COVER STORY
Part I: Saving the company
How ordinary smart people will change the organization
By Dave Pollard
One of the most important
things I’ve learned in the
last few years is that, except
for senior management, no
one in most organizations
really understands what the
business of the organizations
is all about – how decisions
are made, what information is
used and how, etc.
And, at the same time,
senior management really
has no clue about what goes
on at the front lines of their
organization, or outside their
organization –
what potential
new recruits
think, what
customers
really think
about the
organization,
etc.
4 SMART PEOPLE
This should be obvious,
if you think about it. Senior
managers are insulated from
the front lines and customers.
No one wants to tell the
boss what’s wrong with the
organization – it’s a career-
limiting move.
And senior managers are
too busy to spend much quality
time with either employees
or customers. To the extent
they interact with customers
it’s with the senior managers
of those customers, who are
likewise unenlightened about
what is going on in their own
organizations. So decisions
are made, often, in a vacuum,
based on deficient and filtered
information.
As for the line employees,
they usually have never been
exposed to or taught about
what goes on in other parts
of the organization, or how
managers make decisions.
This is getting worse: The
current generation of young
employees are likely to work in
12 organizations in their
careers – not enough
time to really figure
out “the business of
the business” in any
of them.
The tragedy is
that often neither they nor
their senior managers think
they need to know what the
business is all about, unless
and until they become senior
managers themselves.
So most employees
spend their entire careers
feeling under-appreciated,
disconnected, never consulted,
and annoyed at stupid
instructions and useless
information requests from
management. And they have
tons of very useful information
about customers, operational
ineffectiveness, and what’s
going on in the world and
the marketplace that is never
solicited and never proffered.
I care about all this because
I have spent about one-third
of my career in an area called
Knowledge Management.
This discipline began about
15 years ago and has largely
followed the track of other
business ‘fads’ like business
process reengineering and total
quality management – a flurry
of investment and enthusiasm,
followed by disenchantment
and finally abandonment.
The problem with KM
is that the people charged
with introducing it into
organizations were mostly
front-line back-office people
– middle managers with
a background in library
management, IT or training.
Few of them really knew how
decisions were made or what
resources were allocated in
their organizations.
The library people saw
KM as a content management
exercise. The IT people saw
KM as a set of technology
projects (intranets, extranets,
groupware). The training
people saw KM as an e-
learning vehicle.
Senior managers were
mostly unenthusiastic, worried
it would spawn more IT
bureaucracy like email, not
seeing any new value provided
by it. Their hope, tragically,

was that KM might automate
some back office functions
and allow cost savings (e.g.,
blowing up the corporate
library).
We might be able to
understand the reasons for
KM’s failure if we looked at
the value of information to
organizations through the
eyes of senior managers, front-
line employees and customers.
Take a look back to 1975
– internal memos, typed up by
secretaries, instructed front-
line and back-office employees
what to do, and required them
to report production data
that managers could use for
making decisions.
Written information
flowed vertically, not
horizontally. Managers talked
with other managers, and
employees talked with other
employees, and occasionally
with outside colleagues, to
learn their jobs and share
what they had learned.
A few employees had
started using the Internet and
other electronic sources of
information for research, but
most research was done using
the internal library or outside
journals.
Customers received
printed marketing material
from the organization, and
submitted their orders. These
were the principal information
flows in organizations at that
time.
This actually made a lot
of sense when you consider
how senior managers saw, and
operated, their organizations.
The job of senior managers
was and is to make the
organization sustainable.
Managers do this by making
critical decisions, issuing
instructions, capturing
performance data, and
tweaking those decisions
accordingly. The variables
they need to watch and make
decisions about are:
1. Cash flow: The net result
of sales, investments,
loans and share issues,
government incentives,
operating expenses, R&D,
dividends, and capital
expenditures.
2. Share price: Investors’
assessment of future
growth in cash flow, which
is critical to obtaining low-
cost capital.
3. Risks and opportunities:
Threats from new and
existing competitors,
a variety of threats to
reputation and business
continuity, regulatory
changes, rate changes,
supply changes,
frauds, disasters, and
opportunities to innovate,
make acquisitions,
outsource, reorganize or
change capital structure
To manage cash flow,
managers pressure employees
to find ways to increase sales
and reduce costs. Budgets,
resource allocations, and
monthly targets and reporting
are their levers for doing so.
To manage share price,
they need to ensure that
cash flow is always steadily
rising. When cash flow from
operations fails to meet
targets, they look at layoffs,
outsourcing, capital budget
reductions, increasing
government incentives
through lobbying, cutting
dividends or reorganizing
(e.g., divesting unprofitable
operations).
To manage risks, they will
acquire, sue or out-advertise
competitors, hire PR firms to
COVER STORY
whitewash and greenwash
their social and environmental
misdeeds, put controls in
place to reduce risk of fraud,
buy insurance and hedges
to reduce exposure to rate
changes and disasters, lobby
against new regulations,
lock in or acquire suppliers,
Dave Pollard
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constantly forcing customers com/0002007
to replace or upgrade, and
locking them in to the
organization’s product.
This is what senior
managers do. It is not
surprising, therefore, that
they tend to see IT, KM and
training as “non-value-added”
activities.
They were getting the
information they needed
before the advent of
computers, so why should
they invest in new IT and
KM projects? And since
they expect and receive little
loyalty from employees, why
should they invest in training
them, when the essential
knowledge they need must
be obtained “on-the-job”
anyway?
Stopping here is like having to
wait through a TV commercial,
but Part II is worth waiting for. It
begins the look forward to see how
ordinary smart people will change
this picture.
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