It is time for some new old management

2009

Back in the early days of the 20th century, Henry Ford's vision to create a sacred bond between workers, owners, and consumers through the role of the professional manager was fulfilled in 1908 with the manufacturing approach for the Model T. This discipline that I call "classical management" would serve as the underpinning for America's economic power for the next five decades.

By increasing a worker's daily pay from $2.34 to $5.00, and reducing the price of a car from $850 to $440 within a few years, the Ford Motor Company provided testament for how a company could grow through enabling the prosperity of the firm to be evenly distributed to all of its primary stakeholders - consumers, workers, and investors.

This model became the modus operandi for US companies and the principle driver of private sector economic growth and productivity in comparison to the rest of the world for the better part of five decades.

The role of the professional manager at the company would revolutionize capitalism through creating a multiplier effect that generated middle class prosperity through recycled growth instead of the benefits from business being stifled through being hoarded primarily within the ownership class.

This multiplier effect of capitalism through classical management and the role of the professional manager was originated by Henry Ford in 1908, and was perfected by management giants over the course of the following few decades.

Management pioneers such as Frederick Taylor, W. Edwards Deming, Henry Gantt, Alfred P. Sloan and Peter Drucker all understood and acknowledged the importance of a balanced benefit of growth between all stakeholders, including supporting the public good.

While some of these original management thinkers aren't given the credit that they deserve relative to their accomplishments, this may have more to do with how management has been functionally disfigured under today's conventional definition rather than management's original classical intent. What we label as management today is what we do as an occupation, but this isn't how classical management originally worked.

This discrepancy of what management was and what it is today should give a manager reason to pause regarding what has happened to our profession. The solution of a "new old management'" is precisely what is needed to close this gap, and to restore real value within the corporation.

Let's start with the premise that "if something is broken, then it should be fixed". The response of most corporations around the world to the current economic recession is evidence of an approach to management that is incapable of creating and executing sustainable business strategies.

While General Motors may be the most provocative example of how this dysfunctional approach to management has failed its shareholders, workers and consumers, it is by no means an island of malcontent. For decades, the role of the corporate manager at the multinational corporation has been to maximize the benefits for favored elements within the corporation's stakeholders, often at the detriment of others.

In the 1950s, US corporate managers became obsessed over the idea of organizational development (OD) to the point of it becoming a means to an end, even above financial profitability. As a result of management's OD bias, real wages grew faster in industrialized nations during the 70s and 80s than the level of productivity and innovation required for the work to remain in that country.

Once this era of organization fixation ended, the corporate manager's focus did an about-face in the 80s and 90s, and became obsessed over enabling shareholder's wealth over all other factors - as an MBA student in the early 1990s, this concept was drilled into my head.

Professional managers like me were educated and rewarded to measure and achieve growth and productivity through financial rules and transactions rather than core business strategies and optimization. We were rewarded through stock options and bonuses that favored a paper profit over long-term sustainable value.

Once this financially engineered economy fell like a house of cards as it did last year, professional managers started looking for the next theme of how to manufacture growth. However, these managers must ask themselves whether manufacturing or concocting growth is really what a manager in a corporation should be doing.

No matter whether you are a manager in India, the US, the UK, or even China, the solution to the growth and productivity problems facing companies around the world must be fixed through classical management principles – this new old management.

Today, as you listen to all of the voices speaking out regarding what is the new normal for management in this recessionary environment, and what happens next, you'll likely hear little about the foundations of classical management. Instead, cutting edge concepts will emerge from the next generation of management theorists just as it happened in the 1980s and 1990s.

Back then, noted theorists such as Tom Peters, Gary Hamel, C.K. Prahalad and James Champy responded to the chaos of that economic era with new management theories meant to respond to uncertainty. These new ideas were exciting and innovative for sure, and led to the redefinition of the corporate manager as someone who lives and breathes within the chaos of the times, rather than hiding from it.

This mentality went as far as to suggest that management gurus should break and disrupt existing corporate norms whether they were broken or not because, as Peters noted, it probably is, you just don't know it yet. Instead of seeking stability and balance through classical management, the management gurus of the 80s and 90s sought chaos without end.

Today, as we sort through more chaos in our business environments that we ever thought would be possible, are we really waiting for the next creative thinker to seek progress through disruption.

A better approach would be to understand how the foundations of classical management brought stability to corporations during its heyday. This I'll explain in part two.

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About The Author

Jack Buffington
Jack Buffington

Jack Buffington is a professor at the Daniels Business School, The University of Denver, a corporate executive at MillerCoors and author of a range of business books including his latest, "Death of Management: Restoring Value to the US Economy".

Older Comments

Why do we always hark back to a previous age when we want point out how bad it is now? We paid people to take big risks without any thought of the consequences of actions. That's why we got in trouble. Old style management won't help that level of stupidity.

John Glasgow, Scotland