In a single word, it is “disconnected.” With certainly some notable and admirable exceptions, many big corporations and their leaders have become isolated, disconnected, and not really plugged into the customer base they attempt to serve. Many corporate headquarters have become not leaders of the economic empires they have created, but fortresses built to preserve the leadership itself. Size for its own sake has become the objective, and the results are unmanageable entities in which management anarchy and disconnection often reigns. This shows up in two distinctive characteristics:
#1. Loss of the “product guys.” A few years back, colleges and universities created an educational cash cow program called the Masters in Business Administration (the MBA), and to sell it they convinced corporate America that these were the people needed to run business operations. They were trained in manipulating financial statements, “crunching the numbers,” interpreting market surveys and demographic statistics, and steeped in supply-chain concepts. With “MBA” stamped on their foreheads, they were hired directly into (upper-)middle management good-income positions to lead the company’s future. Unfortunately, what they were not steeped in was the actual core product of their industry which is the real heart of the corporation’s existence. They did not spend time out in the plant, the warehouse, making the sales calls, seeing firsthand how their customers actually use their products day-to-day. Coming into the corporation at the management level, thinking that business success is simply a matter of managing the income statement and generating market share, these kinds of corporate leaders never really understood the product that justifies the corporate being, or the people throughout the corporation who make it all happen (or not). They did not understand all of the different pieces that must come together to get that product into the hands of customers. The many dangers of missing that understanding is why the smart business owners of yesterday always started their rising stars at the bottom of the organizational rung and let them work themselves up – so that they would truly know how that business worked top to bottom.
Bob Lutz is a lifetime car guy. He was hired by GM in 2000 to try to turn that corporation around on the inside after years of GM’s downward slide in sales, market share, and profitability against its competition. His very excellent book, Car Guys Vs. Bean Counters, The Battle for the Soul of American Business, is highly recommended to those interested in understanding the decline of American business. It details his experiences encountering GM in 2000 versus the company he had left 30 years earlier towards becoming a successful auto manufacturing executive. This giant corporation that once exemplified American can-do success had become choked with focus groups, decision-making-by-committee, oppressive generations of statistical numbers and irrelevant marketing projections. All while the “car guys” (of whatever gender) – the people who lived, breathed, designed and built cars simply because they loved cars and truly understood Americans’ longstanding love affair with their cars – were marginalized to the sidelines. The finance/MBA folks focusing on the numbers had taken control of the company at the expense of the engineer / product designers who intuitively understood the product and the people who wanted to buy it. This gap resulted in a massive disconnect between company and consumer, fully exploited by the Japanese auto industry, ultimately leading GM into structured bankruptcy.
We can only hope that real automotive people are moving back into running the American auto manufacturers; early indications show such a potential revival. What is clear is that GM’s experience is but an example of a wider-spread problem – that when the creative entrepreneur who started the business based on his/her love of the product move out and are replaced by “the suits” (the finance people who should be supporting the business leaders not trying to run things), that is when the disconnect happens between corporation and consumer. (E.g. – think Steve Jobs’ tenures at Apple.) It explains why the consumer takes a product home and, after numerous bad experiences trying to assemble / use / consume it, is fully convinced that because it is so unusable / unfriendly the corporation’s leaders must surely have never actually used their own product themselves.
This disconnect between corporation and consumers also creates an internal disconnect between corporate leaders and workers. Corporations that get too big, well beyond the point where size creates true benefits of scale, progressively get further removed from what is actually happening inside their companies. Leaders are so busy holding the seams of the organization together, focusing on their own survival and personal monetary success and promoting the image of the company instead of strengthening its product, they become virtually clueless about the substance of what is actually happening at the factory / retail / classroom / branch office level. So employees and operational middle-managers are either ignored or left to their own decision making without adequate guidance, supervision or ethical example. Or they become so bottled up in ill-thought, overly-broad generic corporate-written rules, regulations and policies that they cannot respond to the real-world needs, problems and creative ideas that arise each working day. In management theory it is important to delegate and allow for initiative in the ranks; such has been a hallmark of American business and military success. But in the last few years we have heard far too many excuses from business and educational leaders that “I never knew that was happening,” not understanding that such ignorance does not take them off the hook; it puts them squarely on it.
Truth is, large corporate size can be a good ingredient for business success. It can bring an aggregate power to production and marketing leading to cheaper cost and wider distribution. But when size creates insulation, and corporate leaders are no longer connected to nor understanding of their customers or employees, when corporate success is no longer shared top-to-bottom in recognition of the interdependency and contributions of all levels and functions of employees, and mere personal survival is more important than product, then failure sits at the CEO’s door. In big corporate America, we have too many instances of the wrong people running the show. We need the product people back in charge, and the finance people back at their computers doing the important advisory job keeping financial score. Good business success is about good product from good employees clearly focused on customer needs. When that is in place, the balance sheet will be automatically taken care of.
[Next upcoming posting: #2 – Corporate Customer Service]
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