As management gurus spread the word on their new Tower of Babel, they may find that no one is listening. By David James
A truism of history is that civilisations are most at peril at their apogee; that success contains within it the seed of failure. Something similar may be true of management. At the point at which it has become the coinage of global corporate power and a key to wealth and influence, it may be starting to decline in importance.
The word “management” (from the Latin manere) initially referred to holding the reins of a horse. Only since the Industrial Revolution has it commonly been used to mean guiding an organisation. Lex Donaldson, professor of management at the Australian Graduate School of Management, says the modern management role first appeared in the late 19th century in the United States railway system.
In a little more than a century, the role of management has been adopted in organisations across the world, to the point where it is considered an essential part of work. Management thinker Peter Drucker, the first professor of management and still its most accessible proponent, nominates the spread of management across the world as the most surprising development in his time. He even goes so far as to say that management is the key to a country’s economic advantage.
It has not always been so. Social commentator John Ralston Saul, in his book The Unconscious Civilisation, says the economic theorist Adam Smith considered management to be unproductive labor. He says Smith would regard the “managerial elite” of modern organisations as a burden.
Saul acknowledges that management must exist in some form, but says: “How much of it can industry support? The answer might be that 30% to 50% the current level of the managerial class in our society is far too high; that the management of business along with the financial and consulting industries all of which are extremely expensive are a far more important factor in keeping the economy in depression than is any over-expansion of government services.
“Many are surprised that this management elite continues to expand and prosper at a time when society as a whole is clearly blocked by a long-term economic crisis. There is no reason to be surprised. The reaction of sophisticated elites, when confronted by their own failure to lead society, is almost invariably the same. They set about building a wall between themselves and reality by creating an artificial sense of well-being on the inside.”
Not everyone agrees with Saul’s observations especially that management is languishing in an artificial sense of well being. The removal of management layers in many organisations has if anything led to the opposite: an excessive degree of fear. But he voices a widely-felt discontent: that management is an ill-defined activity more concerned with privilege than effectiveness. It was this that led Donaldson and professor Fred Hilmer, former dean of the Australian Graduate School of Management, to write Management Redeemed, in defence of managers. They say that management is a profession still in its infancy, but they believe it performs as important a function as medicine, law and engineering.
“Managers are becoming something of an outcast group in the public mind. The mass media readily portray managers as grossly failing in their duties. The medicine that is prescribed is to reduce the power and authority of managers, curb their status and pay, and, preferably, get rid of large numbers of managers from corporations by downsizing and flattening hierarchy.”
A more direct attack on the role of manager is coming from changes to markets and the investment community. One is the change in the manager’s mediating role. When the emphasis in wealth creation was on efficiently allocating scarce resources, managers came between customers, who wanted as many resources as they could get, and investors, who wanted to retain resources.
But improvements in technology have reduced the cost of raw materials required in production. Meanwhile, the ageing of populations in developed economies has led to lower levels of demand growth Drucker estimates that half the economic growth in developed economies this century has been due to population growth and half due to productivity improvements.
The result is that the emphasis has shifted from creating efficiencies in supply to stimulating demand. It is no longer enough to bring products to market in the belief that there will be a ready market. Accordingly, the manager’s function is to find ever-better ways of satisfying customers. Employees often understand this as well as managers do, or better, thus weakening the role of management.
The information revolution has changed the role of managers. Kenneth Courtis, chief economist of the Deutsche Bank in Japan, says the greater availability of information implies a more egalitarian structure. Workers are usually just as able to understand information as management. For example, Rio Tinto (formerly CRA), despite having a reputation for aggressive management, makes most management information available to employees (partly as a way of rendering the union irrelevant). Employees at the company’s Bell Bay operations in Tasmania can even get easy access to information on board meetings, creating at least the appearance of internal democracy and reducing the need for managerial supervision.
A generational shift is changing the role of managers. Younger workers are not as prepared to accept authority. Whereas the main management “schools” in Australia in the three decades after World War Two were the armed forces, the MBA schools are now more likely to preach the need to “empower” the workers and adopt a “coaching” style, rather than directing the workers.
In part, this is an outcome of new understandings of industrial processes. Total quality management, a statistics-based analysis of repeated tasks, showed that nine times out of 10, errors in quality are due to randomness in the production process rather than worker fallibility. The corollary was that managers should work on the system with staff, rather than dictate what should be done.
Studies of worker behavior, especially those of Australia’s former premier management theoretician, professor Fred Emery, for the Tavistock Institute in London, showed that the style of management developed in the late 19th century by Frederick Taylor whereby unwanted variation was removed from industrial processes by strictly circumscribing tasks and using a military-style method of supervision led to poorer results than a “participative” style of management, in which workers are given a variety of skills and are allowed to find the best way of doing their jobs.
Many managers have struggled implementing participative methods partly because it raises questions about what they are there for. However, social trends are making the participative approach mandatory.
US management commentator Jay Conger says younger workers must be “persuaded” to work: they can no longer be told. He says the baby-boomers, although they do not like hierarchy, still like to have control they are just more sneaky about it. But the next generations of workers have little loyalty or willingness to accept direction. Managers must be persuasive if they hope to keep their good people.
Paradoxically, the more management is debated and analysed, the less vital it seems. The most obvious symptom of the difficulties confronting management is the fraught and confused dialogue about its function and importance.
A recent AIM-sponsored conference featured US military leader Norman Schwarzkopf; the former chief of Chrysler, Lee Iaccoca; Brazilian Ricardo Semler, chief executive of Semco and author of the management book Maverick; and Stephen Covey, author of the world’s most popular management book, The Seven Habits of Highly Effective People. Each “guru” sounded persuasive individually, but their messages were sharply contradictory. Schwarzkopf asserted that, when in doubt, managers should always “do something”, take control. Semler described how he managed his company by letting other people decide what they would do, provided they observed some financial guidelines and internal market rules.
