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Given the significant pressures on firms in the real world, what do we know about the traits, characteristics, or management approaches that help ensure that a firm can and will survive within its environment? Some might think this is a difficult, if not an impossible task, given all of the variables at play. Nonetheless, we will look at three approaches to survival and the mechanisms at play, which can be listed as: (1) survival of the paranoid, (2) survival of the fittest, and (3) survival of the effective.

1. Survival of the Paranoid

Andy Grove, the former CEO of Intel was the author of a 1996 book entitled, “Only the Paranoid Survive,” which tells about his experiences at Intel. Granted, this is a book written for a mass audience but stay with me for a minute. Formed in 1968, Intel first made memory chips, but moved primarily into microprocessors after 1981, once the IBM personal computer arrived.  In thinking about survival, Grove says, “sooner or later something fundamental in your business will change.” He emphasized the concept of strategic inflection points where change and adaptation to the environment can be critical, and where a firm needs to act with conviction once a revised course had been set.  Grove listed a number of different directions from which threats can arise, including competition, technology, customers, suppliers, flaws in the business model, and regulation.  Any of these could lead to what he called a 10x change.

In Andy Grove’s world, a strong dose of paranoia was a competitive advantage.  It was about never being sure what signal to trust, yet all the while surveying the environment for incipient change and trying to separate signal from noise. The fact that Intel was on the forefront for supplying technology to the next generation of computers put the company at risk for costly missteps, due to the large capital infusions needed to build and maintain chip technologies. Every transition was important. If Intel were to lose the leadership position, it would have been very difficult to recover. The company was remarkedly successful and remains an important technology company today. Despite the obvious risks, Intel rode a technology wave and won; however, survival of the paranoid seems unlikely to provide a general model for firm survival going forward.

2. Survival of the Fittest

Sometimes lessons for firm survival are drawn from other disciplines. For instance, the survival of firms over time is sometimes compared to survival of species in the natural environment. Here, we often see references to Charles Darwin’s work in biology and population ecology in the 1800s, where natural selection was believed to be important for the survival of natural systems. This is commonly referred to as Survival of the Fittest (a term coined by naturalist Herbert Spencer to refer to a species’ reproductive success). Darwin believed that survival is most likely among those species that are best suited to their natural environment.  Survival over time in natural systems is primarily about which species are able to successfully pass the most genes on to the next generation.

Darwin’s mechanism of “natural selection” was at the time contrasted with “artificial selection,” which was the process used by breeders of domestic livestock animals (preferentially selecting desirable traits for continuation in the line, while reducing others). In the mid-1800s, the theory of genetics was not well developed. DNA had not been discovered, and electron microscopes were not available to study cell material directly.  Darwin developed his theory of evolution based on the observable characteristics of a species, known as its phenotype. Darwin’s theory of natural selection was controversial and did not receive wide acceptance during his own time. It went against the creation story and many other teachings of the Christian church. It was not until the 1930s and 1940s, as Gregor Mendel’s ideas on genetics were combined with Darwin’s views that natural selection experienced something of a resurgence, and the scientific community came to a modern understanding of evolution through natural selection.

There are some similarities, but also considerable differences, between firms living within their chosen environment and organisms living in a natural environment. Perhaps the greatest difference is that organisms live for a relatively short time and pass on their genes through reproduction. Organizations, on the other hand, can theoretically live forever but must capture energy flows and benefit streams to continue their existence. Survival of the fittest provides a way for organizations to think about competition in their environment (often characterized as a ‘Red Ocean’ view of the world), but the mechanisms involved for success in the biological sphere are considerably different than those that firms need to adopt for their own success.

