company management

Top managers are incurable, insatiable romantics. Any idea of cold-blooded, fact-driven, cost-averse calculating machines is far from reality. Often overpaid themselves, these super-optimists overpay passionately for corporate deals, promising rich success for dead-cert failures; report grand profits that were never earned and never will be; boast about exploits and methods whose brilliance is pure moonshine.

The list is endless. And, like lovers blind to the beloved's faults, these romantics believe their own romances. Their grand opera excesses are encouraged by an army of claques, some paid for applause (PR people, advertising agents, City pundits, consultants, etc), some free. The freebies include not only journalists, but academics. One super-guru, for example, even praised the despicable Enron - then widely hailed (Heaven forfend) as prime model for 21st century corporations.

In The Fusion Manager, I seek to explain and expound the reality behind the romances. All sane managers understand this reality, because it governs their actual (as opposed to their idealised) lives. It's the reality of the trade-off. You cannot, for example, at the same time maximize short-term profit and long-term business development. You cannot achieve maximum discipline and control through order-and-obey cultures and yet simultaneously win full and free flows of creativity and innovation. Every success, moreover, carries within the seed of its own failure - even the latest Big Idea.

The chief damage done by the gurus is to encourage the myth of the One Right Answer, the all-purpose ideology that will infallibly transform even corporate sow's ears into silken purses. Of these blockbusters, none has ever come bigger than the Cult of Shareholder Value. Company after company succumbed to the enticing notion that managers should devote themselves to investor interests through dynamic policies that would drive the share price onwards and upwards into the wild blue yonder.

SV lasted longer than any previous fad or fashion - indeed, it still lingers on, despite sickening crashes in share prices which demolished shareholder value. The longevity is easily explained. The Cult coincided with, and reinforced, the ripest years of a wondrous bull market. It seemed to automatically unite the self-interests of investors and managers. Most seductively, it locked leaders into a get-rich-quick system, where they could effectively write and sign their own seven (or eight or even nine) figure cheques.

The Cult of SV became the Cult of CEO Value. It focused managements on the one key variable beyond their (legal) control - the share price. It stopped them from concentrating on the metrics (often not financial) that tell the unromantic truths about a business. SV seduced CEOs into believing that, the richer they become personally, the more they benefit outside shareholders. It made these mere mortals see themselves as Gods of Management.

This hubris stands in amazing contrast to the mood of the 1980s, when Western management was widely castigated (and flagellated itself) for defeats at Japanese hands. Far from chasing the share price, Japan's champions ignored short-term considerations in the pursuit of long-term market penetration, productivity and growth. Far from romanticizing their success, they took an uncompromising, hard-nosed approach to their failures. An entire management culture burgeoned around continuous improvement - and the Western romantics lapped it up.

Eastern predllections like quality circles surfaced in the West. Some companies went the whole hog, plunging into Total Quality Management. But like other Big Idea enthusiasms - from Management by Objectives to Business Process Reengineering - TQM faded from fashion. It has reappeared late in the day under the disguise of Six Sigma, blessed by SV management's arch-hero, Jack Welch of General Electric. Even so, Six Sigma has also had limited impact, even though the basic quality principle is undeniable: that all operations can always be improved by planned and trained bottom-up methodology.

But Six Sigma success (3.4 defects per million parts) won't much help a company that's pursuing the wrong strategy (like Welch's swansong failure to capture Honeywell) and/or the wrong business. One favoured guru-word is truly relevant: holistic. Management is endlessly many-sided. If that sounds paradoxical, so it is. The true fusion manager seeks to optimise every one of the multiple facets, while knowing the impossibility of the task: just as true quality managers must seek a perfection that can never be achieved.

The unachievable aim of holism is a complete and self-contained system greater than the sum of its parts. Notoriously, organizations succeed in achieving less than that sum (i.e, they fail). Every manager has personal experience of the causes of this systemic malfunction: the decisions that get stuck and often lost in hierarchical bottlenecks; the opportunities that go unseized because of over-centralised and rigid control; the self-satisfaction that ignores mistakes until too much damage is done; the talent barred from expressing itself; and much, much more.

The greatest mistake, though, is to accept these ailments as inevitable and incurable. Thanks to the gurus and the most responsive managers, knowledge of best practice is far greater than ever before. Systemic defects respond admirably to therapists who treat underlying illness rather than symptoms - and who understand, first, that optimisation (that is, effective trading-off) is the objective: second, that nothing lasts for ever - repeated reform and renewal are indispensable, keeping the best of the old while zestfully adopting the best of the new.

That new-old combo is the essence of fusion management, which also seeks to combine the entrepreneurial dynamism of the West with the philosophic patience of the East. You create Western Shareholder Value, paradoxically again, by not trying to: an approach which any Zen master would recognise. Two Harvard professors once compared exclusively 'shareholder-first' companies with those that valued all stakeholders equally. Over 11 years, the egalitarians outdid the former by 12 times on share price and (astoundingly) 756 times in profit growth.

Egalitarian managers confine romance to big ambitions rather than Big Ideas, basing achievable, exciting visions on prosaic, pragmatic effectiveness. That fusion is how mere mortals stop being mere - and generate genuine, lasting value for one and all.

Robert Heller's book, The Fusion Manager, is published by Profile Books at £14.99