This is a book review of What Management

is. It has a very brief introduction of the

author followed by critical evaluation and a
short summary of the book. Most part of
the review is devoted to authors view on
management and its chief responsibilities.

What
Management is
and why is it
everybodys
business
By Joan Margetta
Book review by Kiran Ali

About the Author:

(Taken from Businessreview.com)
Joan Magretta is a Senior Institute Associate at the Institute for Strategy and Competitiveness at the
Harvard Business School. Prior to her current position at Harvard, Joan was the Editor-at-Large and
principal strategy editor of Harvard Business Review. A collection of her work at the Review has been
published as Managing in the New Economy, which was hailed by Business Week as one of the "six
books that are essential reading for modern managers." She also served as a partner at Bain and
Company, a leading strategy firm. For two decades she has advised senior management in a wide range
of settings, from healthcare to high fashion, to heavy manufacturing and higher education. She has also
written for The Wall Street Journal and Sloan Management Review.

CRITICAL EVALUATION :
Joan Magretta is a uniquely authoritative speaker on management who has written the big-picture
management book for our timeschosen by BusinessWeek as one of the ten best business books of
2002. Speaking with an authority that comes from exhaustive research and many years as a corporate
manager herself, author brings her message to the podium with enthusiasm, humor, and common
sense.
The application of the discipline of management to various walks of life is important and an ordinary
person who is not a management graduate has to have an understanding of this discipline. This is what
this book accomplishes. It is for everyone.
This book contains a dose of realism about what management is and some idealism about what it can
and should be. Above all, it is a book about how and why management matters.
To quote Dr. Max Schreiber from Western Carolina University review of this book:
The title is not very sexy, but what's inside is. This is a slight volume which promises to clarify only "the
basic principles of management simply." And, the author does deliver.
Management is never done on paper and no matter how powerful words are, management is best
observed and learned through practical examples. This is exactly what is being done in this book. I find it
to be quite awesome that this book is not just a jargon of principles, jotted down on the paper. Author
gives examples from what happened in the past for her readers to make conclusions. She avoids the
typical academic form (tons of definitions) and presents all the subjects in a very practical way with tons
of real life samples making the reading even more interesting.
We find ourselves on a journey with prominent names like Ford, Sloan, Walmart and GE. Author takes us
inside the business models and strategy building of Dell, General Motors, General Electric, Pepsi, Coke,
UPS and many more. She explains the rise of Toyota and Honda in automotive industry. Explaining
things this way, through real world events make the underlying principles of discipline of management
clear. I really enjoyed this book, it was almost like reading a novel, I found it easy to follow and very
informative.

This is not a "how-to" or a "12-step" program. Rather, we are given a primer containing the fundamental
lessons about developing a business model, selecting a strategy, organizing the resources, motivating
people, and gauging how well the organization is performing. It reminds us that fundamentals never go
out of style.
As someone who is very new to the field of management, I think this book is a must-read. Author
practices what she is preaching, that is, this book does create a lot of value and her writing style gives it
an edge over her other competitors (other management books). It follows a well-defined structure,
similar to what she is propagating in the book.
I am not an experienced manager so I cannot comment on the usefulness of this book for people who
have been in this field for very long but a quick search showed that professors and practitioners alike
consider it to be a bible for managers.
According to The Business Review:
Not since Peter Drucker's great work of the 1950s and 1960s has there been a comparable effort to
present the work of management as a coherent whole, to take stock of the current state of play, and to
write about it thoughtfully for readers of all backgrounds. Newcomers will find the basics demystified.
More experienced readers will recognize a store of useful wisdom and a framework for improving their
own performance.

SUMMARY OF THE BOOK

This book presents management as a discipline. According to author, human ability to manage is pretty
old but the discipline itself is new. Its roots can be traced to mid-nineteenth century.
The core concepts of management are explored through real-life events. The big corporations and their
management strategies are outlined and compared to their competitors. We get a very good insight into
how an organization sets it goals and what it must do to accomplish them while ensuring their survival in
a highly competitive environment.
This book is divided into two parts. First part is design, which tackles the question of why do people
work together. The design concepts explored here provides a disciplined way of thinking about our
ultimate goals and about viable alternatives to achieve them.

