In search of true management excellence
May 7, 2013
WHO IS the excellent business manager? Is it the manager who brings in impressive financial numbers? What about the one who produces a breakthrough product that dominates the market?
These are notable business achievements, of course, and we see publications and organizations recognizing men and women with such achievements all the time. But do they define excellence? Do they suffice to make those who achieve them worthy of emulation by the young managers of today?
As the chief financial officer of Enron Corp., Andrew Fastow achieved great financial results for the company. At the height of its powers, Enron was recognized by business publications as an exemplar of performance. Fortune magazine called Enron "America’s most innovative company" six years in a row. CFO Magazine awarded him for his capital structure practices in the company -- the very practices that would lead the company into trouble and wipe out the pensions of thousands of employees.
Following its spectacular collapse in 2001, the Enron story has been used as a cautionary tale of everything that can go wrong in a company. After spending almost six years in jail for fraud, Fastow was released in December 2011 and has been giving talks to students on where he went terribly wrong. Speaking to Dartmouth University students in October 2012, he admitted that he "used loopholes in the rules to get around the principles of the rules." Earlier, he explained to students at the University of Colorado: "The question I should have asked is not what is the rule, but what is the principle."
Do great numbers indicate management excellence? No. Impressive financial numbers can be achieved through manipulative and dishonest means. Worse, such numbers may have been achieved at the expense of other stakeholders of the company.
Terry Gou is founder and chairman of Hon Hai Precision, the Taipei-based manufacturer better known as Foxconn. Foxconn is China’s largest private employer and is the dominant consumer manufacturer today, producing an estimated 40% of global output for Apple, Dell, Hewlett-Packard, Sony, IBM, Nokia, Amazon, among others. According to BusinessWeek, when Gou agreed to make expensive investments to meet Apple’s exacting standards for producing the iPhone 4, then Apple COO Tim Cook remarked: "He’s a trusted partner and we are fortunate to work with him."
In 2012, at the behest of Apple and after increasing media reports of suicides and worker unrest at Foxconn plants, the Fair Labor Association (FLA) investigated conditions at the company’s facilities in China. The FLA reported that: (1) "there were periods during which some employees worked more than seven days in a row without the required minimum 24-hour break," (2) "workers were largely alienated, in fact or in perception, from factories’ safety and health committees and had little confidence in the management of health and safety issues," and (3) "14% of the workers may not receive fair compensation for unscheduled overtime." Foxconn has agreed to implement remedial measures for these issues.
In a BusinessWeek interview, Gou admitted that he failed to see the significance of the worker suicides in his plants early enough: "The first one, second one, and third one, I did not see this as a serious problem. We had around 800,000 employees, and here [in Longhua] we are about 2.1 square kilometers. At the moment, I’m feeling guilty. But at that moment, I didn’t think I should be taking full responsibility."
Does manufacturing breakthrough products establish management excellence? No. As the FLA report has shown, products such as the iPhone are sometimes produced by workers under inhumane conditions. A manager far removed from the factory floor may not be duly aware of how products are actually made.
If financial results and product excellence do not equal management excellence, what does? To begin with, excellence is a holistic and multi-dimensional concept. No single accomplishment can establish exemplary management. Also, financial and product excellence by themselves are not sustainable because they ignore the people side of business. Truly excellent management must somehow demonstrate a positive impact on everyone the business touches.
The CSR (Corporate Social Responsibility) committee of the Management Association of the Philippines (MAP) aims to promote this notion of management excellence through various activities under its operating theme of "Sustainable business for the common good," The committee will conduct training activities for faculty teaching the CHED-required Good Governance and Social Responsibility courses to business students. Educational fora on the ISO 26000 Guidance for Social Responsibility will also be held. We will develop a management framework by enhancing Porter and Kramer’s "Creating shared value" model to incorporate common good principles.
The committee also aims to promote broader and deeper involvement of women in business leadership roles. Finally, we will be launching the third MAP CSR Leadership Challenge, the MAP’s recognition program for socially responsible business practices.
Through MAP’s advocacy, we want the next generation of business leaders to have a deep understanding of what an excellently managed business really looks like. Bea Roxas, director of Roxas Holdings and president of Roxas Foundation, explained simply that in such a business, people "all grow together." Are there such businesses? The search is on.
(The author is chairman of the MAP CSR committee and chairman of the Management and Organization Department of De La Salle University.)