Tuesday, February 17, 2009

Three Degrees of Separation

Pawel Brodzinski opened an interesting discussion about why executive management seems to be disconnected.  I responded with my previous post and both Pawel and Josh responded.  My perspective of why executive management seems detached is different from theirs, because I believe we approach the whole topic from different philosophical perspectives.  In my last post, I outlined management from the ground up.  This time I'll set my contextual perspective and then describe management from the top down.

Why Businesses Came into Existence
My outlook on business derives from why businesses first appeared and why they were structured the way they were.  The modern corporation came started in Britain in the early seventeenth century, when wealthy, land owning nobleman  realized that if they gave up a portion of their capital and entrusted it to an organized group of intelligent, motivated and hungry workers, they could make themselves much wealthier. However, to make sure that these workers didn't run off with their money, they set up structures and oversight and put two or three of their own people, the executives, in charge of running their businesses.  

The CEO, CFO and Chief Legal Council could be put in and with little background experience in the particulars of the business, they could ensure capital was effectively deployed, dividends were paid.  They did not have to know the working details in order to effectively manage it.  

Few businesses had over 500 people and with three people, the business structures were created so that skills and goals could be organized into departments to make the work most effective.  The people in those departments (operations, sales, accounting etc.) needed to know the details of their area, but those people could be promoted from within the ranks.

So Why Do You Say Executives Are Different? (Degree of Separation One)
An executive's responsibility is to people outside the business.  Whether it's Board Meetings, sitting on Boards of other companies to create synergies, conducting financial analyst conference calls, meeting with bankers or participating in closing large sales; their focus is external to the business.  When they allocate their time, depending upon the type of business, 30 to 60% of their time is devoted to people external to the business.  

The Importance of Structures (Degree of Separation Two)
This is as it should be.  Within departments, there are managers, usually several layers of them.  One problem with setting up structures is that if you don't respect the structure, you render it useless.  As an executive, if you say something to someone at a lower level in the business that contradicts what their manager has told them, you have rendered the structure ineffective.  

The difficulty for an executive is that they don't know what mid level managers have said.  They can't check with them every time someone asks them a question.  So what are they going to do?  Either, they limit access to pleasantries in the hallway and large company events or they find themselves pulled into the quicksand of internal management that they are paying mid-level managers to do.  Additionally, they then cannot focus 30 to 60% of their time to parties external to the business that need attention if the business is going to continue to grow.

Where They Come From (Degree of Separation Three)
It's a taboo subject, but there are classes in the US.  Historically, less than 20% of the population went to university.  A university degree from an elite institution was a clear socioeconomic indicator.  Even though the number of people going to university has increased tremendously, your college degree still largely determines who you'll work with, who your friends will be and the jobs you'll take.

If you graduate from Yale or Harvard or Princeton or Stanford, you'll enter the business world in a way and level that will determine much of your future career.  If you graduate from a state university, that will also determine the way, level and expectations people will hold of you.

Very few people start in the proverbial mail room and work their way up to executive.  I'm not saying that it never happens, but it is pointed out as news when it happens specifically because it is so uncommon.

Those are three degrees of separation that make executives seem distant.  They have different responsibilities, different structural concerns and different background and expectations.  

This is why I think inquiries into alignment are so interesting.


Pawel Brodzinski said...

I'm happy to see active discussion because of my post. I see your points, at least first two, since here in Poland it isn't so important which university you graduate. This is because we've started economy as it looks in western world in early 90 and we had very little people ready to manage all these new companies which were born.

Coming back to the point. While I agree executives have different role I don't think it frees them from care about internal affairs: especially building a company culture and talking with at least managers about people's opinions and spirits. One of my previous CEOs said in public:

"Every professional can be replaced with finite number of students."

Guess what was the reaction of majority of skilled professionals in the company. It was a clear signal that it's not the right place for their careers. Did the CEO know about that? No, because he didn't talk with people across the company (including most of his management staff) and even when he did it was a rarity when he agreed with them.

There similar situations with trainings (they are too expensive, there won't be any) job ads (we pay way too much for job advertising, we stay on our website only) pay cuts (everyone with no exceptions, the best people left) etc. I call a disconnection and a bad one.

About respecting the structure: yes, tasks should be never assigned with the omission of managers standing between the CEO and an employee. However information often flies directly from execs to whole company when the CEO or other VP informs the comapny/his division about results of the last year or goals for the new one or spread a new stupid directive trying to judge it in any reasonable way or telling about yet another reorganization or just coming in to the meeting room and asking stupid questions which make everyone asking themselves WTF? The other direction should be open too since people rarely would come tell about an asshole manager to the asshole manager himself. They want to go to someone superior for him. When there are organizational issues and a manager is reluctant to d anything they should probably be directed to a proper VP etc. Open-door policy didn't appear from nothing. Or did it?

I think it's all about balance. I don't say that executives should focus on communication with their employees only and I never did. However if they forget about thing at all they become disconnected and that leads them to wrong business decisions. If people hates your company and you send them to another country to build a branch there what will be the result? If you say and believe your company builds high-quality solutions but your decisions support increasing rotation in your teams and your key solutions are built by newbies it's living in your imagination not in reality.

Execs should focus on both sides of their work: external (strategy, cooperation with other companies etc) and internal (organization and people). If either one is left alone they become disconnected with the business environment or with their organizations respectively. Unfortunately the latter happens so very often.

Craig Brown said...

I'm with paul on this.

Yes execs need to be accountable to the sharehodlers and stakeholders.

But without paying attention to what's going on inhouse, how can they do that? how can an exec lead, direct and vision their way to a happy dividend if tey aren't paying attention to internal focua and alignment?