COMMON FALLACIES/FLAWS OF TOP EXECUTIVES IN BIG CORPORATIONS

Many high level executives, whose remuneration mainly hinges on business revenue measurements, harbour the notion that sales promotion must be their prime focus. Understandably so, as after all the corporations they represent thrive on sales and business promotion expansion. Thus, they normally direct their full attention to prop up top line scores.

There is nothing seemingly wrong with this notion. Such a philosophy may appear plausible. However, if practised imprudently and blindly, downside side effects will eventually surface. 

The premise “sales is all that matters” to a sales oriented corporation is one of the common fallacies or flaws manifested by some topmost managements. I now elaborate the fallacies by presenting simulated ASSUMPTIONS (of top executives), followed by MY RESPONSE to each assumed statement.  Here goes…….

ASSUMPTION:  My vital role as chief executive officer (CEO) is to ensure business revenue continues to grow. As such, I shall fully concentrate on top line goals. I shall fully delegate the other functions, like the service areas, to my assigned subordinates.

MY RESPONSE:  To delegate a function 100 per cent is as good as relegating control of that function to a subordinate. Beware! This mind-set may ostensibly project out as plausible rationale, but could also inhibit unseen flaws which carry repercussions to overall performance.  There is no guarantee that subordinates can implement the “relegated” tasks well without proper guidance cascaded from the top. There is no guarantee the subordinates are impeccable implementers.

I cite the example of corporations providing financial solution services. I have many Malaysian friends who are contracted sales force of their respective principals. Quite often, I have had heard their grouses expressed somewhat like this……….

“The top officers only bother about us pushing sales and the products. They neglect the need to shape up after-sales support services. I have been receiving blasts of complaints from my clients about the company’s poor efficiency in delivering service commitments. The more I sell, the more complaints I receive, and the more I become demoralised.  Much time is being spent to handle service issues voiced by my clients, so much so I don’t have time to go for more new sales. I might as well just fulfil my minimum contractual sales quota and diversify my efforts to another endeavour. “

No wonder some corporations have not been able to hit their coveted goals - the adverse ramifications from poor after-sales support services – because their top management only bothered about pushing for business and not giving any attention to ensure other aspects are well in place.

Sole focus on sales revenue by a CEO without overseeing the overall operations could put his corporation on a precarious ledge.  Prudent top executives keep a balanced purview on the total works of their respective corporation although they may be leaned more to sales and marketing perspectives. A stable company is a wholesome entity in all respects, and not just strong in business promotion efforts.                                                                                                                                                                                                                                                                                                                          

ASSUMPTION:  Personnel in marketing or sales related responsibilities are the ones directly contributing to business growth of a corporation. Therefore the CEO should direct more resources – i.e. financial, logistics and remuneration – to these stakeholders. By taking care of their well-being, the company’s well-being will be assured.

MY RESPONSE:  Superficially, that sounds plausible but holistically it could manifest as a serious flaw.

A corporation thrives only if the well-being of its manpower at large is set on firm footing. Preferential treatment for one group and side lining the importance of others always sow seeds of discord, alignment gaps, general discontent and fragmentation amongst internal stakeholders. All segments are co-dependent on one another. The sales people depend on the after-sales service people to deliver service expectations as committed by the former at the point of sale. The latter depend on the former to follow up with customers for assuring service issues are settled with full satisfaction. Any break in the end-to-end work chain connectivity definitely disrupts business wholesomeness of a corporation. 

Never underestimate the impact general morale has on long term business performance. Negative general morale carries negative vibes gradually permeating all segments of a corporation; positive general morale ushers positive work atmosphere that hypes up enthusiasm of the overall workforce. Such is the law of cause and effect. Undoubtedly, the type of general morale and atmosphere has great bearing to group performance in terms of long term sustainable, steady business growth. Morale can spread fast like fatal cancer cells due to negative vibes, or like energizers radiating to the whole body due to positive vibes.

