The LSE Summer School 2004
Management Programme
MG106 - Organisation and Strategic Management
Seminar 12: Review Session
Management Gurus
Michael Porter: The master strategist
By Morgen Witzel / The Financial Times, August 14 2003
Michael Porter (pictured), became famous in the 1990s as a consultant on competitiveness to business and governments. In the 1980s,
however, he wrote several popular and respected books on business
strategy, introducing basic tools of strategic thinking such as the "five
forces" model and the value chain.
It is for this work on strategy that he is likely to be remembered, and
his ideas have had a wide impact. In 1999, Fortune called him the single most important strategist working today, and possibly of all time.
Prof Porter was born in Ann Arbor, Michigan, in 1947. He studied at Princeton and Harvard and joined the faculty at Harvard in 1973. He has also become a highly respected
consultant, working with companies such as DuPont and Shell, and the US, Canadian,
New Zealand and Swedish governments.
Prof Porter views strategy from the standpoint of economics, and his ideas on how
strategy should be implemented are based on an understanding of competition and
other economic forces. Strategy is not devised in isolation; a company's options will always be limited by what is going on around it.
His famous "five forces" model shows the constraining impact that competition and environment have on strategy.
The five forces identified by Prof Porter are: the threat of new entrants and the appearance of new competitors; the degree of rivalry among existing competitors in the market; the bargaining power of buyers; the bargaining power of suppliers; and the threat
of substitute products or services that could shrink the market.
The strength of each of these forces varies from industry to industry, but taken together
they determine long-term profitability. They help to shape the prices companies can
charge, the costs they must pay for resources and the level of investment that will be
needed to compete.
From the external environment, he turns to the company itself. Companies make products and deliver them to consumers, but they can also add value to the basic product in
a variety of ways and through different functions.
Value can be added directly, for example by giving a product new technology features,
or indirectly, through measures that allow the company to become more efficient. Prof
Porter argues that every product follows a critical path through the company, from its
inception to its delivery as a finished article. At every stage along this path there are
opportunities to add value. This path he calls the "value chain".
The value chain is crucial, he says, because it demonstrates that the company is more
than just the sum of its parts and activities: all activities are connected, and what is
done at one stage affects work at other stages.
The company needs to examine its value chain and decide where it can add value most
effectively to meet competitive pressures in the industry.
These concepts can be applied to entire sectors and national economies as well as individual companies, and Prof Porter went on to develop his theories of national competitiveness in great detail.
Best-known books: Competitive Strategy: Techniques for Analyzing Industries and
Competitors, New York: The Free Press, 1980; The Competitive Advantage of Nations,
London: Macmillan, 1991.
Warren Bennis: A leader on leadership
By Morgen Witzel / The Financial Times, August 13 2003
Best known for his work on leadership, Warren Bennis (pictured),
has also covered subjects such as working in groups, change management and bureaucracy. A prolific writer, he has written or edited
26 books and more than 1,500 articles over the course of 40 years.
He twice won the McKinsey Foundation Award for the best book on
management and has received many other awards and accolades.
Prof Bennis was born in New York in 1925. He served as an officer
in the US Army during the second world war and was decorated for gallantry. After the
war he studied economics, psychology and business at Antioch College and MIT. He
then taught at several US universities and spent a number of years in university administration. He is currently affiliated with the University of Southern California.
Prof Bennis's earliest academic work was on groups and their dynamics. He believes
that groups, and by extension all organisations, can only function effectively in an open
atmosphere where people are willing and able to trust each other. He claims conventional, hierarchical organisations stifle trust and encourage internal rivalries and dissent.
The old style of "command and control" was, in his view, doomed. A change was on the
way: in the future, organisations would be forced to open up and allow more democracy. And democracy would lead to organisational change, as bureaucracies broke down
and were replaced by "adhocracies" - flexible, sometimes temporary, organisations that
shifted and adapted their form to meet changing needs.
Prof Bennis's first work on leadership grew from these early studies on organisational
dynamics. He became interested in the kinds of people who became leaders and how
they emerged out of the ordinary mass of employees and managers. This led to a consideration of leadership itself, which he went on to define as "the capacity to create a
compelling vision, and to translate it into action and sustain it".
To be successful, a leader must not only be able to create a vision for the organisation,
but he or she must also be able to communicate that vision successfully to employees.
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This in turn requires the "management of self", an understanding of one's own skills
and abilities so as to know how to be most effective in preaching the vision.
Finally, a leader needs the ability to generate and maintain trust, "the emotional glue
that binds leaders and followers together". To create trust, leaders must be consistent
and believable. They should lead from the front by being publicly seen to accept challenges and take responsibility.
Like John Kotter, Prof Bennis believes leadership is not necessarily an inborn skill and
can be taught. His preferred method of training leaders is through personal coaching
rather than group training. Leaders must be encouraged to learn from other leaders,
and at times he seems to suggest a kind of apprenticeship programme for future leaders that would expose them to some of the challenges of leadership and allow them to
learn more about themselves before taking over at the top.
Great leaders, says Prof Bennis, have three common features: ambition, competence
and integrity. All three are essential; not least integrity, without which ambition and
competence can ultimately lead both leader and organisation into dangerous waters.
Best-known books: On Becoming a Leader, Reading, MA: Addison-Wesley, 1989; Warren Bennis and Bert Nanus, Leaders, New York: Harper & Bros, 1985.
Hamel and Prahalad: Partners in introspection
By Morgen Witzel / The Financial Times, August 11 2003
Gary Hamel and C.K. Prahalad were among the highest-profile academics writing
about business in the 1990s, producing landmark articles for Harvard Business Review
and a best-selling book, Competing for the Future. Since ending their collaboration,
both men have produced important solo works. Fortune magazine has called Hamel
"the leading strategy expert in business today", and Prahalad is regarded as one of the
primary theorists on global business.
Prahalad was born in 1941 in Coimbatore, India. He trained as an engineer and worked
for Union Carbide, the US chemicals group, before attending the Indian Institute of
Management and then obtaining his doctorate from Harvard in 1975. Since 1978 he
has taught strategy and international business at the University of Michigan. His first big
work was a study of strategic imperatives for global corporations, where he insisted
that, although it is possible for companies to develop global reach, they will never be
able to dispense entirely with adapting to local cultures.
Hamel was born in Michigan in 1954 and attended the University of Michigan, where he
first met Prahalad; he took his PhD in 1990. He has also been a member of faculty at
London Business School. His collaboration with Prahalad resulted in the development
of influential concepts such as strategic intent and core competencies, which are now
part of mainstream business thinking.
In Competing for the Future, Hamel and Prahalad took issue with the current view of
strategy, which focused largely on competitive pressures. Businesses competed with the
primary goal of winning market share from opponents and were guided in their strategic
planning and decision-making by what competitors were doing or might do. Hamel and
Prahalad argued that this was misguided. Rather than look at competitors, businesses
ought to focus on their own strengths and on what their customers wanted. Aligning ca3
pabilities with the needs of customers was, they said, the key to competitive success.
