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RGM: Return on Good Management

by APICS CEO Abe Eshkenazi CSCP, CPA, CAE | N/A 2012 | 0 | 0

APICS Operations Management NowIt is hard to believe, but in 2013, the Harvard Business Review celebrates its 90th anniversary. We, at APICS, consider HBR a go-to publication on management and leadership, and it is a frequent reference for APICS Certified in Production and Inventory Management and Certified Supply Chain Professional materials as well as in the pages of Operations Management Now.

Therefore, it should be no surprise that our group read with great interest the November article “Does Management Really Work,” by Nicholas Bloom, Raffaella Sadun, and John Van Reenen.

In their research, the authors set out to examine the prevailing belief that organizations are more likely to succeed if they adopt good management practices. Looking at thousands of organizations worldwide, the authors investigated whether managers were adhering to the following three fundamental management principles:

  • Targets: Does the organization support long-term goals with tough but achievable short-term performance benchmarks?
  • Incentives: Does the organization reward high performers with promotions and bonuses while retraining or moving underperformers?
  • Monitoring: Does the organization rigorously collect and analyze performance data to identify opportunities for improvement?

What did they discover? “Indicators of better management and superior performance are strongly correlated with measures such as productivity, return on capital employed, and firm survival.” More interesting, however, was that researchers found many organizations throughout the world that are very badly managed.

Improving management performance

In my travels, I have found that United States manufacturing productivity is admired by company leaders all around the world. It is true that US businesses tend to have a highly developed management culture. Bloom, Sadun, and Van Reenen attribute at least a quarter of the almost 30 percent productivity gap between the US and Europe to stricter adherence to the management principles previously outlined.

If simple management principles are the key to unlocking company success, then education is critical to improved management innovation and performance. Business schools and professional societies, such as APICS, continue to play a significant role in improving productivity by developing managers around the world.

Perhaps you are among the roughly 73 percent of APICS-educated members and customers who serve in a management positions. Therefore, you are familiar with leadership and its qualities. Still, do you take time to ask yourself how well you adhere to the practices outlined in the HBR article?

Core management principles must be practiced at every level in an organization to continuously elevate performance. In fact, they must become part of the company’s culture, and this can only happen when every manager is dedicated to developing targets, creating incentives for high performers, and monitoring performance.

As the end of 2012 approaches, it is a good time to take a critical look at how well you are serving your organization. Think about how you can take a disciplined approach to performance management. How can you create focus around targets, incentives, and monitoring? How can you make core management principles a part of your organization’s culture? What needs to be improved in the coming year?

I encourage you to continue this discussion in the Operations Management Now community on the APICS Supply Chain Channel.

In other news

Related APICS education

  • Stepping It Up
    By Albrecht Enders
    September/October 2011, APICS magazine

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