During the past 25 years, the speed of change has accelerated and employee engagement has dropped. For most businesses, the managerial context has fundamentally changed from the way we have become accustomed to doing business. Moreover, fresh technologies, mobile talent, and globalization have demanded dynamic capabilities comprising people-centric management and leadership with a high ability to act for agile, fast and robust organizational responses.

The 2014 Global Drucker Forum concluded that ‘The Great Transformation’ is on its way. The management of people has returned to the center of the business landscape. There was not one speaker that did not emphasize the need of a more people-centric approach. Engagement, self-responsibility and purpose were among the features outlined in great detail. It was felt that Peter Drucker’s people-centric approach, with a different image of human mankind and the rich heritage in past centuries of European Humanism, finally finds its way into management practice. It is viewed as the solution to superior innovation and growth.

We need the transformation not because of a sudden need for soft skills or to cater solely to the needs of Generation Y. We need it because of new knowledge work with outcomes that cannot be easily controlled nor commanded. The different nature of knowledge work calls for an update of the firm’s ‘operating system’. Most corporations still operate on an operating system ‘Windows 3.11’ while the world uses iOS and Android: ‘new work’ calls for very different ways to collaborate, communicate, interact and get work done.

In addition to bringing people into the center, transformation calls for management with a higher agility to act to better cope with a dynamic environment: early sensing of opportunities, fast decisions and flexible responses are needed paired with the ability to withstand external shocks. Speed, agility and resilience are the managerial and organization capabilities needed to enable the new way to operate.

Many recipes, tips and practices of the past are unsuited to guide the businesses of the future. Some speakers at the forum argued that most traditional management tools and routines have produced unintended consequences or have fallen by the wayside entirely. Organizations built for the new way to operate have new capabilities in place that simultaneously help people to perform at their peak and facilitate speed, agility and resilience. They have designed their toolbox for both their talent and to cope with the challenges of a dynamic environment.

The new toolbox promotes features such as a stronger engagement, diversity, collaboration, collective intelligence, delegated decision-making, flexible work hours, communities, access to networks, knowledge building, transparency, open culture, mobile work and more -a Swiss pocket knife with many tools for different purposes.

Democracy promotes many of these capabilities. Why then not organize corporations as democracies?

Democracy is defined by the “power” of “people”. It is a rather demanding call that requires ultimate respect when used in politics and even more so when it is related to work and corporations. Subsidiarity is one of the principles of democracy: it demands autonomy, self-organization, participation and collective decision-making.

Peter Drucker once said “In the knowledge era, every employee is an executive”. This implies autonomous action and an image of human mankind based on a deep sense of self-responsibility. Self-organization needs skills and time –it implies leadership!

In the purest sense, democratic decision-making in firms requires management participation, financial ownership and social participation. Practical examples demonstrate different ways to participate and different forms of ownership. However, participation by itself does not automatically warrant a superior leadership culture.

Democracy means that more people are involved in decision-making; decisions are made by voting or require consensus. But the swarm is not always right. Recent research is clear: just having a group of smart people does not necessarily lead to better than individuals decisions. Moreover, voting does not always lead to better outcomes.

Leaders in favor of democratic decision-making may now ask: is it suited for big or small decisions? The response is clear. It is primarily for the big decisions. Why otherwise would one want to benefit from collective intelligence? Small decisions don’t require democratic decision-making procedures. Leaving democracy to small decisions is faking democracy. This then leads to the questions of what CEO decisions are: Strategy? Alignment? People? Reputation? They are all big decisions and are in conflict with democratic decision-making. This leaves the combination of democratic approaches and leadership in charge through consensus decision-making. Consensus is known to lead to superior innovation.

Does democracy humanize work? A closer look at ‘people-centric’ requirements leads to Timothy Gallwey’s ‘Inner Game’ principles of work with awareness, choice and trust as the levers of superior learning and performance. The ‘Inner Game’ demands self-responsibility to be valued as the most important determinant of motivation. It represents the capacity with which individuals deal with the challenges of the ’Outer Game’. For an entrepreneur and leader, this means creating a work environment that unlocks the potential of its talent.

Such a work environment humanizes work. This, however, requires enabling management more than democratic procedures -management with an operating environment for better navigation in a turbulent environment.

In comparison, only visible results of early adopters of ‘democratic organizations’ will indicate whether democracy truly humanizes work.

