Six Basics for General Managers

Great coaches underline the basic skills and playing skills that make a team a consistent winner. Great managers do the same. You know that sustained higher performance cannot be built on one-sided upgrades such as reorganizations and massive cost savings. Sure, if you are in a situation where it is necessary or desirable, they will take such sweeping actions. But avoiding such a situation is their priority. And that is by focussing on the six key tasks that are behind every manager's job: shape the business environment, strategy, resource allocation, development of managers, organization building, and management.

This list should be no surprise; after all, the basics of the job of a general manager should be familiar. Its status as an organizing framework is important to the vast majority of general managers' activities. It helps you define the scope of the work, establish priorities and see important interconnections between these sectors.

Shaping the Work Environment

Each company has its own specific working environment, its past legacy, which determines to a great extent how its managers respond to problems and opportunities. But whatever the environment a manager inherits, it is a critically important task to shape or redefine. And that's just like it is for giants such as General Motors and General Electric, for small and medium enterprises.

Three elements dictate the working environment of an enterprise:

• Current performance standards which set the pace and quality of the effort of people
• Business concepts that determine what the enterprise is and how it functions
• Concepts and values of the people who prevail and define what works in it.

These three are the most important components of performance standards, as they determine in general the quality of the effort that the organization makes. Usually, key managers follow suit if the manager sets high standards. Subordinates are not likely to do much better if GM standards are low or vague. The main means by which top managers have their influence and use their skills throughout the whole business is therefore high standards.

That's why the bigger contribution you can make to immediate results and long-term success is raising your performance expectancy for every manager, not just for yourself unless your business or division already has demanding standards—and very few. This means that you decide consciously on the tangible actions of your company, on the position it has now, and if you are willing to make tough calls and steps from here to there.

Of course, the company's objectives are one of the main standards set by GM. The best genetic engineering companies have targets that force the organization. This does not mean arbitrary, unreal goals which will not miss and motivate anybody, but goals that will not make anybody forget how tough the competitive arena.

I remember vividly a general manager who astounded subordinates by refusing a plan showing a good profit for the third consecutive year on a good sales gain. They considered the plan to be demanding and competitive. But, instead of letting volumes grow, the GM told them to come back with a plan which kept the same volume but cut the cost base 5 percent lower than in the previous year. This was a tough task, but he was persuaded of the goal because his main competitor expected a price cut for market share to recover.

Over a series of innovative reductions in costs, in production, distribution, purchasing, overheads, and product mixes, the company changed dramatically its cost structure in the coming years. This led to record profits and market share gains, despite significant price erosion. Without this tangible objective, I doubt that the company would never be able to achieve these results every morning. A top Japanese CEO who was asked by a US trade negotiator how would he compete if the yen fell from 200 to 160 dollars is obviously of the same kind of thinking. “We are already prepared to compete at 120 yen to the dollar,” he replied, “so 160 doesn’t worry us at all.”

Naturally, high standards are more than demanding objectives. Like top coaches, military leaders, and symphony drivers, top managers set a personal example of how long they work, how obviously they are committed to success, and how consistently they are working. In addition, high standards are set and strengthened in small and rapid mounting ways.

Instead of complaining but accepting them, they reject long-drawn-out, poorly prepared plans and bagged profit targets. The managers of their businesses or functions have to know the details, not just the big picture. In pivotal jobs, marginal performers are not long. Tight deadlines are set and implemented by the best GMs. They are not satisfied, first and foremost. Once a standard has been achieved by the sales or production or R&D department, expectations are raised and continued.

For example, one general manager asks key managers to classify their subordinates from 1 to 9 every year. Then he reminds everyone that it took only five years for the same performance to reach six this year. This approach certainly creates additional stress and possibly even frustration. It also reduces self-sufficiency, fosters personal growth and results.

GMs consistently influence the second element of the work environment is the corporate fundamental concepts. Whether it has been drawn up or not, leading GMs to have a wide overall overview of the areas in which they want to compete and the way the company is going to succeed in the fields of centralization and decentralization. They have the equality between centralization and decentralization, the role of the line and staff, and the sort of awards that motivate people to achieve their goals. Simply put, this summary shows how the company will differ from a collection of entirely independent companies, and better.

