About the book

In today’s competitive world, good management is essential. With Management: The Essence of the Craft, Fredmund Malik – one of the most prominent authors of management scholarship in Europe – draws on the works of Stafford Beer, Peter Drucker, Friedrich von Hayek, and Viktor Frankl to outline the basic principles of effective professional management. While previous studies have relied strictly on human psychology to evaluate existing theories of management, Malik instead employs a cybernetics of complex systems for the task. Though Mangagement is written primarily for managers in the business world, it will be valuable to those in other fields facing management tasks.

About the author

Prof. Fredmund Malik numbers among Europe’s leading management thinkers. As a consultant and management instructor for the last 30 years he has advised, educated and shaped executives at all levels and in all industries. He himself has been a successful entrepreneur for decades as CEO and principal of Malik Managementzentrum St. Gallen, with roughly 200 employees in St. Gallen, Zurich,London, Vienna, Shanghai and Toronto.

“Fredmund Malik has become the leading analyst of, and expert on, management in Europe. He is a commanding figure – in theory as well as in the practice of management.” (Peter F. Drucker)

Author’s Preface to the English Edition 2010

In this book I am presenting a new kind of management for a new kind of world. It is my concept of right and good management for functioning organizations in functioning societies of exceeding complexity.

The need for such a concept arises because conventional management – by which, basically, I mean the US-type management theory and practice now applied worldwide – has come to its very limits as it is unable to deal with the consequences of its own success. The result of its tremendous achievements is a world of inextricably interrelated dynamic systems which are incomprehensibly complex. This has largely been ignored by the dominating US management approach because it was never designed for such conditions. It now fails exactly for this reason, thereby causing the present crisis. I have actually been predicting this for years in many of my publications, including the German version of this book which was first published in 2005.

The fact that success almost inevitably breeds its own failure is often overlooked, although it is well known in many fields and in particular in those that accept complexity explicitly as their research subject such as biology or ecology. Albert Einstein already remarked that one cannot solve problems with the same methods which produced them.

Failure to manage complexity as the major cause of the world-crisis

What, at present, a majority – at least in the West – considers to be a mere financial crisis can probably be much better understood if it is looked at from an altogether different perspective: the failure to understand and manage complexity.

Business and society seem to be undergoing one of the most fundamental transformations in history. Only on the surface, and only if perceived in conventional categories, do present changes appear to be financial and economic in nature.

What is happening might better be understood as an Old World dying because a New World is being born. There will hardly be any bridges back to the old state of affairs. Perhaps the most practical premise to navigate by is that whatever can change will change.

If so, we are witnessing no less than the almost complete collapse of the formerly so efficient US management approach, which was developed mainly in the context of business administration and taught in business schools as the ultimate wisdom with regard to the running of corporations in a world where its premises applied to an ever lesser degree. Its realities have already been changing for quite some time but this went largely unnoticed because most people tend to see only the old familiar patterns in the new realities.

We are experiencing in particular the failure of the US-type of corporate governance and the kind of top management which is dominated almost exclusively by financial variables only. We see the collapse of the shareholder value approach, which due to its short term profit orientation is largely ignoring the customer and is hostile to future-oriented investing and innovating, thereby systematically misdirecting the allocation of societal resources. The failure of the US-approach is, among other aspects, the consequence of mistaking financial investment for real investment, thereby undermining the former strengths of the US-economy, of confusing mountains of bad debts with sustainable wealth, and of failing to distinguish between healthy and pathological growth.

Ironically, what collapsed first was the financial system which appeared to be the most highly developed and sophisticated system ever designed. It was believed to be free of systemic risk by most experts and run by the world’s most excellent executives educated in what were thought to be the best universities and business schools worldwide.

However, complex systems have properties and laws of their own. Their driving forces – if systematically ignored – make them inevitably go out of control. Such systems are incomputable and unpredictable in principle and incomprehensible to the conventionally educated mind. They are non-linear, self-dynamic and continuously self-changing and self-restructuring in unforeseeable ways. They are largely self-organizing and self-regulating.

Nevertheless, they can be – up to a degree – controlled and regulated albeit only by a fundamentally different kind of thinking, a new approach for managing complexity and by applying the right methods and tools which are the subject of this book and its companion volumes.

