In this essay we will discuss about the process which helps to make corporate agenda successful. After reading this essay you will learn about:- 1. Identification and Choice 2. Strategic Control 3. Creating the Excitement.
Essay # 1. Identification and Choice of Corporate Agenda:
The starting point for identifying and choosing an agenda is a correct understanding of complex, interacting factors (both internal and external), and the development of alternative scenarios under different situational settings. Once the alternative scenarios have been developed on a zero-base approach and their impact on the achievement of ambition has been worked out, it is time to initiate strategic dialogues and debates on the assessment of the relative contribution and implement ability of various options under varying assumptions of time and resource availability. The process must provide scope for examining the initial observations on the agenda by the corporate management legally to confirmation, alteration, or even discarding of one or more aspects.
The thrust is on early testing of initial proposals about the agenda against the data and reality. The quality of the process involving strategic dialogue and debates can be enhanced by the participation of managers belonging to various levels as they not only have a storehouse of data and street-level information on markets and competition, but also have the right orientation to sift out strategic long-term issues.
Also to be encouraged is the participation of operating managers, with courage, initiative, motivation and capability to push an agenda after it has been finalised by the CEO and his top management team. If the debates and dialogue on strategic issues involve the right kind of managers, its current resources and rigidity, it would be possible to develop a set of corporate agenda and supporting programmes that maximise, rather than optimise, the long-term value of the firm.
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A key requirement for ensuring an objective assessment of the present context-defined in terms of resources and capabilities-and the development of an alternative agenda is to avoid biases at all levels of management. It is well-known that every company operates on the basis of a fixed and predictable paradigm, influenced by an age-old, core set of values and collective beliefs, which have a significant bearing on the way managers assess environmental opportunities and threats as well as the strengths and weaknesses.
The paradigm acts as a filter, and the resulting assessment frequently turns out to be internally-perceived rather than objectively determined. Obviously, if the paradigm is allowed to dominate strategic thinking-even unknowingly the new agenda will only be an extension of the old one, at best with alterations at the margins. The CEO and his top management have to consciously recognise the fact that organisational structure, systems and various business processes influence the way managers perceive the present and emerging scenarios, and hence, their relevance should be examined.
In addition, the managers who occupy influential senior positions and have accumulated both formal and informal power, quite often have massive blind spots against any sharp bending of strategy or innovative moves. This is because a large number of them may tend to feel that the new initiatives that require resources and management capabilities of a different scope and scale, will expose their relative inadequacies under the changed context. The management process that generates an alternative corporate agenda, and makes the final choice, has to guard against these biases of the so called powerful managers.
Three specific actions that are called for to minimise the biases and to avoid drifting from the desired direction are:
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(a) Ensuring the distribution of legitimate power to those managers who have earlier demonstrated capabilities in strategic thinking and who also have with them first-hand information and a street-level understanding of competitors’ strategy as well as customers’ emerging requirements.
(b) Inclusion of, and conversation with, middle-level managers- belonging to various functional areas and the SBUs, both during the planning and review processes.
(c) Reengineering the company and its systems and processes, since most old concepts used for organisational design (structure, system and process) are going increasingly out of tune with the emerging reality. The thrust will have to be on networking (sharing ideas, resources and information), cross-functional teams, and lateral, bottom-up communication.
The above steps will help in mixing alternative visions and will also facilitate development of a shared understanding and implementation of the path being chosen to achieve the ambition. The alignment of the power structure with (information availability,) the use of divergent thinking and the choice of the right administrative systems for planning, control and rewards, etc. will bring the desired perspective needed to pursue the ambition. Since general enthusiasm will not lead to automatic success, extracting the motivation and commitment of the middle management is an absolute necessity.
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The organisation has to redefine the middle management’s role as the expediter and facilitator, rather than just a defender of corporate bureaucracy, or an insignificant soldier in the marketing warfare. The strategic conversation with the middle management level improves communication down the line; concretises strategic thinking into action; and enhances the quality of the executive processes.
It also reduces the possibility of any manager getting disillusioned in case his/her ideas are not accepted, since the process of dialogues and debates will help remove any doubt about procedural injustice done to his/her proposals. The need for reengineering the organisation and its business processes to facilitate both the formulation and implementation of agenda, thus, cannot be overemphasised.
Avoiding biases and overcoming the current perspective and limitations that influence the thinking process, both during the identification of the corporate agenda and its subsequent implementation, are critical for the ultimate achievement of the ambition. It is not easy to reach the desired state of objectivity or avoid distractions, anomalies of the past or avoid getting stuck to strategies and tactics of success achieved so far.
However, a conscious effort made by the CEO and his team to encourage divergent, non-linear thinking and a questioning attitude towards, be it strategy, assessment of competition, trends in technology and market-without any dogma or predisposition-will help avoid biases and minimise the impact of current perspectives on the future course of action. The emphasis will also have to be on process-based thinking which may lead to lower costs, increased quality, better service and enhanced speed.
