9 Attributes of Effective Management

What is Effective Management?

Effective management is one that is successful in achieving the short as well as a long-term goals of an organization while running right towards the vision of the organization. The organization could be profit-oriented or a not-for-profit organization. All organizations are formed with a defined goal, and the management of that organization is given the responsibility to achieve that by using their expertise.

For our discussion on effective management, we will focus primarily on profit-oriented organizations/corporations whose goal is to achieve wealth maximization for their investors. There are two main approaches to achieving the same: the shareholder or stakeholder’s approach. The different approach is prevalent in different parts of the world.

Let us see the top companies from the Fortune 500 list and how they are achieving their goal of maximizing profits and wealth for their investors. These companies are scored on 9 attributes, and the list of fortune 500 companies represents the ranking based on these attributes. If a manager is able to score well in these attributes, we can safely assume that the company must be effectively managed. Let’s look at those attributes and try to understand them.

Effective Management

Attributes of Effective Management

Although for the survey purpose where the respondents are executives, directors, and security analysts, the attributes are not defined in detail; they are just listed. The interpretation is left to the survey respondent.

Innovativeness

The organizations at the top are characterized by their keenness for innovations. They do not mind spending or instead investing in research and development for the sake of innovations. Especially when they know that there is no guarantee of results, they keep coming up with new and innovative ideas to serve their customers and stakeholders better.

Quality of Management / Effective Management Skills

Quality of management should be construed as the quality of the board of directors and the top management team. The team should be highly qualified and have extensive experience in their core field and overall management of their respective responsibilities. The management should possess the effective management skills to conduct effective management meetings that take the decisions that directly contribute to the achievement of the company’s goals.

Long-Term Investment Value

Effectively managed companies look at the very long-term value of their investments. They do not sacrifice or compromise on their long-term goals for the sake of short-term benefits. The company’s policies are designed in a manner that encourages long-term thinking.

Social Responsibility

Development is not a one-time need, and therefore it is of utmost importance to focus on the concept of sustainable development. Society is also one of the stakeholders of a company. The brand image that a company wishes is nowhere but in the mind of the society it is serving.

Employee Talent

An organization or a company is not a living thing. Behind the scene are the management and employees. They are the most important asset of an organization, and appropriate skill and talent can only produce world-class products and services.

Quality of Products and Services

The quality of a company’s products and services greatly contributes to achieving its financial and other goals. There are two important channels of increasing sales, i.e., through referred customers and repeat customers. A company can generate sales through marketing and advertisement, but it cannot sustain itself in the long run if the quality of products or services is not sufficient. To outperform the competitors, the first quality of the product should outperform the other products in the market. This does not mean that the cost of these could be anything. The overall value proposition should be customer-oriented.

Financial Soundness

Most of the biggest companies have started from proprietorship to partnerships with corporations. As the company reaches an opportunity to grow, it needs additional funds/capital and sources of funds to grasp that opportunity. Financial soundness can also be understood as the optimized capital structure or effective working capital management, or readiness to bear temporary losses.

Use of Corporate Assets

What is a business? It is simply investing in buying assets and effectively utilizing these assets to generate further money to buy more assets. It is all about effectively utilizing each and every asset of the organization. These companies regularly monitor their assets and take required actions for an optimized asset structure. The action could be buying more assets and resources, selling off assets, repairing, etc. Don’t just restrict thinking to fixed assets; the assets could be all kinds of assets.

The Effectiveness of Doing Business Globally

To reach the fortune 500 lists, a company should possess enough infrastructure for global business opportunities. No company has become as big as the top 10 companies in the world, working within the boundaries of its home country.

Characteristics of Effective Management

There can’t be an exhaustive list of attributes of effective management of a company, but additionally, we can list down the following characteristics as well.

  1. Effective Dealings with Change
  2. Applies best techniques and processes for delivery of products and services
  3. The management style is effective and suitable with respect to the nature of the business.
  4. Have knowledge of Effective Management Strategies


Sanjay Borad

Sanjay Bulaki Borad

Sanjay Borad is the founder & CEO of eFinanceManagement. He is passionate about keeping and making things simple and easy. Running this blog since 2009 and trying to explain "Financial Management Concepts in Layman's Terms".

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