Every generation predicts that the nature of management work is changing before our eyes, and that the future will be more democratic, flat and employee-centric. Every generation has evidence that the emerging model is better.
If you are a regular reader of London Business School’s publications, you probably already have a point of view on the future of management. Indeed, business schools were set up in large part to help managers and students to understand the changes underway in the business world, so chances are you have already bought into the argument that we are going through a period of upheaval that will transform the way we work in organizations in the year ahead.
I hope and believe this argument is right. And in future blog posts on this site I will discuss examples of some of the changes in management that are currently underway. But let me develop a contrarian line of argument first, before offering a synthesis.
Here’s the problem with all this talk of virtual and networked organizations, and this vision of empowered and engaged employees. We see the massive changes underway in technology and connectivity, and we assume that these changes will drive change in how we work. The trouble is, previous generations went through the same process. In the late 1990s, commentators talked about the emergence of the ICE age, where ICE was an acronym for “the Internet Changes Everything”. In the early 1980s, the business world was abuzz with talk of employee empowerment, and with the idea that computers would herald the end of middle management. Go back further still, to the 1960s or 1930s, and it’s the same story – the bad-old, machine-like organisations of the past are being overthrown, and replaced with enlightened and humane companies that put their employees first.
So there is an enduring puzzle that we need to get to grips with. Every generation predicts that the nature of management work is changing before our eyes, and that the future will be more democratic, flat and employee-centric. Every generation has evidence that the emerging model is better. But while some things do indeed change (for example: the use of IT systems for managing our business process, the offshoring and outsourcing of work, the cycle-time for new product development), the vast majority of management work – by which I mean how we motivate people, make decisions, set objectives and allocate resources—seems almost impervious to change.
Why is this? Remember, we have pretty solid evidence that companies who put their employees first outperform others over a long-term period. And yet despite the conscious efforts of some management innovators, and many commentators, we are still stuck with an industrial-revolution era approach to management built on concepts like hierarchy, bureaucracy, planning and control.
I see four interlinked reasons.
First, the traditional model of management is so pervasive that it is still the safe way of doing things. No-one got fired for hiring IBM, and no-one ever got fired for using an enterprise resource planning system either. When you are proposing a new way of doing things, the first question you get is: who else has done this? What are our competitors doing in this area? Following the herd gives no opportunity for competitive advantage, but it is still a very safe and defensible place to be. What we need are more ‘alternative’ role models - companies with unusual and successful management models. Unfortunately, these are few and far between, and they often get built up so much that they lose their lustre. Companies such as Gore, Semco, and Oticon, and HCL Technologies all have valuable lessons to offer other companies, but their popularity and their novelty also makes them suspect in some people’s eyes.
Second, the traditional model has a very explicit power structure that makes life very comfortable for those at the top of the tree. Anyone who has been promoted into a senior position has had to work hard to get there, and has likely been socialised into a world view that says he or she deserves the trappings of success. It’s a rare individual who willingly gives up power – ask Hosni Mubarak or Colonel Qaddafi– so the hierarchy-oriented status quo persists.
Third, new approaches to management are initially pretty fragile – they require people to work in ways that are unfamiliar, they require more skill, and they need different types of incentive. They often work fine on a temporary basis, but as soon as there are problems – a recession, a change in personnel, a new set of regulations – those who are responsible revert to type, and pull control back to the centre. Such events also have a deleterious effect on the image of the new management practice, and make it unlikely they will be tried again.
Finally, many of the problems of the old model are so systemic that they are impossible for even a large company to challenge. Everyone agrees that banking bonuses are out of line, but if one bank changes its approach unilaterally, it will quickly lose its best people to its competitors. We need system-wide change, but we lack the collaborative bodies to make such change happen. The same is true within a large organisation – if one department wants to make meaningful changes, it often needs buy-in from other departments who may be less gung-ho about the whole idea.
All of which explains, to a large degree, why management has been so impervious to change for the last few decades.
But this analysis also helps us think about a route forward for a potential management innovator:
*Find exemplary practices in other places, and evidence to support them
*Look for ways of co-opting the existing power bases of the firm; make it win-win
*Try to isolate the experiment, give it time to work before it gets fully tested
*Seek partners across the organisation, once you have a working model; or look for catalytic mechanisms that you can control and will have a big impact.
So what does the future look like? Well, the good news is that we are starting to see some new role-models, thanks to the interactive, community-based version of the Internet we often call Web 2.0. The likes of Linux, Mozilla, Google, Amazon, Netflix and eBay all grow up in an on-line world, and with a majority of Gen Y employees. And as a result, they are managed in much more enlightened way than their traditional competitors. And this provides inspiration to others.
But in all honesty, these new ways of working are not going to transform the BPs and the Toyotas and the General Electrics of this world. Rather, they provide the insights that let traditional companies capture some of the benefits of the “new economy” without sacrificing the benefits of scale, efficiency and control that their “old economy” models currently offer. I believe smart management is about making conscious choices – when to use top-down decision making, and when to use the collective wisdom of my employees – rather than following the crowd. And when armed with a good understanding of the old and the new worlds, executives are better positioned to make those choices.