Core competencies are sometimes defined as unique skills or attributes: "what a company is good at". In fact the concept is more complex. Core competencies are not what
a company values about itself; they are what customers value about the company. Any
definition must begin with the customer's point of view; any attribute that cannot be
seen to be desired by the customer is not a core competency.
Core competencies provide a set of strategic principles: if managers understand their
core competencies, they have a framework from which to build a competitive strategy
that will satisfy customers and achieve corporate goals. Core competencies are difficult
to imitate, allowing each company's strategy to be unique.
Strategic intent, the second influential concept to emerge from Hamel and Prahalad's
work, is the idea that senior managers should promote their strategic vision until it infuses the entire business. Challenge and motivation are important aspects of this; people have to believe in the vision to the point where they are ready to meet the challenge
of making it reality. Hamel and Prahalad highlight the importance of "strategy as
stretch"; ideally a strategy should challenge people to do their utmost.
Hamel and Prahalad take the focus of competitive strategy away from the environment
and instead examine the organisation itself. Businesses succeed because of what they
are, not what their competitors are. In a later work, Leading the Revolution, Hamel
urged companies to innovate and be revolutionary, turning themselves into "relentless
innovators" constantly seeking to exceed customer demands and thus staying ahead of
competitors.
Best-known books: Gary Hamel, Leading the Revolution, New York: McGraw-Hill,
2001; Gary Hamel and C.K. Prahalad, Competing for the Future, Boston, MA: Harvard
Business School Press, 1994.
Rosabeth Moss Kanter: Dance teacher to the giants
By Morgen Witzel / The Financial Times, August 10 2003
Rosabeth Moss Kanter, one of the few women to achieve international status as a management guru, came to prominence in the
1980s with her call to large companies, particularly US companies,
to undertake reform or face extinction. Her two main works, The
Change Masters and When Giants Learn to Dance, were bestsellers.
They have also had a strong, positive impact on the world of business. In the 1990s, many large companies followed her ideas and
restructured to become more flexible. Managers at companies such as International
Business Machines credit Kanter as the influence that helped them to change.
Ms Kanter, who was born in Cleveland, Ohio, in 1943, studied sociology at Bryn Mawr
and the University of Michigan and has taught at Yale, Brandeis and Harvard. She has
been based at Harvard since 1986 and, among other duties, was editor of Harvard
Business Review from 1989 to 1992. An active supporter of women in management,
she is a founding committee member of the International Women's Forum.
Her starting point is that companies are structured in a way that impedes communication and innovation. Innovation, in her view, is the key to success, for individual busi4
nesses but also for nations and cultures. The fundamental problem is that most organisations are not used to managing innovation. In the west, innovation has traditionally
been the province of individual entrepreneurs. The challenge for companies is to learn
how to "create conditions, even inside larger organisations, that make it possible for individuals to get the power to experiment, to create, to develop, to test - to innovate".
The reality in most companies is the opposite, she says: innovation is restricted and
slowed.
Communication is the key. Businesses must make the free flow of information and
knowledge a priority. If lines of communication are poor, employees at the lower levels
feel cut off from the decision-makers at the top. They respond to this feeling of isolation
in one of two ways. Either they try to achieve promotion, getting into the upper ranks
themselves where they will have access to information and perhaps some influence on
the decision-making processes; or they slip into what she calls a "static state", where
both motivation and productivity begin to decline.
The solution to this problem is to break down organisational barriers and create a corporate culture where the circulation of knowledge, through both formal and informal
channels, is encouraged and stimulated. Ms Kanter emphasises concepts such as employee participation, coalitions and teamwork, all of which can lead to closer contact between the separate elements and individuals that make up the organisation. Coordination and co-operation are essential. In the complex environment of modern business, there is no longer any room for the "lone wolf" entrepreneur, as few single individuals have sufficient span of control to manage at the required level of complexity. Instead, she says, we are moving into a "post-entrepreneurial" world where only cooperation will yield any certain success.
The future, says Ms Kanter, will require corporations to achieve more with less. "This
constitutes the great corporate balancing act. Cut back and grow. Trim down and build.
Accomplish more and do it in new areas, with fewer resources." She accepts the prevailing view that companies need to become "leaner and fitter", but argues strongly
against what she sees as the thoughtless slashing of costs and structures without regard for the consequences.
Best-known books: The Change Masters: Innovation for Productivity in the American
Corporation, Simon & Schuster, 1983; When Giants Learn to Dance: Mastering the Challenge of Strategy, Management and Careers in the 1990s, Simon & Schuster, 1989
Ikujiro Nonaka: An all-knowing analysis
By Morgen Witzel / The Financial Times, August 7 2003
In the mid-1990s Ikujiro Nonaka, already one of Japan's foremost
thinkers on management, won an international reputation for his
book The Knowledge-Creating Company.
The book became a worldwide bestseller and won a number of important awards. Ohmae Kenichi, the Japanese writer and consultant,
has called it "the most important management book to come out of
Japan".
Nonaka, who was born in Tokyo in 1935, took a degree in politics and economics, then
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spent 10 years with Fuji Electric in Japan before moving into academia. He spent five
years at the University of California at Berkeley, then returned to Japan. Since 1981 he
has been based at Hitotsubashi University but also holds a professorship at Berkeley.
"Circular" is a word that often appears in Nonaka's work. He takes a holistic view, arguing that in organisations the whole is always greater than the sum of its parts and depicting them not so much as structures but as a series of causal links.
The form of an organisation is defined by the strategic needs of the business, he contends. Strategy in turn is influenced by ability to innovate and create sustainable advantage. Innovation is influenced by ability to create and manage knowledge; and that
is directly influenced by organisational form. Successful management, then, requires an
ability to understand and control these flows and forces.
The crucial factor, in Nonaka's view, is knowledge and his ideas are now at the heart of
current thinking on knowledge management. He argues, using case studies from Japan
including those of Sony, Matsushita, Honda, Canon, NEC and Fuji-Xerox, that in order
to survive, an organisation must be capable of continuous innovation; and that
knowledge is the source from which innovation flows.
He says knowledge and innovation are "not the responsibility of a selected few - a specialist in research and development, strategic planning, or marketing - but that of everyone in the organisation".
Innovation has to come from a deep personal belief and commitment, he says, and he
believes that, in the end, "innovation is as much about ideals as about ideas". Creating
knowledge and promoting innovation is therefore central to the task of the manager.
Nonaka is sharply critical of Tom Peters, the American management guru who in the
1980s advised companies to get rid of middle- management "dead wood" in order to
become more creative and flexible. To Nonaka this is tantamount to ripping the heart
out of the organisation: middle managers have a vital role to play not only in creating
knowledge but also in holding the organisation together and transmitting knowledge
through it.
Drawing a distinction between implicit knowledge - ideas that are formally set down and
can be easily learnt - and tacit knowledge - which is innate but which we find hard to
express - Nonaka regards the latter as the most important, questioning the western belief that knowledge is best passed on through education and training.
