March 2006 – High value employees

The Advanced Institute of Management, the organisation created in 2002 in an attempt to create a national management agenda for the UK, has launched its first book, The Exceptional Manager that examines the way management improvements might raise UK competitiveness.

It is not often that a British management book is launched, as this one was, with advanced publicity promising “big potential”. Reading it, however, alongside Peter Drucker’s, The Practice of Management, now more than 50 years old, I am left wondering whether the challenges of management have changed fundamentally in the intervening years.

Competition has certainly changed. As the authors, Rick Delbridge, Lynda Gratton and Gerry Johnson, point out, the UK has become less attractive in recent years for the kind of foreign direct investment that was aiming for low costs. That kind of money today is seeking out cheaper labour markets in central Europe and Asia.

This means that the UK must focus its economic development on industries that can add value through innovation in new products, processes and services. Here again Drucker recognised as much when he outlined a management imperative for the US in 1954. As both books argued, then and now, good management can make a difference in achieving these aims.

Drucker outlined what he called “management by objectives” based on the analysis of existing and future business needs, employee appraisal and performance measures across an entire workforce. In some ways, The Exceptional Manager appears to be trying to recapture some of the purity in management systems that have grown over complicated and characterised b y increasing demands on time.

In one significant diversion from Drucker’s thinking, however, the new book tries to link managerial attitudes, corporate strategy and Government policy. While it welcomes market deregulation, it notes that liberalisation has not helped to position the UK in high value sectors.

“Policies to cut down red tape and lower labour and other costs of doing business encouraged companies to centre their competitive position on low input costs; reluctance to invest in research and development and new management techniques can be explained in the same way,” it says.

This raises an important policy question: has market liberalisation in the UK damaged its ability to focus on the knowledge-rich economy sectors? As the authors point out, a focus on cheaper services means that the system needed to supply high-value work can be neglected.

“For instance, corporate emphasis on low input cost creates less demand for well-educated and highly skilled workers, while the limited supply from the education system makes it harder to alter the strategy,” they write. “Similarly, low levels of public sector R&D are reflected in weak R&D spending and a low innovation count in the private sector.”

The authors argue that managers could play a constructive role, supporting management education and “transforming national institutions to reflect the need for innovation and risk-taking.”

But are most managers in the business of risk taking? Risking-taking inside large companies can offer the same kind of risk as that associated with setting up a business independently, with few of the associated rewards. The only difference is that the downside of failure for the independent entrepreneur is the loss of the business whereas the downside failure in internal project management is the loss of your job or a transfer to some other job with a blemish against your name.

The new book is right to concentrate on innovation as the answer to UK competitiveness. But, as it notes, simply working harder is not the answer. The authors examine innovation in its broadest sense, including the development of participative working practices that rely on high levels of trust between managers and employees.

Again there is nothing new in the promotion of self-directed teams and ideas such as gain-sharing, employee involvement and objective-setting. Drucker and his contemporaries were writing about these things decades ago. A more difficult step is to persuade enough small and medium-sized businesses to undertake such measures.

As the authors point out: “Many UK firms seem content to aim for survival, operating in the most cost-sensitive sectors of the market, without sufficient commitment or aspiration to innovation and improvement in business performance.”

It is one thing to flag-up the problem, but is the answer to be found in the growing number of courses in the UK offering management education? Management has become the single most popular course for undergraduates and there seems little shortage of demand for their skills. In 2003, 18 per cent of all men and 10 per cent of all women were managers, senior officials, professionals or associated professional or technical staff. This is a heavily managed nation.

But managers who can really make a difference – what the authors call “exceptional managers” are far less common. This is because too few of them are able to influence corporate strategy. The authors describe strategy as “the means for achieving sustainable competitive advantage resulting in superior returns to shareholders (and the achievement of other stakeholder objectives).” I prefer a much simpler, two-pronged definition: strategy is what you are going to do and how you are going to do it.

One of the skills of business management is knowing when to change strategy, but too few managers position themselves to undertake change. Instead they become burdened with what the authors call “overwhelming demands”.

“Many managers get caught in webs of expectations that completely overwhelm them. The demands of their day-to-day work leave no time for reflection or prioritization and, as a result, they lose sight of what really matters,” says the book.

Another problem is constraints – rules, regulations and structures that leave too little room for autonomous action. There is always that next job – a set of appraisals, talking to suppliers or customers, filling out inventories and job specifications. Sometimes, write the authors, they become involved solely in “busyness that has no productive outcome”.

Too often, they say, managers chase off on errands without setting priorities. “A highly fragmented day is often a lazy day. It is easier to respond to each new request, to chase the latest query, and to complain about overwhelming demands, than to set an order of priorities and stick to it.”

Such managers begin to believe they are indispensable. “Most often, managers who complain that they have too little time actually thrive on the sense of importance they derive from their busyness. They enjoy being at the centre of frantic activity. The last thing they want to have is more time – to reflect on what they are doing.”

This new book allows some time for reflection without necessarily providing all the answers. As it points out, sometimes the only way to change the context in which you work may be to change jobs. It seems that exceptional management will only become the rule when managers become willing to confront the way they are expected to work. In that respect the Exceptional Manager is pointing in the right direction.

The Exceptional Manager, by Rick Delbridge, Lynda Gratton and Gerry Johnson, is published by Oxford University Press, price £24.99.