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This change in approach has to be initiated at the top of the organisation, so that it may percolate downwards. Side by side, the traditional approaches used by the organisation to analyse the industry, customer preferences, competition, strategic cost, value chain, technology forecasting, etc., will have to be examined critically from the point of their relevance in the corporate agenda.
The quality of the management process will be critical to achieve such purposes as maintaining a sharp focus; the participation of key managers; the use of virtual or short-lived teams; data integrity; challenging and decoupling existing perceptions; provoking new and unconventional thoughts; and allowing a creative evolution of the alternatives developed. A mechanist approach will severely limit the leveraging of capabilities and resources, while a broad band of directions will encourage a creative search for a set of new agenda that can reposition the company under a changed business scenario.
May tend to feel that the new initiatives that require resources and management capabilities of a different scope and scale, will expose their relative inadequacies under the changed context. The management process that generates an alternative corporate agenda, and makes the final choice, has to guard against these biases of the so called powerful managers.
The process of identifying and implementing” corporate agenda requires careful management; the participating managers must enjoy the process of implementation rather than perceiving the agenda as pressure from the top. Being involved at every stage of the process, each manager strives to succeed-a feature that emanates from an obsession of the overall organisation to see that the agenda gets implemented and things happen as planned.
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When the excitement catches up, no deviation from the primary agenda takes place because of such cliches as the history, culture or reality of the present organisation. In order to get the desired outcome, the top management has to help resolve contradictions, confusions and inconsistencies; challenge the insularity of the organisation which results from the existing perceptions; amplify variety as a prelude to focusing, and think flexibly, efficiently and strategically all through using a common language and framework.
The corporate management’s efforts to facilitate management process for the successful achievement of ambition cannot be based on just a static snapshot understanding of the market, competition, technology, organisation structure or people. It also has to feel the not-so-visible issues; such as, relationships, power structures and ‘Iteration processes. The volatility, fluidity and sometimes, the incomprehensibility of the external environment, makes the formulation and the Implementation of corporate agenda both complex and challenging.
Essay # 2. Strategic Control of Corporate Agenda:
The effective execution of the corporate agency will depend on the right combination of structure, systems, values, expertise and leadership. But for achieving the desired success, there is a need exercise strategic control by setting short and medium-term milestones (the cumulative achievement of which will lead to a realisation of the agenda within the target time frame); reviewing performance against the same, and taking corrective actions.
A strategic control system is not a tension of the “traditional financial data-dominated control system. For the successful implementation of a corporate agenda, the management needs to ensure that the feedback on performance vis-a-vis targets in respect to each strategic programme, is made available to people who are responsible for implementing the same. The items to be covered will obviously have to be multifunctional and should facilitate strategic control at the action points.
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The design and implementation of an information system for reporting such non-financial measures as:
(a) target vs. actual time taken at the various stages of development of a specific technology or core capability,
(b) the gap between product development and commercialisation, and
(c) the level of performance against various improvement programmes, like customer service, demanding and downsizing, quality and safety, segment wise market share, operating efficiency, etc. are critical for strategic controls. The choice of control parameters will depend on the specific agenda being pursued.
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Its complexity increases significantly if the span of activity encompasses multiple plants, markets and technologies. The control system will also differ depending on the kind of structure-functional, multidivisional or matrix-the organisation has. The essence of any control system has to be its measurability, since what cannot be measured, cannot be managed, and this principle also applies to the strategic control of programmes that support the corporate agenda.
The responsibility for identifying stretched and non-incremental milestones-commensurate with the strategic ambition and based on international or competitive benchmarks-for providing the resources required to execute the same and for designing a system for measuring and reporting performance against each milestone at a predetermined frequency-lies with the corporate management. This responsibility is integral to the ownership the CEO and his team has towards the implementation of the corporate agenda.
For a strategic control system to become an effective instrument for implementing corporate agenda, the review process adopted by the corporate management has to be administered carefully. The management style of the CEO and his team of top managers, as well as the organisational culture, will have a significant impact on actual effectiveness.
Directing the talent, energy and orientation of the people down the line towards the agenda, and speeding up their responses will depend to a great extent on the posture the top management takes during the various review processes across the organisation. Extreme care is needed to ensure that the control system and review processes do not destroy cooperation among the managers at different levels. If this happens, political compromises will be made (rather than rational) while setting targets and tasks thereby undermining the basic purpose of the agenda.
It will also result in defensive attitude, and prevent transparency. This being so, it is essential to have a constructive and result-oriented review process, which is sensitive to people- related issues, like power structures and relationships, rewards, involvements and empowerment, and individual capability profile, which measures progress and makes mid-course corrections.
