The Changing World of Business


The poor performance of star companies in the 1980s and 90s, both MNCs and domestic, has amply demonstrated their susceptibility to under-perform in the face of rapid and marked changes in technology, competition and customer expectations. It is not that all these companies lacked resources, capabilities or competent managers to anticipate and assess the impending changes and initiate proactive action; what they lacked was concern on the part of their managers to enhance the shareholder value of their respective firms on a sustained basis. As a result, this value got diverted to the customers, employees, competitors and suppliers of the company. While it is well known that a firm needs to develop distinctive capabilities and also build a strong network with its key stakeholders to enhance its value creating potential and appropriation of value this created, what really happened in case of most of these unsuccessful firms was that one or more of the stakeholders gained at the expense of the shareholders. The proponsity of managers to take operating, investment and financial decisions without any concern as to how such decisions can affect their shareholders led them to pursue strategies and investments that were ill-conceived and poorly executed, thereby systematically destroying the capabilities and equity developed over the years.

We should argue how the outcome of such a tendency can be detrimental to not only the firms but also to the job and career of the managers, particularly in the light of the various new developments—such as economic liberalization and opening up of most economies to domestic and global competition, greater freedom to access and move capital, emergence of the market for corporate control, and rising shareholder, activism—which have brought the issue of enhancing shareholders’ wealth to the forefront.

It is clear that managers will need to take a fresh guard and revisit their strategies, business processes and organization in order to face this complex set of challenges and retain their firm’s ability to enhance wealth of their shareholders. Thanks to the contribution made by the academia and practising executives, managers now have access to various concepts based on experiences when it comes to facing such challenges. However, it must be stressed that the need of the hour is not another set of concepts and framework; rather what is required is a new “philosophy of business” that draws the attention of every employee of an organization, starting with the CEO, to the importance of creating, enhancing and sustaining shareholder value in everything that the company does—be it strategic, tactical or even routine matters. Needless to say, the employees will also need guidelines on how to operationalize this new philosophy and what actions are needed to sustain the same.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Cognition in managerial context


The word ‘cognition’ means the ‘act or faculty of knowing.’ Cognition also signifies awareness, comprehension, discernment, insight, intelligence, perception, reasoning and understanding. In change management, cognition implies knowing when to launch change in an organization. This act of knowing is based on the collection and interpretation of data from outside. In other words, the way in which a manager collects and interprets information about the world outside the organization shapes his/her knowledge about change.

 

Specially, managerial cognition in the context of change is the recognition and interpretation of signals from an organization’s environment that denote impending shifts in the environment. If a manager recognizes and interprets the signals accurately, he/she is unlikely to commit this or that errors. On the other hand, both type of errors are more likely when recognition and interpretation are flawed. Then the key question is: what leads to flawed recognition and interpretation of environmental signals? If cognition is the recognition and interpretation of the world outside, what leads to faulty cognition on the part of managers?

 

Although this seems like a simple question, the answer is quite complicated. There are a number of factors that can cause flawed cognition, which can be broadly classified in two categories: (i) organizational factors that can lead to defective cognition and (ii) personal or human factors thaty can cause errors in cognition.

 

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com, Line of Sight