Strategic Assessment - Understanding how your business functions and is perceived to function is a crucial first step in developing a strategy. The Assessment typically consists of four parts:

  1. A Company-wide Survey delineates your current strategy, structure, and culture in action.
  2. Process Audits shine the light on how work gets done, efficiently or not, in key areas of your business.
  3. Management and Employee Interviews draw out views and suggestions about the functioning of your organization.
  4. Customer Interviews provide an understanding of how outsiders view your business and your competition.

This information is summarized in a report that includes specific recommendations and action steps.

Strategic Retreat - To move forward, sometimes you have to take a step back. During your Retreat, participants review the Strategic Assessment and then develop the means to achieve a more successful workplace:

  1. Scenario Planning places your firm in different possible future scenarios and asks what it would take for your firm to thrive in each. Working backwards in time from these futures to today, we determine what it is you have to do now in order to succeed no matter which scenario appears.
  2. Goal Setting translates corporate strategy into specific and measurable goals that can then be cascaded throughout your organization. The net result is that all employees know how they contribute to the success of the firm.



In today’s marketplace, the rules keep changing.

New technology, new product introductions, new market niches, new competition, new customer demands…. Major change challenges a company’s confidence and ability to thrive.

Opportunities and obstacles can appear quickly. How the firm responds and utilizes these events can make an enormous difference in profits, market presence, customer loyalty and company morale.Even the fastest-growing firms experience problems in the face of change, problems that can threaten the best companies despite having the best products -- miscommunications, decisions not made or not made fast enough, doing “anything” in order to get product out, “things” falling through the cracks, etc.

More than ever before, successful firms need teams of people that not only clearly understand corporate goals, but experience the importance and urgency of each individual’s role in the organization’s success. When people understand and embrace their roles, they tend to contribute at significantly higher levels of performance. They can see possibilities, actions and threats that were not as apparent to them previously.Of course, not everyone responds in the same way at the same time. Resistance to change can – and must -- be converted into a welcoming of innovation and creativity, into interest in learning new ways of succeeding and pride in getting products and services recognized as first class.Companies that create environments like this keep their most excellent employees. We call these organizations Companies of Excellence.

Today, in these, the most challenging times in business history, how do you build a Company of Excellence, a Company{footnote}The principles outlined here apply to all levels and tiers within a firm, be it Corporate, Division, Department, etc. To underline this fact, “Division” and “Department” are used interchangeably. “Company”, “Corporate” and “Firm” refers to the entire organization. Liebowitz & Associates has been invited to consult at all three levels.{/footnote} whose products are of the highest quality, a Company that improves on a continuous and innovative basis, a Company whose employees are personally identified with the future of the firm?

There are many roads to that goal, all overlapping and intertwining. But the one feature that characterizes each of these paths is the degree to which staff and employees are pulling in the same direction.

How do you ensure that everyone in your firm is heading in the same direction?

In working with scores of firms in many industries, Liebowitz & Associates has found that continuous communication of how each team member impacts the implementation of corporate strategy and corporate goals is the most significant factor in organizational success. Most firms do not realize the importance of “cascading” their goals throughout a firm so that every workgroup is aware of their contribution to corporate strategy!!

What causes businesses to stumble in many instances is the difficulty in undertaking this process. The consequence is that the business becomes like a multi-engine airplane, with each engine tuned and timed differently, causing the plane to slip-slide through the air. It does reach its destination, but late and at great fuel expense. It eventually wears out at a rate more rapidly than expected.


The Company of Excellence is distinguished by the fact that everyone in it is heading in the same direction. Everyone knows the Company’s corporate strategy and its goals. And, most important, each person knows how his or her individual performance contributes to the overall success of the Company! Corporate goals have been cascaded down throughout each level of the firm, touching everyone in the firm.

What makes it so difficult, then, building a Company of Excellence?

Frequently senior managers either do not know how to cascade goals down through the company or do not feel it is necessary. In some companies the different divisions and departments act as if they are from different and competing businesses, making the necessary flow of information between them difficult, if not impossible. In other firms, workflow is so ingrained that departments find it to be an imposition to change in order to collaborate and meet corporate goals. And, in still other corporations, staff is not sure exactly what is expected of them.

But, in all these instances the establishing and cascading of goals is experienced as a burden rather than as a business necessity.


(1). Each workgroup becomes more productive, efficient and responsive, since they have a clearer understanding of how they specifically contribute to overall goals.

(2). Team-building is enhanced both within and between workgroups. Everyone knows their role on the team and what’s expected of them. Performance is more easily managed. Because of the extensive negotiation process between workgroups, people know what to expect from each other and what is expected of them.

