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Good management holds more weight in business success than you might think

(ENTREPRENEUR) You have the ability to transform your business towards success using good management.

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Association game

What do you think of when you think of good management? Open communication? Happy employees? Other good stuff? Nobody is against good management, because in the abstract, it’s an objectively good thing.

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It has “good” in the name – doesn’t get any simpler.

Management matters

But until recently, there hasn’t been any real data to back up the fact that it’s good. Other seemingly objectively good things like investment in research and development, skilled employees, and high quality IT have plenty of research backing up their individual value to a standard company.

Good management, though, is usually discussed in terms of giants like Google and Facebook, which aren’t exactly typical firms.

The Harvard Business Review recently released the data they collected through a new study on the real world effects of management practices, and now we have legit proof that good management is good. In collaboration with the U.S. Census Bureau, the HBR collected vast quantities of info on a large number of small and large manufacturing firms across the nation. In total, 35,000 plants were surveyed on three key management metrics: monitoring, targets, and incentives.

The results were pretty clear: management matters.

Only 20 percent of the surveyed plants reported using 75 percent or more of the performance-focused techniques for management mentioned in the survey. These rare good management plants performed dramatically better than did the other 80 percent of plants. The good management plants that use monitoring and incentives-based techniques proved to be more productive, creative, and ultimately, profitable.

Each 10 percent increase in the management index of a plant correlated to a full 14 percent increase in productivity.

That increase was even found true for plants that weren’t already doing well saw performance gains. A higher management index was also found to be an indicator of business expansion, and a sign that the plant was less likely to go out of business.

The above average management techniques also appeared to explain 18 percent of the difference in performance between the top 10 percent of plants and the bottom 10 percent. In contrast, R&D only accounts for 17 percent, employee skills represent 11 percent, and IT spending accounts for 8 percent. AKA management matters most.

Keep an eye open

So what does a firm with good management look like? It starts with their geographical location. Companies in more pro-business states tend to have better management thanks to Right to Work laws. Competitive industries also tend to breed better management, because competition is just magic that way.

College also plays a factor, in a couple of ways.

Businesses with more degree-holding employees, and even the companies that are close to universities, seem to use better management techniques. Proximity to big, successful industry peers also improved practices, likely because smaller local businesses had the opportunity to learn from the big fish.

Gamer changer

That doesn’t account for all the variation, so individual leaders may play a large role in the quality of the management. That means that, independent of all other factors, entrepreneurs and other leaders have the ability and autonomy to re-direct management practices toward the more productive methods.

Good management is THE predictor of business success.Click To TweetThere’s no excuse not to invest as many resources as you can into achieving it.

#GOODManagement

Staff Writer, Natalie Bradford earned her B.A. in English from Cornell University and spends a lot of time convincing herself not to bake MORE brownies. She enjoys cats, cocktails, and good films - preferably together. She is currently working on a collection of short stories.

Business Entrepreneur

Is this normal (you wonder about your business)?

(ENTREPRENEURIALISM) It can be lonely not being able to openly ask potentially embarrassing questions about your business – there’s a way to do it anonymously…

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Entrepreneurialism is wildly rewarding – you are fully in control of the direction of your company, and you’re solving the world’s problems. But it’s also isolating when you’re not sure if what you’re experiencing is normal.

Sure, there’s Google, news networks (like ours), and professional connections to help you navigate, but sometimes you just want to know if something simple you’re seeing is normal.

Is Instagram Stories really where it’s at? Probably not if you’re a consultant.

Is it normal for an employee to attempt to re-negotiate their salary on their first day? Nope, but how do you keep the desirable employee without being bullied into new terms?

Do all entrepreneurs spend their first year in business as exhausted as a new parent? Sometimes.

You have questions, and together, we can share our experiences.

We have a brand new Facebook Group that is already wildly engaging, active, and you’d be amazed at how selflessly helpful people are – and we invite you to be one of them.

Want to anonymously ask a question about something you’re unsure is normal or not?

Click here to submit your question, and we’ll select as many as possible to discuss in the Facebook Group!