Reliable Functioning by Wholistic Management Systems

Economic and financial measures on the macro level alone will hardly cure the crisis. What it takes on the level of societal institutions is a new way of functioning which is described in my six volume series Management: Mastering Complexity in which I present my Malik Wholistic General Management Systems. This first volume contains an overview of the system as a whole whereas the other five volumes will describe the constitutive parts of the system. The second volume “Corporate Policy and Governance: How Organizations Self-Organize”, was published in 2008 in German and will be available in English soon. The third volume on strategy is still due in 2010. The remaining three volumes will be dedicated to the new structure for functioning complex organizations, their appropriate culture and the kind of executives who have to be able to understand and master complexity.

Together these six volumes will contain the essence of the most comprehensive General Management System worldwide. To the best of my knowledge my Wholistic General Management Systems are globally the only ones explicitly designed to ensure reliable functioning under conditions of exceedingly high and dynamic complexity.

For this reason and because my Management Systems are universally applicable conventional business administration plays a limited role in my book. For practical reasons, however, I am going to illustrate the application of my systems mainly in the context of the business enterprise. Familiar concepts and terms are left unchanged wherever possible in order to avoid confusion for the practitioner whereas their meaning and most contents are new and different.

The important new knowledge for mastering complex systems does not come from economics or business administration but from what I call the Complexity Sciences, i.e. Systemics, Bionics and Cybernetics, which can also be called the Sciences of Functioning.

For the term “Functioning” I often use the synonym “Right and Good Management” as opposed to wrong and bad management. By this I want to point to the need to understand management as a true profession with its own standards of craftsmanship as indicated in the subtitle of this book.

If the institutions of today’s and more so of tomorrow’s societies are supposed to function, management needs to liberate itself from fashions and fads and has to become a profession of the same status as for example the profession of the surgeon, the aircraft pilot or the lawyer all of which have as a matter of course their standards of professionalism. The foundation for a profession of effective management for functioning institutions is to be found in my earlier book Managing Performing Living.

My General Management Systems – with the support of the experts of my own organization – have been developed, tested and implemented in numerous cases over more than 30 years in all sorts of institutions in business and non-business areas mostly in Europe and particularly in the German speaking world including their worldwide subsidiaries. What works in the complexities of these areas will almost certainly work worldwide. Having discussed the structure, functioning principles and effects of my systems with tens of thousands of executives of all levels I have strong arguments that there is only one kind of management that works effectively, namely Right and Good Management as I present it in my books, and that it is – contrary to mainstream thinking – universally valid and culturally invariant. Fashionable arbitrariness which so often characterizes management should not be given any place in what is one of the most important social functions.

In most respects my Wholistic Management Systems for Functioning are the opposite of what is taught in most business schools. That they will have to change fundamentally as a consequence of the global crisis is hesitatingly becoming apparent to some – among them also a few leading ivy league schools. But it might be a long and hard way for them to recover from the fallacies of their own teachings and partly from the application of wrong management to themselves. At the same time, however, if they manage to change radically and fast it is one of the greatest opportunities for them to show effective leadership in the service of a functioning society in times of great change.

Fredmund Malik
St. Gallen, January 2010

Preface to the New German Edition 2007

If the genome is the code to human life, good management is the code to man’s ability to master life. It determines both the ability of the individual to survive in society, and the ability of society and its institutions to function and perform. Few things could be more important. Few raise so many questions. Few are as complex.

But what is management? Concepts abound. If they all worked reliably there would be no failures. Unfortunately there are many, as the worldwide crisis tragically makes visible – which, in my view, is primarily a crisis of functioning, which in turn is synonymous with a crisis of management. Obviously it does not suffice to ask what management is – the question must be more precise: what is right management? And, proceeding from there: what is good management?

So what is right and good management? This first volume of the sixvolume series “Management: Mastering Complexity” provides an overview of my concept of a wholistic, systemic, cybernetics-based general management theory in the sense of right and good management. In the following volumes¹ I will elaborate on and define the different topics pertaining to right and good management.

Critical readers may wonder about the principles and characteristics of the management theory presented here. Management, in my view, is not an empirical science in the usual sense but an application-focused discipline – or, in other words, a practice. It does, however, draw on numerous empirical sciences and their findings. The best evidence of management being practiced rightly is when it works. This book was written for German-speaking countries. Most of its content is contrarian to mainstream thinking in these countries and even more so in the Anglo-Saxon world. The crisis shows that conventional mainstream management is dead wrong and caused the mess we are in. So, my approach may prove to be the best solution for getting out of this mess.

