>> MIM Speaks
MANAGEMENT MAKES OR BREAKS A FIRM
JULY 15, 2001 (P.34) -
THE STAR
RUNNING a modern business, or any organisation for that matter,
requires a number of key resources. They include:
* AN enthusiastic and competent workforce;
* A LOYAL customer base that has to be built and maintained;
* A REASONABLE market share;
* AVAILABLE funds to finance companies that are "maverick" and
"adventurous;"
* A SYNERGISTIC relationship with suppliers, especially in the
building up of company technology;
* A POLITICAL and economic environment that is not too
"unpredictable;"
* A PUBLIC that is supportive and yet demanding in its
expectations.
Of course, there is a need for top quality management to
spearhead the organisation into the future.
If posed with the question as to which one of the above
resources is the most important, one would find it quite
difficult to provide the answer straightaway.
These resources are interdependent; they work in harmony to
result in the expansion and prosperity of the organisation. In
other words, organisations today must have a "strategic-fit" in
order to become dominant players.
If pushed to answer the question, even though it would sound a
bit academic, I would venture to say that management has the
edge.
Many people know about General Electric's Jack Welch - it is
said that a dozen of his senior managers are willing to take a
bullet meant for him - but not many know that GE takes the
trouble to nurture and develop its managers.
Continuous learning, challenging tasks and vast experience are
being provided for its management people. No wonder many of his
vice presidents are headhunted to be CEOs of other companies.
Honeywell Corporation did a six-year study on how to develop
leadership and strengthen its management. The company is now
paying attention to providing assignments that are varied and
challenging.
Considering that experience is important, the management is
given exposure through promotions, transfers and membership in
project groups. Training and education go hand in hand with the
above.
Members are encouraged to network within and without the
organisation. The company recently stressed the need for good
corporate values and has included values congruence (i.e.,
whether they are in line with the company's mission) in their
performance appraisal.
Time and time again, we see that it is the "collective
leadership" of the management that makes or breaks a company.
A five-year study by G. Hanson from the University of
Michigan's Business School in 1986 on the determinants of a
firm's performance is interesting. The major question that
Hanson asked of 40 manufacturing firms in the USA was, "What
explains the financial success of the firms that are highly
effective?"
Five powerful factors were identified:
* MARKET share;
* THE firm's capital intensity (firm's automation and
up-to-date technology);
* THE size of the firm in assets (economies of scale, etc);
* INDUSTRY average return on sales (in a highly profitable
industry, e.g. dotcom);
* THE ability of managers to get the best out of their people.
The result of statistical analysis showed that the ability of
managers to manage their people effectively was three times
more powerful than all the other factors put together in
determining the financial success of a firm. Good management
inevitably was the crucial factor.
The General Motors' automobile assembly plant in Fremont,
California, had major problems. Absenteeism was high (20% a
large number of grievances was being filed, there were wildcat
strikes, costs were 30% higher than their Japanese
counterparts, and production was low and of poor quality.
In 1982, the plant was closed. GM arranged for a joint
operation agreement with Toyota in 1985. It was put to a test
at the Fremont plant. Most of the former workers were rehired
and the equipment used was essentially the same. The only
difference was the management team of the plant.
In one year, this new team made significant improvements in the
operation. Absenteeism dropped to 2%, grievances dropped from
5,000 to two, there was no strike, production was 20% higher
and costs and quality were equal to those of Japanese cars. By
changing the way the workers were managed, the plant managed to
turn around.
Lester Thurow from the Massachusetts Institute of Technology
often stressed the importance of a good management team and
that it is the key factor to the success of a company. While
most management gurus talk about this in the context of Be last
50 years, ancient kings and conquerors had practised this quite
successfully.
Genghis Khan established the largest land empire the world had
ever seen, Nora Japan to the Caspian Sea. He had a pod
"management team" comprising the various tribal leaders like
Jamuga and Toghril, Chepi Noyon, his nephews and sons, Juchi
and Chagatai. Genghis had united the warring tribes of
Kereyits, Merkits and Kerghirs and taken their best to form
part of his team.
He did not award positions to those by birth but it was earned
by merit, especially that at the warfront through proven
campaigns. It was his team, which was rewarded and appreciated,
that kept the vast empire together and kept it growing even
after his death.
The management and collective leadership is indeed crucial to
the success of an organisation. Capitalism may have its
drawbacks, but it does allow the fittest and the most effective
and efficient to prosper. While it is true there are exceptions
to this rule, especially in the context of developing
countries, one must not allow the exceptions to become the
rule.
Organisations must have both long-term and short-term plans to
develop their people, especially those at the management level.
They should also acknowledge the fact that the world is fast
moving away from the swash-buckling hero to one that is
collective in nature.
Even people like Jack Welch, Herb Kelleher (Southwest Airlines)
and Dr Cheong Choon Kong (SIA) still build and depend on a good
management team. Organisations too need to expose their
executives to varied experiences, train them and provide an
atmosphere that is conducive to building of relationships.
The management that has good interpersonal skills which can
develop trust, is endowed with the ability to manage in
different environments, works together as a team, and is proud
of its values will inevitably forge the organisation ahead.
In the final analysis, it is the people constituting the
collective leadership (i.e. the management) who are going to
work for a "strategic fit" of all resources for the company's
success.
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