Great care and sensitivity is required during the review process with regard to the attitude taken towards experimentation and innovation, the treatment of genuine failures, and short-circuiting bureaucracy and rigid procedures by the people at the frontline to resolve problems and make progress. A judicious top management can mix the firm’s central direction and individual autonomy in order to encourage innovation and entrepreneurship. Such a step shall enable the organisation to push people in the desired direction-in spite of all odds-without diluting individual autonomy.
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Seen from this angle, strategic controls are ideally exercised through an appropriate articulation of the corporate agenda. Having a people-orientation does not imply accepting excuses for underperformance or complacency. The thrust should finitely be on the achievement of results against all uncertainties and complexities, through sheer persistence.
But emphasising short-term, measurable gains at each stage, sidestepping lengthy rituals, and developing a genuine people-orientation, will actually enhance the possibility of achievement of the agenda through building small but significant success stories. The process of control must also insist on rediscovering humility to learn from others across the organisation.
The choice of an intervention strategy and corrective actions can be as complex as the original process of identifying the agenda and its supporting programmes. The management has to blend the feedback it receives from the control system with intuition, experience and judgement. The timing of intervention is critical as any delay would throw agenda out of gear.
The key task, thus, is to keep an eye on the short-term results being achieved vis-a-vis the milestones, against the background of overall direction given in the agenda. The CEO and his team will have to remain conscious of the fact that things do not always happen exactly as planned, because assumptions can go wrong. Hence, they need to be continually informed about the activities on the ground in order to be ready to intervene anytime; an effective CEO will not like sudden surprises. When and if the need for intervention arises, no time should be lost to initiate the contingency plan.
The single-minded pursuit of the agenda and non-acceptance of underperformance in implementation, provide the determination and thrust required to ensure that different organisational units keep moving at the right pace. Given the fact that the top management has direct responsibility and ownership of the corporate agenda, but is not itself involved in actual production, distribution, selling, or research and development, it must pay continuous attention to review the progress vis-a-vis the plan, and intervene if a crisis or signs of major deviation appear.
If, when faced with underperformance due to downturn in economy, inflation, input shortages, invasion by a competitor, or industrial relations problems, the top management takes comfort in the things-could-have-been-worse attitude, the people down the line will get the message that attitude, targets and commitments are negotiable.
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If explanations and rationalisations are accepted as a way of life and the CEO himself starts compromising, the corporate agenda will no longer to be realised. If managers do not achieve the results envisaged in the agenda, it is because the corporate management does not make them do the same. All interventions by the CEO and his team of top managers will have to be guided by this orientation whenever there is any crisis or hiccup. The essence is that the momentum should be maintained and corrective actions taken rapidly in order to make things happen and ensure that opportunities do not vanish.
Essay # 3. Creating the Excitement for Corporate Agenda:
For a corporate agenda to be successful, a lot more needs to be done beyond just involving people down the line in strategic planning, execution and review. The process must be able to generate a sense of pride from the lowest level worker to the topmost executive through the strategically sound, intrinsic logic of the agenda and the inspiring challenges it makes. The pride will enable the managers to take risks to achieve results because it will appear worthwhile to do so. No amount of monitoring, control or intervention can make up for the self-driven initiative and self-measurement of progress against target.
If the agenda is properly communicated, lived in details, frequently mentioned in all possible forms, and its urgency made visible in every act of the CEO and the top management team, the excitement trickles down. If the top management takes bold initiatives, it will generate an intensity and passion that will change the metabolism of the organisation. Creating excitement and pride in every little thing across the organisation are the tasks of the CEO and his key managers.
The corporate agenda also requires dramatic changes in attitude and orientation. The change has to come from the top because that is where flabbiness starts. The managerial style must not be dominated by passing the buck and playing safe. Unless the top management dedicates itself to high standards of performance, and avoids double standards and compromises, the people below will rarely assume ownership and put in their best.
The management will have to set an example, by its actions and behaviour. The communication should be so convincing that the organisation thinks that nothing but the corporate agenda and its supporting programmes can steer the company towards its ambition. The agenda needs to be communicated rapidly and must be kept vibrant.
When there is enthusiasm and excitement in the air, everybody shall get enthused and accept the challenge themselves. In such a case the managers get transformed into entrepreneurs, develop a “must” do attitude, take pride in the achievement of results, and transmit their feelings to their co-workers.
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An organisation needs to undertake a selective overhauling of the system and change its culture to create and sustain this passion for result achievement. Strategic initiatives should be rewarded in the same manner as achievement of routine operating targets. Public acclamation of small breakthroughs in the desired direction ensures subsequent big wins. The removal of demeaning procedures and roll-back of meaningless rules will reduce hindrances.
The propensity to make strategic planning elitist and to disenfranchise the lower-level, operating managers from the process must be eliminated. This will develop a wider base of shared responsibility and transmit the agenda down the organisational hierarchy. Many organisations ignore these sensitive issues while pursuing their strategic ambition, and as a result, the actual impact of their efforts falls far short of potential benefits.
