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Practices – the Pillars

“Leadership is the capacity to translate vision into reality” – Warren Bennis.

Football

So, we are off to a great start! In our first post, we have concluded that Sustainable Wealth Creation is the goal of the manufacturing enterprise. In our second, we discussed how a clearly aligned mission (Principles) for the enterprise engages the full efforts of the organization toward achieving that goal. Great theory, but does not make a product you can ship to a customer. Where this all comes together is the Practices of the organization, the essential pillars of how things are actually done that build on the foundation of the Principles and create the wealth – the translation of vision into reality.

What are these Practices? As I mentioned in the last post, the key Resources of the enterprise are its Technology and its People. As a result, we can think of the Practices of the organization in two general categories:
1. The Business Practices that enable the enterprise to maximize the sustainable wealth creation of its Technology
2. The Human Resource Practices that enable the enterprise to maximize the sustainable wealth creation of its People
These two fundamental Practices are complementary and both are required for excellence.

Each pillar is greatly impacted by both the initial selection or sourcing of the resources and the effective utilization of the resources once acquired. As a management consultant who loves to “fix enterprises,” my bias is on maximization of the wealth creating potential of the resources that exist. This is not only a personal bias, however, it is a very practical one.

If an enterprise spends unlimited funds to hire the best people and/or deploy the hottest new technologies, the results may be good for a short period but will never succeed in the long term unless the processes by which these resources are managed are effective. The underutilized talent will come at a high labor cost and the underutilized technology will add a high depreciation burden to the enterprise, which the ineffective utilization of these Resources will not be able to compensate on the revenue line. As a result, wealth creation will be suboptimized and the goal of maximizing sustainable wealth creation will not be realized.

Let me provide an example from sports. Suppose an owner hired the most talented football players in the world and bought the best training and performing facilities in the world, yet asked a child to manage the team. I think anyone can guess the type of record such a club would have – certainly not up to the potential of the Resources acquired! But in fact some companies do the same thing, they think by throwing money at people and technology they can succeed, even though their Practices are “childish,” based on uninformed or outdated thinking about how to run a business effectively and how to manage people well.

It is critical, therefore, to get the Practices right, and this is much more about how an enterprise elects to manage its resources than how it sources them. Robust Wealth Creation can be sustained with suboptimal Resources managed in an excellent way, but can never be sustained with poor management practices that simply waste the potential of the Resources deployed. Ultimately, market forces will redeploy those Resources to more productive enterprises with better Practices.

In our coming posts, we will look more deeply at the Human Resource and Business Practices that lead to Sustainable Wealth Creation for the manufacturing enterprise..

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