NOV 16, 2009 5:25am ET

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Highly Irritating Management Gurus

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The Economist was angry. Rarely have I seen an article as inflammatory as Schumpeter: The three habits ... of highly irritating management gurus. Usually subdued and intellectual, the Economist apparently had had about enough of the non-accountable tomes from consultants like Stephen Covey, author of The 7 Habits of Highly Effective People, which provide prescriptions for business success using a combination of the latest management fads and self-help formulas.

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Comments (2)
Great bit of defrocking Steve. The myth of trainable traits among leaders that drive wild success was torn down well before Jeff Immelt said a German Shepherd could have run GE as well as Jack Welch did in the 1990s.

There's another good piece on charismatic leaders in Atlantic Monthly from June. http://www.theatlantic.com/doc/200906/steve-jobs/3

I'm more in the camp of situational success myself. You can't just plug a nice Italian suit into a business model. Maybe that accounts for all the ads for CEOs in The Economist.

Jim

Posted by Jim E | Wednesday, November 18 2009 at 4:26PM ET
A good example is Jim Collins' book "Good to Great", which has been at the top of business book sales for years. I read it during an MBA Leadership class. Collins and students identified companies whose stock returns greatly improved over a few years and evaluated possible management drivers behind the "companies improving". This makes a newbie mistake that should be obvious to any student of finance. Stock prices don't increase because a company improves. They go up because the company did better than analysts (market) expected, which could even be "declined slower". Expected future performance is built into today's price.

Collins should have asked why these companies did better than expected. I pointed this out in my paper, but the professor was one of them (runs consulting business) and either didn't understand my argument or perhaps didn't read the papers. My explanation was that in most cases Collins profiled, the companies had developed a solution that was cheap to clone. Development cost was "water under the bridge" at the starting interval. Nucor, with their mini steel mills was a perfect example. Stock analysts have little understanding of engineering and the hardware that runs industry. They make their decisions by sitting in NYC reading balance sheets and SEC filings. Has one ever been seen on a factory floor?

Collins attributes too much to the corporate office. Everywhere I have worked they have been amazingly clueless. However, I don't disagree with his finding that most of the profiled companies were better run because the CEO's worked their way up from the trenches. None were flashy Jack Welch'es with a fad "rank and yank" mandate.

Posted by William G | Wednesday, November 18 2009 at 5:14PM ET
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