How to manage a company – and how not to

The governance and management crisis in our state-owned enterprises will eventually lead to their collapse, says Peter Hughes. But people in glass houses shouldn’t throw stones. How is your organisation doing?

How to manage a company –  and how not to
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Imagine you’re managing a subsidiary of the listed company, ABC Corp. Let’s call it XYZ, It has its own board of directors and your boss is the chairperson. XYZ has not been doing well lately due to factors entirely out of your control.

One morning you open the daily newspaper, and there’s a statement by a senior director of ABC blaming you personally for the poor performance of XYZ, insinuating that you have been sabotaging the company.

You expect to receive a speedy call from your boss about this scandalous statement, but there’s not a word from any of your superiors.

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Then, out of the blue, ABC appoints one of its directors to oversee the performance of XYZ, usurping the role of your chairperson. You finally contact your boss, and find him as upset as you are. He says he’ll take the matter up with the ABC board, but you hear no more from him.

The appointed ABC director is soon snooping around the company, bypassing you and your boss. The chairperson of ABC, the ABC director and the XYZ chairperson are soon at each other’s throats, trading insults and allocating blame.

Sound familiar? To a greater or lesser degree, it’s something likely to be happening in most of the 300 South African state-owned enterprises (SOEs).

There has never been, and never will be, a great organisation which ignores the following six crucial principles and processes:

Shared vision
Few, if any forces in human affairs, are as powerful as a shared vision, says Peter Senge MIT Sloan School of Management, and developing a vision and gaining support from all stakeholders galvanises focus and commitment like nothing else. It’s the most important role of any leader.

Corporate governance
Without the following characteristics governance and performance will flounder:

  • The rule of law is sacrosanct;
  • The highest standards of ethics and integrity apply;
  • Individuals are held accountable for their performance;
  • A culture of transparency and openness exists;
  • Equity and inclusiveness apply to all.

Management structure
The management structure draws on the natural talents of employees, and offers opportunity for personal growth and development. In addition it:

  • delineates boss-subordinate relationships and lines of authority;
    demarcates communication channels vertically, between different levels of management, and horizontally, between departments or teams;
  • provides guidelines for decision-making, involvement of all relevant stakeholders and gaining of different perspectives;
  • is adaptable to change;
  • assists in identification and development of successors.

Job description
A job description agreed between boss and subordinate is essential. It must be short and simple. It must focus on outputs, not inputs, on results expected, not on how time is spent.

It should draw on the personal skills and talents of the employee. It must cover the detail of the job, and encompass all possible areas the job may be required to cover. Finally, the job description must be reviewed regularly.

Recruitment, selection and employment is based entirely on merit. It is handled by professionals in the field. Nepotism and patronage by managers is a dismissible offence.

Performance management
Proven performance management and evaluation systems incorporating the following elements are in place:

  • Clear and measurable goals are agreed upon and reviewed routinely between boss and subordinate;
  • Regular feedback is provided with a formal documented review once per annum;
  • Performance evaluation is based on the agreed goals and desired behaviours;
  • Areas for improvement are identified and solutions agreed;
  • Development and training needs are agreed and programmed.

The SOEs in South Africa provide the perfect example of how not to govern and manage any organisation or company, but people in glass houses shouldn’t throw stones. If your organisation ignores these six principles, eventually it will catch up with you, and as my cynical business-school-trained son says, you too could go SOE – ‘straight over the edge’!

Peter Hughes is a business and management consultant.