From the 1960s, there has been an explosion of multiple concepts in management (refer my post “Thought Leadership in Management: Current Drought and Future Potential” in my Blog “Strategy Musings” dated July 28, 2009). Several thought leaders have sought to enrich functional management streams such as general management, operations management, organization management and information management in terms of new concepts and models based on new integrative approaches related to leadership, strategy and reengineering. Fifty years later, however, it is evident that there are certain fundamentals of management that are ageless in applicability and appropriateness.
No substitute for leadership
Each entity, be it a corporation or a function, needs to have singular leadership at the helm. Each company needs a unique leadership icon to capture internal followership and external appreciation. Concepts of shared leadership, surrogate leadership, informal leadership, collective leadership and individualized leadership are excellent tools for inclusive management but do not provide the requisite focus and drive to the larger organization. Human race is designed and culturally acclimatized to look up to, and be led by, singular leaders. Further, principles of natural selection and cardinal performance management force a gradation of leadership in organization. Rigorous leadership filters ensure that only the fittest move up the organizational ladder and in turn get the mandate to direct the organization. The focus on singular leadership does not mean that organizations are for autocrats. On the other hand, it provides the challenge and opportunity to groom leadership through creative organization design.
Design of an appropriate organizational structure keeping the perspectives of business, operations and talent in view helps in the development of progressive and parallel leadership talent in the company. Functional, product or geographic organizational units in integrated companies and strategic business units in diversified corporations represent opportunities for singular leadership development at multiple levels. Such tools help corporations successfully manage leadership transitions in a seamless manner. General Electric could transit successfully into a Geff Immelt era despite the two decade (1981-2001) hegemony of a Jack Welch era, mainly because of the several leadership constructs adopted by Welch . GSK could also see a successful leadership transformation from the Sir Richard Sykes era to Andrew Witty age due to the availability of proven leadership at hand. It is again the limitation of the singular leadership phenomenon that made Chris Viehbacher move from GSK, after the unsuccessful leadership bid, to Sanofi-Aventis as its CEO.
No substitute for strategy
Strategy is the compass for navigating a company in the choppy business waters. Although vision and strategy are seen to be sequential, strategy encompasses vision. A sustainable vision would need to define the industry in which the firm would operate or help create. Strategy would incorporate such sustainable vision and create a pathway that also reflects the business values that are often considered a part of the vision. Strategies would vary depending on the ethical values, business values and the scientific values that a firm would believe in. If an internet search engine firm believes in cutting out immoral traffic it would have to deploy costlier technology tools and be prepared to live with a smaller market compared to another search firm which has no such qualms. The higher level of ethical practice would require it to deploy more virtuous strategies to stay competitive. Similarly if a media firm does not wish to operate under censorship in a country its business strategy needs to be that much more focused on other countries. A firm which believes in fundamental science has to make commensurate investments in technology and scientists.
Firms must, therefore, give considerable importance to deliberating on strategy as part of the long range or corporate planning processes. The master strategy or the corporate strategy of a firm must be directionally focused and conceptually robust to provide a sense of stability to the firm. This does not mean obduracy in the wake of environmental opportunities and challenges. In fact, successful firms, for example, periodically develop critical strategy canopies that redefine the business models. Big pharmaceutical multinational firms which were once opposed vehemently to generic medicines are today engaged in aggressive establishment of generic businesses through acquisition of products and firms. Leading Korean consumer electronics firms targeted India as their important strategic destination which enabled them take a host of strategic initiatives, covering marketing, manufacturing and research in that order, under such a master strategy. Today, almost all global companies are engaged in redefining their manufacturing priorities between China and India, and their marketing priorities between advanced and emerging economies.
No substitute for structure
Business is a complex set of activities that requires an organizational structure to achieve sustained delivery. Alfred Chandler hypothesized through a study of industrial firms that organization structure shapes the industrial corporation and structure is driven by strategy (“Strategy and Structure: Chapters in the History of American Industrial Enterprise”, 1962). Chandler’s studies brought structural issues to the centre stage of studies of corporate performance. As years progressed organization design became an important domain of management. That said, corporations are quite diffident about reengineering the organization structures with changing needs or strategies. Despite vast changes in product-market alignments and significant increases in the levels of globalization, firms rarely go beyond the traditional functional organization, supplemented by geographic organization occasionally. Concepts of autonomous strategic business units or collaborative matrix structures remain more as experiments on paper.
Many leaders do not appreciate the need for an organization structure to adapt itself to a dynamic corporate strategy; instead, incumbents of various positions are expected to stretch themselves to the changing strategic needs. This approach is fallacious as part-time structures not only fail to enable the required attention to emerging needs but also lag behind in servicing the established needs as well. Tata Motors is a clear example of how a changing organization structure (from a functional-geographic structure to a divisional-business structure) supported the diversification of the company (from an India-centric truck and bus maker to a global full-line automobile manufacturer). On the other hand, many public sector undertakings in India demonstrate how they are unable to realize their potential due to their ossified organizational structures. A dynamic organization structure is also the first step to creating a compelling value proposition to attract and develop the right leadership talent.
