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Critics of American business claim that U.S. managers rely too heavily on a few financial techniques to weigh major investment decisions. Calculation of discounted cash flows, internal rates of return, and net present values, say critics, is inherently biased against long-term investments. But according to the authors, DCF procedures can work if management sets realistic hurdle rates and examines carefully its assumptions. Decision makers need to consider three critical issues: the effects of inflation, the different levels of uncertainty in different phases of a program, and management's own ability to mitigate risk.

Prompted by the success of Japanese products in the United States, American companies are seeking to upgrade quality and productivity by adopting quality circles--programs that allow employees to meet in groups to solve common work problems and to make suggestions to management. Although managers expect quality circles to create a more participative workplace, the groups must first progress through a series of growth stages, each containing key activities as well as threats to the programs' existence. Study of quality circles in different organizations indicates that resistance by middle management and staff, budget cuts, and participants' disillusionment usually precipitate their decline.

The different roles that manufacturing can play in a company's efforts to formulate and achieve its strategic objectives can be described in terms of a developmental continuum. At the lowest "internally neutral" stage, top managers regard production as a low-tech operation, incapable of influencing competitive success. Stage 2 companies seek an "externally neutral" parity with major competitors on the manufacturing dimension. This attitude is often found in America's smokestack industries. Stage 3 organizations, on the other hand, expect production to support and strengthen the company's competitive position, and manufacturing investments are screened for consistency with the business strategy. The fourth and most progressive stage arises when competitive strategy rests to a significant degree on a company's production capability.

The term "socialization" usually evokes a strong emotional response and is often misunderstood. While it does seem to go against our culturally-ingrained "individualism," a certain degree of carefully-thought-out socialization does make organizations work better--as evidenced by the success of strongly socialized firms. This article examines the "seven steps of socialization" and provides a method for rating a firm's corporate culture.

Two strategies for resolving intergroup conflicts have been found: the interpersonal facilitator approach, which relies on a neutral person to serve as an intermediary between disputing parties so that they can find common ground, and the interface conflict-solving approach, which has disputants deal directly with each other under the direction of a neutral person who leads them through five steps to identify and resolve their differences. The interface conflict-solving approach usually relieves tension between warring parties better that the interpersonal facilitator approach.

A two-year study of top executives shows that they do not closely follow the classical rational model of first clarifying goals, assessing the situation, formulating options, estimating likelihoods of success, making their decision, and then taking action to implement it. Nor do they select one problem at a time to solve. Most successful senior managers have overriding concerns rather than precise goals and objectives, and they think more often about how to do things than what is being accomplished.

Shareholders, who are the most important constituency of the modern corporation because they bear its residual risk, benefit most directly from acquisitions because of the increase in the value of target company shares. Many current criticisms directed at takeover activity are wrong or based on faulty logic. Takeovers protect shareholders from mismanagement of a corporation as they allow alternative management teams to compete for the right to manage the corporation's assets. The takeover market provides a unique, powerful, and impersonal mechanism to accomplish the major restructuring and redeployment of assets continually required by changes in technology and consumer preferences.

The most profitable industrial companies are successful not because they have the lowest costs but because they outmaneuver their competitors on price. These companies analyze the way pricing works in their industries. With this information, these companies design pricing policies that result in extra earnings of millions of dollars. The normal frequency distribution curve that emerges from comparison of orders for a product to its price is called the price band. A series of steps to shift the price band is a pricing strategy.

Companies that link research and development (R&D) and marketing can effectively anticipate, analyze, and exploit market opportunities. The makeup of the marketing and R&D team depends on whether the product or application is in development or being sold. Top management must forge the linkage between marketing and R&D, so each group is concerned not only with market planning but also with offering directions for new research and applications.

Many Japanese managers are concerned that traditional methods such as consensus management, the ringi decision-making system, seniority promotions, lifetime employment, and Japanese-style long-range planning will inhibit their companies' ability to adapt to rapid technological change and global competition. Three examples of Japanese companies illustrate some common problems with traditional Japanese management methods.

Professional service firms are paying an increasing amount of attention to formal marketing practices to attract clients. The professionals are being prompted by legal sanctions, an overabundance of professionals, and a declining public image. Professional service firms are inhibited from freely using traditional marketing approaches by special challenges: strict ethical and legal constraints, buyer uncertainty, and the need to be perceived as having experience.

