Business Management Education for Professionals

Several years ago, Dan Johnson, Pastor of Good Samaritan United Methodist Church in Edina shared with me an enigma that Pastors’ face. They go to school and get their degree in theology and then get assigned to a church. Their education has been very thorough on religious subjects but nothing on business and now they are faced with managing a fairly large business. Dan started a Leadership Academy for Ministers in which he arranged for leaders from industry come in and present subjects in their area of expertise. These classes were filled to capacity with Ministers from around the state eager to learn.

Dan recognized and filled one of societies unmet needs. A similar need undoubtedly exists for doctors, lawyers, accountants, veterinarians, and other professionals. They enthusiastically pursue an education in their field of interest, which does not include classes on leadership and management of a business.

Doctors, for example, are drawn to health care because they want to dedicate their life’s work on doing something good, helping patients. Altruism is key to their makeup and they cannot succeed as physicians without it. They value their independence but medicine is seeing an explosion of knowledge, is increasingly complex, and requires increasing numbers of specialists in narrow fields, therefore creating the need to work in teams in clinics and hospitals. Choices for top management or administers of clinics and hospitals can be of two types-professional managers without a degree in medicine who face the constant lack of respect by doctors because of the lack of understanding of medicine, or doctors who lack education in how to manage a business.

Heading the management team in healthcare is difficult because of the idealistic nature of the people that it attracts who value their autonomy. Healthcare leaders need to work carefully to develop a shared vision of the future state of the organization and then get all involved in identifying the necessary steps to achieve that vision. How to do that takes education and training.

A classmate of mine at Pepperdine University of Los Angeles was a sharecropper’s daughter who made her way up through a medical degree and a promising career as a family doctor. She decided she was going to open a clinic in Watts, a poorer section of Los Angeles, but recognized her shortcomings in running a business. She enrolled in an executive  program for a Masters Degree in Business Administration in order to enhance her chances of success. This entailed 25-30 hours per week for two years of study and classes in addition to her medical practice, but she did it.  That takes extraordinary dedication.

Similar scenarios exist for lawyers, accountants, and other professionals. Forward thinking educational institutions will imbed basic business courses in their curricula but there will be an additional need for training by consultants and specialized schools at the time needed. If the need is exposed, it will be filled but the real dilemma may be for the new leaders of professional groups to realize they are missing something in their education.

Choosing a Board for Your Organization

Are you ready to get advice on how to run your company? Are you open to being directed on how to run your company? Unless you have a publicly traded company, in which you must have a Board of Directors, you have options.

An Advisory Board is a body that advises the management of an organization. It does not have authority to vote on corporate matters nor does it have legal fiduciary responsibility. It is a way for top management to utilize the brainpower of several respected individuals but it is up to management to heed or ignore the input.

Individuals for the Board of Advisors are typically people known and respected by the Chief Executive of the organization. They tend to be people with broad experience but not necessarily in the same line of business. They should be willing to speak forthrightly to the CEO, be willing to listen, and put forth recommendations. They tend to be unpaid for this service so their time is mostly spent with the CEO discussing problems he/she brings to meetings. No time or action is expected from the Board of Advisors other than what they spend in meetings, which are typically held monthly. The agenda is set by the CEO and includes a review of financial performance and projections and problems where the CEO would like advice.

Alternately, an organization may decide it would benefit from a formal Board of Directors who jointly oversee the activities of the company or organization and are elected or appointed by the owners or stockholders. A board's activities are typically detailed in the organization's bylaws. The bylaws commonly also specify the number of members of the board, how they are to be chosen, and when they are to meet. It is a good idea to have an uneven number of members of the Board so as to avoid a tie vote or stalemate. The ideal number is considered to be seven. That would allow for one to be committee chair for each of the three standing committees; Audit, Human Resources (sometimes called Compensation), and Strategy. They should have expertise in the field of their committee. One member of the Board is the CEO of the organization and the other three should have expertise in the organization’s line of business.

Typical duties of the Audit Committee include:

·      ensuring the availability of adequate financial resources;

•                approving annual budgets;

•                accounting to the stakeholders for the organization's performance;

Usual duties for the Human Resources Committee are:

•                setting the salaries and compensation of company management.

