2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Leading The Organization: Are General Managers Still Relevant?
Jeffrey A. Krug
Loyola University New Orleans
6363 St. Charles Avenue, Box 15
New Orleans, Louisiana 70118
Phone: (504) 864-7148
Email: jakrug@loyno.edu
KEYWORDS
General management, leadership, management, strategic thinking, organizational leadership
June 27-28, 2012
Cambridge, UK
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Leading The Organization: Are General Managers Still Relevant?
ABSTRACT
Many believe that today’s business landscape no longer requires general managers.
Globalization trends and rapidly evolving technologies have stimulated greater cross-border
flows and increased the complexity of managing global organizations. General management
skills – once the historical focus of training in business schools – have fallen out of favor.
Universities have responded by adding courses and academic programs to meet the rising
demand for business leaders who can manage rapidly developing technologies in an increasingly
global business environment. Courses in general management, which once formed the nucleus
of training in managerial thinking have been replaced by capstone courses in strategy and
elective courses in leadership, entrepreneurship, and innovation and technology.
Increased
uncertainty and volatility in world markets, however, underline the continued importance of
general managers who possess strategic and critical thinking skills. Management continues to be
the chief responsibility of all who hold positions of leadership. This paper examines the role of
general managers as they manage the division, business, or enterprise as a whole. It focuses on
the evolution of the role of the general manager from an analytical to strategic thinker capable of
leading increasingly complex businesses, organizing globally dispersed assets, managing a wider
range of stakeholders, and responding to rapid technological and global change.
INTRODUCTION
Organizations must increasingly respond to a wider, more complex, and evolving set of industry
forces and competitive conditions. Rapidly changing technologies, for example, have made it
more difficult for firms to sustain established competitive positions (Bower & Christensen, 1995;
June 27-28, 2012
Cambridge, UK
2
2012 Cambridge Business & Economics Conference
Jones, 2003).
ISBN : 9780974211428
Globalization has subjected firms to more intense competition from global
companies, price pressure from global suppliers, a greater multitude of substitute products, and
global customers with more complex needs and lower switching costs (Buckley & Ghauri,
2004). In addition, organizations are faced with growing pressures from governments worldwide
to support environmentally friendly policies and protect local industries and employment
(Vernon, 2001). Last, a wider range of stakeholders has become more proactive in demanding
greater accountability (e.g., shareholders), social responsibility (e.g., customers, governments,
the news media, and society), and employment stability (e.g., employees and governments)
This paper examines the evolution of organizations in response to rapidly evolving
technologies and globalization trends and discusses the changing role of general managers as
they manage the enterprise as a whole. Despite their lost appeal, general managers – the
organization’s top executives – continue to do what they have in the past. They lead, direct, and
manage the strategic direction of their businesses in ways that lead to long-term, sustainable
competitive advantage and superior performance. Indeed, the rapid pace of technological change
and increased globalization have stimulated demand for managers who are able to lead
increasingly complex businesses, survive more intense competition, and respond to rapid
technological and global change. It might be argued that the need for general managers has
never been greater.
ORIGINS OF GENERAL MANAGEMENT THEORY
The publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of
Nations in 1776 marked the beginning of classical economic theory, which focused on free
markets as the most efficient mechanism for allocating scarce resources and increasing national
June 27-28, 2012
Cambridge, UK
3
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
income (Smith, 1904). David Ricardo, Thomas Malthus, and John Stuart Mill were prominent in
developing concepts and theories that advanced Smith’s focus on free-market mechanisms to
determine prices and wages. One of the important theories to emerge from this period was
Ricardo’s “Theory of Comparative Advantage,” which he advanced in his book On Principles of
Political Economy and Taxation (Ricardo, 1817). Ricardo argued that a nation’s wealth (i.e.,
national income) could be maximized by specializing in the production of goods or commodities
using the nation’s most efficient resources.
Economic theory during this period focused on land, labor, and capital as the most
important resources involved in production. However, Adam Smith also recognized the role of
management throughout his writings. For example, he discussed the benefits of sustaining
internally created competitive advantages by organizing economic transactions in-house:
“Secrets in manufactures are capable of being longer kept than secrets in trade. A dyer who has
found the means of producing a particular colour with materials which cost only half the price of
those commonly made use of, may, with good management, enjoy the advantage of his discovery
as long as he lives, and even leave it as a legacy to his posterity” (Smith, 1937, p. 60). It is
noteworthy that – almost 250 years later – these same ideas are deeply imbedded in current
thinking in the field of strategy, e.g. transaction cost theory, resource-based theory of the firm,
and theory of competitive advantage (Barney, 1991; Coase, 1937; Mahoney & Pajendran, 1992;
Penrose, 1959; Porter, 1985; Williamson, 1981).
In sum, early economists recognized the
important role played by general managers in the management of organizations generally and the
production process more specifically.
EMERGENCE OF THE INDUSTRIAL ENTERPRISE
June 27-28, 2012
Cambridge, UK
4
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Centralization and Specialization
Classical economists promoted the concept of specialization and division of labor in terms of
maximizing a nation’s wealth.
