Section One: Basics ( or - if you have been there - Back to Basics )
1.1. AN Organisation: ITS purpose and method
The purpose of an organisation should be to maximise its return to its stakeholders.
It does this by :
and
A company without customers is a company without revenue. A hospital without patients is a wasted asset. A company or a hospital without suppliers will not be able to produce its product or service.
If we do not have enough available time, available energy, or skill, to do the job all on our own, then we need to employ people. We now become managers.
The organisation achieves its results through managers managing people, managing the work people do (the processes they perform), and managing the output that is produced (the products and the services).
Effective management understands these very simple basics.
An effective manager, if he is at the top of an organisation, must be fulfilling the requirements of those who are judging him and his people. It follows, that if he is really effective, then his organisation will be a quality organisation.
A quality organisation is one where there exists sustained:
( satisfaction ) ( as viewed by )
Listing the organisations that to your knowledge pass - or do not pass - the test for a quality organisation will sharpen the focus on what has to be done to qualify.
Some seem to stand out, and have appeared in books like "In Search of Excellence".
It is also useful to learn from the mistakes. Like the company that lost it vital suppliers because it was a poor quality payer, or the very profitable company, with good products, whose employee discrimination practices were unacceptable to a minority of their employees but to a majority of society.
One of the mistakes of some centrally controlled government organisations was their complete lack of focus, or even acknowledgement, that they had customers or owners.
"A local authority, told that its bus drivers were "speeding past queues of people with a smile and a wave of the hand" replied that "it is impossible for drivers to keep to their timetables if they have to stop and pick up passengers"
It is very hard work for the management of those organisations that pass the test, but they know the criteria for a quality organisation, and knowing your problem is the major step in solving any problem.
As quality is conformance to requirements that have a fitness for purpose, it follows that management should think hard about the requirements of each of the stakeholders. They should understand and manage the conflicting expressions of requirements, and negotiate and communicate the reasons if the right balance differs from the request. Not an easy job! It must be continuously monitored and resolved.
Conformance means that it has to be measured. Most companies measure customer satisfaction, very few government organisations do. A lot of companies fail to measure supplier satisfaction, public satisfaction, and industry satisfaction.
Leading companies have regular surveys of employee opinions, and regular appraisal and counselling sessions with each employee.
Financial measurements:
are certainly key quality measurements, but should not be the only thing to be measured.
Sustained financial performance is vital for shareholder and owner satisfaction, but an organisation that thinks it only has to have good financial performance may set itself on the path to fail to be a quality organisation.
Shareholders are also customers, suppliers, and members of society at large. So financial performance alone is not enough for shareholder satisfaction.
While the quality of the product and service is paramount, sustained high financial performance is often an important element in customer satisfaction.
Good profitability results in the ability to be able to reduce prices. At the other extreme, particularly in consumer and other capital goods, it should be remembered that your customer makes an investment and that you are part of the investment. When a company goes into liquidation the customers suffer. Customers do not want to do business with someone who will not be there tomorrow. ( Suppliers also suffer! Suppliers certainly look to see whether the organisation can pay its bills).
Many factors influence employee satisfaction. From pay, facilities, to individual training and development. A company with good profits can pay more, a company with poor financial results has a difficulty to hold good people. Equally an organisation that completely disregards owner satisfaction in favour of high earnings for some or all employees should not be surprised if owners complain.
Good financial performance means payment of higher taxes, more economic activity, and the ability to subscribe to charitable causes; all these have an important influence on public satisfaction. On the other hand, high profits perceived to have been earned unfairly can be fatal to the success of an organisation: this type of dissatisfaction can cause legislation or other constraints that could dramatically affect the health of an organisation.
So financial measurements are certainly key quality measurements for any organisation, but not the only things to be measured. However, the organisation that measures the right things in the near term and responds, will find over time that a quality organisation is the one with the best long term sustained financial performance.
Management in a quality organisation looks after his owners but remembers that there are many other stakeholders:
An effective manager understands that measurement, and what is measured, is vital for an organisation to ensure sustained satisfaction: a primary goal of management.
All other objectives are meaningless if the organisation has no customers.
Peter Drucker: " there is only one valid definition of business purpose - to create a customer."
Theodore Levitt: " the central task of business is to get and keep a customer."
Adam Smith: " consumption is the sole end purpose of production; and the interests of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer." ( In modern language: " production minus sales equals scrap." )
A definition of Marketing:
" Converting customers and potential customers purchasing power into effective demand for a product or service and moving that product or service to the consumer to achieve the revenue and profit objective"
Who are they?
Who is the customer? the eventual consumer? or the distributor? or both?
What is their purchasing power?
What do they want? Do they want it cheaper, or better, or smaller, or bigger, or faster?
The customer is an asset, and service to the customer is paramount to the effectiveness of management.
However, the notion of the customer can be taken further. We are all suppliers to others, and others are suppliers to us. However, for a supplier to provide us with what we want, we have to supply him with our requirements. In the simplest form, if we supply the supplier with the wrong delivery address then we have not got what we want where we want it.