The dissipation of energy and lack of motivation at individual level arising out of lack of motivation at individual level arising out of lack of autonomy, misalignment of structures, power struggles, bureaucratic procedures and poor communication reduce the effectiveness of various group processes vis-a- vis the possibilities The corporate management needs to address itself to these issues for successful execution of the agenda.
The Prime Mover:
The role of Sloan, Iacocca, Geneen and Morita in shaping and influencing the path taken by GM, Chrysler, ITT, and Sony respectively are well-known. A similar influence was also seen in the case of Jack Welch of GE, Percy Barnevik of ABB and Paul Allaire of Xerox. What was so special about their styles which distinguished them from others doing similar jobs elsewhere? Did they possess similar attributes and follow (by and large) the same style while pursuing their respective corporate agenda? Did they accept more ownership than their counterparts in other organisations?
No doubt, each of these CEOs provided the impetus and exhibited a personal commitment to the agenda they had set for their respective organisations. They demanded a very high level of performance while executing the agenda and got the result. They believed that the management must manage, and performance was the only yardstick they used to evaluate progress against the agenda. They were, no doubt, the champion implementers.
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The CEO’s role in finding the right ‘path’ for achieving the strategic ambition is a crucial one for the success of the corporate agenda.
He has to master two kinds of expertise simultaneously:
1. One, in terms of the ability to envision the organisation’s desired position in the marketplace 5 to 10 years hence; and
2. The other, in terms of the ability to relate this vision with operations through an action orientation.
Thus, a CEO has to become a role model and a leader with a difference to drive the agenda. He or she has to become a champion among champions. The CEO has to create a nucleus of leaders in the organisation who see things the way he or she does and who would be willing to take risks for making a dramatic impact in their respective areas.
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The CEO’s commitment to the agenda can be seen from the time he spends on each priority area. The people in the organisation get convinced of the urgency and criticality of the agenda when they see clearly the determination and perseverance of the CEO and the top management team. Also important is the symbolic behaviour related to the activities of the CEO, like the places he visits, the questions he/she asks or the personal examples of austerity and cost control he/she sets. Exhibiting any double standard while pursuing the agenda could be enormously detrimental to the quality of implementation. One of the items in Lee Iacocca’s agenda for turning around Chrysler was cost reduction, and he got this done effectively by first reducing his own salary to one dollar per year.
It is not unusual to find companies whose operating units have been pressurised to become leaner, and flatter, but where no such urgency has been shown to effect similar changes at the top management level, which continues to act and operate in old- fashioned ways. Setting a personal example helps in implementing the agenda since the people watch and follow every move of their leader.
The CEO’s preference for change has to be communicated not just by circulars but also by creating an urgency throughout the organisation and the conscious act of rewarding those managers who have been making things different and better, who love change and who believe that a dramatic improvement in performance is possible in spite of current constraints.
Similarly, the CEO also needs to show courage in taking harsh measures, if necessary. Many a time, even after initiating a bold move, the CEO shows a lack of courage, which inhibits his/her going far enough. This could have the greatest long-term impact on corporate performance. Roger Smith of GM, though acclaimed as one of the most courageous CEOs in recent times, could have shown probably much better performance, had he been more courageous in implementing his ideas and convictions.
Seen from this angle, the choice of a CEO with the right courage and conviction is a critical factor in the success of any agenda. For instance, Reg Jones showed courage in picking up John F Welch as his successor at GE, instead of others whose background had looked alright when compared against past performance, but who would not have been able to initiate the cultural change GE needed badly.
Thus, for the success of the corporate agenda as the means for achieving ambition, the CEO has to act as the role model.
The CEO is both an orchestrator and value-shaper and has the capability to bring out the best in ordinary people. For him/her the pursuit of the agenda is as important as the agenda itself.
He/She is courageous, but shows power only when it is necessary.
He/She can openly accept mistakes and is meticulous in changing the agenda, if it becomes necessary.
The world over, most industries are facing crises, problems and dramatic changes. Even in industries like airlines, automobiles, computers and telecommunication, where changes have been quite common during the last 10-15 years, the pace and direction of changes are already mind- boggling. In the face of such new developments, all corporations will have to take a fresh look at their corporate agenda to confirm its relevance in achieving strategic ambition, and its implement-ability in the changed context.
Given the complexity and fluidity of the emerging scenario, the need for a clearly articulated corporate agenda will be felt more than ever before.
The agenda will have to be:
(i) Owned explicitly by the CEO and the top management team;
(ii) Defined in terms of specific, time-bound operating programmes;
(iii) Relevant to the changing business environment;
(iv) Driven single mindedly with great persistence; and
(v) Non-Negotiable in terms of its targets, irrespective of the difficulties faced.
