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The Metamorphosis and Science of Management Thinking.
By Dietmar Kielnhofer Ph.D.
Thursday, 12th April 2012
 
How companies must redefine their raison d' être to survive in the third millennium; since French industrialist and management theorist Henry Fayol in the 19th century defined the meaning of management, countless books and articles have been written on this subject.

The notion of what should constitute (contemporary) management was a novelty in the 19th century when divisions of labor were in disarray, workers were poorly educated, exploitation was the rule rather then the exception and unity of command did not exist.

The history of famous management scholars would be incomplete without mentioning the name of renowned academic Henry Mintzberg, the Canadian Professor at McGill University in Montreal who asked the perennial question what work managers really do?

Then there is Philip Kotler, Distinguished Professor of International Marketing at Kellogg Scholl of Management at Northwestern University considered the father of modern marketing who brought us the marketing concept that basically stipulates that a company should make good marketing decisions by considering consumer's wants and needs, the company's requirements, and society's long-term interests.

And finaly there is Michel Porter, the father of strategic management and arguably one of the greatest academics of all time. Management scholars love to debate whether it is Prahalad & Hamel's Core Competence of the Company or Porter's Five Forces Model.

Whilst Porter's five forces model is considered the outside-in approach, Prahalad & Hamel advocate the opposite approach, focusing on a company's internal core competency (and key resources). Porter is a proponent of placing market forces, the competitive environment and the customer at the focal point of its strategic process.

The core competency model states that in the long run competitiveness is derived from the ability to leverage internal competency and a combination of leveraging internal resources. Probably there is no correct answer as environmental and socioeconomic parameters keep on changing; and in a volatile environment adapting ones strategy is a key success factor per se.

The aforementioned samples illustrate what a beguiling and mesmerizing subject management science can be. The subject of management, if seriously pursued, gives management access to a variety of multi dimensional views of problem solving techniques.

The paradox of management learning is complex and a dichotomy in itself. Whilst all the scholars and academics lecture on the need for change, the Zeitgeist unfortunately shows no or only marginal progress – this is evident by watching as world wide economies fail.

A culture of meritocracy does not happen overnight by wishing for it. What these management thinkers of the past advocate is a combination of lateral thinking, stretching the boundaries of imagination and synthesizing on a variety problems before converging on a solution? Management is a progressive function; it is an evolutionary process. Like strategic management that is dynamic, action oriented and not a static undertaking.

The parallels between the evolution of management and the age of enlightenment are striking. The Enlightenment or Age of Reason as it was also known was a period of social and religious upheaval in Europe in the 17th and 18th century. It was the time of, inter alia, Descartes, Voltaire, Rousseau and Montesquieu who questioned the source and legitimacy of authority and the prevailing status quo.

It became a period of the power of reasoning over dogmatism and conventionalism. These social philosophers saw themselves as bridge builders between the ever widening aristocracy and the bourgeoisie that eventually culminated in the French Revolution.  I refer to these philosophers as historic management thinkers since they propagated fresh ideals and values hitherto only reserved for royalty. They dared to speak out and question past values and mind sets. There was no convergence of competing ideas - on the contrary - these philosophies were often mutually contradictory and divergent – but they were after all different. I would even take the subject of management learning and philosophy even further and refer back to the Greek Philosophers of Aristotle, Plato and Socrates. 

These early thinkers instilled in human kind values as diverse as ethics, aesthetics and moral. Didn't they provide spiritual guidance and a sense of moral direction in times of uncertainty? They were revolutionaries in their own right. These values are in strong demand in management behavior in the aftermath of the excessiveness and exuberance of the 90's. Business skills can be taught but these moral principles and ideals have to be indoctrinated from an early age.

Peter Drucker, the Austrian born father of modern management redefined the meaning of management in the 20th century by calling it liberal art and placed "human beings" at the centre of the 20th century corporation – thus the birth of the knowledge worker. It was the mind of the "intellectual worker" that intrigued Drucker for most of his early management consulting life. His famous question "In what business are we in" was the central question CEO's had to ask if they wanted to succeed in an increasingly competitive market place where the fight for market share, appreciating stock price and profit margins ruled supreme on Wall Street.

