The current recession has produced a flood of management "experts" and many leaders of organizations whose only strategy for dealing with the downturn in the economy is cutting costs, layoffs and more efficiency based strategies. The mantra for business for much of the last century has been operational efficiency. So leaders look for ways to cut costs and make the operations lean and mean. Yet much of the rationale for and evidence supporting efficiency as a key management strategy is questionable.
In a great article by Adam Hartung in Forbes, titled The Myth of Efficiency, he outlines how leaders have mistakenly used efficiency to drive business results, often with disastrous results. Hartung cites W. Chan Kim and Renee Mauborgne, of INSEAD International Business School, and the authors of Blue Ocean Strategy, who advanced the argument that businesses should create new market space or "Blue Ocean" rather than competing in an existing industry. Kim and Mauborgne say that only 14% of innovations are radical, and that those few radical innovations produce 61% of company profits. Hartung cites a report by the Doblin Group, a U.S. consultancy company, specializing in innovation research and implementation, that claims 9% of innovation resources are focused on incremental improvements.
The core of the problem of the poor showing for innovation producing business success is that innovation has been constantly battling efficiency as a management strategy. Jill Lepore, wrote a recent article in The New Yorker, titled, Not So Fast: Scientific Management Started as a Way To Work: How Did It Become a Way of Life? She recounts the story of how renowned Supreme Court Judge, Louis Brandeis was mesmerized by an industrial engineer from Philadelphia, Frederick Winslow Taylor. Management theory came to life in 1899 with a simple question: “How many tons of pig iron bars can a worker load onto a rail car in the course of a working day?” The man behind this question was Frederick Winslow Taylor, the author of The Principles of Scientific Management and, by most accounts, the founding father of the whole management business. Lillian Gilbreth, often called the mother of modern management, had serious doubts about the industrial management movement that she initially helped to promote. Yet, Taylor's scientific management principles became the Bible upon which management practices have been used to dominate Western business for the past century. The problem is, that Taylor was a better salesman than a scientist.
Matthew Stewart, the author of The Management Myth: Why The Experts Keep Getting It Wrong, describes how Taylor manufactured his data, lied to his clients and inflated his results. He argues that since Taylor, business programs in universities continue to model much of their education, with particular emphasis on technical knowledge and the scientific management approach. Stewart, who was for many years a management consultant, argues that the study of philosophy and ethics would serve society better as a basis for educating business leaders.
This theme is echoed by Tom Demarco in his book, Slack: Getting Past Burnout, Busywork And The Myth Of Total Efficiency, in which he details American business leaders' obsession with planning and cost saving efficiency based on a mistaken belief that human beings are efficient in the same way that machines are. In a similar vein, a ground-breaking book by Dan Coffey, titled The Myth of Japanese Efficiency, challenges the commonly held view based on an earlier MIT study that Japanese car manufacturers pioneered a "lean and flexible" production model, which has helped to reinforce the cultish devotion to efficiency. 3M's CEO, George Buckley in BusinessWeek, argues that creative blue ocean strategy produces better business results than the traditional focus on operational efficiency, and he argues further, that excessive focus on efficiency stifles innovation.
The economic recession, with the dominant leadership strategies emphasizing cost cutting and technical analysis has shown that Taylor's scientific management approach has not left us, despite decades of attempts to move to a management approach that is humanistic rather than mechanistic.