RE: EOpriv: Developing competent management

[jdoggett <jdoggett@kent.edu>]

A point about developing competent management should, perhaps, consider how 
one would measures their competence.


Consider this difference.  A national economy of some country x exploded.  As 
we can see from GNP and, more importantly, GDP, the economy boomed.  When we 
consider per capita income from GDP, there has been a 400% increase over the 
past two years.  Now, what does this mean?  What this means is that the macro 
indicator reveals a substantial change.  When utilizing macro numbers and 
dividing by the number of people in the country, then there is a substantial 
change in the income.  However, this is an incomplete picture.

If one were to consider most change in developing countries, then one would 
see that incomes grew substantially for a small percentage, but many, most, 
people experienced no change.  The point is that the indicator used to 
demonstrate success is skewed.  To address economic change for the masses, 
perhaps one should consider using an indicator that expresses change at the 
individual level.  For example, what is the real change in income for the 
individual?  Has individual income risen?

Utilizing the logic of economic development and real change for individuals, 
an evaluator of management competence should consider not macro changes but 
real, overall change.  More often than not, the type of measure of competent 
management is that of efficiency.  However, there are multiple types of 
efficiency, and there are declensions within efficiencies.  Let us consider 
economic efficiency.

In an article by David Parker (Parker, David.  1999.  "Privatization in the 
European Union: A Critical Assessment of its Development, Rationale, and 
Consequences."  Economic and Industrial Democracy.  SAGE: London.) he writes 
about economic efficiency in terms of static-efficiency gains and dynamic 
gains.  Static gains are those that are short-term but easy to acquire.  For 
example, increasing efficiency, economically, may be easy if one reduces 
staff.  This is the removing waste mentality--I suppose this means that the 
staff is a waste.  On the other hand, dynamic-efficiency gains are more 
long-term and are more difficult to realize.  Dynamic-efficiency gains would 
be acquired through appropriate capital investment, innovation, marketing, or 
improved human-resource policies.

Now, the indicator used to measure competence could be a choice between 
static-efficiency gains and dynamic-efficiency gains.  If the evaluator 
chooses the former, then the outcome is surely to be getting rid of people to 
show immediate gains.  However, this type of option will reveal no long-term 
benefit.  In fact, it could hurt.  (I think that Dave Wheatcroft would be 
better equipped to discuss some of the ramifications in the UK in terms of 
reducing staff and the accompanied problems.)  The latter indicator would 
compel management to engage in activities that are for the long-term.  The 
activities in which management would have to act would be much harder.  
Likewise, measuring the gains from management in terms of dynamic-efficiency 
gains would be much harder.  However, the outcome would be a better company 
that is more suited to exist in the long-term.  (I am aware of Keynes's 
comment that in the long-term we are all dead.  Quippets aside, I would be 
fore a long-term focus that ensures individual livelihood and company 
success.)