Lessons from History

first_imgRecessions can have a deep impact on the ideas that shape people management.Stephen Overell looks back at how economic hard times have spawned newmanagement theories and asks what will be the casualties of a recession todayThe air hangs heavy with talk of recession. In just two days in mid-October, United Technologies cut 5,000 jobs, Opel axed 2,500, Commerzbankslashed 3,400, Siemens 7,000 and Rolls-Royce 4,000. Many less familiar names did likewise and, for the first time in months,there was a rise in unemployment on some measures. But as well as the personal sadness of people losing their jobs, recessionsoften tend to have another less publicised, but no less profound impact onpeople management. They are the times when the ideas which shape how organisations are run andhow people are motivated tend to undergo something of a shake-up. Dominantmanagement theories in place when a recession bites are going to be perceivedas inadequate to a stultifying business environment – new, and often extremeanswers can seem compelling. Bob Norton, head of information services at the Institute of Management,says, “Recessions can be times when thinking gets a clean-out. It will beinteresting to see if things like emotional intelligence survive unaltered. “Ideas that are more focused on the bottom line, like re-engineeringwill inevitably tend to do better.” There is evidence to support this view. The two biggest fads of the past 25years were born out of major recessions – Tom Peters and Robert Waterman’s”excellence” cult, conceived in 1982, and business processre-engineering (BPR) pioneered by James Champy and Michael Hammer, which firstsaw light in 1990. Recessions can be times for reappraisal – and this one is unlikely to bemuch different. Indeed, the publication of Michael Hammer’s new book last monthcould be seen as prescient. In The Agenda, Hammer defends BPR from its criticsand says that with a few tweaks and a new emphasis on human capital management,there could be life in the old religion. It begs the question, could the hard-won emphasis on people as thefundamental source of value and competitive advantage be diminished ascompanies trim costs? Sol Davidson, a coach with Penna Executive Coaching,believes that is unlikely. “The future – whether there is a recession ornot – is about building intelligent organisations that can cope with change.Hierarchical power is no longer effective – the future is about interconnectednetworks, building partnerships and joint ventures. “What I fear is that while organisations may pay lip service, they willmake decisions around cost and as a consequence lose the intelligence and thecollective memory of their organisation.” The hard-won evidence that the way people are managed and developed has adirect relationship with the bottom line is strong. More than 30 differentstudies in both the US and the UK have confirmed it during the course of the1990s. The imperative of good people management remains, come recession or boom time.John Philpott, chief economist at the CIPD, says this potential recession isunlikely to distort priorities as much as previous ones. “Some of the management ideas that have evolved out of recessions havehad a rather tough and unsympathetic character,” he says. “I thinkthat this time there will be a calculated attempt to try and avoid that. Themacho thing that workers can be dispensed with, has, I think, been defeated bya combination of management theory saying just how fundamental people are to businesssuccess and basic common sense.” Philpott says the war for talent will also probably survive the downturn.”Most businesses understand that initiative and flair are important and needto be nurtured. Provided businesses do not lose their heads, the essentialelements of the psychological contract should be preserved.” However, the haemorrhage of knowledge is inevitably the anxiety during timesof recession. During the last recession, in 1993, one Institute of Managementsurvey found that cutting staff was the single most popular response of seniormanagers. Some 50 per cent said they were reducing headcount, while 34 per centwish they had cut back more severely earlier on. The fear of loss of knowledge is just. Already, it appears to beknowledge-based businesses which are suffering the most. Consultancy firmsreport very lean times. Commerzbank of Germany is saving £94m on consultants’costs. Accenture has cut 1,000 jobs while allowing another 1,000 to take asabbatical. PricewaterhouseCoopers plans to cut more than 2,000. However, others are attempting to turn a stagnant market into anopportunity. HR consultancy Barnes Kavelle has launched a new programme calledCorporate Skills Leaseback to prepare employees facing redundancy for a life asindependent consultants. Elsewhere, an active debate has been circling about how to structureincentives to encourage employees fearful of redundancy to share information.Naturally, many are seeking to hoard it to increase their value. While recessions have undoubtedly acted as a spur to some importantmanagement ideas in the past, it is unclear whether companies in difficultcircumstances are unduly conversion-prone. The Institute of Management’s Norton explains, “For the most part,companies are not preoccupied with theory in difficult times. They bracethemselves and get ready to move off when things pick up.” But some commentators believe the “softer”, perhaps more marginalmovements in management are likely to be the first casualties of recession. Professor David Norburn, director of Imperial College Management School,says, “Anything that is less readily perceived to have an impact onbusiness performance is likely to go.” If that is true, there could be a drop in the hunt for meaning at work. Recent years have witnessed a noticeable trend towards management theoryblending into metaphysics, as questions of spiritual purpose and calling becomerelevant or people trying to shift the culture of their organisations. Emotional intelligence has also spawned spiritual intelligence, whilequestions of value are seen as critical to world-class performance. All thismay come to seem a little like the luxuries of boom time – at least for a shorttime. In October, the first of a series of talks laid on by the Industrial Societyentitled The Soul @ Work had to be cancelled due to a lack of bookings. However, Norburn says the craving for big, new solutions to problems in thebusiness environment – solutions that are only ever likely to be part of theanswer – will endure. “The Tom Peters excellence stuff was stunningly good when it came out.People matter, put yourself in the customer’s shoes, Management By WalkingAround, and all that – really good stuff,” he says. “But