June 05 - 11, 2006

In my earlier article by the same title which was published in PAGE on May 8, 2006 , I had penned my thoughts about the main asset, I believe any organization, any company can possess, i.e., human capital. If a company has good human capital and if it is motivated and if it manages to retain it, there is hardly any goal it can not achieve. That about describes it; the art and science of management.

Ask any young bright eyed bushy tailed business grad; what is the primary reason or main objective for any business?

"Oh, that's easy, It's the profit motive". That should be the typical expected answer.

An older, already employed person may have a witty retort, "Oh, so they can pay my bills."

Really, what are the reasons the companies are in business for? If we are to look in their glossy, aggrandized annual reports we often come across enigmatic mission statements which would require help from a professional intelligence operative to decipher in order to make a head or tail out of it. What should be the mission statement of a company be?

In the temerity of my youth once, I was flippant enough to make a remark that I was searching in life something to live for, and or something to die for. Now that I have managed to collect some gray hair due to dust of time, I do think these remarks were rather brazen. I would still think that, a mission statement should be something that a company should believe in from the core of its very heart. Mission statement is not something that makes interesting reading or makes a good impression. Remember there is nobody to impress by writing of a mission statement. People would be impressed by the bottom line rather than words. Action speaks louder than words.

Once the mission statement is written , it translates into an Objective Statement.

What is an Objectives Statement? A question may be asked. A Mission statement is a policy statement, which is rather vague. It states, what the company wants to do. The Objective Statement tells how the company wants to accomplish it. This again, falls within the strategic framework of the company. But between the two, the Mission statement and the Objective statement comes the Short term goals and the Long Term Goals of the Company. These Goals define the planning horizon of the management. Some industries have a long product life cycles and others have a short product cycles which are getting even shorter. For example, the textile industry, housing, construction related industry can be considered as having a long product life cycle, whereas the communications, consumer electronics, etc have a short product life cycle which is getting even shorter. Hence, the decision making and planning horizon in industries / sectors with shorter product life cycle have to be taken in consideration for that. The payback periods are shorter, hence if the NPVs are good, one has also to consider the payback period also while doing he capital budgeting decisions.

Why is the discussion getting bogged down on basics? One may ask. This is known to one and all! Yes it may be known to one and all. But, pity how little it is practiced.

What I find that in most organizations here in Pakistan, in all sizes and sectors, there may be very few that these things are actually practiced. These are the basics. We are good at aping the going conventions, but not good at using the principles which are actually behind them. Mission Statements are not to fill in gaps in the Annual Statements which are required to be published by SECP, annually. Neither they should be used for to impress others or for ego polishing. They are to be used as a motto, as a guiding principle. Let me give an example. One of the companies I had an opportunity to work for was Emerson Electric Company, a fortune 100 Company of USA. Its Mission was to be a World Class Manufacturer that meant embracing most modern management techniques such as JIT, TQM, SPC and striving to improve the quality and services continuously for the customers in order to meet or exceed the Customer Satisfaction. This was not just a slogan, but on other hand something that every member of the company believed in. As a result the had an Annual Sales Revenue at the time that I left them in 1992 of USD 20 Billion and what I remember Skil which was a Group Company that I was working with, had inventory turnover ratio of 66, i.e., it was turning inventory roughly every 5 days, not a small feat. Its commitment to customers was legendary, which can be considered by this fact that the it was ready to take back products which had been produced after years of use, which in some cases was as far back as 10 to 12. This resulted in unfailing customer loyalty.

Let us look at some of the other world class companies, such as 3M, Sony and Apple. These are highly committed Technology oriented companies, with a sharp focus on technology. Their desire is to be on the Cutting Edge of the Technology. They are highly innovative. These companies are source of new products and new ideas. They have a vision that defines the horizon for the rest of mankind. A few years ago Sony came up with the first digital camera called Mavica. It was a very novel idea. At first it seemed like an oddity. Who would actually need a digital picture, especially when the result was not even that clear and comparable? The market was dominated by the conventional photographic film and it seemed that the idea may not progress more than the few novices, photographic freaks and techies. But today the photographic landscape has totally changed. Even the stalwarts have shifted over to digital photography and every known camera manufacturer has come up with their offering. Similarly, I remember when the first Mobile Telephone came about; it was as bulky as a brief case and as heavy as a proverbial ton of bricks, a far cry from the slim cell phones one finds today. The whole industry has changed so much that it is truly amazing; it is again because of some company's commitment to technology. I recently saw a very funny cartoon, which depicted a pregnant woman being checked by a doctor using an ultrasound machine and the doctor telling the woman that she could send an email to the child in her womb.

Leaving the levity aside, same is the case with the other companies who think of themselves being committed to Technology. The technology driven companies live on the cutting edge of the technology by providing new products which shape our lives. Now, wait a minute. The companies we just talked about were all manufacturing companies, were they not? What about the companies which are in services? But, really, there is no difference in Manufacturing and Services. Both of them are providing something to the customers or clients. Technology driven Manufacturing Companies may be using technology which they may be inventing themselves or they may use technology which has been invented by somebody else, and they are among the first ones to employ the technology to bring their services or products to their particular customers or clientele.

The actual question is of the Identity that is how the companies view themselves. Who they are? What they are in business for? What is their Razon de Etre, i.e., the very reason of existence? Just making money is not the motive enough! Without the spirit, or a greater purpose in life, is like being a ship in high ocean without a rudder!

Moving on, Let us say for a company, which is being newly formed, or which is not sure, of what it stands for what should it be aiming at? What should be a purpose for a company's existence? The main reason for a company's existence in my view should be to meet or exceed the expectations of its customers. But wait a minute, is it not the basic definition of quality. Yes, that is exactly how, the quality is defined by one of the experts. And this is the very basic building block for a company should be. It has to meet or exceed the expectation of its stakeholders, which includes the customers, employees, suppliers and of course its owners. According to research conducted at various levels, a lack of customer focus results in dissatisfaction not only from the customers but also from the employees internally which results in a high employee turnover. A number of authors vouch for this, such as Carl Sewell (1990), Frederick Reicheld (1996), et al. C. this has termed a movement called Customer Relationship Marketing. Customer is the primary focus for any business concern. One has to know the customer. The Organization is a living breathing culture. It is not to be to be subjugated and brought to the will of the owner / senior management. The day of autocrat is over and long gone. Progressive managements understand that autocratic style stifles initiatives and creativity. In the long run it is damaging to the organization's strengths. This was brought to the fore by the Japanese management in 1970s which resulted in the inroads the Japanese auto and consumer electronics made in the western markets. This was emphasized by the use of Quality Circles and personal commitments which Japanese style of management was able to enlist due to better use of, again the best asset, i.e., human asset. I would say it again, autocratic style of Attila the Hun, does not cut it in modern complex world anymore as it does not incorporate human creativity.

Almost as an engineer would do, the issue next is to question every area of business in terms of value. The Engineers have a special name for it. They have given this area the name of Value Engineering. Each aspect of the organization is questioned in terms of value addition to the customer. If it is adding value to the customer than it stays or it is enhanced, and if it does not, then it has to go. This is to question the whole paradigm or it may call for the whole paradigm to shift. But then, in the long run, it may mean the difference between the survival or not. This is what the doctor calls for.