The evidence of a management revolution is accumulating day by day. Companies are reshaping everything, from their portfolios to their payment systems, as they seek to develop the speed, focus, collaboration and responsiveness that modern markets demand.
Change management, in fact, is becoming synonymous with management itself. But you can scarcely apply radical change to a process without affecting its parts. Since the constituents of management are individual managers, it follows that a new kind of manager is required to enable the revolution to succeed.
That's an uncomfortable reality for the old kind, who by definition constitute the great majority of practising managers. A somewhat sad account in the Wall Street Journal tells of a 54-year old middle manager whose career, as he knows, has peaked; who has already experienced one lay-off and another near miss; who now drives himself long and hard to keep up with younger colleagues; who has changed specialism three times in 15 years - from production management to marketing, to purchasing, to finance; and who, despite all that effort and flexibility, earns the same as in 1989.
What hasn't basically changed is his work. As he has always done, he administers a small group of people, 'making revenue projections and supervising expenses in the sales division and resolving disputes over compensation.' That sounds neither very exciting, nor creative - yet this is no stuck-in-the-mud old-line business, but a software company, the third high-tech employer for this stalwart. He is an electronic paper-pusher, whose vast e-mail load (128 messages waiting in the morning, 150 more each day) has simply replaced hard copy.
No sign of management revolution there. Nor is one visible in this letter from a Californian executive, who had won the contract to supply equipment to a high-tech plant. The equipment was time-critical, but the management process wasn't: the contract was held up nearly three weeks after the signature date. Why? One corporate entity had placed the contract, but the plant was 'operated by a second company, negotiated for by a third separate company, which apparently does purchasing, and paid for by a fourth company, which apparently issues checks.'
PREDICTABLE CONFUSION
The disgruntled supplier, Kenneth W. Harris, observed: 'None of the people in any of these companies had ever spoken to each other. The confusion was predictable.' Once again, the old administrative Adam survives even in areas of the highest technology - and of apparent success. The purchaser is IBM, whose chief executive, Lou Gerstner, has been widely praised for restoring the corporation to profit and reforming the outdated management that explained its previous historic fall from grace. Moreover, the plant is a 'chip fab', operating in the same conditions that have generated, at Intel, one of the most famous expositions of the new management.
Nor has IBM lagged in this hothouse of technology, according to an article in the Harvard Business Review (May-June 1997). It cites IBM and Intel as the only two US microprocessor manufacturers which 'dramatically increased' their performance: as opposed to the rest, which 'continued to lag and tried unsuccessfully to compensate for inferior process technology with more aggressive chip designs.' The intriguing point in this study, however, is that the two Harvard Business School authors (Marco Iansiti and Jonathan West) attribute the superior process technology to better management process: an improvement which illustrates the essence of the management revolution.
The pre-revolutionary method of managing research and development was hierarchical and compartmentalised. Laboratories were isolated from the rest of the company so that they could concentrate undisturbed on making scientific breakthroughs (like the original invention of the transistor at Bell Laboratories, the AT&T centre). The researchers passed down their favoured new technology to the developers. When the development team had done its best (or worst) for the new product or process, the manufacturing organisation finally got its hands on the technology.
This management model still applies in most companies - no doubt, the electronic paper-pusher described above is part of just such a system. A strategic or operational decision starts at the top and slowly works its way down through an organisation whose human components make no contribution until the message arrives - and who either don't communicate at all (like the four IBM companies also mentioned earlier), or do so with difficulty, argument, and variable success.
RADICAL NEW MODEL
According to the two Harvard authors: 'The US companies that prevailed in the computer industry in the 1990s abandoned the traditional R&D model and created a radically new one.' The new model is not hierarchical and is based on integration rather than isolation. To start with, the in-house researchers were no longer the sole source of new ideas: universities, consortia and other companies (mostly suppliers) were brought into the act. Instead of the traditional situation - an invention looking for an application - the ideas were tightly focused on creating 'new generations of major products and processes.'
