Why Do We Undervalue Competent Management?

Raffaella  Sadun; Nicholas  Bloom; John  Van Reenen

Article | Harvard Business Review | September–October 2017

Why Do We Undervalue Competent Management?: Neither Great Leadership Nor Brilliant Strategy Matters Without Operational Excellence

by Raffaella Sadun, Nicholas Bloom and John Van Reenen

Abstract

A recurring message in business education is that you can’t compete on the basis of management processes because they’re easily copied. Operational effectiveness is table stakes in the competitive universe, it is often assumed, and thus cannot serve as a sustainable source of competitive advantage. But data from a decade-long research project involving 12,000 firms challenges that thinking. The study examined how well companies performed 18 core management practices. It found vast differences in how they execute basic tasks like setting targets, running operations, and grooming talent, and that those differences matter: Firms with strong managerial processes do significantly better on high-level metrics such as profitability, growth, and productivity. What’s more, the differences in process quality persist over time, suggesting that competent management is not easy to imitate. In this article the authors review the findings of the research and explore what prevents executives from investing in management capabilities, arguing that such investments are a powerful way to become more competitive.

Keywords: Management; Management Analysis, Tools, and Techniques; Management Practices and Processes; Performance Effectiveness;

Format: Print

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Citation:

Sadun, Raffaella, Nicholas Bloom, and John Van Reenen. "Why Do We Undervalue Competent Management? Neither Great Leadership Nor Brilliant Strategy Matters Without Operational Excellence." Harvard Business Review 95, no. 5 (September–October 2017): 120–127. (Winner of 59th Annual HBR McKinsey Award.)

Case | HBS Case Collection | September 2019

Earth Bank of Codes: Making Nature's Biological Assets Visible and Valuable for the Benefit of All

Tarun Khanna, Raffaella Sadun and Susie Ma

In 2019, entrepreneur Juan Carlos Castilla-Rubio was developing a project he hoped could generate and share wealth from the natural resources of the Amazon without destroying those resources. His idea, called Earth Bank of Codes (EBC), would create a library of the genomic codes of all known species that could be tapped for discovery and innovation, from new medical interventions to more efficient manufacturing processes. He proposed to use blockchain technology to make the data both accessible and trackable so that its use could be monitored. Castilla-Rubio envisioned a time when a company in the U.S. could access a biological asset from the Peruvian Amazon, develop and commercialize a product based on the asset, and have a fraction of the resulting sales land directly in the bank account of various beneficiaries, including the Peruvian government and indigenous communities. Now he was facing major decisions about how to structure EBC to achieve his goals. Should he start at the top and build partnerships with national governments and inter-governmental organizations as the cornerstone of EBC? Or would it be better to forge ahead with a few stakeholders in an entrepreneurial project?

Keywords: Decision Making; Development Economics; Entrepreneurship; Innovation and Invention; Intellectual Property; Emerging Markets; Market Design; Marketplace Matching; Science; Genetics; Natural Environment; Environmental Sustainability; Weather and Climate Change; Social Enterprise; Strategy; Strategic Planning; Technology; Ownership; Social Psychology; Trust; Society; Biotechnology Industry; South America; Amazon Basin;

Citation:

Khanna, Tarun, Raffaella Sadun, and Susie Ma. "Earth Bank of Codes: Making Nature's Biological Assets Visible and Valuable for the Benefit of All." Harvard Business School Case 720-356, September 2019. View Details

Cite View Details Educators

Plant management at Pasta Serafina, a pasta producer in the south of Italy, is struggling to contain employee absenteeism. While the misbehavior is concentrated in a minority of the workers, its effects impact not only the plant’s performance, but also the climate and work environment. Embedded in an institutional and legal environment that allows very little room for corrective action, and already dealing with persistent low margins, management decides to address the issue by asking the employees themselves to find a solution to the problem. The case exposes students to managerial challenges associated with curbing moral hazard and changing the company culture in a setting where standard legal and contractual tools, such as firing workers for performance or using incentives to influence behaviors, are not available.

The case complements Pasta Serafina (A) by describing the aftermath of a town hall meeting in which management had publicly denounced the absenteeism problem and challenged the employees to find a solution. In spite of the initial mistrust against management, the fear of an imminent plant closure coupled with the relief associated with finally being able to be heard by management, pushes the employees to act to contain the problem themselves. Within a short time, absenteeism hits record lows. Management, however, is left wondering about the sustainability of the new culture.

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Why Do We Undervalue Competent Management?: Neither Great Leadership Nor Brilliant Strategy Matters Without Operational Excellence

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