Google(TM) great staff practices = strategic decision making

Accountancy SA,  Feb 2008  by van der Meer, Nicholas

Tags: decision-making, Google Inc.

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What is the purpose of business? How does management meet that purpose?

Most people would probably answer 'increasing shareholder value' and proceed to a convoluted explanation of increasing productivity, while gearing up, cutting costs and gaining market share.

Michael Porter, in his paper 'What is strategy? (Harvard Business Review, Nov-Dec 1996)', states that a major destructor of a company's sustainable competitive advantage is managers that chase growth, profits and operational efficiencies, instead of focusing their activities on a defined strategic plan.

A concern with business is that managers are too afraid to make strategic decisions, because it means diverting from the herd. When decisions are made, they are targeted at the bottom line; although in the short-term these may result in financial benefits, there is value destruction of any sustainable competitive advantage, because often 'short-term profit making' decisions are in no way congruent with the 'long-term strategy' (if one exists) of the company. In the age of near-perfect information, most competitors should theoretically be able to copy the operational efficiency of any other competitor in the long term. Although there may be absolute benefits in pursuing operational efficiencies, in relative terms no company is establishing or gaining a sustainable competitive advantage over its competitors. Therefore, as competition gets more fierce, a company that aims to maintain an advantage needs to do something unique, something that will separate it from the crowd; and personnel practice is a great place to start.

Personnel practice and management is an important area of focus for any business. Unfortunately, this focus is often on frugal staff management and cutting staff costs, instead of recognising staff as the builders of the strategic vision. A company that aims to be consistently beating the competition has therefore got to get rid of the narrow-minded approach that a successful business is merely one that grows revenues at a faster pace than costs. Managers need to start making strategic decisions, in pursuit of a holistic business plan that recognises profit growth as a by-product of good strategy.

As a company like Google has shown, once a competitive advantage has been established on unique practices, and advantages that are continually re-enforced through further new ideas and unique practices, that business becomes a very difficult train to stop.

Many managers will say it: "your staff is your company's most valuable asset". Should it not, therefore, be treated with the utmost care and attention, ensuring that this asset is working well, not breaking down, and generating healthy returns? How many companies really treat their people as the spring of their proverbial river? Why is headcount and remuneration the first item we attack when cost cutting is on management's chopping board? And note how many companies attempt to get more out of their employees by being more strict on time and micro-managing, because employees 'who think they are being watched are more productive'.

People are not machines; they need to be growing through education and personal, emotional and intellectual development. They need balanced lives; they need encouragement and affirmation; they need training and time off, and to be treated fairly. They need to have a sense of meaning and find purpose in their work before they will ever share the same passion for a business as do the owners. Managers that ignore this fact and aim to get more, without giving more, are finding it increasingly difficult to motivate and retain their staff. If you want to make more orange juice, don't squeeze the oranges harder, grow better oranges.

In the latter part of the 20th century, it was often the norm for employees to prove their commitment to the company before the favour was returned. But since the turn of the century, particularly in South Africa (SA), there has been a shift of power - referring particularly to skilled and highly skilled workers, and even more so for AIC candidates within these skills sets. Because of SA's entrenched skills shortage, the skilled and highly skilled have a plethora of options at their fingertips.

They are now the ones asking the questions, "Does this company value me and place a premium on me working for them?" If a company cannot prove this to an employee, the employee will simply leave in search of a company that is prepared to satisfy him/her. No longer is it, "what can I do for my company?", but rather, "what can my company do for me?"

It may sound like a no brainer, but people who are happy in their jobs will be less inclined to leave. And considering the lack of skills and the exorbitant cost of sourcing and retraining new staff, managers can ill afford to view staff contentment with a blurred vision.

What many profit-driven, numbers-obsessed individuals fail to recognise, is that, ultimately, businesses are run by people. The numbers, the machines, the computers, the systems and processes are all invented, built up and, yes, sometimes broken down, by people.