As a Swiss, I have learned that a well-functioning direct democracy is an ongoing construction site. The same holds for the operating system of corporations. Their toolbox and capabilities need to be reinvented over and over to meet the changing needs of people and the environment. Large legacy organizations struggle with their path dependency and the fact that this means changes on running the “machine”.

The debate around democratization of work is a controversial conversation –it may have the potential to add to the question of what superior management means and what it requires. Democratic capabilities and tools have the potential of bringing humans back to work to enable organizations better deal with the challenges of a dynamic environment. But they are not the only solution to a better working life and better companies.

About the Author:

Lukas Michel, Author, Speaker, Mentor – www.AgilityInsights.com

In the West it has been our enduring crisis: an overleveraged financial economy, huge debts and imbalances, increasing inequalities, and resistant high unemployment rates. At the same time we see stock markets at all-time highs and CEOs earning obscene  amounts of money. This is what Henry Mintzberg is referring to and what is threatening to undermine our basic institutions like democracy, market economy, rule of law, and civil society.

A different global society

Additionally, the crisis in the West together with Asia’s and specifically China’s positive economic track record has led to the replacement of the liberal democratic nation state as the role model for the global society by the state capitalistic system.

In fact, the new model is a combination of state-capitalism – where the state is seen as an important actor in the otherwise corporate world – and shareholder value thinking – where the purpose of a business to make money is seen as an overall good for society – which is highly attractive for elites everywhere in the world. Authoritarian regimes, together with an oligarchic private ownership, patriarchic societies, the rule of elites instead of law, and an oppressed civil society, are again in advance. This has resulted in the rise of an unprecedented rich ruling class from China to Russia, Saudi Arabia to Brazil, and Nigeria to Angola.

Hence, the West’s self-inflicted crisis is also backfiring on it from the outside its boundaries and a different form of global society is emerging.

Economic and social crisis inside, less influence and reduced power in the rest of the world, what can the West do to not destroy its basic institutions?

Assuming that the emerging global society is a self-organizing social system, solutions along the political left-right scheme become meaningless. No single government or multinational corporation has enough power to control the system. It is the interplay of decisions and actions taken by governments, supra-national institutions, civil society organizations, national and multinational companies and the like which is shaping the future of our planet.

Looking for high-level parameters capable of influencing the global society, Peter Drucker has given us a hint. Long ago he realized that knowledge societies are societies of organizations with the single organization as a key element. And behind each of these interdependent organizations are people whose practice is put to work by an “operating system”. And this, of course, is …

… the Art of Management.

While the choice of the management system is independent of the type or the activities of an organization, it is a value-decision that articulates fundamental principles, ideas and values of what we think an organization and hence society is all about.

With the global triumph of mainstream management thinking, principles center almost solely along financial values and financial engineering. To overcome its implicit logic of “winner takes all” we need a managerial operating system, which helps managers to deal with the increasing volatility, uncertainty, complexity and ambiguity of our emerging global society.

We think such a system can only be based on an appreciation of the individual and a sustainable use of our planet.

A European Humanistic Management Movement

Europe has come a long way to arrive at its “humanistic worldview”. From ancient Greece to the Renaissance, the Enlightenment, the Protestant Reformation right up to the modern peace project called the European Union. European Humanism with Kant and Rousseau brought forward the concept of self-responsibility as the human trait that determines motivation and meaning.

The appreciation of the self-responsible individual as a manager, employee, customer or any other stakeholder is the solution for a higher ability of organizations to act in a turbulent environment.

Only a people-centered management based on humanistic values allows drawing on the ingenuity and creativity of the human beings.

In any organization values are articulated as operational principles, which guide its decisions and actions. For a European Humanistic Management Movement we think the following constituting principles can be put forward:

1. The raison-d’être of any organization is value creation for society (public value) and not maximizing the value of the own organization.
2. The operating system and toolbox, guiding decisions and actions, follow systems and design thinking rather than a pre-dominant financial focus.
3. Organizations shall be adapted to people rather than people to organizations.
4. Configuring everyone’s toolbox to cope with the challenges of a dynamic environment is an ongoing management task.

Values, routines and tools constitute the operating system of an organization. As such, the modern toolbox has a design where principles allow for choice, routines raise the awareness for what matters most, tools help people to remain focused on creating public value and leadership interactions build trust. It is this toolbox that simultaneously caters to the humanistic values and at the same time to addresses the challenges of a turbulent environment.

