Business Studies Project
One of the first persons to sit down and try to work out what managers do (and what they should do) was a Frenchman called Henri Fayol. Fayol was a mining engineer who became the managing director of an ailing coal mining firm and turned it into a highly successful coal and steel business. All this took place between 1888 and 1918, when he retired. In 1916, after many years ofthinking about the job of the manager, he published a small book called General and Industrial Management.
Henry Fayol was years ahead of his time in linking strategy and organizational theory and in emphasizing the need for management development and the qualities of leadership. Igor Ansoff, in Corporate Strategy (1965) said that Fayol ‘anticipated imaginatively and soundly most of the more recent analyses of modern business practice,’ although Peter Drucker in his great compendium Management: Tasks, Responsibilities and Practice (1973), criticized the application of Fayol’s functional approach to larger and more complex organizations than the one he knew and managed.
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Oddly enough, it was years before a translation appeared in English, even though it contains a great deal of wisdom and sense. Part of the book deals with the ‘elements’ or ‘functions’ of management, and Fayol identifies five such functions. They are: • Forecasting and Planning • Organizing • Command • Co-ordination • Control It is important to appreciate what Fayol meant by these five functions: • Forecasting and Planningis looking ahead, examining and making provision for the future, and drawing up a plan of action. Failure to plan signifies managerial incompetence. Principles of Management: Project 1
Management Thinkers and Companies © 2005 Aditya Anupkumar 4 • Organizingis in building up the structure of the business/undertaking, and providing it with everything it needs to operate (equipment, materials, finance, people) and includes managementtraining as a key part in it. • Commandis how organizing gets achieved; in a nutshell, it is directing and maintaining activity among your personnel. • Co-ordinationis binding together, unifying, and harmonizingactivities and efforts for successful results. • Controlis seeing that everything occurs in conformity with established rule and expressed command…
The first and last functions—planning and control—are immediately recognizable from the analysis that has just been carried out, and indeed there tends to be less argument generally about these two functions than about others. Organizing is, of course, similar to planning in that it is concerned with preparation for some future events. But whereas planning is the more glamorous activity of deciding on the overall future direction of the business, organization is that tough, demanding business of putting together the elements in such a way that the overall plans succeed.
Command is seen as the function that actually makes things happen. It is really derived from military practice, and no doubt in Fayol’stime all employees in organizations responded to command. The very word suggests ‘ordering about’ and has been the subject of a great deal of debate and argument. Fayol did not really intend it to be taken in a very narrow sense, but rather in the sense of making sure that things get done—the actual operations of the organization.
As a result, all kinds of substitute words have been used in its place—like ‘direction’ and (horribly) ‘actuating’. The fifth function of management in Fayol’sview is that of co-ordination. It is concerned with harmony, with making sure that all the bits work together, and, like an orchestra under its conductor, play the same tune. This is the only function that does not seem easily to stand on its own and will be found to be part of planning, of organizing, of control, and the key to successful operations themselves.
An organization, therefore, begins with a strategic plan or definition of goals, progresses to a structure to put that plan into action, is carried forward by controlled Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 5 activity between manager and workforce, has the work of its disparate departments harmonized by coordinated management and, finally, is subject to checks on the efficiency of its working, preferably by the independent ‘staff’ departments separate from the functional departments.
The five functions of management have been adequately discussed, but there are two other aspects of managementthat Fayol mentioned that must be looked at separately. Fayol believed that a manager obtained the best performance from his workforce by leadership qualities, by his knowledge ofthe business and his workers, and by the ability to instill sense of mission. From his own long experience inIndustry, Fayol identified fourteen General Principles of Management, or guidelines, and he emphasized that these are not rigid but have to be adapted to suit the particular needs of the situation.
1. Division of work—with specialization allowing individuals to build up skills and become more productive. ‘The objective of division of work is to produce more and better work with the same effort. ’ 2. Authority—both official and personal, and matching responsibility. ‘Generally speaking, responsibility is feared as much as authority is sought after, and fear of responsibility paralyzes much initiative and destroys many good qualities. A good leader should possess and infuse into those around him courage to accept responsibility’ 3.
Discipline—‘in essence, obedience, application, energy, behavior and outward marks of respect observed in accordance with the standing agreements between the firm and its employees… when a defect in discipline is apparent or when relations betweensuperiors and subordinates leave much to be desired… the ill mostly results from the ineptitude of leaders. 4. Unity of Command—each man should have only one boss with no conflicting lines of command. ‘In all human associations, in industry, commerce, army, home, State, dual command is a perpetual source of conflicts…’ 5.
Unity of direction—‘one head and one plan for a group of activities having the same objective. It is the condition essential to unity of action, coordination of strength, and focusing of effort. ’ Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 6 6. Subordination of individual intereststo general interests, reconciling conflicting interests where necessary—‘that represents one of the great difficulties of management. ’ Means of affecting it are (1) firmness and good example on the part of the superiors (2) agreements as fair as possible (3) constant supervision. 7.
Fair Remunerationfor effort—‘every mode of payment likely to make the personnel more valuable and improve itslot in life, and also to inspire keenness on the part of employees at all levels, should be a matter for managers’ constant attention. ’ 8. Centralizationor decentralization—the choice to depend on the condition of the business and the culture of its staff. ‘The finding of the measure which shall give the best overall yield; that is the problem of centralization or decentralization. Everything which goes to increase the importance of the subordinate’s role is decentralization;everything which goes to reduce it is centralization.
’ 9. The scalar chain or hierarchical principle of management—a path ‘dictated both by the need for some transmission and by the principle of unity of command, but it is not always the swiftest… it is an error to depart needlessly from the line of authority but an even greater one to keep to it when detriment to the business ensues… when an employee is obliged to choose between the two practices, and it is impossible for him to take advice from his superiors, he should be courageous enough and feel free enough toadopt the line dictated by the general interest.
’ 10. Order, both managerial and social—‘Social order demands a precise knowledge of the human requirements and resources of the concern and a constant balance between these. ’ In terms of managerial order—‘a place for everything and everything in its place’, e. g. the organization chart and statement of areas of responsibility 11. Equityin the treatment of employees—‘the head of the business should strive to instill a sense of equity throughout all levels of the scalar chain. ’—i. e. kindliness and justice by managers help to produce loyalty
from staff Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 7 12. Stability of tenureamong personnel—‘generally the managerial concern of prosperous personnel is stable, thatof unsuccessful ones is unstable. Instability of tenure is at one and the same time cause and effect of bad running. Nevertheless, changes of personnel are also a question of proportion. ’ 13. Initiative—‘thinking out a plan and ensuring its success is one of the keenest satisfactions for an intelligent man to experience.
It is also one of the most powerful stimulants of human endeavor… the initiative of all, added to that of the manager and supplementing it if needbe, represents a great source of strength for business… the manager must be able to sacrifice some personal vanity in order to grant this sortof satisfaction to subordinates. ’ 14. A sense of Esprit de corps—essential for management to foster the morale of its workforce. ‘Real talent is needed,’ said Fayol, ‘to coordinate effort, encourage keenness, use each person’s abilities, and reward each one’s merit without arousing possible jealousies and disturbing harmonious relations.
’ Qualities needed in a manger: • Physical: healthy, vigorous; • Mental: ability to understand and learn, judgment, mental vigor, adaptability; • Moral: firmness, acceptance of responsibility, initiative, loyalty, tact; • General Education: good general knowledge; • Special Knowledge: for the work; • Experience Fayol also stressed on the importance of managerial training, ‘steady, methodical training of all employees at all levels’, and made the point that a manager should not ignore his responsibility for his own training. Principles of Management: Project 1
Management Thinkers and Companies © 2005 Aditya Anupkumar 8 Elton Mayo (1880-1949): Human relations inindustry and respect for individuals Australian-born Mayo is regarded as the founder, of Industrial sociology, particularly the ‘Human Relations Movement,’ based on his discoveries in the Hawthorne Experiments of 1927-32 of what really motivates workers to higher performance. A graduate of Adelaide University and a medical student in London and Edinburgh, Mayo taught mental and moral- philosophy at the University of Queensland between 1911 and 1919.
In 1923 he immigrated to the United States, where he worked first on a three-year research project at a Pennsylvania textile mill, prior to joining Harvard University, as associate professor of industrial research in 1926. Mayo spent most of his career at Harvard, ending up as professor of industrial research in the Graduate School of Business Administration. He was also a consultant on industrial problems to the postwar British Labor government led by Clement Attlee.
Elton Mayo’s most important finding was to identify the roots of work ‘satisfaction as non-economic and to connect them more with the interest taken in a worker’s performance than with financial reward. In this, he reversed the emphasis on the incentive of monetary reward which had been the conventional wisdom ever since the writings of F. W. Taylor. Workers rejected ‘Taylorism,’ Mayo explained, because in spite of its aids to efficiency itwas basically an imposed system, not one that took account of the employees’ own views.
The vital importance of management-worker communication, a key Mayo discovery, laid the foundation for the workof many later management thinkers and writers, including Peters and Waterman (In Search of Excellence) and the 1950s school of sociologists headed by Chris Argyris, Frederick Herzberg and Abraham Maslow. The Hawthorne Experiments with which Mayo’s name is forever linked were named after Western Electric’s Hawthorne Works in Chicago.
They ran from 1927 to 1932 under Mayo’s leadership (and a further fiveyears after that), and were conducted by a team of Harvard scientists and between75 and 100 investigators working with 20,000 Western Electric employees. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 9 The experiments arose from an earlier series of tests by Western Electric which had involved changes in working conditionsand produced unexpected results in employee performance.
Two teams of workers took part in these tests, in which the lighting conditions for one group only wereimproved. Production in that group rose dramatically – but so it did in the group for which the lighting remained unchanged. Mayo took these further, making as many as ten changes in working conditions such as shorter hours, varied rest breaks and a number of incentives. Mayo’s research team spent a great deal of time with the work groups—each consisting of six women—discussing the changes before they were put into effect. Output increased each time a change was made.
Yet when the teams were asked to return to their original working conditions, with a 48-hour week, no incentives and no rest breaks,output rose again—indeed, to the highest ever recorded at Hawthorne. Other significant results included a decline in absenteeism of 80 per cent. The only explanation, Mayo concluded in one ofhis later works, was that the employees had gained enormously in work satisfaction by, the feeling that they were teams of individuals, not cogs in a machine, and by the communication between researchers and workers, leading to everyone feeling more valued and responsible for her performance and that of the group as a whole.
This sense of cohesiveness and self-esteem was more important to performance than any number of improvements ill the working environment. Although Mayo did not crystallize his findings until years after the Hawthorne Experiments, a contemporary series of interviews in the Chicago works established an equally important discovery: that worker-management conflict may often be due less to the ostensible reasons for a dispute, such as tea-breaks or insufficient light, than to basic emotional attitudes.
Workers were ruled by the logic of sentiment, thought Mayo, whereas managers were activated by the ‘logic of cost and efficiency. ’ Thus, without understanding the compromise,conflict was inevitable. The ultimate importance of the Hawthorne experiments was their demonstration, in Mayo’s view; that the dour Taylorist philosophy of ‘self-interest was disproved: that workers valued spontaneous cooperation and creative relationships among those with, whom they worked, and would perform accordingly.
‘The desire to stand well with one’s fellows, the so-called human instinct ofassociation, easily outweighs the merely Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 10 individual interest and the logic of reasoning upon which so many spurious principles of management are based,’ wrote Mayo in theSocial Problems of an Industrial Civilization. Mayo was not, however, against scientific management, for all that he debunked Taylor’s rigid application of it.