In addition, because each business world changes over time, the best managers ask constantly: What kind of business would we like to run? Are we in the correct areas? Are we in each of them still viable? How should we transform the company? The result is a set of enterprise concepts that move consistently in small ways.

An outstanding example is Johnson & Johnson. The company, with a long record of business history, wants to lead the low technology growth segments of healthcare, making it a broad-based company that is confronted by various smaller competitive worldwide. CEO James Burke believes he and his managers need to excel in early spotting promising new market segments, tailoring products to serve them, and promptly marketing them. This is done through a network of approximately 100 closely focused, independent businesses.

This highly decentralized organization has expertise in marketing and product innovation and is supported by a company credo that binds all together into a highly human but competitive business. Managers all over J&J know exactly what to do and how to do it. This carefully designed company overview offers J&J virtually everywhere it operates an important competitive edge.

J&J now faces a new set of competitive conditions that compel managers to reprocess long-standing business concepts despite their overall success. Customers have decided in several major parts of the business to want fewer suppliers, better-integrated distribution, and administrative services. For that reason, J&J is still competing with companies offering broader coordinated product lines and services to maintain its traditional decentral divisions – and all they stand for.

The third part of the work environment — the concepts of the employees of the company — is closely connected with the other two. Innovative, fast-moving enterprises require managers different from those in small- and slow-moving enterprises, where cost control and high volumes are the main focus. For instance, an aggressive, growth-oriented company decided that it needed: a combination of high-potential managers, not just some good managers with the following implementers; innovative managers who act like owners and not managers who take decisions; and ambitious quick learners who don't like to move slowly.

Of course, not every company will be subject to the same pattern. A GM focuses on two questions to determine what applies: What sort of managers do we need in the foreseeable future to compete effectively? What must we do to attract these people, motivate them and retain them? GMs who constantly ask the questions and reply end up with more managers of a high impact than those who have not paid much attention to the combination of skills and styles required to win their particular battles.

In determining the values of your company, the best GMs participate also deeply—"what is like working here." Cummins Engine's CEO Henry Schacht is a great example. The kind of organization, which he wants to be, he has a keen sense. While he reduced the workforce of the company by 50 percent, he carefully considered how to make cuts to people's understanding and judgment. In addition, Cummins is deeply concerned with colleagues and the high ethical standards — just as Irwin Miller was CEO. Employees, therefore, need no policy handbooks or rules books to be ethical and equitable – they do this.

While this may seem obvious, I know many managers who end up with conflicting cultural values and inconsistent behavioral standards because they have not deliberately decided what is important for them. Naturally, some of them always have faulty or expedient own values but still manage to succeed in the short term. However, character defects or even weaknesses like incompatibility come to grips with people in time—causing both GM and company serious problems.

Crafting a Strategic Vision

Given that the general director is the only manager able to engage the whole organization with a certain strategy, the best GMs always participate in the development of strategy and lead the effort, and not only lead it. First of all, they have a strategic vision for each company or develop one quickly when new jobs are appointed.

When Ned Johnson took over Fidelity Management & Research, for example, he decided there were two mistakes in the mutual fund industry: competition was based on the person who had been best lately, so that fund managers were living or died based on the results of each quarter or year. To avoid such problems, Johnson has imagined a 50-60-fund supermarket, offering clients superior service and every conceivable investment focus. In this way, customers, not the fund manager usually blame themselves if a particular fund does not have a record year. And the superior service of the company makes changing to another Fidelity fund easier for customers. In addition, Fidelity has four or five winners always to boast about with so many funds operating.

When David Farrell took control of May Department Shops, several "experts" told him to diversify from the "dying" shop. However, Farrell saw a chance to diversify into financial services by competitors like Sears and by moving into specialty stores. He focused on becoming the merchandising and operating leader in the department store business on each of its markets instead of following the crowd. It centralized merchandise concepts, aggressively priced, eliminated losers, established strong local administration driven by implementation, and managed cost. As a result, May was the largest, best-run public company in its chosen field, while the former leading competitors like Allied, ADG, and Federated were stumbling. Naturally not in all markets; but it's the best thing overall—a long way from Farrell, a medium-sized and glossy artist.

