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Management

A concise introduction

by Richard Pettinger

Chapter 21

The purpose here is to make informed, educated and (informed) speculative assertions and assumptions (and guesses) about how things are to develop over the immediate and longer term future. In order to do this effectively you need to know and understand the present and immediately unfolding state of the world because this is where you are starting from; and you need to know and understand what is to drive your future:
  • the activities that you carry out and their present and enduring value to the customers that you serve
  • the activities that you are intending to carry out in the future and their immediate and perceived enduring value
  • the ability and willingness of management to look to the future and work within its opportunities and constraints
  • specific resource pressures
  • specific financial pressures
  • problems in finding and retaining the expertise that you are going to need and want
  • technology developments and their commercial prospects and potential
  • technology and IT and its value for the future.
You also need to be aware of any specific issues regarding the nature and location of your activities, and whether things are likely to change for the future.

You need all of the capabilities in strategy, marketing and finance; the ability to analyse and evaluate the environment, markets, customers and clients; the ability to organise and direct operations, products and services, in the context of things that are only partly known and assured. You have to have the capability and willingness to operate effectively as circumstances change and as existing activities and opportunities decline and increase, and as new opportunities come your way.

Above all it is essential to have the attitudes that embrace the future, as well as the knowledge and expertise to deal with whatever comes up.

Additional readings

You should read P Drucker (1999) Management Challenges for the Twenty First Century – HarperCollins 
to see how things have changed over the past two decades or so and to see also which of the predictions – the challenges – came to pass as Peter Drucker forecast.

You should also have a brief look at G Hamel (1999) Managing for the Future – Harvard 
to see how not to look at the future; and especially to see how not to lionise a company but rather stick to principles. Gary Hamel lionised Enron as shifting the whole context of business by turning everything that it did into a commodity (including its own management expertise, which could be hired out to clients); this of course foundered when it became apparent that Enron was indeed a crooked and corrupted company. Having said all of that, much of the rest of the book – where Gary Hamel does stick to principles – is very substantial.

Case studies and examples

Groupon

Groupon’s founder and chief executive Andrew Mason was sacked on 1 March 2013, as the company tried to halt the loss of confidence and freefall in its share price. His departure follows a spectacular fall from grace by the listed company, which was lauded as one the hottest technology companies of this decade ahead of its flotation in November 2011 but has continually disappointed investors since.

Concerns over its spiralling expansion costs, controversial accounting methods, and quarterly losses have helped drive the company’s value down by more than three quarters since its $20-a-share flotation.

The day before the board showed Mr Mason the exit, Groupon had reported operating losses of over $13m (£8.5m), sending shares down 24pc to close at $4.53 in New York. His departure sent Groupon shares up 8pc to $4.90 in after-hours trading, even without news of who might replace him.

Eric Lefkosky, Groupon’s executive chairman, and Ted Leonsis, its vice chairman, said they would oversee the Chicago-based business until a permanent replacement is found.

Mr Mason was sanguine about the board's decision to fire him.

“From…two quarters of missing our own expectations and a stock price that’s hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As chief executive, I am accountable,” he said.

“You are doing amazing things at Groupon, and you deserve the outside world to give you a second chance. I’m getting in the way of that. A fresh chief executive earns you that chance.”

Mr Mason opened what was a characteristically informal letter to staff by joking that “after four and a half intense and wonderful years as chief executive”, he’d decided “to spend more time with my family” – a reference to the carefully constructed tales spun by many sacked chief executives. But Mr Mason added: “Just kidding. I’ve been fired.”

As above, Groupon was hailed as one of the top performing and most exciting ventures that had been created over the previous period. Described as having a fresh business model, an exciting attitude and a maverick approach to online retailing, it was going to change the face of retail activity forever.

It reinforces the points made elsewhere, that whatever your overall approach, managing for the present and the future requires that:
  • you have a steady and assured customer base that can service the financial base that you do have;
  • you manage the expectations of all stakeholders so that they continue to show confidence in you;
  • you attend to the finances: in this case, this meant attending to the share values as well as the losses;
  • you attend to the question of overall stakeholder confidence – and this is very often carried out or at least underpinned by removing top, senior and key staff (again as in this case).
Some fundamentals therefore are set to remain in place for the foreseeable future, especially those fundamentals of profitability, customer confidence, and attracting the volumes of business required providing long term sustainability.

The other issue to be aware of here is the faddish nature of management and business practice. Part of the reason Groupon gained such a substantial presence was because they were able to create an identity for themselves based on their own characteristics, rather than on the sustainability of their products and services and business practices.  This was an enduring problem with previous fads: the dotcom boom (and bust) of the late twentieth century; the telecoms and smart phone boom of the first part of the twenty first century; and the television revolution built around satellite and digital sports coverage which began in the 1990s. none of these previous fads were sustainable in their original forms; and this lesson needs to be taken forwards as soon as another supposedly revolutionary business approach or management initiative becomes apparent.

Discussion questions

Following on from the above, what changes do you foresee for the future development of business organisation and practice:
  • over the next two years;
  • the next five years;
  • the next twenty years.

To what extent is management expertise becoming fully professional; and to what extent is this expertise likely never to be fully professional?

Under what circumstances should you reward managers for their management expertise? How do you assess what this expertise is, and how do you assess what it has delivered for particular organisations in particular sets of circumstances?

Web links to other examples, materials and sources

You need to be familiar with the main regulatory drives that influence business and managerial behaviour and the ways in which companies and organisations are supposed to conduct their business. The most high profile regulatory approach is the US Sarbanes-Oxley Act 2002, which was brought in to try and ensure that companies worked to a universal set of standards in the wake of the collapse of Enron. The link is:
www.soxlaw.com

You should also be familiar with the links to the regulatory and statutory bodies with which you have dealings as the result of involvement in particular industries, sectors and locations.

You should also be familiar with universal statutory bodies: