Six essentials for business leaders (2023)

Great coaches value fundamentals: The fundamentalsskills andGames that make a team a consistent winner. Great CEOs do the same. They know that sustainable superior performance cannot be based on one-off improvements such as downtime, massive cost reductions or reorganizations. Of course, they will take drastic action when they find themselves in a situation where this is necessary or desirable. But your priority is to avoid such situations. And they do it by focusing on the six core responsibilities that form the foundation of every CEO's job: designing the work environment, defining strategy, allocating resources, developing managers, building the organization, and overseeing operations.

This list shouldn't surprise you; the basics of aGeneral managerAfter all, work should look familiar. What makes it important is its status as an organizational structure for the vast majority of activities that general managers perform. It helps you to scope the work, set priorities and identify important connections between these areas of activity.

Every organization has its own unique work environment, and its legacy from the past plays a significant role in how its managers respond to problems and opportunities. But whatever environment a general manager inherits from the past, shaping—or transforming—it is an extremely important task. And this applies to small and medium-sized companies as well as giants like General Motors and General Electric.

Three elements determine an organization's work environment: (1) the prevailing performance standards, which determine the pace and quality of employee effort; (2) the business concepts that define what the company looks like and how it works; and (3) the people's concepts and values ​​that prevail and define what it's like to work there.

Of these three, performance standards are the most important element as they largely determine the quality of an organization's efforts. If the general manager makes big demands, top managers will usually do the same. If the general manager's standards are low or vague, subordinates are unlikely to do much better. High standards are therefore the primary means by which top managers can leverage their influence and leverage their talents throughout the organization.

So unless your company or department already has exacting standards, which few do, you can make the biggest contribution to immediate results.long term successit's raising your performance expectations for all managers, not just yourself, which means making conscious decisions about what specific actions constitute superior performance; where is your store now; and if you're willing to make the tough decisions and take the necessary steps to get from here to there.

One of the most important standards a GM sets is clear company goals. The best GMs set goals that compel the organization to strive to achieve them. This doesn't mean arbitrary and unrealistic goals that are sure to get lost and not motivate anyone, but goals that don't let anyone forget how tough the competition is.

I vividly remember a general manager who surprised his subordinates by turning down a plan that was showing good earnings with good revenue growth for the third year in a row. They thought the plan was ambitious and competitive. But the general manager told them to come back with a plan that would keep volumes the same but cut base costs to 5% below last year rather than let them rise with volume. Difficult task, but he believed the target was essential because he expected his main competitor to lower prices to recover the market.

Over the next few years, the company radically changed its cost structure through a series of innovative cost reductions in manufacturing, distribution, purchasing, corporate overhead and product mix management. As a result, record profits and market share gains were achieved despite significant price declines. I doubt the company would have achieved these results if management hadn't had this specific goal in mind every morning. The same mindset is evident in the comments of a top Japanese executive when asked by an American trader how his company would compete if the yen fell from $200 to $160. “We are already ready to compete at 120 yen. to the dollar," he replied, "so 160 doesn't worry us a bit."

Of course, high demands result from more than demanding goals. Like the best coaches, military leaders, or symphonic conductors, the best general managers set a personal example in terms of long hours, apparent commitment to success, and consistent quality of their efforts. They also set and reinforce high standards in small ways that quickly add up.

They reject long-winded, ill-prepared plans and "pocketed" profit targets instead of complaining, but accepting them anyway. Your managers need to know the details of your company or role, not just the big picture. Marginal workers don't stay in important jobs for long. The best leaders set tight deadlines and stick to them. Above all, they are unsatisfactory. Once sales, production, or R&D hit a standard, they raise the bar a little and go from there.

For example, a general manager asks top managers to rate their subordinates annually on a scale of one to nine. He then reminds everyone that the same effort that went into getting a six this year will only be a five next year. Of course, this approach creates additional stress, possibly even frustration. It also reduces complacency, encourages personal growth and leads to better results.

The second element of the work environment that CEOs constantly influence is the fundamental business concepts that the company pursues. Whether they wrote it or not, top CEOs have a broad vision of the areas in which they want to compete and how the company will succeed in those chosen areas: the balance between centralization and decentralization, the line and role of people, the types of rewards that motivate people to achieve their goals, the skills needed to become an industry leader. In short, this overview defines how the company is different and better than a collection of completely independent companies.

