Thursday, 12 March 2009

Gary Hamel - the Future of Management


  Deep cyclical trends are transforming the world of business – they’ll force us to change, like it or not, how we manage, organise etc.  We need to ask, ‘what is it in our organisation that most limits our success over the next few years?’

And we need to think about how we change the way we manage - think of it as a social technology.  Including: planning, budgeting, allocating, measuring, evaluating, organising, controlling, structuring, motivating, rewarding, training, hiring.

One of the most important changes is what’s been happening on the internet, with RSS, blogs, hacks, podcasts.  This is driving change everywhere, whilst management is moribund.

Executives understand how web will change their operating model.  Some industries are changing their business model.  But there’s little sense yet how this will change way we manage.

The way we think about management is going to change dramatically.  Imagine you’re a CEO of a new company.  You’ve taken $5m in venture capital money, and are the majority shareholder etc.  You want to grow your little seedling into a giant global company and have to put in place an operating model.  You’ve got a clean sheet of paper, no constraints.  How different will those systems be compared to those that predominate in the organisation you’ve just left?

Can you image alternatives radically different to managerial status quo?  What about giving employee right to say no to any explicit request.  Everything on this list being done right now in a progressive, successful company:


Management as we know it has barely changed in out lifetimes.  McGregor published the Human side of Enterprise (Theory X, Y etc) in 1960.  50 years later we’re still having same bloody debate.  We can dream, but have a hard time imagining.

We can plot the evolution of management – following a classic S curve - 1860 to 2010: Edison, Taylor, Sloan, McGregor, Deming; pay for performance, job design, financial reporting.  All of this stuff was invented before 1850 (US Civil War).


A manager from the 1960s would be surprised by the complexity of the global economy.  But there’s a lot they would find similar: decisions from top etc.  Resource allocation works way it always did, modelled on Soviet system.  Why is this stuff in place?

We’ve solved the really tough problems in management.  But, however uninspiring organisations are, is this the best we can hope for?  The other hypothesis is that we’re all unthinking prisoners of handed down beliefs.  We haven’t taken the time to examine them.

Companies are being managed by ex CEOs and management thinkers who are long dead – their edicts from history are governing the way we do things in our organisations today.

We can change it now as much as it changed in the adolescence of the 20th century.  We need to put management in the dock – what has it accomplished?

It’s helped us break things down, do things in repetitive steps, but we’ve lost flexibility etc.  It’s helped raise productivity but limited adaptablity.  It’s conquered complexity but squashed imagination.

Companies that will win in the future will be those that innovate their management models faster, in a way that unleashes the creativity of their people

The first thing is that we need a genuine sense of urgency.  Not just talking about people as critical human assets.  We have to believe it and convince other people of this fact.

We need a way of re-inventing the managerial plumbing in our organisations.  Every organisation has transformed their business processes through reengineering, outsourcing etc.  We need the same level of investment in transforming our management processes

The challenge to management innovation is that change itself has changed.  So new innovations will need to respond to:


1. Staying relevant in a world of accelerating change

Our organisations were never built to operate in this sort of world.  What things have been moving at an exponential pace? - CO2 emissions, internet bandwidth, knowledge itself etc.

No organisations can cope with things changing at this pace.   Today’s earnings a poorer predictor of tomorrow’s earnings.  The world is becoming more turbulent faster than organisations are being more resilient.

We often need huge crisis before things change.  We used to see companies that were dinosaurs, now whole industries are being left behind.  Eg IBM 1990 to 1997 moved from being a product to a service company.  They needed to pick through the fossilised beliefs of executive team.

There are two kinds of stories.  the first is stories about change at the margins – moving to an adjacent product category etc – but no change in overall beliefs.  A Zimbabwe model of change.  Changing automatically, spontaneously, reflexively – like the reaction of our pupils when see someone attractive.

the second is like Google.  Bold aspirations – understanding what you are doing now is never going to be enough.  70/20/10.  Eg implementing a 60:1 span of control – you can’t manage in any traditional way with this span.  Small, self-managing teams – every little team has its own website.  Transparency – peer to peer feedback.  Use this to decide which projects go forward and which wont.


