To master how to operating a business is enterprise’s special skill. Since the industrial revolution, under the continuous effects of population and demand growth, biggest problems that enterprises face all the time are how to supply more and better products, how to enhance laborers’ skills and efficiency, and that began the age of business management.
In the new era conditions, what is the difference between operation and management? Why should we go from management to operation? How can entrepreneurs improve their operating ability? Let’s hear the words from party secretary and chairman of China National Building Materials Group Corporation, Song Zhiping.
To master how to operating a business is enterprises’ special skill. Since the industrial revolution, under the continuous effects of population and demand growth, biggest problems that enterprises face all the time are how to provide more and better products, how to enhance laborers’ skills and efficiency, and that began the age of business management. From time study by father of scientific management Taylor to research in organizational behavior by Maslow, the entire industrial age was the age which known for management. But facing today’s rapid development of new technical revolution and changing requirements, if we only depend on management, the company will likely fall into a standstill and even go bankrupt. Because in this age, abundant technology and experience have been built into intellectualized machines, number of employees has greatly reduced and the efficiency of traditional management is waning. So in this age, the biggest problems facing by companies to earning are innovation, uncertainty of market environment. It needs enterprise’s operating ability to solve them.
Especially enterprise leaders, they need to shift their focus from miscellaneous daily management to core operating work. Their identities also change from managers to operators.
what is the difference between operation and management
Operation is facing uncertain stuffs in external business environment, it’s more about making decisions and choices, and the goal is profit. While management is facing specific people, machines, things and materials within the enterprise, it’s more about methods and systems, and the aim is to promote the efficiency. Operator’s mission is marking money, while manager’s main mission is to reduce cost. In some sense, management is a subitem of operating activities, the focus is solving the cost problem. Cost reduction will lead to increase profits. But if there got mistakes in operation, even if management could be zero-cost, it is unnecessarily that enterprise will be profitable.
Managerialist Fayol divided corporate activities into six types which are technical activity, business activity, financial activity, safety activity, accounting activity, management activity and proposed plan, organization, command, coordination and control as main contents of business administration. Taylor put forward exception principle which pointed that senior executives should authorize general daily routines to junior management and they only reserve the right to decision marking and oversight of exceptional items which mean important matters. Even though they have realized operating problems like technology, investment decision go beyond management. But in the early industrial stage, it’s mostly a seller’s market, relatively low technical level, large number of employees. In that case, management was the primary contradiction. Companies could survive and develop by improving labor efficiency, lowering the cost and ensuring quality. Along with the promotion of technology and increased competition, uncertain factors of enterprise have become higher and higher. Nowadays, operating a good business not only need good management, but also good operation. Today’s operator needs to make choices in uncertain factors. To choose technical route, marketing strategy, pricing strategy, business model and etc., operating ability becomes extremely important. It is commonplace that outstanding management enterprises in worldwide collapsed because of an operational mistake. For example, Motorola, an enterprise that we familiar with. There is a method known as Six Sigma Management was created by him. But his historical investment on IRIDIUM is a wrong operation which made him cannot recover after the setback.
Let’s take cement industry as an example. We were in early urbanization and industrialization age twenty years ago, there was only 0.3 billion tons cement output, so the market was on shortage stage. And technology was very backward at that time, there were fire workers, kilnman and etc. A factory with 5000 tons cements daily output needs 2000 workers around. So, in that condition, to concentrate efforts on management was almost the whole contents of enterprise activity. Then there was a slogan: “focus on internal, reinforcing the internal work”. But now, the whole market is a surplus market. Production line has come into an era of intelligence. A production line which has 5000 tons output per day only need about 50 workers, so on-site management has significantly reduced. And operating cost between enterprises is very close owing to technical homogenization. Therefore, the primary tasks of running a business are facing market, finding demands and needs, choosing marketing strategy, innovative technology, segmenting products and creating values for customers, thus we can occupy the market and make profits.
From management to operation
Now that we have recognized that enterprise focus is shifting from management to operation, we should increase the research to operation work and redefine our central work. But in reality, most enterprise leadership is developed by junior management positions. From their opinions, work in the enterprise is management, they focus on that for so many years. And it’s hard to turn their mind to thinking about uncertain operation thinking model, but this is a necessary shift.
Thinking back to when I was a factory manager, most content of meeting were about management, major repair, quality control, on-site management and etc. While nowadays in monthly business meeting, it is mainly around market, price, innovating business model and etc., and we hardly talk about enterprise management. A lot of administrative work has moved down, senior executives focus on operating work. It doesn’t mean management isn’t important, but means operation is more important.
Classes that MBA students have in business college are mainly about management. Because enterprise’s priority work was management over the last one hundred year. And management is easy to be concluded and taught. But for EMBA, it should have more operation lessons. This is an age of innovation and Entrepreneurship. Students of EMBA hope to learn the ability of how to operating a company. They need abilities of startup company and earning money, but lessons mainly about management have no help with operation. That is the reason why Ma Yun said that entrepreneur will not produce by business college and Zhang Ruimin considered that the more they learn, the less they gain. Now, business colleges start to offer enlightening classes and seminars, hiring more successful entrepreneurs as professor of practice. I think it is a progress. Also, I suggest curriculum design for MBA could increase contents of operation lesson, opening minds, improving learning and strain capacity, enhancing the ability of judgment and choosing and the ability of integration of resources, etc.
Leader of enterprise should be an operator first
Enterprise should focus on operation, the leader of enterprise should be an operator first, and he must be an expert of operation.
Operation capacity is the core ability of entrepreneur. As the head of enterprise, it is not an official, nor a traditional manager. It should be an operator first. The aim of operator is making money. It can’t say that who can make money is a good operator, but an operator who can’t make money is definitely not a good operator. As the head of enterprise, you can authorize all management work to subordinate staff. But operations should be at your fingertips, for instance, for market work, you can’t only hear reports from salesman, you should in the first line of market. Head of enterprise need to master operation and concern about profits.
I have met such business executives who talk quite off the point, and once I asked about enterprise efficiency, they became hesitate and their reason is enterprise is unprofitable. And some people always speak with words like perhaps, maybe. They can’t speak with numbers. How to be the head of enterprise if you don’t have a definite idea? There was a head of enterprise asked me that whether Beijing New Building Material group makes money every year since listing? And I said: “yes, how can it make no profits?” Later I know that the listed companies which he managed is rarely in profit condition. Not be able to operating, chronically loss-making firms will often form loss culture. And they even don’t care about it and feel normal about it. Such cadres can’t be the head of enterprise.
The ability of operation needs self-cultivation. We should learn methods of how to operating seriously and open up your eyes. Focus on the change of environment and be creative. So many years, when I attended meetings of CNBM, whatever in annual meeting, or monthly operation meeting, I always talked about methods of operation which are the way of making money. Every meeting is an advanced course of EMBA. For that reason, after years of training, CNBM group has cultivated a large number of operators. The head of each business segments of CNBM group, 80% of their work is operation, 20% is management. It doesn’t mean management is not important. As a mature enterprise, there are many people who own the ability of management, junior members have undertaken responsibility for a mass of administrative work, while operating work is irreplaceable. Cement factories, glass factories, gypsum board factories of CNBM group are all in good management. On the other hand, each enterprise has the head of each division. Give it to him. I do not advocate the head of enterprise stay in workshop whole day. They should open up their eyes，to make enterprise in good operation and profitable.