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An era of prosperity and technical dominance is coming to an end: the German car industry has lost the thread and is losing market share. Both manufacturers and suppliers are rethinking their business areas, are forced to restructure and lay off thousands of employees and temporary workers.
Why is management in the automotive industry so difficult right now?
Because the existing decision-making processes are outdated and sclerotic. As absurd as it sounds: it’s not the fault of the people. It’s because of how they organize decisions.
My view of what a decision-making process should look like comes from practice. I never managed to go to business school and do an MBA. Instead, I worked as a consultant and as a manager for almost 3 decades. During this time, I learned what works, developed principles and collected the best tools.
A fool with a tool is still a fool.
A tool doesn’t have to be modern and doesn’t have to feel good. It has to deliver the right results. To do this, it must be used correctly. This applies to any type of tool.
For the correct application of the tools in this article, two principles and seven implementation steps have proven to be effective. They are the decisive context. They turn a beginner into a professional. Unfortunately, they are often forgotten. And then the tools don’t work.
I have tested the following principles, tools and application steps in companies with tens of thousands of employees. And in small ones too. They have consistently produced amazing results. If they are disciplined and applied correctly.
Overall, the five tools need two principles and seven steps to implement.
First principle: There is good management. And stupid management.
We reflexively associate good management with well-known names. Reitzle, Zetsche, Marchionne… They knew how to do it right. Charismatic guys with the right managerial skillset.
They were only in the right place at the right time.
When listing the names, it is striking that times have changed. They would not be so successful today.
Management consultants claim that the right management style is needed. Participatory. Situational. Agile. Inclusive. Sustainable. There are many labels.
But even a certain management style does not guarantee success.
Because labels lead to “stupid management”: people imitate “management styles” without dealing with the actual situation.
Stupid management blocks an objective analysis of the situation, the recognition of the underlying causes of a problem and therefore wastes resources instead of using and coordinating them sensibly. Success fails to materialize. The team is frustrated.
This could be a cause of the current situation in the automotive industry.
Silicon Valley legend Chamath Palihapitiya puts it in a nutshell:
„There is good management and there is stupid management… instead of looking for some labels… if things aren’t working, break it down to the studs… most people don’t have the courage to go through the glass-eating that is required to get on the other side of this process.”
If the management team recognizes the right issues together and works on them systematically, if they take the company that may not be functioning back to its basic building blocks and basic principles and rebuild it from there, then this leads to the functioning of the company. And to success.
A good manager creates a decision-making process to bring his leadership team together, develop joint strategies and initiatives, and agree on the mechanisms of interaction.
The two principles, five implementation steps and seven tools in this article help to rethink and restart current decision-making processes in the direction of “good management”. “Dumb management” may also use the tools presented here, without the right principles, without logical discipline and without taking the context into account.
Second principle: Develop an operational, an executive and a supervision level.
A manager can’t do anything if the company can’t be divided into three levels.
The first level is the operational team level: the team does the actual value creation, the actual work.
In the company, teams deliver the products and services with which the company serves customers, acquire new customers and partners, books revenue, and develop the company. Without them, nothing moves forward.
Teams need strong players, clear responsibilities, decision-making freedom, sufficient resources and access to the necessary information to be successful.
The second level is the executive. It is responsible for coordination, targets, budgets, resource provision, and conflict resolution. This is where the managers sit.
First and foremost, the executive needs an excellent understanding of the work of the operational teams.
In the Royal Navy, which ruled the world’s oceans for centuries, it was mandatory for officers to have served as enlisted ranks for a few years before being promoted. They first learned how the operational teams worked and had to be led before they were given leadership responsibility themselves. In operational roles, future leaders also acquire a good understanding of the environment, the market, the competition, the state of the art, the performance of comparable companies, etc.
This is what many executives lack today – so-called chimney careers often follow power-political considerations and not the rules of a meritocracy.
The most important task of the executive is to build up decision-making structures in such a way that it continue to operate stably, even if key players are replaced.
The third level, which is overlooked and therefore poorly developed or non-existent in many companies, is the supervision level for controlling management.
