Putting the H in HR: The opportunity for HR in radical management

       The industrial age is over. Stop improving products. Start improving lives. Make it matter

                                                             Umair Haque

What’s involved in managing human talent? How does HR become influential in and share responsibility for the strategic human resource decisions made around the executive table? How does HR create real value for the organization? How does HR deliver on making the staff (really) the organization’s most valuable asset?

A historic opportunity is now opening up for HR, with the advent of radical management.

The history of the human factor

HR is traditionally concerned with the people side of the organization. Advocacy for the importance of this role has a long history. The ideas—giving people a voice in how to do work and using teams to get things done—are obviously not new. In fact, for almost a hundred years, people have kept discovering—and rediscovering—the importance of teamwork.

In the 1920s, Mary Parker Follett was giving lectures at Harvard Business School and Oxford University on the principle of non-coercive power sharing and emphasizing “power with” rather than “power over.”

In 1930s, Elton Mayo argued that attention to employees as people could relieve the monotony and boredom of their work. He claimed that the experiments at the Hawthorne Project showed that paying attention to workers and their concerns could improve performance even without doing anything about the complaints. Years later he would romanticize the Hawthorne experiments as instances where “six individuals became a team and the team gave itself wholeheartedly and spontaneously to cooperation in the experiment.” As a result, “they felt themselves to be participating freely and without afterthought, and were happy in the knowledge that they were working without coercion from above or limitation from below.”

In 1938, Chester Barnard argued that to survive, an organization had to satisfy the motives of its members while attaining its explicit goals, and foster cooperation among its members.

In 1943, Abraham Maslow put forward his theory of human motivation, with a pyramidal hierarchy of needs, both psychological and physical, and capped by the highest human need of all, which Maslow called self-actualization.

By the 1950s, human resource departments were using the rhetoric of teams, team spirit, and winning as a way to creating positive attitudes toward the organizational goals.

By 1960, MIT professor Douglas McGregor questioned the assumptions of traditional hierarchy that people are lazy, which he labeled Theory X. McGregor urged managers to explore Theory Y: that people want to do a good job and wanted to have responsibility.

In 1971, the report by the Department of Health, Education and Welfare, Work in America, commissioned by the Nixon administration, concluded that the workplace would have to change to fit the aspirations, attitudes, and values of workers. People wanted meaningful work that provides satisfaction. Job redesign and increased participation of workers were necessary for America to be competitive.

In 1982, Tom Peters and Robert Waterman announced in their book, In Search of Excellence, that it was attention to employees, not work conditions themselves, that has a dominant effect on productivity.

As recently as 2007, Gary Hamel, at the time of publication of his book, The Future of Management, could once again rediscover the human factor: “Probably for the first time since the industrial revolution, you can’t build a company that’s fit for the future unless it’s fit for human beings.”

Why didn’t the human factor stick?

Why did we see this incessant “rediscovery” of the human factor and teams? How could management theorists plausibly claim the same thing over and over, shouting, “Eureka!” as though they had made an extraordinary discovery? How could managers continue to be amazed by these “discoveries”? Why did the traditional mental model of hierarchical bureaucracy remain largely unscathed?

There are a number of reasons. The most important is that traditional management and HR are still largely a prisoner of machine-age thinking. As Gary Hamel writes:

Management was originally invented to solve two problems: the first -- getting semiskilled employees to perform repetitive activities competently, diligently, and efficiently; the second -- coordinating those efforts in ways that enabled complex goods and services to be produced in large quantities. In a nutshell, the problems were efficiency and scale, and the solution was bureaucracy, with its hierarchical structure, cascading goals, precise role definitions, and elaborate rules and procedures. (“Moon Shots For Management,” HBR, February 2009.)

The goal of the organization is seen as producing goods and services so as to make money for shareholders. Hierarchical bureaucracy is the means of achieving the goal, through cost reduction flowing from economies of scale, downsizing and outsourcing. In this world, it follows that employees are simply another set of “things” to be manipulated to achieve the lowest cost result.

In this environment, the HR department tends to become a menial accomplice in the management task of manipulating the employees to achieve the lowest cost result. The idea of doing work through teams and treating people as people are adopted sporadically as tactical moves to achieve particular short-term results, but are fundamentally at odds with the long-term philosophy of cost reduction through command-and-control. They are aberrations that don’t stick. Statements about “employees being our most important assets” were seen for the empty words they usually were.

A peculiar feature of this traditional managerial discourse is the unspoken assumption of its inevitability. It is as though the practices of traditional management—hierarchy,  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 can become an issue.

The world has changed: 1. The shift 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.

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.

The world has changed: 2. Organization Needs the Commitment of the Workforce

Second, the engagement of the workforce has become a serious productivity issue. As sociologist 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.

From the firm’s point of view, unused talent is a serious productivity problem. And it’s not merely sub-optimizing 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.

The world has changed: 3. The customer takes charge

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.

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.

The implications of the changes

Traditional management viewed employees as “human resources” i.e. not people, but “things” that could be controlled and manipulated and exploited. So long as the firm was merely providing goods and services to the marketplace, it could give commands to employees as to what to do and control them to make sure that they did what they were told. Once the challenge became one of having interactions with customers and creating a steady flow of innovations and new value to customers so that they would be delighted, the firm depended on its employees to generate those innovations and interactions. Smart firms discovered that the energy and enthusiasm and insights of its employees—now often highly educated—couldn’t be bought or directed or commanded and controlled. Instead, employees had to be inspired to contribute—a radically different and more difficult challenge. Again it was a shift from a simple linear manipulation to a complex interaction.

