Why is it important for leadership to marshal, build, and retain competences of a performance-based workforce? – People are the most important asset of every business enterprise. The more capable or competent the people are working for a company, the better is the company’s performance. But people are not born with knowledge or skills; thus leaders need to train and build their subordinates (even though some might have acquired some pertinent knowledge or experience prior to joining the company) in their related work areas. The longer the employees work with a company, the more skillful they would become; and hence the more important they are to the ongoing success of the company. Thus, it is equally important for leadership to keep them from leaving the company. – But what would happen if a company could not retain a competent performance-based worker? According to New PwC research, it shows that immense cost would incur in lost skills, replacement, training, and lost of productivity that amounts to about a year of that person’s salary (Failure to retain competent employees, 2010). Thus, if a company could not retain its competent staff, this would reduce the profit of the company. For example, if a restaurant could not retain its chef, whose ability to cook tasteful food has continuously attracted many customers, it would greatly suffer from the loss of existing customers. Likewise, all its other competent employees, such as managers, supervisors, promoters, waiters, and waitresses, are just as important to the restaurant business as the cook because any of them leaving would not only slow down the process of the day to day restaurant operation, but also adversely affect the income. Hence the ongoing success of a restaurant depends on the its ability to effectively marshal, build, and retain competences of a performance-based workforce.
Why might managers sacrifice short-term profits in pursuit of a long-term strategic plan?
There are short-term and long-term profits and strategic plans in almost all types of businesses. In a newly start up restaurant, for example, managers would set up a long-term strategic plan, say, after three years, to build 1 million dollars in net income yearly for their employer. To achieve this long-term strategic plan, they would first have to provide tasty food and quality service at a lower than market price so as to attract more customers to build up their customer database. During the first three years of business, the restaurant might have only a small profit or just breakeven the cost. However, after the customer database is firmly established, they would then systematically and strategically increase the food price to such an extend that their customers don’t feel the impact at all. The managers are now having a solid foundation (big customer database and good food services) to embark upon their long term strategic plan to build their 1 million dollars in net income yearly. - Now suppose managers do not scarify their short-term profits and run the business just like their other competitors would. Since there is no difference in food price, albeit quality of food and services might be either similar or different, they would not be able to build as large a customer database as they would when they scarify their short-term profits. In this case, they would never achieve their vision. In other words, it is necessary for managers to scarify their short-term profits in pursuit of a long-term strategic plan.
How might the alignment of interests by managers with the shareholders improve strategic management of the firm? To improve the strategic management of a restaurant, “alignment of interests among management and capital providers is a necessary condition for prosperity. Otherwise, disagreement will divert precious resources from their most productive use. Once the operating agreement is consummated, adversity will be difficult to mitigate. No matter how engaging the concept or how talented the chef is, the business is likely to fail if any key person judges the deal to be unfair” (David Housey, 2001). Note that the keyword here is fairness. For instance, the shareholders might feel unfair when the restaurant is not making much profit, yet managers want money to decorate or renovate the restaurant to upgrade its image or outlook so that they might improve strategic management of restaurant business by attracting more customers, or to raise the wage of the chef to motivate and retain him as he seems to be looking for greener pasture elsewhere. To overcome these problems, managers might need to align their interests with the shareholders such as reasonably reducing the original required mount of fund for decoration or renovation yet achieving the purpose of improving the image or outlook of the restaurant, or providing other forms of appraisal for the chef yet effectively retaining him in the company. - In both instances, however, managers would be aligning the interests with shareholders to improve strategic management of the restaurant.