Reinventing Management

Professor Julian Birkinshaw

Reinventing Management

Professor Julian Birkinshaw

London Business School
And the MLab
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Purpose of talk

ƒ To explain why management needs reinventing,

and to suggest how companies to do so

ƒ 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

ƒ Shockingly poor risk-management

decisions
ƒ Perverse incentive systems,
“eat what you kill”
ƒ Firm as a vehicle for perpetuating
the raw vices of capitalism

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 Reinventing Management
Professor Julian Birkinshaw

The failure of management (2)

ƒ The definitive
professionally-managed
company c.1950

ƒ Gradually lost touch

with
ith th
the marketplace
k t l
through 1970s/80s

ƒ “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

ƒ Fluid, flexible, ƒ Professionally managed,

entrepreneurial, clear structure,
client-focused, formal systems,
results-oriented
lt i t d t h i l ffocus
technical

ƒ But led to greed, ƒ 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
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So what is management?

“Getting work done through others”

“Bringing people together to accomplish

desired goals”

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 Reinventing Management
Professor Julian Birkinshaw

But “management” as a concept got corrupted

1. By the rise of the Industrial Corporation

ƒ The Industrial
Corporation became
enormously
successful
ƒ 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
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 Reinventing Management
Professor Julian Birkinshaw

The reinvention of management?

ƒ 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
ƒ 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?”

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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

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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

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The screen versions of these slides have full details of copyright and acknowledgements
4
 Reinventing Management
Professor Julian Birkinshaw

Observations from research on the process

of management innovation

ƒ Innovation can occur on two levels

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

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3. What does the future of management

really look like?

Flat
Decentralised
Empowered
Self-organised
Values-driven
Virtual
Engaged

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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

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5
 Reinventing Management
Professor Julian Birkinshaw

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:
ƒ Sources of revenue ƒ Defining objectives
ƒ Cost structure ƒ Motivating effort
ƒ What to make / buy ƒ Coordinating activities
ƒ How to make a profit ƒ Allocating resources

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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

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A framework for rethinking management (2)

Managing objectives Alignment Obliquity

ENDS

Managing individual
motivation
Managing
MEANS

across: activities
Managing
down: decisions

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 Reinventing Management
Professor Julian Birkinshaw

Alignment: is this really how

organisations work?

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A more oblique path to success…

“Employees First, Customers Second”

Vineet Nayar, President HCL Technologies

ƒ Make employees feel wanted

ƒ 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.

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The screen versions of these slides have full details of copyright and acknowledgements
7
 Reinventing Management
Professor Julian Birkinshaw

A framework for rethinking management

Managing objectives Alignment Obliquity

ENDS

Managing individual
motivation Extrinsic Intrinsic

Managing
MEANS

across: activities

Managing
down: decisions

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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)

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Why do some people work longer hours?

ƒ 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

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8
 Reinventing Management
Professor Julian Birkinshaw

Why do some people work longer hours? (2)

ƒ 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

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A framework for rethinking management

Managing objectives Alignment Obliquity

ENDS

Managing individual
motivation
Extrinsic Intrinsic

Managing
B
Bureaucracy Emergence
MEANS

across: activities

Managing
down: decisions

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Bureaucracy Emergence

Drachten, The Netherlands

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9
 Reinventing Management
Professor Julian Birkinshaw

Eliminate unnecessary activities

Est
.5.1
ƒ Objective: organic growth
ƒ Biggest orthodoxy: 4.1
3.5
the budgeting process 3.2
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2.6 2.6
ƒ 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)

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in CHF Billion

Use “peer pressure” rather than formal rules

• Members of parliament expenses in the UK in 2009

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A framework for rethinking management

Managing objectives Alignment Obliquity

ENDS

Managing individual
motivation Extrinsic Intrinsic
Managing
M i across:
Bureaucracy Emergence
MEANS

activities

Managing down:
Hierarchy Collective wisdom
decisions

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10
 Reinventing Management
Professor Julian Birkinshaw

Hierarchy Collective Wisdom

65% 91%

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Exploiting collective wisdom at Best Buy

Collective wisdom --- a real world application

in the business set
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Management model = explicit choices

on these four dimensions

Managing objectives Alignment Obliquity

ENDS

Managing individual
motivation Extrinsic Intrinsic

Managing
Bureaucracy Emergence
MEANS

across: Activities

Managing Hierarchy Collective wisdom

down: Decisions
Tight means Tight ends
Loose ends Loose means

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The screen versions of these slides have full details of copyright and acknowledgements
11
 Reinventing Management
Professor Julian Birkinshaw

Key points on developing your own

management model

ƒ There is no one best way

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

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The screen versions of these slides have full details of copyright and acknowledgements
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