3 July 2007 Thomas Tunstall
Thomas Tunstall explains how advances in technology and globalisation have changed the role and attitude of management.
As outsourcing and cross-organisational relationships become more important, new management behaviours will be required. Working with other businesses and organisations requires skills that many traditional managers simply don't have.
Internal departments, for example, can be managed by whim or fiat, but outside companies won't do business that way. As a result, old authoritarian management styles will prove ineffective.
OUTDATED MANAGEMENT STYLES
The 'old school' manager began his career during the rise of industrialisation, as professional managers were brought in to take the reins from the owners who also ran the enterprise. The market advantage that came with scope and scale during the manufacturing era required more formal governance mechanisms than most proprietorships were capable of providing.
As the large corporation blossomed in the late 1800s, it was first modelled as a stiff hierarchy, not dissimilar to the proprietorship it replaced. It then evolved into a multi-divisional form in the 1920s, which left finance and strategy functions at headquarters, but pushed operations and other tactical functions into the hands of field personnel.
However this structural change, the organisation nonetheless still retained hierarchical management styles that have endured for decades. The era of the old school manager finally peaked in the 1960s, as the service economy began to overtake the manufacturing economy in terms of output and jobs.
Services used to be classified as merely overhead because they made up such a small percentage of overall costs relative to raw materials and direct labour. As services have become more dominant, there has been an increasing strategic advantage to stripping down the old corporation, with all of its attendant functions and non-related processes, to its core, and giving the work to specialists. This means that more work gets done outside corporate boundaries – what we have come to know as outsourcing.
Unsurprisingly, technology has played a large part in this transformation.
IN-HOUSE TO INTER-COMPANY NETWORKS
Initially, management pioneered large-scale networks for use inside organisations using more traditional suppliers such as IBM, Fujitsu and Toshiba. The closed systems enabled the use of in-house email systems, which provided faster internal communication but were designed for the old insular corporation. Even as late as 1992, these in-house networks constituted the most dominant form of data communication for enterprises.
With the rise of the internet, communication across organisational boundaries became feasible. Offerings from companies such as Cisco, 3Com and Bay Networks focused on internet protocol (IP) standards to create cross-organisational networks that rendered in-house networks superfluous.
So, while in the 20th century it was hard to communicate across organisational boundaries, today you can easily send an email across the globe to tap experts in any organisation. Managers still relying too much on in-house resources will find themselves at a distinct competitive disadvantage.
Incredibly, many managers and executives, stuck in an old school mindset, voluntarily handicap themselves by failing to make use of new tools that enable cross-organisational collaboration – and by extension losing out on the opportunity to leverage the full panorama of global talent and expertise housed inside other organisations. Such provincial attitudes will be swept away in the new economy.
Don't expect management to change behaviour based on goodwill or altruistic intentions. It will take the discipline of the market, and the nature of the new rules of competition to force the issue. And the lessons will be harsh to those who refuse to learn them.
Managers will find that nothing focuses the mind like live ammunition. By way of analogy, notice how employees, reluctant to learn new skills while still employed, find new motivation after they get downsized (or outsourced) out of a job.
FOCUS FOR THE FUTURE
Greater collaboration will become a must because it improves coordination. Management will be focused on outputs, process interfaces, and clear rules of engagement, with outsourcing providing an important catalyst. Strong working relationships will win the day; idiosyncratic, ego-driven personalities will be an expensive luxury that few can afford.
In the years ahead, watch the old school managers and executives retire early or be forced to bring new mindsets to the game. Many old school boys have become casualties already. Will you be next?
Adapted from Outsourcing and Management: Why the Market Benchmark Will Topple Old School Management Styles by Thomas Tunstall (Palgrave 2007).