The principles, or the basic tenets of management did not change since Fayol's time but what changed is the application under a new set of evolving circumstances and their priorities.

For years the question was raised what is management? The word "Management" consequently has a different meaning to different people depending where a company operates. A laborer in China might interpret the word "to collaborate or to control" differently than somebody from England or Egypt.

All these questions and meanings undoubtedly have their legitimacy; the fact of the matter is, management in the 21st century will be totally different to what it was 10 years ago. Management is about taking risks in particular this is important in times of crisis.

Otherwise what is the raison d'etre for managers and why do we have boards? History books are littered with failed companies because the oversight and duty of a board was not fulfilled. How can we, as a mature society, progress and discover new horizons if we are afraid taking a step into the unknown. We would have never landed on the moon if John F. Kennedy did not provide us with the inspiration to think big; he encouraged us (I would even say he intentionally provoked NASA to try harder and win the race against time and USSR efforts) to intellectually to venture into the unknown and discover the limits of our curiosity.

And that level of risk taking and innovative thinking is so conspicuously absent in modern management. No great invention in the history of humankind has ever been made that did not involve a great amount of risk.

A manager's job description will not fundamentally change in the 21st century. Leading, controlling, organizing and planning functions will never change or cease to exist. The future can only be understood if we know the past. We are currently on the edge of a major management paradigm shift.

The full impact of e-commerce on our daily lives and consequently business dealings, unfathomable ten or 15 years ago, has now fully emerged and those who did not prepare to develop a corresponding strategy have either been left stranded or severely weakened. Managers must have a global perspective in their business dealings. Companies of the future will be bigger in terms of market capitalization and penetration – they will permeate and impact on every level of society.

Cross border mergers will be the norm. These mega companies will however be much smaller in terms of permanent employed staff. There will be a core of top line mangers that will be paid according to specialization and their performance. The remaining staff will be employed on a temporary basis thus keeping payroll at a minimum. The most crucial point however is the ability to read the market and having a global vision.

Understanding market trends and consumer behaviour is vital for success. A major demographic shift occurs right in front of our daily lives and social scientists warn us frequently of dire ramification if not addressed. Business leaders, including political leadership, have to realize the consequences inertia will have on the social fabric of a nation. Managers must demonstrate the ability to adapt their organization and their teams to the constant market changes that frequently will occur.

Companies of the future will be even leaner with a flat organisational structure that underscores speedy decision making over prolonged debates. The corporate head office of a multi national company will consist of a small core of highly specialised people coordinating finance, marketing, legal, information and system technology and R&D - but the decision making process will be decentralised to reflect the changing consumer behaviour into several "strategic hubs" close to customers, where the action is.

Exercising mental flexibility, identifying new consumer trends and financial discipline will be key character traits in these new business leaders. The difference between leadership and management will be even more distinct in the future than what it is presently. Managers have to undergo a metamorphosis into highly educated technocrats  with a narrow field of specialisation (it will herald the end of generalists) whereas leaders have to emphasise on forming alliances and creating loose partnerships without compromising their competitive position.

Leaders increasingly have to concentrate on creating sophisticated demand conditions, finding new buyers for their product. This new class of inspirational leaders needs to demonstrate intellectual enthusiasm, passion and creativity in dealing with mid to long-term problems in a highly uncertain and volatile environment. These managers and leaders are in a unique position as they posses the breadth and dept of knowledge of creating an exceptional environment that recognises and nourishes talent and brings out their best in their teams. In such a conducive atmosphere people will feel treasured and secure to pursue their deep intrinsic life goals combined with the strategic objectives of a company.

Software programmers at Apple and Microsoft for instance would fall into this category as well as research specialist for pharmacy and medical companies who have ulterior motives developing cures for the world's underprivileged. These rare managers are the nucleus of an enterprise and will either have a direct stake in the company they manage in form of share options or they own the company outright (Microsoft and Virgin would be classical examples as they demonstrate innovation and cutting edge guest service).

