How Small Businesses Can Deal With Competition

handshakes-business

Jay Cain was a promising engineering student at Georgia Tech. Coming into his sophomore year, Jay was ranked in the top of his engineering class. Having two high successful parents who were engineers themselves didn’t hurt his image among his peers. However, Jay was not happy with his projection in life. His passion was deejaying in front of an audience.  He had garnered a reputation in his high school and his local community for being a good talent in music. He even found himself deejaying parties in college while he was preparing for engineering exams and assignments. 

He told his parents several times he was thinking about leaving school in order to start his business full-time deejay. His parents dismissed the thought because they felt it was not realistic or practical given his abilities in engineering.  When the semester started at Georgia Tech, the school was missing one bright talented student…Jay Cain.  Leaving Georgia, Jay went to New York to make it big. Using money he saved, Jay found himself roomed with three unfamiliar roommates where the rent was cheap.  Jay found that working as a deejay was difficult because of the large competition among established deejays in the area.  Yet, Jay wasn’t about to give up with his dream. He just couldn’t go back to his parents or college.  Jay sat by himself trying to figure out how to meet the competition.

 As many millenniums start flooding the employment landscape, young adults are considering starting their own businesses.  Corporate downsizing and layoffs have thrust many individuals into a tough employment market while other employed workers who are unsatisfied with their jobs plot to fix a plausible exit strategy which will land them into their ideal job.

Sadly, many people run with these well intended ideas about starting a business with little insight into how to implement their plan so that the idea can be successful.  Most folks don’t realize that there is nothing new under the sun and found someone else who is doing what they set out to do. In fact, some people find themselves in a highly competitive environment with little or no plan for navigating this climate. In this issue, we will  examine the concepts of competition for small businesses fighting in global environments. Individuals will learn more about starting a business with competitive environment. Continue reading

Mapping Out Socio-Technical Systems

human-vs-robot-09

Another problem is presented. A worker gets injured on a subcontractor’s project. We gather around the table to dish out the blame. Everyone wants to point fingers. The project manager blames inadequate funding while the safety engineer cites an ineffective preplanning process. Nothing gets resolved. The issue moves up the line for a senior management decision. There’s a meeting to discuss the matter.  

Someone leads out and says, “What can be done to prevent this problem?” Numerous technical recommendations are offered. Standing up, I state, “Why don’t we ask the workers about this problem? Let’s get them involved so that they can help find the solution.”

The room gets quiet. Finally, one senior manager suggests that we should take money away from the subcontractor, buy new technology, and fire the worker’s supervisor. Everyone agrees. After dealing with this same problem every month, I was hoping for a different answer. I was disappointed again.[1] 

Why do we see managers make the same mistakes over and over and never want the day-to-day workers involved in the process? Executives are then shocked when their employees don’t buy-in on their latest management initiative. One of the reasons organizations do not reach peak performance is because managers do not create socio-technical systems to support organizational values.

With fierce global competition and a need for a market advantage, I found it surprising that managers move toward the quick fixes like downsizing for short term gain without analyzing the organization over the long-term. I am not suggesting that this approach is easy; however, I am declaring that over the long haul, an organization will become a stronger institution in the process. [2]  

The concept of socio-technical systems is very important in a highly competitive environment. Socio-technical systems relate to the reciprocal interrelationship between humans and machines. In fact, the idea explores how both the technical and the social conditions of work interact with efficiency and the human condition.[3]

This interaction satisfies each, but does not compromise the other.  Since the industrial age, researchers have recognized that both technical and social factors impact organizational performance.

 https://www.youtube.com/watch?v=GOePJH7LYZ4

Daniel Wren, author of The Evolution of Management Thought, concludes that analyzing a social system gives management an avenue to measure conflict between the “logic of efficiency” demanded  by the formal organization and  the “logic by sentiments” by the informal organization.[4]

In profit hunting, many businesses lose focus of the importance of socio-technical systems. Given precepts, the questions for most managers becomes how to use this scholarly perspective in the practitioner’s avenue where time is money and money is time.  In the following weeks, we will address three practical applications (i.e. value modeling, technology relevancy, and human factor buy-in) so that socio-technical systems within organizations can support its organizational values. 

Discuss the concept of socio-technical systems in today’s organizations.

