Business managers and value creation

Posted March 9th, 2019 by russfrazierwp and filed in Business and Economy, Low Snark Kvetching
Comments Off on Business managers and value creation

There are certain disparities between what business academics teaches and real-world organizational operations. A particularly fundamental difference relates to the conscious recognition of value creation. An MBA is taught that a firm is like a money-making machine, returning value to stakeholders by generating wealth through the act of value creation. Focusing on value creation should be a goal of organizational planning and strategy.

A desk.
A desk.

That is far from what business managers think day to day, however.

If, for example, an MBA prescribes the use of forecasting based on historical results, why would a business manager ignore the advice and use guesswork or nothing at all?

The first conclusion is that contrary to what MBAs have been taught, business managers are not interested in value creation, per se. They are far more motivated by a drive for self-determination and ego. I think this translates into the frequently expressed but vaguely defined idea of “freedom” in a business context. Value creation is too much of an abstract microeconomic concept, divorced from the everyday struggles of time and resource management, selling, operational control and career ambitions.

When people feel that their independence is being questioned, the first reaction is to resist. They aren’t ready to listen to an involved explanation as to why they should do things a certain way, supported by a significant body of management research and case studies, even if doing so suggests the result would be a higher probability of value creation. People simply don’t like being told what to do. As in other walks of life, the truth is no match for human beliefs.

My opinion is based on my work experiences in over 40 years with over 20 widely different organizations including the military, large public corporations and small privately owned operations. After all that, I can say with confidence that I can tell the difference between good and bad management. All managers have certain things in common. It is a rare one who considers an objective point of view and asks, “What if I did do it that way? Maybe my results would be better.”

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