The Proven Benefits of "Structured Management"

Joel Trammell

Posted by Joel Trammell
May 19, 2017

What's one of the most surprising traits of great leaders? They also tend to be great managers.

“Management” is typically seen as a lower form of leadership. But in my estimation, it’s just as important. While leadership is about influencing what you can’t control (how inspired and engaged your employees are, how invested they are in the company’s vision), management is all about managing what you can control (who to hire, what targets to aim for, how to allocate resources, and how to adjust when problems or opportunities arise).

Both sides of that coin are vital, no matter where in the corporate hierarchy you stand.

A recent study from the National Bureau of Economic Research supports the idea that successful executives exhibit good management and foster it throughout their organizations. Analyzing US Census Bureau data from 32,000 manufacturing firms, researchers from Stanford, MIT, and elsewhere found a strong correlation between “structured management practices” and a firm’s growth, profitability, workforce productivity, and innovation. 

Each firm answered sixteen questions relating to its management practices, including:

  • “How many key performance indicators were monitored at this establishment?”
  • “How frequently were the key performance indicators reviewed by managers at this establishment?”
  • “Who was aware of the production targets at this establishment?”
  • “What was the primary way non-managers were promoted at this establishment?”

Based on its responses, firms were assigned a single management score, rating how structured and consistent their management practices were. The higher the score, the greater the firm’s productivity, profitability, growth, and innovation.

The paper’s authors write:

This relationship is robust to a wide range of controls including industry, education, establishment and firm age, and potential survey noise. . . . These management practices also have a highly significant predictive power for future growth and firm survival. 

The findings align with my own long-held belief that a consistent, repeatable management system gives any organization an edge. So many companies run willy-nilly—targets unclear, data and insight unused, poor managers entrenched throughout the organization—that even a simple management framework can help you deliver far superior outcomes.

“But wait a second,” you might say. “This was a study of manufacturing firms! That's not what I'm running.”

Good point. Manufacturing environments are different from organizations where knowledge work is predominant. Yet I would argue that in knowledge-based workplaces, structured management practices are even more vital.

When your employees work with knowledge and use creative initiative to perform their roles, it’s more difficult for a manager to monitor the work. In most cases, there’s nothing concrete to look at. Even the hard numbers must be placed in context by the employees who understand them best. In this nebulous, human-centered environment, placing structure around management practices is particularly essential. Without a system, the executive team will remain in the dark and be unable to lead effectively.

Interestingly, there’s also research to support the benefits of structured management in organizations that are not exclusively in manufacturing. A different research paper titled “Structured Management Processes Lead to Better Business Performance” concludes that:

Companies that have adopted clearly defined, well-structured, repeatable processes for strategy setting, business planning, and decision making are more able to make well-informed and timely decisions in response to internal and external changes. 

The paper also finds that these companies are more collaborative and better at business planning and reporting.

In light of research like this, I would encourage every executive to ask themselves: Do we have consistent, repeatable management practices in our organization? If not, what can we do to construct a management framework that is appropriate for our organization?

Ultimately, this is about institutionalizing management excellence. It’s about ensuring that the CEO has a system for communicating targets and reviewing performance, and that every manager in the business is looped into this system and managing his or her team well.

Where to start? First, check out the US Census Bureau’s “Management and Organizational Practices Survey.” What do you think your management score would be?

Second, you can make sure you have at least the bare bones of a management system in place. I’ve cherry-picked a few concepts from the Census survey that in my experience as CEO comprise a good starting point:

  1. Establish key goals and metrics at the company and department levels. Make them specific, relevant to your strategy, and supportable by most of the organization. I recommend these goals be reset on a quarterly cadence.
  1. Share goals and metrics with everyone. Everyone should be consistently aware of what the company is trying to achieve and how their team contributes.
  1. Review performance against key goals and metrics every week. The CEO and executives should examine how the organization is tracking against its targets weekly, based on input from employees across the organization.
  1. Ensure that managers coach and evaluate effectively. Formal performance-based feedback should be delivered to each employee at least once a quarter. Information about which employees are high performers as well as which are underperforming each quarter should be transmitted up to the CEO.

Your management system shouldn’t be top-down, rigid, or onerous. Instead, look to incorporate a few simple, consistent management practices into your company’s operations. Because, ultimately, leaders are only effective when they can manage well too.

If you want to make sure basic management hygiene is practiced across your organization, I would also recommend distributing my company’s ebook Manager Fundamentals.

Joel Trammell

Joel Trammell

Joel Trammell is the founder and chairman of Khorus Software. He currently serves as CEO of Black Box Network Services. His book, The CEO Tightrope, is a guide to the chief-executive role.

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