Modes of Management - Shifting Management Gears as Your Company Grows

Modes of Management

Adjusting Your Management Style To Your Company's Stage

By Bob Norton

From the moment a new company is founded to its appearance on the Fortune 500 list, executives must be able to transform the way they manage a company — shifting gears, often dramatically to a different management style — to ensure the company’s optimum development. I am not referring to individual executive style here. What I am talking about is the total adjustment and evolution of the context in which major management decisions are made. I call this the “Mode of Management”, which is very dependent on the company’s current developmental stage.

Would you make the same product development decisions in an identical way with one hundred dollars in the bank and no customers as you would with $50 million in the bank and 1,000 customers? Of course not! So why do many managers often run an organization in the same way despite the many gradual and often sudden changes that happen between these two extremes? It is human nature to continue to do what we have always done; to simplify and repeat what worked in the past, despite vastly differing circumstances. We need a system or context for adjusting and teaching the different “modes of management” as companies evolve. Some of these changes come naturally, but most are very subtle and linger far longer than they should. A failure to change can do substantial damage to a company before adjustments are made, or even doom the company to flat sales in the long term.

A key to ensuring corporate success is to let the various stages of a company's development determine it’s overall management “mode”. It is a given that we must use the appropriate management mode for each and every decision and action we take in a company. The company's existing condition and/or stage of development is always the major determining factor or context for almost every significant decision.

Companies can reap enormous benefits when the style by which they are managed is adjusted quickly to accommodate the company’s shifting complexities, stages and sensitivities. In fact, quickly adjusting this mode of management can be a huge competitive advantage since most companies fail to adjust quickly enough. Just about every company exhibits often-overlooked, but critical, stress points that signal the need for decisive action or gradual reorganization. Recognizing these signs during a company’s gradual metamorphosis, and responding to them appropriately, may mean the difference between bankruptcy and survival, or at least will help avoid stagnation.

Any good manager knows an adjustment in style and tone is warranted for different individuals and situations. People have different motivations and often respond differently to the exact same circumstance. This is natural; people react to other people’s tone and body language in very individual ways. We receive immediate feedback in the form of facial expression, body language and actions, and adjust our reactions accordingly. However, a company, which is a much more complex organism that consists of many individuals interacting with complex outside market conditions, provides little immediate feedback. Therefore, it is very difficult to use direct feedback to fine-tune your management mode. Only years of experience can build enough data to form theories and adjust management modes.

Why We Simplify Too Much

Millions of years of evolution have taught us to run from danger and created a mind that adheres to simple "rules" that have worked for us in the past. Our mind wants basic rules we can reuse and has been designed to use these learned shortcuts again and again. For example, we all know that fire is hot, don’t touch it. The more pain (failure) or pleasure (success) that results from a lesson, the deeper these rules are ingrained. This is why people who experience a single, huge success often have a tougher time changing or accepting input from outside sources. They take this success as proof that they are “always” right and begin to repeat what has worked for them before. If they use their one learned mode in a different context then they are very likely to fail.

Unfortunately, the world is much more complex, and changes much more rapidly, than ever before. In fact, this trend is accelerating because human knowledge is now doubling every few years. One hundred years ago, most people still used horses to get around and technology of any kind was primitive by today’s standards. Because life is currently so much more complex, we need these mental simplifications more than ever. Yet now, we must overcome these past evolutionary behaviors and discipline ourselves to take hundreds of variables into account for complex and unique decisions we may never again make under the same circumstances.

Overcoming evolution can be difficult, but it is simply an exercise in conscious thinking that can be facilitated by some simple methodologies that force us to review important circumstances. The challenge as an executive is to force ourselves to think through all the variables of a given situation and make a decision in the proper, current context, not simply by referring to past experiences or rules of thumb.

Cognitive dissonance, the mind's tendency to see only those factors that reinforce what we are expecting to see, greatly aggravates this problem. We tend to distinguish only those things that reinforce our beliefs and actively avoid or explain away those things that disprove these beliefs. At the extreme, this can become the proverbial ostrich with its head in the sand — the "What I don't know can't hurt me" pose. Of course, this statement couldn’t be further from the truth. Any company that fails to adjust to rapidly changing world, economic, and market conditions is doomed. Even great Fortune 500 companies are rarely still there 25 years later. As managers we have to overcome human nature and cognitive dissonance in order to make the proper contextual decisions for the benefit of our company.

Cognitive Dissonance – The strong tendency to see and acknowledge only that which reinforces what you already know and ignore or easily explain away data that conflicts with your beliefs. The desire to avoid dissonance, or inconsistency, that would make you rethink things you already believe to be true.

