Our recent economic problems going back to at least 2008 and some would argue, much further than that, have often been attributed to external events such as the market place, globalization or the rise of other economies. Few have suggested it may be the problem of competent management, and even that management, as we have known it, may be obsolete.
Steve Denning, author of A Leader’s Guide To Radical Management, writing in Forbes, points out that “something has gone terribly wrong with the U.S. private sector—the supposed engine of economic growth…when the best firms have rates of return on assets or invested capital of on average just over one per cent, we have a management catastrophe on our hands.”
A study by Deloitte’s Center for the Edge shows that the effectiveness of management in organizations has been steadily falling for the last 50 years. Denning cites data that shows the life expectancy of firms in the Fortune 500 is now less than 15 years and rapidly declining. He also cites data from the Kaufmann Foundation which indicates between 1980-2005, firms older than 5 years created net zero jobs in the U.S.
Denning argues that the economy and world of business today, with the advent of globalization, the Internet, and social media has changed everything, and the result on management-driven hierarchical bureaucracies is devastating. “Now the power in the marketplace has shifted from seller to buyer,” Denning contends, “And in this new ecosystem, big lumbering bureaucracies of the 20th century are not agile enough to compete.” And yet, management consultants, business schools and governments still don’t get it, Denning says, although a new generation of managers have realized a paradigm shift.
What is the paradigm shift? “It’s really a change in an ecosystem,” from a hierarchical bureaucracy that is internally focused on production outputs to an ecosystem that is agile, flexible and externally focused on clients, Denning argues. It’s also a change “from a world in which workers and customers are manipulated as things to a world in which workers and customers are interacted with as human beings.” It’s a shift from a boss/manager centric world to a customer-centered world. Management guru Gary Hamel says, “Management is out of date, like the combustion engine, a technology that has stopped evolving.”
Jeffrey Pfeffer and Christina Fong, writing in the Academy of Management Learning and Education, argue that research shows business schools are not influential on management practices in organizations. Harold Leavitt, writing in the California Management Review, says cryptically of business schools that they produce "critters with lopsided brains, icy hearts and shrunken souls." Rakesh Khurana, Nitin Nohria and Daniel Penrice, writing in the Harvard Business Review, point out that other professionals have criteria that define it as a profession, notably a common body of knowledge, a system for certifying individuals before they can practice, and a commitment to use knowledge for the public good, and a code of ethics. The field of management has none of these characteristics and therefore cannot justifiably be called a profession.
Thomas Hout, writing in the Harvard Business Review, argues that if management is so good at predicting outcomes through analytical and scientific methods why have so few public companies performed well? “Companies that are managed the traditional way—by executives developing analytically-driven strategy and shaping the organization to meet the needs of the business as they see them—are obsolete. Management as we have know it, is too cumbersome.” Hout cites the work of Howard Sherman and Ron Schultz at the Santa Fe Center for Emergent Studies, who contend that business today moves in a nonlinear fashion, with no continuity in the flow of events, and no way to predict which products or services will succeed. Sherman and Schultz argue, in their book, Open Boundaries, business structures should be self-organized to be successful, which means managers allow employees to organize as needed, based on customer needs. This conclusion places the role of the manager in a very different light.
Mitch MCrimmon, writing in the Ivey Business School Journal, argues “in many organizations, employees know more about their work than their managers. This reality should force organizations that still cling to the old top-down style of managing to recognize that many employees today are very capable of managing themselves.” He contends management should be seen as a process, one in which everyone can engage, rather than a role. McCrimmon contends a critical area of focus in today’s organization, employee engagement “cannot become a reality until we move beyond our industrial-age definition of a manager.”
So what, if anything, should we retain as the management function? McCrimmon suggests managers in modern organizations should act more like investors, customers, coaches and partners, and abandon the outmoded directing and controlling functions. This would require recruiting people as managers with very different skills, particularly soft skills.
In my article in Psychology Today in 2010, I wrote, “In today's world, rapid globalization, innovation, competition and fluid economies have been creative, destructive forces dismantling many of the structures associated with 100 years of corporate bureaucracies. Suddenly, scores of old established institutions disappeared, while new ones such as Google and Facebook appear overnight, with very different organizational structures. Some futurists, such as Don Tapscott and Anthony Williams, authors of Wikinomics, go as far as to say that corporate hierarchies will disappear as individuals are empowered to work together in creating a new era of mass collaboration--in a new Renaissance.”
In an article in the Wall Street Journal, Alan Murray says that strategies for running large corporations, pioneered by men like Alfred Sloan of General Motors and popularized by scores of elite business schools, helped to fuel a century of unprecedented global prosperity. Murray suggests that management as an innovation won't survive the 21st century.
An even bigger challenge that faces organizations is creating workplaces that motivate and inspire workers. Survey after survey show that most workers in complex and large organizations are not engaged in their work. The new kind of workplace, Murray argues, has to instill in workers the same kind of drive, creativity and innovation spirit seen in entrepreneurs, which may explain why an increasing number of Generation Y are becoming entrepreneurs.
So does that mean we need to abolish management structures and replace them with ad-hoc teams of peers who come together to accomplish specific work and then disband? The concept of a learning organization and knowledge management may have to be re-examined as well. Traditional bureaucratic organizations focus on not sharing information, which is used as a source of power by managers. New mechanisms for sharing the "wisdom of crowds," or as the Japanese call it, "ba," may have to be part of rethinking management.
Robert Sutton, professor of management at Stanford University argues that defining the job of managers, as a profession, has no parallel to other professions. Most other professions are trained to put their client's interests ahead of their own. In contrast, Sutton argues the most effective managers take as much money as they can for themselves from their clients. Sutton suggests that managers would be well served to embrace the Buddhist philosophy of "do no harm."
It may be an ideal time to re-examine the purpose and structure of management for organizations, one that better suits the times and needs of modern organizations and their customers and employees.