MER Model of Integral Management Concept and Basic Features

Prof. Dr. Janko Belak and

Assist. Prof. Dr. Mojca Duh

University of Maribor and

MER Evrocentre – Family Business Institute in Maribor, Koroška c. 113/b SI - 2000 Maribor

e-mail: janko.belak@mer-evrocenter.sie-mail: mojca.duh@uni-mb.si

Abstract: The MER Model of Integral Management has been growing out of several years of research cooperation of universities and other research institutions from different countries. The coordinator of research activities is the MER Eurocentre from Slovenia. The concept and basic features of the MER Model of Integral Management are presented in this paper.

Keywords: Management, Integral Management, MER Model of Integral Management

1 The Evolution of Integral Management

From the evolutionary perspective management has been presented differently in the scientific and professional (business) literature. Early stages of the management evolution are very often described as budgeting, controlling and long-range planning. In later stages of the management evolution progress toward development of business strategic planning, corporate strategic planning and strategic management was made, somewhere also toward the development of general management (e.g. [1]). In the last two decades we can observe substantive progress toward the development of integral management. Among those management researchers, who foresaw such evolution of management, was also Slovenian researcher and author of many books on management Prof. Dr. Janko

Kralj. He described four major stages in the evolution of management as empirical, rational, cognitive and integrative management [2].

Among developed and comprehensive models of integral management is the St.Gallen Management Model of the major importance. The story of the St. Gallen Management Model began with the foundation of the Institute of Management (at the Hochschule St. Gallen – HSG) in the year 19 by Prof. Dr. Hans Ulrich. He was convinced of the necessity of a strong theory of the firm and of its complex embedding in multitude of environmental spheres. In the year 1968, his book “Die Unternehmung als produktives soziales System (The Corporation as a Productive Social System)” outlined the basics for a system-oriented education in management. It is regarded as the fundament of his overall work. On this basis, the first version of the “St. Gallen Management Model” was published in the year 1972 together with Walter Krieg in a book with the same title.

From the year 1984 to 1994, the institute was headed by Prof. Dr. Knut Bleicher. During this period, the overall idea of an integrated management approach was shaped towards a framework captioned “St. Gallen Management Concept”. By emphasizing distinct phases of corporate development, it especially focused on evolutionary conditions of management. This framework picks up three management levels highlighted by Prof. Dr. Hans Ulrich and combines them with what is often regarded as the specific “St. Gallen” demands of successful management: the harmonization of strategic programs (or more general: activities), structure, and culture (or more general: attitudes) to a common chord. Six editions have made “Das Konzept Integriertes Management (The Concept Integrated Management)” an acknowledged standard in management literature. In the year 1998 the University of St. Gallen (still branded HSG) initiated a comprehensive project to renew the St. Gallen Management Model. In the year 2002 these efforts led to the new HSG approach to integrated management. With this, the acknowledge St. Gallen concept of the firm and of the accompanying management challenges went into its third generation. The latest HSG approach to integrated management enhanced the original Ulrich model in various respects. First, there is more importance attached to the ethical, normative dimension of management. Second, the new model reflects the enormously increased relevance of a process oriented view of the firm. Third and closely related to the latter, there is much emphasis on the interpretative, meaning-based dimension of management. With the integrating levels of strategy, structure, and culture, three main pillars of the second St. Gallen Management Model developed in the Bleicher era also play an important role in the new model. Finally, the great contemporary issues of interactions (resources, norms and values, concerns and interests) are bundled in a new way. This is done to draw more attention to the insight that management is very much about interpreting certain facts and giving meaning to them. The project was conducted by Prof. Dr. Johannes Rüegg-Stürm, who introduced the management framework in his book “Das neue St. Galler Management-Modell (New St. Gallen Management Model)” [3, 4].