(3). Compensation programs can be more easily built and monitored with this system in place. People are paid for performance.

(4). A monitoring program allows management to evaluate progress and to do something about problems immediately. Without a system that enables management to review progress as needed, a firm usually has to wait until quarterly figures are in to detect problems; and, then it takes time to detect the causes of the problems.

(5). The system ensures that strategic goals and the planning process remain foremost in the minds of staff. In the absence of a system that monitors corporate goals and performance, staff too easily slips into downplaying the importance of achieving goals. The consequence is that strategic goals play a minimal role in business growth and the strategic planning process becomes a burden unhappily experienced once a year.

(6). Each work group can access, again at will, information about their progress and correct the problems then and there. This expedites decision-making and problem-solving rather than waiting until the problem becomes acute (usually when the quarterly financials appear).

(7). Possibly most important is that the creativity leading to new products and services, the learning the organization must achieve and the development of employees a company must undertake attain equal status to the usual business considerations of profit, sales, etc. A Company is asked to deliberately plan what its goals are with respect to this dimension. It is not left to chance or happenstance.


Corporate goals can be grouped into four categories:

  • Financial (including Profits, Margins, etc.)
  • The Customer
  • Internal Processes (including productivity, efficiency, etc.)
  • Organizational Learning and Development

The number of goals within each category is limited only by the corporation or organization itself, not by the “logic” of goal setting. And, each goal can have a nest of sub-goals attached to it. For example, the goal of a division may be to increase sales revenues to $100 million. Nested within that goal may be sub-goals of $25 million for Product #1, $50 million for Product #2 and another $25 million for Product #3.

The only restriction on the process of goal setting is that each goal at all levels be measurable, i.e., be expressed numerically. This restriction often raises eyebrows, particularly around issues related to customer perception and by service-oriented firms.

For example, how can an art design department measure the creativity of its output? By sales? Well, sales does measure “saleability,” but does it measure “creativity?” The real question, of course, is how does the department define “creativity?”

After some very intense and in-depth discussions, one art department came to the conclusion that “creativity” meant the number of times its work was mentioned in the national trade journals relative to the mention of the works of competitors. Obviously, this is not “creativity” but rather “competitiveness,” but for this department this particular measurement was their criterion of successful creativity.

This example is intended to illustrate that, in fact, virtually all goals can be expressed numerically and the discussions around those that seem to defy this requirement can be very enlightening for a business.

Table #1, entitled “Corporate Goals”, illustrates how goals at this senior level might be displayed.



















































Table #2 plots how corporate goals are distributed across a firm’s departments (or, divisions) and implies that each department can contribute to goals in more than one category. A specific department would utilize Table #3 to specify to which goals it would contribute and to define how it would contribute to these goals. Similar tables could be designed for each workgroup within each department or division.




Dept'l Goal:

How measure?

Who measures?

Start value?

Aim or goal?

Resources needed? 

Action steps?



Once each department and each workgroup within each department develops their goals that “roll up to” (that contribute to) the corporate goals, senior managers might review Table #4 or one similar to it to ensure that each category (in this case, it is Internal Processes) is adequately covered.



(enter goal )_________________________

Dept. _____________ 


Dept. _____________ 


Dept. _____________ 


Dept. _____________ 



The preceding brief overview of the goal-setting process follows a simple logic: namely, that the goals and action programs of all divisions, departments and workgroups are designed to “roll up to”, contribute to or add up to the corporate goals of a firm. For example, one could imagine a bottom row in Tables #2 or #3 that is labeled “TOTAL”. Theoretically, were the numeric value of the goals of all departments added by columns, their sum would equal the numeric value of the corporate goals listed in the row labeled “Corporate Goals”.

Reality sets in during the course of the year. Programs don’t work or have to be reedited, monthly goals are not met, employee turnover impedes progress, the nature of the market place changes... any myriad of complications occurs to make expectations turn pale. To repeat, this is reality!

Our approach asks a firm to anticipate this reality by developing a monitoring system that is being regularly consulted and whose output is being frequently discussed by and among the various teams, leading to a periodic reframing of the picture and corrective changes.

Without a monitoring system that watches over progress on a continual basis, unexpected and undesirable events go unnoticed until late or too late to do anything meaningful about them. And, in the absence of a monitoring system, the “goal of achieving these goals” tends to go by the wayside. The usual excuse is, “We are too busy to monitor,” but not too busy to be reacting to the many problems that could otherwise be anticipated!


