Arkadiy PRIGOJIN
Ph.D., President of NICMC

Konstantin Y. Smolentsev
 Ph.D., the Academician of IIA, СМС
Chairman of Board of directors
IC “SMOLENTSEV & Partners”
http://www.smolentsev.com/ 

Highly respected managers!

For many years already we have been working with you, all are so different, but in some ways very similar. You are the hope of our economics and the most active and responsible part of the society. We highly respect you. And as it is common in those kind of situations, there is a big “BUT”.

Our managers are gradually mastering the legal and financial aspects but are still incompetent in management. Today we are a far-away province of raw material not only because of our biography, our sense of hopelessness, our low self-esteem, usual laziness and slowness, but also because of the underestimation that for many decades in an industrial world the core concept for development is organizational and management consulting.

Don’t argue, we know very well what we are talking about. Here are our reasons.

WHERE ARE INVESTMENTS LOST?

Answering the question:
- What is extremely necessary for your business?
Significant amount of managers (and that number adds up to 99%) answer:
-Investments! When we have investments – we will have development and success!

But why investments in certain agricultural farms bring super returns and investments in other agricultural enterprises of the same region – only losses? Why despite the formal positive changes in our legislation foreign investments in Russia are decreasing while increasing in communistic China? Why sponsors invest big money in certain political parties and absolutely ignore other parties of the same kind? Why despite all the struggles performed by political technologists, supported with a solid budget, people vote for completely another candidate, who doesn’t have neither as much money, nor a “support group”? Why does business actively develop in some regions of the country, but “runs away” from neighboring regions?

Dear managers, ask these questions to economists, and it will take them a long time to look for correlation of financial indicators, to deduce laws of recession and growth, to estimate a world conjuncture of the prices for power resources, etc., etc., but an unequivocal answer will not be given. Ask these questions to political scientists or psychologists, and the result will be the same. So what is the problem?

The answer is pretty simple and is not a secret. It is all about investment attraction, in comfort investment climate.

It is much harder to create an investment attraction, form a favorable investment climate.

However: for who, for what, by whom, when and how precisely this has to be done?

Are there standard approaches or prepared recopies for these questions? Can a manager objectively and impartially estimate his own organization and results of his work? Can his team independently put together and systemize information and opinions suppliers, customers, clients, ordinary employees, competitors, regulating organizations and not giving out desirable for valid, to dare to present the "not updated" information to the first person or actual owners? Does the top-management possess a wide arsenal of special knowledge, methods and technologies to make changes in the organization? Confident, that no. Will there be expected result without that? That’s doubtful. Increase of strategic potential of every concrete region is achieved by one strictly individual complex of solutions and methods; company, wishing to place its shares on Russian stock exchange, or on foreign platform – for others. And there’s an absolutely different way to solve a problem of creating investment appeal for a group of private enterprises with one founder – physical person for his family members, for his children. And we solved such problem before!

WHERE IS CONTROLLABILITY LOST?

We have never met and never will see a Chairman, whose heart would not tremble at the sound of a word – "controllability". No doubt! The lost of controllability of the factories, banks, investment and insurance companies, enforcement authorities, political parties – is a terrible threat for each director, the proprietor, the investor, the head, the leader.

The first assistant of the general director of one petrochemical combine invites to help raise the realization of decisions at the combine:
- How do you think, what are the reasons of low realization of decisions?
- What are the reasons? Low performing discipline.

Yes, that’s the answer of 90 % of Chairmen. It is habitual for consultants. We do diagnostics of management. We take an annual filing of orders and the orders signed by the general director for a basis; we analyze their degree of performance of decisions and the reasons of default. Certainly, a thought of using theses pseudo-statistics, which is conducted by whether local control service of execution, or by a secretary, does not come to our minds. Their data is absolutely doubtful. Now you will see why. But for now we shall say, that for this purpose we use special methods.

At one quite successful chemical combine realization of made decisions in a year hit 61 %. Is it a lot or a little? It is typical. We doubt that this number is higher in your organizations. Although it was noticed, that as the size of an organization gets larger, the lower (real, not accounting) is the degree of decisions realization. This is a repeated situation.

Well, let’s assume that 39 % of not realized decisions is 100 % and now let’s look at the reasons of their default. We get this kind of picture.

Realization of made decisions-61 %
                                                39 % = 100 % 
                                                Performing discipline-28 %
                                               Unforeseen events – 32 %
                                                Miscalculations in decisions – 37 %

As we see, low performing discipline surely takes a big place. How does it show itself? Weak qualification, administrative non-ability, and simple non-compulsion of heads of average and local parts.

