news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Song Zhiping, Chairman of the China Association of Listed Companies and Chief Expert of the China Enterprise Reform and Development Research Association

Running a business is about doing the right thing, and management is about doing things right.

Text | Song Zhiping

Source | Understanding Management

Author: Song Zhiping, Chairman of the China Association of Listed Companies and Chief Expert of the China Enterprise Reform and Development Research Association

I remember that in July 2019, I gave a speech at a meeting of leaders of a large company. The title of the speech was "From Management to Operation". At that time, I felt the many uncertainties faced by the company and suggested that weBusiness leaders should pay more attention to business operations and delegate much of the management work to their subordinates.But I know that it is extremely difficult to do this, because most of these big business leaders have similar experiences to me, and have grown up step by step from the grassroots. They have great enthusiasm and preference for management (especially for managing people and affairs). If they don’t manage people and affairs, they may feel that power is falling into someone else’s hands. In fact, at this momentFor business leaders, the most important thing is to make the right choices in an uncertain environment, rather than worrying about specific trivial matters.

In the Western context, the word "management" is a general concept, which often covers the two meanings of operation and management. In the Eastern context, especially for Chinese and Japanese, they are accustomed to separate operation and management, believing that operation is "doing the right thing" and management is "doing things right".Operations are outward-looking, mainly focusing on making correct decisions and acquiring resources, with the goal of improving efficiency, while management is inward-looking, handling the relationships between people, machines, objects and materials in the enterprise, with the goal of improving efficiency.

Operation is about increasing revenue, making more money, and drawing "three buckets of water" from the market, while management is about saving money, spending less money, and squeezing out "three drops of water" from within the enterprise.In an enterprise, there must be operators who look up and see the road, and there must be managers who keep their heads down and pull the cart. Although management is the eternal theme of an enterprise, it is not omnipotent. It can only solve things that need to be managed, but it cannot replace operation. In many cases, the marginal utility of management is decreasing. You cannot reduce costs and increase efficiency infinitely through management, while the marginal utility of operation is increasing. The better the operation, the more money you make. This is the biggest difference between management and operation.

Historically, the entire 20th century can be said to be the "hundred years of management", an era of production management that solves the problem of whether there are products or not. As a result, a large number of management theories are often developed around efficiency improvement. However, since the beginning of the 21st century, with the Internet revolution, climate issues, anti-globalization, and the entry of some emerging economies into the post-industrial and post-urbanization era, the environment faced by enterprises has undergone major changes. The two keywords "uncertainty" and "vulnerability" better reflect the characteristics of the new era. It is precisely because of these changes that the concept and logic of "effective operators" have gradually become clear in my mind. In some companies, there is often no shortage of well-trained managers, but what is really lacking is operators with strategic thinking.Business leaders must not only transform from managers to operators, but also transform from ordinary operators to effective operators.

I have worked in the business world for 40 years, including 17 years as a factory manager and 18 years as a manager of a large state-owned enterprise. I also served as the chairman of the China Association of Public Companies for many years, during which I conducted research on hundreds of companies. It can be said that I have experienced the entire process of Chinese business leaders from management to operation. Especially during the long years as a manager of a state-owned enterprise, I have a deep understanding of how to be an effective manager. In his book "The Effective Executive", Peter Drucker proposed the five key principles for effective managers, namely, making good use of time, valuing contributions, leveraging strengths, prioritizing important matters, and making effective decisions. Based on my own experience, observations, and thoughts, I also summarized and proposed these five principles in the book "The Effective Manager".The five tasks of an effective manager are correct choice, effective innovation, resource integration, value creation, and sharing mechanism.If we want to transform from a manager to an operator, and grow from an ordinary operator to an effective operator, we must grasp these five tasks well.

In the book "Effective Managers", I particularly emphasize the effectiveness of management. That is to say, even if we understand the inner truth from management to management, it is still far from enough, because there is still the problem of effectiveness in management. This book actually unfolds from two levels, one is from management to management, and the other is how to achieve effective management, and discusses in detail the five tasks of effective managers.

The right choice

The biggest challenges facing enterprises are uncertainty and fragility.Making the right choice is the first priority for an effective operator.As an operator, the most difficult thing is making decisions, and no one can replace you. Although you can gather ideas from all sides when making decisions, the final decision on what decision to make or not to make is up to the operator of the company. Even after making a decision, if you find that information is asymmetric or the environment has changed, the operator has to change his decision, even if it was made yesterday.

If managers work hard on strategic choices, business choices, and personnel selection, and establish a set of underlying logic for selection, they will not be afraid of not making the right choices, and such managers can be considered effective managers.The correctness of the choices in strategy, business and talent often determines the life or death of an enterprise.kindA major event that must not be ignored.When studying the strategic choices of the enterprise, effective managers not only need to have a clear set of ideas and correct principles, but also be able to decompose the strategy and implement the strategies at the company level and business level respectively. Effective managers follow principles when selecting businesses, and the same is true when selecting people. They select people with both moral integrity and ability, with moral integrity first and talent as the main consideration. At the same time, they will also select those who are obsessed and professional.

