Indicators of management effectiveness.

Through my readings, I discovered that the famous investor Warren Buffet selects potential companies to invest based on the management effectiveness of the companies. After acquiring companies with good management, Warren Buffet lets the original management continue with their management of the company. There is usually no replacement of the original management after acquisition since the managment has already have a proven track record in profitability and a good organisational culture in place.

I shall share some pointers I learnt through my research on what makes a good management. My sharing is by no means exhaustive as the knowledge of good business management is vast beyond measure and constantly evolving.

A good management focuses on four indicators namely:-
1. Product and service quality
2. Reliability
3. Speed of execution
4. Adaptability

1. Product and service quality

The product or service offered by a company to it's customers must always be of the best quality possible. Products or services of the best possible quality will completely meet the needs of the customers and may even offer higher value than the expectations of customers. On the internal side of the organisation, the managment will put in place every controls to make sure the final product or service is of the best possible quality to meet customers' expectations and beyond.

For example, in a hotel, all product and service offering from the hotel rooms and furnishings, customer service by staffs, hotel food offering and ambience will need to be of the best quality based on the type of the hotel standards. The hotel should meet the expectations of it's customers, if not exceed their expectations in terms of it's products and services offered. To do so, the hotel must seek ways to find out what are the expectations of it's customers so as to better meet their expectations. The hotel must also seek feedback from it's customers on it's products and service offering so as to constantly maintain and even improve their standards in terms of product and service quality.

So, one indictor of management effectiveness is the product and service quality that the company is offering to it's customers. A lot goes into the strategic planning and execution by the management in order to reach the final presentation of it's quality product and service offering to it's customers. It is by no means easy.

2. Reliability

Reliability means how consistent the product and service offering can meet the expectations of the customers of a company. No use offering quality products and services that only meet the expectations of customers sometimes and while at other times, the products and services offered fail to meet the expectations of customers. An effective management must ensure consistency in it's product and service such that it will be able to meet the expectations of all it's customers all the time.

For a hotel, this means hotel rooms must be periodically maintained. Phone calls at the service counter must be answered within a set time. Room guests must always get their rooms at exact set times for check-ins and check-outs must be finished within a set time (as fast as possible) to prevent any delay to the schedule of the guests. Food must be prepared and always served at exact set times for the room guests.

As one can see, reliability is based on consistency in standards. A good management always strives to maintain a consistent standard in the quality of it's product and service so that the product and service quality is not only good but most importantly also consistently good.

3. Speed of execution

The quality product and service offered must be able to meet the expectations of customers fast enough.  There are different expectations in terms of speed of execution depending on what type of products or services are offered. However, generally customers will expect a reasonable time frame within that the product and service must be offered to them. The product and service must always be ready any moment to answer the needs and expectations of customers whenever required.

In a hotel, speed of execution in the product and service offered is more evident. To most hotel guests, time is of essence. The challenge of the hotel is to meet the personal schedule of every hotel guests so that no guests are delayed when they should expect to get their service on time.

It is by no means easy in terms of manpower and execution in order to answer the needs of every hotel guests on time so that no one gets delayed. This is thus another indicator of management effectiveness to make sure the product and service is offered with fast enough speed of execution to meet the expectations of customers at an agreed time frame.

4. Adaptability

This is another test of management effectiveness, the ability to make sudden changes when required to respond to changing needs of the customers. For a hotel, if a guest ask for a food that is not found on the food menu of the hotel restaurant, a good hotel service standard will mean the hotel will still try it's best to answer the unique needs of the guest. The hotel can promptly send personel to buy the ingredients for the new food and prepare it if possible. Or the hotel can try to order the food if it is available from another hotel nearby. The idea here is not to reject the requests of customers as much as possible, but instead try it's best to be flexible to make sudden changes to answer a different new expectation of the customer.

This is another test of management and organisational effectiveness, to be flexible always to anticipate sudden changes to the needs of it's customers.

Conclusion

These four indicators of management effectiveness are by no means easy to reach. However, the management that can better meet these four indicators will have in place strategies and execution measures to ensure the productivity of the organisation is always on the high side.

For an investor, one should look out for good management of businesses to invest in.