•                selecting, appointing, supporting and reviewing the performance of the chief executive

Normal duties for the Strategy Committee are:

·      governing the organization by establishing direction, broad policies, and objectives;

The legal responsibilities of boards and board members vary with the nature of the organization, and with the jurisdiction within which it operates. Board members are expected to spend at least two days per month discussing potential problems with employees at all levels. This is in addition to the Board meeting on site with additional time in research outside the facility. For these reasons, board members are usually limited to belonging to no more than two boards of for-profit organizations. To have this time available, they are usually retired from their personal careers and are considered to be professional board directors. All are independent of the organization except for the CEO.

So, what is the right kind of board for your organization? Questions to be considered are:

·      Are you a public or private organization? Public organizations require a Board of Directors.

·      Are you willing to give up some of your power?

·      Do you have the ability to pay professional directors? Advisory Board members typically not paid fees other than expense reimbursements.

·      Do you have the ability to attract professional directors?

·      Do you recognize the value of professional directors?

Establishing a Board is a very important decision to be made by the owners and should not be made lightly. The additional brainpower can be very valuable but there are tradeoffs.

“Management Is the Most Creative of Arts”

We cannot manage today like we did in the past and hope to be successful. Change is upon us in management just like in everything else.

The 1950s and 60s brought new insight into management techniques that we now call Traditional Management. The leading managing technique at the time was based on Plan, Organize, Direct, and Control. Management was taught to carefully plan what was to be accomplished, organize the structure and resources of the organization to achieve the plan, direct the people on what to do, and control their actions to conform to the plan. This placed a heavy burden on relatively few managers to be the brains to develop the right plan, organize correctly, oversee activity of the workers, and make sure they did not deviate from plan. This lent focus and structure to work and was successful in its time. However it did not make use of all of the brainpower of the organization and led to micro-management of the workers.

The initial work of W. Edwards Deming and other statisticians during World II to use statistical techniques to improve work processes and adopted by companies throughout Japan in the 50s and 60s was finally recognized in this country in the 80s. Thus began the era of Scientific Management. Frederick Winslow Taylor is credited with contributions to Scientific Management, but his work was more exhortation rather than supplying people with processes that would allow them to do better. Largely ignored in America during the 50s through 70s, Scientific Management was embraced by the Japanese under the tutelage of Dr. Deming and their business turnaround was miraculous. A notable exception to the void in usage of Scientific Management in America was at Ford Motor Company

Robert S. McNamara and the “Whiz Kids” created favorable publicity for Scientific Management with their contributions to the turnaround at Ford in the 60s and 70s. Universities started offering courses in business statistics to teach quantitative decision-making. Facts and figures were used for data-driven diagnosis and determination of action. A resultant complication was focus on the numbers to the detriment of understanding of human behavior and motivation, although both Deming and MacNamara warned against this. Management focused on rational solutions for problems in order to maximize financial returns for the companies and its owners. Over time, the need to balance rational decision making by data with social responsibility made its presence. The desire to bring positive change to the world is a force to be considered. All employees, customers, owners, and neighbors must be treated with mutual trust, respect, dignity, and consideration of their needs.

Popular methods today can be titled System Management with the intent to optimize the system for all shareholders. It recognizes that all employees have brains and should be utilized to make decisions and corrective actions. People have an inherent need to be a part of a team, feel needed and appreciated, but most important derive satisfaction of doing work that is worthwhile. It is a blend of the above management styles with some added features required by today’s complex operations.

Whereas Traditional Management focused on Plan, Organize, Direct, and Control, and Scientific Management used a similar simple guide, Plan, Do, Check (Study), and Act, System Management can be described with Plan, Develop, Communicate, and Monitor.

Plan in this case starts at the aim (Vision) of the total organization and all other plans should be judged on their contribution to the greater aim of the organization. It is the responsibility of top leadership to develop the Aim.

The next step by various levels of management is to develop the systems and processes that will achieve the plan. People do the best job they can within the processes supplied to them but usually only management has the authority to create or change processes.

