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Emerald Group Publishing Limited
Copyright © 2008, Emerald Group Publishing Limited
The Future of Management
Article Type: Suggested reading From: Human Resource Management International Digest, Volume 16, Issue 6
Gary Hamel(with Bill Breen),Harvard Business School Press, 2007
Keywords: Innovation, Creativity, Organizational change, Management theory
“I dream of organizations that are capable of spontaneous renewal, where the drama of change is unaccompanied by the wrenching trauma of a turn-around. I dream of businesses where an electric current of innovation pulses through every activity, where the renegades always trump the reactionaries. I dream of companies that actually deserve the passion and creativity of the people who work there, and naturally elicit the very best that people have to give.” So says Gary Hamel, in the preface to The Future of Management.
The dreams are not new; nor are the challenges they pose. The late Peter Drucker, in the 1970s, berated managers for being “fond of saying our greatest asset is our people,” while knowing that little of the human potential of any organization is put to work.
In the early 1980s, Tom Peters and Robert Waterman recognized that too many companies were held back by impoverished management models that left most of their people “waiting for motivation,” while in the late-1990s, Sumantra Ghoshal and Chris Bartlett bemoaned the persistence of traditional management models in which “thousands of capable individuals” continued to be “crushed and constrained by the very organizations created to harness their energy and expertise.”
But aspirations such as these are now “more than dreams,” according to Hamel. They are fast becoming “do or die challenges for any company that hopes to thrive in the tumultuous times ahead,” he warns, and they “can now be surmounted only with inspired management innovation.”
When Hamel sounds the alarm, his credentials require business leaders to respond. He has advised major firms worldwide and authored or co-authored several books on strategic management. A Visiting Professor of Strategic and International Management at London Business School, he is leading a project to build a so-called “management-innovation laboratory.”
Hamel organizes The Future of Management into four sections: why management innovation matters; management innovation in action; the principles of management innovation; and getting started.
He asks us to consider whether management, as we have come to know it, might be reaching the “limits of its improvability”. Modern management was originally a social technology developed primarily to solve the problem of inefficiency, and this is no longer the most pressing concern. In a context in which the pace of change continues to accelerate, companies will in future have to learn how to become “as strategically adaptable as they are operationally efficient.”
As Hamel points out, modern management is more than “a suite of tools and techniques” - it is “a paradigm,” so nothing less than a paradigm shift is required. The ideas of Taylor, Weber and the other management pioneers on which the current paradigm is based were radical in the early decades of the last century. Can the practice of management undergo revolutionary transformation over the first two or three decades of this century? Hamel believes that it can, and must.
He theorizes that a radical management innovation will tend to yield significant competitive advantage when it:
is based on a management principle that challenges some long-established orthodoxy;
is systemic and extends well beyond one or two discrete processes or methods; and
is part of an ongoing program of innovation, where “progress compounds over time.”
In Hamel’s view, the three most formidable challenges facing companies are:
dramatically accelerating the pace of strategic renewal in organizations large and small;
making innovation everyone’s job, every day; and
creating a highly engaging work environment that inspires employees to give their best.
Taken together, these will be the defining challenges for twenty-first century management.
The main impediments to building a company that can “change as fast as the world around us” are, says Hamel, denial by leaders, the lack of ability to generate a range of new strategic options, and allocation rigidities.
The tendency to treat the capacity for innovation as if it were narrowly distributed, along with the drag of old mental models, and insufficient respect for experimentation, are seen as major inhibitors to meeting the second challenge.
The major problems when tackling the third challenge are “too much management, too little discretion”, “too much hierarchy, too little community” and “too much exhortation, too little purpose.”
These three challenges are interdependent. Finding ways to address the third may be the key to solving the others. A recent international survey involving 86,000 employees found that less that 15 percent considered themselves to be highly engaged in their work, while almost a quarter felt almost totally disengaged, prompting the author to offer his own “hierarchy of human capabilities”. In ascending order, in terms of contribution to value creation, these are obedience, diligence, intellect, initiative, creativity and passion.