As every business environment changes over time, the best CEOs constantly ask themselves: what kind of business do we want to run? Are we in the right areas? Do we still have viable positions on each? How should we transform the business? The result of this process is a set of business concepts that change slightly.in a consistent direction.

Johnson & Johnson is an excellent example. With a decade-long history of excellence, the company aims to be a leader in the low-tech, high-growth healthcare segments, which is why it has a diversified business and stands out against many smaller competitors around the world. CEO James Burke believes that to stay at the forefront, he and his managers must excel at early identifying promising new market segments, aligning products with them, and bringing those products to market quickly. They do this through a network of approximately 100 independent and focused operating companies.

This highly decentralized organization specializes in marketing and product innovation and is backed by a corporate creed that brings it all together in a very humane yet competitive company. J&J managers know exactly what they are trying to do and how to do it. This carefully crafted company description gives J&J a significant competitive advantage in virtually every location it operates.

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Despite its overall success, J&J now faces a new competitive environment that is forcing managers to reconsider traditional business concepts. In several key areas of the business, customers have decided they want fewer vendors and more integrated sales and management services. So J&J is figuring out how to keep its traditional decentralized divisions and everything they stand for, and compete with companies that offer more broadly coordinated product lines and services.

The third element in workplace design, the concepts of the company's employees, is closely related to the other two. Innovative, fast-paced businesses require different managers than those in busy, slow-growing businesses where the focus is on cost control and high volume. For example, an aggressive, growth-oriented company has decided it needs: a mix of high-potential managers, a few good managers at the top, and implementers below; innovative managers who act as owners, not administrators, happy to delegate decisions to others; and ambitious people who learn quickly, not people who are content to climb the corporate ladder slowly.

Of course, this pattern doesn't apply to all companies. To determine which is true, a general manager focuses on two questions: What kind of manager do we need to compete effectively now and for the foreseeable future? What do we have to do to attract, motivate and retain these people? General managers who consistently ask these questions and act on the answers will become more effective managers than those who haven't paid close attention to the mix of skills and styles needed to win their respective battles.

The best business leaders are also deeply involved in defining their company's values: "What it's like to work here." Henry Schacht, CEO of Cummins Engine, is a good example. He has a keen sense of the kind of organization Cummins wants to be. Although he reduced the company's workforce by 50%, thought carefully about how to make cuts in a way that people would understand and consider fair. Furthermore, this deep concern for colleagues and high ethical standards permeates Cummins, just as it did when Irwin Miller was CEO. So employees don't need policy manuals or rulebooks to act ethically and fairly, they just do it.

While this may seem obvious, I know many CEOs who end up with conflicting cultural values ​​and inconsistent standards of behavior because they haven't consciously decided what's important to them. And, of course, there are always some whose own values ​​are flawed or comfortable, but who nevertheless succeed in the short term. However, over time, character flaws or even imperfections such as inconsistency rub off on people and cause serious problems for both the CEO and the company.

Because the CEO is the only leader who can commit the entire company to a specific strategy, the best CEOs invariably participate in strategy formulation and lead the effort, not just chair it. They initially have or quickly develop a strategic vision for each company when appointed to a new position.

For example, when Ned Johnson took over Fidelity Management & Research, he decided that two things were wrong with the mutual fund industry: competition was based on who had done better recently, so fund managers' funds lived or died with based on who they were. Quarter or Year. Performance; and customers continued to switch funds due to poor performance or poor service. To avoid these problems, Johnson envisioned a 50-60 fund supermarket that would offer clients every conceivable investment approach, as well as top-notch service. So if a particular fund doesn't have a record year, it's usually the fault of the clients themselves, not the fund manager. And the company's top-notch service makes it easy for customers to switch to another Fidelity fund. Plus, with so many features, Fidelity always has four or five winners to brag about.

When David Farrell took over the May department stores, several "experts" advised him to diversify the "dying" department store business. But Farrell saw an opportunity when competitors like Sears entered the financial services industry, while others moved into specialty stores. Rather than following the crowd, he focused his company on becoming the merchandising and operational leader in department stores in each of its markets. He centralized merchandising concepts, set aggressive pricing, eliminated losing departments, built strong, execution-oriented local management, and controlled costs. The result: While previous major competitors such as Allied, ADG and Federated have stumbled, May has grown to become the largest and best-run public company in its chosen field. Not in all markets, of course; but overall it's the best, far from the lackluster midrange actor that Farrell inherited.

