It is amazing to think that until 1954 no one had ever run a mile in under 4 minutes. Then Roger Bannister destroyed the myth that a 4-minute mile was physically impossible, and in doing so broke the previous record that had stood for 9 years. However, by the end of 1956 no less than 16 other athletes had achieved the same feat.
In business, something similar is happening today. Organisations that were once thought of as bellwethers within their markets have seemingly disappeared overnight. Whereas 100 years ago the average lifespan of a FTSE500 company was more than 100 years, today it is less than 50, and a CEO is unusual if they survived in post more than 5 years!
We all know that the rate of change is accelerating, that companies need to adapt ever more quickly, but this alone does not explain why numerous previously rich and successful market leaders have failed to defend their position.
To understand why this is the case and to understand why many commentators believe that decline is an inevitability, we need to look more closely at the makeup of organisations.
Why is change difficult?
When writing about change, most commentators focus on the symptoms of change; factors such as communication, momentum, tenacity etc. Very few mention the underlying challenge, the fact that change is an anathema to most organisations.
I am sure that this statement will raise the hackles of many CEO’s who will argue that they have witnessed, coped with and managed more change in the last 12 months that their predecessors had to cope with in a decade. But that is the point! Change is like falling off a log; easy to do when you don’t want to, but try falling off deliberately. You can jump, but can you make yourself fall? The answer is no, because you are pre-programmed to balance, to protect yourself, to be stable.
Organisations are the same, they were designed from the outset to be stable and predictable. Over the years, that stability and predictability has been institutionalised and become part of the DNA of most organisations, making deliberate change extremely difficult.
To understand this we need to think back to a time before the Industrial Revolution. At that time businesses were quite literally cottage industries. The along came the Industrial Revolution and everything changed. Organisations became much larger and processes needed to be invented to coordinate and supervise huge numbers of workers. Industry therefore took a tip from the military and organised itself into hierarchal structures. They even borrowed some of the terminology – the word “fired” comes from “firing-squad”.
It was also at this time that most of the management colleges emerged. These were needed as every entrepreneur or business-founder needed scores of managers to control the workers – to make sure that they were in fact doing what was required of them. These colleges therefore trained people in the discipline of “management”.
From then until the present day the discipline of management presupposes that there is a best way of doing things. The role of the manager is therefore to know the best way, to help their subordinates and understudies to learn the best way and to supervise them to ensure that they do things the best way.
Take Ford cars as an example, once Henry Ford had decided that all his cars would be black, the last thing he wanted was some bright spark on the production line thinking; “pink might be nice”.
Even today, the vast majority of job descriptions for managerial positions place the emphasis on a person’s understanding of the job their subordinates do.
The great strength of this managerial approach is that it produces predictability and stability, its weakness is that large organisations become like super-tankers, set on a course that is very difficult to change.
Where this stability is positive it can be very beneficial – take IBM during the 1970’s and 80’s as an example, where the culture was so ingrained that they even gave recruitment priority to relatives of existing employees. But when an organisation needs to react to change, this institutionalised stability is a curse – take the IBM of the 1990’s as an example. There are numerous others: Boots, M&S, General Motors – organisations that had institutionalised their formulae for success, only to find that when the world changed they had been left behind.
What can you do about it?
The irony is that in today’s environment, the management disciplines that created our success now serve as an encumbrance. But that is not to say that organisations do not need guidance, simply that the form the guidance needs to take has now changed.
Whereas once it was directive and authoritarian, now it needs to be supportive and empowering. Whereas in the past the role of the manager was to provide the answers, today the role of the leader it to facilitate the process by which answers emerge.
Possibly the best analogy is with the Eurofighter Typhoon. This is a plane that is designed to be fundamentally unstable at sub-sonic speeds. While instability sounds like a bad thing, it is its instability that makes it so incredibly manoeuvrable. To make it flyable, the computerised Flight Control System makes thousands of adjustments to the plane’s controls every second.
In organisations, the equivalent of the Eurofighter approach is to dispense with the traditional top-down, managerial, hierarchical culture of control and instead adopt a more flexible and empowering approach.
The great fear traditionalists have with this approach is that it can result in chaos, since no one person has overall control. In reality, if a CEO feels they have that degree of control today, in most cases it is safe to assume that they are deluding themselves anyway!
In today’s organisations, the only control a CEO and the Board have over a company is cost and culture, which is why so many organisations try to control costs. However, a survey in 2008 of 1,000 companies found that the average annual budget, that took 3 months to prepare, was either obsolete or needed amending within a month of publication. The only thing you can say for certain about most budgets therefore, is that they are wrong.
In the modern age, the only control a Board should have is over the vision and values of the organisation as, with everyone making decisions and taking responsibility, the only way to ensure that chaos does not ensue is to make sure that everyone in the organisation shares the same vision and values.
To test this, ask yourself whether if you gave all the empowered people in your business a challenge (the sales people, contract negotiators, customer service staff, engineers), would they make roughly the same decision as you? If not, you could be in trouble.