Hamel points out that obedience, diligence and even intellect, are fast becoming global commodities, while capabilities with the greatest potential to differentiate a company, like initiative, creativity and passion, are “benefactions which employees choose, day-by-day and moment-by-moment to give or withhold”. Creating the kind of organizational model that will deserve these gifts is the essential management challenge for the times ahead.
Central to the argument advanced in The Future of Management is that any organizational model reflects a set of underlying management principles and beliefs, and that new principles will be needed to guide the evolution of a high-engagement organizational model. As yet, there is no complete exemplar of future best practice, but there are pioneering efforts at Whole Food Markets, WL Gore and Google.
Whole Food Markets, the least-well known, is a fast-growing enterprise in the relatively mature US food-retailing sector. The company is built around the proposition that people will pay a premium for high-quality organic and locally produced food.
It would be hard to find three companies less alike, yet each, in its own way, is a modern-management pioneer. Taken together they help to underline how radical deviations from management orthodoxy can have a significant commercial impact.
Cases such as these can help to show how to: empower people by managing less while retaining discipline and focus; create a company with the spirit of a community that binds people together; build an enlarged sense of purpose that merits extraordinary contributions; enroll everyone in the company as an innovator; make sure that management’s hallowed beliefs do not strangle innovation; create time and space for innovation; guard against the dangers of hubris and denial; create a steady stream of new strategic options; and accelerate the reallocation of resources from legacy projects to new initiatives.
Hamel offers three key principles to improve the chances of achieving radical management innovation:
adopting a disciplined approach for unearthing and challenging the long-standing management orthodoxies that constrain creative thinking;
giving management the power to illuminate new approaches; and
capitalizing on insights drawn from the practices of “positive deviants”.
He observes: “In management, as in science, it is anomalies that point us toward new truths.”
Hamel argues that modern management is based on standardization, specialization, hierarchy, goal alignment, planning and control, and the use of extrinsic rewards to shape human behavior. These were developed to maximize operational efficiency and reliability in large-scale organizations, and this is “still the only problem that modern management is fully competent to address.” When it comes to the challenge of how to create organizations that are highly adaptable and engaging, these principles are “insufficient and often toxic.”
So where should we look for new ones? Hamel draws inspiration from five domains and literatures - life, markets, democracy, faith and cities. From life he distils the principle of variety, from markets comes flexibility, democracy yields up activism, faith gives meaning while cities furnish serendipity. He argues, for example, that the writings of new urbanists, like Richard Florida and Jane Jacobs, show how great cities contribute to the generation of “new pools of economic use” through enabling diverse people to interact and discover opportunities to trade information, goods and ideas, and how, at least in part, cities are “able to reinvent themselves because they make it easy for individuals to reinvent themselves.” Great cities also show us how to organize for serendipity.
The final part of the book is devoted to getting started. Here, the insights are more tentative. While companies have worked hard on reinventing their business processes, few have devoted similar energy and imagination to reinventing their management processes. The exceptions include General Electric, Procter & Gamble and Whirlpool.
The book concludes by acknowledging that there is “no well-thumbed manual” to help a company to become “a serial management innovator,” but there are some essential building blocks. These include having the courage to lead, generating an ever-widening management-innovation conversation that will bring more and more people into the process, and focusing on causes, not symptoms.
Perhaps the surest signpost yet to how the future will evolve may be the internet, the “most adaptable, innovative and engaging thing that human beings have created” and in many ways “the new technology of management” because it gives everyone a voice, distributes the tools of creativity widely, allows ideas to compete on an equal footing, decentralizes just about everything and encourages resources to follow opportunities.
At times, the book reads more like a collage than a synthesis. It does not always pack the same strength of argument as some of the author’s previous offerings. Yet by putting management innovation on the agenda in a way that no one else has done before, he may have made an invaluable contribution to the future of management.
Reviewed by Brian Leavy, AIB Professor of Strategic Management at Dublin City University Business School, Dublin, Eire.
A version of this review was originally published in Strategy & Leadership, Vol. 36 No. 1, 2008.