Management Strategies: A Critique of Theories and Practices

314 Pages·1999·15.389 MB·English

by  Samuel Eilon (auth.)

MANAGEMENT STRATEGIES
A CRITIQUE OF THEORIES
AND PRACTICES
MANAGEMENT STRA TEGIES
A CRITIQUE OF THEORIES
AND PRACTICES
by
Samuel Eilon
~.
"
Springer Science+Business Media, LLC
Library of Congress Cataloging-in-Publication Data
Eilon, Samuel.
Management strategies : a eritique oftheories and praetices I by
Samuel Eilon.
p. em.
Includes bibliographieal referenees and index.
ISBN 978-1-4613-7071-0 ISBN 978-1-4615-4585-9 (eBook)
DOI 10.1007/978-1-4615-4585-9
1. Strategic planning. 2. Management. 3. Corporations.
4. Industrial management. 1. Title.
HD30.28.E34 1999
658.4'012 --dc21 99-44534
CIP
Copyright © 1999 by Springer Science+Business Media New York
Originally published by Kluwer Academic Publishers in 1999
Softcover reprint ofthe hardcover lst edition 1999
AII rights reserved. No part of this publication may be reproduced, stored in a retrieval
system or transmitted in any form or by any means, mechanical, photo-copying, recording,
or otherwise, without the prior written permission of the publisher, Springer Science +
Business Media, LLC.
Printed on acid-free paper.
To
Amir
Ronit
Carmel
Daniel
who have greatly enriched my life
Contents
Preface page 1
1 Structuring the unstructured 9
2 Mission incomplete 25
3 Board size and corporate failure 35
4 Determinants of corporate performance 45
5 Prominent performance ratios 61
6 A simple formula 79
7 A misleading performance ratio 91
8 Use and misuse of productivity ratios 97
9 The bottom-liners 107
10 In pursuit of market share 119
11 Intrepid gurus 133
12 On competitiveness 141
13 OR at the top? 149
14 Managing change 163
15 Closing the gap 169
16 Measuring quality of information systems 179
17 Divide and rule 187
18 Centralism versus federalism 209
19 Hondaism - myth and reality 217
20 A cake can be cut in many ways 231
21 Time management 243
22 Management performance appraisal 249
23 What makes Sammy run? 263
24 Don't spit in the soup, we all have to eat 283
25 The role of business schools 293
26 Business policy for beginners 305
Index 315
PREFACE
The wide range of possible performance criteria for business
enterprises raises serious questions of definition and measurement.
Indeed, measurement is at the heart of the analysis of success and failure
of business operations, and much depends on the quality of the
information that is available.
The evaluation of business performance comes into sharp focus
with the pUblication of companies' annual and semi-annual accounts,
which are then followed by commentaries from stockbrokers and
business analysts in reports to investors and in articles in the financial
press. Captains of industry may not have to suffer the indignity of
frequent public opinion polls that gauge the popularity of politicians.
Nevertheless, they are plagued by a similar phenomenon, in that views
expressed by analysts, customers, shareholders and investors, serve as
powerful reminders to senior executives that the business world is
subject to many upheavals and that even the most seemingly secure can
suddenly fall from grace.
This vulnerability is accentuated by the stick and carrot syndrome,
which is very much in evidence in business and industry. Successful
enterprises with good ratings are offered almost limitless credit at very
attractive terms, and their shares are highly valued. Not only do they
provide excellent security for borrowings, but they also constitute an
effective paper currency for expansion and acquisitions. Consequently,
senior executives of successful enterprises enjoy fabulous
packages, including many non-monetary incentives, and are
constantly sought after in business and social circles. In contrast, poor
corporate performance leads to a credit squeeze and mounting pressure
on management from banks, from shareholders and from would-be
investors. Coup d'e tats in boardrooms, hostile take-over bids and
2
wholesale reorganizations (all of which often result in job losses at all
levels of the managerial hierarchy, even at the very top) are sufficiently
common to make executives extremely nervous about their future.
There is, therefore, much to gain from corporate success and
everything to lose from failure, both for the enterprise and for those who
lead it. A striking feature of the business scene is that it is dominated by
two major considerations. The first is the undue emphasis put by the
financial world on a short-term perception of corporate performance
(and hence on pre-occupation with reported financial results and
published commentaries), and the second concerns the great inertia of
large business systems and the difficulties encountered in trying to
change them.
Thus, the CEO (Chief Executive Officer) is faced with the
constant dilemma that, while his (or her) performance is often judged by
the here and now, it takes considerable time for a change in the
organization to manifest itself. This is particularly evident when changes
in strategy are called for, such as those concerning the range of products
and services, the introduction of new products, revamping quality and
pricing policies, opening new production plants and distribution centres,
concentrating on prime markets or developing new markets.
Each of these issues may require not only a fundamental policy
re-adjustment, but may involve considerable financial expenditure and
take many months, even years, to implement. Other central questions
relating to corporate size, to innovations, to investments and acquisitions,
as well as policies on personnel recruitment and training, all these may
have long-term effects, which are not immediately evident in evaluating
corporate performance in the short term.
The key question that needs to be asked in the course of this
evaluation is what is meant by 'corporate success'. How is it to be
defined, and how can it be measured? When questioned on these
matters, senior executives tend to cite the following ten attributes of
success:
• happy, well trained and efficient workforce
• highly motivated and suitably rewarded managerial hierarchy
• satisfied customers and a strong standing in the market, as evidenced
by an improving market share
3
• secure and reliable sources of supply for all material inputs
• good corporate performance, as judged by an accepted range of
financial criteria
• high ratings in the stock market and among financial analysts
• satisfied shareholders and a high reputation among investors
• immunity from predators and hostile take-over bids
• good credit lines at reasonable terms
