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Fad or Failure of the Month: Managers Must Decide

Fad or Failure of the Month: Managers Must Decide

How do executives decide whether to spend millions on re-engineering, knowledge management, mission statements, core competencies or some other management tool or technique that consultants sell to companies around the world?

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Fad or Failure of the Month: Managers Must Decide
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Management tools are not silver bullets that will instantly and magically eradicate a problem, writes Crawford Gillies.

How do executives decide whether to spend millions on re-engineering, knowledge management, mission statements, core competencies or some other management tool or technique that consultants sell to companies around the world?

Keeping up with these techniques and deciding which to use is becoming an essential part of every executives responsibilities. Unfortunately, there has been little objective evidence on whether tool usage is good or bad, or which tools have produced what results over what period of time. Nothing has been published on the use of management tools and techniques to help managers sort facts from fictions.

In the absence of data, groundless hype can make choosing and using management tools a dangerous game of chance. Research shows these tools are to some extent fashion items, becoming chic or dclass with the march of the management zeitgeist.

We have all suspected as much, but we can now prove and even quantify this. Bain & Co has just completed its seventh annual research project into the usage and satisfaction levels of such tools and techniques. It is possible to trace the ups and downs of these tools over time.

Bain has been asking a targeted selection of senior executives at big companies their views on the sort of tools and techniques that management consultants sell to companies around the world. The results of this years survey of 475 global firms have just been published.

The survey shows that tool usage is high across all industries and in all countries, with the average respondent using 13 of the top 25 tools. Yet 77% of executives report that tools promise more than they deliver, and even highly rated tools vary widely in their ability to improve financial results, customer quality, and competitive advantage.

Asked what they think of market disruption analysis or supply-chain integration, companies confess that they are using such tools less often. Some tools seem to exasperate those who try them.

The survey found that 46% of North American firms that experimented with real options analysis gave up, perhaps because it is too rarefied a concept. (It exploits highbrow financial techniques used to price share options in order to assess the value of business investments.) Indeed, management tools are not silver bullets that will instantly eradicate the problem. They are more like chain saws potentially powerful when applied to the right problems, but extraordinarily dangerous in the wrong hands.

Another widely spurned tool is knowledge management, something that consultancies such as Bain and Co go in for a lot, but their clients, especially those outside North America, find a failure.

Bain has its own Global Experience Centre on its intranet. This collects cleansed, disguised insights by consultants working on particular projects so that they can be used by their colleagues on similar jobs. We find that it helps us a lot, but we accept that many other companies may not share Bains culture of teamwork.

For many people, sharing their bright ideas with the rest of the company involves not only laboriously transferring their knowledge to their management system; it means also handing over their most valuable asset for general corporate use.

Another tool that registers less with managers is business-process re-engineering. In 1993 and 1994, re-engineering was the rage. From 1995 onwards, however, re-engineerings satisfaction scores plummeted. Early users started to complain about unexpected long-term side effects such as declining morale, loss of innovation, an erosion of trust, and weakening teamwork.

Indeed, bosses these days are more worried about corporate anorexia and the shortage of talent than about sacking middle management.

As previously hot tools such as re-engineering cool off, other approaches rise to take their place. The latest surveys show that companies are still keen on strategic planning (89%), mission and vision statements (85%) and benchmarking (76%): all are used by 75% of companies surveyed.

In SA, it seems that the real reason for the under-utilisation of management tools and techniques is not that executives have built into their everyday activities such now-familiar ideas as Core Competencies and Total Quality Management. Nor does it appear to be dissatisfaction with the jargon-riddled novelties that many consultancies are pushing as the next big thing. Rather, interviews with executives have shown, they are too busy making sense of the new economy and the implications of the internet to have time for these tools.

Seven years may sound long enough to test any tool. However, from 1993 to 1998, stock prices have grown faster than earnings (20% vs 16%), and earnings have grown faster than revenues (16% vs 7%).

How will tools such as Pay For Performance do in a bear market? Could an economic downturn revive re-engineering? It is realities like these that should guide companies choice of tools, not the buzz surrounding them or the market share.

Gillies is a director and managing partner of Bain & Company, a leading international strategy consulting firm.

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