with managing. When managing people with relatively clearly defined tasks, it is not overly risky to characterize success and failure within those tasks as delivery against a set of clearly defined indicators. However, a manager's role is far more complex than can be easily summarized by a set of indicators, no matter how clear or concrete.
The success of a manager includes delivery on multiple dimensions, each of which is imperfectly captured by concrete indicators, and which, when viewed together, are extremely difficult to measure in any straightforward way. For this reason, to assess and motivate the performance of managers, the general manager must be capable of seeing beyond the concrete indicators, which might summarize ‘what’ the manager accomplished, to assess ‘how’ and ‘why’ the manager delivered against them. The general manager must be capable of assessing whether delivery against the concrete indicators might have been at the expense of the long-term health of the company. While this big-picture view is difficult to explain and nearly impossible to measure, there are key success factors that we feel will help any general manager achieve the task.
1. Questions are more important than answers
Successful functional managers often attribute their success to the knowledge and experience they gained in their previous functional role. Having become accustomed to having the answers, they experience great difficulty transitioning to a role that relies more on asking good questions. A general manager cannot have all the answers. He or she must instead learn to ask the right questions of his or her managers to assess how well they are managing the business.
If your people are simply waiting to be told what to do instead of playing an active role in problem-solving, then you have misunderstood your role as general manager. It is virtually impossible to imagine a business situation in the modern world in which the general manager knows what each person in his or her charge needs to do in order to succeed. Nor is it feasible that the GM knows which indicators will hit which levels by which date while the business is achieving long-term value creation. Instead of telling people what to do, or what to deliver by which date, the GM must work to ensure that people are actively asking the right questions. And the surest way to prevent your people from asking the right questions and contributing to the ongoing adaptability and problem-solving of your organization is to start telling them what to do instead of asking how you can help.
2. Trust is key
When people look upward within the organization, they see a boss who has the power to overrule, embarrass or fire them. For this reason, their natural reaction to any person above them in the hierarchy is a combination of admiration (hopefully) and fear (unfortunately). As a functional manager you may have been the boss, but people could identify with you because you shared a functional identity and you were tasked with looking out for the interests of that functional area.
As a general manager, you no longer share this functional identity with those below you. Worse, you may have to make decisions that may not be seen as being in the best interests of the functional area you previously led. To ensure that everyone continues to speak openly and honestly to you as you move up the ladder, you must demonstrate fairness, openness and genuine respect. The honest input and feedback from those ‘below’ you is the key to success in your general management role, which means you must be conscious of behaviours that will compromise their willingness or ability to provide it. If they fear your authority, they will quickly shut down, but if they know you respect and value them, they will be forthcoming in the manner you need them to be for your own success. This trust can take years to earn, but can be lost in an instant.
3. Beware of your expertise
As mentioned, successful functional managers often attribute their success in moving up through the organization to the functional expertise that has to date propelled them forward. While this expertise may drive success and confidence, it may also prevent proper appreciation of the relevance of other areas in the company. As one moves up into a general management role, the ability to see and prioritize all areas of the business becomes key, yet the natural reliance on one's comfort zone may inhibit, or completely mask, this ability.
In addition, there is evidence that humans selectively focus on and recall data that supports their assumptions, which means our biases may increase, rather than decrease, as we become more knowledgeable on a topic. As a result, our expertise in a particular business function may simply strengthen incorrect presumptions and, worse, by building unfounded confidence, close our minds to the willingness to incorporate new data.
This effect is exacerbated by the tendencies of those below us in the hierarchy to agree with those above, further enhancing our misplaced confidence and solidifying our mistaken assumptions, especially if reinforced by those who have moved even further up the ladder.
4. Value is not earnings. Or market share. Or share price. Or …
Moving into general management means expanding your scope on two key dimensions: (1) from short-term to long-term thinking; and (2) from a single area of responsibility to the impact on the entire organization. The concept of managing for value incorporates both dimensions, and is distinct from the tendency, especially for lower levels of management, to focus on narrow indicators that do not capture the performance implications for the entire organization or short-term targets that cannot incorporate the long-term impact of any decision.
We define the value of an organization as the present value of the expected future free cash flows discounted at the opportunity cost of capital. This concept is explained in detail in a recent book by one of the authors, The Blue Line Imperative: What Managing for Value Really Means. The expected future free cash flows are not simply those as estimated by management; they also incorporate unseen effects in other areas of the business, and in the future. For this reason, any estimate of value is by definition incorrect. The process of continuous learning is needed to ensure steady improvement in estimation in order to reduce the risk of value-destroying decisions.
The new general manager needs to resist the temptation to over-simplify the job by choosing to define success by narrowly defined, short-term performance indicators, and must instead maintain integrity by focusing on the long-term, organization-wide impact of any act or decision. The only way to expect those below you to do this is to demonstrate it yourself.
5. Business is about serving customers
Every decision in business must be oriented around serving customers, and doing so in a way such that the organization makes enough money to support its continued health. Your organization does not seek this goal in isolation. Other companies are trying to serve your customers with similar products or services, and any success of theirs will come – to some degree – at your expense. Survival depends upon having a sustainable competitive advantage in the ability to serve customers while making money. Any discussion not focused on this customer-driven, efficiency-oriented perspective is one that needs to be reframed.
6. Bias has no place in sound decision-making
It is well known that the human brain tends to follow mental processes which make use of shortcuts resulting in a variety of different biases. These biases show up in the way we search for and select data. They also affect the way we make decisions. (One example is that we often have a bigger aversion to losses than attraction to gains. Another is that, when making decisions in teams, we are susceptible to considerable influence from others.) Finally, these biases can inhibit our ability to learn. For example, we have an easy time giving ourselves credit for successes, but we tend to find excuses for our failures rather than deriving important lessons from them. The GM must be conscious of these biases and be vigilant in mitigating their impact – by forming diverse teams, soliciting independent opinions, collecting broad data sets, reframing questions, and assigning and rotating the role of devil's advocate, among other techniques.
7. Morale
