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MBA in Perspective Fundamentals in General Management

MBA in Perspective Fundamentals in General Management. Prof. dr. Pieter Klaas Jagersma BSN - Buren - May 20 2008. Points to cover. Speaker and approach History of general management Basics of general management Scanning the environment Policy formulation Policy implementation

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MBA in Perspective Fundamentals in General Management

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  1. MBA in PerspectiveFundamentals in General Management Prof. dr. Pieter Klaas Jagersma BSN - Buren - May 20 2008

  2. Points to cover • Speaker and approach • History of general management • Basics of general management • Scanning the environment • Policy formulation • Policy implementation • Policy evaluation and control • Last but not least

  3. 0 Speaker and Approach

  4. Speaker Science Author ‘Heart’share Entrepreneur Non-executive Private life

  5. About today’s lecture ... • Put MBA in perspective - holistic approach • Cliffhangers (frameworks/visualizations) • From Paper > Practice • ‘On the cutting edge’ - tailor made for BSN • Present some generalized lessons learned • ‘The key to success is not trying to please everyone’/Cosby ‘95 (monologue/dialogue) • Have fun!

  6. Today’s core message • Transparancy is the magic word!

  7. 1History of General Management (GM)

  8. Contents • General management: what’s in a name? • General management and faculty • Journals and professional societies • Development of general management theory and research

  9. a General Management: What’s in a Name?

  10. Quite clear ..... • General Management is about the direction of organizations • ‘Heart’ of wealth creation in modern society!

  11. General Management = • General management is an approach in which leading managers (‘general’ managers) decide what to do with regard to which value chain activities in a holistic manner and oriented towards specific organization-wide goals [MBA]

  12. Surprise ... • Practice >> very old • but ..... • Theory >> ‘child of sixties’

  13. Background • First Industrial Revolution (1750-1850): • no ‘strategic’ behavior >> businesses small, little capital employed, room for everyone,‘invisible hand of the market’ • Second Industrial Revolution (1850-1920): • construction of key railroads >> mass market buil- ding possible >> ec. of scale/scope >> rivalry • ‘visible hand of general managers’: large verti-cal integrated firms + management hierarchies to deal with (environmental) complexity

  14. Background (Cont.) • Alfred Sloan (CEO GM: 1923-1946): • articulated need for ‘general’ management think-ing: business policy = f (strengths + weaknesses of Ford) • developed multidivisional ‘control’ structure • WW II vs ‘general’ management: • how to allocate scarce resources across an organi- zation? (quantitative analysis/’OR’-’besliskunde’) • through formal planning organizations can exert control over market forces and future

  15. b General Management and Faculty

  16. Roots of General Management as an academic discipline • First ‘Business Policy’ (GM) course at Harvard University (1912) • GM/Business Policy course: built out of functio-nal courses like accounting, operations, finance (‘integration’) • Case method (Harvard style) • Model for other Business Schools • First course or final course

  17. General Management faculty • Professors (experienced teachers with broad view of business) + assistent/associate professors (for-mer ‘senior’ - general - managers) • Eclecticism + holistic perspective: how to match a firm’s choices with its (competitive) environ-ment (famous ‘fit’ question) • General Management/Business Policy as a ‘cap-stone course’

  18. Consequence of ‘capstone course’ • Single ‘capstone course’ permits no development! • Faculty makes intellectual homes elsewhere • Course development work: cases (not articles and books) • ‘Rich’ general descriptions of practice (thanks to case writing and consulting) • In 1963 influential ‘general management’ confe-rence at Harvard Business School (HBS) • Since early 1970s accumulation of cases and re- search (externally)

  19. c Professional Societies and Journals

  20. Professional societies • The Planning Forum (USA)/Business Poli-cy Society (UK) (since 1950s/1960s) • Strategic Management Society (since 80s) >> Sponsored AMJ, AMR, AME, SMJ • Vereniging voor Strategische Beleidsvor- ming (VSB) (since 1980s) • NCD (since 1970s)

  21. General Management Journals - categories • Specific Business Journals • LRP, The Planning Review (70s); JoM (60s); SMJ (80s) and JBS (also since 80s) • General Management Journals • HBR, SMR, CMR, JofB, Business Horizons, JoGM, HMR, M@n@gement (www.managementsite.net) • Academic Journals • ASQ, AMJ, AMR, Management Science, MAB, M&O, ESB

  22. d Development of General Management Theory and Research

  23. Birth of the General Management Field: One fundamental work/book “Business Policy: Text and Cases” (Harvard Textbook Andrews / Learned et al, 1965)

  24. Business Policy: Text and Cases (1965) • Organization-concept of Chandler + ‘Dis-tinctive Competence’ (Selznick, ‘57) + ‘un-certain environment’ (which means instantadaptation of organizations) • Environment (thanks to changes): ‘opportu- nities and threats’ and firm’s ‘strengths + weaknesses’ were adapted to avoid threats and take advantage of opportunities [SWOT]

  25. Business Policy: Text and Cases (1965) (Cont.) • Internal appraisal of strengths and weaknes- ses >> ‘distinctive competencies’ and exter- nal appraisal of threats and opportunities > ‘potential success factors’ (CSFs/KSFs) • Internal + external appraisal = foundations of ‘business policy formulation’ • ‘Business policy formulation’ is ‘analytical’ and ‘business policy implementation’ is ‘ad-ministrative’ (denken versus doen)

  26. Their audience ... • Professors and students

  27. Who influenced General Management practice? • 1 • General Electric (GE): in 1960s ‘godfather’ of business planning and executive education programs with help from ‘academic friends’ and private consulting firms (McKinsey&Company)

