Old world risk-averse best practice doesn’t hold water anymore. In today’s management environment, practices need to be emergent and they have to escape replication, according to Stéphane JG Girod and Martin Králik
History shows us that when systems, structures or ruling classes outlive their usefulness, they are cast away – often ruthlessly and violently. In 2018, when a front-page story in the Harvard Business Review declared ‘The end of bureaucracy’, it was a daring yet timely statement: Bureaucracy and hierarchy have reached the end of an era.
Despite their adaptations over the decades, with their many layers of command they were simply built to support a model of predictable, linear business and competition that doesn’t exist anymore. This is not to say the business landscape of the future will be devoid of hierarchy, but that hierarchy is likely to be radically different from what it has been up till now.
Crucially, bureaucracies have a knack for preventing managers from doing what they were hired to do by clogging their time with information requests, paperwork and other distractions. (These take precedence over everything – especially customers and products – because whoever initiated that request is now ‘waiting’.)
This on top of endless meetings of little more than ritual value: A 2014 study by Bain & Co. revealed that in a single large company, supporting and running the weekly executive committee meeting devoured 300,000 man-hours a year.
Traditionally, hierarchy bureaucracies adjusted to external changes through restructuring. Freeze-change-refreeze, academics Elaine Romanelli and Michael Tushman writing in the Academy of Management Journal in 1994 called the cycle ‘punctuated equilibrium.’ Whatever the nature of the restructuring, the end point was one where ‘order has been restored’.
Similarly, the old world of best practices was built on cause-and-effect relationships that could be anticipated. Risk was managed because the risks were known and could be quantified.
In a turbulent environment, those expectations don’t hold water anymore. In today’s management, practices are emergent; they escape replication. Cause and effect are often only discernible in retrospect and, according to David J Snowden and Mary E Boone writing in Harvard Business Review risk management gives way to uncertainty management.Although scholars have acknowledged this reality for the past 15-20 years, the ‘how’ has remained stubbornly difficult.
The top-down, authoritarian mould of management is a particularly tough sell with the millennial workforce. A cohort that grew up with always-on connectivity, random access and instant validation expects the work environment to morph into its own image. The old bureaucratic order thrived on impersonality; some go as far as talking about its dehumanizing effects. This was the corporate ‘deal’, and the previous generation – saddled with mortgages, car loans and consumer debt – endorsed it. But James Weber, writing in the Journal of Business Ethics in 2017 argues that it is hardly a good match with young workers who are passionate about values and community;who prefer experiences over material possessions; and sharing or renting over ownership.
According to Didier Cossin and Ong Boon Hwee in their 2016 book Inspiring Stewardship, as the corporate world absorbs millennial perspectives, it adopts an inclusive, stakeholder view. Increasingly, it regards short-termism as a trap, diverting the bulk of managers’ time to issues of compliance and reporting while limiting the space for open-ended thinking that is indispensable for competitiveness and growth.
Collaboration must replace siloes
In the bureaucracy, siloes may have existed for good reasons. In the next management paradigm, collaboration needs to replace them. Case in point: A Chinese smart home company IMD worked with.
By now, China’s highly digital customers are accustomed to being presented with an integrated view of different product options and offerings. To fashion these new ‘phygital’ retail experiences, data must be collected across families of products. It takes sophisticated data analytics to identify viable consumer segments in this market. Internally, however, the company continues to be siloed by divisional profits and losses. Marketing, consumer journeys, customer data are fragmented by business line. Divisional heads are rewarded on how much they grow their own business, not the companywide business.
In another example, carmaker Lamborghini realised that great products are not enough for today’s consumers. What they demand are new experiences and ongoing interactions with the brands they like. Its exclusive, invitation-only mobile app named Lamborghini Unica does just that by connecting the buyer’s physical and digital touchpoints into a coherent, engaging customer journey where daily upgrades can take place. Of course, to make this happen the company had to integrate its own inner workings, aggressively breaking down walls to make sense of big data and help every employee connect to the firm’s purpose.
Lamborghini’s initiative shows that great customer experience and data-driven cross-selling and upselling won’t happen without internal collaboration.These stronger internal linkages militate against the processes that support traditional risk management bureaucracies.
KPIs, ERP and others were designed to provide maximum visibility at the top. Effectively crowding out new businesses, they entrench the tyranny of the core business. This curtails the potential for new skills to integrate with the core business and regenerate it.
This adapted extract from Resetting Management: Thrive with Agility in the Age of Uncertainty by Stéphane J. G. Girod and Martin Králik © 2021 is reproduced with permission from Kogan Page Ltd.