THE PRACTISE OF TOP MANAGEMENT.

PART TWO.

WHAT STRATEGIES CAN TOP MANAGERS ADOPT TO INFLUENCE CORPORATE PERFORMANCE?

In the previous section, we argued that managers should be mainly measured by the long-term performance of the businesses that they lead. In this section, we will begin to discuss how they can influence the performance of these enterprises.

As is discussed elsewhere on this site, the popular perception of the powers of top managers, spread widely by the press and investment community, is that of super-beings performing acts of daring and heroism. Gideon Haigh, in his book, 'Bad Company, The Strange Cult of the CEO', describes the impression given as a touching belief in 'The Power of One'.

This tendency is vividly portrayed in the obituary of Sir Graham Wilkins, ex-chairman of Thorn EMI, who died on July 2, 2003.
The obituary writer says, "Recognising that there was excess capacity in the television manufacturing industry, he restructured Ferguson and cut a thousand jobs. He made management changes at Inmos, Thorn EMI's struggling semiconductor business, and supervised an overhaul of the roster of artists signed by EMI, which had become unbalanced".
The impression given is that Sir Graham was decisively and directly involved in these executive acts.

The reality was that Sir Graham was part-time non-executive chairman of Thorn EMI. He had come from the pharmaceutical industry and knew nothing of the industries mentioned. Below him in the executive ranks were a group chief executive, chief executives of business groups and managing directors of individual businesses.

So for example, the 'overhaul of the artists roster' was one small part of a major tightening and professionalisation of the management of EMI, led by music group CEO Jim Fifield and a group of functional and regional managers. It was this group and the managing directors of individual music businesses in more than 30 countries, who overhauled the marketing strategies of EMI, including, of course, its artists rosters. Sir Graham, who knew nothing of the music industry, had no part whatsoever in 'overhauling the roster of artists'.

Lest readers might take away the impression that Sir Graham did nothing, what he did contribute was his considerable reputation in the financial markets, brought from Beecham plc, which enabled him to advise an inexperienced corporate executive in how to handle relationships with investors and press. That was his proper role.

Does it matter that a grossly misleading impression is given of what top managers can and cannot do, of how large businesses actually work and of the importance of the wider management group and the total workforce?

We would contend that it matters profoundly, and here are some reasons why:

• It gives a totally misleading sense of what really creates strong companies.
• It gives the impression that the wider workforce is of little consequence, leaving those who create the most long-term value without proper recognition.
• It creates a completely misleading notion of how long it takes to bring about real and sustainable change, thus leading to superficial 'fixes' and real long-term damage to the vital fabric of enterprises.
• It lionises a tiny element of the workforce, enabling them to support the notion that they merit huge pay packages, thus strengthening the divorce from the people that they lead.
• It creates instability in corporate leadership, as unsustainable expectations are raised of what managers can do; causing the 'hero to zero' effect that bedevils the contemporary business scene.
• It causes managers to seek to please investors, which is all too frequently not the same as creating durable high performing enterprises.

Convinced? Well, let us consider the realities of what managers can really do, and different strategies for influencing corporate performance.

First, we need to define the reality of what a business is. At the centre of any business lies the organisation that is its active and creative element. Without the people who populate it, there is no business. An organisation is a human community of many people working in a structured and disciplined way to perform the many activities needed to design, develop, make, sell and service the products or services of the enterprise. Like any human community, organisations have hierarchies and work is divided up into parcels, performed by divisions, functions or levels of authority. Most organisations have histories, and contain commonly shared beliefs deriving from their experience - these in aggregate form the cultures and collective capabilities of organisations, which are real but often intangible and invisible to outsiders.
The culture will also affect the norms and standards of work and behaviour that will affect the quality of the enterprise's outputs and determine how well and fast the organisation can learn, adapt and change, as well as whether the organisation is outward looking towards its customers or more concerned with its own affairs.

Embedded in the organisation are the regular and informal means by which information is passed, and purposeful activities like planning, measurement and control are exercised. The key skills and vital work of designing, making, selling products and services and supporting customers are also embedded in the entity called the organisation. Last, but by no means least, are the processes by which people at all levels are trained, promoted, motivated, indoctrinated, rewarded, hired and fired.

Outside the organisation itself are physical and legal artefacts, like buildings, machinery, equipment, patents and the ownership of brands and intellectual property. All of these elements will have a value and be essential to the sustenance of the business, but will also rapidly depreciate in value if not renewed by purposeful human activity. Enterprises will also have legal forms and be defined in the minds of many by their products, their reputations or by the structured and synthesised information that they transmit to the wider world.

It is these external manifestations that are assessed and measured by observers such as investors. However, it is very important to recognise that accounts and management statements are rather like Magritte's painting of a pipe, entitled 'Ceci n'est pas une pipe'- they are synthetic manifestations of a few of the trends and activities going on inside the business, rather than the real business, and are rather susceptible to manipulation by those inside the company.

Without the organisation, the human entity that gives life and vitality, a business is simply an array of tangible and intangible assets that will lose value, wither and die. This must be a central fact about business - yet it is surprising that so business educators mainly concentrate on the 'assets' - money, brands, plant and equipment - and on 'synthetic' aspects such as accounting, financial analysis and strategic typologies, rather than fostering an understanding of business as an integrated whole.

In considering, therefore, what managers can do to affect business performance - it seems to us that there are only two basic stances top managers can adopt:

1. They can choose to act with and through the organisation, becoming so involved with its realities that they not only know the truth about how it is performing and what improvement is needed, but also have strong networks for influencing what happens and insight into the most effective strategies for change. Managers who behave this way are likely to have access to a lot of information about customers and key staff. They are likely to derive their strategies from a deep understanding of what is going on currently, what are the realistic options and possibilities, ones that the organisation is capable of implementing. Such managers are likely to have a long-term commitment to their industries and companies.
    
2. They can detach themselves from the organisation, focusing on top-down instructions like cost-cutting or transaction-based strategies, like portfolio restructuring and acquisitions and disposals. Managers who choose to separate themselves and do things to the organisation are likely to be psychologically distant from the wider population and often tend to be transient.

We would maintain that the two stances are radically different in terms of leadership behaviours and impacts.

In the next section, we will consider what managers of the two persuasions can actually do and the likely longer-term outcomes of their actions.