The model presented here requires a commitment on the part of senior management to the values expressed in the statement, “Everyone in the firm is on board and heading in the same direction.” The commitment is demonstrated by having a senior manager appointed as “Advocate” or “Champion” for the process, thereby guaranteeing the success of the project in a timely and efficient manner.

(1). Once the firm’s strategic plan is in place and the specific goals for each department and/or division are specified, we meet with the group of managers responsible for achieving these goals and the Champion. This meeting is devoted to outlining our model, explaining how we go about the cascading process, answering questions and scheduling meetings.

(2). For any one division, we facilitate a retreat with the manager in charge and those directly reporting to him/her.{footnote}This process might be repeated down the hierarchy depending on the number of tiers existing in the Department, as well as on other factors (e.g., geographical dispersion, size of the Department, etc.)3 In developing the software for a monitoring system that is uniquely tailored to the needs of the Firm, we engage an associate consulting firm whose specialty is the development of performance measurement applications.{/footnote} In this meeting we focus on their goals as they relate to corporate goals, what is required to attain them, the difficulties that might stand in the way, the sub-goals for which each work-group within the division is responsible, the specific action plans underpinning these activities, dates by which certain actions are to be completed and measures of the success of these activities. In addition, we provide guidelines and instructions about how to cascade goals, sub-goals and action steps downward, as well as how to solicit feedback and suggestions. This group then meets on a scheduled basis to review progress, to evaluate feedback and suggestions, to make any necessary revisions in program and, in particular, to report back to the senior management cabinet. This process ensures that corporate goals are being continually monitored for their relevance, suitability and achievability.

(3). One immediate outcome of this process is the recognition on the part of division staff that work- and information-flow needs to be redesigned. We work with staff to develop new designs that support their attainment of objectives.

(4). We meet regularly with the Champion to review progress, address issues that might arise, anticipate problems down the road, and develop plans and structures that ensure progress.

(5). Throughout the consultation we work with managers and their staffs in creating a monitoring system3. As indicated earlier, the value of having an installed software-based system is enormous.

(6). To further support our objectives in consultation we engage in the following activities as and when needed:

(a). Facilitating the negotiations between divisions that are dependent on each other to attain their respective aims.

(b). Team-building among various groups that are having difficulty in cohesion or that are undergoing changes that hinder their productivity.

(c). Coaching of executives and managers to support their efforts in cascading goals downward. Our coaching program is a structured, time-limited program designed especially to manage this process.


There have been many “fads” (e.g., Just-in-Time, Business Process Re-Engineering, Total Quality Management, Continuous Improvement, etc.) that have grazed on the business scene. Many of them have failed and have been forgotten; some have survived in diluted form; the few that have persevered have been adopted by business and industry. All of them, however, have contained a kernel of truth, however veiled these gems might have been. Our program is based on:

  • A careful review, distillation and integration of what might have constituted a “gem”
  • Decoding the common themes underlying these insights
  • Translating these themes into a set of essential business practices
  • And, providing a program within which these practices become the foundation of a Company of Excellence

Thus, our program is characterized by goals, communication, a constant flow of information, continual feedback, employee involvement and management commitment. These are the elements that ensure the success of any program and are the cornerstones of ours. These elements are designed to create a Company of Excellence.

What are the steps in developing a comprehensive strategic planning process? And, once developed, how do we ensure that it will be put into use and not gather dust on the proverbial "shelf"?

But before undertaking a planning process ownership has to understand that unless it is committed to involving the entire employee staff (both management and line), it won't work. For employees to be identified with the goals of ownership, their participation has to be part of developing strategy, as we'll see. Furthermore, an owner's commitment to growth and change breathes life into strategic planning; without that, planning is empty.

Strategic planning is the answer to at least four questions: How Do Our Customers/Clients See Us?, How Do We See Ourselves and the Business Environment?, How Do We See the Future?, and What Are We Going to Do About It?


The words "service" and "total quality" have become part of business's everyday vocabulary. However, too often we assume that we know what customers want without asking them, or, we depend on our sales people to tell us. Some owners will mail a customer survey, but the return rates are skimpy and those who do return the cards rarely reflect the entire range of opinion. But what is even more problematic is that we don't know the views of our lost customers, i.e., those who won't come back to buy, and those desirable customers who have never bought from us in the first place.

An early step in the planning process is to interview a sampling of these three customer or client groups: our current customers, the ones we have lost and the ones in our target group who have never bought from us. We need to know what they think of our firm, our products and services, our competitors in comparison to us. They'll also tell us what they will need from us in the future.


This portion of planning comes in two parts: an overview of our firm's structure and systems, and, an analysis of our business and industry including our competitors.