Encouraged by the development of integral management models, especially the one developed at the HSG (i.e. St. Gallen Management Model), researches from Slovenia took the initiative for developing the model of integral management (captioned “MER Model of Integral Management”) which would take into considerations special transition conditions. The coordination of research activities was taken over by the MER Eurocentre (in Slovene: MER Evrocenter) from Slovenia. MER is acronym: M - Management, E - Entwicklung (in German) → Development, R - razvoj (in Slovene) → Development. The MER Eurocentre is the institute for research, education and publishing in the field of management and development of enterprises, regions and other environments. It is a non-profit oriented and politically neutral institute and in its work and management, internationally cooperative and open. Its development is oriented toward global European environment and the home region represents a space for direct applicative activity.

The MER Model of Integral Management has been growing out of several years of research cooperation of universities and other research institutions from different countries. The concept and basic features of the MER Model of Integral Management are presented in this paper.

2 MER Activities in Developing the Model of Integral Management

Although the MER Eurocentre was officially established in the year 1997, the beginnings of the international cooperation on research and publication programs and projects went back to the year 1992. One of the main reasons for the international research cooperation on the MER projects were differences in development between traditional market economies and post socialists transition countries. Also Slovenia was one of the transition countries, and its researchers found themselves in difficult conditions caused by the transition efforts to the market economy. They had to acquire new knowledge as fast as possible, but on the other hand had to forget the knowledge which was useless in new circumstances.

All these problems were recognized in the year 1992 by initiators of the MER activities which have been still running today. Since its beginning the MER mission has been the free exchange of theoretical and practical cognitions and experiences between researchers, managers and other experts from developed market economies and less developed former socialist countries. Recognizing the need for new knowledge on management and development of enterprises the Slovenian researchers and authors Prof. Dr. Štefan Kajzer and Prof. Dr. Janko Belak decided to invite researchers to cooperate in preparation of a joint book on this topic. Besides Slovenian researches and scientists colleagues from Austria,

Germany, Switzerland and Canada took part in preparations of the book. The realization of this publication [20] represents the beginning of the MER activities, which became an important form of scientific cooperation. Symposiums

Cooperation in the scientific and research work has been manifesting also thorough the organization of several international scientific symposiums. In the context of the MER program the following symposiums were held in the period 1994-2003:

- In the year 1994 the symposium on the topic “Management der Unternehmen in Transition und die Wirtschaftsentwicklung an Beispielen aus Slowenien (Management of Enterprises in Transition and Economic Development with Cases from Slovenia) was organized. The idea of MER symposiums was born at the 1994 symposium [5, 6, 7].

- MER ’96: Theorie und Praxis der Unternehmensentwicklung - mit Besonderheiten der Klein- und Mittelbetriebe (Theory and Practice of Enterprises Development - with Particularities of Small and Medium-Sized Enterprises) [8, 9].

- MER ’97: Unternehmens- und Management-Entwicklung - unter Besonderheiten der Klein- und Mittelbetriebe in den Reformländern (Enterprises- and Management-Development - with particularities of Small and Medium-Sized Enterprises in Transition Countries) [10].

- MER ’98: Management zwischen Krise und Erfolg (Management between Crisis and Success) [11, 12].

- MER ’99: EU-Integration und Krisenmanagement - Vergleichsanalyse zwischen verschiedenen Ländern (EU-Integrations and Crisis Management - Comparative Analysis Among Different Countries) [13].

- MER 2000: EU-Integration und Unternehmenskooperationen – mit Betonung der KMU (EU-Integration and Enterprises Cooperation – with an Emphasis on SMEs) [14].

- MER 2001: EU-Integration, Synergie und Modelle des Gründungs- und Entwicklungsmanagements (EU-Integration, Synergy and Models of Start-up and Developmental Management) [15].

- MER 2002: EU-Integration und die Entwicklungsbesonderheiten der Familienunternehmen (EU-Integration and Developmental Particularities of Family Enterprises) [16].

- MER 2003: Unterstützung des Managements und der Entwicklung von Familienunternehmen (Support of Management and Development of Family Enterprises) [17].

