The paradox of reinvented management:
Make more money by focusing less on money
In an earlier post entitled The Reinvention of Management: Part 1, I noted that current management practices represent a set of economic, social and political problems of the first order, which cannot be resolved by a single fix.
Instead, a whole host of business leaders and writers, including Umair Haque, John Hagel, John Seely Brown, Lang Davison, Rod Collins, Ranjay Gulati and Carol Sanford are exploring a fundamental rethinking of the basic tenets of management. Among the most important changes being proposed are five basic shifts in management practice:
1. The firm’s goal (a shift from inside-out to outside-in).
2. Role of managers (a shift from controller to enabler).
3. Mode of coordination (from hierarchical bureaucracy to dynamic linking).
4. Values practiced (a shift from value to values).
5. Communications (a shift from command to conversation).
In this continuing series of posts, I explore in more detail the specific practices needed to accomplish these five shifts.
In previous posts, I have described the practices needed to achieve the shift in the firm’s goal to delighting the client, the shift in the manager’s role from controller to enabler and the shift from bureaucracy to dynamic linking.
In this post, I describe the practices involved in the shift in the values practice: from a single-minded focus on economic value to shareholders to a broader set of values to dynamic linking.
Shift #4: From economic value to values
When the firm’s goal shifts from making money for shareholders to providing a continuous stream of additional value to customers, there is a necessary shift from a single-minded preoccupation with economic value—efficiency, economies of scale and cost-cutting—to a broader focus on the values that will grow the business by generating innovation and customer delight.
A number of books, including The New Capitalist Manifesto, The Power of Pull, Reorganize for Resilience, Open Leadership
and The Responsible Business
, point to the need for adherence to values that are aligned with delighting the client, motivating autonomous teams and continuous innovation. Trust, honesty, diversity, and caring for the environment are obviously important and have also been present in traditional management. However two values differentiate the reinvented organization from traditional management and lay the basis for continuous innovation: radical transparency and a commitment to continuous improvement.
Radical transparency
In a bureaucracy, problems can fester for years, or even decades, before anything is done about them. Such unresponsiveness is incompatible with the goal of delighting clients. Radical transparency both within the team and between the team and management, and among the management, is a necessary basis for continuous innovation. Management by enablement and dynamic linking provide some of the practices needed to establish radical transparency, including daily standup meetings, the systematic identification and removal of impediments, delegation to the team of how much work to undertake, and providing a clear line of sight for everyone in the organization to the client. In addition, the following practices are important:
1. Display real-time information: As in the automaker Ford under CEO Alan Mulally and the Danish software developer Systematic under CEO Michael Holm, senior management meets in a room where real-time information is visible to everyone. Similarly at the working level, notice boards in the workspace display what is being worked on, what has been completed, and what remains to be done in the iteration. When information is continuously visible, people can see at a glance where things stand. Public display serves an information radiator.
2. Set priorities at the beginning of each work cycle: Unlike traditional management where work often begins without clear priorities, management needs to provide a unified set of priorities by the start of every work cycle. Management normally refrains from making any changes in priorities until the next iteration. The team knows what is expected of it and is free to decide how much can be accomplished and how it should be accomplished. As a result, work is always focused on items of highest priority to the client.
3. Embrace two-sided accountability: If subordinates have failed, managers accept that they have also failed. As management theorist Samuel Culbert says in Beyond Bullsh*t
, “The consequence of a failed performance should be personal development, new perspective, improved judgment, skill enhancement, and general all-around learning. If the cohort is one’s boss, so much the better. In a straight-talk relationship, both have the opportunity to learn. Subordinates learn what they need to do differently to achieve desired results, and bosses learn what type of support and guidance the subordinate needed but did not receive.”[1]
Continuous self-improvement
4. Embrace continuous improvement: Unlike traditional management that is based on processes and procedures aimed at producing standardized products, a fundamental assumption of the reinvented organization is that improvement is endless. No matter how well work is proceeding, it can always be enhanced. Hence there is no such thing as “best practice”: every process can be improved. Moreover as Toyota has shown, there is no such thing as “unskilled labor”: there is only work to which intelligence has yet to be applied.[2]
5. Give recognition for identifying impediments: Unlike a bureaucracy where people are punished for pointing out impediments, or a learning organization where people are rewarded for finding solutions, the reinvented organization rewards the identification of impediments, even when no solution is in sight, as Jeffrey Liker and Michael Hoseus explain in Toyota Culture: The Heart and Soul of the Toyota Way
[3]
6. Align the team’s interests with the organization: If a team is concerned that any savings it generates will result in staff layoffs, then the team is unlikely to make progress towards identifying inefficiencies, eliminating tasks, or streamlining unnecessary processes. The experience in lean manufacturing is that it is central to have a policy in which savings are deployed for better products, better service, and better price rather than layoffs.
