Why Management Science Fails to Perform, according to Peter Drucker

Parts exist in contemplation of the whole.

There is one fundamental insight underlying all management science. It is that the business enterprise is a system of the highest order: a system whose parts are human beings contributing voluntarily of their knowledge, skill, and dedication to a joint venture. And one thing characterizes all genuine systems, whether they be mechanical like the control of a missile, biological like a tree, or social like the business enterprise: it is interdependence. The whole of a system is not necessarily improved if one particular function or part is improved or made more efficient. In fact, the system may well be damaged thereby, or even destroyed. In some cases the best way to strengthen the system may be to weaken a part–to make it less precise or less efficient. For what matters in any system is the performance of the whole; this is the result of growth and of dynamic balance, adjustment, and integration, rather than of mere technical efficiency.

Primary emphasis on the efficiency of parts in management sciences is therefore bound to do damage. It is bound to optimize precision of the tool at the expense of the health and performance of the whole.

Landmarks of Tomorrow
Management: Tasks, Responsibilities, Practices

Why Management Science Fails to Perform, according to Peter Drucker

Organization Design: “All the elements interact in a system”

Organizations, like individuals, can avoid identity crises by deciding what it is they wish to be and then pursuing it with a healthy obsession.

Some organizations do indeed achieve and maintain an internal consistency. But then they find that it is designed for an environment the organization is no longer in. To have a nice, neat machine bureaucracy in a dynamic industry calling for constant innovation or, alternately, a flexible adhocracy in a stable industry calling for minimum cost makes no sense. Remember that these are configurations of situation as well as structure. Indeed, the very notion of configuration is that all the elements interact in a system. One element does not cause another; instead, all influence each other interactively. Structure is no more designed to fit the situation than situation is selected to fit the structure.

The way to deal with the right structure in the wrong environment may be to change the environment, not the structure. Often, in fact, it is far easier to shift industries or retreat to a suitable niche in an industry than to undo a cohesive structure.

Essentially, the organization has two choices. It can adapt continuously to the environment at the expense of internal consistency—that is, steadily redesign its structure to maintain external fit. Or it can maintain internal consistency at the expense of a gradually worsening fit with its environment, at least until the fit becomes so bad that it must undergo sudden structural redesign to achieve a new internally consistent configuration. In other words, the choice is between evolution and revolution, between perpetual mild adaptation, which favors external fit over time, and infrequent major realignment, which favors internal consistency over time.

–Henry Mintzberg, 1981
Organization Design: Fashion or Fit?

Organization Design: “All the elements interact in a system”

The Alliance: Managing Talent in the Networked Age

Reid Hoffman, Ben Casnocha, and Chris Yeh’s The Alliance: Managing Talent in the Networked Age (find in a library) is a short but engaging read focused on three core ideas for talent management in the “networked” age:

1. Use an “Alliance” framework between employer and employee
2. Invest in and leverage employee networks
3. Encourage and/or run employee alumni networks and groups

The Alliance Framework

The book opens with the usual assertion that the old model of “lifetime” employment is dead. Where it begins to veer from the typical, though, is by frankly criticizing the alternatives seen as replacing lifetime employment: falsely ascribing “family” status to an organization and its members and employees, or fully resigning to a free agent, market-ruled alternative.

Most CEOs have good intentions when they describe their company as being “like family.” They’re searching for a model that represents the kind of relationships they want to have with their employees–a lifetime relationship with a sense of belonging. But using the term “family” makes it easy for misunderstandings to arise.

In a real family, parents can’t fire their children.

The authors instead point to professional sports teams as an exemplar of the Alliance framework. The professional sports team has a specific mission (win games and championships) and members come together to accomplish the mission, even as the composition of the team changes over time.

While a professional sports team doesn’t assume lifetime employment, the principles of trust, mutual investment, and mutual benefit still apply. Teams win when their individual members trust each other enough to prioritize team success over individual glory; paradoxically, winning as a team is the best way for the team members to achieve individual success.

Borrowing a military term, the authors suggest that organizations harness entrepreneurial talent by using a tour of duty framework. They are careful to note that companies are very different from the military: while a departing employee might get a farewell party, a soldier who leaves his unit before his tour is complete is AWOL and gets court-martialed. They argue that the metaphor is still useful, however, since both military and business tours of duty focus on honorably completing a specific, finite mission.

Tours of duty are defined by the specific mission to be accomplished, and not time-in-role as career experience is often reduced to. Tours of duty are also not “one size fits all,” and three different types of tours are suggested:

Rotational Tour of Duty

Typically at the entry or junior level, Rotational tours are not personalized to specific employees. Rotational tours are often used by consulting firms, investment banks, and tech companies who provide standardized on-boarding for new junior employees, often allowing them to rotate through a finite number of roles during the often two to four years of the tour, usually for a predetermined number of months (3, 6, or 9) in each role. The primary purpose of the Rotational tour is to evaluate potential long-term fit on both sides: employer and employee.