There will always be a discrepancy between how we see ourselves and how others see us, between what we intend and what others infer about our intentions and expectations. How we think we run our business will differ from how our managers and employees see it. We need to find out their perceptions and what their recommendations for change are. We have to ask them in a risk-free environment while guaranteeing them confidentiality. Without this knowledge I have seen many firms stall in their growth. The very process of asking employees is one important ingredient to eliciting their full cooperation with our goals.

The second part entails looking at our present and future markets, the products and services we provide now and could provide in the future, the resources (financial, technical, and human) we have to bring our product and services to market, our methods of distribution, pricing, advertising and PR, and the efforts and plans of our competitors.

The answer to the question, "How do we see ourselves?", is a statement about the uniqueness, desirability and competitiveness of our products and services, and the efficiency with which we are developing and promoting them. We are talking about our core competencies, our abilities or characteristics that are difficult or impossible for others to emulate, that give us an advantage over competition, and that our buying public appreciates.


We can't predict the future, but we can imagine it. One way of looking down the road is to ask, what are the driving forces (technological, business and economic, political, human and social, and environmental) that will shape our industry in the future? What elements move our industry? Examples of driving forces include the aging of the buying public, new technology, a demand for "mass customization", etc. Trade association journals, newspapers and business magazines are full of examples of the driving forces in our industry.

Now, fit these driving forces into three future scenarios: a "Dog Eat Dog" environment in our industry where competition will be more fierce than ever, an industry that is "Fundamentally Changed in Some Significant Way", and an industry atmosphere that is "The Same as Now, Only Better". How could these driving forces contribute to the future of our industry looking either extraordinarily cutthroat, dramatically different and changed, or bigger and better?

Next, think about what our firm would have to look like and be like in order to compete in any of these three scenarios. What technology would we have to be using? What kinds of products and services would we need to provide? What abilities would our personnel need?


We now have three sets of data: how our customers perceive us, how our firm is actually working and the competencies we have in place, what we think our business should look like in the future to remain competitive. What do we do with it all?

By now it should be clear that we can't be planning strategy by ourselves. Not only is it a heavy burden for one or two people, but its implementation is problematic at best if the people who have to carry it out are not included in the process from the beginning. For these reasons data gathering and planning requires different meetings between different groups of people at different times. Besides our employee staff, this could include get-togethers with suppliers and distributors for the explicit purpose of enhancing our strategic thinking, customer focus groups, other businesses for the purpose of benchmarking, etc.

A meeting of senior managers (e.g., at a two or three day retreat away from the office) would be the next step. This meeting lays out the information that has been gathered so far. The managers themselves have developed some of the data and, therefore, are familiar with parts or all of it, or should be.

The task for the management group at this retreat is to design in general terms what the firm in five years should look like, given the information in hand. The design would include, among other elements, the size of the firm, the products and services, the various markets, delivery processes, etc. Then, the group needs to define what the firm would need to look like in two and a half years in order to serve as a platform for the five year plan. The answer to this question is more specific than to the first question.

Most of the time is spent planning the upcoming year of business. We have to keep in mind the need to create a platform for the two and a half year vision as well as the constraints and opportunities of where the firm is now. This plan is to be specific in terms of financial goals, specific action plans to reach these goals, resources that will be needed, target markets, etc.

But, the strategy process is not complete as yet. The strategy thus far developed has to be cascaded down into the various departments for discussion and for their development of departmental and individual action plans, recycled back to the senior levels for their overview and then back down the ranks until everyone is going in the same direction on the same boat. This step is crucial to ensure that in fact the strategic planning process will take hold and be useful.

Strategy making can look at first blush as an overwhelming undertaking especially for small businesses. Au contraire, as the French would say!! It can and should be taken in steps and not taken all at the same time. A preliminary management meeting can outline the sequence. Further, it is a process that really does not begin and end with definite boundaries but rather has to be revisited throughout the business year. Lastly, involving all employees in the process can seem like a fruitless task ("Some don't even speak English!"); however, the facts are that it is not fruitless and that it dramatically engages the loyalty and productivity of employees.

Happy planning!!

Management Report
A Report About Management, Business and Organizational Development
Volume II Number Vl

The first of a series of articles dealing with organizational structure and design.

There are many reasons for how and why businesses succeed or fail. Most of the reasons usually offered are rooted in economic fields: strategy, marketing, sales, pricing, distribution systems, manufacturing capabilities and the like. If a company succeeded in outpacing its competition, it was because they were first to market, their pricing was right, they gave their customer what they wanted, they could fill their distribution channels. A failure, on the other hand, was due to not reading the market right, not investing in updated equipment, providing poor customer service and follow-up, not caring about quality, and similar such explanations.

