Corporate Turnaround

There are many important imperatives and factors which are not quantified or measurable by the traditional accounting system.

Human capital is perhaps the single most critical success factor for companies. But its importance cannot be captured or measured by the financial numbers. One can anticipate the failure of companies by observing the high defections within their middle and senior management ranks. The exodus of these key managers is the precursor to a much more severe problem, which can impact the continuity of execution and administration of the company.

Another intangible factor of the financial health is the morale of the staff. Although good morale of the staff does not always equate to good productivity, poor morale certainly spells trouble for the company. A reduction in the staff morale will result in reduction of the flow of constructive ideas and effective operation of the company. In turn, poor morale can cause the exodus of good staff and eventually a decline in the profitability and market share of the company.

Low morale is another intangible factor that cannot be measured using financial terms. High morale does not necessarily yield high productivity. Low morale is the definite formula for low productivity. The problem with low morale is that the flow of ideas is reduced, there is exodus of good staff and operations efficiency are affected in the process.

Unfortunately, the traditional accounting statements also do not measure the brand equity. Brand equity is actually the amount of good will resident in the brand. It is the added value endowed upon the product or service as a result of past investments and marketing of the brand. It is also an asset that the company must ensure that its value does not depreciate. Unfortunately, the brand equity is not captured in the balance sheet because of its arbitrary nature.

Another significant root cause of corporate failures is the quality of the CEO. Most turnaround situations arise because of incompetent CEO. Weak board of directors and the financial controllers are also a possible cause. Yet, the current accounting system in place does not measure the quality of these key management staff and board members. Other causes of failures include poor quality staff and dysfunctional corporate culture that are ill equipped to handle changes in the marketplace. The damage caused by such factors is often only manifested just prior to the financial numbers displaying the red flags.

Financial statements can give some amount of indication and warning signs. But they should not be solely depended upon to gauge the health of the company. There are many corporate and accounting scandals to testify that financial statements are insufficient.

The profitability barometer of a vulnerable company usually takes the form of negative or declining profitability. It may have been slipping for several years, consistently below the industry’s average and compares unfavourably with the competitors. However, the declining trend is sometimes confused with many other factors such as poor economic conditions, shocks in the marketplace etc. An experienced manager needs to be able to identify the problems long before the financial numbers turn red.

Troubled companies are often the result of incompetent management. The rot at the top will fester downwards as they also hire incompetent sub-ordinates. A good leader must ensure that the right people are in place or there is good talent management. Then the rest of the business will take care of itself.

Management failure, loss of market share, bad debts and poor financial management are the common manifestations of an incompetent CEOs. Incompetent CEOs usually hire incompetent managers who may lack the necessary expertise, business acumen and skills to run the company’s operations. These may result in untimely decisions and diminish the company’s opportunities for growth and expansion in the ever-changing world of business.

It is good for companies to rotate the positions and management posts regularly. This will allow for the people rotated to handle new challenges and portfolio. It brings fresh perspective to issues not seen by the predecessors. It is also one good way to identify leaders. Exxon-Mobil has an executive development programme for the staff rotation every two to three years. Engineers are asked to be financial analysts and economists asked to become logistics executives, computer analysts, etc. Through such rotational programmes, staff are groomed for higher positions and responsibilities.

Turnaround expert Peter Tourtellot suggested over the years, companies tend to promote cadres of yes men to ever-higher positions. This happens because upper management likes being told it is on track. Being a part of the organisation for years, the acquiescent hires are finally promoted to their level of incompetence. At that point they become fearful of losing their jobs and make them even less likely to criticize the company’s leadership constructively. Company heads should hire people with dissenting views if they want to have more balanced outlooks.

Most firms suffer from the weakness of having a team of homogeneous executives at the helm. Many of Compaq’s top executives came from Texas Instruments and Firestone managers were ‘gum-dipped’. This uniformity was no coincidence as these executives were the products of management selection and promotion processes that produced a standard product. It deprives the company of the much desired diversity of views and catalysts for effective response to market changes.