Iaccoca said management was a tough business that required a willingness to be unpopular. Covey advised that managers should never do anything until they and their employees fully understand each other’s point of view.
Some of this confusion was attributable to the fact that the gurus were talking about very different types of organisational challenge: management in the military is very different from management in consumer-products industries. Nevertheless, such contradiction is common.
One reason is that the complexity required of analyses and solutions cannot be compressed into the available time. The Canadian management academic Henry Mintzberg in 1973 famously studied what managers actually do in their daily routines, finding that half their tasks take an average of nine minutes (he recently repeated the study and found that it had risen to 11 minutes). Only 10% of management tasks take longer than an hour.
This implies that managers want quick answers, and there is a reluctance to undertake lengthy reflection, which creates a market for simple statements of management “principles”. Neil Flanagan, managing director of the Queensland consultancy Plum, says recent US studies have shown that if managers read all the material they received, they would be occupied eight hours a day, for six days a week. “That is why 90% of management books never get read past the first chapter.”
Needs to know
Flanagan has co-written Just About Everything a Manager Needs to Know with Jarvis Finger. The book is made up of one-page summaries of what managers should do in particular situations. For example, on the subject “how to overcome fear of failure”, the advice is: try not to be too hard on yourself, set your own standards, don’t confuse success with excellence, stop seeing everything in black and white, consider the worst-case scenario, accept that you are not alone, see failure as a learning experience and plunge right in.
Such statements run the risk of being correct but unhelpful (rather like a quick lesson on how to play the flute: “Blow in one end and wiggle your fingers up and down”).
Flanagan acknowledges that simplicity is only valuable if it happens to be accurate, but he believes that there is still a need for it. He warns that when gurus think they are losing an audience, they often resort to stating simple rules. “When Schwarzkopf thought he was losing people, he said: There are only two things I want to leave you with. People sat down and listened.”
To Hilmer, the emphasis on simplicity is corrupting good management practice. He believes it often takes a decade to evaluate the quality of managers. “I think you can only say now that Jack Welch [US chief executive of General Electric] is an excellent manager. The other thing that makes it difficult to assess managers is that it is not always obvious what they do. I remember my daughter went with me to work once. She said afterwards: Now I know what you do: you have cups of coffee and talk to people. ”
Globalisation is bringing subtle changes to the role of manager. Private-sector management emerged out of the separation of ownership and control; investors reaped the benefits, managers made the decisions. The growth of world financial markets (global capital flows are currently $US300 trillion, compared with $US30 trillion of world GDP), and the rise of cross-border investment by multinationals (foreign direct investment) is changing the way global corporations are being managed. The locus of power is now the debate between fund managers charged with investing and senior executives of corporations overseeing would-be global enterprises.
The result is that managers at lower levels of the corporation are confined by financial and economic strictures. Fund managers techniques, such as “economic value added” (a return-on-investment model applied to all aspects of an organisation’s operations), are being employed to compare corporations across the world, thus reducing the opportunities for management autonomy.
Similarly, the economic growth prospects of different national markets are determining many strategic decisions in global organisations. Managers are finding themselves under pressure to subscribe to the short-term financial logic of the global investment community.
Globalisation poses a threat to public-sector managers for different reasons. Governments of developed economies are finding their tax revenue reduced by the combined effects of ageing populations and the ability of transnational companies to shift their profits. As yet there are no global civic structures to match the spread of global capital and global commerce, putting great pressure on public-sector managers.
Donald Kettl, director of the Robert LaFollet Institute of Public Affairs at the University of Wisconsin-Madison says: “Policy makers the world over have long sought influence over administrative action, even detailed administrative decisions, by using their control over inputs, especially budgets. Performance-based contracting requires these officials to take a step back from the methods of control they are used to using.”
The most insidious attack on management is the emphasis in business on leadership rather than management. Richard Koch and Ian Godden, in their book Managing Without Management, describe the new ideology: “Top management power used to rest on middle management power within a bureaucracy, literally a pyramid of management layers. There is now a generation of CEOs and successful leaders buried within corporations who find the bureaucratic machine more a hindrance than a help. People like GE’s Jack Welch, William Weiss of Ameritech, CNN’s Ted Turner, Virgin’s Richard Branson or Microsoft’s Bill Gates all have a hammer lock on their organisation.”
Flat organisations with dominant leadership can be efficient and effective. For example, there are only four layers between the worker in GE’s Dandenong plant in Melbourne and Welch.
But the weaknesses are evident. By focusing on only one person, the organisation is at peril as soon as that person goes. Donaldson says the removal of management layers has created many problems, as those left are unable to cope with large groups. Japanese corporations are highly bureaucratic, suggesting that structure should not be seen as an end in itself, but should be adapted to the aims and style of the organisation. However, the leadership fad is unlikely to go away; most managers would rather see themselves as leaders than managers.
Where does this collection of influences leave management? Certainly under attack. In the organisation of the future there will almost certainly be fewer managers and a less rigid distinction between management and staff as more employees are expected to have generalist management skills. The skills of management are, if anything, likely to become more important, especially in industries subject to global competition. Management is finally concerned with greater awareness about what makes organisations successful, and the challenge will be to refine and develop that awareness.
As the philosopher C. S. Lewis comments: “No model is a catalogue of ultimate realities, and none is a mere fantasy. Each is a serious attempt to get in all the phenomena known at a given period, and each succeeds in getting a great many. But also, no less surely, each reflects the psychology of an age almost as much as it reflects the state of that age’s knowledge.”