All of these rationales at one time or another, in one place or other, are correct. They clearly merit the attention of all business people.

I would like to suggest another factor contributing to success (or otherwise), a factor that in many ways is more basic than many of these others simply because it undergirds most of them, i.e. either supports, allows, encourages, structures and/or promotes them. In fact, its influence is most clearly visible when rapidly and apparently successful growing firms (that have read the market right, that have a clear vision of the future, etc.) falter or fail. I call this factor the firm's "organizational design", comprising at least four overlapping elements:

  • The influence of a vision and strategy on a firm's operations
  • Its people: their selection, qualification, compensation, promotion, career pathing
  • Its system structures and work processes
  • Its organizational culture

Organizational design is rarely considered when a firm's failure or success is under the microscope. The usual view is that high flyers are soaring because of being in the right place at the right time with the right product or service, thereby catching the wind that lifts them above competitors. The dying swan couldn't anticipate, much less catch up with, the leaders, thus being left behind to starve.

But, given the right time, place and product or service, how is the firm organized and structured so that it can be lifted by the wind? What goes on in successful firms that allows them to soar? What keeps unsuccessful firms on the ground, unable to take off?

This series of newsletters is devoted to answering these questions and is intended to aid business owners and entrepreneurs as they consider how and whether their firm is organized and structured to support their growth!!


There are innumerable ways at looking at strategy and its components. Our focus here is not on strategy per se, but rather on how strategy is translated into a supporting and supportive organizational structure. A very useful way of viewing business strategy is to outline how businesses deliver customer value, which, after all, is the goal of every business. A recent Harvard Business Review article (January/February, 1993) by Michael Treacy and Fred Wiersma suggests three ways:

  • Being "customer intimate", i.e. being able to anticipate customer needs and reacting accordingly.
  • Providing product leadership, i.e. creating products and services that satisfy customer needs.
  • Exhibiting operational excellence, i.e. continually improving how product and services are provided to customers.

Each strategic aim requires a different structural focus. The strategies themselves overlap and, in fact, no one strategy is or can be pursued entirely in isolation from the other. To be successful requires a firm to actively seek excellence in at least one of the three strategies and to be good in the other two. The strategy that becomes prime for a company, however, has implications for its organizational structure.


"Customer intimacy" entails precisely segmenting and targeting markets, acquiring detailed customer knowledge, developing an operational flexibility that allows for immediate response to customer need, and securing tremendous customer loyalty. The value added component of this strategy is knowing the customer so well that what he/she needs is immediately provided.

For a business to pursue this strategy, what is demanded is a very responsive customer service department and a very active marketing and sales department geared to relationship selling. In fact, these departments drive the company. They are the firm's primary interface with the customer base. Customer information is continually solicited, sorted, ordered, and immediately distributed throughout the company so that it can be acted upon immediately. Information systems are state of the art. The recipients of this information have to be able to act quickly to stay on top. Thus, they have to be very team centered (to analyze the information and to translate it into new products and services), and they have to have a great deal of leeway with respect to decision making and authority (to respond promptly to customer needs).

A growing and successful construction company prided itself on building expensive homes geared to client needs and adaptable to client wants. However, client requirements were initially not addressed in depth, methods to solicit this information were not developed (e.g., the use of software that would enable clients to imagine "being inside the house" as it was being built), contact was initiated only when another payment was due, and only the owner could fix the final price of the house. The net result was that the owner, in effect, convinced buyers what they should want, thereby dramatically increasing the number of client-initiated changes as the clients along the way became clearer about what they wanted.

Information about customer-initiated changes was frequently communicated incorrectly or late to the field, even more increasing construction costs due to the need to undo work that had been already completed. Sales people were pre-empted at closing regarding sales price, making for rapid turnover of sales people and suspicious buyers, and many client complaints throughout the construction period. Needless to say, the cost of building the homes (which was, of course, passed onto the customer) also increased.

The firm's relative success was due to the fact that it was small enough to eventually determine what a customer wanted, as well as the fact that its competition in its geographical area was no better. However, this firm's growth is hampered by a mismatch of its strategy and its organizational structure.

In contrast, a truck parts firm divided its customers into three groups, from their "best" through to their "infrequent customer". They devoted a considerable amount of attention to what their "best customer" wanted and needed, and when what they wanted would be needed. Frequent personal interviews with their "best" customers were conducted by sales personnel (both at the in-house counter and on the road) and other senior managers to anticipate needs and concerns. The "infrequent customer" group was not neglected, but the information sought from and about them was minimal. Information, however, that was closely monitored were those transition points where a customer graduated to a higher "class" with the company and, also, where customer's business growth profile was changing.