The most valuable knowledge, he says, is not gained from others but is created by ourselves.
Best-known book: Ikujiro Nonaka and Takeuchi Hirotaka, The Knowledge-Creating
Company, New York, Oxford University Press, 1995
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Joseph Juran: Quality put into practice
By Morgen Witzel / The Financial Times, August 12 2003
Joseph Juran (pictured), along with W. Edwards Deming and Philip
Crosby, is one of the founders of the quality management movement. While Deming and Crosby often spoke of quality in more philosophical terms, urging companies to adopt quality as a vision, Juran has concentrated on the problems of planning and implementing
quality systems.
Among his many awards and honours is the Order of the Sacred
Treasure, the highest honour bestowed by the government of Japan on foreigners.
Juran was born in Romania in 1904, but grew up in rural Minnesota. He attended the
University of Minnesota, where he studied electrical engineering and was also chess
champion. He then went to work for Western Electric Company at Hawthorne, near
Chicago, where he developed many of his most important ideas on quality.
After the second world war he joined the faculty of New York University and began further revising and publicising his ideas. This led him towards a series of lectures and
consultancy projects in Japan during the 1950s and 1960s.
Although Juran always said that the Japanese quality revolution would have happened
without his or Deming's work, there seems little doubt that both men were a big influence in Japan. In 1979, the Romanian founded the Juran Institute for the study of quality management, and served as its first chairman. He retired in 1987.
Juran defines quality as "the process of identifying and administering the activities
needed to achieve the quality objectives of an organisation". He begins from two principles. First, managers have to realise that "they, not the workers, must shoulder most of
the responsibility for the performance of their companies". Second, they must understand the financial benefits that can be realised once quality is made a priority.
He thus turns quality into a management issue first and foremost. Improving quality, he
says, requires a systematic, company-wide approach; piecemeal efforts by individual
teams or business units will not work.
Juran insists that quality is defined by the user, not the producer. If the customer does
not perceive that a product has delivered good quality, then the company has failed. An
assessment of quality, therefore, means that management must look outside the company as well as inside.
This assessment of quality is seen as the first step in implementing a quality system,
and requires the company to analyse customer perceptions, internal systems, whether
there is a "quality culture" in the organisation and, most important, the financial costs of
delivering poor- quality products.
In organising for quality, managers again must take the lead. Juran suggests the idea
of "quality councils", teams of senior managers drawn from all departments who could
lead the co-ordination of systems across the company.
Quality is implemented in three stages. First, in the planning stage, quality targets are
set and resources are allocated. In the control stage, performance is evaluated and
compared with goals, and the gap between the two identified. Third, for each gap, a
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quality improvement project is set up to find ways of closing the gap and then implementing the solutions.
This is a simple but painstaking approach to quality, and one that many companies
have used to great effect.
Juran is a pragmatist and believes there are no quick fixes where quality is concerned.
Instead, companies need to proceed one step at a time, fixing each quality problem in
turn; and, as new problems will constantly emerge, this is probably a continuous process throughout the life of the company.
But he sees most quality problems as being the result of bad management; adhering to
basic principles should result in successful quality improvement every time.
Best-known books: Juran's Quality Control Handbook, 4th edn, New York: McGraw-Hill,
1988
Sumantra Ghoshal - Champion of the individual
By Morgen Witzel
The Financial Times, August 6 2003
Sumantra Ghoshal is one of the most international of management
gurus. He came to prominence through his work with Christopher
Bartlett in the late 1980s, developing the concept of the "transnational corporation" and suggesting that a new model of international
business strategy and organisation was emerging.
Since then, with Bartlett and other collaborators, Ghoshal has suggested that we are witnessing "the unfolding of the most profound change in management in a lifetime".
Ghoshal, who was born in Kolkata in 1948, worked for the Indian Oil Corporation before
taking degrees at Massachusetts Institute of Technology and Harvard University. He
has been based in Europe since 1988, first at Insead management school in France
and since 1994 at London Business School.
The Economist has called him a "Euro-guru" and he is regarded as one of the most influential figures in European management thought.
Managing across Borders, published in 1989, marked the first collaboration between
Ghoshal and Bartlett, an Australian who teaches at Harvard. They argued that old-style
multinational and global corporations were being forced to change by simultaneous
demands for global efficiency and local responsiveness. Rather than choosing between
globalisation and localisation, corporations were forced to adopt both strategies at the
same time.
The result, Ghoshal and Bartlett said, was the emergence of the "transnational corporation", which had the characteristics of both big and small companies and could operate
globally and locally. Rather than centralised, hierarchical structures, transnational companies operated as networks, with "increasingly specialised units worldwide" integrated
into a seamless whole and working in harmony.
At the heart of their thinking is a mindset that requires managers to work across bound8
aries, pulling together far-flung teams and resources in order to achieve strategic goals.
In the mid-1990s Bartlett and Ghoshal produced The Individualised Corporation, a
more far-reaching look at the changes in business.
There was a revolution happening, they argued, and it was being led by pioneering
companies, such as ABB and General Electric, that were no longer forcing employees
to conform to a rigid conception of what an employee should be and do but were reconfiguring the organisation itself to fit around the talents and abilities of their employees:
the "individualised corporation" of the title.
By doing so, these organisations "were releasing entrepreneurial hostages", allowing
individual members room to be creative and add value to the business.
Purpose, Ghoshal argues, is more important than strategy or systems. Infusing every
member of an organisation with a sense of common purpose is the key to organisational change. The most successful big corporations today are those that have realised the
importance of purpose and made this, rather than preconceived ideas about organisation or strategy, their central focus.
Christopher Bartlett and Sumantra Ghoshal, Managing across Borders: The Transnational Solution, London, Century Business, 1989; The Individualized Corporation, London, Random House, 1997
Philip Kotler: First among marketers
By Morgen Witzel
The Financial Times, August 5 2003
Marketing, says Philip Kotler (pictured), "serves as the link between
society's needs and its patterns of industrial response". It is, he says,
much more than just selling; it is a social activity, which should benefit consumers as well as companies. For Kotler, meeting consumer
needs must be at the top of any list of management priorities. He has
been described by the American Marketing Association as the most
influential marketer of all time.
Kotler was born in Chicago in 1931. He first trained as an economist, studying at the
University of Chicago and Massachusetts Institute of Technology and working with Milton Friedman and Paul Samuelson. In 1962 he switched to marketing, taking up a post
at Northwestern University, where he has remained. His textbook Marketing Management, first published in 1967, has gone through many editions and has been read by
students worldwide.
Kotler's contribution to marketing and to management generally has been threefold.
First, he has done more than any other writer or scholar to promote the importance of
marketing, transforming it from a peripheral activity, bolted on to the more "important"
work of production.
Second, he continued a trend started by Peter Drucker, shifting emphasis away from
price and distribution to a greater focus on meeting customers' needs and on the benefits received from a product or service.
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Third, he has broadened the concept of marketing from mere selling to a more general
process of communication and exchange, and has shown how marketing can be extended and applied to charities, political parties and many other non-commercial situations.