These leaders will be identified by stakeholders as the quintessential company of the next millennium. Without the mental capacity to deal with a variety of complex problems and possessing a curios and inquisitive mind, leaders will be doomed to fail. The moment this flexibility is taken away from an employee (and manager) companies end up sub-optimizing their human performance potential.

Managers need the freedom to operate in their respective environments without being controlled or micro managed. Despite millions of dollars being spent in brain research and understanding the cognitive thinking process the human mind is still a mystery and raises more questions than answers.

Human behaviour is still misunderstood in a lot of companies as human resource professionals lack either the training in psychology and / or behavioural science that is required to take a company to the next level. The success of management has brought us to a surprising paradox: the more we manage the future the less we will need managers to do it. Until recently well managed organisations required managers.

Since the Second World War their number grew faster than any other segment of the working population in industry with the effect of creating more layers of a hierarchy and spinning off a profusion of specialisation. In the past the manager clearly fulfilled a need. He assumed responsibility and co-ordinated tasks, transmitted information, controlled and collaborated and made decisions (as defined by Fayol in the 19th century).

Today, however, these responsibilities are being spread and assimilated throughout the corporate world. The imminent disappearance of managers is a direct consequence of forty years of learning and evolution. Their function in an efficient organisation will have to change. The intrinsic meaning of what it means to be a successful manager will have to be redefined in light of the available knowledge base of the workforce and the changing environment.

Traditionally, managers maintained a role of authority in vertical relationships with power centralised in the hands of a few. With the emergence of a new management paradigm associates have learned to take responsibility and be in charge of their own destiny. They no longer need to be supervised or need the surveillance of an authority figure, they are empowered to make decisions to protect the interest of the company or in favour of the customer.

Among the myriad of responsibilities managers have, one that will be conspicuously dominant is that of a distributor of knowledge and a harbinger of change.

As the worst financial crisis since the great depression in the 30's unfolds the calamity and seriousness sets in among managers. The subprime mortgage crisis as it became known was precipitated by unprecedented greed, risky speculation and highly doubtful investment decisions by 25 year old hedge fund managers that wanted to make a name for themselves.

After all, it was the subsequent run on the banks after the stock market crashed in 1929 that led to the Great Depression – the similarities to what we see now are striking. It is depressing to realize that the treasury department did not learn anything from past precedents. This is the type of crisis that gives birth to a new leadership paradigm. A crisis of this depth and magnitude is also the time where opportunities are created. Instead of focusing on the crisis and its side effects, leaders must see this as an opportunity where new management thinking is tested and required. The old adage that history repeats itself and those who fail to learn from it are condemned to repeat it is true. 

The Roman senator and advocate Cicero, got it right over 2000 year ago when he sad: To be ignorant of what occurred before you were born is to remain always child. For what is the worth of human life, unless it is woven into the life of our ancestors by the records of history?

So after what we have learned in this decade the time is ready for a management renaissance on a similar scope than what transpired during the age of enlightenment in the 18th century? The global business environment does not allow for complacency.

There is no time for nostalgia and denial. Business leaders have to divert yesterday's resources to future success stories. Of all the negative traits that are frequently bestowed on Singapore's leaderships, complacency and basking in yesterday success is certainly not among them. The subject of change is not exclusively reserved for business leaders.

It affects political leaders, from Cuba's Fidel Castro to the Burmese military junta or to the aging North Korean leadership. If they don't embrace change these leaders will have one in thing in common with the dinosaurs – they will disappear. The failure to adapt to a new climate can have catastrophic consequences for businesses.

Dietmar Kielnhofer Ph.D

The author of this article lives in Tokyo and works as a General Manager for a multi national company headquartered in New York whose stock is listed on the New York Stock Exchange. The thoughts expressed in this article are those of the author only. The author can be contacted under kielnhofer@Yahoo.com
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