“…we must analyse whether the corporation is satisfying these basic demands: the promise that opportunities be equal and rewards be commensurate to abilities and efforts; the promise that each member of society, however humble, be a citizen with the status, function and dignity of a member of society and with a chance of individual fulfillment in his social life; finally, the promise that big and small, rich and poor, powerful and weak be partners in a joint enterprise rather than opponents benefiting by each other’s loss.”
That quotation comes from a “management guru” book with much to say about responding to the COVID business environment. There is a major twist to this story, so I’m not going to tell you the expert or details until the end. Try not to look ahead!
The guru used the example of one large corporation’s successful pivot. His examples and advice show how many terms thrown about in businesses, but rarely really implemented, help companies embrace change.
For example, the author focuses on decentralization. The company already operated as a loose confederation of separate divisions. “It attempts to combine the greatest corporate unity with the greatest divisional autonomy and responsibility; and like every true federation, it aims at realizing unity through local self-government and vice versa… It is not a mere technique of management but an outline of a social order.” This structure allowed the company to shift from making 250 related products to 3,000 unrelated ones without any central planning.
Based on interviews with executives, the author compiled a long list of advantages:
- The speed of decision-making.
- Fairness based on appreciation of a job well done.
- Democracy and informality: “Everybody is free to criticize, to talk and to suggest…”
- The lack of a large power gap between top executives and middle managers.
- “weak divisions and weak managers cannot ride for any length of time on the coat tail of successful divisions, or trade on their own past reputation”
- “the absence of ‘edict management’ in which nobody quite knows why” they are doing something.
Persuasion, not Orders
Central control in the company “is informal and a question of advice, discussion or mutual respect built up over years of collaboration. The vice-president in charge of a group of divisions, for instance, has a very real power; but it is rarely, if ever, exercised in the form of orders.”
To make that work, the company practiced the twin principles of transparency and participative decision-making. “By these means managerial employees of the corporation are kept informed on policies and problems: they are also constantly brought into the determination of policies.” Not only were objections encouraged, “It is a standing rule that central management is to rely on persuasion and on rational proof rather than on an order.” These principles were pushed, if not always adopted, down to the line and outward to partners.
There was an emphasis on evidence. If an “opinion or suggestion (is) overruled it should be not because of the higher rank of the boss, but because the facts are against (it). That would make it possible for superiors freely to admit mistakes to their subordinates—perhaps the most important thing in human relations.”
Shifting the Balance of Power
That humility relates to a different view of success that accepts the impact of environment and luck. “We can only deny social status and function to the economically unsuccessful if we are convinced that lack of economic success is (a) always a [person’s] own fault, and (b) a reliable indication of [their] worthlessness as a human personality and as a citizen.”
The author implies that inaccurate belief contributes to the failure of corporations to meet the needs in the quotation at the top of this post. In denying “social status and function” to workers, “even… the best-intentioned management must lead to favouritism and must demoralize the organization.” Unfortunately, he says, “there is a natural tendency to discourage initiative and to put a premium on conformity… (because) the subordinate’s legitimate desire to do things (their) own way, to introduce new methods, etc., appears as an attack upon the older person’s authority or peace of mind.”
Other symptoms that corporations are failing workers include:
- The system for promotion, which “seems to be based on nothing but the arbitrary whims of a management quite remote and personally almost unknown to… the ranks,” as opposed to a system using “objective criteria.”
- The over-emphasis on formal education for promotion. Thus people with a degree but little experience are promoted over experienced people without it, despite their capability—which means it also gives people from higher-income backgrounds, who can afford college, an advantage. (I thought of my best friend, a dependable worker for 18 years with deep understanding of customer preferences and efficient practices whom Lowe’s constantly passed over for supervisor roles because he only had a high-school education.)
- The tendency toward specialization, which can hide other talents if someone isn’t given the opportunity to use them.
Another key point was motivating workers by giving them what author Daniel Pink has summarized as autonomy, mastery, and purpose. One division found it could not produce, using their normal processes, completely new products that required high-precision work. Several engineering firms tried to figure out how and failed. So the company turned to the workers, and the resulting process resembled Kanban in key ways. Each worker could do the entire process. The worker did not get parts until they asked for them. No time limits were placed on the final calibration process—it could take minutes or days, and workers were required to take a break or do something else for a while if the first few attempts didn’t work. The products ended up being manufactured much faster and cheaper than they had been using traditional methods.
A similar approach at another plant quickly enabled unskilled workers to do processes formerly done by highly skilled ones. Meanwhile, a third plant switched to creating different products through a humane approach to time-motion studies. The workers were shown how to use the end product and where the parts they created fit in. Next, an out-of-specification part was introduced, and workers were allowed to use the product again. The need for precision became apparent. Then each worker and a specialist sat together to customize how the worker would built the part. Workers also set their own production schedules. The plant’s turnover and absenteeism rates went below the pre-crisis average, and output was higher.
Another division producing a part for a large, complicated machine began suffering morale problems, absenteeism, and mini-strikes. Raising wages, better working hours, and extra benefits did not fix the problems. Finally the company brought one of the machines to the factory campus. Workers and their families learned about the machine, and heard about the importance of the part they created from those who used it. The author reports, “the bad morale and unrest disappeared at once.”
In general, the author recommends letting workers design and plan their own work. “What is needed is a serious and adult effort to supply the answers the worker wants to know (my italics) instead of giving… the answers management expects (them) to want to know.” He suggests that management does too much for workers that workers should be allowed to do themselves.
These concepts of giving power to employees and trusting them to make the right decisions reflect principles of the Agile Manifesto. Agility is critical, the author says, because corporations operate in conditions of “continuous change”; in fact, he says their primary function is “economic and technological progress.” Despite this, there is “a real danger that rigid insistence on policy and precedent will stifle the spirit of adventure and initiative.”
Per agility’s emphasis on working directly with customers, the company created a “Customer Research Staff” to break through the isolation of managers from customer wishes. The unit had to convince managers that the point was not to educate the stakeholders, but to listen to them and educate the company. This is a key point made by proponents of “customer discovery.”
Although the company required annual estimates from its division, each was allowed to provide three, based on bad, average, and good years. This is far more agile than the standard approach of providing a single estimate that must be met, as if the unit has complete control over its fate.
And now for that twist I promised you. This book was written in… 1947! The massive change was World War II. The author, legendary management thinker Peter Drucker, was talking about General Motors. The new products featured in the “Motivation” section were bomb sights, guns, and bombers.
Stop thinking “today’s” business problems, or the solutions from agile management, are anything new. We are facing the same problems, generation after generation, because we don’t widely adopt those solutions.
Source: Drucker, Peter F., Big Business, 1947 <http://archive.org/details/in.ernet.dli.2015.217993> [accessed 1 April 2022].