This information was distributed throughout the firm, so that Inventory knew in advance what would be needed when, shipping knew what was to go out to whom when and with what priority, and Accounting knew the appropriate pricing schedules. Information transmission was instantaneous, decision making was local and immediate, and problems (in inventory, shipping, unusual demands, etc.) were anticipated or handled on site.

This firm's information system, personnel and departments were an exquisitely networked organizational structure. The phrase, "customer intimacy", would be an understated description of their organization's structure.


To pursue a strategy of "product" leadership entails delivering value through offering leading edge products and services, providing a stream of new products and services, and creatively adapting to new and changing marketing conditions while constantly pursuing new solutions on behalf of its clients and customers.

This strategy depends on an organizational structure that, among other things, is very research and development centered (if a manufacturing company) or extremely knowledgeable about the products and services currently being developed and considered in the market place. In addition, the firm's Sales & Marketing Departments must be part and parcel of their customer's business planning process so as to be able to anticipate future needs, to supply that need, to teach their customers new approaches and solutions to their problems, and particularly to be able to direct their customers into avenues they hadn't entertained on their own as being profitable directions.

In contrast to (but overlapping in certain respects with) the organizational structure demanded by a "customer intimacy" strategy, "product leadership" requires an organization that is not bureaucratic but rather quick to action and opportunistic in intent. Personnel tend to be organized into matrix teams that cross departmental lines since this type of structure provides the fastest response time. At the same time, since decision making authority is spread throughout the firm, risk management is carefully monitored.

In addition, in order to stay current with clients' long range plans to which their input could be invaluable, "relation selling" is de rigeur. These firms have not only the sales force, but also as many other departments as they can, in their clients' planning meetings. The firm's personnel take on an advisory and consultative role, putting them in the position of informing their clients' strategic thinking and anticipating their needs.

An advertising and PR firm continually scans the marketing environment for new approaches to offer their clients and for creative talent with whom to partner either temporarily or long term. They are continually meeting with their clients to review these new approaches and the opportunities their newly discovered talent opens up.

In order to achieve this level of "service leadership", personnel are teamed into matrices, with each team having the responsibility to bring fresh ideas and directions to their clients. They joke about almost having offices at their clients because they are rarely seen in their home offices. Communication between team members is so crucial that each team has a designated person whose primary responsibility is to ensure that everyone knows what everyone else on the team is doing and to serve as a liaison to senior management. In addition, the teams convene regularly to review not only the latest presentations and their impact, but also what is out there in the market place, who is doing what, etc., and how can they partner with or ally themselves with the talent that is out there.

Because the cost of this kind of process is high (e.g., voluntarily preparing project ideas with accompanying support material clients hadn't even initiated or requested), Finance is regularly consulted about each team's ROIs.


"Operational excellence" as a strategy emphasizes reliable and high quality products and services, competitive pricing, and minimal difficulty and inconvenience. This strategy entails a continual search for ways to minimize overhead costs, to eliminate intermediate non-value added steps, to reduce transactions costs, and, in general, to optimize business processes and work flow.

The organizational structural dynamics supporting "operational excellence" is in-ward looking: how to get quality product and service to the customer at the best most, competitive price by changing, tinkering, re-engineering, eliminating etc., what is done internally. Most of today's popular focus (the Baldridge Award, Total Quality Management, Continuous Improvement, Achieving Manufacturing Excellence, etc.) is devoted to this strategy.

This inward looking stance is reflected in an organization willing to look at itself, warts, scars, and all; training people to do so; continually measuring itself against specific goals and objectives; and revising and revamping itself accordingly. Clearly, then, this is an organization where employee empowerment is preached and practiced, team work is a sine qua non, training programs are the norm. All departments become equal partners in the quest for success. No one department dominates.

A large manufacturing company, in pursuing "operational excellence", was highly invested in continuous learning principles and re-engineering. Their first step was for senior management to develop a first draft vision of "The Company of the Future" utilizing scenario planning as a means of optimizing their ability to compete in the future. They then developed tentative goals (financial, productivity, etc.) and specific action programs that spanned the next several years. This plan was cascaded down through the firm. Its various departments were encouraged to give feedback about and to question the attainability of the goals and the feasibility of the action plans, as well as to consider the future vision. After another iteration sharpened these future maps, the departments then developed their goals and action plans that would contribute to the achievement of the corporate objectives.

