|

Price is Right, part 4: Flat Wrong

May 29th, 2015

The fruit of Pricing Right in 5 years from diagnosis through design to implementation:

  1. ROA roared past 30%, up from 12% (itself a respectable number).  ROI topped 50%
  2. Profits in those five years were greater than the total of the preceding 19.
  3. Debt was completely extinguished.
  4. Owner’s pay rose 4x; employees from broom-handler to engineer participated.
  5. At the beginning of the 2008 recession, they had 8 months of operating costs in cash.

So where was management before this?  How could such a fast rise not indict management?

But consider the recent sad miscues and mistakes at Home Depot, GE, GM, First Bank, Citibank, Fannie Mae, Bank of America, Target, and General Mills.  Just brimming with management talent of the sort my client might only dream about (and envy), they managed to blow through billions of dollars and hundreds of thousands of employees.  Just what did Jeff Immelt and others at GE learn, or were not taught, by Jack Welch?  Is there no compelling lesson from the near-death of Apple after John Sculley forced out Jobs?  Is there something in management triad of order, control, and proven solutions that makes management susceptible to such dramatic failures?

So where was management?  Our owner had said he didn’t know what was going on outside; therefore, they had better find out.  Management only asked What will we get?  The owner said he didn’t think it would work, and went forward anyway–the upside was too important.  Management said they didn’t understand.  Later they said the process didn’t do anything.

Apparently doing nothing is better than all the work they did managing.

Management demanded proof before undertaking the risk.  There was no consensus, so the decision by default would have been No.  If the owner was gifted, whatever that means, he was uneducated, and therefore no “expert.”

The owner, for his part, knew too little about his own gift, its extent, its implications.  That is usually the case.  But he pushed price discovery even though he had to break some knuckles to get us data.  The pressure for him to abandon the project was intense, and continuous.  He stopped the project three times, only to examine the gains in knowledge and [later on] performance and then restart.

I’ve been at this a long time.  Gifts vary in extent and implication.  But the idea of gifts, of otherwise inexplicable skills or insights, does not fit the management scheme.  They are unproven until afterward.

In my client’s case, they were unrecognized internally and unrewarded in pricing.  No one bothered to look, so the fact of this gift was hidden.  What to management was an indication that owner was stupid (or a past-his-prime idiot savant, at least) was to me an anomaly worthy of exploration.  The simple idea of having respect for another ought to have shown them that.  Then again, personal respect has little to do with management.

The exploration of errors, mistakes, and anomalies is the very ground of discovery.  It is the source of wealth and almost always the project of individual action, not consensus nor best practices.  It is, since order and control are fundamental to management, the very thing to eliminate.

The gifted owner sees possibility; management sees risky speculation.

The outside world and those whose gifts place them outside the norm are threats–

  1. to order; they introduce chaos
  2. to perceived success; looking implies failure
  3. to teamwork and consensus; applying one’s unique gift it only happens with singular support
  4. to flow of authority; it fosters bottom-up revolution
  5. to the presumption of expert knowledge
  6. to accepted [best] practice.

But if management has become about avoiding and correcting such things, couldn’t it as easily be turned around to support them?  Rather than block, as they tend to, they could refine, which leads to the next advance. Without support this resistance is wedded to bureaucracy, and the next better thing is lost, or at least deferred, until a new upstart unhampered by bureaucracy finds it.

Steve Jobs was a jerk, seemingly random, and uncontrollable.  Sculley was everything Jobs was not:  smooth, steady, unflappable, articulate, polite.

There are more Steve Jobs owners.  My client was like him in kind, if not in degree.  Progress, welfare of thy neighbor (aren’t customers neighbors?), welfare of employees, and vendors would gain much if the Sculleys of this world would calm Jobs’ fear, ego and have the courage to support rather than curb.  The manager needn’t doubt his or her skills or feared a loss of power and/or the exposure personal frailties.  The managers who rise to this occasion find their position not weaker, but stronger.

 

Note:

Praexis’ work is objective.  We measure the effects of an owner’s idea of what a thing should be.  Yet there is much to be gained for owners by coaching, a less objective, a subjective approach.  To that end we introduce Mathew Tuttle.

My business coaching is based on helping my clients develop clarity by uncovering the relationship between their business and their gifts.  Finding meaning in their business and exploring possibilities has a dramatic impact on them as a leader personally.  I bring organization to my clients’s thoughts and implement a strategy that works with their natural talents.

Matt Tuttle, Pure Performance Coaching

Cell: 612-810-4144

Office: 612-524-6337