Management thought leader, speaker, and President of the Sonax Group, David A. J. Axson, was kind enough to take the time to answer a few questions about his provocative and thought provoking book The Management Mythbuster. The author takes a fresh and often humorous perspective on the most frequently voiced conventional management wisdom, and describes how much of what is taken for granted, is often very wrong and in need of some serious revision.
Thanks to David Axson for his informative and insightful answers.
What was the background to writing this book The Management Mythbuster?
David Axson: For 25 years I have observed (and often participated in) management processes that consume vast amounts of time and energy only for the results to be abandoned or ignored – from strategic plans that all but guarantee market domination, detailed budgets that project sustained earnings growth, to IT projects that promise incredible ROI’s. It has become not just a colossal waste of time but downright dangerous as managers rely on the results of these exercises to make decisions while all around them the world is changing ever faster. Thankfully the global credit crisis has brought the deficiencies into sharp focus
Why have basic management practices been overlooked as a root cause of the market crash and of the continued sluggish economy?
David Axson: First of all it does make for such good press as greed, stupidity and fraud. However we are seeing many organizations such as IBM, Proctor & Gamble, Google, and American Express embrace many of the changes that are needed from short cycle forecasting, rolling budgets to scenario planning and risk-based planning.
Why are these established business practices, taken as accepted wisdom, so dangerous to the companies and to the economy as a whole?
David Axson: These practices were designed for a different world – the post WWII era when manufacturing dominated, economies were largely national and computer and communications technology was in its infancy. So much has changed, today terrorist bombs in Mumbai (December 2008) or a flu outbreak in Mexico (March 2009) are not just items on the news but material business issues for many companies across the globe.
Are traditional management practices outdated in the rapidly changing modern globalized economy?
David Axson: The short answer is yes. There are rigid, calendar-based and excessively financial in focus. Five year strategies, detailed annual budgets and quarterly forecasts have little hope of remaining relevant in today’s volatile and uncertain world. We need management practices that are able to keep pace with the speed of today’s world – in short we need our management practices to act in real time just like our businesses
You make the statement, in the book, that strategic planning is of little use in times of great volatility and uncertainty. Why are strategic plans of little value to companies today?
David Axson: There is nothing wrong with developing a strategic plan providing the right focus is adopted. Larry Bossidy former CEO of Honeywell described it well, “Strategies are a road map lightly filled in.” Unfortunately too many organizations have developed very detailed strategies that have no ability to adapt to material, unforeseen events (“Black Swan”). We have had a lot of them in the last ten years: dot.com bust, 9/11, Hurricane Katrina/Rita, Asian Tsunami, SARS/avian/H1N1, credit crunch, Icelandic volcano, etc.
David Axson (photo left)
What is wrong with the current state of budgeting and operating plans?
David Axson: Apart from taking too long to create, being obsolete they day they are created, focused on the wrong things and offering a false sense of security, not much! In many organizations that level of detail in plans and budgets has become absurd and frankly our crystal ball isn’t that good. We need to “match our desire for detail with our predictive ability.” We also need to embrace uncertainty and not place all our bets on a single, albeit very detailed, view of the future that has little change of becoming reality.
You write that executive compensation rewards poor performance and punishes good performance. Why is that the case?
David Axson: The majority of organizations set fixed targets for compensation. For example, your target is to grow 10% or make $100m next year. The problem occurs when either of the following situations occur:
a) you grow 12% and everyone gets a nice fat bonus – but what if all your competitors grew by 15%? Did you do a great job or just have a bad plan? Consider the reverse situation which has been very prevalent recently.
b) The target is 10% but you only deliver 3% because of a down economy that was not expected when the plans were drawn up (think of 2008 and 2009), however all your competitors report huge losses and a shrinkage in the size of their business. In reality you are a hero but no bonus for you this year!
Is corporate investment in personnel and training wasted or just misdirected?
David Axson: Often its both! Too much effort is focused on developing generic skills (problem solving, communications, etc.) and too little effort is spent developing analytic and decision-making skills. A second problem area is IT training when a new system is deployed the training tends to focus on educating people on the features and functions of the software rather than how the system can be integrated in the overall performance management process. Organizations that fail to get this right will suffer in two ways:
a) They will never get the full return on their IT investments
b) Their best people will not stay around very long
Why has technology failed to live up to its promises?
David Axson: Two major reasons:
a) A lot of technology solutions have simply automated inefficient processes
b) Technology is only as good as the people who use it. This relates to the prior point on training – we do a very poor job at equipping people with the skills to use cool new technology to make better decisions.
What has happened to common sense in management, and what has replaced it?
David Axson: A large part of it is fear. After all we have been doing it the same way for decades. I jokingly say that common sense has been replaced by nonsense – unfortunately there is more truth to the statement than we would like. Every manager should ask himself or herself whether they think their business will be more or less predictable and slower or faster moving in three years time. If the answer is less predictable and faster moving then ask yourself if the processes you use today can cope.
What do companies need to do to end the myths that surround management?
David Axson: Take a little time to ask some basic questions:
a) What if the assumptions we have about the future are wrong?
b) How we will know they are wrong?
c) What will we do about it?
Simply asking these three questions can dramatically change the dialogue in the boardroom or executive suite.
What is next for David Axson?
David Axson: I am heading off to the Asia and Australia to take the message global. I am also working with a small group of organizations that get the need for change and we are building new processes that will allow them to confidently navigate tomorrow’s uncertain world.
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My book review of The Management Mythbuster by David A. J. Axson.
