By: Carlos Alcérreca J. and Aurora Monroy.

Introduction

In this article we try to identify the managerial competencies that are important in Mexican organizations and to assess whether these competencies differ in accordance with the hierarchical level of the people. A competency is defined here as a mixture of the knowledge and skills necessary to perform the functions of a job in the organization. The concept of managerial competencies focuses attention on what people are able or required to do to perform their work. The studies listed in the bibliography on this topic were conducted mainly in the United States ((Dai, Tang and De Meuse, 2011; Kaiser, Craig, Overfield and Yarborough, 2011; Mumford, Campion and Morgeson, 2003; De Meuse, Dai and Wu, 2011).

This study may be useful for organizations, universities and career planners. For organizations, the study can provide insights on qualities to be evaluated when considering candidates for positions, especially when the promotion of a person to a new hierarchical level is involved. It could also be used as a framework for evaluating staff performance in their current positions. In addition, it is possible to use this information in establishing the objectives of training and development programs. For universities, the framework would serve to establish learning objectives and to update the curricula of private and public administration academic programs. Finally, budding executives can use the competency framework to plan their personal development. This last perspective is the one that will be addressed in this article.

Methodology

First, a list of competencies was selected from the specialized bibliography. In particular the studies conducted by The Conference Board, The American Management Association and The Wall Street Journal were taken into account. The competencies that were used more frequently were considered in this study. The knowledge in two areas was added to this list. First, basic areas related to business, such as economics, law, public policies and quantitative methods. Then, knowledge in functions of administration, such as knowledge of marketing, finance, accounting, operations and human resources were also included. A final list of 30 competencies was obtained.

Next, a question was designed: “According to your experience and using a scale from 1 to 5, where 1 means ‘not very important’ and 5 ‘very important,’ how important has each of (the competencies) been in the position you currently occupy in your organization?”

In the questionnaire, the respondent was asked to indicate his/her hierarchical level in the organization according to three levels:

1. Directive level: General manager, CEO, CFO, etc.

2. Executive level: Area manager or director

3. Operational level: In charge of no personnel

The questionnaire was sent in 2016 to 6,306 graduates of business programs of a private, non-profit university in Mexico City. The programs were undergraduate, diplomado (specialization courses) and master’s level. We obtained 645 responses that were reviewed and validated, and a final database was compiled with the responses of 348 people, which represented a 5.52% final response rate.

An Analysis of Variance statistical technique was used with the data to determine if people at different hierarchical levels had different perceptions of the importance of each competency.

Results

63% of the respondents were men and 37% were women. Of the total, 19% were in the operational level, 48% in the executive and 33% in the directive level. The average age of the respondents was 42 years, with a standard deviation of 13 years. Regarding the educational level, 57% had a bachelor’s degree, 41% a master’s degree and 2% a Ph.D. In their areas of work, 27% worked in finance, 15% in general management, 12% in marketing and sales, 11% in accounting, auditing and taxes, 8% in operations and purchases, 4% in consulting, 4% in human resources and 19% in other departments.

The average importance attributed to a competency was 4.2. The competencies perceived as of greatest importance in their current position were: use of information technologies, knowledge of operations, analytic/quantitative skills, teamwork/collaboration, care of the environment/procurement of a sustainable environment and adaptation to the organizational culture (Table 1).

Table 1. Perception of the most important competencies.

The competencies perceived as of lesser importance in the current position of the person were: knowledge of public policies, knowledge of economics, strategic thinking, creativity, written communication and global perspective (Table 2).

Table 2. Perception of competencies of lesser importance.

Significant differences were detected in the importance attributed to the competencies at the different hierarchical levels, indicating that the importance of certain competencies increases with the hierarchical level of the person. The most significant differences, from a statistical point of view, were in negotiation skills, knowledge of marketing, teamwork/collaboration, knowledge of public policies, knowledge of law, knowledge of accounting, adaptation to the organizational culture, innovation and knowledge of finance. (Table 3).

Table 3. A variance analysis of competencies whose importance changes according to the hierarchical level.

Discussion

First, the competencies perceived as the most important, especially the importance given to information technologies, confirm that we are well advanced in the third industrial revolution, of digital and information technologies, and that this requires expertise in this area to perform properly in the world of work. The problem of preparing oneself in this area is that it changes very quickly and it is very specific to each organization, which can use different systems and software.

The importance given to the knowledge of operations indicates that the majority of people who work are dedicated to “operating” an existing process or system. Therefore, it is necessary to prepare oneself by learning about process management. Analytical skills are also important because in many positions, for example in the field of finance and consulting, various aspects of reality are analyzed. Teamwork is essential for process operations and the realization of projects in organizations. Care of the environment is present every day in the media, there is legislation on the subject, and it is crucial for our civilization.

The adaptation to the organizational culture is underestimated in the preparation of the people, but it is critical in order to be successful in organizations, especially for those who have the intention of ascending in the organizational hierarchy. This theme is emphasized in the induction programs of companies, but only over time will people come to understand the culture of the organization. Those who fail to adapt to the culture do not advance and often end up leaving the organization.

Secondly, it must be taken into consideration that this is a study of the 30 competencies that had been identified as important in previous studies, and minor competencies were not included. Therefore, the competencies that appear here as of lesser importance should not be considered irrelevant or that it is not worth the effort to cultivate them. The one that appears in the last place, knowledge of public policies, is a competency that increases in importance with the hierarchical level. However, for those who responded, information technologies, operations and analytical skills were considered more important than public policies, economics, strategic thinking and creativity, indicating that, during that at the time, the concern of most people was operating a process or system rather than changing it.

Finally, significant differences were detected in the importance attributed to different competencies by hierarchical level. These competencies, whose importance increases with the hierarchical level, are: negotiation, teamwork, innovation, adaption to the organizational culture, knowledge of marketing, accounting and finance, knowledge of public policies and law.

These competencies can be grouped together to form a conceptual framework integrated by four dilemmas: the dilemma of relationships, the dilemma of change, the functional dilemma and the dilemma of the structure of the environment or institutions.

The dilemma of relationships is the space negotiation-teamwork/collaboration. In this space, before a situation or project in which one must relate to others, a person could consider the problem as one of allocation of resources and seek to negotiate, thus competing for a part of the resources at stake, or one of creating more value seeking to collaborate and cooperate to increase the value of the resources for all participants. The resulting behavior, the mixture of negotiation and collaboration, has four possible profiles: low in negotiation and collaboration, high in negotiation and low in collaboration, low in negotiation and high in collaboration, and high in negotiation and collaboration. When moving to a higher hierarchical level, people must change their competencies so that their profile is increasingly higher both in negotiation and in collaboration. That is, they have to focus on both the creation and allocation of resources.

The dilemma of change is the space innovation-adaptation to the organizational culture. The person may face situations with the idea of adapting or innovating. This leads to four potential profiles for change: low in adaptation and innovation, high in adaptation and low in innovation, low in adaptation and high in innovation, and high in adaptation and innovation. When promoted to higher levels of the hierarchy, people must acquire competencies that provide adaptability and innovation. That is, they need to be “ambidextrous” in their relation to change.

The functional dilemma is the marketing-finance and accounting space and it focuses on the question for whom is the value created. In this space, marketing represents an orientation toward the markets of clients and finance and accounting are inclined toward the financial markets. People with a high or low profile can be identified in each one of these orientations. However, at high hierarchical levels it is necessary to know and conciliate the orientation to marketing with the orientation to finance and accounting.

The institutional, or structure of the environment, dilemma is the space of law-public policies and represents the opportunities and constraints of the environment. In this space, law represents the institutional normativity and the public policies, the discretion of the political leaders. Different profiles of people may have high or low knowledge in each of these areas. However, in high hierarchical levels one must know the two areas.

Conclusion

In general, business program graduates are more involved in the operation and analysis of administrative processes and systems (using information technologies) than in their strategic change. Surely, the operation consumes most of the time of the executives. However, when promoted to a new hierarchical level, they need to reinforce knowledge and skills that they previously considered to be of lesser importance. To do this, they need to acquire competencies that can be conceptualized as dilemmas in relationships, change, functional areas and the structure of the environment in which they operate. People seeking to develop their careers must be prepared in these areas if they are to succeed at the highest hierarchical levels of organizations.

References

• American Management Association, AMA 2010 Critical Skills Survey, April 15, 2010.
• The Conference Board, Developing Business Leaders for 2010. Executive Summary. April 2002. Report R-1315-02-RR.
• Davidson, Kate, The ‘Soft Skills’ Employers Are Looking For, The Wall Street Journal, August 30, 2016.
• Day, G., Tang, K.Y. and De Meuse, K.P., Leadership Competencies Across Organizational Levels: A Test of the Pipeline Model, Journal of Management Development, Vol. 30, No. 4, pp. 366-380, 2011.
• De Meuse, K.P. Dai, G. and Wu, J. Leadership Skills Across Organizational Levels: A Closer Examination, The Psychologist-Manager Journal, 14:130-139, 2011.
• The Wall Street Journal, How the Rankings Were Compiled, September 30, 2010.
• Kaiser, R.B. and Craig, S. B. Do the Behaviors Related to Managerial Effectiveness Really Change with Organizational Level? An Empirical Test, The Psychologist-Manager Journal, 14: 92-119, 2011.
• Kaiser, R.B., Craig, S.B., Overfield, D.V. and Yarborough, P., Differences in Managerial Jobs at the Bottom, Middle and Top: A Review of the Empirical Research, The Psychologist-Manager Journal, 14:76-91, 2011.
• Mumford, T.V., Campion, M.A. and Morgeson, F.P., The Leadership Skills Strataplex: Leadership Skill Requirements Across Organizational Levels, Academy of Management Best Conference Paper 2003.

By: Marco Morán, ITAM

The competitive environment that businesses confront today requires the constant improvement of our products or services in order to increase customer satisfaction and, at the same time, increase or maintain operating margins; all of this with an almost immediate set up speed.

On the other hand, there is no longer a business that does not have a strong operational and strategic dependence on information technologies, the technological enabling of processes, products and services. To respond to market changes, you will need to keep pace with the demands that companies face.

Initiatives such as the consolidation of the business unit, acquisitions, divestitures, changes in the business model, or preparation for the initial public offering (IPO) have an important component of information technologies.