You see a high degree of uncertainty in functioning combine – so-called unforeseen events: emergency and pre-emergencies, failures in deliveries, "whims" of the consumer and other. Doesn’t this huge percentage of administrative mistakes scare you? It includes tasks which have been given out not by people who are responsible for this work, especially mobilized, i.e. unreal terms of execution; neediness of power and resources, etc for executors.

Dear Heads of companies, we did such gauging repeatedly and almost always the first and third reasons on the volumes are quite comparable among themselves. A little bit more, a little less – they make rather close sizes.

Is it clear to you now, why consultants do not use data of your control services? In fact in these data silently it is supposed, that all orders are good and has put only behind their strict execution. But we see, that in reality it is different. Not having real understanding of the reasons of non-performance of the decisions, heads get in deep error about that, where exactly there are main failures in management.

We are far from an idea to blame personally Heads for it. We all understand that orders are written not by them – they are prepared by different managements and departments, i.e. it is not a question of personal, but mistakes of the organization’s system. However those mistakes are usually not comprehended and unknown to their authors.

Have you ever met a subordinate who will specify them to you? No, he will probably show you the execution, will give you the "accounting" controllability.

WHERE ARE THE GOALS LOST?

This is the biggest problem point of our organizations. How does a businessman usually answer questions about the goals of his firm: « What are the goals might be? Profit, certainly... ». This very primitive and absolutely non-working understanding of the goal. The profit is a condition of existence of any commercial organization, as breathing to a person. Breath can become a goal if it is damaged. Profit becomes the main goal  only in three cases:
- When business is being created (it is necessary to find a market niche with the greatest rate of return);
- selling a business (who will give more);
- At the threat of bankruptcy (how to restore profitability).

And whose goals are we considering? Goals of the proprietors? Yes, they create the enterprises for the sake of profit. What are the goals of a business? It is clientele. Development of client base enables to exist and become stronger to business. Without clients business perishes. What are the goals of heads? Controllability of the enterprise, career, the salary, etc. What are the goals of the personnel? The same salary, realization of the abilities, etc.

But in fact proprietors, heads, workers can realize their goals only through the development of business. And its goal is clientele. That is why the western businessmen answer the question about goals of their business: development and deepening of demand for the production and services, an output on the new markets, improvement of quality, updating of assortment, etc. If we answer the same – we’ll raise the profit.

Let’s take primary goals of the organization – strategy and ideology.

Senior Heads, do you have a strategy? We doubt it. Most likely, they are long-term plans. On supervision of the Association of Consultants for Management and Organizational Development, a demand for development of strategy quickly grows. However, in our opinion, real work on strategy is conducted no more than at 30 percent of firms. But from this number only four – five percent develop their strategy more or less competently, with the use of modern methods. The rest have easy homemade strategies that will expire in 8-10 months after their writing. So there are only a few Heads who are able to work with the future, methodically overcoming its uncertainty.

Let’s assume that you have a competently developed goal of the firm. Do agree that in process of its transfer on hierarchy downwards, there’s almost nothing left of it. In any organization the goals dissipate, passing through personal and group interests of workers. At a level of local executors from the firms’ goals there is not much left.

Meanwhile, there is a mechanism of transfer of firm goals on a level of divisions and workers – this is a definition of their service functions. We bet you do that all the time. Though we never met an organization where the service functions are defined qualitatively. In most cases – it is an aspiration to describe in details the list of actions of the worker. It’s a needless action: such list never will be full, and the executor can always tell you: « It’s not written down for my duties ».

Does everyone in your organization write duties for themselves or do they write them under dictation of employees which again have to be accepted by employee management. How often do we see a one large and rather perspective industrially-trading alliance to have a developed strategy of development or even formulated mission of the holding? It sounds ridiculous. Can a person give instructions to himself? The meaning of this kind of work is lost. Then for whom and for what all previous great and, certainly, necessary work of formation of the future vision of the business was done?

What is a service function? It is the goal of a firm transferred to a level of division and the worker. And nothing more! We have managed consistently to transfer the purpose of firm to different levels of the organization, we have managed to adhere individual motivators and the personal purposes of employees to the firm’s problems – on a maximum level we have kept unity of the goals and actions. And modern methods of service definition functions also give the heads such opportunity though there are not many of us, who are familiar with them.

