- Series: Harvard Business School Press
- Hardcover: 272 pages
- Publisher: Harvard Business Review Press; 1 edition (August 2000)
- Language: English
- ISBN-10: 0875848982
- ISBN-13: 978-0875848983
- Product Dimensions: 0.8 x 6.2 x 9 inches
- Shipping Weight: 1.4 pounds (View shipping rates and policies)
- Average Customer Review: 12 customer reviews
- Amazon Best Sellers Rank: #653,672 in Books (See Top 100 in Books)
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Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People 1st Edition
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From Publishers Weekly
In today's heated job market, companies must look within to develop and nurture talented employees, say O'Reilly and Pfeffer, both professors at Stanford Business School. They offer a detailed look at several companiesAamong them, Cisco, Men's Warehouse and PSS World MedicalAthat are profitable in competitive industries and that have successfully retained and promoted their staffs. Following a brief company history, the authors present a straightforward discussion of each company's culture and policies, in some cases including quotations from its executives. Occasionally, the secrets of a company's success are obvious: Southwest Airlines has carefully chosen a niche market; it puts high value on customer service and its employees feel as if their daily work will contribute to the future of the company. Certainly, CEO Herb Kelleher is part of the winning formula, but Southwest's business is run differently than other airlines. Its employees can work at different jobs and financial data about the company's performance as well as its competitors is shared regularly with staffers. Similarly, PSS Medical values its employees and works very hard at both recruiting and training people who will fit in at the company. With its emphasis on detailed anecdotes, this unusually engaging management book proves that concentrating on "soft issues" like employee values can give a company the competitive edge. (Sept.)
Copyright 2000 Reed Business Information, Inc.
Stressing the need to attract and retain the best people has become a mantra for corporate executives and human-resource departments. O'Reilly and Pfeffer warn, though, that too much effort is spent on attracting star performers and too little on fostering the creativity, drive, and ambition of current employees. Both are Stanford University business professors, and both have written popular management books. O'Reilly is coauthor of Winning through Innovation (1997); Pfeffer's titles include The Knowing-Doing Gap (1999). A common theme running through these earlier books and this new joint effort is that corporate strategy, values, culture, policies, procedures, and management practices all must be in alignment for companies to take advantage of the emotional and intellectual resources of the people that work for them. O'Reilly and Pfeffer let the stories of eight companies like Cisco Systems, Southwest Airlines, and the Men's Wearhouse "take center stage" to illustrate how internal talent can be maximized. The authors also suggest reasons why competitors of these companies have not been able to replicate their success stories. David Rouse
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What these studies show is how these high performing companies have achieved their success by aligning their values, strategies and people. This is something which is easy to understand but hard to do. It requires consistent articulation and implementation of the values and vision and a relentless attention to detail in ensuring that all policies and practices support the company's values. In order to be able to show this kind of consistency a real belief and commitment are needed and a willingness to persevere.
This book shows how high performing companies consciously turn a lot of the conventional management wisdom upside down. For instance:
1. Contrary to what many people now think, recruiting, selecting and retaining unique talent is NOT the prime source of competitive advantage. Although these activities are important, the examples of these extraordinary companies show that it is much more important to build a culture and work system that enables all people to use their talents and develop their talents. A byproduct of this will be that your company will also be better at attracting and retaining people.
2. Values first instead of strategies. The conventional view puts competitive strategy on top and derives from that what structure is needed, what competencies and behaviors are needed and so on. The companies described here work differently. Although they do have competitive strategies these are secondary to their set of guiding values and to the alignment of these values with their management practices. In other words: they have a values-based view of strategy.
3. Respectful and trusting way of dealing with people. Many companies monitor, check and try to control employee behavior. The hidden value companies work differently. In the spirit of Douglas McGregor's book The Human Side of Enterprise, they seem to understand that if you begin by designing systems to protect against the small unmotivated minority, you end up alienating the motivated majority. So they put their people first by treating them respectfully, involving them and trusting them.
Lessons like the ones presented in this book can be found in several other books by for instance Jeffrey Pfeffer himself, David Maister and Jim Collins. What makes this book different and interesting to me is the presentation in the form of detailed case descriptions.
Like so many business books, "Hidden Value" is second hand wisdom, a description by (tenured) academics describing how entrepreneurs ran successful businesses. This is fine for academic pursuits. But if you are putting your life savings (and most likely a few other things you would rather not lose) at risk in a business, "Hidden Value" is far from the last word on the subject.
2.Cisco business purpose is "To shape the future of global networking by creating unprecedented opportunities and value for our customers, employees, partners, and investors."