At the core of Kotler's views on marketing is the belief that it is not just a matter of
commercial transactions but also involves social values. Every product that is made
and sold performs a social function and every transaction has a social aspect. Marketing is a social activity.
The most sophisticated form of marketing, says Kotler, is that which "holds that the organisation's task is to determine the needs, wants and interests of target markets and
to achieve the desired results more effectively and efficiently than competitors, in a way
that preserves or enhances the consumer's or society's well-being". One of the results
of this approach is to link ethical behaviour with the profit motive and satisfaction of
consumer wants.
Kotler emphasises the need to understand how and why customers make buying decisions. People try to assess the value a product will give them and choose the one they
think offers the best value. After purchase, they assess whether the product lived up to
expectations. If it did, they will be satisfied and will buy the product again.
This seems simple but Kotler argues that, in order to market effectively, the company
has not only to provide the marketing function with sufficient resources but also to put
marketing at the heart of its strategy. The whole company should be focused on the
needs and wants of customers and be prepared to satisfy their demands. Marketing,
says Kotler, must become part of the philosophy of all managers.
Marketing Management, Englewood Cliffs, NJ, Prentice-Hall, 2000
Peter Drucker: The master of the art
By Morgen Witzel
The Financial Times, August 1 2003
Peter Drucker is the world's most influential management guru. Probably more than anyone else, he has helped to define management and the tasks and responsibilities of
the manager.
Drucker was born in Vienna in 1909. After attending university in Germany he worked
as a financial journalist. He left Germany following the rise of Hitler and moved to London, where he was a merchant banker. In 1937 he moved to the US. In 1941 he took
up a teaching post at Bennington College and later moved to New York University. Now
retired, he lives in California. He has written 35 books and many articles for newspapers and journals.
Drucker's interests have ranged broadly. In the 1930s and 1940s he wrote a series of
thoughtful books on capitalist society, including an important study of the management
of General Motors. From the 1950s to the 1970s he wrote a series of books on management, which are arguably his classic works. Since the late 1970s he has been more
interested in the impact of technological and social change on management and business.
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Drucker's writings avoid formal theories of management and organisation and instead
encourage managers to ask basic questions. What kind of business are we? What kind
of business should we be? Famously, he urged managers to stop trying to manage
processes and instead seek to manage for results, emphasising output rather than
function. In his view, managers should be the pivot around which the organisation revolves, rather than directors controlling from the top down or officers leading from the
front.
According to Drucker, it is the manager who breathes life into the enterprise and makes
it function. "The enterprise can decide, act and behave only as its managers do - by itself the enterprise has no effective existence."
As well as harnessing resources and creating production, the manager has an even
more important task: the creation of markets. In a landmark passage, Drucker says that
there is only one valid purpose for a business: "to create a customer. Markets are not
created by God, nature or economic forces, but by the people who manage a business." Drucker emphasises the need to consider the needs and motivations of customers, not just the problems of price and distribution that had formerly dominated marketing.
He also stresses the responsibilities of managers, which he says are threefold: to
achieve economic performance, to make work productive and to manage the social effects that any enterprise has on its environment. Particularly important is the third set of
responsibilities. Increased social responsibility, says Drucker, is part of the price that
must be paid for commercial success.
Drucker sees management as an art rather than a science and constantly speaks of
management in human terms. This, plus his easy, pithy writing style and ability to cut to
the heart of any argument, has made him the most popular and widely read management writer of all time. Perhaps the ultimate accolade came in the 1990s when a Korean businessman, seeking to honour his hero, changed his own name to Peter Drucker.
Best-known books:
Management: Tasks, Responsibilities, Practices (New York: Harper & Row, 1974);
The New Realities (New York: Harper & Row, 1989)
Henry Mintzberg: The great iconoclast
By Morgen Witzel
The Financial Times, August 4 2003
Henry Mintzberg (pictured), had been called "the great management
iconoclast" for his willingness to attack previously sacred concepts in
business and management. But his commonsense approach to
management problems have won him a broad following, particularly
among students and working managers. He is best known for his
work on business strategy, where he exposed the gap between academic concepts of strategy and reality.
Born in Montreal in 1939, Mintzberg studied engineering and worked for Canadian National Railways before obtaining a doctorate from the Massachusetts Institute of Technology in 1968. He joined the faculty of management at McGill University, Canada,
where he has remained. Mintzberg was interested in defining what managers really do
and how they carry out their tasks. He discovered a vast body of what he termed "man11
agerial folklore": research studies that considered managers rational beings who made
decisions based on careful analysis of all available information.
Experience told Mintzberg that managerial work was not like that. Not only was it less
structured and ordered than assumed but its true nature was also hard to define. His
observations of managers in action confirmed this. He found that decisions were made
quickly, often on the move, usually based more on intuition and experience than on
considered analysis. Action was more important than reflection. Half the daily management tasks he observed took less than 10 minutes each and only 10 per cent took
more than an hour.
The portrait of the manager and his task that emerges from Mintzberg's work is a sympathetic one. Managers are constantly "firefighting", dealing with problems under pressure. Rather than the best possible solution, they seek the best solution that can be
implemented given the resources available. And, says Mintzberg, because each organisation has its own culture and needs, managers' responses to problems will vary.
There may be no one "right" way to manage a business.
This affects strategy. Academic conceptions of strategy regarded it as the province of
top management, who consider and make strategic decisions with detachment. Again,
Mintzberg disagrees. In the real world, strategy-making is ad hoc and instinctive, not
structured and planned. The concept of "strategic planning" becomes an oxymoron.
Mintzberg sees this approach to strategy as a virtue. "Emergent strategy", as he calls it,
is strategy that evolves according to need, constantly adjusted and adapted. He also
speaks of "crafting strategy", a process by which managers develop strategy according
to the needs of their organisation and environment. Here, strategy creation and implementation are interdependent. He compares the art of strategy making to pottery and
managers to potters sitting at a wheel moulding the clay and letting the shape of the
object evolve in their hands.
Successful management is about knowing the business - in all its aspects and not just
in specialist areas - and an ability to manage through discontinuity.
Best-known books: Mintzberg on Management (New York Free Press, 1989); The Rise
and Fall of Strategic Planning (New York Free Press, 1993)
Chris Argyris: A life unlocking defences
By Morgen Witzel
Financial Times, August 18 2003
Although highly respected in academic circles, Chris Argyris (pictured), is lesser known among managers. Yet his contribution over
the past four decades in fields such as organisation, knowledge
management, leadership and the management of change has been
immense. His ideas on "action science", developed in partnership
with Donald Schön at Massachusetts Institute of Technology, are
perhaps more talked about than practised but his views on how people and organisations react to change have been hugely influential.
Mr Argyris was born in New Jersey in 1923 and served in the US Army during the second world war before going into academia. He has been based at Harvard University
since 1971. Early in his career he became interested in organisational behaviour. In
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particular, he saw that the needs of individuals and the demands of organisations often
do not match.