‘Observation – skill – experiment and logic—these must be regarded as the three stages of advancement,’ he observed in the same book. Mayo believed that his findings disproved what he called the ‘rabble hypotheses of society as ‘a horde of unorganized individuals,’ each of whom ‘acts in a manner calculated to secure his self-preservation or self-interest. ’ Two later sociological writers, D. C. Miller and W. H. Form, developed eight principal conclusions from Mayo’s researches in their book Industrial Sociology, quoted in J. A. C. Brown’s The Social Psychology of Industry (1954): (1) Work is a group activity.
(2) The social world of the adult is primarily patterned about work activity. (3) The need for recognition, security, and sense of belonging is more important in determining a worker’s morale and productivity than the physical conditions under which he works. (4) A complaint is not necessarily an objective recital, of facts; it is commonly a symptom manifesting disturbance of an individual’s status position. (5) The worker is a person whose attitudes and effectiveness are conditioned by social demands from both insideand outside the work plant.
(6) Informal groups within the work plant exercise strong social controls over the work habits and attitudes of the individual worker. (7) The change from an established to an adaptive society . . . tends continually to disrupt the social organization of a work plant and industry generally. (8) Group collaboration does not occur by accident; it must be planned for and developed. If group collaboration is achieved, the work relations within a work plant may reach a cohesion which resists the disrupting effects of adaptive society.
Another writer on industrial psychology in the 1950s, Gordon Rattray Taylor, estimated from his observations of firms which had put similar principles into practice Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 11 that by using such methods Britain could expand its national income by 50 per cent within five years without additional capital investment, and that the price of many manufactured goods could be reduced by a third. Needless, to say, the experiment has never been carried out on a sufficiently wide scale to prove or disprove his theory.
Mayo’s discovery of the importance of the peer group at work led/him to conclude that within each formal organization existed many informal ones which could be encouraged to greater productivity by being led to do it themselves, through interest and respect on the part of their managers. More profoundly, Mayo believed that by creating such an atmosphere of spontaneous cooperation in industry, society at large should help to combat the postwar collapse in traditional values. This, for him,remained one of the most important tasks facing a manager.
The whole Human Relations movement, as engendered by Mayo’s work, became concerned with discovering, through scientific research, how to harness the motivation and commitment of individuals to corporate goals. . Mayo’s contribution to management thinking was seminal. It revealed the importance, in hard bottom-line terms, of human emotions, reactions and respect to the business of managing others. It also pioneeredthe whole concept of proper managementworker communication—again a new idea because of the respect for the individual it required between bosses and workers.
Management, Mayo demonstrated once and for all, could only succeed in leading an organization’s employees if the workers in their informal groups, accepted that leadership without reservation. In his own words, Mayo identified the importance of the Hawthorne findings as specifying, quite clearly, that the relation ofworking groups to management was one of ‘the fundamental problems of large-scale industry. Organizing teamwork—developing and Sustaining cooperation—had to be a major preoccupation ofmanagement.
Above all, management needed to think less about what ‘we’ wanted to get across to ‘them’ than to listen to what ‘they’ wanted to know and would be receptive to. ‘The human relations prescription, though rarely practiced, remains the classic formula,’ wrote Peter Drucker in 1973. It isstill too rarely practiced; though every management pays lip service to it. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 12 W. Edwards Deming (1900-1993): The key to quality: reducing variation US statistician and founding father of the quality movement, who was
responsible, with his fellow-American Joseph Juran, for instilling the quality philosophy into postwar Japanese industry. The message had been rejected or ignored by American companies and was only re-imported after Japanese manufacturing began its competitive march into American markets. Deming and Juran remain icons of Japanese industry, whose companies compete annually for a Deming Prize, awarded since 1951 for major improvements in quality. Both men were honored by the Emperor with the Order of the Sacred Treasure, second class, the highest Japanese award ever given to foreigners.
Deming is regarded by the Japanese as the chief architect of their phenomenal industrial success, but his home country only began to recognize him in 1980, as a result of an NBC television documentary on Japanese industry called ‘If Japan Can, Why Can’t We’’ Overnight, American industry discovered his existence. Now he is revered internationally for his simple yet revolutionary principle that all processes are vulnerable to loss of quality through variation: if the levels of variation are managed, they can be decreased and quality raised.
After US industry finally woke up toDeming’s theories, several large corporations suffering intractable problems came to credit Deming as the key to their revival; most notably Ford Motor Company in the early 1970s. Nashua Corporation in New Hampshire, a Fortune 500 company making computer disks, copiers and other office products, was one of the first Western companies to adopt Deming’s principles. Nashua subsequently managed to cut its order-entry lead times from eight days to one hour and achieved a 70 per cent reduction in customer claims.
William E. Conway, Nashua’s president and later chief executive officer, who ‘discovered’ Deming when the guru was 78, has called him ‘the father of the Third Wave of the Industrial Revolution’ for the way inwhich he developed statistical control of quality levels into a new way of managing business. ‘The Japanese manufacturers, utilizing the statistical control of quality are sweeping the world in the second half of the 20th century, just as American manufacturers utilizing mass production swept the world in the first half,’ said Conway.
Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 13 ‘In the UK, Sir John Egan applied Deming principles to turning round the ailing fortunes of Jaguar Cars in the early 1980s. Egan wrote of Deming’s 1986 book Out of the Crisisthat it was ‘required reading for every chief executive in British industry who is serious about ensuring the international competitiveness of his company’ (Director Magazine, September 1988). Deming, an electrical engineer by training (University of Wyoming, 1921) and a Ph. D.
in mathematical physics from Yale, worked for a time in the 1920s at the Western Electric Hawthorne plant in Chicago where Elton Mayo carried out his famous experiments in communication and motivation. Here Deming discovered the work of Walter Shewhart, the pioneer of controlled and uncontrolled variables and the statistical control of processes. He later became a statistician for the US government, working on data for the national census of 1939/40. In 1942 he set up courses to teach Shewhart’s methods to industrialists and engineers. After the war he was invited to Japan by General Macarthur to advise on the Japanese census.
Contacts made then resulted in the watershed invitation of 1950 which was to have such reverberating effects. Deming’s approach to quality control is basically that of a statistician (his compatriot and fellow quality guru J. M. Juran has criticized him for it), but it is also firmly rooted in the belief that quality is about people, not products—an approach which made a particular impact on the Japanese. He also believes that 85 per cent of production faults are the responsibility of management, not workers. The famous Deming ‘Fourteen Points’ of management are at the heart of his philosophy. In 1950, when W.
Edwards Deming made his first visit to Japan, the country was still recovering from the atomic bombing raids of August 1945. The economy was struggling to stand upright, much less moveahead, and Japanese goods still suffered from their prewar reputation for shoddiness. Deming embarked on an exhausting series oflectures to engineers, from 8am to 5pm day after day in punishing heat. ‘I was dripping wet by 8. 30am,’ he recalled in the BBC2 television series Nippon. ‘The Japanese appreciated it. Theywere sorely afraid that they had established a reputation for shoddy quality and that they could never undo it.
I assured them that it would take only a short while to undo that reputation and develop a new one. ‘I think I was the only man in Japanin 1950 who believed my prediction—that Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 14 within five years manufacturers the world over would be screaming for protection. It took four years. ’ The core element in this apparent miracle was the ‘management circle’—still known in Japan as the ‘Deming circle’—of planning, implementation, check and action.
Above all, it rested on the belief in ‘Management for Quality’ (Deming uses this term where Juran ‘brands’ his approach as ‘Company-Wide Quality’. ) Deming’s basic management philosophy, as impressed on his eager Japanese audiences, was to regard the consumer as ‘the most important part of the production line. ’ Developing this in Out of the Crisis (1984), he insisted that merely having a satisfied customer was not enough. ‘Profit in business comes from repeat customers, customers that boast about your product and service,and that bring friends with them.
’ Deming also teaches the necessity of staying ahead of the customer, anticipating what his needs will be in years to come. His Fourteen Points for management weredeveloped over some twenty years and are still being refined and re-worded by the master. Henry Neave, author of The Deming Dimension (SPC Press, Knoxville, 1990), explains that they are not instructions or techniques, but rather ‘vehicles for opening up the mind to new thinking, to the possibility that there are radically different and better ways of organizing our businesses and working with people. ’
These, as quoted in Neave’s book and Deming’s own words, are the basic Fourteen Points: 1. Create constancy of purpose for continual improvement of products and service. 2. Adopt the new philosophy created in Japan. 3. Cease dependence on mass inspection: buildquality into the product in the first place. 4. End lowest-tender contracts; instead, require meaningful measures of quality along with price. 5. Improve constantly and forever every process for planning, production and service. 6. Institute modern methods oftraining on the job for all, including management. 7.
Adopt and institute leadership aimed athelping people to do a better job. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 15 8. Drive out fear, encourage effective two-way communication. 9. Break down barriers between departments and staff areas. 10. Eliminate exhortations for the workforce – they only create adversarial relationships. 11. Eliminate quotas and numerical targets. Substitute aid and helpful leadership 12. Remove barriers to pride of workmanship, including annual appraisals and Management by Objectives. 13.
Encourage education and self-improvement for everyone 14. Define top management’s permanent commitment to ever-improving quality and productivity, and their obligation to implement all these principles The Fourteen Points are comprehensively expounded, chapter by chapter, in The Deming Dimension, a fascinating exposition of the guru’s work and its development since publication of Out of the Crisis. Deming himself has said: ‘If I had to reduce my message for management to just a few words, I’d say it all had to do with reducing variation’ Principles of Management: Project 1
Management Thinkers and Companies © 2005 Aditya Anupkumar 16 Joseph M Juran (b. 1904): Company-wide quality cannot be delegated US electrical engineer born in Romania, worked contemporaneously with W. Edwards Deming on pioneering the quality management revolution that began in postwar Japan. Ironically, no industrialist in the US was interested in the theories of Deming and Juran – the production mentality ruled at the time – until Japanese manufacturing, practicing the quality philosophy, began driving American products to the wall.
By coincidence, bath Deming and Juran had became interested in the techniques of assuring quality in manufacturing based an statistical control while working in the 1920s at Western Electric, the manufacturing division of Bell Telephone System. Juran joined Western in 1924, three years before the famous Elton Mayo experiments at Western’s Hawthorne plant in Chicago, which revolutionized thinking about motivation and the human element in industry. Juran then joined the manufacturing side of AT&T in the 1920s. He became a corporate industrial engineer and later branched out as a quality consultant.
Juran established his reputation in 1951 with the publication of his Quality Control Handbook, the first manual of its kind. The Japanese, who had already absorbed Deming’s lessons to the extent of instituting a Deming Prize that year, invited Juran to Tokyo in 1953 for a series of lectures. In the early 1980s his contribution to Japanese quality achievements was recognized with the award of the Order of the Sacred Treasure, second class, an honor also conferred on Deming. Since 1954 he has preached his gospel in Japan and claims some of the credit
for turning round Japan’s initially poor reputation for quality: His ‘Management of Quality’ courses have been attended by more than 20,000 managers in over 30 countries. As a consultant, his clients include Texas Instruments, Du Pont, Monsanto, Xerox, Motorola and the Internal Revenue Service. Juran’s principal contribution to qualitymanagement thinking is his methodology for determining the avoidable and the unavoidable costs of quality, thus providing a yardstick for measuring the cost of a quality programme. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar
17 Juran has devised a structured concept known as CWQM – Company-Wide Quality Management. He believes it absolutely essential for senior managers to involve themselves, to define the goals, to assign responsibilities and to measure progress. Quality, Juran teaches, cannot be delegated. Like other management thinkers – notably Peter Drucker, Charles Handy and Rosabeth Moss Kanter – Juran has developed a vision of the future corporation, in which he sees quality targets being incorporated inbusiness plans as routinely, as targets for sales, profits, return on capital and earningsper share.
