Principles of General Management

Principles of General Management: The Art and Science of Getting Results Across Organizational Boundaries

John L. Colley
Jacqueline L. Doyle
Robert D. Hardie
George W. Logan
Wallace Stettinius
Foreword by Robert F. Bruner
Copyright Date: 2007
Published by: Yale University Press
Pages: 488
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  • Book Info
    Principles of General Management
    Book Description:

    Stop! If you have been looking for the one resource for managing a business of any size, this is it. Based on the extensive business experience of five experts, this authoritative guide provides an in-depth look at what every leader must know about managing across departments, functions, divisions, or companies.

    Drawing on decades of combined experience, John Colley and colleagues detail the wide range of skills, tools, and conceptual understanding as well as the qualities of leadership that a successful general manager must acquire. In an era of specialization and specialists, the authors return due focus to the generalist. No other book so passionately and thoroughly examines the roles and responsibilities of the general manager and the full scope of this distinct, pressure-filled occupation. The authors explore the quantitative and qualitative aspects of the job and discuss how the skilled manager moves an organization from abstract goals to definitive action. For every profit center or plant manager, function head, division president, or CEO, this book is indispensable reading.

    eISBN: 978-0-300-13491-9
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
    (pp. ix-xii)

    The general manager has a predicament unlike any other. This person is subject to immense pressure from others, must have a bias for action, and yet must analyze carefully and comprehensively, often under conditions of incomplete information. General managers do not solve problems; they manage messes. Russell Ackoff, professor at the Wharton School, wrote, “Managers are not confronted with problems that are independent of each other, but with dynamic situations that consist of complex systems of changing problems that interact with each other. I call such situationsmesses. . . Managers do not solve problems: they manage messes.” General...

    (pp. xiii-xviii)
    (pp. xix-xx)
  6. Part I: Introduction to General Management
    • [Part I: Introduction]
      (pp. 1-2)

      Part I of this book introduces the reader to the roles and tasks of the general manager (GM) and the contexts within which these activities take place. These contexts (settings) include the broader economic system that determines the “rules of the game,” the overall setting within which the business is governed and organized, and the general manager’s personal orientation and management style.

      A business operates within a system of economic, political, and social forces over which the general manager has very little, if any, control. These forces must be understood, along with the impact they are having and will continue...

      (pp. 3-14)

      The termsgeneral managementandgeneral managerhave been in use since the early twentieth century, along with an extensive litany of substitutes, to refer to a field of study or practice and the associated practitioner in the realm of the modern corporation. As with most broad subjects, numerous interpretations of the terms exist, along with variations and inconsistencies in their form and application.

      General management addresses sources of income or revenue (sales) as well as expenses, with the difference between these two measures determining a level of profit or loss. General managers therefore have what is commonly referred to...

      (pp. 15-39)

      We begin our examination of the position of chief executive officer (CEO) in an organizational context with a discussion of how the nature of the business ownership affects the structure. Then we shift our discussion to the level of the board of directors, for it is the board that ultimately represents the interests of the owners (shareholders) of the business and hires the CEO. We then discuss how the board interfaces with management and evaluates its performance. Finally we discuss how the CEO shapes the organization’s structure.

      The nature of a company’s ownership—whether it is publicly or privately owned—...

      (pp. 40-60)

      The responsibilities of the general manager of a business encompass a wide variety of roles and tasks. In some way, nearly every major role of the general manager involves making decisions. These decisions, ranging from straightforward to complex, may address simply whether to perpetuate the status quo in some facet of the organization (often viewed as no decision at all), or they may encompass considering a broad range of variables and options in the context of the global economy. The outcomes of this wide variety of decisions faced by a general manager, collectively and sometimes individually, will undoubtedly have a...

  7. Part II: The General Management Process:: Planning
    • [Part II: Introduction]
      (pp. 61-63)

      At any point in time, every business organization is at a given position in its long-term journey. It has a degree of momentum from that point in some direction. The question is whether the momentum is moving the business in the direction desired by those who are responsible. It is reasonable to ask first whether management knows the preferred destination, or even where the business can feasibly hope to move. And, if the destination is known, does management know what actions should be taken to maximize the likelihood of getting there? The answers to these questions are the essence of...