Consensual decision making works extremely well when there is the luxury of time to obtain to the right decision. The bad news is that the right decision often comes too late and becomes the wrong decision. Consensual decision often proceeds at a glacial pace.

In a company, the ‘yes’ men tend to find favour with the top management. However, they are usually promoted to their level of incompetence. To protect their ‘rice bowl’, they are unlikely to offer critical or dissenting views. This is why top management should encourage people with different views, especially if these are supported by sound facts.

To prevent a rat from getting up the pole, top management should have the discipline to remove ‘dead wood’in the company. It is important to perform periodic spring-cleaning of possible ‘dead rats’ as well as live ones at the workplace if you want to prevent an epidemic outbreak. Good management means not just hiring the right person but also firing the wrong one. This is good talent management.

Talent management functions hires the good personnel and fires the bad ones. This functions like the kidney in our body.

The two kidneys are the vital organs in the body amongst other functions cleanse the blood of toxins and keep it chemically balanced. The kidneys are sophisticated reprocessing machines and process the blood to filter out the wastes and extra water. Similarly a good talent management system will hire the good personnel, retain them and remove the bad ones.

Good management is not just about recruiting the right people to do the right jobs. This is particularly important during challenging times when staff budgets are cut to the bone. A strong management team must also have the discipline and insight to identify the dead wood in the company, and to be able to take firm action to remove them. These executives are those who have being entrenched in the system because of their job security and seniority are just cruising along and marking time. They do not have active and productive contributions as well as add value to the company. Most managers acknowledge that the most difficult task is firing of employees, particularly somebody that they have worked with closely for several years. Usually, the people that you did not fire are the ones that make your life miserable.

In many organisations, the decision-making power resides at the top. Empire-building by yes-men becomes the main preoccupation of the day. In the corporate intrigue of power struggle for status and position, the good personnel who may have differing views are stifled.

In talent management, the CEO has to look beyond himself and his abilities. He is smart if he hires the right people who may be better than he in those competencies to execute tasks that he himself is unable to do. He is then able to extend ‘his arms and legs’ within the organisation to get things done in more efficient manner. This philosophy is shared by Jack Welch as he felt that smart people hire smart people.

He said: “Every time you hire someone that is not better than you, you have missed an opportunity, because if you got all the answers, who the hell needs anybody else.” GE’s core competence is the development of people and Welch’s greatest legacy was to transform GE as the training ground of the world’s top business honchos. For example, the other two candidates, namely Robert Nardelli and James McNerney who did not get Welch’s job left GE to become CEO of The Home Depot and 3M respectively. Hiring the right person takes good skill in recruitment. Sometimes, even with good evaluation and hiring efforts, the employers do make the wrong hire. In such situation, you need to try to redeem the situation or live with it or fire the employee and start the recruitment process all over again.

However, in the situation of lean staff budget, you do not have the luxury of carrying ‘dead wood’. It maybe necessary to fire the wrong recruit. Jack Welch saw nothing wrong in delayering and downsizing incompetent people. To him, downsizing and delayering were absolutely necessary, and not firing workers who were a part of a losing business would have been more heartless than letting them go past the age of 50.

Welch the self-actualizer is also Welch the pragmatist and he sees these decisions as necessary threads in the fabric of business. . “That is business,” added the GE Chairman. He also explained it this way: “I think the cruelest thing you can do to somebody is give them the fake nice appraisals.. that’s called false kindness. A removal should never be a surprise.”

On the other hand too, retaining the people that you want to keep has become a key issue for organisations. When the key and talented people leave, there is a loss of experience and knowledge as well as continuity. Yet, companies would rather spend the valuable resources to recruit new talent from competitors than retaining the talent that they already have.

Planning tells you what is going to happen, post-mortem tells you what has happened Both planning and post-mortem are essential management tools needed to achieve corporate objectives, as well as to prevent the recurrence of the same mistakes. Planning for change must be the ever-present concern of every executive. At the same time, if events do not happen as planned, a post mortem is to be conducted so as not to repeat the same planning errors.