In both cases, an innovation targeting a competitive position was achieved through the strategic vision of GM that took industry, customers, and a specific competitive environment into account. That is what makes a helpful view different from a bunch of meaningless generalities that certain GMs use to describe their corporate strategies.

High impact next GMs looks at gaps in competitiveness—in products, functions, services—as crises. It is not just another major business problem to close these gaps that is their overall priority. Implicitly, the majority of GMs do not do this well, namely to understand fully how their costs, products, services, and systems are countered by their competitors. For example, how many GMs have disassembled the entire car of a competitor to show what they have faced with manufacturers? Too many GMs — not only those in Detroit — construct their strategy based on unsupported assumptions of their comparative performance and wishful thinking.

Without giving customers better value than their competitors, you can't write about strategy today. However, two different things are talking about the concept and making it alive. Excellent GMs seem to be committed to better serve customers and to better produce products. They receive competitive information instead of looking at each other directly by conversing with knowledgeable clients and distributors. And this knowledge gives them the belief to do things and to gain a competitive edge.

The best GMs are based on existing strength and are looking for new benefits because they recognize that lasting competitive edges are difficult to generate. First, in their strongest markets, they improve sales and profits with their strongest distributors. Then they make faster payments to help finance the search for future borders. For example, in the 1970s Pepsi focused on its core markets, food chains, and new large packs – all of which were Pepsi's strengths. On the other hand, Pepsi spent so much of its money and effort in the 1960s to advance weaker markets, products, and canals that there were no resources for everything to be done in stronger areas. Worse, the managers were convinced that building a 5% market share at 10% would be easier than growing from 30 to 35%. It was the opposite way, as it is for the majority of companies. In addition, strength building keeps competitors so busy with your initiatives that they have less time to launch their own initiatives.

Finally, the best GMs expect their competition to retaliate against any strategic move and plan to respond to the worst-case situation. They get away from games that they can't win, too. For many years, for instance, Heinz was more proud that Campbell was introducing new soups. Then its managers found out that Campbell was playing not their own game since Campbell would copy its new product on a routine basis and use its superior brand acceptance and distribution muscles to overwhelm it at the point of sale. As a result, Heinz shifted his focus from "beat Campbell" to making soup money; it reduced costs and concentrated on the niche that Campbell did not have an interest in.

Marshaling Resources

All managers say they allocate resources to support competitive strategies, maintain business healthy economically and generate high returns. However, if you analyze how most companies operate, you will find excessive support for marginal companies, low-paid projects, and operational requirements. Simply put, no policy emphasis.

The best genetically modified substances are concentrating more resources on situations that offer the chance to attain or at least improve an important competitive edge. Long before the restructuring became fashionable, they were ready to shift their emphasis on their dollars. This was done by a new GM in the late 1970s when it took over Frito-Lay. At that time, each year, the company built new chip potato plants to take on a market share in the low-income business. This GM invested a small part of its resources in improvements to processes and productivity, and increased the margin on the chips, rather than continuing its predecessor's practice or scaling back his big potato chip business (as the financial president recommended). Once this investment started paying off, it started construction of new plants but improved the return on investment significantly.

The way the Top GMs treat money is another difference. Sounds funny to reflect on one of most professional managers' cardinal weaknesses: they spend cash in companies as though it were someone else's. Even once owners often invest in marginal projects when the business belongs to them, they never dreamed of financing. Excellent GMs, on the other hand, feel like owners. You avoid projects where all must work 110% to achieve a decent return. They are prepared to defer or replenish high-risk investments or shortage low-return businesses to use market resources to develop successful strategies. They also have a hard mind as to what comes from parceling funds to subordinates who promise best (despite low odds) or to key managers to keep them happy, because they realized that they do get out-of-date returns. This doesn't mean that they are not risky—without that. However, by concentrating on fewer bets and aggressively supporting them, they improve their chances.

In addition, top GMs protect the downside on large investments carefully. Everybody knows that the market often fails to deliver promising ideas. However, many GMs want to bet on the company before they know whether a new strategy works. You plunge forward and build a plant, hire many overheads, and quickly and aggressively launch the new products — presumably to punch competitors. However, this flat-out approach does only produces a large drop if the idea doesn't succeed immediately.