Effective innovation

Ordinary operators also understand the importance of innovation and want to innovate, but they have not formed an effective way and method to innovate.Innovation must be effective.If there is no benefit, no matter how good the technology is, it will not work, because the enterprise cannot continue to operate if it cannot make money in the long run. Innovation has risks, but we cannot say that there are risks and we will not do it. Effective managers are not willing to take risks, but can also minimize the risks. For venture capital, 30% of the projects are profitable, but ordinary enterprises can neither think so nor do so. So, what is the probability of success for enterprises to innovate? I think a 70% success rate is enough, that is, for innovative projects, there must be a 70% chance of success before enterprises can do it. Innovation has both rules to follow and models to rely on. Effective managers pay more attention to effectiveness in innovation, pursue purposeful, high-quality and effective innovation, and also pay more attention to the choice of innovation model.

Resource Integration

Today's competition does not lie in how many resources a company possesses, but in how many resources it can integrate.When running a business, resources are not necessarily owned by you, and you cannot start everything from scratch. Doing so is neither necessary nor traditional, and will also miss opportunities. Managers should have the concept of integration, but they cannot integrate simply for the sake of scale. The key to integration lies in whether the synergy effect is truly brought into play. Effective managers also have their own principles in integrating resources. They will not simply and blindly talk about integration, but will pay attention to specific methods. Joint restructuring must be a restructuring that conforms to the strategy, and after the joint restructuring, special attention will be paid to the integration of management and culture. For example, when I was in China Building Materials, I summarized management integration methods such as "three-five integration" and "eight major construction methods". Internationally, there is a "seven-seven" rule for mergers and acquisitions: 70% of mergers and acquisitions cases are unsuccessful and fail to achieve the expected business value, and 70% of unsuccessful mergers and acquisitions cases are due to the failure of cultural integration. The most important thing in joint restructuring is cultural integration. In terms of cultural integration, effective managers will always use good culture to assimilate bad culture, and never allow bad culture to assimilate good culture.

Creating value

Today's enterprises need to face two markets: one is the product market, and the other is the capital market.In the product market, companies focus on creating profits; in the capital market, companies focus on creating value; profit is the basis of value, but profit is not equal to value. Ordinary managers often focus on the product market and neglect the capital market.Effective managers value both and do not neglect either one.Effective managers advocate that from the product site to the product market, they attach importance to product pricing and brand building. They should not only be good at managing factories but also be good at operating the market. Making good products is the foundation of doing business, but whether it can be recognized by the market and whether it can obtain customer premiums is a question of the level of management. Effective managers believe that the market is a large system. They uphold the concept that industry interests are higher than corporate interests, and corporate interests are hidden in industry interests. In terms of price, they attach great importance to harmonious coexistence with competitors. Generally, they do not adopt blind price-cutting competition, but adopt a stable price approach, moving from volume-based profits to price-based profits, and from the red ocean of competition to the blue ocean of competition.

Effective managers in the capital market do not only focus on issuing stocks for financing, but also regard whether they have created corporate value as their most important performance in the capital market. They are good at using innovation and corporate growth to enhance corporate value, and then return to shareholders and other stakeholders. The value of a listed company is its market value, and creating value is an important task for effective managers. In fact, Moutai has only raised funds once - 2.244 billion yuan, but over the years, its cumulative dividends have exceeded 200 billion yuan, creating huge value for investors. Listed companies should also attach importance to social benefits, actively fulfill their social responsibilities, and achieve benign interaction and harmonious coexistence with stakeholders such as employees, customers, suppliers, banks, and communities.

Sharing Mechanism

The mechanism is the positive correlation between corporate benefits and employee interests.Since the emergence of organizations, stimulating people's enthusiasm and initiative has been a commonplace problem that has plagued organizational development. Regardless of whether it is a state-owned enterprise or a private enterprise, whoever can solve the problem of the mechanism and have a good mechanism can develop quickly and well. The purpose of an enterprise is to make society better, and the starting point of the sharing mechanism is social fairness and justice. Effective operators believe that human capital and financial capital are equally important, and emphasize that enterprise employees can share the benefits with financial capital in the primary distribution through employee stock ownership and technology dividends. Ordinary operators have not yet deeply realized the value of sharing, and most of the time they will start from the perspective of incentives. The sublimation from the incentive mechanism to the sharing mechanism is a sublimation of effective operators. Effective operators themselves are also entrepreneurs with a high sense of social responsibility. While creating wealth, they are responsible, righteous, and loving.

In the past, we talked more about effective managers, which is not contradictory to effective operators. They are not contradictory, but are inherited from each other and are also inherited and developed with the times.We need to do both management and operation well; we need both effective managers and effective operators.After all, effective managers are still a new concept and new logic. I hope that everyone will give more comments and suggestions after reading this, so that we can continuously enrich and improve it in our common practice.