The End of Management

Wall Street Journal Deputy Managing Editor Alan Murray has an excellent essay in the paper today titled "The End of Management: Corporate bureaucracy is becoming obsolete. Why managers should act like venture capitalists."  It stunned me in its alignment with the Bossless Organization (aka Organization 2.0), all the way down to the venture capital model and entrepreneurial, ad-hoc teams of peers.

It starts by arguing that, if management of the corporate bureaucracy was the most important innovation of the 20th century (Drucker), changes in the 21st century are rapidly making it obsolete: globalization, accelerating innovation, relentless competition, rapidly changing markets - they simply can't adapt fast enough. That's half of the problem - the other half is rapidly dropping transaction costs reducing the need for large, bureaucratic corporations (a la Ronald Coase). Mass collaboration is now easily accessible and affordable via the Internet. He then moves on to what's next:

...the trends here are big and undeniable. Change is rapidly accelerating. Transaction costs are rapidly diminishing. And as a result, 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 21st century change.
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The new model will have to be more like the marketplace, and less like corporations of the past. It will need to be flexible, agile, able to quickly adjust to market developments, and ruthless in reallocating resources to new opportunities.
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This is the core of the innovator's dilemma. The big companies Mr. Christensen studied failed, not necessarily because they didn't see the coming innovations, but because they failed to adequately invest in those innovations. To avoid this problem, the people who control large pools of capital need to act more like venture capitalists, and less like corporate finance departments. They need to make lots of bets, not just a few big ones, and they need to be willing to cut their losses.

The resource allocation problem is one Google has tried to address with its "20%" policy. All engineers are allowed to spend 20% of their time working on Google-related projects other than those assigned to them.
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In addition to resource allocation, there's the even bigger challenge of creating structures that motivate and inspire workers. There's plenty of evidence that most workers in today's complex organizations are simply not engaged in their work. Many are like Jim Halpert from "The Office," who in season one of the popular TV show declared: "This is just a job.…If this were my career, I'd have to throw myself in front of a train."

The new model will have to instill in workers the kind of drive and creativity and innovative spirit more commonly found among entrepreneurs. It will have to push power and decision-making down the organization as much as possible, rather than leave it concentrated at the top. Traditional bureaucratic structures will have to be replaced with something more like ad-hoc teams of peers, who come together to tackle individual projects, and then disband.
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The new model will have to go further. New mechanisms will have to be created for harnessing the "wisdom of crowds." Feedback loops will need to be built that allow products and services to constantly evolve in response to new information. Change, innovation, adaptability, all have to become orders of the day.

Can the 20th-century corporation evolve into this new, 21st-century organization? It won't be easy. The "innovator's dilemma" applies to management, as well as technology. But the time has come to find out. The old methods won't last much longer.

Hear, hear!

The workforce disengagement problem

Came across this post on the problem of widespread disengagement in the workforce, based on a Towers Perrin Global Workforce Study. The excerpt:

Just 21% of the employees surveyed around the world are engaged in their work, meaning they're willing to go the extra mile to help their companies succeed. Fully 38% are partly to fully disengaged. The result is a gap - which Towers Perrin has dubbed the "engagement gap" - between the discretionary effort companies need and people actually want to invest and companies' effectiveness in channeling this effort to enhance performance.

The study found that companies with the highest levels of employee engagement achieve better financial results and are more successful in retaining their most valued employees than companies with lower levels of engagement.

"It's impossible to overstate the importance of an engaged workforce on a company's bottom line," said Julie Gebauer, managing director and leader of Towers Perrin's Workforce Effectiveness consulting practice. "The Global Workforce Study establishes a definitive link between levels of engagement and financial performance and, for the first time, begins to quantify that link. It demonstrates that, at a time when companies are looking for every source of competitive advantage, the workforce itself represents the largest reservoir of untapped potential."

The most striking data about the linkage between employee engagement and financial performance come from a study of 40 global companies which involved a regression analysis of company financial results against engagement data. It found that firms with the highest percentage of engaged employees collectively increased operating income 19% and earnings per share 28% year to year. Those companies with the lowest percentage of engaged employees showed year-to-year declines of 33% in operating income and 11% in earnings per share.

OpenTeams increases employee engagement by helping them self-organize into entrepreneurial teams around innovative ideas. Entrepreneurs are the personification of "engagement," and having more of that spirit within an organization can do wonders for motivating employees to tap their full potential.

Opportunistic Innovation as Strategy

Caught this book review of "Strategic Intuition" in the Wall Street Journal, which is a great fit with what OpenTeams can do for your company:

Set big goals. Do whatever it takes to reach them. These muscular sentences form the core of commencement addresses, business-advice books, political movements and even the United Nations approach to global poverty. In "Strategic Intuition," a concise and entertaining treatise on human achievement, William Duggan says that such pronouncements are not only banal but wrong.