Example 1: Corporate Agenda of the BOC Group Plc:
As at 1993, BOC Group pic was a 108 years old, 9 billion pound sterling company having interests in three core businesses viz., industrial and medical gases (70% of the turnover); health care products (18% of the turnover) and vacuum engineering and distribution services (12% of the turnover). The group had 97 subsidiaries and affiliates, located in 50 countries around the world which were managed from its headquarters at Windle sham, Surrey, UK. In 1992, the total assets of the group were 2 ‘ million pound sterling, of which 36% was in Europe, 31 % in the Americas, 27% in the Asia-Pacific and 6% in Africa. In terms of operating profit, 33% was accounted for by Europe, 32% by America, 22% by Asia-Pacific and 13% by Africa.
The company, one of the major players in the world’s industrial and medical gases industry (multidomestic in character) had a high market share in the UK, North Pacific, South Pacific, South Africa and India, but faced competition from leading companies like Praxair (formerly Union Carbide), Air Products, Linde and L’ Air Liquide in the Americas and contmental Europe. In health care equipment, which was a global business, it had a high market in the Ohmeda range of products.
From the 60’s to the mid-70’s, the company pursued a growth strategy that focused on a substantial expansion not only in the core activities of gases, but also in unrelated activities, like minerals and ferro alloys; chemical products based on derivatives of calcium carbide (CaC2) (raw material for manufacturing dissolved acetylene gases); fatty adds and resins; isotopes and radioactivity-labelled compounds and super-conducting magnets.
However, by the mid-70s and early 80s the company had realised that diversification to unrelated fields had not only distracted the management’s attention from the core activities, viz., gases and related products, health care equipment and the vacuum engineering and distribution services, but it also had not contributed to the overall financial health of the company.
The company also found that its competitiveness-both in terms of cost structure and the ability to develop new applications-had significantly eroded due to the presence of a number of uneconomic businesses in its portfolio, large number of employees and their low productivity, and the lack of technological thrust in core activities commensurate with the emerging needs.
By 1980, the company had worked out its corporate agenda and the supporting programmes that aimed to help BOC achieve group’s strategic ambition of becoming the world leader in all the business sectors they operated in. The list of agenda included programmes on divestment; downsizing of numbers; innovation in products and processes; quality; development of core competencies; and harnessing the talents of their people.
The company pursued that agenda vigorously and divested all its businesses outside the core activities, which were being carried on in various countries. Similarly, the number reduction programme was pursued ruthlessly, and in the early 80s, many jobs cut as unviable businesses were closed or sold off.
In 1992, IOL Ltd, the Indian affiliate of the company, (the name got subsequently changed to BOC India Ltd.), sold its welding and engineering equipment business to ESAB AB of Sweden as a follow-up of the BOC Group’s agenda-set in the early 80s-to stick to core business. Likewise, the Indian affiliate reduced its total number of employees from 5,300 in 1989 to less than 1,800 by 1994, by the sheer perseverance and single-mindedness shown by the CEO and his corporate management team.
These programmes were driven forward by the entire management staff down the line who had the necessary clarity about the basic agenda and who also felt the need to support the same for turning the company around. The BOC Group also invested significantly in the modernisation of the plant and distribution facilities, filling system, and handling of cylinders in order to improve the operating efficiency of production, storage and distribution, and also to augment the productivity per employee.
The responsibility of the BOC Group’s corporate management to push the twin programmes of improving operating efficiency and productivity of employees was a basic requirement since effectiveness in these two areas was central to achieving a level of competitiveness that was fundamental to fighting market share battle with Praxair (USA) Air Products (USA), L ‘Air Liquide (France) and Linde (Germany).
Another important programme that came under BOC’s corporate agenda, was process and product innovation, and the company spent steadily on R&D over the years to retain and sharpen its competitive edge. To ensure that the technology got due importance, the company had a technology director on the main board and regular reviews were done by an apex executive committee against the annual technology plans, which were closely coupled with the business strategies and priorities.
Regarding the harnessing of the talent available in the Group companies across the world, the Group maintained an up-to-date career plan of all key executives in order to ensure balanced development and career progression. As of 1992, over 50% of the top management team (consisting of chairman, managing directors, executive directors and functional head” operating from the Group HQ) had been promoted from inside. One interesting factor was that no particular nationality dominated the composition of the corporate management team at the Group HQ.
In order to facilitate the communication of corporate agenda and its supporting programmes, and also the development of specific action plans to implement them, the annual planning process was fine-tuned from time to time to increase participation by middle and junior-level managers in different group companies. In order to ensure that the corporate agenda was never lost sight of, the group companies were asked to outline the annual programmes against each item of the corporate agenda.
These were in addition to the specific, multifunctional annual plans that were worked out at every individual country level to tackle the market and competitive issues faced in that particular host country. The emphasis placed on working out annual programmes against each of the Group’s priorities (Le., corporate agenda) helped the subsidiaries and affiliates develop their own set of corporate agenda. The latter was required to achieve the strategic ambitions of the subsidianes/affiliates, set against their own specific situation defined in terms of market, competition (international and domestic), technology and financial policies.