• being well placed to take advantage of innovation and manage new
developments.
Many of these attributes of success are inter-dependent and are
conditional on the attainment of others. This list of desiderata can be
dismissed as banal statements reminiscent of slogans proclaiming the
virtues of clean living and motherhood. But a closer examination of the
industrial scene suggests that, to a greater or lesser extent, senior
executives do focus on these criteria, as tangible objectives to aim for,
and this gives rise to a number of interesting observations.
The first, and perhaps the most important, question that senior
executives are concerned with, is how to proceed from initially nebulous
ideas about objectives to structured programmes of action (certain
aspects of these problems are discussed in Chapters 1-3 of this book).
Senior executives also need to consider various determinants of
corporate performance and what modes of managerial style and control
enhance the probability or certainty of success (see Chapters 4-9,
including the discussion of selecting performance criteria and the
importance of measurement in Chapters 5-8). They also need to
examine various popular assertions and beliefs in management theory,
such as the over riding importance of market share (Chapter 10) and
prevailing fashions in management practice (Chapters 7-11).
They are concerned about competitiveness (Chapter 12), the
quality of information systems (Chapter 16), the potential contribution
of operational research (Chapter 13), and a host of related issues
(Chapters 14-23). And since ultimately it is through people that success
is brought about, it is necessary to consider ways in which individual
performance can be evaluated and rewarded (Chapters 22 and 23).
4
Secondly, not all industrialists see the objectives listed earlier as
equally important. The ranking of objectives may not just depend on the
industrial sector to which a given enterprise belongs, or to the position
held by the enterprise within that sector. Many other factors playa part,
such as the history of the organization, the dynamics of the marketplace
and the strength of the competitors. Managers need to be acutely aware
of the threats and opportunities envisaged for the industrial sector in
general and for the enterprise in particular. Perhaps above all, one
should not under estimate the personality, ethos and aspirations of the
man (or woman) at the top. Some senior executives may dismiss
particular objectives as being of minor consequence, while singling out
others for special attention. The formulation of objectives and the pre
occupation with short-term performance, coupled with simple recipes,
can have far-reaching consequences for the enterprise (as discussed in
Chapters 6-10), particularly when management is bombarded by advice
from numerous fashionable gurus (Chapters 11, 17-20).
Thirdly, as any manager faced with multi-criteria knows only too
well, corporate objectives are not always compatible with each other, and
many may be found to be in direct conflict (these issues and the choice
of measurement criteria are debated in Chapters 5-9).
Even when senior executives are prepared to rank objectives - an
exercise that many are loath to perform - the result cannot provide
relative weights and trade-offs between objectives in a form that can be
converted into an all-embracing single objective function. Furthermore,
whatever ranking is produced may well alter with time, depending on
changing external and internal circumstances; thus, objectives often
become moving and fuzzy targets. Also, each of the' objectives is itself
an amalgam of many more specific attributes and criteria. For example,
when managers concentrate on financial performance they soon discover
that this involves a host of financial characteristics and ratios, and these
too mayor may not be compatible with each other (Chapters 5-7).
The dynamic nature of the business world leads managers to
consider how to handle the rapid changes that take place and how to
close the gap between actual and desirable levels of performance
(Chapters 14-15). Styles of management have implications on
responsibility and accountability of departments and individuals
(Chapter 17) and on the degree to which control should be centralized
5
(Chapter 18). Managers are also concerned on whether lessons can be
learnt from experience gained in one case to be applied elsewhere (this
question is discussed in many chapters; of particular interest is the case
of Honda in Chapter 19).
The importance of measurement cannot be over emphasized. One
example of how measurement can affect analysis of performance is the
manner in which costs are determined and it is not difficult to
demonstrate the profound effect that basic concepts and conventions can
have on the results (as shown in Chapter 20). Another example is the
popular area of productivity analysis, which begs the question of what
productivity means and how it can be measured (this is discussed in
Chapter 8).
All these issues are inter-twined and cannot be considered in
isolation, and this is what makes any coherent and methodical
discussion of the management task so difficult. There is no obvious
starting set of premises on which a complete theory of management can
be systematically constructed on the lines of Euclidean geometry. It has
been argued that the managerial task can be equated with making
decisions, so that analysis of the decision making process through
modelling can provide the insight that students of management are
looking for.
An allied proposition is that the logical sequence in which
elements of the managerial process can be analysed is to start with a
definition (or at least a description) of the purpose of an organization, of
what is popularly called its 'mission'. Once you know where you are
going, you can proceed to determine the route for getting there. This
'ends and means' approach has a natural intuitive appeal and has kept
management consultants in business for decades, but converting this
idea into reality is fraught with many difficulties (as Chapters 1 and 2
suggest).
The same is true about many other issues that both theorists and
practitioners take for granted. The theorists pontificate in obtuse
language about paradigms and the prevalence of professional
bureaucracy as a manifestation of a formal analysis of assumptions and
beliefs. In contrast, there are practitioners who manage by the seat of
their pants, who spurn theory and embrace adhocracy (solving problems
on an ad hoc basis). They do not accept the supremacy of methodology