Monthly Archives: December 2008

One would think we have the idea by now…

A recent study done by the London School of Economics and Stanford University shows that a standard of management practice is linked to the favorable financial performance of the business. The way an organization is managed has a strong effect on its performance. It also states that “Management excellence is a matter of internal policy and not just the business environment”

The study cites practices such as:

  • Setting Goals
  • Managing Performance
  • Promoting people based on merit
  • Managing people
  • Operations management

The study shows that practical management techniques actually do deliver financial results for the company, yet many organizations do not even attempt to implement such practices. “For companies, the research is good news, suggesting that they access to dramatic improvements simply by adopting good practices used elsewhere.”, says the authors.

The study of 4,600 factories in 12 countries, referenced in the September 8 issue of The Wall Street Journal, found that, “a one-point increase in a factory’s management rating (on a one-to-five scale) translated to a 25% increase in labor productivity and a 65% increase in return on invested capital.”

These results, which Harvard Business School said are, “pioneering work,” and, “a real innovation in the study of management,” led experts to conclude that, “common management techniques such as setting targets, monitoring performance and ‘lean’ manufacturing actually help companies become more productive and profitable.”

Another convicting – and humbling – finding in this research relates to the apparent inability of factory managers to accurately assess the strengths or weaknesses of their own leadership skills.

“Good management appears to be so strongly linked with good performance that it might be reasonable to expect all firms to make better practices a priority,” shares a Stanford University report about this research. “The techniques of good practice are, after all, available in the public domain in a wide range of easily accessible forms. Yet many firms are still poorly managed…The majority of firms are making no attempt to compare their own management behaviour with accepted practices or even with that of other firms in their sector. As a consequence, many organizations are probably missing out on an opportunity for significant improvement because they simply do not recognize that their own management practices are so poor.”

The authors also note a disparity between family run organizations and those that are not: “Family-run and government-run businesses are less well managed and less productive than similar plants with professional managers. Promoting successive generations of family management “significantly damages company performance,”

Remember the London School of Economics research finding above that, “a one-point increase in a factory’s management rating can translate to a 25% increase in labor productivity and a 65% increase in return on invested capital,”

You can read the article here

You can download a copy of the study here

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It’s that time of the year; review your past successes and update your plans for the coming year or so…

I was doing some research on selling professional services, and ran accross the “best business brochure ever written”. It was a brochure written by Arthur D. Little for his fledgling consulting firm. In it, he describes how his team literally converted sows ears into a silk purse!

Silk purse made from sow's ear

The purpose of the article? To demonstrate that the commonly accepted wisdom is not “true”, merely difficult. Secondly, along the same lines, the firm sought to make lead balloons fly. Quite successfully, too!

Here’s some insight into the process.

Here is the actual brochure

So often, when faced with a difficult situation, we accept the conventional wisdom as being “true”, when really, we haven’t looked deeply enough into the situation, challenging ourselves to find the essence of the problem.

I find the more problems I solve, the less willing I am to accept the conventional solutions. In fact, the more publicity a solution recieves as being “correct”, the more skeptical I become!

“Things that everybody thinks he knows only because he has learned the words that say it, are poisons to progress. The only way to get ahead is to dig in, to study, to find out, to reason our theories, to test them – and then hold fast to what is good”

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