General Dwight D Eisenhower’s famous quote, “Planning is nothing and planning is everything” was a response to his cynical colleagues, who believed that, because plans never survive first contact with the enemy, planning was a waste of time. In the corporate world, quite often, planning gets thrown out of the window because of mounting short-term pressures to perform and deliver the bottom line.

Those who fail to plan are ultimately planning for a post-mortem. It is not that postmortem is unimportant but companies should always plan to succeed and minimize the occasions to do post-mortem on failed projects. Planning companies outperform those non-planning ones.

Crises and the unexpected changes are no longer a rare, random or abnormal part of our lives. They are built into the very fabric of society and modern-day corporations. While not all crises can be foreseen or even prevented, all of them can be managed if we plan strategically and tactically for what is humanly possible. The impacts of the crises can be minimised if one has a thorough understanding of the basics of crisis planning and management.

Tactical is short term planning whereas strategic is considered long term. Strategic plan looks at the forces in the external environment and responses to them. Tactical planning usually covers one year and is the stepping stone of the strategic plan, which normally covers three to five years.

Having post-implementation analysis or post-mortem is also critical. Just as a postmortem reveals the cause of death, a corporate post-mortem can be extremely revealing. You learn from your past mistakes and get all the feedback. It functions much like a resurrection experience, enabling you to have a new lease of life or second chance. In physical term it is reflection. Without this, the same mistakes may be made all over again and lessons learnt earlier will come to waste. This is why there is a saying that history repeats itself. Two world wars were fought within a short span of less than 30 years. Empires and dynasties fall and rise because of a lack of reflection and committing the very same mistakes that ushered them into power in the first place.

Post-mortem job is dull and boring particularly when it is preceded by overwhelming success. But it is also from reflecting upon your successes that one can avoid the pitfalls of failures in the future. Good managers always find out what has gone awry not so much to apportion blame, but to ensure that the same problems do not surface again. This is why some companies conduct exit interviews with departing staff to ascertain if there are more issues than meet the eye. Even chaos has its patterns. The post-mortem is the process to ascertain the patterns of things that have gone wrong so that these mistakes will not be repeated in the future. In the past, three strikes and you are out.

Today, one strike and you are history. This is because today’s world is highly competitive and you may not have a second chance. Through one mistake, miscalculation or strategic error, your competitors can steal away your customers very quickly. Your margins for errors are very thin as resources are scarce. This amplifies the importance of post-mortem to minimise repeating the mistakes

Over-eating or bingeing is detrimental to one’s health. Similarly, over-acquisition can cause corporate indigestion such as over-leveraging, integration difficulties, cultural misfits etc. You are what you eat.

While fast growth through acquisition is a thrilling experience in running businesses, it also holds much more risks than meets the eye. When the company is in trouble, some CEOs also go on a shopping spree’s acquisition. It is more glamorous and exciting than trying to fix mundane turnaround issues back in the office. It takes shareholders’ attention away from the domestic problems and impressed them with expansionary programs. Rapid acquisition done in haste with inadequate homework, wrong timing, egoistic reasons and impatience for success can result in calamity.

Harvard don, Michael Porter studied the success rate of 33 highly regarded companies over a 36-year period of acquisition. His data revealed that over half of the unrelated acquisitions were later divested.

Research by McKinsey & Company found a failure rate of 61% in acquisition programmes, with failure defined as not earning a sufficient return on the funds invested. Sometimes these failures are due to the fact that the acquisition was a mismatch in the first place, with small odds for success.

A high percentage of merger difficulties and failures are the result of defective management. Target companies are strategically sought and stalked, but then the follow-up acts are poorly orchestrated. Often people in both firms will be seriously troubled about how the acquisition may affect their personal careers. A good part of the merger/acquisition planning should be aimed at deciding how these concerns will be addressed. For instance, Novell’s merger with WordPerfect caused people in both organizations to experience dismay and the combined company teetered subsequently on the brink of disaster.

