How Excellent Companies Avoid Dumb Things: Breaking the 8 Hidden Barriers that Plague Even the Best Businessesby Neil Smith
Every day, seemingly intelligent and successful companies make headline news for poor decisions that can cause their business to stumble and make many of us scratch our heads in wonder. Why would such a successful business make "that" strategic decision? Neil Smith, with more than 20 years of experience leading large-scale performance improvements, reveals the
Every day, seemingly intelligent and successful companies make headline news for poor decisions that can cause their business to stumble and make many of us scratch our heads in wonder. Why would such a successful business make "that" strategic decision? Neil Smith, with more than 20 years of experience leading large-scale performance improvements, reveals the hidden barriers that limit excellent companies from reaching their potential, and cause even the smartest managers and leaders to falter. During his experience transforming some of the top global businesses, Smith has identified 8 barriers that exist in every organization and prevent them from implementing literally thousands of ideas to improve the way they work:
Poor Use of Time
Reluctance to Change
Incorrect Information and Bad Assumptions
Rich with anecdotes and case studies, Smith identifies the ways in each of these barriers interrupt your own business. He then outlines a fast and proven process in which 12 principles of business transformation can break down the processes that hold companies back. What Smith offers his readers is the same thing he offers every day to the major companies he works with, A PROMISE that by following his insights, the company will be able to increase communication, simplicity, and profit to levels never before attainable.
Throughout the book, Dr. Richard Levak has contributed personality and organizational insights that shed light on why an individual or an organization behaves in contrary ways giving you a better sense of why these internal walls exist and how to be aware of your actions in your day to day life.
“Neil Smith has helped create incalculable shareholder value and customer loyalty for companies across America and around the world with one 'radical' idea: Our own employees know where the barriers to success are, and they know how to break them down so the CEO and the management teams can drive the vision and strategy we set for our companies.” Brian T. Moynihan, chief executive officer, Bank of America Corporation
“This exciting book, How Excellent Companies Avoid Dumb Things, provides an in-depth look at the structural and behavioral barriers that keep organizations from outstanding performance, and offers a clear set of principles to get on track. Neil Smith's brilliant insights into removing these barriers and empowering employees to produce creative ideas are a must-read for managers everywhere.” Bill George, professor of Management Practice, Harvard Business School, former chairman & CEO of Medtronic, Inc. and author of True North
“Neil Smith makes 'A Promise' for transforming your organization, and I can attest from his work with us at NYSE Euronext that he delivers. In this book, he outlines the process by which any company can become more efficient and profitable while reducing complexity. It is a must-read for any company that wants to improve its performance and for any manager who is serious about adding value to their organization.” Duncan Niederauer, chief executive officer, NYSE Euronext
“This book provides a practical, common sense guide to the main stumbling blocks facing business leaders and how to deal with them.” John Quelch, dean of China Europe International Business School (CEIBS), Shanghai
“A top-notch consultant reveals his secret sauce! Crisply reasoned and crisply written, this book is a virtual how-to-do-it manual for improving your company. If it doesn't give you dozens of good ideas, you haven't read it.” Alan Blinder, Gordon S. Rentschler Memorial professor of Economics and Public Affairs at Princeton University and co-author of Economics: Principles and Policy
“This book is a great gift to leaders facing the 8 barriers because it underscores how critical it is to engage employees across the entire organization. Dumb things, goodbye!” Frances Hesselbein, president and chief executive officer of Frances Hesselbein Leadership Institute, former chief executive officer, Girl Scouts of the USA and author of My Life in Leadership
“A helpful reminder on how lack of oversight on even commonplace issues can interfere with an enterprise's productivity and success, this work will appeal to managers and leaders alike.” Publishers Weekly
“Neil Smith provides brilliant insights and great practical advice, based on his global expertise in helping excellent companies challenge the status quo and improve performance. Move this book to the top of your inbox.” Martin Sullivan, deputy chairman of Willis Group Holdings PLC and chairman and CEO of Willis Global Solutions
A top-notch consultant reveals his secret sauce! Crisply reasoned and crisply written, this book is a virtual how-to-do-it manual for improving your company. If it doesn't give you dozens of good ideas, you haven't read it.
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How Excellent Companies Avoid Dumb Things
Breaking the 8 Hidden Barriers that Plague Even the Best Businesses
By Neil Smith, Patricia O'Connell
St. Martin's PressCopyright © 2012 NTS, LLC
All rights reserved.
BARRIER 1: AVOIDING CONTROVERSY
MY COLLEGE ROOMMATE WAS VERY EXCITED WHEN he called to tell me that he had been made regional manager of the pharmaceutical distributor he worked for. He had worked hard and fully deserved his promotion, which probably was overdue. "Now I can finally make some decisions to get this place moving," he said. His enthusiasm was centered on something we all believe to be true: managers make decisions and direct others. But in every company I have worked with, this truism turns out to be not quite so true. In every company, large, controversial issues are left unresolved because decisions have not been made. And these unresolved issues exist at every level of management in even the best companies.
