We have all seen and experienced corporate scandals of unimaginable proportions in many companies in Zimbabwe since dollarisation. These failures cut across so many sectors of our economy today. In the financial sector it’s properly dressed and it’s called “curatorship,” in other sectors it is called judicial management. Shareholders, clients and employees are left shell shocked when their beloved firm suddenly fails to carry the wage burden and eventually closes. The surprising thing is that in all cases the signs have been there for all to see and not a single person bothered to take corrective action.
Zimbabwe has one of the highest literacy rates in the world. This is a good starting point but it’s not enough.
If you ask economists they will tell you, for the economy to grow we need to focus on political, institutional, geographic, and historical factors. Human capital theorists have emphasised the importance of human talent and technological progress as the anchor in any economic growth model. According to Heiner Rindermann and James Thompson (2011) Chemnitz University of Technology and University College London “cognitive ability predicts the quality of economic and political institutions, which further determines the economic affluence of the nation. Cognitive resources enable the evolution of capitalism and the rise of wealth.” The research reports that “an increase of 1 IQ point in the intellectual
class raises the average GDP by $468 U.S.”
I came across interesting findings from a study (2007) by McKinsey & Company on “Management Practices & Productivity: Why they matter.” In this paper they reassert the notion that organisations that have best practice management practices outperform those that do not have. This commodity called good management practices seems to be in short supply in the local firms. What do we have? We have out-dated management practices that do not work anywhere.
In the same research they discovered that multinational companies wherever they operate tend to outperform local firms. Zimbabwe is no exception. Most multinationals operating in this country are doing far much better than our local companies in every respect. What is also interesting is that the more multinationals operating in any country, the better the performance of local companies. Locals companies tend to benchmark against best practices of multinational companies thereby bettering their management practices and in turn this increases the company’s performance.
Another interesting finding is that organisations that tend to recruit and select managers on merit tend to outperform those who do not. This is also another challenge for most local organisations. Majority of them are staffed with friends and relatives of the shareholders which compromises their objectivity when looking at business issues. In the same study they also found out that owner managed firms (family owned) are the poorest run in terms of management best practices and performance. In Zimbabwe managers have found it convenient to blame their poor performance on external factors such as the politics and government policies. The findings point to the fact that the failure and poor performance of companies is impacted more by internal policies than outside factors.
The research findings also indicate that the better managed organisations tend to have highly educated employees at both managerial and non-managerial level. In Zimbabwe we fare very well on this dimension but our educated managers can’t run organisations profitably. The failure can be attributed to the type of education offered in this country which has been criticised for many years. Is our education good enough to produce world class managers and leaders? I leave this question open for debate.
The research also noted that the level of economic growth is determined by the level of firms that have adopted best practice management practices. If we look at our ailing economy you can see clearly the link between poor management practices and our economy. The government must take the initiative to promote good management practices across all sectors of the economy as this has a positive knock on effect on the individuals firms. Individual firms can also learn a lot from those firms implementing best practice management systems through benchmarking and seconding their employees to best performing organisations in the world.
It is interesting to note that the above findings have been found to be true in all cultures. According to the same study, improvements in management practices is highly correlated with significant improvement in productivity and output. According to this research “a single point improvement in management practices score is associated with the same increase in output as a 25% increase in the labour force or a 65% increase in invested capital”. This is a revelation for those firms that would like to increase their performance even in the current challenging environment. The sad thing about Zimbabwean organisations is that they are investing less and less in management training when the rest of the world in investing millions in management training.
Another interesting finding is that the US, for example, scored highly on people management practices (e.g. promoting and rewarding employees). They are however outperformed by Germany, Japan and Sweden on shop floor operations management.
As outlined at the beginning of this article multinationals, especially US based multinationals, performed better than owner managed or organisations run by founders or members of the founder’s family. However at the bottom of the performance ladder are government controlled firms. Government controlled firms suffer from people who are promoted based on political connections instead on merit. It was also reported that in government controlled firms non- performers are tolerated and promotions are based on tenure instead of merit. These findings are very true in Zimbabwe were some of the worst performing organisations are those run by founders or owners and at the bottom here are government controlled entities (as well as all municipalities.) Once again the presence of multinationals assists in the transfer of best practices to local firms. It is said the transfer happens at two levels: transfer of skills through people moving from one organisation to the other and also through commercial interactions at various levels and also trade associations. If this is true, what will be the future of Zimbabwean organisations once we have fully taken over all the foreign owned organisations through indigenisation?
The unfortunate part about the firms with bad management practices is the managers themselves think their management practices are fine. This makes it very difficult for interventions to be implemented because these poor managers hold themselves highly.
It was also found that competition plays a big part in improving management practices. Firms operating in highly competitive markets have better management practices compared to those in low competitive environments. Flexible labour markets also tend to promote good management practices. Firms operating in flexible labour markets, as measured by the World Bank’s measure of employment law rigidity, outperform those in rigid markets. In Zimbabwe we have a big challenge as our labour laws make it very hard for organisations to restructure. The lesson for our government is that they must promote competition and develop flexible labour laws to promote good management practices. This will have a significant positive knock on effect on the economy. Relevant education will also do us a lot of good.
- Management Practices & Productivity: Why they matter (July 2007) – McKinsey & Company
- Cognitive Capitalism: The Effect of Cognitive Ability on Wealth, as Mediated through Scientific Achievement and Economic Freedom: Heiner Rindermann and James Thompson (2011) Chemnitz University of Technology and University College London
Memory Nguwi is the Managing Consultant of Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. Phone 481946-48/481950/2900276/2900966 or email: firstname.lastname@example.org or visit our website at www.ipcconsultants.com