This authority is necessary to oversee and correct management decisions because personal preferences, perceptual tendencies, and power-political decisions have a significant influence at the executive management level. This supervisory or steering committee level controls the executive management level, for example, when it comes to adherence to principles, the strategic plan and the agreed budgets. However, it also advises and fills gaps in skills and experience that often exist at the executive level.
Five steps to introducing new decision-making processes
A restart, restructuring, or transformation program begins with the CEO deciding to bring their company back to its core principles and reorganize it.
To reset and restart the decision-making process:
- In the first step, the CEO talks to his management team and schedules a workshop in two to four weeks. This means that the CEO sends an invitation with the request to meet at a fixed location for three days to initiate the restart.
- The success of the workshop is proportional to the workshop preparation: analyses are carried out in the following weeks. The most important thing is a financial analysis that shows the current cash situation according to an updated forecast. If fundamental decisions are to be made (M&A, closures, investments, etc.), various scenarios can be developed.
- Another analysis is the inclusion of all initiatives in the company. Most companies suffer from a proliferation of projects that tie up resources and are not equally connected to the company’s goals. This initiative review makes it possible to bundle, prioritize or stop initiatives. In most cases, enormous resources are already released here, which can either be saved or used for growth topics.
- Interviews with the managers must also be conducted. This serves analytical purposes, but also the recognition and early involvement of people who have a significant influence on decisions in the company.
- The workshop will be conducted with the results of the analyses (financial plan, initiatives, stakeholders). The focus of the first day is on finances, a reappraisal of the recent past, and the derivation of principles for further action. On the second day, initiatives, team sizes, and the future organization in the three levels will be discussed and decided. On the third day, the workshop participants deal with medium-term planning and the preparation of a communication plan.
After these five steps, many more follow. However, these five steps create the initial spark for a comprehensive change in decision-making processes. And with it, the direction of development of the entire company is also changing.
Seven tools of a decision-making process.
The seven tools are initialized in steps 2 to 4 and filled with existing data. They serve as a basis for discussion. This is because within the workshop under step 5, the tools with an initial data filling are explained to the managers and discussed with them.
The aim is to gain a common view of the following tools:
- A financial plan according to a current forecast with projected inflows and outflows, as well as concrete targets regarding income and liabilities. This includes all inflows, all liquidity reserves and all planned investments.
- A list of prioritized initiatives to achieve financial goals or create key enablers (such as implementing an ERP or CRM system, implementing digital marketing, etc.).
- An adjusted plan of human resources (including all internal and external employees and service providers relevant to the business) with reduction and build-up targets.
- A milestone plan with simple, easy-to-understand milestones that subsumes initiatives and measures progress toward the budget plan
- A program structure with names and clear responsibilities at the three levels. All teams must be named and filled. And principles must be agreed on how these teams work together.
- The calendars of everyone listed in the program structure must include meeting invitations, with standard agendas. This is the only way to bring the organization to life effectively.
- A change management and communication plan. These are intended to ensure that all those involved understand the goals and the projects correctly. Changes often trigger negative reactions. This, in turn, leads to obstructions in information processing and thus to resistance and delays. Well-timed information, communication and training measures help both the operational team and the management team to get through this adaptation process faster and to achieve the goals of the program faster.
Again, the size of the company is irrelevant with these tools. Certainly, cascading in large companies is more complex and takes longer. But with the proposed structure, it works.
Only the complete and correct application guarantees an effective decision-making process that aligns the direction of a company and enables “good management”.
Conclusion: “Good management” can be achieved at any time.
Many situations are muddled and complex for the CEO. Finding yourself in such a situation can have many causes. The key factor is the CEO’s will to create clarity and “reboot” the decision-making process in his company.
An unclouded view from the outside, coupled with the will to bring the company back to its basic principles, can solve misperceptions and resistance and focus on growth and competitiveness.
Because the transition from stupid management to good management always means: “Eating glass.” To come out on the other side of the process stronger, focused, and ready for new growth.