In this paper, we will discuss, from a business point of view, the basic concepts of cloud computing, which has become a major topic of interest because of the speed and ease with which we can get state-of-the-art technology at affordable prices for any company and that can help us face current challenges and difficulties.

Even though cloud computing has been on the market for a long time, there is still much confusion about what it means in various markets or business sectors. Cloud computing is the practice of using a remote network of services that are hosted on the internet to store, manage and process data, rather than a local server or a personal computer.

Cloud computing has certain attributes, delivered in different ways and services. The company that uses in-the-cloud technology does not own the assets, it only pays to use them.

It is a scalable and elastic scheme. That is, they are shared services that can increase or decrease as required. The main infrastructure, software and platforms are shared among customers who use a service.

Cloud computing offers a variety of payment models according to use. That is, payment is by consumption without having idle capacity installed in the company or insufficiencies in times in which the processing needs of a company increase. The cloud uses internet technologies, and services are provided using identifiers, formats and protocols such as URL, HTTP, IP, etc.

There are three ways to deliver services in the cloud:

• Public Cloud. Computer assets belong to a third party and anyone can take advantage of them. The assets, definition of the service, cost and risk of implementation are responsibility of the service provider.
• Private Cloud. Computer assets belong to a company, which limits access to the users of its organization or to those who decide to give them the payment. Assets, definition of the service, cost and risks of implementation are responsibility of the customer.
• Hybrid Cloud. Services are coordinated between internal and external computer elements. There are various combinations, so this style has gained popularity.

Finally, let us talk about the services that companies can acquire using cloud computing:

• Infrastructure as a Service (IaaS). It is equivalent to the initiatives of information technology infrastructure and data centers. The IaaS provides an almost immediate self-service scheme of scalable and elastic infrastructure resources complemented by storage and network capabilities.
• Platform as a Service (PaaS). It is the version of cloud services that deals with the infrastructure of applications: the technological foundation to develop, test, integrate and deploy technology.
• Software as a Service (SaaS). It is the layer of computing applications in the cloud. One or more providers own the software applications and are the ones who deliver and manage them. The method of purchasing of SaaS is based on the volume of use or consists of a subscription that depends on certain metrics.
• Business Processes as a Service (BPaaS). It is a specific type of outsourcing through internet-based technologies. The provider is responsible for the management of the process, the steps are highly automated and the customer is given access to data for reporting information or preparation of analysis.

In conclusion, cloud computing is an option for launching business initiatives in an agile, scalable and low cost manner. Cloud technology is state-of-the-art, secure and accessible for companies of all types and sizes. It is a scheme that must be revised at the time of identifying the options when an initiative requires a technological component.

Many providers have a complete offering, and some specialize in a niche. Certainly, the market will continue to evolve and strengthen the offer of services. It is important that the evaluation of options is informed and that it follows a formal procedure to choose the one that best suits the needs of the company.

By: Antonio Lloret, ITAM

It is common to find in articles and books about business strategy definitions of strategy that are intended to sustain a discipline. For example, according to Thompson, Strickland and Gamble (2008), “strategy consists of the competitive moves and business tactics that administrators employ to grow the business, attract and satisfy consumers and compete successfully through operations with which organizational goals are achieved.” For Barney and Hesterly (2010), strategy “is a theory of how to generate competitive advantages,” while Porter (1996) defines strategy as “the creation of a fit between the various activities of a company.” These definitions are very useful, but because they are so general, they don’t give us the simplicity needed to explain how strategy generates value. In fact, if we try to establish the link between a company’s business model and its strategy (Osterwalder and Pigneur, 2010), we find a conceptual void. This situation creates a dilemma, because it can discredit an entire discipline by its vagueness and relativism, instead of adding value to it.

How, then, can we simplify the concept of strategy to understand its importance in a simple, intuitive way?

One possibility (though not the only one) is thinking in terms of a linear function as a straight line. In geometry and algebra, a linear function is a first-degree polynomialfunction. In other words, a function whose representation on the cartesian plane is a straight line. The function can be written as:

f(x) = b + mx

where m and b are constant or parameters, and x is a variable. The constant m is the slope of the straight line and b is the point where the straight line cuts across the Y axis. If we modify m, the slope of the straight line changes, if we modify b, the straight line will shift up or down.

We can think of the concept of strategy in terms of a linear function, or a straight line. We just need to be creative, think about what the straight line means, what it relates, and that the strategy will be the set of actions that must be taken to move the parameters m and b. If we could map out the graph of a business situation, we can understand it. A linear function is very helpful in describing what we have to do, and that “we have to do” is in itself a strategy.

Think about the following situation: you’re the manager of a company and your boss tells you that you have to increase your sales margin (the margin is the difference between the price and the cost of the good sold), you probably only have one way to do this. Since the product price is given by the market (in other words, it’s constant), you have to lower the cost. The straight line can simplify the strategy you should follow. Let’s look at it in terms of a graph:

Step 1: Draw a cartesian plane.

Step 2: Label the vertical axis as margin (price less cost).

Step 3: Label the horizontal axis as products made or sold.

The graph would look like this:

Step 4. Establish the relationship you think should exist in terms of a straight line.

What this linear representation indicates is that the more products you sell, the higher the sales margin. The function is: Margin = b + m (products), where b takes a value of zero because it is at the origin, and m is the value of the slope that gives the level of the margin obtained for each product sold. As part of this example, the price is set by the market, so the only way to raise the margin is to reduce costs. Thus, the previous representation is similar to the following:

In other words, we have to reduce the cost of each product if we want to increase our margin. The linear function in this case is Costs = b – m (products). Here, b represents the costs independently of the product sold and m is the marginal (or variable) cost of each one of the products made or sold.

The mere representation should communicate that if the goal is to increase the margin, the only alternative is to act upon the slope, the value m, and that’s where strategy comes in, because there are countless ways to modify m, which is the ultimate purpose of the strategy. For example, we can think of economies of scale, in production efficiency, in increasing production capacity, or in resources to affect the value of m, reduce the cost and increase the margin.

Let’s look at a more simple and intuitive example. Suppose your level of profitability (vertical axis) depends on the number of clients you serve. Imagine a coffee shop in which just to open the place, without selling a single cup of coffee, you have to spend something. This situation can be represented graphically as we did in the preceding example:

If we express this representation as a function, it would be: Profitability = -b + m (cups of coffee). This means that if you don’t sell any coffee, there’s a loss equal to b, which might be the rent on the shop or the wages of your employees. You have to sell at least b/m coffees to break even, and any additional coffee after b/m would be the coffee shop profit. This b/m, in its simplest form, is the concept of the break-even point, where you neither make or lose money. Strategy then implies, for example, increasing the price of the coffee, reducing the cost of the coffee or modifying b to bring it closer to zero by reducing the costs of your shop, or even lower the wages or working hours of your employees to hire more people to work at the busiest hours, and less at other times.

These linear representations are very useful for understanding business situations; we can also make them more complex so we don’t leave them in these simplistic (which is not to say simple) terms.

One of the creators of strategy, Michael Porter, in 1980 conceptualized five forces of the industry to postulate that, based on a static analysis of the industry, it was possible to determine potential profitability based on two principles: 1) the relative power of suppliers and clients; and 2) the threat of substitutes, rivalry from competitors and threat of new participants coming in to the market. Figure 5 shows this model.

The analysis is very useful, but it’s still ambiguous. How does the straight line help us better understand such an important concept?

The simplest thing, once again, is to represent the concepts in terms of a linear function and see the effect of each of these forces on profitability. For example, let’s think about suppliers’ power of negotiation:

As we see in the graph, as suppliers’ power rises, profitability drops. The function would be: Profitability = b- mRPS. This representation indicates that as suppliers’ purchasing power rises, profitability is reduced. In strategic terms, we need to modify the rate at which the relative power of suppliers grows, and as a result, what the company should do is think of strategic actions to reduce that power -for example, seek out more suppliers, renegotiate contracts, etc. All of these are highly important strategic decisions. The same is true for the client. The representation is practically the same, but this time the horizontal axis represents customers. The strategic movement should be to increase the company’s power vis-à-vis its customers, for example, with switching costs (that is, a client would lose something for no longer consuming) or differentiating itself enough so that the client, instead of seeking out alternatives, stays with the company.

As for the threat from substitute products, rivalry from competitors and the threat of new participants, we can group all of these into a single category called “competitors”:

Here, Profitability = b – m (competitors). This means that as the number of competitors (substitutes or new entrants) rises, profitability declines, unless -strategically-the company makes decisions that raise entry barriers or create mechanisms to insulate it from the competition, like patents, exclusivity agreements or differentiation, which will modify m and increase profitability.

In conclusion, strategy has a graphic representation that can help us to understand and, more simply, intuit the decisions that need to be made.

We have to understand that even though reality doesn’t behave in a linear fashion, a conceptual approach like the straight line is useful for understanding the possible relationship between the company’s strategic decisions. We shouldn’t be afraid of graphs and mathematical functions. Rather, we should realize that what can be graphed out can be understood, and if it is understood, it can be acted upon and decided.

References

• Barney, J. B., and Hesterly, W. S. (2012). Strategic management and competitive advantage (4th ed.), Pearson.
• Osterwalder, A., and Pigneur, Y. (2010). Business model generation: A handbook for visionaries, game changers, and challengers, Wiley.
• Porter, M. E. (1985). Competitive advantage (pp. 11-15), New York, The Free Press.
• Porter, M. E. (1996). What is strategy? Harvard Business Review (November).
• Thompson, Strickland and Gamble; 2008 “Crafting; executing strategy: Text and readings.

By: Michelle Lee, Lynne Thomas, Dr. Howard Thomas, Dr. Alexander Wilson*

The African approach to management education has been shaped by a range of environmental, cultural, contextual and regional characteristics.
Africa is by any measure a massive, multi- cultural, multi-lingual continent offering the promise of significant economic growth in the longer term. The environment is characterised by volatility, uncertainty, complexity, ambiguity and, often, disruptive change. Despite this, some African states have tried to adapt and formulate a range of strategies for economic growth management and the development of international and inter-regional trading opportunities arising from globalisation.