VALUE CREATION
This value creation is discussed in the first chapter of this book. Creating value is the primary duty of
management. The term Value Creation is important because it underscores the shift from managing
resources (which was the main focus of management from the late 19th to the early 20th century) to
managing the results or performance of the organization.
There are different mindsets which value creation differently. Historically, manufacturing mindset
was dominant and value was viewed through manufacturers or consumers lens. Taylors view was
making whatever you were making but more efficiently. This was not wrong, but narrow. Marketing
mindset following a sense-and-respond model which tries to understand the needs of customer and
respond accordingly. Another frame of reference for value judgment is shareholder perspective.

Shareholders are interested in the profit companies are making and they are very strict on managers for
maximizing the value for them.

BUSINESS MODELS
A business model is a theoretical structure of how an organization will perform based on assumptions
made. The theory predicts the value it creates for participants: the shareholders, customers, etc. As real
data comes in, the theory is revised to account for real results. A business model is analogous to a story.
The characters are all the people involved and their respective roles and motivations. The plot in a profit
venture is about how it will make money. The plot in a non-profit is how it will effect change. The plot
twist is usually an insight into the value chain. The characters, their motivations and the plot twist/value
chain insight all have to be plausible.

STRATEGY
Strategy deals with uniqueness of an organization. A good strategy makes the survival possible in a
competitive environment. A business might be able to create value but not be able to capture any of it.
A good strategy ensures this does not happen. It is all about winning. In 1979 Michael Porter identified
five underlying forces active in an industry. Since then it has become common to plan strategy with
these forces in mind:
1)
2)
3)
4)
5)

The competition among existing players

The threat of new entrants
The power of suppliers
The power of customers
The availability of substitute products

ORGANIZATION
Current trends are for organizations to remain small, focused, and lean by reorganizing, outsourcing or
spinning off functions and units. The value chain extends more across companies. Paradoxically, some
big companies get bigger by expanding or by acquiring new companies. Organizations reorganize
depending on business strategy and in reaction to competition. For an organization to perform, every
player must be motivated to perform his best. There is no best way to organize. Scale, scope and
structure are enormously contingent on what you are trying to do.
Author ends her planning section here and turns to translating plans into performance.

FACING REALITY: WHICH NUMBERS MATTERS AND WHY

Execution starts out with measuring then goes onto analyzing the context of the measurements.
Reading the measures and their context is usually represented as a ratio or percentage or average or
trend. These numbers help managers decide the appropriate course of action to take. The actual
number crunching is easily taught and easily learned. The more difficult skill is interpreting the numbers
as this requires experience. Experience helps develop expectations about the numbers and guides the
managers decisions. Numbers are aids to understanding. In themselves, they are not fool proof. The
numbers are simple but the markets are complex.

THE REAL BOTTOM LINE: MISSIONS AND MEASURES

Managers translate the organization's mission into concrete terms of goals and performance to focus
members' actions. The challenge is that there is rarely a clear and easy answer. Profits are not a goal;
they are a result of the actions to achieve the mission.
There is no one measure that will tell you everything you need to know about the company. The profits
can tell you if costs are reasonable or if your product is doing well now. It cannot tell you if your product
will continue to do well tomorrow or if it even did as well last year. Measures are industry and business
specific. Some general important measures are:
Operating and financial measures: these can indicate the productivity of resources, personnel,
etc.
Employee turnover: can indicate organization spirit
External performance measures: can indicate customer satisfaction and loyalty
Market share: can indicate relative performance versus rivals

BETTING ON FUTURE
Innovation in management is searching for new value or new ways to create value. Without innovation a
company will stagnate and fall behind the competition. Because the future is uncertain, managers must
make bets as to which innovation will keep the company ahead or at least strongly competitive
tomorrow.
Many business decisions will have to be made based on incomplete information. A component of
innovation is not just researching information but also evaluating it:

What information is fact?

What information is an assumption?
What information can you find out and what can you not find out?
Is what you don't know critical to your innovation/decision?

Innovation and value creation is not necessarily a random process. Tools for arriving at decisions
involving uncertainty have been developed. These tools aid the manager in arriving at good decisions.

DELIVERING RESULTS
The ability to deliver results year in and year out is one of the hallmarks of a seasoned professional.
Ability to deliver results is teachable, because it largely rests on a handful of basic performance
disciplines, which have evolved over decades of practice. These disciplines, in turn, are built on a couple
of very simple principles.
o
o

PARETTOS LAW OR 80-20 RULE:

80% of results are produced by 20% of causes.
MOORES LAW OR KAIZEN
Law of continuous improvement. Everything is advancing very quickly.