Organisations are usually hierarchical and control- centred and one of the tasks of
managers is to impose limits on the actions of those below them. People, however, are
independent, active entities, and they tend to become more independent and active as
they grow older and wiser. The paradox of organisations is that the most knowledgeable and experienced employees are those who are likely to feel most inhibited and frustrated. This sense of inhibition leads to disbelief and distrust. Employees lose their
commitment to their work, seeing it as merely a means to a personal end. All change is
regarded as threatening. Employees develop what Mr Argyris calls "defensive routines", which impede or prevent change. Many of these routines are selfish, as people
try to protect their status and power. In other cases, people may be trying to support the
organisation against changes they believe would damage it, or to protect employees
they believe are vulnerable. Defensive routines are often deeply embedded in the organisation and even the best change management strategy will find it hard to overcome
them.
Defensive routines and resistance to change are a complex problem and Mr Argyris
does not believe there is a simple solution. Overcoming resistance to change cannot be
achieved by force. Rather, it requires the organisational culture to be transformed until
it reaches a state where change is welcomed. His tool for creating this change is called
"action science".
Action science grew out of a frustration with "normal science", in which impartial researchers study the problems of organisations in isolation. Mr Argyris argued that this
was leading researchers to become remote from the real problems of business. He believed it was time that scientific research came down from its ivory tower and integrated
itself into business. In Mr Argyris's view, businesses should not call in outside experts
to observe and make recommendations. They should do their own research on the job
and make knowledge-gathering part of the manager's daily routine.
The aim of action science is to generate knowledge that is powerful and relevant to the
needs of both businesses and employees. This knowledge provides a stimulus to
change that can overcome even the strongest defensive routines.
Ironically, Mr Argyris's work has been criticised for being too academic and difficult to
read; and certainly some of his work is highly theoretical. He has tried to remedy both
these problems in his later work, offering practical advice and ideas about everyday
management. Some of his ideas were ahead of their time and it is only now, with the
growth of the knowledge economy, that their true importance has become apparent.
Best-known books: Chris Argyris and Donald Schön, Organisational Learning: a Theory
of Action Perspective, Addison-Wesley, 1978; Chris Argyris, Flawed Advice and the
Management Trap: How Managers Can Know When They're Getting Good Advice and
When They're Not, Oxford University Press, 2000
Arie de Geus: Birth of the living company
By Morgen Witzel
Financial Times, August 20 2003
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Arie de Geus (pictured), is best known for his role in the development of the concept of the "learning organisation". He has also produced a series of works on organisation that take a holistic view of
companies and their environment. A working manager who only
turned to academia late in his career, he combines pragmatism with
high theory. His statement that in the future a company's only sustainable advantage may be its ability to learn became a business
mantra of the 1990s.
Mr de Geus was born in Rotterdam in 1930. He joined Royal Dutch/Shell in 1951 and
remained there until his retirement in 1989. Since he retired he has been a visiting fellow of London Business School and has worked with MIT's Centre for Organisational
Learning. Here he worked closely with Peter Senge, who cited Mr de Geus as an influence over his book, The Fifth Discipline.
Both Mr de Geus and Prof Senge have been credited with originating the term "learning
organisation", but in fact it was first used by Tom Peters and Robert Waterman in In
Search of Excellence nearly 10 years earlier. In Mr de Geus's view, learning and
knowledge-gathering are not peripheral management activities but the very heart of
management and the company that learns how to do them well can compete and win.
His article Planning as Learning, published in Harvard Business Review in 1988, made
the learning organisation into one of the most talked-about management concepts of
our time.
Mr de Geus's principal work, The Living Company, goes further in understanding how
the learning organisation functions. He compares it to a living organism, and links its
ability to learn with the extent to which it is integrated into its environment. Living organisms scour their environment for sustenance: the "living company" uses its environment
to acquire knowledge, equally important to its survival.
Mr de Geus believes that companies should develop strong bonds with their customers
and shareholders and develop a "harmony of values" with them. These strong relationships enable a greater depth of learning. Learning becomes built-in, enabling companies
to grow organically and even become self-aware. Companies cannot exist in isolation.
The "learning organisation" and the "living company" are thus simultaneous concepts.
There are no hard and fast rules for creating a living company. Companies evolve and
their systems for learning will change over time. Learning should always happen,
though, as a natural part of business activity. Learning organisations learn as entities;
effective learning is shared, not locked up in individuals. If shared effectively, the sum
total of an organisation's knowledge is much greater than the pooled knowledge of individuals can ever be.
The strength of the "living company" model is not its stress on learning, but its ability to
integrate key concepts: knowledge management, communication, culture, systems and
ethics. The living company has been called "the most original and innovative model of
business to emerge in the latter half of the 20th century". It offers a route to sustainable
success in the 21st century, too.
Best-known book: The Living Company: Habits for Survival in a Turbulent Environment,
London: Nicholas Brealey, 1997
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Kaplan and Norton: Great believers in balance
By Morgen Witzel
Financial Times, August 21 2003
Robert Kaplan and David Norton (pictured), researched and developed the concept of the "balanced scorecard" and this remains the
main idea with which they are associated. They argue that traditional
financial accounting measures are no longer sufficient in the modern
age: other dimensions of performance need to be measured as well.
The balanced scorecard begins as a measurement system; but
Kaplan and Norton argue that it can also be the basis for a new way
of managing.
Prof Kaplan, a Harvard Business School professor, and Mr Norton, head of Nolan Norton (the research arm of KPMG) began working on the balanced scorecard project in
1990. Believing that financial performance measures were in danger of becoming obsolete, they undertook a year-long study of new measurement systems. Early results appeared in articles in Harvard Business Review in 1992 and 1993, followed by publication of the entire system in the book The Balanced Scorecard in 1996. Sears, Mobil Oil
and Cigna Insurance were among the companies that credited the balanced scorecard
approach with helping them achieve strategic change and corporate transformation.
Prof Kaplan and Mr Norton argued that financial performance measures were primarily
a description of past events rather than potential. Their study led them to re-evaluate
this view. Financial performance measures could be used to help business units link
their financial goals to overall corporate strategy but they were not sufficient to measure
total performance.
Three further measures were proposed. First, the company should assess how it performs relative to customers' expectations. Second, it needs to examine improvement in
its own internal business processes, and meet quality and efficiency targets. Third it
needs to measure organisational learning and growth.
Prof Kaplan and Mr Norton stress that no measure is sufficient by itself. They compare
measuring corporate performance along a single dimension with a pilot trying to fly an
aeroplane by concentrating on airspeed and ignoring altitude. Failure to take a broadbased view causes problems when implementing strategy, and they note that even the
best-designed strategies often fail when it comes to implementation. People may fail to
buy into the strategy as they feel their own aims are not represented. Targets are then
scaled down when later budget cuts become necessary; too often, the budget is treated
as the plan itself.
The balanced scorecard is also a vehicle for implementing strategy. Managers need to
create a strategy map that sets out aims in four dimensions: financial performance, customer satisfaction, internal process improvement and organisational learning. Attention
needs to be paid to integrating planning and budgeting.