The 5 Stages of a Company's Development

1) Raw Startup No revenue (by definition) 0-50
a) Innovation as a priority
b) Always in flux, high risk
c) More unknowns than knowns
d) Product or service looking to prove its market exists
e) Everything is fragile

2) Early Revenue $100 to $5MM, 5 to 100 employees, Product delivered proving some value proposition, but still no proven sustainable or profitable business model. Most companies slow or stop growing here due to organizational and people limits. This is often the hardest leap to make which requires the most changes in the smallest period of time.

3) Established Customer Base $500,000 to $20MM in sales, 20 to 200 employees
a) Profitable or clear path to profits based on scaling business.
b) A proven market and value or price formula, with profits clearly available in a steady state world when scaled.

4) Expansion/Growth Phase $1MM to $1 billion in sales, 100 to 1,000 employees
Market opportunity is many times larger than the company and there is a desire and ability for significant market share and/or revenue growth.

5) Mature (or large) $2MM to $100+ billion in sales, 100 to ∞ employees
a) Slow growth, stagnation of market or company, or focused on harvesting past investments.
b) Slow/little change in market and/or company or commoditization of products forcing a focus on costs above innovation.
c) Consolidation of competitors and focus on finding new distribution and/or leverage.

Companies come in many types, styles and sizes, and an approach that works tremendously well at one company can be a miserable failure at a different place and time. Every company and situation is different, so there are literally hundreds of possible “styles” or “management modes.” For practical purposes, it is necessary to create a simpler, more workable model, which can be used to illustrate a company’s major plateaus and organize this infinite spectrum into useful stages. Then we can probe along the required dimensions for key issues.

Only experience at executive levels in large, medium and small companies can help to identify the pivotal developmental stages that dramatically affect the context of a given company’s decisions. Success comes from implementing a management mode that is a direct function of the company’s current stage, industry and market conditions. The risk is that a company will be run in the same way as its VPs, managers and/or CEO have always run their past companies or departments, irrespective of the important and differing macro variables created by this stage of development.

What is Different about This Philosophy?
Conduct a search via Amazon.com or the Internet on the term “management” and you will literally find tens of thousands of books on the subject. From project management to company management, lots of authors push their particular methods and styles. These range from micromanagement and the One-Minute Manager to how to transform “good” into “great” behavior. What you will not find is much discussion in any of these books about an approach that helps you define and implement a management mode that clearly correlates to your company’s current status and position in the market. Yes, there are a few good books and some successful startups, but, in general, there is little on this topic available in the millions of books in print! I don’t know if the lack of discourse is just because authors want to appeal to the broadest possible audience, or if they are actually naive as to how one must manage differently according to the different stages of a company. I am certainly not the first person to recognize this natural phenomenon. I suspect that authors are addressing the stage of company they are most familiar with without much thought to the others. Unfortunately, for the bulk of their readers, this can make the majority of their recommendations and advice wrong, which is of little help. When making a major decision, too little credence is given to the enormous number of variables that make every corporate situation unique.

Actually, I have seen very successful executives with significant experience in large company environments give perfectly good talks on management that are 100 percent true for large companies — and almost 100 percent wrong and potentially fatal if followed by smaller companies. They are talking about steering an oil tanker when their audience consists of nothing but little speedboat captains. These executives must have little experience and perspective beyond that large company perch, and they often wind up preaching to a crowd of entrepreneurs about things they must do, when in fact, following that advice could kill their companies. The problem is that there was no context defined for the lecture and no language or thinking in the advice about a company’s current stage. If it had been qualified as advice for companies over $70 million in sales, for example, it would not have been a potentially lethal lecture for the many startups and entrepreneurs in attendance that day. It seems we pay little heed to the simple fact that what can be right for a small company can be totally disastrous for a larger company and vice versa.

Of course, the opposite situation can also be true, wherein entrepreneurs, more often than not, fail to change their company’s and personal management styles from raw startup mode to the next level. They cannot “let go” and delegate to others. This is why entrepreneurs are often replaced by “professional management” or people with specific experience in that stage of company development. It is also a major reason why most companies stagnate at a certain level, which is ultimately the maximum level or size at which a controlling entrepreneur can be effective or remain in their comfort zone. A Board of Directors of any company with more than a single shareholder has a fiduciary responsibility to replace such a CEO as soon as there are signs the entrepreneur is not evolving with the company so as to ensure that stockholder value continues to grow. I believe a solid, well thought-out system can allow many entrepreneurs to make this evolutionary transition as their company grows.

