Introduction Excellent management can make the difference between a mediocre business and an outstanding one.

Many a great businesses have been run in to the ground by poor management. Investing in a management which is infamous for a variety of things, giving false information etc will only make you lose your money. With many of Indias corporate honchos being named in various scams that keep cropping up, it has become all the more important to invest your hard earned money in a company run by a trustworthy management; a management that respects the interest of a minority shareholder. A strong management is the backbone of any successful company. This is not to say that employees are not also important, but it is management that ultimately makes the strategic decisions. One can think of management as the captain of a ship. While not physically driving the boat, he directs others to look after all the factors that ensure a safe trip. However, while we understand the significance of a strong, capable and unselfish management, assessing its competence is a difficult task. There is no full-proof method available to analyze a management. Most investors realize that it's important for a company to have a good management team. The problem is that evaluating management is difficult - so many aspects of the job are intangible. It's clear that investors can't always be sure of a company by only poring over financial statements. Fallouts such as Satyam computers have demonstrated the importance of emphasizing the qualitative aspects of a company. There is no magic formula for evaluating management, but there are factors to which one should pay attention to. While its difficult to ascertain whether a companys management is the best or not, it is definitely possible to look at some qualitative and quantitative parameters which can help to separate the wheat from the chaff and objectively assess the quality of management.

Management Having established the competitive position of a company within its industry. Q ualitative company analysis turns next to an evaluation of the quality of a company's management. Some experts believe that the quality of a company's management nay be the single most important influence on its future profitability and overall success. A company can have strong financial statements, for example, and yet be overly bureaucratic and incapable of responding quickly to changing business conditions. To assess management quality, the analyst must understand what the work of management involves. Management is the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading, and controlling organizational resources. This general definition of management conveys two important ideas: 1. Managers responsible for the attainment of various organizational objectives both effectively and efficiently. 2. Management includes four basic functions: planning, organizing, leading and controlling. Organizational Performance

The first part of the definition of management deals with organizational performance. Managers are ultimately responsible for applying company resources effectively and efficiently to accomplish the company's goals. Effectiveness is defined as the degree to which the company achieves its goals, efficiency is defined as the amount of resources required to produce certain level of output. Performance depends on how effectively and efficiently the company attains its goals. 2

Management Functions The second part of the general definition of management lists four functions: planning, organizing, leading, and controlling. The planning function involves setting future goals for the organization and then identifying the tasks and resource necessary to obtain those goals. The organizing functions assign tasks to various parts of the organization and allocate resources within the organization. The leading function involves the motivation of employees to achieve the goals of the organization. The controlling function is concerned with
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the monitoring performance, keeping the organization moving toward its goals, and correcting deficiencies. Management Skills What kinds of skills must managers have? Most experts identify three essential types of managerial skills: technical, conceptual, and human skills. Technical skills involve knowledge and mastery of such disciplines as engineering manufacturing, basic science, and finance. Conceptual skills involve the ability to think and plan, to see the company as a whole as well as the relationships among all its parts. Finally, human skills involve the ability to work with and through other people. Some human skills include leadership, motivation, communication, and conflict resolution. Management experts argue that all managers need all three skills; however, the relative importance of each change as a manager moves up the organizational hierarchy. For example, technical - skills may be very important for lower-level managers, but they are less important than conceptual and human skills for top managers. 3

Evaluating Management The discussion of the nature of management leads to the critical question that investors must answer: how well managed is the company? Determining the quality of management is neither easy nor totally objective. In a nutshell, the fundamental issue is how well the company's management performs the four basic functions. Of course, this analysis cannot stop with an assessment of how well management has performed in the past; it must extend to their likely future performance, as well. Many experienced analysts have trouble defining good management, but they often know it when they see it. Generally, to distinguish between good and bad management, the analysts can evaluate management by getting information on some specific questions such as listed below:

What Are the Age and Experience Characteristics of Management? Information on senior management appears in the company's annual
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report.

This usually includes ages, current titles, and brief biographic sketches of each individual. Experts look for a senior management group that appears to have some depth of experience. At the same time, the group should exhibit some variation in terms of age, length of service with the company, and background. For example, some should have marketing backgrounds , whereas others have technical backgrounds. A group of senior managers that appear to be carbon copies of one another should raise concerns. Evaluating the senior management group includes considering likely successors to current leaders. This is especially important if the company bears the stamp of one individual. The analyst should ask, could someone

take over for the current CEO immediately? If the current CEO were to step down, would possible successors engage in a power struggle? Has the current CEO stayed too long? Some think that the struggle to replace may distract the company and hurt efforts to improve the business.

Has the Company Developed and Followed a Sound Marketing Strategy? An investor's analysis should not discount the importance of a clear, well-planned marketing strategy. To prosper, every company must satisfy the demands of consumers. The basic components of marketing strategy: the target market and the marketing mix variables (distribution, price, product, and promotion) along with the environmental factors form the framework for the marketing strategy. An investor must evaluate how well the company has delineated its target market (or markets). Further, although each marketing mix is another important question variable should be examined individually, the analyst should also assess how well the company has blended the four variables together to satisfy chosen target markets.