3. A global networked business is an enterprise of any size strategically using information and communications to build a network of strong, interactive relationship, with all its key constituencies.
4.Cisco recognizes that if the company does not have the internal resources to develop a new product within six months, it must buy its way into the market or miss the window of opportunity.
5.Cisco's initial approach to acquisition would have problems. Cisco's core strategy for growth was acquisitions; and one primary purposes for acquisition was engineering talent. Retaining acquire company top management means retaining key engineers.
6.Cisco emphasizes the importance of being either number of 1 or number 2, in each segment in which they compete.
7.Cisco emphasizes reliance on empowered teams and programs to increase the speed of assimilation of the acquired company.
8.Cisco prefers to acquire companies that are much smaller than it is. Acquisitions are screen on five principles: The presence of a share vision; The right chemistry or cultural compatibility; The likelihood of a short-term win for both parties; A long-term win for all parties; and Reasonable geographic proximity.
9.In Cisco experience, excessive secrecy may signal a lack of openness and honesty. Cisco looks for how flexible the candidate company is in conversation and how widely they share equity. "We won't deal if the candidate company has aggressive vesting" of stock options, says Giancarlo. We prefer gold handcuffs, typically consisting of two year non-compete agreements with key executives and technical personnel and provision of Cisco stock options that vest over time. This technique is an effective way to retain key personnel."
10.Chambers says, "We've learned that to make acquisitions successful, you have to tell employees up front what you are going to do, because trust is everything in this business. You have go to tell them early so you don`t betray their trust later."
11.Over 70 percent of senior managers from acquired firms are still with Cisco. The senior managers stay because they now have corporate resources and back to purse their dream projects.
12. "Early if not elegant" means the goal is to ship the acquired companies product under the Cisco label by the time the deal is closed, usually within three to six months.
13.In the typical acquisition, the engineering, marketing, and sales units will be integrated into the sponsoring business unit, while human resource service, manufacturing, and distribution are merged into the Cisco infrastructure. The process has been refined to the point that is usually takes two to three months, with smaller acquisitions being competed in as few as ten days and the largest, with 1,200 employees, taking only four months.
14.Cisco uses the buddy system after acquisition, pairing each new employee with a Cisco veteran of equal stature and similar job responsibility The buddy offers personalized attention better suited to conveying the Cisco values and culture.
15. Cisco pays between $500,000 and $2 million per employee, the economic rationale for retaining these assets is clear.
16. Chambers says of his experience at IBM and Wang, "I learned at both companies that in high tech, if you don't stay ahead of trends, they'll destroy everything you work for and tragically disrupt the lives of your employees." Skills and strategy is the way to win against smarter opponents.
17. Three things can get you fired at Cisco: not producing business results, not recruiting and developing the right people, or not being a team player.
18. Cisco espouse five core values: a dedication to customer success, innovation and learning; partnerships; teamwork; and doing more with less. Chamber contacts customers each day, he says, "I want to hear the emotion, I want to hear the frustration, I want to hear the person's level of comfort with the strategy we're employing. And you can't get that through emails." 85% of Cisco customers claim they are satisfied.
19. Learn by taking a risk and learning from the failure.
20. Cisco believed meeting time to market guidelines was, the key to successfully dominating the market, they realized that Cisco needed to act like a small company from a product development point of view while retaining big-company strengths in manufacturing, distribution, and finance. All component manufacturing is outsourced, but there is centralized final assembly and test manufacturing organization. The overarching intent is to develop high value added products that offer high margins. Achieving high margins and profitability growth is key to Cisco's continual investment in technology.
21. Roger Sant and Dennis Bakke wrote a book called "Creating Abundance: America's Least-Cost Energy Strategy". The book reflected the emerging view and gave some answers to the energy crisis. The primary answer was produce services - heat, light, and power, at the lowest possible cost."
22.Sant and Bakke start AES as a provider of consulting services in the energy industry. They raise $1.3 million of their desired $3 million from Venture Capitalist. Initial investors did well. A $10,000 investment in 1982 was worth about $20 million in 1999. Eventually AES moved beyond consulting and began operating an independent power plant. The first power plant was in Houston, Texas, in 1996. AES total energy generation capacity is 24,076 Megawatts and in 1996 was the twelfth fast growing company in the US. AES operates power plants in the US, England, Northern Ireland, Wales, the Netherlands, Argentina, China, Hungary, Kazakhstan, Republic of Georgia, Canada, Brazil, Dominican Republic, Panama, Australia, India, and Pakistan.