      (pp. 64-84)

      Today’s competitive business environment demands the evaluation of results. In the economic context of a free market built on the precepts of capitalism and competition, managers are constantly under pressure to perform and to explain their performance. This attribute of a competitive marketplace is logical; if investors are to make informed decisions about buying and selling shares of corporations, they should have access to all available accurate, current information. Performance has numer ous dimensions.

      Some managers have a disdain for strategy and strategic planning, assuming these methods are too theoretical for practical use. Every successful company, however, benefits from an...

      (pp. 85-109)

      The strategic thinking phase of strategic management requires a review at the level of each business the organization operates, and if there is more than one, at the corporate or parent level as well. We begin this chapter by examining the corporate level, and then move to the business or divisional level. Many of the lessons for and concerns of the general manager at one level are shared by the general manager of the other.

      Corporate strategy formulation consists of looking toward the future, providing direction to the firm beginning with the industries in which the firm chooses to compete...

      (pp. 110-136)

      In Chapter 5, we are introduced to the strategic management process and its components, and we explore the concept of setting goals for an organization. We are also introduced to the notion of a necessary beginning of the strategic planning process and accompanying groundwork to which a general manager must attend before launching this process in an inexperienced organization. For many businesses, though, particularly larger ones, the process is well under way, both as a reactive course of action and as a formal and regular practice.

      The strategic management process, as laid out in Exhibit 5-1, addresses the ongoing scanning...

      (pp. 137-150)

      This chapter addresses the development of the planning documents that articulate and communicate the broad plans to implement the organization’s strategy and achieve its goals. Carefully documenting the strategies and plans for achieving them is an important discipline that forces management to sharpen its thinking and bring issues into focus. The written documents are the fundamental bases for the all-important communications effort that is essential to executing the plans successfully.

      The end product of the strategic planning effort consists of three documents:

      1. The strategic plan

      2. The business plan

      3. The annual plan

      This chapter addresses the first of...

      (pp. 151-174)

      The business plan and annual plan are intended to project the aggregate performance of the organization by capturing all potential sources of revenue and expenses, and, consequently, profit or loss. These two plans should include detailed product, marketing, and pricing plans for each business, whether focused or part of a diversified collection. For an organization to maintain long-term prosperity, the expected revenues and the costs to generate them for each business must demonstrate a viable economic model in terms of expected income levels, return on investment, and cash flow. Similarly, the asset base and the resultant capital structure must provide...

      (pp. 175-190)

      No strategy has value until it leads to action. Whereas the strategic plan is about direction and momentum, and the business plan is about the scale of future operations and the requisite resources, the annual plan is about action. It is about what will be done during the next year to create the kind of future the general manager desires, with an emphasis on meeting the current operating goals. It is important to keep in mind that a strong future consists of a series of strong individual years. A down year in profitability, whatever the reason, causes a pattern of...

  8. Part III: Analytical Concepts for the General Manager
    • [Part III: Introduction]
      (pp. 191-193)

      Part I of this book describes the roles and tasks of general managers and the economic and organizational context within which these activities take place. Part II covers the strategic planning process from the initial impetus for clarity propounded by the investment community (the sources of capital) to the preparation of the annual plan or budget, which provides a detailed plan of action for the organization in the immediate future. Part IV covers the detailed topics related to the numerous ways in which general managers take action.

      “Analytical Concepts for the General Manager,” is inserted between Parts II and IV...

      (pp. 194-206)

      The general manager has the responsibility to operate a business to maximize long-term shareholder value for the investors. Profit is the reward for successfully creating or attracting customers; the potential for profit attracts investors; and the realization of profit (or expected realization of profit) ultimately increases shareholder value. The general manager must therefore translate the intent to satisfy customers into a viable financial framework, given the business model of the firm.

      The organization sets goals and objectives based on measurable results to guide management and the organization to create value. Goals typically encompass aims for profits, return on investment, cash...

