The Business Odyssey 2015 No 9 - Business Infrastructure To Serve and To Protect
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This document discusses business infrastructure and its role in serving and protecting businesses. It defines business infrastructure as an organized system of people, things, and rules working together to achieve business outcomes and satisfy customers. The document focuses on the people aspect of infrastructure, describing how human resources functions can both protect a business from non-compliance issues and serve the business by recruiting and retaining talented employees. It argues that senior executives often overlook the ways infrastructure can contribute to business performance and success.
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The Business Odyssey 2015 No 9 - Business Infrastructure To Serve and To Protect
- 1. THE BUSINESS ODYSSEY Business Infrastructure – To Serve and To Protect 17March2015 Issue9 AndrewC.Harvey C.T. Moffitt & Company “Idon’treadverywell.SoIdon’tthinkIthinkverywelleither.”Galindasmiled.“Idresstokill,though.” ─GregoryMaguire,Wicked Iwanttoofferyouadealthatwilldoubleyournetworth.Andallthat’srequiredofyouistomakea decision,somethingyoudoeveryday.Thereishoweveracatch:thereisa30%riskthatyouwilllose everything.Everything.Howsimpleisthat;youmakeadecisionandacceptthepossibilitythatyoumay loseeverything. Idon’tknowaboutyoubutI’mnotrealcrazyaboutthepossibilityoflosingeverythingI’veworkedsohard toacquire.DoIreallyneedtorisklosingeverythingI’vealreadycreated?Ithinkmostofuswould graciouslyrunawayfromthiswonderfulopportunity.Posingtheoffersodirectlycreatesatremendous advantage;thepossibilityoflosingeverythingismadeobvious.Myofferalertsyourightfromthestart thatthereisrisk.Unfortunately,mostbusinessdecisionsdon’tannouncerisksotransparentlyandin manycasestheriskisveryeffectivelydisguised.Thisleadstobusinessownersandexecutivesmaking seeminglysimpledecisionsthatunnecessarilyputthebusinessatriskoftentimeswithnohintofdoingso. ThetopicofriskmanagementisextremelycomplexandatopicIwillreturntoinfutureissues.Atthis timeIamgoingtofocusonBusinessInfrastructure;employedeffectively,thefirstlineofdefenseagainst unacceptable risk. I intend to divide infrastructure into its components, People, Things and Rules, discussedindividuallyoverthecourseofthenextthreeissuesofTheBusinessOdyssey. Iusethetermbusinessinfrastructurefrequently.Businessinfrastructureisessentialtobusinesssuccess, financialperformanceandeffectivedecisionmaking.Businessinfrastructureisalsotheheartandsoulof businessmaturity.Thetermbusinessinfrastructureisconfusingandmeansdifferentthingstodifferent people.Itsmeaningvarieswidelyandusuallydependsonperspective;remindingmeoftheparableabout thesixblindmendescribinganelephant.Theparabletellsofeachblind‐man’sindividualperception, whileeachdescriptionwastrue,nonerevealedanythingtosuggestthattheobjectwasanelephant.So ratherthanstartingoffdescribingparts,Iamgoingtodescribetheelephant–orinthiscase–describe themeaningofbusinessinfrastructure. Businessinfrastructureisanorganizedassemblageofpeople,thingsandrulesthatworkingtogether producespecificbusinessoutcomes. Business infrastructure exists to satisfy two purposes: to serve and to protect. Businesses rely on infrastructure,sometimesunknowingly,toensurethatthemultitudeoftasks,somevisibleandsome invisible, are accomplished correctly so that the business can provide its customers the satisfaction expected. Inthissensebusinessinfrastructure existsto serve thebusinessinitspursuitofcreating customersatisfaction,providingareturnoninvestedcapitalanddistinguishingitselffromcompetitors. Separatelybusinessinfrastructurealsoexiststoprotectthebusinessfromunintendedorundesirable consequences.
