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"Soft stuff matters." (managing soft subjects such as corporate values, corporate culture, corporate philosophy) (Management Strategy)

What sets apart one good company from another? CEO Weston believes the answer lies in his 11 "soft" management principles.

Many people speak and write about management principles. Some are very good; others are just average. My management principles are a little different because all of my business career has been in line management; my ideas work for a line manager trying to produce results.

Almost every one of these principle deals with a soft subject--company values, company culture, company philosophy--not a digital subject. I believe that, in most businesses, if you have good associates, good technologists, good accountants, good statisticians, and good market researchers, the sum of the soft stuff makes one engine work more effectively than the others. Soft stuff matters.

Principle 1: Give your people top billing.

I doubt there is any letter to shareholders in any annual report that doesn't have as its last sentence, "We thank all of our employees, without whom we could not have produced these excellent results." While it's easy to print that line in a letter to shareholders, the results of an organization do indeed depend on its people and the corporate culture all year long. Many techniques account for a successful business--expert systems, artificial intelligence, TQM, robotics, LBOs--but these items can't be fully successful without turned-on, capable people helping the company succeed day in and day out.

Give the people in your organization top billing on your list of priorities. Each company must choose its own way to do this. At ADP, we go to great lengths to be an informal, non-political, loosely structured organization where employees talk up and down the tiering levels. We try to create a culture that's not stuffy, to make every employee feel that ADP executives are accessible.

And it's extremely important to begin with your people when you're developing or analyzing policies in your business. More than 10,000 ADP employees are now shareholders in the company. More than 2,000 managers participate in our stock-option plan. I try to be a part-time instructor for many incoming groups of new hires, and I try to meet many employees throughout the country. People matter.

Principle 2: Use full-time champions.

In our society, most managers gauge their importance by the size of the entity they're leading: How many employees are in my group? What's my sales or revenue level? How much profit am I responsible for? The better a person thinks he is, the more he wants to be responsible for something bigger than he was responsible for yesterday.

On the other hand, the best people should be working on the toughest projects. And one of the toughest projects is starting something new that is small. Often, a company will try to accomplish this without violating the "biggest desk" rule by tucking the new project under a very capable manager who aspires to an ever bigger project. But then the tough, new project has a part-time manager.

I believe full-time champions are absolutely necessary on your toughest jobs, and your toughest jobs usually aren't the ones with the most employees or the biggest revenue level. That's why at ADP we try very hard to make the best person accountable full time for the toughest job and to overcome the normal instinct to measure a person by how many additional employees he supervises as a result of a new assignment.

Principle 3: Communicate well and often.

In all companies, misinformation and rumors are rife. Circulating advisory memos isn't enough. In fact, with the printed word, often more becomes less.

At ADP, we're multimedia. We communicate via many mediums, from VCR tapes that run on screens in different parts of the company to audiocassette tapes people can listen to as they travel to and from work. We have both formal and informal meetings; some include breakfast, lunch, or dinner. Our rule for sending a message: Don't settle for communicating it only once and only in writing. Go multimedia. If you don't think you're "overkilling" communications, you're probably not communicating enough and the rumors will begin to dominate the facts.

Also, remember it's okay to skip levels when you're communicating. The A's need not talk only to the B's and ask the B's to tell the C's. The A's should talk to the E's, the F's and the G's.

Principle 4: Be a "hands-in" executive.

I prefer executives who are "hands-in," instead of "hands-on." Why? When a person is hands-in, he's even more deeply involved than someone who is hands-on. He delves into the detail work to get a corroborated understanding of what's going on in the company and to convey to employees, or "associates" at ADP, that each one is doing an important job. Very often, you learn information from an associate that you couldn't possibly learn from sitting in an office on the top floor.

Some people think that being so involved is impossible. How can an executive at a big company be hands-in, particularly a CEO since he has other duties to pursue? I look at it this way: If I were to detach myself from intermittent hands-in involvement, I would eventually spend more time getting up to speed on something I missed than I would spend simply staying involved. I would forfeit

learning opportunities because I'd be out of touch with the organization.

My style of intermittent hands-in includes many techniques. We have more than 50 locations, and I visit each one every year. At every location, I talk one on one to not only the senior managers but to more than half a dozen middle managers.

I also review some of our accounts payable. Once a month, the coporate controller and the controllers from each of our largest strategies business units will give me about 30 randomly selected accounts payable vouchers to examine. The entire accounting organization knows I look at these vouchers. I'm not performing a normal auditor's accounts payable review, verifying arithmetic or checking receiving tickets against invoices. I'm looking for activities that appear to have not been handled as I'd expect they would be. For example, I once noticed some large disbursements for lease-hold improvements to one of our locations; the disbursements had been approved by all the right people. But, in one of my visits to the site, I saw something peculiar and asked if we could review the logic of that decision--not to criticize anybody, but to see how we can improve a process that permitted us to spend $300,000 on lease-holds for a building we're likely to vacate in two years.