Mr. Duggan, who teaches strategy at Columbia Business School, argues that the commonplace formula has it backward. Instead of setting goals first, he says, it is better to watch for opportunities with large payoffs at low costs and only then set your goals. That is what innovators throughout history have done, as Mr. Duggan shows in a deliriously fast-paced tour of history.

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One of the insights of "Strategic Intuition" is that business makes progress by following the opportunistic innovation model, while governments and international-aid agencies aim repetitively at rigid social goals.

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If there are still businessmen who feel compelled to follow a fixed-goal plan -- missing out on the profits of opportunistic flexibility -- then at least there is the free market to punish them. Market feedback is surely one big reason that we have so many innovative entrepreneurs.

Of course, OpenTeams is a great environment for sparking and developing opportunistic innovation options by tapping the wisdom and insights of employees at all levels.

Next wave of tech-driven productivity = Enterprise 2.0

This is an essay I recently wrote for a local publication on the potential benefits of the Enterprise 2.0 movement, especially to boost U.S. productivity from recently lackluster levels. And, of course, OpenTeams is the perfect tool to drive these sorts of benefits in any organization.

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American business is facing a productivity crisis. Last year, U.S. productivity increased an anemic 1.6% – half the 3-4% annual rates of the previous decade, driven by technologies like business process automation and the Internet. Those technologies have reached saturation, and if the next tech wave doesn’t arrive soon, our economic growth and the quality-of-life improvements it affords will suffer.

This crisis is particularly acute in Houston, where the new energy boom has run up against a tight labor market, and talent constraints prevent companies from fully seizing new opportunities. The renewed focus is productivity: how can we get more out of our organization? Especially when it comes to what McKinsey calls “tacit interactions” – complex collaborative problem-solving – the type of work that has traditionally been resistant to productivity-increasing technological process automation like manufacturing and many services.

Almost everyone feels the primary symptom of this failure: email overload. Collaboration is more important than ever, but email is showing its inadequacy to the task, with overflowing inboxes, the spiraling “Cc: CYA” problem, out-of-sync file attachments, and the lack of any organized, up-to-date, persistent, transparent institutional memory or knowledgebase.

The technological answer is slowly migrating over from the consumer side of the Internet, collectively known as “Web 2.0”. If “Web 1.0” was static web sites, “Web 2.0” is all about interactivity and communities: blogs (short, frequent, easy publishing), tags (community-driven categorization of information), social networking (like MySpace, Facebook, or LinkedIn), and wikis (web-sites easily editable by anyone, such as Wikipedia, the rapidly growing global encyclopedia).

The application of these Web 2.0 technologies in businesses has been termed, naturally, “Enterprise 2.0”. Dr. Andrew McAfee of the Harvard Business School defines Enterprise 2.0 as “the use of emergent social software platforms within companies, or between companies and their partners or customers.” He further clarifies two key words in that definition:

1. “Platforms are digital environments in which contributions and interactions are globally visible and persistent over time.” (as opposed to email)
2. “Emergent means that the software is freeform, and that it contains mechanisms to let the patterns and structure inherent in people’s interactions become visible over time.” (like with tags or links; and freeform, as opposed to process-oriented workflow, traditional pre-structured knowledge management software, or narrow project-oriented groupware)

These technologies are just starting to be piloted inside companies, but the impact can be dramatic. Some groups using wikis for collaboration have reported email reductions of one-third, meetings and conference calls cut by half, project cycles accelerated by 25%, and even an overall doubling of group productivity. These results make Enterprise 2.0 a prime candidate for the next great tech-driven productivity boom, finally “cracking the code” on accelerating and improving tacit interactions.

The benefits go beyond productivity, impacting areas like innovation, knowledge management, and telework.

In a globalizing economy of fierce competition, commoditization, and cost pressures, innovation has become the new mantra to stay ahead of China and India. And not just product innovation, but bottom-up innovation in processes, costs, service, quality, speed, sales, supply chains, and even business models. Enterprise 2.0 tools create the perfect incubator environment for ad hoc global teams to collaborate on innovative ideas.

In addition to increasing productivity and fostering innovation, Enterprise 2.0 tools are even reviving the field of knowledge management from a decade of high-profile failure (“Knowledge Management 2.0,” anyone?). The lack of incentives and rapidly stale information hobbled such efforts in the past, but because tools like blogs and wikis are integrated into daily work, they overcome these problems and emerge into the “collective intelligence” knowledgebase companies always knew they wanted, but couldn’t quite achieve.

Finally, Enterprise 2.0 software is a great enabler of telework by our newly virtual workforce, whether on the road “living out of a laptop” or working from home. Today companies like Sun and Agilent report that their virtual workforces are 60% less expensive while being 15% more productive. Some experts believe we are at a “tipping point” in the rise of this phenomena, and 40% of the workforce may work this way by 2012.

Collaboration. Productivity. Innovation. Knowledge management. Telework. The benefits of the Enterprise 2.0 movement are both broad and deep, enabling the flexible, adaptive corporation of the 21st century. Make sure yours doesn’t get left behind.