      (pp. 207-214)

      A corporate manager attempts to achieve a pattern of improving operating results that are predictable from year to year. A number of different criteria are used to measure financial performance, including the levels of profit or cash flow and the growth rate of sales, assets, or profits. This chapter presents analytical relationships between a firm’s growth rate and cash flow. These relationships provide tools that assist in the process of developing feasible, self-reinforcing sets of operating goals, and in making efficient trade-offs among competing objectives. The computing technology available today makes the generation of pro forma financial statements a straightforward...

      (pp. 215-223)

      As described earlier, the control stage of the strategic planning process compares results with goals or targets and notes exceptions for corrective action. Control activities take place throughout the organization at an overall level, and within each functional department at a detailed level. At a profit-center level, the general manager must exercise control to ensure that the product, marketing/pricing, and manufacturing strategies are realistic and provide a framework for successful business operations. This process is described in some detail in Chapter 3 in the discussion of managing the functional interfaces and, in a broader context, in Chapter 10 as the...

      (pp. 224-246)

      The understanding, management, and improvement of productivity, and their relationship to competitiveness are compelling aspects of general management. Competing organizations often have access to the same or similar production technology, as well as the same or comparable supplies and suppliers of raw materials and finished parts. When a firm does have proprietary technology, it can have a significant competitive advantage. But, in most situations, competitive advantage results from neither the availability of technology nor the cost of purchased goods. A preponderance of the other noninterest costs—the remaining direct costs; sales, general, and administrative (SG&A) costs; other overhead costs; and...

      (pp. 247-261)

      Measuring the profitability and value of a business is very important because it is a key consideration when there is discussion of a merger or acquisition, when capital investment decisions are being considered, and in designing management incentive compensation plans. Investors have the same challenge when deciding whether or not to buy or sell a company’s stock. General managers must regularly evaluate the performance of their operating business units, and that is the perspective on which we are focused in this chapter.

      The efficiency with which a profit center (division or subsidiary) of a diversified, decentralized company employs its assets...

      (pp. 262-274)

      The allocation of available and anticipated levels of cash to strategic and operational initiatives constitutes one of the most important duties of the general manager. A firm begins competing with a prescribed capital structure, normally consisting of a combination of debt and equity. Throughout this book, the examples have stressed the great strategic value attributable to a strong balance sheet. There is, of course, a wide diversity of opinion about the definition of a “strong balance sheet.” For the purposes of this book, we assume that a (book value) debt to capital ratio of .35, which corresponds roughly to an...

      (pp. 275-286)

      Share repurchases have become a widely used strategic tool for U.S. corporations (see Exhibit 16-1). This chapter explores the reasons why corporations repurchase shares, how share repurchase plans are implemented, and the implications of those plans.

      There are four key reasons a company repurchases its outstanding shares:

      To return excess funds to shareholders

      To increase the proportion of debt in the company’s capital structure

      To signal the management’s confidence in the company’s stock to the financial markets

      To mount a corporate takeover defense

      Companies also may choose to buy back shares in order to have them available for subsequent issue...

  9. Part IV: General Managers Taking Action
    • [Part IV: Introduction]
      (pp. 287-288)

      The general manager is faced with the challenge of converting the previously developed plans into action—to make the right things happen, and to accomplish them effectively. No matter how brilliant the strategies are or how well they have been planned, at the end of the day, management must take actions that produce the desired results.

      Part IV begins with Chapter 17, “Making Effective Decisions.” The effectiveness of the leader determines how well an organization functions. The most successful leaders are prone to action, since meeting goals and operating effectively require strong management. General managers must exhibit the combined skills...

      (pp. 289-308)

      In Chapter 3, general managers are described as serving as both leaders and managers, which are important and different, but complementary, roles. Contemporary management literature includes many definitions of leadership and management and discussions of the distinctions between the two terms. Our understanding of these terms is explained in Chapter 3 and is restated here. Managers are focused on the present, assuming responsibility for profit and loss and managing the functional interfaces. Leaders are seen as having a focus on the future and defining the need for and the desired pace of change. Leaders determine where the organization should go,...

      (pp. 309-322)

      Organizing has deep anthropological roots. Over time, human biological and social needs to organize expanded to include political and economic motivations. Initially, the military, the church, and the temporal powers (usually city-states or countries) were the only entities large enough to be faced with critical organizational challenges. This began to change with the Industrial Revolution in the latter half of the eighteenth century, during which larger, more complex businesses were created. The need for organization in commerce and industry became increasingly more important during this era.