The bankruptcy of traditional management

The futility of continuing with traditional management is underlined by the findings a huge study—the Shift Index—done by the Deloitte’s Center for the Edge:

·        The rate of return on assets of US companies is one quarter of what it was in 1965.

·        The life expectancy of firms in the Fortune 500 has declined from around 50-60 years to just 15 years, and is heading towards 5 years, unless something changes.

·        Executive turnover is accelerating.

·        The “topple rate of leading firms is accelerating.

·        Only one in five workers is fully engaged in their work.

Radical management and the new goal of work: Delighting clients

Fortunately a new way of organizing and managing work has emerged. Radical management begins by clarifying the goal of work: to delight clients and stakeholders. In the twentieth century, the traditional view of an organization was an entity principally aimed at the production of goods and services or making money for the company. These goals don’t get anyone’s juices flowing. That’s because goods, services, and money are means, not ends.

In today’s world of global competition and continuous change, a firm that isn’t continuously adding new value for its clients and so turning them into active promoters of its goods and services is unlikely to endure. If the firm is making profits while leaving customers disgruntled, then the profits are “bad profits” and are generating brand liabilities that will have to be repaid one day. The true bottom line of any organization is whether and to what extent it is delighting clients and stakeholders. A firm that adopts client delight as its goal is also making inroads on improving job satisfaction. Improving the lives of others is something worth believing in and fighting for.

Radical management: Teams now become central

Adopting the goal of client delight leads to the self-organizing team. That’s because inspiring client delight requires continuous innovation, and a self-organizing team is the management arrangement most likely to generate this innovation. Self-organizing teams are well suited to accomplish this complex task; when they are properly executed, they draw on all the talents, energies, and passion of the workforce. Instead of teams being a sporadic tactic to solve unique problems, teams replace bureaucracy as the standard way of getting work done.

The key role of HR in radical management.

The shift from traditional management to radical management is an inevitable one, since radical management is two- to four-times more productive than traditional management. The economics will be inexorable.

HR departments have a crucial role to play in enabling and facilitating the shift, because it is essentially one of moving from a world where employees and customers are treated as “things” to be manipulated to a world where employees and customers as thinking, feeling, caring human beings with whom there are relationships.

The first step is for HR departments to become familiar with the principles and practices of radical management so that they help guide the transition and educate their organizations about what’s involved.

A second step—symbolic but important—will be to reconsider their own label: the human resource department.

Using terminology that refers to human beings as “resources” i.e. things, is a remnant of traditional machine thinking. What does it imply to call human beings “resources”? Using such terminology unwittingly degrades human beings into things to be manipulated, exploited, and then thrown away.

The issue is thus not so much putting the H back into HR, but rather taking out the R.

HR becomes the “People Department” as at Southwest Airlines, or something similar.

A third step is for the incumbents of the newly named People Department to step up to the plate and become leaders—inspiring the change, educating the CEO, the managers and the staff and persuading them to leave behind the 20^th Century machine-age world of traditional management and step into the future: radical management.

In effect, radical management offers a massive opportunity for HR, if HR elects to grasp it. In the world of traditional management, HR was condemned to play a menial role of helping the management manipulate the employees in the most cost effective way. With the advent of radical management, with its focus treating people as people, and inspiring the staff to give their very best on a daily basis, there is a huge opportunity for HR to lead the organization into the 21st Century.

To learn more about radical management, go to:

http://www.stevedenning.com/Books/radical-management.aspx

Comments

[twitter.com/driessen]

Great post, Steve. I enjoy reading your posts. You stress the importance of employee engagement, employee self-organization, etc. I was wondering: do you know of companies that are organized based on the passions of their employees? Of course most start-ups are. But I was thinking: what would happen if large companies would allow their employees to work on what they are passionate about. They could bail-out of their current projects, set up new ones, etc. What would happen? And will this work or will the un-interesting work (whatever that may be) be left undone?

[Steve Denning]

Hi Driessen,

Let me be clear that I am not suggesting that we let all employees work on whatever they happen to feel like working on, whenever.

This is actually a highly structured approach to getting things done. The work is done in short cycles. One has to reach agreement at the start of the cycle as to what will be accomplished in the cycle. It's the person who understands the client perspective who decides what are the priorities of things to be accomplished in a cycle. It's the team that says how much they can accomplish. If they agree, the client proxy steps aside and lets the team get on with it.

Funny thing: initially the team proposes way more than they can actually accomplish. A rule of thumb is to take what the team says it will accomplish and then deduct 40%.

Over time, the team begins to have a more realistic understanding of what it can accomplish.

At the end of the cycle, there is a review as to what has been accomplished. Then a new setting of priorities and a new cycle. As well as identifying any impediments that preventing the work getting done.

So this is the opposite of letting anyone do whatever they are passionate about. It is highly structured and focused on getting things that delight clients done at the earliest possible opportunity.

If the workers aren't passionate about delighting the clients, this will quickly become apparent, and then decisions will have to be taken. If they aren't taken, then we are back into traditional management.

Hope this clarifies things.

Steve

[twitter.com/driessen]

Hi Steve, I should have left my name. I'm Samuel Driessen. Thanks for the clarification! And the follow-up post.

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