My views on the subject, set forth in this book and in the following volumes of the series, have evolved in over thirty years of research on management, of developing management systems, and of employing them in my own as well as in other businesses, organizations and institutions, both in German-speaking countries and internationally. What has been particularly valuable is the feedback I obtained from my ongoing interaction with thousands of managers in different functions and at different levels, as well as with many of my readers.

In addition, I make a point of drawing on the insights of other management thinkers who, like me, focus on management in its entirety – that is to say, on general management. Among them I consider the works of Peter F. Drucker, Stafford Beer, Hans Ulrich, Aloys Gälweiler, and Frederik Vester to be my most valuable sources, along with the essential publications existing on cybernetics. To answer the question of what right and good management is, proven findings and reliable principles must be amalgamated, as this is the only way to achieve further insights. By contrast, the widespread trend in management literature – starting from scratch every time and reinventing the wheel over and over again – is a roadblock to progress.

My publications on the subject of management are designed for thematic continuity and for consistency of content and language. They are based on my application of cybernetics, as described in my book Strategie des Managements komplexer Systeme [“Strategy for the Management of Complex Systems”]. Readers familiar with my previous publications will immediately realize this. Others may find it difficult to view some of my remarks in the context of right and good management. This series of books, therefore, is an attempt to provide an overview of essential issues and interrelations and depict them in a comprehensible way.

My sincere thanks go to my colleagues at Malik Management for many helpful discussions. I also thank Linda Pelzmann, professor of business psychology, for her invaluable feedback, Tamara Bechter for the critical review of my first draft and numerous suggestions for improvement, Maria Pruckner for helping with the new edition of this book, and the staff of the Campus Verlag publishing house. Last but not least, I thank my wife Angelika for her limitless patience.

Fredmund Malik

St. Gallen, August 2008

Concept and Logic of the Series “Management: Mastering Complexity”

This six-book series entitled “Management: Mastering Complexity” has a modular structure. The first volume, Management. The Essence of the Craft, lays the foundation, giving an overview of the overall layout of my model for right and good management. The remaining volumes elaborate on the topics of each chapter.

In other words, each of the volumes to follow deals with a subject matter en bloc. They can be read independently of one another and in random sequence. However, readers of succeeding volumes may find it useful to consult this introductory volume Management. The Essence of the Craft, as this will enable them to put the individual subject matters in context (as visualized in figure 1).

A key concept for this series of books is my Basic Model of Right and Good Management, frequently referred to as “The Management Wheel” due to its shape. In my book Managing Performing Living² it is described in detail. The statements I make in this book are an essential prerequisite for correctly understanding the contents of the series “Management: Mastering Complexity”.

The basis for all my books and essays is my book Strategie des Managements komplexer Systeme [“Strategy for the Management of Complex Systems”]³, a considerably expanded version of my habilitation thesis. It was based on Systemmethodik [“System Methodology”], Volumes I and II⁴, the joint doctoral thesis by Peter Gomez, Karl-Heinz Oeller, and myself. These books lay out the theoretical principles of cybernetics and system sciences which represent the cornerstones of all my deliberations.

[Enlarge image]

Figure 1: Structure of the series “Management: Mastering Complexity”

The dynamics of a cybernetic system are best explored in dialogue-like interaction. To familiarize yourself with the Malik Management System and the way it works, please visit www.malik.ch.

Introduction

Our increasingly complex world cannot function without management, and it can hardly function without precise management. This is true for all kinds of societal institutions, be it commercial enterprises or other organizations. The purpose of this book is to help their managers and employees fulfill their demanding occupational tasks in a professional manner.

In the midst of a jumble of doctrines, ideologies, and true innovations, this book will provide the overview required to distinguish right from wrong and useful from useless. These distinctions are indispensable for meeting both individual and shared responsibilities at each stage of a professional career. They are also crucial for successful and productive interaction.

This book is a compact compendium for right and good management – for general management – in that it provides the necessary overview of what it entails. In the following volumes of this series, each of the elements of right and good management will be described in greater detail, including both theoretical content and recommended implementation approaches. Interested readers will be able to familiarize themselves with the tools and practices of the craft, along with numerous practical examples. As such, the present book is a prelude to a practical, comprehensive guide to what the management craft and managerial professionalism must entail.

