Is it Time to Reset Management?

First, hierarchical bureaucracy is geared for predictability and risk avoidance. With digital ending up blurring industry boundaries unexpectedly, (de)globalisation and other social changes, turbulence becomes the norm. In a turbulent environment, practices are emergent; they escape replication. Cause and effect are often only discernible in retrospect. Risk management should give way to uncertainty management.

Second, because bureaucracies entrench the status quo and create inward-looking cultures, most companies tend to play “not to lose”, rather than “play to win.” A recent study found that out of close to 1,500 publicly listed companies, 60% of them create almost zero economic value; worse, 80% stagnate in that position a decade later and close to 10% fall into value destruction mode.

Increasingly, the mandate for C-suite executives is to form better conditions of flexibility and growth. This is where business agility breaks with traditional management, where resetting management comes in.

Understand what business agility is

To reset management, you ought to be first clear about what business agility is and how it works. This is not an academic exercise. Misconceptions abound. Unless you see through them, you might end up following a wrong path during implementation.

We found that non-digital native, highly entrepreneurial businesses that embrace, rather than fear or ignore uncertainty, have a clear understanding of agility. Companies like Siemens, LVMH, Haier, ING have reset their management approach to minimise critical “either-or” trade-offs and instead create the conditions for “both-and” solutions at both strategic and organizational levels. This is tough because unavoidably, tensions come creeping into the picture. But think of it this way: If you can juggle seemingly competing priorities, it gives you extra options to change tack when uncertainty strikes.

These companies try to be nimble, i.e., experiment and improvise faster. However, nimbleness with no stability brings dilution and chaos. The secret to resolving this tension is to discover what sources of stability are healthy (e.g., clear and well-communicated direction, cautious sensemaking, analysis and synthesis for good strategising) and which ones you should stay clear of (e.g. risk avoidance).

These companies also simplify. That way their business portfolio is focused and allows good resource allocation. Bureaucracy and layers of management get trimmed down. Yet, they cannot afford to be simplistic, either. They maintain a healthy level of complexity that resides in networks of learning and hyper-aware employees; the ability to exploit a sufficiently diverse portfolio of businesses and customers.

In sum, counter-intuitively, the shift towards greater agility is not solely about doing things faster. It does not mean the end of the bureaucratic hierarchy altogether, but it does mean much less of it. It means modernising.

The shift to greater agility has many implications on how you lead yourself and others. Here are four that will get you a long way.

#1. Resetting how you work in the top team

As companies shift to empower small, cross-functional teams to experiment around customers with transparent information and to foster greater collaboration by tearing down unnecessary silos and layers, their top management teams realise that they cannot embed those new mindsets and behaviours without walking the talk themselves. Besides, the speed of decision making in those small teams is such that if they do not change themselves, top management teams end up slowing them down and thwart agility.

In traditional management, top managers’ turfs are well respected. At ING Benelux, the top management team has its own scrum board where every business and functional issue becomes transparent to all the C-suite and gets resolved collaboratively at the start of the day through short “stand-up” style meetings. To accommodate uncertain circumstances, this agile way of working also allows things to be reprioritised on the spot.

The CEO’s job is to encourage deviant thinking in the top team rather than managing by fear or consensus, to really enable breakthrough ideas, those that will move the needle, to surface. But it’s also to get unified commitment of the top team when executing innovative projects.

#2. Resetting how you lead employees

In traditional management, top leaders know 100% of the strategy and 5% of the customer issues. Yet, this is where real opportunities for innovation and growth abound. Front-line employees know 100% of those issues but 5% of the strategy. When you reset management for agility, you have an opportunity to let the employees drive new levels of entrepreneurship.

To achieve this without creating chaos, your role is to double down on a few clearly communicated strategic directions, that are short, easy to remember, precise enough in what they mean for customers so that employees can innovate and experiment freely without creating strategic drift. In traditional management, companies have complex strategy documents which explains why management feels compelled to micro-manage employees. In agile businesses, you inspire employees to discover the roadmap to reach the direction you have set through great storytelling.

#3. Resetting how you interact with middle management

The transition to greater organisational agility can have two unintended consequences: it might result in fewer hierarchical layers and therefore fewer career opportunities for middle management. The middle managers who stay might also resist the rollout of agility principles as they fear that if employees fail, they will get punished.

CEOs must anticipate how they will mitigate these issues. The responses will include developing the functional expertise of middle managers, not just their general manager skills, and creating career ladders based on expertise levels, just like in professional service firms; and aligning the incentives of middle managers on how they have encouraged employee risk-taking and the creating of new knowledge from those experiments, even if they failed.

#4. Resetting how you lead yourself

In the next management paradigm where the distance between top and front-line shrinks, you will need to work at being more approachable and empathetic, with authenticity. Think how approachable John Legere and Satya Nadella are. They do not hesitate to share their own vulnerabilities to create the trust which, in turn, inspires employees to innovate and improvise. They show they are prepared to accept that leadership is more distributed. They know what they don’t know, accept they don’t have all the answers, and so will gladly consult experts, even if they are much less junior than them.

Resetting CEOs are also highly curious; they lead themselves for “learning it all” rather than “knowing it all”. For example, they forcefully develop their digital acumen.

Professor Stéphane JG Girod is a leading IMD professor and co-author of the new book Resetting Management: Thrive with Agility in the Age of Uncertainty (Kogan Page).

References

1. C Bradley, M Hirt, and S. Smit, Strategy Beyond the Hockey Stick, Wiley, 2018.