The Chicken or the Egg or the Farmer or the Feed? Nevermind.

McKinsey Quarterly [free reg] has a new survey that says -- tadaa! -- management matters and good management is jolly special. I know, you're shocked they would suggest something like that.

New research now confirms the notion that management matters to all companies, including the top performers. While this finding is hardly a surprise, what is startling is just how much the decisions of managers matter. Managers are more important than the industry sector in which a company competes, the regulatory environment that constrains it, or the country where it operates. In other words, managers are more important to how a company is managed than business lines, government policy, or geography

Okay. Managers are more managerially significant than SKUs, SIC codes, Regulations and Zip Codes. Good to know, but is that a compliment? McKinsey looked at 700 Manufacturing Cos in the US, UK, France and Germany and came up with a raft of stats. But I wonder: Do the managers do well by quote-Managing-unquote, or by getting out of the way because good people self-manage? Maybe they found those good people? Are the good managers really just better judges of character and therefore more effective interviewers? It's worth wondering if management at its best is really a fire-and-forget affair.

Uh, bad analogy--I mean like the missles that find their own way. Read this first sentence and you'll see why I'm still fumbling....

Although statistical-correlation analyses cannot prove that better management leads to improved performance, it is difficult to see how better performance could magically result in more effective management. We did identify some companies that perform well financially because they have unique technological or structural advantages, even though their management practices tend to be poor. They included small manufacturers with a hit product, a particular niche, or a geographic monopoly—atypical situations. After careful examination, we found that these companies thrive mostly on their unique advantage rather than on their management practices. The proposition that good management drives effective performance, rather than the other way around, is the best explanation of our findings.

I once had a boss, a manager no less, who told us correlation is not causality. A lot. He was also absent, a lot. We mostly felt he was fine manager for this reason. His practices correlated well with the cause of our happpines, and his bonus.

There is, however, a significant management gap between the United Kingdom and its EU partners France and Germany. Continental European companies have been more diligent than UK manufacturers have in using the latest and best operational-management practices on the shop floor. Since managers' actions account for the largest part of the division between the United Kingdom and continental Europe—considerations such as skills, the age of the company, labor regulations, and the number of competitors account for the rest—the gap is more significant than it might at first appear. Continental Europe could surge even further ahead of the United Kingdom by adopting more of the US-style labor market regulations that enable managers to excel in areas beyond the shop floor.

Notice the dig? EU managers are kicking effectiveness butt in more attentively regulated economies than the UK which, as it happens, resembles US models and practice more and more. But-- EU managers are supposed to follow the path of their lesser-regulated under-achieving Briton neighbors in order to get even more ahead of Britannia. Huh?

Maybe some of those managers are from ELUX. Sweden's Electrolux, operating very profitably from one of Europe's highest social cost locales earns 50% of its revenues in the USA, while shifting it's manufacturing mass south, struggling mightily to implement next-generation manufacturing in macquilladoras.

What's it all mean? I dunno. I'm tired. Of too little selflessness. Of too many arsonists posing as firefighters. Of paradigm shifters burning rubber because they like the smell of smoke, not because they have any particlularly fabulous idea of why they must be going (except, of course, because "everybody's doing it.") I do wonder sometimes whether we can just let bygones be bygones, east is east, etc. The cultural differences are not really *that* large between New World and Old Europe, barring the sensibility the funny-talkers have from being rubble-ized and subjected to the whims of authority a fair bit more than we colonists. History tends to make Jeanette and Mario Four-pacque peform a slightly different cost benefit analysis when it comes to "the pursuit of happiness," though.

Since I'm all over the map with this post, why not some art I stole from Barry Ritholtz who swiped it from the NYT? Yeah.