3. Survival of the Effective

Our last approach to firm survival is called “Survival of the Effective,” which comes from my 2017 book, Become Truly Great. From first principles, we know that firms must exchange benefits with their environment to survive and thrive.  In a real sense, a firm must serve its environment, else it receives no benefits in return. A firm and its environment form an open system, and there are many different kinds of benefits that can be exchanged. Benefit exchanges with the environment should not be considered casually, however, since a Darwinian-style imperative is at work behind the scenes to enforce a culling of the ineffective. Over time, ineffective firms are marginalized or eliminated in the absence of adequate benefit exchanges with their environment. Effective firms, alternatively, are selectively retained to survive and thrive. Firms that are highly effective for a period (e.g., Apple or Google) can experience rapid growth, and appear to enjoy an effectiveness premium through preferential benefit exchanges with actors in the environment. Effectiveness thus confers a significant advantage when facing many present and future challenges.

While it may be clear that ineffective firms can be marginalized or culled by the environment, there are usually internal early warning signs before this fully plays out. Often, instability arises from inappropriate objectives driving the organization. Consider that the traditional approach to organizing the work internally is for management to set up a particular organizational form (organizational chart), program the units with a series of goals and objectives, then lead and direct the staff to fulfill them. This is the basic idea behind Management by Objectives, and variations thereof, that utilizes the goal model for effectiveness. The problem with this approach is that the goal model will accept almost any goal that management wishes to throw at it, and not all goals have any relation to improvements in effectiveness. It is difficult to know whether the right goal has been specified, and even if the goal is achieved, it may not mean that the organization is effective. Selecting a new executive team with a new set of goals can be a risky strategy with unpredictable results. In 1974, Peter Drucker wrote in response to a rash of reorganizations in large American organizations, “the main causes of instability are changes in the objective task, in the kind of business and institution to be organized. This is at the root of the crisis of organization practice.”

It seems that the more single-minded a firm becomes in focusing on a narrow financial objective (such as maximization of profit or shareholder value) at the expense of everything else, the more likely it is that dysfunction will emerge. The situation can even lead to a national crisis if an entire sector is doing the same thing. For example, the financial debacle of 2006-2008 and beyond in the USA was precipitated by investment banks that were focused on generating financial profits from complex investment vehicles in the housing market, without the vehicles being sufficiently supported by underlying assets on their books — thus increasing market risks and increasing environmental instability over time (eventually leading to a crisis). The rise of instability in organizational systems may explain why the risk of exit for public companies traded in the US now stands at 32 percent over 5 years, compared with the 5 percent risk that they would have faced 50 years ago. For individual public companies, these exits are mostly unintended and are likely associated with managerial failure.

A traditional view of a firm often describes one as a conventional entity focused on specific goals and organized somewhat like a factory to achieve them. When the firm is threatened, it is anticipated that staff will react with one accord to counter the threat. But this model does not work reliably, especially when the environment in which the firm lives is changing rapidly. It would be useful if its employees could react quickly like a flock of birds, each following its wingman in a coordinated turn. Humans don’t seem to be able to execute this maneuver easily. During periods of rapid transition, individuals, and social grouping within the organization can enter a state of uncertainty.

In reality, firms should be viewed as complex adaptive systems (CAS). The CAS perspective is a valuable one for examining firm performance because it reveals hidden patterns that can be found beneath the surface. In the CAS perspective, firms (and their environment) compose complex systems made up of individuals that can act on their own, both internally or externally. These individuals are called agents, and typically include a firm’s management and employees (internal agents), and their customers and other stakeholders (external agents). In such systems, despite efforts at top-down management control, order often emerges from below based on the interaction of the agents with each other, producing observable internal phenomena as a firm’s “culture,” and a general sense of “how we do things around here,” or external customer demand. Complex adaptive systems often react in unpredictable ways. When the system is in crisis and far from equilibrium, individual employees may adapt to a new reality by either cooperating to fix the problem or, alternatively, display a non-cooperative or competitive attitude by rejecting the storyline that management offers.

The complexity theory of organizations rejects the metaphor of firms as well-oiled machines made up of replaceable parts. Instead, a firm’s collection of internal agents has been brought together for a specific period, where they exhibit aspects of self-organization, emergence, and interdependency. During transition periods, so-called ‘attractor’ regimes can emerge. For example, when confronted with a zero-sum game, such as outsourcing some jobs overseas, employees seldom cooperate. On the other hand, the positive-sum game presented by the expansion of a firm into a new segment of the market readily gains employee acceptance.

