There is talk now, as in previous economic crises, of having to reinvent capitalism. What this generally means is that we need to redefine the roles
of state and market. But there are people who think this is not enough. The time may also have come to remake key institutions of capitalism.
One institution that is under siege today is
management . There is a sense everywhere of having been let down by managers at some of the most prestigious corporations in the world.
The world's leading financial companies were held up for long as role models of
management — efficient, innovative and nimble. Now, these very institutions and their CEOs are being pilloried for having messed up in a big way. Management has got discredited and in the process it has given capitalism a bad name.
What sort of changes in management practices are needed to build companies that are truly fit for the future? Thirty five scholars and practitioners met in California to debate this question. They came up with 25 ideas for reinventing management. Gary Hamel summarises them in a recent Harvard
Business Review article titled, 'Moonshots for management' — moonshots to signify that management should be aiming high. Hamel contends that if management does not reinvent itself by using these ideas, companies cannot survive.
Alas, many of the ideas will evoke cynicism because they have been around for a while now. Eliminate formal hierarchies. Reduce fear and increase trust. Exploit diversity. Expand employee autonomy. Unleash human imagination. Encourage passion among employees. Use lofty goals such as truth, love and justice to inspire employees instead of mundane ones such as differentiation or focus. And so on.
There are two problems with the list. One, no management would quarrel with it. Indeed, all managements will profess to practise virtues such as the ones listed above. ("We believe in transparency and empowerment.") Except that in most organisations, people down the ladder have difficulty believing this to be true.
Two, if the benefits to implementing the list are so obvious — if the
business imperative is indeed so strong — why is it that these precepts appear so distant, almost Utopian? Clearly, management does not practise these precepts because the incentives to do so are missing. Or, to put it differently, the incentives to continue on the existing basis are stronger.
The incentives, in turn, have to do with the way performance is measured. Today, performance is all about maximising shareholder value. CEOs in the US are lucky if they last five years. Their incentives are tied to producing shareholder value in the short period they are in
office, not to sustaining performance over a long period.
