Favoured management strategy of UK businesses fatally flawed
The preferred 2014 business strategy of the vast majority (77%) of UK managers and leaders – closely controlling costs rather than increasing investment – is likely to be successful for just 3% of businesses, according to a leading business professor.
Dr Jules Goddard of London Business School labelled businesses’ over-reliance on cost cutting as a perilous, nonsensical and lazy option as he picked up the top prize in the CMI management articles of the year competition, for his article on the subject.
A top crop of UK managers voted the article, entitled The Fatal Bias, as the must-read piece of research to come out of British business schools over the last year. It explores why controlling costs has become the most prevalent management strategy of modern times despite the fact that evidence shows it is counterproductive as a route to long term growth. In the article, Jules sets out why companies increasing costs and making bolder, less risk averse investments are the ones that stand to be successful in the future, and suggests new rules for business management that concentrate on better rather than cheaper, and revenue rather than costs.
Routes to innovation and growth were at the heart of this year’s collection of CMI management articles of the year, with topics ranging from the use of competitions to solve complex business issues to innovating for sustainable business.
The competition aims to reduce the gap between theory and practice in management and leadership, by directing time-poor managers to the five articles from the past year their peers believe will most help boost performance.
Petra Wilton, director of strategy at the CMI, said: “This competition helps managers to get their hands on the best of academic research and thinking. Jules’ winning article shows powerfully how management thinking needs to change if the UK is to compete globally and get fit for the future. This is exactly the reason why CMI will be putting managers and leaders in the spotlight with our commission on the future of management and leadership with the all-party parliamentary group on management, to identify how management behaviour needs to change and how this change needs to be embraced.”
Jules said: “I’m interested in business success and business failure – and if we want more of the former, we have to challenge the attitude that costs are generally too high and if they are made to be lower it would create more wealth. I am thrilled to have been recognised with the award and pleased that respected business practitioners and senior leaders are taking note of this argument. Too many managers think that they will win with cost reduction strategies, but in practice, the chances of turning cost leadership into a sustainable profitable strategy are roughly 3%.
“The boards of UK companies spend almost 10 times as much time measuring and evaluating cashflow as working out where it comes from and how it can be increased. Clever managers will turn these outmoded and lazy management habits on their heads if they want to take advantage of the healthier economy in 2104.”
To download the articles or find out more about the competition, visit:
http://www.managers.org.uk/articlesoftheyear
For more information on London Business School please visit:
http://www.london.edu/programmes/mastersinmanagement.html#.UxWs2uN_u3M
