Professor Julian Birkinshaw: Reinventing Management

Reinventing Management
Professor Julian Birkinshaw

London Business School
And the MLab
1
Purpose of talk
To explain why management needs reinventing,

and to suggest how companies to do so
The talk is in three parts:

─ The failure of management
─ The need for innovation in management
─ What does the future of management really look like?
1. The failure of management
Shockingly poor risk-management

decisions
Perverse incentive systems,
“eat what you kill”
Firm as a vehicle for perpetuating
the raw vices of capitalism
The screen versions of these slides have full details of copyright and acknowledgements
1
The failure of management (2)
The definitive
professionally-managed
company c.1950
Gradually lost touch

with
ith th
the marketplace
k t l
through 1970s/80s
“At GM the stress is not

on getting results — on winning —
but on bureaucracy,
on conforming to the GM System”
Two contrasting management models
Lehman Brothers General Motors
Fluid, flexible, Professionally managed,

entrepreneurial, clear structure,
client-focused, formal systems,
results-oriented
lt i t d t h i l ffocus
technical
But led to greed, But led to lack

arrogance, internal of customer
competition, lack responsiveness,
of concern for risks taken, complacency,
failure to see big picture lack of urgency
5
So what is management?
“Getting work done through others”
“Bringing people together to accomplish

desired goals”
2
But “management” as a concept got corrupted

1. By the rise of the Industrial Corporation
The Industrial
Corporation became
enormously
successful
Creating hierarchical
systems
Management became associated

with management in a big hierarchical company
How “management” got corrupted

2. By the rhetoric of “Leadership”
A manager... A leader...
• copes with complexity • copes with change

John • plans and budgets • sets a direction
• organizes and staffs • aligns people
Kotter
• controls and problem solves • motivates people
• promotes efficiency • promotes effectiveness
• is a good soldier • is his or her own person
Warren
• Imitates • originates
Bennis • accepts the status quo • challenges
• does things right • does the right things
Managers vs. leaders: a false dichotomy;

Executives need to do both parts of the job well
Leadership is a process
of social influence
9
3
The reinvention of management?
We need to recapture the “spirit” of management

– Good executives are leaders and managers
– Management is not just how work gets done in large,
industrial-age companies
We need to become more innovative about management
– Are there new or alternative principles that we can apply
to the challenge of “getting work done through others?”
10
2. Long history of management innovation
1800s Employee Benefits

Assembly Line Pension plans
1900
Scientific Management Industrialization of R&D
1920 Brand Management The multi-divisional structure
Human Relations Movement
1940
TQM / Lean Manufacturing Skunkworks
Outsourcing Quality Circles
1960
Corporate Planning Scenario Planning
Enterprise Resource Planning
1980 Stage-gate investing Quality of Work Life
Business Process Reengineering Six Sigma
2000 Economic Value Added Open Innovation
11
How does management innovation happen?

Consider the balanced scorecard
Motivation Invention Implementation
How do we monitor Art Schneiderman Scorecard is implemented
non-financial as well experiments with and developed inside
as financial metrics? “Corporate Scorecard” the company

att Analog
A l D Devices
i
Validation, labeling
Kaplan writes about
the “Balanced Scorecard”
and attracts interest
from many companies
12
4
Observations from research on the process

of management innovation
Innovation can occur on two levels

– New management practices, ways of working
– New rhetoric, new ways
y of describing
g the work
Most management innovation is incremental,
often using new language to describe old ideas
Radical management innovations are rarely sustained,
and rarely get diffused
13
3. What does the future of management

really look like?
Flat
Decentralised
Empowered
Self-organised
Values-driven
Virtual
Engaged
14
Why has there been so little

management innovation over the last
half-century?
1. Many aspects of our current model of management
are effective and necessary
2. We are “stuck” with an inferior model:
– It suits those in positions of power
– Most of us cannot envision an alternative
– Innovation in management is perceived as risky
3. We have lacked (up to now) the impetus or the enabling
technologies to make significant changes
15
5
A possible way forward:

management as a conscious set of choices
among known alternatives
Business model Management model

Choices firms make about: Choices firms make about:
Sources of revenue Defining objectives
Cost structure Motivating effort
What to make / buy Coordinating activities
How to make a profit Allocating resources
16
A framework for rethinking management
Managing objectives Alignment Obliquity

ENDS
Managing individual
motivation Extrinsic Intrinsic
Managing
MEANS
across: activities Bureaucracy Emergence
Managing
down: decisions
Hierarchy Collective wisdom
17
A framework for rethinking management (2)

ENDS
Managing individual
motivation
Managing
MEANS
across: activities
Managing
down: decisions
18
6
Alignment: is this really how

organisations work?
19
A more oblique path to success…
“Employees First, Customers Second”

Vineet Nayar, President HCL Technologies
Make employees feel wanted

Harness employee’s knowledge and skills
towards the objectives of the company 20
Obliquity pays off

