Table of Contents
Title Page
Copyright Page
PREFACE
Introduction
THE MARKETPLACE HAS CHANGED
THE WORKPLACE HAS ALSO CHANGED
THE SYSTEM IS THE PROBLEM
THE SEVEN PRINCIPLES OF RADICAL MANAGEMENT
PRINCIPLES AND PRACTICES
WHO THIS BOOK IS FOR
Chapter 1 - MANAGEMENT TODAY
THE ABSTRACT WRITER
THE AUDITOR
THE SOFTWARE DEVELOPER
THE BANKER
THE CONSULTANT
THE PARADOX OF MANAGERIAL SUCCESS
Chapter 2 - A BRIEF HISTORY OF MANAGEMENT
WHY TRADITIONAL MANAGEMENT IS STRUGGLING
HOW THE WORKPLACE HAS EVOLVED
THE SITUATION REACHES A CRISIS POINT
A NEW START
Chapter 3 - WHAT RADICAL MANAGEMENT MEANS
SEVEN BASIC PRINCIPLES OF CONTINUOUS INNOVATION
AN INTEGRATED SET OF MEASURES
THE IDEA IN ACTION: EASEL CORPORATION
WHERE IS IT HAPPENING?
HOW WILL IT HAPPEN MORE WIDELY?
Part 1 - THE SEVEN PRINCIPLES OF CONTINUOUS INNOVATION
Chapter 4 - PRINCIPLE # 1: DELIGHTING CLIENTS
THE MEANING OF WORK
THE NEW LOCALISM
THE ORGANIZATION’S PRIMARY GOAL: THINGS VERSUS PEOPLE
THE CASE OF THE PUBLIC SECTOR ORGANIZATION
DEVELOPMENT VERSUS PRODUCTION
DO WE HAVE THE RIGHT GOAL?
WHO DECIDES?
MEASURING CLIENT DELIGHT
THE ADDICTION TO BAD PROFITS
THE DESIGN OF THE INSTRUMENT
WHY ARE WE NOT BEING DELIGHTED?
Chapter 5 - PRINCIPLE # 2: SELF-ORGANIZING TEAMS
THE CASE OF HENRY FITZEMPRESS
WHY SELF-ORGANIZING GROUPS WORK
THE PSYCHOLOGY OF SELF-ORGANIZING TEAMS
THE BENEFITS OF TEAMS
WHY TEAMS KEEP BEING REDISCOVERED
Chapter 6 - PRINCIPLE # 3: CLIENT-DRIVEN ITERATIONS
ITERATIONS AT TOYOTA
ITERATIONS IN BUILDING HOUSES
MEANING IN WORK AND MEANING AT WORK
THE USE OF ITERATIVE WORK PATTERNS
BUSTING THE IRON TRIANGLE OF MANAGEMENT
IMPLICATIONS FOR WORK IN GENERAL
Chapter 7 - PRINCIPLE # 4: DELIVERING VALUE TO CLIENTS IN EACH ITERATION
UNDERSTANDING PHANTOM WORK JAMS
IDENTIFYING AND REMOVING PHANTOM WORK JAMS
THE MANAGEMENT MIND-SET PROBLEM
TACTICS FOR INTRODUCING RADICAL MANAGEMENT
Chapter 8 - PRINCIPLE # 5: RADICAL TRANSPARENCY
THE STRUGGLE BETWEEN TRUTH AND POWER
THE BLUE PILL VERSUS THE RED PILL
THE PARALLEL TO SCIENCE
THE SCOPE OF RADICAL TRANSPARENCY
Chapter 9 - PRINCIPLE # 6: CONTINUOUS SELF-IMPROVEMENT
THE EXPERIENCE OF CONTINUOUS SELF-IMPROVEMENT
THE CONCEPT OF CONTINUOUS IMPROVEMENT
THE TOYOTA APPROACH AT FREMONT
THE IMPACT OF THE TOYOTA APPROACH
UNDERSTANDING WHAT TOYOTA DOES
THE MEANING OF LEAN
UNINTENDED ACCELERATION
THE SAYLOR CASE
A CRISIS OR AN OPPORTUNITY?
THREE FACTS
FOUR LESSONS FOR CONTINUOUS SELF-IMPROVEMENT
Chapter 10 - PRINCIPLE # 7: INTERACTIVE COMMUNICATION
THREE DIFFERENT WORLDS
THE COMMUNICATION CHALLENGE FOR MANAGERS
THE POWER OF NARRATIVE
THE CONCEPT OF CONVERSATION
PUTTING THE BOUNDARIES IN THE RIGHT PLACE
Part 2 - IMPLEMENTATION
Chapter 11 - A RIVER OF CASCADING CONVERSATIONS
MY INITIATION INTO RADICAL CHANGE MANAGEMENT
SOME PRACTICES OF RADICAL CHANGE MANAGEMENT
WHAT WILL BE YOUR STORY?
