Down & out: a new strategy for success - business success

Chief Executive, The, May, 1993 by Roy Serpa, J. Gerard Viera

In order to gain a competitive edge, most CEOs now demand that their organization stay close to its customers. But one of the barriers to achieving this aim is a bureaucratic culture with an inward and upward focus. Under such a system, managers are preoccupied with satisfying their superiors and meeting the internal needs of the organization--rather than with satisfying customers and enabling their subordinates to do the same.

A focus on customer satisfaction is the hallmark of an entrepreneurial culture. Interestingly, the larger and more mature a company grows, the less entrepreneurial it is likely to become. Most companies fall between those that are completely bureaucratic and completely entrepreneurial. Even so, this article will focus on the two extremes in an effort to identify the weaknesses of the former and the strengths of the latter.

We maintain that it is worthwhile to compare the time spent by employees and managers on inward and upward activity versus that directed outward and downward. Take into account regular working hours and overtime, including travel time and work at home. If your firm's orientation is predominantly outward and downward, it is likely that it has an entrepreneurial culture--and thus is better-equipped to withstand the competitive crush of the mid-1990s and beyond.

THE INWARD/UPWARD FOCUS

Ironically, some companies drift toward bureaucracy because of their preoccupation with becoming "lean and mean"--another requirement of the demanding competitive environment. This obsession usually leads to a substantial inward orientation of activity. According to Dr. M.L. Spikanth, the co-author of "Synchronous Manufacturing: Principles of World Class Excellence," "In a competitive environment, customers must be satisfied, or market share will decrease." He adds: "Customers don't care about your efficiencies. They care about getting orders faster. They care about price, but also about design, quality, reliability of deliveries, speed of response, and level of service."

At a company in which I served as a middle manager, there was a substantial upward focus. Executives at the company requested frequent briefings from managers, so managers, in turn, imposed similar requirements on their subordinates. It wasn't until I joined the executive staff and reported to the chief executive of the company--a division of one of the top 20 global companies--that the reasoning behind this upward focus became obvious. The chief executive was constantly on call from the senior executive of the parent company; so much so, that he rarely left the executive floor and demanded frequent briefings from his subordinates. In this way, he was always available and prepared to respond upward to satisfy his superior. This relationship was duplicated throughout the management hierarchy.

There are a number of elements working against customer satisfaction in many corporations. They are:

* the insulation of executives from the direct customer satisfaction process,

* the inflexibility of the "culture" to accommodate individual employee/customer satisfaction initiatives,

* a management rewarded and promoted based on its ability to satisfy inward- and upward-based needs, and

* the threat of punishment for breaking the cultural rules of behavior.

As a company grows, and the organizational hierarchy evolves, the executives become removed from contact downward and outside the organization. Customer information comes from a salesman, who reports to his sales manager, who then may, or may not, feed this information to middle management. After all, that is why sales managers are hired: to free upper management for other duties. The sales manager must respond to requests from middle management: i.e., fill out reports, review status of accounts, and provide forecasts to the financial planner.

Once the company begins to add bureaucratic layers vertically and specialized functions horizontally (legal, financial, facilities, human resources), requests seem to multiply. Examples may be budgets, personnel forecasts, and performance reviews--all of which must be filled out on a regular basis according to policies and procedures. In addition, there are non-periodic requests for updates, reviews, special projects, and committees. As a result of these activities, there is a rapid and geometric depreciation of middle manager time allotted outward toward customer needs and downward toward enabling and empowering employees.

But here's the most nefarious aspect of such a process: What begins to get rewarded at a bureaucratic company is a manager's ability to conform to the "culture," rather than his ability to satisfy the customer. A good employee religiously feeds the hierarchy all the information it requests. If the cultural norms are violated because a manager misses a periodic review, there is at least an outcry, if not a negative career impact.

Too often in the bureaucratic organization, direct customer satisfaction activities are out of the direct visibility of corporate executives. One consequence is a layer of middle management that is promoted based on its collective ability to conform with cultural norms. "Cool under pressure" becomes the new performance ideal, even if such composure is only internally responsive. This situation leads to an unhealthy divergence of personal and corporate goals (see graphic in this story).