In both cases, GM's strategic vision, which considered the industry, the customer and a specific competitive environment, led to innovations aimed at a specific competitive position. This separates useful insights from the mound of meaningless generalities that some GMs use to describe their business strategies.

High-performing GMs see gaps in competition—in products, resources, services—as crises. Closing those gaps becomes your number one priority and not just another big business problem. Achieving this implicitly is something most GMs are not good at, namely understanding in detail how your costs, products, services and systems compare to your competitors. For example, how many GMs would have taken a competitor's entire car apart to show the production people what they were dealing with, as the president of Honda USA did? Many GMs, not just those in Detroit, base their strategies on unfounded and wishful assumptions about their comparative performance.

For example, I recently saw a consultant's report comparing the cost structure of a major US electronics manufacturer to its Japanese competitor. The Japanese company had invested more money and a higher percentage of sales in just two areas: R&D and quality. In return, he got fewer rejects, better products, more market share, and higher earnings per share. Guess who (five years later) changed their minds about their company's position and what it took to regain market leadership?

It's impossible to write about strategy these days without talking about offering customers better value than the competition. However, talking about the concept and implementing it are two different things. Great business leaders seem to have a personal commitment to serving customers better and making products that perform better. Rather than just looking inward, they get their competitive intelligence firsthand by talking to informed customers and dealers. And that knowledge gives them the conviction they need to make things happen and gain a competitive advantage.

Recognizing that building lasting competitive advantage is difficult, the best general managers build on existing strengths while looking for new sources of advantage. First, they improve sales and profits for their strongest products in their strongest markets with their strongest distributors. They then use the resulting faster payouts to fund the pursuit of future benefits. For example, in the 1970s, Pepsi focused on its core markets, supermarket chains and new bulk packaging - all of Pepsi's strengths. By contrast, in the 1960s, Pepsi invested so much money and effort trying to shore up weaker markets, products, and channels that it didn't have the resources to do all it could in stronger areas. Even worse, their managers were convinced that it would be easier to build a 5% to 10% market share than to grow from 30% to 35%. In fact, like most companies, it was the other way around. Furthermore, leveraging strengths keeps competitors so busy responding to your initiatives that they have less time to launch their own.

After all, the best general managers expect their competitors to retaliate for every successful strategic move and plan for the worst case scenario. They also leave games they cannot win. For years, for example, Heinz prided itself on introducing more new soups than Campbell's. Its managers then discovered that they were playing Campbell's game, not their own, as Campbell routinely copied its new product and used its superior brand acceptance and distribution power to dominate them at the point of sale. As a result, Heinz shifted his focus from "beating Campbell" to making soup money; He cut costs and focused on the budget niche that Campbell wasn't interested in.

All CEOs say they allocate resources to support competitive strategies, keep the company financially healthy and generate strong returns. However, if you look at how the process works at most companies, you'll find excessive support for fringe businesses, low-paying projects, and operational needs. In short, there is no strategic approach.

The best GMs focus more resources on situations that present an opportunity to gain a significant competitive advantage, or at least improve an existing one. Long before the reorganization took hold, they were willing to shift their focus to getting more bang for their buck. That's exactly what a new CEO did when he took over Frito-Lay in the late 1970s. At the time, the company was building new potato chip plants every year to gain market share in the potato chip business. Rather than continue his predecessor's practice or scale back his large French fries business (as recommended by the VP of finance), this general manager invested a small portion of his resources in process and productivity improvements that increased potato margins. fries. When the investment started to pay off, he resumed building a new facility, but with a much better ROI.

Another difference is how the best GMs handle money. It sounds funny until you consider one of the fundamental weaknesses of most professional managers: They spend the company's money like it's someone else's. Even former owners often invest in fringe projects that they never dreamed of financing when they owned the company. Excellent managers, on the other hand, think like owners. They avoid projects where everything needs to work 110% to get decent performance. In order to pool resources for successful strategies, they are willing to postpone or reconsider high-risk investments or steal from low-return companies. They are also adamant about who gets what, recognizing that excellent returns don't come from doling out money to subordinates who promise the best numbers (despite the slim odds) or key managers to keep them happy. This does not mean that they are risk averse, quite the contrary. But by focusing on fewer bets and backing them aggressively, the odds improve.

