Company like an opera house


Managerial mission in times of crisis

Should you join the profit and fast return on investments flow? What should you keep and what should you change as of tomorrow?

What should you develop inside and what outside the company? At what pace should you change the existing importance of business functions and capabilities? These are just some of the questions that a manager in crisis needs to provide a precise answer to.

In the mid-1990s, ‘the founding father’ of contemporary management, Peter Drucker said that he was confident that, in fifteen years time, managing companies would be completely different to today’s. Drucker is long gone, he died in 2005, but his prevision that management, particularly in large systems, is going to become the ‘most complex job in the world’ that would need to be constantly reviewed since the nature of business and the world was changing all the time.

The problem with managing systems is a typical Serbian topic. According to the 2008 data, Serbia had 598 large companies, i.e. those with 250 and more employees, which means around 550,000 employees or 45% of all workforce. Out of these large companies, only ten have 5,000 and more employees, and only 27 between 2,000 and 5,000 employees. European and other foreign companies in Serbia have their operative extremities, i.e. branches, that are managed from remote places, with more or less success. According to some estimates, there are close to 5,000 high and middle foreign managers in Serbia. Due to the bad management in business and politics, the problems with development, environment, and losses are growing.

New ethics

The biggest demand that modern top managers are facing is balancing out. First, you need to optimize processes in long- and short-term. A strong urge to generate profit and have a fast return on your investment is often viewed as shortsighted and short-term. Often, a new ownership structure, mostly investment and pension funds, push managers into doing exactly that. What should you keep, and what should you change, as of tomorrow? This is a difficult question. Insufficient changes means regressing and becoming obsolete in terms of consumer needs and competition. Changes that are too large and too frequent are often exhausting. What should you develop inside and what outside the company (the so-called outsourcing)? At what pace should you change the existing importance of business functions and capabilities? Young company puts the sales first, followed by mature know-how and motivated staff (according to the company life cycle in Isaak Adizes book ‘Managing the Company Lifecycle’).

The most important thing is achieving new balance in relation to other companies and the society. Companies do not operate in vacuum, and according to one definition, a company is a social institution, just like a kindergarten, a school, a court. And it should be a responsible part of the society. Top management in a company that doesn’t care much about its natural surroundings, welfare of its employees, social situation and processes, is in for trouble long-term. The care for the overall welfare of the society is a line that will divide successful from unsuccessful managers. Company’s social responsibility is not only a phrase – it becomes a serious and powerful global movement. Institutionally wise, this request was built around the ISO 26000, SA 8000 standard which is a part of an annual report. Understanding ethics of top managers is constantly changing. Huge salaries and bonuses, getting rich in only two to three years of working at the top will be impossible to attain, firstly because of ethic norms, and secondly maybe because of laws.

Time for giving orders, time for cooperating

'More and more, the position of a CEO will be like the most complex job I know, and that is managing an opera house. You have your star opera singers and there is no way you can order them around. You have a troupe and an orchestra, there are people who work backstage and there is the audience. Each single group is different. However, the conductor has music scores and everybody else also has the same scores. In a company, you need to make sure that all of these different groups come together in order to produce a desired group result. This is not about who is more or less important, but who is important for which job. One should discern when to give orders and when to treat someone as a partner or a co-woker (P. Drucker in his book ‘The practice of management’). Nobody can boss around their business partners. Working with a partner is basically a marketing job, carried out for the mutual pleasure. This implies the director general posing the following questions: What values do my co-workers possess? Aims? Expectations? What motivates a person, what is his or hers guideline? Of course there are times when it is necessary to issue commands in order to get things done. But one should know when to give orders, and when to behave in a partner like manner. Drucker’s premonition about the company hierarchy as a managing principle is surviving, albeit significantly altered.

