Treat corporate maladies early

PUBLISHED : Sunday, 17 January, 1993, 12:00am
UPDATED : Sunday, 17 January, 1993, 12:00am

SHAFFRAN: 1992 was a year of tremendous change for corporations worldwide. Many had to face the fact they were close to being terminally ill or, at the very least, showing signs of a major illness. Look at Wang, Macy's Olympia and York, General Motors, Isuzu and the Maxwell group of companies. In Hongkong, even Hutchison Whampoa faced difficulties.

Forrest: It's amazing most companies have to be bleeding to death before they can make the decision to institute major changes. Perhaps Hutchison has made some major corrections so it does not have to go to the emergency room. Only time will tell.

Steilen: Why do companies get into so much trouble? Why won't they take an in-depth look when they're healthy to make sure they stay that way. As long as companies are posting profits, or announcing major commitments in China, they and their shareholdersbelieve they are growing and keeping up with the rapid changes taking place in businesses around the world.

O'Hara: Have you noticed when a company is doing well, it is always ''Let us tell you why we are doing so well.'' But when things start to go wrong, it is always outside forces - ''the economy, the Gulf War, US policies in China, the brain drain, whatever''.

Forrest: When it's often a slow deterioration - old practices, old ways of doing things which don't work anymore. A failure to accurately assess their workforce and their markets. Then inefficiency sets in and often company management doesn't want to acknowledge it. They justify, rationalise, accept, compensate. They're either incapable or unwilling to look deeply into their organisation and their management.

Shaffran: Companies are a lot like people. We hate to deal with unpleasantness. If, say, we are gaining weight or haven't exercised, or are smoking too much, or are even having trouble with our hearing or eyesight, or think we've found a lump, we put offgoing to a doctor. Then we become used to it and don't notice it getting worse. A slow deterioration sets in. We begin to compensate and rationalise.

Steilen: Exactly. The analogy works well. As humans, we keep putting off going to the doctor. It's the fear of knowing; the fear of having to make hard decisions like giving up smoking, or having surgery. So we keep going until we're too far gone. Companies, rather company executives, do the same thing.

O'Hara: Often we tinker with the problem. Try a variety of ''home-grown'' remedies - diets, vitamins, a burst of exercise, meditation or acupressure. We feel better, but the real problem does not go away. Now we're facing major decisions. That's often the condition companies are in when they come to us. They're looking at long-term change and they don't know how to go about it.

Forrest: What makes companies or people decide to change, to take control of their lives? Shaffran: A crisis - the heart attack or bankruptcy. Or narrowly missing a crisis - by almost getting hit by a bus, or finding the lump wasn't cancerous, then you actually decide to change. Or it's when you see a company similar to yours in trouble. The smart executive sizes up the competitors' problems and takes the strong medicine necessary to avoid a similar situation. The most enlightened companies act on inner awareness - a constant scanning of the environment.

Forrest: They are the people who go for annual check-ups and practice preventative medicine. They're not afraid of looking squarely at a situation. And they value ''expert advice'', objective analysis. Why aren't more companies like that? Why don't boards of directors insist on it? Steilen: Again, success breeds complacency. They fail to accept the rate of change gets faster every year. Changes in management style, corporate focus, and workers' perceptions that may have taken a decade to evolve in the US are hitting Asian companieslike a tidal wave. They don't need 10 years to evolve out here. Global competition is forcing local companies to make major changes overnight. They have excelled at instant change when it comes to products, but failed when it has to do with management practices.

O'Hara: Companies are not recognising the symptoms in time. If they do, they think ''this too shall pass''. The push for profits and growth affects long-term thinking about people, markets and management - for Asian and Western companies.

Shaffran: We've found there are times CEOs do sense a serious problem, but that short-term perspective gets in their way. They self-diagnose and look for quick remedies - a new brochure or logo.

Steilen: Or that wonderful cure-all - a quality programme, with a catchy name.

Forrest: It comes back to the need for a vision and a strategic direction for a company.

O'Hara: Companies which come to us have tried a lot of things. They've been all over the place. Frequently, no one below the senior level has had any say. The leadership thinks that to call in experts is an admission of failure. Staff and lower management know things are not working but feel powerless to say or do anything. Yet they have the most to offer and the most at stake.

Steilen: Precisely. We find when we get into companies there is a lack of realistic planning - based on the market, the competition, what customers need and want, and what the company does best. When I hear managers say ''I think'' or ''we think'', I know their data is not based on facts. That is a recipe for disaster.

Shaffran: It's all about strategy - whether it's looking at where a company is going, what it says or does, how it looks or acts, or how it treats its customers and employees. Every decision should be based on, and consistent with, the corporate strategy. It is the lesson for the '90s. Why is it so difficult for companies to focus on a strategy? Forrest: I often find CEOs or chairmen in Hongkong are operating from a strategy or vision, but they keep it to themselves. It's the ''trust me, I know what's best'' syndrome. So they've never written it down, articulated it, tied it to everything the company does, and - most importantly - sold it throughout the organisation. And they have not trusted their managers and employees enough to let them make decisions within the strategy.

O'Hara: One other major theme has been change - managing change. Certainly nothing new or clever; everyone is talking about change. But few people understand how to manage change. Hongkong is in the midst of massive change. That should mean great opportunities. Organisations which can adjust to the present and the future will seize the competitive advantage. They will be the healthy companies for 1933 and beyond.

All: When did you last examine your company? Is it at its peak physical condition, or is it in the process of deterioration? Do you give it an annual physical? If yes, how? Internally, externally, or both? Do you rely on updating last year's plan or do you do a real ''zero-based'' review? How do you ensure objectivity? Or, if you don't go in for that annual check-up, why not? We'd like to hear from you.

Cliff Shaffran is managing director of Quicksilver, Deborah O' Hara is managing director of Connective Management, Charles Steilen is executive director of Asia-Pacific Institute of Business, Chinese University of Hongkong, and Anne Forrest is managing director of Forrest International