2. Making innovation everyone’s job every day

How many people have you trained as management innovators?  You can’t waste this innovation capital down there

Does every single employee have access to database of innovations – every bit of data that might inspire them to think differently?

Is it easy to get the time and cash you need to develop your ideas?

Does your company track your innovation performance, and does it influence your compensation?


This is important because these are the things which will drive the future.  Some companies know this.  Eg WL Gore in industrial products.  Never in 50 years have they had a loss.  They asked, how do I build a company where people spend all of their time innovating, and none of their time struggling against the bureaucracy?

The first answer is about being a lattice, not a hierarchy.  People have no business cards, no boss – just a mentor – who will help you find the right team – but the team has to invite you.

And secondly, not having any titles but plenty of leaders.  And you get to be a leader when someone asks you to be a leader.  If you call a meeting and people show up it would be a good sign!

All commitments are voluntary.  You can’t tell someone what to do – you have to convince them.  True leaders have no positional power, no sanctions.  Otherwise you’re really talking about bureaucratic control mechanisms.  Gore want to find natural leaders and created an environment in which they can emerge.


3. Dramatically raising the returns on human capital


4. Moving on from offshoring, outsourcing, contract manufacturing, industry consortia, consultants commoditising knowledge etc

We’re now in a creative economy – need relationships for conduit of knowledge or learning.  Innovating inn new ways is extraordinary valuable in this economy.

And example is HCL Technologies – employees first customers second.  They told their customers you are not #1 for us – and their share price when down the next day.  They’ve implemented reverse accountability – employees rate their boss and their boss’ boss.  There’s a whole parrallel organisation – a virtual currency – people buy time of their colleagues.  And they pay their bonuses in advance – trust pay – they trust people to do what they need to do to meet their bonuses.


How do you become a Management Innovator?

Richard Florida suggests its perhaps about creativity and organisation:

1. Kindle a passion for working on problems you don’t yet have solutions for

Too often we only want to do something when there is a users manual.  This is about being a follower not a leader.  Innovators need to be willing to go after something big and tough.  Small and piffling problems lead to S&P solutions.

Inspire people bring all of themselves to work every day.


2. Question beliefs – are they habits?

Write your core beliefs - what do people really believe?  Many beliefs are deeply suspect eg strategy making starts at the top, freedom and discipline are trade-offs (there’s discipline at Gore – 20 of your peers do an evaluation - not 360 because it’s not up and down – this is used to put people on a bell shaped curve – and this drives compensation).

These are just habits, old assumptions – people can’t imagine an alternative.


3. Get out on the fringe – innovation isn’t starting in the Fortune 500 with a few rare exceptions

Look at art, fashion, music.  Look at the enormous feats of management without management, organisations without organisation.  Look at the social revolution on the web.

Many organisations institute creative apartheid.  This compares to democratised management innovation on the web.

What tools are we giving to are people to innovate?


4. Be willing to experiment

Create communities of passion.  As managers, we don’t think about experiments – change it big.  We talk about pilot – when 90% is already sorted.  Experiment – we don’t know what.  Accept this may blow up in our face.  Be radical and prudent. Evolutionary and revolutionary.

Use the Wisdom of Crowds eg prediction markets for Best Buy sales - traditional forecasters 93% right but this broader group 99.9% right.  All for a $100 gift card.  It’s now driving whole decision making and spawning a whole series of small incremental improvements.

How many other decisions are made at the top?  We need to tap more broadly the wisdom of this group.


We are lucky to have this moment in front of us.  Crisis brings old problems into relief.  We need to out-adapt and out-inspire.

Industrial revolution pioneers were working against the grain of what it means to be human.  We’ve turned people into machines.

We’re trying to do something different.  People are already adaptable, enormously innovative, born to create.  Somehow we’ve produced organisations that are less adaptable and innovative than the people inside them.

Orgs Our organisations are less human that we are!