Research work

Symposiums were based on results of the research work of more than four hundred researchers, who have been cooperating on the research projects on the

following topics for the past ten years (also with the aim of developing own model of integral management):

- Co-dependencies between entrepreneurship, enterprise’s policy and management

- Transition influences on development of an economy and enterprises

- Particularities of development and developmental management of small and medium-sized enterprises

- Business planning as the management component

- Synergy effects of start-up and developmental management - Particularities of crisis management in different environments

- Comparative analysis of integral management models with models of strategic management and enterprise’s policy

- Integration and cooperation particularities of small and medium-sized enterprises (comparing EU countries with other countries) - Developmental particularities of family enterprises Publications

New knowledge and research results of the above listed symposiums and researches have been introduced in different publications (i.e. books, journals, and symposium proceedings). They have been published at the beginning by the Publishing House Obzorja from Maribor, then by Linde from Vienna, Versus from Zürich, in between also by the Faculty of Economics and Business at the University of Maribor. After the founding of the MER Eurocentre in the year 1997, its own publishing house took over all publishing activities. Publications, on which the MER Model of Integral Management is based, comprise several thousands of pages. They are listed among references at the end of the paper [5-34].

Synergy of participating partners

For the past ten years participants (researchers and authors of published contributions) from Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Byelorussia, Canada, Czech Republic, Croatia, Estonia, France, Germany, Hungary, Italy, Poland, Romania, Russia, Slovak Republic, Slovenia, Switzerland, Ukraine and USA have been cooperating in the MER programs. They have been coming from more than fifty (mainly university-) institutions, some of them also in teams. In the continuation are listed only those partners who had major influence on the development of the MER Model of Integral Management (the list of all participants would be to long):

- Abteilung für Controlling und strategische Unternehmensführung, Institut für Wirtschaftswissenschaften der Universität Klagenfurt (Department of Controlling and Strategic Management at the University Klagenfurt), Austria - Akademia Ekonomiczna im. Karol Adamieckiego w Katowicach (University of Economics Katowice), Poland

- Akademia Ekonomiczna im. Oskara Langego we Wrocławiu (Oskar Lange University of Economics Wroclav), Poland

- Ekonomska fakulteta Univerze v Ljubljani (Faculty of Economics, University of Ljubljana), Slovenia

- Ekonomski fakultet, Sveučilište u Zagrebu (Faculty of Economics and Business, University of Zagreb), Croatia

- Fakulta ekonomiky a manažmentu, Slovak Agricultural University in Nitra (Faculty of Economics and Management, Slovak University of Agriculture, Nitra), Slovak Republic

- Institut für Arbeitswissenschaft, Ruhr-Universität Bochum (Ruhr-University Bochum), Germany

- Instytut Inżynierii Zarządzania, Wydział Informatyki i Zarządzania, Politehnika Poznańska, (Institute of Management Engineering, Department of Informatics and Management, Poznan Technical University), Poland

- Institut für Betriebswirtschaftslehre der Klein- und Mittelbetriebe an der Wirschaftsuniversität Wien (Department of Small Business Management, University of Economics and Business Administration, Vienna), Austria

- Inštitut za podjetništvo in management malih podjetij, Ekonomsko-poslovna fakulteta Univerze v Mariboru (Institute of Entrepreneurship and Small Business Management, Faculty of Economics and Business, University of Maribor), Slovenia

- Kaiserslautern University of Applied Sciences, Studiengang Mittelstandsökonomie, FH-Campus Zweibrücken (Kaiserlautern University of Applied Sciences, Department of Small Business), Germany

- Lehrstuhl für Organisation und Personal (Department of Organization and Human Resources), European Business School Schloß Reichartshausen, Oestrich-Winkel, Germany

- Provoznĕ ekonomická fakulta, Česká zemĕdĕlská univerzita v Praze (Faculty of Economics and Management, Czech University of Agriculture Prague), Czech Republic

- Szervezési és Vezetési Intézet, Keleti Károly Gazdasági Kar, Budapesti Müszaki Föiskola (Institute for Management and Organization, Keleti Károly Faculty of Economics at the Budapest Tech), Hungary

- Universität für National- und Weltwirtschaft, Sofia (University of National and World Economy, Sofia), Bulgaria