The competent description of service functions begins with definition of the product which division or the employee should, conditionally speaking, sell. Let’s take an example: department of advertising. Any head of service of advertising has not admitted that the document with detailed descriptions of a circle of duties and actions represented some interest or meaning. « What is it necessary for then... ». And here is how in one paragraph we will clarify the distributor service functions of the advertising department. First: to provide arrival of new clients. Second: to create good reputation in the opinion of dealers and suppliers. Thus the chief of this department will plan and coordinate actions in such a way to use these or other advertising technologies until it seems to sound better. And the companies are necessary to know only these two its products.

That is the product approach which has huge advantage before the list of actions: it as much as possible precisely leads up the commodity form of its contribution to achievement of the purposes of the organization to the executor. Such approach reaches the maximal coordination of the purposes and actions in a direction of the company’s purpose.

WHERE IS ENERGY LOST?

Dear Heads, count – how many of your orders are gratitude, premiums on the one hand, and how many reprimands, remarks, depremiums – with another. The answer is clear in advance: punishments are more than encouragements. Much more! In three, in six, once it was in eleven times more... Just count – and feel frightened. Keep it to yourself.

Just don’t take into account so-called "Danish" gratitude and the premium: on 8th March (International Women’s Day), by professional holidays, anniversaries and retiring. Such pseudo-encouragements do not have any motivating force.

But let’s think.

You will agree that any worker has an opportunity to do the work at the maximum or lowest levels of execution. Everyone has a choice, and it doesn’t matter how carefully you described his post and function. It is possible to do any work better and worse.

And how does the person react in reply to negative influence acts? Certainly, he falls down on the bottom level of execution, tries to get off a minimum of efforts if only to not give an occasion for new reproaches. Don’t wait neither qualities, nor diligence from him.

Sometimes you see the organization – a good premise, modern equipment, decent qualification, developments are perspective... And it looks as a deflated ball. Everyone work indifferently, unwillingly, as though under supervision, they are forced. The negative which is going from the first Heads, sates an atmosphere with fear and despondency literally. The organization doesn’t receive energy, optimism from the personnel. All initiatives come only from the above, and still, they quickly die away, passing from one level to another. Nobody wishes to improve anything. All thoughts, ideas, assumptions people hold in themselves.

It is called – repressive culture. It is built with the prevalence of punishments over encouragements. You won’t make much under fear. It wasn’t proved by us that encouragement for positive is more effective, than punishment for negative. It, punishment of course, is inevitable, but it is necessary to dose out punishment skillfully. Besides such techniques of motivation which avoid punishments have been developed. Furthermore, absence of encouragement acts as the form of a reproach, even if the reproach is indirect.

There is one more typical recount. How often do you give orders « through a head » of heads of an average department? For some people it takes up to 70 % of all tasks. What a self-centrists! Aspire to pull everything all to his self, to penetrate and interfere everywhere. Certainly, the authority of heads of an average department is falling in opinion of their subordinates; they become weak-willed and irresponsible. We have noticed how such heads ask for the signature of the Head for those orders which quite could appear in the form of their own orders. But they "are already disconnected", without the sanction of the chief they cannot are hesitating to give a certain decision, avoiding any responsibility. 

Such self-centrist overstrains himself under a cargo of the excessive information, expectations on the account. But wasn’t he the one who has transformed the assistants, chiefs of departments and services into alive question marks? During each given moment it seems to him that he wins in correctness of decisions, but his attention, memory, energy some day will flow away. And its impossible to rely on the initiative and the responsibility of subordinates, because that and this is beaten out of them. Organization loses power and withers.

WHERE IS THE CHANCE LOST?

How many of these typical illnesses of management can we name! But as there are illnesses, there are also doctors – management and organization development management. We are not engaged in advertising management consultation – we wish to show you a resource which is used cautiously and widely by Heads of all developed countries and successful organizations therefore they are thoroughly developed and successful.

An expected question: « How can management consultants help me, an experienced and formed Manager? These people often have never managed anything or did not work in my business area».

We answer: there are three main sources of success of management consultation.

The first one is that management consultant can offer you the most valuable experience of other organizations in solving those problems which may now bother you. Agree, thinking about the organizational structure, about an estimation of the personnel, about the search of competitive advantages, about the increase of controllability, you would want to find out, what variants appeared to be successful in the organizations similar to yours.

The second one is: the consultant constantly holds a hand on pulse of new tendencies in management (both world, and domestic). All the newest developments, concepts, points of view of well-known and not experts, scientists are caught by consultants and in the adapted view are offered to clients.

