It is a well know observation that as organizations grow, they become more bureaucratic, with a tendency to focus more on maintaining their internal systems than delivering their purpose. In organizations, government or commercial, bureaucracy becomes increasingly important to the detriment of delivery. Little empires are born and silo mentality develops.
Different parts of a company, sales, advertising, customer relations, delivery, can often have a tendency to independent action and organization, when they should be integrated and managed in order to satisfy customer demand profitably. Customer satisfaction is the key to good business. But making profit is the ultimate reason for business existence. If a business is to be managed effectively to produce profit, then simplicity of organization aids communication and effective control. However, old outdated ideas of business still prevail and a silo mentality still persists amongst many involved in business development.
Whatever maybe the perceived importance of specialist business activities, the prime purpose of any business is to make money, for the benefit of the owners and the workforce, regardless of whether it is a business for manufacturing, retail or professional services. Businesses make money by producing goods and services which customers want to buy. However, the generation of sustainable profitable income for the long term future of any business requires the collective management of all the customer related activities under a single manager.
If managing assets and resources to produce profitable income is the responsibility of a commercial manager, then using performance measurements not just for sales but across all customer related activities is essential for their effective management. In all probability, the majority of businesses would be hard pressed to quantify how much they actually spend or invest in getting and retaining business and might be surprised at the true costs involved.
The commercial manager must view all the business getting and retaining activities as contributing to the generation of sustainable profitable revenue. Previous experience and specialization must not be allowed to bias necessary objectivity or decision making.
Business organizations may be considered in two parts; Business Operations and Business Support. The area of Business Support, provides the necessary resources for the Business Operations area, mainly finance and personnel. Commercial managers must think beyond the confines of textbook definitions.
Marketing, defined as “the management process of anticipating and satisfying customer demand profitably,” is at the centre of “Business Operations,” which must include all the traditional marketing activities, but also those of production or service provision, as well as research and development. Gaining and maintaining necessary customer satisfaction does not necessarily lead to profitable income. Only the effective management of resources makes the production of income profitable.
The internationally famous management consultant, the late Peter Drucker once said” if you can’t measure it you can’t manage it”. When evaluating the contribution of business operations, its performance must be measured in terms of output and efficiency. From the business point of view, the main factors will be the amount of sustainable profitable revenue produced together with a measure of its efficiency in converting marketing costs and investment into revenue.
The commercial manager is responsible for producing and maintaining the levels of necessary profitable income for the continued development of the business. Therefore it should be their specific interest to ensure that all the workforce understand that individually and collectively, their actions affect customer perceptions and satisfaction, which ultimately effects the level of income on which they all depend. Instilling enthusiasm, motivation creativity and expertise is not simply a matter of communication, but of effective management and leadership.
Companies that develop a multi departmental organisation may also develop a silo mentality of independent working, so that the requirements of the department tend to gain primacy over the objectives of the business, protecting the system rather than satisfying customers to profitably. Such “silo mentality”, and a breakdown of effective leadership and management can foster individuals gaming the system to their own advantage with the potential development of wayward activities to the disadvantage of the business.
To reduce and control silo mentality Commercial managers need to ensure that all the specialist areas, such as sales, advertising, promotion, and customer relations have:
* a clear understanding of their objectives
* All have clear reporting lines to the commercial manager
* Have a full understanding of all the processes for which the commercial manager has overall responsibility.
The commercial manager must also:
* Ensure close supervision of all activities but avoid micro management.
* Develop an integrated team spirit so that all problems are discussed.
* Ensure that those earning commission cannot game the system to their own advantage
* Try to develop an atmosphere where mistakes and error may be identified and dealt without rancour.
* Ensure there is a regular reporting system that identifies all important activities, the relevant progress and highlights any problems.
Good and effective management requires good internal communication throughout the organisation. A silo mentality prevents good management, tending to adversely affect customer relations and profitable income. The commercial manager has the final responsibility of knowing how income producing activities are being conducted at all times; there is no excuse for not knowing.
© N.C.Watkis, Contract Marketing Service 28 SEP 21