Market-Based Management®

MBM's Impact on Performance

In this paper by Stanford's Nick Bloom, you will find an interesting appendix that lists the eighteen management practices in medium-sized companies that strongly correlate with productivity and survival rates.

According to Bloom, these management practices are as important as (for example) technological innovation and employee talent and when you rank firms against them, those in the top quartile command 30% higher share prices than those in the bottom quartile. No small potatoes.

Some of the practices:

• All major aspects of modern manufacturing have been introduced (value-stream mapping, production cells, takt time analyses, kanban, etc.) in a formal way and align with well defined business objectives.
• Exposing problems in a structured way is integral to individuals' responsibilities and resolution occurs as a part of normal business processes rather than by extraordinary effort.
• Performance measures are well defined, communicated, continuously tracked, reinforced at all reviews...
• Performance reviews focus on problem solving, address root causes, meetings are an opportunity for constructive feedback and coaching.
• Corporate goals focus on share holder value.

You'll see references to accountability, the need to attract and develop talented employees, and other things that should sound familiar. In fact, when analyzed through the five dimensions of MBM (Vision, Virtues & Talents, Knowledge Processes, Decision Rights and Incentives) you'll find much to admire... but you'll also find glaring gaps - and there's a prescriptiveness about these practices that begs a lot of questions. Skim it and see what you think.

This paper was interesting in its approach to controlling for other factors in order to single out the impact that good management practices can have on the value of a company... Perhaps this is an independent proxy confirming that MBM can make a difference. Because MBM goes far beyond the practices captured in this paper (through a broader encompassing philosophy, framework and rich set of mental models and guiding principles) - it should easily be north of the reported 30% premium.

Agreeable Disagreement

For some people, conflict is personal. A challenge to their idea is perceived as an insult, or a sign of disloyalty. This behavior is displayed constantly in the letters-to-the-editor section of any local paper.

You may not know the latin phrase, "ad hominem," but if you've read many of those "Dear Editor" letters then you have the gist of it. Ad hominem, in English means, "to the man." It refers to a pattern of logic that's really just a personal attack. Here's just one example:

"Joe disagrees with me and thinks that public places ought to allow smoking - but Joe smokes, he doesn't recycle and he walks his dog without a leash. Therefor I am right and he is wrong. QED."

This type of arguing with someone is very effective - if you are trying to polarize the debate and squash any constructive dialogue from which insight and understanding might emerge...

An argument either stands on its merits (good logic and strong evidence) or it does not. It doesn't matter who is making the argument. The ad hominem is pure distraction. It skips right past the logic and evidence and goes after the messenger.

Using character assassination or guilt by association as a reason for ignoring an argument is fantastically disrespectful. If the truth, or some approximation of it, is on your side, then the world would benefit from your sharing it in a way that invites inspection and debate. If you present it with humility, care about intellectual honesty and seek out those who can challenge it, you can't help but improve its veracity. Who wouldn't want that?

If someone tries the ad hominem trick on you, be the adult. Don't fall for it - they are egging you into a 10-year-old name-calling contest. It's likely they are doing it to encourage you to brush them off so they can avoid having to grapple with a difficult issue. Be civil, respectful and focus things back on the ideas, the logic and the evidence.

Conflict and disagreement don't have to be personal. There is far more to be learned through principled disagreement than there is agreeing with each other.

By the way, feel free to use the comment section to disagree with me.

Comparative Advantage

Russell Roberts has a gift for explaining the principles of economic thinking. In his essays, books, blogs, podcasts and radio interviews he engages with interesting anecdotes, parables and allegories that spark curiousity and instill the desire to learn more.

His most recent essay over at the Library of Eonomics and Liberty is about comparative advantage.

Comparative advantage is an essential mental model in MBM. Within the Decision Rights dimension, for example, we use it to guide discovery of those roles and responsibilities that allow us to create the most value.

You won't find a more capable guide as you explore this useful concept than Russ Roberts. I hope you enjoy the essay - leave a comment and let us know what you thought. (By the way - the essay promises to be part one of two.)

Intellectual Honesty and the Challenge Process

B.H. Liddell Hart's 64-page classic, Why Don't We Learn from History? is out of print and tough to find, but worth the effort.

To quote at length from the forward in a section titled, "The Scientific Approach"...

"If a man reads or hears a criticism of anything in which he has an interest, watch whether his first question is as to its fairness and truth. If he reacts to any such criticism with strong emotion; if he bases his complaint on the ground that it is not in "good taste," or that it will have a bad effect - in short, if he shows concern with any question except "is it true?" he thereby reveals that his own attitude is unscientific. Likewise if in his turn he judges an idea not on its merits but with reference to the author of it; if he criticizes it as "heresy"; if he argues that authority must be right because it is authority; if he takes a particular criticism as a general depreciation; if he confuses opinion with facts; if he claims that any expression of opinion is "unquestionable"; if he declares that something will "never" come about, or it is "certain" that any view is right. The path of truth is paved with critical doubt, and lighted by the spirit of objective enquiry..."

Just after that, in a section titled, "The Fear of Truth," he writes:

We learn from history that in every age and every clime the majority of people have resented what seems in retrospect to have been purely matter of fact comment on their institutions. We learn too that nothing has aided the persistence of falsehood, and the evils resulting from it, more than the unwillingness of good people to admit the truth when it was disturbing to their comfortable assurance. Always the tendency continues to be shocked by natural comment, and to hold certain things too "sacred" to think about. I can conceive no finer ideal of a man's life than to face life with clear eyes instead of stumbling through it like a blind man, an imbecile, or a drunkard -- which, in a thinking sense, is the common preference. How rarely does one meet anyone whose first reaction to anything is to ask: "is it true?" Yet, unless that is a man's natural reaction, it shows that truth is not uppermost in his mind, and unless it is, true progress is unlikely."

There is much in all of that to ponder deeply. The pursuit of real progress and understanding requires healthy challenge, a seeking out of the best knowledge - for people that will disagree with you - and a heavy dose of humility, respect and intellectual honesty.