Existing evidence suggests that African management educators have tried to adopt a pragmatic perspective that emphasises management practices and somewhat de-emphasises strong analytical rigour and the pursuit of scientific management research, which offers little immediate practical relevance for a managerial audience.

They also prefer a closer relationship with business and practice and favour a faculty role as teacher-first, offering a blend of practical experience and knowledge to students.

Only a relatively few elite schools in Africa have an orientation and resource profile that matches, or even approaches, the best American and international business schools. Yet these African schools have an international mindset that involves a strategic intent to achieve international accreditation and favourable media rankings. They stand in almost complete strategic isolation from the “rump” of basic, vocationally oriented African business schools.

However, individual countries and regions such as Southern Africa, East Africa, West Africa and francophone North Africa are all very different and do not conduct business or even run business schools in the same way. This suggests that a range of different forms of business school is to be found across Africa. Further, they should not necessarily be thought of as carbon copies of models from distinctly different contexts such as the US or Europe.

African countries and their business schools are developing, and will certainly continue to do so, at different rates of growth. Collaboration between them will improve and partnerships with international schools may also provide a useful source of advice and expertise.

Although there are differences across Africa, there may nevertheless be some similarities that can be integrated across cultures to synthesise a “set of features and issues” that could possibly form the elements and content of an African management education model.

Is an African model of management education realistic?

As part of our research we interviewed leading management educators and stakeholders – all of whom had close associations with Africa. One question we asked them was:

Is it realistic to think in terms of an “African model” for management education? If not, what local adaptations might be appropriate? How easy might it be to develop these?

The first part of this question yielded a variety of responses from “yes”, “no” and “yes, if…”,
the latter being the views of respondents who indicated that there could be some form of “African model” for management education if certain adaptations were made. A small minority of respondents claimed that it was realistic to think in terms of an African model for management education. Slightly less than half of respondents said that it was not realistic to conceive of an African model for management education.

Figure 1

Figure 1 summarises the relative strength of the various responses:

What themes are evident in comments about an African model?
Given the roughly 50/50 split between those in favour and those arguing against an African model, it is important to outline the main themes in the interviewees’ comments and to understand their logic and rationale. These themes underlie the propositions and perspectives put forward in the discussion and are summarised in Figure 2.

Figure 2

The most dominant theme was whether (or not) African schools can contextualise management education to produce a national, regional or broader African model. The next theme of adaptation is closely connected with this. It captures a range of perceptions as to whether, and in what ways, management education might undergo adaptation.

As well as the context and adaptation of management education, respondents also debated whether the theory and practice of management itself is universal or locally situated, which produced further debate and conjecture about whether an African model was possible or relevant.

These themes were then mapped onto our earlier research about whether respondents thought an African model for management education was realistic. Our findings illustrate that there are some differences of opinion about the potential influence that each theme has in strengthening or diluting a distinct model for management education. The findings for each theme are shown in Figure 3.

Figure 3

Figure 3 highlights where the differences of opinion arise in the themes discussed by respondents and whether or not they contribute to an African model. For example, the notion that the African model requires further definition and needs leadership to establish it were themes closely aligned with the notion that there is (or could be) an African model. One respondent commented:

“The African business school model for me is a model that talks about social innovation, business model innovation, inclusiveness, entrepreneurship.”

A need to contextualise

The most frequently discussed themes were about the need to contextualise management education given the wide diversity of cultures and experiences across Africa. However, one-third of those who mentioned contextualisation thought that there was not, or could not be, an African model, whereas two-thirds argued that there could be, if properly contextualised.

Management as a universal construct

A theme that also divided how respondents see management education was the nature of management itself; either management was perceived as universal and therefore did not need an African model or such a model would have a standard core of knowledge and require an element of contextualisation. Two-thirds of respondents discussing this theme argued the former. For example: “I think this is not just an African but a global question. It’s a global model… Finance will be finance, marketing will be marketing and so on. So the theory of marketing, I think, is across not just Africa but many other continents”.

Management education requires adaptation

A further point of debate was whether, and in what ways, management education should be adapted in the African context. Again respondents were divided yes (60%) and no (40%) on whether there should be an African model for management education. Those who saw no distinct African model reasoned that another model (for example a theory-driven model of management education) could be used with some adaptation in terms of content, structure and delivery.

In contrast, other respondents argued along the lines of plural, emerging African models for management education, which will require ongoing clear identification of management education needs and substantive adaptation of current provisions.

The Western model is dominant

A further theme that emerged was centred on the role that other models of management education play in enabling or constraining the development of an African model. For example, one respondent reasoned that it is “not realistic” to have an African model when established models are so dominant:

“There are two reasons for that. First, there is the institutional academic and business power, may I call it the ‘Western model’? I cannot see that that will be unseated. Second, where do the book publishers come from, in what language are the books published? English.
Where are the main offices of the corporates of this world, which are basically the focus of management? Therefore, the hegemony of that power, we can’t beat. We’re way too small”.

Contrasting views were also apparent where respondents felt that in the face of a Western- dominated sector some variety of an African model should be seen as an aspiration.

“I think there’s an aspiration. So in terms of the aspiration, should we not as Africans, maybe not build a model but set up our own set of criteria as a beginning? So that we don’t compete with the rest of the world initially but we compete with ourselves. So we actually do it on our own terms and say ‘we think a good school…in Africa [would] adhere to these principles’”.

Management is a local construct

In opposition to those who argue that management is a universal construct, a smaller group of respondents contend that management is local and situational. However, from this position, respondents discussing this theme were evenly split on whether there was an African model or not. This respondent argues that too many differences between different regions and groups of people rule out the possibility for a coherent African model:

“I don’t think so. This is a huge continent. Every single region or market would differ, [with] emphasis on different things. People behave differently. Some things are important in certain in areas, the nature of people differ. I think in terms of that alone, you’ll have to design for the specific context”.

Another respondent takes the view that re-contextualised and adapted models could form the basis of models of management education for Africa:

“Today, I don’t believe in one exclusive model of management education. I do believe in models that are contextualised and take, adapt, adopt and re-contextualise tried-and-tested models elsewhere. To simply adopt, as is usually the case, does not work. But to re-contextualise and adapt is meaningful”.

Conclusion

So should there be an African management education model?

Clearly a very small minority of the interview panel would favour a single African management education model. The balance of responses are almost evenly split between a clear “no” and those who favour a balanced basic model – perhaps using Western ideas but with a contextualised content that reflects the differences in the contexts and cultures across Africa.

The current evidence from Association of African Business Schools (AABS) and others suggests that Africa can already be clustered into (at least) five sub-regions: North Africa, Southern Africa, West Africa, Central Africa and East Africa. They are all quite different with a range of ways of doing business. Even within regions individual countries have their own way of operating businesses.

Within these regions there is already a set of diverse business schools with, in most cases, models largely adapted and contextualised from models generated elsewhere – typically in North America or Europe. These schools have largely achieved a strategic balance between mimicking Western models but with strong country and regional factors of differentiation.

In the spirit of adding to the debate about how to build an African model, a suggested holistic business school curriculum design is proposed in Figure 4 (See in PDF). This design argues that there is a range of “African business school models” and not a single African paradigm.

Figure 4

In summary, this holistic curriculum contains three key elements.

The first covers the core foundations, which represent the key “universal” aspects of management such as the basic disciplines of accounting, finance, marketing, decision analysis and organisational behaviour.

In the second element, the communitarianism, the ubuntu philosophy and the importance of the relationships between family, the tribal organisation (the micro-nation and its languages) and the nation state are discussed and evaluated.

The third element provides a set of potential key topics that are important in applying management concepts in the African context. For example, the study of leadership theories may require knowledge of previous successes and failures of leadership.

This may lead to a focus on values-based leadership and a thorough discussion of the role of ethical principles and culture in governance. In addition, given the economic growth imperatives in Africa, economics and finance courses, for example, may need a greater focus on issues and principles of economic and financial development that are critical in macro-economic management.
Note that this model is presented with a few suggestions about structure and some curriculum illustrations in order to create further debate about appropriate topics and models and to promote even more research about the needs, management practices and curricula requirements in an African context in which greater economic collaboration and integration between African countries may be essential.

*Authors:

Michelle Lee

Professor Michelle Lee is Associate Professor of Marketing (Education) and Academic Director (Accreditation) at the Lee Kong Chian School of Business at Singapore Management University. Her main research focus is on the more passive or unconscious influences of memory on consumer behaviour.

Lynne Thomas

Lynne Thomas is a co-author of this and numerous other works including Promises Fulfilled and Unfulfilled in Management Education (2013).

Howard Thomas

Dr Howard Thomas is Distinguished Term Professor of Strategic Management and Management Education at Lee Kong Chian School of Business, Singapore Management University, and Ahmass Fakahany Distinguished Visiting Professor, Boston University Questrom School of Business.

Alexander Wilson

Dr Alexander Wilson is Lecturer in Strategy at Loughborough University, UK. Previously he worked as a research fellow in strategic management at Warwick Business School, UK, examining the evolution and development of management education, teaching and research and the role of business schools globally. He has held visiting fellowships at Singapore Management University (2011, 2012 & 2013). His doctoral research at Warwick Business School examined the strategic adoption of technology and organisational change.

This article was originally published in http://globalfocusmagazine.com/does-africa-need-an-african-management-education-model/

Since June 2014, the world has assisted to a dramatic fall in the price of oil, which reached approximately half of its previous value.

While this turn of events has hurt producers of oil, like Mexico, it has – or should have – benefitted consumers and companies that use oil as a main input of production. Like airline companies.

It would be natural to expect airline companies to transfer parts of these benefits to consumers in the form of lower travel fares. But those of you who tried to travel in the past year have probably noticed that airplane tickets have not gotten any lower: over some U.S. routes the average fare has even increased by 10USD. What is happening to the industry? Could travelers expect cheaper fares any time soon?

Some representative of the industry has commented that because airline companies are working with long-term oil contracts they are still paying old prices. But these arguments have been dismissed after other exponents admitted that the industry was enjoying a period of unprecedented savings (jet fuel is an airline company’s major expense).

In a competitive environment companies who set prices should fight with discounts until they fill all their seats, cutting their ticket prices down to their marginal costs. And the airline industry has shown in different occasions to be very competitive, bringing notoriously low returns to its shareholders. How is it possible that such a competitive industry has failed to transfer its cost savings to the customers?

