Proactive vs Reactive Management

In order to properly address these issues, I'll first define the terms proactive and reactive.

  • Proactive - Anticipating events such as problems, markets, trends, and consumer demands and planning ahead for them.
  • Reactive - Reacting to events when they occur with little to no anticipation of events.

First of all, I must state that all management must be both proactive and reactive to survive. Obviously when significant events happen it is necessary to react to them. But the reaction most of the time should be planned and well thought out. The best management is primarily proactive rather than reactive. Good management is proactive first and reactive second. During the course of my career, I have seen many organizations fail to make money because they were reactive. Wars have been started because of governments that were more reactive than proactive.

Reactive Failure #1

Some number of years ago I had the opportunity to get in on the ground floor when a company was beginning to design their own line of personal computers. It seems they had been selling a low end computer system that a third party was making for them and they were selling like hotcakes. They were all excited about this new market. So they were putting together a team of digital designers and were excited about bringing this new product to market in a very aggressive six month schedule. At the same time they were laying off personnel who worked in a part of their company where sales were not very good. I turned the opportunity down.

Their attitude of layoffs rather than retraining indicated that they did not value longevity on the part of employees. This was not why they failed. A few years later I learned that the design team had successfully designed their computers and brought the product to market successfully and on schedule. However sales were apparently lackluster and the whole idea of bringing computers to market was abandoned by the company. I wonder what happened to those dedicated individuals who worked so hard?

The reason for the failure was reactive management or actually it was lack of proactive management. By the time the management realized there was such a great market for computers, so had everyone else. The only companies that remained in the personal computer market were those that had forseen the opportunity early, already had designs ready, and were set to produce product to meet the demand. Of course we know who these companies were.

Reactive Failure #2

Another company I had worked for had seen success by one of its competitors in the cellular phone market. The competing company selling cellular phones was making money hand over fist. The company I worked for tried (late in the market demand curve) to get into this lucrative market. Some design was done, but to my knowledge, the product was never brought to market.

How to be Proactive

So the question is how can one organization forsee a future event and be ready for it when other organizations fail to do this? What do they do?

  • They plan for short and long term.
  • They work closely with technical and marketing staff to determine marketing opportunities that may be opening up.
  • They encourage innovation.
  • They pretest markets.
  • They take polls.
  • They take calculated risks.

Proactive Successes

When I worked for the telephone industry they had a planning and forecasting section. They projected increases or reductions in the customer demand curve based on forecasting and trends. Based on these projections, we adjusted construction schedules to add additional facilities sooner when more demand was forecasted or to delay construction of new facilities when projected demand decreased. Setting schedules in this way obviously was much more efficient and saved a great deal of unnecessary expense. In many industries, proactive management is essential.

Other examples of proactive successes include:

Shortages of Goods or Services

When you hear of an increase price of goods or services to to a shortage of supply there are only two possibilities:

  1. A conspiracy by the industry to cause prices to be artifically high in order to increase profits.
  2. A lack of proactive management and planning for increased demand by the industry involved.

Reactive Successes?

Any reactive management successes are more likely due to dumb luck rather than skill. If anyone is aware of reactive successes due to reactive management, it would be worth sending us an e-mail.

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