Author: GARY HAMEL
Review: NYTIMES
This book comes at a time when American companies face a new avalanche of competition from China and India, as well as entrenched competition from Japan and Western Europe. Mr. Hamel, a co-founder of the Management Innovation Lab, offers a way for business leaders to face this onslaught through what he calls “the technology of management.”
If companies now innovate by creating new products or new business models, he asks, why can’t they do the same in how they manage organizations? Might not a more modern approach to management be just the ticket to keep American companies ahead of their global competitors? This would entail moving from a century-old command-and-control model to a more latticed, networked style of organization.
If industrialization and world wars created one model of management hierarchy shared by business and the military, perhaps the next set of management ideas should be spawned by the Internet and the upheaval it has prompted in how humans think about information and community.
Mr. Hamel, who wrote this book with Bill Breen, critiques three companies that he argues may be harbingers of the future: Whole Foods Market, W. L. Gore & Associates (a privately held company that invented Gore-Tex, among other products) and Google.
Whole Foods has organized itself into roughly eight teams at individual stores, all of whom have the mission of improving the food that Americans eat. These teams, which have the right to hire and fire their own members, are given wide latitude about what to stock on the shelves and how to manage their stores as a whole.
But their performance numbers are open to all to behold, and their compensation is strongly linked to team, not individual, performance. “Unlike so many other companies, front-line employees at Whole Foods have both the freedom to do the right thing for customers, and the incentive to do the right thing for profits,” Mr. Hamel writes.
The fact that front-line employees are empowered to respond to the changing tastes of finicky shoppers is powerful. “In a more hierarchical company,” Mr. Hamel argues, “top management only sees problems once they’ve become pervasive and, therefore, expensive to fix.”
At Gore, which was founded by a former DuPont executive in Newark, Del., teams that are small, focused and self-managing have wide latitude to pursue new ideas. Their products have shown up in things as diverse as surgical meshes implanted in medical patients and space suits worn by NASA astronauts. Employees have “dabble time” to pursue their own ideas and are given permission to push back against those in power above them.
Mr. Hamel writes that companies organized in this way challenge the very notion that a manager is “above” in the hierarchy and that a researcher is “below.”
As has been widely reported, Google also creates small teams of bright people who are encouraged to pursue seemingly wild ideas. It embraces the 70-20-10 rule — that the company should devote 70 percent of its engineering resources to its base business, 20 percent to services that might expand from that core and 10 percent to “fringe” ideas.
To his credit, Mr. Hamel doesn’t fall completely for the Googlemania dominating headlines these days. “Despite its innovation-friendly management model, Google’s fortunes are still tied to one business: search-driven advertising,” he says. “Odds are, Google will never find another Google, since truly revolutionary, global-scale business models don’t come along every day, or even every decade.”
Whatever shortcomings Google may have, Mr. Hamel argues that these innovative companies realize that employees should not be treated like 13-year-olds who need clear boundaries on their freedom. Employees are on the front lines and are often closest to customer needs. As a result, they should have power to reveal to their hierarchies what products and services are needed, and they should be involved in deciding how the company’s time and money are spent. Moreover, they should be pursuing a passion or a mission, not just quarterly profits.
The implication of all this is that we don’t need as many managers in organizations. Yes, we still need some managers and some centralized processes to prevent an organization from spinning wildly in all directions. But the best organizations will be those whose employees have the power to innovate, not just follow orders from on high, Mr. Hamel says. In such an environment, the notion of a whole class of managers evaluating and re-evaluating each action of those below them in a vertical hierarchy becomes nonsensical.
Some major companies are already experimenting with these ideas. I.B.M., for example, had an online “innovation jam” in 2006 in which 100,000 employees, customers, consultants and others sought to communicate their views to Samuel J. Palmisano, the chief executive. Top management gave funding to the best ideas. I.B.M. also encourages its researchers to make decisions about what projects to pursue, without being ordered to do so.
If American companies could achieve the right balance between grass-roots initiative and centralized control, between the pursuit of noble missions and quarterly profits, the results could be a management system that would be very hard for competitors to copy. Chinese companies, for example, would find it much harder, if not impossible, to adopt management models that challenge their own brand of top-down management, a cross between Confucius and Mao.
