The Hindu Business Line : Listing the tools of management

I REMEMBER a popular textbook on Indian economics that I was required to study as an undergraduate. It was encyclopaedic, covered every topic imaginable, but very efficiently boiled everything down to lists. There were, for example, six reasons why a particular Five Year Plan failed to meet the target. There were similarly specific numbers of points for and against setting minimum support prices for agricultural commodities. And so on.

As a student, I found these lists to be very comforting. If the author provided more points in favour of a policy rather than against it, then surely, it was a good policy! That kind of certainty helps when you are young. The list approach also helped during exam time.

As one was preparing for the exam, one could know when to stop studying a chapter depending on whether one knew `all' six reasons for nationalisation of banks. It was also easy to evaluate performance. As you left the exam, if your friend asked you whether you wrote all four reasons for why we adopted a mixed economy, and you had written only three, you immediately knew how much you would get for that question. Disappointing, but measurable.

That was all right as a student. But when you think of the real world, I only hope the economic ministries did not limit themselves to these lists. I dread to think of a Finance Minister asking his Joint Secretary in charge of Budget if she had dealt with `all' five reasons for pursuing policies to control the budget deficit.

Someone has tried to replicate the list principle in the management field. The credit goes to Bain & Co., a Boston-based consulting company for publishing a booklet titled An Executive's Guide To Management Tools. It contains a list of 25 tools. If the book was meant for students getting ready for their mid-term exam, then we should not have any problem. Even as an instructor, such a list would relieve me of a lot of grading anxieties!

But as the title suggests, it is meant to make life simple for our harried managers.

The booklet explains that every year, the company interviews senior managers and conducts literature searches to identify 25 of the most popular and pertinent management tools.

Each tool is conveniently covered in a two-page summary giving the description of the tool, the methodology, common uses and related topics. There is also a list of references in case the reader wants to learn more about the subject.

To qualify, a tool had to satisfy three criteria: Be relevant to senior management, be topical (as evidenced by coverage in the business press), and be measurable. That is simple enough. Thus, I presume, a CEO should have been able to tell his golfing partner, "After reading about Enron's troubles, we started using "corporate code of ethics" (Tool No 7), and the number of our employees sent to jail has fallen by 28 per cent." Now, that would satisfy all three criteria.

Bain's web site gives us further insights on the use of these tools. In a survey in 2005 (its tenth in a series), the company declares a key finding: "This year, the news is that executives are thinking about customers... " The executives, in its survey, are thinking about how to acquire customers, keep them, learn more about what they want, and then satisfy and delight them.

Gosh, can you imagine these businesses all these years getting away with running their companies without thinking about their customers! The managers must have been buying the products themselves. Finally, in 2005 they have begun thinking about them.

The use of the term management `tool' bothers me. I associate a tool with something like a pair of pliers that one can use to cut a wire. You don't need to know the metallurgy behind the metal used to make the pliers, or the physics of Newton's third law of motion that makes the tool work, and still be able to use the pliers without making a mistake.

But can you use `pay-for-performance' (Tool No 19) in order to "tie compensation directly to specific business goals" without knowing the debate about agency theory and the assumption being made that only pay motivates executive behaviour to fall in line with owner's expectations? `Use of `RFID' (radio frequency identification tags) figures as a tool in 2005 but not in 2003. But as a management concept, is RFID comparable to `growth strategies?' I think not. I'll grant you that RFID is a tool to monitor inventory and all the nice things that leads to. But is `growth strategy' a tool?

Perhaps, we are getting confused between management `tools' and `buzzwords.' Thus, the survey finds that `loyalty management' as a tool is significantly below the mean in terms of usage and satisfaction. Poor saps, those employees. We don't need to be concerned about managing their loyalty anymore. Let's focus on RFID this year. But wait! The reports warns that the tools with low scores should not be written off, for `loyalty management' may become popular in the years to come. Ah, so we can continue to serve them tea, just water it down for a while. Another example of the confusion between concept and buzzword is the finding that business process reengineering which went from fad to flop is now again being used by 61 per cent of the companies.

One cannot blame the consulting company for these findings, even if it is not meaningful to boil down concepts to manageable sound bites.

Another problem is that some of the tools may be ok but not the concepts that they are based on! In an article published posthumously, a management scholar Sumantra Ghosal bemoaned that bad management theories are destroying good management practices. For example, the oft-repeated dictum that managers work to maximise shareholder returns is based on agency theory that managers are the `agents' and shareholders are the `principals.' Agents may pursue their own objectives unless we structure the arrangement to align their goals.

So layering another theory that individuals maximise personal benefit (also questionable), we come to the conclusion that `pay-for-performance' is a good tool to align the managers' interests to that of the owners. This line of reasoning completely blocks out rival explanations for managerial behaviour or organisational purpose.

I understand that the survey and the booklet are just teasers to get the befuddled manager to then call the company for help in executing the tool. So the manager who flips through the booklet and decides that perhaps he needs to indulge in `Stock buyback' (Tool No 21) so that he can `build investor confidence and shareholder loyalty' (a listed use) would probably pick-up the phone and call the consulting firm for help.

The booklet carefully warns the reader that no tool is a silver bullet but tantalisingly suggests that a correlation exists between financial performance and the way in which organisations use management tools. Clearly, a warning not to go blindly using the tools without finding out first how. But I dread that very soon we will see a CEO stand up during the annual meeting and announce, "Your Company's performance has shown a significant jump over last year by 18 per cent after we decided to increase the number of management tools used by 9 per cent."

(The author is a professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is: cgopinat@suffolk.edu)

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