Business management myths, truths and consequences

People in business management are great believers. They hold to ideas about success, the strength or weakness of markets, what motivates people in companies, the nature and role of innovation, and so on. The list goes on and on, jumping from misconception to misconception. The results can be humorous, but it's no laughing matter.

I have long stressed the weakness and obvious failure of the ubiquitous belief that the comparative performance of the shares is the most meaningful and powerful measure of management.

If the principal beneficiaries of a proposition are also the chief architects of its application, you can be sure that the impact will be high, wide and handsome. Year after year the level of CEO wealth packages in the US rose to massive amounts, far exceeding equivalent levels of pay for other players in the economy.

Another misguided principle is that where the Americans lead, other nationalities will follow. This is because of another firmly held belief - that the US remains the world leader in the quality and achievement of business management. It's another misapprehension, alas.

Management has few truths; only situations and alternatives that apply in particular circumstances. False generalities produce unhappy results for perpetrators and followers alike. The overblown valuation of US managerial prowess encouraged the corporate giants to believe in their own superiority.

This mistake discouraged many overseas firms from competing in the US for fear of defeat; or, still worse, mimicking the transatlantic heroes by picking up their most lethal products and practices. Following your leaders is a very dangerous procedure when they are running on the wrong track at high speed.

Rational managers start from the position that a rational explanation always exists. While accidents do occur, the evolution of markets and industries is not accidental. There are always developments and trends that alter the possible outcomes of economic activity. The irrational manager refuses to accept that new needs and norms are altering the factors that will dominate future returns.

What you don't need is readiness to take risks - that is, if you identify risk with danger. The professional gambler doesn't take risks; he utilises his knowledge, powers of analysis and experience to make the bet which has the best chance of winning big.

Professional managers should mimic this approach. Consultant Ram Charan expounds on the need to anticipate and visualise radical change - like Steve Jobs at Apple, Andy Grove at Intel and Sam Walton at Wal-Mart. Such heroes seek to make the unsure thing sure, adapting their products and processes to their visualisation, and being led and leading others by the innovatory flow, not the financials.

To quote the US humorist Mort Sahl, the future lies ahead. Belief in that future is a truth that could have huge consequences.

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