Moving Management Online (Part One)

Posted by Gary Hamel on October 31, 2007

Over the last decade, the Internet has dramatically transformed the world of business. It has enabled real-time, globe-spanning supply lines, 24/7 customer service, and the digital distribution of many products and services. It has reduced the costs of coordination across geographic and organizational boundaries, and made it easier for companies to arbitrage wage costs via outsourcing and off-shoring. Just as significantly, the Web has allowed a swarm of upstarts to circumvent long-standing entry barriers in industries as diverse as publishing, music, travel, retailing, and insurance. Whether it’s incumbent companies overhauling old operating models, or newcomers blowing up time-worn business models, the Internet’s impact on business has been pervasive and profound.

Yet when it comes to the management models that predominate most companies—the methods and processes used to create strategies, set goals, make critical decisions, allocate resources, and align human effort—the Web’s impact has been comparatively modest.

While e-mail, Intranets, webcasts, and a burgeoning array of online collaboration tools have helped to make management more efficient, there’s little evidence that the Web has dramatically altered the responsibilities of business leaders, or fundamentally changed the way in which they do their jobs—at least thus far. Looking forward, though, there’s every reason to believe that the Internet will change the work of management just as thoroughly as it’s changed every other facet of commercial life. Why? Because the Internet is an immensely powerful tool for multiplying human accomplishment—a goal that is central to the work of every manager and the design of every management system.

At its essence, “modern” management is nothing more than a technology for “getting more out of people.” Unfortunately, it’s easy to lose sight of this simple truth when one is surrounded by the clanging Rube Goldberg-like machinery of corporate decision making—the never-ending budget wrangles, the elaborately staged planning sessions, the carefully scripted review meetings, and a gaggle of other similarly contentious and time-consuming rituals. Yet to fully appreciate the power of the Internet to transform the work of management, we have to go back to basics, and focus on the two essential tasks that confront anyone who seeks to extend the boundaries of human achievement.

The first task is to amplify human capabilities—that is, to create an environment in which individuals are empowered, equipped, and encouraged to give the very best of themselves. Studies show that fewer than 20% of employees around the world are highly engaged in their work. This is a potentially debilitating handicap for organizations competing in today’s “creative economy.” Disengaged employees may be obedient, industrious, and smart, but they are unlikely to bring their initiative, creativity, and passion to work—even though, as individuals, they may be richly endowed with these high value capabilities. The right tools, a compelling sense of mission, access to information, the freedom to chose one’s work, high caliber colleagues, a stimulating physical environment—these are a just a few of the things that help to amplify individual accomplishment.

The second task of management is to aggregate individual efforts together in ways that make it possible for human beings to do together what they couldn’t do on their own. No single individual can construct a jetliner, build a robust computer operating system, or make an Oscar-winning movie. Once unleashed, human effort must be coordinated, and coordination tasks come in varying degrees of complexity. The simplest involves merely pooling resources—assembling a busload of farm laborers, for example, and delivering them to an orchard that needs pruning. At the other end of the spectrum is the challenge of optimizing the performance of a highly complex production system that requires the sequencing and integration of a varied mix of critical inputs. Improving the yields in a semiconductor factory, or better managing risk in a global bank are examples of tasks that demand high levels of coordination.

One can picture these core challenges on two axes, as in Figure 1. Improving managerial effectiveness entails getting better at both amplifying and aggregating human capability—and it is this challenge that brings us back to the Internet. Over the next decade or two, it is likely that Internet will grow into the most powerful tool that humanity has ever possessed for boosting human accomplishment.

Figure 1: The Essence of Management
Figure 1

Everything about the Internet, its global reach and configurability, its diversity and openness, its community-centric ethos, and anarchic disorderliness, serves to enlarge the scope for human accomplishment. Blogs, podcasts, mash-ups, wikis, folksonomies, opinion markets, discussion boards, and social networks—these technologies have already extended the range of human creativity and collaboration in ways that would have been unimaginable a decade or two ago, and there is much more to come.

While the social technology of management has made an immense contribution to the world’s economic welfare over the past century, it is now a mature technology. Peel away the new-age rhetoric about innovation and teamwork, and in most companies you will find a management model that conforms closely to Max Weber’s bureaucratic ideal. While pundits are already talking about Web 3.0, most companies are still running Management 1.0. Nevertheless, over the coming years, management as currently practiced, will largely be absorbed by, and/or supplanted by, the new social technologies of the Web.

Before the Internet, human beings had only two choices when confronted with the challenge of mobilizing human effort for productive ends—create a market or build a bureaucracy. While markets are great at unleashing initiative and passion—picture the frenzied madness of a Wall Street trading floor or the passionate haggling in an Arab souk—they’re not very good at complex coordination tasks. A market will never build an A380 (a feat that even Airbus finds difficult). Bureaucracies, on the other hand, were invented to aggregate human capabilities—and modern bureaucracies are capable of feats that would have amazed even pyramid-building Pharaohs.

Yet as every victim of red tape, myopic leadership, and organizational inertia knows, bureaucracies aren’t very good at amplifying human capabilities. In a Management 1.0 regime, initiative and creativity nearly always take a back seat to conformance and alignment. In such a setting, individuals with a sense of derring-do are labeled loose cannons; those with a large dollop of creative genius are dismissed as romantic dreamers; and anyone who’s truly passionate is likely to be viewed as slightly delusional. It’s hardly surprising, then, that most large organizations are less lively, less creative, and less adaptable—in short, less human—than the people who work there.

But now, thanks to the power of the Web, there may be an opportunity to transcend the market-versus-hierarchy trade-offs that have long bedeviled human beings. (See Figure 2.) Eventually, the Web may allow each of us to avoid the trade-off between fully exercising our humanity and being a full partner in a grand enterprise, between being enormously creative and enormously productive, between doing the things we love and doing things at scale. Even in its adolescence, the Web gives us reason to believe that such hopes are not entirely naïve.

Figure 2: Markets, Hierarchies, and Networks

Like the stock market, the Web allows individuals to “trade on their own account,” to be free agents in the global economy; yet unlike the stock market, it also allows them to collaborate across time and space to build things of enormous complexity—like a computer operating system. Like a bureaucracy, the Web is filled with mini-hierarchies, where some voices carry more authority than others; yet unlike a bureaucracy, where share of voice is a product of credentials and titles, influence on the Web is a measure of the value one actually brings to the broader community.

If we’re clever, and a bit courageous, the Web may well allow us to overcome some of the systemic pathologies of our long-in-the-tooth bureaucratic management model.

Moving Management Online (Part Two) will appear in two weeks.


Reply to comment | MLab

Thanks for sharing your very good web page.

My web-site ... 7 habits for highly effective people