the problem is they [managers] adopt things with religious fervourand it gets taken out of proportion – the classic magic bullet fallacy. “Most of these theories either come at it from the supply side, likePeters, or from the demand side – how to build new markets like Gary Hamel andCK Prahalad, but they only look through one lens, as it were. There has to be abalance between the two.” In truth, genuine revolutions in business thinking rarely happen. It hastaken the bursting of the dotcom bubble – and with it all the far-fetchedhyperbole – to realise the new economy was really not much different from theold. Still subject to the same logistical pressures, the same customerimperatives and the same laws of finance. According to management expert and author Carol Kennedy’s new book The NextBig Idea, the ideas that take off in the future are likely to be fairly smallones. In the speeded-up world of modern business, she suggests companies may notbe able to afford the time to work management fads through the system as in thepast. Smaller ones can be tried out, adopted or dumped without too muchinvestment – as Idealab and other internet incubators currently do with theirstart-up projects. If the recession aids this movement, many employees might breathe a sigh ofrelief. Why business process re-engineering caught on during the last recessionWhen re-engineering first appeared inan article in the Harvard Business Review in July/August 1990, the dominant fadof the day was quality or TQM – roughly translated as getting products orservices right first time rather than waiting to check them once they werefinished. The quality movement began to wane precisely because it becameuniversal – it was no longer a source of competitive advantage, merely acommercial necessity. TQM was about doing the same things better. Re-engineeringpromised radical change. When asked what he did for a living, Michael Hammerused to respond, “Reversing the industrial revolution.” The newmovement’s catchphrase was, “Don’t automate, obliterate”. BPR was aimed at breaking an organisation down into itscomponent parts and then putting them back together again to create a newmachine, hence the emphasis on process. Re-engineers favoured tearing up all the old procedures,”functional chimneys” and layers and getting everyone workingtogether in one multi-functional team with computers doing the rest. By the time Champy and Hammer came to set out their ideas morethoughtfully in Re-engineering the Corporation of 1993, the fad was in fullswing. The book sold 2 million copies in 17 languages. By 1994 a survey by Price Waterhouse found 78 per cent ofFortune 500 companies and 68 per cent of British ones were engaged in some formof re-engineering projects. Yet despite its extraordinary success, BPR soon becameassociated with just sacking people.While re-engineering undoubtedly contributed directly tomillions of people working in entirely new ways, millions also lost their jobs.A survey of large US companies carried out in May 1995 foundthat the main reason for wanting to re-engineer was cost cutting (29 per cent)followed closely by “someone important said we should do it” (26 percent). At Lloyds Bank, 2,100 branches became 1,800. There was soontalk of “the anorexic corporation”. According to management expert and author Carol Kennedy,”Re-engineering probably enjoyed the vogue it did because many companiesused it as a cloak for savage downsizing simply to cut headcount in therecession. “They then found they were not equipped to take advantageof growth when it came.”Fads we could do withoutSport as a motivational metaphorFor a brief phase in the mid to late 1990s, everyone becameobsessed with the workplace lessons of touchline and locker room. Footballers,rugby players and round-the-world yacht people leapt on board to the extentthat the business lecture circuit became a retirement paddock for sportsheroes. The problem was that while they had no difficulty enthusing a crowd,the impact on the workforce did not last. It was soon realised that scoring agoal and closing a sale are very different.Paradox ManagementThis attempted to help managers navigate perilous, changeabletimes by making a reference point of the contradictions of modern businesslife. Firms had to be global and local, profit-focused, but sociallyresponsible. Managers needed to be autonomous, but team-players; decisive, butconsultative. Paradox management was an attempt to transcend polar opposites.The problem was, it was far too esoteric. Management has always been aboutnegotiating between conflicting pressures, so it was really just another sillyname.Work as CommunitySome of the crassest cod-psychology developed around the themeof work replacing geographical communities in people’s lives, while providingsome of the functions of the shrinking nation state such as childcare. Thetruth is that so-called concierge services never expanded beyond a clutch ofprofessional service firms in London. Work is back to being work.Ones towatchSpirituality/Meaning/Values/Emotional IntelligenceGuilty of some Class A hocus-pocus around the turn of themillennium, this movement has yet to burn itself out. Work is assuming a largerrole in people’s lives, while there remains a lingering suspicion that thosewho do well at work and are happiest with their lot tend to have”something”. Boiling down that something is likely to preoccupyexecutive development specialists post-recession. Academic research has foundthat the only way to explain the superior performance of some companies overthe long term is through the values by which the firm operates. Change ManagementNothing new about this, of course, but the subtlety, skill anddetermination involved in solid strategic thinking and, more importantly,thorough implementation, will ensure change remains a key issue for executives.The focus is likely to move away from fantastic strategic modelling towards howto secure a new vision, years down the line. Making it work, in short. Ischange going to reduce in life, work and business? Unlikely.Knowledge ManagementSome of the most venal, idiotic thinking has gone into KM,while its tangible contribution to the workplace has been negligible. KM hasbeen guilty of the classical hubris of attempting to replace humans withmachines as organisations gather and distribute corporate knowledge. For awhile everything was being called KM – intranets, libraries, databases. But ithas to be acknowledged that knowledge really is one of the key elements ofcompetitive advantage, which is why KM – hopefully in a more muted form – willsurvive. Related posts:No related photos. Previous Article Next Article Lessons from HistoryOn 13 Nov 2001 in Personnel Today Comments are closed. last_img read more