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Thursday, February 23, 2012

The Iceberg of Ignorance.



As sort of an end to the series of posts about could someone beat Wal-Mart I wanted to address why there is a problem with companies like Wal-Mart. This is typical of any big company that isn’t paying attention.

In 1989, Sidney Yoshida conducted a study that found that the top level of management was only aware of 4% of the problems in the company. The lower one goes in the hierarchy of leadership, the more that level knows about the problems in the company. The study found that 9% of the problems were known to general supervisors, 74% were known to supervisors and 100% of the problems were known to the line-level employees.
The study was named The Iceberg of Ignorance, the thought being that problems within a company are like an iceberg. Only a little bit of an iceberg can be seen above the water line. In a company, only a few of the problems can be seen from the top.

Sam Walton, the founder of Wal-Mart, was probably one of the best at getting past this iceberg of ignorance. He was known to show up at distribution centers late at night with doughnuts and talk with truck drivers about what was going on at the stores. Since the truck drivers were in a lot of the stores on a consistent basis, they had a good feeling for what was going on in the company.

In Search of Excellence calls this M.B.W.A. which stands for Management by Walking Around or Management by Wandering About. Here, a good company leader will learn more by going into his company and talking with the line-level employees. It is sort of like the show Undercover Boss. Unlike Undercover Boss, though, employees know they are talking to the boss and know he can change things.

In the book, The Customer Driven Company: Moving from Action to Talk, Richard C. Whitley talks about the ServiceMaster Company. It tells us that Allan C. Emery, Jr. was a prosperous wool trader who closed his business and invested in a ServiceMaster franchise. The training he went through required that he perform all tasks associated with a ServiceMaster franchise. He learned from the ground up what problems and challenges his future employees would face.

Any company seeking to be the best it could be would require all top level managers from the CEO down to spend time in the field actually performing the tasks involved with the company.  In a perfect Wal-Mart, you would see Michael Duke behind the deli case or pushing a pallet jack through the store with no fanfare. Not as a photo op for the annual report, but as a means of really finding out what goes on in a Wal-Mart.

It would seem that Sam Walton had the right idea when he wandered around at Wal-Mart. Perhaps Wal-Mart wouldn’t leave so much money on the table if the powers that be would be in at least one store every day. If, before one could sit in the C-suite they had to work in each line-level job there was, they would have a better understanding of what was going on in the stores.
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