Defining Issues & Priorities


Ensure that the key issues facing business have been realistically defined in light of the current and rapidly changing business environment. There is nothing new about this requirement, but the fact is that very few management teams actually take the time and apply the discipline necessary to objectively define and prioritize the key issues that can make or break their business. The issues of inferior quality, higher cost products, lower productivity, and nonresponsive service plague manufacturers for the better part of the recent past. Many companies in industries such as steel, automotive, machine tool, textile, farm and construction equipment suffer badly as a result. Only few companies address these issues in effective ways. Most are unable to clearly identify the key issues, set priorities, and develop the necessary business plans to overcome the underlying problems.

While the specific issues vary for different companies and industries, the management mindset should not vary. To deal effectively with an increasingly turbulent environment, priorities must be set so the business can survive unexpected blows, adapt to sudden dropping changes, and then capitalize on smaller windows of opportunity that develop and close much more quickly than they have in the past.

Many progressive managers kick off their planning process with a session aimed specifically at getting agreement on key issues and priorities. Accepting these priorities require a shift in the way most managers think and act, such as:

  • Liquidity becomes a more important objective, often more important than reported earnings. It provides the flexibility to deal more effectively with unexpected events than is possible when everything is tied up in fixed and slow moving assets.
  • Productivity gains per dollar of capital and per employee must be achieved annually. These reductions must exceed inflation and achieve demonstrably lower costs.
  • Innovation must never stop. Demonstrable product and process improvements must be achieved year after year.
  • All cycle and response times must be continuously reduced.
  • A “frightened” sense of urgency must be the way of life in all parts of the business.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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Economic Truths


Although there are few truisms that apply universally in the business world, there are four related economic truths that are valid in every business situation:

  1. Over the long term, it is absolutely essential to be a lower cost supplier or profit margins will erode.
  2. To stay competitive, inflation-adjusted costs of  producing and supplying any product or service must continuously trend downward.
  3. The true cost and profit picture for each discrete product/market segment is often obscured by traditional accounting practice.
  4. Real business winners concentrate as much or more on cash flow and balance sheet strength as they do on reported profits.

These points have always been valid, but they are far more serious today because there is much less margin for error in our more turbulent environment.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Realigning the Organization


Organization or reorganization schemes have been proposed ad nauseam as solutions to many business problems. As a general rule, organizational changes, especially those that simply reshuffle the same names into different boxes on the organization chart, don’t improve anything. This does not mean suggesting some new organization approach that is better suited for these turbulent times. However, many organizations are too top-heavy, over-structured, and over-satisfied to be responsive to market needs and too costly to be competitive. The structure and staffing of any organization must be rigorously challenged to ensure it is really geared to accomplish the fundamental objectives of the business in as cost-effective a manner as possible. An honest evaluation of the answers to the following critical questions will provide a good function for action.

a)        Is the organization structured to serve markets or simply to manage functions and sell products? Have priority markets been identified? Does someone have primary responsibility for ensuring that the product/service package is tailored to each target market? Do mechanisms exist to ensure cross-markets? Is there any kind of a market focus in the selling organization?

b)        Are there enough discrete profit centers? Do enough managers feel the burden of full profit responsibility? Is the business unit larger than its most successful smaller competitors? Are there any big cost centers that are not assigned or allocated to someone who has a profit and loss responsibility?

c)        Are there corporate group or division staff redundancies? Do the same titles exist at different levels (e.g., corporate controller, group controller, division controller, plant controller)? If so, does it make sense? Can staff position or groups show how they actively contribute to profit results? If so, do line managers agree that these functions are worth the cost?

d)        Are there too many layers? Are there more than five layers between the business unit manager and first level workers? Are there managers with assignments limited to managing one, two, three or four people? Why? Can any of these activities be combined under one manager? Why not?

e)        Is the ratio of supporters to actual results producers satisfactory? How many people actually make a direct contribution to results (e.g., first-line sales personnel, direct hourly workers, sales order engineering and order entry workers, handlers of incoming materials, and storing and shipping personnel)? How many managers, staff, and support personnel are cheering them on? If there is more than one support person for every two producers, what do they do? How do they contribute to profits?

The questions are not new, but the answers are more important now than ever. Traditional or experience-based answers are probably wrong because conditions have changed so dramatically. Moreover, it is doubtful whether existing management can or will ever come up with the right answers, because they have vested interests and the changes needed are simply too tough for them to swallow. These organization structure questions are not as serious for many small to medium-size companies since they are not as likely to be troubled with highly structured, functionally focused organizations lacking a dedicated market orientation. However, even managers in these companies must constantly fight the natural tendency to become more structured, bureaucratic, and lethargic.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Yoking Technology with Market Opportunities


Developing new products that cost less or perform better has always been crucial for any technically based company. In our increasingly turbulent business environment, developing the know-how to keep pace with or even ahead of technological developments and competitors’ moves is more important than ever for several reasons. First, exploding technology is spawning new products and processes at an accelerating rate that threatens almost every product and process in place. Second, competition continues to intensify from abroad and a plethora of new startups and many substitute technologies that encroach on established products and processes. Third, product innovations that result in superior performance or cost advantages are the best means of protecting or building market position without sacrificing profit margins. This is especially true in today’s world when many industrial markets are flat or slow growth and excess capacity is commonplace.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Creativogenic Management Style