Adjusting to the Best Management Mode

My goal is to shine a light on this failure to preach in context and to create a methodology to qualify these recommendations and comments and adjust our mode of management. This needs a system of definitions, models and language. To be successful, we must also have some guidelines for management modes that are appropriate for certain stages and situations in a company’s life. This would allow us to benchmark our management mode and proactively evolve it as a company grows.

Unfortunately, there are not many people who have experience and perspective in various different size companies and can speak to these vast differences. Academia cannot properly recognize and study this problem without first establishing a framework by someone with experience across most stages of a company’s development. After all, this is not so much a theoretical problem as a real world experiential learning issue and therefore it is hard to define and bound properly.

Each decision we make is highly context-sensitive to many macro factors. Sometimes, these macro factors are developed or institutionalized over time. For example, IBM would never go after a very small market because doing so would distract management and resources from bigger market opportunities that would better serve its corporate size, overhead and growth needs. Everyone at IBM knows this and, accordingly, would not present a plan to the IBM corporate machinery for a product with a very small market opportunity. However at the other extreme, younger companies have not had the time or experience to develop such rules or systems, forcing executives of small and medium-sized firms to make them up as they go along based on the specific circumstances of the day. People may attempt to adopt their own "rules of thumb" from their former companies, but the odds that these are also appropriate for their new company are slim indeed. I have seen many young companies enter markets that were way too big for them to be successful in because larger companies will replicate what they do quickly and because they have not already secured a beachhead they can protect before evolving into the larger market. This classic startup without a market entry strategy is common in technology where technologists do not have enough experience in building businesses and attaching markets. I cannot possibly count the number of companies with a superior product that ultimately failed because they did not adjust their market entry strategy to the size of their company’s resources or because they managed the company like a large one when it was just in its infancy.

An executive’s ability to shift gears in the face of a situation that appears familiar, but is actually ALMOST ALWAYS a different context compared to what they have seen in the past, can make or break a company. When a decision’s context is very different due to the corporation’s current stage, it must be recognized immediately to produce a vibrant, growing company.

So what do you do differently along the spectrum from a raw startup to a mature company? There is enough information for an entire book or at least a long series of articles. It requires many examples and structural models to aid the decision-context management. The first step toward success is acknowledging the need for a decision-context management framework and an understanding that the biggest factor in almost any corporate decision is this framework. Upcoming articles will compare and contrast management modes for a wide range of companies, from small through large.

Motoring: New style gearbox on the way

OF THE many Heath Robinson-like contraptions that make up the modern car, none is so needlessly complicated as the manual gearbox. For starters, it demands that a car has three pedals when, to paraphrase Dickens, popular prejudice runs in favour of people having only two feet.

Even Grand Prix drivers have given up the challenge. Modern F1 cars do not have foot clutches, the technical boffins having discovered a better way. The clutches of F1 cars are engaged automatically, as drivers change gear using steering column-mounted paddles.

Yet modern road cars still make do with a stick having to be negotiated through an awkward H-pattern and a clutch which, in concert with the brake and the accelerator, demand the most dextrous of feet movements. Even if you are good at it, it can still be a pain. Juggling with clutch, throttle and gears as you fight your way home in nose-to-tail traffic is irritating, tiring and bad for wearing out the soles of good shoes.

Until recently, the only alternative has been the automatic gearbox. In America, where motorists are less macho than in Europe and take less pleasure in driving, almost everybody buys automatic. In the past year or so, new style semi-automatic gear changes have also surfaced, the Porsche 911 Tiptronic was the first, which seek to replicate clutchless F1 gear shifts using paddles, buttons or a stick. Most are at least partly a con, for they use automatic gearboxes as their base. As a result, power is not parcelled to the wheels as efficiently as on a manual gearbox.

That is changing. The large car makers are on the verge of releasing gearboxes which can double as both manuals and automatics. Of the mass makers, Renault is likely to be there first. Next year it launches a new transmission called the BVR (boite de vitesses robotise, or robotised gearbox). I drove a prototype version recently, fitted to a Twingo. At the touch of a button, your fully automatic gearbox (ideal in traffic) can be converted into a five- speed manual. Hit some traffic again, or lose interest in DIY gear changing? Then go back to full auto mode.

There is no clutch, even in manual form. On the prototype I drove, you changed gear by using a conventional stick. In production form, gear changes will be made by F1-style steering column paddles and the change pattern will be sequential, as in a motorcycle. Push a button, and you are back in full auto mode.

The BVR system is likely to be offered in the Clio and Megane from next autumn. Other clutchless manual gearboxes from other manufacturers are imminent.

