The Starting Point for Successful Strategies

       During the current time of crisis especially, many companies are faced with unprecedented challenges in the market place and they are busy changing their strategic direction, rethinking their business models and restructuring their work forces. However, as the number of strategic challenges and related projects mounts, so does the pressure on the capacity of management. This term is used here to describe the accumulated expiences and competencies of the management personnel in a company. Many strategies fail becausme there is a lack of sufficient management capacity. Companies may find that they have not enought managers and/or the available managers do not have the required competencies. For example, a company planning to expand internationally realises that its managers lack the necessary cross-cultural skills to do business with partners in foreign countries. As a consequence market share and profitability results related to the international business activities turn out to be far below the expected targets.
       Management capacity - A critical, but often neglected resource
       Most CEOs will confirm that the management capacity of a company is the key for excellent performance and growth. However, few top executives assess their management capacity gaps properly. In general the following can be said: the highekr a company's ambition level or the more drastic its shift in terms of strategic direction, the larger lthe management capacity gap. Executives frequenctly fall prey to the following dangerous misconceptions.
       1. Management capacity rests primarily at the top of the organisational pyramid. This assumes that all important decisions must be made by top management. As a result, decision-making takes place in hierarchican, chimey-like structures, in which all decisions are delegated upwards. The top becomes quickly overburdened, important decisions take too much time and market opportunities may be lost. In addition, lower and middle management staff within the organisation are not motivated and will always wait for instructions from above before taking any action.
       2. Management capacity can be easily expanded. If the existing management capacity is not sufficient, the necessary managers can be hired from the outside, i.e. from other companies or competitors. But there are two drawbacks. Firstly, the success rate of external hires for upper management levels is estimated to be only about 50%, i.e. only one out of two externally hired managers meets the expectations. Secondly, the newly hired management capacity will not be immediately available since the new manager will need time to become familiar with the organisation and its culture. Sometimes management consultancies can cover the lack of management capacity, but that is only a temporary solution and often also quite expensive.
       3. Management capacity is resilient and will be able to rise to different challenges. The underlying idea is that of a General Manager who can successfully manage various strategies in different environments. But every manager has a specific background with unique experiences and competencies. Obviously a manager who has spent most of his career in managing growth strategies abroad, may not be particularly suitable to manage a tight restructuring and rationalisation programme in the home country. In that sense the idea of a General Manager is more a myth than a reality.
       Before embarking on a new strategy, top leaders must assess the available management capacity. One can often observe that new strategic initiatives are loaded on the existing management group. Then a vicious cycle is set in motion. These managers become quickly overburdened, make suboptimal decisions and do not have the necessary time for other important tasks, e.g. developing new management talent. They may be dissatisfied with lack of progress and their personal work situation and search for another job. If the more expienced managers leave and hand over to poorly prepared successors, the company's survival may be at risk.
       Top leaders should realise that an elaborate strategy remains wishful thinking if it cannot be implemented. There are two key questions which they need to ask: 1) Who will be doing the work related to this particular strategic initiative? and 2) Does that manager have the necessary competencies required to make the initiative a success? If both questions cannot be answered satisfactorily, then there are three choices: the strategy must be changed - perhaps it can be realised with a partner. Sometimes it is possible to wait and develop the necessary management capacity. In other cases it may be best to cancel the strategy.
       How to develop sufficient management capacity?
       A clear picture of the management capacity not only helps to make better strategic decisions, it also focuses attention on the need to manage the management capacity. The capacity gap can be closed by utilizing the available management in a more efficient manner and by developing new managers. Each approach has a number of advantages and drawbacks.
       The following four practical suggestions help to make better use of the available management capacity:
       1. Developing a compelling future-oriented vision. Much has been said and written about this subject, but two key issues are really important: The first is to create a clear picture of where the company should be in 5 or 10 years time. The statement 'We want to be the leading company or the no. 1 in our industry' is not enough! The second issue relates to gaining the commitment of the management staff and the entire organisation. A clear and attractive vision about the future and a committed management team can have a powerful impact on motivation and creativity.
       2. Reconfiguring the management team. CEOs soemtime hesitate to change the functions and assignments of the members of their top management teams because they want to avoid the related political games and power struggles. But such reconfigurations are sometimes needed in order to fully utilise the existing talents and competencies of each management team member. The rotation anc change in tasks also contributes to a learning process within the management group and thus enhances the management capacity of the company.
       3. Getting the strategic priorities right. Top management must regularly review their strategic priorities. In many companies executives accumulate large portfolios of initiativejs ovekr time. Eventually their energy and efforts become too thinly spread over many and projects. In the end no project makes much progress. Here it is important to clarify which initiatives are strategically really important, which initiatives can be delegated and which ones should simply be cancelled.
       4. Training managers to acquire and utilise new competencies. Training is especially effective if theory-based concepts are directly applied to practical problems. Perhaps the best known example is training centre in the US, which provides a wide range of customized courses and programmes under the motto 'learning whil doing' to support the various GE businesses. Another good example is Thailand SCG offers over 200 classroom courses for its staff and has set up specific cross-functional training programs for its upper management levels. The intent is to acquire new knowledge and adapt it to practical business situations.
       The second major appraocg towards building the management capacity aims to develop new managerial personnel:
       1. Setting up a management trainee programme. This entrails the hiring of young people with high-potential and systematically traning them for taking over managerial functions, the so-called 'gold fish pond'. Although a number of large companies have such programmes, also medium-sized and smaller companies can initiate such programmes without great cost. Such a programme will bring in new management talents into the company on a regular basis.
       2. Developing successors for managerial positions. The iron rule in every company should be: For each management positions a successor must be in place. However, it is not enough to have the name of the successor on the organisation chart - that person must also be trained sufficiently to handle the job lof the incumbent.
       3. Hiring external managers. Generally the internal development of managers is considered more efficient, but there may be situations when it is necessary to bring fresh blood into the company. To avoid the previouslt mentioned high failure rates, attention must not only be paid to careful selection, but especially to training and giving the new manager time to become familiar with the comany's culture. A member might be very useful during this process.
       Assessing the required management capacity prior to approving a new strategy can have a major impact on the strategic direction as well as on the actual outcome of specific strategies. Sufficient management capacity often makes the difference between marginally or fully realising the potential of a strategic opportunity. The top leadership of a company must be aware that managing the management capacity requires substantial HR-investments and, above all, consistency over time. Frequently good programmes and policies are developed during growth periods - but these are axed first, when the economic situation worsens. Then, one growth kicks back in, the lack of management capacity will inevitably slow down any expansion.