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Role of Public Relations

“Public Relations” has acquired a connotation of ballyhoo, propaganda, and whitewashing.

To the general public, “public relations” means publicity—essentially an extension of advertising from advertising a product o advertising its producer. But, the emphasis should be on acquainting the broad public with the problems of the enterprise rather than on convincing it of the company’s virtues and achievements. This leads to the realization that to reach the public with its problems, the enterprise must understand the public’s problems first.

Every major decision of a great corporation affects the public somehow, as workers, consumers, citizens; hence the public will react consciously or subconsciously to every move the company makes. On this reaction depends, however, the effectiveness of the company’s decision—simply another way of saying that any corporation lives in society. Hence the effectiveness of the executive’s decision depends not only on his understanding the problems of his business but also on his understanding the public attitude toward his problems. Hence the program of public relations is to give both central-office and divisional executives a knowledge of public attitudes and beliefs, and an understanding of the reasons behind them.

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Rules for Staff Peple

Unless staff people have proved themselves in operations, they will lack credibility among operating people and will be dismissed as “theoreticians.”

Rules for staff people are just as important as rules for staff work. Don’t ever put anyone into a staff job unless he or she has successfully held a number of operating jobs, preferably in more than one functional area. For if staff people lack operating experience, they will be arrogant about operations, which always look so simple to the “planner.” But today, in government even more than in business, we put young people fresh out of business or law school into fairly senior staff jobs as analysts or planners or staff counsel. Their arrogance and their rejection by the operating organization practically guarantee that they will be totally unproductive.

With rare exceptions, staff work should not be a person’s “career” but only be a part of his or her career. After five to seven years on a staff job, people ought to go back into operating work and not return to a staff assignment for five years or so. Otherwise, they will soon become behind-the-scene wire pullers, “gray eminences,” “kingmakers,” “brilliant mischief-makers.”

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Rules for Staff Work

Staff work is not done to advance knowledge; its only justification is the improvement of the performance of operating people and of the entire organization.

First, staff should concentrate on tasks of major importance that will continue for many years. A task of major importance that will not last forever—for example, the reorganization of a company’s management—is better handled as a one-time assignment. Staff work should be limited to a few tasks of high priority. Proliferation of staff services deprives them of effectiveness. Worse, it destroys the effectiveness of the people who produce results, the operating people. Unless the number of staff tasks is closely controlled, staff will gobble up more and more of operating people’s scarcest resource: time.

Effective staff work requires specific goals and objectives, clear targets, and deadlines. “We expect to cut absenteeism in half within three years” or “Two years from now we expect to understand the segmentation of our markets sufficiently to reduce the number of product lines by at least one third.” Objectives like these make for productive staff work. Vague goals such as “getting a handle on employee behavior” or “a study of customer motivation” do not. Every three years or so, it is important to sit down with every staff unit and ask, “What have you contributed these last three years that makes a real difference to this company?

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Fundamentals of Communications

To improve communications work not on the utterer but the recipient.

It is the recipient who communicates. Unless there is someone who hears, there is no communication. There is only noise. One can perceive only what one is capable of perceiving. One can communicate only in the recipients’ language or in their terms. And the terms have to be experience-based. We perceive, as a rule, what we expect to perceive. We see largely what we expect to see, and we hear largely what we expect to hear. The unexpected is usually not received at all. Communication always makes demands. It always demands that the recipient become somebody, do something, believe something. It always appeals to motivation. If it goes against her aspirations, her values, her motivations, it is likely not to be received at all or, at best, to be resisted.

Where communication is perception, information is logic. As such, information is purely formal and has no meaning. Information is always encoded. To be received, let alone to be used, the code must be known and understood by the recipient. This requires prior agreement, that is, some communication.

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Building Blocks of Organization

Contribution determines ranking and placement.