Sound general management is not about doing something new, modern, or fashionable. What matters is that it is right, that it works, and that it helps practitioners fulfill their tasks to the best of their abilities. The subject of this book – and of the rest of my publications – is not the “management thinking of today”. Rather, all my books are practical guides to effectiveness. They point out my personal opinions on different matters, which are often not in sync with mainstream thinking.

Management. The Essence of the Craft continues, enlarges upon, and complements my book Managing Performing Living. While the latter deals with the conduct and actions of the individual manager, the present book goes much further in that it deals with the institution as a whole – with system-oriented general management.

The book contains a series of propositions which, compared to mainstream thinking, may be regarded as provocative, unusual, and frequently even wrong – at least initially. In this book, and the books to follow, I am putting my arguments forward for discussion.

Central Propositions

1. Management is society’s most important function. The functioning of society depends on management. Only management turns resources into results.
2. Management can largely be acquired by learning. It is a profession and a craft. It follows the same rules of professionalism that are known and have proven useful in other professions. Talents are useful but not essential.
3. The only kind of management a person needs to learn is right and good management. Right and good management is universal, invariant, and independent of culture. It is equally valid for all kinds of organizations and all countries. There is no need for international, multicultural, or global management. All effective institutions function in the same way. They employ the same functional principles.
4. Apparent differences are not related to management but to the nature of the different tasks to be fulfilled in different organizations.
5. Not everyone can manage just any organization. This is not due to management skills but to the difference in operational tasks.
6. All managers in all organizations and across all hierarchy levels need the same kind of management skills. Not all, however, need them in the same degree of comprehensiveness and detail. Disregarding this principle leads to a lack of orientation and direction, which, in turn, means the end of communication and function.
7. In my view, most of the management ideas prevailing over the past fifteen years or so are false, misleading, and harmful. This is true in particular for anything related to the doctrine of shareholder value and its consequences – such as value-increasing strategies and a way of thinking that focuses predominantly on financial aspects. The stakeholder approach is equally wrong.
8. The economic difficulties of our time, which I believe will inevitably deepen, are largely due to factors other than political errors. They are results of misguided management, of faulty and poor management. As a result, the question as to what right and good management is gains all the more importance.

A Word on the Terms Used

In management – as opposed to other, more advanced and mature disciplines of learning – there is no such thing as uniform or common parlance. Quite to the contrary: most authors attempt to impress readers by inventing their own terms and slogans. This is a roadblock to progress and to acquiring management skills. For this book, I essentially draw on the terms used in the St. Gallen Management Model, the first and so far only wholistic, system-driven management model, as well as on the linguistic usage of Peter F. Drucker, the doyen of management theory. As far as cybernetics and system sciences are concerned, I draw on the terms used by Stafford Beer, the originator of management cybernetics, and my own book Strategie des Managements komplexer Systeme [“Strategy for the Management of Complex Systems”].

1. The terms “company”, “organization”, and “institution” are largely used in the same sense. Certain variances in meaning relate to the degree of generality, or the special limitation to a segment of society. The most general terms are “institution” and “organization”. They refer to all organizations existing in a society, no matter what kind or legal form. The term “company”, in essence, belongs to the business sector. Whenever no specific pointers are provided, it will be clear from the context what I mean when using each of these terms.

   The term most frequently used in this book is “company” and other terms related to it, such as “corporate policy”. The statements made will generally be applicable to all kinds of institutions. Depending on the field of usage, the terms might need to be adapted somewhat, as in “educational policy” or “health policy”.

2. The term “management” itself can be understood in several ways:

   Firstly, as a function that exists in any kind of organization and is indispensable for its functioning. This is the so-called functional dimension of management. It is neither linked to specific persons nor to organizational elements. This function is not perceptible to our senses. It is incorporated in certain actions taken by individuals and in this way its impact is perceived.

   Secondly, the term “management” can be understood to be the sum of the legal and/or organizational authorities in an institution. Examples include the executive board of a private company, the executive committee of a public company, a national government, or a university’s board of directors. This is referred to as the institutional dimension, and it also includes expanded boards of managers, group management, management circles, or partners’ conferences. As far as mandatory and/ or higher-level authorities are concerned, the respective responsibilities, rights, obligations, and accountabilities are governed by laws, articles of incorporation, or statutes. Those of other organizational entities are determined by common sense and habits.

   Thirdly, management can be understood to include the persons that belong to the institutional authorities mentioned. This is the personal dimension of management. In particular the terms “top management” and “top manager” frequently carry that meaning.

