Chapter 1 - IntroductionThe coverage of what management is and how it works; management is an increasingly professionalized discipline which consists of knowing everything about, and being able to apply
You should be able to debate the extent to which management is a profession – the need for expert knowledge and capability and the ability to apply this according to the situation and the organisation and circumstances (with the need therefore for a ‘professional’ approach and commitment (including a personal commitment); and the extent to which it is not a profession (there are no entry barriers or pre-qualifications; there is no independent ability to regulate or to set reward levels.
- achieving things through and for people
- delivering performance
- coping with change and uncertainty.
You should also be beginning to recognise the expertise needed of managers: organisation and product knowledge, the ability to support, justify and defend a decision or point of view, knowledge and understanding of the organisation and how it operates, its products and services and the ways in which it delivers customer and client service, the sector in which it works, and the present and unfolding nature of the environment.
Anyone wanting to know and understand what management is and does, what it should deliver, and how it can be made to work effectively in any set of circumstances, needs to read this book. It is written almost as a thriller! It goes into all of the details of the difficulties, obstacles and challenges faced by a company having to operate in the heath of competition, environmental pressures, rising costs and financial shortages. It deals with what management is not in the first part of the book, and the measures taken by Ricardo Semler to replace the existing company management with his own people and his own priorities.
A section and summary of the main lessons from ‘Maverick!’ is as follows:
'When I took over Semco from my father, it was a traditional company in every respect with a pyramid structure and a rule for every contingency. Today our factory workers sometimes set their own production quotas and even come in their own time to meet them without prodding from management or overtime pay. They help redesign the products, the make and formulate the marketing plans. Their bosses for their part can run our business units with extraordinary freedom determining business strategy without interference from the top brass. They even set their own salaries with no strings. Then again everyone will know what they are since all financial information at Semco is openly discussed. Our workers have unlimited access to our books. To show we are serious about this, Semco with the labour unions that represent our workers developed a course to teach everyone, including messengers and cleaning people, to read balance sheets and cash flow statements.
We don't have receptionists. We don't think that they are necessary. We don't have secretaries either, or personal assistants. We don't believe in cluttering the payroll with un-gratifying dead-end jobs. Everyone at Semco, even top managers, fetch guests, stand over photocopiers, send faxes, type letters and use the phone. We have stripped away the unnecessary perks and privileges that feed the ego, but hurt the balance sheet and distract everyone from the crucial corporate tasks of making, selling, billing and collecting.
One sales manager sits in the reception area reading newspapers hour after hour, not even making a pretence of looking busy. Most modern managers would not tolerate it. But when a Semco pump on an oil tanker on the other side of the world fails and millions of gallons of oil are about to spill into the sea he springs into action. He knows everything there is to know about our pumps and how to fix them. That's when he earns his salary. No-one cares if he doesn't look busy the rest of the time.
We are not the only company to experiment with participative management. It has become a fad. But so many efforts at workplace democracy are just so much hot air.
The rewards have already been substantial. We have taken a company that was moribund and made it thrive chiefly by refusing to squander our greatest resource, our people. Semco has grown sixteen-fold despite withering recessions, staggering inflation and chaotic national economic policy. Productivity has increased nearly twenty-fold. Profits have risen ten-fold. And we have had periods of up to fourteen months in which not one worker has left us. We have a backlog of more than 2,000 job applications, hundreds from people who state that they would take any job just to be at Semco. In a pole of recent college graduates conducted by a leading Brazilian magazine, 25% of the men and 13% of the women said Semco was the company at which they most wanted to work.
Not long ago the wife of one of our workers came to see a member of our human resources staff. She was puzzled about her husband's behaviour. He was not his usual grumpy autocratic self. The woman was worried. What, she wondered, were we doing to her husband?
We realised that as Semco had changed for the better, he had too'.
These words are directly quoted from ‘Maverick!’ and illustrate both the ways in which this one company does things, and also some of the key and guiding principles to effective management. There are three immediate lessons:
- these are the principles by which Semco is run and directed; it is not a blue print to be copied;
- once you adopt a set of principles, you have to ensure that they work in every aspect of the work and its organisation;
- the stated and implied positions of openness, trust and honesty have to be maintained as absolutes; once you dilute them, you simply become ‘another company’.
