Business Issues  

Critical Thinking : Primary Management Practices Is Everything

by Dr KC Chan and Priscilla Tanjung

In 2003, Nitin Nohria, the current dean of Harvard Business School, identified the “Must Have’s” management practices based on a five-year study of winning firms that truly produced business results. Nevertheless, these primary management practices needed to be reinforced by four secondary management practices for perpetual business excellence. See Figure 1.

Figure 1. Primary and Secondary Management Practices

Besides identifying the “4 Plus 4” management practices that can significantly affect a firm’s performance, the study developed a list of organisational behaviours that support excellence in each practice.

Organisational Behaviours at Primary Management Practices:

• Strategy
  • Build a strategy around a clear value proposition for the customer.
  • Develop strategy from the “outside in” based on what your stakeholders, i.e. customers, partners and investors have to say and how they behave.
  • Continually fine-tune your strategy base on changes in the marketplace, e.g. a new technology, a social trend, a government regulation or a competitor’s breakaway product. Critical thinking is the essence of an adaptive strategy.
  • Clearly communicate your strategy within the organization and to customers and other external stakeholders.
  • Keep focused. Grow your core business and beware of the unfamiliar.

Whatever is the chosen strategy, whether it is cost leadership or product innovation, it will work only if it is sharply defined, clearly communicated and well-understood by stakeholders, i.e. employees, customers, partners, investors, etc.

• Execution

  • Deliver products/ services that consistently meet customers’ expectations.
  • Put decision-making authority close to the front line so employees can react quickly to changing market conditions. Critical thinking is most need where the action is.
  • Constantly strive to eliminate all forms of excess and waste; improve productivity at a rate that is roughly twice the industry average. Try to attain maximum utilisation of resources to achieve best unit cost as benchmark.
Develop and maintain diligent operational execution. You may not always delight your customers, but make sure never to disappoint them, i.e. stakeholder expectations management for customer retention.

• Structure
  • Simplify. Make your organization easy to work in and work with.
  • Promote cooperation and the exchange of information across the whole company.
  • Put your best people closest to the action. Critical thinking is absolutely essential for ultimate action advantage to exceed stakeholders’ expectations.
  • Establish systems for the seamless sharing of knowledge.
Managers spend hours agonizing over how to structure their organizations. Winners show that what really counts is whether structure reduces bureaucracy and simplifies work. Structure follows strategy; adapt structure when need arises.

• Culture
  • Inspire all managers and employees to do their best.
  • Empower employees and managers to make independent decisions and to find ways to improve operations. Critical thinking is developed at all echelon levels of decisionmaking.
  • Reward achievement with pay base on performance, but keep raising the performance bar.
  • Pay psychological rewards, in addition to financial ones.
  • Create a challenging and satisfying work environment.
  • Establish and abide by clear company values.
Organisational culture advocates sometimes argue that if you can make the work fun, all else will follow. The study suggests that holding high expectations about performance matters a lot more. Critical thinking tells us that culture takes time to nurture. There are five stages of organisational development to reach maturity.

Organisational Behaviours at Secondary Management Practices:

• Talent
  • Fill mid- and high-level jobs with outstanding internal talents.
  • Create and maintain top-of-the-line training and development programs.
  • Design jobs that will intrigue and challenge your best performers.
  • Keep senior management actively involved in the selection and development of people.
Winners hold on to talented employees and develop them into holistic, systems, and critical thinkers to avoid procrastination of decision making.

• Mergers and Partnerships
  • Enter new businesses that leverage existing key stakeholder’s relationships and complement core strengths.
  • Move into new businesses that make the best use of stakeholders’ talents.
  • Develop a system for identifying, screening and closing deals.
Internally generated growth is essential, but companies that can master mergers and acquisitions can become accelerated winners.

• Leadership
  • Closely link the leadership team’s pay to its performance.
  • Encourage management to strengthen its connections with internal and external stakeholders to enrich their social capital and communication skills.
  • Inspire management to hone its capacity to spot opportunities and threats ahead of the competition, i.e. holistic skills.
  • Appoint a Board of Directors whose members have a substantial stake in the company’s success.
Choosing great executives who can execute can raise performance significantly.

• Innovation
  • Relentlessly pursue disruptive technologies to develop innovative new products/ services, i.e. transform complex and expensive products/services into simple and affordable ones.
  • Cannibalise existing products. Change mind-set from satisfying customer needs to managing customer experience, and ultimately to monitoring and controlling stakeholders’ expectations.
  • Apply new technologies to enhance all operating processes, not just those dedicated to designing new products/ services, i.e. total solutions treatment.
An agile company turns out innovative products/ services and anticipates disruptive events in an industry, rather than reacting when it may already be too late. The future competence of a world-class organisation is its ability to integrate resources for optimisation, implement strategies faster-better-cheaper for its entire supply chain, innovate continuously resulting in improvements and breakthroughs in products and services as total solutions provider.

Think before you act. Critical thinking is not good enough, so is holistic thinking; systems thinking is inadequate without holistic and critical thinking. To be sure we need all three thinking skills to fully appreciate and understand the whole situation. Hence, the need for whole brain thinking, in short, Wholistic Thinking!

Professor KC Chan is a practice professor and strategic project management and international business consultant

Priscilla Tanjung is a final year honours degree student at Petra Christian University (Surabaya, Indonesia) specialising in International Business Management