The third step of Evolving Management is communication of “what”, “how”, and “why” of work activities to everyone involved. What and how are fairly straight forward but the why is probably most important. When people understand the why of activity, they are intrinsically motivated to accomplish results and intrinsic motivation of far more powerful than any attempts at extrinsic motivation. Remember there are two parts to communication-sending and receiving, so management needs to engage in discussion to not only explain the plan, systems, and processes but to spend an equal amount of time listening to feedback from others who are doing the work or otherwise involved. Then they need to be open to modify the plans, systems, and processes with the new information gained. The Japanese call this, “catch-ball” because they liken it to tossing a ball back and forth until there is understanding and agreement.

The fourth step is to monitor progress with data on achieving the plan. The purpose is to be able to take corrective action if the systems and processes do not achieve the intended purpose in the time frame needed. An important distinction here is that management is checking on the performance of the systems and processes and not the people. Of equal importance, this step provides opportunities for management to coach and develop employees. It is helpful to view the manager as a coach whose role is to develop the talent the people.  In order to coach, the manager needs to know what is happening, therefore monitoring provides the data and information needed for coaching. Development of people is a key purpose of management.

We have progressed from Traditional Management to Scientific Management to System Management. Management, like technology, is constantly changing and improving. We cannot be content with our old styles but constantly evolving in order to be successful in today’s complex and changing world.

Improving Education Organizations

Two articles ago, I talked about the Minnesota Council for Quality and its efforts to improve the economy of Minnesota by facilitating the improvement of the processes that produce the goods and services of the state. In the last article, I talked about the lack of training in our school system on quality improvement and how we are placing future generations at risk. We are falling behind Asia and other parts of the world in this critical area. In this article, I will attempt to tie them together and, yes there is a glimmer of hope. It is not widespread nor is it stemming from leadership from higher education or statewide, but from leadership of individual schools.

Founded in 1987, the Minnesota Council for Quality advances continuous improvement and performance excellence within organizations, individuals, and communities. It helps leaders identify strengths and improvement opportunities and builds networks that bring information, resources, knowledge, and best practices to organizations desiring to improve. They offer services such as their Baldrige based organizational assessments and the Minnesota/South Dakota Performance Excellence Award.

Established in 1991, the Performance Excellence Award is given to organizations that successfully complete a full organizational assessment using either narrative-based or survey-based approach. Applicant organizations receive between 800-1200 hours of evaluation from a volunteer Board of Evaluators. The assessment process includes an independent review of the application, a consensus review by the Evaluator team, a site visit review, and an Improvement Planning Sessions, at which senior leaders prioritize improvement opportunities for their organization.

To no ones surprise the winners of the Award in the early years were almost all manufacturing companies because they were being pressed to improve by competition. Then state offices and medical organizations began to appear as winners. And now in 2012 the winners are:

Designs for Learning

Marshall Public Schools

Byron Public Schools

Avera Sacred Heart Hospital

Rochester Community & Technical College

Cardinal of Minnesota

Half of the winners this year are individual schools seeking to improve and another is related to education!

This raises the questions:

What did the staff and teachers learn to help them in the future?

What did the students learn?

How has the curriculum been affected to better prepare students for continued improvement?

A retired teacher from Byron Public Schools, Carolynne White lives on Long Lake. She said the Superintendent of Byron Schools, Dr. Wendy Shannon, brought with her knowledge of the Baldrige Award criteria thirteen years ago when she was selected as Superintendent and started applying it to the school system with strong support from Mayo Clinic and IBM. The staff was trained in continuous improvement. They developed a new math curriculum on their own which is now widely recognized as a model for other schools. Every student learned to set personal learning goals and track improvement on charts, even down to the fourth grade. The students graph their improvement from year to year and take pride in their accomplishments. A highlight of the student-lead Parent Conferences in the middle school is when the students present their progress.

There is reason for hope when you see forward thinking schools like Byron and Marshall, but what about the rest of the schools? Ms. White said incoming practice teachers and new teachers have no knowledge of these continuous improvement methods and have to be taught.

How will this new knowledge get fed back into the curriculum of the teachers’ colleges at the universities? Continuous process improvement methods are being taught across Asian and now African schools, including elementary schools, but only rarely in American schools. Resources like the Council for Quality and industry leaders like Mayo and IBM are available to help but we need the education departments of the universities to teach the teachers.

