Forward-looking executives must respond to the growing need for a new managerial model.
Joanna Barsh
November 2007
“Sometime over the next decade,” warns renowned strategy guru Gary Hamel in his new book, The Future of Management, “your company will be challenged to change in a way for which it has no precedent.”1 What’s even more worrisome, he argues, is that decades of orthodox management decision-making practices, organizational designs, and approaches to employee relations provide no real hope that companies will be able to avoid faltering and suffering painful restructurings.
McKinsey partners Lowell Bryan and Claudia Joyce, in their recently published book, Mobilizing Minds,2 arrive at a similar conclusion from a slightly different perspective. They find that the 20th-century model of designing and managing companies, which emphasized hierarchy and the importance of labor and capital inputs, not only lags behind the need for companies today to emphasize collaboration and wealth creation by talented employees but also actually generates unnecessary complexity that works at cross-purposes to those critical goals.
Forward-looking executives will respond to this looming challenge, these authors conclude, by bringing the same energy to innovative management that they now bring to innovative products and services.
The opportunity is substantial. Against the backdrop of the digital age’s dramatic technological change, ongoing globalization, and the declining predictability of strategic-planning models, only new approaches to managing employees and organizing talent to maximize wealth creation will provide companies with a durable competitive advantage. It won’t be easy. As companies discard decades of management orthodoxy, they will have to balance revolutionary thinking with practical experimentation to feel their way to new, innovative management models.
Hamel is the founding director of the Management Innovation Lab, a nonprofit research organization with offices in London and Silicon Valley dedicated to accelerating the evolution of management practice.3 He recently joined Bryan for a conversation on the subject of management innovation. Joanna Barsh, a director in McKinsey’s New York office, moderated their discussion.
Joanna Barsh: What is the opportunity both of you have identified and how did you spot it?
Gary Hamel: For almost 20 years I’ve tried to help large companies innovate. And despite a lot of successes along the way, I’ve often felt as if I were trying to teach a dog to walk on his hind legs. Sure, if you get the right people in the room, create the right incentives, and eliminate the distractions, you can spur a lot of innovation. But the moment you turn your back, the dog is on all fours again because it has quadruped DNA, not biped DNA.
So over the years, it’s become increasingly clear to me that organizations do not have innovation DNA. They don’t have adaptability DNA. This realization inevitably led me back to a fundamental question: what problem was management invented to solve, anyway?
When you read the history of management and of early pioneers like Frederick Taylor, you realize that management was designed to solve a very specific problem—how to do things with perfect replicability, at ever-increasing scale and steadily increasing efficiency.
Now there’s a new set of challenges on the horizon. How do you build organizations that are as nimble as change itself? How do you mobilize and monetize the imagination of every employee, every day? How do you create organizations that are highly engaging places to work in? And these challenges simply can’t be met without reinventing our 100-year-old management model.
Lowell Bryan: I arrived at the same point from a slightly different perspective. McKinsey asked me about 12 years ago to try to understand the impact of technology and globalization on our clients. We concluded that these forces were creating a fundamental discontinuity. Or to put it differently, that technology and globalization were creating a set of opportunities that didn’t exist before.
We observed that companies were struggling to take advantage of the opportunities created by digitization and globalization because their organizations were not designed for this new world.
Joanna Barsh: Is this a topic that CEOs are eager to hear about?
Gary Hamel: Not necessarily. The Internet is making it possible to amplify and aggregate human capabilities in ways never before possible. But most CEOs don’t yet understand how dramatically these developments will change the way companies organize, lead, allocate resources, plan, hire, and motivate—in other words, how new technology will change the work of managing.
Throughout history, technological innovation has always preceded organizational and management innovation. Think back to the end of the 17th century, when muskets started to be introduced into European warfare. At the time, battle formations were very deep, very square, with the archers in the middle of the formation shooting over the heads of the archers in front of them.
Eventually, those formations changed in size and scope to better reflect the capabilities of muskets. But it took almost 100 years for this to happen. Why? Because a couple of generations of generals had to die off before military planners were able to use this new weapon in a productive way.
It won’t take 100 years this time. Still, if we’re going to fully mobilize human minds, to borrow Lowell’s phrasing, we’re going to have to turn a lot of our legacy management beliefs on their head. The old model was, “How do you get people to serve the organization’s goals?” Today we have to ask, “How do you build organizations that merit the gifts of creativity and passion and initiative?” You cannot command those human capabilities. Imagination and commitment are things that people choose to bring to work every day—or not.
