Know When To Say When

by CRP Partner Gene Baldwin
as published in Franchise Times

Several executives I work with manage their business as a project not a process. My definition of a process is a series of steps that must be repeated over a long period of time – similar to manufacturing toothpaste for Wal-Mart. A project also requires a series of steps but the work culminates when the project is completed – similar to constructing a building. Managers that manage their business as a project seem to be putting out fires constantly because they view each issue they encounter as a unique project rather than a systemic problem in the continuum of business.

This difference is best shown when something goes wrong. If a manager views his business as a project, he typically enters the situation in crisis mode, addresses the problem and then leaves. Another name for this style is “seagull management”. Everyone knows what a seagull does. It flies in, leaves its disgusting deposit and then flies off. The manager who manages a business process will get to the root of the process breakdown and make sure that systems, processes and accountabilities are in place to ensure the problem does not happen again.

Let’s take a common example by assuming there has been a theft at the Main Street store. The assistant manager did not take the daily deposit to the bank. He stole the money and covered it with the next day’s receipts. Of course, the assistant manager picked a very busy day to steal the money so he had to cover the missing deposit over the next couple of days. No one noticed the missing deposit, so several days later, he stole another deposit. Before long, the assistant manager had stolen a whole week’s worth of deposits. Finally, the pilfering employee quit, moved to Alaska and was never heard of again. The theft, which totaled $24,500, was finally discovered by the accounting department. Unfortunately, the insurance policy had theft coverage with a $25,000 deductible.

Let’s see how each of our managers handles the situation. When Jonathan, the Seagull Manager, heard about the loss he was furious. He called a meeting with the CFO, Controller, Area Supervisor, the Main Street store General Manager, the Human Resources Manager and the Insurance Agent. Jonathan yelled and screamed at the group for nearly an hour. He vowed to pursue the criminal to the ends of the earth. He threatened to make each manager pay for a portion of the loss from his annual bonus. Jonathan blamed the CFO and the Insurance Agent for having such a large deductible. He also blamed the Area Supervisor, General Manager and Human Resources Manager for hiring such a dishonest employee. Jonathan was so upset with the loss that he asked the Human Resources hire an internal auditor. This new home office employee would report directly to Jonathan. In his thinking, Jonathan was able to shore-up internal controls since the Operations Department could not be trusted. Jonathan felt good about the fact that he had solved the problem and he moved on to a meeting about problems in the marketing department.

Prince, the Process Manager, was equally upset with the loss but handled the situation in a completely different way.Prince called a meeting with the Controller to review internal control procedures. Prince’s main concern was the cause of the internal control breakdown. The Controller explained that the normal procedure was to have each store fax a copy of their daily deposit ticket to Suzy in the accounting department. Suzy’s job was to check the deposit tickets against the bank statements every day. By coincidence, it happened that Suzy had been out sick for several days and when she came back to work she worked diligently to catch up on her reconciliations. By the time Suzy caught the missing deposits, the assistant manager had already quit and there was no way to recover the loss. The Controller and Prince agreed that, in the future, another member of the accounting department will perform the reconciliations if one accounting clerk is absent. When asked about the insurance coverage, the Controller disclosed that this type of loss had not occurred in ten years. It would cost an additional $5,000 per year to reduce the deductible to $1,000 per occurrence. Prince decided not to change the insurance coverage.

Almost everyone has worked for Jonathan, the Seagull Manger, at some time in their career and it is really no fun. A manager can avoid the seagull management style by focusing on correcting business processes. Most employees will comply with prudent business practices if those processes are properly communicated and employees are held accountable for their actions as part of their normal job responsibilities.

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