One might argue that at end ticket fares depend on travelers’ willingness to pay, and data show that not only are travelers willing to pay these high prices, but airplanes are also flying at almost full capacity! This seems to suggest that actual fares are somehow “fair”.

They key of the puzzle lies in that “capacity”. For an airplane, capacity is given by the number of seats that the company makes available in each category. When companies set a large capacity, customers can find seats more easily or they can delay their purchases with less fear of potentially losing an offer. Also, from the company’s perspective, large capacity would likely bring more empty seats that could only be filled with aggressive discounts. Following these examples, we can begin to understand how large capacity usually leads to lower prices. Analogously, high prices can be usually connected to small capacity. Therefore, when industry representatives state that airplanes are already flying at full capacity they are only presenting one side of the problem. Airplanes are flying at full capacity because the companies have reduced the number of seats available per airplane.

For instance, in a recent trip to Europe I noticed that Lufthansa has introduced a new seat-category called Economy Plus on its flights. While being located in the Economy part of the airplane, this category offers more space in exchange for a higher fare. Apart from allowing for better market segmentation – and therefore higher revenues through price discrimination- the introduction of this category has allowed the company to further reduce the total number of seats available on an airplane, stealing space to the Economy class. Next time you praise an airline company for the good space between seats, remember that you are paying a hidden fee for this space!

Concerns for consumers’ welfare have recently moved the American Antitrust authority to put the industry under investigation. The accusation is that airline companies have tacitly colluded in keeping capacity low.

What are the factors that have contributed to the relaxation of competitive pressure in the last few years? First, the emergence of code sharing alliances has reduced the number of independent players, promoting instead large and coordinated groups. Second, in the U.S. there have been some major mergers (see for instance U.S. Airways and American Airlines) that consolidated the industry, making tacit coordination among rivals easier.

Should we expect to see lower ticket prices anytime soon? Travelers should not be too hopeful. The Antitrust investigation is bound to take some time, and it may be difficult to prove airline companies guilty. Moreover, even if airline companies wanted to add capacity to their flights, they would not be able to do so in the short run. In addition, by the time they could accomplish that, the global oil prices might have returned to historical highs.

This lesson showed the role of capacity in preserving profitability in aggressive markets: capacity moves strategy away from quick and reciprocally dangerous price reactions, into a realm of slow quantity adjustments that stop the erosion of profits.

For a company, moving from a price-setting to a capacity-setting strategy is a way to avoid the harms of price wars and creating a friendlier competitive environment. As a strategic variable, capacity is more rigid to adjust than price is, and therefore is not the optimal tool to react fast and aggressively to a rival’s move. When all companies in the industry adopt this strategy, aggressive play slows down and competitive pressure in the industry will become low. Returns skyrocket and prices stay high.

During our lives we learn to consider most activities as common skills. It is unlikely that one day, without any reason, we start questioning activities such as getting dressed, making breakfast or driving.

However, among these seemingly trivial activities, there are some that have relevant consequences. Making decisions is one of them.

Before learning to walk, we experimented with decisions about our tastes, interests and risks. For example, a baby’s first steps are the result of the decision to overcome fear for the sake of curiosity. By the time we become teens, despite our poor judgment, we have accumulated more than 10 years of experience as decision-makers, and on the day we get our first job, making decisions is an act as natural as walking.

Despite of being a seemingly common activity, the corporate world reserves their best positions for those individuals who, given their decision-making abilities, produce the best outcomes, either higher earnings or some other reward. However, it is worthwhile to note the following: If companies value their employees by the outcomes of their decisions, is it possible to make bad decisions that generate good outcomes?

Although the answer may seem trivial, it is surprising the number of qualified entrepreneurs and directors who lack the resources to answer the question. In spite of its importance, the decision-making process is seen as an activity that just happens, as natural as breathing and rarely questioned. Furthermore, there is a false belief that the best managers have an innate intuition for making good decisions, without considering that deciding, unlike breathing, is an activity that can be perfected with a deep understanding based on analysis.

So I ask again, can bad decisions bring good outcomes? It is possible that the reader may begin to doubt whether his/her first answer was correct. Not to prolong the uncertainty, it is important to say that it is not only possible, but it is common to observe bad decisions that yield good outcomes in both public and private sectors. However, although the answer is a resounding yes, it is more important to understand why a decision is correct or not, and to do this, let us take a small game as an example. The game has only one rule: Each question must be answered clearly and in a direct manner, so that words like “it depends” are not allowed. The game begins with the following question: Is it a good decision or bad decision to buy a lottery ticket? As innocent as the question sounds, many will be tempted to say that it depends. However, the game is about thinking and taking a stand. If an employee buys a lottery ticket, would you say that she/he made a good decision or a bad decision? Record your answer and continue. After the day of the drawing, you find out that the ticket won the first prize. With this information, you answer the next question: Was it a bad decision or a good decision to buy the lottery ticket? It is a common reaction for people to change their minds about the decision in the second question. Finally, let us say there was a mistake and the ticket in reality did not win any prize. With this information, answer: Was it a bad decision or a good decision to buy a lottery ticket?

At this point, most readers will have changed their mind at least once about buying lottery tickets, even though the decision is the same, to buy or not to buy a lottery ticket. It should be noted that the context of the decision was never changed; I only provide information about the outcome. That is to say, if we define the quality of a decision based on the outcome, we would say that decisions that produce good outcomes are good decisions. So can a bad decision generate good outcome? If the reader is inclined to answer no, I would remind you that the correct answer is a resounding yes, although it certainly is not the most popular response among managers and academics in the business world.

This mistake is generated by everyday inertia. Since childhood we learn by impulse and response; and learn to relate decisions and outcomes as if they were the same. But this confusion is the cause of many of the biggest mistakes in the world of management. For example, if we evaluate our employees based on the outcome of a strategic decision made today, we will not be able to evaluate such decision until the outcome is revealed. The decision will be the worst and best decision at the time the decision is made, which leaves entrepreneurs and employees with two alternatives. The first one is to avoid bad outcomes at all costs, which means sacrificing risky projects that could bring real competitive advantages. The second one is to study clairvoyance.

A particular problem cause by the confusion between decisions and outcomes is the creation of a culture of fear. For example, Palm, Microsoft and BlackBerry strongly criticized the launch of the first iPhone in 2007, even though the technology necessary to create smartphones existed since 2002, this delay was caused by corporation’s fear of failure. Eight years later, Palm is now out of the market, Microsoft is trying to enter and BlackBerry has lost the leadership of the sector. A more recent example is that of Tesla Motors, which in 2012 shock the markets with an electric car. GM could have been the leader of the electric cars market if it had not cancelled the production of the EV1 in the 1990s. In Mexico, perhaps the most compelling example is Aurrera, which, when facing the risk of competition withdrew from the market giving way to Wal-Mart. The decisions of entrepreneurs like Steve Jobs and Elon Musk were good not because they generated good outcomes. Lisa was one of the greatest failures of Apple and SpaceX (the sister company of Tesla Motors) has failed to date to land a single reusable rocket. However, we can consider these decisions as good if we ask ourselves seriously what makes a decision good or bad.

Similarly, evaluating managers based on their outcomes — as if outcomes and decisions were the same — generates an unfair compensation scheme where incompetent-lucky individuals rise to management positions. This explains why so many employees complain about their bosses’ limited skills. We can illustrate this with a simple example: Assume a brokerage house with a thousand brokers with equal abilities. The company has decided to promote each year those whose portfolio shows no losses. Given the nature of the markets, it is expected that a random percentage (say 50%) of the brokers have a bad year. At the beginning of the second year 500 brokers will have been promoted, and at the beginning of the third year 250 will receive a second promotion. After 10 years, we would have two brokers as stars, even though they all have the same skills. Real life is even tougher, as unskilled workers take fewer risks in order to cling the corporate ladder and wait for a stroke of luck to move up. This scheme is frustrating for employees and it is inefficient for corporations in terms of their management team.

Now, if a bad decision can produce a good outcome, and a good decision can produce a bad outcome, how can we determine what makes a good or a bad decision? To answer this question we need to understand what is a decision and what are its components. In the remainder of this article, I will focus on difficult or important decisions, although trivial decisions such as deciding where to diner share the same elements but do not require rigorous analysis.

We define a decision as “An irrevocable allocation of resources.” A decision is reached when there is no turning back and our resources have been committed. In the business world, the most common resource is money, however depending on the problem; we can speak of other resources such as time, health, etc. Under this definition, decisions have three main components: alternatives, uncertainties and information. The lack of alternatives leaves us incapable to act, the lack of uncertainties is a utopia that leads to a trivial choice about preferences and the lack of information is a trivial gamble.

With these ideas, we can establish that a good decision is one that focuses on strengthening the weak points of its components. For example, readers may ask if during the last important decision at work, a formal procedure was followed to determine whether the alternatives considered were adequate or not. In practice, it is common to consider alternatives that do not resolve the main problem. However, the worst thing is to make a decision without devoting enough time to identify new alternatives. The most interesting alternatives are not easy to find and require intense work. Hence, a decision with bad alternatives will be a bad decision.

Of the three components (alternatives, uncertainties and information), the analysis of uncertainties is perhaps the most interesting and the most technical. In this case, a good decision is one that can identify and describe clearly what the relevant uncertainties are and discard those that have a trivial effect on the final outcome. A large scientific community works on various methods to improve the decision-making process using a wide variety of mathematical models such as: Estimation of empirical probabilities, approximations to joint distributions, optimization under uncertainty, preference analysis, assessment of risk attitudes, sensitivity analysis, among others; the models and tools developed in this area are the difference between making a bad decision and being lucky or making a good decision and generating the highest possible value for the organization. Clearly you do not have to be a mathematician to make good decisions, but to know and use tools that can help to understand the behavior of the uncertainties is essential in a decision of quality¹.

Finally, a good decision is one that has enough information about the problem, the uncertainties, and the preferences of the decision maker. It is essential to understand that a decision made with the information at hand is most likely a decision of low quality. It is the responsibility of decision maker to seek the information that is required and not simply to use what is available. We must understand that to make a decision of quality it is required to leave behind phrases like “paralysis by analysis,” which serve as an excuse for making hasty decisions with insufficient and low-quality information. It is the decision itself and the facilitator that determines when there is enough information to allow us to make a good decision.