The accounting review process works for me. I almost always learn something or teach somebody something, and, just as important, I set an example that managers should review their decisions, even after the fact, because they can learn from them. In fact, the technique is so effective that now about a dozen of my senior associates--some of whom are not even in the financial channels--also look at random samples of large accounts payable vouchers.

And, finally, we apply the hands-in philosophy to our telephone systems. When the phone rings at most companies today, the call goes to the switchboard. From there, it goes to the executive's office, where the secretary answers and, depending on the screening process, may ultimately make its way to the executive. Not at ADP. My direct dial number is available to every client and to anyone else who asks for it. My secretary picks up the phone only if I don't answer it after three rings.

How do I cope with the interruptions? If an insurance salesperson is calling, I have a polite way of turning that off in 15 seconds. But most people who call are calling because they need to reach me, not somebody else. I go home at night with no pink "return-call" messages on my desk, because I answer the callers on the first bounce if I'm in the office. This approach changes both the culture of the company and the way clients percive us because people know they matter.

Principle 5: Zero base your organization periodically.

Federal Express employees always seem to be turned on. So, several years ago, I visited the company's sorting plant in Memphis to learn first-hand how the firm manages to keep its employees motivated. I discovered Federal Express had, at the time, an average span of control of one supervisor for every eight workers in a firm of 30,000 employees. ADP had an average span of control of one-on-five. (We're now at one-on-eight.)

Federal Express' CEO, Fred Smith, and I figured that if his company had the same span-of-control ratio as ADP had, it would have employed 4,000 more supervisors and two extra levels of business management.

Such tiering and spans of control are very important. Many people don't agree because our society views a promotion as a mark of accomplishment. But, unless you have a level to promote someone to, you can't fulfill that aspiration. As a result, most companies make "base-plus" moves. They leave in place yesterday's job, or the "base," and then add to the position another job, or a "plus," and give the employee a new title.

Such a highly tiered organization is seldom as effective as one with fewer tiers. Many organizations today are painfully removing these numerous layers of personnel, many of which would never had been formed had management performed intermittent, "zero-based" reviews of their structure.

So periodically rethink your organization's structure, applying a zero-base philosophy to stay the most productive.

Principle 6: Watch out for "group think."

There's a big difference between brainstorming and decision-making. To some managers, group decisions seem safe. They feel democratic and comfortable because nothing is done unless everybody agrees. However, while getting multiple inputs, or what I call "group think," is valuable when you're examining an issue, you need to stop the opinion-gathering as you get closer to making a decision.

Why? If a group is making the decision, you start searching for the common denominator among the group members. That inevitably dilutes the effectiveness of the decision. For example, if an airplane for the Department of Defense is designed for both the Air Force and the Navy, by the time the specifications are done, the airplane doesn't satisfy either of the services. Or when several laywers compose a legal document simultaneously, odds are the document will be much longer and less clear than had one lawyer been in control.

In short, when you're brainstorming, six people are better than one. But when you must make a decision, one or two people are far better than six.

Principle 7: Outsource your nonstrategic functions.

For various reasons, many supervisors prefer to control everything that passes through their departments. I call it the NIH, or Not Invented Here, Syndrome.

I'm on the board of a public utility that owns part or all of five nuclear plants. Not one of the five plants is like any of the other plants because the engineering team that designed each felt it could do a better job than the teams that designed the others. In fact, the U.S. currently has more than 100 nuclear generation plants and no two are alike. At a tremendous cost, the NIH Syndrome has dictated the design of every single nuclear plant in the country.

Here's another example. Many companies design and redesign their own business systems, such as payroll or human resources, even though independent auditors advise against it. If your firm is handling internally a nonstrategic function that other specialized firms also perform, like a cafeteria service, a cleaning service, or security system maintenance, look at what others are doing before you conclude that it makes more sense for you to design and run your own system. You're almost always better off allocating your best resources to those strategic functions that differentiate you in the marketplace and not to routine support functions.

Principle 8: Don't just throw dollars at R&D.

Executives must resist the temptation to throw more money and more people at an R&D project if it's running late. At some point, you'll do more harm to the project as people step on other people and your best supervisors dilute their time communicating to more people, most of whom are new.

