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Monday, 6 June 2011

Radical management: it’s happening! make more money!

Radical Management Makes Much More Money

“Radical management: it’s happening” is the headline in the editor’s letter of the management journal, Strategy & Leadership, Volume 39, Issue 3. Robert Randall offers twin messages:

“One, corporations are failing their stakeholders by wrongly favoring some more than others or by not managing discontinuity through best practices that foster continuous innovation; two, it’s time to try something else.”

He continues:

As a result of working with these authors and reading manifestos by other leading strategic management thinkers that also call for a reinvention of management, I’m confident that we are witnessing a best-practice revolution. When respected management thinkers like Michael Porter and Gary Hamel tell management to re-boot, then it’s time. It’s not as if the failings of hierarchical, shareholder-first management are a secret. So it should be no surprise that many of the principles of radical management are quietly being adopted by leading companies around the world, to a greater or lesser degree.

Management reinvention… offers company-wide rapid-business-model development as a response to market discontinuity. To compete successfully despite frequent and sudden change, firms have to foster the competencies that promote continuous innovation in both offerings and operations. In practice, managers shift their focus from producing low-cost or high-differentiation offerings to satisfying customers. They become enablers instead of controllers, coordinate their organizations through dynamic linking of teams and customers rather than command and control, make social and customer values their prime concern, and communicate so as to further stakeholder conversations. Leading advocates are Gary Hamel (“It’s time to reinvent management,” S&L V36, N2), Stephen Denning (“Masterclass: The reinvention of management,” S&L V39, N2 and “Reinventing management: the practices that enable continuous innovation,” in this issue), John Hagel in The Power of Pull, and others.
(Note: Those articles require a subscription.)

Outstanding article award

Meanwhile the Emerald Literati Awards For Excellence were officially announced last week.  My article, “Rethinking the organization“, was selected as the Outstanding Article in Strategy & Leadership for 2010. The direct link to all Outstanding and Highly Commended Papers is here.

As a special exception, my prize-winning article, Rethinking the Organization, is available free for unlimited distribution until September 1 here.


Steve Denning’s most recent book is: The Leader’s Guide to Radical Management: Reinventing the Workplace For the 21st Century 

Surprise! Radical Management Makes Much More Money

My colleague, Dennis Rebelo, has written a generous piece about my book,  The Leader’s Guide to Radical Management (Jossey-Bass, 2010). (Jossey-Bass, 2010) while also asking: is radical management really so radical? Isn’t this really just a restatement of the humanist principles that have been formulated many times before?

The bridge between radical management and humanist values

In his blog, Dennis notes the connection between the humanistic principles taught at Saybrook University and the principles laid out in my book and has crafted “a list of some rules of thumb to offer leaders to expand on (but not replace) Steven’s interlocking principles – bridging his concepts to humanistic studies, topics and approaches.”

1. “Focus the organization on delighting clients” (Steve Denning) which means “become more aware of the role of a collaboration culture in supporting the mission you joined to serve fellow human beings” (Dennis Rebelo).

2. “Work in self-organizing teams” (Steve Denning) meaning “focus on natural formation versus control and command styles of the carrot and stick era of management so that you can experience joy at work” (Dennis Rebelo).

3. “Operate in client driven iterations” (Steve Denning) or “engage in a dialogue in the Bohmian-spirit to suspend judgment en route to understanding others” (Dennis Rebelo).

4. “Deliver value to clients” (Steve Denning) in other words “work with honor as you promised you would to serve” (Dennis Rebelo).

5. “Foster radical transparency” (Steve Denning) which is to say “graciously accept the sharing and critical thinking that stems from diversity” (Dennis Rebelo).

6. “Nurture continuous self-improvement” (Steve Denning) because “people are naturally inquisitive and so let the human endeavor at work encourage learning” (Dennis Rebelo).

7. “Communicate interactively” (Steve Denning) which is to say “dialogue versus monologue because no collective wisdom comes from watering down the thoughts of another human” (Dennis Rebelo).

Dennis concludes: “To be human means to accept, honor and be able to work with ease and grace despite having differences in thoughts and feelings with other people… Perhaps being human to get a human back is not a radical concept after all. Let’s not let it be.”

The article is a useful reminder that some of the roots of radical management have been around for a very long time. Indeed much of the spirit of radical management is driven by a wish to transform organizations from places where employees and customers are treated as things to places where people are treated as people. As Dennis points out, that ought not be a radical thought.

Future historians and psychologists will undoubtedly look back on the 20th Century and scratch their heads, wondering why did hundreds of million people accept to go on, day in and day out, treating other people as things and allowing themselves to be treated as things. What illness of the human spirit could have afflicted so many people to act in such a strange way?

More than just the old humanist principles

Yet this line of thinking should not delude us into thinking that radical management is really no more than the general humanistic principles that have been around for centuries. There are at least five fundamental ways in which radical management goes beyond general humanistic principles.

1. A change in the goal of the organization

Fixing the goal of the organization on delighting customers (or stakeholders) involves a lot more than “becoming more aware of the role of a collaboration culture”.

It is a fundamental change in the goal of organizations from making money for the shareholders to delighting the customers or stakeholders. It is a change in the basic geometry of organizations. Top-down becomes outside-in.

