What values are driving your organization?

"Every organization is “values-driven.” The only question is, what values are in the driver’s seat?"
                              Shawn Callahan

One of the questions that has bothered me for some time (and others) is: why hasn’t traditional management already died?

On August 21, 2010, the Wall Street Journal published Alan Murray’s article, “The End of Management”.

In February 2009, Harvard Business Review published Gary Hamel's article “Moon Shots For Management” that declared traditional management’s day was done.

Excellent books like “Reinventing Management” by Julian Birkinshaw (2010) declare that “management has failed”.

And yet, in established organizations, traditional management (aka Dilbert-cartoon style management) grinds on, seemingly triumphant.

Why?

THE CALL FOR CHANGE IS NOT NEW

The question is even more puzzling because the call for change has been made repeatedly.

In the 1920s, Mary Parker Follett was giving lectures at Harvard Business School and Oxford University about the need for a different type of management based on the principle of noncoercive power sharing and emphasizing “power with” rather than “power over.”

In 1930s, Elton Mayo was urging that work based on a team which gave itself wholeheartedly and spontaneously to cooperation

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 made the case for self-actualization in the workplace.

In 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. 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.

In 1993, Michael Hammer and James Champy wrote that American companies had become “bloated, clumsy, rigid, sluggish, non-competitive, uncreative, inefficient, disdainful of customer need and losing money.” A new kind of management was required.

So the idea that there is something terribly wrong with traditional management is not exactly new.

During the 20^th Century, these calls were largely based on an intuitive feeling that something was amiss. Today, we know more.

THE BOTTOM LINE: TRADITIONAL MANAGEMENT DOESN’T WORK

Deloitte’s Center for the Edge published its magisterial study of 20,000 US firms from 1965 to the present. The results are mind-boggling:

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

•        The life expectancy of a firm in the Fortune 500 has declined from around 50 years to 15 years and is heading towards five years if we continue in this fashion.

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

SO WHY DON’T THINGS CHANGE?

Yet despite these pleas, and despite this evidence, traditional management—hierarchy, bureaucracy, economies of scale, downsizing, outsourcing, exploitation of “human resources”, attempts to manipulate customers—remains the norm in Fortune 500 companies, in business schools, in management textbooks and journals.

In a world that is supposedly rational, why is there no change?

IT COMES DOWN TO VALUES

Some insight comes from a recently published book, which examined all of these phenomena, and concluded: “There is nothing wrong with traditional management. It can be highly efficient and profitable in a stable and predictable business environment.”

The values here are clear: if you can make money, it’s ok. There’s nothing wrong if:

•       The rate of return on assets is steadily declining.

•        The life expectancy of the firm is decreasing.

•        The employees are more and more disengaged from their work

•        The customers are increasingly frustrated by the cost-cutting measure.

•        The profits that are being made are bad profits, i.e. being made at the expense of customer satisfaction, by cutting corners, adding charges, doing whatever it takes to make the quarterly dollar target.

The bottom line looks good. Nothing wrong here!

Well, actually there’s a lot wrong.

These firms are destroying their own future, undermining the livelihood of their people, and even putting national economic independence in question.

If your central value is making money, then all of these negative consequences flow

THE VALUES OF THE 21^ST CENTURY ORGANIZATION

By contrast, if your central value is delighting customers, as in radical management, then a lot of positive things flow:

•         You end up having loyal customers

•         You have inspired workers

•         Productivity is high

•         Innovation is continuous

•         You make a lot of money

TRADITIONAL MANAGEMENT IS NOT JUST WRONG, IT’S STUPID

Why do large numbers of seemingly smart people go on acting in a way that is utterly counter-productive to their own interests, as well as the interests of society? You can offer excuses by pointing to the business schools that continue to teach traditional management, the management textbooks that continue to regurgitate its principles or to Wall Street that rewards short-term profits. What we have is vast numbers of people living a collective delusion. How long will it take for people to awaken from the delusion? History gives some pointers.

MEDIEVAL VS MODERN MEDICINE

Take the practice of medieval medicine. Medicine in medieval times consisted of blood-letting, exorcism of devils, spells, incantations, and a proscription of bathing. It didn't work. In fact, like traditional management, it made things worse. But everyone believed in it and they went on doing it, despite all the evidence to the contrary. It took hundreds of years before these counter-productive practices were set aside in favor of modern medicine. Eventually, people awoke from their collective delusion.

MEDIEVAL VS MODERN SCIENCE

The principles of modern science were discovered in the early 17^th Century, when people like Francis Bacon started saying that we have to stop taking on faith what Aristotle said and find out what actually happens. Did people accept this right away? On the contrary. Initially there was fierce resistance, particularly in the universities. Many people’s livelihoods were threatened by the suggestion that everything they were doing and saying was counterproductive. It took decades before rigorous observation was embodied consistently in scientific practice. But eventually it happened. Eventually people awoke from their collective delusion.