Although decision-making seems to be common activity, it can be quite complex and technical. For example, in companies like Chevron Corporation there are entire departments dedicated to implementing iterative procedures for making multimillion-dollar decisions. In U.S. hospitals it is common for facilitators to help patients and doctors make high-risk decisions. Even in sports, films like Moneyball give us proof of the power of the decision-making models in practice.

Decision-making is too broad a topic to be cover in such a small space. However, it is crucial that Mexican industrialists, businesspersons, entrepreneurs and academics participate in this discussion and start questioning traditional concepts. Many of the major economic and social problems of Mexico were generated by decisions made with little information, few alternatives and without thinking about the possible effects of the uncertainties. If we want to solve the current problems to improve our quality of life, we need to stop making bad decisions that produce the known typical outcomes and start making good decisions, although sometimes the outcomes may not be as expected?

_______________________________

Deficient strategic planning in modern enterprises prevents the medium and long-term expectations of its managers from materializing.

For example, according to a survey by Domenge and Belausteguigoitia (2009), one of the main problems that SMEs face in Mexico are poorly designed strategies for obtaining any relatively sustainable competitive advantage in terms of investing or allocating their limited financial resources in the best way. These strategies, by their own general nature, should identify and evaluate the key strategic resources (human, technological, operational, marketing and financial) that the company requires to achieve its objectives, as well as the means to obtain them, either by developing or accumulating them in a complementary and balanced manner (Warren, 2008).

Roughly speaking, a company’s traditional strategic planning consists of four major stages: the external analysis, the internal analysis, the design of the strategy and the implementation plan for the strategy. The external analysis determines the vision of the company in a competitive or challenging environment, and defines how the company wants to be seen in the future, which identifies the strategic objectives. An internal analysis of the resources notes and evaluates the assets and capabilities of the company and those that are missing to achieve its strategic objectives. The design of the strategy results in a path or way to achieve the strategic objectives. Finally, the implementation plan refers to the set of tactical or short-term decisions that, when carried out, will enable it to advance toward the materialization of the strategy from which they were derived.

How do strategists determine or select the best strategy? How do they evaluate the proposed strategies? Is it possible to validate and calibrate the strategy before putting it into action?

The Traditional Approach

Generally, the design of the strategy is based on a number of hypotheses that assume that certain decisions and actions will achieve the desired objectives at a certain time, within the constraints of scenarios that pose realistic assumptions or the most likely of the environment. In most cases, these hypotheses are based on the subjective postulation of causal relationships between the company’s resources and its expected effects, based on the experience of the strategists and supported, perhaps, by an analysis or a linear impact assessment model of the input -> output (IO) type (Figure 1), held in a computer spreadsheet program, which usually considers only measures of financial performance such as the pro-forma financial statements, expected cash flows, financial reasons, net present value and internal rate of return.

Figure 1. Traditional linear IO impact assessment model

These models for the assessment of the causal impacts of decisions on the resources of the company and their expected effects are conceptualized or developed according to a linear view of decisions to effects or performance measures, considering that in these models the effects do not have an influence on decisions in the planning horizon and if it is intended to factorize some undesirable effect, another assessment (or computer run count) must be made, taking into account the previous results in the new decisions.

The learning organization and the interactive learning environment

Poor strategic planning has been one of the main reasons for failure of the small and medium-sized enterprises, since it is generally considered a requirement and not a learning tool. In the approach to learning in the organization (Seng, 1990; Morecroft and Sterman, 1994; Spector and Davidsen, 2006), to design business strategies, the mental models of the strategists are called into question or the ways in which they see and understand the dynamics of the company, by means of new informed visions of the likely scenarios that would result from current decisions.

In recent years, there has been an increase in the tendency to do strategic planning and specifically plans of (new) companies, because, among other reasons, it is a requirement to persuade the directors, to apply for credit or invite equity partners. In many cases, you end up with a static document that is a compilation of data and that does not allow entrepreneurs to understand the structure of the dynamic system in which the company operates (Bianchi et al., 1998). Strategic planning in the context of learning empowers strategists to anticipate future scenarios for company growth and, therefore, understand the time needed to obtain or develop the resources necessary for the company to move toward its strategic objectives.

Learning necessarily involves the concept of feedback. Decisions are made that affect the actual results reflected in the performance measures. With these results, decisions made to achieve the objectives are reviewed and corrected (Sterman, 2000). These objectives, in turn, can be modified and adapted to the dynamics of the company environment, following the idea of resilience of the company.

The relationships between the strategic resources that the strategist has, his strategic objectives and his development strategy are the foundations of management flight simulators (MFS) that serve him at the time of designing, evaluating and predicting the potential performance of his strategy. Planning can be seen as a practical means of learning and the MFS as the vehicle that supports and enhances the understanding of the business system (Bianchi et al., 1998). High competitive levels and market demands force the strategists to be more prepared and to acquire greater knowledge to address today’s business challenges. Because the modern enterprise must be constantly learning and growing, the MFS provide a means of sensitizing entrepreneurs through an immediate feedback on the impact of their strategies, in order to analyze the impact their decisions might have on the organization’s resources.

The interactive learning environments (ILE) are means to achieve learning goals through the interaction of the participant and the focal system (Domenge, 2009). In particular, the MFS are a type of ILE designed for use on the computer, in the form of an interactive game based on virtual simulators of real systems. The MFS use a user-friendly interface for the decision maker.

The MFS are any representation of an environment, or a real or imaginary system, in a computerized simulation model (Davidsen, 2000). A simulator is designed and used when there are impediments to experimenting directly with the real system, such as cost, time, risk or lack of access to resources. The MFS are a means of learning in entrepreneurship education and practice or experimentation spaces for decision makers (Figure 2). With these means, an effective learning cycle is created, since they close the gap between the design and implementation of strategies and their effects.

Figure 2. The role of MFS in the strategy

With the MFS, learning occurs in a double loop in which the feedback from the information (results) stimulates changes in the mental models. Learning involves new concepts of a situation and leads to new objectives and decision rules, and not only to new decisions (Sterman, 2000; Lane, 1995). With the learning of two cycles, the decision makers assess the consistencies of their mental models, as one of the most important risks is making decisions without having examined the consistency of the mental model (Bianchi et al., 1998).

The MFS are an effective model of learning various aspects of business and are also one of the most interesting, as they lead users to engage with their decisions, as they progress through the interactive use of the simulator, since they review results immediately, accelerate their learning and gain experience quickly, experiment new behaviors, and acquire certain skills and competencies related to decision making (Saad, 2013; Lane, 1995). The simulator facilitates learning because it allows you to review and evaluate various strategies in a constant, immediate and iterative manner and to make decisions in light of new information generated by the simulator itself in a series of scenarios or iterations.

The MFS open the possibility of articulating knowledge from different areas of a business; they produce a strong motivation to undertake active learning; combine strategic and analytical thinking, and strengthen the ability to work as a team and improve personal communication and work under pressure. Simulation learning improves the mental models of the participants and helps them to form a shared vision of reality (Bianchi, et al., 1998).

However, the MFS also have some disadvantages. For example, a simulator is a model of reality, that is, it makes certain simplifications beginning with a selective abstraction of the real system. In addition, as the decisions are made without any responsibility –because the results of the simulator do not affect reality– they may influence the behavior of the players.

The bibliography related to MFS addresses issues that have served to formulate and evaluate strategies for a particular business or businesses in general (among others, Saad, 2013; Bianchi et al., 2000; Threshold Entrepreneur; The Business Disc; GoVenture; VCommerce; Venture; Enttrepreneur; DEAL; Corporation; Vensim; EnRoads; CRoads; Der RÜTLI Management-Simulator; Millenium Institute).

Conclusions

Modern business dynamics are complex. Entrepreneurs evaluate their strategies according to the results they obtained as their strategy progresses. Thanks to MFS, strategists can develop more efficient strategic planning by identifying and analyzing the main recourses that are available and by evaluating the gap between the objectives and the results of the simulations.

With the MFS, the company is considered to be dynamic, accumulating resources over time and modifying and evaluating various strategies, as the participant understands its structure and function. By articulating all the areas of the company, the MFS open the possibility of changing the mental model of strategists so that they have a general overview, which can also serve as an interactive method for themselves and others responsible for strategic planning.

With the MFS, the strategist intends to adhere to the following points:

• Develop an explicit mental model for the dynamic development of the company, which is used and continually reformulated in strategic planning.
• Identify and analyze the resources required for the strategic development of a company and to achieve the strategic objectives.
• Map and evaluate various strategies, analyzing their impact on the performance measures considered in the model.
• Propose a strategy that takes into account the investment and the balanced development of the company’s resources.

?.

References

Bianchi, C., E. Bivona y F. Landriscina (2000). Promoting entreprenership thorugh open-distance-learning management flight simulators EcoRoll Educational Package. International System Dynamics Conference. Bergen.

Bianchi, C., G. Winch, y Grey, C. (1998). The business plan as a learning-oriented tool for small/medium enterprises: A business simulation approach. International System Dynamics Conference. Quebec.

Davidsen, P. (2000). “Issues in the design and use of system-dynamics-based interactive learning environments”. Simulation Gaming, 31, 170-177.

Domenge, R. (2009). “Importancia de los factores de transferencia de contenido en una escuela de negocios: percepciones de estudiantes y profesores”. Cuadernos de Estudios Empresariales, 19, 75-104.

Domenge, R. e I. Belausteguigoitia (2009). “Nuevas pymes, problemas y recomendaciones”. Dirección Estratégica, 29(8), 25-27.

Lane, D. (1995). “On a resurgence of management simulations and games”. The Journal of the Operational Research Society, 46, 604-625.

Morecroft, J.D.W. y J. Sterman (comps.) (1994). Modeling for learning organizations. Nueva York: Productivity Press.

Saad, F. (2013). Modeling and comparing a startup dynamics in the US and Egypt. System Dynamics Society Conference. Massachusetts.

Senge, P. (1990). The fifth discipline: The art and practice of the learning organization. Nueva York: Doubleday.

