The Reinvention of Management

The organizations which are managed in the most effective and innovative ways are likely to outperform their competitors. Management can be a competitive advantage.

This is the basis of the concept of ‘management innovation’, championed by London Business School’s Gary Hamel and Julian Birkinshaw. From Toyota’s lean manufacturing to the Malaysian government’s embrace of blue ocean strategy, organizations of all types are constantly seeking out new and better ways to manage their resources. The job of managers is to improve the performance of the resources they have and to identify the future resources they need.

Increasingly, the vital importance of management is being appreciated by the largest organizations of our times. The challenges now faced by companies such as Facebook, Apple and Google are fundamentally about management. They have all developed groundbreaking technology, now the challenge is to maximize the social and economic impact of that technology. This is a management challenge.

Management has unfortunately received a bad press. Managers are synonymous in some sectors with bureaucrats. In large public sector organizations especially managers are often regarded with suspicion. They are the bean-counters, faceless men and women with their spreadsheets. In fast growing high-tech companies the managers are the guys in the suits brought in to be the grown ups while the smart guys in jeans and t-shirts get into the sexy world of bright ideas and even brighter cutting edge products.

But without management, organizations grind unceremoniously to a halt. It takes management for organizations to grow and develop.

Who are the managers?

If we accept that management is important then who are the managers? Who actually practises management?

Over the last century or more the emphasis has been on professionalizing management, to bring the discipline, status and rewards of the professional to the art and science of management. This has had benefits. Managers are better educated than previously. They fill lecture theatres at business schools, have created the booming executive education market and absorb the constant influx of new ideas from business books, magazines and online talks. Managers know their stuff.

The trouble with this, however, is that management has become exclusive rather than the naturally inclusive activity it needs to be to really succeed. Professional managers, with their MBAs and their bookshelves creaking with insights, have a vested interest in keeping their professional domain safe from interlopers. Turkeys tend not to vote for Christmas.

The reality is that someone with a brilliant idea on the factory floor as to how the organization could better use its resources is unlikely to be heard. This is as true now, with a few glorious exceptions, as it was one hundred years ago. In too many organizations, management stops people managing.

This, we believe, is slowly changing and will need to continue to change. Management will go through a necessary recalibration in order to maximize the new resources at the disposal of managers and organizations. This requires five key realizations:

1. Management is organic. The best management is not the result of intricate processes, labyrinthine spreadsheets, and minute measurements. These things are important, but management is as much an art as a science. There is no universal formula. People are at the heart of management and people must be given the freedom to manage themselves and for the nature of their own management style to evolve.
2. Management is open. One of the big ideas of the last decade has been Open Innovation. The classic example of this is Procter & Gamble which threw its innovation doors open to embrace ideas from customers, suppliers, and others outside the organization. This is laudable and productive. No one company has a monopoly on wisdom. Apply the same idea to management. No organization has a monopoly on managerial wisdom. Nor does one department, sector or team. The more open to management ideas an organization is the more likely it is to discover the power of management as a competitive advantage.
3. Management is free of hierarchy. In the 1990s Tom Peters sounded a colourful death knell for middle managers. He proclaimed they were ‘cooked geese’. If only. Recently we were working with a company in Silicon Valley in which there was a cadre of middle managers intent on inaction. Their colleagues labeled them ‘zombies’, but in this particular part of the Valley the zombies ruled. Look around now and you will discover that middle managers are alive and well inside our large organizations. Indeed, look inside many smaller organizations and you will encounter needless levels of management. All managers need to justify their existence in terms of the value they add to the organization’s activities. Simply holding down a place in a hierarchy justifies nothing.
4. Management maximizes technology. It is interesting how many organizations we visit where the very latest technology is utilized on the factory floor or in the company’s interactions with customers and users, but not in its management. Technology sets managers free. It enables more flexible, more global, more interactive, more open, more challenging management than ever before. The best managers we have encountered embrace technology fulsomely.
5. The units of management are small. At its best, the units of management should be limited in size and unlimited in ambition. Small, flexible teams enabled by technology are the modus operandi of the most innovative companies – in their research and development labs at least – but often difficult to find elsewhere in the organizations. A company board is a small team. The C-suite is a locker room. And that stretches up and down an organization: teams are management Viagra.

Alongside this recalibration of management so that it actually delivers what organizations need and want is a questioning of the very nature of organizations.

The context in which management is practised is the organization. Management and the organization exist in tandem. Neither should be static. Organizations constantly change shape and direction – or, at least, they should.

As with management, the organizations of the world largely remain structured as they were one hundred years ago. In the internet age industrial organizations embedded in the structures and expectations of the past remain dominant. Don’t be taken in by the window dressing (in the form of free food, relaxed dress codes and so on), the modern corporation is rigidly structured. It may not have the elaborate organizational charts of yesterday, but it remains remorselessly linear in its structure and thinking.

The modern corporation worked in the twentieth century. Then the emphasis was on size, benefitting from the new vistas of scale made available by the assembly line and mass production. Growing bigger justified the existence of the twentieth-century corporation. This is no longer the case. A company’s headcount can no longer be equated with its commercial health and likely longevity. Companies die and slow moving giants are no exception. Size insulates an organization, but only from the changes necessary to keep it alive.

Research suggests that individuals who experience self-doubt are actually more successful. Apply the same logic to managers and organizations and we believe you will begin to understand what is necessary to compete in the future. The best will question themselves and every aspect of what they do and why.

The Chinese company Haier and its remarkable CEO Zhang Ruimin have been asking questions of how they manage and the nature of their organization for many years. ‘There is no successful company, only those which stay relevant,’ Zhang Ruimin told us when we met at Haier’s headquarters in Qingdao, China. ‘There is no end to exploration of business models and management thinking. You have to challenge yourself. Can you remain relevant in changing times?’

Zhang Ruimin is a humble man. This is expressed in his modest bearing and in his relentless curiosity. He is the best read business leader we have ever encountered. He knows his Mintzberg from his Hamel, his Handy from his Kanter. He wants to improve himself and his organization.

This appears trivial and you would think it is commonplace. It isn’t. Many senior managers we encounter appear hell-bent on securing their legacy or stock options rather than improving their own performance and that of their organization. They are as likely to discuss the latest ideas on innovation as they are to abseil down the headquarters building. There are, of course, exceptions, but humility and curiosity do tend to be in short-supply in the Western corporate world.

Haier’s story is unique, but its lessons are universal and hugely challenging. The company has come from truly ramshackle origins to take over GE Appliances, part of corporate America’s greatest modern empire. It has changed the way management is practised and it should change the way managers throughout the world think about their jobs.

So far Haier has managed to pass the relevance test posed by its own CEO. Its story is a remarkable one. But it is not the story of one man nor a single company, it is the story of how management and organizations can and must change if they are to shape the future.

Stuart Crainer and Des Dearlove are the founders of Thinkers50. This is an edited version of their introduction to Haier Purpose by Hu Yong and Hao Yazhou now available from Thinkers50 and Infinite ideas.