During the current time of crisis especially, many companies are faced with unprecedented challenges in the market place and they are busy changing their strategic direction, rethinking their business models and restructuring their work forces. However, as the number of strategic challenges and related projects mounts, so does the pressure on the capacity of management. This term is used here to describe the accumulated expiences and competencies of the management personnel in a company. Many strategies fail becausme there is a lack of sufficient management capacity. Companies may find that they have not enought managers and/or the available managers do not have the required competencies. For example, a company planning to expand internationally realises that its managers lack the necessary cross-cultural skills to do business with partners in foreign countries. As a consequence market share and profitability results related to the international business activities turn out to be far below the expected targets.
Management capacity - A critical, but often neglected resource
Most CEOs will confirm that the management capacity of a company is the key for excellent performance and growth. However, few top executives assess their management capacity gaps properly. In general the following can be said: the highekr a company's ambition level or the more drastic its shift in terms of strategic direction, the larger lthe management capacity gap. Executives frequenctly fall prey to the following dangerous misconceptions.
1. Management capacity rests primarily at the top of the organisational pyramid. This assumes that all important decisions must be made by top management. As a result, decision-making takes place in hierarchican, chimey-like structures, in which all decisions are delegated upwards. The top becomes quickly overburdened, important decisions take too much time and market opportunities may be lost. In addition, lower and middle management staff within the organisation are not motivated and will always wait for instructions from above before taking any action.
2. Management capacity can be easily expanded. If the existing management capacity is not sufficient, the necessary managers can be hired from the outside, i.e. from other companies or competitors. But there are two drawbacks. Firstly, the success rate of external hires for upper management levels is estimated to be only about 50%, i.e. only one out of two externally hired managers meets the expectations. Secondly, the newly hired management capacity will not be immediately available since the new manager will need time to become familiar with the organisation and its culture. Sometimes management consultancies can cover the lack of management capacity, but that is only a temporary solution and often also quite expensive.
3. Management capacity is resilient and will be able to rise to different challenges. The underlying idea is that of a General Manager who can successfully manage various strategies in different environments. But every manager has a specific background with unique experiences and competencies. Obviously a manager who has spent most of his career in managing growth strategies abroad, may not be particularly suitable to manage a tight restructuring and rationalisation programme in the home country. In that sense the idea of a General Manager is more a myth than a reality.
Before embarking on a new strategy, top leaders must assess the available management capacity. One can often observe that new strategic initiatives are loaded on the existing management group. Then a vicious cycle is set in motion. These managers become quickly overburdened, make suboptimal decisions and do not have the necessary time for other important tasks, e.g. developing new management talent. They may be dissatisfied with lack of progress and their personal work situation and search for another job. If the more expienced managers leave and hand over to poorly prepared successors, the company's survival may be at risk.
Top leaders should realise that an elaborate strategy remains wishful thinking if it cannot be implemented. There are two key questions which they need to ask: 1) Who will be doing the work related to this particular strategic initiative? and 2) Does that manager have the necessary competencies required to make the initiative a success? If both questions cannot be answered satisfactorily, then there are three choices: the strategy must be changed - perhaps it can be realised with a partner. Sometimes it is possible to wait and develop the necessary management capacity. In other cases it may be best to cancel the strategy.
How to develop sufficient management capacity?
A clear picture of the management capacity not only helps to make better strategic decisions, it also focuses attention on the need to manage the management capacity. The capacity gap can be closed by utilizing the available management in a more efficient manner and by developing new managers. Each approach has a number of advantages and drawbacks.
The following four practical suggestions help to make better use of the available management capacity:
1. Developing a compelling future-oriented vision. Much has been said and written about this subject, but two key issues are really important: The first is to create a clear picture of where the company should be in 5 or 10 years time. The statement 'We want to be the leading company or the no. 1 in our industry' is not enough! The second issue relates to gaining the commitment of the management staff and the entire organisation. A clear and attractive vision about the future and a committed management team can have a powerful impact on motivation and creativity.
2. Reconfiguring the management team. CEOs soemtime hesitate to change the functions and assignments of the members of their top management teams because they want to avoid the related political games and power struggles. But such reconfigurations are sometimes needed in order to fully utilise the existing talents and competencies of each management team member. The rotation anc change in tasks also contributes to a learning process within the management group and thus enhances the management capacity of the company.
3. Getting the strategic priorities right. Top management must regularly review their strategic priorities. In many companies executives accumulate large portfolios of initiativejs ovekr time. Eventually their energy and efforts become too thinly spread over many and projects. In the end no project makes much progress. Here it is important to clarify which initiatives are strategically really important, which initiatives can be delegated and which ones should simply be cancelled.
