Wednesday, March 04, 2009

Locating the dynamics within a larger ontological framework

[My problem is: how do you operationalise such goals? How do we measure performance in ways other than shareholder value? Drcuker never answered this question. He left the definition and measurement of management performance as an important challenge for corporations. True, shareholder value leads to distortions in managerial actions but at least the market is an impersonal judge. Are we to substitute the market's judgement with that of some independent personalities who will come up with appropriate measures? Well, I hope these personalities are not independent directors! Old wine in old bottle
from The Big Picture by T T Ram Mohan - More thoughts on this in my last ET column, A new paradigm for management? There is talk now, as in previous economic crises, of having to reinvent capitalism. What this generally means is that we need to redefine the
roles of state and market... The goal that Hamel puts at the very top of his list is that management should serve a higher purpose than shareholder wealth maximisation. But managers are not going to focus on “socially significant and noble” goals of their own accord. They will do so only if their performance is measured differently. How do we define and measure performance in today’s world? Drucker himself was dismissive of shareholder value as the sole measure. He wanted performance to be measured on other dimensions such as innovation and market standing. The presumption, of course, is that the capital markets are not all that efficient and that the share price does not capture these dimensions adequately. But if the market’s judgement is not to be trusted, who is to carry out the task of enforcing performance? Drucker himself did not provide an answer to this question. Perhaps the answer is simply one of providing better information on managerial performance to the markets. Maybe boards, investment banks and rating agencies need to do a far better job of this than they have so far. Hamel and his colleagues do not address the central issue of defining and measuring top management performance. Theirs is a largely moralistic exhortation to managers to raise their sights. If such exhortations could change the world, we wouldn’t be having today’s problems in the first place.
A new paradigm for management?
19 Feb 2009, 0027 hrs IST, TT Ram Mohan, ET Bureau]

Be it business management or public administration, locating the dynamics within a larger ontological framework can eliminate many mistakes that are committed quite myopically. "For all problems of existence are essentially problems of harmony," said Sri Aurobindo. [TNM]

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