Unified Theory of Management

If Einstein could describe gravity, time, and space with a simple formula, E=mc2, surely the success of a business has to have a simple formula as well. But what is it?

As I have studied the management of organizations over my 35+ year career, I have always looked for a simplified explanation of a business that would represent that one element around which an enterprise unites for success. After years of research, consulting, and personal experiences, I feel confident in exclaiming that I have come back to the answer that I discovered in my first HR position in 1972.

Below, in my Unified Theory of Management, I offer to you my vision of the single element that determines financial viability of a business.

The Holy Grail of Physics is to establish an overarching explanation (a Unified Theory) to unite all the particles and forces of the cosmos. Since the pioneering work of Albert Einstein, the quest for a “theory of everything” has depended on combining theories of the very small (quantum theory) and the very large (relativity). This Unified Theory in Physics is based on the fact that the same kinds of atoms appear in all living creatures and non-living objects, only they are arranged differently.

Similarly in the field of Management, all organizations (small, mid-sized, large, manufacturing, service, for-profit, non-profit, etc.) have common elements that are simply arranged differently to achieve financial viability. Numerous theories (i.e., Neoclassical Theory, Agency Theory, Property Rights Theory, Transaction Cost Theory, Resource-Based Theory, Evolutionary Theory, etc.) have been advanced that attempt to mathematically compute the factors (i.e., inputs, processes, outputs, behaviors, etc.) that determine financial success as success is defined as sustainable financial performance.

However, I have concluded that a mathematical explanation of the organization is inadequate because it can never fully capture the single factor that is critical to sustainable financial performance, which is the human element as defined by employee performance. The success or failure of an organization is funneled through a single factor – employee performance.

I have included a link below that provides a graphic representation of my vision of a Unified Theory of Management. Click on the picture below to enlarge the graphic. And if you would like a PDF of the graphic, click on the link at the bottom of this page and I’ll email it to you.

The graphic identifies that financial results (right-hand side of graphic) are driven by and pass through a single element – employee performance. Employee performance is driven by the organizational ingredients (left-hand side of graphic) such as culture, values, policies, systems, etc. The overall “glue” that holds the structure together is comprised of four leadership activities (as described in the book, When Professionals Have to Lead: A New Model for High Performance) surrounding the graphic, which are:

Set/Revise Direction – It is the responsibility of the leaders of the organization to set and periodically revise the direction of the business.
Gain Commitment For The Direction – After setting or revising direction, leadership has an obligation to secure “buy-in” by the rest of the organization for the direction chosen.
Execution – Execution requires a level of attention to detail by the leaders that shows the organization that leadership is actively engaged in ensuring that the business stays on track with the chosen direction.
Set A Personal Example – Employees in every organization look at the examples set by the leaders and respond accordingly.

If employee performance is the key to sustainable financial results, how we identify and measure employee performance will be critical to financial success. Certainly, we can’t use the worn out job descriptions and performance review programs of the past (see the Process Evaluations link for a discussion of performance appraisals). However, we can use the 3-step process identified below:

The first step is to identify the tasks and processes that each employee is responsible for executing.
The second step is to identify the standards of performance that an employee will be held accountable for achieving when executing tasks and processes.
The third step is to link those tasks and processes to specific financial metrics on the right-hand side of the graphic. If done correctly, even activities as simple as cleaning the rest rooms can be linked to financial results because of the impact that a clean environment can have on employee morale.

In the arena of sustainable financial results, the single most important skill of a manager becomes the ability to pinpoint activities, behaviors, and results that accurately reflect the organizational ingredients from the left-hand side of the graphic that will generate positive financial results on the right-hand side of the graphic. If done correctly and monitored regularly, employee performance will deliver the financial results that are sought by the organization.

>> YES, EMAIL THE GRAPHIC TO ME <<

Dedicated To Improving Your Financial & Human Resources!

Rich Lukesh
President
Lukesh Consulting Group, Inc.