Lead Right for Your Company’s Type

How to Connect Your Culture with Your Customer Promise

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Lead Right for Your Company’s Type Book Review (7/10)

Lead right for your company type is truly an eye-opener. Just before you’re a great leader with awesome track-record doesn’t mean that you’ll be great at any organization. Unless the organization fits you.

An oil-drilling field boss hired a sensitivity consultant to work with his crew. The consultant asked the crew members to describe their feelings for each other. They were uncomfortable and silent. This was a misapplication of sensitivity training. How oil rig workers feel about each other isn’t as relevant as how they handle the drill.

Many leaders mistakenly assume that the management techniques that are good for one business are beneficial to all businesses. Implementing the wrong approaches and policies can damage your firm. Hence, consulting psychologist and scholar William E. Schneider provides valuable information on tailoring policy and management approach to four different types of enterprises that is (1) customized, (2) best-in-class, (3) enrichment and (4)predictable and dependable.

Knowing what will work requires an astute understanding of your business. Organizational leaders can make good use of Schneider’s insights, charts, diagrams and assessment resources.  

Lead Right for Your Company’s Type Book Summary

The Four Types of Enterprises

Organizations generally can take four forms with its own distinctive culture, leadership style and promise to customers. Of these interdependent components, customer promise matters most.

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The four types of companies are:

1. Predictable and dependable

These companies provide reliable products or services that fulfil basic needs.

They need well-defined policies, practices and operational systems.

They are capital-intensive and operate with slim margins based on economies of scale. About 60% of the 100 largest American companies fit this category.

Among other features, their management approach generally includes “vertical de-integration, activity-based costing, zero-based budgeting, lean manufacturing” and “statistical process control.”

These companies often have a robust leadership pipeline.

2. Enrichment

These organizations are values-based.

They operate with honourable goals and deeply held beliefs and principles.

They seek to improve customers’ lives and help people reach their full potential and purpose. Most enrichment organizations focus on mission, not profit, and don’t scale well.

Sales and marketing take the form of fundraising.

Their traits often include “principle-centred leadership, humanistic management, quality of work-life, synchronicity,” and similar strategies.

3. Best-in-Class

These firms deliver distinctive products or services and charge premium prices.

Apple exemplifies best-in-class; the iPhone is a best-in-class product.

Among other techniques, these organizations rely on “benchmarking, matrix management, core competencies, meritocracy leadership” and “constant innovation.”

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4. Customized

These companies have a single focus on discovering and serving their clients’ specialized needs.

They learn everything they can about their customers.

Most customized firms establish long-term customer relationships.

Among other attributes, these companies feature “self-directed teams, quality circles, a collaborative workplace, group-oriented leadership, sensitivity training” and “high-performance work teams.”

They emphasize customer loyalty.

Lead Right by Avoiding “System Disconnections”

Every enterprise is a “living people system” made up of employees, customers and leaders which are interdependent. Senior executives who understand this interdependence make the most effective leaders. They realize that many of the challenges they face are “people problems,” such as “internal conflicts, distrust, employee disengagement, low morale, high…turnover, turf battles, too much politicking, leaders hoarding power, low level of accountability, communication breakdowns, workflow bottlenecks” and “power battles.”

“Leadership is about empowerment – creating the conditions for employees, managers and fellow leaders to deliver on the enterprise’s customer promise.”

People problems are symptoms of system disconnections. Typically occur when executives leadership approaches aren’t suitable for the specific type of firm they lead. Inappropriate leadership policies undermine the inter-dependencies among leaders, employees and consumers.

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AOL and Time Warner: Worst business deal in US history?

To illustrate what can go wrong when leaders prove insensitive to their enterprises’ characteristics is the disastrous merger between America Online (AOL) and Time Warner. Which are now, once again, independent companies. Their combined value in 2010 was less than one-seventh of what it was on the day they merged.

“Enterprises are started by people, led by people, operated by people, improved by people, perpetuated by people, dissolved by people.

In 2000, Time Warner joined AOL in a $165 billion merger, the second-biggest financial deal of its type in the United States. At the time, many believed this enormous merger represented a tipping point where traditional media would partner with the Internet to spawn an exciting “new economy.”

But the merger became a disaster.

“People are inherently motivated to prosper, to contribute, to succeed and to win. If you as a leader create the conditions for that to happen, you don’t need to force anything.”

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The two companies interacted like “oil and water.”

  • They didn’t sell to the same people.
  • Their customer promises were at odds.
  • Their employees and leaders had nothing in common.

Attempting to reconcile these groups under a combined AOL–Time Warner could never have worked out because “their living systems (networks) were completely different.” At the time, AOL was a best-in-class enterprise. Time Warner was a predictable and dependable enterprise.

Within less than a year, they suffered trying to work together.

“If a leader brings his or her leadership approach into an enterprise that requires a different approach, it disrupts that system and creates crosscurrents and contradictions.”

Now business schools teach that the AOL–Time Warner merger was one of the worst business deals in US history.

The strategic flaw that condemned the deal was the leaders’ view of their companies as cash cows: strictly financial entities from which they could squeeze the maximum in “revenues, cost-cutting and layoffs, and more profits.”

