management

Transcending Trade-Offs

Making progress on these moon shots will help de-bureaucratize organizations and unshackle human capabilities. The goal, though, is to overcome the limits of today’s management practices without losing the benefits they confer. It would make no sense to find a cure for insularity and inertia, for example, if the side effects were imprudence and inefficiency. Organizations must become a lot more adaptable, innovative, and inspiring without getting any less focused, disciplined, or performance oriented.

Resolving this paradox will require making a clear distinction between ends and means. Executives often defend timeworn practices because they can’t imagine less bureaucratic ways of accomplishing goals. For example, many companies have detailed policies governing business travel. Employees must get permission before embarking on a trip, abide by strict spending limits, and submit travel expenses for approval. Few would argue with the goal of keeping travel costs in check, but there may be less bureaucratic ways of doing that. One approach might be to publish every employee’s expense report on the company’s intranet and rely on peer pressure to rein in profligate spenders. Transparency is often just as effective as a rigidly applied rule book and is usually more flexible and less expensive to administer. Remember the public furor in September 2008 when AIG executives blew $440,000 at a posh resort days after the insurance company received an $85 billion bailout from the U.S. government? AIG’s executives are unlikely to be so lavish again.

Nevertheless, anyone who stood slack-jawed as the flames of greed consumed the investment-banking industry last year can be forgiven for wondering if the problem wasn’t too little bureaucracy. After all, the machinery of bureaucracy—detailed operating procedures, narrowly defined roles, close supervision, and clear approval criteria—keeps employees in check. Undoubtedly, everyone would be better off today if bonus-chasing bankers had been kept on a shorter leash.

Control is critical, but all too often it comes at the cost of initiative, creativity, and passion—the essential building blocks of organizational success. In dynamic environments, like the hair-trigger world of modern finance, decision-making authority has to be distributed, so control has to come mostly from organizational norms, not sclerotic review procedures.

Centralization and draconian controls are probably not the best ways of tackling injudicious risk taking in the long run. Those on the front lines—the “rocket scientists” who create and sell exotic financial instruments—must be accountable for the impact of their actions on balance sheet risk and banks’ medium-term profitability. In recent years, though, they have been responsible for little more than shoveling products out the door. Bankers need incentives that require them to take a longer-term view of success. They must see themselves as stewards, responsible for safeguarding the interests of all those who put trust in them, rather than as mercenaries, motivated only by million-dollar payouts. Control from within rather than from without, time frames that extend beyond the next 12 months, serving a higher purpose, the ethos of community—these moon shots will be the key components of any long-term alternative to the binge-and-purge cycle that has characterized the U.S. financial services industry for most of the last century.

Not all the moon shots are new; many address problems that are endemic in large organizations. The purpose of highlighting them is to inspire new solutions to long-simmering problems. The Gates Foundation has devoted itself to eradicating malaria, which is hardly a new goal. Yet the people leading the charge believe that new ideas, new therapies, and new delivery systems will eventually yield historic gains. In like vein, new minds unencumbered by old beliefs and new tools of the sort that have powered a social revolution on the web may help us escape the limitations of tradition-encrusted management practices.

The aim of Management 2.0 is to make every organization as genuinely human as the people who work there. People are adaptable: Every day, thousands of individuals cross continents to take on new jobs, go back to school to acquire new skills, start fresh careers in midlife, or navigate their way through family crises. People are innovative: Every day, there are millions who post new blog entries, invent new recipes, write poems, or redecorate their homes. People are community minded: Think of all the folks you know who volunteer at their kids’ schools, help at local hospitals, coach junior-league sports teams, or do the shopping for housebound neighbors. Tragically, the technology of management frequently drains organizations of the very qualities that make us human: our vitality, ingenuity, and sense of kinship. What companies once regarded as merely a moral imperative—creating organizations that are genuinely human—has become an inescapable business imperative.

This is a daunting challenge, but take heart. The first management pioneers had to turn freethinking, bloody-minded human beings into obedient, forelock-tugging employees. They were working against the grain of human nature. We, on the other hand, are working with the grain. Our goal is to make organizations more human—not less.

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