MANAGING PEOPLE
Social systems are more complicated, as are the individuals who constitute them. The whole person,
without whom nothing would get done, often makes it hard to get anything done. Caught in our own
egos, we are forever getting in our own and one anothers way. Equally problematic, most people are
resistant to being managed. The real insight about managing people is that, ultimately, you dont. The
best performers are people who know enough and care enough to manage themselves.

WHAT IS MANAGEMENT ACCORDING TO THE BOOK

Doing well in todays world requires that we all learn to think like managers, even if that is not what we
are called. Today, all of us live in a world of managements making. Our well-being is staked on
performance of management.
Author describes the fundamental job of management as
Creating value for customers by helping people to be more productive and innovative in a common
effort.
Management has to accumulate a body of thought and practice that makes an organization work.
Managements true genius is in turning complexity and specialization into performance.
Author starts with a description of how everything is changing and states that dealing with change is
one of the most difficult responsibilities of management. Author argues that managers have to
remember that in periods of great change, they need time-tested fundamentals more than ever to make
sense of what is unfolding around them.
In explaining why the discipline of management is worth studying author explains that management is
a liberal art, drawing freely from all of the disciplines that help us make sense of ourselves and our
world.

Management is not primarily about supervising others. It is not about occupying a privileged rung
in the chain of command.
Managers have numerous responsibilities in each step of planning and execution. How well they juggle
them all determines how good they are at management. In the following few paragraphs, I will
summarize the main responsibilities and tasks of managers which Joan Magretta has discussed in this
masterpiece of a book.

Value creation is an animating principle of modern management and its chief responsibility.
Organizations exist to create value for the people outside it. Managers have to remember the
external orientation of an organization and remind others about it constantly.
Managers have to see each activity not just as a cost but as a step that has to add some increment of
value to the finished product. Managers have to see entire economic process as a whole,
regardless of who performs the activity.

Managers have to realize that managing across boundaries, whether these are between company
and its customers, or the company and its suppliers or business partners, can be as important as
managing within ones own company. In this context, determining who the relevant outsiders are

may be the managements single most critical decision.

Every organization needs a viable business model but if it fails to achieve the expected results, it is

managements responsibility to re-imagine the model.

When managers look at the market, they see a web of power relationships that sets limits to their
organizations ability to perform. Resources come with their limits. Thinking managerially means

looking at the resources through the lens of market, seeing the world as a set of discrete
markets for talent, capital and supplies.
Even in the business world, customers are not the only constituency modern management has
to satisfy. In reality, every successful organization depends on multiple players, each of whom defines
values in a particular way.
Management plays a crucial role in strategy building of an organization. Strategy in management is
about winning. Management make choices about which customers and markets to serve, which
products and services to offer and what kind of value to create.
Managers have to understand that there can be more than winners in businesses. They have to be
unique and keep their organizations focused on creating value for their targeted audience.
Companies who try to be all things to all people, fail to find distinctive ways to compete and eventually
lose their place in the economy.
Managers constantly have to work to provide a unique solution which very few companies (ideally none)
are providing. They have to steer their organizations away from a much exploited areas and
undertake the risk to swim in hitherto unknown waters. As weird as it may sound, aim of business
strategy is to move an enterprise away from perfect competition and in direction of monopoly. It is up
to management to play this game of strategy.
For management, thinking strategically means recognizing that the world is filled with purposeful
people whose aims may constrain or challenge yours. Strategic thinking is necessarily interactive,
it acknowledges that the world is filled with potential rivals and allies, it allows for both competition and
co-operation. It is up to managers to make strategic trade-offs. They have to make it hard for the

rivals with different positioning to copy what they do.