3. I use the term “management” in the same meaning as its German equivalent “Führung”. Both terms mean the same. In all my German-language publications, I use the two terms synonymously. By contrast, the terms “management” and “leadership” do not mean the same.

4. In the chapter on structure, the term “organization” carries two different meanings: the first, as mentioned above, is what we refer to when we speak of an institution being an organization; the second is what we mean when we speak of an institution having an organization. Which one of the two meanings applies should be clear from the particular context.

Chapter 1
What Management Is Not

Many people think management is the art of attaining wealth, fame and power. Those are the categories in which PR people and the media often report on management. They have about as much in common with professional management as does a low-budget thriller with the realities of police work.

There is much confusion about what management is, what it should be, and what it must not be. As management gains importance, countless definitions, concepts and ideas have emerged. Most of them are not only useless, they are also absurd and misleading. Some demonstrate a total lack of expertise in the field.

This confusion is one of the main drivers of deep-rooted misunderstandings, misapprehensions and ambiguous interpretations of management. It is also one of the main reasons why the advancement of this topical area progresses so slowly, if at all, and why there are so many recurrent trends and fashions. Another, highly expensive consequence is the alarming ineffectiveness of much of the existing management training, for it is a prerequisite for any training, no matter what kind, that the subject matter is unmistakably clear.

A good way to get started is by clarifying what management is not, thus helping to clear up some of the many widespread misunderstandings. My own understanding of what management is not has resulted from three decades of studying management in theory and practice; it has undergone thousands of revisions during that time and proven its worth over and over again. As we are not dealing with laws of nature here but with choices to be made in every organization for the sake of clarity, there is no obligation for readers to adopt my views. Those disagreeing with my suggestions are free to make their own choices, according to whatever seems more useful to them. These choices may be better or they may be worse. At any rate, the riskiest of all conceivable options is to not make exceedingly clear what management is and what it is most definitely not.

Management Is Not Status, Rank, and Privileges

If you understand management to mean rank and status, you will never be a good manager. Status and privileges are possible side effects rather than core elements of management. In most cases they can even interfere with professionalism. They are temptations which can easily result in extravagance, ego trips, and a general lack of contact with reality.

Management must be understood from the point of view of its function. It is about fulfilling tasks, performing, making a contribution. No contribution is made simply by being important. Personality cults have no place in management. Whoever aspires to achieve fame will be better off trying his luck in the world of entertainment.

Management Is Not Business Administration

In German-speaking countries, one of the most popular misconceptions is that Betriebswirtschaft – the discipline of business administration – and management (or management theory) are the same. This is wrong. And every new generation of business administration graduates contribute their share to the dissemination and strengthening of this erroneous belief.

Business administration and management are two entirely different things. Knowledge of business economics alone is never sufficient to manage a company. Rather, it requires additional skills which to this date have not been introduced to the academic discipline of business administration.⁶

While a certain degree of knowledge of business economics is without doubt important for managing a commercial enterprise, it is not that relevant for the management of other types of organization. For instance, marketing is important for every commercial enterprise but a minor issue for most hospitals (with the exception of certain fashionable clinics). Cost accounting is important for hospitals but less so for political parties. Production, logistics, purchasing, and research and development are functions not every type of institution requires. Indeed they have little significance for banks and insurance companies, and none at all for a multitude of other organizations.

In short, all organizations need management, but few need business administration. As a matter of fact, those that do are in the minority. For many, a business administration way of thinking would be downright harmful, as, for example, in the case of philharmonic orchestras.

Management Is Not Limited to Commercial Enterprises

The equating of management with business economics is attributable to the basic belief that management is predominantly or exclusively relevant for the world of business – that is to say, that mainly, or solely, commercial enterprises need to be managed – and also to the belief that management evolved in the business sector. At the same time, representatives of other organizations, sometimes condescendingly, tend to consider management something purely business-related and thus profane and materialistic. They do not realize that what they do is essentially also management, even though applied to another field.

Management is a universal societal function. It is needed in all societal institutions. The names used for it in each particular case are meaningless. For instance, the principal of a university is a manager with regard to a major share of his or her tasks – even if he or she may not like to see it that way. The same is true for the director of an opera house or an orchestra, for top-level government officials, principals of schools, and head physicians in hospitals. What matters is the function, not its name. This is something that top people outside the business world often fail to understand, which is why they frequently fail to get appropriate training.