- Wydział Nauk Ekonomicznych i Zarządzania, Uniwersytet Mikołaja Kopernika w Toruniu (Faculty of Economic Sciences and Management, Nicholas Copernicus University Torun), Poland

- Schweizerisches Institut für gewerbliche Wirtschaft an der Universität St. Gallen (Swiss Research Institute of Small Business and Entrepreneurship at the University of St. Gallen), Switzerland Therefore, scientific doctrines of different (mainly European) universities have the major influence on the development of the MER Model of Integral Management. The process of intensive study and harmonization in striving towards a joint model has been carrying out for more than ten years now: from the first researches in the year 1992 and first publications in the year 1993 and 1994 [20, 21], until the presentation in the Slovenian book “Integralni management in razvoj podjetja

(Integral Management and Development of an Enterprise)” published in the year 2003 [34].

Considering this special occasion (the Budapest Tech Jubilee Conference) we would like to stress the cooperation and an important role of researchers from the Institute for Management and Organization, Keleti Károly Faculty of Economics at the Budapest Tech. This cooperation can be best illustrated by authors and their contributions:

- György Kadosca: Das Forschungsprogramm für den Unterricht der Betriebswirtschaftslehre von Klein- und Mittelbetrieben and der Technischen Hochschule Banki Donat (Development of Education in Management of SMEs at the Budapest Tech). Presented at the Symposium 1994.

- Anna Francsovics, György Kadosca: Die Rolle des Controllings im Management der KMU in Ungarn (The Role of Controlling in the Management of SMEs in Hungary). Presented at the Symposium MER ’96. - György Kadosca, Anna Francsovics: Besonderheiten des Krisenmanagements der KMU in Ungarn (Particularities of Crisis Management of SMEs in Hungary). Presented at the Symposium MER ’99.

- György Kadosca: Change Management der KMU in Ungarn (Change Management in SMEs in Hungary). Presented at the Symposium MER 2000. - György Kadosca: Change Management und Synergie – beispiel eines ungarischen Unternehmens (Change Management and Synergy – the Case of Hungarian Enterprise). Presented at the Symposium MER 2001.

- György Kadosca: Die Rolle der Familienunternehmen in der ungarischen Landwirtschaft (The Role of Family Enterprises in Hungarian Agriculture). Presented at the Symposium MER 2002.

- Peter Halpern: Corporate Identity und Familie. Situation und Nachholbedarf in Ungarn (Corporate Identity and Family. Situation and Catching-up in Hungary). Presented at the Symposium MER 2002.

- György Kadosca: Lage der Familienunternehmen in Ungarn (State of Family Enterprises in Hungary). Presented at the Symposium MER 2003. The above listed contributions represent an important part of published papers on the MER Model of Integral Management. They have been published in symposium proceedings [7, 8, 13, 14, 15, 16, 17], in the “MER Revija za management in razvoj (MER Journal for Management and Development)” (3(2001)6-7; 4(2002)1, 2; 5(2003)1), in the journal “Naše gospodarstvo (Review of Current Issues in Economics)” (46(2000)1), and in the book “Integralni management in razvoj podjetja (Integral Management and Development of an Enterprise)” published in the year 2003 [34].

3 MER Model of Integral Management

3.1 Important Scientific Origins

The MER Model of Integral Management (further in the text: the MER Model) is based (first of all) on the following scientific origins:

- on fixing boundaries between an enterprise and management as an object and as a subject of the managerial activity, and on co-dependencies between management and an enterprise;

- on the process comprehension of an enterprise, on understanding the diversity of enterprises and their influences on the necessary adjustments of management;

- on understanding the life cycle and developmental cycles, special situations and goals of enterprises, and their influences on particularities of management; - on understanding characteristics of the enterprise’s environment, their direct influences on an enterprise as well as their indirect influences on the management of an enterprise;

- on knowing and understanding chosen different and developmental models of an enterprise;

- on knowing and understanding different management models;

- on understanding the importance of philosophy, culture and ethics for an enterprise and its management;

- on understanding entrepreneurship, synergy and ecology as the key success factors of enterprises and their management. All these cognitions and knowledge form an important basis for developing the MER Model of Integral Management.