At the heart of the balanced scorecard idea lies the concept of integration. Corporations
need to harness the activities of business units that are often diverse in activities and
function. The balanced scorecard offers a chance to set common goals, plan from a
common basis, and measure performance against common benchmarks. The result is
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total performance management.
Robert Kaplan and David Norton, The Balanced Scorecard, Harvard Business School
Press, 1996
Charles Handy: The manager's moralist
By Morgen Witzel
Financial Times, August 24 2003
Charles Handy is often described as Europe's leading management guru. He is also
the closest thing we have today to a philosopher of management. Originally an innovative and perceptive thinker on organisational behaviour, Prof Handy has gone on to
look at the nature of work and the role of management in society and to argue for a
more holistic and ethical view of business. His books, notably The Age of Unreason
and The Empty Raincoat, have struck a chord with many readers. He is, after Peter
Drucker, the most widely read management guru in the world.
Prof Handy was born in Ireland in 1932. After graduating from the University of Oxford
he worked for companies including Shell and Anglo-American. He joined the faculty of
London Business School in 1967. He remains a visiting professor there but concentrates on writing and broadcasting. His recent books have considered wider problems
of work, action and creativity in a changing society.
Prof Handy sees organisations as complex, bewildering, often frightening places. He
reminds us that they are social organisms, not mechanical constructs, which are
formed from overlapping networks of human relationships.
Every one of us, says Prof Handy, forms a psychological contract with our organisation;
and the nature of that contract is shaped by our feelings, needs and wants. We may
regard our contract as a coercive one, where the organisation forces us to do what it
wants, or as a co-operative one, in which we identify the organisation's needs and
goals with our own. But whatever the case, the nature of the contract will be subtly different depending on the individual. It is this kaleidoscope of human relationships that
makes organisations so diverse.
From this understanding of what organisations are, Prof Handy considers how they are
changing. He foresees the emergence of "shamrock organisations", tripartite structures
that allow human and financial resources to be concentrated where they are most
needed.
The first part of the "leaf" is the professionals and technicians who are essential to the
organisation. The second comprises non-essential work that needs doing but can be
contracted out. The third is part-time and temporary workers who are hired as and
when they are needed in order to meet peaks of labour demand.
But although he sees the shamrock organisation as the organisational form of the future, Prof Handy worries about the impact on the second and third groups, who will be
forced to sacrifice job security. These groups, less well paid and less motivated, are
vulnerable to organisations that want to squeeze the maximum labour from them in exchange for minimal reward.
Prof Handy reminds us that in order to function in the modern age, managers must be16
come less mechanistic. We need to be more accepting of paradox and change, and
more humanistic in our approach. The new corporate score card should include factors
such as the knowledge and welfare of employees and contributions to society and the
environment. Personal welfare is more important than profit.
Managers are not technicians, says Prof Handy; they are moral beings; and without a
sense of ethics, and indeed faith, they become no more than unthinking servants of
their organisation and in time both they and the organisation will lose their creative impulse and wither away.
With the right inspiration, though, they can transcend their organisation and create their
own vision of the future. In doing so, they can re-energise their organisations. People
die, says Prof Handy, but organisations can live forever.
Best-known books: The Age of Unreason, Business Books, 1989; The Empty Raincoat,
Hutchinson, 1994
Geert Hofstede: The quantifier of culture
By Morgen Witzel
Financial Times, August 25 2003
Geert Hofstede pioneered the scientific study of culture in the workplace in the 1970s and 1980s. His research into cultural differences
in the 1960s and 1970s opened the door to a greater understanding
of worldwide variations in the psychology of work and of organisations and has had a strong impact on international human resources
management. Before Prof Hofstede's work, there was a great deal of
folklore about culture and its impact on employee behaviour, but little
hard evidence. Now even those who disagree with his conclusions acknowledge his influence.
Prof Hofstede was born in 1928 in Haarlem, the Netherlands. He served in the Dutch
army and then worked as an engineer for a number of years. He joined International
Business Machines' personnel management arm in 1965. In 1971 he entered academia, teaching at several European universities. He eventually retired from the University
of Maastricht in 1993.
While still with IBM, Prof Hofstede had noticed that, although the company had a strong
corporate culture of its own, there were variations in cultural values among the employees of IBM subsidaries around the world. He conducted two studies of IBM employees
worldwide in 1968 and 1972, surveying 116,000 employees in the largest study of employee attitudes that had then been conducted.
Amid the mass of data generated, Prof Hofstede looked for factors that could explain
variations in cultural behaviour on a broad scale. He rated each national culture along
four dimensions: power distance, uncertainty avoidance, individualism/collectivism and
masculinity/femininity.
Put briefly, power distance measures how power is distributed within a society; high
power distance societies have strong hierarchies, while low power distance societies
have weak and loose hierarchies. In uncertainty avoidance, societies with high scores
are intolerant of risk and change, while low scores show that risk and paradox are more
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widely accepted. On the scale of individualism/collectivism, high scores reflect the importance of personal freedom and free will, while low scores require a degree of subjugation of the individual will to the needs of the community. Last, in masculinity/femininity, societies where earnings, promotion and status are seen as the most important work goals are classified as "masculine", while those where quality of life and
human relationships are prioritised are classified as "feminine".
Prof Hofstede uses a 10-point scale to score each culture in each of the four dimensions. Some cultures score high in some dimensions and low in others and no two cultures are exactly alike.
Discussing each culture, Prof Hofstede shows how the values we see in the workplace
reflect much deeper cultural attributes. Collectivist-minded workers grew up in societies
where family and community relations are important; individualists come from countries
where personal freedom is important. So strong are these findings that Prof Hofstede
concludes that the impact of national culture on the workplace is much greater than that
of the organisation's own culture.
Although some follow-up studies have challenged this conclusion, others have argued
that despite globalisation, local cultural values remain a powerful force.
Prof Hofstede shows us that there are strong causal links between workers' cultural
backgrounds, including their values, social mores and ideals, and their workplace behaviour and attitudes. Thus, when managing people, different concepts and methods
may be necessary at different times and places.
In an era when globalisation is the word on everyone's lips, Prof Hofstede reminds us
that local culture still matters.
Books: Culture's Consequences: International Differences in Work-Related Values,
Sage, 1980; Cultures and Organisations: Software of the Mind, McGraw-Hill, 1991
Clayton Christensen: Lessons of an innovator
By Morgen Witzel
Financial Times, August 26 2003
Clayton Christensen has challenged existing theories of management, arguing that even the best-managed companies may fail and
that the drive to innovation can sow the seeds of corporate destruction. The keys to lasting success, he says, are not conventional
ones: "Managing better, working harder and not making so many
dumb mistakes is not the answer." Instead, he calls for a radical rethink of strategy, organisation and marketing to solve "the innovator's
dilemma".