This happens because managers often deliberately avoid making controversial decisions. One of the key skills of being a strong manager is knowing which battles to fight and which to ignore. The best managers have a knack for getting this just right. They have impeccable timing. They know exactly when to make a decision. They also know that it is sometimes easier and even wiser in the short run to leave things the way they are rather than to make a decision that, although obviously the right thing to do, may have other consequences. But leaders are expected to deal with and resolve controversial issues. When they do not, however good the reason, they can cause confusion, frustration, and misunderstanding as well as inefficiency.
Avoiding controversy is one of the most significant behavioral barriers, and in its wake important issues remain unresolved, usually leaving huge opportunities for change.
There are many reasons people avoid controversy and try to keep the peace, but as Neville Chamberlain learned in the years before World War II, "peace in our time" carries a high price indeed. In this chapter, I demonstrate why managers avoid controversy and what can happen when they do. And I show how a good change process can provide the air cover to tackle controversial decisions.
As you will see with all the eight barriers we write about, recognizing when a barrier exists is the first step toward breaking it. The goal of a good change process is to help companies see how each of the eight barriers manifests itself in their organizations and how they can break them down. In the case of the Avoiding Controversy barrier, it is usually very clear to the organization that decisions are not being made, but it is unclear why a manager is avoiding making them. There is usually a sound reason, but the reason is often invisible. A good change process will force controversial issues to be addressed and decisions to be made by spotlighting the issues and making avoiding a decision very difficult.
HOW AVOIDING CONTROVERSY FORCES COMPANIES TO DO DUMB THINGS
A chief executive officer of a Midwest industrial company had been living for four years with the pet project of his chief operating officer — an expansion into the "middle market," a customer base that was smaller in size than the company's traditional customer base. The venture was still considered a start-up and had yet to make a profit. The argument, year after unprofitable year, was "Oh, give us another year and we'll make money next year." The project had been approved at a time when the economy was growing quickly and it was hard for industrial companies that already served the market to keep up with demand. After two years of solid investment, it should have generated healthy profits in the third year.
This start-up was launched with much fanfare within the company. A lot of effort and money were invested in it, and its progress was featured prominently on the company's intranet — until it became apparent that the expansion wasn't going well.
The CEO was in a tough spot. The COO had been at the company much longer than he had, and many people who had thought the COOdeserved the top job were disappointed when an outsider was brought in. The CEO knew that he could justify keeping this project going for only so long before the board and shareholders would ask questions, but he also knew that killing the COO's pet project would harm the COO's reputation and a relationship that was important to him.
The CEO didn't feel comfortable turning to the COO and just saying, "We need to close this down." So the expansion continued ... and continued to lose money.
Why should a CEO feel uncomfortable telling a direct report, "Well, we gave it a shot, but it's just not working"? This is business, after all, and everyone is a professional. The industrial company was publicly traded, so the CEO had an obligation to shareholders to maximize profits by doing away with money losers.
As surprising as it may seem, Avoiding Controversy is something I have seen over and over in my work with companies. And like all of the other barriers, it surfaces at all levels of management. But there are many dynamics at play, as you will find true of each of the eight barriers that we explore.
This one misfire notwithstanding, the COO had a great track record. During his 15 years with the company, he had successfully overseen the integration of several acquisitions. Ironically, they had included having to make some tough decisions about jettisoning unprofitable parts of the business. He was known to be fair-minded and reasonable, which earned him the loyalty not only of his direct reports but of people several levels down in the organization. This middle-market expansion was the COO's blind spot as he had invested much in making it a success — so much that the CEO feared he would lose a key lieutenant if he shut down the project. The CEO made a conscious decision: he rationalized that the disruption caused by losing the COO would be more costly than this money-losing project.
The CEO also realized that shutting down the project could be interpreted as a vote of no confidence in the COO, thus robbing this key player of respect within the organization and possibly compromising his ability to be effective going forward. So while on the surface it looked like the CEO was merely taking the easy way out by not addressing the problem, he believed that it was beneficial for the company to live with this money-losing operation for a while longer. Of course, it was not easy for the rest of the organization to understand why he was doing this.
A publishing company had two analytic units that essentially did the same thing. Each provided market research for the company's extensive prospect mailing program to solicit subscriptions. The analytic units used research and statistics to determine the type of people who would buy a particular type of magazine. They then located appropriate mailing lists and monitored the results. They also created, implemented, and monitored the success of different types of offers (such as buy one, give one free as a gift).