Like Moss Kanter, Juran sees greater ’empowerment’ of the workforce as a key – in this case to achieving quality through self-organization and self-supervision. For Juran, quality has always been indissolubly linked with humanrelations and teamwork. Joseph M. Juran and W. Edwards Deming are so closely linked – by age, experience and their part in the Japanese economicmiracle, that it is sometimes hard to differentiate their contribution. Juran himself has set out todevelop Company-Wide Quality Management into a full-blown corporate philosophy, and has criticized the Deming approach for being more at home with statistics than with management.
Juran’s approach is heavily oriented towards the human side of achieving quality, and he has praised the Japanese use of qualitycircles for their effect on human relations in the workplace, while acknowledging that QCs have accounted for less than ten per cent of Japan’s improvement in quality. The Juran methodology has most recently been laid out in Juran on Planning for Quality (1988), which sets out to demonstrate how quality planning affects different levels of quality planning, quality management and quality improvement—by which managers learn how to implement strategic quality planning across the company.
Key elements include: identifying customers and their needs; creating measurements of quality; planning processes thatare capable of meeting quality goals under operating conditions; producing continuing improvements in market share and premium prices and in reducing the error rate. The book emphasizes the universal application of quality commitment throughout an organization—to all products, both goods and services; to all corporate levels from CEO downwards; to all corporate functions from general management to product development; and to all industries, in both manufacturing and service sectors.
Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 18 Peter Drucker (b. 1909): Primary tasks for effective managers The management guru’s management guru… Born in Vienna during the heyday of that city’s pre-1914 culture, Drucker has invented or prefigured most of the leading management theories of the last half century, from “Management by Objectives” to privatization; from putting the customer first to the role of the chief executive in corporate strategy; from “structure follows strategy” to “stick to the knitting”, from decentralization to the
implications of the information age. His five basic principles of managementremain as valid as ever: setting objectives, organizing, motivating and communicating, establishing measurements of performance and developing people. Tom Peters, whose co-authored book In Search of Excellencedeveloped many of Drucker’s ideas, says the Viennese sage deserves much of the credit for “moving 75 to 80 percent of the Fortune 500 to radical decentralization,” adding that no true “discipline of management” existed before Drucker.
For many years a pillar of New York University Business School, Drucker since 1971 has been Clarke Professor of Social Science at Claremont Graduate School, Claremont California. He is still writing prolifically in his eighties, adding to the 24-odd books he has published since The End of the Economic Manappeared in 1939. They divide almost equally between works on management theory and technique and works of economic, political and social analysis. Many of the latter are seminal works which mapped out whole landscapes of the future with much wider horizons than those bounded by management.
Philip Sadler, vice-president and former director of Ashridge Management College, found his thinking entirely changed by Drucker’s 1969 book The Age of Discontinuity, which for Sadler pointed clearly tothe coming decline of Britain’s manufacturing industry. This book, still well worth study, prefigured many of the business best-sellers of the late 1980s and early 1990s on managing chaos and disruptive change. Drucker’s books have anticipated those of Charles Handy, Tom Peters, and Richard Pascale, to name only three.
In some of its ideas, The Age of Discontinuitywas 20 years ahead of John Naisbitt’s Megatrendsand Charles Handy’s The Age of Unreason. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 19 It was in The Age of Discontinuity, incidentally, that Drucker introduced the concept of privatization, though he called it “re-privatization”. He accurately forecasted the disillusionment with government arising from the discovery that governments could now, after all, produce miracles.
“There is littledoubt, for instance, that the British in adopting the National Health Service believedthat medical case would cost nothing … Nurses, doctors, hospitals, drugs, and so on have to be paid for by somebody. But everybody expected this “somebody” to be somebody else. ” Drucker advocated privatization on the grounds that the purpose of government was to govern, not to “do”, and that the two roles were incompatible. His vision, unlike the Conservative Party’s realization of it, was for privatization to cover all institutions, not merely business ones—universities, for example.
A year or so after publication of The Age of Discontinuity, the word “privatization” made its first appearance ina Conservative Central Office pamphlet in May 1970 (“A New Style of Government”), crediting Drucker with the coinage. The son of an Austrian government official who helped found the Salzburg Festival, Drucker came to Britain in the late 1920s, and his first job was as an apprentice clerk in a Bradford wool exporting firm, working with a quill pen in 80-ound brassbound ledgers chained to the desk. Between 1933 and 1936 he worked as an economist in a London merchant bank and then decided to throw in his lot with the United States.
He immigrated to the US in 1937, produced his first book two years later and in 1942 took a consultant’s job with General Motors, then the world’s largest company. Out of this experience came his influential 1946 book Concept of the Corporation, still one of the best and most perceptive analyses if the successful large organization. As well as General Motors, other companies studied in the book were General Electric, IBM, Sears Roebuck, and Drucker identified their success with certain managerial characteristics, notably delegation and goal=setting (Management by Objectives) and certain structural characteristics, such as decentralization.
Drucker believed that the ultimate key to success in all these companies was that “they knew what businesses they were in, what their competencies were and how to keep their efforts focused on their goals. ” (Organization Theory, ed. D. S. Pugh) Nearly 30 years later, Peters and Waterman reached much the same conclusion, set out in more populist style, in their best-seller In Search of Excellence. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 20
Concept of the Corporationalso analyzed the importance of marketing—at that time an almost universally neglected function—and the delicate balance which a company mush seek to achieve between long-termstrategy and short-term performance. Drucker figures in more management-book indexes than any other individual by far. In Makers of Management, by David Clutterbuck and Stuart Crainer, he rates no fewer than 40 separate page references. Peter Drucker’s reputation as a management guru was established with The Practice of Management (1954), a work still regarded by later theorists as one of the best and clearest in the field.
In this, he identified management by objectives as the first of seven primary tasks of management. MBO, dignified with capital letters, became a movement of its own, and Britain’s John Humble made a speciality of developing its theory and practice. Management by Objectives emerged out of Drucker’s work with General Electric among his studies for Concept of the Corporation. Each GE managed was responsible for a profit center and given targets to achieve—seven percent return on sales and 20 percent return on Investment. These were severely applied; you lost your job if you didn’t meet them.
Drucker perceived that, since businesses survive or fall by the bottom line corporate goals should be divided into objectives and clearly assigned to units and individuals. “Management by Objectives,” as Richard Pascale observes in Managing on the Edge, “ensures that each link in the chain of command does its part…” A subsequent handbook, Managing for Results(1964) is, in Drucker’s own words of introduction, a “what-to-do book. ” It was, he believed, “the first attempt at an organized presentation of the economic tasks of the business executive and the first halting step towards a
discipline of economic performance in business enterprise. ” It sets out in clear, no-nonsense prose, guidelines for understanding business realities and for analyzing a company in terms of revenues, resources, prospects, cost centers, customer needs, building on strengths, finding potential, making key decisions, and building strategies for the future. It is still one of the best practical vade mecums for anyone running a business enterprise. Drucker believes that every three years or so a company Principles of Management: Project 1
Management Thinkers and Companies © 2005 Aditya Anupkumar 21 should be put under the microscope and every product, process, technology, service or market subjected to a grueling assessment. Throughout his work, Drucker’s emphasis has been on the effectiveness of managers—particularly in making good use of their human resources—as key to a productive and profitable organization. Management, says Drucker, is the job of organizing resources to achieve the satisfactory performance of an enterprise.
Managers must in the end be measured by their economic performance, though this is not necessarily synonymous with maximum profits; rather, with sufficient profit that will cover the risks which have been taken, and to avoid the enterprise making a loss. Management by objectives is the key to this. Drucker has sometimes been criticizedfor neglecting theories of motivation, though he was one of the first to recognize and praise Douglas McGregor’s Theory Y of consultative management as early as 1954.
Drucker’s emphasis on objective-setting for management is most clearly set out in his mammoth compendium Management: Tasks, Responsibilities and Practices(1973). This represents an encyclopedia of his earlier writings and is recommended as the bedrock of any aspiring manager’s reading list. Studded with illuminating case studies, the massive volume (weighing 3 ? pounds in hardback) defines every aspect of managerial skills and pinpoints
eight areas where clear objectives are vital: marketing, innovation, human organization, financial resources, physical resources, productivity, social responsibility, and profit requirements. A thorough grounding in this vast work is virtually the equivalent of a do-it-yourself business-school course. Shortly before it was published, Drucker had defined his broad view of management in People and Performance(1973): “To fulfill the specific purpose and mission of the organization to make work productive and the worker achieving; and to manage the social impacts and responsibilities”
In Management: Tasks, Responsibilities, Practices, he identified five basic operations in the work of the manager, which together “result in the integration of resources into a viable growing organism. ” These summarize the essentials of management with more clarity thanany other book before or since: “A manager, in the first place, sets objectives. He determines what the objectives should be. He determines what the goals in each area of objectives should be. He decides Principles of Management: Project 1 Management Thinkers and Companies
© 2005 Aditya Anupkumar 22 what has to be done to reach these objectives. He makes the objectives effective by communicating them to the people whose performance is needed to attain them. “Second, a manager organizes. He analyses the activities, decisions and relations needed. He classifies the work. He divides it into manageable activities and further divides it into manageable jobs. He groups these units and jobs into an organization structure. He selects people for the management of these units and for jobs to be done.
“Next, a manager motivates and communicates. He makes a team out of the people that are responsible for various jobs. He does that through the practices with which he works. He does it in his own relations to the men with whom he works. He does it through his “people decisions” on pay, placement and promotion. And he does it through constant communication, to and from his subordinates and to and from his superior, and to and from his colleagues. ” “The fourth basic element in the workof the manager is measurement.
The manager establishes the yardsticks—and few factors are as important to the performance of the organization and of every man in it. Hesees to it that each man has measurements available to him which are focused on the performance of the whole organization and which, at the same time, focus on the work ofthe individual and help him do it. He analyses, appraises and interprets performance. As in all other areas of his work, he communicates the meaning of the measurements and their findingsto his subordinates, to his superiors and to colleagues.
” “Finally, a manager developspeople, including himself. ” Taking a historical perspective, Drucker has since identified seven key elements in postwar management development: (1) Scientific management of workas the key to productivity; (2) Decentralization as a basic principle of organization; (3) Personnel management as the orderly way of fitting people into organization structures; (4) Manager development to providefor the needs of tomorrow; (5) Managerial accounting—use of analysisand information as the foundation for firm decision-making;
(6) Marketing; Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 23 (7) Long-range planning. In recent years, Drucker’s books have included Innovation and Entrepreneurship (1985), a typically wide-ranging study of growth sectors of the US Economy in the early 1980s, including many businesses not normally considered as suck: private health care, for example, non-profit-making private schools and public/private partnerships in which government units contract out services to competitive private companies.
The New Realities(1989) ranged over a global stage, anticipating the development of such contemporary phenomena as the transnational economy, the democratization of the Soviet Republics, the changing ethos of the United States and the demands of a postindustrial, post-business society. Drucker’s breadth of vision, and eclecticrange of publications spring from his belief that management is central to life; not merely to business… One of his recurring concepts is that of the Chief Executive as conductor of an Orchestra.
As he says, “We are beginning to realize that management itself is the central institution of our present society, and that there are very few differences between managing a business, managing a diocese, managing a research lab, managing a labor union, managing a hospital, managing a university, or managing a government agency. All along, this has been the main thrust of my work, and one thatdistinguishes it from practically all my contemporaries working in the field. ” Rosabeth Moss Kanter views his goals as even more embracing. In an article in New Management(winter 1985), she wrote: “Good management is also our best hope for world peace.
