A business enterprise begins with someone’s idea to provide a product or service. As demand for its products and/or services increases, the business grows. With growth in demand often comes an increase in the number of people performing the work of the business and with this there is the added responsibility of managing the people doing the work. Consequently, as business activity intensifies and the number of people employed increases, managing the business becomes increasingly more complex.In an effort to bring order to the enterprise, those in authority design the organization based upon the belief that the effectiveness of the business will be achieved by exacting control over of each of its components. Traditional thinking says the organization will maximize its performance as each department maximizes its performance, since the whole is simply the sum of its parts. To this end, since one can’t manage what is not measured, criteria of performance for each component or functional area are established.
Unfortunately misplaced concreteness sets in. Management by the numbers is the approach of choice to make it all manageable. Those in authority—the leadership—come to believe that the numbers are the (real) things. This is tantamount to believing that the map is actually the territory. Losing sight of the process—with management becoming more and more superficial—the focus turns to results (i.e. growth in profit). Driving the organization for results—as if it is a machine—is management’s mantra.
Of course many tout the importance of money advancing the notion that ‘cash is king’. The fallacy of this thinking is illustrated in the failure of what was once the pillar of egoistic capitalism, General Motors—a corporation wherein the long-view was the wrong view. No doubt cash is a key factor, but it is not the only factor!
So as profits are threatened–as the number on the bottom line becomes smaller–management’s focus and efforts intensify toward the tangible and the measurable. Attention becomes increasingly limited to profit and costs. Arithmetically this makes ultimate sense, since cost is a factor in the profit equation. Moreover it is seen as something that can be directly and objectively affected through goal setting. In effect, by instituting such measures, management requires people to do more with less—forgetting the fact they couldn’t do more before they were given less.
Unfortunately what is lost in all of this is that the essence of a business has not changed. As explained in It’s the EconoME, Stupid, what once was the reason for the business—providing a product of service—becomes a means to the overarching objective of growth in profit.
What most fail to understand is that the business’s product/service was first an idea. An idea is the seed from which a business emerges. Moreover it is the continued emergence of ideas that will sustain a business enterprise over the long term. This fact is quite often not understood. In fact, many failed organizations run out of ideas before they run out of money.
In essence, diminishing the viability of the organization by inhibiting the flow of creative energy through the organization with control-based management and organizing structures. By running the business as if it is (literally) a moneymaking machine those in authority run the capability out of the business—killing the goose for the golden eggs, as if all that matters is monetary gain.
If we fail to understand, or if we simply chose to ignore, this energic perspective, then we unavoidably will continue to adversely affect our ability to not only sustain the viability of the business enterprise, but (just as importantly) we will block the realization of our human potential. So, maintaining a healthy flow of energy—the flow of creative human energy—is a strategic business-sustaining imperative. Or to say it another way, a very important strategic principle to never forget is: When a business organization runs out of ideas, it will eventually run out of business.
Yet a mechanistic orientation and a hedonistic theory of human behavior continue to inform popular management theory and practice. As a result the misuse and abuse of people is epidemic. So the need to change the why, what and how of business and its management should be felt by most.