MEL-Index
- 14.04.09
- Submitted by Udo Dierk
The continued sustainability of companies depends on effective management of the present combined with imaginative vision for the future. On the one hand, they need to optimize processes, organizational structure, staffing procedures and the like, to be faster, more cost efficient and responsive to current markets. Such focus allows companies to succeed in the present and near future. But this does not at all ensure continuity in the longer run. In order to achieve this, companies must also regularly assess their vision, encourage innovation, be willing to adjust or change strategies, products and markets and more. This adaptive approach helps them forge a flexible and dynamic roadmap for the medium and long term future. In order then to sustain both short and long term futures companies must work simultaneously on doing the same things better while stimulating and responding to change (doing things differently). It may well be that the emphasis shifts from current optimization to future change management and backwards like a pendulum, depending on such factors as the situation at the individual company, market forces, and the socio-economic environment.
Many organizations struggle to attain this delicate balance with the result that otherwise adept companies often fail in rapidly changing markets. Recent business history is replete with companies who have either gone to the corporate graveyard (e.g., Digital Equipment Corporation; Wang; Siemens-Nixdorf) or are now sadly diminished (e.g., Polaroid; Kodak) because of the reluctance of senior management to embrace necessary change (a classical yet apocalyptic example was the collapse of the Swiss watch industry in the 1970s and early 1980s where companies refused to accept the digital threat to their analog dominance). Following many years of observing and working with both SME’s and large international corporations, we became fascinated by the concept of the ambidextrous organization[1]and by the formal and informal roles played by various personnel in longitudinally guiding the firm. The decision to commence this major multinational research project therefore started with the a priori view that strategic and operational success depends, in large part, on the combination of skills evident in the leadership group of a firm. Such skills must serve the company in both the short and longer term as well as in a variety of contextual settings. In particular, we became interested in the integrative impact of three types of personnel – managers, entrepreneurs and leaders – in the sustainable fortunes of the organization.
This basic conceptual building block for our research – that three major decision making archetypes exist – receives some support from the business literature (e.g., Kotter, 2001; Mintzberg, 1990; Thornberry, 2006; Zaleznik, 1992). Initial evaluation of this secondary research suggests that managers, entrepreneurs and leaders bring different skills and capabilities to their company roles. We have tentatively summarized them as focusing on current complexity (Manager), focusing on change (Leader), and focusing on opportunities (Entrepreneur).
While the management literature is quite well represented by work on the similarities and differences between leaders and managers (e.g., Goffee and Jones, 2000; Zaleznik, 1992) – and has started to address, if somewhat less completely, the associated role of corporate entrepreneurs (e.g., Darling, Gabrielsson and Seristo, 2007; Garvin and Levesque, 2006; Thornberry, 2006) – it is largely silent on the combination of skills required of executives to guide the short and long term development of the organization. This led us to pose a number of intriguing questions:
– what is the weighting of these managerial, entrepreneurial and leadership practices that result in optimal short and long term corporate performance? How are these weights impacted by contextual variables such as industry maturity, technological intensity and cultural norms?
– do we all have elements of managerial, entrepreneurial and leadership skills in our approach to problem solving? Can we measure the balance of skills contained within members of an executive group as well as measuring the spread of capabilities across the group (e.g., business unit) or company?
– if different kind of capabilities are required to simultaneously work on both short and long term initiatives, how can they be balanced to ensure smooth operations and leverage conflict? How does attaining (or failing to attain) this skill balance impact the innovation profile of the organization?
If everyone working in a major decision making role has some degree of each of the three archetypes in him/her, then the balance of these archetypes could cast a negative as well as a positive influence on decision making at both the individual and leadership team levels. Consequently, our interest lay in understanding and measuring the combined role of the manager, leader and entrepreneur at short and longer term horizons in a company’s fortunes. Specifically, this led to the following research objectives:
- To develop and validate a measurement instrument (the MEL-Index) that will allow an organization to assess the managerial, leadership and entrepreneurial capabilities of its key personnel as well as the company as a whole.
- To operationalize the MEL-Index in a number of business contexts including geographies/cultures, size and type of company, stage of the industry life cycle, and management level (senior executives + high potentials).
- To correlate MEL-Index profiles with company performance metrics (profitability, market share, customer loyalty, etc.) and perceived level of innovation activity.
- To offer prescriptive guidance to corporations on achieving an appropriate balance between entrepreneurial, managerial and leadership capabilities.
[1] This term was first used by O’Reilly and Tushman (2004) to describe companies that manage for short-term efficiency by emphasizing stability and control, and for long-term innovation by taking risks and learning by doing.