Spector, J.M. y P. Davidsen (2006). “How can organizational learning be modeled and measured?” Evaluation and Program Planning, 29, 63-69.

Sterman, J. (2000). Business dynamics: Systems thinking and modeling for a complex world. Boston: McGraw-Hill.

Warren, K. (2008). Strategic Management Dynamics. Chichester: John Wiley and Sons.

We have uncovered tens of thousands of groups experiencing extraordinary success every day. In this article, we highlight what we found about how they achieve and sustain these off-the-charts outcomes, often for decades.

What does this extraordinary success look like? A Texas-based community health center provides services typically only found at top hospitals for a mostly uninsured population, when all other community health centers have been drastically reducing the basic services they provide. A textile mill changed the whole hosiery industry, moving from a focus on pretty foot coverings to preventive foot health products, while paying US-based employees middle-class wages, sustaining a very loyal customer base, while the rest of the industry outsourced its low-cost production to low-wage countries. A global bank’s Latin American back-office operations showed a 10X financial benefit in efficiency gains from fomenting individual potential and respectful relationships within and across teams within a broader outcomes-based business focused predominantly on power through information hording. What is happening in these examples that allows them to realize such unusual outcomes? What are the possibilities and strategies for increasing the incidence of such organizations? What are the implications?

Mainstream, economic resource efficiency-based analysis classifies these groups as outliers, with special resource endowments or situational effects. They are fortunate winners who just happened to show up with the right resources at the right time and place. The community health center’s doctors and nurses were really committed. The sock company’s charismatic founder saw a new niche. The bank operations paid high wages for highly educated leaders. From this perspective, these exciting examples of lucky outliers are interesting but not imitable. We find otherwise. When we used a different analysis, based on the agreements at the foundation of these groups, we found that these seemingly unrelated exemplars share a form of formal and informal agreements that are based in abundance, not scarcity. This distinguishes them from the rest, and this is replicable.

This article’s evidence-based research derives from a validated survey with 2,500 responses from 94 countries and longitudinal field research with 93 of these groups in Belgium, Germany, Guatemala, Mexico, The Netherlands, Romania, South Africa, UK, and the USA, which we have described in a recent book Ecosynomics: The Science of Abundance (Ritchie-Dunham, 2014).

In our work with these extraordinary groups, people were asked to describe their experience of being part of the group. Over and over, in English, German, and Spanish-speaking groups, individuals from the high performing groups used the word “vibrancy” and closely related terms to describe their experience, by which they said they meant a flourishing relationship with a sense of vitality and high energy in contrast to energy-depleting experiences. A typical description was like this one a German leader shared:

“When I am with the people in this effort, I experience a lot more of myself showing up. I learn more about who I am and who I can be. I feel appreciated by everyone, seen for what I uniquely contribute, just as everyone else makes a unique contribution. I love these folks, and we are always seeing new possibilities, what we might achieve from those possibilities, and pathways for developing our capacity to generate those outcomes. It is like creativity is everywhere all of the time, and we are constantly looking for it.”

This contrasts with the description from people in most efforts, like a leader in Guatemala:

“This effort is deadening. I am no better off for having been here. None of my gifts are used here: nobody sees me. I am completely replaceable. Any time I try to share a spark of interest or a new idea, someone stifles it telling me, ‘That’s not the way we do things here.’ No creativity at all, and we only focus on making sure we get the outcomes we were told to get.”

We have heard stories like this in hundreds of groups, where people talk about the experience they have of groups in terms of the energy they have before and after they meeting with the group. They experience their energy depleted in interactions when they leave the group feeling less creative, excited, and engaged. They experience their energy enhanced in interactions when they leave feeling more creative, excited, and engaged. Across cultures as diverse as Mexico, Germany, South Africa, and the USA, these people consistently described five ways they relate to the experience:

1. Self.  How much of my own capacities, growth, and potential do I experience when with this group?
2. Other. Do I acknowledge and support others and do they support me in being my best and their best?
3. Group. Does the group invite each participant to contribute our own unique perspective to the group?
4. Nature – the creative process. Does the group focus only on the reality of outcomes and things or also on the reality of learning and developing capacities, relationships, and possibilities?
5. Spirit – the creative source. Does the group see only the creative solutions we inherited from our founders or does it look for creativity from experts, or from all of us all of the time?

Corporate social responsibility is in decadence. Despite being an attractive and fashionable topic, it is not a sustainable trend, and it is destined to disappear if it is superficially adopted, by way of certifications or seals of endorsement and without the actions of responsibility permeating the interior of the firm.

For a firm’s behavior to really be maintained and changed, it is necessary to institutionalize it and link it to the firm’s strategy.

Corporate social responsibility is attractive because it is seen as an active and voluntary contribution by the firm towards the solution of complex problems and toward social, economic and environmental improvements. In Mexico in recent years there is a growing number of companies that have become socially responsible. If one takes into account the public data and indicators that are relevant to the matter, there has been an extraordinary increase in the number of companies that have obtained the seal of a Socially Responsible Business (ESR® in Spanish) that is granted by the Mexican Center for Philanthropy (CEMEFI). From the year 2000 until the last report in March of 2014, the number went from 10 businesses in 2000 to more than 900 in 2013.ⁱ

Also, there has been significant growth in the Global Reporting Initiative (GRI®), which is the worldwide standard that is used to report practices of social responsibility by businesses. Created in 1999, to date it has logged 18,488 reports around the globe. In Mexico, the number of companies reporting to GRI® went from one (Industrias Peñoles was the first) in 2005 to 33 in 2013.

Several of the companies reporting, but not all, are public companies on the stock exchange and are part of the Sustainability Index of the Mexican Stock Exchange. This index comprises only those public companies that are on the stock exchange and have been graded on the environmental, social and corporate governance topics as companies with social responsibility.

Compared with the Mexican Stock Exchange’s Index (IPC, for Índice de Precios y Cotizaciones), the Sustainability Index has given, on average, a simple average yieldⁱⁱ of 33%, compared to the average annual yield of the IPC, which, in the same period, rendered 19.8%. It is a fairly attractive return if one considers that the CETES rate (Govenrment bonds), in the best of cases, is around 3% annually.ⁱⁱⁱ However, there is a reasonable doubt as to whether the extraordinary returns are the result of firms in this index being “super companies” or because they are socially responsible companies. Let’s give the benefit of the doubt to the second reason.

So the data seem to suggest that the adoption of a social responsibility is a growing trend and even a source of competitive advantage. If this is the case, then it is worth asking if this trend is sustainable over time, if it is a long-term phenomenon, if it goes beyond a series of good intentions, and if it is here to stay.

From my point of view, the answer is no.

Corporate social responsibility is not sustainable over time, and it is not so because it is sold and seen as an attractive idea, a trend in which adoption occurs due to pressure exerted by actors such as the media, universities, civil society organizations and even governments, and one in which sometimes the main goal is to obtain a seal, an emblem, a registration, an accreditation or a certification. The intentions are laudable, but they do not always permeate the firm and thus they end up only on the surface.

Moreover, corporate social responsibility has a problem with its origin. While it is understood as the active and voluntary contribution of the firm toward social, economic and environmental improvement, the firm, which is composed of people, cannot be personified but by those individuals who run it, and thus it is the individual, not the firm that can be socially responsible. This argument had been put forth before in 1970 by Milton Friedman^iv, who suggested that the firm’s only social responsibility is to increase its profits and that the economic impact of its activities, at the end of the day, would generate economic, social and environmental improvement.

Thus the challenges are twofold: First, that given the depersonalization of the firm, the individuals who compose it opt for the institutionalization of the actions of responsibility; otherwise, if the actions are developed and approved by the same people who generate them, there is a vacuum in their application. Second, that the actions of responsibility be linked to the company’s mission, and, as a result, be aligned with the firm’s strategy.

So, if the superficial version of corporate social responsibility is destined to disappear, how is it possible to permeate the firm with responsible actions that will last and be linked to the strategy?

One possible answer is that there is an underlying model of business management that incorporates, within the firm, business strategies with formal and institutionalized processes that are able to address the complexity and limits imposed by the social, economic and environmental systems and that allow the firm to generate value over time. But first let us understand the topic within a national context, so we can then describe the model at hand.

According with the Business Information System (known as SIEM) within Mexico’s Secretariat of Economy, 681,723 companies in the country are registered^v, and of these, 5.7% are companies with more than 50 employees that account for about 65% of total gross production and employ just over 25% of the labor force (INEGI, 2010).

If it were the case that small businesses individually have less impact compared to large businesses (although as a whole it can be significant), or that they lack the economic resources^vi to adopt social responsibility systems or that they are simply unaware of the issue, their incentives are smaller than those of the large companies.

As for the large companies, based on a study^vii conducted in the ITAM in 2012 of the 500 most important companies in Mexico and according to the list published by Expansión magazine between 2009 and 2011, it appears that only about 50% of the firms have some kind of social responsibility system, while the rest are not sure what the topic means or simply are not interested. Of the 50% that do carry out socially responsible actions, only 53% have institutionalized it by adopting some sort of a formal management system.

If we extrapolate the results, we could conclude that, in the best of cases, only one out of every four firms of the most important companies of Mexico have a clear social responsibility strategy. The reason why many have not adopted one could very well be because companies do not consider its use beyond that of good intentions, or because, once incorporated, eventually they become disenchanted since they expect immediate returns.

The study also found three main incentives for which the companies have adopted actions of responsibility. These are: (1) because it is beneficial to comply with national or international regulation, as it facilitates the implementation of current standards; (2) because there is leadership in the firm that directs them to do so; and (3) to open new markets.

The results help to show that there are specific incentives that firms follow and that these are not isolated efforts but actions that respond to a management model that suggests that actions of social responsibility are characteristic of the firm, without the need for them to be “socially responsible,” at least not in the company etiquette.

Those three incentives show, besides, that they are not products of a trend, but they are part of the “guts” of the firm and that they comply with at least two characteristics: (1) they are linked to the strategy and (2) they are institutionalized. This management model is called the “corporate sustainability model.”^viii

The corporate sustainability model also has a characteristic that functions if and only if its cornerstone is the long-term view. And here it makes sense to think that actions of social responsibility or its variants generate value, for they are linked to competitiveness, which is a long-term phenomenon. However, it is an indispensable requirement to have a strategy^ix that allows the company to meet its objectives.

