WHY DO WE UNDERVALUE COMPETENT MANAGEMENT?The Conventional Wisdom
It’s a truism among strategists that
you can’t compete on the basis
of better management processes
because they’re easily copied.
Operational excellence is table
stakes in the competitive market-
place.
What the Data Shows
There are three problems with this
thinking. First, eff ective manage-
ment processes are highly cor-
related with measures of strategic
success. Second, diff erences in
process quality persist over time.
Third, there’s little evidence that
best- in- class processes can be
imitated. GM tried for years to
adopt Toyota’s superior production
system and failed miserably.
Implications
Organizations need competent
management just as much as they
need analytical brilliance. We
should stop teaching business
school students that operational
issues are beneath the CEO— and
should encourage fi rms to invest
in strengthening management
throughout the organization.Idea in Brief
industries, and countries inhibited the statistical study of manage-
ment practices. In the past decade, however, we have developed
ways to robustly measure core management practices, and we can
now show that their adoption accounts for a large fraction of perfor-
mance diff erences across fi rms and countries.
As we’ve described in earlier articles in HBR, in 2002 we began
an in- depth study of how organizations in 34 countries use (or don’t
use) core management practices. Building on a survey instrument
that was initially developed by John Dowdy and Stephen Dorgan at
McKinsey, we set out to rate companies on their use of 18 practices in
four areas: operations management, performance monitoring, target
setting, and talent management. (See the sidebar “Core Managerial
Practices” for a detailed list. Though these don’t represent the full
set of important managerial practices, we have found that they’re
good proxies for general operational excellence.) The ratings ranged
from poor to nonexistent at the low end (say, for performance mon-
itoring using metrics that did not indicate directly whether overall
business objectives were being met) to very sophisticated at the
high end (for performance monitoring that continuously tracked