3.2 Objective, Time and Space Dimension

Management is not a subsystem but a partial system of an enterprise “which it serves”. That means that it is present throughout an enterprise: in all processes, instruments and institutions. Boundaries of management which is regarded as a partial system of an enterprise cannot be clearly determined since there are no firm boundaries between “internal” and “external” environment of an enterprise. The objective dimension of the MER model is expressed by its applicability for all types of enterprises (in the broader sense of the term) regardless their activity, size, legal form etc. (i.e. not only for profit oriented enterprises but also for public companies, institutes and other non-profit institutions). The MER model is designed for enterprises in different life cycle phases, developmental and growth stages, of course with certain modifications. These lead to special managements (e.g.: start-up management, developmental management, management of an enterprise in bankruptcy etc.). Such special managements are not isolated parts but partial systems of the integral management. For each of the above mentioned

cases the partial system is different: in the first case it is oriented toward starting-up an enterprise and in the later one into closing (ending) of an enterprise. The MER Model is designed also for enterprises which find themselves in special situations or follow different set of goals. Typical cases are crisis management, total quality management (TQM) and innovation management, which also represent partial systems of the integral management. Crisis management is an example of management of an enterprise in a special (critical) situation. Within TQM quality goals and objectives are emphasized, whereas the innovation management aims at obtaining the innovativeness of an enterprise. Special managements such as conflict management, risk management, lean management etc. could be also added to the above list. From the time perspective, the MER Model is designed to be used in all time dimensions: for longer and shorter time periods, for the future, the present and the past of an enterprise. Regarding the space dimension the MER Model enables functioning of management in all three places (market, operational and cognitive) of an enterprise.

3.3 Process, Instrumental and Institutional Dimension

3.3.1 Process Dimension

The process dimension of the MER Model is based on integration of:

- hierarchical levels of the management process (political level, strategic management level and operational management level),

- basic functions of the management process (planning, organizing, directing, controlling) and

- process functions (preparation of information, decision making, undertaking measures). a) Process hierarchy and levels

The process dimension of the MER Model is based on understanding the hierarchy of the management process. What is typical of management activities is that global and developmental definitions of an enterprise are followed by its more detailed, operational definitions. There is hierarchical order in:

- defining a vision and a policy of an enterprise at the highest, political level; enterprise’s policy consists of a mission, purposes and basic goals;

- identifying strategic opportunities and developing strategies for implementing the policy at the middle, strategic level;

- planning and allocating resources and operational tasks at the lowest, tactical and operational levels. Processes at different hierarchical levels, described above, need to be integrated into one holistic and complex process. Therefore, in the MER Model no special attention is given to distinguishing between governance and management processes because of the need for linking and interweaving processes at all hierarchical levels. The need for integration of governance and management

processes into one complex and holistic process is stressed also in other models of integral management.

b) Basic functions: planning, organizing, directing and controlling

The management process in the MER Model begins with planning which is followed by organizing and directing of implementation. Control is not the last step in this sequence. It is needed many times in between and together with planning, organizing, directing of implementation and implementation itself. Planning, organizing, directing and controlling are present at all hierarchical levels of the management process.

c) Process functions: preparatory information activities, decision making and measures undertaking

The essence of management processes represent decision making and measures undertaking processes. Both, decision making and measures undertaking processes are needed in all stages and at all levels of the management process. Decisions are based on information. The preparation of the needed data and information is based on collecting, processing, storing and communicating data and information. Information processes, like decision making processes, are presented in all basic functions and at all levels of the management process. The purpose of the management processes is achieved by the process of undertaking measures. Decisions within an enterprise are realized by measures. The realization of measures is always done at the level which is hierarchical lower from the level at which the decision was made. Political decisions are realized by strategies, strategic decisions by structuring of resources, decisions on structuring of resources by making decisions on the operational level and by the realization in the basic processes of an enterprise. 3.3.2 Instrumental Dimension