The connotation of long-term is important. Competitiveness understood “as once in a while” is just an illusion. Thinking that way implies generalizing that a good business deal will recur forever, which is a fallacy that is alien to the concept of competitiveness. In fact, the long-term competitive advantage is known as the “supportable or sustainable competitive advantage.”

Now then, let us think for a moment about the theme of sustainability. Of the many definitions of sustainability^x, the most classic one refers to the ability to live within limits imposed by the environment, taking into account the interconnection between the economic, social and environmental systems, and maintaining the equity of the resources and opportunities for future generations.

This means that the firm must generate value over time, considering the restrictions imposed by the economic, social and environmental systems, which make the business decisions subject to the limits imposed by said systems.

For example, one economic limit is the plant’s production capacity. In the social environment, individual preferences for goods and services are a restriction, and in the environmental system, the scarcity of a basic component such as energy. These restrictions limit the level of competitiveness that a business can attain, and therefore, its permanence. To ignore their existence is like thinking that business decisions are lineal. Thus, the integration of sustainability practices in the business is key for its survival, for such practices, when well established in the strategy, are a source of competitive advantages.

To summarize, a firm’s competitiveness only makes sense in the long term and is subject to limits imposed by the economic, social and environmental systems. Sustainability aligned with strategy is the key to making the business more competitive. Let’s see how we can bring together these ideas to develop a business model as shown in Figure 1.

Figure 1. Model of Corporate Sustainability

The model of corporate sustainability is composed of three elements: the first, in the lower part, where one finds the restrictions and limits imposed by the economic, social and environmental systems; the second, at the far left, which represents the firm’s leadership based on having a corporate governance and leadership that allows it to make important decisions to lead the firm to generate value; and third, in the center, showing the company’s strategy. We are particularly interested in the company’s strategy, for that is where the actions of responsibility are located.

As to strategy, the model of corporate sustainability is supported by three views: the market view, the resources based view, and the institutional view. These elements that support the company strategy are the ones that lead to the achievement of competitiveness.

The first element, the market view, is based on the classic argument of a competitive advantage based on leadership in costs and on leadership in differentiation or in benefits (Porter, 1985). On the one hand, this support is the catalyst for the preferences of individuals and, on the other, the generator of operating margins. A company that generates greater perceived profits compared to the competition will be able to generate greater value, while, if it is able to reduce costs through strategic actions, it will obtain a greater operating margin.

From the point of view of differentiation, sustainability is an element that increases the company’s attributes and can increase the differentiation and increment the capture of value, while, on the cost side, Porter and Van der Linde (1995) propose that it is through the optimization of resources that an increase in productivity is possible, and, as a result, a reduction in costs.

The idea, in reality, is that actions of responsibility are geared toward increasing differentiation and reducing operating costs, and these do not necessarily derive from social responsibility but from the commitment of management that allows the firm to address the challenges inherent in seeking alternatives that yield more value to the client at a lesser cost.

The second model of corporate sustainability is based on the view of resources and capabilities (Barney, 1991; Hart, 1995; Russo and Fouts, 1997). According to this idea, the company proposes to use and exploit strategic assets, resources and capabilities bases on tangible and intangible assets that enable it to continue being competitive. This position considers that the resources and capabilities of a company create value when they are valuable, rare, inimitable and adaptable to the organization in a purely business context or as an expansion of natural resources (Hart, 1995) while considering that the strategic assets are subject to biophysical limits set by the environment itself.

In addition, Hart argues that the biophysical limits that are imposed can be a source of competitive advantage. One way to obtain new capabilities and resources based on the limits of natural resources is to develop the view of a sustainable company. Companies can gain advantages through waste reduction, the design of new products and technologies, the integration of stakeholders in the decision-making process and, most importantly, by having a long-term view (Hart, 1995). This is definitely the way that results in the key link with ecology, the environment and the company.

Finally, the third element, the institutional theory, or the new institutionalism, has been considered recently in the literature of management by Peng et al. (2009), among others.

Peng suggests that the source of competitive advantage is found within the institutional limits established inside and outside of the company. However, it is necessary to go beyond the limits and establish the institutional view as an essential factor to understand corporate sustainability. If one considers classical definitions, the institutions are the precepts, laws, rules, codes, customs and traditions that determine our behavior. Thus, boundaries are established between which individuals, businesses and governments take actions. Their main attribute is to provide certainty to business operations and reduce transaction costs.

In this sense, the view of the company’s institutional theory of the company indicates that the normative or cognitive framework establishes limits along which the organization moves, formally or informally. For sustainability to exist, it is essential to have an institutional view, because the company is subject to regional, national and international regulations, as well as internal self-regulatory mechanisms that determine its behavior. The ability to adapt to the institutional conditions gives the company the ability to generate long-term strategies that help it create, capture and generate value.

In summary, the business model of corporate sustainability is subject to the limits imposed by the economic, environmental and social systems. The company’s strategy should be long-term, so that it can assure competitiveness. For that, it is necessary to incorporate the concept of sustainability into the business model, which is achieved with three elements: (1) the market view, (2) the view of natural resources, and (3) the institutional view.

A strategy akin to the three elements can adapt and react more quickly to changes in the environment, thereby reducing risk exposure, since the three elements allow the company to adopt a longer-term perspective to create, generate and capture value.

In conclusion, unless corporate social responsibility is modified to move from something superficial to a management model based on its institutionalization and linkage to strategy, so that it becomes a model of corporate sustainability, there is a great risk of missing a golden opportunity. It is important to take advantage of the power that the business sector has to change the behavior of businesses, governments and society, and to not waste the opportunity that social responsibility offers to do things right. That opportunity may not be seen again.?

References

• Aigner, D.J., and A. Lloret, “Competitiveness and Sustainability in Mexico,” Management Research Review, Volume 36, Issue 12, pp. 1252-1271, 2013.
• Barney, J.B., “Firm Resources and Sustained Competitive Advantage,” Journal of Management 17(1), pp. 99-120, 1991.
• Clarkson, P.M., Li, Y., Richardson, G.D., and F.P. Vasvari, “Does it really pay to be green? Determinants and consequences of proactive environmental strategies,” Journal of Accounting and Public Policy 30(2), pp. 122-144, 2011.
• Hart, S.L., “A Natural-Resource-Based View of the Firm”, The Academy of Management Review 20(4), pp. 986-1014, 1995. Available at http://www.jstor.org/stable/258963
• King, A., and M.J. Lenox, “Does It Really Pay to Be Green? Accounting for Strategy Selection in the Relationship Between Environmental and Financial Performance,” Journal of Industrial Ecology 5(1), pp. 105-116, 2001.
• Russo, M., and A. Fouts, “A Resource Based Perspective on Corporate Environmental Performance and Profitability,” Academy of Management Review, 40, pp. 534-559, 1997.
• Orlitzky, M., Schimdt, F.L., and S.L. Rynes, “Corporate Social and Financial Performance: A Meta-analysis,” Organization Studies 24(3), pp. 403-441, 2003.
• Peng, M., “The Institution-Based View as a Third Leg for a Strategy Tripod,” Academy of Management Perspectives, Vol. (23), Number 3, pp. 63-81, 2009.
• Porter, M.E., and C. van der Linde, “Toward a New Conception of the Environment-Competitiveness Relationship,” The Journal of Economic Perspectives, 9(4), pp. 97-118, 1995.
• Thompson, Strickland and Gamble, Crafting and Executing Strategy, McGraw-Hill/Irwin, 2008.

______
ⁱ CEMEFI grants the ESR® seal annually, and while there are companies that have obtained it for as long as 14 years, there are firms that have left and have not continued to report to CEMEFI and may not be continuing to carry out social responsibility actions.

ⁱⁱ The calculation was made by BMV for the period from November 2008 to February 2014, although the sustainability index starts trading in December 2011. Information available at http://www.bmv.com.mx. Date of page view: June 10, 2014.

ⁱⁱⁱ Current CETES rate at 182 days is 3.05%. Source Bank of Mexico. Information available at http://www.banxico.org.mx. Date of page view: June 10, 2014.

^iv In fact, his position was misinterpreted by the media, since Friedman, as a good libertarian immersed in the Cold War climax, aimed his criticism particularly at the fact that the government was passing on responsibilities to the firm, dictating what it should do in the way of Social Responsibility.

^v SIEM only evaluates companies registered voluntarily in its database. INEGI, meanwhile, has a database from the National Statistical Directory of Economic Units (DENUE), which ranges from businesses, micro and small businesses to large corporations, including subsidiaries, factories or establishments incorporated with other firms. In the latest update of DENUE 2013, INEGI reported 4.4 million economic units, of which 47,388 are economic units with more than 50 employees, or 1.07%. Date of page views for INEGI and SIEM: June 10, 2014.

^vi According to Expok, a consultant on Social Responsibility topics, the ESR® certification can range from 12,000 to 50,000 pesos, plus the cost of the consultation and the investment to implement social responsibility systems. Source: Expoknews of December 11, 2013, in http://www.expoknews.com/cuanto-cuesta-obtener-el-distintivo-esr/. Page View Date: June 10, 2014.

^vii The results of the study, supported by the Mexican Association of Culture A.C., and funded by UCMEXUS-CONACYT are published in Aigner and Lloret, 2013, Management Research Review (36) 12 and can be requested from antonio.lloret@itam.mx.

^viii The link between competitiveness and corporate sustainability is found in the literature on financial performance and environmental and social performance (for example, Clarkson et al, 2011; King and Lenox, 2001; Orlitzky et al., 2003). The results indicate that a company that strives to improve its environmental and social performance also achieves, over time, a positive financial performance.

^ix According to Thompson et al. (2009), the strategy consists of the competitive moves and business management that administrators employ to grow the business, attract and satisfy consumers and compete successfully through operations with which organizational goals are achieved.

^x Which by the way is a word borrowed from English and has it no translation into Spanish despite the fact that its use in business is already accepted and it has been adopted.

In companies, several people besides the CEO perform the functions of General Management , such as the leaders of multifunctional projects, business unit managers, division directors and many of the members of the board of directors.