These concepts became important cornerstones in the
development of the industrial organization at the turn of the century. The industrial revolution
led to the rapid transformation of Europe and the United States from farm- to machine-based
economies during the late 1800s and early 1900s.
Industrial enterprises emerged to mass
produce goods in a wide range of industries using mechanized processes.
Through the
specialization of work and standardization of parts, industrial firms could mass produce goods
more quickly and at lower cost than comparable goods made by individual craftsmen. The
assembly line developed at Ford Motor Company in the early 1900s symbolized the emergence
of the industrial enterprise. As an unfinished car chassis was moved along the assembly line,
workers added standardized, interchangeable parts until a finished Model T was rolled off the
line. The assembly line process enabled Ford to simultaneously lower prices to consumers and
offer higher wages to workers (Wik, 1972). The emergence of industrial enterprises to produce a
variety of products using similar processes led to a significant increase in national incomes and
standards of living in Europe and United States through the early 1900s (Hounshell, 1984).
The field of “General Management” was to a large degree an outcrop of this industrial
transformation.
Beforehand, business was almost exclusively the domain of individual
craftsmen or small businesses operated by their owners. The emergence of large-scale industrial
organizations created the need for hiring and training large numbers of workers to operate
machinery and perform a wide range of standardized tasks. Increased spans of control in large
organizations created the need for supervisors to hire and train greater numbers of workers.
This, in turn, created the need for managers to coordinate the activities of supervisors, and so on
June 27-28, 2012
Cambridge, UK
5
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
up to the organization’s chief executive. These emerging management responsibilities created
the need for new management tools to help managers build more complex organizations,
coordinate a wider range of tasks, and motivate larger numbers of workers. They also created
the need for new theories of management on motivation, coordination, integration, labor
relations, organizational design, structure, processes, control, and strategy.
One of the most influential early works on industrial organizations, which formed a basis
for the development of early theory in general management, was Frederick Taylor’s The
Principles of Scientific Management (1911). Trained as an engineer, Taylor had an intense
interest in discovering new ways of performing small tasks more efficiently. He lamented the
lack of national interest in eliminating waste. Indeed, he begins his book by quoting President
Theodore Roosevelt (1901–1909):
“The conversation of our national resources is only
preliminary to the larger question of national efficiency” (Taylor, 1911, p. 5). Consequently, his
work focused on developing awareness of the extent to which national resources were
inefficiently used and developing theory on how national efficiencies could be maximized using
scientific principles of management.
Taylor believed that efficiencies could only be achieved when systematic management
practices were applied to the tasks of workers. In his view, management was a science that could
be applied to a wide range of activities using clearly defined laws, rules, and principles to
improve organizational efficiency.
The personal backgrounds and leadership qualities of
managers were less important than managers’ ability to properly train workers to perform tasks
using scientific principles of management. One of Taylor’s primary goals was to “convince the
reader that the remedy for [this] inefficiency lies in systematic management, rather than in
searching for some unusual or extraordinary man” (Taylor, 1911, p. 7). Thus, he believed in a
June 27-28, 2012
Cambridge, UK
6
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
well-coordinated chain of command structure similar to that used in military organizations.
Because, he believed, it was rare to find competent men – or men already trained to perform their
function properly – efficiencies could only be achieved using a command structure. In such a
structure, managers trained those below them using rigid rules and standards for performing each
assigned task. In turn, these workers trained those below them, and so on down the line. A unity
chain of command structure permitted organizations to train workers and implement scientific
principles of management without relying on the competence of individual managers or workers.
Scientific principles substituted for the competence of managers and workers as a driver of
efficiency.
Moreover, Taylor believed that methods for training and motivating workers in industrial
organizations of the early 1900s created a natural antagonism between management and workers.
“The fundamental interests of employees and employers are necessarily antagonistic” (Taylor,
1911, p. 10). Such feelings, he believed, could be eliminated once workers understood that they
could work more productively – and in return earn higher wages – if they could perform work
tasks more efficiently using well-defined methods. “Scientific management, on the contrary, has
for its very foundation the firm conviction that the true interests of the two are one and the same;
that prosperity for the employer cannot exist through a long term of years unless it is
accompanied by prosperity for the employee, and vice versa; and that it is possible to give the
workman what he most wants – high wages – and the employer what he wants – a low labor cost
– for his manufactures” (Taylor, 1911, p. 10).
In Taylor’s view, the primary responsibility of managers was to provide proper training
and preparation for workers. “According to scientific laws, [the] management must take over
and perform much of the work which is now left to the men; almost every act of the workman
June 27-28, 2012
Cambridge, UK
7
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
should be preceded by one or more preparatory acts of [the] management which enable him to do
his work better and quicker than he otherwise could” (Taylor, 1911, p. 26). In order to be
effective, managers needed to develop intimate, cooperative relationships with workers. This
made it easier for managers to develop a “science” for each worker’s task, scientifically select
and train workers, and cooperate with workers so that tasks could be performed precisely.
according to the scientific principles they had developed. As a result, there should be “an almost
equal division of work and responsibility between [the] management and the workmen. [The]
management takes over all work for which they are better fitted than the workmen, while in the
past, almost all of the work and the greater part of the responsibility were thrown upon the men”
(Taylor, 1911, p. 37). Taylor’s principles of management strongly influenced how industrial
organizations designed manufacturing processes and organized labor during the early 1900s.
