Despite the talk that tech advances will bring an age of management utopia, traditional corporate juggernauts do not change overnight.
(ManagementInnovationeXchange) — When it comes to the future of management, there’s a problem with all this talk of virtual and networked organizations, and this vision of empowered and engaged employees. We see the massive changes underway in technology and connectivity, and we assume that these changes will drive change in how we work. The trouble is, previous generations went through the same process.
In the late 1990s, commentators talked about the emergence of the ICE age, where ICE was an acronym for “the Internet Changes Everything.” In the early 1980s, the business world was abuzz with talk of employee empowerment, and with the idea that computers would herald the end of middle management. Go back further still, to the 1960s or 1930s, and it’s the same story — the bad-old, machine-like organizations of the past were being overthrown and replaced with enlightened and humane companies that put their employees first.
So there is an enduring puzzle that we need to come to grips with. Every generation predicts that the nature of management is changing before our eyes, and that the future will be more democratic, flat and employee-centric. Every generation has evidence that the emerging model is better. But while some things do indeed change (for example, the use of IT systems for managing our business process, the off-shoring and outsourcing of work, the cycle-time for new product development), the vast majority of management work — by which I mean how we motivate people, make decisions, set objectives and allocate resources — seems almost impervious to change.
Why is this? Remember, we have pretty solid evidence that companies that put their employees first outperform others over the long term. And yet, despite the conscious efforts of some management innovators (and many commentators), we are still stuck with an industrial-revolution era approach to management, built on concepts like hierarchy, bureaucracy, planning and control.
I see four interlinked reasons why this is the case.
First, the traditional model of management is so pervasive that it is still the safe way of doing things. When you are proposing a new way of doing things, the first question you get is: who else has done this? What are our competitors doing in this area? Following the herd gives no opportunity for competitive advantage, but it is still a very safe and defensible place to be. What we need are more “alternative” role models — companies with unusual and successful management models. Unfortunately, these are few and far between, and they often get built up so much that they lose their luster. Companies such as Gore, Semco, Oticon, and HCL Technologies all have valuable lessons to offer other companies, but their popularity and their novelty can also diminish their impact.
Second, the traditional model has a very explicit power structure that makes life very comfortable for those at the top of the tree. Anyone who has been promoted into a senior position has had to work hard to get there, and has likely come to believe that he or she deserves the trappings of success. It’s a rare individual who willingly gives up power (just ask Hosni Mubarak or Colonel Qaddafi), so the hierarchy-oriented status quo persists.
Third, new approaches to management are, at least initially, pretty fragile — they require people to work in ways that are unfamiliar, they require more skill, and they need different types of incentives. They often work fine on a temporary basis, but as soon as there are problems — a recession, a change in personnel, a new set of regulations — those who are responsible revert back to the original methods. Such events also have a deleterious effect on the image of the new management practice, and make it unlikely they will be tried again.
Finally, many of the problems of the old model are so systemic they are impossible for even a large company to challenge. Everyone agrees that banking bonuses are out of line, but if one bank changes its approach unilaterally, it will quickly lose its best people to its competitors. We need system-wide change, but we lack the collaborative bodies to make such changes happen. The same is true within a large organisation — if one department wants to make meaningful changes, it often needs agreement from other departments with less enthusiasm for the whole idea.
All of which explains, to a large degree, why management has been so impervious to change for the last few decades.
But this analysis also helps us think about a route forward for a potential management innovator:
- Find exemplary practices in other places and evidence to support them
- Look for ways of co-opting the existing power bases in your organization — make it a win-win argument
- Try to isolate the experiment — give it time to work before it gets fully tested
- Seek partners across the organization, once you have a working model
So what will the future look like? Well, the good news is that we are starting to see some new role models, thanks to the interactive, community-based version of the Internet we often call Web 2.0. The likes of Linux, Mozilla, Google (GOOG), Amazon (amzn), Netflix (nflx) and eBay (ebay) all grew up in an online world, and with a majority of Gen Y employees. As a result, they tend to adopt a more progressive approach to management — one that is much more in line with the ruling values of the day. . And this provides inspiration to others.
But in all honesty, these new ways of working are not going to transform the BPs and the Toyotas and the General Electrics of the world. Rather, they provide the insights that let traditional companies capture some of the benefits of the “new economy” without sacrificing the benefits of scale, efficiency and control that their “old economy” models currently offer.
I believe smart management is about making conscious choices — when to use top-down decision-making, and when to use the collective wisdom of my employees — rather than following the crowd. And when armed with a good understanding of the old and the new worlds, executives are better positioned to make those choices.
Julian Birkinshaw is Professor of Strategic and International Management at London Business School. He is co-Founder and Research Director of the Management Lab (MLab).
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