4. Training managers to acquire and utilise new competencies. Training is especially effective if theory-based concepts are directly applied to practical problems. Perhaps the best known example is training centre in the US, which provides a wide range of customized courses and programmes under the motto 'learning whil doing' to support the various GE businesses. Another good example is Thailand SCG offers over 200 classroom courses for its staff and has set up specific cross-functional training programs for its upper management levels. The intent is to acquire new knowledge and adapt it to practical business situations.
The second major appraocg towards building the management capacity aims to develop new managerial personnel:
1. Setting up a management trainee programme. This entrails the hiring of young people with high-potential and systematically traning them for taking over managerial functions, the so-called 'gold fish pond'. Although a number of large companies have such programmes, also medium-sized and smaller companies can initiate such programmes without great cost. Such a programme will bring in new management talents into the company on a regular basis.
2. Developing successors for managerial positions. The iron rule in every company should be: For each management positions a successor must be in place. However, it is not enough to have the name of the successor on the organisation chart - that person must also be trained sufficiently to handle the job lof the incumbent.
3. Hiring external managers. Generally the internal development of managers is considered more efficient, but there may be situations when it is necessary to bring fresh blood into the company. To avoid the previouslt mentioned high failure rates, attention must not only be paid to careful selection, but especially to training and giving the new manager time to become familiar with the comany's culture. A member might be very useful during this process.
Assessing the required management capacity prior to approving a new strategy can have a major impact on the strategic direction as well as on the actual outcome of specific strategies. Sufficient management capacity often makes the difference between marginally or fully realising the potential of a strategic opportunity. The top leadership of a company must be aware that managing the management capacity requires substantial HR-investments and, above all, consistency over time. Frequently good programmes and policies are developed during growth periods - but these are axed first, when the economic situation worsens. Then, one growth kicks back in, the lack of management capacity will inevitably slow down any expansion.
Friday, August 28, 2009
HARD TECHNOLOGY NEEDS SOFT TOUCH
Papon Ratanachaikanont, deputy group chief commercial officer at True, explains the "retailisation" movement being championed at Thailand's only fully integrated telecommunitations and media company to The Nation's Pichaya Changsorn.
About three years ago, when Papon Ratanachaikanont proposed to True's board of directors that the company set up coffee outlets, he was stunned by a question from one board member who asked bluntly: "Who are you?"
Having just left the local unit of auto-maker Mazda to joining the telecom conglomerate, Papon had yet to prove himself.
However, after some intense debate, the board approved Papon's plan, which he now admits was intended to be no more than a "marketing gimmick."
"That's how savvy our board was. They approved a budget of more than Bt100 million and ordered me to return the money within three years," he said.
The entrepreneurial task was a big challenge. Papon himself had not expected True to pursue the business. "We first approached Starbucks for a partnership, but they said they did not know us," he said.
Today, True Coffee has paid back the original investment and is a profitable enterprise, Papon said.
As a vote of confidence and part of the group's "convergence" business policy, the parent company in March assigned Papon to take care of all of the group's retailing units and customer service points, totalling nearly 400 outlets, and unit them. These include True Shops, handling fixed-line telephone and Internet business, the outlets of cellular-phone business True Move, customer-service points for cable-TV unit True Vision, True Coffee and 167 new iPhone kiosks established over the past 45 days under Papon's direction in big discount stores and retail complexes, such as Tesco Lotus.
The physical merger of True'e retail outlets is now complete, but there remains a lot of back-office work to be done, and one of the most challenging areas is people management. Papon, who was earlier responsible for True Coffee, with fewer than 40 outlets and a combined staff of 160, is now managing nearly 400 group outlets employing 2,500 people.
But why did he go for coffee in the first place?
Papon said he believed in the "retailisation" trend now seen around the world. Technology is a "hard side" of the business. People are unable actually to feel and touch it, so it needs an "aesthetic" feature like coffee to merge into it.
"I began with a stark contrast - coffee and technology - but people liked it. A 'soft touch' is important, because it gives an aesthetic dimension to people's communications with True," he said.
"In the previous environment, customers felt like they owed us, because they came in with the sole purpose of paying telecom bills. There was no way to improve customer touch points."
In terms of the company's bottom line, True shops are now no longer a pure cost, accepted in the interests of earining income. Coffee and bakery sales have softened this status.
A new True shop recently opened in Central Chon Buri, the first outlet to merge coffee and other services from day one. Up to 100 True shops will soon incorporate a full coffee-store format, while the rest might have self-service coffee sales or other 'soft-side' features, Papon said.
"It's a reverse psychology. Consumers would not be able to find us if we 'converged' without all of the physical presences," Papon said, referring to True's "convergence lifestyle" business philolophy of cross-selling and cross-marketing its Internet-access, cable-TV and wi wired and wireless telephone-network service.
A longer-term goal is to transform all of True's physical outlets into "third-generation destinations" and lifestyle centres for consumers, he said.