Here's where I'll let Brad Delong pick up the baton, reviewing Uchitelle's "The Disposable American: Layoffs and their Consequences" for the NYTBR:

In Western Europe, unions bargained fiercely for job security, and governments enacted "no firing without cause" laws, giving workers individually and collectively quasi-property rights in their jobs. Yet this did not lead to a happy labor market. Instead, high overall unemployment, extra-high long-term unemployment and extra-extra-high youth unemployment appear to be the consequences of attempts to ensure that managers and workers are in the same boat. Companies that know they cannot lay off groups of workers if demand goes sour are very likely to be companies that hesitate to hire groups of workers even when demand is strong.

Indeed, Uchitelle does not want to forbid all mass layoffs. "Some," he writes, "are inevitable as American companies adjust to the growing competition from abroad." His real wish is for managers to treat their workers as partners and fellow human beings, rather than as potentially obsolete and disposable parts in the corporate money-making machine. But when demand and industrial structure are shifting rapidly, there is a great deal of money to be made by treating workers as disposable parts rather than as partners.

Uchitelle wants the government to help. But the government's powers and competence are limited: it can do much more at cleaning up the mess afterward -- in the form of unemployment compensation, education support and job search assistance -- than it can at getting managers, directors and shareholders to "play nice" when the financial stakes are high.

Playing nice. Sometimes--most times--the challenge isn't "playing nice," it is making an effort to not continually play scared. And the only way that effort goes forth--gets sanctioned and exalted--is if it's stated early and often from the aeries where Gulfstreams soar.

But there's a whole lot of whisper from poobahs about a lack of confidence in the American worker--elevated senses of entitlement, lack of commitment, initiative or staying power, a proclivity to whine. That's how Boston Consulting Group essentially describes their convos with muckitys. The conventional wisdom-buster in that last sentence is that particular BCG report (WaPo) had CEOs complaining about their professionals and mid-level management, not wrench turners and route salepeople. Ouch. Of course, having mentioned Gulfstreams, elevated senses of entitlement, lack of commitment, initiative or staying power and a proclivity to whine are pretty popular ways to characterize the passengers in those jets also.

Sticking around and sticking with it is so unsexy, as Jim Collins famously pointed out. Which brings us to McKinsey's next bit. The study also notes the often co-located phenomena of Peter Principals[sic] and Youthenasia

We also found that the more protected companies are from competition, the less incentive they have to adopt advanced management tactics. With this kind of protection, some companies can survive for years. In fact, we found that some of the most persistently mismanaged companies are family owned and often do business in uncompetitive markets. Conversely, the study revealed that the more competitive the environment, the more sophisticated a company's management approach became.

Mismanaged companies tend to be older than well-managed ones. In fact, our study showed that young companies and good management go together. The reason might be that younger companies, as new entrants to the market, have a greater incentive to innovate, learn, and put novel management tactics in place. Older, larger companies are less likely to adopt newer, better management approaches, mainly because altering embedded processes, mind-sets, and behavior that might have worked well in the past is an enormous challenge.

Does fostering a gutsy, honest, let-chips-fall-where-they-may internal culture of merit count as "competition"? You didn't hear it from me, but one might think they suspect inbreeding and old dogs are just as (if not more) dangerous to business performance as would be any new regulatory trick. Maybe there's no surprise there. But the ladies may like this one

But what does "working smarter" mean when it comes to policies that managers have the power to implement? The ability to introduce best practices, and quickly, hinges on the readiness of the workforce to accept change. We found that better-managed companies have fostered adaptability through more flexible working arrangements, greater autonomy over decision making, and better training....

In the United States—the country with the largest number of well-managed companies—female managers and decentralized decision making are more common than they are in France, Germany, and the United Kingdom. In general, our study found that in countries with more female managers, decision making is delegated further down in the ranks and employees have greater autonomy. We think that the relationship between female managers and decentralized decision making in well-managed companies is worthy of further study.

Nodes are from Mars, Networks are from Venus. Further study? Yes, let us at once. In the meantime, I'm going to order some ritalin.

Here's the McKinsey link again.