For those who like to labour, the clutch will probably always have its place. But for those who like their machinery to shoulder as much of the responsibility as possible, the "third pedal" is on its way out. Although few will admit it, most drivers must privately be rather glad.

Hey buddy, can you spare a gear? Expect more - and less - from transmissions - Column

Mike Kluger manager-automatic transmission technology section at Southwest Research Institute (SWRI), has authored or co-authored numerous SAE papers relating to transmission technology and SWRI tests. He also evaluates transmissions for many of the world's major automakers. Mr. Kluger recently shared his thoughts on near-term automatic-transmission development with WAW.

The industry has experienced numerous interesting developments in automatic transmission configurations in recent years, some of which appear almost contradictory. In the next five years we'll see an accelerated degree of engineering research focused on transmissions.

In particular, there will be increased demand to, reduce manufacturing costs while simultaneously improving transmission efficiency. These goals will partially be realized through material advaces and with a heavy emphasis on reducing parasitic, or "spin" losses.

A sampling of some near-term automatic transmission trends and advances: Future transmission configurations At the top end of the market, a recent trend has been the move toward 5-speed automatics, now beginning to appear in a number of luxury and near-luxury passenger cars. The impetus behind this development is a typical 5% improvement in fuel economy over vehicles with 4-speed transmissions. To transition to 5-speed configuration, some existing 4-speed automatics comprised of three planetary gear sets will obtain the additional gear ratio by "swap" shifting, which allows two clutch packs to be shifted simultaneously. During swap shifting, one clutch pack is engaging while the other is disengaging. The additional precision hydraulic control required for this procedure is provided with fast-acting solenoids and by installing increased memory in the powertrain control module.

Coincidentally, consumers concerned about the cost of new vehicles show an emerging industry need for inexpensive vehicles with simple, serviceable automatic transmissions.

For this reason, we will see a return to traditional 3-speed automatic transmissions. Although they reduce fuel efficiency by approximately 12%, they are significantly less costly because of the reduced number of parts.

To obtain improved shift quality in the future, automatic transmission clutch bands will no longer be used - they do not provide the precise engagement control clutch packs offer.

Automatic transmission fluid (ATF)

In future transmission designs, the automatic transmission will incorporate a fill-for-life ATF system. In addition to eliminating the need for a dipstick and tube, sealing prevents incorrect ATF levels, a condition that today accounts for a large degree of serious transmission damage.

Sealing transmission fluids, however, places a considerable burden on the quality and composition of the ATF. More stable friction modifiers are necessary to withstand continuously slipping torque converter operation. Sealing the ATF also requires increased oxidation protection, as well as the use of thinner, less viscous transmisision fluids that may need to include synthetic base stocks for improved efficiency - and will certainly make ATF more expensive.

Torque converters

In an effort to improve fuel economy, shift quality and NVH characteristics, there have been attempts in recent years to adopt continuously slipping torque converter they allow transmisisons to transition easily from the "unlocked" to the "locked" mode. Current transmission designs are torque-limited because the friction load-carrying capabilities of today's standard lock-up clutch permits low-torque operation only in third and fourth gear.

Future advances will incorporate locked-up converter operation in all but the lower two-thirds of first gear. Test results using the recommended Environmental Protection Agency (EPA) city-cycle guidelines show a 7% improvement in fuel economy in the locked converter mode.

Solenoids

Fast-acting solenoids - providing better control and more "precise" transmission performance - were first introduced eight years ago for torque converter lockup clutch engagement. Since then, the use of solenoids has increased exponentially to the point where certain quality transmissions contain more than eight, overseeing such tasks as gearshift selection and pressure control. Most current transmissions use only four solenoids, but the number undoubtedly will increase in the future.

Pump systems

Pumping loss accounts for a disproportionately high percentage of the overall power consumed by an automatic transmission and can be as high as 20% in some cases. To reduce these losses, manufacturers have developed new, duocentric and hypocycloid gear designs for the fixed-displacement, internal gear tooth forms.

The advantage of a hypocycloid design, for example, is that it requires only half as many teeth as a conventional internal-external gear form, is at least 15% more efficient and is less expensive.

In some new automatics, there is increasing use of a fluid-recirculation "boost" loop that returns unused, pressurized fluid to the pump inlet. The boost loop dramatically improves fluid flow at crankshaft speeds greater than 3,500 rpm and helps forestall the damaging effects of cavitation at high speeds. Cavitation can be a critical problem for new vehicles with advanced engines delivering shift speeds as high as 7,200 rpm.