ASSUMPTION:  More investments should be accorded to technological improvisations instead of manpower in line with modern trends. State-of-the-art technical logistics have capabilities to cater for better efficiency. In longer run, corporations may be less reliant on manual tasks, thus requiring smaller manpower force and therefore lesser manpower cost. Investment in technology will lead to higher expense saving after a certain time-frame.

MY RESPONSE:  True, technological innovations are inevitably required for a corporation to remain competitive. However, danger lurks around when due care is not executed to balance implementation of new technologies with necessary manpower contribution. Never, ever ignore the importance of the human element vis-à-vis the technological element. The fundamentals and foundation of a corporation are laid by people, not machines.

Do not forget that it is people in a corporation who design its technical systems. Machines function according to the system structures designed by people. Machines have to rely on people first before being able to supplement people’s drive for better efficiency.

An impeccable system comes about only by way of impeccable design by the people behind it. Its functionalities can be pristine only if the backroom manpower puts in the right logic and key in the right inputs. There is a technical jargon called “GIGO”, which means “garbage in, garbage out”. In other words, inefficient and ineffective process logic built into a technical system by people operating in the backroom will generate poor outputs.

If sufficient investment is not directed at forming the right manpower structure, the fundamentals for formulating the right technological innovations will not materialise. Remember, people first, technology or technical systems second. Technology systems can offer supplementary solutions only. Primary solutions are derived from human beings.  And this perspective spans the long term outlook whereby new innovations may be needed to be launched in future with the vital involvement of people in the backroom. 

I now share a revelation projected in the form of a short allegory, depicting a dialogue between a chief financial officer (CFO) and his superior, the CEO. They are discussing whether to roll out a programme to enhance the skills of their existing manpower. 

CFO:   What happens if, after incurring much expense to groom our existing staff, they leave to join competitors?

CEO:   Well, the money spent on them may look like a waste but at least they would have contributed somewhat to the company from new things they learn before they leave.

CFO:   We could save the money by calling off this programme if we do pre-empt the risk of losing them to competitors later.

CEO:   Let me ask you this question ……….. What happens if we don’t spend the money to groom them and they remain in the company, using outdated ways for performing their work? 

(I shall leave the CEO’s question for you readers to imagine the consequences.)

Investment in technological innovation is needed for enhancements to support business growth. But it must not be done at the expense of ignoring human resourcefulness. There must be a balance between the two in terms of budget and expenditure. 

ASSUMPTION:  Meetings are important to key officers for them to be cognizant of progress updates pertaining to the business and also to discuss issues. Meetings should be a major daily activity of top managements. 

MY RESPONSE:  Be cautious not to be too immersed in the “management by meeting” culture, which seems to have pervaded the corporate world. 

I often hear friends in the employment market lamenting they are too busily engaged in “back to back” meetings , so much so they do not find time to attending other matters. No wonder assignments and projects are stalled, no wonder timelines are not met, no wonder urgent issues are not solved. This is the backlash resulted by being over engrossed in meetings after meetings on daily frequency.

Today’s managements are fond of calling for large group meetings. Town hall meetings  -  the moniker for meetings attended by almost all employees of a corporation with their top management officers  -  have now become a fad. In fact, such sessions are held more often than needed. And more often than not, the platform is to announce updates on latest developments, with the intent of transpiring the impression that the top management wants to touch base with the “grassroots” frequently; in other words, to create a feel-good atmosphere. 

Here is my take how to optimise the use of meetings:

·         *Meetings are compulsorily needed for the purpose of deliberating specific  major issues and arriving at action plans as solutions. Confine such meetings within officers who have the relevant mandate to deliberate on the issues and contribute to concurred decisions. Invite lower level executives to attend provided their relevant feedback is also needed before arriving at a conclusion.

·        * Meetings just for announcing simple updates may be substituted by way of memoranda, circulars or e-mails which are more time expedient.

