Sunday, January 29, 2012

American Dominance And Its Effect on Business Management

Looking through my traffic results, I see there is renewed interest in the school rankings for Online MBAs. That tells me it’s time to get back to work and prepare the 2012 list, but it also reminds me to discuss the importance of such schools. Obviously, people go to school to earn degrees that make them more desirable to employers, for better positions and higher pay, but the decision should also be made in recognition of becoming much more effective at our work.

I’ve been reading George Friedman’s work, “The Next 100 Years”, which includes his opinion that the United States will dominate the century, not only because of our military and geopolitical standing, but also because of our business. That’s important for us, because it means that even if you want to become effective in international business, you have to first master the fundamentals of American business. The Master of Business Administration (MBA) degree, therefore, is not just a key to senior management posts, but is also a critical tool in helping your business gain long-term competitive advantage.

So, how does American dominance translate to your own career? First off, consider that (using Friedman’s data) the U.S. has about 4 percent of the world’s population, but creates 26 percent of all good and services, and 26 percent of the world’s GDP. The U.S. is far and away the world’s largest country for industrial production, is still one of the world’s largest energy producers, and is under-populated by global standards. Friedman says that an economy consists of land, labor, and capital, and on all three counts the U.S. is in very strong condition.

Now, it is true that the credit rating of the United States took a hit last year; as I work with credit analysis in my job, this is a point which must be counted with a lot of weight. But in context, always in context. The credit rating downgrade came from the behavior of the federal government, not the nation as a whole. When President Obama said the U.S. was and would always be a “triple-A” nation, he was correct – but he was also ducking the abysmal lack of responsibility by the federal government. The impact of the credit downgrade, then, comes in two parts. First, no matter how well an individual business is run, that business will be subject to penalties and disadvantages according to how it’s home country runs its policies and pays its own debts. That is tied to the second part; whenever a government messes up, the people will have to pay for the repairs and clean-up, and usually governments do this by punishing corporations, on the lie that penalizing large businesses which employ many people will somehow spare people the cost. History proves rather the opposite, but few politicians will ever admit this, especially since so few politicians have actually worked in or run a private-sector business. In short, success will always be desirable but great success will certainly make you a target for government powers seeking to get someone else to pay for their own blunders. As a result, major corporations will of necessity have to staff their teams with tax professionals able to address the sometimes ridiculous demands from government. This in no means that a company should evade taxes or seek to avoid paying an appropriate amount. In addition to the fact that government tax authorities have vast resources to pursue and punish cheats, the history of business also shows that paying too little also brings a cost in brand recognition and loss of goodwill. The point, though, is that paying too much in taxes does not improve the brand or make customers like you better; quite the opposite. Paying too much in taxes invariably forces a company to raise its prices, harming competitive advantage, and paying too much in taxes just makes your executives look stupid. Also, I should not need to mention that the government is far from eager to refund overpaid taxes, especially when a company does not realize its error.

Coming back to our own focus of interest, managers exist to get things done. Knowing that many companies are multi-national now, the globalization question is pertinent, but also must be folded into the acknowledgement of American dominance. By that I mean the understanding that American business practices are generally accepted worldwide as a standard, to the point that many elite businessmen come to U.S. universities and send their children here to learn business management. It means that Codes of Conduct and Mission Statements will generally have an American flavor to them, even in China and Russia, Brazil and India. It means that the exemplars of business excellence will continue to have names like Exxon Mobil, Kraft, and AT&T. Part of it comes from the long history of American business success, part from the dominance of U.S. business school doctrine, and part from the sheer optimism and energy of American strategy. For the foreseeable future, if you want to succeed globally, think American.

So how to do so as a manager? There are a lot of companies with poor management, for simple but foolish reasons. One example is the practice dubbed the Peter Principle, which promotes people who do a given job to a level above it, until they reach a level they cannot handle. The obvious correction for that is to peer-review managers and include regular training and refreshers for each tier of authority. Another common problem is allowing managers to build silos, preventing cooperation and also denying employees advancement opportunities through other departments and shutting down critical feedback for fear of losing image to executives. The correction there is a more active HR presence, especially by creating career paths for employees to encourage development and moral investment in the company future. Also, managers can help themselves by making sure their staff have access to opportunities. Rather than hurting the manager’s position, acting as mentor and providing support for promotion helps the manager nurture relationships outside his own group and department, not only be helping employees advance in the company, but also providing a talent resource for other managers. In this way the company thrives, inter-department cooperation is excellent, employees see proof of career opportunity and the manager who makes it happen gains trust and support from his team. A manager exists to make things work, and to do so more effectively. Sometimes that means seeking efficiency, but more often it means you need a leader with practical experience who knows from his own work what will and will not produce the desired results. Therefore, the goal should be to seek finding such people as managers, and to be such people ourselves.