Monday, October 22, 2007

Book Review: The Future of Management, by Gary Hamel

The Future of Management. Gary Hamel with Bill Breen. Harvard Business School Press. 2007. List $26.95. 269 pages.

Hamel opens by explaining that we are running 21st century companies using management ideas and principles that are often 100 years old and were created by “long dead theorists”. These ideas began with Taylor’s principles of scientific management and largely focus on creating static structures that can improve productivity and quality of products that change only gradually over time. At this point in history, however, these ideas are too static, too regimented, and too myopic to be effective among the very dynamic, disruptive, and shifting opportunities that present themselves.

Hamel’s historical analysis of management points to the following list of practices which have evolved over the last century: setting and programming objectives, motivating and aligning effort, coordinating and controlling activities, developing and assigning talent, accumulating and applying knowledge, amassing and allocating resources, building and nurturing relationships, and balancing and meeting stakeholder demands. All of these are sensible, logical, and seemingly effective. But inherent in this list is the assumption that the external environment is largely static and can be operated on in the same manner repetitively and with cumulative effect.

Although the word does not appear in the title, Hamel has written another innovation book. He insists that productivity and quality cannot be the basis of advantage in the 21st century. Companies that hew to these old measurements will become more effective at operations and with products that are increasingly obsolete. Hamel insists that companies must adopt management practices that are centered on innovation and adaptability. He presents a number of different management principles for adaptability. First, life is about creating variety, not enforcing standardization. Second, market forces within a company enable flexibility. A market environment allows innovators to be creative and attracts the types of people that companies need in the present and future. Third, leaders are accountable to those being governed and everyone has a right to dissent about the direction of the organization. Leadership is actually distributed throughout the organization, not resident at the top. Fourth, the mission or the organization really does matter. Modern organizations must be in pursuit of goals that are meaningful to the employees and for which stakeholders are willing to adapt their behavior toward the achievement of those goals. Fifth, diversity of skills and perspectives begets creativity. Organizations must structure themselves so that information and ideas can flow everywhere and come together in unexpected patterns. Serendipity in idea combination will create opportunity, value, and advantage.

In building these ideas, Hamel draws on case studies of Whole Foods, W.L. Gore, and Google. He also turns to lessons learned by IBM in its most recent business transformation. This is an innovation book, but Hamel uses it to challenge the management practices that have evolved over a century and then proposes replacements that may be more effective in the present and future. Those of us who have spent decades in traditional organizations resonate with the established practices that Hamel has distilled. But we are also aware of the limitations that those impose and wonder about ways to incorporate new practices within the old. Hamel suggests that an entirely new set of practices is needed and that they will be more effective at running a business in the future than those put forward by dead theorists. As practitioners we can choose to experiment with Hamel’s new practices or we can choose to ignore them and carry on with our existing practices. Given the extreme changes in the global business world, it appears that sticking with the past will put your company in competition with low-cost providers around the globe. On the other hand, Hamel’s practices will put your company in competition with global innovators who create products with much higher margins. The best choice seems to stem from the business strategy of the company and its plans for its own future.

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