| Insurmountable
Problems |
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In small organizations the leader very often has a rather thorough command
of the various details involved in the running of the business and is quite
capable of making most of the important decisions. |
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The leader of the organization is close to the customers, deals with the
employees on a personal basis, knows everyone by name and knows their skills,
abilities, and backgrounds. The leader knows the customers, suppliers,
and is quite capable of making appropriate decisions. |
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Of course if the leader is deficient in some specific business area, this
can have ultimate disastrous results for the organization. For example,
a leader deficient in financial analysis and financial planning will often
lead the company into financial straits. A leader deficient in sales and
marketing will often find the company withering on the vine. A leader lacking
entrepreneurial capabilities will often find the company drifting into
obsolescence and ultimately a decline in business and so forth. |
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One common solution to this problem is for small business leaders to form
partnerships. In the ideal situation the partners can compliment each other
and make up for any mutual deficiencies. |
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The traditional management method is not only appropriate in small organizations,
but is probably the only one that is practical. However, as organizations
grow and become larger it is increasingly demanding on top management,
the leader for example, to keep track of the various details of the organization. |
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It is difficult for the leader to remain in touch with the customers and
suppliers, to understand the various activities in the various departments,
and to make timely and even appropriate decisions. Very often as the company
grows, the leader feels stressed and out of control because the demands
of decision making on the leader have become greater and greater. The larger
the organization or the faster growing the organization, the more this
problem is aggravated. |
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In larger and rapidly growing businesses traditional management structures
are simply not adequate. |
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Management has two fundamental responsibilities. 1.) is to make decisions
and 2.) is cause decisions to be implemented. |
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Traditional management structures make this more and more difficult as
the business grows. It is inefficient and expensive to send information
up and down the corporate pyramid. It becomes hard to understand where
people fit in. The division of the company into various departments or
profit centers often creates serious internal conflicts of interest that
can be a terrific drag on the organization (see the Local
Optimization Fallacy ). |
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Management By Objectives turns out to be a deficient technique. Setting
objectives does not in any way indicate how the objective will be achieved.
Very often the objectives cause actions to take place that are in the long
term and in the global sense very counterproductive. |
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Tampering tends to be rampant in an MBO traditionally managed organization.
This in turn is very destructive to the productivity of the organization. |
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The bottom line is that as our economies and organizations become evermore
complex, as the environment is changing evermore rapidly, and response
time requirements are increasing, the old management structures are simply
not up to the task and are crumbling. |
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Many companies have realized this. Many authors, teachers, consultants,
and business leaders have recognized this for a number of years. Many ideas
have been forthcoming, some very good and some very bad. |
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One conclusion is that we need a new management paradigm. |
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