5 Management Myths

An ongoing series where I share a “Business Playlist” of articles that made me think in the hope that you find them valuable also.

This week: 5 myths about management

***

Unpacking 5 Myths About Management

This article from the Harvard Business Review supports many themes I have written about over the years. No matter how it is dressed up, management is not a science. Best-selling books and charismatic speakers sell the intoxicating idea that if you follow their formula you will achieve success. But is that really true?

Just because someone has sold millions of books, it does not mean their formula works. Just because someone has given a popular TED Talk, that does not mean their ideas make sense. I have written about this subject in Who is Believable? and Survivorship Bias – Don’t Believe the Hype.  Many popular management concepts we take as “facts” are simply well-told stories that have become accepted practice.

This HBR article takes 5 common management concepts, explores where they are plausible, and how they can lead you astray. Quotes from the article are in italics.

1. Successful businesses set stretch goals

Note: I have written previously about How to Create a BHAG (Big Hairy Audacious Goal) For Your Business. This concept from Jim Collins has become part of the business vernacular. In essence, a BHAG is about setting a long-term stretch goal for your business to inspire your team. Here are my BHAG best practices that I have learned over the years.

Why it’s plausible.

From HBR, “Sometimes, visionary entrepreneurs see the possibility of fulfilling unmet customer needs in unprecedented ways. They set seemingly impossible goals, take huge risks, and succeed. We don’t hear much about the many visionary entrepreneurs who fail.” (see Survivorship Bias)

“Sometimes, visionary CEOs realize that their companies need to radically change their ways of working and set an apparently impossible goal in order to stimulate creativity. They challenge their organizations because they realize that the biggest risk to them is carrying on as before.”

“What is common to both groups is that they have a completely realistic grasp of the potential for innovation. Their situational awareness is acute, their vision is pragmatic, and the goal is carefully chosen.”

How it can lead you astray

“The problem comes when the goal has no logic behind it, the situation actually demands persevering with incremental improvements, and the organization does not have much stretch left in it.”

“Rather than simply focus on being good stewards of solid businesses and creating value for shareholders by returning cash, (unsuccessful CEOs) chose to take high risks to increase the pace of growth. They developed ambitious plans that ended up destroying value.”

“In an uncertain environment, betting on one optimistic scenario is particularly perilous. It is wiser to follow the rule of minimizing maximum regrets. That means optimizing decisions for robustness so that you will do reasonably well in any plausible future and might even enjoy a boost if luck is on your side”

2. You should use performance targets to set direction

“The Balanced Scorecard” advocates supplementing financial measures with ones covering customer, business process, and learning perspectives.”

Note: I work with small-medium businesses (SMB) and help clients identify the right Metrics (Key Performance Indicators) for their business model. I emphasize that we do not just focus on financial targets, but identify and track the activity and effectiveness measures that drive those outcomes. Personally, I have never seen the need for the balanced scorecard approach, but I can see how it might benefit large corporations.

Why it’s plausible

“In order to execute a strategy, you need to know what effects your actions are having and whether they are moving you in the right direction. This involves measuring a range of variables, not just financial results, to create the equivalent of the dashboard of a car.”

How it can lead you astray

“But that does not mean you should turn the whole of the dashboard into a scorecard consisting solely of targets. If you let a scorecard of targets drive your strategy, you may end up mistaking your targets for your strategy. There is even a name for this trap: surrogation.”

“If you are driving a car, the way to do that is not to stare at the instrument panel, but to look out of the window. If you are running a business, it’s not a bad idea to do the equivalent once in a while.”

“Creating a strategy is about setting direction. A set of measures is a just control system that helps you to understand whether or not you are heading in the direction you set.”

3. You have to win the war for talent

“The insight was that a company’s performance depends to a disproportionate extent on the performance of a minority of employees, the “talented” few who are highly intelligent, highly qualified, and highly driven.”  (see How to Hire A-Players)

Why it’s plausible

“There is indeed some evidence that every company has a few high performers who contribute disproportionately to its success.”