However, the people performing general management work often do not have a good conceptual framework to carry out their duties. This article proposes a conceptual framework that can diagnose and structure the work of individuals who perform general management duties in companies (Garvin, 2001; Pérez López, 1996). A conceptual framework is a set of concepts that are interrelated and can be used to assess a situation based on the presence and quality of each of the identified elements.

In this conceptual framework it is useful to differentiate between structural elements – the company’s anatomy - and dynamic processes -its physiology. The principal structural elements are aspects of reality that have certain inertia; that is, they normally change slowly. These include the company’s external environment, the organizational architecture, the business model, and the corporate governance system. The principal dynamic processes are sets of activities that include the following: learning and influence on the environment, leadership and management of people, decision-making and performance of actions, and management of resources and results. The dynamic processes operate based on the structural elements and they can affect the structural elements by changing them or keeping them stable despite the existing pressures to change.

All the elements – structural and dynamic – have lifecycles of introduction, growth, maturity and decline, as well as times of evolutionary change that increase or decrease the number of companies in a sector.

Structural Elements The company’s main structural elements are explained below. Also described are examples of the processes or operational mechanisms that make them work on a daily basis.

External environment. One must make a distinction between the macro-environment, composed of the national and international environment, and the company’s industrial environment. The national and international environment contains legal and political components that are related to establishing the rules of the game, socio-economic components that have to do with how the economic players perform in a given country, and technological components that are becoming increasingly important as sources of innovation. As to the change processes in the macro-environment, they could originate in any of the three dimensions described, for example, technological changes could bring about socio-economic changes that in turn result in legal and political changes. The industrial environment has to do with the cluster of elements in the value chain of the industry that one is engaged in: suppliers, sellers of complementary products, distributors and final customers. Countries as well as industries have life cycles that have stages with varying rates of growth or decline. These factors in the macro-environment and the industrial environment interact in different ways in certain situations, often making a company’s future complex and uncertain. Any given company interacts normally with groups of elements from both the macro-environment and the industrial environment; these are groups that can affect or are affected by the performance of the company are called its “stakeholders.” Examples are financial institutions, government regulators, community groups, clients, and suppliers.

Organizational architecture. The organizational architecture involves the organizational structure, the culture and the coordination system of the company. The organizational structure focuses on structuring a company’s tasks. The organizational structure points out how functions are divided horizontally and vertically within the organization; that is, in each hierarchical level and between hierarchical levels. The organizational structure states the hierarchical relations of authority and responsibility in the company. The coordination systems are those that are used to coordinate the organization´s activities once its functions have been divided. That is to say, the coordination system is the way people with different functions interact and establish communication mechanisms and incentives. An integrating factor with strong inertia in organizational architecture is the organizational culture, understood as the system of values and norms shared by members of a group or organization. Normally, it is difficult to change the culture because it takes time and may require changes in personnel or incentives. The organization also changes according to a life cycle and evolutionary processes, although its characteristics are different from those of living beings as it can extend its existence indefinitely.

Business model. Shows how the company creates value in a particular business. Its components include: market segments that are served; value proposition offered, including prices and collection mechanisms; processes used to generate the value proposition; and tangible, intangible and human resources used to create value. Business models explain how value is generated and how much of the created value is retained by the company in relation to its clients, suppliers and complementary product suppliers. Business models describe how the company produces, distributes, charges and collects for the products and services that are delivered. Business models also have life cycles and are subject to evolutionay change, both of which result in changes in the level of performance of the company.

Corporate governance. The corporate governance is the system used by stakeholders to impact and control the behavior of the company. It is based on the legal framework of the country or region. This has to do with the group of legal entities (i.e., corporations) that are part of the company, the type of each one, their resources and important contracts. Of importance in corporate governance are the boards of directors, executive committees and other committees set up to guide the company’s management. The processes in corporate governance involve the partners or owners of a business voting for the board of directors that will represent them, and the board in turn appointing a Chief Executive Officer. Then the CEO will choose a group of collaborators to carry out the management functions in the company. Generally, the board members give guidance to the company through the appointment of the CEO and the ratification of his or her most important executives, the approval of strategic and financial plans, and by monitoring reviewing company performance. Corporate governance normally changes slowly, although it can undergo radical changes when a subsidiary is acquired or sold, or when there is a comprehensive restructuring of the group. For example, when a company receives a major loan, it can sign a contract that significantly restricts its activities so that the institution that granted the loan becomes an important part of its corporate governance system.

The structural elements could be seen as different approaches or perspectives on the company. However, it is convenient to see them as the main subsystems integrating the company. All structural elements are subject to changes due to the life cycle of a specific company and the evolution processes of the population of similar companies.

Dynamic processes Dynamic processes can be identified at several levels. First are those that make the company function on a daily and normal basis; these are the operating mechanisms mentioned earlier. Second arethe processes having to do with attempts to improve the company’s regular activities. Third are those that lead to determining how to improve the company’s processes for change (Collis, 1994). The focus of executive management is on the second and third categories, what we might call “dynamic capabilities.” A dynamic capability can be defined as “a learned and stable pattern of collective activity by which the organization systematically generates and modifies its operating routines in search of improving its effectiveness” (Zollo & Winter, 2002, p. 340).

Relationship with the environment. The company engages in activities to link itself with its external environment. These activities include intelligence or learning efforts to obtain information, analyze it and discover opportunities and threats, as well as public relations efforts by which the company can communicate its view on matters – its “reality” – to groups that are involved or interested in the performance of the company, to its stakeholders and other members of the external environment. Thus, the relationship with the environment involves learning and teaching. Activities of this type have the potential to change the environment. An example would be lobbying the government about a specific regulation. Companies can be more or less proactive in their relationship with the environment. In addition, relationships with environmental elements tend to be about greater competition or cooperation, but they are generally a mixture of the two, with the competitive focus being more important in for-profit companies.

Leadership and management of people. People are in certain roles or positions in companies for only a certain time. Of course, individuals also have a life cycle. Some managers deem it appropriate to separate leadership from management, although these two processes are complementary. The first is more focused on generating consensual visions and on aligning groups toward them. The second is more focused on setting concrete goals, assigning resources and and controlling results. Carrying out specific tasks or activities requires the motivation and the will of its members. The sum total of the motivation of the company’s members can be viewed as the organizational energy. Managers have to worry about maintaining high organizational energy within the companies they lead because the quality and quantity of actions they can perform as a group depends on those energy levels (Bruch & Ghoshal, 2004).

Decision-making and performance of actions. Each company has a portfolio of actions; some are long-term commitments and others are options to invest additional resources that remain open for a period of time. The decision as to which actions will be kept within the portfolio depends not only on the person who makes the decision but on the company’s decision-making system. Different systems of decision-making result in different resolutions, different qualities and a different number of decisions. Specifically, companies need to avoid cultures of indecision where nothing happens, or an excess of decisions that could confuse the participants. It is important to be clear about the role of each person who takes part in the decision and if the decision will be taken by an individual, a committee, or one person with the advice and approval of others.

Management of resources and results. The company needs to define the performance criteria that it will use, and what it will call a success. For example, if it wants to increase market share, increase the value of its shares in the stock market, or a mix of the two. It is also important to identify performance drivers, what variables will impact the level of results, and try to influence them. The results expected include indicators of costs, income, return, assets employed and indicators of risk. What is sought is a combination of these performance variables that is acceptable to each of the company’s stakeholders. Achieving a level of performance generally requires a certain investment in resources. Investments are usually evaluated according to the results expected. If the opportunities available to the company are not adequate, it would do well to return the money to investors in the form of dividends or share buybacks.

The structural and dynamic elements could be combined in a table showing how the dynamic processes are supported or constrained by the structural elements, and the structure is affected by the dynamic processes. See the table below.

General Management Framework: Structural elements and dynamic processes.

Use of the framework Following are some examples of possible uses of the framework. The General Managers could try to change the structural elements, major surgery, or make incremental changes in the dynamic processes such as modifying the networks and information systems of the company, the individuals occupying each job, the leadership and management style, the level of resource allocation or the goals established. An executive who has decided to make changes in some elements of the structure could evaluate how changes in the dynamic processes could affect the structural element that he or she hopes to change. Each cell in the matrix indicates what change will be made and how it will affect the rest of the model’s elements.

When a new CEO is appointed, that person could use the General Management framework to assess the environment, the organizational architecture, the business model and the corporate governance, and see which dynamic processes have the greatest impact on the structural elements that one hopes to change. The executive must periodically evaluate the performance of both the dynamic processes and the structural elements. The structural elements can be evaluated as to their fit with others and their flexibility when the other elements change. That is, the structural elements can be assessed technically in terms of how well they perform the intended function, and they can be assessed evolutionarily as to how well they adapt to changes in the environment (Helfat et al., 2007). The dynamic processes can also be evaluated in terms of cost, speed and flexibility.

An executive facing a crisis in performance could evaluate the dynamic processes to determine if the problems are due to poor performance management, inappropriate actions, incompetent people, or faulty information from the environment. The structural elements can also be evaluated as if the problems are due to the business model, the organizational architecture, the corporate governance, changes in the environment, or a mix of these elements.

ConclusionA dynamic process can affect all of the structural elements. A structural element can affect how a dynamic process works. All the structural elements and dynamic processes are interrelated. The model indicates why actions are taken (current or future changes in the environment), who carries out those actions (people), what is done (decisions and actions) and with what results as far as risk and returns (resources and performance).?

*I would like to thank Carlos González Martínez, Francisco Mendoza Trejo, Antonio Sacristán Roy y Giulio Chiesa for their comments to an earlier version of this article.

References

• Bruch, H. & Ghoshal, S. A bias for action, Harvard Business School Press, 2004.
• Collis, D.J. Research note: How valuable are organizational capabilities? Strategic Management Journal, 15, 143-152.
• Garvin, D. A. General Management: Processes and Action, Nueva York, McGraw-Hill/ Irwin, 2001.
• Helfat, C.E. et al., Dynamic capabilities: Understanding strategic change in organizations, Londres, Blackwell, 2007.
• Pérez López, J. A. Fundamentos de la dirección de empresas, 5a. ed. Madrid, Edicions RIALP, 1996.
• Zollo, M & Winter, S. Deliberate learning and the evolution of dynamic capabilities, Organization Science, 13, 339-351.