Book Author: Joan Magretta and Nan Stone
Book Review by : S S George
Director, ICMR (IBS Center for Management Research)
Joan Magretta, Harvard Business Review, HBR, Peter Drucker, onceptual core, is value creation, OnTimeAuditor.com, shareholders, Michael Porter, Competitive Strategy
At a time when most books on management are either mind-numbingly abstruse or amusingly simplistic, Joan Magretta takes a clear-eyed look at the discipline of management. She describes what management is, and why it is important to all of us - the managers, the managed, and the bystanders. According to her, management now affects everyone because "today, all of us live in a world of management's making." If we are to make informed choices about matters that affect our well-being and that of our communities, we must know what management is, and when it is good for us and when it is bad. To satisfy our needs with the limited resources available to us, we need to understand and apply the principles of management to what we do. The discipline of management has made possible the organizations that are so much a part of modern day life. We now rely on vast organizations to carry on much of the work of modern society. Management did not evolve because we had organizations and we needed a way to run them; instead, it made it possible for us to design and create these organizations, and in many cases, to run them well. However, the very success of the discipline, and the all-pervasiveness of the organizations that have been built on its principles mean that we now take these organizations and the principles on which they are run, for granted.
One does not require formal training to become a good manager. Many good managers have no formal qualifications in management. Conversely, a degree or diploma in management does not ensure that a person becomes a good manager. At a time when the field of management is being increasingly fragmented, this book aims to present a coherent view of the whole field, as Peter Drucker did in 1954 with his seminal book The Practice of Management. This book is meant not just for managers, but also for people whose lives are affected by management
- and that means all of us.
The book is organized into two parts. The first part - Why do People Work Together and How - examines the "conceptual core" of management. The author discusses why an organization exists, how it plans to accomplish its purpose, and how its plans and systems differ from others. The second part of the book explores the act of managing, that is, translating plans into action. According to Magretta, this is a lot harder than it looks, requiring both discipline and judgment. While the author uses real life examples to discuss the principles of management, she maintains that management is the art of performance, and, "like all performing arts, done in real time without a net, enacted in a present that is constantly passing". Organizations and the contexts in which they operate change over time. So the lessons and concepts drawn from examples are not a " blanket endorsement of everything that an organization has done, and will do, for all time." In other words, today's champs may become tomorrow's chumps.
Value creation is a much abused buzzword - but, according to the author, this should not detract from its importance. It is the critical core of modern management and denotes a shift in management focus from managing inputs to managing performance or results. "Management's mission, first and foremost," says Magretta,
"is value creation."
The value created by organizations does not consist merely of the products they make or the services they provide. It is much more than all this. Magretta uses the example of OnTimeAuditor.com to illustrate this concept. OnTimeAuditor.com provides tracking software which helps its customers keep tabs on delayed deliveries, for a fixed monthly fee. When deliveries are delayed, they can demand and obtain refunds from the shippers. At one level, the value provided by OnTimeAuditor.com can be measured in terms of the total value of such refunds obtained by the customer. This will depend on the number of packages the customer ships. Clearly, the value of the same service will be different for different customers. This value can computed in money terms. However, the service also creates value in ways that are not always easily quantifiable, e.g., by improving customer relations. Thus, in addition to the tangibles, value also resides to a great extent in intangibles. And it is the customer who defines this value.