How many managers really know what goes on inside their own businesses? Judging by recent events, we might be forgiven for assuming that the answer is ‘not many’. This statement becomes more true the larger the business is. Research has shown that most people in large international firms know very little of what happens in departments or business units apart from their own. As a result, people in one area of the business often don’t realise things are going wrong elsewhere – until it is too late. In this article, Morgen Witzel, honorary senior fellow at the University of Exeter Business School, writing for FSN, suggests that it is time to look at businesses more holistically.
Managing the whole business
The problem goes all the way to the top. Just a few months before the collapse of Lehman Brothers, chairman Richard Fuld and his senior executives were assuring the world, seemingly quite sincerely, that the firm was still sound. They didn’t discover the abyss beneath their feet until they had actually stepped over the cliff.
We don’t manage big companies any more; we manage our own little part of them, not knowing what is happening around us. Previous writers have commented on how people in some business functions come to feel detached from the rest of their own firm, and that as a result their own work is being undervalued. In his book Marketing and the Bottom Line (2000), Tim Ambler of London Business School commented that marketing directors often feel they have to justify their activities to the rest of the board. He also criticised boards for spending too much time crunching financial data and not enough on looking at marketing information.
On the other side of the coin, in his Reinventing the CFO (2006), Jeremy Holt of the Beyond Budgeting Round Table argued that traditionally, chief financial officers ‘were not expected to be part of the team running the business’. Their job was to produce accounts and manage budgets, not discuss big issues like marketing and strategy. Holt believed this was producing an inferiority complex in financial managers that in turn led to stress and even mental health problems.
It was not always thus. Once upon a time, the manager’s job was to manage every aspect of the business. In the fifteenth century, the Florentine firm the Medici Bank had offices across Europe and agency relationships as far away as China and Iceland. It had diversified into mining, cloth manufacturing, transport and general merchandise, and a portfolio of financial services including wholesale and retail banking, foreign exchange, insurance and mortgage lending. Its turnover, translated into modern money, was in the billions. It had a tiny management team, whose members did everything. The head of the Bank, Cosimo dei Medici, personally scrutinised all the company accounts and approved every major decision in every field. He was not unique.
Then at the end of the nineteenth century came scientific management, and with it the atomisation of management, breaking management down into its component parts and analysing each. The first business schools took up this model and began to teach, not management per se, but marketing, operations management, financial management and so on. Today, nearly all business schools still teach management in exactly this way, and most firms are still organised with separate departments devoted to marketing, finance, HR, operations and the like, each with its director on the board. The same pattern is usually replicated down the line in smaller business units.
The result is a series of silos, in which people are experts in their own field but too often know nothing about what happens in the office next door. It even affects people’s self-identity. Ask people what they do for a living and they will say, ‘I am a sales manager’, or ‘I am an IT manager’, or ‘I am a financial manager’. No one says simply, ‘I am a manager.’
This is a problem because, as we are repeatedly told by people who know, the only way to run a business is to know what is going on inside it; not just in one’s own immediate environment, but everywhere. In his recent book On Leadership (2007), Allan Leighton comments that ‘before you do anything else, you need to know in some detail what you sell or what service you supply and its impact on customers. This may sound blindingly obvious, but it’s amazing how few leaders take the time to their explore their business.’
Jacques Kemp, formerly head of ING insurance in the Asia/Pacific region, likened the task of the manager to ‘connecting all the dots’. In an interview for European Business Forum in March 2008, he likened the task of the manager to that of an architect. It is not enough to just have a grand design. The manager also needs to know, in detail, how the design will be built and how it will work, so that vital things like plumbing and electricity conduits go in the right place, and so that the roof is built at the right pitch so it does not leak.
Of course architects have consulting engineers and project managers who tell them these things and advise them on what to do. But in order to do their jobs well, architects have to have basic general knowledge about how buildings are built. They must take a holistic view and look at the whole structure, not just the layout of the rooms and the decorative flourishes over the door. There is no point in having a grand fountain in the courtyard if at the same time the toilets don’t flush.
Managers even the specialists, need to learn to take that same holistic view. Ultimately, every manager in every part of the firm has a contribution to make to the firm’s success. But their contribution only has impact if they work with other managers and coordinate their efforts across functional boundaries. It is no good hoping that the board will somehow pull everything together and make things happen. Managers at every level need to come out of their silos, start socialising within the firm, and find out what is happening.
No one department or business unit is critical to success; they all are. The key to successful management is to manage the firm as a whole firm, not a collection of bits and pieces. Management as a whole is far greater than the sum of its parts.