Management as an instrumental system consists of business and management guiding principles, styles, techniques and management methods. Business and management guiding principles globally define relationships between an enterprise and its environment, and relationships of an enterprise toward its employees (coworkers). They are communicated to employees and to the environment in different ways and in different forms. The chosen management styles and techniques are based on them. Among different management styles two extremes can be distinguished, that are authoritarian and participative management style, and their combinations. Among different management techniques we distinguish the following ones: management by objectives, management by exception, management by delegation and management by system. Regarding the management methods, in the process of developing the MER Model the priority has been given to the business planning methods, especially for start-up and developmental planning of an enterprise.

3.3.3 Institutional Dimension

The institutional dimension of the MER Model represents those people who are involved in governance and management of an enterprise (i.e. governance and management structures). Boundaries between governance and management structure have been disappearing more and more by the development of the models of integral management. Researches show the growing need for integration of both structures (for references see [30]). Regarding those who participate in the governance and management processes hierarchically can be distinguished between: owners making decisions on the policy of an enterprise, top management making decisions on strategies, middle management making decisions on the optimal allocation of resources (tactics) and first line management making decisions on the distribution of operational tasks.

Definition of management functions holders (i.e. institutional dimension) is done regarding their responsibilities in decision making processes. Management processes consist besides of decision making also of other activities. These are different planning, organizing, directing and controlling activities on which professional realization depend the quality of decisions made and measures taken. People involved in these activities are experts within the enterprise, very often also managers or even those from governance structure, if they posses the needed expert knowledge.

The horizontal and vertical integration of management processes, instruments and institutions is done within the MER Model.

3.4 Incorporation of Success Factors into the MER Model

a) Philosophy, culture and ethics

The MER Model is based on understanding philosophy, culture and ethics of an enterprise as important success factors. The philosophy, culture and ethics of an enterprise are importantly influenced by those of its management. The MER Model predicts such functioning of an enterprise and its management which is based on credibility of an enterprise. Such values are an important component of the MER Model.

b) Synergy, entrepreneurship and ecology

Synergy, entrepreneurship and ecology are also placed among the key success factors of an enterprise. The care for achieving positive synergy effects is built into all dimensions of the MER Model. The same is true for entrepreneurship and ecology. Entrepreneurship (as the process of seeking for, creating and using business opportunities) and ecological responsible behavior of an enterprise, both are integrated into the MER Model.

4 Conclusions

The MER Model of Integral Management has been verified several times during the process of its creation. Very often verifications of different parts of the MER Model were done in the praxis of participating enterprises or by presenting the MER Model at different scientific and other meetings: at the scientific symposiums and conferences, at faculties and other schools by giving lectures, or at different seminars. Many people in different (mostly) European countries know the MER Model (or its parts) – possibly not with the name “MER Model” - since mainly university professors and assistants are among those who were and are still involved in its development. The MER Model has been introduced in many (reviewed) books and journals. Most of the written contributions have been reviewed before publication and were opened to criticism of broader scientific and professional public. All the responses received contributed significantly to improving the quality of the MER Model. Those, who have learned about the MER Model at different educational meetings, were more thousands and many of them have used the acquired knowledge for solving real problems. Despite all these facts it would be unrealistic stating that the MER Model has “survived” the process of verification. Its verification and improving is still going on. The creation of such model is “never ending job”. We need to learn constantly and improve already learned and done.

We have the opportunity to present some dimensions of the MER Model at the two International Conferences on Management, Enterprise and Benchmarking (in the year 2003 and 2004) organized by Keleti Károly Faculty of Economics at the Budapest Tech. That were the following papers: MER-Modell des Entwicklungsmanagements (MER Model of Developmental Management) [35], MER Modell des integralen Management: Synergie und Management von Unternehmenskooperationen (MER Model of Integral Management: Synergy and Cooperative Management) [36], MER Model of Integral Management: Environmental Management as a Part of Integral Management [37], MER Model of Integral Management: Family Enterprises Strategic Management [38] and MER Model of Integral Management: Family Business Ethics [39].

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