23.The electric power generation business is both competitive and complex. However, the growth potential for independent power generation is great because most of the world does not have access to reliable electricity. In 1997, 40 percent of the world's households had no electricity.
24.There is a growing movement to privatize government-owed power generation and distribution facilities. Complexity comes from various ownership and financial arrangements. The purchasing or building a new power plant requires governmental approval and often requires two to five years to complete.
25.AES has 300 team leaders all over the globe. AES maintains a 20 percent return on investment for projects. AES is opportunistic in that is does not believe that financial capital for good investment is scarce, so the company sets no limits on how many deals it works on or completes. Team leaders make project decisions and they make the deals not senior management. Roger Sant emphasizes that people are important, they make a real difference; they don't need to be controlled; they can be depended on. Freeing up people makes them adaptable to a world of complexity and for this reason employees are faster at solving problems and recognizing opportunities while spending less money.
26.The AES management system was designed to make people happier in the way they work. Smart people produce prodigious amounts of work. Employees are willing to learn new skills and knowledge. AES was able to leverage capital by using non-recourse project financing, where debt is secured by the specific generating asset and not by the company as a whole.
27.AES strategy is about building a competitive advantage.
28.In a McKinsey survey, of the 5,679 respondents, 58 percent cited values and culture as being absolutely essential, 50 percent cited good management, 38 percent mentioned the company having exciting challenges, and 56 percent mentioned freedom and autonomy. Only 23 percent of the respondents mentioned high total compensation.
29.What good does it do to have smart, trained, informed, committed people who can't take action? It only creates frustration. Driving out fear and helping people feel secure is a central core value in all successful businesses. Implement organizational structures that permit the knowledge, skills, and insights of the firms people to be recognized and implemented. Perform depends on the degree of decentralization and delegation of decision making authority. Successful companies attract and develop talent and intellectual capital and build relationships of mutual commitment with their people. A critical core value for senior management is too organize so intellectual capital and energy can be used to affect business decisions and operations.
30.In real delegation and empowerment, people consult others from throughout the organization, including senior leadership, but in the end they make the decisions and are held accountable for their results.
31.Listen to the market and the consumer focus, hear what the consumer wants and act. Look at how the firm acts, not what it says.
32.A focus on faster growth give people a sense of purpose and direction.
33.Competitors can not imitate successful companies because the don't understand nor believe the values that are driving the successful company. It is impossible to imitate values and culture in a company without comprehensive understanding and commitment to the values and culture.
34.Senior managers should see their roles as not managing the day-to-day business or even about grand strategy, but as setting and reinforcing the vision, values, and culture of the organization.
35.Overall alignment and consistency in supporting teams, fun in learning and risk taking, rewards and recognition, widespread sharing of information, investing for people, and hiring for fit reinforce the core values of the company.
36. Organizing for teams is not a belief in a fad but from the belief that teams are fundamental in getting work done. Teams can give people a sense of purpose and a feeling of belonging. In competitive in environments is not the natural tendency for individuals to form teams. Team organization must become a value of senior management and these values must be transmitted through the organization.
37.How to attract the right talent? Design screening processes that help identify individuals that share the same values as the company and will fit with the company culture. Most companies focus on skills for a specific job. This approach meets Human Resource requirement but can prove to be disruptive to the organization; he could change the culture of the organization. People centered firms hire for how well the person will fit the company. This does not mean HR will ignore the candidates ability, but that they will consider values, additionally. The person must feel comfortable long term in the organization. Core values should include the desire to learn new things, be part of a team, and accept responsibility. By beginning with an explicit set of values and screen people against these, companies will increase their chance that people who join will share the values and culture of the organization.
38.Values drive management practices and help define strategy - the exact opposite of what conventional wisdom teaches. Values helps solve perplexing problems, keep the company moving in the right direction, and keep policies from become bureaucratic. Business practices must align with company values, this keeps inconsistency at bay.
39.Why are values important? We want to believe that our work is important and our work is making a differences to others. No one can be very motivated if they genuinely believe that what they are doing is worthless or violates their fundamental values. People want to be respected, thought or a people and not economic agents, and be around people with similar beliefs and values.
40.Why does team need to be promoted as a core value? Teamwork across groups or divisions with others whom a person see infrequently is not likely to be highly valued. In this world, status comes from getting more money and promotions, not helping customers or fellow employees. The culture emphasizes individual achievement and short-term success, not mutual obligation, trust, and loyalty. Senior management must create incentive systems to ensure teamwork occurs and loss of intellectual capital minimized, such as, Team rewards that make being part of the team attractive
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I recomend it for every manager.