What Management Must Learn From Finance

Given the cliché that professionals are often inward looking, and talk mainly to each other, it perhaps should not be a surprise that the discipline of management pays relatively little systematic attention to financial and market data, even though making money is a vital goal, and key to very survival, of any private enterprise.

Management writers often identify a firm as a “model of management” or a “success” because mode of operations correspond to the writer’s own preferences as what good management comprises, without always signaling that the firm in question is experiencing mediocre financial results, or that the global consensus of detailed reviews by expert financial analysts is that the firm has limited prospects of doing better in future.

The Use Of Financial And Market Data In Management

London Business School professor Julian Birkinshaw and Harvard Business Review are therefore to be congratulated for the article in the current issue of HBR, “How Incumbents Survive and Thrive,” which systematically examines the revenues of all of firms in the S&P 500 and the Fortune 500 in 1995 and in 2020.

The analysis shows that the list of firms considered as the stalwarts of 1995 in each sector is remarkably similar to the list of “mainstays” in 2020. Most the 1995 firms still exist “in some shape or other.” In some cases, the identity of the leading firm in any particular…