Role of the General Manager as Controller
A second work that advanced the field of general management beyond the work of Taylor was
Henri Fayol’s Administration Industrielle et Général (1916). Fayol’s ideas on management were
not widely known in the United States until they were published in English as Industrial and
General Administration (1930). He outlined and detailed six important functions or activities of
an industrial organization:
(1) technical (production, manufacture, and adaptation), (2)
commercial (buying, selling, and exchange), (3) financial (search for and optimum use of
capital), (4) security (protection of assets and personnel), (5) accounting (stocktaking, balance
sheet, costs, and statistics), and (6) managerial.
In organizing on the basis of functional
specialties, each functional head reported directly to the firm’s chief executive officer. This
June 27-28, 2012
Cambridge, UK
8
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
organizational structure became the basis for the functional structure, which remained the
predominate structure for a majority of firms throughout much of the 20th century.
Fayol also defined and outlined a series of general principles and elements of
management. An analysis of Fayol’s interpretation of these principles reveals an insight into
basic organizational processes that remain deeply imbedded in the organizational structures of
today’s largest organizations. For example, he recognizes the link between specialization and
efficiency. By dividing work among those with skills in particular tasks (“division of work”),
firms simultaneously maximize output (i.e., efficiency) and minimize error.
In addition,
specialization has the benefit of separating power based on area of expertise (Fayol, 1949, p. 20).
He also recognized the important linkage between authority and responsibility, and discussed
benefits and problems associated with the centralization versus decentralization of decision
making across business disciplines.
Like Taylor, Fayol believed in the unity chain of command structure. He considered
discipline (obedience, application, energy, behavior, and outward marks of respect) as necessary
to the smooth operation of any enterprise. Fayol also cautioned against breaking the unity of
command structure and emphasized that employees should report to one superior only. “As soon
as two superiors wield their authority over the same person or department, uneasiness makes
itself felt and should the cause persist, the disorder increases” (Fayol, 1949, p. 24). It is
noteworthy that the matrix structure, in which individuals report to more than one boss, was
adopted by many of the world’s largest corporations during the 1980s, almost a century after
Fayol discussed its weaknesses. As he would have predicted, the matrix structure quickly
disappeared during the 1990s, as organizations shifted to divisional or geographic structures,
which preserved the unity of command principle. Similar to the concept of “division of work,”
June 27-28, 2012
Cambridge, UK
9
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Fayol believed that line workers and foremen should perform as few functions as possible. This
system of “functional management” ensured that those on the line would be instructed by those
with specialized expertise for each task performed. More importantly, he believed that those on
the line should be free from the process of planning. Planning should be the primary domain of
managers (Wren, Bedeian, & Breeze, 2002). Freed from planning and aided by staff personnel
who had expertise in their functional area, line personnel could focus exclusively on performing
assigned tasks as efficiently as possible.
Role of the General Manager as Analytical Thinker
In sum, early management theory focused largely on questions of efficiency and the structure of
organizations based on the specialization of duties and maximization of efficiency in production.
The general manager’s role was viewed largely in terms of defining responsibilities, controlling
worker behavior, planning, and thinking analytically about the structure of the organization, its
processes, and structure of worker responsibilities. As businesses began to diversify outside
their primary area of business during the 1950s and 1960s, the analysis of business strategy
shifted to the analysis of corporate strategy. Whereas business strategy focused on establishing
competitive advantage in a single-product business, corporate strategy focused on establishing
corporate-level competitive advantages through the centralization of overhead, coordination of
resource flows, and transfer of capabilities across a portfolio of related businesses, in order to
increase performance of the business as a whole (Bourgeois, 1980).
Our understanding of the evolution of the strategy–structure relationships in response to
diversification is most notably influenced by the work of Chandler in his analysis of the
historical development of companies like E.I. du Pont de Nemours, Standard Oil of New Jersey,
June 27-28, 2012
Cambridge, UK
10
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
General Motors Corporation, and Sears, Roebuck and Co. from the early 1900s through the
1960s (Chandler, 1977, 1990). In turn, our initial understanding of diversification originated in
the work of Ansoff, who developed the first analytical models for use in making diversification
decisions (1958).
Subsequent work by Gort (1962), Chandler (1962), and Rumelt (1974)
contributed to our understanding of diversification as a corporate strategy.
Numerous analytical models were subsequently developed from the 1960s through the
1980s to help executives make more effective decisions in portfolio planning, restructuring,
acquisitions, and divestitures.