3M
General Electric
Hewlett Packard
Pursuit of
IBM
a higher-order
Johnson & Johnson
vision results in
Marriott
greater long-term
Merck
profitability
Nordstrom
Procter & Gamble
Sony
Walt Disney etc.
21
7

ENDS
Managing individual
Managing
MEANS
across: activities
Managing
down: decisions
22
Extrinsic Intrinsic
Doing work Doing work Doing work

for direct, to gain status for its own sake:
material or recognition, for innate
rewards to fit in pleasure
Extrinsic Internalised Intrinsic

Motivation Extrinsic Motivation
Motivation
(Theory X) (Theory Y)
23
Why do some people work longer hours?
How important is each of the following factors to you?
– Salary
– Benefits
– Opportunities for advancement
– Intellectual challenge
– Level of responsibility
– Contribution to society
– Job security
More
importance
Source: Sauermann and Cohen, 2007 24
8
Why do some people work longer hours? (2)
And which of these actually affects number

hours worked?
– Salary
Positive
effect
– Intellectual challenge
– Level of responsibility
Negative
– Job security
effect
Source: Sauermann and Cohen, 2007

25

ENDS
Managing individual
motivation
Extrinsic Intrinsic
Managing
B
Bureaucracy Emergence
MEANS
across: activities
Managing
down: decisions
26
Drachten, The Netherlands

27
9
Eliminate unnecessary activities
Est
.5.1
Objective: organic growth
Biggest orthodoxy: 4.1
3.5
the budgeting process 3.2
32
2.6 2.6
Solution: elimination
of traditional budgeting,
each desk head now
01 02 03 04 05 06
evaluated on ROI versus
peer units Profit before tax for Wealth
Management (ex US)
28
in CHF Billion
Use “peer pressure” rather than formal rules
• Members of parliament expenses in the UK in 2009
29

ENDS
Managing individual
Managing
M i across:
MEANS
activities
Managing down:
Hierarchy Collective wisdom
decisions
30
10
Hierarchy Collective Wisdom
65% 91%
31
Exploiting collective wisdom at Best Buy
Collective wisdom --- a real world application

in the business set
32
Management model = explicit choices

on these four dimensions

ENDS
Managing individual
Managing
MEANS
across: Activities
Managing Hierarchy Collective wisdom

down: Decisions
Tight means Tight ends
Loose ends Loose means
33
11
Key points on developing your own

management model
There is no one best way

Management models operate at the level of principles
which then drive specific practices
Your management model should be a conscious choice:
– To suit the task at hand, the challenges you face
– To enhance your distinctiveness
34
35
12

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Reinventing Management

Professor Julian Birkinshaw

Professor Julian Birkinshaw

 To explain why management needs reinventing,

 The talk is in three parts:

─ What does the future of management really look like?

1. The failure of management

 Shockingly poor risk-management

The failure of management (2)

 Gradually lost touch

 “At GM the stress is not

Two contrasting management models

Lehman Brothers General Motors

 Fluid, flexible,  Professionally managed,

 But led to greed,  But led to lack

“Getting work done through others”

“Bringing people together to accomplish

But “management” as a concept got corrupted

Management became associated

How “management” got corrupted

• copes with complexity • copes with change

Managers vs. leaders: a false dichotomy;

The reinvention of management?

 We need to recapture the “spirit” of management

2. Long history of management innovation

1800s Employee Benefits

How does management innovation happen?

as financial metrics? “Corporate Scorecard” the company

Observations from research on the process

 Innovation can occur on two levels

3. What does the future of management

Why has there been so little

A possible way forward:

Business model Management model

A framework for rethinking management

Managing objectives Alignment Obliquity

across: activities Bureaucracy Emergence

A framework for rethinking management (2)

Managing objectives Alignment Obliquity

Alignment: is this really how

A more oblique path to success…

“Employees First, Customers Second”

 Make employees feel wanted

Obliquity pays off

A framework for rethinking management

Managing objectives Alignment Obliquity

Doing work Doing work Doing work

Extrinsic Internalised Intrinsic

Why do some people work longer hours?

 How important is each of the following factors to you?

Source: Sauermann and Cohen, 2007 24

Why do some people work longer hours? (2)

 And which of these actually affects number

Source: Sauermann and Cohen, 2007

A framework for rethinking management

Managing objectives Alignment Obliquity

Drachten, The Netherlands

Eliminate unnecessary activities

Use “peer pressure” rather than formal rules

• Members of parliament expenses in the UK in 2009

A framework for rethinking management

Managing objectives Alignment Obliquity

Hierarchy Collective Wisdom

To explain why management needs reinventing,

The talk is in three parts:

Shockingly poor risk-management

Gradually lost touch

“At GM the stress is not

Fluid, flexible, Professionally managed,

But led to greed, But led to lack

We need to recapture the “spirit” of management

Innovation can occur on two levels

Make employees feel wanted

How important is each of the following factors to you?

And which of these actually affects number

There is no one best way