In a critically important move, integration was no longer left to separate units to achieve. Now 'tightly knit teams of expert integrators' were given overall responsibility for the entire project. These people, all possessing 'extensive backgrounds in research, development and manufacture', had a clear set of tasks:
1. To develop a product concept that (a) satisfied the customer need: and (b) was capable of efficient and fast manufacture.
2. By working closely with developers, to hand over a perfect product and production process to the manufacturing arm.
3. To coordinate the parallel development of components by in-house teams and outside suppliers.
4. In all the above, to make full use of their considerable freedom and large resources to range widely over the field of technological choice.
Note the further parallels with the general management revolution. First, the new method looks at the entire business system, rather than the company, taking in outside expertise and suppliers, and looking outwards to the customer. Second, the widening use of project teams has probably been the management revolution's most prominent aspect. But a team is only as powerful as its powers allow. The criteria used for the US micro-electronics comeback have to be applied generally:
1. Does the team have genuine independence and adequate resources?
2. Has the broad task been clearly defined, and is the team free, within that broad definition, to choose the best options for meeting the mandate?
3. Will the team work in close harmony with the internal and external units involved in the project?
4. Is the team working backwards from customer needs - and forwards to achieving perfect product or service performance?
Observe the absence of financial targets or criteria. The task for any team must always be to achieve the solution that will optimise the monetary value of the project and thus of the company as a whole. But that's an outcome and a necessary condition, not an objective. The problem is that financial measures are relatively clear and simply described, and can be applied to all activities in any business. That makes the money yardstick attractive, but doesn't focus the firm.
The new kind of manager is more interested in the new search for meaningful non-financial scoring - as in the efforts of Britain's new Foundation for Performance Measurement. It quotes the Royal Society of Arts to the effect that: 'Of the eleven companies that topped the Management Today profitability league between 1979 and 1989, four collapsed and two have been acquired. Companies which rely solely on financial measures are exposing their shareholders to unnecessary risk.'
MEASURING PERFORMANCE
So what does the new manager look at instead? The Foundation heard from Tony Mehew of Glaxo Wellcome how his company seeks to focus an annual £1.2 billion of R&D expenditure by twice-yearly reviews - conducted (see above) by a team. It includes, following the same practice as the semiconductor integrators, cross-functional members: research scientists, commercial people and financial executives (of whom Mehew, the group controller, is one). They score all projects on the basis of six drivers:
1. Strength of [scientific] rationale. Most important at the early stages of a project.
2. Total unmet need: 'Will people be able to use the product, and will they pay for it?'
3. Strength of value proposition. 'Will the product stand up in an economic sense?' The question is not only whether people will buy it, but also whether it has economic value in another way [for example, reducing the period of hospitalisation and reducing overall health costs].
4. [R&D] feasibility: 'Will [the compound] do what we say it's going to do? Can we make it work?'
5. Net present value - to be worked out later on, when more accurate figures on cost and sales are available.
6. Strategic fit. 'Is it in [therapeutic] areas in which the company already has a presence?'
The square brackets are mine: omit the words within, and you have a clear guide to assessment of any project in any business. It's important that the financial calculations only begin when the work is sufficiently advanced for the sums to be worth the expenditure of computer time. Often, old-style management takes seriously figures that are pure fiction - like the five-year forecast, full of detailed numbers, that one company tabled recently to support a proposed takeover with a five-year earn-out for the vendor proprietors. The deal would have failed at least five of the six Glaxo tests.
MBM (managing by money) falls foul, not only of commonsense (as in that instance), but of this statement about the 'new business era': 'formerly cherished views of how to lead a business are suddenly obsolete - perhaps even dangerous'. The quotation comes from John Wareham, promoting a course which he labels the 'One-Day MBA'. That sounds like a very tall order, but Wareham has a clear and accurate understanding of how the new kind of manager and management differ from the old. As he says, in a new environment in which quality is taken for granted, 'you cannot win merely by seeking to compete.'
Rather, 'your fate hinges on your ability to stay ahead of fast-breaking changes.' That being so, 'you must apply state-of-the-art thinking and a sometimes counter-intuitive intellectual model.' Wareham argues further that there's only one way to resolve a top manager's problems - 'to adopt a radically new approach to your business, your people and your goals.' These wise but challenging words were supposedly uttered to the chief executive of a major US company who found the solutions too radical for problems that he thought less serious than Wareham did: 'Just twelve weeks later he was fired.'