My favorite approach to management, which I have discussed before on this podcast, is called Management by Positive Organizational Effectiveness (M+OE). It discards the goal model that has is commonly used to gauge effectiveness because it does not provide a way to discriminate between useful and non-useful goals. Within M + OE, by contrast, the goal of every firm is fixed, that is, to be effective within its environment. Firms that consider their goals to be the maximization of profit, shareholder value, or other such goals driven primarily by financial or economic gain are not using M+OE. They are still living in the present age of ‘efficiencyism,’ where improvements in efficiency have been elevated to the prime directive without understanding the assumptions and consequences. Dysfunction is an emergent phenomenon under efficiencyism, due to potential instability within a firm’s complex adaptive systems.

It is likely to be more rewarding and stabilizing over the mid- to long-term to entertain the creation of social capital, psychological capital, spiritual capital, and environmental capital among stakeholders –- thus encouraging the emergence of attractor narratives (e.g., in social media and elsewhere) based on real benefit exchanges. Evolutionary processes operate on the population of organizations, while adaptive pressures act on individual organizations, to enforce “survival of the effective” over time.

Let’s consider a story about social capital building among employees and management. In 2001, in the aftermath of 9/11, the airline industry was reeling. Planes were grounded for three days throughout the country. Once they started to fly again, people were afraid to fly, and passenger traffic dropped precipitously. It wasn’t clear that the domestic airline industry would survive. In the weeks following the event, many airlines laid off employees. Only Southwest Airlines and Alaska Airlines did not, among major US carriers. James F. Parker, who had been CEO of Southwest for only a few months, faced some tough decisions in September 2001. “We just had to make a gut decision based on what we thought was important,” he said. The decision was to give customers refunds if they wanted them, no strings attached. It was a risky policy for the company. If customers flooded the company with requests for refunds, the company could quickly exhaust the cash required to remain solvent. Fortunately, few customers requested a refund; instead, they generally opted for credit on future flights. Some even sent in small amounts of cash to the airline to show their support.

Despite the uncertainty, Southwest went ahead and made a $ 179 million payment to the employee pension fund on time. Employees experienced no layoffs or reductions in pay. In the three years after 9/11, researchers followed the performance of the 10 largest US airlines. It was Southwest and Alaska that recovered most strongly and quickly, and those were the only two that had not resorted to layoffs. Before the event, they had the strongest cash reserves and the lowest debt and engaged in a no-layoff policy. US Airways and United Airlines, who laid off 20-25% of employees and had high debt and relatively low cash positions prior to 9/11, recovered more slowly. Southwest Airlines was the only airline to show a profit in every quarter studied, while US Airways showed a loss in every corresponding quarter. No doubt, strong performance prior to 9/11 was important in building financial reserves, but so were decisions immediately afterward in terms of resisting employee layoffs. Crisis events lay bare the real values of a company and its management. In Southwest’s case, grateful employees went out of their way to make the difference in company performance, while other airlines imposed layoffs. This story highlights the positive aspects of building social capital between management and employees of Southwest, and conversely the destruction of social capital among employees following layoffs at other airlines. Today, Southwest remains one of the strongest airlines in the country.

Examples such as this reflect a broader reality. Consider a September 2014 article entitled “Profits without prosperity” appeared the Harvard Business Review. The author notes that the period after World War II until the late 1970s was characterized by a “retain-and-reinvest” approach to resource allocation in major U.S. corporations. During this period, firms tended to retain earnings and reinvest them to increase the firms’ capabilities. The approach served to benefit the employees who had helped make the firms more competitive and provided workers with higher incomes and greater job security. The “retain-and-invest” pattern gave way in the late-1970s to a “downsize-and-distribute” regime where short-term efficiencies were implemented involving layoffs, asset sales, and other cost reduction approaches, followed by the distribution of freed-up cash to financial interests, particularly shareholders.

It is doubtful that history will be kind to the downsize-and-distribute regime. It tends to strip value from a firm and contributes to employment instability and income inequality inside the firm because the firm’s ability to be productive in the future is weakened. It also tends to destroy social capital inside the firm rather than build it.

