Management will survive. Managers, too. Even corporations and bureaucracies.
The end of management is nigh proclaims Alan Murray in an article in the Wall Street Journal on August 21, 2010.
Murray sees two main reasons for why managed corporate bureaucracies have or soon will reach the end of their road.
The first is that bureaucratic corporations can’t keep up with the whirlwind of change sweeping the world: “rapid globalization, accelerating innovation, relentless competition,” in Murray’s words.
The second is that technological advancements have reduced the so-called transaction costs that historically have worked as a rationale for the internal command economy of corporate bureaucracies:
The corporation might not be as good at allocating labor and capital as the marketplace; it made up for those weaknesses by reducing transaction costs… Complicated enterprises, like maintaining Wikipedia or building a Linux operating system, now can be accomplished with little or no corporate management structure at all.
Hence:
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.
If only the 21st Century were easy-peasy like the uneventful 20th Century!
Sarcasm aside, I think Murray is wrong regarding the future of managed corporate bureaucracies.
Small companies die all the time. What’s so strange about big companies occasionally bellying up? Murray uses Lehman Brothers and Bear Stearns as example of large established companies disappearing overnight but their demise was primarily the result of doing what Murray recommends, namely following the so-called wisdom of crowds (the market place). Other large corporations often disappear because they are gobbled up by even larger companies. Accounting used to have the Big Eight, now they are down to Big Four, I believe, if that. If bigness is a shortcoming, it’s mostly one if you’re on the wrong big firm.
My native Sweden’s industrial base has been divided up by international behemoths: Asea merged with Swiss engineering giant Brown Boveri. Ford grabbed Volvo, GM snatched Saab Automobile, Astra is AstraZeneca. Much remains intact, though, and those companies have themselves scarfed on other companies: Ericsson, Electrolux, Atlas-Copco, SKF, Alfa-Laval etc.
These aren’t exactly small companies and I don’t think its employees would claim they are free of managed bureaucracies or bureaucratic processes. In good times, when they are unable to keep up with demand, they are usually quick to hire growing hordes of consultants (what Americans would call contractors, really) with all the attached increases in organizational complexity (who gets to hire, who should be hired, whose budget will pay for them, what responsibilities will HR have to assume for them etc). But when you make, say, tunnel boring machines, you face challenges that are bit complex than re-writing web content, to use one of Murray’s examples of “complicated enterprises” that can be “accomplished with little or no corporate management structure,” so you kind of have to man up and manage such issues (it’s instructive, though, that even Wikipedia has instituted rules and hierarchies to manage the crowds that try to impart their wisdom on the site).
Murray writes that “it’s no surprise that fewer than 100 of the companies in the S&P 500 stock index were around when that index started in 1957,” which probably would come as a surprise to anyone who’s bought into the idea that we now live in a super-turbo-charged era of ever more rapid change. But even if one finds such turn over stunning, looking at the current roster of S&P 500 companies, who would give a shit, if you pardon a bit of salty language, if Noble Energy bought Peabody Energy and thus made room for an all new member of the S&P 500?
Companies do not simply stand around waiting to be swept away by the sands of history. They constantly evolve in response to the changing circumstances in which they operate. The conglomerate came and went, to take the perhaps most extreme example of organizational response to adverse conditions. The reality is that it is very difficult for large established companies to successfully invent or take advantage industry-transforming innovation just as it is very difficult for small upstarts to do the same. Companies can play venture capitalists, as Murray wants them to, but why would a large mature company that is probably no more than just barely able to meet its customers’ expectations knock it out of the ballpark as a venture capitalist? It is a fanciful fantasy that one can design a system that would accomplish something so unlikely. While Google likes to pat itself on the back for devoting much of its employees time to come up with new products and services the company has been remarkably bad at it. Instead Google is making money hand over fist by wringing more and more money out of its two core offerings: Search and contextual advertising.
In fact, Murray overlooks that corporations are even more efficient than they appear. Had they not been reined in by anti-trust regulation they would be larger and face less competition than they presently do. Wal-Mart has demonstrated how a huge and growing corporation can take advantage of decreasing transaction costs by demanding and getting lower prices and inventory stocking that precisely matches the company’s needs nation wide. While transaction costs that are altered primarily by technology may be coming down, politically and regulatory imposed transaction costs are constantly incrreasing, giving corporations a dramatic advantage over smaller competitors who can’t spread the added overhead across huge sales volumes.
Nor are corporate bureaucracies nearly as stale environments as Murray paints them. Take this little nugget from a breathless BusinessWeek cover story on former Mattel CEO Jill Barad:
With her sharp tongue and combative nature, Barad thrived in Mattel’s competitive culture. ”It has always been a place where people are pitted against each other,” says Judy Schakelford, Barad’s former boss. ”It’s a shark pond. You throw people in and see if they can swim fast enough to stay alive.
That doesn’t sound like something recommended by Max Weber.
Murray thinks managerial bureaucracies have to fall by the wayside because they are resistant to change, but that view assumes, more or less, that change-inspired directions dictated by executives is the right way forward. Often they are not. It was not by chance I chose to quote an article on Ms. Barad.
Writes Murray:
In recent years, however, most of the greatest management stories have been not triumphs of the corporation, but triumphs over the corporation. General Electric’s Jack Welch may have been the last of the great corporate builders. But even Mr. Welch was famous for waging war on bureaucracy. Other management icons of recent decades earned their reputations by attacking entrenched corporate cultures, bypassing corporate hierarchies, undermining corporate structures, and otherwise using the tactics of revolution in a desperate effort to make the elephants dance. The best corporate managers have become, in a sense, enemies of the corporation.
Yes, management is something executives can control to some extent, or at least mold or “wage war on.” It’s a bit tougher to treat customers, regulators or even suppliers the same way. Contrary to what Murray believes, properly managed management and managers are resources that help an executive reach set goals, not a hurdle.
Nor are the managerial ranks nearly as monolithic as Murray suggests. Typically you’ll find at least two kinds of managers: The young promosing fast riser and the older could-have-been whose career has stalled but sits on experience, knowledge and maybe even a bit of wisdom.
Managed corporate bureaucracies exist to deliver predictable outputs. I don’t think many executives would go to sleep with ease at night if they could not depend on that output. When they can’t their challenge is operational dysfunction and the solution almost always relies on management devising and implementing new production routines. Likewise, employees expect getting paid and reimbursed on time in accordance with their expectations even if an external or internal wisdom of crowds would rather they didn’t.
[Aaron Wall puts it well in a slightly different context:
"its the boring stuff that makes the money" largely because that which is boring has been refined, is predictable, and can scale.
9/23/2010.]
It seems reasonable to imagine that C-level management tasked with growing companies that have tens of thousands of employees and billions of dollars in annual sales exasperated cast about for ideas on how their respective organizations can perform better. It is a given that that their demand will result in supply of advice that speaks to their concerns and needs. Who better to blame than your underlings, no matter how much you ultimately need them?
Management will survive.
