Our management theory is crazy!
As the Covid19 crisis unfolds, we feel helpless as we watch governments and businesses flounder or react with cold, narrow self-interest, stranding millions in the face of the epidemic and then miring them in the coming recession. Was the West always this hapless in the face of unforeseen circumstances and unfavorable odds?
We act on what we believe — our theories matter because they define how we frame problems and where we look for answers. Looking back at the previous century, governments were able to put together the New Deal, Allied Command during WWII, the Marshall plan, and construct Europe from the ruins of the war. We were not always this incapable.
People then, however, had very different beliefs about how to manage organizations and respond to events. Without a time machine it’s impossible to know how people thought then — all we now have are the record of their decisions and the accounts of their thinking. Still, we can look at what theories were popular at the time, as a reflection of the general thinking and mood towards topics, such as management.
In 1938, Chester Barnard wrote The Functions of the Executive, one of the most influential books on management — influence that has waned with time, but that struck a deep note in its day. His premises were threefold. First, organizations are cooperative systems. Second, an organization is effective if it can be efficient in satisfying individual motives of its members. Thirdly, commands from the top are obeyed inasmuch as people accept their authority and find them legitimate and sensible. This outlook on organizations fully integrates human motivations in 1/ defining goals according to their local (and limited) perspective and 2/ acting with opportunism both in terms of the situation and what is demanded by the chain of command.
In the second half of the century, when the main issues were first reconstruction, and then exploitation, of global markets, this theory was progressively replaced by management-by-objectives first outlined by another seminal management thinker, Peter Drucker, in his 1954 landmark book The Practice Of Management. The renewed focus on objectives set by the chain of command through functional silos progressively became so dominant that the skills and practices of cooperation disappeared to be replaced by rigid cross-functional processes, now supported by hard-coded IT systems. This thinking resulted in the management we now take for granted:
· Strategic objectives defined in isolation by senior leadership
· Cascaded through the ranks as financial objectives supported by pay-for-performance
· Enacted through rigid IT processes and controlled by endless reporting
This is crazy.
Such a theory of management fits perfectly the growing dominance of finance where all situation can be expressed as financial ratios to be optimized and where the resulting action plans can be imposed on people no matter what the consequences, since financial rewards to top management are guaranteed regardless of success or failure. Consequently, senior leaders no longer need to consider worker motivation or engagement, that indeed are at records lows as the oft quoted Gallup studies show (https://www.gallup.com/workplace/236495/worldwide-employee-engagement-crisis.aspx)
Our current brutal awakening is that this worldview falls dramatically short of solving any real world crisis.
We need to recognize again that the critical success factor to any crisis is cooperation. This is something we knew — and forgot.
Our inability to coordinate, unfortunately, has been revealed starkly by the Covid19 epidemic. Governments have fumbled supply chains of key protective and testing equipment. Firms wonder how they’re going to manage large numbers of remote workers. Indeed, we discover that companies already working in full remote modes before the crisis have used digital tools to enhance collaboration, rather than reproduce remotely traditional command-and-control structures.
Hopefully, this coronavirus will pass. Many will mourn its victims, and get back to business as usual — but should we? Whether the virus is here to stay or will disappear soon, it has already reveal the fragility of our organizational structures. If we want to take stock and rebuild, we need to challenge our profound assumptions about how organizations grow and prosper.
To face global threats such as the pandemic and the following recession, we need to come to our senses and see our crazy management theories for what they are — financial wishful thinking that deny the free will and autonomy of individuals. We need to rediscover how to build collaborative systems and learn to manage coordination and motivation, rather than command and control. We need to rewrite the management handbook and look at the obvious: to succeed we need initiatives, improvement and engagement from everyone, every day, and fully realize that people matter!