In summary, the keys to firm survival (what we have been talking about today) can be summarized as follows:

1. Adopt an objective function where the goal of the firm is to be effective within its environment (using the Survival of the Effective approach);
2. Adopt a “retain and invest” mentality which builds social capital between employees and management and positions the firm to survive and thrive for the long term;
3. Become a Truly Great firm. (For more information, grab a copy of my book Become Truly Great at Amazon.com or on Barnes and Noble’s website.)

Charles G. Chandler, Ph.D.
[email protected]

Reference:

Chandler, Charles G. 2017. Become Truly Great: Serve the common good through Management by Positive Organizational Effectiveness. Powell, OH: Author Academy Elite.

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For most of the history of management (beginning in the mid-1800s), organizations included command and control structures and top-down information flow. Managers were viewed as the boss, the big cheese, the man, or master within a hierarchical system of control. This is an authoritarian model of organization, where management drives the organization as a machine, and employees are just cogs among the big wheels. The basic idea underlying this tradition is that firms make money for their owners. Managers control the individuals in the firm, and a bureaucracy introduces rules, plans, and reports to create a predictable and stable organization. This is all in the service of efficiency and productivity. When things go awry, managers introduce cost-cutting and downsizing. The basic principles become self-reinforcing and interlocking.

The industrial revolution (from which modern capitalism emerged) spurred on the growth of hierarchical organizations as capital equipment (i.e., machines) began to take over the workplace, driven, in turn, by water power, steam power, and electric power. As the 19th Century gave way to the 20th Century, productivity rose quickly. Employees no longer made things by hand but learned instead to tend the equipment that made things. Looking back over the decades, Peter Drucker credited the management principles of Frederick Winslow Taylor with a 50-fold increase in the productivity of manual work during the 20th Century, an increase upon which rested, he noted, “all of the economic and social gains” of the times.

Today, despite the rise in productivity and living standards in the 20th Century, it is not clear that they can be maintained as we move further into the 21st Century. Productivity growth has been weak, and getting weaker, for decades in most industrialized countries. If the current pace continues, living standards in the USA and highly developed countries around the world will stagnate for most workers.

While authoritarian styles of management are still prevalent in many sectors of the economy, they are coming to represent an out of date, last century paradigm that is wrong-headed on many levels. If we need fresh evidence that management is broken, we only have to look at the 2017 numbers on worker engagement from Gallup. Only 21% of employees strongly agree that they are managed in a way that motivates them to do outstanding work. Overall, only 33% of US workers report that they are actively engaged in their work. Today, when so many business models are being disrupted by Internet-based newcomers, every organization needs to innovate to stay relevant, and authoritarian command and control structures just don’t get the job done. They hinder innovation more than they support it.

New ideas are emerging to encourage greater freedom and innovation in the workplace and to increase the speed of action. Broadly, these could be called network models rather than hierarchical models. Instead of control flowing downward through a hierarchy of people with fixed managerial roles (and sign-off authority), the new approaches provide structure through a flat network of individuals or teams held together by unifying philosophical principles, evolving roles, and a belief in individual responsibility. Examples of these ideas include (1) servant-leadership, (2) self-management (or holacracy), and (3) agile/scrum techniques (or radical management).

In our first example, the servant leadership approach proposes that the best leaders think and act as a servant to those they are leading. The approach is rooted in ancient philosophy, including Chinese Taoism and early Christianity. In the New Testament, for instance, Jesus tells his disciples (Mark 9:35), “If anyone wants to be first, he must make himself last of all and servant of all.” In modern times, Robert K. Greenleaf outlined the characteristics of the servant leader, first in an essay in 1970, and later in his 1977 book, Servant Leadership. Greenleaf taught that a servant-leader tends to the growth and well-being of the people they lead and the communities to which they belong. While traditional leadership serves to accumulate power at the top of an organizational hierarchy, the servant-leader shares power, putting the needs of others first in service to the common good. This is a model that has worked well in the non-profit sector, including churches. Where churches have run into trouble, however, is when they have strayed from this model by allowing the accumulation of power, prestige, and wealth at the top. Ideas similar to servant leadership can also be found in other techniques discussed below.