The best GMs also do lots to reduce their exposure to the front end, including farming pilots, renting plants and machinery. They try not to convert processes to other purposes. You are grudgingly adding overhead. They perform regional roll-outs to test the cost of the market. Then, they go to war for it when they're sure it will work.

Finally, top GMs always look for productive assets to keep them equal to or off the books. They are monitoring major capital expenditures to ensure the anticipated advantages are achieved. Each unit will manage its balance sheet and measure its return carefully. And the organization was constantly under pressure to improve productivity.

This perspective was colorfully expressed by James Robison, the former GM of the Indian Head. "We start a whole new ball game every Friday night," he would say. "Every company, plant, equipment, and work is open to question. It's on our hit list if it doesn't produce an adequate return. We begin to look for ways of getting rid of the situation if we can't find out how to improve the situation promptly."

Developing Star Performers

All know how important it is to attract, develop and maintain talented managers quickly and effectively. However, not everyone does what it takes to do that. Very few businesses do, actually. The absence of management skills is a cause of poor performance directly behind low standards.

The best GMs make the tough calls to upgrade an organization voluntarily. They do not try to rationalize inaction in the hope of a weak manager becoming somehow a strong one or a solid performer. Instead of a group that is only one year longer in its tooth, they have better managers each year in key locations.

Hard decision-making must begin at the top. Otherwise, managers postpone action, streamline marginalization or misuse one or two outsiders to be recruited as an effective upgrade. That is why the best GMs conduct annual staff reviews rather than delegation to heads of department or division chairmen.

Hard decision-making must begin at the top. Otherwise, managers postpone action, streamline marginalization or misuse one or two outsiders to be recruited as an effective upgrade. That is why the best GMs conduct annual staff reviews rather than delegation to heads of department or division chairmen.

In particular, line managers participate extensively in the upgrade process by forcing periodic, rigorous evaluations of individuals and groups. They are constantly wondering how their people with high potential perform and how managers solve their problems with their people. However, action is the key, not questions, especially against the lower quartile performers. In this regard, they ensure that the process produces better results every year and that the organization is further pushed down.

The best GMs know that compensation is not a purpose itself, but a means to an end. Benefits are connected to achievement. They pay significantly more for their best performers, although that means paying less than they expect from the average performers. They are willing to take the heat by cutting back bonuses in a poor year rather than pretending that the wrong year has never been and reward all for "trying hard."

Finally, good people – godfathers and not loyalists – invariably encircle the best GMs. They do not just hire themselves but rather tolerate a variety of styles, even encourage them. Each year their talent pool becomes deeper and better because the theory that you've never enough good people is a constant building of critical mass. So, when the possibilities arise, a hole in one part of the business must not be created to fill an opening in another part.

Organizational Bodybuilding

One of the most innovative GMs I once know proudly told me about his plan for restructuring and decentralization, to make quicker decisions, to improve local market performance, and to decrease costs. If they are realistic, great goals. However, local decisions are not very important in his business quickly, and his company was considered a speedy mover rather than a laggard. The local management of the company had already been largely superior to its principal competitors. The new decentralized organization, before it had an opportunity to expand, would cost roughly what the old organization did. In short, he planned to reorganize his company in the face of generic problems. The moral of this story: know what you are trying to do better and why before you reorganize it.

It seems that the best GMs are looking for the simplest ways to do something, which means generally fewer strata, larger jobs, and broader tasks. They also work to solve important issues in person, regardless of what is said in the organization chart. If the stakes are crucial to the success of the company, the academic organizational concept will not prevent them from intruding into another's territory. They ensure – in advance – that subordinates understand how the system works and why intrusion is sometimes necessary to reduce the damaged feelings. But they do not use this privilege as a pretext to dabble in the territory of all others.

Another corporate preference is that the best genetically modified animals organize around people instead of principles. If they have a business strategy or problem or a major opportunity, they turn to the person who has the appropriate skills and style for that job. They then delegate responsibility after the match without interrupting the person with a narrow work description or organizational restrictions. Managers feel more accountable for the results simply because they are responsible for them.

I've seen many GMs who think they solve major problems with logical re-organizations that left the most important thing — the leader. Of course, these reorganizations were very little success. To be sure, you cannot ignore the logic and strategy of your organization. But the main consideration is usually people.