Before joining Harvard Business School, Prof Christensen was president of a technology company. His book The Innovator's Dilemma, aimed at a managerial rather than an
academic audience, caused a sensation. Forbes regarded it as "absolutely chilling for
any executive who might feel bullet-proof" - a warning for over-confident business leaders everywhere. During the dotcom boom, few seemed disposed to heed Prof Christensen's message. Now, taking stock in the aftermath, his ideas seem even more cogent than before.
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In the book, Prof Christensen spells out his "framework for failure" - conditions that can
drag down even the most successful business. First and most important is the failure to
distinguish between technologies that are sustaining and those that are disruptive. Sustaining technologies improve the performance of existing products "along the dimensions of performance that mainstream customers in major markets have historically
valued".
Disruptive technologies appear to offer lower product performance: for example, small,
cheap motorcycles, when introduced, performed poorly compared with high-powered
large ones. They nonetheless found a market that rapidly ate into the share of the more
conventional producers. Disruptive technologies transform markets in ways hard to understand and harder to predict.
Second, says Prof Christensen, technological progress often outstrips market demand.
This means companies tend to "overshoot" the market, giving customers more than
they want or are willing to pay for.
Last, pressures from both customers and shareholders influence the innovation in
which firms engage. Disruptive technologies are seen as relatively risky and unprofitable, so companies tend to steer clear of them and concentrate on sustaining technologies - until it is too late.
Companies that begin as innovators are tempted to pursue the path of their original innovation rather than look ahead towards the next revolutionary or disruptive technology. In doing so, they remain innovative - but they do so along the wrong lines. Prof
Christensen's solution is that managers should learn to harness the forces of disruptive
technology, to "go with the flow" rather than try to fight change.
Properly harnessed, disruptive innovation can be a powerful force. Prof Christensen
sets out several principles for doing so. First, companies should not depend only on
customer demand to lead innovation. Customers cannot be expected to predict new
technologies and therefore cannot say exactly what they want. Management must try to
predict and lead customer demand. Second, the size of the organisation needs to be
matched to the size of the market. If only a small market exists, it may be worth creating a separate, smaller organisation to serve it.
Third, it is important to continue developing sustaining technologies for the existing
mainstream market rather than forcing a disruptive technology into a market where it
will not fit. Fourth, the company needs to develop its own capabilities to suit the new
technologies, especially in marketing.
Last, companies need to be prepared to accept that many radical new technologies will
fail. This means understanding that first-mover advantage is not always genuine and
companies that follow the technological leader often reap bigger rewards.
The Innovator's Dilemma, HarperCollins, 1997
John Kotter: From managers to leaders
By Morgen Witzel
Financial Times, August 27 2003
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John Kotter (pictured), is one of the most important writers on leadership to have emerged in recent years. His distinction between
"leadership" and "management" has been important in advancing our
understanding of both concepts. More recently he has written on
leadership and change, and on how leaders can best be trained and
developed.
Prof Kotter was born in San Diego, California, in 1947. He trained as
an electrical engineer at Massachusetts Institute of Technology before going on to
study management. He gained his PhD in 1972, working at Harvard under Paul Lawrence, the great organisation theorist. He then joined the teaching faculty at Harvard,
becoming a full professor in 1980, and has remained there ever since.
Before turning to leadership, Prof Kotter had written extensively on general management, looking at how general managers work and the important elements of their discipline. He had concluded that much of a manager's effectiveness is dependent on how
he or she builds relationships with others. The most important relationships often have
nothing to do with the structure or hierarchy of the business; managers engage in what
is in effect a form of alliance-building with colleagues and others whom they believe will
support them and help them to achieve their goals.
Prof Kotter went on to compare management with leadership and concluded that there
were four significant differences between the two concepts. The first can be described
as a difference in agenda: managers are concerned with planning and budgeting within
specified time frames, while leaders have a more open-ended approach and work to
create a vision of the future. Second, managers are responsible for the form of the organisation, while leaders put more stress on communication. Third, managers focus on
problem solving, while leaders aim to inspire and motivate the organisation. Last, because managers are focused on targets, they aim to achieve predictability; leaders,
whose job is to create and manage change, must at times be unpredictable.
So, in general, management tasks are focused on execution and control, whereas
leadership tasks deal with planning and vision. Prof Kotter does not believe that managers and leaders should be separate people, although in many cases this is what
does happen. Management and leadership can be combined in the same person but it
is critical, he argues, to recognise that the tasks themselves are different. Management
is about the present; leadership is about the future. Both are essential to a business but
Prof Kotter argues that organisations need less management and more leadership than
they are currently getting.
Much of Prof Kotter's later writing has focused on how training for leaders can best be
provided in order to ensure an adequate supply for the future.
He has also challenged the long-held view that leaders are born, not made. Leadership,
he says, consists of a series of definable skills that can - and should - be taught. It is
not enough to rely on entrepreneurial spirit; potential leaders need to be identified at an
early age and groomed to lead long before they assume positions of leadership.
A Force for Change: How Leadership Differs from Management, The Free Press, 1990
Daniel Goleman: The emotional dimension
By Morgen Witzel
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Financial Times, August 28 2003
Daniel Goleman (pictured), is most often associated with the concept
of "emotional intelligence". He suggested that existing ways of
measuring human intelligence were not suited to the workplace, and
developed his own system for defining and measuring useful traits.
His book Emotional Intelligence became an international hit, selling
more than 5m copies.
Prof Goleman was born in Stockton, California, and studied at Amherst College and then Harvard, where he took a PhD in clinical psychology. He then
moved to Yale and is now at Rutgers where he heads a research centre. One of his
projects was Destructive Emotions, an account of a dialogue between the Dalai Lama
and a group of western scientists, psychologists and philosophers.
He discusses the physical structure of the brain and how this shapes what we call intelligence. In particular, our emotions and our "thinking" intelligence are located in separate areas.
Prof Goleman holds that our emotions have a "wisdom" of their own and need to be
considered as separate - but equally important - types of brain activity. Emotional intelligence, he believes, is not only distinct from thinking intelligence but also sometimes
conflicts with it, when our rational mind refuses to accept what our emotions tell us. Included within emotional intelligence are motivation, empathy and social skills.
Thinking intelligence is measured using long-established methods of determining intelligence quotient. Prof Goleman proposes that we should also measure EQ, or emotional quotient. We should analyse and measure human attributes such as self-awareness,
self- management, social competence and social skills. By doing so, we can see how
we perceive ourselves and interact with each other.
He goes on to explore practical applications. Looking particularly at leadership, he has
defined six approaches, depending on how people use their emotional intelligence.
Visionary leadership creates shared dreams and moves people towards them, while
coaching leadership seeks to find what people want and then works to connect them
with the organisation's goals. Affiliative leadership seeks to create harmony, removing
barriers and bringing people to work more closely together. Democratic leadership
stresses consultation and participation and seeks consensus on goals. All four styles
work by creating what Prof Goleman calls "resonance" between the emotional intelligence of the leader and the organisation; in effect, they begin to think like each other.
