Importance of assumptions
Management has a basic set of assumptions about facts. Basic assumptions determine what should be paid attention to and what should be discarded or ignored.
The laws of natural science are fixed. However, the research object of management is changing people and human society, so in management, the correct assumptions are constantly changing .
Management assumptions of the past.
The first set of assumptions lays the foundation for management principles:
1. Management is business management.
Second, there should be a correct organizational form.
Third, there should be a correct way to manage "people".
The second set of assumptions lays the foundation for management practice:
1. Technology, market and end-user are specific.
2. The scope of management shall be defined by law.
Third, management focuses on internal.
4. The economic system defined by national boundaries is the "ecological environment" of enterprises and management.
Now, these assumptions are outdated, and a new set of assumptions needs to be created.
Management does not equal business management, just as medicine does not equal obstetrics and gynecology.
The first conclusion is that management is a specific and special tool.
There is no single correct organizational form. Different periods, different situations, and different tasks require different organizational forms.
There must be one ultimate authority in any institution, and that is the "boss".
Principle 1: Match rights and responsibilities
Principle 2: Everyone should have only one "boss"
Top management organizations, in particular, need to be explored.
The focus on organization, in fact, begins with the design of top management positions. In an obvious example, the U.S. Constitution addressed the issue of "inheritance" in political society for the first time. In the non-political organization, the organization of the top management, the practice also goes ahead of the theory. Siemens devised an effective way of organizing: a group of partners of equal status, each of whom is an expert in his or her position, with absolute autonomy in the area of expertise. The entire group elects a spokesperson, not a "boss", just a "leader".
But does anyone really know how to organize top management? We rhetorically, all research points to the need for a team for top management. In reality, however, the "superhuman" CEO of each company rules everything. These CEOs with eyes above the top do not take the issue of successor candidates very seriously. However, the question of succession is the most fundamental test in every C-suite and organization.
Generally speaking, the supervisor of a knowledge worker does not do the work his subordinates do, just as the conductor of a symphony orchestra does not play the trumpet. Knowledge workers, in turn, need to rely on their supervisors for direction and to determine what the performance of the entire organization should be, that is, what standards, values, and performance should be. And just as a symphony orchestra can destroy the best conductor, an intellectual organization can also destroy the most capable director.
More and more "employees" need to be managed as "partners" - the definition of a partnership is that all partners are equal. Also because of the "partnership" relationship, partners cannot be called, they need to be persuaded. Management jobs are more and more like "selling" jobs. When selling, we will not say what we want, but will ask what the other party wants, where is the value, where is the goal, and what is the performance identified.
Maybe we have to redefine the whole thing about "people management". The starting point, both theoretically and practically, will probably be "managing performance" rather than "managing people". The starting point should be on the definition of results, just as for symphony orchestra conductors and football coaches, final performance is the focus .
Improving the productivity of knowledge workers will become a focus of management. Management requires a radically different set of assumptions: not to "manage" people but to "lead" people, and the goal is to bring everyone's strengths and knowledge to good use.
In the 19th century, the various technologies were independent of each other. Today, technologies are intertwined, a trend that points to a business's "non-customers" as just as important as its "customers . " Another key implication is: 'Management can no longer start with the company's own products or services, or even those whose end-uses are already known. "Management must start with "what the customer considers valuable". This starting point must be based on a proven assumption - "The customer never buys what the supplier sells, and the value identified in the customer's mind is always the same as that of the supplier." There are quite a few discrepancies. "
For example, the fast-growing megachurches in the United States. These churches flourished because they understood the "values" that people who don't usually attend church believe. Large churches found that traditional churches provided religious services that these people didn't need. What they need is a spiritual experience and feeling, as well as being able to participate and contribute by volunteering in the church or community.
In other words, management needs to rely on the assumption that technology or end-use can no longer be the basis for management policy, in fact they are a limitation. What customers value and how customers decide to allocate their disposable income is what really matters. Management policies and strategies begin with this.
Both in theory and practice, the objects of management are individual institutions, whether enterprises, hospitals, universities, etc., are all legal entities. Therefore, "the scope of management is defined by law" is a common assumption. The reason is that traditional management is based on the concept of "authoritarian control". Authoritarian control is in fact defined by law.
