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WHAT
MANAGEMENT IS
Book Author- Joan Magretta and Nan Stone
Book Review by -S S George
Dean, ICMR Case Studies and Management Resources
Abstract:
"Most management books preach a
single formula or a single fad. This one distills the wisdom of the best that
has been thought and written about the discipline of management. Using numerous
examples, Joan Magretta lucidly explains the logic of successful organizations
and how that logic is embodied in practice."
About the Author:
"Joan Magretta is an
award winning contributor to the Harvard Business Review (HBR). She has also
served as HBR's strategy editor during the 90's."
"Most management books preach a single formula or a single fad. This one
distills the wisdom of the best that has been thought and written about the
discipline of management. Using numerous examples, Joan Magretta lucidly
explains the logic of successful organizations and how that logic is embodied in
practice."
The Universal Discipline
At a time when most books on
management are either mind-numbingly abstruse or amusingly simplistic, Joan
Magretta takes a clear-eyed look at the discipline of management. She describes
what management is, and why it is important to all of us – the managers, the
managed, and the bystanders. According to her, management now affects everyone
because "today, all of us live in a world of management 's making." If we are to
make informed choices about matters that affect our well-being and that of our
communities, we must know what management is, and when it is good for us and
when it is bad. To satisfy our needs with the limited resources available to us,
we need to understand and apply the principles of management to what we do.
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The discipline of management has made
possible the organizations that are so much a part of modern day life. We now
rely on vast organizations to carry on much of the work of modern society.
Management did not evolve because we had organizations and we needed a way to
run them; instead, it made it possible for us to design and create these
organizations, and in many cases, to run them well. However, the very success of
the discipline, and the all-pervasiveness of the organizations that have been
built on its principles mean that we now take these organizations and the
principles on which they are run, for granted.
One does not require formal training to become a good
manager. Many good managers have no formal qualifications in management.
Conversely, a degree or diploma in management does not ensure that a person
becomes a good manager. At a time when the field of management is being
increasingly fragmented, this book aims to present a coherent view of the whole
field, as Peter Drucker did in 1954 with his seminal book The Practice of Management. This book is meant not just for managers, but
also for people whose lives are affected by management – and that means all of
us.
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The book is organized into two parts.
The first part - Why do People Work Together and How - examines the "conceptual
core" of management. The author discusses why an organization exists, how it
plans to accomplish its purpose, and how its plans and systems differ from
others. The second part of the book explores the act of managing, that is,
translating plans into action. According to Magretta, this is a lot harder than
it looks, requiring both discipline and judgment.
While the author uses real life examples to discuss the
principles of management, she maintains that management is the art of
performance, and, "like all performing arts, done in real time without a net,
enacted in a present that is constantly passing". Organizations and the contexts
in which they operate change over time. So the lessons and concepts drawn from
examples are not a " blanket endorsement of everything that an organization has
done, and will do, for all time." In other words, today's champs may become
tomorrow’s chumps.
Why People Work Together and How
Value creation is a much abused
buzzword – but, according to the author, this should not detract from its
importance. It is the critical core of modern management and denotes a shift in
management focus from managing inputs to managing performance or results.
"Management's mission, first and foremost,” says Magretta, “is value creation."
The value created by organizations does not consist merely of the products they
make or the services they provide. It is much more than all this. Magretta uses
the example of OnTimeAuditor.com to illustrate this concept. OnTimeAuditor.com
provides tracking software which helps its customers keep tabs on delayed
deliveries, for a fixed monthly fee. When deliveries are delayed, they can
demand and obtain refunds from the shippers. At one level, the value provided by
OnTimeAuditor.com can be measured in terms of the total value of such refunds
obtained by the customer. This will depend on the number of packages the
customer ships. Clearly, the value of the same service will be different for
different customers. This value can computed in money terms. However, the
service also creates value in ways that are not always easily quantifiable,
e.g., by improving customer relations. Thus, in addition to the tangibles, value
also resides to a great extent in intangibles. And it is the customer who
defines this value.
Firms have taken the customer’s perspective of value creation into consideration
only recently. Historically, value has been defined in terms of what the
business made. To increase value, firms looked to improving manufacturing
efficiency. During the first half of the twentieth century, their religion was
scientific management, and their prophet, Frederick Winslow Taylor.
While this single -minded focus on manufacturing efficiency was reasonable at a
time when goods were scarce, it became increasingly inappropriate in the latter
half of the twentieth century – when consumers had a large number of products to
choose from (especially in the United States). It was left to Peter Drucker to
recognize this change and redefine value. According to him, customers don't buy
products, they buy the satisfaction of particular needs. To understand value,
Drucker said, don't look inwards at what you produce, look at value through the
customers' eyes. This perspective became known as the marketing mindset, as
opposed to the earlier manufacturing mindset that focussed on efficiency.
By the 1970s, shareholders, the real owners of businesses, had become
dissatisfied with the way many companies were being managed. They felt that
managers were more concerned with empire building and maintaining lavish
lifestyles, than looking after the interests of shareholders. This resulted in
tussles for corporate control between owners and managements, and many managers
found themselves booted out. Ultimately, managements were forced to become more
responsive to the interests of the owners, and realize the importance of
providing value to shareholders as well as customers.
How is value created in an organization? In 1980, Michael Porter, in his book
Competitive Strategy, introduced the concept of the value chain , where the
activities and information exchanges that a company and its supplier perform to
produce, market and support its products incrementally add value for the
customer.
More>>
2004, ICMR Case Studies and Management Resources. All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means - electronic or mechanical, without permission.
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