The Seven Deadly Sins of Management
by Jonathan Ellis and René Tissen
Profile Books, 2003
I read this book in the Summer of 2003,
after the NASDAQ bubble burst that took part of Altitude Software with it.
The book explains how good ideas can go bad and, in particular,
how the management mantras that seem so right can be twisted until they become very very wrong.
Although Altitude Software survived until today,
I have seen a few of these sins come and go.
The Seven Deadly Sins discussed here all appear at first to be legitimate management practices.
Yet each of them betrays a mentality that is firmly rooted in the past.
And this is what makes them suspect.
1. Lust in the Boardroom
Create shareholder value — no matter what it costs.
"Shareholder value" becomes the value in the stock market,
which is based on the promises that the company makes,
and not on its ability to generate money.
Managers become focused on the stock market only,
and forget about other stakeholders in the company,
which include customers, suppliers, employees, banks, and so on.
Managers concentrate on "shareholder value" because their own stock options
are connected to the market value of the company.
While the stock market may make your company wealthy,
it can never generate cash flow for you.
Concentrating on the "core competencies" often means financial engineering
where the manager sells the "family silver", generating immediate money to shareholders,
but limiting the ability of the company to generate cash flow in the future.
2. Wrath on the High Street
Attack the competition — with anything it takes.
Concentrating on the competition may mean that you no longer concentrate on your customers,
and thus you are not able to detect market opportunities.
Assumption replaces knowledge: if the competition does it,
it must be important, so we do it as well.
In today's competitive markets, the need to understand your own competencies
— the abilities that distinguish you from the competition — is increasingly vital.
Yet this is one thing that causes enormous difficulties
to even the most successful companies.
[...] success [can be] found by isolating an aspect of the business
that is not sufficiently served by the competition.
This requires deep knowledge — not just of the competition, but also,
more specifically, of the needs of the consumer.
Attacking the competition has taken the place of mobilizing your own resources.
And when this happens, it becomes a deadly sin.
3. Sloth in Executive Decisions
Focus on the future — and let the present take care of itself.
You're a man of vision. The work can be done by others...
Do not count on much from the future,
nor trouble your mind about the past. — Chinese proverb
[...] managers prefer to predict what others will do,
rather than taking steps themselves to create a company
that is [...] flexible enough to be adaptable to new situations
and to take advantage of emerging opportunities as they occur.
The future happens whether we like it or not.
Successful managers built in an ability to react to the future as it happens.
[...] no projections can take account of the unpredictable.
[...] when opportunities appear and disappear overnight,
we cannot focus on the future.
We cannot allow ourselves to create an illusion
when we are actually in the business of reality.
Creating the future means creating the ability to seize opportunities as they occur,
not predicting whether they will happen or not.
All that glitters is not gold.
But some people can create the illusion of gold
as long as there are enough fools around.
I don't try to describe the future. I try to prevent it. — Ray Bradbury
[...] there is no safe bet on the future.
By focusing on the future,
many companies have allowed their current business to go wanting.
4. Covetousness of the Corporate Joneses
Embrace change — for better or for worse.
Managers need flexibility, so they embrace change.
Then managers decide to encourage change.
Because change does not happen fast enough, managers initiate change.
Since it is still not enough, managers implement change.
At last the manager is in control.
And so managers change the company by restructuring, re-engineering, and downsizing.
What started as an attempt to change mentalities has ended up in yet another excuse for company-wide "rationalization".
[...] people who suffer most from such change programs
are those who have the least influence in what causes them.
[...] those who have led the company into a position where change is necessary
are the ones least likely to be affected by any change process.
[Managers] embrace change as an excuse for doing one thing today
and something different tomorrow.
[change] is something that is inflicted on companies by managers
who are trying to get out of a scrape.
Seven out of ten re-engineering projects have failed.
(In Downsizing guru admits mistake, De Standaard, 14 May 1996)
How often can people change? People cannot change every few weeks.
When managers attempt to change attitudes,
how can they know that people are changing the way they think?
Managers and employees have been concentrating on embracing change
when they should have been embracing trust.
Philips makes products, but people make Philips.
In the Industrial past, people were hands [...]
[After automation replaced manual work] people were no longer tangible hands;
they had become intangible brains.
When the company is doing well,
employees are considered intangible assets,
making an important contribution to the knowledge base of the company;
when things start going less well, employees slip down the scale,
and once again become — for management — tangible assets.