After buying WordPerfect for US$855 million, Novell sold it to Corel less than two years later for only US$115 million. Media companies faced similar problems of acquisition binge. The conventional wisdom in the industry that spur such manoeuvre was to grow the business by acquisition. Sony Corporation (Japan) was a case in point of being one of the first to venture aggressively into music and films. The same course of action was adopted by Vivendi Universal (French), Bertelsmann (German) and AOL Time Warner (US). It was believed that a product could be developed, then marketed through a wide range of in-house channels, from compact disks, DVDs, Web sites and even theme parks. This led to a proliferation of businesses requiring different skills and expertise, resulting in the failures of these acquisition ventures.

In their haste to capitalize on the boom years, many companies reckoned that the fastest way to beat the competition was to join in. After all, if you cannot beat it, join it. Thus goes the acquisition spiral. With each new acquisition, it is assumed that revenues automatically jumped up, while margins presumably stayed within acceptable ranges, especially if the deal is accomplished through stock swaps. The growing company acquires not just the market share but the expertise as well. Everything seems to augur well especially from the stock market as long as the company grows and numbers are good. However, therein lies the fundamental flaw with the growth-by-acquisition strategy.

This is what Herb Greenberg of Fortune magazine commented of the US corporate scene: “As with any addiction, the growth-by-bulk acquisition approach necessitates increasing doses of the drug to preserve the high. The only way to keep revenues growing fast enough for Wall Street is to buy ever more companies.” Once the growth curve halts and the stock price plummets to an extent that initiates a vicious downward spiral. The company loses its leveraging ability when capitalization decreases and interest expense increases to service the loan financing for acquisition. In the bid to reduce costs, the company starts trimming corners at the expense of quality, customers, and employees.

Therefore, the adage still holds true, ‘Do not bite more than you can chew’. It can become toxic for the company if they go into acquisition binge.

There is a strong parallel between corporations and medical science. Companies fall sick just as people do. Contrary to the common view, a company is not an inanimate object. Rather, it is a community of people, a living organism and an entity with its own distinctive personality and attitudes. Therefore, without proper care, a company, which has a life of its own, will perish. Rather than understanding businesses by using some mechanical or industrial models, it is useful to understand them from the perspective of ecology of organisms. Like all organisms, the companies exist primarily for their own survival and improvement as well as fulfill their full potential. Similarly, as human beings, we exist to survive and thrive.

At the antenatal stage, just as in the case of the impregnation of the human embryo, a company is incorporated through a concept wherein the founder explores or brainstorms the initial idea. In the case of the person, the foetus will be nurtured through antenatal care till birth. For the company it is conceptualized from a feasibility report on its commercial viability followed by incubation and culminating in its start up. The company may have been born out of a merger or acquisition, the social marriage for corporations. At birth, the start up company is a baby. Some babies are stillborn and aborted due to various congenital defects. Similarly, some start-up companies are aborted due to lack of funds or breakup in the partnerships.

A healthy person is like a profitable company, full of vitality and energy, whereas a patient is akin to a troubled company plagued by problems. The trouble is often financial in nature. When the company is sick, it needs a corporate doctor for healing or turnaround. In many cases, the sick company requires fresh injection of funds to resuscitate it. This is where the company needs to turn to hospital.

The hospital is the bank, private investor or venture capitalist which provides vital financing and cash flow for the sick company to sustain itself. The surgery is known by a host of corporate euphemisms such as restructuring, rationalising, downsizing and reengineering. They all mean the same thing. If you have been a victim of re-engineering, it basically means that you have been fired.

Companies get attacked by viruses too. These viruses can include incompetent management, low cost competition, economic recession etc. The mindset also affects the company’s financial health, just as psychosomatic problems can affect the physical health. Mindsets problems include the negative attitude, lack of enthusiasm and a general dysfunctional corporate culture that is resistant to changes in the marketplace.

When a company falls critically ill with a major disease such as loss of competitiveness, it needs to be admitted into the intensive care unit where it can receive turnaround treatments. When the company is healed, it is successfully turned around; otherwise, death in the form of financial collapse or bankruptcy ensues. Company also has its own undertaker, it is known as the liquidator, spelling its demise or death. Thus, there are many similarities between fiscal and physical health.