A specific focus was on those activities that added value to their product, i.e., on work processes that could be "seen" and "experienced" as valuable by the customer, minimizing those activities (e.g., unnecessary lifting and moving of materials around the shop, duplication of steps in the order taking, etc.) that did not. Further, each work process was documented and reviewed on a regular basis to ensure efficiency and effectiveness. People were trained in skill areas that upgraded their skills and prepared them for advancement, working new machinery, supervising, etc. People were gradually transitioned from departments to matrix teams, with each team working on a different product line. Their task was to not only stay in touch with customers and what they needed, but to also anticipate future products and needs and to translate these into new products and services.

"Operational excellence" requires an organizational design that is fluid, with people and roles changing in response to the winds of the market. Only a company where employees are fully trusted and entrusted, trained and loyal, can successfully undertake this strategy. One reason most TQM and re-engineering projects fail is because the hosts lack this flexibility and are not willing to look in the mirror to see why.

Management Report
A Report About Management, Business and Organizational Development
Volume II Number V

Re-Engineering, TQM, JIT Manufacturing, ISO9000 -- programs all designed to enhance the competitiveness of American businesses both here and abroad! However, among entrepreneurial and closely-held corporations, few try to undertake the changes these programs introduce, and, if they do, they do so timidly, as if they are going to be burned.

The most common reaction owners have to even the most diffident mention of these processes is, "We are too small to try them -- they are only for the big boys!! And, besides, they cost too much to introduce." Another frequent reaction is the refusal to consider outside assistance in setting up one of these programs -- "What will he/she know about my business?" And, besides, "My employees can't handle this new stuff. Half of them can't even speak English!" "How can I be sure that there will be a return on investments of time, money and energy?" "Besides, we are doing just great the way we are! We have squeezed out all the fat and are as lean as we can be!"

Most of the time these responses reflect a lack of awareness about what any of these programs do in fact offer. This article is intended to summarize a few of the basics common to all these programs, basics that a business owner can very easily carry out if in fact he or she wants to grow and compete in the future. And that is really the name of the game -- growing and competing in a dramatically changing market place where Third World countries produce high quality at low prices, technology outpaces the ability to utilize its benefits and the understanding of its implications, and the nature of competition reinvents itself every day.


Value-added, if it means anything, is what and how your customers view you, your products and your services. Though this sounds simple-minded, it is really surprising to witness companies focusing on what they think their customer wants without asking the customers themselves, manufacturing product without true consideration for what the customer deems as attractive, arranging store hours without thinking what the customer might find convenient, etc.

A basic but common underpinning of the new trends is to have a plan that reflects what your current customers want from you and from your competitors, what your past or lost customers didn't find with you but have with your competitors, and what would attract potential customers who use your competitors but have never used you. This step could serve as one ingredient for a strategic plan. What this information does is to structure where in your company you should look to make changes. You might conclude that your customers want more rapid delivery of product, fewer errors in shipment, better quality product, a more varied product choice, reduced cost of product, etc.

In deciding what to tackle first, it is important not to discard any information your customers provide. Some may appear at the moment unattainable, or too costly to achieve. Many business owners at this juncture might throw in the towel and continue business as usual. However, if these new programs have anything to contribute, it is the finding that any business can take this type of information and realize a return only if they are willing to discontinue business as usual and consider alternative ways.


Another element in the new wave of business ideas is the willingness to sit down and flow chart the work flow most related to the goals you have chosen to pursue.

The problem here is the nature of the entrepreneur/business owner. They are doers, not planners; they are and can be the big-picture person, not the detail-minder. What can I say other than, "Do it just this once."

Take for example the customer who wants immediate delivery of product. Right now, turn around time from order to deliver is 3 days; your customer wants product as and when he runs out of it, i.e. immediately or sooner. Your order taking system involves the following steps: the customer calls in just as his inventory of parts runs out; the order taker writes down the order; she then types it into the computer; the purchasing department accesses the order; he then calls in the order to your supplier; the supplier receives the order and whatever they do with it takes time; and so it goes.

But consider the following scenario. You arranged a preferred supplier relationship in which you would order all parts from this one supplier provided you could agree on price, quality and delivery; in which you would bypass their order entry department and directly enter their shipping department electronically, i.e. via computer links; and in which drop shipping could be arranged. Furthermore, you arranged with your customer a preferred supplier relationship in which you as his supplier was informed of all of his sales and delivery dates that involved your product; in which you agreed to monitor his levels of inventory and provide parts as needed and forecasted within agreed upon limits without his having to contact you.