Machine gear producer synchronizes engineering changes and documentation - Pro/ENGINEER software and BPS Industries

Companies often move into new areas of business because of changing technology or the introduction of new products by a key customer, who requires their support. Such a scenario unfolded for BPS Industries, Baltimore, Maryland, a firm that machines industrial plastics. The customer was Flowdata, Inc., a manufacturer of precision flow-metering systems. The product was a radically new gear-like impeller called the Vector.

Flowmeters measure liquid flows with paired impellers, and great accuracy is required in machining their complex geometries. To work properly, Flowdata's impellers have to mesh perfectly. The patented Vectors mesh so well and run so smoothly that Flowdata eliminated the synchronizing gearboxes, a system common among competing flowmeter designs. Based in Richardson, Texas, Flowdata designs, assembles, tests and calibrates but does not cut metal. It relies on BPS, 1400 miles away, for machining.

Vector impellers are true gears but contain only three or four oversized teeth known as lobes that twist around the impeller's core. Although elegant, Vector's lobes are generated like any other gear teeth, with a mathematical formula called an involute curve. Machining the curved surface of the product, however, is a challenge using standard approaches.

Cutting the teeth of the Vectors required a breakthrough in metal cutting. BPS bridged the chasm between gear cutting and CNC machining by mastering the mechanical design through manufacturing software, Pro/ENGINEER, from Parametric Technology Corp. (PTC) in Waltham, Massachusetts.

The most important aspect of any gear design is the profile of its teeth. These are machined with a tool called a hob. The hob itself is generated from mathematical and kinematic formulas unique to gear making. Though Flowdata's Vector is a standard gear profile - a double-helical similar to a herringbone - it could not be hobbed.

In its search for smoother-running and tighter-meshing gears, Flowdata modified the characteristic V of the herringbone tooth into a gracefully rounded U. "We softened the edges and added a gentle nose twist, which lets BPS machine the lobe in just one pass," said Pedro Fernandez, lead Vector designer.

The biggest challenge of the new involute design was machining the root surfaces between the Vector's lobes. BPS and Flowdata quickly realized that four- and five-axis CNC machining was their only alternative. However, CNC machining requires complete geometric surface data, not just the involute's mathematics.

BPS and Flowdata realized that machinable tooth profiles could not be generated simply by plugging the involute calculations into the 3D solid modeler into a CAM package. Flowdata painstakingly converted the mathematics of the involute into surface data points accurate to 0.00001 inch.

When BPS received Flowdata's impeller work, it invested several million dollars for new machine tools and a coordinate measuring machine (CMM). Seven new vertical machining centers with 10,000 rpm main spindles were bought. Two have five-axis capability and three have four-axis controls. The other two VMCs are three-axis machines with automatic pallet changers. For years, BPS had made nearly all of Flowdata's plastic impellers and gearing. But until the Vector, BPS had cut very few metal parts for Flowdata.

Having designed the Vectors using Pro/ENGINEER, Flowdata urged BPS to buy the system. "Having 3D solid modeling and parametric-design capability was the only way to design these impellers effectively," said Flowdata President Dave Foran. "We did in weeks, days and sometimes only hours would have taken us months with our old CAD system." After testing a few other CAD packages, BPS concurred. Using the same system "means more than just avoiding IGES transfers and eliminating geometry translations and cleanups," said BPS President Richard G. Scherr. "It lets us look at the model the same way the customer does. It's all about embedding design intent among critical features of the part."

"Using Pro/ENGINEER, I can modify designs from two lobes to ten in just a few minutes," explained Mr. Fernandez. "I can re-size the impellers anywhere in a one-to-ten range. I can change the helical twist, which determines the amount of lobe contact, from zero (that is a simple spur gear) to 180 degrees, which wraps the lobes halfway around the shaft. With each change, the 3D solid model of the gear is automatically reconstructed, and it is completely accurate."

At BPS, parametric capability plays a major role in keeping up with changes like these and dozens of Vector engineering iterations. Of particular importance is the fact that new surfaces can be substituted quickly and easily in the 3D solid model. Each time Flowdata makes changes, BPS obtains a Pro/ENGINEER file in self-extracting zipped (compressed) format on its electronic bulletin board system.

Lead BPS Programmer Jim Narimatsu explained how the engineering-change process works. "The first step is to replicate the lobes and assemble the new impeller model in the software along with the accompanying fixture using Pro/ENGINEER's assembly mode. This enables us to visualize potential part or cutting tool interference problems and collisions. We graphically compare the new model with the previous version, then develop new cutting strategies, redesign the fixtures and select new tools," he explained.