In the early 1960s, a certain company established unusually high productivity improvements. With the work load increasing as the work force reduced, this company’s “productivity ranked among the best in its industry. The difference between average and best performance was worth savings of more than $40 million a year—well over one-third of its net income at that time.
What contributed to this?
Neither new technology nor labor-saving machinery was a significant factor. No significant change in management took place. The company was not reorganized. Nor were programs incorporating management by objectives, organizational development, mathematical modeling, or management information systems responsible for the shift. The key to the turnaround was a decision by the principal operating officer (with backing from the chief executive) that the company must and could make substantial productivity gains. Naturally, many supportive programs and activities were necessary to translate this determination into results. These activities, however, would have produced little if a clear demand for improved performance had not been placed on the company’s management team.
Most organizations have the potential for as great—or greater—gains. Very few, however, ever realize them. Few managers possess the capacity—or feel compelled—to establish high performance-improvement expectations in ways that elicit results. Indeed, the capacity for such demand making could be the most universally underdeveloped management skill.
Why Demands Aren’t Made
Pushing for major gains can appear very risky to managers, and these perceived risks exert tremendous inhibition on performance expectations. If the newly installed manager asserts that significant gains are possible, he may threaten his predecessor and current boss—and thus arouse their antagonism—by implying that they had settled for less. Even if he has been in the job for a while, he subjects himself to the same estrangement.
Great demands increase the risk of resistance from subordinates and of the embarrassment of failing to reach ambitious goals. Managers who set unusually high demands may be challenged by others. They must therefore be sure of their facts and clear about directions. The struggle to upgrade performance may expose their uncertainties, weaknesses, and inadequate knowledge. More modest expectations reduce all these risks.
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It is not surprising that many companies find their strategies and business models increasingly out of step with their environments.