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Managers must stop arguing about whether the market has valued their company's stock price fairly and learn to interpret what share prices tell them about market expectations of their future performance. Here is a "market signals approach" that allows management to compare its own plans against those of the market. This technique enables executives to: determine whether a suggested acquisition price is too high; use share price to ascertain whether market expectations about a company's hurdle rates are reasonable; discover at what level it should set hurdle rates for capital investment projects; and better align management and shareholder interests.

A leading venture capitalist--who looks at people, particularly financial people, rather than at the financial projections in business plans--sets forth his beliefs as to how entrepreneurs can create successful, thriving enterprises. They must be brutally honest with themselves, accepting bad news and staying on top of disappointing developments. At the same time, they must believe in their ideas; understand how vital good management is to their company; if they can't provide it themselves, bring the right person in; be skilled managers who can be tough-minded with themselves and their team, can say "no," and ideally, are well versed in the technology on which the company is based.

Large U.S. consumer goods manufacturers and retailers have seen profits decline disastrously when they have overpromoted lines to stimulate short-term volume. A simple application of economic theory shows that overpromotion costs too much - whatever extra volume is generated will be eaten up by increased competition, overhead costs, and customers who learn to wait for a sale rather than to buy at full price.

Describes Ruth Linsky's charges of sex discrimination against Triton, where she is a sales manager. Ruth believes that she has been denied promotion because of an institutionalized system of sexual discrimination. Barbara Smith, Triton's personnel director, must weigh the issues: Where does the law draw the line? Does the company personnel policy favor men? Why didn't the affirmative action policy work? A panel of experts from business and the law discuss the case.

Strategy requires multiple definitions to fully appreciate its implications. Accordingly, this article proposes five definitions--strategy as plan, ploy, pattern, position, and perspective--and analyzes how these definitions interrelate. Part II reconsiders the question of why organizations really do need strategies, and also shows how some long-held beliefs explain why organizations don't, as well as do, need strategies. It considers the needs for strategy to set direction, focus effort, define the organization, and provide consistency.

Faster and more flexible information technology can be converted into positive programs to help get and keep customers. It can revitalize the traditional corporate control functions. While the new technology offers managers new options for gathering, organizing, and using data, it opens new horizons for new results. Companies can get constant updates on field operations. Organizations confined by historic accounting or reporting formats can now arrange information however best suits their purposes. Technology has the power to transform the information and control function.

Inside companies and beyond them, business and ethics still demand managers to make tough decisions. Concerns about doing business in South Africa, how to handle plant closures, issues involving personnel matters--none is new. What is new is the interest the public takes in business decisions and the pressure it applies--pressure that tempts boards and managers to sidestep hard choices. Managers must be open to the role ethics plays in decision making. Know where you stand on issues as an individual. Weigh all the competing interests carefully. Then simply get on with doing business and let your actions speak for themselves. This article won HBR's 1986 Ethics in Business Prize.

The performance measurement system in many decentralized companies actually works against good management. It encourages profit center managers to cover up bad news, take short-term actions that may hurt the real interests of their organizations, and accept responsibility for things over which they have little or no control. The solution is to measure the performance of profit centers and their managers with different yardsticks. Measure profit centers with profit center financial statements that follow traditional accounting systems. To measure the managers, use separate profit budget reports.

More than eight million workers now participate in employee stock ownership plans (ESOPs) in approximately 8,100 companies. The tax incentives designed by Congress since 1974 partly explain the growth in the number of ESOP companies, but most ESOPs reflect the view that worker ownership and participation have real advantages. Over 73% of the ESOP companies significantly improved their performance after setting up their plans. Moreover, there is a strong correlation between corporate performance and worker participation: ESOP companies do best when they set up programs that permit workers to have a say in corporate policy. With ESOPs performing so well more American managers should consider adopting this approach.

Many companies have found that high sales volume does not automatically mean high profits. Among the factors that do affect customer profitability are geography, order size, and extra attention to keep the account. Some customers simply cost more to serve. Others will pay any price to get a certain product. If companies want profits and not just sales, they should start by understanding the differences among their customers. Careful analysis of customers and products will steer sellers into more profitable markets. Sellers should: know the exact amount and origin of costs; understand their profitability dispersion and set prices according to the value customers place on each product; focus strategy according to their knowledge of customers and their own strengths; install information and other systems to support a chosen strategy; and analyze profit dispersion and rethink strategy continually.