Our second example is called self-management. According to the Morning Star Self-Management Institute, self-management “is an organizational model where the traditional functions of a manager (planning, coordinating, controlling, staffing and directing) are pushed out to all participants in the organization instead of just to a select few. Each member of the organization is personally responsible for forging their own personal relationships, planning their own work, coordinating their actions with other members, acquiring requisite resources to accomplish their mission, and for taking corrective action with respect to other members when needed.”

The Morning Star Company is a California-based wholesale supplier of tomatoes and tomato products. The company was started in 1970 by Chris Rufer, a college student and one-truck owner/operator, who hauled tomatoes to processing plants. Rufer envisioned a firm where there were no bosses, only philosophical principles to which everyone would adhere. According to a 2016 Los Angeles Times article, Morning Star’s idea of self-management is an early form of what has become known as ‘holacracy’, a philosophy that takes its name from the ‘holarchy’ built of interdependent but autonomous units (called ‘holons’). Early ideas were first described by Arthur Koestler in his 1967 psychological treatise “The Ghost in the Machine.”

Zappo’s, now a Las Vegas-based shoe retailing arm of Amazon, is a well-known practitioner of holacracy. According to Tony Hsieh, CEO of Zappos, “research shows that every time the size of a city doubles, innovation or productivity per resident increases by 15 percent. But when companies get bigger, innovation or productivity per employee generally goes down. So, we’re trying to figure out how to structure Zappos more like a city, and less like a bureaucratic corporation. In a city, people and businesses are self-organizing. We’re trying to do the same thing by switching from a normal hierarchical structure to a system called Holacracy, which enables employees to act more like entrepreneurs and self-direct their work instead of reporting to a manager who tells them what to do.”

In holacracy, decision making is vested in self-organizing teams (structured around work roles) rather than a rigidly-dictated management hierarchy. Holacracy brings groups of people together around a single purpose, strengthening the group’s relationship with the organization’s purpose, and then clarifying and optimizing the way people get work done together. (In episode 061 of this podcast, I interviewed Karim Bishay, principal consultant at Living Orgs. We talked about holacracy in some detail in that episode.)

Our third example focuses on agile and scrum techniques, which began as a way for rapid product development in software projects by staying close to customer needs. Scrum is a methodology that allows a team to self-organize and make changes quickly, in accordance with agile principles. A scrum master is the facilitator and process manager for an agile development team. Steve Denning, in his book Radical Management (2010), describes the manager’s job as one of enabling self-organizing teams to delight the customer. Much of what Denning describes came out of the so-called ‘Agile’ movement which started by focusing on the improvement of software project implementation using self-organizing teams, ‘scrum’ techniques, and scheduled meetings every couple of weeks to discuss progress. Scrum teams engage in sprints, with short bursts to achieve a short-term objective and then report back. Agile principles and practices seem to work well in software development, where they started, but many of the agile techniques have expanded into wider business settings in recent years. It should be noted that agile methods for project management are broadly part of the quality movement, and have much in common with TQM (i.e., total quality management) for products and services.

These examples point to the emergence of new forms of organization that cast management more as servant than master. While management is still about getting work done, some fundamental things have changed, and are pushing society in this direction. First, the demand-side (the customer) is now fully in control. He/she can go elsewhere very easily. There are so many choices and so much overcapacity, particularly in the manufacturing sector, that the customer can be picky. Second, all workers are knowledge workers now. Today’s products and services have significant amounts of embedded knowledge incorporated within them, and instruction manuals and training programs need to be available to translate the full value of the offering via the manufacturer’s recommendations. Likewise, knowledge workers need to be given freedom to innovate as they undertake the work rather than simply commanded to do it, as in the past. The knowledge worker, by definition, knows more about the work than any potential boss, so it makes sense to push decision making out to the periphery where knowledge workers live and work.