In the Drucker perspective, imperatives for growth push organizations beyond national borders in the search for new markets. The world becomes interconnected by a series of cross-cutting traderelationships in which the interests of managers in the survival of their multinational enterprises outweigh the interests of politicians. Quality of life, technological progress, and world peace, then, are all the products of good management… at root, Drucker is a management utopian, descended as much from Robert Owen as Max Weber. ” To Drucker, the business organization, as any organization, is “a human, a social, indeed a moral phenomenon.
” Customer service rather than profit should dominate Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 24 management thinking, profit being the means of continued investment in innovation and improvement. “Contrary to the approach to the study ofpolitical and social organization that has prevailed in the West since Machiavelli, I stressed all along that organization does not deal with power but with responsibility. This is the keynote of my work that has remained constant over more than 40 years. ”
Drucker sums up his own vast contribution to management thinking in these words, quoted in Makers of Management(Clutterbuck and Crainer): “I was the first one to see that the purpose of a business lies outside of itself—that is, in creating and satisfying a customer. I was the first to see the decision process as central, the first to see that structure has to follow strategy, and the first one to see, or at leas the first to say, that management has to be management by objectives and selfcontrol. ” Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 25 Michael E. Porter (b.
1947): Strategies for competitive advantage, both national and international. Michael E. Porter is the Bishop William Lawrence University Professor, based at Harvard Business School. A University professorship is the highest professional recognition that can be awarded to a Harvardfaculty member. Michael Porter is the fourth faculty member in Harvard Business School history to earn this distinction, and is one of about 15 current University Professorsat Harvard. In 2001, Harvard Business School and Harvard University jointly created the Institute for Strategy and Competitiveness, to further Michael Porter’s work.
Michael Porter, the author of 17 books and over 125 articles, is a leading authority on competitive strategy and the competitiveness and economic development of nations, states, and regions. He received a B. S. E. with high honors in aerospace and mechanical engineering from Princeton University in 1969, where he was elected to Phi Beta Kappa and Tau Beta Pi. He received an M. B. A. with high distinction in 1971 from the Harvard Business School, where he was a George F. Baker Scholar and a Ph. D. in Business Economics from Harvard University in 1973. Porter joined the Harvard faculty at the age of twenty six after earning his Ph. D.
Books such as Competitive Strategy, and the Competitive Advantage of Nationsanalyze various factors of strategy,–corporate and governmental/trans-national Teaching Michael Porter’s ideas on strategy havenow become the foundation for the required strategy course at the Harvard Business School, and his work is taught in virtually every business school in the world. Michael Porter’s primary course for Harvard graduate students is a University-wide course, Microeconomics of Competitiveness, which is taught not only at Harvard but at56 other universities around the world using video content and instructor support developed at Harvard.
Michael Porter also created and chairs Harvard’s program for newly appointed CEOs of billion dollar corporations. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 26 Michael Porter speaks widely on competitive strategy, competitiveness, and related subjects to business and government leaders throughout the world. Research on Strategy Michael Porter’s core field is strategy, and this remains a primary focus of his research. His book, Competitive Strategy: Techniques for Analyzing Industries and Competitors, was his first book-length publication on strategy.
The book is in its 58th printing and has been translated into 17 languages. His second major strategy book, Competitive Advantage: Creating and Sustaining Superior Performance, was published in 1985 and is in its 34th printing. His book On Competition(1998) includes a series of articles on strategy and competition, including his Harvard Business Review article ‘What is Strategy? ‘ (1996). ‘Strategy and the Internet’ was published in 2001. Competitiveness of Nations and Regions
Michael Porter’s 1990 book The Competitive Advantage of Nations was motivated by his appointment by President Ronald Reagan in 1983 to the President’s Commission on Industrial Competitiveness. This book kicked off his second major body of work, which addresses competitiveness and economic development. The book presents a new theory of how nations, states, and regionscompete, and their sources of economic prosperity. It was followed by an extensive body of publications on the influence of locations on competition, with a special focus on the role of clusters. These ideas have guided economic policy throughout the world.
National Competitiveness: Building on The Competitive Advantage of Nations, Michael Porter has published books about national competitiveness on New Zealand, Canada, Sweden, and Switzerland. Most recently, his book Can Japan Compete? (2000) challenges long-held views about the sources of Japan’s economic miracle and offers a new path for that nation’s future. It was selected as one of the top three non-fiction books of 2000 by The Economist. Michael Porter co-chairs the Global Competitiveness Report, an annual ranking of the competitiveness and growth prospects of more than 100 countries released by the World Economic Forum.
Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 27 Clusters: Michael Porter’s ideas on clusters, first introducedin 1990, have given rise to a large body of research on new cluster-based economic development approaches and hundreds of public-private cluster initiatives throughout the world. Michael Porter’s research on clusters is summarized in “Clusters and Competition: New Agendas for Companies, Governments, and Institutions” in On Competition (1998) and other publications listed in his curriculum vitae.
Regional Competitiveness: Michael Porter has extended his work on competitiveness to sub-national regions. He led the Clusters of Innovation project (2001-2002) which studied five major U. S. regions, developing new theory, new sources of data, and new methodologies for fostering innovation and prosperity in regional economies. Growing out of this research, the Harvard Cluster Mapping Project was developed and provides rich data on the economicgeography of U. S. regions and clusters from 1990 to 2002. The Cluster Mapping Project has over 7,900 registered users.
His article ‘The Economic Performance of Regions’ (2003) summarizes some of the important findings. Michael Porter has led studies on the roleof private capital investment in competitiveness, including Capital Choices (1992) and Lifting All Boats (1995). He has also written on competition policy, including ‘Competition and Antitrust: Towards a Productivity-based Approach to Evaluating Mergers and Joint Ventures’ (2002). Competition and Society Michael Porter’s research on economic development gave rise to his third major body of work: the relationship between competition and society.
Inner Cities: Michael Porter has conducted extensive research on economic development in America’s distressed inner city areas, beginning with the Harvard Business Review article ‘The Competitive Advantage of the Inner City’. In 1994, he founded The Initiative for a Competitive Inner City (ICIC), a non-profit, private-sector organization to catalyze inner-city business development across the country. Michael Porter is Chairman and CEO of the ICIC, a national organization with a staff of more than 40 professionals.
The ICIC has conducted extensive research and practiced extensively in this field, and a bibliography of work is available on the organization’s website. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 28 Environment: Michael Porter has examined the relationship between competitiveness and the natural environment. His Scientific American essay ‘America’s Green Strategy’, showed that economic competitiveness and environmental improvement could and should be complementary.
This essaytriggered a body of literature and new policy thinking, including publications by Michael Porter: ‘Green and Competitive’ (1995), ‘Toward a New Conception of the Environment-Competitiveness Relationship’ (1995), and ‘National Environmental Performance Measurement and Determinants’ (2002). Philanthropy: Michael Porter has devotedgrowing attention to philanthropy and especially the role of corporations in society. His Harvard Business Review article with Mark Kramer, ‘Philanthropy’s New Agenda: Creating Value'(1999), offers a new framework for developing strategy in foundations and other philanthropic organizations.
He co-founded the Center for Effective Philanthropy, an organization dedicated to creating concepts and measurement tools to improve foundation performance. Michael Porter’s Harvard Business Review article, ‘The Competitive Advantage of Corporate Philanthropy'(2002), addresses how corporations can create more social benefit by integrating their philanthropy with their business context. A forthcoming article tackles the strategic underpinnings of corporate social responsibility. Health Care: Recently, Michael Porter has devoted considerable attention to competition in health care and the reform of the U. S.
health care system. His article with Elizabeth Teisberg, ‘Redefining Competition in Health Care’(2004), has stimulated a national dialog. His joint book with Teisberg, Redefining Health Care (Harvard Business School Press) is due to bepublished in September 2005. The very words “competitive strategy” or “competitive advantage” are enough to identify Michael Porter wherever managementgurus gather. Some critics claim that his ideas for analyzing markets and industries are based on old economic theories, and Porter himself has acknowledged his debt to Joseph A Schumpeter, among others, in The Competitive Advantage of Nations.
What he does brilliantly, however, is to package and simplify analytical models that would otherwise be dauntingly difficult for most working Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 29 businessmen to understand. His seminars, in particular, are as lively as those of Tom Peters. On joining the Harvard faculty, Porter was among the first to project corporate strategy in marketplace terms rather thanas a theoretical concept linking various functions in an organization.
His basic tool for managers seeking to analyze their own company’s competitive position employs five factors or forces that drive competition: (1) Existing rivalry between firms (2) The threat of new entrants to a market (3) The threat of substitute products and services (4) The bargaining power of suppliers (5) The bargaining power of buyers. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 30 He then identifies five generic descriptions of industries:fragmented, emerging, mature, declining, and global.
Porter says a firm may possess two kinds of competitive advantage: low cost or differentiation. “Competitive advantage is a function of either providing comparable buyer value more efficiently than competitors (low cost), or in performing activities at comparable cost but in uniqueways that generate more buyer value than competitors and, hence, command a premium price (differentiation). ” Firms that operate in a number of different countries can locate processes where the best advantage lies—e. g.
low labor costs,or proximity to vast markets like Japanese firms based in the UK—but at the same time, Porter argues,the most competitive ones come from home bases that are themselves strong and competitive. This sharpens up the instinct to succeed and provides valuable “cluster” support from equally successful linked industries that act as buyers and suppliers. This theory, developed over several books and numerous articles, reaches its full, flowering in The Competitive Advantage of Nations, which takes as its key a “diamond” of factors that makes some nations (and consequently their industries) more competitive than others.
The four points of this diamond are: (1) Factor conditions: the nation’s position in factors of production (such as skilled labor or infrastructure) necessary to compete in a particular industry. (2) Demand Conditions: the nature of homedemand for the industry’s product or service and how discriminating it is. (3) Related and supporting industries” the presence or absence of supplier industries and related industries thatare internationally competitive themselves.
(4) Company strategy, structure, and rivalry: the conditions governing how firms are created, organized, and managed, as well as the nature of domestic rivalry. Tough domestic rivalry breeds international success. Firms gain competitive advantage outside their home markets, Porter argues, when their own countries provide a dynamic competitive environment, characterized by an accumulation of specialized assets and skills and a constant stimulus to upgrade and Principles of Management: Project 1
Management Thinkers and Companies © 2005 Aditya Anupkumar 31 improve their products and processes. “Clusters” of mutually supporting industries are important to success; one reason why Britain’sperformance has declined over the years. Among Michael Porter’s strategic recommendations for the competitive company are: (1) Sell to the most sophisticated and demanding buyers: they will set a standard for the organization. (2) Seek out buyers with the most difficult needs; they become a part of the firm’s R&D program.
(3) Establish norms of exceeding the toughest regulations, hurdles or product standards: these provide targets that will force improvement. (4) Source from the most advanced and international home-based suppliers; those with competitive advantage already will challenge the firm to improve and upgrade. (5) Treat employees as permanent instead of demoralizing hire-and-fire approach. (6) Establish outstanding competitors as motivators. One of Porter’s favorite methods of identifying a firm’s competitive position is to analyze its “value chain”—all the activities itperforms and how they interact.
Examining these components sheds lights on the roots of costs and how they behave, and picks out existing and potential sources of differentiation. “A firm gains competitive advantage by performing these strategically important activities more cheaply or better than its competitors. ” Kathryn Rudie Harrigan, a former studentof Porter’s—and now a guru in her own right as well as being professor of strategic management at New York’s Columbia University—says the ideas in Competitive Strategy are required reading in every US Business School and most executive education programs.
“The framework he popularized forms the cornerstone for the nextdecade of research concerning strategy formulation… the first chapter of the book Competition in Global Industry provides what has become a the dominant framework for looking at issues in Global Strategy. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 32 Tom Peters (b. 1942): The “excellence” cult and prescriptions for managing chaotic change
Tom Peters and Robert Waterman will forever be linked because of the phenomenal success of In Search of Excellence, although it was the only book the two former McKinsey consultants wrote together. Since its publication in 192, each has carved out his own distinctive niche in authorship on the lecture trail. Excellence is by far the world’s best selling business book. It was slow to take off on both sides of the Atlanta, but its reputation rocketed by word of mouth, and suddenly companies were ordering “50, 100, 200 copies togive to their executives,” as their British publisher recalls.