 

© 2013 by Daryl D. Green                                                       

 


[1] “Leading others while supporting organizational values” by Daryl D. Green

[2] “Leading others while supporting organizational values” by Daryl D. Green

[3] “Philosophy of socio-technical systems” by Gunter Ropohl

[4] The Evolution of Management Thought by Daniel Wren

 

Sustainable Job Creation

Several weeks ago, I was exercising at the YMCA downtown.  I was starting my workout at the bench press and noticed a young man lifting a lot of weight (not typical for this recreational area).  He asked me to spot him with this heavy weight. I learned that he was a new professor at Lincoln Memorial University Duncan School of Law. 

I mentioned I was serving as an adjunct professor for the same school in the School of Business. We talked about various issues—as we both tried to complete our workout at the same time.  As I walked him through my strategy of giving MBA candidates practical application for studies, he asked me a question that stopped me in my tracks. He asked me what would I advise President Obama about the current financial crisis.  I didn’t have an immediate answer. I have always tried to deal with this economic crisis at the local level.  Yet, I knew what worked locally might not have the same results nationally.  Therefore, the answer was very complicated, especially regarding job creation.

We are in troubling times. In August of 2011, our nation posted no job gains.  This economic slump is historical since it’s the first time since World War II that the economy has had precisely net zero for job creation for a month. Retail, manufacturing, information services, and construction all lost jobs.

Furthermore, government employment fell by 17,000 as state government begun their budget exercises which included downsizing government employees including teachers and policemen.  According to some financial experts, the economy must add 13.7 million jobs over the next three years (381,000 each month) to bring unemployment from a current rate of 9% to 6%.

 With over 15 million people unemployed in our nation, worried U.S. citizens look to their government and/or business leaders for job creation. Is this faith misplaced?   The concept of job creation is a hot buzz word among politicians and media pundits.  Last week (September 8, 2011), President Barack Obama announced a ‘job creation jumpstart’ plan before a Joint Session of Congress.  A $447 billion American Act proposal, consisting of infrastructural upgrades, was proposed.  Yet, partisan politics make this job creation initiative an uphill struggle. Furthermore, many people doubt that the government can create any sustainable jobs. 

 

Other individuals look to businesses to create millions of jobs because they are considered commensurate with job creation.  They argue that giving businesses major tax breaks and other financial incentives will encourage them to create millions of jobs. However, anyone taking a basic course from the School of Hard-knocks understands that businesses primary mission is making profit for their investors.  

Financial experts applaud major outsourcing initiatives and layoffs by corporations because they feel it will lead to greater profitability for shareholders.  However, John Gamble and Arthur Thompson, authors of Essentials of Strategic Management, suggest that a low cost strategy can backfire on a business. 

They note, “Perhaps, the biggest pitfall of a low-cost provider strategy is getting carried away with overly aggressive price cutting and ending up with lower, rather than higher, profitability.”  Despite an economic crisis, many U.S. corporate profits hit all-time highs at the close of 2010.

According to the Federal Bureau of Economic Analysis, corporations reported an annualized $1.68 trillion in profit in the fourth quarter. The previous record (without being adjusted for inflation) was $1.65 trillion in the third quarter of 2006.  For example, General Electric posted worldwide profits of $14.2 billion, while JPMorgan Chase’s profits went up 47%.  The financial firms were some of the biggest winners.

While the federal government provided aid during the economic downturn to save many of these ‘too big to fail’ institutions, these firms did not return the favor.

They found little incentive to provide loans to struggling U.S. businesses to assist in job creation. Their investors applauded their actions since it moved toward greater profitability. Yet, the public frowned on their self-servicing actions which were interpreted as market driven.

Given this financial crisis in America, there are two concepts at odds with each other.  They are economic viability and one’s quality of life.  Economic viability relates to creating jobs that are necessary for a business.  One’s quality of life involves an unwritten standard of living for a citizen to live reasonably comfortable given his or her work effort.   

This reality for many organizations has meant outsourcing high-cost activities such as manufacturing, to countries abroad like India, China, and more underdeveloped countries. 

If it costs $20 an hour for customer service in the U.S., would a business give up sending that work abroad for $1 per hour?  Therefore, companies that have a focus on a low cost strategy will continue to search for the newest lowest labor market to be competitive. 

