The only constant is change.“The more corporate executives believe in a free (unregulated) market, the more they believe in a regulated internal market.” Russell Ackoff
TODAY’S BUSINESS CLIMATE is generally seen as uniquely challenging. Many executives describe market conditions as difficult, stressful and ambiguous. They admit to feeling confused, frustrated and pressured. They wonder whether business conditions will ever “return to normal”. They fear that turbulence, uncertainty and discontinuity have become permanent features of the managerial landscape.
These are the two most popular clichés:
The only constant is change.
The pace of change is accelerating.
Other platitudes are that customers are more discerning, shareholders are more impatient, competitors are more aggressive and employees are more demanding. (The mirror image of these assumptions is that, once upon a time, there was a golden age of plentiful demand, pliant customers, passive competitors, supine staff and easy profits.) It is rare for today’s widely held beliefs to be questioned, let alone tested. They are simply accepted as central truths of the modern condition.
Executives typically explain these pressures as originating in the external world. They see the drivers of change as advances in technology, shifts of demography, trends in lifestyle, changes of regulatory regime and the globalisation of business. Interestingly, they see these forces as originating outside the firm and operating mercilessly on the firm. They are unlikely to claim that they themselves are responsible for accelerating change.
How do executives cope with a world that they perceive as turbulent, unpredictable and threatening? One response is to make a determined attempt to isolate the firm from these external forces by taking tighter control of the internal corporate environment. This usually means adopting a more disciplined management style: a focus on the essentials, greater attention to costs, a resolve to squeeze out waste, strict adherence to the principles of lean thinking and total quality management (TQM), adoption of the language of conformance, a certain scepticism towards intrapreneurial initiatives – such as experimentation or investment in new and untried business models – and, overall, a preference for optimising the current operating model rather than inventing radically new ones. The results of all this belt-tightening, however, are not always rewarding. All too often, revenues will have shrunk faster than costs.
As observers of the business scene over the past 20 years, we have noticed a default to three basic forms of behaviour when the pressures on performance become acute:
Decision-making is centralised. Firms only make decisions that can be strongly corroborated by incontrovertible evidence; speculative or experimental investments are shunned.
Greater alignment is sought. Firms pursue transformational development programmes for their people, designed either to bring individual behaviour into line with the company’s espoused values or to raise individual skills to the level of some desired “competency profile”.
Personal accountability is emphasised. Reliance is placed upon a plethora of targets, metrics and incentives to “drive” performance and hold managers responsible for “meeting their commitments”.
We believe that these stereotypical responses to pressure serve only to increase the pressure; that the pressures themselves are largely self-induced rather than emanating from the external world; that as a result of this combination of perceived threat, aversion to risk, pessimism and safety-first management, corporate performance deteriorates still further; and that a completely different set of economic and psychological assumptions is needed if firms are not to fall foul of this self-destructive pattern of behaviour.
We need a radically different model of managerial behaviour and organisational effectiveness.