Management is like playing an economic game. To win, following three points should be kept in
mind:
1) Every move will evoke a response
2) Keep your eye on the whole value chain and on the value that each player adds to the whole.
3) Put yourself in the shoes and minds of other players.
When working for an organization, managers have to realize that organization lines are constantly
drawn and re-drawn. Managements job requires it to draw three different types of lines:
1) Boundary lines: which separate whats inside from whats outside

2) Lines of the organization chart: which map how the whole is divided into working units and each
part relates to the other.
3) Lines of authority: these determine who gets to decide what and how the internal game is
played.
Today management looks at the value chain from the outside in, from the customers point of
view and seeks the configuration that delivers the best value overall, regardless of who executes each
activity.
Like any profession, management has developed its own vocabulary and much of it is quantitative.
Managers have to make sense of the numbers they are dealing with. They have to put them in context
to create trend data. There are two extremes of people managers encounter. Mathphobes who consider
all the quantitative data as realm too hard and true number crunchers who are at ease with numbers
but cannot make the connection with the human behavior. Between these extremes, good managers
use numbers to create a common middle ground of purposeful action. Managers have to see the
larger pattern unfolding so that they can take appropriate action.
In the present day, managers have to be capable of making decisions based on quantitative analysis
instantly because data is now available in real-time and managing-on-the-fly can cause a huge
difference in the accomplishment of goals.
Managers have to be smart enough to understand that tools are just that: tools. It is the intellectual
power which determines if the tool is useful or irrelevant.
One of the most powerful management disciplines, the one that more than any other keeps people
focused and pulling in the same direction, is to make an organizations purposes tangible. Managers do
this by translating the organizations mission into a set of goals and performance measures
that make success concrete for everyone. Author considers this as most fundamental managerial
challenges of all.
Management should not only focus on the bottom line of meeting numbers. It has to stay in touch
with the organizations purpose and should understand that profits are a result, not a purpose.
Management has to focus on the underlying reality these numbers represent.
Management has to take measures which fit an organizations purpose, business model and the
competitive reality of the time. They should have the power of translating what the organization

needs to do into simple measures of performance that everyone can understand.

Good managers know they cant live without performance measures, but neither can they live by them
without respecting their limitations. They use measures flexibly, as tools, almost always in
combination, and they create new ones as they confront new performance challenges.
Good management works to achieve a terrific level of clarity about the basics, even when there is
no comparable pressure to do so. This means defining results and specifying measures of performance
that would keep a large organization focused on the right things.
Discipline of management has to tackle the risky business of innovation. Good managers always
have one eye fixed on the horizon and the other on their current position. They are accountable for
results now and at the same time they are responsible for the long term. Managers either

innovate today or fall behind tomorrow. But every dollar they spend for the future is charged against
todays performance.

Uncertain balancing act between present and the future is a universal condition of management.
Managing for the long term takes discipline, courage and a radical belief in the promise of tomorrow.
The investments that managers make to project their organizations into the future reflect the
fundamental optimism of management.

Good management must be entrepreneurial. Modern organization is a destabilizer, designed to

produce change.
Good managers know how to use the constraints of strategy, constraints of a business model,
constraints of a budget, to set them as challenges that spark creativity and ingenuity.
Managers have to act on the basis of incomplete information and make bets that cannot be
recalled once they are placed. Discipline of innovation is an important part of the discipline of
management. Faced with an uncertainty they cant resolve, good managers ask themselves simple
questions: What do we have to believe about x to push forward with this initiative? And then: Are those
reasonable things to believe?
Managers cant afford to sit on the sidelines, so they have to be more clearheaded and disciplined about
the bets they place. The entrepreneurial work of management is not just a crapshoot. Todays
managers have at their disposal a set of simple but powerful tools for structuring decisions involving
uncertainty. They make it possible for the managers to make smarter choices about the future.
Thinking outside the box has become a phrase synonymous with creativity and innovation. A popular
graphic to illustrate this is the 9 dot problem arranged in a 3 x 3 square formation. The problem posed is
how to link all 9 dots without lifting your pen and with just 4 lines. The solution requires the lines to
extend outside the box or square that you would naturally picture. This innovative solution comes
about because of the constraints or bounds of the box. This is the core principle of innovation in
business: creating new value within fixed constraints.
To see the constraints or bounds of the box, the manager must first find the answer to what the
customers need or value. This can be done with surveys, interviews, or observing their activities.
Creating the future is rarely as simple as placing a bet and waiting passively for the outcome. More
typically, a number of uncertainties and future choices stand between managements initial decision and
the outcome it desire. Uncertainties are often nested, one within another, and smart decisions take that
into account. Moreover, management is active, not passive. It makes hundreds of decisions over the
course of time as events unfold, as new information emerges, as it learns and responds. With better
understanding of value, time, and risk, managers and private individuals can make smarter investment
decisions and capital markets can more efficiently fund innovation and growth.
Without innovation and risk taking, there would be no economic progress. The discipline of
management helps to increase the odds that the risky business of innovation will pay off.
Managers have to deliver results. And for that they have to learn the basic performance disciplines. The
80-20 rule is one of the most basic disciplines of managerial thinking. In organizations, as in
many aspects of life, it is universally true that some small number of x will account for a

