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Get Real By Looking Outside Your Organization

Bob Lutz, the 77-year old veteran car executive, said that when he joined General Motors in 2002, the company’s culture was “inwardly focused not customer focused.” As Lutz who will retire next month explained in an interview on NPR’s Morning Edition, metrics in manufacturing, purchasing, and operations were allowed to trump the business of serving customers needs

Bob Lutz, the 77-year old veteran car executive, said that when he joined General Motors in 2002, the company’s culture was “inwardly focused not customer focused.” As Lutz who will retire next month explained in an interview on NPR’s Morning Edition, metrics in manufacturing, purchasing, and operations were allowed to trump the business of serving customers needs for new and different vehicles. Lutz’s words echo those of another former auto executive whom I recall speaking similarly about his company more than a decade ago.  That company was Ford Motor.

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In the intervening years, GM plunged into bankruptcy; Ford came close but avoided it in part because it shifted from thinking inside to acting outside. Today Ford is on track to return to profitability. Part of its success is owed to its CEO, Alan Mulally, who was hired in September 2006 to shake up the company. As an executive hired from the outside, Boeing, Mulally had no internal axes to grind and since he was not part of the Ford culture he could prod the company into taking a fresh look at itself. [After the federal government seized control of GM, it did hire Ed Whitacre, a former teleco executive, as chairman who is now CEO.]

It is vital that every organization adopt a more outward focus, but it is not necessary to hire a CEO from the outside. One key reason we promote inward thinking is because it flows from our job description. So much of management involves maintain measures of control over processes, policies and systems. People engaged in that work must look at what they do, not specifically look around them. It falls to senior management to think and act more broadly.

The first step is to recognize the symptoms of inward thinking. The chief symptom is adherence to false metrics; such metrics are created to imply progress but in reality hide reality. For years, General Motors measured itself against domestic competition in which it dominated. This overlooked (and by design) the rising sales of Asian makes. Likewise you can create internal metrics what measure yourself against last year’s numbers. This is valid to a point but can be dangerous when the playing field changes and you are measuring yourself against yesterday’s reality.

If you are comparing yourself to a declining segment (as GM did) your mediocre performance hides your abysmal performance against the industry as a whole. The reporting of such metrics becomes an act of deception in itself. Executives report the numbers but not the consequences of the decline. The art of deception prevails over reality.

Once you identify the symptoms of inward thinking here is what you can do:

Accept reality. A key benefit of having an outsider at the top is that he or she knows how others perceive your company. Such an executive does not accept the conventional wisdom. Acknowledging the fact that inward thinking is hindering performance is the first step to greater understanding. But since most companies cannot and should not hire CEOs from the outside, it is necessary to adopt that outsider’s perspective. That starts with talking your stakeholders, including your customers.

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Talk to your customers. Ask your customers why they continue to do business with you. Make certain you connect with those who formally patronized your company. Ask them why they now shop elsewhere? Is it product, price, performance or a combination of all three and more? How is your service? You will never progress is you do not identify the issues.

Benchmark inside and outside your industry. Study what your competitors are doing. That’s a given, but learn to think out of the box. For example, the health care systems are seeking to make themselves more patient friendly. Studying other hospitals is not the answer; learning from the hospitality industry opens the door to treating patients as guests and integrating a total service ethos.

Reward those who dare. Adopting a more outward focus is a change process and it is uncomfortable for many. Management needs to recognize those who try to do things differently within the context of product and process improvement. Going further, innovation is essential but it will not happen unless management makes it safe for people to try new ideas. Reward those whose ideas for improvement are implemented.

Acknowledge progress but do not accept it wholly. Take stock of what you have accomplished as a more outwardly focused company, but never assume that you are done. Progress must be followed by more hard work otherwise you risk losing your gains to your competition.

It is very easy for outsiders to call for companies to think and do differently but when you are in the inside, change is always hard. This is especially so when your metrics are based on internal barometers rather than external factors. So you need to reconfigure your performance systems so that people are measured against metrics that hold validity against the “real world” not simply the company. Your barometer must measure value as it is delivered to customers not to bosses upstairs. Specifically you must insist that employees work must complement value not reputation enhancement.

Perhaps science fiction author, Philip K. Dick, put it best when he wrote, “Reality is that which, when you stop believing in it, doesn’t go away.” That premise should underscore every organization’s attempt to leverage self knowledge by embracing the outside world.

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John Baldoni is an internationally recognized leadership development consultant, executive coach, author, and speaker. In 2010 Top Leadership Gurus named John one of the world’s top 25 leadership experts. John’s newest book is Lead Your Boss: The Subtle Art of Managing Up (Amacom 2009). Readers are welcome to visit John’s website, www.johnbaldoni.com

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