Magazine article Management Today

The Evergreen Route to Growth

Magazine article Management Today

The Evergreen Route to Growth

Article excerpt

As the various management fads come and go, the pursuit of organic growth gains favour. This, says Robert Heller, is one management concept at least that will run and run

New management fashions are sweeping all before them, and then being swept away themselves, at disconcerting speed. Only three years after re-engineering rudely pushed Total Quality Management aside, its tide is in full retreat. Financial re-engineering, in the extreme shape of demerging, has also faded fast - despite apparent success in finding the new Eldorado of shareholder value.

The two fashions are giving way to an evergreen of management: pursuit of organic growth. The downsizing cutbacks which still disfigure the strategies of Europe's corporate leaders cannot expand businesses. As Michael Hammer, Dr Re-engineering himself, has admitted, 'The real point is longer term growth on the revenue side. It's not so much getting rid of people. It's getting more out of people.'

You can't enhance the performance of axed employees. Hammer told the Wall Street Journal that 'reflecting my engineering background', he had been 'insufficiently appreciative of the human dimension. I've learned that's critical.' How could anyone, even an engineer, ever have thought otherwise? Even the demerging wheeler-dealers claimed humanity: splitting companies into focused operations allegedly removes the dead hand of head office and sets free local, individual initiative.

Ironically, head offices like that of Hanson - now demerging - were supposed to maximise the value of subsidiaries by dynamic, financially-oriented direction. That star has fallen. But the stock market's downbeat reaction to Hanson, ITT, AT&T and others implies that the demerging magic, too, no longer works. If a demerged unit, like ICI's Zeneca, has the potential for organic growth and the means to mine that gold, all well and very good. But, to quote the Journal, 'if the offspring aren't ready for the rough-and-tumble world of global competition, breaking up may even cause values to decline'.

That competitive readiness is fundamental for re-engineered and demerged businesses alike. So how would you rate the readiness of one case: Company X? It's strong on distribution, financial management and manufacturing processes: notably less effective at sales and marketing: only just holding its own on product development and quality control: and frankly below par at business planning, linking design to production, market research, and IT. So far, the prognosis must be mediocre: but the rest of the score-card turns middling to awful.

The weakness of Company X at managing operations is as marked as its strength at running the finances. Procurement and supply chain management aren't much better. …

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