With this, the choice on the right design of the operating system becomes one of the most important leadership decisions and at the same time it is the central “lever” for shaping the global society. The self-responsible individual is incompatible with a pure shareholder-value driven approach, but is needed to cope with challenges of an emerging global society and disruptions of new technologies.

Executives of private and public organizations have the power to transform the operating system of their organizations as a badly needed evolution to prevent yet another revolution. This can help rebalance society in ways to promote value for the common good and not to further undermine the basic institutions of democracy, market economy, rule of law, and civil society.

About the authors: 

Hans Stoisser, entrepreneur, management consultant and author with a longtime experience in emerging countries. His book “Der Schwarze Tiger – was wir von Afrika lernen können” will be published in September (Kösel Verlag).

Lukas Michel, author of the two books The Performance Triangle and Management Design, mentor for executive teams and associate of the European Drucker Society.

Organizations around the globe in all sectors continue a trend of increasing size and complexity that began over 100 years ago with the business strategies of the likes of Carnegie and Rockefeller. New and emerging technologies for communication and data sharing have accelerated this process in recent decades. We view this process as a natural and inevitable occurrence due, if for no other reason, to simple economics. Expenses will rise through time in many ways that management cannot prevent no matter how much they try. Those pesky employees always seem to want and expect raises, healthcare expenses increase, rents go up every year according to contracts, governments seem to want a greater piece of the action, and the list goes on and on. If top line revenues remain constant and expenses increase due to any or all of these sources the squeeze point becomes the bottom line. These are simple economic realities which force executives to constantly look for ways to increase the top line and keep their jobs.

There are, of course, any number of ways to increase the top line some of which include expanding market share in current markets, expanding into new markets, and introducing new products or services using an almost endless list of strategies. This is inevitable yet many, if not most, executives continue running very large enterprises using management techniques and structures developed in an industrial age which is very different from the rapidly changing, complex, business environment of the 21st Century. Argyris and Schon pointed out that the management challenges in business where there is little or very slow change is very different from those in uncertain environments. We would suggest that it would be difficult today to identify ANY businesses not in uncertain environments. If increasing complexity is a natural and unavoidable condition and that uncertainty and rapid change influence virtually every organization then what do we know for sure?

What we do know is that we don’t know what opportunities or threats will emerge or what the best way to take advantages of opportunities or respond to threats will be. We also know that whatever course of action is decided the decision must be made quickly and execution must be swift and decisive. Additionally, because of the complexity of organizations effective decision-making by one, autocratic, individual is likely a formula for failure. We also know that the overwhelming body of knowledge within an organization exists in the minds and experiences of people, particularly knowledge workers [Link 1].

The Borg – Ultimate Knowledge Collective

The “Star Trek, Next Generation” TV series introduced the ultimate evil, the Borg. The Borg society consisted of millions of individuals who were all connected mentally through a vast neural network so that the experiences of any single individual were immediately shared with the entire collective. The result was that with the power of millions of minds sensing then working on a problem, solutions were developed very quickly allowing the Borg to adapt rapidly to any threat that the intrepid crew of the Enterprise dreamed up. The ability to sense, evaluate, implement, and adapt to threats faster than our heroes made them nearly invincible. Ultimately, our heroes defeated the Borg by introducing a virus into their network disrupting their ability to sense individual experiences and apply the collective knowledge of millions of individuals to find solutions. We suggest that the most effective organizations manage complexity and uncertainty by accessing the collective knowledge of all individuals through social networks connecting a performance triangle of leadership, systems, and culture of the organization.

Viruses Disrupt the Performance Triangle

People, through collaboration, purpose, and relationships connect a performance triangle of leadership, systems, and culture and drive the organizations ability to effectively manage complex structures in rapidly changing situations. The triangle model [Link 2] emerged over a 10-year period from information gathered from over 100 business case studies involving organizations in different industries throughout the world. Statistical analysis of the results of a diagnostic survey conducted with 50 of these organizations between 2006 and 2011 established the validity of the performance triangle model and provided deep insights into the potential for dealing with the growing complexity of organizations and the barriers that keep employees from using and sharing their knowledge. The research indicated that viruses disrupt or inhibit that flow of knowledge among people that degrade the ability of the organization to sense what is happening and tap into the collective knowledge base. These viruses are insidious because they are typically unseen and undetected because they exist in the minds of individuals or groups of individuals on a mostly subconscious level. We have sat in countless meetings and observed the highest ranking individual dominate the idea pool while all others simple attend. In many organizations, we have listened closely to talk in the hallway and other places, away from earshot, to see how people distrust management and each other therefore they are unwilling to share what they know. These would be two examples of organizational viruses but the list is endless and cannot be observed without looking and listening closely through an objective electron microscope. We all know that successful managers advance within an organization because they fit in and promote the values, beliefs, and assumptions of the organization that made it successful. These highly successful managers are unlikely to detect disruptive viruses because they are themselves infected. Some successful managers observe the outward signs of these viruses and a few are able to detect viruses but truly rare are those leaders who can remain objective enough to go further and actually do something to eliminate the viruses.