- 2. THE BUSINESS ODYSSEY Business Infrastructure – To Serve and To Protect 17March2015 Issue9 Page2of4 Managinghumanresourcesisausefulexampletoillustrateinfrastructure’sabilityToProtectandToServe. Companiesreachingacertainnumberofemployeesneedadedicatedmanagerofhumanresourcesto overseecomplexadministrativeandcompliancedemands.Generallyspeaking,theHRManagerensures a correct payroll, transparent benefits information, standards of conduct, and other regulatory compliance.Thecompliancerequirementspertainingtoemployeesisanightmareandgladlydelegated tosomeone.Thisisasimplifieddescriptionillustratingtheobligationsthehumanresourcesinfrastructure is expected to satisfy. I suspect most senior executives recognize the appeal of delegating those responsibilities. My example highlights the To Protect half of the infrastructure equation. The responsibilityofthehumanresourcesinfrastructureistoprotectthebusinessfromtheconsequences associatedwithnon‐compliance.This,notuncommonly,ignorestheToServecontributions. ToServecontributionsareperhapsalittlelessobvious.HowdoesHumanResourcesServethebusiness, inadditiontoprotectingthebusiness?Humanresourcescanbecriticallyvaluablerecruitingandretaining thebestpeople. ArecentclientengagementincludedhelpingthecompanyrecruitacontrollertoreplacetheCFOwhohad recentlydeparted.Seniorexecutiveswereprimarilyfocusedonspendingless.Theoldsage“pennywise dollarfoolish”ringsfamiliar.TheCompany’scompliancecultureinclinedtheHRmanagertoconcentrate his time writing an “acceptable” job description, posting an advertisement, screening resumes and schedulinginterviews.Completelyabsentwasadialogdevotedtotheposition’scontributiontopresent andfutureperformance.Simplysaid,executivemanagersknewatitleandprice,buthadnocluewhat thepersontheywereattemptingtohireshoulddo.TheHRinfrastructurecouldhavefosteredthedialog, craftedalternativejobdescriptions,analyzedsalarydataandsummarizedthequalificationsofcandidates so executives could better understand the decision they were trying to make. As an aside, this all happened but was led by an experienced outside consultant (me) rather than organically by the HR infrastructure. Themanagerofhumanresourcesneednotbeanexpertinthespecificfunctionalrequirementsbutrather possesstheabilitytounderstandwhatisrequiredtorecruitandretainthebestpeople.Thisofcourse willonlyhappenwhentheseniorexecutivesrecognizethebusinessinfrastructure’sabilitytocontribute tothebusiness. Thereisnoready‐madebusinessinfrastructuretemplatethatfullysatisfiestheneedsofanindividual business.InthenextfewissuesIintendtodissectbusinessinfrastructureintoitsthreeinterdependent components:1)People;2)Things;and3)Rules.Thebusiness’sinfrastructureislikeotherbusinessassets –capableofcontributingtosatisfyingcustomersandrewardingcapitalproviders. InthethirdissueofTheBusinessOdysseyIintroducedtheFundamentalBusinessPurpose.Mypremise assertsthateverybusinessmustconvertrevenuesandcapitalintocustomersatisfactionandareturnon investedcapital.AsyoumayrecallIillustratedthisPurposebyusingtheanalogyofaninternalcombustion engine.Thedifferencebetweenalawnmowerandaformulaoneracecarengineisnotfunctionitisthe intention the engine’s design seeks to satisfy and this is reflected in its infrastructure. Same with businesses;thedifferenceisintheinfrastructure.
