Golden Rules

Top management strategies of the past 20 years and what still works.

Magazine Contributor

May 1, 1997 12 min read

This story appears in the May 1997 issue of Entrepreneur. Subscribe »

If this were 1977, Seth Godin might be sitting down with one of his 40 employees to coalign their goals according to the concepts of management by objective. He might be rounding up Yoyodyne Entertainment Inc.'s workers into quality circles. He might be using lateral thinking to spur the creativity that drives the Irvington, New York, online game show production company.

Today, however, Yoyodyne's founder and president tells his people to "ready, fire, aim," as management guru Tom Peters advised in 1994 in The Pursuit of Wow! (Vintage Books). He urges them to develop one-to-one relationships with customers, as Don Peppers and Martha Rogers suggested in The One to One Future (Doubleday) in 1993. And he asks them to be guerrillas, in the approach popularized by Jay Conrad Levinson in 1984's Guerrilla Marketing (Houghton Mifflin).

"We run our business based on those three books," says Godin. "Every single person who works here has read some or all of them. It's fundamentally changed the way we run our business."

Godin isn't alone in basing his management style on popular new ideas presented in bestselling business books. The past two decades have seen the almost complete discrediting of the long-standard MBO, or management by objective, as well as the rise and fall of countless shorter-lived fads, each accompanied by a flurry of books, articles, videos and seminars. There are buzzwords for every letter of the alphabet and every function of management, from activity-based costing to intrapreneurship, from just-in-time inventory to zero-defects manufacturing.

All this ferment can be confusing as well as helpful, say experts. "A lot of managers waste their time chasing the latest idea," says Richard Hamermesh, founder of management consulting firm The Center for Executive Development in Cambridge, Massachusetts, and author of Fad-Free Management (Knowledge Exchange). Hamermesh blames managerial insecurity--"If other people are doing it and it's on magazine covers, then I'd better do it"--for what he sees as harmful trend-chasing.

Consultants are also due a share of the blame for the bewildering explosion of odd acronyms, newly invented terms and supposedly unique advice. "Every consulting firm will come up with a focus to differentiate itself from competitors," explains Charles B. Wendel, president of Financial Institutions Consulting in New York City and co-author of Business Buzzwords (Amacom).

But wherever they come from and whatever their failings, there's no doubt that some of these management ideas have proved to have lasting merit. Somewhere between adventure-based learning and Theory Z management lies a style and practice to fit almost any entrepreneur's personal inclinations. But before you dive in, here is a road map to four of the trends that have most influenced business in the recent past and are likely to carry it into the future.

1. TQM: King of the Hill

Total quality management, together with its associated concepts, such as continuous improvement, zero defects and statistical process control, make up what is easily the most talked-about business idea of recent years. TQM, as it's almost always referred to, is especially remarkable for its long tenure atop the heap.

Some of TQM's basics came out of Bell Telephone's labs as early as the 1920s. The ideas were refined in
Japan not long after World War II, then gained wide attention from U.S. businesses about the time Entrepreneur was founded 20 years ago.

TQM can affect almost every area of a firm's operations, but it rests on one principal idea: It calls for continually improving quality by using statistical measures to track both problems and the results of efforts to fix those problems. It helps many businesses greatly cut costs by, among other things, reducing waste and scrap while boosting customer satisfaction.

The TQM approach is a marked contrast to the traditional method of using post-production inspection to catch errors. Propelled by the impressive quality of Japanese goods produced using TQM methods and led by the vision of gurus such as Joseph M. Juran, W. Edwards Deming and Philip Crosby, millions of businesses have dropped the old ways and adopted TQM in one form or another.

Indeed, many credit TQM with virtually saving American business from high-quality, low-cost foreign competitors. But partly as a result, today TQM is the closest thing to a religion in the ordinarily secular American business scene. And overzealous TQM advocates who insist on strict adherence to its principles are the reason, say many, that TQM may be on the decline as a high-profile business strategy.

That doesn't mean quality management will go away or people will stop doing the things it teaches. It's just that years from now, say experts, it will no longer be talked about.

"It won't be a buzzword anymore," explains Michael Hitt, a management professor at Texas A & M University in College Station and co-author of Strategic Management (West Publishing Co.), "because firms will have to compete on quality or they won't stay in existence."

2. Reengineering

Business process reengineering hit the business world in 1994 with the publication of Reengineering the Corporation (Harper Collins) by consultants James Champy and Michael Hammer. Though just 3 years old, business process reengineering, or BPR, has already had such a major impact that most experts consider it a leading idea of the past two decades.

Reengineering calls for making major changes to a business's fundamental operations, with cost reduction as the primary goal. Because these changes often call for reducing the number of workers, it's closely associated with ideas like downsizing and rightsizing.

Reengineering's main appeal rests in its ability to provide companies with a quick way to control costs, says Dipak Jain, professor of entrepreneurial studies at Northwestern University in Evanston, Illinois. While it violates one of TQM's rules by often concluding that workers should be laid off, BPR shares many of the same goals. "Quality [management] and reengineering are not mutually exclusive," Jain says. "They need to be done jointly."

Recently, BPR has been widely criticized as a short-term way to boost profits by gutting a company's work force. "Corporate anorexia" and "hollow-shell corporation" are two newly coined terms referring to companies that have trimmed so many workers, they have lost essential functions.

Yet BPR has also produced some remarkable success stories. The ability to coexist with TQM may explain much of BPR's rapid rise in influence and popularity, and suggests it will remain influential for some time.

3. Empowerment

Handing employees the power to make decisions and rewarding them for making the right ones has proved one of the toughest pills for managers to swallow in recent years. Perhaps that is what has saved the idea of empowering employees from the kind of overexposure that characterizes other trends and kept it, after more than a decade of considerable prominence, still on a growth trajectory.

