Laws of Managing

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This section comes from and expands on The Laws of Managing.

 

 

Enterprise Value Creation

 

Introducing Managing

There has to be a better way! Professors, pundits, and the press all – even practitioners – have been saying for decades that management is broken. Why, then, is command and control still so widely practiced? Why do so many people still hate their jobs? And why do companies still fail so often?

If we truly understood the problem, management would have been fixed long ago. But no, we continue to muddle through piecemeal approaches and counter-measures, seek out stellar exemplars to show us the way, and jump from fad to fad. We revere leaders who overcome managing’s shortcomings through sheer force of will, but how many of us can really pull that off? What we must do instead: establish what managing ought to be in the first place, and build up its principles from there, and then apply those principles to each company’s situation in order to develop practices that yield a better way.

To discover the fundamentals and true potential of managing, we forego the management-by-anecdote approach universally employed – find X excellent companies by some favored criteria, determine Y practices they have in common, formulate principles supposedly free of the contexts of the practices, and finally extol them to the rest of the world. Instead, we look at the world of business much as Isaac Newton examined the natural world to make sense of it. Putting aside the conventional understanding of his time, Newton objectively observed the movement of heavenly bodies and objects on earth, discerned the underlying principles governing their activities, and began to build the body of knowledge now known as the laws of physics.

 Managing as Three vs One

Managing includes everything to do with the forming, organizing, operating, growing, renewing, optimizing, or vitalizing an enterprise.

 

Taking an Objective Look

Similarly, we ignore traditional management thinking and paradigms in order to objectively research, discover, and make sense of the true nature of business enterprises and of managing. This approach enables us to establish the fundamental aspects of the enterprise, discover the first principles of managing, and thereby begin to build an understanding that elicits the laws of managing. (It will of course be up to the business world to determine if we have done anywhere near the job Newton did or just have physics envy. And we fully expect an Einstein to come along some day to elucidate the principles below these laws that cannot yet be seen.)

To remain unencumbered by common biases, established doctrine, and conventional wisdom, we even ignore the orthodox separation of leadership, management, and governance, which proves to be a stumbling block to gaining a truly objective view. We therefore use the term “managing” to refer to everything involved in forming and sustaining enterprise value creation. Warren G. Bennis, a pioneer in the field of leadership studies, wrote that “leadership is the fulcrum on which the demands of the individual and the demands of the organization are balanced,”(1) while professor Henry Mintzberg further makes the case that an “executive cannot lead without managing. If they’re not coupled, the organization becomes dysfunctional.”(2) We see the same inseparability with governance, as you cannot divorce the distribution of power, dissemination of values, and exercise of purpose from management or leadership.

Clearing the playing field in this way enabled us, standing on the shoulders of giants, to get at the objective essence of enterprises, businesses, and people in order to then derive the first principles and laws that expose the full glory and possibility of managing.

 

The Essence of the Enterprise

Taking this dispassionate approach to our research, we find that enterprises are simply humanity and activities arranged to create economic value. Managing, therefore, entails two fundamental challenges: (1) at what to aim the activities of the enterprise, and (2) how to employ workers to achieve that aim. From this elementary foundation we must next determine the aspects of value creation and the associated functions of managing required of an enterprise to meet these two challenges in creating economic value.

The Enterprise

 

Managing’s Objective Lens

To uncover the ways in which enterprises create value we follow Rudyard Kipling’s guidance: “I keep six honest serving-men / (They taught me all I knew); / Their names are What and Why and When / And How and Where and Who.”

Examining value creation through this lens yields its six aspects, and then for each one we determine the function of managing required to carry it out. Two of Kipling’s questions focus our quest on humanity:

  • Who creates value for the enterprise? The answer for managing: People who choose employment in the work offered by the enterprise. Therefore managing must induce engagement in order to provide employment, the first domain of value creation, the individual, within humanity.
  • Why do people come together to create value within the enterprise? To satisfy their own needs while collectively, as part of one organization, providing for the needs of others. Therefore managing must effect alignment in order to bring about organization, the next domain of value creation, the group, within humanity.

 

These first two functions of managing, induce engagement and effect alignment, meet one fundamental challenge of managing – how to employ workers to achieve the aim of the enterprise.

 

 Managings Objective Lens

 

The final four questions in turn relate to the other challenge, at what to aim the activities of the enterprise. These then define the aspects of value creation and functions of managing related to the enterprise’s activities:

  • Where does the enterprise create value? In the context of one or more ecosystems, filled with other enterprises seeking to create value themselves. Therefore managing must discover opportunities in order to mold ecosystems, the most fundamental and expansive value-creation domain essential to creating new economic value.
  • How does the enterprise create value? Through the capabilities of its people and activities. Therefore managing must generate knowledge in order to develop capabilities, the value-creation domain reflective of the enterprise’s potential.
  • What value does the enterprise create? Economic offerings, purchased by customers, which satisfy their human needs through the businesses it carries out. Therefore managing must create offerings in order to establish businesses, the value-creation domain at the intersection of the customer and the enterprise.
  • When does the enterprise create value? In its operation, the cumulative decisions to form, operate, reform, and perpetuate the enterprise. Therefore managing must produce wealth in order to conduct operation, the value-creation domain producing profits, the lifeblood of the ever-changing enterprise.

 

These four functions collectively meet the challenge of determining at what to aim the activities of the enterprise. But in order to bring them together with the other two functions of managing and ensure that all six work cohesively and comprehensively, we must ask one final, bonus-round question:

  • In what way do these aspects collectively harmonize to create value? Through ongoing orchestration that continually aligns and integrates the humanity and activities of the enterprise into one unified whole. Therefore managing must integrate aspects in order to unify the enterprise, the domain of value creation where all domains unite.

 

Properly performing these seven functions allows any enterprise to meet the two challenges of managing.

Establishing these truths regarding the enterprise, managing, and value creation, we now know the form the answer must take to the question of what managing ought to be. Employing this objective lens, we next set out to discover managing’s first principles – the self-evident truths from which we can then discern the laws of managing, aspect-by-aspect of value creation along with the related functions of managing.

These first principles and laws will give you the foundation for managing your enterprise based not on what everyone else is or is not doing, nor on the captivating narratives of heroic leadership so beloved in the popular press, but based on the true nature of the business world. Gaining this understanding, you will then have what you need to assess your own enterprise’s current way of managing, to define what its managing ought to be, and then to chart your way forward.

So in Unleash Potential we discuss the first aspect of enterprise value creation – who creates value – and derive the related law of managing required to induce engagement, the law of potential.

 

Notes:

(1) Warren G. Bennis, “Revisionist Theory of Leadership,” Harvard Business Review, January-February 1961, pp. 26-35.

(2) Robert J. Allio, “Henry Mintzberg: still the zealous skeptic and scold,” Strategy & Leadership, Vol 39 No 2, 2011, pp. 4-8.