Also, the best GMs carefully hedge against the downsides of big investments. Everyone knows that promising ideas often fail on the market. But many CEOs are willing to take a gamble on the company before knowing whether a new strategy will work. They go in and build a factory, eliminate a lot of overhead, and launch new products quickly and aggressively, presumably to beat the competition. But if the idea doesn't catch on immediately, this objective approach will yield nothing but a big loss.

The best GMs also do a lot of little things, like outsourcing pilots and renting equipment, that limit their initial exposure. They try to avoid processes that cannot be swapped out for other uses. They reluctantly add overhead. They do regional launches to test the market and control costs. Then, when they are sure the idea will work, they go to war for it.

After all, the best general managers are always looking for distressed assets to bring them up to par or off the books. To that end, they track key capital expenditures to ensure projected benefits are realized. They charge each business unit with managing its balance sheet and carefully measuring its profitability. And they constantly push the company to improve productivity.

James Robison, former general manager of Indian Head, expressed this perspective curiously. "Every Friday night we start a new ball game," he said. “It means that every operation, plant, machine and job is being questioned. If it doesn't work well enough, it's on our hit list. If we can't figure out how to quickly improve the situation, we look for ways to get out of it."

The whole worldDo you knowthe importance of attracting talented managers, developing them quickly, challenging them and using them effectively. However, not everyone does what is required. In fact, few companies do this. Lack of leadership ranks close behind low standards as a cause of poor performance.

The best general managers are willing to make the tough decisions necessary to improve an organization. They don't try to rationalize inaction in hopes that more experience will somehow turn a weak manager into a strong one or a solid worker into a great one. As a result, they have managers that are better at vulnerabilities every year, rather than a group that has only been in trouble for a year.

Making tough people decisions must start at the top. Otherwise, managers will delay action, rationalize marginal performance, or mistakenly hire an outsider or two to really improve. That's why the best general managers conduct annual appraisal reviews rather than delegating that job to department or division heads.

They use challenging work assignments to accelerate the development of high-potential leaders and remove barriers to job openings. They also understand the importance of job turnover and break down functional empires that stand in the way. Finally, they directly influence important appointments by vetoing them or offering subordinates a list of candidates to choose from.

More importantly, they involve line managers deeply in the improvement process, forcing regular and rigorous assessments of individuals and groups. They constantly ask how their high potentials are doing and how managers solve their people's problems. But action, not questions, is key, especially against lower quartile players. To do this, they ensure that the process produces better results each year and is carried forward in the organization.

The best GMs also know that compensation is a means to an end, not an end in itself. Rewards are based on performance. They pay their best employees significantly more, even if that means paying their average employees less than they expect. They're also willing to take the heat by cutting bonuses in a bad year, rather than pretending the bad year never happened and rewarding everyone for "trying hard."

After all, the best general managers invariably surround themselves with good people: high performers, not comrades or loyalists. Not only do they hire in their own image, they also tolerate, and even encourage, a variety of styles. Each year their talent pool deepens and improves as they constantly build critical mass based on the theory that you never have enough good people. That way, when opportunities arise, they don't have to drill a hole in one part of the company to fill a hole in another.

One of the most innovative CEOs I know once proudly told me about his plan to reorganize and decentralize his business to make decisions faster, improve execution in local markets, and reduce costs. big goalsethey are realistic. In his business, however, quick, local decisions are not particularly important, and his company was already considered a fast mover, not a laggard. The company's local execution was already far superior to that of its main competitor. The new decentralized organization would initially cost about the same as the old one before it grew. In short, you've planned a major reorganization for common issues not relevant to your business. The moral of this story: Before you reorganize, make sure you know what you're trying to do better and why.

The best general managers seem to look for easier ways to do things, which often means fewer levels, bigger titles, and broader responsibilities. You are also personally involved in solving important problems, regardless of what is written on the org chart. Academic organizational concepts don't stop you from entering foreign territory when it comes to corporate success. To reduce hurt feelings, they ensure in advance that subordinates understand how the system works and why intervention is sometimes necessary. But they don't use that privilege as an excuse to invade foreign territory.

Another notable organizational bias is that the best GMs organize around people rather than concepts or principles. When they have a strategy, a business problem, or a big opportunity, they turn to the person who has the right skills and style for the job. After finding the match, they delegate responsibility without limiting the person to a strict job description or organizational constraints. Thus, managers feel more responsible for results simply because they are more responsible.

I've seen too many general managers who thought they were solving big problems with reorganizations that seemed logical and left out the most important ingredient: the right leader. Of course, these restructurings achieved very little. Of course, you can't ignore organizational logic or strategic fit. But people usually come first.

