Category Archives: management

I had the pleasure yesterday of hearing a presentation by Henry Mintzberg, McGill professor and management guru. One attendee described him as the "Tiger Woods of management science".

I know him as the Strategy professor during my McGill MBA program from 35 years ago. (Yikes, neither of us seem to have aged that much! OK, maybe less hair.)

He is a widely respected academic and the acclaimed author of "The Nature of Managerial Work ", "The Rise and Fall of Strategic Planning", "Managers not MBAs" and many other books and articles that argue against the conventional wisdom and provoke thoughtful reflection on management and business. He is also the co-founder of the International Masters Program in Practicing Management (IMPM), a unique approach to learning that is designed to flow from the experience of the participants.

His presentation yesterday was originally advertised to be on the dilemma of corporate compensation, but that turned out be only part of his critique of the modern CEO focus on shareholder value that is leading to the great depression of 2008.

Some of his points to consider:

  • Productivity is a euphemism for cutting costs, mostly by firing employees, while maintaining short-term revenues.
  • The theoretical corporate objective of maximizing long-term shareholder value has been hijacked to mean pushing short-term earnings to inflate current market share prices.
  • How can employees be motivated to work for shareholders they have never met? Many of whom have no interest in the company except for the short-term ability to make a profit on their investment - they are day traders or hedge funds.
  • Shareholder value is not a worthy objective of the corporate institution as it specifically ignores (or exploits) other stakeholders, especially employees.
  • Mercenary corporate leadership is stealing from shareholders with absurd compensation and severance packages that are not tied to performance. The "robber barons are back!"
  • The old corporate silos have been replaced by horizontal slabs of concrete separating executives from their employees and the real operating issues.
  • "Human resources" is a term that dehumanizes human beings. It makes it easier to treat people like other "resources" to buy, sell, use and dispose of them. It's like describing airline passengers as "self-loading cargo"!
  • Corporations need to remember that customers are people too. They are not just another asset to be exploited.

Professor Mintzberg also suggested some remedies to avoid the great depression of 2008:

  • Stop being misled by the apparent productivity gains and profitability of large American corporations.
  • Get the mercenaries out of the executive suite and add employee voices in the boardroom.
  • Stop running businesses to satisfy financial analysts or investors with no interest in anything except short-term results.
  • Install real corporate leadership that is concerned, engaged, and modest. (Interestingly close to Jim Collins description of Level 5 Leadership from "Good to Great".)
  • Ignore the obsession with measurable factors and reconsider the immeasurable - values, benefits and impacts of economic activity.
  • In the larger context, get back to a better balance of the three sectors in society - public, private and social.

His full commentary is available at How Productivity Killed American Enterprise.

Lots to think about and to influence if we can.

I'm currently reading Stephen Covey's latest - "The 8th Habit"; following of course his best selling "The Seven Habits of Highly Effective People".

On the subject of management and leadership he summarizes the themes and concepts of many other authors. (Give him credit for some humility.) What sticks with me are the stated principles of: 1. Set the direction, 2. set an example, 3. define the values, 4. provide the systems; then let people manage themselves.

My own summary of management has always been simply to communicate the objectives and then remove the obstacles to achieving them. The guiding principles may be simple, it doesn't mean they are easy to follow.

I am just completing the teaching of two summer courses in Financial Management at Concordia University. It's time for their final exams so I'm now thinking about what are the most important lessons to learn for future business managers and entrepreneurs. Or alternatively, what do most entrepreneurs neglect in the management of their businesses?

Most of us focus regularly on the income statement - revenues, gross margins, expenses and the resulting profits. But we often neglect the management of our balance sheet - inventory, receivables, return on assets, and the short and long-term sources of funds. These issues can all have significant impact on profitability and the long-term value of the enterprise.

So I will try to emphasize the importance of regularly reviewing performance of assets and liabilities in addition to the more obvious and intuitive issues of sales and income. How does balance sheet performance compare to prior years? the plan? or the industry averages?

Can we improve turnover on inventory and receivables without losing sales or diminishing service levels. Can we extend payables and get additional short-term financing without hurting our credit ratings or adding to our costs? Are we making good use of long-term debt to add financial leverage and improve the return on our equity investment?

All important issues for effective financial management.

I had lunch yesterday with a client and friend who represents for me the essence of entrepreneurship. (He is too modest and discrete for me to mention his name here.)

In my opinion, the essence is to combine the strength of a marketable expertise with the ability to think and act strategically. In his case, he has a very high level of knowledge and experience in the design, build and maintenance of computer data centres. He initally worked for another a specialist in that field then left to start his own business. Over time he successfully positioned his company as the recommended service centre for the industry's leading manufacturer; grew to a size that exceeded his own management abilities; introduced a new partner and executive management team; accepted a new role in the company that leveraged his unique expertise and skills in developing customer relationships; and managed to re-position the company as a major project contractor to design and build large computer room installations from its origins selling and servicing basic hardware.

Many entrepreneurs I work with are equally competent and dedicated to their area of technical expertise but much less capable of managing their business strategically. Others may have the education and experience to manage and think strategically but have little to offer in unique expertise.

Success flows more easily for those that have both.

Mothers and business seems to be my current theme. Perhaps it's the subliminal (or blatant) advertising for Mother's Day this weekend.

My Uncle Ralph persona is partly inspired by my father and his well-recognized character and manner of dispensing wise advice. But my mother also had a strong influence on my personality and management style (other than the genetic connection), but it was more subtle and less frequently stated than demonstrated. Quiet, hard working, good humoured, and responsible are the characteristics that immediately come to mind. Things we all learned from her example, simply by being around her. Of course, she was also good at reminding us when we forgot those important principles or our behaviour was not up to her standards. And it's still a pleasure to make her proud.

That's why I recommend you use the test "What would Mom think?" before your actions and decisions in business too.

Thanks Mom. And Happy Mother's Day.