This is not a pipe dream but a reality for many companies, large and small. You have essentially eliminated your order processing department and substituted an efficient process to satisfy your customer. Conducting a work flow analysis on other work processes and tasks could be equally revealing.


To ensure that defective or discarded parts are not improperly shipped, that measuring instruments are calibrated on a regular basis, that outdated blueprints are no longer being used, and that innumerable other concerns are similarly broached, each step of the workflow is documented in written form. Each person then knows what part of the process he "owns" and for what he is responsible. This is essentially a page from the ISO 9000 standard of quality, and, for that matter, from any other standard of quality. Each of these standards vary in emphasis and focus, but all agree on the need for documentation.

As an organizational imperative, it forces employees to be aware of what they are doing and whether they are following standards; as an organizational strategy, documentation allows you to compete in different markets. The government, for example, requires it; for overseas firms, particularly in Europe, that are expecting delivery of product, it is basic.


Businesses see not only their competitors as adversaries, but they also too often lump their suppliers, vendors and customers in the same barrel. As the earlier example suggests, your vendors might be able to help you enhance considerably the value-added in your products and services. In fact, I have often suggested that vendors and suppliers be included in the strategic planning process of my clients. What they have to offer in the way of new knowledge and information can make or break the success of your new product. Preferred supplier relationships are win/win relationships. What you might lose in price can be made up, often in spades, by what you gain in service and support.

The same considerations apply to your customers. The less you see them as part of the "enemy" whom you have to convince to buy from you, the more you can see them as partners whose advice and counsel you could be seeking from the beginning of any new product introduction or sale.


The new motif is, "If it isn't broke, break it!!" That the nature of competition is so rapidly changing has become a cliché, though too true. Staying even, much less getting ahead, requires a continual reviewing of how one makes, delivers and services. This in turn depends on an openness to new ways of doing and looking, and, on an aggressiveness in seeing how others do the same thing. Benchmarking is the term used as businesses observe how various work processes (e.g., accounting, billing, order taking, selling, marketing, etc.) are conducted by others not only in your industry but in other unrelated businesses.


Let's assume that you build custom homes. A serious problem is that a great many errors are made when a home is first being built with the resulting redoing cutting into margins. You determine from a workflow analysis that all the specs are not on the blue prints when the framers are told to begin. It turns out that the Project Manager, the Designer and the crew foremen don't meet beforehand to plan but rather each proceeds with their assignment on the basis of whatever information they have immediately available.

By having the three meet as a team with the customer as negotiations proceed and once again just before construction begins, the firm is able to increase their margins while increasing quality. This kind of solution is an example of a "team approach to quality".

The way most business owners see work getting done is through the efforts of individuals each doing their job as well as possible. However, this is only part of the picture since each individual depends on others within a firm. Another way of saying this is that each employee is a "supplier" (of parts, product, information, service) to another employee (a "customer") often in another department. This network of individuals doing a job is a more accurate picture of what occurs in business.

What many companies have done is to utilize this model of work and created cross-functional teams who are given the responsibility to produce, correct, amend and change work processes. A team could consist of a member of marketing, operations, administration, sales and design, all working together on getting out a new product. Other businesses (both manufacturers and services firms) have divided their entire companies into such cross-functional teams

A significant contribution to the effectiveness of your teams is knowing what your employees think about your firm. What I call an organization audit consists of surveying (confidentially and anonymously) the attitudes and opinions of employees. This survey can direct efforts into changing what employees find counterproductive and inefficient, if not downright discouraging.


Each of the above elements of new business practices depends on extensive training of employees not only in the technical aspects of their work but in some of the "softer" areas, like decision-making and problem solving, team work, financial bottom line considerations, statistical process control, supervision, etc. A very basic assumption underlying modern business trends is investment in employee training is a competitive advantage. It not only promotes learning of new procedures, but it also enhances the identification of employees with your firm and encourages initiative and responsibility.


Everything we have discussed thus far needs to fit into a plan, an overall strategy that the guides the company and its business into the future. The long term strategy and the accompanying changes has to be based on customer needs and perceptions. In plotting change, a firm has to first analyze how it does its work, how processes interconnect. Given this analysis, a business is then able to consider how it can change what it does in order to add value to their products and services

The work has to be documented and, as change progresses, has to be continually updated. Learning new, more efficient and productive ways of delivering a product or service keeps strategic plans current and relevant. The entire plan depends on employees: how well trained they are, how they work together as a team, whether their identification is to the firm or only to their job and salary, the degree of their willingness to take initiative and responsibility.

And, again, all of this depends on a plan of action guided by an overall strategy of where the company is going.