RADICAL RESPONSE
The anecdote makes two valuable points. First, the demand for a new management and a new kind of manager arises from radical changes in the economy and the environment which call for radical response. Second, failure to provide that response places the manager at risk. That's a powerful paradox. The main cause of resistance to radical change is reluctance to take risks. Yet giving way to that reluctance exposes managers to what may be even greater personal vulnerability. That places them in a trap: damned, perhaps, if they change, and very possibly damned if they don't.
Not surprisingly, the consequence is widespread insecurity. According to one economist, James Annable, that's no bad thing. He argues that management insecurity is 'transforming the way American corporations operate, especially the way employees and vendors are managed.' His interpretation of events is that: 'Globalisation, deregulation, the threat of corporate takeovers and the rise in shareholder activisim have dramatically changed the comfort level.' Most executives are now 'convinced that their jobs depend on taking aggressive action to increase earnings and push up stock prices.'
The actions Annable mainly has in mind consist of eliminating employees ('often higher-wage managers and professional workers') by outsourcing, improved efficiency, discontinuation of product lines and the use of temporary workers: in other words, downsizing. He gives the process utmost credit for the surge in US corporate earnings, which has set a new postwar record. But what about creativity and the opening of new markets? What about building a new kind of company, based not on insecurity, but on shared values and vision - as the gurus recommend? What about Wareham's profile of the risk-taking thinker?
There's a heavy price to pay for putting a premium on cost-cutting rather than creative, adventurous thought. For instance, according to the Wall Street Journal, 'American food companies are starving for new ideas'. Launches of new food products by these firms, once the great global innovators, dropped by a fifth in 1996. The reason was obvious: the mega-mergers of the 1980s pushed down the number of food researchers, so food patents filed by US companies started to lag behind those of foreign companies. The mighty Coca-Cola has generated enormous stock market wealth over a period lacking any major innovations: the last one, Diet Coke, dates back to 1982.
FEARFUL MANAGEMENT
None of this would surprise the gurus who have been arguing with increasing urgency for a great shift in emphasis from downsizing and cost-cutting to creativity and new growth. They would also argue that fear is inimical to both those processes, and generally makes for bad, old-style management. That view is apparently contradicted by Intel's chief executive, Andrew Grove. In his book, Only the Paranoid Survive, he praises fear as a driving force behind management. But his 'fear' is the very opposite of insecurity. His new kind of manager hates to lose and is fearfully alert to every threat - but has the total security needed to take the actions and risks that repel threats and win victories.
The competitive, combative manager in the Grove portrait, 'passionately dedicated to winning in the marketplace', though, seems incompatible with the findings of research among 400 managers by Arthur Andersen and the Batey Research and Information Centre of Singapore. Compared to Eastern managers, those from the West were more open, direct and confrontational, favoured databases and statistics and resisted intuition, were more productivity-oriented than people-oriented, and put greater emphasis on short-term profits; in a word, they are old-style.
In other respects (for example, being supposedly more flexible and creative), the West appeared in a more modern light: but the picture is still markedly different from that of the ideal manager, as seen by the 400. Test yourself against this paragon. Are you...
1. Offering full support and motivation to staff?
2. Able to anticipate future trends and changes?
3. Able to identify and recruit talented people?
4. Willing to give subordinates wider responsibilities?
5. Using resources efficiently to meet sales/profit targets?
Interestingly, the only difference between the Asian and Western ideals is that the Asians replace 'Willing to give subordinates wider responsibilities' with 'A role model for co-managers and subordinates.' Otherwise, the research confirms that, just as goods and services are becoming global, so is the perceived requirement for a new kind of manager. The problem remains that of the gap between requirement and reality. That gap will never be closed by the old variety of manager. But the formula for breeding, nurturing and exploiting the new kind is clear - and that is the only way in which the new management can work.
Source:thinkmanagers
