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Superior Management -- The Only Competitive Advantage?
By Jack Deal

      There is an old consultant's saying that goes 'Competition vs. competition can be reduced to management vs. management.' As we students sort through the changing dynamics of business we keep coming back to management -- all business dynamics eventually loop back to management.
      One of the advantages a management consultant has is to use the world as a field class and to a certain extent a 'laboratory'. Sometimes we get a view that others do not -- and sometimes we are privileged to witness insights that are truly astounding. Such is the case with two distributors I had as clients.
      Both companies were distributors in the same industry, roughly the same size, same number of employees and same national markets. Although they were in the same region they were not physically located near each other and did not compete directly for the same market share, employees, vendors, etc.
      I was asked to assist both companies several months apart -- in fact my work engagements actually overlapped with both companies. I was very close to both companies at the same time. Both companies faced similar if not identical problems in operations, sales/marketing and management. Both companies monitored their critical numbers on a weekly if not a daily basis. However, the specific business dynamics were very different!
      Company A had been declining in total sales. With the decline in sales came a decline in net margin. In fact Company A had been losing money the previous 3 quarters and that is why I was called in. Company B had been increasing sales each of the last 8 quarters. The actual net margins had been somewhat flat due to heavy investments in technology but the past two quarters had shown strong double digit net margins. Their growth was expected to increase exponentially and that was why I was called in.
      Company A was run by managers that watched the clock and rated numerically every single category of employee performance. They used an elaborate employee reprimand system with written 'write-ups'. Their employees complained of being micromanaged, bored and viewed their jobs as 'punching the time clock'. They were paid hourly or salaried with essentially all management contact involving reprimands or monitoring.
      Company B had half the management team. Managers monitored performance not tasks. If an employee came in 10 minutes late they were on the honor system to make up the time. There were no time clocks. Company B employees were largely self-managed and independent. They had direct input through company suggestions and all suggestions were tracked on a database. They were paid a base hourly or salary wage with about half of their pay coming from commissions based on performance. They often did not even see management and when they did it was usually for praise or asking for input.
      Company A Managers spent most of their time dealing with crises and 'fires'. Company B Managers were looking at ways to improve production, diversify their products and enter new markets. Company A Managers would meet after work at the local pub and discuss how the company was only attracting inferior employees. Company B Managers went home to their families. Company A Managers worked 50-60 hour weeks and Company B Managers 40-50 hour weeks.
      Walking into Company A, the atmosphere was one of stress, tension and impending gloom. Walking into Company B the atmosphere was busy, relaxed, upbeat -- with almost everyone smiling and laughing.
      Even though at the time I was involved with both companies they were roughly the same size, that is no longer the case. Company B is now 50% larger than Company A -- the change coming in a period of just over 6 months.
      Company A fired their President. Company B called me back to look at how the employees could buy into the company through a stock plan. Company B had two of Company A's top employees submit unsolicited resumes and applications.
      The single outstanding difference in both companies was management. Company A has publicly traded stock and now Company B is going IPO. Which stock would you buy?
      Jack Deal is owner of Deal Consulting in Santa Cruz, California. Related articles may be found at www.dealconsulting.com.

Other article by Jack Deal:
The Knowledge/Ideas Paradox
Corporate Culture - A Case Study
10 Business Trends for 2000

 

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