Measuring Management
There is no doubt that the organizations cannot be any more successful than their management. So, you would think we would have the management performance and forecasting down to a science. Yet, with a few notable exceptions, most of us cannot tell good management from bad one to save our lives. Most of the market invests in stocks with little consideration to the quality of the management team or at most by looking at a very indirect indicators of that quality. It is not uncommon for someone to perform relatively well by just guessing stocks, with no research whatsoever. That tells me that the current financial market is a fairly poor judge of the management quality even without looking at examples of Tyco, Enron and Worldcom.
The impirical studies of management quality are few and most take business as a basic unit, whereas there is extensive evidence that a small business unit (under 150 people) tends to be a much more important indicator of the quality of management team. Perhaps more importantly, only on such a granular level, the variation due to special cercumstances can be properly accounted for and analysed.
It is clear that if we can build a better management team, we can outperform competition, provide a better investment opportunity and achieve more, so how do we get there?
We have already talked about the individual traits of awareness, imagination, empathy and logic that are necessary for management success. We have also talked about the team variable of cohesiveness. We even talked about the past business performance as being a lagging indicator of management quality and having some predictive function if the management is stagnating ( there is no turnover and nobody is learning anything). There are a number of other factors, such as learning and growth, emotional well being, strength of the convictions, prior experiences, personal priorities that certainly impact the team performance.
Finally, there are techniques and tricks, approaches that can be used to leverage the management skill set. Practitioners of Theory of Inventive Problem Solving (TRIZ) often use example of a modern day eight grader who is transported to 15th century. Even though today he may be an average kid, in that time period he would appear shear genius because of what he knows and could easily do. Thus good technique raises everyone, no matter how mediocre to a level that is a lot higher than what was available without it. It is so with management: Balanced Scorecard, Theory of Inventive Problem Solving, Lean, Six Sigma, Primal Leadership and many other techniques can raise the quality of leadership substantially.
But we run in to the fundamental problem: if we don’t know what it means to be a quality leader, how will we know if the quality of management is increasing and what is the ROI on that investment? Thus we are back to the measurement challenge.
In a sense, even a crude measurement will give us a substantial improvement over the current state of uncertainty since we have established that we cannot accurately tell a good manager from a bad one, often substituting popularity, or personal charisma for some indicator of management ability or falling back to relying on the past track record. So, over the next few weeks we will explore alternative ways of approximating the measure of management ability.
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Oleg Tumarkin, Juris Doctor, Master of Business Administration, Certified Six Sigma Black Belt is an Adjunct Professor of Business at Lakeland College and Concordia University of Wisconsin. His firm, FutureWorks, in partnership with Bucket Brigade and AKS-Labs provides business coaching and Balanced Scorecard implementations. His life’s passion is the development of a universal business measurement and management system that would cause management in to the realm of a repeatable, replicable, yet humane and flexible science.
