Management Theory – No Simple Solutions

Management Theory – No Simple Solutions
By R Heller

The problem with any management theory is that there is no one correct answer. There is no all-purpose philosophy that will suddenly transform a failing business into a successful one. But that doesn’t stop managers being taken in.

Shareholder Value is one such management theory that developed into a cult. Numerous companies were enticed into the notion that managers must take care of investor interests via dynamic policies to drive up the share price ad infinitum.

Shareholder Value lasted longer than almost any other fad. In fact, it still lingers, in spite of shocking crashes in shares which decimated shareholder value. But the Cult of Shareholder Value transformed into the Cult of CEO Value, focusing managements on the sole key variable out of their control – the share price. It prevented them from focusing on the metrics (not always financial) that tell cold, hard truths about a business. Shareholder Value fooled chief executives into believing that the wealthier they became personally, the better for the shareholders. These mortals soon believed themselves to be Gods of Management.

This was a stark contrast to the 1980s, when Western management looked East to successes in Japan, where short-term considerations were ignored in pursuit of productivity, growth and long-term market penetration. As a result, the managers of the West took on board the Eastern management theory of continuous improvement.

Many companies went as far as taking the plunge into Total Quality Management, which faded but reappeared in the form of Six Sigma, with the undeniable basic principle that planned and trained bottom-up methodology can improve all operations.

However, success in Six Sigma will do little to help a company that is pursuing the wrong strategy in the first place. Management has many sides and one theory rarely applies to all.

Most managers have experience of an organization achieving less than the sum of its parts: opportunities not seized and information lost because of systematic bottlenecks and over-rigid control, talent wasted and mistakes ignored until it is too late.

However, the biggest mistake is to consider those kinds of problems inevitable and incurable. Systematic defects tend to respond well when the underlying illness is treated rather than just the symptoms. The managers most qualified to do this are those who know that optimization is the objective and that nothing lasts for ever so reform and renewal must be repeated and a combination of old and new tricks are necessary rather than one, all-conquering management theory.

This old-new combination is at the heart of fusion management, seeking to marry the entrepreneurial dynamism of Western minds with the patient philosophy of the East. Good managers concern themselves with big ambitions rather than the latest Big Idea.

The above article on management theory was written by Robert Heller, renowned management expert and co-author of business management website Thinking Managers along with world renowned thinker and creativity expert Edward de Bono.