Analytical modeling focused on product portfolio questions
related to both industry structure (e.g., rate of industry growth) and strategic position of the firm
(e.g., market share) (Day, 1977). The Boston Consulting Group (BCG) matrix, for example, was
widely used to analyze product portfolio positions based on industry growth rate and firm market
share. Firms used the model to label products as “cash cows” (high market share, low market
growth rate), “stars” (high market share, high market growth rate), “question marks” (also known
as “problem childs” or “wildcats”) (low market share, high market growth rate), and “dogs” (low
market share, low market growth rate). Strategically, the model implied that firms should divest
dogs, leverage high cash flows from cash cows to support growth in stars and question marks,
invest heavily in stars, and either divest or invest heavily in question marks (Henderson, 1979).
The GE/McKinsey Matrix developed by McKinsey & Co. at General Electric during the 1970s
used a similar structure to analyze product portfolios based on industry attractiveness and
business unit strength.
Models like the BCG and GE/McKinsey Matrices were criticized for a variety of reasons.
The decision, for example, about what constituted the midpoint of each axis in the BCG model
was arbitrary and debatable. Decisions on the exact measurement of each axis influenced the
June 27-28, 2012
Cambridge, UK
11
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
exact placement of products in each of the four quadrants. The subjective nature of the model,
therefore, created the possibility of errors in decision making if a manager’s measurements of
each axis or placement of individual products were inaccurate. Overall, it was not clear that the
assumptions of different models were accurate.
Hambrick, MacMillan, and Day (1982)
demonstrated that product performance and cash flow varied in each of the BCG categories
depending on a variety of factors. “Dogs,” for example, actually produced higher cash flows
than question markets in a sample of firms. Kroll and Caples (1982) demonstrated that the
Arbitrage Pricing Model (APM) could be used to make more accurate investment decisions than
the BCG matrix by incorporating the firm’s product portfolio risk (systematic risk) and overall
risk (systematic and unsystematic risk) into the modeling process. Thus, the assumptions of
analytical models did not always accurately portray a product’s competitive position and
potentially led executives to inaccurate investment decisions. Analytical models, while perhaps
more useful as brain-storming tools, were inadequate substitutes for strategic thinking and often
failed when used as decision-making tools.
EMERGENCE OF THE GENERAL MANAGER AS STRATEGIC THINKER
Fayol’s work provided insight into how management works and is organized. However, it was
not until Peter Drucker wrote The Practice of Management that management began to be treated
as a distinct function or field of study (Drucker, 1954). Drucker suggested that general managers
play a three-dimensional role in organizations: (1) managing the business, (2) managing other
managers, and (3) managing workers and their work. Of these, the most important is the
responsibility of managing the “enterprise as a whole.” Like Taylor, Drucker believed that it
was management’s responsibility to make resources productive. A general manager improves
June 27-28, 2012
Cambridge, UK
12
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
performance “through the systematic study of principles, the acquisition of organized knowledge
and the systematic analysis of his own performance in all areas of his work and job and on all
levels of management” (Drucker, 1954. p. 9).
Like Fayol, however, Drucker believed that management was a practice rather than a
science or profession. Management’s first function is to manage the enterprise. Its second
function is to manage human and material resources, so that the enterprise is capable of
“producing more or better than all the resources that comprise it. It must be a genuine whole:
greater than—or at least different from—the sum of its parts, with its output larger than the sum
of all inputs” (Drucker, 1954, p. 12). Only human resources can be enlarged. Work may be
defined using pre-determined rules and guidelines. However, the motivation of human resources
– indeed, the managing of the enterprise as a whole – is a creative rather than an adaptive task.
Chester Barnard expressed a similar view of management in his Functions of the
Executive: “But we must now refer to one question about systems in general, and about
organization systems in particular, the answer to which is of fundamental importance. I refer to
the question as to whether the whole is more than the sum of the parts…whether there emerges
from the system properties which are not inherent in the parts” (1938, p. 79). Although Barnard
spoke of executives in terms of integrating systems, he was primarily interested in understanding
how executives manage communication. In his view, effective communication systems were the
means by which managers gained cooperation from organizational members and communicated
purpose and objectives throughout the organization. Drucker, in contrast, was interested in the
broader concept of general management as an independent function. He attempted to understand
the role of the general manager, the process of decision making, how the general manager
June 27-28, 2012
Cambridge, UK
13
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
effectively managed others, and the management of organizational resources – primarily human
capital – in order to create a greater whole.
What General Managers Really Do
The role of general managers, as well as the structure of organizations, has changed in response
to evolving and emerging trends (see Figure 1). On the one hand, the role of the general
manager has steadily moved from a focus on analytical to strategic thinking (x axis). On the
other hand, the structure of organizations has moved from a focus on control and specialization
to greater coordination and decentralization (y axis). In addition, organizations have become
more flexible and responsive to a growing range of stakeholders, non-market institutions such as
governments, and growing volatility and uncertainty in world markets.
