Journal of Management Excellence: Creating Value

Updated March 2011

 

 

7

Commentary: Creating Value By Doing More With Less

Sometimes we find interesting similarities between organizations and

the human beings who build them. One similarity is that both tend to

stick with accustomed behavior. And the longer that behavior is

maintained, the harder it is to change it. I have to admit that the love

handles on my hips are a visible result of unchanged behavior. They

don t hurt, but they do make me a little bit slower in sports. To

remove them requires me to change and rethink my habits. A short

term diet doesn t help, as we all know. In principle, my energy input

simply exceeds my energy utilization.

Transferring this metaphor to organizations, we can find a similar

pattern. Resource input is mostly allocated based on following the

habits of the past. It worked, ergo it will work. The tendency is to do

more with more. In contrast a large body of recent studies demonstrates that leading

organizations are able to achieve higher returns and, at the same time, reduce their working

capital significantly and increase the cash flow. They do more with less. Across industries and

irrespective of size, what these leading organizations seem to have in common is a systematic and

comprehensive approach to implementing enterprise performance management (EPM) across

the organization. The key is not only to get the insight to understand resource efficiency and

effectiveness, but rather the way resource allocation is planned and budgeted. Tom William s

article in this issue explains this phenomenon.

I would like to go back one more step in the chain of management processes. The root cause of

inadequate resource allocation often comes from wrong assumptions. It is not easy to predict

what will happen in the future. And as recent history shows, many businesses had either over-

optimistic assumptions or simply ignored alternative scenarios. Few companies are now able to

proactively leverage the downturn and gain market share. Most companies can only be reactive

and try to cope with the slump. Toby Hatch and Frank Buytendijk recently introduced the

intriguing idea of scenario-based scorecards. This is a brilliant idea, in my opinion, to allow an

organization to navigate changing market conditions and understand the impact of those changes

and the need for adjustments to the business.

The do more with less approach could start with identifying the minimum resource

requirements to survive in different scenarios. Then additional resources are allocated when they

are needed and in activities where they deliver the best value. The challenging question is not

why, but when. Timing is the essential problem. From inside the organization why something

makes sense and creates value is often well explored. When to do it (or not to do it) depends on

external conditions. The smartest companies tend to find the best timing.

 

Thomas Oestreich,

Chief EPM Strategist 

thomas.oestreich@oracle.com