Disassembling Leadership

The value of competent management

3 minute read

Often we evaluate strategy as being more important than management, especially in the tech world that prizes the vague idea of “startup culture”. It’s thus interesting to see a research diving into both the practices and the effectiveness of good management.

If you look at the data, it becomes clear that core management practices can’t be taken for granted. There are vast differences in how well companies execute basic tasks like setting targets and grooming talent, and those differences matter: Firms with strong managerial processes perform significantly better on high-level metrics such as productivity, profitability, growth, and longevity.

R. Sadun, N. Bloom, J. Van Reenen (2017) Why Do We Undervalue Competent Management?

What are these core management practices? The HRB research conducted across 34 countries uses a 18 practices model that is a proxy for operational excellence:

  • Operations Management
    • Use of lean techniques
    • Reasons for adopting lean processes
  • Performance Monitoring
    • Process documentation
    • Use of key performance indicators
    • KPI reviews
    • Discussion of results
    • Consequences for missing targets
  • Target Setting
    • Choice of targets
    • Connection to strategy, extent to which targets cascade down to individual workers
    • Time horizon
    • Level of challenge
    • Clarity of goals and measurement
  • Talent Management
    • Talent mindset at the highest levels
    • Stretch goals
    • Management of low performance
    • Talent development
    • Employee value proposition
    • Talent retention

Unsurprisingly, this is a good breakdown of the people plus vision goals of management.

The same articles also notes in the video:

There’s no tradeoff of innovation for efficiency. Although better management is a clear path for success, not a lot of firms seem able to do it.

Why then? The article tries to answer focusing on methods and processes, but I think that a different angle can come out from the case studies that mention failures:

Unfortunately, preexisting divides between engineers and salespeople meant that the structured interactions, which had been effective in driving continuous improvement in manufacturing, became perfunctory meetings.

Even in the face of mounting competition, GM found it hard to adopt Toyota’s superior management methods, mainly because of adversarial relationships with suppliers and blue-collar workers.

To me it’s very poignant that the case studies failures that are mentioned are not process or structure failures, but failures involving a lack of understanding of the people — which isn’t captured by the 18 practices model.

We can summarize the people-related mistakes in three categories:

  1. Trying to apply a model instead of the principles of the model
  2. Trying to apply a model without understanding the people
  3. The overconfidence of management

The first mistake appears when a model is applied to the letter, ignoring the history, processes, and people in the company. The model can be one of the best possible ones, but management forces the minor rules instead of keeping the core principles and adapting the details to the company. This scenario happens often when external consultants are involved for a short amount of time to give “recommendations”, or when a new manager gets hired and try to prove themselves, or when a junior manager finds out a “new” management technique. Another far too common example is when “agile” is introduced in a company in a superficial way. Good change requires adaptation of the core principles of any model.

The second mistake appears when a good model, following the core principles, is adapted to the specific conditions and culture of a company, but it’s missing the understanding of the human component. Example: having a shared kanban board to track work between two different parts of the organization can be the perfect idea for a company… but if there’s historical or structural conflict between the two parts of the organization, that change will become just another space where the conflict appears, and no progress gets made. Good change requires understanding of the socio-psychological dynamics at play.

We found zero correlation between perceived management quality and actual quality, suggesting that self-assessments are a long way from reality.

The third mistake can come from different sources, the two most common are either bad management or junior management. The difference is usually in terms of responsibility: a bad manager can happen at any time, and usually is the kind of person that shouldn’t be a manager (even if they might have the skills). A junior manager maybe it’s a potentially good manager, but too junior for the kind of transformation needed. In these situations, even if the model is good and is well aligned with the people, it won’t work. Good change requires skilled management.

These three mistakes provide a complement to the 18 practices mentioned above in the process in improving how your company operates.