IT TAKES TIME FOR A WHOLE SOCIETY TO CHANGE ITS VALUES

We may be sure therefore that eventually we will all awaken from the collective delusion that traditional management is the way to run organizations. But if history is any guide, it may take an agonizingly long time. Values don’t change rapidly.

That's no reason not to get started on the change. We can all help hasten the awakening by asking the question: "what values are driving our organization?" and spreading the word. Traditional management doesn’t work! There is a better way!

To learn more about radical management, go here:

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

Comments

[Michelle Delebet]

Steve, this is a compelling blog. It reinforces for me why I have recently chosen a new path - both to escape the traditional management that was failing the organisation and, more importantly, to pursue my dream that there is a better way, a successful way, and that there are others who think the same way that I do and want help to move toward it. Thanks for helping me retain my focus and for your many ideas which stimulate new conversations.
Cheers
Michelle

[Ralf Westphal]

Why do ineffective habits persist? Some thoughts. I´d say, there are several reasons:

1. Missing link between cause and effect. When a company measures it has lost sales compared to last year, how is this data tied to a) management decisions?, b) management values?

2. Personal errors must be avoided. Any non-intended effect of a managers decisions tends to be attributed to some outside factors, since personal failure is a no go. You fail, you get fired. This further dilutes the connection between cause and effect. And this impedes learning.

3. Adoration of past successes. What has worked in the past must work in the future. And if it does not work then you must try harder.

4. Ruthlessness. As long as I personally gain any benefit from success or failure, why should I change anything?

[Matt Koschmann]

The sad truth is that traditional management DOES work for a select few...mainly those in power. Short term profits, outsourcing, downsizing, etc. do benefit many at the top of these companies. Yes, they may eventually run their companies into the ground, but these people will not be around to experience the downfall. Chances are they will have retired, cashed out, or moved on to another company before the negative effects of their decisions come to light. Until we address the fact that there are strong incentives for the powerful to continue practicing the principles of traditional management I'm not sure it will go away. Hopefully ideas like radical management can spur on the development of a new culture of organizational thinking...especially among the future generation of leaders and those who will be in positions of power.

Matt Koschmann
Department of Communication
University of Colorado

[Sara O'Neill]

This article is really interesting in that it describes what doesn't work but it doesn't detail what we should be doing instead. It's pretty clear that what is happening in many organisations isn't working but the problem that many are grappling with is what new interventions to develop that are (a) palatable to business owners trained in the old ways; and (b) palatable to employees who are used to the old ways. I don't disagree with this article but neither does it clearly articulate a vision for the future - apart from "old ways bad".

[Steve Denning]

Sara, I quite agree. This particular post is about what's bad. Elsewhere on the blog, my website and and in the forthcoming book, The Leader's Guide to Radical Management, you will find a lot of detail about what's good, including the seven principles of innovation and more than seventy practices supporting those principles. These principles will be very palatable even to business owners only interested in the bottom line, because it happens to be two- to four-times more productive than the traditional management. And it will be palatable to those doing the work, because it generates deep job satisfaction. I hope you will find this helpful. Steve

[davidburkus]

Good post. I did an interview with Dan Pink a few months ago. He regularly says "Management is a tool. A tool invented in the 1800s."

[Steve Denning]

David,

October 5, 1841, to be precise. On that day, a couple of trains on the Western Railroad had a head-on collision. A conductor and a passenger were killed, and seventeen others were injured. Following a public outcry, the directors of the Western Railroad appointed a committee headed by an army man, Major George W. Whistler, to determine what sort of organization should be in place to prevent this kind of thing from happening. Being an army man, he proposed, guess what, a military solution: rules, regulations, hierarchy, detailed reporting so that if someone made a mistake they could be punished. And so his recommendations became the model for big organizations. In a stable world where you didn't have worry much about customers, this worked ok. In today's world of rapid change where the customer is in charge, it doesn't work any more. But companies keep doing it. Business schools keep teaching it. Management journals keep publishing articles about how to tweak it. But it's like medieval medicine. About time we stopped using it.

Steve

[Ryan]

Why do business schools continue to teach management and leadership practices form the industrial revolution? The Wall Street Journal and other experts think there is a better way to lead an organization
http://bit.ly/dbCPr9

[Pete Laburn]

There is a wonderful quote from Upton Sinclair that goes "It is very difficult to get a man to understand something when his salary depends on him not understanding it". This I think helps explain why traditional management continues - it is how the vast majority of corporate managers are paid or incentivized to behave. Corporations just don't want mavericks / leaders who change things, as the legacy thinking and systems just wont cope.

[Steve Denning]

Pete

Great quote!

Steve

[Health News]

I can't believe how much of this I just wasn't aware of. Thank you for bringing more information to this topic for me. I'm truly grateful and really impressed.