Learning from the past

Aug 24 2009 by Jack Buffington Print This Article

So how did classical management bring stability to corporations in its heyday? And, is today's manager willing to do what it takes to pull his company from the current toxic approach to business?

The solution to your company's problems can be found in a place that is deeper than perhaps you've searched before. Much like when Dr. Deming came back from Japan in the 1970s and told US managers that their problems ran deep and that "management itself is the problem", the same rings true today.

Selling the leaders of your organization that they, not the workers, process, or products are the primary problem won't be easy to accept and fix. Too often, managers seek to find the problems elsewhere. This includes with the workforce, the business processes, company products, and financial engineering/investor mentality, among others.

Many of the cutting edge management theorists from the 1980s and 1990s let management off the hook, and allowed them to focus on other areas. While surface level symptoms may be easier to target and correct, they do little to solve the real problem.

A deeply seeded fix to the problem must start with organizational structure and its leaders. The "new old management" is a focus on the foundation, an approach that will dig deep, but perhaps go deeper than the appetite of most managers today, especially when they need to look in the mirror.

Moving your organization in this classical management direction isn't as crazy as you might think. You might be surprised to find one of your competitors already practicing classical management, or in the process of doing so.

Take Nucor Steel, the largest US steel manufacturer based in Charlotte North Carolina. Since 2000, Dan DiMicco, the CEO, has focused on transforming his organization on a classical management approach.

This is a decentralized management structure in place to serve the worker - instead of vice versa - egalitarian benefits, a responsive approach to customer needs, a cutting edge approach to technology, and strong financial results (until this current recession). This is a corporate model worth building for all stakeholders.

Similarly, Costco Corporation has built a classical management focused corporation from scratch. Long-time CEO Jim Sinegal spends more time on the retail floor than in a corporate office. Wages and health benefits are much better than its competition and it delivers very high levels of customer satisfaction. It has the lowest profit margin in the sector, and solid net income even in the midst of the recession.

A few years ago Jim Sinegal was challenged by Wall Street stock analysts for why his company contributes a larger percentage of a worker's health insurance. He noted that "it isn't philanthropic, it's just good business."

Sinegal's rebuttal to Wall Street and DiMicco's response to why a US steel company can be competitive in today's market are indicative of a classical management approach to leading an organization. Creating these classical management influenced business strategies are difficult and time consuming but is a strategy that is worth committing to under difficult economic circumstances.

Seeking to build a corporation from the roots of an organization is a radical undertaking for any manager to consider. For US managers, the greatest challenge is the going against the grain when the financial community is still obsessed with short-term quarterly profits.

Companies such as Costco have fought conventional wisdom with Wall Street analysts, and it has paid off. But challenging the management status quo is an unnerving prospect for most managers to consider.

In other nations where there is less of an egalitarian culture such as India and China, the prospect of creating a balanced approach to distributing benefits to consumers, workers, and investors is even more daunting.

However, we must remember what it must have been like to be Henry Ford in 1908 when he proposed increasing the wages of the largely blue collar immigrant population as a way of improving business results.

In particular, savvy Indian managers should look at this as their greatest productivity opportunity. For managers to create a corporate environment where the benefits to the worker, consumer, and investor are equally distributed, improving the possibilities of that companies' growth.

The second decade of the 21st century will bring challenges to whether management should exist as a productive element of a corporation. More pop culture thinking will push the extremes of management away from its classical roots, to less than productive sustainable results.

As free market capitalism is attacked from those promoting more of a state regulated approach to private enterprise, there will also be a countervailing bias away from "management by chaos", and toward a bureaucratic state regulated approach to business.

Neither of these approaches has stood the test of time as did classical management in its day. Some companies such as Nucor Steel and Costco will go against the grain and build its corporate structures from the ground up with classical management as its foundation. These leaders will be the new pioneers of the 21st century, the Henry Fords and Alfred P Sloan's of their day.

However, they will come from all over the world, from cultures that understand and respect the need for a balanced approach toward workers, consumers, and investors. It'll take an approach of long-term investment, and leadership courage.

If there was anything to be learned from this latest disruptive recession, it is that there aren't any shortcuts to corporate growth and productivity. The question is whether you and your organization are ready for the challenge.


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".