Take tips from the masters and develop your own management philosophy

Feb 12 2005 by Robert Heller Print This Article

Jack Welch has bent the huge General Electric to his will by force of personality and ideas, but is only now (in his pending retirement) planning to put his thoughts on paper.

His most renowned idea was expressed in a stark injunction to the managers of GE's many and unrelated businesses: be Number One or Number Two in your market, or get out - by sale or closure. This rhymes with Heller's Law: that the majority of markets will only support two profitable leaders and one specialist.

Welch's edict, and the actions that enforced it, were based on the same concepts as my Law: that optimising return on assets is an vital aim of management; that resources should therefore be allocated to activities offering the best prospects of exceptional returns; and that, other things being equal, market share correlates with profitability - small goes with small, and large with large. I generalised from my observations: the difference is that Welch did not.

That is a prime difference between thinkers and doers. Sometimes the lines become crossed. The Boston Consulting Group catapulted to fame and fortune by codifying the same trio of ideas. Based on profitability and growth, it produced a seductive matrix. High growth and profitability were achieved by Stars, which were supplied with investment. Low growth and profitability Dogs were put down. Low growth and high profitability Cows were milked - and, getting no nourishing investment, probably starved to death.

Intellectual Flaw

That left the remaining companies, with high growth but low profitability, which could become Stars or degenerate into Dogs. They received ample investment up to the point where the issue was decided, one way or another.

Many managers seized upon this theory and allowed it to do their thinking for them. Sadly, though, the Boston Matrix had an intellectual flaw. To begin with, allocation of resources is a beginning, not an end; putting businesses into categories didn't manage them. Even more importantly, giving Dogs (and Cows) a bad name was a self-fulfilling prophecy that no doubt killed many a perfectly good business.

You are in effect writing your own management textbook if you think consciously and constantly about your deeds, their rationale and their consequences, and alter course as you receive feedback from the real world.

That was definitely true of Welch. With interviews, GE reports, speeches, etc., I had no trouble in writing a book on his thought, for one of the eight compact volumes in my Business Mastermind series (Dorling Kindersley, £8.99 each).

Wealth Creation

The other doers who features in the eight-book series are Warren Buffett, the mega-investor whose Berkshire Hathaway is another legend of wealth creation; Bill Gates, the man behind Microsoft, and Intel's Andy Grove. All three of these doers possess strong intellectual credentials.

It's hard to find other managers, especially successful ones, who have made powerful contributions to management thought and thus practice.
While at university Buffett sat at the feet of guru Ben Graham. Gates has penned two books on his explosive industry and its technological workings. Grove has written a renowned text book on microelectronics and two good management books.

However, these four are very much the exceptions, not the rule. Search as you may, it's hard to find other managers, especially successful ones, who have made powerful contributions to management thought and thus practice.

On the other hand, non-managing gurus are in abundance. I concentrated on four of the gurus for the Masterminds series: Peter Drucker, Stephen R.Covey, Tom Peters and Charles Handy. You wouldn't place them in charge of a major corporation, even though two of them (Covey and Peters) are successful businessmen.

But their teachings are by no means invalidated by this. All these writers have the advantage of a broader view than the vast majority of businessmen. More important, however, the thinkers generalise. They look for patterns and impose philosophies.

Moral Content

Moreover, there is often a strong moral content in the philosophies. Covey believes that eternal natural laws of ethical behaviour are the guides to success, while Handy favours the evolution of new organizations that disorganize to free individuals from the immoral chains of traditional employment. Peters also advocates liberation, calling for 'chaotic' management.

Drucker has no overriding theme, except to urge the pursuit of rational ends in rational ways, testing every alleged truth and expecting the conventional wisdom to be profoundly unwise. 'Masterclasses' in aspects of business management are included in each of the three books.

The first Drucker class thus teaches readers how to manage effectively by: setting objectives, organizing groups, motivating and communicating, measuring performance, and 'developing yourself and others' - a section which examines 'developing a relationship responsibility' for those you work with.

Peters is particularly good at challenging 'the way we do things round here' and acting as a corporate or personal gadfly. For instance, one of the Peters classes demands to know whether or not you are a 'skunk' Ė which means a rule-breaker, innovator and individualist. If you aren't, why not?

Thought and Action

Thinking should turn into action. For example, all managers must have heard that you should strive to make the future happen. Gates did it - one Masterclass shows how to pursue 'big, hairy audacious goals', and 'manage by fear' (believing that the opposition is capable of achieving the impossible).

Examine what a Buffett Masterclass on buying companies has to teach, and the value of directed thought becomes clear.

The value is also obvious from the performance of the thinking managers' equities: $100,000 invested equally between GE, Microsoft, Intel and Berkshire Hathaway in 1989, after doubling every two years, would have grown to $3.2 million in 1999.

It is up to you whether the thinkers pay off as well. Test what they advise against the realities of your job and incorporate what works into your own management philosophy.

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About The Author

Robert Heller
Robert Heller

Robert Heller, who died aged 80 in August 2012, was Britain's most renowned and best-selling author on business management. Author of more than 50 books, he was the founding editor of Management Today and the Global Future Forum. About his latest title, The Fusion Manager, Sir John Harvey-Jones wrote: "The future lies with the thinking manager, and the thinking manager must read this book".