Yet, this reality drives down the wages for US workers and the quality of life for U.S. citizens.  Therefore, the concept of job creation as it relates to sustainability is a difficult problem for any nation to solve.

As U.S. businesses deal with globalization and hypercompetition, is it possible to achieve economic viability and a good quality of life at the same time for U.S. citizens? If so, how?

© 2011 by Daryl D. Green

Technology Relevancy

“The Cylons were created by man. They rebelled. They evolved. They look and feel human. Some are programmed to think they are human. There are many copies. And they have a plan.”
– Season 1 Opening Prologue

Battlestar Galatica, regardless of the series (1978 or 2003), provides a good platform for this technology discussion.  In this scenario, the creation (Cylons) turns on the creator (mankind). The Cylons were created to make life easier for humanity.  However, Cylons evolved into thinking beings  and rebelled against their intended use. Clearly, the inventors had created something without understanding unintended consequences in the socio-technical system. 

We now approach the 2nd critical element for effective socio-technical systems, which is technology relevancy.  Organizations rush to accelerate their products quicker to their customers. Under this umbrella, industrial designers seek to optimize three elements: (a) tools – involves the material infrastructures, (b) training – relates to human capital matters, and (c) time- considers setting realistic expectations in the operations.  Yet, organizations shouldn’t  ignore the significance of any soci-technical system integrations. In their article “The Relevancy of Concurrent Engineering in Industrial Technology Programs,” Dr. Radha Balamuralikrishna, Dr. Ragu Athinarayanan, and Dr. Xueshu Song analyze how organizations attempt to maximize operational efficiencies: “It is safe to assume that a hurried implementation of concurrent engineering without careful planning and investment of time has a high probability of backfiring.”

Organizations must understand that technology needs to be relevant as it relates to benefiting the whole socio-technical system. As an engineer, we are taught how to use theory in order to build, design, and operate technical systems, whether mechanical, digital, or otherwise. Sometimes this creates a technical superiority over the other components of this socio-technical system. Vince Adams, a technical manager, agrees, “Engineers are more concerned about the technical aspects of a system. This is what we are taught. Engineers do not want to deal with the social aspects.”

Organizations should gain input from employees to ensure that the organization has not only the best technology for its operations but the right technology.  This sharing of information can only come with mutual trust between leaders and follows.  

Gary Yukl, author of Leadership in Organizations, notes, “Empowerment is more feasible when there is a high level of mutual trust…Leaders can affect the psychological employment of followers in many ways, and participative leadership and delegation are only two of the relevant behaviors [4].” There have been numerous cases which show that organizations have purchased new technology to solve a problem or to become more efficient when a simple conversation with impacted employees would have produced better results at a lower cost. Therefore, organization should invest their time in identifying relevant technologies for their socio-technical system in a participatory manner.    

How do organizations ensure they are placing technologies in their operations that do not conflict or disrupt their processes?  When technologies are forced to be used due to external forces (i.e.  competitors, suppliers, etc.), what is the best process for introducing these changes to the workers?

 © 2010 by Daryl D. Green

Virtual Strategies for 21st Century Organizations

The latest business craze of the 21st century encompasses going global. Yet, these organizations often operate virtually. Communication, however, takes on a brand new meaning when there is no “face-to-face” interaction between team members to facilitate these nontraditional relationships; it is essential to understand how to unify these virtual relationships.

Furthermore, many companies have allowed workers to work from home to achieve huge company savings. Managers assume that an employee, equipped with a computer and fax machine, can stay connected to the organization. This outlook is simply a myth.

James Kouzes and Barry Posner, Authors of The Leadership Challenge, further explain, “…how do leaders create commitment in a virtual organization? Can there be such a thing as virtual commitment?” According to a USA Today poll, nearly half of those interviewed said that corporations can be trusted only a little, or not at all, when it involves looking out for the best interest of employees. Relationships are built on trust. This blog explores the characteristics of effective virtual teams in 21st century organizations.

Virtual organizations are becoming the mascot for globalization. A virtual team (VT) is geographically separated and has very little personal contact; it depends on computers and telecommunication technologies such as the internet and videoconferencing.  VTs provide the benefits of bringing talented people together, providing international perspectives, and saving millions in traveling costs. Yet, going virtual isn’t easy.