----------------------------------Insert Figure 1 About Here
----------------------------------While formal strategic planning systems have lost much of their popularity since the
1980s and early 1990s, executives continue to view the use of analytic methods as a means to
increase profitability. Analytics – viewed as a subset of business intelligence – focuses on the
“extensive use of data, statistical and quantitative analysis, explanatory and predictive models,
and fact-based management to drive decisions and actions” (Davenport & Harris, 2007, p. 7). In
many ways, the use of analytics is an effective response to more intense global competition, the
dispersion of global assets and the elimination of government barriers on trade and investment.
These evolving globalization trends have allowed ability global competitors to more quickly
move assets from one location to another, in order to improve operational efficiencies. In
addition, the use of analytics is also an effective response to rapidly evolving technologies and
June 27-28, 2012
Cambridge, UK
14
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
shorter product life cycles. These technology trends have increased pressures on firms to
innovate more quickly and increase sales volumes more quickly, in order to cover higher
technology costs. Indeed, the primary benefit of international expansion is higher sales volume,
which increases a firm’s revenues and promotes scale and scope efficiencies.
Analytics, then, helps competitors compete more effectively and efficiently against
increasingly powerful and efficient global competitors and to respond to rapidly evolving
technology trends. Firms have increasingly focused on analytics as a basis for formulating
strategy. Walgreen’s, for example, is well-known for focusing on a single metric – “maximizing
profit per customer visit” – as a basis for establishing determining store locations, determining
product mix, and formulating pricing and promotion strategies (Collins, 2001, pp. 82–83).
Moreover, most industries are driven by metrics that are peculiar to the industry’s unique set of
structural and economic characteristics. In the fast-food industry, for example, competitors focus
on “per store sales” to formulate strategy and measure performance. Per store sales is peculiar to
the fast-food industry because focusing on revenue growth or other metrics fails to capture the
potential cannibalization of sales from established restaurants when new restaurants are opened
(Cramer, 2006).
Strategic planning, analytical models, and use of analytics have all been criticized for
destroying strategic thinking. In addition, they have been accused of motivating managers to
focus on the manipulation of numbers at the expense of focusing on the development of vision.
Mintzberg, for example, criticized strategic planning as strategic programming or “the
articulation and elaboration of strategies, or visions, that already exist” (1994, p. 107). He
likened planning to analysis, breaking goals into steps, and formalizing these steps to effect
systematic implementation.
June 27-28, 2012
Cambridge, UK
Strategic thinking, in contrast to strategic planning, is about
15
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
synthesis, involves intuition and creativity, leads to an integrated perspective of the enterprise,
and helps the firm articulate a vision. Mintzberg quoted Michael Porter as an example of how
analysis has come to dominate managerial thinking: “I favour a set of analytical techniques for
developing strategy” (Mintzberg, 1994, p. 108).
Porter, perhaps more than any other
management scholar, has contributed significantly to the field of strategy by developing
analytical models that continue to be popular among managers as an aid in decision making, e.g.
the “Five Forces Model” for analyzing the structural determinants of industries and competition
(Porter, 1980, 1985, 1990).
Porter, however, also stressed the need for strategic thinking in formulating strategy. He
suggested that many organizations fail precisely because they focus on operational effectiveness
instead of strategy. He viewed operational effectiveness as “performing similar activities better
than rivals perform them” (Porter, 1996, p. 62). Operational effectiveness focuses a firm’s
efforts on achieving higher levels of productivity, quality, and speed through the use of
management tools and models, e.g. total quality management (TQM), benchmarking,
outsourcing, partnering, reengineering, and change management.
Firms may achieve
competitive advantages by implementing new techniques, but only over the short term. Over the
long term, competitors tend to copy the same techniques. The outcome is good for consumers.
The productivity frontier is pushed further outward, with all competitors becoming equally more
efficient at performing the same activity. Customers often benefit from lower-priced, higherquality products, but competitors rarely turn such efficiencies into long-term competitive
advantages. Strategy, in contrast, is about being different – creating a “unique and valuable
position, involving a different set of activities” (Porter, 1996, p. 68). Strategy is also about
making choices – choosing to focus resources on building one or more distinctive competencies
June 27-28, 2012
Cambridge, UK
16
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
and minimizing expenditures and effort on resources that don’t lead to long-term competitive
advantage.
Thus, Porter defines the general manager’s role in terms of “defining and communicating
strategy, communicating the company’s unique position, and making trade-offs” (Porter, 1996, p.
77). Such a view supports the role of the general manager primarily as a strategic thinker who
uses analytical models to aid the process of decision making. Many continue to view the work of
general managers in terms of Henri Fayol’s view of management in 1916. That is, the manager’s
job is to plan, organize, command, coordinate, and control. In reality, the manager’s job is far
less structured and simplistic (Sayle, 1989; Kotter, 1999; Hill, 2003). The general manager’s job
is ambiguous, unpredictable, and chaotic (Mintzberg, 1989, 2010, 2011).