By and large, the humanist school of management from Mary Parker Follett onwards tried to work within the existing framework of shareholder capitalism, without always realizing that the goal itself would inexorably undermine humanist values. Instead of working within the goals of shareholder capitalism, radical management changes the very goal of the organization. Radical management rejects the framework of assumptions of traditional management and offers a different framework.

2. Radical management makes much more money

Happily, when the organization changes its goal to delighting the customer, it ends up making more money for the shareholders, because the organization is now in sync with today’s marketplace, where the customer is in charge. Delighting the customer is not just profitable, it is hugely profitable, as one can see from the results of Apple [APPL], Amazon [AMZN] and [CRM], particularly in comparison to companies still being run in the mode of shareholder capitalism, such as GE [GE], Walmart [WMT] and Intel [INTC].

Hence radical management doesn’t have to depend on persuading business people to treat people as people just because that’s the right thing to do (which it is). Happily the economics is inexorably driving the change, whether business people want it or not. Wall Street is already putting traditional, thing-driven firms out of business at an accelerating pace, as Deloitte’s Shift Index conclusively demonstrates. In one sense, this phenomenon is a triumph of humanism. But we should not forget that there is a lot more than general humanist principles that is responsible for what is occurring.

3. Many of the practices are genuinely new

Many of the people-oriented vocabulary and practices would be unfamiliar to the humanist writers. That’s because these practices and this vocabulary are genuinely new:
  • At the organizational level, the goal of the firm to delight customers is measured by the Net Promoter Score. It enables the organization to measure whether it is delighting the customer by inviting the customer to imagine a story: “Would you recommend this product or service to a colleague or friend?”
  • At the level of the team, work is planned in the form of user stories—a special kind of story devised to formulate the goals of teams in terms of customer outcomes.
  • The user stories that are developed are then sized and prioritized using other methodologies called “story points” and “planning poker” to measure how much work is involved in making any of the user stories “come true.” In such work places, people routinely speak of “implementing stories.”
  • Value stream mapping is a tool that creates a story of the organization seen from the customer’s point of view, and helps identify any delays in delivering value to the customer. It enables the organization to manage the forgotten competitive weapon: time.
  • These story-based measures enable the firm to go further and—for the first time—calculate the productivity of a firm in terms of human outcomes rather than merely the production of things.
With radical management, we are thus in a world of NPS, user stories, story points, planning poker, team velocity and value stream mapping. This vocabulary and these methodologies represent an evolution of the innocent world of general humanist values. In effect, by using these discoveries, radical management is able to transform general humanist principles into actionable business processes. The humanist principles are sound. But by themselves, they are not enough to run an organization.

4. Doing all the changes together is new

Individually none of these seven principles is new. Each principle has been implemented by some organizations for many years:

• Finding ways to measure client delight and the consequent impact on firm growth has been systematically studied by Fred Reichheld and his colleagues at the consulting firm Bain & Company for over twenty-five years.
• Self-organizing teams have been the staple of new product development for several decades.
• Iterative work practices have been promoted since the 1930s by Walter Shewhart, a quality expert at Bell Labs.
• Reducing inventory and delivering value to clients each iteration lie at the heart of lean manufacturing, which was invented by Toyota some fifty years ago.
• Radical transparency has been a guiding principle of software development practices known as Scrum and Agile for several decades.
• Continuous self-improvement is a legacy from the total quality movement for more than half a century.
• Interactive communication—storytelling, questions, conversations—has a rapidly growing literature and practice in the past decade.

Individually, then, none of the seven principles is new. What is new is for organizations to break free from the interlocking assumptions of traditional management and put all the principles of radical management together as an integrated, mutually supporting whole. It’s the integrated implementation of all the pieces that gives the approach its full power. Each of the components adds an increment: when they are combined, the increment becomes exponential.

As I noted in my post yesterday, many companies have mistakenly approached radical management (and its forerunners: Scrum, Agile and Lean) as it if were just another business process to be bolted on to the existing business processes. The result is generally a failure. Radical management is a different way of thinking, speaking and acting in the workplace. It is only when firms realize this that they achieve the full benefits from implementing it.

5. An end to mere PR

Traditional managers have often professed to be devoted to delighting their customer and valuing employees as the organization’s most important asset. Yada, yada, yada. Everyone knew that the real bottom line was neither customer focus nor valuing employees: the real goal was making money for the shareholders. The other stuff was PR bullshit.

So if radical management were to be merely talking about becoming more aware of the role of a collaboration culture, there would be a serious risk that people would see it as more of the same traditional management PR bullshit. They would suspect that the real bottom line of radical management was really still what it always was: making money for shareholders. By being crystal clear that this is a shift in the real bottom line of the organization from making money for shareholders to delighting the customer, we get to the heart of the matter of what is really driving the organization. This is not just PR bullshit. This is a fundamental change in the way organizations are run. This is what makes this thinking radical.
To learn more about the principles and practices of radical management, read Steve Denning’s book: The Leader’s Guide to Radical Management: Reinventing the Workplace For the 21st Century (Jossey-Bass, 2010).

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