Management theories: yours or theirs?

Has management advice actually made any progress?

Doesn’t seem so. Prominent business leaders, management gurus, and leading academics – all three have a history of failure.

It can happen anywhere, anytime. I worked for three years in Singapore in the 1980s. Each year someone was designated “Businessman of the Year”. All three nominees suffered ignominious reversals before I had left, including gaol time.

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Failure: Do it cheaply and do it less often

Let the “NO” case be heard

How hard is it to temper enthusiasm? Most business advice these days is about how to rev it up, not tone it down. Try standing up at the end of a inspiring and motivating off-site and telling everyone why the amazing new strategy won’t work.

Not a good look.

Yet there seems to be no slowdown in business failures, either at the firm level or the product level. In some ways there seems to be more. The pace of change puts on pressure for more innovation, not less — and more rapid innovation at that. There’s even less time to get it right.

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Buzz words: wake-up calls for our natural instincts

Plus ca change

Why do some buzz words embed themselves in our vocabulary while others slide past the window with just a short burst of fame? Some take a long time to leave. Let’s hope “paradigm shift” and “no-brainer” are nearing the end of their useful life. 

Words that get traction align with our natural instincts. Fashionable buzz words are not new ideas. They get traction because they embrace the things we instinctively do best. 

Instincts are there to preserve and propagate the species. One is to form communities because, collectively, we have a better chance at survival and prosperity. No surprises that “collaboration” has got traction.

Ditto our ability to organize. The desire for food has fashioned agriculture. We no longer just kill things; we also grow them. We embrace agriculture because it underwrites our future. We instinctively know that “sustainability” is good.

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Your top customer is not always your best customer

Who’s your most profitable account?

The most common ranking of customers is by percentage of sales. Most businesses have a few standouts. What makes them so? 

It is not always the size of their operations. Your product may just suit them perfectly. Or the sales team on that account delivers a superior service. There are other reasons. Maybe you do not monitor their receivables closely, and they know that you help their cash flow by allowing their account to age out to 90 days, when others are paying on time.

All these things have costs associated with them. Maybe it is free add-ons or complimentary backup services that make your product the perfect one. That costs money. The sales team may be your most expensive. Those cozy payment arrangements can be costing you in working capital and overdraft expenses.

Try ranking your customers on their net contribution to profitability. How do they stand on a fully-costed basis? 

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Cash flow 101: keeping it simple

Think like your accountant

When you look at a complicated cash flow statement in an annual report, it might look like accountants do anything but make it simple. Yet if you want to take some fast action when cash is tight, the basic structure of a cash flow statement makes a very handy checklist.

It’s made up of three very simple categories. Cash is either raised or spent in:

• operating activities
• investing activities
• financing activities

In plain English, those three things mean what you do, what you’ve got and how you fund the first two. That’s pretty much all there is to cash flow. It’s not exactly rocket science. 

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