Many companies often let their success and euphoria gloat over their heads and forget to do their homework. Expansion is done without proper evaluation or support from adequate market research and survey.

Decisions are often overridden by the desire to accomplish business expansion as part of the company’s objectives and the risk factors are ignored. If the companies have done rational thinking, simple homework and some reflection, they would have been spared massive headaches and avoided some of these projects. Rational thinking is going back to the basic and not allowing emotions, egos and euphoria to get the better of you when making decisions.

There are many instances of poor rational thinking in business failures. For instance, many pioneering investors in China have lost money because their investments were based upon ‘China statistics’. This is based on the assumption that China has a population of 1.0 billion people then. If we are able to capture one percent of the market, which though minuscule, translates into 10 million of captured customers. This is indeed an impressive captive market. Unfortunately, these investors learned to their dismay that China was still a third world country. The bulk of the population was unable to pay for their products and services. The immutable law in marketing that “You cannot make money from people who do not have money” is applicable here.

History reminds us that there are many companies that embarked upon major mergers and acquisitions but failed miserably. Sometimes, proper homework, reflection as well as rational thinking will reveal that it is better to buy over the key people and grow the business than buy another company lock, stock and barrel. Apart from the strategic synergies of a merger and acquisition (M&A), one also has to be mindful of the cultural fit. An example was the teething problems encountered by both the Chinese and Singaporean partners in the Singapore-China Suzhou Industrial Park project in China in the mid 1990s.

Though the project had the support and endorsement of both the Chinese and Singaporean governments, there were many events of misunderstanding and conflict. These arise because of cultural differences even though both parties involved were of ethnic Chinese origin. The Singapore government eventually ceded the management of the industrial park in September 1999.

If both the parties could have tried on a smaller scale project to understand each other first, many headaches might have been averted. Instead, the whole project went full scale without testing the waters first.

In Singapore, many contractors in the construction industry landed up with projects’ cost overrun because they did not estimate the projects’ costs properly before the tendering stage. It is very critical to estimate the contract price correctly as during the project execution stage there is very little margin for error. Some contractors did not cater for contingencies in raw material price escalation such as the stainless steel, foreign exchange fluctuations, country risks and interest rates etc.

The Sydney Opera House may be one the landmark buildings in Australia. However, it was apparent that the project cost was over run by 15 times to over 100 million Australian dollars in the 1950s when it was built.. The building was designed by an Danish architect, Joern Utzon, beating 200 other international competitors. Its design was not backed by realism and practicality in the actual construction. If the judges had thought rationally and logically that it would be an uphill task translating the dreamed design into reality, it would have saved them millions of dollars.

Another project that blew the budget was the Euro tunnel. It was constructed amidst much fanfare. It expected to capture a third of the commuters’ market. However, when the tunnel was completed after much delays and cost overrun. It ran into the snag of its other competitors - the ferry and air transportation services lower their prices. By then, billions of dollars were already sunk into the project.

The rational thinking should be coupled with detailed planning, market feasibility studies and survey as well studying the mistakes made by competitors. All these efforts expended up front will pay great dividends in the long run. You avoid making many mistakes and tons of headaches and nightmares. It will help you to sleep well.

Many businesses are still focusing on yesterday’s problems at the expense of forgoing future opportunities. The best chess players always have a strategy in place. But in businesses, future planning seems to play second fiddle to analyzing of past performance. Architects would not build a house without the architectural plans because selecting the wrong layout or laying the wrong foundation or using the wrong building materials could result in disaster. The house can collapse on you after you move in. A strategic plan is the architectural blueprint for your business.

Executives always have the excuse for not doing strategic planning. They reckon that things are changing so rapidly. It does not make sense to do ten or even five year planning as events will change and it is not possible to preempt changes any more. It is true that nowadays environment changes are very rapid and that makes long-term planning even more difficult. Non-strategic planning companies give the excuse that planning results in paralysis through too much analysis. It is also true that some companies cover their backs with expensive market research and spreadsheet analyses.

