When I moved to the USA I was idealizing American system of capitalism. Now after some experience with great people I saw one pattern that is destroying the companies’ outlook from inside. There is a visible rift between owners and managers. Managers and less and less productive and owners more and more often have to intervene and to put their businesses back on track.

As I wrote in my previous article, managers job is to “manage resources and to increase their value”. But there is other part that says that “managers are executing their duties with power and in the name of owners by promoting of their benefits”.

I see that in many companies there are disconnected management from the owner. Bigger is the company, more you can see it. For example, in large banks associates approving loans will not even try to investigate assets for prospective customers and to try to “hunt them”. Their job today is only administrative “because they do not need to do other research”. The same with insurance, and any other service providers. Large companies are losing large amounts of money.

I think that the reason for that is a rift between management and owners. Owners have to hire managers that will be “their players”. They have to manage resources with high respect of owners’ interests. To motivate and increase that “connection” wise owners are giving shares to management to motivate them further.

How to know that there is a problem? One of signs, and I would say a major one, is when management plays as “union representatives”. They play as they are representing their people in the board and not representing the board and enforcing board’s decisions to the lowest level of hierarchy. Of course, there should be intensive communication from professionals at lower levels to upper management. As I already said: more than 50% of value of all resources of the company are people. You have to give space to people who have more energy and that are ready to help company to survive and to grow in very competitive environment. As management’s job is to increase the value of their resources (people), they have to do everything they can to select and push their top professionals up, they have to create simple to understand performance evaluation system and to try not to do anything that will demotivate people.

Finally, there is no progress without intensive work and adaptiveness. In everyday business we have to change nearly everything we are used to to new scientifically proven truths (methods). Today, everything has to be quicker and to have better quality than ever.

 

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