The Dual Focus of Management
Most functional managers are necessarily focused on the present. They are occupied with
performing the daily tasks of the business, in order to maximize operational efficiency. The
general manager shares the functional manager’s concern about successfully completing these
daily operational tasks and is accountable for their results. In addition, the general manager must
be concerned that functional specialists focus on activities that help the firm achieve its mission
(i.e., developing long-term capabilities for providing superior value to the firm’s customer base)
and vision (i.e., the type of organization it wishes to become). This requires a long-term
perspective, effective time management of conflicting priorities, and an effective allocation of
limited resources over time. The management of short- and long-term goals is a challenging
responsibility. Winston Churchill summarized this challenge: “Two equal and opposite errors
are typical: people sacrifice short-term projects for a vague long run that never arrives or is
June 27-28, 2012
Cambridge, UK
17
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
continuously postponed, or they allow the long run to get eaten up in an endless series of shortterm initiatives that never get into a coherent long-term strategy” (Hayward 1998, p. 83).
General managers have the dual responsibility of overseeing short-term tactical
operations and formulating long-term strategy. Tactics is often defined as doing things right,
whereas strategy is often defined as doing the right things.
Many writers argue that this
represents a difference between functional managers – efficiency (“Doing things well”) and
leaders – effectiveness (“Doing the right things”). The latter implies that leaders – those at the
apex of the organization – are primarily responsible for formulating and implementing long-term
strategy or determining the long-term direction of the organization. General managers must be
concerned with both.
Thus, strategic thinking focuses on issues related to future competitive positioning (see
Figure 2). Strategic thinking is critical to the general manager as he or she responds to change
and environmental and uncertainty. Analytical thinking focuses on operational questions of
staffing, organizing, controlling, implementation, and measurement of performance. It supports
strategic thinking in the formulation of strategy. There is, therefore, a critical link between
analytical and strategic thinking in both the formulation and execution of strategy. When the
firm performs well operationally, and is expected to continue performing well in the future,
many view this as evidence that current strategy is effective. In such instances, there may be
little expectation or need for change. In contrast, when the firm performs poorly from an
operational perspective, or environmental changes threaten the firm’s existing competitive
position, then the opposite may be true. Change may be an important response to changing
demands and competitive conditions.
----------------------------------Insert Figure 2 About Here
June 27-28, 2012
Cambridge, UK
18
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
----------------------------------Organizational Context
The many activities of general managers are a consequence of the unpredictable and ambiguous
nature of business. Managers spend significant time responding to a myriad of problems as they
occur – often under pressure and tremendous time constraints. The day-to-day activities of one
manager are unlikely to be the same as activities performed by other managers. The daily
activities of different managers cannot easily be compared because each manager must respond
to different sets of problems, pressures, and deadlines. Therefore, what a manager actually does
on a day-to-day basis has much to do with organizational context and the firm’s environment.
“Good management” may mean different things – and require different roles and actions –
depending on the nature of the organization, its industry, and its environment. Context matters.
Mintzberg commented that “after years of seeking these Holy Grails, it is time to recognize that
managing is neither a science nor a profession; it is a practice – learning through experience –
that is rooted in context” (2010, p. 9).
In practice, context may have more to do with
determining the activities of a manager’s job than the manager’s background or leadership
qualities.
Thus, managers shape their work environment based on organizational context. Different
kinds of managers are needed in different kinds of organizations, e.g. fast-paced, innovative
firms versus slow-growth businesses that focus on high volume and low cost. Each organization
must determine the kind of managers needed to build an effective organization. The personality
traits, experiences, and mind-set of the chief executive are important elements in building an
executive team that shares the organization’s value system and work ethic. A wide range of
variables shape and influence each organizational problem. These variables create such a variety
June 27-28, 2012
Cambridge, UK
19
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
of possible organizational situations that it is unlikely that any theory would provide an adequate
prescription about how a general manager should perform his or her job. Because the nature of
the job is specific to the situation, good judgment and intuition are critical to the general
manager’s overall effectiveness.
A firm’s external environment includes global, national, industry, and business segment
forces, each which includes a unique set of political, economic, legal, and social characteristics.
The general manager must interpret these forces in the context of the firm’s unique set of
environmental pressures and constraints. He or she must also interpret how trends and structural
changes potentially affect the firm’s long-term profitability. The effect of global competition,
rapidly evolving technologies, increased environmental concerns, and demographic changes are
among the many current trends causing global, national, industry, and business segment
characteristics to change over time. Each force affects different businesses in different ways –
both positively and negatively. In addition to these long-term forces, firms must contend with
other short- and intermediate-term forces. The current recession, growing government debt,
rising energy costs, and geopolitical tensions in many regions of the world are among many
examples of environmental changes that have significant short- and intermediate-term effects on
firm performance. These evolving trends create greater pressures on organizations to develop
structures that are decentralized and more responsive to local country needs. They also create
demands on organizations to more effectively work with foreign governments to develop
mutually beneficial agreements on trade and the investment activities of multinational enterprises
(MNEs). Last, they create pressures to develop new structures and processes to more effectively
respond to proactive stakeholders and more quickly react to increased market volatility
worldwide.
