The long-running Selected Papers series features notable work by University of Chicago faculty. This essay is an edited excerpt; the original was presented on February 12, 1979, at a luncheon sponsored by the Executive Program Club of the Graduate School of Business at the University of Chicago. It was printed as Selected Paper No. 53.
An organization is doomed to mediocrity unless it is guided by good general managers in key positions. A company can bumble along for years, but good general managers are the ingredient that will make it stand out from the pack. No matter how rich its other resources—such as technical know-how, uniqueness of product, market monopoly, ample finances, and luck—an organization will not excel unless it is led by what are becoming increasingly rare individuals.
Good general managers have always been scarce, but today the widespread addiction to professional management is drying up the supply. The combination of higher education and on-the-job experience is producing a generation of management candidates who have little training or appetite for the job of general management. Whether the aspiring men or women come from a graduate school or from humbler origins, the organization immerses them in highly specialized units that reinforce the concepts implemented by the school or by books on management.
The system is producing a horde of professional managers with demonstrable talents, but talents nonetheless that are not in the mainstream of the enterprise. Professional managers can describe management concepts, apply elegant techniques, catalog the tools available, and make penetrating analyses of problems. In some organizations, they can succeed if they are simply good at making presentations to the board of directors, or writing strategies and plans, or even creating imaginative position descriptions. The tragedy is that these talents may mask real deficiencies in overall general-management capabilities. These talented performers often fail miserably when they are charged with earning a profit, getting things done, choosing a strategy and backing up that choice, and moving an organization forward.
The job of the general manager is integration. While the ultimate integrator is the CEO of an organization, jobs with large elements of general management may be found under titles such as president, COO, division manager, product manager, branch manager, store manager, and plant manager. Whatever the title, the general manager is the one who must convert the throngs of specialists into a vibrant enterprise.
Most good general managers probably develop in an environment requiring quick and continual response to change. In such an environment, the person who is stimulated to his best thinking by the unexpected will emerge as a leader. This manager learns to deal calmly with difficult developments that cannot be anticipated. He faces the unforeseen with appetite and equanimity. By contrast, the person who develops in a highly controlled environment where the lead times are lengthy and everything is studied and planned does not gain the self-confidence needed to deal with the unexpected.
Defining this form of manager, the professional general manager, is more difficult than describing the things he does. He immerses himself in a world of techniques, planning, financial controls, budgets, financial incentives, explicit manuals on what to do and how to do it, neatly defined job responsibilities, reorganizations, orderly reporting, and formal training programs. Conceptually, he is steeped in specialization, standardization, efficiency, productivity, and quantification. He insists on objective goals such as earnings per share and return on investment. He prefers to work with aggregates and averages rather than with random bits of information. His initial response to a problem is to turn to his staff for in-depth studies and to consultants for advice on every topic imaginable. He takes great comfort in making long lists of problems, facts, variables, conclusions, and alternatives. In his mind, the astuteness of the management correlates with the length of the lists. He likes to make policy decisions and to embalm all the policies in elaborate manuals.
Our knowledge of what makes a good general manager and how to recognize one is extremely limited. In an earlier paper, “Good Managers Don’t Make Policy Decisions,” I discuss the five most critical skills of the general manager:
These five skills, then, become benchmarks for appraising a general manager. In order to sharpen comprehension of the differences in approach between professional general managers and good general managers, it may be useful to focus on a few favorite techniques of modern management.
The introduction of formal long-range planning almost always leads to overemphasis on the technique. The people assigned to planning may find it to be a welcome respite from operating problems. It is intellectually more rewarding. It does not carry the pressure that operations entail. Professionally, it is more respectable. Board members and other influential outsiders give it high status by their interest and support.
The professional general manager will probably set up a staff for planning and hire consultants to reinforce the staff. He will encourage the preparation of a planning manual and a proliferation of forms to be filled out by many different units in the organization. He will stress the preparation and analysis of the numbers that summarize his plans. He will demonstrate his mastery of the numbers in presentations to corporate management and the board of directors. He may even convince himself that preoccupation with the numbers is the best focus for the exchanges among his subordinates and with corporate management.
One corporation I am familiar with employed a consulting firm to devise an overall corporate strategy. Over a period of 14 months and after the expenditure of almost $200,000, the consultant produced a report; however, the report stimulated almost no action in the management group. About a year later, the company hired a director of
planning. He elected to approach his new task by organizing discussions throughout the company on the mechanics of planning. After some nine months of discussions, management has still not been able to agree on how planning is to be carried out. Almost three years have elapsed, and management is still discussing how to plan.
By contrast, the good general manager and his operating managers may appear to be almost indifferent to the planning activity, if not openly derisive in their comments. The general manager may see planning as handicapping his efforts to instill a sense of urgency in the organization. He is skeptical that the entrepreneurial function can be synthesized by planners. He has discovered that the future cannot be predicted with any great certainty and that he must hedge against any one of several eventualities. He is reminded daily of the crises, major and minor, that demand a quick response rather than in-depth study.
At heart, the good general manager knows that he and his organization must be concerned with long-range plans, for the strategy that evolves from planning is essential to holding together the ever-growing swarms of specialists who work for him. Periodically, he pulls out the plans for review with his subordinates, but he avoids the constant nagging and reference to plans that over time may convince them that skill in planning is the only thing that matters.