To improve the quality of the management processes of planning, decision- making, and review, the Group HQ strengthened the information system, introduced the concepts of TQM, started various safety and occupational health programm’s, and also formed task forces for dealing with priority issues. It also examined its corporate, regional and national organisational structures and made the changes necessary to implement the corporate agenda.
To facilitate review, each SBD (either a product group or a country) was asked to identify a few Critical Success Factors (CSFs), the achievement of which would be instrumental in implementing the corporate agenda of the Group. Against each CSF, Key Performance Indicators (KPIs) were identified with quantified milestones. For example, the downsizing of the number of employees was an important KPI against the BOC Group’s corporation agenda of cost reduction. India was one of the countries where BOC operations were over manned.
The CEO of the Indian subsidiary was given a specific target for demanning (which was a KPI) over the period 1989-1991 and the Group officials closely monitored the progress made against this important yardstick of performance. The CEO of Indian operations, in order to make sure that the demanning as expected by the BOC Group- was achieved, took the same as his personal agenda and pursued it forcefully.
Each regional head of Indian operations was given specific year wise, target for demanning and part of their performance bonus was linked to actual achievement in this area. Similar KPIs were also worked out for operating efficiency, quality, safety, market share, etc., all in line with the BOC Group’s overall corporate agenda.
The BOC Group’s success during the 80s and early 90s in achieving the corporate agenda became possible because successive CEOs-starting with Dick Giordano in the early 80s (one of the highest paid executives in UK during his time)-accepted ownership of the corporate agenda in totality and pursued the same was great determination and steadfastness. They initiated the required modification of the organisational structure, control systems and management processes in a manner that facilitated the development of alternative programmes and their dispassionate review prior to final selection.
They monitored execution and obtained feedback on the results achieved vis-a-vis the milestones set. On top of this, the corporate management always made efforts to develop a consensus across the Group companies on a global vision for the gases and health care businesses by conducting workshops and seminars, and ensuring proper communication through internal circulars and dialogues during visits. The process helped in constructing a shared perception on the corporate agenda as well as its significance in achieving the strategic ambition of the BOC Group.
Example 2: Corporate Agenda of Caterpillar INC:
Caterpillar INC operated in the construction machinery industry which was highly competitive and relatively concentrated. In 1960, eight companies accounted for 40% of the worldwide sales; but by 1984, 73% of the same was contributed by seven top companies. The intensity of competition in the early 80s originating from weak demand, high exit barriers and a strong dollar, led to a stagnation in volume, low industrial capacity utilisation, and decline in real prices.
The manufacturers, margins were under severe pressure as demand shifted from high margin, large specialised machineries used in major projects, towards low margin, small and versatile equipment. Competitive rivalry intensified, replacement requirements showed a slow growth and US exports became expensive due to an appreciating dollar. Industry experts felt that such a scenario was likely to continue throughout the 80s and the only way a company could survive was to become a world class manufacturer in terms of product-mix, brand image, cost, quality and distribution network.
Caterpillar-long recognised as the industry leader since its inception in 1925-followed two corporate policies, viz., ‘focus’ and ‘preemptive market occupation’, each of which defined sharply the product range and markets they would serve. The thrust was on heavy machinery and engines, and the company opted to compete in all the important national markets. This strategy worked well during 1960-1980, and the company’s net income, as percentage of sales as well as returns on shareholders’ equity, was the highest in the industry.
Caterpillar faced major competition from Komatsu (formed in 1921), whose sales had been only 78 million in I960 (as against $ 716 million of Caterpillar) but had risen to $3.4 billion by 1985. In 1985, 48% of the Company’s sales had been outside Japan. Working primarily on a strategy to counteract Caterpillar, Komatsu concentrated on improving the quality and durability of its various products, and also the reduction of costs by redesigning products and rationalising production processes.
As a result of this effort, Komatsu increased its domestic market share of bulldozers from 50% in 1965 to 65% in 1970. This was in spite of the increasing competition from Caterpillar Mitsubishi which was set up as a joint venture in 1964, after Japanese Government (Japan’s Ministry of International Trade and Industry) had relaxed its rules on foreign direct investment. The company pursued an aggressive export policy-particularly after the 1973 oil crisis-which was facilitated by a weak yen and passive support from the Japanese government.
By 1984, Komatsu had gained major strongholds in the Middle East, the countries of the erstwhile communist bloc, and South East Asia; but the strategy was yet to payoff in the USA where its market share was only 4% vis-a-vis Caterpillar’s 36% Komatsu followed a manufacturing strategy that centred around a few large scale, highly automated plants; networking with outside suppliers (to reduce in-house production of parts and subassemblies); high labour and asset productivity; all of which contributed to Komatsu becoming the lowest cost producer by the mid-80s.
Faced with this depressed industry scenario and competitive pressure, and Komatsu’s continued commitment to its long-term goal of encircling Caterpillar, Caterpillar’s top management outlined its strategic ambition as “to become the lowest cost producer in the industry, based on the value provided”. The specific goal for 1986-1990 was to reduce cost by 15-20% below the 1985 level.
