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Down & out: a new strategy for success.

In order to gain a competitive edge, most CEOs now demand that their organization stay close to its customers. But one of the barriers to achieving this aim is a bureaucratic culture with an inward and upward focus. Under such a system, managers are preoccupied with satisfying their superiors and meeting the internal needs of the organization--rather than with satisfying customers and enabling their subordinates to do the same.

A focus on customer satisfaction is the hallmark of an entrepreneurial culture. Interestingly, the larger and more mature a company grows, the less entrepreneurial it is likely to become. Most companies fall between those that are completely bureaucratic and completely entrepreneurial. Even so, this article will focus on the two extremes in an effort to identify the weaknesses of the former and the strengths of the latter.

We maintain that it is worthwhile to compare the time spent by employees and managers on inward and upward activity versus that directed outward and downward. Take into account regular working hours and overtime, including travel time and work at home. If your firm's orientation is predominantly outward and downward, it is likely that it has an entrepreneurial culture--and thus is better-equipped to withstand the competitive crush of the mid-1990s and beyond.


Ironically, some companies drift toward bureaucracy because of their preoccupation with becoming "lean and mean"--another requirement of the demanding competitive environment. This obsession usually leads to a substantial inward orientation of activity. According to Dr. M.L. Spikanth, the co-author of "Synchronous Manufacturing: Principles of World Class Excellence," "In a competitive environment, customers must be satisfied, or market share will decrease." He adds: "Customers don't care about your efficiencies. They care about getting orders faster. They care about price, but also about design, quality, reliability of deliveries, speed of response, and level of service."

At a company in which I served as a middle manager, there was a substantial upward focus. Executives at the company requested frequent briefings from managers, so managers, in turn, imposed similar requirements on their subordinates. It wasn't until I joined the executive staff and reported to the chief executive of the company--a division of one of the top 20 global companies--that the reasoning behind this upward focus became obvious. The chief executive was constantly on call from the senior executive of the parent company; so much so, that he rarely left the executive floor and demanded frequent briefings from his subordinates. In this way, he was always available and prepared to respond upward to satisfy his superior. This relationship was duplicated throughout the management hierarchy.

There are a number of elements working against customer satisfaction in many corporations. They are:

* the insulation of executives from the direct customer satisfaction process,

* the inflexibility of the "culture" to accommodate individual employee/customer satisfaction initiatives,

* a management rewarded and promoted based on its ability to satisfy inward- and upward-based needs, and

* the threat of punishment for breaking the cultural rules of behavior.

As a company grows, and the organizational hierarchy evolves, the executives become removed from contact downward and outside the organization. Customer information comes from a salesman, who reports to his sales manager, who then may, or may not, feed this information to middle management. After all, that is why sales managers are hired: to free upper management for other duties. The sales manager must respond to requests from middle management: i.e., fill out reports, review status of accounts, and provide forecasts to the financial planner.

Once the company begins to add bureaucratic layers vertically and specialized functions horizontally (legal, financial, facilities, human resources), requests seem to multiply. Examples may be budgets, personnel forecasts, and performance reviews--all of which must be filled out on a regular basis according to policies and procedures. In addition, there are non-periodic requests for updates, reviews, special projects, and committees. As a result of these activities, there is a rapid and geometric depreciation of middle manager time allotted outward toward customer needs and downward toward enabling and empowering employees.

But here's the most nefarious aspect of such a process: What begins to get rewarded at a bureaucratic company is a manager's ability to conform to the "culture," rather than his ability to satisfy the customer. A good employee religiously feeds the hierarchy all the information it requests. If the cultural norms are violated because a manager misses a periodic review, there is at least an outcry, if not a negative career impact.

Too often in the bureaucratic organization, direct customer satisfaction activities are out of the direct visibility of corporate executives. One consequence is a layer of middle management that is promoted based on its collective ability to conform with cultural norms. "Cool under pressure" becomes the new performance ideal, even if such composure is only internally responsive. This situation leads to an unhealthy divergence of personal and corporate goals (see graphic in this story).

Under such a system, what happens to the voice of the customer and to the voices of employees downward in the management hierarchy who are most directly responsible for customer satisfaction? Quite simply, if the culture doesn't require or support activities to satisfy the customer, the customer remains unsatisfied and employees become frustrated and demoralized.

In other words: A corporation gets behavior of the type it chooses to reward. Employees need a certain degree of latitude in seeking to satisfy the customer. In a bureaucratic organization, however, such freedom and any special customer needs are viewed as an inconvenience, not as an opportunity.

An example of the mind-set that exists in some companies is related by a General Motors executive in "The Renewal Factor" by Robert J. Waterman Jr. "H. Ross Perot saw something that needed to be done inside GM and directed a GM manager to do it. That man replied it was not part of his job descriptionn. Perot responded, 'You need a job description, I'll give you a job description: Use your head.'" The GM executive added, "Can you imagine what chaos we'd have around here if everybody did that?"


