What is so different about competitiveness now?

Until the last decade or so of the last century, established organizations usually had sufficient time to adjust to all but the most catastrophic changes in business circumstances. If, for example, a company’s sales increased or decreased unexpectedly, the change invariably took place at a rate that was, in corporate terms, easily controllable and not usually seen as a reason for undue concern. In many cases it was just a matter of adjusting the number of employees and the long established organizations built up considerable expertise in handling problems of this type. Having made the necessary corrections, it was normal to expect that no further change would be necessary to that area for at least a year or so.

Fundamental to this expertise was the creation of business structures or functions that developed according to the type of organization, i.e. public sector organizations would be mainly broken down into administrative functions and manufacturing concerns would be split into manufacturing, finance, sales, etc. In each organization the various functions would come under the control of senior managers who were specialists in their respective areas. In this way the various business activities or processes were grouped together to make them easier to manage. One effect of grouping these processes into distinct functions was the creation of hierarchies, which in turn often produced layers of middle management in the functions.

During the early to middle part of the century, a certain ’sameness’ developed in organizations in similar business areas and industries. For example, up until the 1970s, food manufacturers tended to have the same functional areas and structure within functions, irrespective of size or country of manufacture. In effect, business ’norms’ had been created by which the senior managers could, to some extent, judge their own performance. By and large this came about because senior executives tended to look for jobs within the sector they understood and employers almost always believed that knowledge of their sector was essential, even when they were recruiting for non-core functions. For most of the century this was senior management’s main guide as to how the various functions should be constructed. Having developed in this way, the functions would frequently operate as independent units between which there was sometimes only occasional contact.

Only on very rare occasions did anyone seriously challenge this type of structure. Those that did were mainly academics and their arguments largely failed because they could not come up with suitable alternatives. The perceived business wisdom, therefore, was that an ideal method of managing an organization had developed over many years and it had been tried and tested – so it had to be right. Given these circumstances it was normal for changes to be made to one function in isolation from other parts of the organization. Even when management consultants were brought in to try to improve performance they often looked for savings from the relevant function without considering the full impact elsewhere in the organization. Organizations were thus guilty of looking in on themselves and to some extent ignoring the accelerating change that was affecting their marketplace and individual customers.

During the 1990s all this began to change. The competitive pressure became so strong that the continued existence of everything and everyone in business was soon being challenged. Technology developments changed some processes, made others obsolete and effectively moved some from one function to another, e.g. from finance to IT. The management theorists began to argue that the time had come to knock down the hierarchical walls and create a flatter, more competitive management structure by getting rid of middle management. Over the last few years management structures have got notably flatter in many organizations, with many of the redundant middle managers being used in new, often technical specialist, roles that reflect the organizations’ changing circumstances.

Heads of functions dealing with these changes were therefore under pressure from an unprecedented number of directions. Apart from the usual problems of maintaining the quality of their service, they had to contend with the threat to their empires and cope with naturally concerned subordinates.

A number of factors were responsible for creating this situation. These included the globalization of commerce, benchmarking, dramatically improved communications, as well as a range of other technology developments, which frequently emerged as packaged software.

Taken all together, these changes and threats add up to one conclusion – in future each manager’s main responsibility is to achieve and maintain the competitiveness of the processes that are under his or her control. Obviously, competitive pressure has always existed for the majority of organizations but in the 1990s it took on a new momentum and meaning, simply because its importance was becoming more obvious.

The importance of the competitive issue is illustrated by the fact that a significant proportion of the articles and books currently being printed on business subjects, concentrate in some way or other, on the problem of how to be competitive and remain competitive.

We must now accept that there is both a threat and an opportunity continuously present in every function in every organization. Manage the function well and you have a competitive advantage; manage it badly and you will be in trouble. If you performed the function badly in the 1990s you were more likely to suffer than if you did so in the 1980s and if you do it badly in the first few years of the new millennium, then your corporate house is going to come under pressure that much quicker.

All procedures and processes must now be analyzed continuously and, ideally, collectively. It is no longer possible to concentrate on a few ’key’ tasks and leave the others to look after themselves. It is now rarely correct to look at performance levels of functions in isolation. Each function is part of a body that is being continuously pushed and pulled by increasingly strong competitive forces and you need to know the direction the body is going in to justify any significant change.

With this in mind it is interesting to compare the PR handouts issued by the major management consultancies over the years. In the 1980s a typical claim would illustrate what the consultancy had achieved in function X for client Y. Now consultancies like Booz-Allen & Hamilton appear to limit their PR case histories to where they have worked with the client across all its functions on a single project.

For many organizations, the internet has only just started to influence the competitive situation but few can be in any doubt that it will make the situation more rather than less difficult to control. The net result of all of this is that you cannot be sure that the savings and improvements you made this month will be sufficient to keep you competitive next month.