I recently asked eighty electronics’ distributors at a Las Vegas convention to answer three questions before we began an Activity Based Management (ABM) workshop…
- Have you ever had a brush with fame?
- Who are your heroes?
- What would you do in your business if success were guaranteed?
Their responses provided me a quick insight into their personal and professional lives. Most had no brushes with fame. Maybe that’s why they were meeting in Las Vegas! But a majority had at least one hero. The hero list included both familiar and unfamiliar people … Walt Disney, Bill Gates, Jesus Christ, Jack Welch, George Bush, grade school teachers and the single-mom CEO of a local hospital. The most frequently mentioned hero, however, was “my wife”.
There were many good answers to question 3. If guaranteed to succeed, the distributors said they would add more sales staff, build larger stores, diversify and expand product lines, make all employees equal, or reinvest in their business. One person defined success as retirement! All in attendance had good businesses. Otherwise they would not have taken the time and expense to go to Las Vegas. My goal was to teach them how Activity Based Management (ABM) could make their good businesses great.
During research for the best selling book, Good to Great, author Jim Collins found seven characteristics of great organizations. Activity Based Management (ABM) is an enabler of each trait of greatness.
- Great organizations have humble leaders who are fanatically driven to produce sustained results, no matter how big or hard the decisions.
ABM provides the foundation information, productivity information, competence information and resource allocation information leaders need to make decisions and lead sustained improvement.
- Great organizations “first get the right people on the bus, the wrong people off the bus, and the right people in the right seats – and then they figured out where to drive it.”(1) ABM activity analysis often exposes that people currently performing the work do not have skills, experience or interest to do the job well.
- Great organizations have the discipline to confront the brutal facts without losing faith. ABM replaces feelings with financial facts. ABM accurately reports which paper sections, revenue streams, distribution channels and customers are profitable and which are not. Pet projects, products and customers are exposed by Activity Based Costing.
- Great organizations focus their resources at the overlapping point to these three questions: (a) What are we passionate about? (b) What drives our economic engine? and, (c) What can we be best at?
ABM provides financial facts to answer questions (b) and (c).
- Great organizations have a culture of discipline. “All companies have a culture, some companies have discipline, but few companies have a culture of discipline.” (1) ABM brings discipline to an organization. Discipline is a focused effort to develop a habit. ABM delivers a discipline of measuring and improving cost, value, cross-functional processes, cycle time and quality of output.
- Great organizations think differently about the role of technology. “They never use technology as the primary means of igniting a transformation.”(1) Americans tend to automate things we should have eliminated. ABM encourages managers to eliminate non-value added activities before automating a process.
- Great organizations don’t do so overnight. “Rather, the process resembled pushing a giant heavy flywheel in one direction, turn upon turn, building momentum until a point of breakthrough, and beyond.” (1) ABM is not a project. It’s an ongoing process of performance measurement system that supports improved decision-making and continuous improvement. Many manufacturing, service and governmental organizations use ABM as the system to build and sustain improvement momentum.
I found it ironic that this group of business owners met in a city where the odds were stacked against them to learn about a cost management method that stacks the odds in their favor. No matter the location, size or industry, your organization has the potential of being a great organization. “Our study clearly shows that a company does not need to be in a great industry to become a great company. Each good-to-great company built a fabulous economic engine, regardless of the industry. They were able to do this because they attained profound insights into their economics.” (1)ABM will provide profound insights into your organization’s economic engine. Don’t settle for good … be great!
(1) Good to Great, Jim Collins, Harper Business Press, 2011
To purchase “Good to Great”, go to http://www.amazon.com/exec/obidos/ASIN/0066620996/icminc.