Helmont Ltd., is a fish processing and cannery company located at Walsall, West Midlands, UK. Until recently, it took its supplies of fresh and frozen fish from Ocean Going Trawlers Ltd., a fishing fleet based in Liverpool. Helmont Ltd., was a very successful and profitable company and supplied to all of the main brands, including John West, Bird's Eye and Ross. Helmont also supplied fresh, frozen, canned and processed fish products to the supermarket chains for sale under their own brand names.
Following new quota arrangements introduced by the EU, the prices of the landed fish catches in the UK rose by 10%. Accordingly, Helmont decided to look around for alternative supplies. After extensive research, the company found that the port and fishing fleet of Cadiz, Spain, were prepared to supply them with the volumes of fish and the regularity of deliveries required. Helmont unilaterally cancelled the contract with Ocean Going Trawlers of Liverpool and took up with Cadiz. The catch prices in Cadiz were 53% lower than those from Liverpool; and the full cost, including transport, worked out at 38% cheaper than the Liverpool supplies.
The key lesson is that there is a simple cost advantage, and this is apparent to all. However, Helmont's previous suppliers were barely 100 miles away, and it was therefore much easier to manage any difficulties if things did go wrong. The new suppliers would be over 1,000 miles away; and consequently, there was a much greater propensity for things to go wrong. All of this in practice has to be paid for out of the cost advantages.
In practice this venture failed because everything that could go wrong did go wrong. Refrigeration units on the lorries broke down. There were strikes and disputes involving the border authorities between France and Spain with the result that the lorries were held up on their journeys (in spite of the fact that the EU is notionally an open market, the Spanish in particular retain an active border presence). There were hold-ups at the Channel ports in Northern France. The lorries were then faced with the problems of negotiating the overcrowded UK motorway network, in particular the M25 around London and the M6 through the West Midlands before they could get back to the company's headquarters and factory.
Helmont tried to reschedule deliveries to meet its own new limitations, and to ensure that the customers would remain satisfied. However, the customers - the branded goods and the supermarket own brands - had contracted with Helmont in good faith, and now did their best to hold them to the agreement. In order to remain viable, Helmont now had to return to Ocean Going Trawlers in Liverpool and to do their best to renegotiate the contract. This they did, but the conditions in the contract were now to be very much more onerous.
Clearly, not every cost-saving exercise goes wrong; and all managers at all times need to be actively managing their costs and maximising and optimising their resources. However, it is essential that the full context and range of issues are addressed. Simply to concentrate on one priority at the expense of all others is invariably a recipe for disaster.
There are further points to note also, both in relation to this case, and also as wider questions arising from the matters with which Helmont was quite rightly concerned:
All of these questions need full and proper evaluation. And while this might appear trite and obvious from the point of view of studying management, do remember that the world is full of damaged and ruined companies which have failed to consider these matters in full – for example:
- would what was proposed really deliver the savings needed?
- Would this be the best way to deliver the savings needed? What other steps could the company have taken in order to deliver the savings needed?
- Why go to Spain? Was it really because the catches were so much cheaper; or was it simply that it is known to be a nice place to visit and to work, and so business reasons were dreamed up to support a decision that was de facto taken on a human basis?
- What about the residual product quality? Would the new supplies actually deliver the product outputs that Helmont wanted and needed for their own customers and clients?
There are many others; and as you study the subject of management, you do need to try always to come to conclusions as to why things succeed and fail, as well as noting the facts of their success and failure.
- Sock Shop opened a chain of shops at US railway stations simply because it had been so successful in London; the losses incurred bankrupted the original company, and it now operates as a jointly owned venture in the UK only;
- Tesco opened and then shut its Fresh Fields US venture; initially successful, it soon failed because it had not recognised the extent of customer loyalty to US stores in the grocery industry;
- The Halifax Bank was successful as a UK retail bank for over 100 years; and it ruined itself by going into international finance and investment markets.
Why do managers nevertheless take decisions that are plainly not in the best interests of either their organisation or its long term future?