Leaders must focus on creating 'surplus value'

7 May 2012

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7 May 2012 | Paul Snell

Purchasing leaders in fast-growing nations must understand how to create “surplus value” from their teams, according to a leadership expert.

Speaking at the CIPS Middle East Conference in Doha, Qatar yesterday, Tommy Weir, founder of the Emerging Market Leadership Center, said when faced with greater demands and expectations there is often an assumption this can just be achieved by working harder. But, he argued, the best leaders must be able to understand how to be able to make productivity rise with fewer resources.

“Great leaders understand that it is their job to create surplus value,” he told delegates. He added that the creation of surplus value does not come from getting more people, but getting more from your people.

“Average leaders talk about cost-leadership, motivation, operational leadership, replicating quality and teamwork,” he added. “But if we want to look at becoming a better leader where you are working today, we need to transition from cost-leadership to value creation, from motivation to inspiration, from operational leadership to scaleable leadership, from looking at staffing positions to driving productivity, from replicating quality to accelerating improvement and from teamwork to winning together.”

He said it should not simply be about the cost, but instead leaders should focus on the value that is created for the organisation, citing an example where the cost in terms of time and effort of making a saving had outstripped the saving created as a result.

He added that often in rapidly growing regions, such as the Middle East, the typical reaction to rising costs is simply to think about what can be cut, but an alternative approach should be taken.

“A value creation approach asks a very simple question: 'what do we need to stop doing?',” he told the audience. “Cost-creep in an organisation averages between 3 to 5 per cent in organisation every two to three years, simply from bureaucracy and what is going on in the business. In the midst of rapid growth we don't pause to cut out. When we grow rapidly things that aren't important tend to stay with us.”

But he warned it takes courage as a leader to look at what processes and actions an organisation no longer needs. “It's a very difficult thing to do as a leader, and the reason it is difficult is people's security is tied and attached to what people do. So what we are talking about when we are moving to value creation is upsetting the levels of personal security in the business, which is why it is very few and rare that leaders go into those areas.”

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