- 3. THE BUSINESS ODYSSEY Business Infrastructure – To Serve and To Protect 17March2015 Issue9 Page3of4 Infrastructure’scontributionstobusinessperformancemaytakemanydifferentforms.Itmaybedirect suchasthepackagingIntuitRealEstateServicesusedwhenitshippedloandocuments.Alternatively,it maybelessobvioussuchasGeneralElectric’sdisciplinedapplicationoffinancialmeasuresindecision making.Myhopeisthatbusinessleaderswillthinkdifferentlyaboutbusinessinfrastructureandbe inspiredtochallengetheirinfrastructureinvestmenttocontributeinnewandimaginativeways. Returning to my irresistible opportunity to lose everything. I observed that many executives make outwardlyroutinechoicesthatexposetheirbusinesstoseriousorevencatastrophiclosses.Themost commonexampleisthedecisionsooftenmadetotradediligenceforexpedience.Itisnotuncommonin my experience to discover business infrastructure’s part in decision making routinely dismissed or disregarded. Businessinfrastructureisbegrudginglyincorporatedasabusinessgrows primarilyasa meansforbusinessexecutivestofree‐uptimeforothermatters(principallymakingmoney)andtoensure tax compliance. Most middle‐market business leaders I’ve worked with assume that all the tedious infrastructuretasksaresatisfiedandthelesstimedevotedtothinkingaboutbusinessinfrastructurethe better.Thereisacertainappealtothismanagementstratagemifnotfortheoneminorproblemthat ultimatelyitproducesdangerousresults. In the issue of The Business Odyssey to follow I will discuss the people component of business infrastructure.ThisforthcomingissueistitledBureaucracy–Success’sAdversaryorSavior?Whenthe ultimategoalisproducingcustomersatisfactionandareturnoninvestedcapitaltherearecountless hiddentasksthatneedtobeperformedcorrectly.Hardlysurprisingmostofthesearetakenforgranted, wedon’tthinkaboutthemwejustexpectthemtobeaccomplishedproducingtherightoutcomeand doingsoattherighttime.Thesetasksareaccomplishedbecauseofpeople.Thesearethefolkswearing thegreeneyeshadesthatarechargedwithsayingno;orleastthat’swhatwe’vebeenledtothink. Bureaucracyisaconvenient,albeitmostoftenpejorative,labeldescribingtheorganizationresponsible forensuringallthegrubbyback‐officeworkisperformedcorrectlyandtimely.Thisterm,bureaucracy, unfortunatelyhasareputation,deservedlyinmanycases,ofbeingaridgeandunyieldingorganization placing more importance on pushing paper than producing results. Labels, while convenient, are oftentimesmisleading.Highlightingbureaucracywillhopefullyencourageexecutivestore‐focustheir attentionontheoutcomesandvaluesinfrastructureoffersbylookingbeyondcommonandmisleading labels.Ialsowanttodispelthemyththatbureaucracyconflictswithentrepreneurialism.Divingdeeper intothemeaningofbureaucracymayprovideafreshapproachtobusinessinfrastructurethatproduces superiorfinancialandoperatingperformance. Therearethreecomponentstobusinessinfrastructure:People,ThingsandRules.Thingstakeonmany differentformsbutcanincludetools,softwaresystems,information,machines,locations,orthelike.The issuefollowingpeoplewillfocusoninfrastructurethingsentitled“Things–TheLeversofBusiness.”My intentionislimitedtoexposingtheideathatabusinessprobablyhasalotofidleassetsthatcanand shouldbeputtoadditionalproductiveuses. Thefinalinstallmentinthisseriesonbusinessinfrastructurewillbe“Rules–SuccessNeedsaPlaybook.” Smart, motivated and well‐meaning people are essential to a successful business. Business success howeverdependsonpeopledoingtherightthingattherighttime.Andthatshouldnotbelefttochance
- 4. THE BUSINESS ODYSSEY Business Infrastructure – To Serve and To Protect 17March2015 Issue9 Page4of4 orcarelesslydelegated.Rules,asI’musingtheterm,meanswellthought‐outproceduresandprotocols thatdescribehowspecificcircumstancesaretoberesolved.Rulesalsoclearlyidentifyresponsibilitiesand authorities.Clearandwellunderstoodrulesimprovetheefficiencyandeffectivenessofdealingwith routinetasks.Moreover,itallowsexecutivestosleepbetterknowingthattheirtimeandenergyisonly requiredwhensomeexceptionalorunexpectedeventarises.Exploringwhyrulesareimportantandhow theymanifesttoproduceawell‐functioningbusinessinfrastructurewillbethesubjectofthisupcoming issue. Collectively,businessesneednotonlyasolidfoundation,satisfyingtheFundamentalBusinessPurpose, but also sturdy framing in the form of business infrastructure. Mature, sustainable and profitable businessesusetheirbusinessinfrastructuretoserveunderlyingbusinessintentionsandtoprotectthe valuethathasalreadybeencreated.