Articles

When an activity turns into a buzzword, the odds are high that managers will stop thinking consciously about the behavior they’re trying to elicit and the best way to set expectations clearly. That’s why it’s important to pay attention when buzzwords take over management’s most important responsibilities. Business writer Joan Magretta explains, for example, how thinking outside the box,” a phrase that makes many people cringe, is a useful metaphor when properly understood. The vital work of innovation in companies is sparked precisely because there is a box & #8212; a puzzle with rules that limit and define good solutions. Managers must clearly understand the constraints & #8212; the shape of the box & #8212; if they are to help their employees think sensibly about innovation. She also takes on “resource allocation,” a dry-as-dust technocratic phrase that actually refers to one of management’s most difficult and emotionally charged responsibilities. The crux of the matter is that providing resources for one project means not giving them to another. In other words, it means that managers often have to say no when it is easier to say yes. Last, she focuses on “respect for the individual,” a phrase that, even when used sincerely (and often it’s said insincerely), implies a kind of everyone-gets-treated-the-same ideal. In an organizational context, this phrase really refers to management’s need to match the right individual to the job & #8212; and harsh as it may sound, to fire those who are in jobs they can’t perform. Buzzwords and catchphrases can speed communication. But when it comes to the messy, human realities of management, a dose of straight talk & #8212; and clear thinking & #8212; can go a long way.

In an often overemphasized focus on efficiency, many companies turn to packaged information-technology systems to manage business processes. University of Michigan Business School professors C.K. Prahalad and M.S. Krishnan suggest they should be more concerned about strategy & #8212; and getting line managers and IT managers to use information systems in ways that facilitate strategic change. A new applications-portfolio scorecard helps managers assess information infrastructure before making investments. Six key considerations are each IT application’s role in strategy, whether the knowledge embodied in the application (say, salaries in a payroll application) is stable or evolving, how much change will be needed, where the application will be sourced, whether the data is proprietary or public, and the application’s freedom from conformance defects. Those parameters differ for different functions. Managers may not need the latest software for a stable function. They may decide not to purchase a customized package, because it could be out of sync with the vendor’s future software. Only those companies that deeply analyze what they need from each IT application will acquire the right portfolio. The authors’ work with 500 executives revealed that few managers believed their information infrastructure was able to handle the pressures from deregulation, globalization, ubiquitous connectivity and the convergence of industries and technologies. Though fully aware their organizations lacked rapid-response capability or flexibility, the managers rarely knew how to fix the disconnection between the quality of IT infrastructures and the need for strategic change. Considering that information-infrastructure expenditures are generally 2% to 8% of companies’ revenues, new measures to address the disconnection are essential. A corresponding change in the mind-sets and the skill sets of smart line managers and IT managers also is helping improve overall competitiveness.

Are companies that purchase ancillary services from their auditors more likely to manage earnings?

A down economy is not the time to “slash-and-burn,” but rather to ensure growth potential during the ensuing rebound. This requires a focus on strengthening key relationships, capitalizing on underutilized staff, clarifying strategic roles and forging stronger links between compensation and results.” More than 20,000 times last year, midsize and large U.S. companies responded to adversity by slashing on average 100 staffers at a time. It’s a safe assumption, says compensation consultant Jeffrey Oxman, that many of those organizations destroyed value by cutting capacity they soon had to replace, by making poor choices as to who should go and who should stay, by failing to communicate the rationale for change so as to keep surviving employees motivated, and by missing the opportunity to rethink their business model to optimize their positioning for the recovery ahead. Such issues, says Oxman, go beyond the question of layoffs; they go to the heart of how companies can avoid lasting damage and build long-term value. The conventional wisdom is suspect. Recessionary economies may not require re-engineering or moving noncore competencies outside the organization for greater efficiency. Oxman suggests four critical ways to prepare for economic recovery: strengthening key relationships across customers, employees and shareholders; leveraging downtime by capitalizing on underutilized staff for innovation initiatives; refocusing staff on what’s important by prioritizing strategic roles and clarifying individual goals; and building return on compensation by forging stronger links between pay and results.

When companies first plunged into e-commerce, they thought success meant cutting out middlemen. That approach didn’t work, in part because e-businesses misunderstood the role of intermediaries. Middlemen are not costly, necessary evils. They solve problems for customers and, in so doing, they enable sales and create value for producers. INSEAD’s Philip Anderson and Erin Anderson show how intermediaries are helping smart companies realize the promise of the Web. They explain intermediaries’ nine ways of adding value, suggesting that three will change, three will survive in a new form, and three (reducing uncertainty about quality, preserving customer anonymity and tailoring offerings to customer needs) present growth opportunities. Middlemen can co-opt the Internet by offering services that would be too difficult for individual producers to provide. However, the authors caution, intermediaries must be open to new ways of doing business with suppliers and vice versa. The Web transforms but does not eliminate the advantages of the middleman’s central lookout position. But what was once thought of as a straight distribution channel from supplier through middleman to customer is now more accurately described as a service hub. The player that takes the customer order & #8212; possibly a Web site & #8212; occupies the center and interacts with many partners. The authors specify appropriate, fair incentives (for example, because Ethan Allen has quasi-independent furniture stores that customers browse before buying directly from the manufacturer’s Web site, the company automatically gives the nearest retailer a 10% tip). And they describe service-hub management that will generate enough trust to permit producers to get closer to customers & #8212; indirectly.

The answer to the question, "Who are we?" is complex, elusive and can confound strategic change.

Walking the fine edge between efficiency and consensus.

IT professionals may be uniquely positioned to see and affect a company's "big picture."