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Is Competent Management a Strategy?


Another title for this article my well be "Why do we undervalue competent management?" In fact that was the title of the recent Harvard article (Raffaella Sadun, Associate Professor at Harvard; Nicholas Bllom, Professor at Stanfard; and John Van Reenan, Professor at MIT) that forms the basis of this article. And this is an area that I have always argued - the overall standard of management in business today is so low that competent management can be deemed to be rare, and as a result can be a Strategy! The research by Sadun et al confirms this (at last!)

Firstly, the research. The project is called "The World Management Survey" and has examined the adoption and use of management practices across 12,000 companies in 34 countries (including NZ.) Each organisations performance in 18 specific management practices in four areas: operations management; performance monitoring; target setting; and talent management, are measured. The project is on-going, beginning in 2002, and so far 20,000 interviews have taken place in four sectors: manufacturing, health care, retail and higher education. So this is big!

In Michael Porters' seminal article "What is Strategy?" he argued that operational effectiveness is not a way to ensure competitive advantage. It is too easy to copy by competitors so cannot be a source of sustainable competitive advantage (nowdays I, and others, would contend that no competitive advantage is sustainable as such, it is fleeting at best, and we can thank technology for that!) So, Porter argued, operational effectiveness (read management competencies) is not a strategy.

The World Management Survey has turned this view on its head. They have found, conclusively, that competent management is rare. There have been vast differences between companies in areas of management. And, again conclusively, those companies with higher levels of competent management perform significantly better in the important metrics - productivity, profitability, growth and longevity. Also, the differences in levels of management competency between companies persists over time, so it is not easy to replicate. The good companies stay good, the bad companies stay bad. Sounds like a good strategy to me! To quote Sadun et al:

"Nobody has ever argued that operational excellence doesn’t matter. But we contend that it should be treated as a crucial complement to strategy—and that this is true now more than ever. After all, if a firm can’t get the operational basics right, it doesn’t matter how brilliant its strategy is ........ Achieving managerial competence takes effort, though: It requires sizable investments in people and processes throughout good times and bad. These investments, we argue, represent a major barrier to imitation."

So what does this mean to us? The message is simple. Lets get those crucial management competencies right. Lets put effort and investment into that - both our current leaders and managers, and our future ones. Training and Development is the key. Make sure our foundations are set, know what we need to do, and do it effectively. The challenge here may well be knowing the difference between competent and incompetent. It reminds me of the management survey some years ago when 85% of managers claimed they were above average over a range of competencies.

In the next Blog I want to identify those critical areas that we cant afford to get wrong.

Be well, be competent, and succeed!

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