No substitute for process
Organization structure by itself does not lead to successful execution. In fact, the broader definition of organization structure as a set of policies and guidelines by which different organizational units conduct themselves and interact with each other is rarely well understood. These policies and guidelines may be called in the aggregate as organizational processes. The importance of organizational processes in enabling managerial effectiveness cannot be understated. Processes ensure that the right parts of an organization structure are involved in strategy and execution, and the right sequence of consultations and decision making are enabled. A right organization structure can be rendered ineffective by distorted management processes. A process-driven organization, on the other hand, reinforces organizational performance. The success of select Indian pharmaceutical firms in the highly regulated markets of USA and European Union, relative to manufacturers from other countries is related to the process driven management of such Indian firms.
The civil services in many countries, including India, are reflective of process driven management. The operation of Federal Reserve in the US, for example, is an epitome of considered decision making that follows a rigorous process of confabulations. As a national comparative advantage, however, Japanese enterprise excels in process driven management. The resilience of the Japanese business and industry in the face of asset bubble and prolonged deflation is related to the consensual and concerted manner in which strategy is conceived and implemented in organizations. In Japan, extreme negative measures are avoided even in the face of crises and aggressive expansionist moves are avoided despite opportunities. The processes of multiple consultations impede speed but promote stability. Every strategic initiative in Japanese organizations is taken only after all the relevant organizational units are involved. Each strategic decision that is taken is backed up for implementation by a clear project management plan (Gantt chart) that covers five years or longer.
No substitute for talent
Talent is the spring of organizational creativity. Superior talent vests in organizations a unique competitive advantage. An organizational structure needs talent to deliver results. Identifying the right talent profiles relative to the strategic requirements, creating value propositions to attract the right talent and facilitating a motivating work environment to retain and grow the talent are the key responsibilities for any corporate leadership. Talent management is an integrated process which starts with appropriate organizational structuring and clear recruitment principles. Talent induction has to be titrated to organizational aspirations and culture. Different talent pools have different performance metrics and different motivational levers. It will be foolhardy to apply the talent management philosophy of an FMCG company to an infrastructure company, for example.
Successful companies therefore rely on creating their own preparation and talent reshaping methodologies to adapt the talent they acquire fresh from institutions or experienced from other firms to the organizational needs. This takes several forms. At one end lie firms which rely entirely on job specific experiential training to adapt talent strictly to needs. Slightly higher on the evolutionary scale are firms which rely on customized training modules conducted by a mix of in-house and external mentors to develop flexible talent profiles. At the other end lie firms like Infosys which have established leadership training campuses to retool skills and reshape personalities to meet the challenges of a global delivery model. Talent typically stagnates with time unless it is kept in a mode of continuous development. It is, therefore, imperative that every firm selects and follows a system of continuous talent development to ensure organizational competitiveness.
No substitute for results
Leadership, strategy, structure, process and talent constitute five important elements of an essential prescription for competitive performance. That said, organizational effectiveness is judged by the stakeholders through the optics of performance. Deficiency in any of the five elements could sub-optimize the overall performance. The ability of a company to achieve the balance among the five factors distinguishes a competitive firm from the not so competitive firm. These five elements form a virtuous sequence whereby a visionary leadership crafts a viable strategy, creates a dynamic organization, establishes structured processes and inducts relevant talent to achieve desired results. Every successful firm which went on to achieve industry leadership epitomizes the five factorial management design.
While results are important, the speed with which results are sought to be achieved could cast a deep shadow on the quality of the results. Oftentimes a quest for the top seeded position leads to distorted results. Ranbaxy, India’s largest pharmaceutical firm, found itself in the throes of unprecedented quality issues, including a ban on import of its drugs by the US FDA. Even, the world leader in quality, Toyota, in its quest for the global leadership in automobile production has found itself in a major recall campaign. Results have to be sustainable and durable to be acknowledged as a concomitant of the five factor “no substitute management” model. Sheer pursuit of ends without concern for the means could lead to results that are deficient.
No substitute for ethics
Results are often considered the end-all of corporate activity. Results, of course, are quantitative, material and measurable reflections of what is termed as the management of a corporation. Results, however, are not the only indicator of the success of management. Results achieved without regard to ethics are of little use to the society in the long run. Mahatma Gandhi would ask everyone to evaluate as to whether each step that one could take would be of benefit to the weakest and the poorest of the society. The expectations from a corporation are no different. While generation of wealth is important for corporations, such generation and distribution of wealth has to carry an element of corporate social responsibility.
Ethics have a connotation broader than financial. Developing, manufacturing and selling products of the right quality with the right practices is an ethical activity. Representing in a label the true and complete product specifications is an ethical practice. Aligning promises to capabilities is an ethical manner of managing supply-demand balance. In summary, corporations need to focus on doing the right things the right way for the right results to follow. From Enron to Satyam, it has been established in several instances that pursuit of undue riches in a greedy and unethical manner is the formula for self-annihilation. Ethics in management have no substitute in the final analysis.
Over the last few decades, several management concepts and constructs have come to the fore, seeking to challenge the traditional concepts of management. Grassroots and distributed leadership, competitive and comparative strategy constructs, flexible and flat organizational structures, processes of creative chaos and destruction, talent modulation and adaptation, results driven and street smart performance, and wealth over ethics have tended to dominate multiple managerial prescriptions for achieving aggressive growth. Yet, the history of successful as well as failed corporations, across the globe, teaches us that there are seven fundamentals of management that have no substitutes. Singular leadership with succession plan, flexible strategic canopies, clear organizational constructs, structured management processes, talent-competency constructs, managing for results and ethics-driven management constitute the seven dimensions of management that are truly ageless and have no substitutes ever.
Posted by Dr CB Rao on February 3, 2010