Management did not evolve in the business world – this is only where its impact is most visible, and where the difference between right and wrong management can best be observed. One reason is that in commercial enterprises there is access to data that does not exist in other organizations. Many things can be measured that cannot be quantified in other sectors. Here, the impact of management errors and mistakes manifest themselves in facts and figures, and become evident much earlier than they would in many other organizations. This does not necessarily mean that in those other organizations management mistakes will always go undetected – rather, a possible dysfunction is revealed in other ways: in a hospital, for instance, it may be a patient operated on the wrong leg; in schools it may be an increase in violence among students.

Management Is Not Management of People

A rather widely held belief is that management is about managing people. It is a misconception, and its root cause lies in the fact that the term “management” is often used in the sense of managing individuals, groups or teams, not in the sense of managing entire organizations. The logical consequence is that management training is often understood to deal solely with management of people, and thus the major emphasis is put on psychological issues. Communication, too, is perceived to refer to the communicative interaction between people – although, in fact, this is where the fewest problems lie. The greatest challenge regarding communication is its organization: when to communicate what to whom; who needs to be told what when and by whom? These questions cannot be answered by psychological means – they require solid, system-driven general management.

Management does include management of people, but it is much more than that. Wherever people fail to understand that management must be applied to the institution as a whole, all their efforts are doomed to fail. For one thing, management of people is not simply about managing people but about managing people in organizations – which is different from people in their private lives. Likewise, organizations are often dealt with unilaterally if it is not understood that management refers to organizations made up of people. In short: what is often overlooked is that organizations and the people that constitute them are mutually dependent.

What we are dealing with is the management of people in organizations, and the shaping of organizations made up of people. And this is precisely what makes everything so difficult. In and by itself, each of these tasks would be relatively easy to solve; yet both in conjunction with one another are rather difficult to handle. This leads us to yet another problem: if people management is not viewed as having an inextricable connection with the functional requirements of organizations, the risk is that issues relevant to people’s private lives will be transferred to the organization – where they will be out of place in many cases. This phenomenon is reflected in large parts of motivation theory, but also in the question of whether a profession should or can be expected to be fun. Conversely, principles that are crucial for people in organizations (as organizations cannot function without them) are inconsiderately transferred to people’s private lives, where they do not belong and may even do harm.

In my experience, three quarters of the training programs on people management are useless or even misleading, as they leave such ambiguity, confusion, and existing differences unconsidered.

When management is understood to be people management, the result is a certain prevalence of psychological factors with partially detrimental effects. Management problems are mistaken for psychological problems; solutions are sought in the field of psychology. Efforts focus on so-called “difficult” employees although the “normal” ones – those without problems – are by far in the majority, which causes problems of bias. Those in functions of responsibility forget that their task is not to change, diagnose, and therapeutically treat people, but to accept them as they are and make use of their strengths. The bottom-line result is a massive disorientation, as everything is seen in purely psychological categories and the whole thing moves further and further away from what good management actually is. Management means adapting organizations to human nature, not the other way round. Whoever practices good management will also need psychology – but of a very different kind, as people-oriented organizations do not develop neuroses or provoke avoidable conflicts.

Management Is Not Doing Business

20 years ago, only few people outside English-speaking countries knew and used the term “management”. Today it has worldwide currency, and apart from having lost its original meaning it has gained numerous others, including some rather absurd ones.

For instance, the term “management” is often used when referring to business transactions – including everything from the activities of honorable merchants to downright shady deals. As a result, even such crucial differences are veiled in contemporary usage of the term.

Many think that by studying the subject of management they will learn how to get better bargains. That, however, has nothing to do with management. These people would probably be better off attending a sales training. Of course companies need to do business, but that is not what we refer to in business management theory when we use the term management; rather, we refer to managing the company that does business. “Doing business” and “managing a company” are two things that need to be clearly distinguished. The latter requires management – the former hardly does.

When it comes to making a deal, management might even be an obstacle. Why? Because management requires thinking in greater dimensions and longer time horizons. From this perspective a short-term business deal may appear counterproductive, for instance, if it is inconsistent with overriding strategic goals. Just think of a business selling a bad product, which will drive customers to the competition and, in the longer term, cause an erosion of trust in the brand or company.

Management Is Not Entrepreneurship

The perception just described, of management being about doing business, is closely related to another one: of management training helping you become a better entrepreneur, or simply become an entrepreneur. This is another thing management cannot accomplish (nor, by the way, can a course of study in business management,).