As insightful as Mr. Hamel’s book is, it’s surprising that it has attracted so little attention since being published in October. One part of the explanation is that it represents an assault on business schools, which obviously specialize in training managers who go on to enjoy rich salaries. Mr. Hamel has the audacity to point out that some of the best, most innovative ideas in business these days are not coming from business schools, but from people who never went to B-school. Every hierarchy, it seems, scorns fresh thinking.
Review: Management Today
His new book, ‘The Future of Management’, takes on perhaps the most ingrained orthodoxy of all – the concept of management – and says we need to reinvent it. Hamel’s agenda is ambitious and daunting, but the underlying logic is compelling, and deserves to be taken seriously.
The basic argument of the book is that the core practices of management – from capital budgeting, to talent management, to reporting structures – were all invented some 100 years ago to allow the companies of that time to deliver standardised, mass-produced outputs for a rapidly-growing market. The underlying principles of hierarchy, bureaucratic control, and pay-for-performance worked well when the objective was efficiency. But today companies need to deliver on a broader set of objectives, and they need to be far more creative than their forebears.
So rather than force-fit our old management practices to the needs of today’s companies, we should actually develop a new set of practices – based on new principles such as community, variety, and creativity.
Hamel argues, in other words, that management innovation is a greater potential source of competitive advantage and a superior engine for productivity growth than traditional notions of product or technological innovation. Building on historical as well as contemporary examples, he shows how firms have stolen a march on their competitors through the uniqueness of their management model, and their dedication to continually improving it.
GE and Procter & Gamble are two of the ‘serial’ management innovators he identifies, and there are entire chapters in the book about the distinctive models developed by Google, WL Gore, the company behind Gore-Tex and a host of other innovative fabrics, and the US supermarket chain Wholefoods.
Hamel also lays out a basic recipe for becoming a management innovator. As in his earlier book, ‘Leading the Revolution’, his target audience is not just top executives. Instead, he argues that any individual can –and should - look for opportunities to experiment with new ways of working. So as well as describing IBM’s root-and-branch rethinking of its business development process, which took two years and involved a dozen senior executives, he also describes the fascinating case of Jeff Severts, a vice president of consumer marketing at US electronics retailer Best Buy, who with $50 and a few days of his time put in place a small experiment in forecasting sales numbers that is still reverberating today.
‘The Future of Management’ is a very good read. Hamel writes beautifully – far better than your average management author – and the examples are resonant and contemporary. In fact, it’s almost too slick – the metaphors and examples come thick and fast, the arguments are carefully and tightly woven, but it is very hard for the reader to retain the capacity for critical analysis.
‘The Future of Management’ faces two lines of critique. Some readers will say that management cannot be reinvented – we have hierarchy and bureaucracy for good reasons, the current model works better than any other, and we have –in Francis Fukayama’s terms – reached the ‘end of history’ when it comes to the evolution of management. This is a reasonable challenge, and the fact that many of the examples in the book are drawn from small internet-age companies adds further fuel to the sceptic’s concern that large organisations cannot be rewired.
Hamel’s answer to this challenge is, in essence, that we created these systems, so we can recreate them. Our current models of capital allocation and performance management are not defined by laws of nature; they are human constructions. So if we have sufficient collective will, and a better set of principles, why should we not make the fundamental changes that are needed?
Hamel admits he is an idealist in pursuit of a ‘romantic’ goal. He simply wants to make the business world a better place, and you don’t have to go with him all the way to buy the basic argument that we can improve the quality of management in our large companies.
Other readers may feel that ‘The Future of Management’ is just empty rhetoric – easy to say, but very difficult to do. But here Hamel is on fairly solid ground. Unlike many management writers, he has always attempted to practice what he preaches. He founded Strategos in the mid 1990s to help companies become business innovators. And now he has founded the Management Innovation Lab (MLab) as a collaborative venture with London Business School, UBS, and other partners yet to be named. Its goal is to create ‘an inflection point in the evolution of management’ by working with companies to create new management practices. You can question how close he will get to this audacious goal, but don’t criticise him for lack of effort.
Julian Birkinshaw is a professor at London Business School, and is affiliated with the Management Innovation Lab.
