What Management Is: How it works and why it’s everyone’s business

by Joan Magretta

The author says this book is about the basics of management, but she adds, “the basics aren’t always obvious.”  Topics include: value creation, business models, competitive strategy, organization, numbers, innovation, and managing people.

Management’s primary responsibility is value creation, where value is defined by customers. A B2B customer may define value in monetary terms, while a B2C customer may define value in another form, such as prestige or aesthetics. A business model is a set of assumptions on how value will be created.  Business models that fail are often based on unlikely behavior.  Strategy goes a step further and factors in competition.  Management is responsible for results, but “overreliance on short-term financial measures like ROI could lead to the slow death of investment in the innovation that is the lifeblood of most organizations.”  On people management, the author emphasizes respect for the individual and says the key to performance is “getting the right individual for the job.”

A recurring theme about numbers is that they are just a tool to aid judgment. There is no single, silver-bullet metric. Management must carefully choose which measurements are meaningful for their company’s context. “Interpreting numbers requires experience that allows you to develop a set of norms or expectations about what the number should look like.” The author warns that averages and aggregate numbers can be misleading. Only by examining the components “will the numbers yield a story that’s both meaningful and actionable.” For example, average profit per customer may obscure the fact that 80% of profits are coming from 20% of the customers. Improving the value proposition for those 20% would be more productive than marketing to a nonexistent average customer. “It’s easy to focus so intently on the numbers alone, that you forget that they reflect what people are doing.” See also The Flaw of Averages.

Before writing What Management Is, Joan Magretta was the strategy editor for Harvard Business Review; prior to that she was a partner with the consulting firm Bain and Company.

Magretta, Joan, and Nan Dundes Stone. What Management Is: How It Works and Why It’s Everyone’s Business. New York: Free Press, 2002. Buy from Amazon.com

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