      In 1962, Alfred D. Chandler wroteStrategy and Structure: Chapters in the History of...

    • 19 STAFFING
      (pp. 323-345)

      A general manager must realize that the likely effectiveness of even the “ideal” strategy and its related plans is dependent on people and how they perform. Personnel, from the hourly workers to the general manager, are therefore essential strategic resources.

      Every general manager must recognize that there are limitations on his or her effective span of control, and must therefore learn to delegate the authority for certain actions to others. The act of delegating requires that those to whom the authority is delegated be competent to assume responsibility for achieving appropriate results in a timely way. Few, if any, principles...

      (pp. 346-360)

      An organization is a collection of many parts that must operate in a coordinated way to function effectively as an integrated whole. Bringing about this coordination and essential collaboration between and among the parts of a business organization is one of the major challenges facing a general manager. When these tasks are not done skillfully, severe operating problems may occur, accompanied by weak results and ongoing disputes among functions and groups within the organization.

      Business integration occurs on various levels. Three primary levels of integration include the following:

      Integration of the functional activities within a focused business activity: This has...

    • 21 EXECUTING
      (pp. 361-374)

      Execution is the process of converting strategies into detailed operational plans and then into action. The plans and associated actions are tactical, meaning that the management team focuses on how to perform the tasks (doing things right) as opposed to what actions to take (doing the right things), the latter representing the strategic view. Functional operating plans are devised to meet functional goals that align with the firm’s strategies and are coordinated between the functions. These plans should consist of specific manageable actions and designate clearly who is to do what by when. They should include budgets and timetables, and...

  10. Part V: In Summation
    • [Part V: Introduction]
      (pp. 375-376)

      We reach Part V of this book having cover ed the basics of general management, beginning in the thr ee chapters of Part I with the economic and organizational contexts within which the general manager functions and a delineation of the general manager’s roles and tasks. The six chapters in Part II describe the strategic management process, beginning with the factors that impel a general manager to engage in strategic management and ending with the three key planning documents—the strategic plan, the multiyear business plan, and the annual plan or budget. The seven chapters in Part III present a...

      (pp. 377-389)

      Controlling may be defined as guiding or managing an organization in response to understanding what is happening within the organization and in its environment. In smaller businesses, the general manager generally participates in or directly observes the activities of the organization. As businesses grow, however, general managers are led by circumstances to delegate, first to one subordinate management level, and eventually to personnel in a number of organizational levels.

      Delegation brings its own set of managerial challenges. The general manager is often quite removed in time and space from delegated activities, so there is little opportunity for him or her...

      (pp. 390-402)

      Learning is one of the most important skills of a general manager and his or her collective organization. The pace of change through the first half of the twentieth century was quite slow when compared to today. For generations, craftsmen could learn their trades at a young age and pursue them for a lifetime. Improvements were primarily in tools and machines that did not obsolete the craft skills. An example was the Linotype machine used to set type for printing, which was a mechanical marvel when it was invented in 1885. With minor, evolutionary improvements, the machine was used as...

      (pp. 403-414)

      Public relations and advocacy are important aspects of the general manager’s responsibilities, although they are generally given little emphasis in the curricula of most business schools. They are similar functions in that they both deal with relationships with key stakeholders and the external community. While public relations is primarily about building and maintaining the corporate image, advocacy is about protecting and advancing the interests of the business with the rule makers and rule enforcers at all levels of government and in other relevant institutions. For certain CEOs whose organizations have operations in countries around the globe, advocacy may even encompass...

      (pp. 415-434)

      In this closing chapter, we reflect on the general manager and general management from the perspectives provided within the earlier chapters. Our view is that the concept of general management must be well understood by all persons involved in governance and management because of its importance to an organization’s success. An organization that does not have effective general management eventually will be incoherent, uncoordinated, and unsuccessful.

      The success of the business is important to the people who are invested in it—those who invest their capital, the employees who invest their time and careers, the customers who depend on its...

  11. NOTES
    (pp. 435-438)
    (pp. 439-448)
  13. INDEX
    (pp. 449-468)