The third one is: the consultant owns the methods of the analysis and of the different administrative problems decisions. And he often  begins his work with diagnosing the organization. Yes, almost as in medicine. A consultant will give you that kind of picture of the condition of your organization which will be new and important for you. There is no other way you can get such information on the organization There is the same situation with the methods of work on motivation, strategy, formation of administrative commands, increase of controllability, re-structuring, attractiveness for clients, investors... There are a lot of problems which the Head has to solve, so an opinion of the professional armed with special methods, will appear effective.

Really, if you were ill with a stomach ulcer and when registering in a hospital for an appointment, you do not ask the nurse: « Tell me, did doctor himself have been ill with an ulcer?». And when you hear the answer: « No, fortunately, he is healthy », you don’t doubt whether the doctor can help you if he never had the same illness. Or, following such logic, – among gynecologists there should be no men.

So did the time for attracting management consultants for a constant teamwork, and or even including them in Boards of directors, Political councils of parties, Committees of the Legislature of authority and even in the Government?

Demand for consulting services has changed a lot, became much more qualified, selective. What should you keep in mind when choosing a management consultant?

You should know that consultants can be "serial" and "exclusive". A serial consultant works on a narrow circle of administrative technologies, methods of decisions of any problems and in a final view transfers to organizations-clients, certainly, adapting to the specificity of everyone. An exclusive consultant has long-term and deep work with each organization, offering it different methods that help solving a big circle of problems. Neither that, nor another is better or worse than another and the choice between them depends on your preferences and problems. Just keep in mind that there are 95 percent of first ones, and count the rest for the second ones.

There are large consulting firms that can offer their service in absolutely different directions. There are many specialists on managerial accounting, organizational structures, on strategic planning, information technologies, motivations and an estimation of the personnel, etc. There are small consulting companies which specialize in one or in a small amount of directions incorporated around a strong consultant. There are independent consultants who work individually with each firm as a family doctor. When choosing a consultant you should consider his work experience, personal publications, membership in professional associations, presence of special education. A certification of Russian consultants under international standards now is being prepared.

About prices. Estimating the work of a consultant in hours fluctuations here are huge: from 10 up to 250 dollars an hour. Sometimes it is less, sometimes it is more. But not everything a consultant does can be measured in hours, only if we talk about seminars or couching. Usually consultants name the prices of concrete projects or stages. But, as a rule, direct and indirect benefit from the cooperation is much higher than direct expenses on consultation.

WHERE THE ARE THE STATISTICS LOST?

You are certainly interested to see administrative consultation in numbers. We are warning you authoritatively — the statistics here is extremely unreliable and can confuse you. Why?

First of all, this business is new and very arrogant for Russia. People call themselves management consultants, but in reality they are not. For example, lawyers, psychologists, economists, high school senior lecturers hastily alter the methodical device, sketchy knowledge under market condition, aspiring to enter into administrative consultation and give out the desire for a fact. We face that all the time. And professionals talk about the phenomenon of " the spoiled field” more often and with discomfort.

Secondly, management consultants are less incorporated in association comparing to their colleagues from adjacent areas. There are a lot of homebrew or quite mature experts in the country who do not feel the need in participating in any associations.

If you ask the leaders of this market about the quantity of really operating management and organizational development consultants they, having lifted eyes to a ceiling and straining memory and imagination, will answer uncertainly... Do you really need IT?
Well, and about "ratings" you, certainly, have a guess…
What else can we talk about without statistics? Obvious tendencies. The most respected from all of them have literally appeared in the last couple of years. Demand, both obvious, and latent which always lagged behind the offer, has now exceeded it and continues to grow promptly. Do you still want an advice? Pay attention not only to offered products, but first of all on persons offering. Prefer small consulting firms with strong leaders. Quality of their work is higher and is more adjusted on individuality of the client. And also: if the consultant is proud of the orders executed for huge corporations – be aware. There not so carp at quality. And it is even more risky to invite those consultants who have  the hand on the orders paid by the international funds (the World bank, TASIS, etc.), because if the client doesn’t pay, it all turns out as « a presented horse ». A professional (grows) ripens on commercial orders.
AND FROM THE HEADS’ POINT OF VIEW? …

The Siberian Suburb, October 14-21, 2003.

Republications:

UPRAV. Portal of growing companies, July 18, 2006.
BUSINESS.PETERLIFE.RU, 09.2006