"Business success can only be obtained through good management." "Over 90 percent of all business failure is due to the lack of good management!" "The outstanding growth of our company was achieved through good management."
This simple phrase of "good management" is pointed to as the elixir of success. It seems to be a mystical quality or formula reserved for those who are blessed by the gods to scale the craggy precipice and appear victorious at the mountain summit.Good management is also used as a label, maybe to an excess today, to recognize individuals or groups for outstanding achievement.
What is good management?
"Good management" is one of those oblique phrases that we all use but rarely stop to consider its true meaning. Go ahead, ask your spouse or a companion to define "good management" and note how their eyes will drift to the ceiling (this a reflex action of deep thought).
There will then be a prolonged pause followed by one or two stammers or false starts at which point you will be asked, "Why do you want to know, anyway?"
Most people attempt to define good management in terms of "profit." For example, a well-managed organization is one which makes a "profit."
Now this definition would work fine if all organizations were designed with a profit motive, but many are not. Government, churches, family households and little league football teams are all organizations that may be well-managed but don't make a profit. Hence, profit by itself is an inadequate yardstick in measuring good management.
In order to derive a more accurate definition of good management, a reflection on the historical comments of J.S. Says, a French economist in 1815, may be helpful. Says stated that good management occurred when "economic resources were shifted out of areas of lower productivity to areas of higher productivity and yield."
In other words, good management is maximizing resource yield by shifting resources to their highest level of efficient utilization.
Says said to achieve good management an organization must:
- Accurately identify and utilize all available resources.
- Constantly search for and innovate new areas of higher productivity.
- Effectively monitor all resources to ensure they are utilized at their highest level of productivity.
This definition had a dramatic impact on the evolution of the early free enterprise system of Western Europe and the United States. For it was this definition that Says applied to the then new business term "entrepreneur."
Good management and entrepreneurship are interchangeable, for they mean the same. The terms apply to outstanding performers in all walks of life.