One of the units reported directly into the flagship magazine division. The second unit reported to the centralized marketing division, which supported the other two publishing divisions. This duplication of effort stemmed from a time many years earlier when the central analytic unit did a very poor job of supporting the flagship magazine. As a result, the flagship magazine division created its own unit. Since then the circumstances had changed. An executive who was considered an industry leader was running the central unit, and service levels had increased tremendously. Both heads of their respective divisions now agreed there should only be one group doing analytics, but each believed that his own unit could do the job better. The executive vice president (EVP) to whom both division heads reported did not want to address this issue for fear of demoralizing either team member, each of whom was a high performer. As a result, both analytic units were left untouched — and duplication persisted.
Clearly it would have been far more efficient to have one unit performing the analytics function. But the two executives in charge of the units were fiercely protective of their own units. Neither believed that a new, combined analytics center of excellence should report to the other.
The EVP who oversaw the two divisions didn't want to look like he was favoring one manager over the other. Each of them had a large degree of autonomy and responsibility, and it was important to him that each was in control of his own resources. He knew there should only be one unit, but he didn't want to dictate the answer to them — he wanted them to figure it out for themselves. If he chose a winner, by default there would be a loser. This was a zero-sum game, and the EVP didn't want to demoralize either of his high-performing executives. And he had another concern. One of the potential losers was very close to the EVP's boss, the CEO. If, as a result of his decision, the company lost an executive for whom it had high hopes, the EVP didn't relish the thought of facing the CEO's wrath.
The customer service call center of a bank provided live service 24 hours a day, 7 days a week, as was the industry standard. The head of operations (to whom the call center employees reported) believed that keeping the center open 24/7, 365 days a year was an unnecessary expense. He proposed reducing the hours to 20 a day, shutting down between 1:00 AM and 5:00 AM. This four-hour-a-day reduction would allow him to move from three eight-hour shifts to two ten-hour shifts and would save the bank more than $2 million a year. The retail banking president, whose job it was to keep customers satisfied, resisted the idea of reducing the hours. "We can't offer our customers less service than the competition does," he argued. He believed that customer service was one of the few areas in which the bank could distinguish itself from its competitors. This line of reasoning was behind the retail banking president's already-successful campaign against outsourcing the call center function, as market research had shown that the bank's customers were against outsourcing.
Each executive had a strong argument — substantial cost savings versus keeping up with the competition. The details of the situation were clear and the financials were known, but the two executives couldn't reach an agreement. Neither of them wanted a showdown, and interference on the part of the CEO, to whom both reported, could have been seen as heavy-handedness.
These two departments shared responsibility for numerous initiatives, and they worked closely together and partnered on many other projects. Outside the bank the two executives were best friends, a fact that made it even more surprising that they couldn't reach an agreement on this simple issue. To the retail president, it was clearly important to mirror what competitors were doing. To the head of operations, this was a simple waste of money. This was a highly visible disagreement, and for the CEO the choice was very difficult. Because the debate was so visible to the organization, to side with one executive over the other would clearly undermine the power of whichever executive's suggestion was rejected and potentially cause bitterness in the ranks.
BARING THE BARRIER
You may think the answers to these problems are obvious and that these are just examples of weak managers unable to make decisions. But all three of these companies were considered among the best in their industry. Even the very best managers will have more than a couple of controversial ideas they do not want to act on ... and that includes the CEO.
Perhaps they don't want to anger the person they don't agree with, because there is already tension there. Perhaps they don't want to be seen as empowering one person at the expense of another. I even know of one executive who could not bring himself to fire someone who was incompetent at running his division because, frankly, he liked the person too much. Managers are human, after all.
The real reason the Avoiding Controversy barrier exists is because everyone who makes decisions has to pick their battles — whether you have just three people reporting to you or whether you are the CEO in charge of the entire company, you leave some things undecided. That means that issues — often big, controversial issues — are left untouched in every organization.
Sometimes decision makers are essentially powerless. They may have the authority to make a decision, but, from a political perspective, it would make no sense for them to act. To be seen as a manager who wields decision-making authority in anything less than a deft way is to run the risk of being viewed as heavy-handed and unfair. The best managers always think carefully, for example, about a business decision that produces a zero-sum game, where, if there is a winner, there is also a loser. Decisions can become polarizing; people align with one side or the other. Even CEOs can be powerless. True, the CEO is the ultimate boss, but once he or she has designated a person to run a business, unit, or division, for the CEO to intervene would be disrespectful and disruptive. The CEO would be seen to be micromanaging and risk having a revolt on his or her hands. If there is no decision, there is neither a winner nor a loser. So, because of the Avoiding Controversy barrier, contentious matters remain unresolved, because it can seem to make more sense to do nothing.
This is true regardless of whether a manager's style is dictatorial, democratic, or delegating. Even dictators have a power base that they cannot risk offending by issuing a fiat. Democratic bosses, whose teams are accustomed to sharing in the decision making, cannot suddenly switch gears. And bosses who have delegated responsibility run the risk of destroying their power base by taking away authority they have given others.
