Organisational Change Management Volume 1

Framework 47 Change Your Management Model

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Introduction

There is much literature written about the most appropriate business models for different organisations to give them sustainable competitive advantages so that they are

- sources of differentiation

- hard to copy

- of value in the marketplace.

The appropriateness of the business model revolves around the question "what business are you really in?" This involves analysing 3 parts:

i. assumptions about the environment in which the organisation operates

ii. specific mission of the organisation

iii. the core competencies required to achieve the organisation's mission

"...these assumptions define what an organisation gets paid for, what results it considers meaningful and what it must excel at to maintain its competitive position...."

Julian Birkinshaw et al, 2009

Answers to i, ii & iii provide the "what" and "why".

An alternative may be to look at your management model and is to answer "how".

"...The management model is the choice made by company's top executives......to define objectives, motivate effort, coordinate activities and allocate resources..."

Julian Birkinshaw et al, 2009

Drivers of the management model

Some drivers in developing a management model are

- staff expectations

- capability to handle technological change

- competition (including new entrants)

Some examples include

- choosing managers based on how good they are at managing (not qualifications) and appraised by the levels of satisfaction of their stakeholders including staff, customers, etc

- encouraging competition amongst staff (computer programmers) by offering prizes which taps into their intrinsic desire for peer recognition.

Most organisations' success cannot be explained by the distinctive products/services they provide. In fact, their success is more about choices on

"...how to set objectives, motivate people and coordinate work, and those choices have in turn had a dramatic impact on the quality, responsiveness and cost of the services they offer..."

Julian Birkinshaw et al, 2009

Principles of management model

This is more about understanding management than leadership (yet the literature has focussed on leadership)

Management is about how to get things done through others, ie

"...it is concerned with the day-to-day work of setting objectives, motivating efforts, coordinating activities and shaping decisions..."

Julian Birkinshaw et al, 2009

Managing involves the following choices

- about the nature of the objectives the organisation's pursues

(Do managers have a clear set of short-term goals for the organisation? Or do they pursue an oblique path through the definitions of higher-level and longer-term set of objectives?)

- about how individuals are motivated to pursue these objectives

(Do managers attempt to hire and retain good people by making extrinsic rewards attractive, such as salary, benefits and bonuses' Or do they focus on intrinsic rewards, such as the opportunity to contribute to society, a feeling of achievement or peer recognition?)

- about how activities are co-ordinated in the organisation

(Do managers focus on using formal and well-structured management processes to deliver outputs? Or do they encourage a process of informal and spontaneous coordination through mutual adjustment?

- about how decisions are made in the organisation

(Do managers take personal responsibility for decision-making by relying strongly on their own the knowledge and experience? Or do they prefer to tap into the disparate knowledge of their staff and assign collective responsibility?)

A Framework of Dimensions of Management*i

Notes

i. Most organisations never reach a position delivering on either extremes of the maximum level, as their position involves trade-offs and choices.

ii. One extreme involves defining a clear set of targets and time frames to achieve them, eg Exxon Mobil sets specific financial goals; the other extreme involves setting one's sights on a goal and while pursuing it, achieving another worthwhile goal, eg IKEA. This latter involves focusing on a high-order goal rather than profitability itself, but profitability results nonetheless.

"...When an organisation is relatively simple and the involvement in which it operates is well understood and predictable, it is possible to define a specific set of goals and put together a detailed plan to achieve them. But in situations with greater uncertainty and complexity, careful planning tends to go out the window and the oblique principal is likely to be more effective..."

Julian Birkinshaw et al, 2009

On the other hand, obliquity can be risky as a broad vision can be symptomatic of hubris and/or lack of clear thinking, eg Enron

NB Shareholder value is a consequence of goals!!!!!

iii. People are motivated both intrinsically and extrinsically. The relative levels of these motivations vary with the individual and with the nature of the activity. It is interesting to note that most individuals derive greater satisfaction from out-of-work activities than from the ones they are paid to perform. The reasons for this are not clear, ie

"...Is the lack of discretionary effort at work because we are being paid? Or because of the way we are paid? Or is it because the nature of paid work is less intrinsically interesting than, say, charitable work or building a Facebook profile?..."

Julian Birkinshaw et al, 2009

Most organisations had significant degrees of freedom in which to manage the balance between extrinsic and intrinsic rewards.

iv. Most large organisations are bureaucratic with formal regulations and structures to ensure conformity of behaviour and to generate consistent outputs. This is a sound principle as long as the goals of the organisation are efficiency, quality and waste reduction. On the other hand, if the goal is innovation or adaptability, bureaucracy is a hindrance and the alternative principle of emergence is more appropriate. Emergence means the spontaneous co-ordination for the self-interested behaviour of independent people. Sometimes a negative impact of emergence is short-term efficiency gain at the expense of long-term effectiveness.

v. Hierarchy gives managers direct accountability for the decisions they make, provides them with legitimate authority over their subordinates and vests this power in them because it values their experience and wisdom. On the other hand, collective intelligence suggests that the combined expertise of many people can produce more accurate forecasts and better decisions than those of a small number of experts. While hierarchy is a good means for channelling information and subdividing tasks, it is based on the understanding that hierarchical position equates with expertise and wisdom in its decision-making on behalf of the entire organisation.

Limitations of collective wisdom include

- the failure to tap into a suitably diverse crowd. This can result in groupthink, ie a collection of individuals with similar backgrounds and/or experiences that will reach a consensus rather than the right answer

- allowing it to be a substitute for executive judgment

- has limited capacity for creative tasks

- not necessarily good at implementation

"...Collective intelligence work best in well-specified tasks, such as reviewing a company's values, but works poorly if the task lacks structure..."

Julian Birkinshaw et al, 2009

Planning model

Many large, successful organisations, such as Exxon Mobil, Wal-Mart, etc operate with narrow short-term objectives, clearly defined management processes and strict hierarchical decision-making.

Which model is suitable for your organisation? Using the distinction between 'tight' and 'loose' principles plus 'ends' and 'means' dimensions is useful (see earlier table). While the table below describes the conditions most suitable for each model:

Notes

i) 'Means' refers to managing objectives and enabling individual motivation

ii) 'Ends' refers to co-ordinating activities and making decisions

Summary

There is no one best management model. Rather there are deliberate choices to be made, based on many factors unique to each organisation. The most appropriate choice depends on a host of circumstantial, situational and competitive factors.

Specific organisational practices are generally invisible and rarely made explicit, ie organisations are usually unaware of what management model they are using. An understanding of the management principles that are operating and the potential to make conscious changes can result in a significant increase in competitiveness.

The Internet-based technologies are prime drivers of management evolution

(source: Julian Birkinshaw et al, 2009)