It reached the million mark in sales in record time, within a year, and has now sold over 5m copies. Despitethe fact that 2/3rds of its “excellent” companies have since faded in performance—Peters began his 1987 book Thriving on Chaos with bold words, “There are no excellent companies”—In Search of Excellence still endlessly reprints in paperback and its distinctive black, white and gold cover continues to walk off the airport bookstallswhere most business books are sold in the UK.
Before joining McKinsey in 1974, Peters worked in the Pentagon for two years, where he became “fascinated by complex organizations. ” He then took a master’s degree in civil engineering at Cornell University before serving in Vietnam. Later, he took an MBA at Stanford and worked again in Washington for the Office of management and Budget. Today, he and Michael Porter can probably claim to be the most sought-after and expensive management lecturers in the world. The Tom Peters Group has built a huge business in videos, cassettes, and TV series as well as personal appearances and Consultancy work.
Peters left McKinsey after Excellence was published. As Waterman was not enthusiastic about a sequel, Peters wrote the sequel—A Passion for Excellence with Nancy Austin. Peters’ work took on a new direction with Thriving on Chaos (1987) which inaugurated a genre of books on managing change. Peters and Waterman have almost branded the word “excellence” as a branch of management theory. Their phenomenally successful book has spawned a host of other Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 33
imitators and this was indeed the subject of a fascinated study by Japan’s Kenichi Ohmae, also a McKinsey man. At the time, Waterman says they had no idea it would prove such a watershed. Its simple idea was the extension of a McKinsey project that began in 1977, to analyze the lessons from 43 of Fortune’s top 500 companies that had consistently beaten their competitors over twenty years by six financial yardsticks: (1) Compound asset growth (2) Compound equity growth (3) Ratio of market value to book value (4) Return on Capital (5) Return on Equity (6) Return on Sales
Peters and Waterman developed the famous McKinsey “Seven-S” formula to analyze an organization: structure, strategy, systems, style of management, skills (corporate strengths), staff and shared values. Applying this framework to their 43 companies, they identified their eight by now well-known characteristics shared by all of them: (1) A bias for action: getting on with it (2) Close to the customer: learning from the people they serve Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 34 (3) Autonomy and entrepreneurship: fostering innovation and nurturing “champions”
(4) Productivity through people: treating rank and file as a source of quality (5) Hands-on, value-driver: management showing its commitment (6) Stick to the knitting: staywith the business you know (7) Simple form, lean staff: some of the best companies have a minimum of headquarters staff (8) Simultaneous loose-tight properties: autonomy in shop flooractivities plus centralized values. All their 43 companies, Peters and Waterman found, were“brilliant on the basics” Also, in almost every case, a strong leader had been influential at some stage in forming the culture of excellence.
Five years later, only 14 companies of the original 43 could still be described as excellent by the original criteria. Peters concluded that nothing in today’s chaotic business environment stays the same long enough for excellence of the sustained type possible before 1982 to be developed. In Thriving on Chaos, he cited IBM—“declared dead in 1979, the best of the best in 1982, and dead again in 1986. ” People Express, one star of Excellence, collapsed completely! Excellence, suggested Peters, required redefining—excellent firms were now those that believed only in constant improvement and the demands of constant change.
A key concept behind Thriving on Chaos, a title that strucka chord with many gurus in the late 80s, was the need to move from a hierarchical pyramid of management, to a horizontal, fast, cross-functional cooperative one. Peters evolved 42 precepts for managers across every level. They ran as follows: (1) Quality Revolution (2) Become a Service addict (3) Achieve total customer responsiveness (4) Become true internationalists, both small and large firms (5) Strive to achieve uniqueness (6) Listen to customers, end users, suppliers, retailers
(7) Make manufacturing the prime marketing tool Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 35 (8) “Over-invest” in people, frontline sales, service, distribution (make the company heroes) (9) Become customer-obsessed (10) Develop an innovation strategy (11) Use multi-function teams for all development activities (12) Substitute pilots and prototypes for proposals (13) Ignore “Not invented Here” and learn to adapt from the best (practice “creative swiping”) (14) Use systematic word of mouth for launching
(15) Applaud champions (16) Symbolize innovativeness (17) Support failures by publicly rewarding well throughout mistakes (18) Measure innovation (19) Make innovation a way of life for everyone (20) Involve all personnel in all functions in virtually everything (21) Organize as much as possible around teams (22) Invest time in recruiting (23) Invest human capital as much as hardware (24) Provide bold financial incentives for all (25) Guarantee continuous employment for a large slice of the workforce (26) Radically reduce layers of management
(27) Re-conceive middle managers as facilitators instead of guardians (28) Reduce and simplify paperwork and bureaucratic procedures (29) Challenge conventional management wisdom on a day-to-day basis (30) Develop and live an “enabling and empowering vision” (effective leadership at all levels is marked by a core philosophy [values] and a vision of how the enterprise or department wishes to make its mark) (31) Lead by personal example (32) Practice visible management (33) Become a compulsive listener (34) Ensure that frontline people know they are heroes
(35) Examine each act of delegationand increase it radically (36) Destroy bureaucratic baggage (37) Focus on exactly what you have changed recently—what your subordinates have changed. Ask the question a dozen times a day at least, induce a sense of urgency throughout (38) Develop simple systems to encourage participation and understanding (39) Simplify control systems (e. g. performance appraisals, setting of objectives, job descriptions) (40) Share information with everyone (41) Set conservative financial targets (42) Demand total integrity in all dealings, both inside and outside the firm. Principles of Management: Project 1
Management Thinkers and Companies © 2005 Aditya Anupkumar 36 Henry Mintzberg (b. 1939): How strategy ismade, and how managers use their time Canadian-born professor of Management atMcGill University, Montreal, whose immensely influential work falls into three main categories: strategy-making, what managers actually do with their time (as opposed to what they think they do), and how mental processes work (left-brain and right-brain theories), and how organizations design themselves to suit their needs. Mintzberg studied engineering at McGill and later studied management at the Sloan School in MIT.
In all, Mintzberg has published about 130 articles and about 10 books. Honors accorded to him have included election as an Officer of the Order of Canada, and of l’Ordre national du Quebec, and selection as Distinguished Scholar for the year 2000 by the Academy of Management. Henry Mintzberg believes that both management and management education are deeply troubled, but that neither can bechanged without changing the other. In his latest book, Managers not MBA, Mintzberg asserts that conventional MBA classrooms overemphasize the science of management while ignoring its art and denigrating its craft, leaving a distorted impression of its
practice. We need to get back to a more engaging style of management, to build stronger organizations, not bloated share prices. This calls for another approach tomanagement education, whereby practicing mangers learn from their own experience. We needto build the art and the craft back into management education, and into management itself. Mintzberg examines what is wrong with our current system. Conventional MBA programs are mostly for young people with little or no experience. These are the wrong people. Programs to train them emphasize analysis and technique.
These are the wrong ways. They leave graduates with the false impression that they have been trained as managers, which has had a corrupting effecton the practice of management as well as on our organizations and societies. These are the wrong consequences. Mintzberg describes a very different approach to management education, which encourages practicing mangers to learn from their own experience. No one can create a manager in a classroom. But existing managers can significantly improve their practice in a thoughtful classroom that makes use of that experience.
Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 37 Mintzberg’s reputation was made by The Nature of Managerial Work(1973) and the article in the Harvard Business Reviewin 1975, which broughtit to a wider public— The Manager’s Job: Folklore and Fact. In researching the book, he spent a week in each of five middle- to large-sizedorganizations—a consulting firm, a technology company, a hospital, a consumer goods company and a school system, observing how CEOs used their time, as well as reporting other studies of managers lower down the line.
Far from confirming any grand all-embracing role, such as Peter Drucker proposed in his analogy of the manager as orchestra conductor, Mintzberg found that a manger’s time is constantly being fragmented by interruptions, but that these appeared to produce adrenaline of their own and to convince the manager that he was achieving a great deal through responding to pressures ofthe job over a great many issues, even in summary and incomplete fashion. “Jumping from topic to topic, he (the manager) thrives on interruptions, and, more often than not, disposes of items in ten minutes or less.
Though he may have 50 projects going on, they all are delegated. He juggles them, checking each one periodically before sending it back into orbit” The four definitions of managerial work laid down by Fayol in 1916—planning, organization, coordination and control—have very little bearing on actually daily routine, Mintzberg discovered. Yet, as he explained in the Harvard Business Review article, “Without a proper answer, how can we teachmanagement? How can we design planning or information systems for managers?
How canwe improve the practice of management at all? … The traditional literature notwithstanding, the job of managing does not breed reflective planners; the manager responds to stimuli as an individual who is conditioned by his job to prefer live to delayed action? Indeed, Mintzberg concluded in a memorable finding, “the executives I was studying—all very competent by any standard—were fundamentally indistinguishable from their counterparts of 100 years ago, or a 1000. The information they need differs, but they seek it in the same way-by word of mouth. ”
Mintzberg identified ten principle managerial roles, grouped into 3 main areas— interpersonal, informational, and decisional. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 38 Interpersonal roles, in his definition, compromise three functions—those of figurehead, leader, and liaison. The first two are “ceremonial”, rather, while the third covers a manager’s network ofrelationships within and without the organization, outside his vertical chain of command, and mainly inpursuit of building up a private information system.
Informational roles involve those of monitor (keeping tabs on what’s going on), disseminator (transmitting essential information to subordinates), and spokesman (the public voice of the unit). The manager emerges as the nerve center of any organization, even though he may not know everything. It isthe way in which the manager develops information that communicates it, that is whatdefines the organization. Decisional roles, not surprisingly, are described as the most important. Mintzberg divided these into 4 categories—entrepreneur, disturbance handler, resource allocator, and negotiator.
As an entrepreneur, the manager “seeks toimprove his unit and to adapt it to changing conditions” sometimes juggling more than 50 different projects at a time As a disturbance handler, the manager reacts to events and change beyond foresight or control; a strike, the bankruptcy of a major customer, or the failure of a key supplier—Mintzberg parts company with Drucker’s idea of the Orchestral conductor strikingly at this point, by saying, “in effect, every manager must spend a good part of his time responding to high pressure disturbances. ”
As a resource allocator, the manager must decide how to best deploy human, intellectual, time-based and physical assets of the company; and must use his abilities as a negotiator to ensure smooth process flow. All the variables contained within these permutations led Mintzberg to conclude that management is an art rather than a teachable science, and that it requires a continuous process of self-education and assessment. Management schools, he concluded, would only begin “the serious training of managers when skill training takes a seriousplace next to cognitive learning… cognitive learning no more makes a manager than it does a swimmer.
The latter will drown the first time he jumps into the water if hic coach never takes him out of a lecture hall, gets him wet, and gives him feedback on his performance. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 39 “No job is more vital to oursociety,” declared Mintzberg. “it is the manager who determines whether our institutions serve us well or whether they squander our talents and resources. It is time to strip away the folklore about managerial work, and time to study it realistically so that we can begin the difficult task of making significant improvements in its performance.
” He concluded that most organizational structures fall into 5 basic categories: simple, machine bureaucracy, professional bureaucracy, divisionalized form and adhocracy. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 40 Section II: Companies Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 41 Wockhardt Established nearly four decades ago, Wockhardt Limited today is among India’s top research and technology oriented pharmaceutical companies, with global presence.
