A major study by the Institute of Management two years ago found that UK businesses were not producing the quality of managers companies said they wanted. Its latest report shows dramatic performance improvements. What has prompted this turnaround?
The announcement last month of a planned extension to the City Business School provoked a renewed explosion of pride in the capital. Not only were we blessed with a magnificent new art gallery, the best panoramic wheel in the world and an excitingly volatile new bridge (it had not then been closed), but London was also being tipped as a potential Top Three player in the highly competitive world of international management academia.
No doubt incumbents at rival institutions such as the London Business School, Cranfield and Ashridge would claim their combined efforts have already made the UK a force to be reckoned with in this area. Indeed, when they are not squabbling about their respective placings in the global league tables or elegantly stabbing each other in the back about who’s invested what in research, they are remarkably consistent on one point. Guess what? Despite everything we hear from Numbers 10 and 11, British companies are actually getting quite good at management.
To some extent this new ascendancy is a vogue thing. As John Stopford, professor of international business at the London Business School, points out, who is in and who is out in the international management admiration stakes is subject to a permanent state of flux. “I like to compare it to the Tour de France. The cyclist with the yellow jersey changes daily.”
And neither is the ability to command international acclaim for one’s management skills any safeguard against disaster, as the “extraordinary about-turn in Japan” demonstrates.
But, for the moment, the trend is swinging in a more European direction. Japan is out of the running for a while, US management techniques, with their emphasis on earnings, earnings, earnings, are out of style.
“Companies are looking to put things into perspective. They’re not just driving after the bottom line, they’re paying attention to their hearts as well as their heads,” says Gene Horan, director of leadership at Ashridge Management College.
And that means a greater emphasis on generic management and leadership skills such as team building, communication, and customer focus. “The most successful people are self-developers – organisations are realising this and seeking to encourage it.” He reports a growing interest in Ashridge’s general leadership programme “across a full range of industries and managerial levels” – a sign that companies are recognising the need to grow their own super managers.
Andrew Kakabadse, professor of international management development at Cranfield, adds, “The evidence shows first that management development is a necessary tool for economic health, and second that the UK is better at it than we think.” In one study he compared the core capabilities and qualities most likely to lead to good management in 10,000 organisations across 14 countries. “When I looked at the management of British and US companies, I didn’t see a negative comparison.”
In particular, he claims, UK companies are getting increasingly good at the “paradoxical approach” of striking the right balance between upping customer service levels (a potentially ruinously expensive exercise) while keeping costs down.
In a study of executive and non-executive directors he found that “the one factor that really damaged an organisation was when there were difficulties about speaking openly”. But here again British managers scored highly. “We found UK companies compared well to Japan and also to the US.”
New research from the Institute of Management also backs up these claims. In its latest report, Achieving Management Excellence, the IM argues not only that the quality and quantity of management development in the UK has accelerated, but that the development is also having an impact on financial performance. “We’re seeing a consistent trend in improvement in management development which contrasts with the oft-quoted message that UK management lags behind,” concludes IM head of policy, Mark Hastings.
“Management in this country is far more advanced than at any other time in history – particularly when you compare the situation now to the glum picture of the 1980s.” He claims that “those senior figures” who have blamed Britain’s continuing under-performance on poor management are barking up the wrong tree.
“We’re beginning to see consistent evidence that if you train and develop people it will have a positive effect on the bottom line. The study is not definitive in these terms, but it gives evidence of this. Now we need credible measurement programmes in place to prove it.”
Few commentators pretend that measuring the bottom-line impact of such “soft” skills is an easy task, but most can point to before-and-after success stories. For example, Kakabadse cites the Midland Bank, part of the Hong Kong & Shanghai banking group. Under the leadership of chief executive Bill Dalton, it recently completed a management development programme encompassing its top 90 managers. “Two-and-a-half years ago, Midland was contributing around 22 to 23 per cent of the group’s overall profits. That’s now shot up to 75 per cent.”
But for every Tate Modern there is a Dome, and for every Midland Bank there is a Rover. There is plenty of evidence to point to some spectacular instances of mismanagement in some of the country’s major industries and institutions. Take the print industry, for example – in recent months two of the sector’s largest players, Polestar and Jarvis Porter, have been beset by management difficulties, resulting in damaging board upheavals, redundancies, and the closure of previously profitable plants.