  28. Who influenced General Management practice? (Cont.) • 2 • The Boston Consulting Group - BCG (Henderson - mid-1960s) Why? - Applying quantitative research to business problems - Selling powerful oversimplifications - What are basic rules for success? - The most relevant frame of reference is the ‘concept’

  29. How? • Concepts • a. Experience curve • Experience in production > market share > lower costs > higher margins and cash flow > highest profits > dynamic aspect called for ‘competitive behavior’ (needing: ‘integrated’ management = ‘general management’)

  30. How? (Cont.) • b. Growth-share matrix • Cash cows/dogs/stars/question marks (‘era of port- folio analyses’)

  31. ‘Growth-share matrix’ Marketshare high low Star ? high low Industry growth Cash cow Dog

  32. Industry attractiveness - Competitive position matrix Industry attractiveness (lots of criteria) high medium low Invest/ Selective Selectivity growth growth high medium low Selective Selectivity Divest/ growth harvest Business strength Selectivity Divest/ Divest/ harvest harvest

  33. How? (Cont.) • Spin-offs: Bain&Company etc etc • ‘Thanks to’ BCG, the entrepreneurial res- ponsibility of management was recognized to consider the long-run, dynamic direction of the firm, even while maintaining routi- ne and efficient operations (mindset of de- cision makers: from efficiency to effective- ness)

  34. General Management research in the 1960s/1970s • Experiental, case-based evidence in 1960s: descriptive studies • Systematic observation, deductive analysis and modeling (1970s): normative studies

  35. General Management research in the 1980s: dichotomy • Descriptive studies of how policies are for-med/implemented (‘management process’) • G. Steiner (long-range planning), H. Mintzberg (‘emergent decision making’), J.B. Quinn (‘logical incrementalism’) • Studies seeking to understand the relation- ship between organization choices and per-formance (‘management content’ school) • HBS (growth and diversification), Purdue (heterogeneity and perfor-mance within a single industry), Harvard University (IO/market po-wer and entry/exit barriers) et cetera et cetera

  36. General Management research in the 1990s/2000s • General Management inspired by ‘globalization’: • - third dimension of management (P/F) product functions geography

  37. 2Basics of General Management (GM)

  38. Organization performance (‘firms’) attractive- positioning potential potential maximum ness of of firm internal external profitability industry synergy synergy 55% 20% 10% 15% 100% Source: Caves (1977); Porter (1980); Goldman Sachs (1996); Jagersma (2000)

  39. Definition of ‘general management’ • General management = • 1. environmental scanning + • 2. (business) policy formulation + • 3. (business) policy implementation + • 4. (business) policy evaluation/control

  40. General Management is ... • Future thinking/‘Controlling’ the future Design of a desired future • (Integrated) Decision making Fundamental choices; Integration of hierarchically determined actions • ‘Formalized procedure to produce an articu- lated result, in the form of an integrated sys- tem of decisions/actions’ (Mintzberg, 1990) Emphasis on formalization: decomposition, distinction, and rationali- zation of processes/decisions/actions ‘Business plans’

  41. Why business plans? • They provide a discipline forcing managers to take a careful look ahead periodically (mngt of ‘future’) • They require rigorous communications about mis-sion, vision, strategies, objectives, goals, and resour-ce allocations: clarity • Basis for evaluating + integrating short-term (func-tional) plans • They help implement changes once decided on • They make the management group coherent

  42. Bad General Management - numbers oriented • ‘Playing tennis by watching the scoreboard instead of the ball’ • - The Economist (1988)

  43. General Management (process): 6 basics • GM is a process - basic ingredients design great general management • Congruence/‘fit’ between ingredients is decisive • Responsible for ‘pie’ is the ‘general’ manager, CEO and/or Managing Board (RvB/Directie) • The result of the GM process - a couple of steps - is explicit and prioritized • Simplicity always wins! • Formulation + implementation ‘join hands’

  44. Explicit; prioritization; consistency; communicate; responsibility Basics of GM process ‘FIT’ Scanning the Policy Policy Policy environment formation roll-out evaluation External Mission Action pro- BBS/EFQM - Societal Vision grams (performance) - Industry Objectives (margin) Goals Internal Strategies - Structure (C, B, C, F) - Culture - Resources INGREDIENTS

  45. Basic requirements for successful General Management 4Fs Focus Fit Fitness Flexibility ..... on ..... be- ..... of front- ..... of total customer tween will and back- organization needs and skill office

  46. 3Scanning the environment

  47. Explicit; prioritization; consistency; communicate; responsibility Basics of GM process ‘FIT’ Scanning the Policy Policy Policy environment formation roll-out evaluation External Mission Action pro- BBS/EFQM - Societal Vision grams (performance) - Industry Objectives (margin) Goals Internal Strategies - Structure (C, B, C, F) - Culture - Resources INGREDIENTS

  48. External environment: what’s in a name? • Opportunities and threats (OTs) outside the organization • Organizational context: determines success or failure of organization • Variables (often) not within short-run con-trol of general management

  49. External environment: two parts • Societal environment: forces that influen-ce the long-term decisions of an organiza-tion • Business (industry) environment: forces or groups that directly affect an organiza-tion (stakeholders, 5-forces of Porter, uni-ons, et cetera) Scenario Building

  50. Explicit; prioritization; consistency; communicate; responsibility Basics of GM process ‘FIT’ Scanning the Policy Policy Policy environment formation roll-out evaluation External Mission Action pro- BBS/EFQM - Societal Vision grams (performance) - Industry Objectives (margin) Goals Internal Strategies - Structure (C, B, C, F) - Culture - Resources INGREDIENTS

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