Like Hemingway’s bankruptcy, the collapse of the conventional management model has come in two ways – ‘gradually, then suddenly.’
In obvious decay since the financial crash of 2008, although the rot had set in long before that, management as we know it has finally been finished off by covid.
It’s as if a switch has been turned. As Gary Hamel reflected at this year’s Global Peter Drucker Forum at the end of October, everything we thought we knew about management has been derived from observation of organisations that came into being in the first Industrial Revolution. It was perfected against the bureaucratic template of the early 20th century and locked into place since the 1970s by the toxic doctrine of shareholder value.
The pseudo-scientific pretensions of this technocratic, numbers-driven and inhuman model have been stripped bare by a pandemic that has systematically inverted the values it embodied. Human cooperation has been more use than competition – and should have been pursued much more at international level. Centralisation and scale have been no match for a nimble disease which strikes one person at the time (witness the failure and waste in our huge outsourced testing and test-and-trace centres); and above all, it has reasserted in the most basic of terms the centrality of people.
One of the flaws of the exclusive focus on shareholders is that it disables companies' auto-immune systems, blinding them to their own long-term interest. Covid reminds companies that they need people to be employed and paid not just to solve problems and make stuff, but also to buy it. Absent people with jobs, governments have to invent surrogates in enormous stimulus and recovery programmes, as now. Welcome back, employment policy.
At the same time, the pandemic underlines how dangerously out of kilter we have allowed our value system to become. As Mark Carney is exploring in his current Reith lectures, the market as currently constituted overvalues the present at the expense of the future, and undervalues essential work like care, transport and other basic service to the benefit of a host of inessential ones. Hence our bullshit economies, built on work that is often not worth doing. This too is due for a reset.
But it’s at the company level that divergence between old and new is most spectacular. The recent online Drucker Forum got off to an electrifying start (I mean that) by showcasing a number of companies that unlike struggling competitors are sailing unscathed through covid not only while ignoring conventional management practices, but because they ignore them.
Among the five presenting firms – Nucor (US), Buurtzorg (Netherlands), Michelin (France), Handelsbanken (Sweden) GE Appliances (Sino-US) – only Buurtzorg, the Dutch nurse-run healthcare operator, is a start-up, the rest being solid corporate citizens of many years standing. They prove that it is perfectly possible to ‘transform’ – to use a catastrophically traduced word – if, but only if, managers throw off the blindfold of the old and devote as much attention to management innovation as they do to product and technology development, attempting to make their companies as inventive and creative as their employees are.
Currently, that’s a big ask. At a time when we need to harness every scrap of human ingenuity – and when three new vaccines stand as shining testimony to what can be achieved when that happens – it should be a global emergency that 80 per cent of workers think their opinions are disregarded at work; 70 per cent of jobs require little or no ingenuity; and just 18 per cent of workers are engaged at work – present physically but absent (at best) mentally. Baldly, companies in their present form squander much more human capacity than they use, or than we can afford.
As amply shown by the Forum five, it doesn’t have to be like that. Buurtzorg and Handelsbanken, the Swedish bank, are already rightly well known. Buurtzorg, now 15,000 nurses strong, continues to attract a further 100 recruits a month, and as it expands is starting to transform the Dutch healthcare model from the inside. Handelsbanken’s decentralised, relationship-based banking model ensures that it can respond instantly to its customers’ changing circumstances – one reason it has outperformed its Swedish rivals for the 49th year in succession.
As for the others, disparate as they are in culture, history and nationality, they are united in an unshakable belief that success is driven by people. This is absolutely nothing to do with being ‘nice’. It’s the conviction that ‘27,000 minds are more powerful than any single one,’ in the words of former Nucor CEO John Ferriola. Ferriola talks of a ‘chain of trust’ in which top management's job is to build teams rather than products, and then provide the environment in which they can focus single-mindedly on the effectiveness that makes Nucor ‘the safest, highest quality, lowest cost, most productive and most profitable steel and steel products company in the world’.
‘Never underestimate the casual genius in every human being’, says Florent Menegaux, CEO of 130-year-old Michelin, the French tire-maker – while admitting that most of the time corporate bullshit stifles them from using it. Starting from small experiments, Michelin is now riding an upsurge of frontline improvement welling up from below. Menegaux now sees his mission as taking the stress out of operational pressures – including on middle managers – and feeding energy back. The manager takes care of the team; the team takes care of everything else, as one slogan neatly puts it.
At GE Appliances the divergence from management's mainstream is even more dramatic. When the traditionally run white-goods maker was sold to China’s Haier in 2016 the culture shock was colossal. It didn’t realise it, but the company ‘was slowly dying’, in the words of CEO Kevin Nolan, strangled by its 100-year past. Now broken up into ever smaller micro-enterprises, a re-energised GEA is thriving like never before. ‘We need more ceos!’ says Nolan. ‘It sounds counterintuitive, but you have to get more ceos within your company. You have to let people control their future and their decision-making to unlock their creativity.’
The reason why these companies have done so well during the pandemic is blindingly clear. Simply put, their decentralised structure and carefully fostered cult of trustworthiness means that their people don’t have to wait for orders from above – they know what to do and do it. At Handelsbanken, local knowledge and branch responsibility for all lending translates into a fraction of the bad loans of rivals during the crisis. GEA’s ambition of ‘zero-distance’ formalises its recognition that closing the gap between the enterprise and its true boss, the customer, is a key metric of success. Nolan notes that without central direction GEA’s micro-enterprises were solving issues daily ‘at the speed of the market’; under covid they see the future as brighter than at any time in the company's history.
To achieve zero distance with the customer, omission – eliminating what gets in the way – becomes as important as commission. What gets in the way is management. Buurtzorg has a slide entitled ‘what we don’t do’ that lists ‘management meetings, policy notes, strategic documents, HR strategies, year plans, and other useless things’. The latter include budgets and intermediate goals like targets, two things that Handelsbanken also eschews. Threats and opportunities don’t come in 12-month packages, so why should decisions?
As the technology of human accomplishment, ‘management sets the outer limits on what we can do as a species. It is humankind’s most important technology’, Hamel noted at the Drucker Forum, channelling Drucker himself. After a long pause, companies like those described (among many others) are beginning to test those limits, as they do so redefining management’s fundamental laws along human rather than economic metrics.
Unlike sheer physical size, trust and decentralisation appear to scale without diminishing returns. Effective relationships trump efficient transactions. Companies succeed by working with the grain of the ecosystems they operate in, not against them. Zero (response time, distance from the customer, management itself) is often the best score. IT in the background, not the foreground. Having spent the last 40 years trying to eliminate all traces of the human, companies are belatedly beginning to realise that it’s when they betray the human that things start to go wrong. With that established, perhaps management at last has a chance to live up to the gurus' claims for it.