Managerial Competence
Managerial Competence is the ability for managers and leaders to direct workstreams and define outcomes clearly. Competence refers to both the ability (technical/certified) and the inferred ability (acceptance by those who are managed).
Managerial Competence is part assessment (definition / alignment) and part implementation. Without managerial competence, it will be difficult to realise success. Although many incompetent teams are able to attract finance/funding, eventually a project will fail due to the shortcomings of the management team. Therefore, it is important to determine the current state of the management team and address shortfalls prior to undertaking a capital development.
The first part of determining the managerial competence of an organisation attempting to take on a major capital projects is assessment:
- What are the qualifications of the management team?
- What are the technical capabilities of the management team?
- How is the management team viewed by the staff team?
The assessment process must remain simple, answering these queries and matching them to the preferred competencies for undertaking a major change programme (i.e. capital build). The exercise of mapping the assessment to the project will indicate where the team needs improvement and/or will need to secure external consultancy.
The second part of determining the managerial competence of your organisation is the ability of the team to or leader in concert with the team to define the outcomes (implementation):
- What is the outcome?
- How will it be achieved?
- How are risks identified and mitigated?
- Is the implementation (outcome) aligned with the mission of the organisation?
- Can the team clearly identify and gain buy in from both the internal team and external investors?
Many teams are able to convince external resources with a quality business plan, so it is critical that the team pitch the plan to the staff team first. After getting the buy-in of the staff team, a stronger and more competent bid can be produced for finance/funding. Importantly, the staff team buy-in is the ingredient that will get the management team through the difficult periods in the capital programme.
The most basic element, for management teams to avoid, is the acceptance and promulgation of HUBRIS. Many people think hubris is simply the presence of arrogance. In fact, management hubris is the inability to use data to support a business plan. Unbelievably, much of the plans in the 3rd sector are based on how a management team feels. “We feel rents should be X”, “We feel the community wants Y”. This is further disguised by a well meaning and experienced team.
Further to hubris, the following pitfalls should be avoided:
- Management Team Overreach. The team should avoid trying to take on tasks that are not aligned with their competence. Often times cited as grafting, this kind of approach can cost the team additional time, energy and money.
How to mitigate? Identify the gaps in competence and clearly address them with action (resources or training).
- Dismissing the importance of qualifications on the team | While it is often times not necessary to have an MBA or other qualification; it is important to recognise that qualifications do provide a baseline understanding of particular subjects and their absence should be addressed through external resources or improvement action within the team.
How to mitigate? Avoid the experience trap; thinking that experience can completely trump technical qualifications. Determine what qualifications would be helpful and obtain them through external resources/training.
- Clearly identifying and mitigating the risks. Many teams attempt to identify and suggest mitigation of only those risks within their control (i.e. slow take up of tenants), when in fact it is often the risks out of their control that will have the biggest negative impact on the project (i.e. economy). Investors are not concerned that the team has the answers; investors are interested to see that the team has both the ability to recognise the full suite of risks and a robust approach to mitigate (creative or scientific).
How to mitigate? Brainstorm with the staff team to identify how things could go wrong. A session with opponents of the plan would be the ideal mechanism for gathering all the risks.
- Saving money on expertise. Many management teams with a small amount of knowledge in a subject area believe this can replace the benefits of an industry or area expert. While this may be true for smaller portions of the project, management teams should avoid the “clever clogs” trap by believing they can figure it out. Often times the figuring it out phase costs more than hiring an expert (in time/money/reputation).
How to mitigate? Teams must analyse the potential cost of a slower problematic implementation or even failure with the cost of hiring an expert.
- Relying on the capital build to save a misguided business. Some teams view the the capital programme as a panacea to financial difficulties. The capital programme should enhance a competent business model.
How to mitigate? The management team must analyse the current business for health and clearly identify how the capital build will enhance the business. If the capital build does not enhance the mission and/or business, it should not be undertaken.
Examples of managerial competence in successful and unsuccessful projects.
Case 1: Management Hubris
A modest social business operating for some time, finds itself in deficit for a number of reasons (economy, poor performance). An analysis is conducted on the business and it appears the rents of their building are 40% below the area average. It is pointed out that this 40% differential is greater than the current deficit. Asked why the rents were 40% less than market rates, the management team responded with “We felt the rents were high enough”.
What went wrong?
- The management team did not use data to support their pricing actions and believed a well-meaning feeling for rental levels was adequate.
- The team did not identify the low rent as a risk for the future when the business may undergo difficulties.
- The team allowed modest performance to become the norm, avoiding pushing the staff team to deliver better results within the current capacity.
Case 2: Expert Advise Avoided
A start up social business with a highly certified (MBAs) management team undertakes a large capital program. The project is delivered successfully, but the a post project review indicates costs in some areas overran by as much as 50% because the team delivered specialist activity themselves. These micro overruns consume cash that could be used in the future.
What went wrong?
- The management team did not review the cost of expert advice/support versus the additional time to implement.
- The management team focused on the overall success without attention to the micro elements where expert advice/support could improve efficiency.
Case 3: Vision and Mission Alignment, Buy-in
A medium sized social business undertakes a major capital expansion after identifying how it will clearly enhance the both the social mission and business of the organisation. Importantly, the management team gets buy-in from the staff team prior to raising finance/funding. The project is successfully implemented but is suddenly overcome by a business downturn in their sector. The management team identified the risk in the plan and noted the mitigation strategy (redundancies and reconfiguration of business). The team is able to undertake a reconfiguration of the business and avoid some redundancies by acting quickly and with the help of the staff team. The business is saved and 2 years later is thriving under the new business configuration.
What went right?
- The management team was able to reconfigure the business model within the capital expansion where often times the capital expansion can hinder any change to the business. This was possible because the capital expansion was integral to the social business.
- The management team gathered critical early stage staff team buy-in to the core plan associated with the capital build.
- The management team gathered buy-in to risk mitigation (micro level planning) with the staff team.
- The business was able to survive because quick action could be realised with the full support of the staff and management teams.
In all of these cases, the attention to micro parts of the overall project is critical to the success. Grafting will take a management team only some distance, while proper planning and integration of resources to the project will carry the business further every time. And in nearly every case, the basic avoidance of hubris can help the team adapt to changing environments.
Research on Managerial Competence in smaller organisation.
Thinking like a competent management team
http://sethgodin.typepad.com/
http://blogs.ft.com/management/
http://www.tompeters.com/
http://longtail.typepad.com/the_long_tail/
http://www.slowleadership.org/blog/
Books to inspire your management team in business and social benefit
Tribes, by Seth Godin
Built to Last, by Jim Collins
Estates, by Lynsey Hanley
The E-myth, by Michael Gerber