A plea for managers – and the educational infrastructure that underpins them – to focus more on delivering resilience rather than efficiency has emerged from the Harvard Business Review, courtesy of a provocative opinion column by leading business strategist Roger L Martin. [1]

In his piece, Martin writes: “Management education focuses on the single-minded pursuit of efficiency – and trains students in analytic techniques that deploy short-term proxies for measuring that quality. As a result, graduates head into the world to build (inadvertently, I believe) highly efficient businesses that largely lack resilience.”

Martin argues that, while management deans, professors and students would “undoubtedly” beg to differ, “the curricula show otherwise”. He explains: “Finance teaches the pursuit of efficient financial structures. Efficient cost management is the goal of management accounting. Human resources teaches efficient staffing. Marketing is about the efficient targeting of and selling to segments. Operations management is about increasing plants’ efficiency. The overarching goal is the maximisation of shareholder value.”

The problem, Martin points out, is that “today’s market capitalisation is what defines shareholder value. Similarly, this quarter’s reductions in labour costs are what define efficiency. And the optimal capital structure for this year’s operating environment is what defines an efficient deployment of capital. Those are all short-term ways of assessing long-term outputs.”

He adds: “If we continue to promote these short-term proxies, managers will seek to maximise them, despite the cost to long-term resilience. And activist hedge funds will take control of companies and cause them to act in ways that appear, if judged by short-term proxies, to be highly efficient. Those funds will be applauded by regulators and institutional proxy-voting advisers, all of whom will continue to think their actions have nothing to do with the production of more-fragile companies.”

For Martin, in the quest to develop leadership skills, “management education must become a voice for – not against – resilience.”

Is Martin on the money here – and if so, how should organisations bring about the broad cultural change he calls for?

Institute of Leadership & Management head of research, policy and standards Kate Cooper says: “Resilience in this sense signifies long-term survival, and some of the tactics that organisations use in order to survive backfire. For example, if you downsize, get really lean and adopt a ‘just-in-time’ ethos – all of which are redolent of efficiency – then there’s no cushion for when circumstances change. The margin between staying afloat and sinking gets thinner and thinner.”

Cooper points out: “We’ve written before in our blogs about some of the more offbeat modern job titles, such as brand warrior, warlord of ingenuity, etc. But I have yet to hear of a ‘chief unexpected officer’: a person responsible for scanning the horizon for emerging disruptive forces that could impact upon the organisation’s day-to-day running or commercial prospects. That in itself would help to boost resilience by adding an extra layer of industry awareness. However, some firms may balk at running such a role through a traditional cost centre, as it would be entirely contingent on the passage of events.”

She notes: “Paul Polman spoke very eloquently about these issues at last November’s Drucker Forum. He pointed out that, as major shareholders, pension funds drive a great deal of short-term thinking in the business community. So if we as individuals were able to say to our company pension schemes, ‘I’m in it for the long term’ – or express that we would prefer our pension money not to be invested in certain causes – then perhaps our influence could encourage a more long-term sensibility to flourish.”

Cooper says: “In another recent blog, we talked about how the MBA degree has become largely a creature of the known – concerning itself with factors that can be readily analysed and quantified, because the unexpected is too real and too untidy to fit into a classroom format. If educators are equipping people only with a knowledge of – and comfort with – the known, then it’s not surprising that when people enter organisations, they will take that outlook with them and try to replicate it within a series of new comfort zones.”

She adds: “What’s required here is a recognition that we need somebody, or something – resources that we could say are dedicated to either resilience or sustainability – built into the very fabric of our organisations to gear us up for the unexpected. Of course, what we have advocated consistently in our News and Views stories is that a huge part of our ability to develop organisational reflexes is determined by our investment in learning. And what we need right now is learning that instructs people how to find things out and engage with unknowns.”

For further thoughts on the themes raised in this blog, check out the Institute’s resources on resilience

Source ref: [1]

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