Even an institution as renowned for the strength of its management programme as the Army is currently experiencing problems. “Companies and firms in the private, public and voluntary sectors would lap up a youngster who has done a year at Sandhurst,” claimed Sandhurst commandant Arthur Denaro recently. But despite the emphasis many individual regiments place on personnel management, for example, the incidence of disgruntled foot soldiers resorting to the courts is on the up.
Meanwhile, at the MoD itself, overrun, under-budgeted projects have become the norm, and even the department’s head procurement, Sir Robert Walmsley, admits to the acute need for a radical shake-up in performance.
Last winter, for instance, it emerged that the radios and guns issued to soldiers in Kosovo did not work properly.
Are such examples just blips on an otherwise healthy landscape, or do they signify a more damaging inability to get to grips with reality? Some would argue they highlight a continuing gap between our perception of what constitutes a well-managed organisation and actual outcomes – we are concentrating too much on “good management” per se at the expense of more important and tangible success factors such as performance and productivity.
John Purcell, professor of HR management at the University of Bath, certainly believes this to be the case. When it comes to improvements in UK management, he contends, “There are grounds for optimism, but equally there are grounds for pessimism.”
This is most apparent in the continuing saga of the UK’s poor productivity figures compared to Continental and US competitors. “The national macro data on productivity is not impressive. If management training is getting better, it is not reflected in performance.”
He suggests that research conducted by organisations such as the IM is unlikely to tell the whole story – management in larger organisations might well be improving, but what of the situation in the small- to medium-sized firms whose long-term health is so critical to the country’s overall prosperity?
Another important area of concern is the continuing high rate of merger and acquisition activity in UK industry. “Research shows that this is a major factor in terms of disruption to productivity and performance,” he says, citing a study by KPMG that demonstrated that three-quarters of all mergers failed to produce the promised performance benefits.
But others claim such conclusions are unnecessarily gloomy. Individual examples of mismanagement are not representative of the overall picture, claims Kakabadse at Cranfield. “You need to do a survey to appreciate that. You could, for example, get two or three cock-ups in the print industry and conclude that the whole sector is in crisis. But that’s patently not true.”
Hastings at the IM, meanwhile, claims the institute’s research demonstrates good management development across sectors, even incorporating traditional industries where, anecdotally at least, generic management training has often taken a back seat to more specific technical training needs.
But this is changing. Manufacturers in particular have been galvanised by the pace of change in the supply chain. “If you’re implementing change, you need the right people to do it – and that means you have to train them. I can see a lot of evidence of skilled managers in this sector being increasingly innovative in a very tight market.”
“Just because you train and develop people, doesn’t mean you won’t be subject to external shocks,” adds Hastings. “But good training means you can recover in a much more planned and assertive way. It’s how you deploy these skills to best effect in the workplace that’s important. Good managers are trained not born – and so are leaders.”
But he nonetheless admits the IM research demonstrates there is still a great deal of work to be done. “Despite these positive messages, there are equally huge challenges. There’s not a huge number of companies putting in place the type of policies and procedures necessary to support management development properly. There is still a missing connection between what you’re trying to do with your business, and what skills you need to see those changes through.”
If companies are going to translate their management development programmes into hard results, they need to take a more scientific approach, matching the attainment of specific skills with particular strategic aims.
And the IM survey demonstrates that in most companies this is still lacking. For example, most HR managers canvassed had no idea of what their companies’ overall training budgets were.
Finally, there is the continuing problem of measurement. Even a commentator as upbeat as Kakabadse concedes the problems inherent in ascertaining the effect of improved management development on the bottom-line – a process made more difficult by the years it might take for these improved skills to percolate into tangible figures. “Most measurements tend to be on operational criteria. It’s very difficult to do that in management development – it might take two or three years to show and even then an improvement could be down to other factors.”
But he maintains the best way to measure the effectiveness of development programmes is to ask senior managers three basic questions: what problems face the business? what are the solutions? where will we be in three years’ time?
“Those companies that take management development seriously are usually accurate in their predictions. Those who don’t are usually way out.”