 (after 29 years with IBM, ending as general manager of Marketing and Services for Europe). He was hailed by the Wall Street Journal as someone who 'spurns vision. The new man, however, instantly drew up 'The Damiani Agenda', a succinct one-pager which wasn't financially-oriented at all. It stated boldly that…
- The overall goal is SATISFIED CUSTOMERS.
- The focus is on leadership and management actions.
- Three Objectives and Ten Action Points form the nucleus.
The three objectives were to create sustainable growth, 'increase efficiency and optimise customer-focused management systems and processes. To reach Objective One, Digital would (1) focus on small to medium-sized customers: (2) team up with partners and develop alliances: (3) optimise new opportunities for services and consulting: (4) develop specific industry and product markets: (5) improve distribution capability and market coverage: and (6) increase marketing and selling competence.
Objective Two would require (7) optimum sizing of organisation and reduce organisational structures and (8) consolidation of support activities. Finally, to satisfy Objective Three, Digital would (9) focus on processes and process ownership: and (10) 'show leadership, communicate more, and more efficiently.' To us, that agenda fits all the criteria for a vision statement. Damiani chose the destination, mapped out the route, and left nobody in any doubt over what was required. Most of that requirement was practical and measurable. But note that the words 'money' and 'profit' don't occur anywhere in the agenda.
Those words are, of course implicit. Satisfy the customers, sustain growth, increase efficiency and optimise your processes, and if you don't make profits, you must be in the wrong business. One of Britain's most 'successful' managers, monetarily speaking, once rightly told us that profit wasn't his corporate objective: profit was the reward for doing the right things in the right way. More recently, the same super-manager had changed his mind, or at least his tune: now profit was the aim. It may be a coincidence, but his group's financial performance has deteriorated since he correctly saw profit as the reward for success, not as the proper ambition in itself.
The great Konosuke Matsushita, founder of the world's largest electrical group, never changed his mind: he maintained a famous corporate philosophy around the earlier concept – that 'profit is a result rather than a goal':
'Profit comes in compensation for contribution to society. Profit is a yardstick with which to measure the degree of social contribution made by an enterprise…If the enterprise tries to earn a reasonable profit but fails to do so, the reason is because the degree of social contribution is still insufficient'.
That quote introduces two other notions of success: social contribution and 'reasonable profit'. Many businessmen will deny that profit can ever be 'unreasonable': their reaction was once epitomised by a New Yorker cartoon character, shown telling an equally hard-jawed manager that 'I've been in this company man and boy for 40 years, and I've yet to see an excess return on capital'. But plainly excess can exist: and excess may well not mean success. Overcharge for a monopoly product, for example, and the competition attracted may well reduce the excess profit to rubble.
Not only is profit alone inadequate as an objective: many companies don't pursue it, anyway. Some years back, a comprehensive study of printing companies divided them into successes and failures, using every possible criterion to separate the sheep from the goats. The differences between the two were stark on every issue of strategy and tactics – none more so than on the central matter of ambition.
Asked if they aimed at continuity, profit or growth, 53% of the failures plumped for the first, only 4% for profit, and just 14% for growth. The successes plumped equally for profit and growth, at 46% apiece. Note that the figures of the failures fall far short of 100: 19% of the relative flops had no objectives at all. You succeed in winning continuity by driving for and achieving profitable growth: but that achievement rests, in the spirit of Matsushita, on aiming to do the right things in the right way.
This simple formula has become enshrined in what can appear to be a complex business: the total quality discussed before. This measures success, not in financial terms (although the financial consequences are formidable), but in many ways, led by customer satisfaction and absence of defects. Quality is about unceasing improvement on these and other scores. Leading quality companies devote enormous energy to achieving tiny gains in figures that are already highly impressive.
Thus Motorola's five year-programme for reducing defects in its electronics business 90% by 1986 was followed by seeking the same 90% improvement by 1989 and again by 1991 – with a 'six sigma' target for 1992: that means at most 3.4 failures per million parts. Getting to 99.9997% of perfection is assuredly another measure of success, more accurate and more specific than most money measures, but also truly lucrative. The difference between that and 99% quality, or 10 defectives out of 1,000 products, may sound very little: but eliminating nine of the faulty fellows, if the profit margin is 10%, will increase profits by a tenth.
What's more, achieving this success will demand a whole chain of other successes, stemming all the way back to design. The 'total' in total quality takes this driving idea through to every activity in a company, from technical manuals and answering phones to internal audits and innovation. Ambition is thus defined as doing the right things better, and then improving all over again. It's a concept with which all players in all sports are deeply familiar. However good you are, the PB ('personal best') can always be improved, and only as a result of a chain of improvements in technique and application.
Total Quality Management can be seen as a series of PBs, specific and measurable ambitions for every process and department in the company, which continuously saves time and money by reaching consistently higher standards. This is essentially project-based work – and success in projects need have no financial dimension (other than keeping within budget). Finding a new oilfield, bringing it on stream, getting the oil to market – these are technical and logistic operations of the highest order, whose completion to plan is unquestionably 'success' and fulfilment of high ambition.
The crucial words are 'to plan'. In life as a whole, some successes are essentially unplanned, or at least unpredictable: a gambling win, buying a grimy old engraving that proves to be a Rembrandt, backing a friend whose company becomes a Klondike. But in both sport and business management, while luck plays its part, it comes most often, as the French philosopher Pascal wrote, to the 'prepared mind'. Being dropped (like Lara) at 19 is luck: going on to score a quintuple century is not. The perfect bounce of an elliptical rugger ball into your hands in the perfect scoring position is luck: but what took you into that position?
