THE BANKRUPTCY of General Motors was a defining moment - in effect a symbolic final line under the management century that began with the invention of mass production and was brought to an end by the series of explosions that blew up the financial sector.
The latter, ironically, was supposed to be the future, a weightless economic and employment successor to limping manufacturing. Only it wasn't. Meet the new economy, same as the old one except on steroids, which just intensify rather than dampen down the destructive effects.
GM's demise comes after the longest death scene in history. Its heyday was the postwar period up to the 1970s, when, to a degree unmatched before or since, this one company was management. Peter Drucker, the discipline's first and most respected chronicler, wrote the seminal Concept of the Corporation after observing the company for two years in the 1950s, and its pioneering multidivisional structure - with a separate division corresponding to each market segment, from Chevrolet to Cadillac - had a huge influence on the shape of other large firms.
In contrast to the maverick entrepreneur Henry Ford, who had little time (or need) for management, GM was the embodiment of what the great historian Alfred Chandler dubbed "the visible hand" - the revolution that substituted rational administrative co-ordination for market forces to drive productivity up and costs down systematically. In the 1950s, GM was the biggest and most successful company in the world.
But its days were numbered as the car industry became global and world supply started to outstrip demand. GM's formula took Ford's mass production to new heights. It built so many cars so cheaply that even if they weren't what buyers really wanted, it could shift them by cutting prices and advertising heavily. But just as GM had undercut Ford's management model, GM's was destroyed. Japanese companies figured out how to make cars in small quantities equally cheaply and of higher quality and, being much more attuned to what customers wanted, they rarely had to discount to get rid of surplus inventory. Economies of flow and market pull replaced economies of scale and marketing push.
Since the decline really set in during the 1980s, GM has staggered from one crisis to another. Automation, changes at the top, new brands - nothing has turned the tide some of its brands now have negative value. But this is not surprising: GM's management model is as obsolete as fins, chrome and whitewall tyres. It has been kept on the road only because, like the banks, it was too big to be allowed to run off it.
All companies are collections of subsystems within a bigger one, which in turn operates within the ecology of the market as a whole. At its height in the 1950s and 1960s, GM's parts all worked in harmony with the market. Since then, the market has radically altered, and the set of accountabilities that worked in the past has driven them ever further in the wrong direction. Neither the parts nor the whole are now functional, and a small GM is a contradiction in terms barring a miracle, the only future for the surviving marques (probably Cadillac and Chevrolet) will, like Opel and Vauxhall, be in the bosom of an acquirer.
It would be nice to think that with its chief protagonist humbled, the GM management model could be buried, the page turned and a new one started. Unfortunately, it has developed a potent half-life in the services sector. With the development of computers and the internet, financial services and communications companies have been sold a vision of services mass-produced like consumer products, with a virtual supply chain linking low-cost suppliers around the globe.
Alas, the template is usually pure GM. The emphasis on economies of scale and low transaction costs achieved through specialisation and standardisation exactly parallels the obsessions of the bankrupt US carmaker. The result is white-collar factories like HM Revenue and Customs, the Department for Work and Pensions and the Probation Service, which are as inflexible, error-prone and customer-unfriendly as any car assembly plant.
But the mass-production analogy is false. Services can and should be systematised , not industrialised. The idea of mass production leads up a blind alley back to the past. The wide variety of service demand means that the standardise-specialise-automate formula can't work. Services can be produced economically, but they need well-organised humans, not computers, to do it.
Services are the most likely place to develop a post-industrial management model, one that is more sensitive to customers than mass production, more responsible than the financial services industry, and less wasteful than either. To do that, though, the first imperative is to dismantle the legacy of GM. RIP