It is my hope that key people from the universities visit with people from Byron Public Schools, Marshall Public Schools, and Rochester Community & Technical College to see first hand the benefits to the students and our future society of continuous improvement practices.

This is also a good idea for leaders of our local public school boards to also visit and learn from these leaders in education.

Quality in Education

Some years ago, I met with some Japanese executives and they mentioned quality improvement techniques taught in their school system. I asked them when they start teaching these techniques in their schools and one of them responded, “Oh, I would have to ask my son who is in the third grade when he started.” He went on to say, “I myself started when I was in the fourth grade.” These students have grown up to help change the quality of Japanese products and services to the highest standards of the world.

Other Asian countries have taken note of Japan’s success and have followed suit. Starting in primary school and extending throughout high school, students are introduced to the teachings of W. Edwards Deming, Joseph Juran, Kaoru Ishikawa, and many other great figures of quality. They learn quality problem-solving tools, basic kaizen, statistical methods, and a host of East/West theories about human development and behavior.

The city of Lucknow in northern India is home to the City Montessori School, the worlds largest school according to the Guinness Book of World Records with 40,000 students.¹ Dr. Jagdish Gandhi and his wife, Mrs. Bharti Ghandi founded it in 1959 and began including quality concepts in their curriculum during the 1990s as they saw what Japan had accomplished.

Jagdish Gandhi’s teachings have spread throughout India and various parts of Asia and Africa. The teachings are shared primarily via an annual convention called the “International Convention on Students’ Quality Control Circles at cities around the world.

For the students from India, given the backdrop of India’s economic rise, one can only wonder what fantastic career paths there will be for these future leaders when they infuse the vigor of their childhood training in quality into their country’s bloodstream.

Meanwhile, what is happening in this country? We are focused on leaving no child behind and certainly would not want to introduce statistical methods in primary school. Even if we were properly motivated to teach improvement techniques to our students so they could compete in the world market on a level playing field basis, you might ask who would teach the teachers?

It turns out that is not a problem.  Most institutions of higher learning have a section or department, with a staff that is knowledgeable in quality improvement. The major problem is that they are focused outward and not inwardly on their own system. They provide training for industry on the improvement philosophy and techniques but rarely does the institution practice it internally. If they did, the professors and staff would see the benefits firsthand and quickly work it into their curriculum, including the Department of Education where they train future teachers.

As Dewar and Bammert said in their article, what we are seeing in Asia is a refreshing young class of future leaders. There is little doubt that their early grounding in quality philosophy and tools will strongly influence how they will one day lead, and live. Deming and Juran were Americans who taught the Japanese. It is time now for us to learn from the Asians the importance of teaching quality improvement to our students.

Benefits of Quality Improvement

Is it worth all the effort required to initiate and sustain process quality improvement in your organization? It is indeed a lot of work and takes time which most of feel we already feel is in short supply. So, does quality indeed get results? The answer is a resounding yes! Many studies are available to answer that question. A search of my files revealed data gathered over the years testifying to the positive impact of quality on performance of organizations’ market, operational, and financial performance. Some highlights of Minnesota companies are:

Company A - Tripled earnings since in five years, increased revenues 62%, reduced manufacturing time 64%.

Company B - Reduced product defects 50%, reduced product returns 75%.

Company C - Increased sales 15%, increased customer retention 92%.

Company D – Doubled business volume, increased productivity 20%

Company E – Increased revenue per employee from $63K to $100K

Company F – Increased Earnings 40%, increased revenues 12%

NOTE: Their names are not shown because they are former clients.

From an article in the Minneapolis Star Tribune, Arpil 6, 1975, Harvey Mackay’s column, “Motorola … spends millions on quality training but it costs them nothing because of the savings they enjoy on returns, retooling, rebates, lawsuits, and customer satisfaction.”

