Anyone who reads Chris Dillow’s blog regularly will know that he is, to say the least, sceptical about the difference managers can make to an organisation. This piece made me laugh:
To a large extent, the value of firms is beyond the control of CEOs. “Management“ functions rather like witchcraft. It’s a set of rituals which are wrongly supposed to have effects on the outside world. When, by happy chance, those effects materialize, the witchdoctor takes credit. And when they don’t he blames external malevolent forces – if not the debt crisis then the “challenging economic environment”, “fragile consumer confidence“ or (more feebly) “operational issues (pdf).”
There is enough of a grain of truth in this to give it a certain credibility. We all know people who have succeeded largely because of luck and then spun the success as being due to their own talent, and people who, when they screw up, pass the blame on to forces beyond their control. Often, they are the same people.
But can it really be true that having good managers or mediocre managers actually makes little difference to the business over the long-term? If it is, HR executives, business academics and the entire talent management industry are wasting their time.
Alas, I don’t have time to do a review of the research this morning, though I promise to do one soon. In the meantime, though, I’d be interested to know what people think.
Are managers really just witch doctors? Does organisational success depend on so many uncontrollable factors that managers can only make a marginal difference? Are organisations successful because they have talented managers or are managers seen as successful because they happen to be in high performing organisations?
Reactions, rants and other random thoughts in the usual place please.
Flip Chart Fairy Tales 
A. We cannot control anything?
B. We have to rely on luck?
C. Why ignore the importance of self-control?
Let’s us make the people feel helpless so they demand a certain brand of justice (equality of outcomes) from the government of the day.
Let us perpetuate the myth that we cannot make choices that determine our success in life.
Let us now denigrate the importance of leadership that brings out the best in people if only to cause them to control their behaviors for a greater good.
BTW, let us elect a government that enables us to resume our indulgences fueled by borrowing more than we earn.
I think that when you’re talking about huge bureacracies, whether they’re a local authority or JPMorgan, at an organisational level, no, managers don’t make a difference. Or perhaps very very rarely. I’m not the first to make the observation that turning round an organisation is like turning round a ship liner, which makes it pretty unlikely that these flash in the pan CEOs have any impact at all. They just come in, publish a strategic plan, reshuffle everything and leave chaos in their wake.
Meanwhile, back at the ranch the boring old staff doing the boring old work just keep on truckin’.
However, if the organisation is smaller than a global behemoth they probably can. I read once that the optimum size for an effective group is about 300. You can reasonably know or know of or be familiar with that number and therefore exert influence. Apparently, an Army “company” (or platoon, or squad sorry don’t know) is this size.
I am sure skill and decision making come into the receipe, but luck plays a part in any endeavour. ” I would rather have lucky Generals”
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I might have been exaggerating for effect, in the hope of getting an intelligent rebuttal.
We should distinguish between upside and downside effect. It is possible for a CEO to turn a good business bad, eg by a bad takeover. It is rarer for one to turn a mediocre business (at least a largeish one) good (it might be easier to turn around a bad business, as everyone then agrees on the need for change). And it is rarer still for him to repeat the feat.
The point about Jim Collins’ “good to great” is that there are few examples of it.
Jim now tells us now that we can choose to be great:
We should study the results of his research. He has some interesting comparisons of the degrees of preparedness of the 1912 polar explorers too. Scott was ill-prepared.
At least we have someone not curling up in helplessness saying success is all down to luck!
Actually, the real point about “Good to Great” is that the methodology is about as flawed as you can get if you’re trying to prove a causal relationship. For instance, it’s a myth that Collins has conducted a longitudinal study. He picks the winners after the event and then goes back into history to try and find why they’re successful. What he doesn’t do is examine whether any companies followed the same strategies, or had the same type of leaders, and didn’t succeed. So, all he may have done is worked out who got lucky. That so many of his ‘built to last’ companies went tits up so soon after featuring in Collins’ work certainly suggests that he hasn’t identified any magic formula for leadership.
I updated Chris by referring to Jim’s new book Great by Choice. Have you read it yet?
True some of the Good to Great companies (published Oct 2001) failed ten years after his research. But he was not predicting performance then, he was simply reporting what some successful companies did.
Now he is reporting some principles for success, if you choose to do the work and make your organization luckier.
I think in most circumstances and projects this depends on the timescale you are measuring things over. In the long-term (say, 10+ years) almost everything is out of your control, but in the short to medium term good management can make a difference.
An odd example that always strikes me is that of Stratford International station on HS1. It was designed to take regional Eurostars from the midlands and north of England, but they never started because of the development of low-cost flights, which was not forseen at the time. Judged now, it looks a bit futile, but that isn’t to say that in the short term managers didn’t do a good job in getting it built. Who knows what we will think of it in another ten years’ time, when things may have shifted again.
The trick is to be able to run the short and medium term stuff in such a way that you don’t get caught out by the long term stuff.
The witchcraft analogy is interesting, yet I wonder if seeing Management as a science would prevent this dynamic? I suspect not. There’ll still be the accusation of failure which is denied for reasons out of our control.
And that’s the reality. Much of what happens around us is not in our control. Try to control and contain people and you are juggling jelly. It’s messy & unpredictable and largely unnecessary.
