Productivity is the First Test of Management
The purpose of this blog is to capture my thoughts about the current state and future direction of the profession of management.
The first test of management is how productive a business is under their care. Productivity is an awful word. It bedevils business professionals. But we have to come to some sort of accommodation with it. Otherwise we probably aren’t being professional.
‘Productivity’ is a noun. But ‘productive’ is an adjective. So we have to find the verb. To produce meant ‘to bring forth’. That is, to be creative. Productivity is about being creative. The objective of productivity comes down to bringing something forth. As I wrote in my last post, an objective requires an object, something tangible. So a productivity objective is all about the 'what'. But the 'what' need not be a product in the conventional sense.
In the economic literature, productivity is fairly straightforward. It’s about how well a business combines resources into products. But a business doesn’t do so as a natural extension of itself. A 'business' is an abstraction. It requires people.
And because a business is a social organism, the people require some form of leadership and organisation. Which means management. This is why I say the first test of management is how productive a business is under their direction.
In a great little 1988 article for HBR, W Bruce Chew wrote “It’s essential to measure productivity appropriately. A manager will look at a productivity index developed by a specialist and say, “Whoever came up with this has no idea what my business is like”. Productivity measurement is simply too important to be delegated to productivity specialists.”
The thing to take from this is, because business is an act of creativity, the management professional is like the artist. They are the ultimate judge of their own work. Certainly, the marketable commodity or service might be so bad that no one buys it. Or it might be so ahead of its time that no one buys it. But much of what occurs in the market is outside our control.
We have a pronounced tendency to assign causation where it doesn’t belong, to ascribe an event as the result of our actions. The closest I’ll go to this view of the world is to quote (fully) Louis Pasteur: “In the fields of observation chance only favours the prepared mind”.
Productivity measurement, or the measurement of what a business creates, is too important to be delegated to productivity specialists… assuming such specialists are economists. I won’t divert too far into a rant against conventional economics but it’s fair to say I don’t have a high opinion of the influence of the doctrine on the business of management.
It’s hard to reconcile reading Adam Smith with the treatment by conventional economists writing about Adam Smith. As Amartya Sen wrote, “While some men are born small and some achieve smallness, it is clear that Adam Smith has had much smallness thrust upon him”. My point here is that, where business is an act of creativity, it requires a creative approach to the measurement of it. Any cookie cutter MBA can make a raft of correct and defensible pronouncements about a business and yet be quite unable to describe what the business actually is.
The first test of management is how productive a business is under their care. Take this further and, in a particular industry, it is the quality of management that is a primary element in the difference between businesses. I think this was the case in the mass-production era and it is certainly the case in the digital era. Given a set of pre-MANIAC (Mobile-Analytics-Internet of things-Artificial intelligence-Cloud) templates, management was to a large degree algorithmised. But the difference making organisations were characterised by ‘something’ in their management teams.
It’s a mistake to characterise the mass-production era as being uncreative. The same charge can be made of shake-and-bake ‘entrepreneurs’. Great people are made by their commitment to something greater than themselves, which brings me back to the point that business is an act of creative endeavour. But it’s not an unfocused act of creativity. It’s not an unconstrained finger painting party. It’s committed action towards a clear vision of what should be.
There’s a trend to throw stones at the profession of management and my sense is that many stone throwers haven’t put themselves to the task of management. Abstractions about leadership have become more common, as if exhorting everyone to be the best leader they can be will fix our problems. Leadership is about taking responsibility for making something important happen that doesn’t necessarily benefit them. I would love to see more of this: who wouldn't. But it’s insufficient to turn businesses into the wind of the social and digital age.
Good management is applied leadership. Good management promotes productivity by channelling peoples energy towards achievement, where achievement is about meeting business objectives. Objectives are about creating objects and the first test of management is a clear and unmistakable expression of the difference they make to the world.