How it can lead you astray

“It also depends on the effectiveness of the organizational system in which they all work.”

“The underlying reason the high performing minority achieve so much is that most of the time they work through others. They come up with innovative ideas, they build great teams, they work for the organization as a whole. In so doing, they help to raise the performance of the average, which by definition, is what most of us are. And it is the performance of the average many, not the talented few, that is the true mark of a great organization.”

4. Businesses need leaders not managers

Note: This is one of my pet peeves. I have written previously about The Real Difference Between Leadership and Management. Popular business literature in the past has implied that leaders and managers were two different types of people and that leadership was a “good thing”, whereas management was a “bad thing”; some kind of a throwback to the industrial age. Somehow the term “manager” had become a dirty word that no one wanted to be associated with. The reason for this was a high-profile business book (from Harvard no less!) which implied that leaders were future-thinking, risk-taking visionaries who motivated and inspired people, whereas managers were an inferior breed of controlling, stability-minded administrators.

My assertion is that leadership and management are functional roles that need to be performed; not a statement about what sort of person you are. And both functions are vital to business success. Thankfully, it seems that Harvard has come around to this way of thinking also.

Why it’s plausible

“…..in a stable, predictable environment businesses need managers, but in an unpredictable world of constant change, they need leaders.”

How it can lead you astray

“The fundamental problem is that leading and managing do not describe the activities of different people, but are different roles carried out by the same people. All executives have both to manage resources judiciously and to lead their people to motivate them. Some are better at one than the other, but every organization needs both. If highly motivated people are badly organized or do not have the tools for the job, they will get nowhere.”

5. No Rules

“We all hate bureaucracy. It wastes time, stifles creativity, and focuses people’s attention inwards instead of outwards towards the customer. Most entrepreneurs – very notably Netflix’s Reed Hastings – hate bureaucracy. Rather than rules, structure, and processes, they want to foster freedom, responsibility, and performance. Many corporations seek to follow their example.”

Why it’s plausible

“Many modern, fast-growing organizations are built around a set of shared values and principles such as “focus obsessively on customers,” “win and lose as a team,” “take some risks, and learn from failure,” “spend money as if it were yours.” They rely on their culture to create coherence rather than on process. As a result, people feel empowered and ideas are judged on their merit. Everyone works together towards shared vision. Structure is minimal, hierarchy is as flat as possible, and processes are whatever it takes to achieve outcomes.”

How it can lead you astray

“Meetings start to proliferate. They are devoted to getting “buy-in” from influential stakeholders or trying to clarify accountability structures, decision-making authorities, and conflicting priorities between teams. People spend more and more time navigating the internal complexity of the organization, which becomes highly political.”

“When there are no clear rules, everyone makes up their own. Core values and operating principles are interpreted inconsistently, which leads to the emergence of subcultures heavily influenced by the personalities of the most influential individuals. It becomes harder to communicate consistently to newcomers, turf wars arise, and the organization becomes more complex to navigate, less stable and less predictable. When hierarchy is not explicit, it emerges on its own, based not on the needs of the organization, but on power.”

“The real choice we have is not between having rules and having no rules, but between having good rules and bad ones. Good ones create internal predictability and simplicity that enables the group to deal with external uncertainty and complexity. It is just like music. Without the rules of harmony, rhythm, and tempo, music is just noise.”

“The purpose of structure is to distribute decision-rights in a rational way. A good structure reflects the hierarchy of the main tasks the organization has to carry out, and there is clear accountability for decision-making at each level. Good processes ensure that everyone knows how the organization works, so that they can devote their energies to dealing with the chaos on the outside. To deal with the unpredictability of the world outside you need to create predictability on the inside.”

I have written a number of related articles: Hierarchy is Good? and Business Leadership is Not a Democracy and Middle Managers Drive Business Execution.

***

Until next time…
Stephen