A peculiar feature of the traditional managerial discourse of the kind that you find in any issue of Harvard Business Review is the unspoken
assumption of its inevitability. It is as though the practices of traditional
command-and-control, tightly planned work, competition through economies
of scale and cost reduction, impersonal communications—reflect timeless truths
of the universe, so obvious that there is scarcely any need to articulate them,
let alone re-examine them. In reality, these managerial practices arose as a
response to a specific set of social and economic conditions. When those
conditions change, the validity of the principles become an issue.
Four major changes have occurred that explain why traditional management, which performed so well in economic terms in the twentieth century, is no longer a good fit for today’s social and economic conditions . Understanding these changes is fundamental to understanding where management has come from, why individual fixes didn’t take hold, and where it is heading.
1. Work Has Shifted from Semiskilled to Knowledge Work
The first change is the continuing shift from semiskilled work to what economists call knowledge work. When modern management was being invented almost a century ago, most employees were semiskilled workers, such as laborers and production line workers. Doing their work required little training and practically no brainpower. They were expected to do what they were told. How they felt about it was irrelevant.
Traditional management was developed principally to get these semiskilled employees to perform repetitive activities competently, diligently, and efficiently. As their work has been steadily replaced by machines and computers, meeting that challenge has become steadily less relevant in today’s workplace.
Work today increasingly requires the application of brainpower and knowledge. Workers include lawyers, doctors, accountants, marketers, administrators, software developers, and researchers with Ph.D.s. These workers—knowledge workers—are expected to identify issues, think through problems, and come up with new solutions. The shift from semiskilled work to knowledge work has changed the relationship between those in charge and those doing the work.
As management sage Peter Drucker noted, “Workers throughout history could be ‘supervised.’ They could be told what to do, how to do it, how fast to do it and so on. Knowledge workers cannot, in effect, be supervised.”
2. The Organization Needs the Commitment of the Workforce
Second, the engagement of the workforce has become a serious productivity issue. As social critic Alain de Botton points out, “Once it became evident that someone who was expected to remove brain tumors, draw up binding legal documents or sell condominiums with convincing energy could not be profitably sullen or resentful, morose or angry, the mental welfare of employees commenced to be an object of supreme concern.” Yet although the mental welfare of employees is recognized as a supreme concern, that concern hasn’t led to supreme success: only one in five of the global workforce is fully engaged.
For much of the previous century, people were happy enough to have a job—any job—that provided a good salary. That’s no longer enough. As work has shifted from semiskilled labor to knowledge work, workers want not just jobs, but meaningful jobs—jobs where they can contribute and make a difference. They want these jobs today, not five or ten years from now, and they will give preference to employers who can provide them.
From the firm’s point of view, unused talent is a serious productivity problem. And it’s not merely suboptimizing for the firm. Since the workers themselves are aware that they are not being allowed to give their best and are spending their time unproductively, both managers and workers become disgruntled. Internal processes grind away, and the customers become more and more an afterthought. The fact that current management practices prevent a full human flourishing is in itself an economic, management, social, and moral problem of the first order.
3. The Customer Takes Charge
Third, customers are no longer willing to be treated as an afterthought. The twentieth-century firm wasn’t sharply focused on pleasing customers. That was because, by and large, it wasn’t necessary. Demand was soaring, and firms could sell whatever product or services they generated. Oligopolies had control of the marketplace.
For much of the previous century, oligopolies could interrupt whomever they wanted with any message they cared to transmit. And the buyers were forced to watch it because there were only three television channels. The system was spamming people over and over again with impersonal, irritating, irrelevant TV commercials that people didn’t want to get about stuff they weren’t interested in.
This worked as long as there were only a few channels of communication and a few sellers and a few products, and buyers had limited information and little choice. But the situation changed. A few channels of communication turned into multiple channels of communication. A few sellers turned into many sellers. A few products turned into the clutter of multiple products. Once buyers had instant access to reliable information and became fed up with being spammed, the old model fell apart. The result was a fundamental shift in the balance of power from sellers to buyers. Now, unless clients are delighted, they can—and will—go elsewhere. So businesses have to change their focus from producing goods and services to an explicit goal of delighting clients.
Some organizations might feel that the word delight is implausible as a serious business proposition. Yet any firm that aspires to create enduring customer loyalty must find a way to turn passively satisfied customers into active advocates and promoters of its goods and services. That usually means doing something noteworthy—something sufficiently different that customers take notice and talk about it to others.
It’s no longer enough merely to remove defects. Customers expect zero defects. If the customer’s experience fits a predictable pattern, it will be boring to the customer, who will therefore ignore it. The bar has been raised. To turn customers into advocates and promoters of the firm’s goods and services, organizations must not only minimize errors: they must innovate. They must break out of the pattern that their customers have come to expect. They must find new and economical ways to provide goods or services that are differentiated, noteworthy, surprising or remarkable.
Delighting clients is the primary goal—a means to competitive advantage and profitability. It takes precedence over profits, turnover, and market share. That’s because unless the firm is delighting clients and turning its customers into enthusiastic advocates and promoters of its products and services, those financial indicators are emblems of temporary success that won’t endure.6 Following several decades in which many firms aimed at maximizing shareholder value, we are now entering the era of customer capitalism, in which the purpose of the firm is to serve clients.
Delighting clients becomes the primary goal of work. One of management’s key functions is to give everyone a clear line of sight as to how their work is—or isn’t—leading to client delight.
4. The System Stopped Delivering.
The unhappiness of workers and the
dissatisfaction of customers are big problems in themselves. Yet the root cause
of today’s troubles—the fourth big change in the world of work—is something
more serious and less obvious. The root cause is that the gains in productivity
that came from conceiving of work as a system of things that can be manipulated
to produce goods and services have largely run their course.
The productivity gains accomplished in the twentieth century using that mental
model of management were amazing—indeed unprecedented in the history of the
human race. However, the expectation that those gains would continue
uninterrupted into the new century has not materialized. The reasons are
corollaries of the other shifts.
Once a firm sets out to maximize the full talents, ingenuity, and inspiration of its workforce, it discovers that it is interacting with people, not inanimate things that can be manipulated. Any hint of manipulation is dispiriting and counterproductive. Managers have to be able to inspire genuine enthusiasm for worthwhile goals. Even more important, once a firm goes beyond the relatively simple task of producing goods and services and sets its sights on the complex goal of delighting clients, it finds that it is dealing with a radically more difficult challenge—a challenge for which traditional command-and-control management is constitutionally unable to handle.
Frederick Winslow Taylor ushered in 20th Century management with his ominous declaration at the start of his book, The Principles of Scientific Management (1911):
“In the past, Man has been first. In future, the system must be first.”
For the first two-thirds of the 20th Century, this seemed like a pretty good idea. By the end of the Century, the idea no longer fitted the social and economic context of the world. As a result, the system stopped delivering. Radical changes in management were needed.
But traditional management--and its official organ, Harvard Business Review--didn't notice. They kept on, and keep on, looking for a fix or a tweak to "the system" that will deal with the issues that ail most established firms today. They haven't grasped that "the system" is the problem, not the solution. We need a fresh start with a radically different kind of management.