“What activities belong together and what activities belong apart?” A searching analysis is needed that groups activities by the kind of contribution they make. There are four major groups of activities, if distinguished by their contribution. First, result-producing activities—that is, activities that produce measurable results that can be related, directly or indirectly, to the results and performance of the entire enterprise. Second, support activities that, while needed and even essential, do not by themselves produce results but have results only through the use made of their “output” by other components within the business. Third, activities that have no direct or indirect relationship to the results of the business, activities that are truly ancillary. They are hygiene and housekeeping activities. Finally, is the top-management activity. Among the result-producing activities, there are some that directly bring in revenues (or in service institutions, directly produce “patient care” or “learning”). here belong innovating activities, selling and al the work needed to do a systematic and organized selling job. Here also belongs the treasury function, that is, the supply and management of money in the business.

Key activities should never be subordinated to nonkey activities. Revenue-producing activities should never be subordinated to nonrevenue-producing activities. And support activities should never be mixed with revenue-producing and result-contributory activities.

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Simulated Decentralization

The main rule is to look upon simulated decentralization as a last resort only.

Whenever a unit can be set up as a business, no design principle can match federal decentralization. We have learned, however, that a great many large companies cannot be divided into genuine businesses. Yet they have clearly outgrown the limits of size and complexity of the functional or of the team structure. These are the companies that are increasingly turning to “simulated decentralization” as the answer to their organization problem. Simulated decentralization forms structural units that are not businesses but which are still set up as if they were businesses, with maximum possible autonomy, with their own management, and with at least a “simulation” of profit-and-loss responsibility. They buy from and sell to each other using “transfer prices” determined internally rather than by an outside market. Or their “profits” are arrived at by internal allocation of costs to which then, often, a “standard fee,” such as 20 percent of costs, is added.

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Reservation of Authority

There must be a kind of “supremacy clause” reserving to central management the decisions that affect the business as a whole and its long-range future welfare.

Top management in a decentralized company must think through carefully what decisions it reserves for itself. For there are decisions that have to do with the entire company, its integrity, and its future. These decisions can be made only by somebody who sees the whole and is responsible for the whole. Specifically, there must be three reserved areas if the business is to remain a whole rather than splinter into fragments. Top management, and top management alone, can make the decision on what technologies, markets, and products to go into, what businesses to start and what businesses to abandon, and also what the basic values, beliefs, and principles of the company are. Second, top management must reserve to itself the control of the allocation of the key resource of capital. Both the supply of capital and its investment are top-management responsibilities that cannot be turned over to the autonomous units of a federal organization.

Third, the other key resource is people. The people in a federally organized company, and especially managers and key professionals, are a resource of the entire company rather than of any one unit. The company’s policies with respect to people and decisions on key appointments in the decentralized autonomous businesses are top-management decisions—though of course, autonomous business managers need to take an active part in them.

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Federal Decentralization: Requirements

As a minimum the unit must contribute a profit to the company rather than merely contribute to the profit of the company.

Federal decentralization has stringent requirements. Federal decentralization is applicable only where a company can truly be organized into a number of genuine “business.” This is its basic limitation. As a minimum the unit must contribute a profit to the company. And it must be a genuine profit determined by the objective judgment of the marketplace.

Federal decentralization will work only if the top-management job is clearly defined and thought through. Federalization, if properly applied, makes top management capable of doing its own job precisely because it does not have to worry about operations, but can concentrate on direction, strategy, objectives, and key decisions for the future. The federal principle demands great responsibility from the operating units, the autonomous businesses. They are given the maximum of autonomy; and this requires that they assume the maximum of responsibility. Federal decentralization requires centralized controls and common measurements. Both the managers of the autonomous businesses and top management must know what is expected of each business, what is meant by “performance,” and what developments are important. To be able to give autonomy one must have confidence. And this requires controls that make opinions unnecessary. A federal unit of a company is autonomous, but it is not independent and should not be. Its autonomy is a means toward better performance for the entire company.

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