Let me finish today by pointing out that Management by Positive Organizational Effectiveness (M+OE), the form of management advocated on this podcast, plays well with network-based management approaches that push decision making out to the organization’s periphery. Under M+OE, every organization has the same goal, to be effective within its environment. The overriding directive for each organization is to serve its environment and be rewarded in return. The job of management is simplified because top executives do not need to set objectives. Rather, product and service teams at the periphery are challenged to consider a key question every day, “How can we serve our environment well today?” Businesses, government agencies, and nonprofits have the same challenge. It is a question that is difficult to answer in a bureaucratic, top-down, command-and-control management system. It is best handled by flexible teams of knowledge workers intent on the success of individual offerings in the environment. Of course, we are not suspending the principles of accounting, economics, or finance, in making such decisions, but these are not necessarily constraints. The approach focuses on staying close to the customer, being passionate about serving, and looking for the presence of expected demand-side responses to verify effectiveness.

Given its features, Management by Positive Organizational Effectiveness offers the promise of a new style of venture capitalism. Consider the possibilities of taking a public company private, removing the C-suite team, installing servant leaders where necessary, and using the philosophy embedded within Management by Positive Organizational Effectiveness as the way to think about the job of management going forward. The company would be expected to remain private for at least five years until it met the tests of true greatness. In this scenario, management can fulfill a higher role as servant, rather than master.

Charles G. Chandler, Ph.D.
[email protected]

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Anthropologists tell us that anatomically modern humans (i.e., Homo Sapiens) emerged about 300 thousand years ago during the Pleistocene era on the African savannas. For over 95% of their history (until the present day), modern humans have been exclusively hunter/gathers, that is, they explored the bounty of nature in small bands, adapting their behavior as they encountered different environments. Few management skills were required other than communication and teamwork. The goal was the discovery and exploitation of food and other resources necessary for survival and continuation of the species.

While Homo Sapiens are not the first species that used stone tools, they took tool making to the next level to better extract value from, and survive in, different environments. In one sense, they were early knowledge workers. They developed and applied a body of knowledge about their environment to the search for food and other resources necessary for survival. A sense of freedom was available in this early form of group organization and management. Specialization of labor was likely along gender lines; the men did the hunting, while the women did the gathering (and nurtured the young).

About 12,000 years ago, horticulture and agriculture first emerged in what is called the Neolithic revolution. Key to this transformation was the domestication of certain plants and animals that could be produced using cultivation and herding practices. For example, the goat was domesticated about 10,000 years ago in Iran, emmer wheat about 11,000 years ago in the southern Levant, and rice about 10,000 years ago in China. The emergence of agriculture-based societies enabled permanent settlements and significant population growth. Whereas hunter/gathers survived with small team-based work groups, early agriculture-based settlements led to more formal types of organization. Early institutions undertook these functions (e.g., in the fertile crescent from Egypt to Mesopotamia) as irrigation, seed distribution, and grain storage were likely organized to avoid crop failure and famine. Widespread single-crop agriculture did not become common until the Bronze Age, about 6,000 years ago.

With settlements, further specialization of labor took place. Artisans such as the butcher, the brewer and the baker that Adam Smith idolized in his book Wealth of Nations (1776) became common. A series of industrial revolutions, beginning in the late 1700s in England and continuing into the 1900s, spread throughout much of the developed world as water power, steam power, and electric power were applied in turn to the production processes of factories and other venues.

The essence of modern capitalism is investment in, and the substitution of, capital equipment for manual work in the search for efficiency gains. By the early-1800s, a textile factory using a 100 HP steam engine could do the work of 880 men. One documented example ran 50,000 spindles, employed 750 workers, and could produce 226 times more than it did before the introduction of steam.

Still, up until the 1840s, US firms remained very small (just a few people). The owners managed, and the managers owned. At the time, transportation and distribution were facilitated by animals on the land, and by wind power on the seas. Commercial steamships were not common until after 1850. Bureaucracy was the new management technology of the mid-1800s and enabled the growth of large organizations, complete with middle management, such as the railroad and telegraph companies of the day.