Wockhardt has emerged as a leading player indomestic as well as international markets, with widely accepted and efficacious drugs and formulations. The company has developed leading brands in Anti-infectives, Pain & Inflammation, Cough, Psychiatry, Medical nutrition and Biotechnology segments. Wockhardt has an active multi-disciplinary R&D program involving over 300 scientists, largely focused on developing innovative technologies and New Drug Discovery. The company has a team of over 90 scientists engaged in new drug discovery research and has several new chemical entities in the field of sepsis and anti-infectives.
Some facts about Wockhardt: • 24th largest wealth creator • Ranked amongst the 50 most valuable companies in India • Rated among the Top 10 emerging Corporates in India (Economic Times, 1999) • Wockhardt employs 2700 people of which more than 1300 constitute the field force covering 1,50,000 Doctors • 35% of total sales come from International Business • Listed on Bombay Stock Exchange, National Stock Exchange and on Luxembourg Stock Exchange • R&D programme rated among the top 3 in the country with R&D spend of 7% of sales – one of the highest in the country.
• Managed by the “Best” Board of Directors in the pharmaceutical industry (Source: Business Today, May, 1997 survey. ) Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 42 Corporate Mission “Pursuit of growth with excellence in the field of pharmaceuticals and healthcare” Profitability through: • Quality of products and services • Increasing investment in R & D • Competent scientific and managerial manpower Wockhardt Business Philosophy “Creating value by understanding and communicating with our customers and business partners” Wockhardt Vision
“To be the most admired Pharmaceutical company in India” Globalization Initiatives Wockhardt’s presence covers more than 90 countries across the globe, with its International Business now constituting more than 60% of the sales turnover, a significant leap from a mere9%, ten years ago (1993). 80% of the international business comes from developed markets of the US and Europe, and 20% comes from the rest of the world. Wockhardt UK Limited Wockhardt is now the largest Indian pharmaceutical company in the United Kingdom and among the top 10 generic pharmaceutical companies in the UK.
In July 2003, Wockhardt acquired Wales-based CP Pharmaceuticals, a fully integrated pharmaceutical firm with four key business areas – hospital brands, generics, contract manufacturing and exports. It has 225 product licenses. The company has a special manufacturing license from MCA, which allows it to manufacture patent protected drugs under development. It also has Home Office license for the manufacture of Schedule 1 controlled drugs (highest schedule). It also has a USFDA approved injectible facility for manufacturing injectibles (cartridges, vials & ampoules) including freeze dried products.
Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 43 Wallis Laboratory, UK, was acquired in 1998. Wallis is a private label manufacturer for pharmacy and OTC retailers. Wockhardt’s German presence In May 2004, Wockhardt acquired the business and the sales and marketing organization of esparma, GmbH, signaling its entry in the German market and strengthening its European presence. esparma has a portfolio of 135 marketing authorizations, of which 67 are in Germany. The company has nine international patents and 94 trademarks.
esparma’s strong presence in urology, neurology and diabetology, is in line with Wockhardt’s therapeutic strengths. Wockhardt US Inc. With a view to increase its presence in the US, the world’s largest pharmaceutical market, Wockhardt, in April 2004, sets up Wockhardt USA Inc. , a sales and marketing subsidiary in the US, and appointed a President to head the sales, marketing and distribution operations in the US. Wockhardt has so far applied for 17 ANDAs for marketing its packaged formulations in the US, of which the US FDA has approved nine. The company plans to apply for 15 ANDAs this year (2004).
It has filed 32 DMF (drug master file) applications for export of active pharmaceutical ingredients to the US. Wockhardt currently sells four products in the US – ranitidine, enalapril, bethanecol chloride and captopril. More than 150 professionals at various levels at Wockhardt in India are supporting the company’s US generics business by working on non-infringing technologies, filing ANDAs and liaising with US regulatory bodies. Key officials handling corporate scientific affairs and intellectual property, were relocated from Wockhardt’s Mumbai headquarters to the newly-established Wockhardt USA Inc. in 2004.
Leading world manufacturer of Bulk Actives: As a quality manufacturer of active pharmaceutical ingredients (APIs), Wockhardt is among the world’s top three suppliers of Dextropropoxyphene, Dextromethorphan, Vitamin B12 and Captopril. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 44 Growing presence around the world: Wockhardt also has full-fledged operations in Russia, Brazil, Vietnam, Myanmar, Sri Lanka, and African countries of Kenya, Ghana, Nigeria and Tanzania. Motivational, Recruitment Principles: To make people successful create success be ambitious, realistic in strategies and goals
ensure your people hired have the necessary skills conduct impartial assessments and reward accordingly When recruiting, look for skill sets potential for growth of candidate understand ability Strategic Planning: Centralized planning in terms of finalscope; however, the company’s sub-units build their own plans from the bottom-up, and the central management executes. Once the strategic plan is implemented, no autonomy is available to the various units to change plans, without prior approval. Firm plan created for every year; broader,flexible defined three year plan also tabulated, with room for maneuvering.
Marketing Efforts: Marketing efforts not towards end-user, but rather only doctors. Wockhardt is involved in “informed individuals thrust ofmarketing” and focuses primarily on Doctors and requests by Doctors. They do however, conduct occasionally focus groups. As Wockhardt is completely a generic drugs company, it does not conduct new molecule research, and most of its development occurs through secondary data such as IMS reports. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 45 Business Structure: Wockhardt is controlled by a single CMD, who presides over the board.
All further subdivisions are in the form ofStrategic Business Units, and are largely autonomous and answer directly to the Board. WTO regulation implications: Only product patents after 1997 are affected. Many thanks to Mr. Lalit Kumar, President, International Business, Wockhardt Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 46 Pfizer Pfizer: Pfizer Inc discovers, develops, manufactures, and markets leading prescription medicines for humans and animals and many of the world’s best-known consumer brands.
Our innovative, value-added products improve the quality of life of people around the world and help them enjoy longer, healthier,and more productive lives. The company has three business segments:health care, animal health and consumer health care. Our products are available in more than 150 countries. Mission Statement: “We will become the world’s most valued company to patients, customers, colleagues, investors, business partners, and the communities where we work and live. We dedicate ourselves to humanity’s quest for longer, healthier, happier lives through innovation in pharmaceutical, consumer, and animal health products.
” “To achieve our Purpose and Mission, we affirm our values of Integrity, Respect for People, Customer Focus, Community, Innovation, Teamwork, Performance, Leadership, and Quality. ” We demand of ourselves and others the highest ethical standards, and our products and processes will be of the highest quality. We recognize that people are the cornerstone of Pfizer’s success, we value our diversity as a source ofstrength, and we are proud of Pfizer’s history of treating people with respect and dignity. We are deeply committed to meeting the needs of our customers, and we constantly focus on customer satisfaction.
We play an active role in making every country and community in which we operate a better place to live and work, knowing that the ongoing vitality of our host nations and local communities has a direct impact on the long- Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 47 term health of our business. Innovation is the key to improving healthand sustaining Pfizer’s growth and profitability. We know that to be a successful company we must work together, frequently transcending organizational and geographical boundaries to meet the changing needs of our customers.
We strive for continuous improvement in our performance, measuring results carefully, and ensuring that integrity and respect for people are never compromised. We believe that leaders empower those around them by sharing knowledge and rewarding outstanding individual effort. Leaders are those who step forward to achieve difficult goals, envisioning what needs to happen and motivating others. Since 1849, the Pfizer name has been synonymous withthe trust and reliability inherent in the word Quality. Quality is ingrained in the work of our colleagues and all our Values.
We are dedicated to the delivery of quality healthcare around the world. Our business practices and processes are designed to achieve quality results that exceed the expectations of patients, customers, colleagues, investors, business partners and regulators. We have a relentless passion for Quality in everything we do. Information The strategy for Pfizer is heavily based upon remaining at the cutting edge Research and Development of Medicine and Molecules; and of their ground sales representatives. Principles of Management: Project 1 Management Thinkers and Companies
© 2005 Aditya Anupkumar 48 Pfizer’s strategy in India is largely linked to marketing and brand development, convincing people to pay the comparatively (as compared to generics) high prices that they charge. However, it was not until 97-99 did they actually bring in their high end or user- specific products. Their launch however, was deterred due to the generic products of local competition, due to the lack of Patent and IPrestrictions, Their prices as compared to competitors’products are already competitive, and they will really benefit them once the TRIP rule is enforced.
Not many know that Pfizer India compromises of 4 companies: Park Davis, Pharacia, Pharmacia HealthCare and Pfizer Since new molecules are what Pfizer sells, Pfizer has billions invested in R&D. They phase out old drugs, but phasing them out with a newer molecule of it. Pfizer is currently no. 1 in the world for HealthCare products, and they lead due to this constant innovation. Their Quality is perhaps flawless, as they have no registered complaints against them. With the new WTO restrictions, Pfizer expect to be more competitive. Many thanks to District Manager of PfizerIndia, Mr.
Sunil Kelkar for his time Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 49 Hewlett Packard About HP: What does HP do? “HP delivers vital technology for business and life. The company’s solutions span IT infrastructure, personal computing and access devices, global services and imaging and printing for consumers, enterprises and small and medium business. Our $4 billion annual R&D investment fuels the invention ofproducts, solutions and new technologies, so that we can better serve customers and enter new markets.
We invent, engineer and deliver technology solutions that drive business value, create social value and improve the lives of our customers. HP has a dynamic, powerful team of 150,000 employees with capabilities in 170 countries doing business in more than 40 currencies and more than 10 languages. Revenues were $79. 9 billion for the fiscal year that ended October 31, 2004. ” When was HP established? HP co-founders Bill Hewlett and Dave Packard established the company in 1939 after successfully launching their first product, an audio oscillator, from a small garage in Palo Alto.
For more information, see a detailed history of HP. Where does HP stand in the industry? HP is: #1 globally in inkjet, all-in-one and single-function printers, mono and color laser printers, large format printing, scanners, print servers, and ink and laser supplies* #1 globally in x86*, Windows*, Linux*, UNIX* and Blade servers** #1 in total disk storage systems* #2 globally in notebook PCs* #1 globally in Pocket PCs* #1 in Customer Support** #1 position in customer satisfaction for ProLiant servers*** * Refers to units, except storage referred in factory revenue.
Source: IDC Q1 2004 ** Source: Gartner, January 2004, Gartner May 2004 *** Source: Technology Business Research, Inc. , May 4, 2004 Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 50 Corporate Objectives: “It is necessary that people work together in unison toward common objectives and avoid working at cross purposes at all levels if the ultimate in efficiency and achievement is to be obtained. ” — Dave Packard HP’s Corporate Objectives have guided the company in the conduct of its business since 1957, when first written by co-founders Bill Hewlett and Dave Packard.
Customer loyalty “To provide products, services and solutions of the highest quality and deliver more value to our customers thatearns their respect and loyalty. Underlying beliefs supporting this objective: • Our continued success is dependent onincreasing the loyalty of our customers. • Listening attentively to customers totruly understands their needs, then delivering solutions that translate intocustomer success is essential to earn customer loyalty. • Competitive total cost of ownership, quality, inventiveness, and the way we do business drives customer loyalty. ” Profit
“To achieve sufficient profit to finance our company growth, create value for our shareholders and provide the resources we needto achieve our other corporate objectives. Underlying beliefs supporting this objective: • Profit is the responsibility of all. • Balance of long-term and short-term objectives is key to profitability. • Profit allows us to reinvest in new and emerging business opportunities. • Profit is highly correlated to generating cash, which brings more flexibility to the business at a lower cost. • Profit enables the achievement of our corporate objectives.
” Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 51 Market leadership “To grow by continually providing useful and significant products, services and solutions to markets we already serve—and to expand into new areas that build on our technologies, competencies and customer interests. Underlying beliefs supporting this objective: • There are more places we can contribute than we will be capable of contributing: We must focus. • To be average in the marketplace is not good enough, we play to win. • We must be No. 1 or No.
