Previously we discussed the ability to leverage beliefs as well as the first philosophy of management. Read part 9
The three management philosophies are:
- To be financially driven
- To be operationally driven
- To be market driven
In this chapter, we will discuss the second management philosophies
2. Operationally Driven Companies
What about operationally driven companies? How are they different from financially driven companies?
Let's take a look at operationally drive companies the same way. Operational has some characteristics too. In an operationally driven company process and procedure are well defined. Have you ever gone into a company where all the job descriptions are laid out well and what your group is supposed to do is fairly well defined and there is a great emphasis in your orientation on understanding the organizational charts, the job descriptions, reporting, responsibility? You have lots of meetings in operationally driven companies because there is a need to make sure that everyone is tracking in the same direction and working in the same way. There is a great awareness of way things work systematically within a business. Now what would be some examples of operationally driven companies? For many, many years IBM was an operationally driven company. The same was true of General Motors prior to 1980.
There are certain strategies that are used in operationally driven companies. First of all, they analyze systems and they use those systems that provide the best short-term results, short term here being defined typically on a one-year basis. What do we mean by systems? How are we going to do research and development? How are we going handle human resource issues that we have through downsizing a plant in Akron, OH? Those are the types of things that go on in an operationally driven company.
Costs are evaluated as a ripple effect. You don’t just look at cost as what it means on a bottom line basis like you do in a financially driven company, but you say, if I eliminate that cost what is the effect throughout the rest of the organization. How is it going to change if I reduce R & D? How is that going to change sales, how is it going to change distribution, how is it going to change our marketing and advertising expenses? So, in an operationally driven companies there is much more attention to the ripple effect.
Operationally driven companies really want to make sure it works right from the start. They want to make sure that the way they go about doing it is the right way because that’s why they’ve hired the people, the same people meet their job definitions and descriptions. We have a well-defined look at what we’re doing and there is a big investment in training and in continuing education. They are the ones who create the wave mentality. Now what do we mean by this? The financially driven company looks for the wave and wants to jump on as cheaply as possible and ride it as long as possible. In an operationally drive company they have a mindset that says, “We know what the right way is and we’re going to build it and they will follow.” There is a build and they will follow mentality. Again referring back to GM, that was GM from Alfred P. Sloan right through the end of the 60’s and early 70’s until we hit the first gas crisis. They determined what the style, engineering, performance, product definition, market differentiation were. They defined all of that. They had product sets that did all of that. So they literally created the wave. And they differentiate themselves by corporate image and doing it right.
That’s the thing that is important. The corporate image in who we are and where we are creates differentiation for that type of business. They tend to evaluate performance long term while satisfying shareholder expectations. They do analyze their systems short-term but they analyze their performance longer term. They understand the time it takes for initiating a change and when it shows up farther up the road because you are constantly tweaking systems. How does an operationally driven company plan? Well they plan by deciding and determining market needs. Here is what the market will need so we modify our short existing systems to fulfill our plan. That is a little snap shot of operationally driven companies.
Part eleven coming soon