 VT organizations are creating a buzz in the academic community. There is a burgeoning literature on virtual teams. As more organizations allow employees to work from remote locations away from their headquarters, there is an increasing problem with office staffing and organizational effectiveness.

 Traditional organizations must shift their viewpoints on virtual organizations. To address human capital issues, an institution must understand the nature of virtual organizations. Effective virtual teams manifest a variety of characteristics including well-defined group sponsorship, goal consensus, effective selection practices, an appropriate skill mix, and specific performance measures linked to goal achievement. Virtual organizations challenge today’s personnel management system by their very existence as a rising number of employees are telecommuting.

 In the old paradigm, managers were required to be technical experts who defined the tasks for the employees. In the new virtual structure, managers are expected to provide technical direction. However, the manager allows employees to participate and listen to their suggestions.

Managers must weigh telecommuting’s benefits against its weaknesses, including reduced employee oversight and accountability, lower productivity, and less direct interpersonal contact thereby decreasing team building opportunities and isolating employees. In fact, VTs require a shift in leadership paradigms. Leaders in virtual organizations must provide an organizational structure for achieving their objectives that is flexible and organic.

 Going virtual will continue to challenge traditional thinking. Establishing trust within a virtual team environment is a prerequisite for an effective team.

 How can organizations build virtual structures that are effective and sustainable?   

 © 2010 by Daryl D. Green

Maximizing Team Chemistry

To build a successful organization in the future, leaders will need to be deliberate in building great team chemistry.  Many organizations consist of both formal and informal groups. In building a high performance organization, individuals within a team must learn how to work together.  In this context, I use groups and teams interchangeable. In other words, employees and leaders need to respect each other and get along. According to leadership experts Michael Hackman and Johnson, the leader-member-exchange (LMX) Theory is another process that outlines the leader-follower development process for relationships.

Let’s explore this more closely. The basic concept is that leaders generally establish two different types of relationships with followers: “in-group” and “out-group.” The in-group is granted more responsibility and influence in decisions. This may remind you of high school. Were you part of the in-group at your school?  Did it hurt to be part of the out-group?  Leaders need wise individuals as personal advisors; however, a leader must be careful about possible organizational ramifications. Why should a leader care? The LMX Theory can create bad feelings in an organization. This could damage team chemistry and make an organization less effective. Organizational cohesiveness is critical for success.

Let’s apply this concept to a mystical journey to King Arthur’s Court and meet the Knights of the Round Table. King Arthur, the son of Uther, was made famous by withdrawing a sword (Excalibur) from a stone and made King of England. He was then given the Round Table as a dowry. Knights, such as Lancelot, were men of courage, valor, and noblity. They were to protect damsels, fight for kings, and undertake dangerous quests like the search for the Holy Grail. The Knight Order’s dominant ideas were the love of God, men, and noble deeds. The LMX Theory was in play.

Let’s dig deeper by exploring a dyadic relationship—marriage. The LMX Theory describes the role-making process for leader-followers. Gary Yukl, the author of Leadership in Organizations, maintains that a high-exchange relationship contains high mutual influence. Marriage involves shared experiences and common goals. What happens when things change?  Follow my example. Body Boy achieves his fitness goal. Mr. Boy is transformed from a shapeless couch potato to a well-formed man. Everyone loves his transformation, except his wife. She is an inactive person. She witnesses ladies swarm around Mr. Body. She screams, “Body Boy!” 

Sadly, misunderstandings can damage the chemistry in an organization. Have you seen it happen in your organization?  Formal groups are more costly in this regard than voluntary groups because they are the creation of management, rather than arising by natural design. Good organizational chemistry keeps the informal efforts aligned with the formal ones.

Clearly, good chemistry is vital in achieving any level of organizational excellence. Leaders need to build relationships with followers in a constructive manner. Therefore, organizations can accomplish this task through training and building caring corporate culture. The results will help produce good team chemistry for today’s organizations and successful organizations in the future.

How does one create good chemistry in nontraditional structures such as matrix organizations or virtual organizations?  Is it possible to infuse good chemistry into a badly run organization? If so, how?

 © 2010 by Daryl D. Green