Management. How hard can it be, really? Is management just dressed up common sense, or is it something magical? It’s a question that has exercised minds since the industrial revolution, and with good reason. Watching the slow-motion collapse of British Leyland, or the Great-Gatsby fortunes of the financial whizzkids, the case for throwing out the besuited managers in favour of Common Sense appears open and shut.
‘Management’ as a profession hardly existed before the nineteenth century. Things got invented, machines got built, fortunes made. So why do investors (that most bloodlessly rational of tribes) insist on its importance? The answer has been evolving over several decades. The first place to hunt for the answer, as so often in business, is the United States.
When Henry Ford built the Model T, he didn’t just create a car. He created a production system. You couldn’t now copy his product by stealing his drawings. The product was the system, the organisation, the philosophy of the assembly line, every bit as much as it was the car. Thirty years later, the argument was sealed in the Second World War. The powerhouse that was US industry could build, ship and operate forces on a scale and with a speed their opponents couldn’t hope to overcome. The numbers were staggering. And it was all done in three years. Ford’s management lay behind it. The world took notice.
The second place to look is, unexpectedly perhaps, the ivory towers of academia. As the world caught up with Henry Ford, the question now nagging was, why are some people making more money at it than others? If everyone has mastered technical efficiency why is the playing field not levelling? Academics such as Michael Porter at Harvard and others made it their work to solve the puzzle.
The answer lay in one much-overused word: strategy. Strategy was why some businesses delivered profits year after year, and others – no less smart or hard working – barely broke even. Strategy was the understanding that business situations had a dynamic all of their own. There was more to it than just banging out product ever more efficiently. Understanding what that was had made Intel and Easyjet winners; failure had made DEC and Swissair losers. More things influenced outcome than nuts-and-bolts efficiency. He who knew what they were and how to use them stood to win.
And there, finally, was why the bloodlessly rational investors insisted. If dissection of failures showed it wasn’t the technology that let them down but the management, then management was what they were going to make sure they had the best of. And it came in two parts. Common Sense underpinned it; you couldn’t go on craft-building cars after Henry Ford had pointed out a better way. But there was more to it. Something a little close to magic. Management ability meant knowing what mattered and what didn’t, which fights to enter and which not, and how to play your limited hand to beat the giants. Like all ability it was an amalgam of knowledge, skill and experience. And the evidence was in: you needed it to win. The world had changed, and it wasn’t changing back.
So management; how hard can it be? As hard or as easy as any other skill. But a skill it certainly is. Which leaves only one question. Should you become the best, or hire the best?