In the entrepreneurial company, individual success and corporate success are inextricably bonded (see graphic). The only way to achieve both is through customer satisfaction. The focus is primarily on what is required to create and satisfy a customer. Any problem within the organization ultimately threatens customer satisfaction. Therefore, it is immediately addressed by the employee closest to the problem. If necessary, the management gets involved, begins to give orders, and all barriers to customer satisfaction are removed. The rewards are a shipment, a receivable, a satisfied customer, a repeat sale, a reference, and a positive cash flow. The actions taken by anyone within the organization who enables that process become immediately recognizable, and reward usually follows.

Rewarding customer satisfaction is the most important action senior management can take. This practice redirects the focus of the organization and the behavior of employees, and facilitates the evolution of a responsive, entrepreneurial corporate culture.

Administrative and bureaucratic functions should not be allowed to achieve a greater stature and reward structure than other, more customer-related, front-line assignments. If they do, then a change to parity is necessary. Parity may temporarily alienate some finance and legal people within the organization, and thus will need to be achieved over time. It will also encourage administrative functions to put a customer satisfaction "spin" on their tasks.

Although rewarding customer satisfaction will foster this new behavior, explicit communication of what is expected as a result of empowerment is also necessary. Empowerment--the authorization and the enabling of employees to make decisions--ultimately should lead to increased customer satisfaction. For example, a large motel chain recently authorized employees to grant a free night's stay to guests not satisfied with the quality of service.

But a word of caution: Empowerment without training is hazardous. Employees should understand both the scope and boundaries of their freedom, as well as their responsibilities. For its part, management must "knock down walls" that exist between functions so employees can succeed in their pursuit of satisfying the customer.

A chief executive should insist that management reduce requests downward and that any requests be limited to essential information. The CEO should clear the decks of bureaucratic activities. Once this is accomplished, a convergence of personal and corporate customer-satisfaction goals will be fostered.

What about profit and growth? Aren't these objectives really the right measures of management success? Yes, but they can't be achieved without customer satisfaction. Quality is the major factor required to satisfy customer requirements and, therefore, attain customer satisfaction. Market research shows unequivocally that relative, perceived quality leads to increased market share and improved profitability. Focusing on profit and growth emphasizes the objectives rather than the process. On the other hand, focusing on customer satisfaction and quality processes yields profit and growth. "If you're achieving total customer satisfaction, performance will take care of itself," noted Richard G. Haworth, CEO of Haworth Co., at a recent Chief Executive roundtable.

In addition, it can be useful to compare the customer satisfaction criteria of the Baldrige Award with that of the company--even if it never intends to pursue the award. (A full 300 of a possible 1,000 points on the Baldrige scorecard relate to customer satisfaction.) In so doing, the company will be able to determine if its resource-rich programs are reinforcing or undermining customer satisfaction.


Ford Motor aggressively pursued customer satisfaction in the middle 1980s, partly because of a study the company conducted in Marin County, CA., a suburb of San Francisco, where Ford had the lowest market share in the country.

Donald Petersen (at that time the chairman of Ford) stated, "It was clear our advertising was absolutely fruitless; they weren't going to listen to an ad, because it didn't mean anything to them. They were saying that we just didn't offer the kind of car they were interested in. Even if we did have something that might be of appeal, they were afraid to buy it. What we had been doing had been against their interest for so long that we actually let a decade go by during which they didn't buy Fords."

The realization that "a permanent change in the way the company sees itself, treats customers, deals with suppliers, motivates employees, designs cars, builds them, and sells them" led to Ford's success with the Taurus and Sable, according to Robert Waterman Jr. in his book previously cited.

To paraphrase The Wall Street Journal: Today's economy has lowered the ocean and exposed a lot of the rocks. Translation: When economic activity is weak, inefficiencies and counterproductive activities within the bureaucratic company become exposed.

In such an environment, many executives are realizing the bureaucratic nightmare they have created and how it has hindered their ability to be responsive to customer needs. This awakening has resulted in the massive restructuring and the downsizing of bureaucracies in a desperate attempt to improve performance. In some cases, these changes have been counterproductive. Sadly, much already has been lost in terms of customer loyalty, employee initiative, customer satisfaction, market share, and profit.

Customer satisfaction can be achieved with a cultural imperative that empowers and rewards employees. The outward/downward concept must be institutionalized. That's the way to break the bureaucratic stranglehold on creativity and initiative, unify corporate and personal goals, and perhaps the only way to achieve true competitive advantage.

Roy Serpa is president of Houston-based enviroGuard Inc., a supplier of proprietary products used in wastewater treatment and filtration in the oil, petrochemical, and mining industries.

J. Gerard Vieira is managing associate of Strategic Positioning Associates, a Dallas-based consulting firm that specializes in introducing quality marketing processes to technology-driven companies.
COPYRIGHT 1993 Chief Executive Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:business success
Author:Viera, J. Gerard
Publication:Chief Executive (U.S.)
Date:May 1, 1993
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