Saturday, March 13, 2004
*
H is for:
Headquarters
Effective decision-making relies on having the right information, the skill to interpret it, and the authority and communication skills to see that your decisions are put into practice.
But for some reason, managers often seem to think that the quality of a decision depends on where you make it and how extravagant the environment is.
While back office staff play sardines in the boondocks, headquarters is almost invariably in a prime location, with luxuriously appointed executive suites. The decision to invest large amounts of capital in the corporate HQ is rarely challenged, yet most of the justifications offered are almost entirely bogus.
1. A quiet, well-organised office environment does help managers think, but no more than any other employee. Ergonomic workstations and a good working environment are a must for all employees. Mahogany, in and of itself, does not contribute.
2. Managers can travel to one-off meetings, or have visitors. The only people they really need to be close to are their staff and their colleagues. [1]
3. Expensive headquarters do send a message to visitors, but it is the wrong one. They tell suppliers that you have plenty of money to spend, with little concern for value for money [2], and they tell customers that you are probably making excessive profits. Even bank managers get a bit twitchy if your premises appear to be out of line with your cashflow.
4. Opulent offices may help to attract new recruits, but not the ones you need. Managers whose prime concerns are comfort and status are rarely the most effective, and are unlikely to have a keen profit focus. Even the most ascetic are soon corrupted. Today’s leather armchair is tomorrow’s top-of-the-range company car (and next year’s corporate jet).
5. Senior managers can be expected to relocate. By contrast, premises may have to move to suit lower-paid employees.
6. Expensive commercial property may be a good long-term investment. But it may not. In any case, unless you are running a property company, you should be able to find better ways to use your capital.
Directors who opt for expensive headquarters have forgotten that they work for the business, rather than the other way round.
In the best run companies, management realises that it is providing a service, just like human resources or IT. Senior managers take the same cost-benefit approach to headquarters as to any other company plant and equipment. They end up with something adequate and effective – and a lot more money to invest in the business.
[1] In some industries, there may be a case for locating in particular centres of excellence, but largely for the benefit of employees, rather than managers. In this situation, managers may indeed end up near their peers in other firms. But those who find themselves spending too much time talking to them may need to consider relocating their HQ elsewhere, before the authorities start to suspect anti-competitive behaviour.
[2] Compare this with the current gambit at British Airways, where every conversation with a would-be supplier begins with the line “We are a loss-making airline – please bear that in mind when quoting your price.” Unfortunately, this gritty approach is undermined by the soaring splendour of BA’s futuristic £200m Waterside HQ, near Heathrow.
H is for:
Headquarters
Effective decision-making relies on having the right information, the skill to interpret it, and the authority and communication skills to see that your decisions are put into practice.
But for some reason, managers often seem to think that the quality of a decision depends on where you make it and how extravagant the environment is.
While back office staff play sardines in the boondocks, headquarters is almost invariably in a prime location, with luxuriously appointed executive suites. The decision to invest large amounts of capital in the corporate HQ is rarely challenged, yet most of the justifications offered are almost entirely bogus.
1. A quiet, well-organised office environment does help managers think, but no more than any other employee. Ergonomic workstations and a good working environment are a must for all employees. Mahogany, in and of itself, does not contribute.
2. Managers can travel to one-off meetings, or have visitors. The only people they really need to be close to are their staff and their colleagues. [1]
3. Expensive headquarters do send a message to visitors, but it is the wrong one. They tell suppliers that you have plenty of money to spend, with little concern for value for money [2], and they tell customers that you are probably making excessive profits. Even bank managers get a bit twitchy if your premises appear to be out of line with your cashflow.
4. Opulent offices may help to attract new recruits, but not the ones you need. Managers whose prime concerns are comfort and status are rarely the most effective, and are unlikely to have a keen profit focus. Even the most ascetic are soon corrupted. Today’s leather armchair is tomorrow’s top-of-the-range company car (and next year’s corporate jet).
5. Senior managers can be expected to relocate. By contrast, premises may have to move to suit lower-paid employees.
6. Expensive commercial property may be a good long-term investment. But it may not. In any case, unless you are running a property company, you should be able to find better ways to use your capital.
Directors who opt for expensive headquarters have forgotten that they work for the business, rather than the other way round.
In the best run companies, management realises that it is providing a service, just like human resources or IT. Senior managers take the same cost-benefit approach to headquarters as to any other company plant and equipment. They end up with something adequate and effective – and a lot more money to invest in the business.
[1] In some industries, there may be a case for locating in particular centres of excellence, but largely for the benefit of employees, rather than managers. In this situation, managers may indeed end up near their peers in other firms. But those who find themselves spending too much time talking to them may need to consider relocating their HQ elsewhere, before the authorities start to suspect anti-competitive behaviour.
[2] Compare this with the current gambit at British Airways, where every conversation with a would-be supplier begins with the line “We are a loss-making airline – please bear that in mind when quoting your price.” Unfortunately, this gritty approach is undermined by the soaring splendour of BA’s futuristic £200m Waterside HQ, near Heathrow.