The other two styles of leadership can create resonance but also, if mishandled, dissonance. Pace-setting leadership sets goals and challenges people to meet them. It can
get good results but if poorly executed can lead to disharmony. Commanding leadership gives clear direction, particularly useful at times of crisis. But this style, too, is susceptible to abuse.
Prof Goleman writes in detail on the problems of training, notably the "honeymoon effect", whereby the effects of training tend to last for less than a year before people return to old patterns. How to bring about a permanent improvement in people's thinking
is still a problem.
Emotional Intelligence, Bantam, 1995; Destructive Emotions, Bantam, 2003
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Gary Hamel: The resilient revolutionary
By Simon London
Financial Times, August 17 2003
Gary Hamel has a framework for everything. The academic turned
consultant expresses himself in a torrent of matrices, curves and
quadrants.
"Management, this thing we have been struggling with for the last
100 years, deals essentially with five issues," he says, sketching
boxes labelled "efficiency", "effectiveness", "complexity", "change"
and "legitimacy".
"I've spent most of my career working on problems you would probably class as effectiveness. But increasingly I find myself working in this space here."
He stabs emphatically at the box labelled "change".
We are sitting on opposite sides of a large oval table in Mr Hamel's fastidiously furnished home office in Woodside, Silicon Valley's most bucolic (and expensive) neighbourhood. The subject of discussion is his article in the latest issue of the Harvard
Business Review.
"It is a statement of intent," he declares. "I think we are at a point in history where we
need some truly new management practices. We are not going to get them without
adopting some truly new principles."
This is a typically bold statement from a man who in the 1990s first helped re- define
corporate strategy and then declared that "the age of incrementalism" was dead. In that
decade of superstar business gurus, the trimmed moustache, fogeyish glasses and
mid- Atlantic accent became star attractions on the conference circuit.
Yet times have changed. Managers are less enamoured of management theory in general and high-profile gurus in particular. Conventional wisdom holds that today's dour
business climate demands attention to the basics: discipline, execution, and focus.
So why should hard-pressed executives read an article entitled "In Search of Resilience: Building Organisations That Can Thrive In Turbulent Times"?
Mr Hamel's response is animated: "When authors tell organisations that success is all
about discipline and focus and not having egotistical CEOs, all of that is true, but it is so
far short of what the real challenge is.
"What I observe is that it is harder than ever to sustain success. The life expectancy of
companies has reduced dramatically. The tenure of CEOs is down to four years."
The thing that organisations really need, he argues, is "resilience", which he defines as
"the ability to dynamically reinvent business models and strategies as circumstances
change".
But has "change management" not been a hot topic since Mr Hamel was an ambitious
University of Michigan doctoral student? Modern classics in the field include The
Change Masters (1983) by Rosabeth Moss Kanter and Leading Change (1996) by
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John Kotter, both of Harvard Business School.
The view from Woodside is that most students of corporate change have focused too
much either on turnarounds or on change at the margin - the introduction of a new
computer system, for example. Yet by the time a company requires a turnaround strategy it is too late. "A turnaround is transformation tragically delayed," Mr Hamel says.
Moreover, companies today are facing pressures to change fundamentally. This is
more difficult than managing change at the level of a department or business unit.
He cites McDonald's, the burger chain now facing up to a world in which its "burgers
and Coke" formula looks out of touch with consumer tastes, and Sun Microsystems, the
computing idol that is being undermined by the success of Linux, the open-source operating system.
In some ways Gary Hamel's migration from the box labelled "effectiveness" to the box
labelled "change" is not all that surprising.
The book that made his name, Competing for the Future (1994), written with former college and intellectual sparring partner C.K. Prahalad, offered a fresh account of strategy
for the new era of human- centred management.
Instead of being an annual ritual performed by top executives, it was argued, making
strategy should be a company-wide conversation about "strategic intent", "core competencies" and ideas for renewal. Buzzwords notwithstanding, it remains a serious and influential book.
Leading The Revolution, published in 2000, took some of these ideas a step further by
looking at the management techniques employed by companies that appeared to have
mastered the art of renewal: Cisco, Charles Schwab and, yes, Enron.
The inclusion of what became America's most reviled company is one reason why
Leading the Revolution now reads like an artifact from another era. The "new economy"
rhetoric also grates. "Living in Silicon Valley I probably drank more of the Kool-Aid than
I should have," Mr Hamel concedes.
Post-mortems aside, however, both books were underpinned by the insight that the
most important role of management is helping organisations develop new capabilities.
"Resilience" now emerges as the über- capability that determines whether companies
succeed or fail over the long term.
I point out that concern with the capacity for fundamental change is also found in the
work of Peter Senge, the MIT professor and de facto leader of the "organisational
learning" movement. "Learning organisations", as defined by Prof Senge, are those that
see competitive advantage in their ability to learn and adapt.
Arie de Geus, a former Shell executive and consultant, explored adjacent territory in
The Living Company (1997), in which he said that the main reason for the short life expectancy of most companies is their focus on profits rather than the skills, capabilities
and knowledge of people.
Against this background, apart from coining the term, is there anything left to say about
"resilience"? "We are about to find out," says Mr Hamel, this time drawing a solar system with "corporations" at the centre and abstractions including faith, democracy, environment, markets and cities around the edge.
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For several months he has been recruiting acquaintances across a range of disciplines
to join a new non-profit institute to study organisational resilience. The idea is that the
institute will look not only at resilient companies but at other organisational forms that
have shown an aptitude for adaptation.
"The ability of the US to adapt and change and endure has been largely independent of
the quality of the leader who sits in the White House," Mr Hamel explains. "By comparison, companies are like poorly governed third-world dictatorships: the only way to
change policy is to change leader. When a company gets into trouble today the first
thing the board does is replace the CEO. Yet that is never going to deal with the deeper
systemic challenge - how do you build organisations that are capable of dynamic selfrenewal."
But wait a minute - democracies were designed to last for generations, while companies are not. From the point of view of society, corporate failure is just a way of reallocating resources.
Mr Hamel's counter is that the social and economic costs of building up corporations
only to tear them down is wasteful if reallocation can be achieved by other means. He
adds: "My argument is that we should be glad for the possibility of bankruptcy, we
should be glad for the market for corporate control, we should encourage unfettered
competition. All of those things are insurance policies against the continued misuse of
resources by organisations.
"But all of those are fairly crude mechanisms. It would be better if we didn't have to call
on the policy in the first place."
It would certainly be better for the people employed by failing companies. Working for a
corporate dud can be stressful and demoralising.
So what are the secrets of organisational resilience?
Trying to answer this question in an original way is Mr Hamel's project for the next few
years. Like any consultant worth his salt, however, he is prepared to draw a few more
diagrams and take some educated guesses.
Thus an organisation that, like the stock market, was free of nostalgia and sentiment
would certainly have an edge when it comes to resource allocation. An organisation
that, like a democracy, allowed local experimentation and decentralisation would never
be short of strategic options.
And an organisation that, like Gary Hamel, spewed forth a torrent of frameworks, contexts and connections, would never be short of interesting ideas. In the box labelled
"conceptual productivity" he has no peers.
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