Each year the Chartered Management Institute (CMI) seeks nominations for the best business articles published. The competition aims to reduce the gap between theory and practice in management and leadership, by directing time-poor managers to the five articles from the past year their peers believe will most help boost performance.
Petra Wilton, Director of Strategy at the CMI said: “This competition helps managers to get their hands on the best of academic research and thinking.”
The winning article for 2014 year is called ‘The Fatal Bias’ and was written by Dr Jules Goddard of London Business School. In it he argues that the current preferred business strategy of the vast majority (77%) of UK managers and leaders, which is to closely control costs rather than increasing investment, is likely to be successful for just 3% of businesses in the coming year!
A top crop of UK managers voted the article, as the must-read piece of research to come out of British business schools over the last year. It explores why controlling costs has become the most prevalent management strategy of modern times despite the fact that evidence shows it is counterproductive as a route to long term growth. In the article, Dr Goddard sets out why companies increasing costs and making bolder, less risk averse investments are the ones that stand to be successful in the future, and suggests new rules for business management that concentrate on ‘better rather than cheaper’, and ‘revenue rather than costs’.
Dr Jules Goddard, said: “I’m interested in business success and business failure – and if we want more of the former, we have to challenge the attitude that ‘costs are generally too high and if they are made to be lower it would create more wealth’. I am thrilled to have been recognised with the CMI Management Article of the Year award and pleased that respected business practitioners and senior leaders are taking note of this argument. Too many managers think that they will win with cost reduction strategies, but in practice, the chances of turning cost leadership into a sustainable profitable strategy are roughly 3%.
The boards of UK companies spend almost 10 times as much time measuring and evaluating cash flow as working out where it comes from and how it can be increased. Clever managers will turn these outmoded and lazy management habits on their heads if they want to take advantage of the healthier economy in 2014.”
I am going to read the full article as this has really resonated with me. As someone that works with organisations to improve revenues and increase profits, I have always argued that cost cutting alone is never the answer. Now with this academic research I can have a much clearer debate on why this policy won’t work.
Congratulations to Dr Jules Goddard who is undoubtedly a shining beacon of light in the fog of current business thinking!
Trainer & Consultant at MTD Training
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