Transformational Tour of Duty

Transformational tours are personalized to individual employees and are less about specific time commitments and more about a clear and specific mission to be accomplished. The promise of the Transformational tour is that it gives the employee the opportunity to transform both his or her career and the company by accomplishing something substantive. The crux of the Transformational tour is this win-win synergy for employer and employee. The Transformational tour is personalized and structured at the outset with both the employer’s goal and the employee’s future career aspirations–whether in the current company or elsewhere–front and center.

Foundational Tour of Duty

Foundational tours often occur at the highest (founder/executive) level. Foundational tours occur when there is “exceptional alignment” between employer and employee as a defining hallmark of the relationship, and the employee is identified with the organization and vice-versa (e.g., Warren Buffett and Berkshire Hathaway). Typical tenure in Foundational tours is 10 years or more, though Foundational tours are not restricted to executives, since Foundational tours at all levels ensure ownership, continuity, and serve as keepers of institutional memory.

No one ever washes a rental car. A Foundational employee would never allow the company to cut corners to meet short-term financial goals.

The authors spend the next several chapters of the book carefully laying out the prerequisites and steps for using tours of duty. First, they discuss the importance of defining an organization’s core mission and values so specifically and rigorously that some players feel strong alignment while others feel so out of alignment they might leave the organization. (The authors argue that organizations want to lose this latter group.) Next, they provide specifics on having the kind of honest, raw conversations with employees that are crucial for effectively using a tour of duty framework. Finally, they provide suggested timelines and tools for checking in and using feedback during the course of a tour of duty, as well as negotiating subsequent tours.

Employee Network Intelligence

In the second major strategy in The Alliance, the authors claim that employee networking is a good thing. Rather than seeing networking as a detriment to the organization or a behavioral indicator that an employee is thinking about leaving, The Alliance suggests that employers should pay employees to build, maintain, and leverage their networks. The authors argue that in the current era of knowledge work, human capital is defined not simply by the knowledge, skills, and abilities in each individual employee, but by all that those employees can bring to an organization through the responsible and skilled use of their individual networks. Employers should enable and train all employees to skillfully utilize social media, pay for learning opportunities and institute a formal system of knowledge transfer whenever external learning occurs, and even start a “networking fund” and allow employees to expense networking lunches.

Corporate Alumni Networks

The third strategy in The Alliance is that organizations should network with ex-employees substantially more than most currently do, specifically by creating corporate alumni networks to facilitate lifelong alliances between organizations and former employees. The authors note extensive potential ROI from corporate alumni networks, including the ability to hire more great people through referrals, new customers, access to competitive and network intelligence, and alumni as brand ambassadors. The authors provide specific how-to guidance on setting up and running corporate alumni networks, ranging from the relatively low-cost to the highly-involved.

Overall, The Alliance: Managing Talent in the Networked Age (find in a library) turns some existing talent management practices sideways, if not upside down. While the authors are perhaps too light on caveating that the Silicon Valley talent ecosystem in which they operate may not generalize to other industries or fields, the talent strategies Hoffman, Casnocha, and Yeh are suggesting are by no means reserved for the tech world. The Alliance challenges leaders, managers, and HR strategists to think differently about legacy talent management practices that may no longer fit today’s environment.

Download the first chapter from the book website.

Source for the SlideShare at the top of this post: The Alliance: A Visual Summary from Reid Hoffman

The Alliance: Managing Talent in the Networked Age

Poem: What the Personnel Handbooks Never Tell You

They leave a lot out of the personnel handbooks.
Dying for instance.
You can find funeral leave
but you can’t find dying.
You can’t find what to do
when a guy you’ve worked with since you both
were pups
looks you in the eye
and says something about hope and chemotherapy.
No phrases,
no triplicate forms,
no rating systems.
Seminars won’t do it
and it’s too late for a new policy on sabbaticals.

They don’t tell you about eye contact
and how easily it slips away
when a woman who lost a breast
says, ‘They didn’t get it all.’
You can find essays on motivation
but the business schools
don’t teach what the good manager says
to keep people taking up the slack
while someone steals a little more time
at the hospital.
There’s no help from those tapes
you pop into the player
while you drive or jog.
They’d never get the voice right.

And this poem won’t help either.
You just have to figure it out for yourself,
and don’t ever expect to do it well.

Jim Autry
Poem: What the Personnel Handbooks Never Tell You