About three years ago, when Papon Ratanachaikanont proposed to True's board of directors that the company set up coffee outlets, he was stunned by a question from one board member who asked bluntly: "Who are you?"
Having just left the local unit of auto-maker Mazda to joining the telecom conglomerate, Papon had yet to prove himself.
However, after some intense debate, the board approved Papon's plan, which he now admits was intended to be no more than a "marketing gimmick."
"That's how savvy our board was. They approved a budget of more than Bt100 million and ordered me to return the money within three years," he said.
The entrepreneurial task was a big challenge. Papon himself had not expected True to pursue the business. "We first approached Starbucks for a partnership, but they said they did not know us," he said.
Today, True Coffee has paid back the original investment and is a profitable enterprise, Papon said.
As a vote of confidence and part of the group's "convergence" business policy, the parent company in March assigned Papon to take care of all of the group's retailing units and customer service points, totalling nearly 400 outlets, and unit them. These include True Shops, handling fixed-line telephone and Internet business, the outlets of cellular-phone business True Move, customer-service points for cable-TV unit True Vision, True Coffee and 167 new iPhone kiosks established over the past 45 days under Papon's direction in big discount stores and retail complexes, such as Tesco Lotus.
The physical merger of True'e retail outlets is now complete, but there remains a lot of back-office work to be done, and one of the most challenging areas is people management. Papon, who was earlier responsible for True Coffee, with fewer than 40 outlets and a combined staff of 160, is now managing nearly 400 group outlets employing 2,500 people.
But why did he go for coffee in the first place?
Papon said he believed in the "retailisation" trend now seen around the world. Technology is a "hard side" of the business. People are unable actually to feel and touch it, so it needs an "aesthetic" feature like coffee to merge into it.
"I began with a stark contrast - coffee and technology - but people liked it. A 'soft touch' is important, because it gives an aesthetic dimension to people's communications with True," he said.
"In the previous environment, customers felt like they owed us, because they came in with the sole purpose of paying telecom bills. There was no way to improve customer touch points."
In terms of the company's bottom line, True shops are now no longer a pure cost, accepted in the interests of earining income. Coffee and bakery sales have softened this status.
A new True shop recently opened in Central Chon Buri, the first outlet to merge coffee and other services from day one. Up to 100 True shops will soon incorporate a full coffee-store format, while the rest might have self-service coffee sales or other 'soft-side' features, Papon said.
"It's a reverse psychology. Consumers would not be able to find us if we 'converged' without all of the physical presences," Papon said, referring to True's "convergence lifestyle" business philolophy of cross-selling and cross-marketing its Internet-access, cable-TV and wi wired and wireless telephone-network service.
A longer-term goal is to transform all of True's physical outlets into "third-generation destinations" and lifestyle centres for consumers, he said.
SSO kidney cover denied
The Social Security Office is denying medical treatment to social security members suffering kidney diseases who share the same surname as their employer, activists say.
Subin Noksakul, president of the Thai Kidney Club, yesterday said it was unacceptable that the SSO would reject claims based on the relationship between employees and employers.
Social security members had been accused of collaborating with employers to defraud the SSO, he said.
"What the SSO should do is to examine the employees' status to find out if they get paid and pay taxes," he said.
Mr Subin also called on the SSO to speed up its decision on the right to medical treatment of SSF members who contracted kidney disease before they joined the social security scheme. The SSO was reluctant to extend medical coverage to people who developed kidney diseases before they became social security members.
He said it was not right to deny these people treatment because they had paid into the Social Security Fund.
"The SSO must not forget that people with kidney problems are capable of working," he said.
Thanaporn Methawikool, head of the SSO's medical standardisation unit, said yesterday it had been agreed that social security members' right to kidney treatment would have to be examined.
She said she would ask SSO officers to speed up their deliberation so those eligible could receive quick treatment for their illnesses.
Subin Noksakul, president of the Thai Kidney Club, yesterday said it was unacceptable that the SSO would reject claims based on the relationship between employees and employers.
Social security members had been accused of collaborating with employers to defraud the SSO, he said.
"What the SSO should do is to examine the employees' status to find out if they get paid and pay taxes," he said.
Mr Subin also called on the SSO to speed up its decision on the right to medical treatment of SSF members who contracted kidney disease before they joined the social security scheme. The SSO was reluctant to extend medical coverage to people who developed kidney diseases before they became social security members.
He said it was not right to deny these people treatment because they had paid into the Social Security Fund.
"The SSO must not forget that people with kidney problems are capable of working," he said.
Thanaporn Methawikool, head of the SSO's medical standardisation unit, said yesterday it had been agreed that social security members' right to kidney treatment would have to be examined.
She said she would ask SSO officers to speed up their deliberation so those eligible could receive quick treatment for their illnesses.
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