They should have seen the two firms as carefully structured, minutely organized living systems.

“If you make money the focus, your enterprise loses money. Money is the result of fully and consistently delivering on your customer promise.”

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Peter Drucker explained why the right systems matter so much to companies citing a “fundamental insight underlying all management science,” he said, “the business enterprise is a system of the highest order: a system whose parts are human beings contributing voluntarily…to a joint venture”. According to Drucker, “interdependence” is the linchpin of well-functioning systems“.

AOL co-founder Steven Case and Time Warner CEO Gerald Levin didn’t lead their companies or set their goals based on a “system-centric” point of view. They failed to understand their separate businesses as living people systems of linked consumers, workers and executives.

Lead Right by Individual-centric mind-set

Instead of a “system-centric mind-set,” many such leaders adopt a dysfunctional “individual-centric mindset.”

To illustrate, Ron Johnson, a successful Apple executive, failed miserably when he took over as CEO at JCPenney department stores in 2011. Johnson couldn’t reorient his mind-set from the workings of Apple, a best-in-class enterprise, to the wildly different operations, environment and system at JCPenney, a predictable and dependable enterprise.

During Johnson’s two-year tenure at the retail chain, sales plummeted 25%.

“A balanced enterprise is functioning in a state of equilibrium. Integrated culture and leadership drivers are being practiced appropriately and not taken to extremes.”

Carly Fiorina ran into similar issues when she took over as CEO of Hewlett-Packard. Like Johnson, Fiorina operated with a best-in-class mind-set. This didn’t work well for Hewlett-Packard, a customized enterprise. Fiorina’s time at Hewlett-Packard was no more successful than Johnson’s tenure at JCPenney.

“Unless and until any management or leadership idea to improve your enterprise can be clearly linked to your customer promise, it needs to be viewed with skepticism at the very least.”

The board members who chose Johnson to run JCPenney and Fiorina to run Hewlett-Packard operated with individual-centric mind-sets. They assumed that because Johnson and Fiorina had impressive records as successful executives, they would automatically succeed in their new CEO roles.

However, a high-quality executive who does well in one business environment won’t necessarily do as well in a different environment. “One size does not fit all.” If the members of both boards had chosen their new CEOs based on recognizing each company as its own kind of interdependent system, they probably would have selected more appropriate executives.

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Connect Your Customer Promise, Culture and Leadership

To deliver on its customer promise, your enterprise must understand itself. You can fulfil your customer promise only by being true to your organization’s nature, so you must establish the conditions which make that fidelity possible.

“Customer promise is the decider. It establishes your mind-set. It centers your thinking, energy, attention and behavior and establishes your core.”

Carefully consider your customer promise – It’s what your customers expect. It represents your enterprise’s honourable pledge to them. It is the value proposition that unifies your enterprise and connects your culture, workforce and leadership. Create an “enterprise-wide customer goal attainment system” to manage the fulfilment of your customer promise.  

Customer promise “sets your priorities, parameters, boundaries and ground rules.”

Leaders should focus on fulfilling their customer promise, instead of dwelling only on finances.

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Microsoft offers a telling example.

By 1997, Microsoft operating systems powered 86.3% of all American personal computers.

Then everything changed. Microsoft’s technology group stopped reporting to chairman Bill Gates and began reporting to CEO Steve Ballmer. Unlike Gates, who emphasized new ideas, Ballmer focused on profits and losses. At the time, a technology group leader recalls, “We couldn’t be focused any more on developing technology that was effective for consumers. Instead, all of a sudden, we had to look at this and say ‘How are we going to use this to make money.’ And it was impossible.”

“Your enterprise is a living people system.”

As a leading best-in-class enterprise, Microsoft must constantly deliver high-quality, innovative technology. An atmosphere where “quick profits” matter more than technological advances won’t ever prioritize developing surprising technology. Ballmer’s insistence that the company’s engineers focus primarily on revenues over innovation seriously undermined Microsoft’s revenues.

In just a few years, the firm lost more than 50% of its value.

“The three living elements of your enterprise are your customers, employees, and you and your fellow leaders. Your job as a leader is to set direction, unify these three and create the systemic conditions for delivering on your promise to your customers.”

Blindness to organizational’s type

Such a loss inevitably happens when leaders fail to understand or appreciate precisely what type of enterprise they are leading. Such a lack of awareness and the inappropriate policies this kind of blindness can generate are at the root of many management mistakes.

Take time to research and understand what type of business you run and how you can lead it most effectively. To fulfil your customer promise, apply a system-centric leadership mind-set that sees your firm as a people-based system.

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Configuring Your Organization

A properly configured company operates as an efficient electricity grid, and each of the four types of enterprise has a different optimal “configuration.” The most effective configuration gives primary power and authority to the core of the enterprise. Spreading power among processes that aren’t relevant diffuses the strength of the configuration and the organization’s potential success. You should also consider building an organization-specified pipeline of leaders.

“People create and provide value for people. People are the life of your enterprise.”

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Author: Muhamad Aarif

A notorious book addict by night and an oil and gas executive by day. As Mark Twain said, "The man who doesn't read good books has no advantage over the man who can't read them." So, read, read, and read some more.

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