Turnaround management is not just for troubled companies. Today's managers must earn the right to compete every day. The basics that will help them do that are the same ones that turnaround managers use to bring failing companies back to life. The rapidly changing environment can dump an otherwise untroubled company into new bankruptcy. Relying on summary reports from distant department heads to learn about the company's cash position can therefore be dangerous. It is better to scrutinize each line item in a cash projection and to use spreadsheet programs to design a number of possible scenarios.

A professional firm cannot exist without its specialists - accountants, lawyers, consultants, bankers, and so on - who generate client services. But how can they be managed? One solution is the producing manager: a person responsible for both management activities and generation of client services. With producing managers heading small, autonomous business units, the organization can stay nonbureaucratic and non-hierarchical and still grow, change, and retain its competitive edge.

Formal planning alone is not the best way for managers to develop strategy. Facts, figures, and forecasts are necessary; but managers also need an intuitive understanding of the organization, a feel for the business not unlike a potter's feel for the clay. Strategy is not just a plan for the future but also a pattern out of the past. Strategies are not always deliberate--they also emerge over time as organizations innovate and respond to their markets. By seeing patterns take shape in their environments, the best strategists find strategies as well as create them. McKinsey Award Winner.

Most great organizations are great because of the way they recruit and groom good people. It is necessary to muscle-build the organization: institute tough, aggressive, companywide upgrading. Start with some frank questions. What are hiring standards? Is there a nucleus of excellent talent to draw from? How are high-potential people identified? What are the performance problems?

This eight-step process for designing a distribution system calls for in-depth study of what services and conveniences the company's customers value and then segmentation of the market according to those values. At several crucial stages, the process requires getting outside checks and hard data for market segments, company objectives, and the projected costs of distribution outlets. The climax of the process is an off-site meeting at which top management tests its prejudices against evidence that researchers have gathered.

Does matrix management stifle or foster the development of new products? The arguments for and against matrices consist primarily of anecdotal success or failure stories. The issue is further obscured by the failure to recognize that there are different types of matrices. Data on the usage and effectiveness of three matrix structures (functional, balanced, and project matrices) were collected from 500 managers experienced in product development. The results indicate that matrices still are the dominant approach for completing development projects. However, while all three types of matrices have comparable usage rates, the project matrix is considered the most effective. Companies using matrix management should consider project matrices if they are trying to improve performance.

Examines a significant example of "technological pioneering"--the development of an emerging technology in pursuit of future commercial opportunity. In this case, the pioneer's efforts resulted in the birth of a major industry, the manufacture of videocassette recorders for the mass consumer market. The authors compare the actions of six firms that were pioneers in the development of this technology, two in the United States and four in Japan. Three firms, all Japanese, emerged in the late 1970s as the big winners in the growth of this new industry. However, this is not another case in which international differences in "competitiveness" were decisive. The real success story lies in the management practices of three pioneers, who just happened to be Japanese.

Manufacturers of packaged goods no longer can entice consumers through traditional "pull" marketing techniques - huge TV and other advertising campaigns and alluring packaging. So the trade has moved in to grab customers through "push" marketing techniques - especially coupons and trade deals. Unless manufacturers reverse this trend, they will risk crippling their own marketing productivity. Manufacturers have to understand the recent changes in society and consumer tastes that have caused the shift from pull to push marketing. They then can return to pull marketing by directing their attention to the small, varied segments that now make up the U.S. market.

A major reason why Japanese corporations succeed in global markets is the informed, hands-on market research they practice. When Japanese managers want information on customer needs or market response to a new product, they don't depend on market research professionals and the so-called scientific methods favored in the United States and Europe. Instead, they meet and talk directly with retailers, wholesalers, distributors, and brokers so that they can gain deep knowledge of their channels.

Two arguments against low trade barriers - that U.S. manufacturing is bound to lose out to places like Korea and Taiwan because they pay rock-bottom wages, and to Japan and other aggressive foreign competitors because they help favored industries with subsidies - don't stand up to the facts. The United States imports less from low-wage countries now than it did in 1960; protection levels haven't changed much since 1981, the year the United States last had a surplus in manufactured goods. What is at the bottom of our massive trade deficit? The huge gap between our production and our spending, fueled largely by the enormous federal budget deficit.