One successful general manager who takes an extreme position against planning describes his dilemma in these terms:
We pay strict attention to details. The company will do all right so long as everyone here understands how important that is. We plan operations carefully. When we moved to this location a couple of years ago, we planned it so carefully that we moved on a Saturday and Sunday, and were back in operation on Monday. But we don’t even draw up a one-year plan or budget. An organization is likely to go stale and forget details if they emphasize budgets and long-term plans.
Clearly, the professional general manager and the good general manager pursue divergent courses as they try to harness the power in the planning process.
Frequent and major reorganizations are an obsession of the professional general manager. Reorganizations are proposed as the solution for all kinds of problems, from lagging earnings to nagging operations quagmires. If management is under fire, the critics can usually be silenced by a reorganization. The announcement of a reorganization carries with it a symbol of decisive action; and yet, if you observe an organization over a period of months, how often does it go through a series of changes and then revert to structures that were earlier abandoned?
The professional general manager takes an orgiastic delight in rearranging the boxes on the chart, changing the reporting relationships, concocting new titles, polishing the job descriptions, and moving the players from job to job. Specialization is a way of life for him. He has been taught to break a problem into parts for analysis, so it is a natural tendency to fragment the management element in an operation. Part of the rationale for the continuous movement toward greater specialization in jobs is that the narrower the responsibility, the greater the opportunity to develop technical expertise. And many organizations have grown so complex with legal, accounting, financial, social, scientific, and legislative dimensions that a generalist is not able to master the many areas of expertise. In this environment, a powerful argument can be made for accumulating inside specialists in order to avoid the use of expensive outside specialists. And, of course, at some point as the boxes increase, more levels of management must be added to supervise the units.
One victim of specialization in a well-known company is bitter about what has happened to him:
Once upon a time I was an all-round marketing man. I knew my product line, my customers, the competition. Over the years, they have whittled away at my job until today I am strictly an order taker. The product managers plan the strategy. The market researchers study the market by talking to strangers. They aren’t even interested in my opinions. So, I say, “To hell with it. Let somebody else do the thinking.”
The good general manager is wary of reorganizations. He is likely to concentrate on making the present organization work rather than devising drastic changes. He has seen the havoc wrought by reorganization and sees its primary benefit as a device for keeping management consultants off the welfare rolls. He knows that major reorganizations almost never deal with the real problems. He insists that his organization be lean with a minimum of staff departments. It is difficult for overspecialization to make much headway in a lean organization, because the demands of the company require that each member of management keep closing the gap and trying his hand at something where he is not a specialist. So a lean organization is consistent with an organization strategy of low profiles for specialists. One successful company president describes his difficulty in persuading his staff subordinates to relate their activities to the overall company goals:
A good part of my day is spent in cutting the staff people down to size. I don’t want to demoralize them, but most of them have an inflated idea about their contribution to the company. They seem to be dedicated to finding something wrong as justification for their existence. They would be more useful to me if they could plan their work in the context of things going on in other staff departments and in the offices of the line managers.
Keeping the organization lean, or understaffed, may be one of the most effective devices for maintaining a sense of urgency. Employees who are stretched out and working harder than they ever thought they could don’t have time to devise a complicated solution for a problem that doesn’t require such an approach.
The professionals in general management and in sales are volume oriented, and therefore are searching for the high volumes that often accompany standardization. Many companies have been persuaded to abandon low-volume, high-margin products in favor of high-volume, low-margin products. The “old fashioned” customer who voices his willingness to pay extra for custom products or services is silenced between blankets of modern management.
The good general manager is one of the last bastions in the defense against the excesses of standardization. He recognizes that a pervasive preoccupation with standardization builds resistance to the introduction of new products; that it results in manufacturing plants that are difficult to adapt to changing market conditions; that it reduces customer service to routine simplistic responses that satisfy no one; that it leads to the most destructive kind of price competition; and that it nullifies the negotiating skills of his best salespeople. He sees the “standardize-it” mentality as the antithesis of the innovative mind. Much of his ammunition must be wasted on shooting down the extremists who see no practical limits to the standardization movement.
The management consultant has become a status symbol for the professional general manager. The hundreds of management consultants who roam the business world have provided much of the horsepower for the professional management movement, for the trappings of the movement are readily saleable merchandise. The mystique of the consultant is reflected in these comments by a division manager in a large conglomerate:
It is virtually impossible for a division manager to gain approval from the corporate office for a project of any size unless it is supported by a report from an outside consulting firm. In refusing to play this game I have relied on my own staff. This policy has confirmed to my staff specialists that they are the experts I have confidence in and will rely on. As a consequence, the staff work in this division is the best in the company.
The good general manager uses consultants in narrowly defined roles such as a tax negotiation, a pension question, or a patent matter. He refuses to permit them any major influence in the mainstream issues, mainly because he is unwilling to relieve his line managers of full responsibility for these decisions.
Businesspeople are deluding themselves as they listen to each other chant the litany of modern management achievements. How many thousands of specialists are working away in their cubicles on projects no one with clout cares about? In fact, how many general managers are hoping that the specialists never complete their projects because they are almost certain to come up with grandiose recommendations that the managers can’t possibly implement?
Boards of directors don’t know how to select CEOs and CEOs don’t know how to pick division managers. They promote a successful functional manager to general management and hope that he works out. If he doesn’t, he usually must leave, and his years of experience are lost to the company. The turnover of general managers in some companies is little short of criminal.
Ask a top manager how he picks persons with high potential for general management, how he grooms those candidates, and how he measures their performance once they are promoted to general management.
The answers will be scanty.
H. Edward Wrapp was professor of business policy, associate dean for management programs, and director of the Executive MBA Program at Chicago Booth. He died in 2009.
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