Management style can both impede innovations and facilitate them. The old firms—once dynamic and vibrant—today fail in terms of deficient management style and resulting ineffective culture and structure. Such firms are managed on machinistic lines, with strong belief in centralization and extreme specialization of functions. This means that coordination of interdepartmental activities is done mainly by the head of the concern. Strong departmental loyalties bred by lifelong career paths only within the functional department make interdepartmental collaboration very easy. Information flows mainly vertically rather than also diagnolly and horizontally. A strong hieracrch-bound operating culture saps initiative at lower levels. An organic mode of management is much more suitable in technological change-driven turbulent markets like electronics. In this mode, solving technical problems is the priority, not maintaining functional turfs, and so decisions emerge through interactions rather than being made by the formally designated bosses. Also, the expert in the situation—who could be quite a junior fellow—calls the shots rather than the formal boss. People interact disregarding departmental boundaries, picking brains and sharing information, and most decisions are taken—or rather, emerge—at middle and lower levels of management. Thus, a fluid, boundaryless, highly interactive, expertise-based management is more suitable for managing technological innovations than a mechanistic, bureaucratic, semi-feudal form.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Managing Cash and Liquidity


In a turbulent environment, cash returns are important, if not more important, than reported profit returns. Cash returns lead to liquidity, and liquidity is a top priority consideration whenever risks and uncertainties surround a business situation, as they do in so many cases today. Cash and liquidity put any company in a better position to withstand a surprise blow, adapt to sudden changes, and capitalize on the narrower windows of opportunity that are commonplace in a turbulent environment.

This doesn’t mean that profits and profit growth are not important. The whole purpose of any business enterprise is to maximize profits and profit growth, but this objective will  not be achieved if business unit managers do not focus more time and attention on managing their cash and liquidity. Any entrepreneur that has lived through a start-up knows the importance of cash and liquidity. The entrepreneur knows from experience that a business can go bankrupt even while it is reporting profits. But it will never go bankrupt as long as its cash and liquidity positions are strong. Most corporate executives understand this point also, but many do not follow through to make sure it is sufficiently stressed or understood at the operating level. This is where the problem lies. Most business unit managers who operate under a corporate umbrella tend to overlook the importance of managing their own cash and liquidity and look instead to the corporation as a never ending source of funds.

The results are apparent in most corporations. Capital expenditure proposals tend to be a “wish list” often justified on project volume gains or cost savings that never occur. Working capital is allowed to build without adequate regard for carrying costs on the cash commitment. In short, overinvestment in plant and equipment, and working capital often serves as a buffer to cover sloppy business practices and control. These are practices that inevitably lead to an investment base that is too big for the business and to marginal profit returns.

Many operating managers in a corporation are not even aware of the costs incurred while excess capital is tied up in the business. This is not an exaggeration. Just ask any four or five business unit managers how much it costs to carry their inventory. Most of them will acknowledge an interest cost of, say 7—8 percent, but few will recognize that total carrying costs, which include storage, taxes, obsolescence, and shrink, actually run closer to 30 percent in today’s environment. We would also bet that none of them have such charges against their earnings, even though it is a very legitimate cost of doing business.

Not every company operates this way. Most corporate executives are not tough minded or rigorous enough in challenging cash commitments, and most business unit managers have more cash tied up in their business than required.

Ideally, every manager should think like a small business entrepreneur with his or her own money at risk. If this were the case, we would not see so many companies with bloated balance sheets and marginal returns. Left on their own, most business unit managers do not think this way, however. Life is not easier when you can draw almost at will on coroprate resources to meet the payroll, build inventories, and buy supplies, tooling and a lot of equipment. Under such conditions you don’t have to worry very much about how to make ends meet.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

The Ethos of Great Managers


Smart individual performers keep getting moved into manager positions without the slightest idea of what the manager role is, let alone the ability to play it. They are sent to leadership development courses, but they come back more impressed with their mini-executive status than with the day-to-day challenges of being a good manager.

Conventional wisdom tells us that the manager role is no longer very important. Apparently managers are now an impediment to speed, flexibility, and agility. Today’s agile companies can no longer afford to employ armies of managers to shuffle papers, sign approvals, and monitor performance. They need self-reliant, self motivated, self-directed work teams. No wonder managers are first against the wall when the reengineering revolution came.

Every manager should be a leader. He must seize opportunity, using his smarts and impatience to exert his will over a fickle world. In this world, the staid little manager is a misfit. It is too quick for him, too exciting, too dangerous. He had better stay out of the way. He might get hurt.

Today’s business pressures are more intense. Companies need self-reliant employees and aggressive leaders. But all this does not diminish the importance of managers. In turbulent times the manager is more important than ever because managers play a vital and distinct role, a role that charismatic leaders and self-directed teams are incapable of playing. The manager role is to reach inside each employee and release his unique talents into performance. This role is best played one employee at a time: one manager asking questions of, listening to, and working with one employee. Multiplied a thousand fold, this one-by-one role is the company’s power supply. In times of great change it is this role that makes the company robust enough to stay focused when needed, yet robust enough to flex without breaking.

Thus the manager role is the catalyst role. As with all catalysts, the manager’s function is to speed up the reaction between two substances, thus creating the desired end product. Specifically the manager creates performance in each employee by speeding up the reaction between the employee’s talents and the company’s goals, and between the employee’s talents and the customers’ needs. When hundreds of managers play this role well, the company becomes strong.

In today’s slimmed-down business world, most of these managers also shoulder other responsibilities. They are expected to be subject matter experts, individual superstars, and sometimes leaders in their own right. These are important roles, which great managers execute with varying styles and degrees of success. But when it comes to the manager aspect of the responsibilities, great managers all excel at this catalyst role.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com, Line of Sight