Introduction to Business Policy - the Role of Top Management

Introduction to business policy

The chief executive of a company should be like the pilot of a plane. He should be familiar with the plane as well as the interrelationships among its parts. He knows that if one part fails it may affect the ability of the craft to stay aloft, or the failure of one part may in turn affect other parts and result in gradual loss of altitude. Through the many controls at his fingertips or within reach of himself and his co-pilot, he can adjust the operation of each functional part to achieve optimum performance.

The operation of the aircraft, however, is not an end in itself. There are clearly set goals which the pilot has to reach. His purpose then, like the chief executive of company, is to see to it that the craft operates in the most efficient manner and arrives at its desired destination.

Unlike most of the crew of an aircraft who are concerned mainly with internal operations, the pilot must be equally concerned with the effects of the external environment and, to the extent possible, with how such can be predicted. Before takeoff, the physical landscape can be accurately assessed, the flight path set to avoid mountain peaks, tall buildings and the like. Weather forecasts, including wind directions and speeds at different altitudes, permit additional adjustments to be made on the flight plan. Prior to takeoff, therefore, the pilot knows the capabilities of his craft and crew; he has set goals; he has obtained the best possible data and predictions on the environment and has determined their effects on the plane's flight. He has also evolved a strategic flight plan.

One particular aspect of the environment is worthy of separate mention; that is, ground control. The pilot must first file his strategic flight plan with ground control, obtain the later's permission to take off, as well as permission to make any deviation from the original plan. It is obvious that ground control is to the aircraft pilot what the government is to the chief executive of a company.

To carry the analogy further, once the aircraft is in flight, the pilot must be concerned with changes in the environment as these occur. Some environmental changes can be counteracted by changes in the plane's operation without having to alter the strategic flight plan. Others, however, will require a change in strategy. Some environmental changes will even compel the pilot to change his destination (his goal). Changes in the weather which were not forecast prior to take-off can still be anticipated if the pilot stays tuned in to the latest weather report. But, sudden in-flight instructions from ground control cannot be anticipated: an unexpected storm may strike; the plane may be blown off course; and a mountain peak might loom unexpectedly ahead. Urgent decisions will have to be made by the pilot in the face of great uncertainty. These same types of problems face the chief executive of a company.

The authors have chosen the analogy of the airplane pilot for two reasons. The first is that the development of the aircraft, of airlines and of the flying profession has taken place, more or less concurrently, with the growth of modern techniques in professional management.

But, the second and key use of this analogy is that it gives a clear distinction between the problems of top management in an advanced industrial country and that of a developing economy. A company chief executive in an advanced industrial country is like a well-trained modern-day pilot flying a Boeing 747 on a round-the-world flight. While in flight, the plane, like a well-managed company, has all aspects of its operation constantly monitored, and information is instantly fed to instruments which can be studies by the pilot. He can quickly spot if some part of the aircraft is beginning to function abnormally, and he can take immediate action to correct it. The four engines must stay synchronized; the fuel flow must be correctly adjusted relative to reserves and need; the controls are at his fingertips to change the plane's internal operation, if that is required; or to maneuver the aircraft vis-à-vis strategic flight plan or in response to changes in the environment.

Most importantly, prior to takeoff, it is possible to plan out the entire trip. Weather forecasts from satellites, plus data on many other aspects of the environment, such as supply and demand of the plane's services, sources of fuel, competition, etc., are all available. Long-range planning for the entire trip around the world can be accomplished with a high degree of accuracy. Even for the first hop, the pilot can develop his strategic flight plan with confidence. While in flight, the pilot receives regular information about the environment, from many sources, via his radio and from the plane's radar. Finally, interference from ground control becomes minimal.

In developing countries, very few business firms can match the sophisticated organization of the Boeing 747. Most companies are more analogous, in fact, to the aircraft of the 1930s which contained very little instrumentation. The information system for the plane was very limited. He could tell from experience that the engine "sounded" normal. He could tell by the "feel" of the controls that the other mechanical parts were in operation. He flew "by the seat of his pants." The lack of proper instrumentation meant that the pilot could not anticipate malfunctions. When something went wrong, he had to look hurriedly for an emergency landing field. In developing economies, there are companies of many types and they run the gamut from the simplicity of the 1920 biplane to the sophistication of, perhaps, the Boeing 747. But all of them operate in an environment which is different from that of the United States or Western Europe. The environment for these developing economies is similar to that of the aircraft of fifty years ago. Weather forecasting then was at its infancy; it was not usually possible to predict rain, wind directions, and wind speeds at different altitudes. The planning of the round-the-world flight plan was very cursory. And, once the plane was aloft, the pilot corrected his flight plan, not on the basis of information received from the then-primitive radio communications (the radar was still non-existent, but rather, in response to changes in the environment as they affected the craft's operation.

It should be made clear that there are, in highly developed countries, many firms which are still old-fashioned; while, in many developing countries, there are those which employ the latest in managerial techniques. In all cases, however, there is a key difference in the managerial policy, strategy, and planning in the developing countries: the environment