Another reason that some managers avoid controversy is that they are deliberately conflict adverse. I recently had lunch with one of my former client CEOs, and he laid this problem bare. He said, "Some executives will avoid conflict as much as possible as they guide their career through the organization. In my experience, controversy avoiders are often very popular, and it is easy to promote them. Everyone feels good and no one feels threatened when they are promoted. A very successful career path can be built on avoiding controversy."
The best managers know when to pick their battles and have a knack for doing so. But even with deft use of this skill, important issues in the organization are left unaddressed. The examples I have given — most rooted in actual work I have done with companies — are just some ways in which avoiding controversy plays out. One of the reasons a good change process is so successful is that it removes the Avoiding Controversy barrier so that managers no longer have to pick battles; the process does this by shining light on every aspect of the company's operations and by forcing the right decision to be made on each one of them.
Now, there are also times that managers do not act for reasons less noble or rational than the situations I have described. Sometimes they do things — or don't do things — because they want to keep people below them from becoming too powerful, for example. But regardless of the reason for the lack of action or not making a decision, and regardless of how a reason might be rationalized, when people avoid dealing with controversy, the barrier is still there and the problems still remain.
BREAKING THE BARRIER
My firm gets hired to break down the barriers in companies and help them achieve change that will make them more efficient, more profitable, and less complex. We do that with the PGI Promise process, which has proven to be extremely effective in allowing creative ideas to come forward. In most cases in which people are Avoiding Controversy, they are aware that they are doing it. Their motive is to avoid painful consequences. A big part of my work in dealing with the Avoiding Controversy barrier is the creation of a short-term environment in which executives must face issues and must determine the outcome together. Failing that, the CEO must make a decision.
The CEO and other executives are "protected" by the process when making decisions. It provides the ground cover for controversial issues to be resolved and decisions to be made. When the entire organization sees an issue and there is a structure in place to make decisions, it becomes hard to avoid making them. The manager can blame the process: "Sorry — it is the process that is making me decide this." The process also makes it easier for "losers" to accept decisions. And, the fact that there is now a change process in place helps to depersonalize the issue. In fact, every idea is depersonalized — and so is every solution. The process is driving the decision making. A key principle of our change process is that ideas are easy to get in the system but hard to take out (see Principle 6 in chapter 9). People have to defend their reasons for not doing something. This is the reverse of the way decision making usually takes place. In a typical environment, one person's dissent can be enough to veto a suggestion for change. In the barrier-busting environment, the onus is on a dissenter to say why an idea cannot work.
Excerpted from How Excellent Companies Avoid Dumb Things by Neil Smith, Patricia O'Connell. Copyright © 2012 NTS, LLC. Excerpted by permission of St. Martin's Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Meet the Author
Neil Smith, CEO of Promontory Growth and Innovation (PGI), has for the last 20 years focused on helping large corporations dramatically improve performance and profitability by growing revenues and innovatively reducing costs. Smith has led initiatives across a number of industries with some of the strongest companies in the U.S. including, Mellon Bank, Willis, and North American Van Lines. He recently spearheaded the highly visable initiative across Bank of America, and a firm he co-founded was responsible for projects at Heinz, Detroit Edison and Blue Cross Blue Shield of Tennessee. His efforts have helped increase profits at top companies by 20 percent or more.
Patricia O'Connell, former Management Editor at BloombergBusinessweek.com, brings more than 20 years of writing and editing in a variety of subjects, including business, leadership, and strategy.
With contributions from Dr. Richard Levak, a nationally recognized personality expert who has been in private practice for over thirty years and has a growing practice in organizational consulting, assisting businesses with executive hiring, development and teambuilding.
Neil Smith, CEO of Promontory Growth and Innovation (PGI), has for 20 years focused on helping corporations dramatically improve performance and profitability by growing revenues and innovatively reducing costs. He is the co-author of How Excellent Companies Avoid Dumb Things. Smith has led initiatives with companies including Mellon Bank, Willis, and North American Van Lines. He recently spearheaded the highly visable initiative across Bank of America.
Patricia O’Connell, former Management Editor at BloombergBusinessweek.com, brings more than 20 years of writing and editing in a variety of subjects, including business, leadership, and strategy. She is the co-author of How Excellent Companies Avoid Dumb Things.
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Leaders of even successful companies unwittingly make bad decisions and costly mistakes. Consultant Neil Smith identifies “eight hidden barriers” that keep companies from reaching their full potential and explains how to shatter them. Recognizing barriers is the first step, but, to create lasting change, companies must reshape their corporate culture from the top down and employees must take ownership of their ideas. Smith identifies both obvious and subtle obstacles, though he can get bogged down in details. getAbstract recommends Smith’s diagnosis to executives seeking to increase their companies’ efficiency and profits.