Why management needs to reinvent itself
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Why management needs to reinvent itself

July 2012
Organizations urgently need to “hack” their management practices — and CIOs must play a key role in this, argues business thinker Gary Hamel.

headshot v2 200X266Traditional management — or Management 1.0 — is a set of tools and methods that organizations use to control, mobilize and organize resources to a productive end. It is, in effect, a form of “social technology” and over the past century or so it has been extremely successful at enabling enterprises to operate at scale and drive out inefficiencies.

Organizations today, however, are faced with new challenges where simply more of this old-style control is not the answer. We’re in a world where change is accelerating and where strategy lifecycles are shortening. Enterprises therefore have to not only be very efficient but also very adaptable. What’s more, they are competing everywhere and all the time, and the only way they can win is by out-innovating everyone else. As a result, the ability to both stimulate and harness human imagination has become a critical competitive edge. Yet in our old management model we are mostly trying to turn human beings into semi-programmable robots.

IT has been partly responsible for this control and centralization: for the first time in history organizations can set policy and standards centrally, knowing that everybody is going to see them. As a result, the ability to rule by diktat from the center is stronger than it’s ever been.

“CEOs must charge their CIOs with building a portfolio of management experiments.”

Changing this way of managing is not easy, as we’re up against a DNA-level problem. Think about trying to train a dog to walk on its hind legs. If you use the right incentives, you can get the animal up and it’ll take a few hopping steps. The moment you turn your back, however, it’ll be on all fours again because a dog has quadruped, not biped, DNA. Similarly, executives in companies today realize that their businesses have to be more adaptable, innovative and inspiring places to work. Unfortunately, like the dog, their organizations are genetically incapable of meeting those challenges.

In any healthy company, imagination and creativity are widely distributed and when you give people the tools of creativity and open
up avenues of contribution, you see an explosion of imagination. In a traditional, hierarchical organization, the prevailing ethos runs against this. You can create wikis, electronic suggestion boxes, idea markets and so on, but until you have a fundamental rethink of roles and capabilities — and the way in which resources are allocated within the business — there can never be a true democracy of ideas.Innovating management

So what can IT do about all of that? Firstly, it’s important to understand that we’re still at the very beginning of a new era of management. If you look at the origins of Management 1.0, it was invented over a 25-30 year period starting in the last decades of the 19th century. Back in 1890, it would have been hard to imagine that by 1915 you’d have a business like Ford making 500,000 cars a year. Likewise, in 2012 it’s hard to imagine what organizations will look like 10 years from now. But the companies that are daring to ask the difficult questions and starting to be explicit about innovating management will be the winners. Just as all the companies that dominated the 20th century were management innovators, the same will be true for the 21st century.

So, we’re currently moving forward without a very clear model. And for many managers that’s scary, as they are afraid to change until they have somebody else’s best practice clearly in view — but unless you can think beyond best practice it is impossible to invent any new practices.

“In the old management model, organizations are mostly trying to turn human beings into semi-programmable robots.”

The only place you can start to do that is with principles. If we acknowledge we need organizations that are more adaptable, more innovative, more engaging and more socially accountable, we must ask: What in our world already exhibits these qualities? The answer, of course, is the World Wide Web. If you think about management as having been the most important social technology of the 20th century, the social web is the most important of the 21st century. And if Management 1.0 was built around the ideology of control, the web is built around the ideology of freedom: you join the communities you want, and
 you are at liberty to go where your interests take you.Learning to experiment

However, the fundamental constraint on how we use technology in our organizations is not technology: it is management ideology. Therefore the real challenge today for IT leaders is to spend less time thinking about specific technologies and more time learning to understand the deep principles that underwrite this new social system on the web. That is, meritocracy, openness, transparency, disaggregation rather than aggregation, things that are small and mashable and can be constantly reused and recombined, choice and opt-in, and community rather than hierarchy.

Organizations must learn to bake all of these principles into their management processes in the same way they have baked in product innovation, conformance, alignment and so on. Where CIOs have traditionally spent a lot of time thinking about IT architectures, they must now devote a lot of their thinking to management architectures. How do decisions get made? What information gets to the top? Who has the ability to allocate resources?

“CEOs must realize that the new social technologies are critical for getting better ideas to the top of their organizations.”

But ask yourself: If you are going to completely rethink — or “hack” — your management processes, how would that work? Because when it comes to reinventing management, an organization cannot leave that problem to the people traditionally seen as the experts: the heads of IT, finance, HR and so on. You cannot ask the people who own today’s systems to invent tomorrow’s, any more than you could have expected Bill Gates to invent Google. They just have too much invested in the old model.

To meet this challenge, therefore, organizations must start to learn how to experiment around management. Five years from now every company will need to have opened up its core management processes and asked its employees to hack them in a constructive way.

CEOs must realize that the new social technologies are critical to getting fresh ideas into the strategy process, more meritocracy into organizational structures and better ideas to the top more quickly, and for distributing the responsibility for allocating capital. They must therefore charge their CIOs with building a portfolio of technology-based management experiments because the pace at which any company can evolve the old model is absolutely determined by the number of experiments it is conducting — and only those that evolve faster than their competitors will win.

For more on Gary Hamel’s ideas on re-inventing management, see The Management Innovation eXchange.
First published July 2012
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