A study of first-line supervisors' responses to employee involvement programs shows that although 72% of the supervisors saw the programs as good for the company and 60% saw them as good for employees, only 31% saw them as good for themselves. Managers should pay attention to these findings because the programs need the support of supervisors if they are to succeed. Each of five types of supervisors has its own reasons for opposing employee participation: proponents of Theory X think workers will take advantage of the programs; status seekers do not want to relinquish their authority; skeptics question the ability of the organization to change; equality seekers think they too--not just the workers--should be included in the programs; and deal makers prefer one-on-one interactions with employees through which they can strike deals.

Operating cash flow (OCF) is an increasingly popular measure of a company's performance, but a study of nearly 300 businesses raises doubt about its reliability as a financial indicator. The study matches 60 companies that had filed for bankruptcy between 1971 and 1982 with 230 nonbankrupt companies chosen randomly from the Compustat Industrial Tape. The study found that OCF figures (OCF, OCF/current liabilities, and OCF/total liabilities) over five years before filing for bankruptcy were poor predictors of failure.

Budgets have two primary functions: planning and control. Companies must decide which function is most important and then resolve a number of formulation issues. Most companies use budgets to evaluate, to some extent, division managers' performances and tie bonuses to the attainment of targeted goals. But while large companies concerned about operational efficiency may want to focus on the coordination and control aspects of budgeting, small and innovative companies may be more concerned with planning aspects. How well a budget succeeds depends on the management systems in place and on the way senior executives view the budgeting process.

Group technology (GT), the concept of exploiting similarities in recurring tasks and grouping like problems, is drawing increasing interest from manufacturers because of its ability to boost productivity in three ways: 1) by performing similar activities together, thereby cutting setup time; 2) by standardizing closely related activities, thereby eliminating unnecessary proliferation of similar parts; and 3) by storing and making accessible information related to recurring problems, thereby cutting time spent searching for information or solving problems.

Outdated cost accounting and management control systems are an obstacle to the lasting success of new manufacturing technologies and procedures. They distort the realities of manufacturing performance and fail to give managers the information they need to optimize the benefits of computer-aided manufacturing processes. Measurement systems for today's manufacturing operations must include such nonfinancial indicators as quality, inventory, productivity, innovation, and the morale and skills of the work force. McKinsey Award Winner.

To be successful, senior executives need to cultivate five skills. First, they need to develop a network of information sources in order to keep informed about a wide range of operating decisions being made at different levels in the company. Second, they need to husband their energies and time and concentrate on a limited number of significant issues. Third, they need to cultivate a sensitivity to the power structure in the company. The fourth skill of successful managers is knowing how to indicate that a company has a sense of direction without ever actually committing themselves publicly to a specific set of objectives. The final, most important, skill is that of developing opportunities. The effective senior manager is, in essence, an opportunist who avoids debates but tries to piece together particles that may appear to be incidentals into a program that moves at least part of the way toward his or her objectives. McKinsey Award Winner.

Four managers of Hugh Russel, Inc. had to change their management style when the company was acquired by a corporation that had no plan and no money on the eve of a major recession. To deal with the new, unsettled environment in which creditors were banging on the door and plants had to be closed, the managers had to develop a "soft", intuitive framework that offers a counterpart to every element in their traditional "hard", rational model. The executives found that the key to effective management is knowing whether you are in hard "box" or a soft "bubble" context. The soft model is conducive to trust, which generates a sense of mission or common purpose. Once the mission is established, the managing group can enter the hard box of strategy.

The reduction in the cost of information systems has allowed computers to offer significant competitive advantage. This new technology allows companies to redeploy their assets and rethink strategy to produce gains in market share. Interorganizational systems can change the balance of power between the buyer and the supplier. New products of higher quality and custom design can also be generated by IS technology. Management must change the way it operates. The CEO must insist that the end product of IS planning communicate the true competitive impact of the expenditures involved. Managers should ensure the confidentiality of strategic IS plans and thinking. They should not allow use of simplistic rules to calculate IS expense levels. Interorganizational IS systems have repercussions in other parts of the business; managers must encourage creativity in R&D and must not be too efficient in IS resource allocation.

The difficulty of segmenting industrial markets has dissuaded companies from trying, despite the benefits they lose in terms of market analysis and selection. The problem is to identify the most useful variables. One way to do this is to arrange the five general segmentation criteria of demographics, operating variables, customer purchasing approaches, situational factors, and personal buyer characteristics, into a nested hierarchy. The segmentation criteria of the largest, outermost nest are general characteristics about industries and companies. Innermost nests are specific, subtle, and hard-to-assess traits.