However, one should not throw out the baby with the bath water. As a matter of fact, it is even more critical to have strategic planning during turbulent and rapidly changing environment. It is like the Titanic, which had the most modern technology in her times but did not plan for eventuality and disaster when it hit the iceberg. We are living in difficult times today and tomorrow things may be worse. With the possible threats such as terrorist attacks, infectious diseases like SARS, bird flu, mad-cow diseases etc, it will be naive for any CEOs to think that they are immune or protected.

One must not be fooled into thinking that a company is successful because it has a good strategic planning system in place. Your success may be coincidentally due to a buoyant market or weak competition. Also, one must not be mistaken that the use of processes such as the annual budget is tantamount to application of strategic planning. If the data is purely internal that is sales figures and product costs, it is not strategic planning. You need to factor in the external factors such as customer data, competition, economic trends, etc.

Also, studies of successful companies such as IBM, Procter and Gamble, 3M found that new innovations and great ideas do not originate from the centralized strategic planning department at the headquarters. Most of the good ideas and innovations were generated from outside the industry or the people who regularly interact with the customers. Strategic planning must not remain in its ivory tower but should incorporate the realities of the ground.

The former chairman of General Electric (US), Jack Welch drew on the strategies of the Prussian general and military writer Clausewitz, Karl von (1780 -1831). One of Clausewitz’s theories included an explanation of why a military leader could not devise a complete battle plan and then stick blindly to it: “Man could not reduce strategy to a formula. Detailed planning necessarily failed, due to the inevitable frictions encountered. Strategy was not a lengthy action plan. It was the evolution of a central idea through continually changing circumstances.”

His own strategic thinking matched that of the general. He constantly reinvented GE over the years as circumstances and the competitive environment shifted. There was an evolution to Welch’s strategic thinking and each major initiative built on the one that preceded it. He would wage one ‘battle’ and then wait to see how the results panned out. In tracing the evolution of GE during his tenure, Welch has drawn a stair-step-like chart that depicts the stages of GE’s culture change. Work-Out laid the foundation for Best Practices, which created a platform for Process Improvement such as Six Sigma, etc. Preparation of a strategic plan may not guarantee success but failure to do so is certainly a recipe for disaster.

Over-eating or bingeing is detrimental to one’s health. Similarly, over-acquisition can cause corporate indigestion such as over-leveraging, integration difficulties, cultural misfits etc. You are what you eat.

While fast growth through acquisition is a thrilling experience in running businesses, it also holds much more risks than meets the eye. When the company is in trouble, some CEOs also go on a shopping spree’s acquisition. It is more glamorous and exciting than trying to fix mundane turnaround issues back in the office. It takes shareholders’ attention away from the domestic problems and impressed them with expansionary programs. Rapid acquisition done in haste with inadequate homework, wrong timing, egoistic reasons and impatience for success can result in calamity.

Harvard don, Michael Porter studied the success rate of 33 highly regarded companies over a 36-year period of acquisition. His data revealed that over half of the unrelated acquisitions were later divested.

Research by McKinsey & Company found a failure rate of 61% in acquisition programmes, with failure defined as not earning a sufficient return on the funds invested. Sometimes these failures are due to the fact that the acquisition was a mismatch in the first place, with small odds for success.

A high percentage of merger difficulties and failures are the result of defective management. Target companies are strategically sought and stalked, but then the follow-up acts are poorly orchestrated. Often people in both firms will be seriously troubled about how the acquisition may affect their personal careers. A good part of the merger/acquisition planning should be aimed at deciding how these concerns will be addressed. For instance, Novell’s merger with WordPerfect caused people in both organizations to experience dismay and the combined company teetered subsequently on the brink of disaster.

After buying WordPerfect for US$855 million, Novell sold it to Corel less than two years later for only US$115 million. Media companies faced similar problems of acquisition binge. The conventional wisdom in the industry that spur such manoeuvre was to grow the business by acquisition. Sony Corporation (Japan) was a case in point of being one of the first to venture aggressively into music and films. The same course of action was adopted by Vivendi Universal (French), Bertelsmann (German) and AOL Time Warner (US). It was believed that a product could be developed, then marketed through a wide range of in-house channels, from compact disks, DVDs, Web sites and even theme parks. This led to a proliferation of businesses requiring different skills and expertise, resulting in the failures of these acquisition ventures.