The trouble of reducing the headcount
is that you also reduce the brain count at the same time.
Skandia, a Swedish-based insurance company, says:
we hire for attitude and train for skills.
Or hire the best people and leave them alone.
Embracing change does not mean that a company
has to be constantly involved in one change programme after another.
Sometimes changing is the last thing a company should do.
5. Gluttony for Growth
Own it all — and still want more.
[...] few companies fully understand the knowledge that resides within them.
Acquisitions may have increased the amount of knowledge,
but existing organizational boundaries frequently block
the free exchange of that knowledge.
[...] It is almost like having the knowledge
neatly filed away in folders on a central computer
yet not being able to access a certain folder
because you do not have the right password — and, even worse,
you have no idea what that folder actually contains.
Knowledge in itself is useless.
[...] Only when it is put to use can it prove profitable.
Business is not about gathering knowledge, it is about putting knowledge to work.
We are talking about the ability to understand — truly understand —
the core competencies of a company and to leverage those competencies
without being burdened down by a whole lot of tangible assets.
Progressive companies today are discovering that a real competitive advantage
can be obtained not by owning assets — whether intangible or tangible —
but rather by enjoying the benefits of those assets.
Owning assets only makes a company fatter; it can never make it more agile.
[...] too much knowledge [...] causes an inward-looking focus
— we must use our own knowledge — when an outward focus is required.
[...] a company that has acquired knowledge owners
may soon find that they have all too quickly outlived their usefulness.
Knowledge is not eternal; it does not automatically continue to be useful.
The task of the company is not to own knowledge, but to add value.
When opportunities present themselves,
it is necessary to leverage the knowledge required quickly and efficiently.
Fat, inefficient companies will go out and buy it;
agile, responsive companies will go out and use it.
6. Envy in the Workplace
Guarantee quality — and let the figures prove you right.
[...] higher quality means you can do away with customer service.
If something never goes wrong, there's no need to fix it.
Nor to listen to all those complains from nit-picking individuals...
It's amazing what design engineers don't know about manufacturing.
— Jane Algee, Lockheed Martin, cited in Industry Week.
Focusing on quality means that managers are concentrating
on the tangible aspects of the business process,
rather than on the intangibles.
Call centers have been heralded as the ultimate means
of creating consumer satisfaction.
Great — until you need to use one.
First, you may find it quite a challenge to get in touch
with the centre required.
And when you do,
you may be kept on hold for what often seems like hours on end.
When, finally, you are connected to the "specialist",
you may realize that he or she is doing little more
than quoting to you from the instruction manual
that you have already tried reading,
in a vain attempt to solve your problem.
Any initiative to go "outside the book" is carefully squashed.
You receive a standard answer — even if your question is far from standard.
Managers who wish to guarantee quality must, in today's world,
guarantee not quality of processes, but quality of environment.
[...] This new breed of knowledge professionals understands
that the knowledge they have acquired and the ability they have to put
that knowledge to work can provide a company with enormous benefits.
And they expect to be respected.
7. Pride at the Top
Fix it — no matter what others think.
Did you know that of the Fortune Top 500 companies in 1970,
only 4 per cent were still around in the same guise by 1991?
You don't move on by staying the same.
Either as a company or as a manager.
... To get ahead of the industry change curve...
top management must recognize that the company may be blind
as well as fat and lazy. — In Gary Hamel and C. K. Pralahad,
Competing for the Future, Harvard Business School Press, 1994.
[...] the web site of amazon.com was little more than a portal
to a highly efficient and well-managed distribution system.
Amazon.com realized that in the Internet world of click-and-go,
customers wouldn't be prepared to wait weeks for the delivery of their order.
A little knowledge is a dangerous thing.
Yet managers force themselves to reach major decisions based
on superficial information.
[...] complexity cannot be reduced to one-page proposals.
Management today is more than at any time in the past about managing people.
About creating an environment that encourages a free flow of knowledge.
It means breaking down walls between departments
and stimulating an exchange of ideas that goes beyond traditional lines of authority.
There is no quick fix for people.
Managers that think otherwise are simply deluding themselves.
Is there any hope of gaining absolution?
Managers have lost their passion for people.
So how do we break out of this situation?
Well, the first step is simply to ask the question "What's on the other side"
— to apply our natural curiosity to our business.
[...] many of the limits in our company [...] are simply in our minds.
We create them.
Give them an indestructibility that they do not really have.
[...] learn to nurture people.