2 in our chosen fields. ” Growth “To view change in the market as an opportunity to grow; to use our profits and our ability to develop and produce innovative products, services and solutions that satisfy emerging customer needs. Underlying beliefs supporting this objective: • Growth comes from taking smart risks, based on the state of the industry— that requires both a conviction in studying the trends, but also in inducing change in our industry. • Our size (and diversity of businesses) gives us an ability to weather economic cycles and turn them to our favor.
” Employee commitment “To help HP employees share in the company’s success that they make possible; to provide people with employment opportunities based on performance; to create with them a safe, exciting and inclusive work environment that values their diversity and recognizes individual contributions; and to help them gain a sense of satisfaction and accomplishment from their work. Underlying beliefs supporting this objective: Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 52
• HP’s performance starts with motivated employees; their loyalty is key. • We trust our employees to do the rightthing and to make a difference. • Everyone has something to contribute: It’s not about title, level or tenure. • An exciting, stimulating work environment is critical to invention. • A diverse workforce gives us a competitive advantage. • Employees are responsible for lifelong learning. ” Leadership capability “To develop leaders at every level who are accountable for achieving business results and exemplifying our values.
Underlying beliefs supporting this objective: • Leaders inspire, foster collaboration and turn vision and strategies into action—with focused, clear goals. • Effective leaders coach, relay good newsand bad, and give feedback that works. • Leaders demonstrate self-awareness and a willingness to accept feedback and continuously develop. • Leaders speak with one voice and act to eliminate busy work. • It is important to measure people on the results they achieve against goals they helped to create. ” Global citizenship “Good citizenship is good business.
We live up to our responsibility to society by being an economic, intellectual and social asset to each country and community in which we do business. Underlying beliefs supporting this objective: • The highest standards of honesty and integrity are critical to developing customer and stakeholder loyalty. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 53 • The betterment of our society is not a job to be left to a few; it is the responsibility to be shared by all. • This objective is essential to delivering on the brand promise. ” HP and the Environment
“HP is committed to providing customers with inventive, high quality products and services that are environmentally sound and to conduct our operations in an environmentally responsible manner. That commitment continues to be one of our guiding principles that are deeplyingrained in our values. It is from this history and these values that HP has become a leader in delivery of environmentally sustainable solutions for the common good. ” HP Recruitment “HP’s employee compensation and benefitsprogram puts us among the leaders in our industry. See Working at HP for more information.
HP’s compensation and benefits program both encourages and rewards employees by linking compensation to individual, business organization and company performance. ” HP Information Obtained via interaction with the HP Corporate Communications Department, Hewlett Packard Company, USA Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 54 IBM About IBM Values of IBM: an email from Sam Palmisano, Chairman, President and CEO, IBM “We’ve been spending a great deal of timethinking, debating and determining the fundamentals of this company.
It has been important to do so. WhenIBMers have been crystal clear and united about our strategies and purpose, it’s amazing what we’ve been able to create and accomplish. When we’ve been uncertain, conflicted or hesitant, we’ve squandered opportunities and even made blunders that would have sunk smaller companies. It may not surprise you, then, that last yearwe examined IBM’s core values for the first time since the company’s founding. In this time of great change, we needed to affirm IBM’s reason for being, what sets the company apart and what should drive our actions as individual IBMers.
Importantly, we needed to find a way to engage everyone in the company and get them to speak up on these important issues. Given the realities of a smart, global, independent-minded, 21st-centuryworkforce like ours, I don’t believe something as vital and personal as values could be dictated from the top. So, for 72 hours last summer, we invited all 319,000 IBMers around the world to engage in an open “values jam” on our global intranet. IBMers by the tens of thousands weighed in. They were thoughtful and passionateabout the company they want to be a part of.
They were also brutally honest. Someof what they wrote was painful to read, because they pointed out all the bureaucratic and dysfunctional things that get in the way of serving clients, working as a team or implementing new ideas. But we were resolute in keeping the dialog free-flowing and candid. And I don’t think what resulted – broad, enthusiastic, grass-roots consensus – could have been obtained in any other way. In the end, IBMers determined that our actions will be driven by these values: • Dedication to every client’s success
• Innovation that matters, for ourcompany and for the world • Trust and personal responsibility in all relationships I must tell you, this process has been verymeaningful to me. We are getting back in touch with what IBM has always been about – and always will be about – in a very Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 55 concrete way. And I feel that I’ve been handed something every CEO craves: a mandate, for exactly the right kinds of transformation, from an entire workforce. Where will this lead?
It is a work inprogress, and many of the implications remain to be discovered. What I can tell you isthat we are rolling up our sleeves to bring IBM’s values to life in our policies, procedures and daily operations. I’ve already touched on a number of things relating toclients and innovation, but our values of trust and personal responsibility are being managed just as seriously – from changes in how we measure and reward performance, to how we equip and support IBMers’ community volunteerism. Our values underpin our relationships with investors, as well.
In late February, the board of directors approved sweeping changes in executive compensation. They include innovative programs that ensure investors first receive meaningful returns – a 10 percent increase in the stock price – before IBM’s top 300 executives can realize a penny of profit from their stock option grants. Putting that into perspective, IBM’s market value would have to increase by $17 billion before executives saw any benefit from this year’s option awards. In addition, these executives will be able to acquire market-priced stock options only if they first invest their own money in IBM stock.
We believe these programs are unprecedented, certainly in our industry and perhaps in business. Clearly, leading by values is very different from some kinds of leadership demonstrated in the past by business. It is empowering, and I think that’s much healthier. Rather than burden our people with excessive controls, we are trusting them to make decisions and to act based on values – values they themselves shaped. To me, it’s also just common sense. Intoday’s world, where everyone is so interconnected and interdependent, it is simply essential that we work for each other’s success.
If we’re going to solve the biggest, thorniest and most widespread problems in business and society, we have to innovate in ways that truly matter. And we have to do all this by taking personal responsibility for all of our relationships – with clients, colleagues, partners, investors and the publicat large. This is IBM’s mission as an enterprise, and a goal toward which we hope to work with many others, in our industry and beyond. Samuel J. Palmisano, Chairman, President and Chief Executive Officer” Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar
56 Corporate • “IBM is the world’s largest information technology company. Measured by revenue, IBM is the biggest provider ofIT services ($43B), hardware ($28B) and rental and financing ($3B). 2003 revenues were $89B. (2/04) • IBM has approximately 319,000 employees and conducts business in some 170 countries. (3/04) • In 2002, Business Week (with data from Interbrand, Corp. and J. P. Morgan Chase & Co. ) ranked IBM the third mostvaluable brand worldwide, after Coca-Cola and Microsoft. (8/02) • Forbes Magazine’s annual “Super 500″composite ranking of the most powerful companies in the U. S.
named IBM the highest-ranking technology industry company on their ‘Computers and Electronics’ list, and number nine overall. Fortune Magazine’s ‘Fortune 500,’ named IBM the highest-ranking technology company on its ‘Computers and Office Equipment’ list and number eight overall. (4/03) • In the Wall Street Journal’s eighth annual Shareholder Scoreboard — which ranked returns for stockholders based on total return — IBM ranked sixth among 30 DJIA stocks on the basis of five-year-returns. (3/03) • In Fortune Magazine’s 21st annual “Top Ten Most Admired Companies – Computer Industry” list, IBM ranked number one.
Ten thousand executives and analysts rated companies based on innovation, financial soundness, employee talent, use of corporate assets,long-term investment value, social responsibility, quality of management, and quality of products and services. (3/03) • In IBM’s 2003 Employee Charitable Contribution Campaign, US employees, executives and retirees pledged a total of $32. 34 million to deserving, community-based causes, up more thansix percent from 2002. (2/04) • In 2004, IBM became the only company chosen for 17 consecutive years by Working Mothers Magazine to be onthe Top Ten List of the 100 Best Companies for working mothers.
(9/04) Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 57 • Over the past five years, the number offemale executives in IBM has risen from 185 to 692. (3/03) • Since 1995, IBM has invested $70 million in its Reinventing Education program – which will touch 100,000 teachers and 10 million students in 10 countries by the end of 2003. IBM provides research and technical expertise, as well as equipment and cash contributions, to improve teaching and learning and raise student achievement. (3/03)
• Through the MentorPlace program more than 6,000 IBM volunteers provide academic assistance and career counseling to students in grades 3-12 in 11 countries – part of the 4 million hours IBM employees volunteered to community organizations in 2002. (3/03) • Chief Executive magazine’s “Top 20 Companies For Leaders” survey in its June 2002 issue ranked IBM as the number one company for grooming talented senior executives. The corporate leadership development survey was conducted in conjunction with Hewitt Associates and included 240 large U. S. companies. (6/02)
• IBM was named number 38 on the FortuneMagazine 2003 list of the 100 Best Companies to Work For. IBM was selected from among 1,000 firms. To select this year’s list, the Great Place to Work Institute in San Francisco surveyed a random sample of employees from 269 company finalists. More than 40,000 employees responded to the survey, and nearly half of them gave additional written comments. (2/03) • IBM, Fannie Mae and American Express, were named the three best U. S. employers of minority women in 2003, according to Working Mother magazine. (5/03)” Global Financing
• “IBM Global Financing is the largest IT financier in the world, with an asset base of $35. 9 billion. It delivers financial services to nearly 125,000 customers in more than 40 countries. (3/04) Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 58 • By assets, IBM Global Financing would be a top 25 U. S. commercial bank. (3/04) • Financial originations in 2003 were $38 billion. $14 billion for customer and government financing and $24 billion for commercial financing, primarily for IBM Business Partners. (3/04)” Global Services
• “IBM Global Services (IGS) is the world’s largest business and technology services provider, with 2003 revenues of more than $42. 6 billion and more than 175,000 professionals. IGS generated $55 billion in services signings in 2003, including seven contracts over $1 billion and an additional 56 contracts in excess of $100 million each. (3/04) • In 2001, IBM services revenue surpassed IBM hardware revenue for the first time. IBM Global Services finished 2002 witha $112 billion backlog. (2/03) • In October 2002 IBM acquired PricewaterhouseCoopers (PwC) Consulting.
With some 30,000 employees and offices in 52 countries, PwC Consulting brought additional depth and leadership capabilities to IBM’s services-led business. At $3. 5 billion, it is one of the most significant acquisitions in IBM’s history. IBM created the world’s largest consulting services organization – Business Consulting Services – following this acquisition. (2/03)” Technology • “In 2003, Dataquest named IBM the industry leader in custom ASICs chips for the fifth year ina row. (April ’04) • In 2004, IBM’s partially complete BlueGene/L supercomputer ascended to No. 4 on the top 500 supercomputer list, based on the Linpack benchmark test.
The Blue Gene/L DD1 Prototype, with a sustained speed of 11. 68 teraflops and a peak speed of 16 teraflops, uses more than 8,000 PowerPC processors packed into just four refrigerator-sized racks. This system is only 1/16 of its planned final capacity. When complete in 2005, it will achieve a peak Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 59 performance of 360 teraflops, use less than one third the power and be ten times smaller than the current No. 1 ranked supercomputer. (6/04) • In 2004, IBM collaborated with Cisco Systems, Inc.
, to design and build the world’s most complex, programmable custom chip — the Cisco Silicon Packet Processor (SPP), a 40-Gbps (gigabits per second) application specific integrated circuit (ASIC), featuring an unprecedented 38 million gates, approximately 185 million transistors and 188 high-performance programmable 32-bit RISC processors executing 47 billion instructions per second (BIPS). The chip powers the Cisco Carrier Routing System (Cisco CRS-1), that Guinness World Records certified as the highest capacity Internet router at 92 terabits — 92 trillion bits per second — of total throughput.