For the first time nearly 100 years ago, the boundaries defined by law were no longer appropriate to manage a business.
The management concept of "consortium" links suppliers, enterprises, and major customers into a system. Take overall consideration in planning, product development, and cost control.
Around 1910, Duran foresaw that the automobile industry would become a major industry. By acquiring small, successful automakers, he created the giant General Motors. A few years later, he felt the need to incorporate suppliers into the company's system, so he began to acquire spare parts manufacturers. In 1920, General Motors already owned 70% of the various parts needed to produce a car. The prototype of this consortium gives GM a decisive advantage in cost and speed. In just a few years, GM became the largest and most profitable manufacturing company in the world. In fact, for the next 30 years, GM has enjoyed a 30 percent cost advantage over its competitors.
But Duran's consortium concept is still rooted in management is command and control, which is why he bought all the companies, and ended up being GM's biggest weakness. At the time, Duran carefully planned to ensure the competitiveness of GM's parts plants: each manufacturer must sell 50% of its products to other automakers to maintain cost and quality competitiveness. But after World War II, other auto factories disappeared one after another, and GM lost the opportunity to evaluate the competitiveness of parts factories. Second, the auto industry established trade unions in 1936 and 1937, which imposed high labor costs on the general parts and components department, making the cost unfavorable to competition, a problem that has not been overcome until now. In other words, the assumption that management is command and control is the reason GM has been in decline over the past 25 years.
The Sears consortium recognizes this fundamental problem. Sears also believes that it is necessary to merge all suppliers, make overall plans, and do comprehensive cost control. But Sears only bought a fraction of the supplier's stake. True relationships are based on contracts.
The most successful consortium model so far may be the Mac & Lions department store. It incorporates all suppliers into its own management system, but this integration is based on contractual relationships rather than ownership or control.
Even in a highly integrated business, production costs as a percentage of revenue are quite limited. In the heyday of GM, 70% of the parts were made by its own factories, but this part only accounted for 15% of the price of a new car. 50% is paid to the sales channel (the fee required after the car leaves the factory), 10% to 15% is taxed, and 17% is paid to peripheral suppliers. This is still the case with GM. The parts made by ordinary companies themselves can only account for 10% of the total selling price. If the scope of management is defined by law, the information available to the manufacturer is limited to this scope, and what can be managed is also limited to this scope.
The above example shows that a "consortium" (a business that integrates management systems through economic linkages rather than legal control) can deliver a 30% cost advantage.
However, the "consortium" also has limitations. Its foundation remains power. General Motors, Sears, Macy's, or Toyota, the core companies all have overwhelming economic power. "Consortium" is not an equal partnership, but is based on the supplier's dependence on the core company.
More and more economic chains begin to develop true partnership (equal power, non-subordination). Companies with new technologies are often fairly small and desperate for capital. But they have independent technology, and they have the upper hand when it comes to technology. It is the small companies that can actively choose who to ally with, not the much larger pharmaceutical companies. The same is true in the field of information technology or finance. The traditional command, control or "consortium" no longer works.
Therefore, the scope of management must be redefined: management covers the entire process. For enterprises, it can be said to be the process of the entire economic chain. But the University's Department of Biology does not consider itself an economic unit and therefore cannot be managed as an economic unit. In other institutions, the entire process is also defined differently. American health and medical institutions first tried to operate the entire medical care with a partnership management system, but it was only experimental and controversial.
Management requires new assumptions, that is, " management must cover the entire process and must focus on the effectiveness of the entire economic chain (rather than being defined by law) ."
Enterprises are gradually globalized, replacing the boundaries between "domestic" and "international". Research, design, engineering, development, experimentation, marketing, etc., are organized with a global perspective, transcending national boundaries.
For traditional multinational corporations, economic entities and political entities are the same. A "country" is a "public institution". However, in today's transnational environment, traditional transnational corporations are forced to transform, and the country is only a "cost center". It is a complex and no longer an organization, cause, strategy or production unit.
The boundaries of management and the boundaries of the state no longer match , and the scope of management can no longer be defined by the boundaries of the state. National boundaries still matter. But the new assumption must be that the boundaries of the state are still important as a boundary, but the practice of governance must increasingly be defined functionally, not politically.