Get Rid of those Nasty Viruses

After years of stalling growth, the new CEO of high-tech firm diagnosed his performance triangle to discover that the organization had inadvertently introduced viruses. Well-intentioned but flawed leadership introduced formal routines and processes that had the effect of disrupting the flow of knowledge and essentially apply brakes to the company’s growth. The systems formalities have names such as TQM, extensive process orientation, request an approval forms, and scorecards that required frequent updates. When organizations grow fast, most entrepreneurs install a leadership team and introduce professional tools and routines to cope with the growing complexity. However, much of these instruments added to the complexity with managers hiding behind processes rather than interact with people to collaborate and use their collective knowledge. “We follow rules rather than to communicate and interact” was the key realization from a diagnostic workshop with the new CEO. The cleanup was simple. He decided with his management team to rework their management system and retool the box with the perspective of (1) supporting the exchange of knowledge of their well-trained staff and (2) relating them to collaborate rather than to engage in well-intended but cumbersome routines. By simply detecting the viruses and cleaning up an infected bureaucracy, the organization returned to its growth path.

What happens if you don’t – deal with complexity by tapping into the vast reservoir of your employee’s knowledge? As the CEO of a regional utility firm confirmed, viruses creep slowly into the operating system of your firm. Unwillingly and unknowingly, they divert your attention from what truly matters and use up time that is not available to tackle the real challenges. The call for help came on a Saturday morning from his office. The first visit revealed a desk with folders full of pending issues, a closed door to his office assistant, dead silence on the executive floor during prime hours, and decisions that always migrated to the top! The diagnostic confirmed our gut-feel: tight managerial performance routines, detailed Management by Objectives tools, stifling bureaucracy, and closed-door conversations prevented any free flow of knowledge, kept employees within tight boundaries, and prevented creativity. Combined with the ongoing deregulation of the industry, the CEO faced a managerial situation that required an instant fix – on behaviors and its guiding managerial systems.

Conclusion – Become Borg-like

So, one key to effectively navigating a complex organization that is constantly becoming more and more complex in an ever changing world of uncertainty is to become more Borg-like. Nurturing neural networks to facilitate the flow of knowledge throughout the organization comprised of many individuals becomes essential for effective sense-making and to get critical information to the right people at the right time. Successful 21st Century companies will develop structures very different from industrial age command and control designs that emphasize free flow of knowledge throughout the organization. Doing this, however, requires recognition of infecting viruses that block collaboration, blur common purpose, and destroy productive relationships among people that degrade effectiveness to managing complexity. Firms with Borg-like knowledge networks, free or with reduced viruses will survive and prosper while those that cannot will fail due to the weight of their own complexity and constant threats from an uncertain environment that, like Star Fleet, will never give up and will always find a new approach to try.

About the Authors

Dr. Herb Nold, Professor of Business Administration, Polk State College, Florida, USA. Winner of the Emerald Literati Network 2013 Award for Excellence for ‘Linking Knowledge Processes with Firm Performance: Organizational Culture’ in Journal of Intellectual Capital and the 2013 International Award for Excellence for ‘Using Knowledge Processes to Improve Performance and Promote Change’ in the International Journal of Knowledge Culture, and Change Management

Lukas Michel, MD of AgilityINsights l Sphere Advisors AG, Switzerland. Author of “The Performance Triangle” and diagnostic mentor to management teams worldwide.

[Link 1: Linking knowledge processes with firm performance: organizational culture. http://www.emeraldinsight.com/journals.htm?show=abstract&articleid=17010190 ]

[Link 2: The Performance Triangle: A Diagnostic Tool to Help Leaders Translate Knowledge into Action for Higher Agility: http://ijmoc.cgpublisher.com/product/pub.258/prod.16 ]

L. Michel, “THE PERFORMANCE TRIANGLE: Diagnostic Mentoring to Manage Organizations and People for Superior Performance in Turbulent Times, LID Publishing, London, September 2013.