Four Management Practices That Really Matter

Wondering what business practices lead to organizational success? Would you be surprised to learn that in-depth analysis of over 160 companies using more than 200 management tools and techniques, such as logistic management systems and intranets, found that there was no correlation between individual tools and techniques and superior business performance? So what did the researchers at Harvard Business Review discover? The takeaway from the Evergreen Project was threefold:

  • Management matters when it comes to shaping national performance. 
  • Indicators of better management and superior performance strongly correlate to measurements of productivity, return on capital employed and firm survival. 
  • Organizational mismanagement is rampant throughout companies around the world.

So if management matters so much, but most tools and techniques don’t actually lend themselves to better business performance, then what management practices actually do matter? It turns out that there are four primary business and management practices that are really crucial. “What really works,” to paraphrase, is focusing—and succeeding—in the following areas:

There may be many different ways to succeed in business, but without a clear, focused strategy, your company won’t make it. Regardless of what you do and how you do it, you need to have a strategy for achieving your goals—and you need to communicate it with everyone: customers, employees, stakeholders, investors. The core of your strategy is simple: know both your target customers and your own capabilities. Then, put them together to formulate a value proposition that you can actually deliver.

Flawless execution is a key management strategy, but it’s not the specifics that matter so much. No single ERP or CRM is going to make your company a rising star. New technologies can be helpful, but only if they significantly increase output or lower costs. What ultimately matters is attention to operations. 

Being realistic also matters when it comes to execution. By identifying and then focusing on your customers’ specific needs, you can determine which processes are most important to efficiently delivering on your value proposition. Research shows that customers rarely reward a company for going above and beyond their needs, unless perfection is part of the company’s value proposition—but fail to deliver on your promise and your customers will most assuredly react negatively. 

Remember when Chipotle lost 40 percent of its valuation after an outsourced supply chain led to foodborne illness outbreaks across the country? Part of what made this so egregious—and led to a $25M federal fine—was that Chipotle had promised customers that its food was made with integrity and transparency. Not only had the company made people sick, it had broken a core promise.

Although not everyone takes culture as seriously as some other aspects of management, it absolutely is an imperative. Unfortunately, even the companies that do recognize its importance often go about implementing culture initiatives poorly. Companies tend to focus on fun perks, which a recent survey from workspace developer Hana has shown isn’t really the most effective way of building positive office culture. 

Instead of concentrating on “fun,” it’s a far better plan to champion high-level performance and ethical behavior. Organizations with a culture of encouraging outstanding contributions (from both individuals and teams), and rewarding them, are significantly more successful. Also more successful are companies with a culture that recognizes individuals’ unique talents and affords team-building through community engagement and volunteerism—things far more appreciated than a foosball table in the break room.

While processes and procedures are necessary to keep your business running, overreliance on them can have the opposite effect. A simple structure, trimmed of unnecessary fat, works best for everyone—customers, employees and vendors. Results from the Evergreen Project show that how the companies were organizationally structured (function, geography, product) wasn’t nearly as important as whether the structuring successfully simplified work.  

Secondary Practices
In addition to the four primary practices, there are four additional secondary practices: talent, innovations, leadership, and mergers and partnerships. Most people would assume that talent and innovation are equally as important as the four primary management practices, but research doesn’t actually bear that out. While successful companies augmented the four primary practices with two of the secondary practices, the Evergreen Project concluded that it really didn’t matter which of the two secondary practices were chosen. 

Since all businesses are limited in their ability to allocate resources, choices must be made with regard to investing in these practices. The goal of any such expenditure is a high rate of return on the investment, so carefully consider the pros and cons of allocating funds to each of the different management practices. The overarching goal is a company with robust management practices in all four primary areas as well as two of the four secondary areas—what the folks at Harvard call the 4 +2 formula for successful business management.