A Wall Street Journal article titled, The End of Management, offers an argument for the need of management of (big) business organizations to change stating “everything we learned in the last century about managing large corporations is in need of a serious rethink. We have both a need and an opportunity to devise a new form of economic organization, and a new science of management that can deal with the breakneck realities of the 21st century change.” It seems the assumption is that until the 21st century, the traditional management method was aligned. It is only because of 21st century’s apparent rapid change environment that we need to change the way of managing.
The article also claims that traditionally managed corporations served the rise of the middle class in the 20th century “bringing luxury to the masses.” Did the 20th century see the rise of a middle class? Absolutely! But drawing the conclusion that the greatest cause or single cause of this was the way corporations were managed during the 20th century is an oversimplification, and possibly even misguided.
The middle class did not truly rise up until the post World War II era. And since the early 80’s the conditions of the middle class have been declining, while the conditions for the top 10% household incomes have been increasing. Why didn’t the same methods of corporate management influence a rise of the middle class prior to the late 40’s? Why didn’t the same methods of corporate management sustain the rise after the early 80’s?
Middle Class Emergence
So what was also going on during the some 30 years of the post World War II period? America was the only one left standing with an intact manufacturing base. And so, by default, America became the world’s producer. Of course America’s corporations were prospering! A critical element not mentioned in the Wall Street article is the Servicemen’s Readjustment Act of 1944 (i.e. the GI Bill). The GI Bill afforded education, training, loan guarantees for home, farm and businesses and unemployment pay thus significantly contributing as a cause of the rise of a middle class life style. Post World War I era had 20th century management but it did not have the GI Bill, and there was no rising middle class.
Given the premise that the 21st century is characterized by rapid change, seemingly 20th century corporate management would be all right if only it was faster to adapt. Why isn’t it faster? Because its’ inertia requires too much effort for too long of a time period to effect productive change. This is another way of saying those in authority are far too invested in what has been, thus enabling it to continue to be what is. When what has been equates to what will be, the realization of potential becomes impossible. [Perhaps this also explains why 20th century management shunned the notion of quality for so long.]
But the dawning of the 21st century is not the first challenge and opportunity for corporate management to improve. Early in the 20th century Mary Parker Follett put forth the ideas of the benefits of cooperation, diversity and process in managing organizations. Yet corporate management paid no attention. Grounded in the fallacy that competition brings out the best in people, traditional management remains well entrenched in the hearts and minds of those in authority of most corporations.
Its has been almost 100 years since Follett put forth the idea that cooperation outperforms competition, yet few have even sought to understand and embrace the idea. Similarly in the post WW II era Sarasohn, Deming and Juran offered similar approaches that have yet to be understood and embraced, though their effectiveness has been demonstrated thanks to the many Japanese companies that put them to practice. Why? Very likely these management practices required those in authority to cease their material self-interested ways. They require courage calling upon those in authority to develop their humanity and acknowledge their responsibility to employees, customers, suppliers and society, thus putting an end to a control-focused ego-centric way of managing. The Wall Street article was right when characterizing the corporations’ and their managers’ saying the “fundamental tendency is toward self-perpetuation. They are, almost by definition, resistant to change.”
The Wall Street article was however mistaken in attributing the cause of “missed disruptive innovations” by market-leading companies to listening “closely to their customers.” As Deming had often said (and I paraphrase) customers don’t know what the corporate capabilities are; customers don’t ask for specific innovations. Did a customer ask for an airplane, a house air conditioner…? Why so many organizations missed opportunity is not because they listened to customers, it is because they were paralyzed by their own paradigm—stopping themselves from realizing opportunity in something other than what they’ve been doing. Their very way of managing inhibited creativity and impeded the flow of ideas. Moreover their short-term focus of attention on profit made them afraid to innovate.
Organizations, such as the SAS Institute Inc., have been managed differently since their inception and have remained so through their market growth. Why? In the case of SAS, Jim Goodnight (founder, CEO) is committed to “treat employees as if they make a difference” and not as instruments or objects in serving the material self-interest of management and the corporation. Moreover keeping it privately held has enabled the SAS Institute Inc. to avoid being misdirected by the short-term material growth demands of Wall Street. Any corporation can change the way they are managed if they choose—if they refuse to align with the irrational dictates of Wall Street.
While the article talks of “the rise of mass collaboration as the new form of economic organization” this is not at all new since it has been put forth by many throughout the previous century. The obstacle to fundamental change in management theory and practice remains: it is the very precept underlying the economic system.