9 Attributes of Effective Management

What is Effective Management?

Effective management is one which is successful in achieving the short as well as a long-term goal 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 the profit-oriented organizations/corporations whose goal is to achieve the wealth maximization for its investors. There are two main approaches towards achieving the same which are shareholder or stakeholder’s approach. The different approach is prevalent in different parts of the world.

Let us see the top companies from Fortune 500 list. 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 represent 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 understanding 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 details, they are just listed. The interpretation is left on to the survey respondent.

Innovativeness

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

Quality of Management / Effective Management Skills

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

Long-Term Investment Value

Effectively managed companies look at a 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 policies of the company are designed in a manner that encourages long-term thinking.

Social Responsibility

Development is not a onetime 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

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

Quality of a company’s products and services is a great contributor towards achieving their financial and other goals. There are two important channels of increasing sales i.e. through referred customer and repeat customers. A company can generate sales through marketing and advertisement but in the longer run, it cannot sustain if the quality of products or services is not sufficient. For outperforming the competitors, 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 a proprietorship to partnership with corporations. As the company reaches an opportunity to grow, it needs additional capital and sources of funds for grasping that opportunity. The 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 of assets and effective utilization of 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, resources, selling off assets, repairing etc. Don’t just restrict thinking to fixed assets; the assets could be all kind of assets.

The Effectiveness of Doing Business Globally

For a company to reach to fortune 500 lists, it should possess enough infrastructures for global business opportunities. No company has become as big as 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 an effective management of a company but additionally, we can list down 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

If you know of more such attributes or characteristics, please add in comments.

References:

http://www.haygroup.com/id/best_companies/index.aspx?id=26111

Book: Financial Management by Brigham and Ehrhardt

Last updated on : August 31st, 2018

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