June 27-28, 2012
Cambridge, UK
20
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Size and complexity of the organization
Businesses that are smaller and less complex generally present fewer challenges to the general
manager. In smaller organizations, the general manager is closer to events and less dependent on
communications systems and the complex unity of command structure that confronts executives
in larger organizations. As a result, issues are often easier to grasp and fewer span-of-control
issues exist.
Moreover, smaller businesses are inherently less centralized.
In larger
organizations, the general manager must find an effective balance between centralization and
decentralization of responsibilities and subordinates.
What is best done at the top and what should be delegated to lower levels? Charles
Handy addresses this topic in depth in The Age of Paradox (Handy, 1994). He used the concept
of “subsidiarity,” which means keeping power as close to the action as possible.
Today,
organizations are more complex and dynamic, must respond to rapidly evolving competitive
pressures, and must have specialized expertise to deal with growing environmental complexities.
As a result, organizations have trended toward decentralization, particularly in operations, over
time. Higher levels of management simply don’t have sufficient information to handle all
complex situations in a timely manner from a distance. Managers who attempt to control line or
operational issues may imply an inability of managers to delegate. It may also indicate that
managers distrust subordinates, an indication that the organization may have the wrong people in
the wrong positions. Paradoxically, the more decentralized the organization, the greater the
importance of control systems. Decentralization requires adequate communication channels that
provide top managers with timely information on performance so that appropriate action can be
take when needed. Decentralized organizations in many ways place greater stress on general
June 27-28, 2012
Cambridge, UK
21
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
managers because they must coordinate the activities of a greater number of levels of
management and collaborate across a greater number of organizational lines.
CONCLUSION
Peter Drucker once commented that “The Government, the Army or the Church—in fact, any
major institution—has to have an organ which, in some of its function, is not unlike the
management of the business enterprise” (1954).
Among the chief executive officer’s (CEO)
many responsibilities, perhaps the most important is that of general manager. The CEO must
continuously redesign the firm’s organizational structure and management processes to support
its evolving strategy and handle the increased size and complexity of the business. The focus of
all chief executives, therefore, is that of a general manager whose role includes management,
organization, leadership, managing change, and execution – hiring the right people, building an
effective team, and defining the need for change. Whereas the functional manager focuses on
developing expertise in a single functional area, the general manager must integrate all the
functional areas into a cohesive whole. Therefore, general management may best be viewed as a
“practice” rather than a “science” or “profession.” The general manager’s role is ambiguous,
ever-changing, and cannot easily be described using theoretical models as might be done in the
sciences (e.g., biology or chemistry) or the professions (e.g., accounting or law). These ideas are
central to the role of general managers in general and the CEO’s responsibilities as general
manager in particular.
Globalization and rapid technological change highlight the need to
recapture the lost art of general management.
Intuition and strategic thinking, rather than
specialization and analytics, remain key attributes of the general manager.
In turn,
decentralization and responsiveness, rather than centralization and control, have become key
June 27-28, 2012
Cambridge, UK
22
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
attributes of effective organizations. These attributes continue to increase in importance as
technological change and globalization trends increase the complexities of managing the
organization as a whole.
REFERENCES
Ansoff, H. I. (1958). A model for diversification. Management Science, 4(4), 392–414.
Barnard, C. I. (1938). The functions of the executive. Cambridge, MA: Harvard University Press.
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of
Management, 17(1), 99–120.
Bourgeois, L. J., III. (1980). Strategy and environment: A conceptual integration. Academy of
Management Review, 5(1), 25–39.
Bower, J., & Christensen, C. M. (1995). Disruptive technologies: Catching the wave. Harvard
Business Review, 73(1), 43–53.
Buckley, P. J., & Ghauri, P. N. (2004). Globalisation, economic geography and the strategy of
multinational enterprises. Journal of International Business Studies, 35(2), 81–98.
Chandler, A. D. (1962). Strategy and structure. Cambridge, MA: MIT Press.
Chandler, A. D. (1977). The visible hand. Cambridge, MA and London: Belknap Press.
Chandler, A. D. (1990). Scale and scope. Cambridge, MA: Belknap Press.
Coase, R. (1937). The nature of the firm. Economica, 4(16), 386–405.
Collins, J. (2001) Good to Great. New York, NY: HarperCollins Publishers.
Cramer, J. J. (2006). Mad Money. New York, NY: Simon & Shuster.
Davenport, T. H., & Harris, J. G. (2007). Competing on analytics: The new science of winning.
Boston: Harvard Business School Press.
Day, G. S. (1977). Diagnosing the product portfolio. Journal of Marketing, 41(2), 29–38.
Drucker, P. F. (1954). The practice of management. New York, NY: Harper & Row Publishers,
Inc.
Fayol, H. (1916). Administration industrielle et générale; Prévoyance, organisation,
commandement, coordination, controle, Paris, France: H. Dunod et E. Pinat.
Fayol, H. (I. Gray, Ed.) (1930). General and industrial administration, London, England: Sir
Isaac Pitman & Sons.
