The hidden resource of management efficiency

   April, 2011

Management is undoubtedly one of the most important professions of humankind. The full potential of management as a hidden resource of business growth is yet to be fully appreciated by local companies.

The leading and “opinion forming” executives of many international companies viewed the economic crisis as an opportunity to rethink their management approaches and become even more efficient. This shows the critical trait of best practice in management – seeing challenges as opportunities for further growth and development.

Armenia scored 117th in the Global Competitiveness Report’s rankings on professional management out of 139 countries. The score denotes that the level of reliance on professional management in the country is rather low: it is yet to higher extent the relatives and friends that are positioned in higher management positions in local companies.

The management is yet not regarded as a profession by itself and management by intuition – is the main approach adopted by most of the company executives.

However, as the era of chaotic business doing is close to exhaustion, it is the right time to turn to best practice management approaches for Armenian companies.

Chaotic – as it was the first phase of business formation, where management was just a function to be carried out and the importance of it was rather low. Along with the growing business sophistication of local companies, the understanding of the need for professional management is also emerging. The latest trend is the intensified search for qualified managers, which turn out to be “the scarce resource” of our times… Hopefully, the healthy demand will facilitate the growth of professional managers in Armenia too.

While people are the essential part of professional management, the tools they use are of no less importance. The management practice is constantly in process of improving the available management tools and developing new ones, the need for which emerges with time. According to the annual survey of companies carried out by Bain consulting, the average number of management tools used by companies worldwide is about 10.

The knowledge and usage of such tools is a sound indicator of business sophistication of the country. The similar survey carried out by EV Consulting among 54 companies operating in various sectors in Armenia showed contradictory results. According to executives the companies use on average 7 management tools, which is still below the global average, however higher than conventional wisdom would expect.

Judging from our experience, we believe that the results that we received are inflated: the “claimed” rates of management tools seem to be higher than the realistic levels. The real essence of the tools seems to be not very well comprehended, which can be one of the causes of inflated results. This can be an indication of a rising need (or desire), which has not yet fully converted into a well comprehended and rationally substantiated demand.