To achieve this ambition-which had a basic need to hold on to its worldwide supremacy of 60 years in the construction machinery industry the company identified five specific corporate agenda viz.:
(a) Closure of uneconomic plants;
(b) Reduction of workforce;
(c) Increased use of external suppliers and offshore sourcing;
(d) Up gradation of manufacturing activities (ailed Plant With A Future [PWAF] programme) through the increased use of automation, flexible manufacturing system, the Just-m-Time (JIT) principle, and electronic communication abilities; and
(e) Renegotiation of the agreement on wage freeze, work rule changes, etc. with United Auto Workers (UAW).
Each item of the agenda had an operational focus and was meant to contribute to achievement of the ultimate ambition, viz., to become the lowest cost producer. Quantified medium-term goals and short-term milestones were set to review progress again) each item of the agenda and programmes were worked out to facilitate implementation. For example, nine plants were closed between 1985 -1988; around 37% reductions coming in the US where productivity was the lowest. In 1985, overseas suppliers provided 16% of the materials consumed in the US factories as against 4% in 1981.
The CEO and his top management team played an important role in developing the corporal agenda of Caterpillar George Schaefer, the CEO of Caterpillar, showed exemplary clarity in developing an agenda that aimed to out think the competition. He spelt out the strategy explicitly and questioned everything from an external perspective. In all management processes-be it for strategic planning or review of progress-competitor focus was never lost. The process of thinking encouraged an openness to change but also ensured that the focus on the core business was maintained.
Also important was the obsession with meeting target costs through the ability to remain flexible by having alternative sourcing options particularly in major currency areas; and the judicious use of forward contracts to protect long-term supply. To sustain volume growth as the means for reducing costs, new products and brands were also developed to enlist a wide spectrum of customers of Caterpillar.
Schaefer also took the initiative to speed up the new product addition by strengthening the in- house development and by entering into Joint Ventures, license arrangements and branding agreements. The twin agenda of cost reduction and widening of product range, duly supported by three corporate programmes, viz., product engineering changes and plant modernisation; quality improvement; and short production runs, were pursued aggressively by the Caterpillar CEO and his top management team for counteracting Komatsu head -on.
To implement the agenda, the top management of Caterpillar took specific actions, like, retraining the employees in basic quality concepts and tools, and developing an orientation to work in teams. In 1982, 1,200 project teams were set up to improve the quality of the existing process and this led to a cost-saving of $64 million per year. The target cost saving could be achieved not by making huge capital expenditure, but by teamwork, which monitored quality by statistical process control, eliminated waste, and looked continuously for opportunities to improve the manufacturing process.
The CEO of Caterpillar was able to instill a sense of pride and create excitement within the entire organisation about the belief that Caterpillar was the biggest in its field, and that it must remain so in the years to come. The single-minded pursuit of quality improvement and cost reduction to the target level was perceived by the people across the organisation as the only option possible to counteract Komatsu, and also to retain market dominance.
The operational focus and competitor orientation of the agenda made it comprehensible and credible to the people down the line and also facilitated communication Top management ownership of the agenda was visible all through, and wherever Schaefer spoke-whether outside or within-on Caterpillar’s agenda for becoming cost competitive, this involvement, determination and forcefulness were all too clear.
Example 3: Corporate Agenda of ABB:
Asea Brown Boveri (ABB) was a company that was formed in 1987 by merging Asea of Sweden and Brown Boveri of Switzer land. It was in the business of electrical systems and equipment, had a turnover of over $29 billion, and employed 2, 15,000 people in 140 countries around the world.
European sales accounted for roughly 60% of its turnover, while North America and Asia contributed 25% and 15% respectively. It had about 1,200 group companies and 4,500 profit centres spread over different continents, which were grouped under fifty or so business areas (BA). The business areas “ere further categorised into eight key business segments which were ABB’s prime focus areas for strategic planning and control.
ABB had designed and implemented a matrix structure which took into account its staggering diversity across business areas and geographical markets, but kept the structure and systems simple enough for people to understand and perform. ABB, in the words of its CEO Percy B Barnevik, was a multidomestic company which followed the apparently contradictor)’ principle of global efficiency with local responsiveness through “thinking global but acting local”.
ABB’s strategic ambition, at the time of the merger of Asea and Brown Boveri, was to restructure the European electrical systems and equipment industry as a step towards achieving global dominance through the amalgamated company ABB. Conceptualised, detailed and driven by Percy Barnevik, the corporate agenda for achieving this ambition centred around consolidation and restructuring, and cross-border mergers by transatlantic acquisition and growth. To support these agenda specific programmes were worked out and implemented meticulously to progress towards the strategic ambition. For example, extensive layoffs, plant closures and product exchanges between countries were effected as part of consolidation and restructuring.