As corny as it sounds, at some point the best general managers learned the value and impact of teamwork. With so much emphasis today on financial restructuring, strategy making, and technology, it's no surprise that many leaders thrive by leading successful projects in their respective functional areas. They learn to impose their ideas through a small group of close-knit subordinates and peers, but they don't learn to lead a diverse team of leaders from different departments. And they learn almost nothing about the problems of implementing their ideas in other functional areas or integrating the efforts of a disparate, often geographically dispersed, group of managers.

In contrast, the best GMs routinely bring managers together to discuss business, seek diverse information about large projects, and coordinate their support.

After all, the best general managers use their people well and expect them to make positive contributions, not be demanding or "get caught." They appoint strong functional leaders (not shunned by line managers, politicians, or seasoned professionals) who can provide thought-provoking, thought-provoking leadership (not just asking good questions) and spreading ideas throughout the organization. As a result, line managers respect and utilize employees instead of writing hostile memos or playing unproductive political games.

A GM's sixth and final area of ​​responsibility is overseeing operations and implementation. That means running the business on a day-to-day basis, developing solid plans, anticipating problems and opportunities and responding aggressively.

The best GMs are usually very results oriented. Your operating plans are commitments, not just something you want to achieve. They know the numbers and what it takes to reach them. But they also know there will be surprises, so they maintain enough flexibility in their spending to account for competitive threats, bright new ideas, or lower volumes. Unlike less resourceful business leaders, they don't lose their profit plan every year.expectedunexpected events.

At the same time, they don't bankrupt the company to "make a plan" in a severe recession. When business slumps, they act faster than others to cut costs, cut discretionary spending, and weed out losers. But they don't sacrifice their competitiveness just to look good in a bad year.

Then they drive functional excellence across the organization. Unlike the general manager, who is content to have only one or two high-performing departments, he demands superior execution in all functions. They also refuse to let weaknesses in one or two areas (such as control, research and development, or engineering) neutralize their strong departments. As a result, they get more out of every strategy and every program than their competitors.

A keen sense of the organization's capabilities separates the best leaders from the least able ones. They don't commit the company to more than it can handle or, at the other extreme, to a rate below its capacity. They also understand the impact of focusing on just a few things at a time. In May department stores, for example, David Farrell achieved miraculous improvements in inventory reduction, inventory, labor costs, and merchandising simply by focusing the efforts of the entire organization on these day-to-day operational problems.

These managers are also cost mistakes. You understand your company's "monetary mechanisms": how costs behave with changes in volume. And they don't let spending percentages get out of hand, no matter how "reasonable" the explanation. For example, they just don't allow overhead to go from 12% of sales to 14% no matter what. They are constantly looking for ways to do things better at a lower cost. And don't accept vague answers, wishful thinking or lack of execution when new departments or programs are proposed.

After all, the best general managers use information better than their peers to detect problems early and identify potential competitive advantages. It's not about more information; They just make better use of the information. Partly because the best GMs are that rare combination of a good operator and a good concept creator. But it goes beyond that. Facts and figures mean something to them because they know their customers, products, and competitors so well. And they never stop reading those facts and figures for clues to market advantage.

They are trained to ask "so what" and "why". They receive first-hand information during field visits to factories and offices. They require substantive reports, not datasheets and MIS factsheets. Above all, they learned to listen, to really care what people think about the business, the competitive environment, the strategy, other people, the organization, the work. Lawrence Bossidy, vice president of GE, put it well: “If your people don't have good ideas, throw them away and buy them. But when you have good people, make sure you listen to what they have to say."

In summary, top GMs influence their companies in six important ways. You will develop a distinctive work environment; Spearhead for innovative strategic thinking; manage company resources productively; lead the team development and deployment process; building a dynamic organization; and oversee day-to-day operations. By itself, none of this is entirely new or unique. But successful GMs are better at seeing the interrelationships between these six areas, prioritizing them and making the right things happen. As a result, your activities in these areas form a coherent and consistent pattern that drives the company forward.

Of course, these six responsibilities don't tell the whole story. The manager's leadership qualities, personal style, and experience are important components of the whole. But focusing on these six areas will help any GM be more effective. And that should mean the right things happen faster and more often, which is something we all want to achieve as business leaders.

A version of this article appeared atJuly-August 1989thing ofHarvard Business Review.