Organisations with individual, talented, artistic, intuitive people are successful. Create an environment where such people can thrive and success will follow. Allow failure so people can learn from it not avoid it.
I think the real question is do organisations have managers & leaders who are actually capable of achieving this, of doing more than just control people output?
Interesting point @Laurie A: good managers can do the wrong things very well, and, in time this won’t make much difference. Equally: do the wrong things the wrong way and the businesses’ demise comes more quickly. Do the right things the wrong way and the business could suffer. Do the right things the right way and luck could still blow you out of the water. Perhap shareholders should cut through the witchcraft & ask themselves whether theirs is a business that depends lot on mangement performance at this time, and if it does what kind of performane are we talking about and what premium should it pay. We never hear much about middle/lower paid bosses who don’t get stellar pay and manage risks so things don’t go wrong year in, year out. Why would we??
perhaps not quite the same question as what do CEOs do, but research shows good management makes a difference.
see here
http://cep.lse.ac.uk/_new/research/productivity/management.asp
(the linked non-technical Journal of Economic Perspectives is the one to read)
a well known field experiment – send in management consultants and see what happens – here
Click to access DMM.pdf
these lectures
[I am forever posting these links in the comments under Chris’ posts]
Thanks Luis, I’d already had a very quick look at these from the links on Chris’s blog. I must admit, my scepticism button was pressed when I saw that a Stanford study had concluded that America had the best management techniques:
Click to access JEP.pdf
However, I haven’t read any of it in any detail yet, so I will reserve judgement until I have.
Thanks for these links. Very interesting.
It might be worth going back to the population ecology literature that started in the 1970s, which broadly speaking argues, based on an evolutionary metaphor, that organisational success is largely a production of fitness within a given environment – it is based on random selection more than wise strategic choices by managers. Individual agency is very much in the backseat and structure dominates. The problem with this type of literature is that I don’t think it’s hugely popular with managers, who like to think they’re making some sort of difference – else what’s the point?
Interesting notion of an ecology of management and evolution. Many women managers have been arguing for some time that the lack of diversity of thinking is causing a ‘mass extinction’ within capitalism and that the current crisis/es are a direct result of a lack of diversity.
This would be congruent with the idea that the new tiny entrepreneurs (ecological niche players) will grow to the fill the gap.
To what extent is doing the right thing for oneself as important or more important as doing the right thing for ones species or one’s offspring (The Selfish Gene and all that vs the Unselfish Gene).
I suspect that ‘effective management’ involves a degree of style flexibility – of doing what is appropriate to a given set of goals and resources and not burning bridges so that a plan B is impossible.
One of the problems with the banks and their ‘too big’ to fail dinosaur style structures was the lack of flexibility or a plan B. This is fed into by the fact that capitalism is treated in some circles as if it were a religion which makes the banking high priests cry heretic and chase off diversity in thinking.
So, if managers are part of and engaged in the eco system of a society and within that an organisation – are they gardeners, caretakers for the future, hunters, or pirates with a scorched earth policy? A pirate’s idea of success and the goals they set are entirely different to a gardeners.
Perhaps the old chinese saying (and the book under that title) was right – Tigers Don’t Eat Grass and the secret to successful management is to put your warriors and pirates where they are needed but not to let them be in overall charge?
@Needs2Cash
I can’t seem to reply direct to your comment above so here’s my response:
As part of my MBA thesis I worked my way through all of Collins’ work. In addition to the ones you’ve already mentioned this included Built to Last, How the Mighty Fall and Good to Great for the Social Sectors. I was attracted to his work because it seemed to tell a good story about what’s required to run a successful business. But that’s all it is – a good story. I’d go over all the reasons why it’s complete rubbish but it’d take too long. Try this link below for a good summary.
http://www.businesspundit.com/why-good-to-great-isnt-very-good/
This isn’t to say that I agree that leadership isn’t important. Surely we’ve all experienced enough good and bad managers in our own lives to know that can’t possibly be the good case? But in my experience it’s a lot harder than the snake oil, one-size-fits-all nonsense that Collins spouts. If you want a far better analysis of what leadership is really about try Heifetz’s “Leadership without easy answers”.
I am not promoting Good to Great. Try Great by Choice instead. I am reading it now and would be interested if you think it repeats Jim’s earlier mistakes.
I think there’s at least 4 ways to look at this.
Q1) Do individual managers – particularly top managers like CEOs – have the influence they claim to have over large organisation performance when they are negotiating their bonus payments?
A1) Pretty clearly not, in general, beyond the odd individual exception.
Q2) If a firm has good workers, good funding and a decent history – but bad managers, is it likely to prosper over time?
A2) Less certainly than in A1, but probably not.
Q3) If a firm has good managers, but bad funding and a bad history and a problematic workforce, is it likely to prosper over time?
A3) Again, probably not.
Q4) If a firm is on an even footing with a close competitor, but has better managers, is it likely to do better?
A4) Probably.
Q5) If a firm is to be assaulted by the slings and arrows of outrageous fortune (e.g. the coming of digital cameras) will good management help it survive?
A5) Well, Fujifilm survived and seems to be prospering, Kodak went down the hole…
Chris is actually engaging in the black and white thinking and mixed definitions he picks up so well in others. Management as a collective can make a difference. Individuals rarely make a difference in a large organisation. Etc.