·         *Town hall meetings should only be called when the top management of a corporation wants to elaborate on vital updates to the entire staff.  The CEO, along with his key officer/s if needed, should address the audience and also allot time for question and answer (Q&A) slot after elaboration.  The Q&A slot helps to clear doubts and for more comprehensive understanding of issues.

·         *Town hall meetings are more practically held at staggered series for different manpower groups during work hours, or one main session for everybody immediately after work hours.

·         *Another alternative to town hall meetings for dissemination of not so vital information is …….. the CEO briefs his key officers and department heads and then let them cascade to personnel under their jurisdiction.

 

·         *Never set meetings for the sake of having meetings as a regular company activity or formality. Never pre-set meetings in the calendar without specific agenda at hand.

·         *Try not to pre-fix meeting agenda for months ahead. Instead, set agenda relevant to subjects that surface in the course of time based on level of importance.  A situation that arises at any point in time should be listed for deliberation as the specific agenda.  

Being overly busy in meetings does not gear up productivity. Time is the mother of all resources.  Without sufficient time, top management directions cannot be implemented well. Rush jobs, because of insufficient time, usually fall short of expectations; worst is that botches flare in. Time prioritisation will support a right balance between meetings and implementation activities. There must be a balance between time spent on talking on one hand and time spent on assessing, planning and acting out on the other hand.

ASSUMPTION:  A value-added quality of a CEO is the eloquent skill to impress, both vocal and written, for intent of making staff and stakeholders feel good about the company.

MY RESPONSE:   I agree eloquence somewhat translates to charisma. A charismatic person captures the attention of the people he communicates with. However, some CEOs have the tendency of being too “showy”.  They tend to paint false positive pictures to stakeholders. They resort to “telling stories” just for the sake of trying to impress.  At the beginning, their subordinates could be held spell bound by the showmanship. Ultimately, their speeches will lose impact, for whatever they say will be treated by their audience as more rounds of “story telling” and false positives.                                                                                                                                                                             

Excessive articulation way above what is necessary for constructive discourse may finally draw flak than praise from listeners. 

ASSUMPTION:   New business score is the prime indicator of business growth, adding to the financial health of a corporation. Hence, top executives naturally want to spearhead more initiatives to enhance new business revenue rather than giving attention to maintain the existing block already in the books. 

MY RESPONSE:  I beg to differ despite the fact that the assumption may be a norm in some industries. 

The life insurance industry in a South East Asia nation, for example, has been referring to new business premium as the main yardstick for defining growth performance. Every company falls on new premium count to determine its growth ratio year-on-year. The industry also lists out ranking positions of various companies in this country based on new premium count. 

Does such a yardstick portray the whole picture of a company’s growth performance? And why grant much higher remuneration to the sales force on new business sales?

To life insurance companies which reap recurring premiums year after year from the existing block of long standing policyholders, would it not be more pertinent to gauge by total in-force premium income than new premium income? Whether first year premiums or renewal premiums, both are revenue to the companies, right? Are not maintenance costs of long standing policies much lower compared to acquisition costs of new business? If the answers are affirmative, then why not remunerate the sales force based on their total premium growth scores? Since the guide for remuneration scales of contracted sales force stems from that country’s regulatory authority overseeing the industry, perhaps the companies as a group may want to re-think and re-deliberate with the supervisory body for review.

Concentrating on acquiring new business without paying equal attention to maintain the old portfolio in the books as much as possible is akin to this analogy:  Turning the water tap wide open to get incoming fresh water fastest possible, but a loose stopper at the bottom of the big basin which allows the contained water to drip out slowly.

I opine that equal efforts should be directed to acquire new business and also to conserve the existing block as both components reflect the total premium revenue of a life insurance company.

ASSUMPTION:  A CEO’s utmost obligation is to take care of owners’/major shareholders’ interest as the primary objective. Thus, the quantum of returns to them matters most as they are the ultimate bosses. 

