I retired for less than a year before I had to go back to the business,” says Tony, founder of a manufacturing company. “I thought our succession process was working. My sons, with top-notch MBAs, want to professionalize to grow, so they hired foreign consultants with expensive ideas. But then the good people are gone, the old customers are angry, and not because of the pandemic. »
“Change is hard, but good employees welcome it,” I say. “Customers benefit from streamlined operations. What is the real problem?”
“The CEO,” Tony said instantly. “He worked in finance for a multinational and my sons offered him an expatriate package. But the employees hate it and many have left.
“Does it require performance that they cannot provide?” I ask.
“No!” shouts Tony. “He doesn’t know what they’re doing, but he gives measurements that no one understands. Finances are done differently, and he says we make money. My sons believe it, but I think the profits are down.
“It makes no sense to hire a financier to run a manufacturing company,” I say, and tell Tony that the CEO seems to suffer from “managerialism,” described by American professors Robert Locke and JC Spender in their book “Confronting Managerialism” as “What happens when a special group, called management, systematically moves into an organization and robs owners and employees of their decision-making power, and justifies this takeover by reasons of [their] education and exclusive possession of codified sets of knowledge and skills necessary for the proper functioning of the organization”.
Good management, characterized by wisdom and humility, is different from managerialism, which is often ignorant and arrogant. The book “offers a scathing critique of the crippling influence of neoclassical economics and modern finance on the teaching and practice of management in business schools. It shows how business leaders, once well-regarded as guardians of the economic engine of growth and social progress, are now more like the rapacious “robber barons” of the 1880s. [in the United States]. Indeed, responsible management has given way to managerialism, where an elite caste of businessmen disconnected from any ethical consideration now takes the reins, turning the lives of us all upside down.
The professors pit German family-owned small and medium-sized enterprises (SMEs) against American startups. The latter want rapid growth through initial public offerings, and “the founders get very rich that way, but by increasing stock valuations, not profits from business activity.” The former prefer to remain in family hands for generations and dislike the idea of corporate takeovers by entities described by one politician as grasshoppers that “graze undervalued businesses, lay off employees and move on.”
German SMEs still hire professional managers, but the power does not belong to them alone, but is shared with the family owners.
“Let the CEO go and talk openly with your sons,” I tell Tony. “Tell them you understand the need to professionalize, but bring in experts who know the local environment. Most importantly, emphasize that you are a family business that cares about employees and customers in addition to profits. So even if you rely on professionals for their expertise, your family should determine the results. Your family is responsible for metrics and goals. Unless your sons understand this, you have no choice but to come back from retirement.
Businesses run by managerialism “commit to short-term profit maximization and cost reduction at the expense of labor”, while family businesses prioritize sustainability in the community. German SMEs are developing apprenticeship programs to improve employee skills and look beyond finance.
“You’re in the industry,” I tell Tony, “so it’s good to know that world-class German family businesses spend time on customer relations, making sure to maintain personal contact with valuable customers. , which you were doing before. Your next CEO should do the same.
Queena N. Lee-Chua serves on the Board of Directors of Ateneo’s Family Business Center. Get his “All in the Family Business” print book at Lazada or Shopee, or an e-book at Amazon, Google Play, Apple iBooks. Contact the author at [email protected]
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