In oil and mining, outstanding exploration records are created, not just by good fortune, but by experience, expertise and that essential concentration of mind to which Pascal referred. Planned success, though, doesn't mean the exact fulfilment of a predetermined strategic ambition. That rarely happens, in life, sport or in business. It means the achievement of predetermined objectives along lines decided in advance, but modified, along with the aims if necessary, as events dictate.
In any good business, at all times, multitudinous lesser aims are being pursued in this methodical way in all of its thousands of operations. That's the essence of TQM, as noted. But the lesson of great success is that these subordinate aims are much more likely to be realised in the context of an overall, unifying thrust: that vision which is the theme of this section. You can call this an ambition, or the focal point of a value system, or whatever you wish. But without this guiding light, companies more easily get lost in the dark.
When the sceptical (or often the neutral) observer looks at the usual collection of words – like the vision statements mentioned in the previous chapter – the reaction is to query the worth of mere words. It's easy to talk about being 'best', or to specify responsibilities to employees, customers, suppliers, the community and shareholders. Credos, written statements of values, differ from company to company, but they mostly strike the same note: and it's plainly a 'soft' note as opposed to the 'hard' language of profits or defects per million parts.
Thus BP believes 'in continually developing a style and climate which liberates the talents and enthusiasm of all our people'. That is in complete harmony with jeans-maker Levi Strauss, whose 'Aspirations Statement' says :'We all want a company that our people are proud of and committed to, where all employees have an opportunity to contribute, learn,grow and advance…' What do such qualitative sentiments have to do with the crucial matter of quantified ambiitions and results? A great deal, according to facts reported in the Harvard Business Review. It found that US companies which had lived by written value statements for a generation had grown 32 times faster than the gross domestic product.
The Levi Strauss record stresses the point: from 1985 to 1989, profits rose fivefold. More important, however, the company, which had gone astray in a brief period under public ownership, had recaptured its sense of purpose: to put that in other words, it had redefined its ambitions and had turned the new words into successful deeds. Public ownership need be no obstacle to such success. Value-driven companies as different as Marks & Spencer in British retailing and Hewlett-Packard in American electronics have satisifed both shareholders and the corporate conscience for many years.
The quality process known as 'bench-marking' holds the secret: if each aspect of its operations equals or betters the standards of the best competitor, a company is well on the way to an objective which all organisations can share – to lead its competitors or counterparts on economic return to shareholders or its equivalent and on everything else. In fact, the evidence indicates that those companies which rank the interests of shareholders no higher than those of employees and customers far outdo others from the shareholders' viewpoint.
Sportsmen know the same phenomenon, best expressed in the Zen approach to sports, which emphasises total relaxation as well as total concentration. By the same token, 'trying too hard' is a sure way to drop the ball or miss the pot – like the great Steve Davis missing the simple black that would have won his world snooker final against Dennis Taylor, certainly a lesser player. Staying on top is always tough, even for a champion of champions. It's a tremendous challenge, that vision: 'to lead competitors on economic return to shareholders and on everything else.'
Completing so ambitious a journey, though, depends on something besides: not only doing things right, but doing the right things. The strategic platform is necessarily decisive: choices like where to invest, or where to disinvest, determine the possibility of ultimate success or failure. Thus, Vincenzo Damiani's Agenda for Digital in Europe, powerful though it is, can only succeed if the company had chosen the right strategic stance – switching from a supplier of mini-computers to a company whose future revolved around networking microprocessors.
There's a direct analogy with individuals. Chris Brasher was an ordinary middle-distance runner. Switching to the steeplechase, he won Olympic gold. Companies whose vision is focused on the wrong strategic objectives – like the insurance companies and building societies which weirdly believed that part of their futures lay in estate agency – won't win any gold. Likewise, individual managers who choose the wrong career in the wrong company are most unlikely to succeed by any standards, no matter how much effort goes into their work.
Successful, ambitious companies with clear visions need successful, ambitious people who can live the vision for both the business and themselves: and who can see that the two go hand-in-hand. That principle was enshrined for 40 years in the teaching of the late American management expert W.Edwards Deming. From his brilliant work in statistical quality control, he observed that successful operations result, not from working harder, but from working more effectively. That in turn was primarily the result, not of individual efforts, but of the system in which the individuals worked. Group success won by raising the performance of the system automatically increased the success of the group's members.
The analogy with sports teams is self-evident. Buying an expensive star won't make a bad soccer team good: but a good soccer team which has a vision of excellent performance, and knows how to achieve it, turns mediocre players into star performers. This importance of group vision doesn't diminish the role of the individual, but enhances it. A system in which individuals can correct defects and suggest improvements in everything – including the vision and its fulfilment – will have higher performance, and more satisfied, better motivated people, than one in which they are confined to obeying orders from on high.
The Deming philosophy hinges on releasing the initiative and ability of individuals to perform better, and to go on raising their game – in short, to make progress, a word which conveys the essence of true success and the power of true vision. The most successful company is the one that has made the most progress along the most ambitiously chosen paths. And the same definition applies to the most successful individual.
Everyone can't come first. But anyone can advance closer and closer to important goals – and having reached them, can pitch their vision higher still. Again, total quality provides a telling metaphor. For companies and individuals, success can never be total, for progress can always be made. There will always be a gap between the vision and realisation, as between potential and performance. This concept of the management gap is basic, but the process of closing the gap is equally fundamental.
The fact that the gap never closes entirely, and that execution seldom, if ever, reaches perfection, only sets the stage for new ambitions. Vision not only always looks ahead, but moves ahead as circumstances change and landmarks are passed. The higher the aim, however, the greater progress and success are likely to be – and that applies on any measure.