Magazine article Management Review

Top Management, Technology, and a Company's Growth

Magazine article Management Review

Top Management, Technology, and a Company's Growth

Article excerpt

TOP MANAGEMENT, TECHNOLOGY, AND A COMPANY'S GROWTH

The aim of the top managements of all industrial companies is to increase their company's business growth. To do this, companies pursue a variety of business strategies. Many of them involve technology.

Developing technology alone, however, does not guarantee business growth. To increase its growth, a company needs to direct and apply technology toward specific marketing or manufacturing needs. A company's R&D and engineering functions cannot by themselves develop and commercialize new products (or implement new manufacturing technologies). Manufacturing, marketing, finance, and other functions also are required. Furthermore, the president or division manager plays an important role. In short, a company needs to have an effective team for managing technology within top management.

Evidence of the relationship between an effective top management team and high business growth became clear from my visits between 1982 and 1987 to 180 industrial companies (124 were U.S. corporations, 56 were European). Of these 180 companies, the 28 companies that I determined to have effective top management teams had a gain in earnings per share of $1.50, while the other 152 companies had a loss in earnings per share of $.10 (from 1982 to 1986). These same 28 companies had a compounded rate of sales growth of 2 percent (from 1982 to 1986) in constant dollars.

The critical differences between the 28 high-growth companies and the other 152 companies were: 1) how the president and the top managers of manufacturing, marketing, and finance operate; and 2) how the top management team as a whole operates. On the other hand, my evaluations show that the role of top technology managers does not differ dramatically in the 28 high-growth companies from the role they play in the other, less successful companies.

The framework I have developed for evaluating these 180 companies can be used for identifying the strengths and weaknesses of any company's top management team and for comparing the company's team with those of the 180 other companies.

THE TEAM AND ITS PLAYERS

Evaluating a management team is similar to evaluating a football team. First break the team's performance down into two components: 1) how well the individual players perform; and 2) how well the team as a whole performs. Unlike football, the top management team consists of five, not 11, players: the president (or division manager) and the top managers of manufacturing, marketing, finance, and technology.

In the evaluation, only the individual players' responsibilities that affect a company's management of technology should be considered. On the whole, how a president deals with a company's debt/equity ratio, or how a manufacturing manager deals with inventories, does not influence how effectively a company manages technology. (These factors, of course, could influence how much is spent on technology, but this is a different issue.) On the other hand, whether the top marketing manager requires that the marketing organization develops and executes long-range plans based on its identification of customers' future needs can influence greatly how well a company manages technology.

In evaluating the individual players on the top management team, four areas should be considered:

1. …

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