Does the Company Understand That It Is Part of a Global Environment? Even a company that is not classified as multinational must operate in a global environment. How well a company has adapted to this fact may give some important insight into the quality of its management. Has the company recognized that it sells its products in a single worldwide market and that competitors come from all over the world today? Does the company treat the entire world as a source of supply, as well as a market?

Has the Company Effectively Adapted to Changes in the External Business Environment? The contemporary business environment is marked by rapid and sometimes unpredictable changes. How well a company anticipates and reacts to changes in its external business environment depends on the quality of its management. One thing to look at is the company's adoption of modern management techniques, especially those that have succeeded in other, similar companies. One example is the trend to adopt many of the Japanese production techniques and organizational structure characteristics by auto makers.

Has Management improved overall competitive Position of the company? Improving competitive position is a prime responsibility of management. Well-run companies maintain or improve the competitive positions of all their business units. If a specific business unit cannot compete, a well-run company promptly reduces its investment, perhaps withdrawing from the business entirely.

Has the Company Been Financed Adequately and Appropriately? A company's financial statements reflect on the quality of its management; as a general rule, better-run companies have better financials than poorly run companies. For Example, prudent financial policy suggests that a company limit its financial risk, if it faces a high degree of business risk.

Does the Company Have Good Relations with Its Unions and Employees? Managers have to lead and motivate employees, good and successful managers develop extremely effective human skills. Managers cannot achieve the company's goals by themselves;

they need employees working with them, not against them. As a general rule, well-run companies have better employee relationships than poorly run companies.

What Is the Company's Public Image? Well-run companies know the importance of public Image. Does a company's name convey a positive or negative image? Of course, well-run companies do not neglect their other responsibilities while cultivating positive public images.

How Effective Is the Board of Directors? Well-run companies generally have effective boards of directors. It may be no coincidence that these companies also produce better returns to shareholders on an average. In fact, some large institutional investors are examining corporate governance first and then performance when making stock investment decisions. What is an effective board of directors? Ideally, an effective board is one that evaluates the performance of the CEO annually, links executive pay to specific performance goals, pays retainers to directors in the form of company stock and requires board members to own a significant amount of stock, has fewer than three inside members, and is elected annually.

These were general analysis techniques which could be used and implemented by a normal investor. However there is one ore method which is much more technical and requires expertise to conduct it. It is called SWOT analysis. This means Strengths, Weaknesses, Opportunities and Threats. A SWOT analysis is a structured planning method used to evaluate the strengths, weaknesses, opportunities, and threats involved in a management.

SWOT analysis is much more complex and sophisticated technique of evaluating a company management. Strengths The first step in the business management SWOT analysis is identifying key strengths of a company. These strengths can include a strong brand image, plenty of working capital, a good reputation among customers and even strong distribution networks. Strength is basically any advantage that a company has over its major competitors. However, companies should also analyze the strengths of their competitors as well, which provides a better assessment of how a company can potentially fare in the marketplace. Weaknesses Like strengths, companies also need to look at their primary weaknesses vs. the competition. Strengths and weaknesses are considered the internal factors of a business management SWOT analysis. For example, a companys weakness may be limited access to natural resources. Opportunities Opportunities and threats are considered external factors of the business management SWOT analysis. A company usually has less control of external factors. For example, opportunities can include a new market such as the Internet, or a potential merger with another company. Threat A new competitor or a potential price war is a potential threat. The goal of the business management SWOT analysis is to take advantage of opportunities and minimize the impact of threats. Such threats must be evaluated studied and protective measure must be taken. Threats are 8

posed by not only competitors but also by other factors like business environment, natural and uncontrollable factors etc. Prevention/Solution A business management SWOT analysis is an important business tool, but it must be used regularly to be effective. Situations can change. The doors on opportunities can be shut if a company does not act quickly enough. Moreover, a competitor may wrest a companys advantage away if the company fails to upgrade its products. Ultimately, the competitor may become the new quality leader by introducing newer and more advanced technology. Therefore, companies should periodically update their business management SWOT analysis. Conclusion It is concluded that business management analysis is an important tool for an investor while investing his money. However even after developing such techniques and methods of analyzing the management it is still not 100% trustworthy. As the management is looked after by the human beings and the behavioral and psychological patterns may change from time to time and situation to situation. Its not possible to accurately judge the management of the company. Only on the basis of few techniques developed up to some extent management of a company can be analyzed and judged. In modern business world where environment is changing rapidly, investors can only hope for the best, from the management. Only reputation of the company and its securities can be a ground of assurance for the investors.

Bibliography Books Fischer D. and Jordan R. (2009), Security Analysis and Portfolio Management, 6th Edition, Pearson Education and Dorling Kindersley Publishing Inc.

Internet Money works4me, (Jan 2012), [Online], Analyze management Look at the jockey before you bet on the horse, Available on internet, http://stockshastra.moneyworks4me.com/investing-tools-solutions/management-businessanalysis-company-research/ Suttle R, Business Management SWOT Analysis, [Online], http://smallbusiness.chron.com/business-management-swot-analysis-3338.html Hamel G. How To use SWOT, [Online], http://www.ehow.com/how_5087381_useswot.html

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