So, is management best when it controls or when it enables freedom? If you look at the definition of management in the dictionary, you will come away thinking that it is largely about constraint — dealing with or controlling people and resources to achieve reproducibility and productivity. Since the Neolithic Revolution in agriculture, management has gradually imposed order and control on processes, in the service of normalization, standardization, and efficiency.

Certainty, management focused on efficient process control can provide benefits, depending upon environmental conditions. For example, total quality management (TQM) was a winning strategy for Japanese car companies that were conquering the American market in the 1970s and 1980s. Consumers of the time were looking for small, reliable, and efficient cars following OPEC-led gasoline price increases. So, normalization and standardization, and the reduction of defects that comes through various management approaches have been historically important beginning with the agricultural revolution, through the industrial revolution, and beyond. This thread of the story of management is primarily about efficiency gains, as well as meeting the demands of the market for quality.

Now, however, we are in the first half of the 21^st Century. The environment has changed and is changing still. The introduction of the Internet in the early 1990s has served to disrupt the business models of many brick and mortar enterprises. Increasingly, large and formerly dominant organizations have become walking zombies as their business models have come under threat from upstart online competitors. For instance, Amazon, Netflix, and Airbnb are capturing, and bringing into their orbit, large portions of the transactions in various retail, entertainment, and hotel spaces, taking business from established brick and mortar players. Internet-based players are creating new intermediation models on a large scale, not tied to a specific location on the map but ubiquitous in cloud-based servers.

There has always been a tension between human agency, such as the individual’s freedom to act and to realize his or her dreams, and the organization’s need to control, normalize, and standardize processes to create reproducibility. Yet today, many workers are feeling trapped in their jobs, bound by bureaucratic processes and soul-draining performance management systems that prioritize adherence to key performance indicators (KPIs) over worker freedom and innovation. At a time when firms scarcest resource is innovation and creativity, management control remains heavy-handed (because it can). Gary Hamel notes that although most employees can purchase a $20,000 car in their personal lives, they need to get official permission to purchase a $200 office chair in their lives as an employee. What’s up with that?

Ironically, the hottest management trends of today (small agile teams using scrum techniques) are something of a throwback to the Pleistocene bands of early humans that exploited their environment through hunting and gathering techniques for survival. Exploring new environments and changing conditions requires freedom of action, and it is time for management to loosen control. Indeed, organizations could think of themselves as being in the Pleistocene again, in need of a modern band of knowledge workers to explore and understand the changing environment and identify new resources for survival. The next time you run into a C-suite executive that wants to impose KPIs on your unit, tell him or her to loosen up and go back to the Pleistocene. Homo Sapiens operated quite successfully in that way for over 95% of human history. It would be a return to our roots.

Unfortunately, today’s management philosophy and practice stand in the way. It is the programming and conditioning between our ears that holds us back. We can’t get to a better future if maximization of profit and shareholder value continue to be prime directives. In fact, these are merely arbitrary and self-serving goals that are unconnected to natural law.

A new management philosophy is required. From first principles, we know that an organization must find ways to exchange benefits with its environment if it is to survive. A new approach to management is emerging which acknowledges and accommodates this reality. It is called Management by Positive Organizational Effectiveness. It holds that the goal of every organization is the same, that is, to be effective within its environment. An organization becomes effective within this framework by serving its environment and being rewarded in return, exchanging different types of benefits in the process that are needed to survive and thrive. This approach places effectiveness above efficiency in the hierarchy of organizational performance.

When the goal of every organization is the same, management is no longer free to set objectives from the top down. Rather, teams at the periphery are empowered to ask, “how can I best serve my environment today.” Like the freedom of the Pleistocene bands, these new teams are set free to create a better future around specific product and service offerings, a future that not only benefits them, but that serves to strengthen the common good as well. Perhaps we have much to learn from our Pleistocene roots.

Charles G. Chandler, Ph.D.
[email protected]

Reference:
Chandler, Charles G. 2017. Become Truly Great: Serve the common good through Management by Positive Organizational Effectiveness. Powell, OH: Author Academy Elite.