by BILL WADDELL
In Simple Excellence Adam Zak and I wrote, "The simplest, leanest and best managed a company will ever be is in its infancy when senior managers wear lots of hats, everyone is fully engaged, and the business operates with a sense of camaraderie forged by a shared sense of urgency. Cash is king in the start up, and spending is tightly controlled. The start-up hangs on every word spoken by the customer, and suppliers are chosen cautiously. It takes success to destroy all of that."
That same principle is behind Steven Pearlstein's recent article in the Washington Post "Protecting Honest Tea's Brand Under Coke's Big Bureaucracy". He writes, "big corporations invariably screw up their entrepreneurial acquisitions, … by sucking all the innovation and promise out of them by imposing their bureaucratic ways of doing business." Those bureaucratic ways of doing business by and large have to do with a management obsession with control.
Pearlstein is correct in raising concerns that the corporate staff at Coke is very likely to justify its existence and prove its superior intelligence and wisdom by picking apart the details of the little tea company and imposing controls, metrics and management reporting processes to whip them into shape. Each thin layer of bureaucratic waste piled on the acquisition will be justified by an opportunity to save a few bucks through economies of scale, derive a penny or two of synergy, or wring a couple of pennies of efficiency from them. By the time they are finished the tea people will be so thoroughly covered with waste that the "innovation and promise" will be completely drained. The senior thinkers at Coke will be driven by a need to control the tea company – make sure it does what they think is best based on their view of the big picture – all well intentioned – each move incrementally supported by numbers and economic logic – and all adding up to disaster.
The cost of control is astronomical, but usually hard to quantify, both in real terms buried in overhead, and in lost opportunities as the energy and creativity is sucked out of the lower level folks when they have to fight the bureaucrats to do the things to contiuously improve that once were done on the fly, but now must be thoroughly documented in advance and presented to multiple levels of the organization via Power Point and detailed cost-benefit analysis.
To see the cost of bureaucratic control in its most obese and ugliest form, one has only to read the reports from the Government Accounting Office whining and moaning about the lack of progress in the Department of Defense in getting the mother of all ERP systems in place. The report on government waste issued earlier this month complained that some $10 billion (yes the 'b' in 'billion' is accurate and not a mistype) is spent every year on business systems in the DOD, yet there is still not absolute management control over the millions of DOD employees and contractors, and that duplication of expenses still occurs, that" key management controls" are still not in place. Incredibly, this effort to get every dime of DOD money and every person under "management control" has been rolling since 1995 at this $10 billion a year pace.
Managers readily join the taxpayer chorus slamming the government for outrageous waste, but much of the government waste is just a larger scale version of the same waste managers routinely impose on themselves.
The simple, lean, aggressive, customer and cash focus of the entrepreneur comes with the risk that mistakes might be made, and the people on the front lines might not make the same decision in the heat of the moment that an analyst far removed might make with more information after the fact. But that entrepreneur will fix problems, improve processes and satisfy customers much, much faster; and he will do it without spending vast sums on systems and staffs to track and analyze every detail and every decision. Control and empowerment are antonyms. Control and speed cannot co-exist – the pipe dreams of the systems fanatics notwithstanding. Professional management kills entrepreneurism. Excellence is achieved through simplicity and the quest for control results in anything but simplicity.