Empowerment and related ideas such as participative management have the dual goals of reducing costs and improving quality. This is done by placing responsibility for many decisions in the hands of production workers, customer service personnel, and others who formerly took orders from managers. The result is less need for overhead-gobbling middle managers and more relevant decisions.

Not surprisingly, empowerment is popular with employees. Among other things, it is said to boost job satisfaction, reduce absenteeism, lower turnover and even improve workplace safety. These advantages alone may drive the concept for years to come.

"What's important about empowerment is that organizations are made up of people," explains Eileen Shapiro, president of Cambridge, Massachusetts, management consulting firm The Hillcrest Group Inc. and author of Fad Surfing in the Boardroom (Addison-Wesley). "To the extent you can get them to do their jobs more effectively and enjoy it, that's got to be a competitive advantage."

4. Teams

Today, people who supervise the work of others are as likely to be called team leaders or project heads as managers or executives. It's all due to the phenomenal popularity of self-directed teams, teamwork, cross-
functional teams and other ideas associated with the practice of organizing groups of workers to achieve a common objective.

Teamwork is central to other major trends, such as quality management and empowerment, because it aids communication, improves cooperation, reduces internal competition and duplication of effort, and maximizes the talents of all employees on a project. But it's only in the last decade or so that attention has been focused on the team itself as a vital management tool.

Like most major trends, the teams movement has lately been criticized for positioning itself as a panacea. In fact, teamwork requires a good deal of back-and-forth communication, which can slow down decision-
making to what is, in some instances, an unacceptable speed. Says Hamermesh, "I'm all for teams, but not when someone on their own can make the decision a lot faster and better."

Tomorrows Trends

While management is undoubtedly evolving and new ideas often have merit, too many new ideas introduced too quickly can be harmful. When you go from one idea to another, your work force quickly becomes jaded, says Hamermesh. Workers may not take your ideas seriously if every month you introduce something new.

Unfortunately for trend busters, the past two decades of management trend-setting are likely to pale in comparison to the trend output of the next two decades. The reason: You're going to need them.

"I believe there's increased management complexity today," says Donald J. Dailey, partner in charge of entrepreneurial advisory services in accounting and consulting firm Coopers & Lybrand's Detroit office. "Business owners are faced with increasing amounts of technical information. Expansion overseas, external partnering relationships, outsourcing--all that combines to make managing a business more complex."

That complexity, in turn, breeds a desire for simplicity. And that happens to be just what management trends offer: a solution that promises to be easier and more effective than simply trying to work harder, be smarter and go with the flow.

The irony is, the more the marketplace demands simplicity, the more ideas consultants, authors and professors spew out, and the more confusing it all becomes. Says Dailey, "There's growing concern among many of the entrepreneurs I [deal] with that they're not prepared for the challenge [of sifting through trends]."

Of course, just because you're burning the midnight oil to keep up on the next big thing doesn't mean you have to follow it. Godin, for instance, stays abreast of mentoring, mission statements and any other trend that comes along. But he never stops being a one-to-one guerrilla in pursuit of wow. "I probably read a hundred management books a year," he says, "and I haven't found anything to replace these three."

Required Reading

The consensus among management experts is that no one can keep up with the outpouring of ideas about how to run businesses better. You can, however, get a good idea of management trends' general direction by reading some of the following publications:

Business Buzzwords: Everything You Need to Know to Speak the Lingo of the '90s (Amacom), by Elaine Svensson and Charles B. Wendel. The best overall look at business trends, this book includes a great deal of background on overall trends and specific management gurus, plus extensive definitions, etymologies, related concepts and synonyms for more than 100 trendy terms.

Fad Surfing in the Boardroom (Addison-Wesley), by Eileen Shapiro. This book is worth owning for its brief "Expanded Fad Surfer's Dictionary of Business Basics," a glossary of management trends written in the "Devil's Dictionary" style of Ambrose Bierce.

Fad-Free Management (Knowledge Exchange), by Richard Hamermesh. More an indictment of management trends than an explanation, this book provides helpful tools for identifying what's new and worthy and what's just recycled common sense.

Guide to the Management Gurus: Shortcuts to the Ideas of Leading Management Thinkers (Random House), by Carol Kennedy. Due out in August 1997, this book is written by one of the most prolific writers on management trends.

Harvard Business Review. An impressive number of important management ideas get their first exposure in this authoritative and widely read journal. A year's worth of tables of contents reads like a catalog of business books to be published in the next few years.

Master Minds

You can't have management trends without gurus. Here are the top management minds of the past 20 years:

Philip B. Crosby: His 1979 book Quality Is Free (McGraw-Hill), along with the extensive training done by his firm Philip Crosby & Associates, is credited with bringing TQM to the management masses.

W. Edwards Deming: The éminence grise of TQM is credited with teaching the concept to the Japanese and, much later, spreading his dogmatic "14 Points" of quality management to American businesspeople.

Peter Drucker: Since the 1950s, this leading management guru, though not closely associated with any particular trend, has written numerous books on various aspects of management.

Michael Hammer & James Champy: Their 2.5 million-copy bestseller Reengineering the Corporation (Harper Collins) kicked off what is so far the leading management craze of the 1990s.

Tom Peters: In Search of Excellence (Harper & Row), written with Robert H. Waterman Jr. and published in 1982, opened the floodgates to countless would-be celebrity management-gurus-turned-writers. "Chaos" and "uncertainty" are Peters' new watchwords now that time has proved many of his ideas about excellence incorrect, but he is still regarded as a gifted management analyst.