The action taken on the twin agenda of transatlantic acquisition and growth also meant acquiring of minority interests in 60 companies, including two major acquisitions in North America-the takeover of Columbus Engineering (manufacturer of power generation and process automation equipment), and the acquisition of the transmission and distribution operations of Westinghouse. In India the company restructured its operations and acquired Flakt India Ltd. (an erstwhile subsidiary of pollution control equipment manufacturer Flakt AB, Sweden).
To further strengthen ABB’s operations worldwide, the corporate management took specific actions to design the right organisational structure and control system It also changed the culture into one which facilitated the implementation of the agenda through better coordination and communication, extensive de-centralisation and altered the mindset of the managers, to become really global.
The control system was designed to give complete information on the agenda both to local managers and headquarter officials. Performance was monitored on the basis of data originating from documents, such as, balance sheets, profit and loss, and cash flow statements.
The comprehensive information system, implemented uniformly across the 1,200 group companies, kept the executive committee of ABB (the apex body, consisting of Percy Barnevik and 12 others, including executive committee members representing the eight core business segments) fully informed on all strategic control areas like, new orders, invoicing, margins, and cash flows relating to various business segments in 50 business areas and major companies in key countries.
During review, the process was handled carefully through ‘informed dialogue’ with the executives concerned. This in turn resulted in extracting a greater involvement and commitment from the country and business area managers, as well as the middle-level managers working under them. The conscious involvement of key operating managers in strategic dialogue improved the quality of the executive process underlying the implementation of the corporate agenda.
As a matter of discipline, ABB restricted the number of items in the corporate agenda to only a few. Each item had a market and competitive focus, but was essentially internally-directed. The aim to make ABB flexible and lean, cost effective, customer responsive and globally successful. These were pursued with steadfastness and determination by the corporate management. For example, in the case of ABB Zamech-Poland’s leading manufacturer of steam turbines, transmission gears, marine equipment and metal castings (76% owned by ABB)-there were major operational problems leading to underperformance vis-a-vis the target.
A three-tier agenda was formulated to turn around the Polish operation and make the same as productive and profitable as ABB’s other operations worldwide. A series of time-bound actions were identified within the main agenda of re-organisation, creation of a nucleus of leaders or change agents, and the transfer of ABB expertise. Side by side, to facilitate the transformation process, experts from Multifunctional areas started visiting the Polish operations frequently, and kept reviewing progress against the plan. A communication infrastructure was created to ease dialogue with the Polish company.
Planning and control systems were completely redesigned for evaluating the performance against targets, and reviewing progress in high priority programmes. The culture of Polish operations was transformed by raising the standards of performance and demanding quick results. While doing all these, the corporate management at the ABB headquarters did not lose sight of the details, and never failed to intervene whenever progress tended to slow down.
The focus always remained on urgency and getting things achieved within a pre-determined time frame. The ownership of the corporate agenda by Barnevik and his top management team was absolute, and no under- performance in achievement was allowed. No hard decisions were postponed in the name of analysis.
The tough-mindedness in the implementation of corporate agenda was all-visible in the ABB culture. The emphasis was always on taking decisions that were “roughly right and fast, rather than exactly right and slow”. Such an orientation was accepted as a living guideline since the hunger for achieving the corporate agenda transcended all other tasks and activities.
Internal competition among managers was encouraged by circulating scorecards which compared data on the operating performance of factories producing same or similar items. The ABB philosophy, supporting the corporate agenda, preferred internal competition among managers as the mean to thwart external competition in the marketplace.
Percy Barnevik’s role in achieving the strategic ambition of ABB cannot be over emphasised. He was the prime mover and implementor per excellence. His determination, singularity of purpose and diligence in pushing the agenda in the right direction and at the right speed made him an example to emulate. His personal ownership of the corporate agenda through visible and urgent action programmes sent the message across to the 1,200-odd group of companies about what was important and what was not.
The drive given by him to streamline the German and Polish operations in the face of extreme obstacles (a common feature in cross-border restructuring), demolished all resistance and brought both the operations to ABB’s worldwide standards. He believed in the principle that management must manage, and results are what matter.
In his management style, there as total clarity on the overall agenda to be pursued, but at the same time, he also possessed the ability to live in details. Time was of essence to him and he always looked at the speedometer to monitor the speed- without, however, losing sight of the milestones or quality of achievement.
He had a personal example too-he kept insisting on the need for a lean and trim organisation and took the first bold step by cutting down the corporate staff by 90%. His courageous decision in Germany to push job cuts, break up the local headquarter, and rationalise production overlaps in the face of strikes, demonstrations and barricades put up by the union, ultimately led to the implementation of the agenda in the way ABB wanted is this role of Percy Barnevik as the CEO of ABB and his acceptance of personal ownership of the corporate agenda that helped ABB to realise its strategic ambition of becoming the most competitive and dominant company in world electrical systems and equipment industry.