MODERN MARKETING
the puerile belief that all directors
and senior managers need to do is
to write down some numbers that
can become targets and eventually
translate into budgets. This only
ever works in growth markets with
little competition.
Such behaviour has consequences.
Of Tom Peters’ original 43 so-called
‘excellent companies’ back in 1982,
very few survived. They had a
fixation with tactics at the expense
of strategy. (Richard T. Pascale
“Managing on the Edge” Simon and
Schuster, 1990)
Here are some quotes from wellknown sources:
“Improvements in a short-term
financial measure, such as economic
profit, can be achieved through
postponing capital investments,
reducing marketing and training
expenditures, or by divesting assets,
each of which may have a positive
effect on near term performance
but could adversely affect long
term value creation performance.
Nevertheless, when incentivised
with bonuses to ‘manage for the
measure’ this is exactly what many
managers will do, irrespective of
the consequences on shareholder
value”. (Simon Court, Market Leader,
Why Value Based Management goes
wrong)
“90% of USA and European firms
think budgets are cumbersome
and unreliable, providing neither
predictability nor control. Budgets
are backward-looking and inflexible.
Instead of focusing managers’ time
on the customers, the real source
of income, attention in focused
on satisfying the boss; that is, the
budget becomes the purpose.
Cheating is endemic in all budget
regimes. The result is fear,
inefficiency, sub-optimisation and
waste. In companies like Enron, the
pressure to make the numbers was
so great that managers didn’t just
doctor a few numbers, they broke
the law. People with targets and jobs
dependent on meeting them will
probably meet the targets, even if
they have to destroy the enterprise
to do it.”
Simon Caulkin. Escape from the
Budget Straightjacket Management
Today, January 2005. p47-49.
Research into the banking sector in
the UK back in 2005 threw up the
following interesting observation:
“In this company, value creation was
merely a matter of protecting market
share and managing costs. The data
shows that the company’s business
model is in effect a ‘money printing’
machine, therefore the challenge
for strategists lies in how they can
act as responsible stewards of a
resilient business model.” (Cranfield
Doctoral Thesis)
Well before the 2008 banking crash,
another major bank was criticised
for its contribution of £1 trillion to
personal debt in the UK. Employees
had been set tough targets for
selling loa