It is the first networking technology to be recognized by Guinness World Records. (6/04) • In May 2001, IBM introduced “pixie dust,” IBM’s newest storage breakthrough, which uses new material – anti-ferro-magnetically-coupled (AFC) media — to quadruple the areal density of current hard disk drive products and surpass 100 billion bits/square inch, something previously thought impossible. IBM plans to implement AFC media across its hard disc drive product lines. (2/02) • In 2001, IBM introduced the world’s quietest high-capacity mobile disk drive that also enables the longest battery life among leading notebook drives on the market.
This new family of drives — the 60GH and 40GN — also includes enhanced availability features for nontraditional applications. These industryfirst models increase available hard disk drive “power-on hours” and are designed to meet the requirements for emerging applications such as those found in 24×7 blade serverenvironments. (2/02)” Personal Systems • “IBM’s Personal Systems Group (PSG) is made up of three worldwide business units: the Personal Computing Division, the Printing Systems Division, and Retail Store Solutions. The Personal Systems Group was an $11. 5 billion annual business in 2003. (3/04)
Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 60 • The IBM ThinkPad notebook boasts more than 50 patents alone, and that number increases yearly. The 20 millionth ThinkPad laptop computer was shipped in October 2002, making the product the best-selling laptop in history. (3/04) • Virtually every U. S. household receives customized documents printed on IBM digital printers, including telephone, power and insurance bills, financial statements and more. IBM’s heritage in printers dates back more than 40 years, and IBM continues to leadin printing innovations.
(3/04) • IBM is the worldwide leader in retail point-of-sale hardware and software systems. (3/04)” Research & Intellectual Property • “IBM Research is the world’s largest information technology research organization, with more than 3,000 scientists and engineers at eight labs in six countries. (3/04) • IBM’s Carbon Nanotube technology uses tiny cylinders of carbon atoms – 50,000 times thinner than the average human hair — roughly 10 atoms across, but with five times the strength of steel– to build transistors, which could lead to smaller, faster, lower-power computer chips.
In 2003, IBM announced the first use of molecular self-assebmly,one example of nanotechnology, to improve semiconductor manufacturing. (3/04) • For the eleventh consecutive year, IBM received the most U. S. patents over any other company — 3,415 U. S. patents in 2003 — 1,400 more than the nearest patent recipient and more than1,600 above the closest IT competitor. Over the past four years, IBM inventors received more than 13,000 patents — approximately 5,400 more than any other patent recipient. (2/04) • IBM Research boasts numerous awards, including 5 Nobel Laureates, 5 National Medals of Technology, and 4 National Medals of Science.
(3/04) • IBM’s On Demand Innovation Services (ODIS) unit was formed in 2002, combining the talents of IBM Research with IBM’s Business Consulting Services. In 2003, the group’s first full year of operation, ODIS worked in Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 61 partnership with IBM consultants on more than 70 customer engagements worldwide, across multiple industries. (3/04) • The potential size of silicon transistors was reduced by a factor of 10 in 2002, when IBM developed the world’s smallest working silicon transistor, measuring just six nanometers.
(3/03)” Servers • “According to IDC (4Q 2003), IBM is the #1 server provider in the world based on annual global server factory market share. (2/04) • IBM is the fastest growing vendor of Intel-based server systems, surpassing the growth of HP and Dell. (IDC 4Q03) (2/04) • IBM is the top blade-server vendor, making it the first time it has led the market in shipments and revenue in the Intel space and dethroning HP. (IDC) (2/04) • IBM is the world’s leading provider ofsupercomputing power with a record total of 186 teraflops of power in the TOP500 list of the world’s most powerful supercomputers. With 35.
4 percent share, IBM dominates the global market with 55 percent more processing power than runner-up HP, which claims 22. 7 percent share. (2/04) • IBM is the top vendor of computer systems running the Linux operating system. IBM has more than 10,000 Linux engagements worldwide. (2/04) • IBM is leading some of the largest and most complex supercomputer projects in the world; • In 1999, IBM unveiled “Blue Gene,” a supercomputer capable of more than one quadrillion floating-point operationsper second (one petaflop) to address fundamental and challenging questions in computer science and computational biology.
• In 2000, IBM announced the delivery of ASCI White, capable of 16 trillion calculations per second. The system is being used by the U. S. Department of Energy’s Lawrence Livermore National Laboratory to simulate nuclear testing. Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 62 • In 2002, the U. S. Defense Department purchased an IBM supercomputer named “BlueOcean. ” The Naval Oceanographic Office will use BlueOcean in developing vaccines and to aid in other research initiatives.
BlueOcean will process more than six trillion calculations per second. (7/02)” Software • “IBM Software Group had 2003 revenues of $14. 3 billion. (3/04) • IBM’s e-business strategy isbeing fueled by the world’s largest portfolio of software patents. Software accounted for more than 40 percent of the 3,415 U. S. patents awarded to IBM in 2003. IBM received nearly three times as many patents as Microsoft, and twice the combined total awarded to its four closest software industry competitors. (2/04)
• In 2003, revenue from IBM middleware increased 11 percent to $11 billion, primarily driven by continued strength in demand for WebSphere, DB2 database and Tivoli middleware products. (3/04) • In 2003, Linux revenue grew over 50 percent to more than $2 billion, as the rate of related software and services combined nearlydoubled year to year. (3/04)” IBM as an e-business • “By the end of 2003, the work of transforming and integrating the supply chain resulted in the lowest inventory levels for IBM in more than 20 years. (3/04)
• IBM’s supply chain transformation effortshave reduced the amount of time the sales force spends on activities like checking on order status, proposal generation and contracts by 20 percent. (3/04) • By speeding inventory turns and improving client collections and supplier payment terms, IBM’s supply chain efforts generated more than $700 million in cash in 2003. (3/04) Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 63 • With more than 2,000 clients, e-business Hosting Services revenue increased by more than 20 percent each of the pastthree years, topping $1 billion in revenue in 2003.
(3/04) • IBM clients have more than $10 billion in dormant computing capacity installed, which can be turned on and paid for on demand. More than $500 million in capacity was turned on in 2003. (3/04)” IBM and Intellectual Property “In 2004, IBM received 3,248 U. S. patents from the USPTO. This is the twelfth consecutive year that IBM has received moreUS patents than any other company in the world. In addition to delivering these innovations through its products and services, IBM maintains an active patent and technology licensing program.
The IBM Corporation’s Intellectual Property and Licensing team is responsible for licensing IBM’s patents, as well as other forms of intellectual property, such as technology, know-how and trademarks. These pages provide an introduction to IBM’s licensing practices as well as a portfolio of patents and technologies currently available for licensing. ” IBM and the Environment “IBM is committed to environmental leadership in all of its business activities, from its operations to the design of its products and use of its technology.
IBM’s corporate policy on environmental affairs, first issued in 1971, is supported by the company’s global environmental managementsystem, which is the key element of company’s efforts to achieve results consistentwith environmental leadership and ensures the company is vigilant in protecting the environment across all of its operations worldwide. ” IBM and Philanthropy “Good Philanthropy is Good Business…… ” “IBM corporate philanthropy spans the globe with diverse and sustained programs that support initiatives in education, workforce development and arts and culture to benefit communities in need.
IBM provides grant recipients withtechnology, project Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 64 funds, and employee time and talent. IBM’s OnDemand Community is a first-of-its kind initiative to encourage and sustain corporate philanthropy through employee volunteerism. ” IBM and its Commitment to Education “IBM counts education as the top priority in its philanthropic efforts. Through Reinventing Education and other strategic efforts, we’re solving education’s toughest problems with solutions that draw on advanced information technologies and the best minds IBM can apply.
Our programs pave the way for systematic reform in school systems nationwide through partnerships with whole school districts and entire states. ” Information provided by Kariappa A Ballachanda, Anand K Anantharaman, Corporate Communications, IBM USA Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 65 Federal Express FedEx facts: Fed Ex is the world’s largest express transportation company, it began operations in 1973. It has 5 major head quarters across the world—Memphis (Worldwide), Hongkong (Asia), Toronto (Canada), Brussels (Europe), and Miami (Latin America).
David Bronczekis the President and CEO of FedEx Revenues: • $3. 8 billion (U. S. dollars) 3rd Qtr. , Fiscal 2000 • $4. 0 billion (U. S. dollars) 4th Qtr. , Fiscal 2000 • $3. 9 billion (U. S. dollars) 1st Qtr. , Fiscal 2001 FedEx employs more than 145,000 people worldwide,in 215 countries. Their logistical difficulties are taken care of drastically due to the number of transportation mechanisms available to FedEx at any given time. They have a total fleet of 638 aircraft serving 365 Airports. Their fleet includes: • 31 MD11s (30 on order) • 36 A300 • 44 A310 • 73 McDonnell Douglas DC 10-10s (9 on order)
• 22 McDonnell Douglas DC 10-30s • 152 Boeing 727s • 261 Cessna 308s • 32 Fokker F-27s • 11 Shorts SD3-60 • 0 Ayers LM 200 (75 on order) Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 66 In addition, they have a Ground Fleet ofabout 43,000 units, and more than 100,000 FedEx Powerships. Other miscellaneous facts: • FedEx Ships & FedEx Ship Manager atfedex. coms: Morethan 2. 0 million • World Service Centers: Approximately 1,200 worldwide • Drop Boxes: Approximately 34,000 • FedEx Ship Sites: More than 2,000 • Authorized Shipcenters: More than 7,800
• Average Package Volume: More than 3. 1 million packages daily • Global Lift Capacity: Approximately 26. 5 million pounds daily • Airfreight Volume: More than 7. 0 million pounds daily • Average Call Volume: More than 500,000 calls daily • Average Number of Electronic Transmissions: Approximately 63 million daily • Distance Driven Per Day: More than2. 7 million miles (United States only) FedEx then and now: • 1973: Federal Express became the FIRST company to offer overnight delivery in the US. • 1986: Federal Express was the FIRST express company to introduce a Money-Back Guarantee.
• 1994: FedEx achieves ISO 9001 quality certification (PDF) for its entire worldwide operation, the FIRST major carrier to be recognized in this way. • 1996: FedEx launches FedEx International First, an 8 am door-to-door delivery service to nearly 5000 zip codes across the USA. • 1996: FedEx expands its European service, further improving the range of solutions offered to customers and its International capabilities. Today, FedEx is the world’s largest express transportation company, with 638 aircraft and service to over 215 countries. There are 46 call centers across the globe handling over Principles of Management: Project 1
Management Thinkers and Companies © 2005 Aditya Anupkumar 67 500,000 telephone calls daily. FedEx employs over 145,000 people, including 42,500 couriers who deliver more than 3. 1 million packages every single working day. FedEx Value Addition Programs • On-time delivery or your money back • Call Customer Service centres throughout the world • Easy to use shipment paperwork • Free packaging • Effective & fast customs clearance systems • Sophisticated real-timetracking information • Free shipping software products • Proof of delivery on every invoice
Information provided by Kristine, Corporate Communications, FedEx USA Principles of Management: Project 1 Management Thinkers and Companies © 2005 Aditya Anupkumar 68 Bibliography • Carol Kennedy: Guide to the Management Gurus (ISBN 0-09-174810-0) • Carol Kennedy: The next big idea (ISBN 0-7126-8444-1) • Roger Oldcorn: Management (ISBN 0-333-59360-X) • Tom Peters and Bob Waterman: In Search of Excellence (ISBN 0-06-054878-9) • Peter Drucker: Managing for Results • Joel Kurtzman: MBA in a Box (ISBN 0-609-61088-0) • HenryMintzberg. com • Harvard Business School: Faculty Profiles: Michael Porter