Pleasant workplace

If we are talking about human aspect of top managers in a large or medium-size organization, they are expected to be highly competent, dedicated to the company mission statement, doing the job together, ready to be team players, completely trusting each other… It takes at least three to six months to transform the group toward the programmed curve of team’s development. All in all, the management in large systems is never going to be reduced to several types and styles, or a couple of über-mangers like Jack Walch and Andrea Groue. There will be many more good models and best practice cases, indigenous to surrounding situations, company’s features and personnel, but also the characteristics of company’s leading man. The new age companies are going to be known for their innovativeness, visionary attitude, long-term thinking, flexibility, social responsibility and balance. Also there is another special feature – they are going to become a pleasant workplace.

Good moves

10 top managers in 2008 (according to the Business Week)

• David Axelrod, the main strategist in Barack Obama’s presidential campaign
Was an ‘architect’ behind shaping Obama’s mission of change and managed to succeed in it.

• Frank Blake, CEO of Home Depot, USA
Managed to internally build up the company, simplified the organization, raised the motivation.

• Jamie Dimon, CEO of J. P. Morgan, USA
Resisted the temptation called ‘exotic financial deals’. Took over the fallen Bear Stearns and Washington Mutual.

• Larry Ellison, CEO of Oracle, USA
In three years, managed to carry out 40 acquisitions worth 25 billion US dollars. Operative profit – 46% of the total sales.

• Take Fukui, CEO of Honda, Japan
Honda is far ahead in the small economy car section. Fukui has been cutting costs, but not saving on innovations.

• Mark Hurd, CEO of Hewlett-Packard, USA
Hurd has a very simple business formula – reduce your costs and increase your efficiency, giving customers innovations they want. HP has been withdrawing from the markets where the company is not No. 1 or 2 and has been carrying out a series of acquisitions.

• Satoru Iwata, CEO of Nintendo, Japan.
Nintendo DS managed to keep its market, whilst doubling the sales. Iwata says: “In crisis, the buyers are just pickier. So, there are buyers.”

• Peter Loescher, CEO of Siemens, Germany
Restructured Siemens after the company’s tarnished image following the corruption affair.

• Irene Rosenfeld, CEO of Kraft Foods, USA
”My job is to be the leader. I know the difference between managing and leading.”

• Jim Sinegal, CEO of Costco, USA
Refrained from increasing the prices longer than his competition in order to maintain the company’s market share. Kept 87% of the company’s buyers.

Bad moves

10 worst managers in 2008 (according to the Business Week)

• Daniel Bouton, former president of Societe Generale, France
Prone to taking risks, weak internal control

• Jerome Kerviel, the former employee of Societe Generale Bank, embezzled 7 million US dollars from the bank.

• James Cayne, former CEO of Bear Stearns, USA
Apparently, amidst the biggest crisis in the company, spent most of his time playing golf and bridge.

• Richard Fuld, former CEO of Lehman Brothers, USA
Ignored the warning signals that led to the collapse, awarded high risk takers and business greed. Believed in ‘ the Great Lehman’ being unsinkable.

• Fred Goodwin, former CEO of Royal Bank of Scotland, Scotland
Orchestrated mega-takeovers, took out huge loans, went into arrogant expansions that led to the debacle.

• Kerry Killinger, former CEO of Washington Mutual, USA
Arrogant disrespect towards reasonable mortgage loans, getting rich from profit bonuses.

• Marcel Ospel, former president of UBS, Switzerland
UBS was one of the biggest losers in 2008. In April 2008, Ospel said: “The storm is passing over”, only to refute himself later by saying: “Who could have ever predicted this?”

• Philip Schoonover, former CEO of Circuit City, USA
Declared war to prices, drop in services, laying off 3,400 experienced workers (“They were earning too much money!”)

• Martin Sullivan, former CEO of American International Group, USA
By persistently claiming that AIG was a healthy company, he showed ignorance of what was really going on.

• Richard Wagoner, CEO of General Motors, USA
Aware of the situation, but refusing to make radical changes, not investing enough in economy cars.

• Jerry Yang, CEO of Yahoo, USA
Refused Microsoft’s offer for a takeover, failed negotiations with Google, the company is sinking on the stock exchange.