                                                                                                                                                           

MY RESPONSE:  I do not refute the accountability to the owners/major shareholders in this respect. One point of caution  -  do not ignore the interest of other stakeholders who have helped to build the business one way or another.

No CEO can churn good returns for owners/major shareholders if other stakeholders, i.e. employees, affiliations, outsourced service providers, contracted agents, suppliers, retailers  etc., do not play their part diligently because of dissatisfaction. Surely these stakeholders, particularly the internal ones, rightly deserve their fair share of the fruits of joint labour. 

Never, ever slash expenses on the other stakeholders who contribute to the company’s business growth in order to maximise returns to owners and major shareholders. Neglecting the interest of these parties will sooner or later lead to business deceleration. Keeping a positive balance in weight accorded to all stakeholders is vital for any business to thrive continually. 

ASSUMPTION:  A corporation wanting to head for transformation should adopt 360 degree change. The total change entails sweeping away of incumbent work structures, traditions and cultures already entrenched in the company, which if not done so, will hamper any successful transformation.

MY RESPONSE:  I have known of top officers who practise this philosophy and say it aloud to their down-lines.  Allow me to contend this assumption in more depth.

BEWARE! Such type of mind-set may get carried away and then turns around like a backfiring boomerang if applied indiscriminately. True, corporations in real need of transformation require some prevailing outdated work structures, processing systems and habits to be phased out. However, the move does not mean a sweeping overhaul.

While implementing some viable changes, transformation should rightly so consolidate those long standing iconic values that have been the bastion of cohesiveness among various stakeholders  - especially employees  -  and sturdiness of the business to-date. Transformation is a merger of new driving forces with old sound ones. 

New CEOs who are too eager to prove themselves as unorthodox game changers tend to overlook certain sensitivities inherent in certain communal groups. Religious perspectives, for example, of a communal group serving a corporation should not be cast aside when implementing reforms. Likewise, infringing certain cultural beliefs of the local society imprudently will be considered taboos, thus likely to invite repulsion. By not acknowledging such sensitivities, any transformation drive will not be successful; instead upheavals probably sprout out.

My formula for the right transformation approach is summed up as the combination of:

*·     *INNOVATION  -  Generating new workable, vibrant concepts.

·        * REINFORCEMENT  -  Further encouraging the existing elements and essence that are sound (e.g. culture, environment, esprit de corps, experienced hands-on technical staff etc.) symbolic of the business foundation of the corporation concerned.

·         *CONSOLIDATION  -  Enforcing firmly the positive elements and essence of the corporation by way of actions, decisions and activities while implementing new projects.

·         *But not ……… DISRUPTION  -  Avoid instituting changes that cause under-currents, negative vibes, feelings of uncertainty, coordination link severance etc. 

Many top executives fallaciously perceive the phrase “think out of the box” as ignoring any vestige of the incumbent scenarios when conceptualising action plans. I opine differently. In actuality, the cliché means extrapolating for ideas and making modifications using the same “think box” as the platform. It does not refer to a new box to replace the existing box. To go for an entirely new think box, yet unproven to bring results, may be a risk not worth taking. In the incumbent box, some contents are still relevant or pertinent for perusal, so the right approach is to galvanise them.

Effective transformation retains some old sound acts and introduces some new unconventional yet impactful acts for the whole works, implemented prudently by circumventing the likely disruptive elements.

Conclusion:

The business world of today is getting more and more complex. Many management philosophies have infused into the corporate arena; some highly profound but impractical, some seemingly practical but too simple to spark up noticeable results.

I end this subject by sharing this (my) statement to corporate protagonists, especially the new ones:  The right top management mind-set blends profoundness and practicality. Top executives, especially at CEO level, must be wise enough to avoid adoption of unrealistic notions. Invariably, such wisdom comes about after going through wide holistically linked experiences that cater for a broad wholesome corporate view. Try not to be a gung-ho character unless you have the real clout. Otherwise, you will falter, sooner or later in the matter of time. 

ENDS….