In their haste to capitalize on the boom years, many companies reckoned that the fastest way to beat the competition was to join in. After all, if you cannot beat it, join it. Thus goes the acquisition spiral. With each new acquisition, it is assumed that revenues automatically jumped up, while margins presumably stayed within acceptable ranges, especially if the deal is accomplished through stock swaps. The growing company acquires not just the market share but the expertise as well. Everything seems to augur well especially from the stock market as long as the company grows and numbers are good. However, therein lies the fundamental flaw with the growth-by-acquisition strategy.

This is what Herb Greenberg of Fortune magazine commented of the US corporate scene: “As with any addiction, the growth-by-bulk acquisition approach necessitates increasing doses of the drug to preserve the high. The only way to keep revenues growing fast enough for Wall Street is to buy ever more companies.” Once the growth curve halts and the stock price plummets to an extent that initiates a vicious downward spiral. The company loses its leveraging ability when capitalization decreases and interest expense increases to service the loan financing for acquisition. In the bid to reduce costs, the company starts trimming corners at the expense of quality, customers, and employees.

Therefore, the adage still holds true, ‘Do not bite more than you can chew’. It can become toxic for the company if they go into acquisition binge.

There is an old saying in Spain: “To be a bullfighter, you must first learn to be like a bull.” You want to be a good fisherman, think like the fish. Then you will understand where the fishes normally like to hide so that you can cast your line or net at the right spot. In the medical context, the best way to learn about the disease is to learn to be the patient. Usually, the patient knows very well about the disease that is afflicting him. Besides researching about the disease, he will also strive to find a cure for the ailment as he is suffering from the pain of the disease.

In business, a manager needs to be on the ground - talk and interact with the various people: staff, suppliers, customers, business partners and even competitors. Through these various channels, the manager is able to acquire more knowledge of the industry and have better feel of the market. The manager does not operate in a vacuum and is better equipped to make sound decisions and take timely action. All these will curtail declining trends and may even result in future improvements. This is why the worst place for a manager is his air-conditioned room, where he is cut off from the realities and dynamics of the marketplace.

During his tenure, Lou Gertsner, the turnaround CEO of IBM became IBM’s most hardworking salesperson -logging thousands of miles to visit key customers and prospects. His approach sent an unmistakable signal to every employee to be hands-on and created a new image for IBM. By staying in contact with the market, Gertsner was able to make the right decision to turn troubled IBM around. Sun Tzu, in the art of war also advocated ’staying on the ground’ policy. “Generally, in the case of armies you wish to strike, cities you wish to attack, and people you wish to assassinate, you must know the names of the garrison commander, the staff officers, the ushers, gatekeepers and the bodyguards. You must instruct your agents to inquire into these matters in minute detail.”

A design engineer who never goes out to see the machines and work with the technicians, the banker who never uses the online services or queue up at the banks, the taxi owner who has not driven the taxi but takes his own car, the restaurant owner who has not been to the kitchen - these people will not understand and make good decisions about the customers’ needs and the issues encountered by the staff.

Many managers do not know the actual situation on the ground and only blame and fire their staff whenever the company encounters financial difficulty. This does not solve the problem as they do not know the actual cause and make the situation worse by making hasty decisions. Taking impulsive actions taken without full understanding of the events on the ground is like dispensing the wrong medication to the patient. It may cause more harm as the disease spreads unabatedly.

Good decision can only be made when you possess first-hand knowledge on the ground. Many senior managers particularly those in the staff functions such as the financial, accounting, human resource and legal departments do not meet with the customers. By exposing these support staff to the problems on the ground, it will help them immensely in understanding the problem faced by the line personnel such as the sales and operations staff. This will in turn foster better rapport and co-operation among the line and support staff.

Therefore, get your feet wet by going to the grounds.