Is your Organisation a Frog in a Slowly Heated Water?

Many organisations today are like a frog in a slowly heated water. Unaware of the forthcoming danger, complacent, unwilling to change, shift to a better place, jump out of the increasingly dangerous hot water and move to safety. They are surfing on the edge of chaos - markets change faster and faster, unforeseen influences require quick adaptation, and changing demographics of the workforce demands different management practices. Many businesses are becoming global, helped by advances in connectivity and digitisation. This means that competitor profiles are constantly shifting and there is an increasing emphasis on innovation, cooperation and collaboration.

The management dogmas of the past do not serve their purpose anymore; it is time to adopt new thinking, take a different type of actions in organisations worldwide and make them more human and fit for purpose. Organisations and societies are better able to adapt by taking a path based on values, integrity, purpose, compassion, continuous innovation and the commitment to make a positive difference and safeguard the future for the young generations.

Continuous learning and innovation are becoming progressively more important for sustainable performance. Engaged employees who feel passionate about their work create innovative cultures, but can be held back by outdated management practices. Managers need to create the conditions for unleashing the power of human passion, wisdom and ingenuity. It is becoming apparent to CEOs, management thinkers and practitioners that we cannot use old solutions for new problems as we have never experienced such a magnitude of changes before. There is a dramatic need for a shift to new mindset, and new management practices, what I call 'The Management Shift'.

Many organisations, both in public and private sectors, need to make profound systemic changes not just to management practices, but to organisational cultures, business processes, regulatory frameworks, work arrangements and work ethics. Traditionally managed organisations resemble supertankers, difficult to respond to any sudden changes in their environment and difficult to change the course. Modern organisations should be managed and led as sailing boats - a general direction is to be determined, but the journey towards the destination should be flexible depending on the environmental conditions.

Management thinking has been traditionally influenced by scientific discoveries. Conventional management approaches have been based on the Newtonian machine model that focuses on hierarchical linearity, a culture based on rules, command and control and formal relationships. It is no more than a metaphor, and while such an approach might have worked well in predictable and stable environments when the objective was efficiency in the production economy, there is ample research evidence that in dynamic and complex business environments this traditional approach inhibits creativity and innovation and decreases motivation, engagement and productivity.

Management innovation is a greater potential source of competitive advantage than traditional innovations of products, services or technology[1]. Einstein’s insights into relativity have influenced other disciplines such as art, music, religion or literature at the beginning of the last century. The main paradigm was that rational and analytical were inseparable from emotional and intuitive, but this has not affected management thinking until recently. The main reason was 'if it is not broken, do not fix it' mantra. From 1950s traditional management model flourished with the wealth creation for industrial nations based on increasing productivity. Then, with all technological changes and increasing importance of knowledge, new business models emerged (such as Amazon.com), where talent, collaboration and innovation enabled faster commercialisation of ideas. However, embracing these new management approaches requires a shift in the mindset which is not easy to achieve, and majority of organisations today are still managed using conventional, Newtonian management approaches.

Not surprisingly, organisations, institutions and societies are now going through a major crisis. Performance continues to decline whether measured through Return on Assets or Return on Invested Capital; U.S. firm's Return on Assets has progressively dropped 75 percent since 1965, despite rising labour productivity[2]. The average life expectancy of Fortune 500 companies has steadily decreased from 75 to 15 years in the last 50 years. Furthermore, data shows that only 25 percent of the workforce is passionate about their work[3], despite the plethora of techniques and resources spent on Learning and Development (L&D) and global figures for engagement show that 80 percent of employees are less than fully engaged at work[4].

There is a cause to the above problems: outdated management paradigm and practices. And now we know that there is a solution to these problems - the new management paradigm and practices or 'The Management Shift' based on people, purpose, collaboration, trust, transparency, community and autonomy. Authority is distributed and decisions are made on the basis of knowledge rather than a formal position in organisational hierarchy[6] and organisations are managed holistically as complex adaptive systems. This approach brings better engagement, productivity, innovation and profit - this is the future of work and we can implement it now.

Organisations can try to keep the status quo and hope business as usual will work in the foreseeable future. This may mean that at some point it might be too late to jump out of the hot water. Or, alternatively, you and your organisation can shift now, get out of danger and embrace new ways of working that will bring sustainable success and create happier and more purposeful work places. The choice is yours!

References:  

[1] Hamel G. (2007), The Future of Management, Harvard Business School Publishing, Boston.

[2] http://ow.ly/7TeUE

[3] http://edgeperspectives.typepad.com/edge_perspectives/2010/11/2010-shift-index-passion-and-performance.html

[4] Hamel G. (2012), What Matters Now: How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation, Jossey-Bass, San Francisco.

[5] Hamel G. (2012), What Matters Now: How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation, Jossey-Bass, San Francisco.

[6] Amar A.D., Hentrich C.and Hlupic V. (2009), 'To Be a Better Leader, Give up Authority', Harvard Business Review, Vol. 87, No. 12, pp. 22-24.Business Review, Vol. 87, No. 12, pp. 22-24.

[7] Holland J. (2006), 'Studying Complex Adaptive Systems', Journal of Systems Science and Complexity, Vol. 19, No. 1, pp. 1-8.