For instance, look at IBM. In many ways, it's a very good company. But, if you examine some of the recent developments in the computer services field, you see that large IBM staffs take a long time to get their products to market. Compare Microsoft's time to develop MS-DOS to IBM's development of analogous products. Look at how long it took Apple to develop the Macintosh and then how much longer it took IBM--with far, far more people--to get to a similar point.

Try to identify the point at which more is less on a project.

Principle 9: Set aside time to think.

At ADP, 39 plus one adds up to more than 40 plus zero. The 40-plus-zero employee is the harried worker who at 40 hours a week just tries to keep up with what's in the "in" basket. He tries to do whatever he thinks he's supposed to do. Because he works his full 40 hours with his head down, he takes zero hours to think about what he's doing, why he's doing it, and how he's doing it. Where does the work go after he does it? Does he need to do it in the first place?

On the other hand, a 39-plus-one employee takes at least one of those 40 hours to think about what he's doing and why he's doing it. That's why the other 39 hours are far more productive.

So encourage your employees--no matter how busy they think they are--to carve out some time to think about the whys and the hows of their work, instead of just doing it the way they've always done it.

Principle 10: Change your organizational structure occassionally.

Force some organizational change every now and then, for two reasons. First, yesterday's company can't possibly meet tomorrow's challenge in every way--structurally, in staffing, and so forth.

Second, there are invariably some ten-mile-per-hour people in your company on a sixty-mile-per-hour highway. If you don't face up to such understandable dispersions in skills until you reach a crisis, you will have suboptimized your performance.

Remember zero-base restructuring from Principle 5? Apply that here, not every day but at suitable intervals in your whole managerial process. You may want to use forced ranking to adequately recognize employees. Ask yourself: Who are my top people, and what am I doing to make them even better? Who are my least effective people, and what am I doing to make them better or to move them into something else?

Just don't close your eyes to individuals who can't molt as frequently as the changing organization requires.

Principle 11: Put your business strategies first.

Never, never allow your business strategies to become subservient to your balance sheet. At ADP, we depreciate all hardware to zero in three years. Sure, a lot of hardware lasts longer than three years, but we never want to hang on to a technology, or to any other investment, because it's still on the balance sheet not fully amortized.

We'll never defer any expense incurred just because it sounds good to match the expense with the future revenue stream. Get the expenses out of the way, so if you want to change or abandon a particular project, you can consider the strategic implications totally unfettered by what's on the balance sheet.

For example, today we have some $400 million of operational computer equipment. It's on our books net at $85 million. I have no reason to think that any of that equipment will change tomorrow, and it's a great feeling. Even our telephone systems are depreciated to zero over three years.

Remember AT&T's gigantic diverstiture at the end of 1983? At the same time, the company announced a $6-billion write-off of assets. The financial community cheered. But what the cheering people didn't realize was the dmage already had been done. AT&T was using 15-year depreciation periods on its PBXs, the old switchboards. The company was dragging its feet in coming out with its computerized telephone switch because it had a zillion PBXs not fully amortized on the books. So Rolm and Northern Telecom came out with their switches first. AT&T's market share on those switches dropped from 100 to 27 percent.

I realize it's hard to adopt this "quick write-off' business philosophy in a society that focuses so much on quarterly earnings, particularly when you have to face security analysts every quarter and your CEO is pressuring you. Every penny per share helps. But, if you can influence the decision-making at your firm, don't allow your balance sheet to control your future strategies.


At ADP, as at most firms, we're always trying to do better. Sometimes employees resent that. They'll say, "I'm working my duff off already, and you're talking about how we can do better." A few years ago, I came up with the following perspective:

Whenever I tell a large group of ADP associates I want to forget about business for a bit and talk about sports, I see tremendous relief. Everyone thinks that's terrific. They ask, "What are we going to talk about?" I blurt out, "Pole vaulting." They look at me puzzled.

Then I say, let's go over the game: Let's assume you're at the Olympics and you pole vault 20 feet. The judges don't give you a gold medal; they just raise the bar an inch and say try to go higher. You try, but you knock the bar down. They say try again. You knock the bar down again. They say try one more time. You knock it down for a third time at 20 feet and 1 inch, and then they raise the American flag up the flag pole. They give you the gold medal--but not before you tried to do better.

We try to transfer the pole-vaulting analogy to business, so our "pole vaulters" suddenly realize this: If foam rubber is on the ground so they can't get hurt, the bar is made of bamboo, and they're going to be recognized as winners anyway--because they are winners--asking them to jump an inch higher isn't dirty pool.

[Mr. Weston is the chariman and CEO of Automatic Data Processing, Inc.]
COPYRIGHT 1992 Financial Executives International
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Weston, Josh S.
Publication:Financial Executive
Date:Jul 1, 1992
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