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Business Entrepreneur

Amazon on a collision course with politicians as they strengthen their monopoly

(BUSINESS) E-commerce has come a long way in the last decade, specifically led by Amazon, but are their controlling ways putting them on a collision course with regulators?

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In March, Amazon stopped replenishing weekly purchase orders for tens of thousands of vendors in a move that has stirred up some trouble. The tech giant has once flexed its power over first-party sellers over their platform. And it’s not the first time.

Amazon originally sent out to vendors as an automated message citing the hold up in orders as a technical glitch. The following day, vendors were told the change was permanent. The affected vendors were categorized as making $10 million or less in sales volume per year and not having managers at Amazon. Vendors selling specialized goods that were difficult to ship were also a factor.

The effects can have remarkable effects on the market as Amazon’s algorithms decide who is able to sell what to whom via their near-ubiquitous platform. According to John Ghiorso, the CEO of Orca Pacific, an Amazon agency for consultation and manufacturers representatives, the decision is driven by financial data such as total revenue, profitability, and catalog size.

In a response from an Amazon spokesperson, the change was made in order to improve value, convenience, and selection for customers. The mass termination of purchase orders and the delayed response from Amazon herald the transition to the One Vendor system, putting vendors in an exclusive relationship with Amazon. This system will merge the current Seller Central and Vendor Central.

Amazon’s message is loud and clear: they will do what’s in their best interest to mitigate the market for their convenience. One may be reminded of the anti-trust lawsuit against Microsoft in 2001.

The lack of warning didn’t do them any favors either.

While smaller businesses need to change for Amazon’s program, first-party business will revolve around larger brands like Nike with whom Amazon is maintaining a relationship.

Despite the streamlined platform Amazon is going for, the company wields power over vendors and customers alike. Capitalism is one thing, but monopolies are a whole other ball game, and politicians are finally paying attention.

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Business Entrepreneur

Culture Codes is the guide you need for company culture questions

(BUSINESS ENTREPRENEUR) One of the biggest sellers of a company to a prospective employee or customer is their culture. Culture Codes has compiled some the biggest companies cultures in convenient decks for you to study and align with.

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Organizational culture is a hot button of conversation. While a variety of definitions exist, one way of defining Culture is the way businesses exist – a summary of values, rituals, and organizational mythology that helps employees make sense of the organization they work in.

Organizational cultures are often reflected in Mission, Vision, and Value statements of organizations.

What many entrepreneurs or new organization struggle with as well, is how to create a culture from the ground up. What kinds of statements and values do they advocate? What are areas of focus? Who are our competitors and what can we do to create a service, product, or quality advantage?

Building a strong culture can be challenging, but a good place to start is looking at the best cultures around.

A new resource by Tettra, Culture Codes, has everything you could want to know on different companies their cultures available for you to study up.

Over 40 companies employing over 280,000 employees have created culture decks and collected core values and mission statements. Companies like Spotify, Netflix, LinkedIn, and NASA have all contributed information.

This information is great for young companies or entrepreneurs to start building a schema about what kind of culture they want to create.

Or existing established companies can look towards peers and competitors and help decide what statements they want to engage culture change on.

For job seekers, Tettra can help potential employees gauge if they are a fit for an organization, or discover that maybe an organization they dream about working for has a culture they may not jive with. And perhaps most valuably, transparently showing off your culture and allowing it to be compared means that organizations can better compete in the talent market.

Recruiters should be obsessed with talking about culture – because it keeps people in the door.

The reasons why people leave employment: work/ life balance, poor treatment, lack of training, or relationship issues with a supervisor or boss; in many ways are a by-product of organizational culture. If you want to compete in the talent market, make culture a selling point and show it off in everything you do.

Even consumer’s benefit from learning about an organization’s culture – values that indicate a commitment to excellence in ethics make consumers feel good about supporting an organization.

It pays to have a good culture. I encourage you to head over to tetra.co/culture-codes and see how companies like Etsy are keeping it real, every day.

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