Have you noticed that general managers are scarce these days? These are the executives who run discrete businesses and control all of the resources associated with them. But in many large companies, the only true general manager is the CEO. Everyone else, whether in the C-suite or in the senior management ranks, runs a piece of a business or a support function.
As a result, a limited number of people have full, end-to-end accountability for business success -- and there are few opportunities for managers to learn all aspects of a business. This may be one of the reasons why many organizations struggle to perform.
At one time general managers were at the center of the action. Two decades ago, organizations were designed around stand-alone business units, so all managers had to understand finance, technology, manufacturing, sales, marketing, strategy, human resources, and more. To get this broad exposure, managers were given a variety of functional roles, eventually assuming leadership for a small business unit. If successful, they then were given responsibility for increasingly larger businesses. However, starting in the 1980s, many companies evolved to "functional" structures to cut costs and reduce duplication. The transition consolidated those support functions which were common among the BUs. GE, for example, went from hundreds of discrete BU's to a dozen large businesses with each one having strong, centralized finance, HR, engineering, marketing, and manufacturing units.
As a result of this shift, career paths today are less geared towards filling the few remaining general management positions, and instead focus on functional specialization. As one of my clients advises his mentees, "Declare a major and stay with it." The only problem with this advice -- as my fellow blogger Vikram Mansharamani pointed out recently -- is that as business becomes more volatile and uncertain, the ability to work across specialties becomes more important. But today no one gets that experience. In fact, for many chief executives I've recently worked with, the first real GM job that they had was CEO!
This doesn't mean that there aren't opportunities for talented people to run real businesses and become general managers -- it's just that those opportunities tend to be in smaller companies and start-ups rather than in established corporations. So that's where entrepreneurs and GM-types tend to migrate. But corporations need these people too, now more than ever.
Obviously we can't reverse the structural trends of the past two decades. However, companies can take steps to give their people more general management experience, which may help them avoid the narrowness of functional specialization. Here are several ideas:
- Turn discrete customer segments or geographies into P&L units by giving managers the ability to "purchase" centralized services, and the accountability for achieving profitability targets. Financial mechanisms like these will allow managers to experience the dynamics of running an end-to-end business. It also will force the functional service providers to be more market-driven.
- Allow for two types of development paths in companies -- within functional specialties and across them -- so that at least some managers broaden their exposure and get more general management learning. As such, managers could have both majors and minors on their resumes.
- Finally, carve out innovation incubators that will serve not only to build new businesses but also to grow general managers. Having entrepreneurial opportunities inside large companies will attract and retain talented people who have the inclination to run full-scale businesses.
Given the complex nature of business today, having people with broader perspective may be critical to developing successful organizations. So it just might be time to bring back the general manager.
To what extent does your company have opportunities for true general managers?
Cross-posted from Harvard Business Online.