The best GMs have learned the value and impact of teamwork, however much it sounds, somewhere along the line. It is not surprising that many executives are currently leading successful projects in their particular functional spheres with such an emphasis on financial restructuring, strategic design, and technology. They learn how to use a small, small group of subjects and peers for their ideas, but not how to manage a varied team of managers from several different fields. They also learn almost nothing about the problems of implementing their ideas in other fields or integrating the efforts of a disparate, often divided, management group.

In contrast, the best GMs routinely bring together managers to talk about the company, get a variety of inputs on major projects and build support.

Finally, the best GMs make good use of employees and expect them not to make a "gotcha" or nitpick positive contributions. They appoint strong leaders who can provide innovative ideas-led leadership (and not just questions good) and transfer ideas across the organization (not just issues good questions). Instead of writing unfriendly memos and playing unproductive political games, line managers, therefore, respect and use the staff.

Up and Running

The sixth and final area in GM management is the monitoring and implementation of operations. That means running the business day by producing sound plans, identifying and responding to problems and opportunities early on.

Top GMs usually focus very much on the results. They have commitments in their business plans, not just what they struggle to achieve. You know the figures and what it takes to fulfill them. But they know also that surprises will happen so that they maintain sufficient spending flexibility to enable competitive threats, new ideas, or a softer volume. Contrary to less resourceful GMs, because of unpredictable events, they don't miss their profit plan every year.

They don't at the same time wreck the company in a serious turnaround to make a "plan." When business declines sharply, they reduce costs, reduce discretion and eliminate losers faster than others. But competitiveness is not sacrificed only to appear good in a bad year.

Then they push the entire company to achieve functional excellence. Unlike a GM that is satisfied with just one or two high-performance departments, they require superior performance in all functions. They refuse to let faintness neutralize their strong departments in one or two areas (such as control, R&D, or technology). As a result, they get more than their competitors from all the strategies and programs.

Top GMs are separated from less capable leaders by a strong sense of the capabilities of the organization. You don't commit your business to more than you can do or – on the other end – to a rate that's not good enough. You also understand the effect of focusing on a couple of things at once. For example, David Farrell made virtually miraculous improvements in shrinking, inventory levels, labor expenses, and merchandising at May Department Stores by focusing his work on these worldwide operational issues.

They are also cost-related bugs. They understand their business "money mechanics": how costs change when volumes change. They do not allow cost percentages to go unchecked, but the explanation may be "reasonable." They will simply not allow overheads, for example, to grow from 12% to 14% regardless of what is involved. You are constantly looking for ways to improve things at less cost. And if new departments or programs are proposed, they do not resolve vague responses, wishful thinking, or lack of follow-up.

Finally, leading GMs to make better use of information to identify early problems and potential competitive edge than their colleagues do. It's not about more information; it's just about better use of information. This is partly because the best GMs are the rare combination of fine operators and fine designers. But it goes further than that. Figures and facts mean something to their clients, products, and competitions because they know so much about them. And they never stop reading those figures and facts for insights into the edge of the market.

You train yourself to ask "so what" and "why." Field visits to plants and offices provide information on a first-hand basis. You require reports on the important things, not MIS sheets and datasheets. They learned, above all, what people think of business, the competitive environment, strategy, other people, organization—works, and they listen and are genuinely interested. "If your subalterns don't have a good idea, get rid of them and have something to do," says Lawrence Bossidy, Vice-Chairman, GE. But make sure you listen to what they say when you have good people."

Conclusion

Exclusive GMs have six important implications for their companies. They develop a distinctive working environment, lead innovative strategic thinking, productively manage corporate resources, manage the development and deployment of staff, create a dynamic organization and oversee everyday activities. None of these things are completely new or unique individually. However, successful GMs better understand the interrelationships between these six sectors, set priorities, and achieve the right things. Their activities in these fields thus make the business forward coherently and consistently.

Of course, these six tasks do not tell the whole story. The GM's personal style and experience and skills in leadership are key pieces. However, focusing efforts in these six fields will make any GM more efficient. This should mean making things happen more quickly and more often – which is what we as general managers all want to achieve.