Why the 'owner management vs professional management' debate is meaningless?

Why the 'owner management vs professional management' debate is meaningless?

If we divide the management method of a company into two broadly, it is probably divided as follows.

'Owner management', in which the owner, the major shareholder of a company, directly participates in management and determines the direction of the company, and 'specialized management', in which the company hires a professional manager (corresponding to the so-called C level position) and he determines the company's decision-making and direction management.

These two management methods were talked about as if they were in contrast to each other, and there was a heated debate among people about which one was superior.

Management by the Owner

In the 1980s, when American companies fell into recession and Japanese companies took over the world, interest in Japanese management was very high.

One of the Japanese-style management categories was 'management by the owner'. At that time, most of the companies in the United States were already run by professional managers, whereas in Japan, they were often run by owners.

Of course, as the Japanese bubble economy collapsed and we entered the lost 30 years, this kind of story quickly falls into place.

Of course, on the other side, there were many criticisms of American-style shareholder capitalism and the effectiveness of owner management.

This discussion seemed to be solidified by a decision win by the owner management in the 2010s.

Not only did Steve Jobs fully resurrect Apple, which had crashed by former executive John Sculley, but he also laid the foundation for a world-class company shortly before his death.

Also, in the case of Mark Zuckerberg's Facebook and Elon Musk's Tesla, it is evaluated that it would not have been possible to achieve the scale it is today if professional managers had run the company.

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[caption id="attachment_4503" align="aligncenter" width="344"] American Companies[/caption]

However, the two are merely chosen according to the life cycle of a company, not by opposing management practices.

Now, except for startups and some tech companies, many American companies are mainly operated by professional managers, but it seems that until the 19th century, family management by the owner was a common method of American companies.

In the early days, companies are born by entrepreneurs with a challenge and creativity, and the owner's families are involved in the management and the company is run.

Especially in the early stages of a company, the strength of owner management is highlighted.

In an explosively growing market, you are exposed to very fierce competition, and in this case, you need a reckless manager who makes decisions at a fast pace.

Owner management, in which the owner takes the lead and takes responsibility for all decisions, is very suitable for this kind of situation.

Elon Musk is a prime example of this.

Although the electric vehicle market was highly regarded as a long-term prospect, it was not a profitable business right now, so existing legacy car companies did not show much enthusiasm for electric vehicles.

However, in the case of Musk, he took all the responsibilities with his strong conviction and vision for the future of electric vehicles, and as a result, Tesla took the lead in the electric vehicle market.

Professional Manegement

But when an industry is mature enough and a company grows in size, it will need a different type of manager.

Stable management becomes more important than aggressiveness, and the need for professional managers is emerging as the owner cannot take care of everything.

Moreover, as the generations pass, it is not easy for a person with the right qualities to run a business to come out of the owner's family.

Since the pool of manpower is limited within the family, the limit is clear.

For this reason, only 12% of the many American businesses that have been created over a long history are family businesses with three or more generations.

Those who pay attention to the advantages of owner management also pay attention to the disadvantages of the professional management system.

However, in the case of Hershey's in the United States, considering that its founder, Milton Hershey, died without children and continued business well despite the relatively quickly entering into a method of operating through a board of directors and professional managers, either deny the professional management system or use a method inferior to the owner management. You can see that it is an irrational number in many ways.

Considering that the person who immediately raised Google into a global company was Eric Schmidt, whom Larry Page hired as a professional manager, and Tim Cook was the person who firmly led Apple after Steve Jobs' death and made it the number one global company today.

Switching from owner management to professional management

[caption id="attachment_4511" align="aligncenter" width="375"] Owner Management Vs Business Managment[/caption]

In any company, management is initially made by the owner. However, as a company grows and matures, there comes a point when it is no longer possible to adhere to the management by the owner.

What is certain is that there will come a time when management cannot be continued by the owner, and there will come a time when management by a professional manager will come.

For this reason, it is important to understand owner management and professional management as a management process that changes according to the birth and growth of a company, rather than as opposed to each other.

What seemed like a decision victory for owner management in the late 2000s was simply because of the boom in technology companies in the United States in the 2000s, and owner entrepreneurs became stars.

However, even this has shown that it is meaningless to discuss which method is superior with the appearance of outstanding professional managers such as AMD's Lisa Su.

For this reason, it is necessary to understand that owner management and professional management are adopted according to the growth and change of the company.

How was today's story?

Owner management Professional management Doesn't it seem that one is good or the other depends on the situation?