Fayol, H. (I. Gray, Ed.) (1949). General and industrial administration, London, England: Sir
Isaac Pitman & Sons.
Fayol, H. (I. Gray, Ed.) (1984). General and industrial management, New York, NY: IEEE
Press, New York.
Gort, M. (1962). Diversification and integration in American industry, Princeton, NJ: Princeton
University Press.
Hambrick, D. C., MacMillan, I. C., & Day, D. L. (1982). Strategic attributes and performance in
the BCG matrix–A PIMS-based analysis of industrial product business. Academy of
Management Journal, 25(3), 510–531.
Handy, C. (1994). The age of paradox, Cambridge, MA: Harvard Business School Press.
Hayward, S. F. (1998). Churchill on leadership, New York, NY: Gramercy Books (Random
House).
June 27-28, 2012
Cambridge, UK
23
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Henderson, B. (1979). Henderson on corporate strategy. New York, NY: Harper Collins.
Hill, L. A. (2003). Becoming a manager. Boston, MA: Harvard Business School Press.
Hounshell, D. A. (1984). From the American system to mass production, 1800-1932: The
development of manufacturing technology in the United States. Baltimore, MD: Johns
Hopkins Press.
Jones, N. (2003). Competing after radical technological change: The significance of product line
management strategy. Strategic Management Journal, 24(13), 1265–1287.
Kotter, J. P. (1999). John P. Kotter on what leaders really do. New York, NY: The Free Press.
Kroll, M., & Caples, S. (1987). Managing acquisitions of strategic business units with the aid of
the Arbitrage Pricing Model. Academy of Management Review, 12(4), 676–685.
Mahoney, J. T., & Pajendran, P. J. (1992). The resource-based view within the conversation of
strategic management. Strategic Management Journal, 13(5), 363–380.
Mintzberg, H. (1989). Mintzberg on management. New York, NY: The Free Press.
Mintzberg, H. (1994). The rise and fall of strategic planning. Harvard Business Review, 72(1),
107–114.
Mintzberg, H. (2010). Managing: It’s not what you think. New York, NY: AMACOM
(American Management Association).
Mintzberg, H. (2011). Managing. San Francisco, CA: Berrett-Koehler Publishers, Inc.
Penrose, E. T. (1959). The theory of the growth of the firm. New York, NY: Wiley.
Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors.
New York, NY: The Free Press.
Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance.
New York, NY: The Free Press.
Porter, M. E. (1990). The competitive advantage of nations. New York, NY: The Free Press.
Porter, M. E. (1996). What is strategy? Harvard Business Review, 74(6), 61–78.
Ricardo, D. (1817). On the principles of political economy and taxation. London, England: John
Murray.
Rumelt, R. P. (1974). Strategy, structure, and economic performance. Cambridge, MA: Harvard
University Press.
Sayle, L. R. (1989). Leadership: What effective managers really do and how they do it. New
York, NY: McGraw-Hill Inc.
Smith, A. (1904). An inquiry into the nature and causes of the wealth of nations. London,
England: Methuen and Co., Ltd.
Smith, A. (1937). An inquiry into the nature and causes of the wealth of nations. New York, NY:
The Modern Library, bk 1., ch. 7, p. 60.
Taylor, F. W. (1911). The principles of scientific management. New York, NY and London,
England: Harper & Brothers Publishers.
Vernon, R. (2001). Big business and national governments: Reshaping the compact in a
globalizing economy. Journal of International Business Studies, 32(3), 509–518.
Williamson, O. E. (1981). The economics of organization: The transaction cost approach.
American Journal of Sociology, 87(3), 548–577.
Wik, R. M. (1972). Henry Ford and grass-roots America. Ann Arbor, MI: University of
Michigan Press.
Wren, D. A., Bedeian, A. G., & Breeze, J. D. (2002). The foundations of Henri Fayol’s
administrative theory. Management Decision, 40(9), 960–918.
June 27-28, 2012
Cambridge, UK
24
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Figure 1: Evolution of the role of the general manager
Strategic
Thinking
Analytical
Thinking
Technological
Change
Traditional
Organization
Control and
Specialization
June 27-28, 2012
Cambridge, UK
Evolving
Organizations
Globalization
Coordination and
Stakeholder
Relationships
25
2012 Cambridge Business & Economics Conference
ISBN : 9780974211428
Figure 2: Dual focus of management
Perspective Historical organizational
form
Evolving organizational
form
Focus
Operational focus:
 Planning.
 Analyzing.
 Organizing.
 Staffing.
 Control.
 Implementation.
 Efficiency.
Strategic focus:
 Articulating vision.
 Establishing mission.
 Setting strategic goals.
 Setting financial goals.
 Formulating strategy.
 Executing strategy.
 Responding to change.
Goals
Operational goals:
 Problem solving.
 Operational efficiency.
 Coordination.
 Control.
Strategic goals:
 Competitive advantage.
 Strategic change.
 Innovation.
 Globalization.
 Stakeholder relationships.
June 27-28, 2012
Cambridge, UK
26