From the United States General Accounting Office report May of 1991, “MANAGEMENT PRACTICES, U.S. Companies Improve Performance Through Quality Efforts”-GAO review of the 20 companies that scored highest of 1988 and 1989 applicants for the Malcolm Baldrige National Quality Award indicated that nearly all achieved:

·      Better employee relations

·      Higher productivity

·      Greater customer satisfaction

·      Increased market share

·      Improved profitability

Details of the study are interesting. Financial performance was detailed in that 15 companies reported a total of 40 observations as measured by several ratios widely used in financial analysis. The ultimate impact of quality management practices is improved profitability.

·      34 improved

·      6 declined

American Quality Foundation and Ernst & Young, joint study, 1992.

·      Higher performing organizations have 25% of their workforce performing in teams compared to 5% for poorer performing organizations.

·      Higher performing organizations had nearly 100% of their workforce formally trained in problem solving compared to less than 20% in poorer performing organizations.

Business Week, October 18, 1993 study –

·      The three publicly traded, whole company, Baldrige winners outperformed the Standard & Poors’ 500 from the time of their winning through September 30, 1993 by 8.6 to 1.

·      The ten Award winners that analyze productivity enhancement as annual increase in revenue/employee, a median average annual compounded growth rate of 9.4% and a mean of 9.25% have been achieved.

Perhaps the greatest testimony to the business results was the investment management company policy of Robinson Capital Management. The president, Jack Robinson, was the oldest active fund manager.  After 44 years of managing another fund, Mr. Robinson followed a path of investing in quality. He decided to only invest in companies who believed in Total Quality Management, the kind that is based on the teachings of the noted quality consultant, Dr. W. Edwards Deming.  He had taken notice of the performance of stocks of TQM companies. He said, “Quality is a companies greatest asset, and it doesn’t show on the balance sheet.” In one years, General Securities Fund was up 9.2% vs. 0.7% for the average fund.

Indeed, quality does pay!

Attributes of a “Best Boss”

Do you think you might be considered the best boss any of your employees ever had? Think about this long and hard. What really constitutes a “best boss”? How would you describe them?

There is a simple exercise you can use to determine the best characteristics of a leader. The next time you are with a group of people, ask them to close their eyes and think about the best boss they ever had or observed; ask them to remember someone who had a positive, long-term impact on their lives. Picture that person in their mind until they remember everything they can about them and write down ten adjectives that best describe that person. Then ask them to call out their adjectives while you record them on a flip chart, blackboard, or computer screen. You and they might be amazed at the adjectives that receive more than one mention.

Business consultant, Ron Wiley, asked that question of some 10,000 people.  The top-ten list is listed in the table below along with the results from similar exercises conducted by the American Management Association and AT&T. Note the similarities.  The fourth column lists those traits commonly taught in our management training schools and seminars.

Characteristics of Leaders

	Ron Wiley	American Mgmt. Assoc.	AT&T		Commonly Taught Characteristics
1.	Honest	Honest	Honest		Visionary
2.	Knowledgeable	Competent	Competent		Persistent
3.	Understanding	Forward Looking	Inspiring		Dedicated
4.	Good Listener	Inspiring	Courageous		Passionate
5.	Fair	Intelligent	Forward Looking		Principled
6.	Considerate	Fair Minded			Resourceful
7.	Positive	Broad Minded			Quick-minded
8.	Supportive	Straight Forward			Self-confident
9.	Caring	Imaginative			Honest
10.	Punctual	Dependable			Determined

Are you surprised that the number one attribute from all three of the feedback groups is honesty?  Notice the high ranking of fair, considerate, dependable, and caring. Wiley concluded that if you want to be a good leader, read the Boy Scout manual. It is all there.

Compare those results with the fourth column of what we think are desired characteristics of a good boss. Do you see similarities or disconnects? Which is right? Perhaps, all of the above.

Now take this one step farther; what do you think your employees would say about you if they were asked to write ten adjectives to describe you. Would honesty be number one on the list? Would you be embarrassed, afraid, or proud of what they might list?

Any exercise has little value unless it results in action. A useful exercise is to write down the ten adjectives that you think they might say and compare to the top ten lists above. Next compose a list of actions to undertake to improve your characteristics. Share this list with a spouse or friend to affirm your commitment and follow through.

It is never too late, nor are we too busy, to improve.