disproportionately large percentage of results. Delivering results requires steady focus on the 20
percent, on the things that will have the greatest impact. Disciplined managers zoom in repeatedly

on the 80-20, on the big cost and profit items where improvements will really move the
needle. Over time, it is the only way an organization can get an adequate return for the time its people
invest.
Another big part of management is resource allocation, i.e. matching resources to opportunities.
Focusing an organizations resources in the right places is never as easy as it sounds. People
disagree about priorities. They build empires and defend their turf. They cling to the past, to familiar
territory. They hate to stop what theyre doing, because it would look and feel like an admission of
failure. Pulling the plug on an existing activity when it is not adding value anymore can be a
wrenching experience but a necessary one for management.
Peter Drucker noted repeatedly that the greatest obstacle to innovation in organizations is the
unwillingness to let go of yesterdays success, and to free up resources that no longer contribute to

results.
Managers have to systematically practice benchmarking. It keeps more and more organizations
marching to the steady drumbeat of continuous improvement. The idea is to compare the performance
of your products or processes with those that are best in class, even if this means going outside your
organization or industry. The goal is to discover who does something best and learn from their practice
how to improve yours.

Social relations school and managing people is one of the biggest aspects of management today.
Students of management tend to divide the world into two separate domains: numbers and people.
There are the hard subjects like finance and operations, and the soft ones like leadership and
organizational behavior. Only in the classroom does the distinction make much sense. All good
executives know that the central challenge of management is seamlessly integrating numbers
and people into a working whole. Organizations are economic machines, and they are also social
systems.
It is managements responsibility to provide a context of values within which individuals can
manage themselves. Management creates performance through others. Without the willing
cooperation of others, management can accomplish very little.
Performance depends on collaboration, on teamwork, on individuals committing their talent and their
best effort to something larger than themselves. Resolving tension between the individual and the
organization is at the heart of managements work.
An unspoken, golden rule of management is, trust others as you would have them trust you and
deliver what you promise. Management has to play with the social dimension of an
organization to give birth to a healthy work culture which can make values come alive.
Culture building is hard work. It requires communication, communication, and, then, more
communication. According to author it often takes a talent for overacting, big gestures that can be seen
in the back row. It also takes a flair for symbol and storytelling. Story, ritual, and symbol are powerful
ways of making values tangible. Values are abstract. Set in stories, they come alive, and the stories
become parables for right action.

No value is more universally and loudly proclaimed in organizations than respect for the individual and it
is genuinely fundamental to management because it is essential to performance. Effective

management is built on respect for the individual.

Good managers have the wisdom to distinguish what is teachable and what isnt. A manager can
help people discover their strengths, and help people to get better at what theyre good at, but a
manager cant and shouldnt change who a person is. Theres a fine line between management and

manipulation.
The most important lesson a manager can learn is the lesson of empathy. Empathy is yet
another instance of the outside, of seeing the world through other peoples eyes. Working effectively
with other people means accepting the limits of your own authority and of your own perspective.
Management does a number of things that make it possible for people to manage themselves.
Creating a culture whose values are aligned with the organizations purpose is an important part of it.
Selecting the right individuals and encouraging them to develop their strengths is another. In addition,
good managers help people manage themselves by teaching them, often by example, to think about
what they are good (and bad) at, how they work and learn, what they value, what motivates them: In
other words, they foster self-knowledge.

THEORY OF MANAGEMENT
Based on the above discussion, a concise theory of management can be written as:
Management is creating value for customers, shareholders and society by helping people to be more
productive and innovative in a common effort, by turning models into performance, by strategizing to
offer unique and feasible solutions to customers demand, by working across the boundaries of an
organizations, by managing both internally and externally and by tackling uncertainty in the light of
quantitative data from the available mathematical tools.