Being an entrepreneur – initiating a business venture and taking the associated risk – is not the same as being a businessperson, and it is not identical to managing a business. That does not mean that both skills cannot coincide in one person – which does happens occasionally though only in rare cases.

This is another differentiation which is often neglected. It is drowned in the maze of arbitrary conceptions, terms, and interpretations – although there are dozens of examples from day-to-day experience that should make the difference clear. It is usually most evident wherever entrepreneurs fail to pass on their business to the next generation: it either goes down with them or it is sold. It takes management to make one’s business independent of oneself.

Being successful as an entrepreneur is difficult enough. The real challenges, however, emerge with the next step, the business’s next development phase. It may be right and true when it is said that an entrepreneur must have certain personal qualities, but that has nothing to do with what the business needs in order to be independent of him or her.

My suggestion to distinguish between entrepreneurs and managers also refutes the theory so adamantly upheld, according to which profit is seen as being the chief motivation for entrepreneurs: what an entrepreneur wants is usually different from what a business needs. This is where we must clearly differentiate. It is also the reason why management is not the same as entrepreneurship.

Management Is Not Only Top Management

Further misconceptions result from the fact that, when hearing the word “management”, many people reflexively think of top management – that is to say, the most senior managers of an organization who, as corporate organs, act on behalf of and commit the organization. Usually that would be the board of directors and/or managers.

Those familiar with the inner workings of a company know that management does not only consist of the organization’s top levels. It also includes the second and third levels, often more.

Still, this does not suffice for a truly function-based understanding of management. On principle, anyone who manages is part of management. This also includes production supervisors. This very perception provided one of the bases for the development of the St. Gallen Management Model, which was initiated back in the late 1960s, as well as that of the System-Oriented Management Theory. To date, the model differs from virtually all other concepts and theories in this regard. Numerous postulates, methods, and tools of the St. Gallen Model are based on this broader understanding of management, and on the belief that management will only make sense in this wider context.

Put somewhat crudely, anyone who is a boss is part of management. I suggest, however, we go one step further and include not only those in management training who are bosses themselves, but also everyone who has a boss (without necessarily being one). A training program for that second group would not have the same content as for the first. Regardless, for anyone with a boss it is extremely important to know how bosses think, by what criteria they act, why they act that way, and why they have to act that way. This would help prevent significant misunderstandings and a good deal of communication effort, and even render a considerable degree of conflict management superfluous. Yet another reason is that not only must subordinates be managed, but so must superiors – by their subordinates. This is a fact neglected in most training programs outside Malik Management, but it is highly recommended and has proved to be effective. People who know how to manage their superiors will seldom face difficulties at the workplace.

Management Is Not Identical with U.S. Management

For the most part, globalization is nothing other than an Americanization of the world. As a consequence, many people unthinkingly assume that America has the world’s best economy, only because it has the largest – and that its management is also the best worldwide. Both assumptions are wrong. It is simply an optical illusion based on statistical deception. Many of my monthly management letters deal with this subject.⁷

America is massively overrated, both economically and in terms of management, as I have shown (and provided evidence of) in many of my essays. Size is not strength. And the endless repetition of erroneous beliefs in the media does not make them any truer.

U.S. management is good for simple situations; in complex ones, it usually fails. U.S. management works under U.S. conditions. Wherever they do not apply, its impact is questionable, if not disastrous.

Along with the world’s Americanization, US management has also been exported. In Asia, it is the only kind available. Alternative concepts are unknown – not because they do not exist but because they are not available in English. It is easily possible that this will create an enormous advantage for Europe in the near future.

Management Is Not Identical with MBA programs

Along with the proliferation of MBA programs, the widespread belief has taken hold that these programs are the ultimate in management education. Wrong again. Management is not identical with business administration theory, be it at business schools or universities.

It is not without reason that these study courses are entitled “Master of Business Administration” rather than “Master of Management”. What North Americans call Business Administration is one variety of what German-speaking people call Betriebswirtschaftslehre.

Although study courses often carry the term “management” in their names, such as Marketing Management, Production Management, or Finance Management, their content usually includes little management – rather, what they teach is simply marketing, production, and finance. Consequently, an MBA degree alone will not make you a capable manager. Yet many MBA graduates and those around them seem to believe just that – which is one of the causes of the sometimes horrendous managerial performance we see.

Managers not MBAs by the Canadian management professor Henry Mintzberg.