Customers are customers, but few think of suppliers as customers. Employees are suppliers, but they are also customers, requiring their requirements to be met by management as individuals and as a group. Shareholders are customers requiring their requirements met by management. Society at large are customers needing their requirements met. Everyone internally in an organisation has suppliers and customers.
The effective manager remembers always that we are working for customers, understands the broad notion of customer, and that meeting customer requirements is the measure of effectiveness. There are so many ways to add value when you think of everyone as a customer.
Customers are people. Suppliers are people. So are shareholders, the public, and those in the industry we work in, manufacturing or service, public or private.
A successful organisation is one that draws its strength from the quality and commitment of its employees, its people.
Ask any manager in a really successful organisation why they are successful, and they may tell you:
BUT they will tell you:
Our people are our biggest plus.
People who care greatly about what they do and why they do it. Led by management who understands that to earn this they have to continually put the human side first; respecting one another as individuals, encouraging one another to do their best, helping one another to achieve his or her potential.
People are competitive and like to succeed. The interaction of good people with good people produces even better results. The sum of the parts is greater than the whole.
The effective manager understands the importance of people, and the elements for success:
and, of course, effectiveness in managing the processes the people are working in, and in managing what the people produce.
1.5. Importance of a Salesperson
Customers are people. People hate to be sold, but they love to buy. Selling is giving people what they want. A quality salesperson understands this requirement, and continually thinks about:
What does this customer want? and why? and how? and where? and when?
While " production minus sales equals scrap" , it is worth remembering that even very valuable ideas finish on the scrap heap if they are not sold.
Not much happens in the world unless someone sells something. While salesmen and saleswomen are not all successful, all really effective managers are salespersons.
Suggested Reading
The One Minute $ales Person by Spencer Johnson, MD. & Larry Wilson
1.6. Importance of Information
Organisations and people within them need information. Many people work only with information. Information is vital for the running of any business, and expands rapidly as an organisation grows.
Let us take the case of the self employed baker who has no staff. His need for information is limited. He buys his flour, makes the dough, bakes the bread, sells the bread, and banks the money. He knows how much bread to bake, how much flour to buy, and how much money to bank, because he sells the bread and knows the demand cycle. The information is in his head.
Then he expands and finds it more efficient to use a specialist who is more effective than him in purchasing flour, another at baking, another in running the shop, and an accountant to keep his books. Now his need for information is vital. Information needed between the specialists: the person purchasing needs information on the demand pattern, the person baking needs a daily demand forecast, the accountant needs information on purchases and cash flows.
Our baker has become a manager, and if he has no information strategy and no implementation plan he will soon be in trouble. The failure to realise the importance of information may well be the most dominant cause for failure of many small businesses.
In too many organisations managers give limited attention to the importance of information. This disregard results in waste of time, of assets, and in lost market opportunities.
Every manager needs an information strategy for his area of responsibility. Information is so vital it cannot be delegated to the head of Information Systems, even though he is the source of expertise in the tools, techniques, logistics, and economics of information gathering and requirements. The really effective manager knows his needs and requirements, and how vital information is for his effectiveness.
Step One : Identify the major information products for the organisation
e.g. Producing an invoice
Paying an employee
Step Two : Identify departments (specialist groups) involved with each
Step Three : Identify information items passed between groups
Step Four : Identify executors and their tasks.
Step Five : Identify the information logistic elements
Information logistic elements are the ways and means of handling information, and are basic information handling activities. There are seven types of logistic elements:
The choice of method to handle a particular element can be very wide. For example, transferring information can be effected by: letter, telephone call, fax, E-mail, a meeting, a formal course, the Internet, and so on.
Many methods have been chosen arbitrarily on such bases as " we have always done it this way", "it seems the cheapest", "we don't have the other facility". Such arbitrary choices are often the main cause of ineffective and inefficient information processes. The symptoms are known as bureaucracy, the results are less well known as high cost of failure which is not perceptible through normal business measurements.
Machines should work and people should think. Any system that depends on human reliability is unreliable. Of the seven logistic elements listed above, usually people are best for one to three, and machines best for four to seven. And even with one, two and three, personal computers and workstations should be used to bring more and more support to the executors in their tasks.
Information is an asset. It is an asset always in need of improvement. Data once created in an organisation should never need to be created again if the information processes are correct.
The really effective manager understands the importance of information, and that the efficiency and effectiveness of the information processes are vital in achieving the goals.
Manage the activities of:
Recommended reading: "Managerial Breakthrough" by Dr. J. M. Juran where he defines the role of management as:
Recommended reading: " In Search of Excellence" by Thomas J Peters and Robert H Waterman where they describe the McKinsey 7 S's, and the Role of Management as ensuring that there is:
The scope of management, whether working in a function, or in a cross-functional responsibility, covers:
Strategic management - ( change)
Control management - ( supervisory )
Operational management - ( hands-on, typically first-line )
People management
Education and communication management
Across the entire scope, effective management will be endeavouring to improve both the quality of the activities and the quality of the output.
This is the end of Section One: Basics
Go to Section Two: Leadership in Management