7. The team measures its own velocity: The team establishes its velocity for each work cycle and learns how much work that adds value to clients it can accomplish during a given period. This enables the team to understand whether its trajectory is improving, stagnating, or deteriorating. Rather than the carrots and sticks of traditional management, radical management uses transparency to inspire the self-organizing team to progress toward high performance. The team is not competing with other teams or responding to managerial goads from above. Instead, the team itself can see how it is doing, can see impediments being removed, and can aspire to do better, [4]
8. Fix problems immediately: Given Toyota’s discovery that the cost of not fixing problems is enormous, priority must be given to detecting mistakes early and fixing them immediately—even stopping the whole production line to achieve this.[5] It is also crucial to get to the root causes of problems, rather than removing symptoms, as Mike Cohn explains in Succeeding with Agile
.[6]
9. Share, rather than enforce, improved practices: Knowledge is spread laterally as an opportunity to improve, not as a top-down instruction to implement. Knowledge about practices is is treated as an invitation to explore their applicability and adapt ideas to the team’s own context. Sharing is fostered in horizontal communities of practice. Such communities nurture opportunities for people facing similar challenges to meet, in person or electronically, and share relevant experiences and learning.
10. Encourage openness to outside ideas: Radical transparency within the organization is important, but it’s not enough. The best organizations expose themselves to outside ideas. Crowd-sourcing is systematically practiced. Being willing to listen and consider the possibility that one’s strongest beliefs are wrong require an open state of mind, intellectual curiosity, and a kind of serious playfulness. Unlike the grim and humorless context of the traditional workplace, laughter is a pervasive feature of the new workplace.
To learn more:
To learn more about reinventing management, read the whole series:
And read books such as The New Capitalist Manifesto by Umair Haque, The Power of Pull by John Hagel, John Seely Brown and Lang Davison, Reorganize for Resilience by Ranjay Gulati, Leadership in a Wiki World by Rod Collins or The Responsible Business by Carol Sanford.
For a comprehensive review of the principles and practices involved in reinventing management, read my book: The Leader's Guide to Radical Management: Reinventing the Workplace for the 21st Century.
[1] Culbert, S. A. Beyond Bullsh*t: Straight-Talk at Work. Stanford, Calif.: Stanford Business Press, 2008, pp. 76–77.
[2] Liker, J. K., and Hoseus, M. Toyota Culture: The Heart and Soul of the Toyota Way. New York: McGraw-Hill, 2008.
[3] Liker, J. K., and Hoseus, M. Toyota Culture: The Heart and Soul of the Toyota Way. New York: McGraw-Hill, 2008.
[4] Cohn, M. Succeeding with Agile: Software Development Using Scrum (Upper Saddle River, N.J.: Addison-Wesley, 2009)
[5] Toyota’s failure to follow its own principles is behind some of its troubles in 2009 with the unintended acceleration of some of its cars, of which the symptoms had been flagged as early as 2004.
[6] Liker, J. K., and Hoseus, M. Toyota Culture: The Heart and Soul of the Toyota Way. New York: McGraw-Hill, 2008.
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, she facilitated the transformation of one of her company's business units from a 20th century hierarchical management model to a 21st century accountability-based model, based on self-managing teams. In the process, she found that there truly is a better way to run a business.
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