In their inaugural article, Richard Straub and Julia Kirby concluded that managers must ‘make the most of human potential, and manage to make prosperity inclusive’. This sounds like what good management is all about.
David Hurst’s article, then positioned management as a means to cultivate prosperity. He ends by quoting Clay Christensen ‘Management is the most noble of professions if practiced well’ suggesting management as an occupation that helps others learn, grow, take responsibility and contribute to team success. This is more about good management. And the scientific evidence is overwhelming: good management matters!
But how do we know? As a manager, I would be interested in finding my own response or at least have some questions that help me understand.
What if we could measure management to determine whether managers have done the job to cultivate an organization which has the capacity to capture new challenges, is able to change its focus, and can innovate, grow and create prosperity? It would elevate the conversation about management to describe management as a distinct capability and producing competitive advantage in organizations!
How? Here are some options and a suggestion of how to get to the ‘know’.
Measuring managerial performance is simple. Take ROE, growth, or any other output measure that you like. It offers clarity on performance related to what you measure. Is it inclusive? No, but it measures what you have decided to measure.
Managerial effectiveness is no different. Simple measure like ROA are adequate to judge whether managerial action results in something productive. But, this does not provide any understanding of management.
ROM (Return on Management) offers measurement of individual managerial efficiency based on a personal investment in attention, time and energy. This approach, development by Robert Simons and Antonio Dávila ‘How High Is Your Return on Management?’ offers many practices managers can apply to increase their individual efficiency. But this is not about assessing management as an organizational capability either.
This leaves us with quality. Stakeholders can be asked for their opinion. But this would require an infrastructure to collect responses.
The quality and process movements have provided us with rigid ways of measuring, among many operational things, managerial quality. My concern: Do we want management as a capability to be measured by a detailed set of metrics that have been derived from the heritage of past successes in a comparably stable economy. As a leader, I would not want to be constrained by metrics from the past.
Today’s world is dynamic. Unexpected events disrupt what we do and we struggle to create a better world. Unlike the dynamic context we now operate in, management, invented in the early 20th century for a comparably stable environment, is little changed. We believe that it is time to transform management to be the ultimate capability and technology for the 21st century. But for this, management needs a different design –a design with agile features for a dynamic context. As such, management may as well be one of the few remaining competitive advantages.
The building blocks of any competitive advantage are the capabilities that organizations build from their resources. Why then not look at management as the capability that enables distinct competitive capabilities? By doing so, management turns itself into a competitive advantage. The dynamic capabilities literatures suggest ‘capability assessments’ as a means to better understand how well capabilities perform in a dynamic setting.
Hence, we now combine the idea of assessing capabilities with a well know concept. Looking at management as a competitive advantage opens the opportunity for a different kind of assessment. The VRIN criteria (initially proposed by Barney 1991, with his extensions to VRIO) offer the ultimate test for a capability to count as a competitive advantage: Valuable. Rare. Inimitable. Nonsubstitutable. VRIO then adds organization to the idea. So, why not apply this concept to management?
Here is an application (somewhat loosely interpreted the concepts), and a test for management with 5 questions:
- Valuable? Does your management create value and get work done? Does it support people to get work done and create value?
- Rare? Does your management have a design that is unique, meaning organization and context specific?
- Inimitable? Is your management hard to copy?
- Nonsubsitutable? Is there no alternative to your management?
- Organization? Is your management practice deeply embedded in your organization’s policies and procedures?
Valuable: Does management create value? In every organization, management is performed through some sort of an operating system. Rules, routines, and tools help managers and people to get work done. A ‘virus’ free operating system has the potential to unlock the talent and promote meaningful work. Does your operating perform do what it was intended for?
Rare: Does your operating system meet the needs of your context and organization? Every organization is unique. Every context is different. Your operating system needs to fit your specific challenges and those challenges, accepted by your leaders and the organization.
Inimitable: Is your management and your operating system hard to copy? The harder the unique management approach is to copy the higher is its competitive advantage. As such, it turns into a distinctive organizational capability.
Nonsubstitutable: Is there no alternative to management? Do members of the organization have no alternatives to applying (and no way to short-cut) management by using the specific operating system? We all know managers and employees that have their own way of doing things – deviating from standard operating procedures with short-cuts. Accepting such behavior is destructive for every organization’s culture as it undermines the unique characteristics of its operating system. The better the operating system supports its users to apply good management, the more it creates a unique competitive advantage for the organization.
Organization: Are your routines, rules and tools deeply embedded in the organization’s governance system and culture? The deeper the operating system is rooted in unique ways of how decisions are made, how performance is delivered, and how behaviors are demonstrated, the more it creates a competitive advantage.
These are intended to serve as observation points to focus leaders’ awareness on the need to design, development and implementation good management.
David Hurst, in his blog, clearly pointed out that ‘prosperity and inclusive growth are wicked problems’. Simple answers are not the solution to higher complexity and a dynamic environment. Answering these 5 questions regularly increases the understanding of how to transform management into a distinct competitive advantage. Good management, in return, ‘makes the most of human potential – the inclusive way to higher prosperity’.
About the author:
Lukas Michel is CEO of the AGILITYINSIGHTS.NET and author of Management Design and The Performance Triangle (Both LID Publishing, 2015 and 2013).
This blog summarizes ‘Measuring Management: Motivations, Concerns, and a Way Forward’. Download at www.agilityinsights.com.