Chapter 12 - EPILOGUE
SIMPLE TO UNDERSTAND, DIFFICULT TO IMPLEMENT
THE SPIRIT OF RADICAL MANAGEMENT
MAKING FRIENDS WITH SURPRISE
MEANING IN WORK AND AT WORK IS PART OF BEING HUMAN
RADICAL MANAGEMENT IS PART OF A LARGER STORY
APPENDIX: SUMMARY OF RADICAL MANAGEMENT PRACTICES
NOTES
Acknowledgments
ABOUT THE AUTHOR
INDEX
PREFACE
“Remarkably, the return on assets for U.S. firms has steadily fallen to almost one quarter of 1965 levels ... very few [workers] (20 percent) are passionate about their jobs . . . executive turnover is increasing. Consumers are becoming less loyal to brands... the rate at which big companies lose their leadership positions is increasing.”
Deloitte Center for the Edge1
Total Attorneys is a rapidly growing Chicago-based company that provides services and software to small law firms. As a start-up in 2002, it was highly energized: work was done on the fly, new products were developed, new markets opened, and new customers were identified. But as the firm grew, so did bureaucracy. Departments were formed, processes and structures were put in place, work slowed down, and the staff morale deteriorated. In some cases, Total Attorneys moved so slowly that by the time its software was completed, the client wanted something different. By 2008, with around 160 employees, Total Attorneys was still making money, but it had gone from being an exciting place to work to a bureaucratic logjam.
Up to this point, Total Attorneys was a depressingly familiar story. But Total Attorney’s CEO, Ed Scanlan, began asking himself: “Why were we able to get more done in forty-five days with three guys than I had just accomplished in the last six months with several departments? Why are our tires stuck in the mud?”
So Scanlan decided to change the story and recapture some of the start-up energy and excitement. He replaced departmental silos with small cross-functional teams that themselves decided how to do the work and even how much work to do. The teams began working in cycles, implementing a prioritized series of tasks that reflected what clients wanted to see developed. At the end of each cycle, the work was demonstrated to clients, and their feedback was incorporated in the next cycle. In this way, the work was always focused on tasks of high priority to clients.
Scanlan started the approach with the software developers, but it was so successful there that he soon extended it to the call centers. For instance, the eighty-five call center employees were divided into fifteen teams and colocated on the same floor as the software developers to enhance direct communication.
More recently, the approach has spread spontaneously to sales, marketing, accounting and the general counsel’s office. Now the whole firm is buzzing with energy and excitement and laughter again.
“This way of managing appeals particularly to the new generation,” says Scanlan. “They want autonomy. They want ownership. They want purpose. It makes sense to them. But it also resonates with older workers.”
Many firms are now discovering what Total Attorneys discovered: that a revolutionary way of organizing and managing work is emerging that can generate continuous innovation, deep job satisfaction, and client delight. It is very different from the practices of traditional management: hierarchy, command and control, tightly planned work, competition through economies of scale and cost reduction, and impersonal communications.
Traditional management practices, which continue to be taught in business schools and described in management textbooks, worked well enough for much of the twentieth century but are a poor fit for today’s economic context.
The signs of the misfit are widespread. The rate of return on assets keeps on its decades-long decline. Innovation continues to falter. Workers are disgruntled. Customers are frustrated. Brands are unraveling. Reorganizations, downsizings, and outsourcings proliferate. Executive turnover is accelerating. Institutional life expectancies are less than two decades. In the past twenty-five years, start-ups created 40 million jobs in the United States, while established firms created almost none.2
Early in 2008, I set out to understand the source of these problems and to discover what could be done about them. This book tells the story of that journey.
There must be workplaces, I thought, where work is highly productive, new ideas are embraced, and jobs are deeply satisfying. Could the conditions that had enabled that to happen be identified? Could those conditions be reverse-engineered? Is it possible to create an environment that was congenial to ideas that are vibrant, exciting, or different, in a sustained way, not just in isolated cases?
I began by asking people if they knew about any such workplaces. My expectation was that finding them would be difficult—like searching for a needle in a haystack. Few people would know about them, I thought, let alone have personal experience of them.
My first surprise was that I had no difficulty at all in finding them. In fact, almost everyone I talked to could tell me about an experience that they had, although typically it wasn’t in their current workplace.
The second surprise came when I noticed that an unusually high proportion of these extraordinary experiences had been in software development. Initially I didn’t pay this any attention. After all, these were geeks, and they talked with a strange vocabulary. What could I possibly learn about management from people who had, I imagined, gone into computing because they preferred machines to people?
My third surprise was what was going on in these companies. When I checked it out, I discovered a way of managing that was much more productive than traditional management and where the people doing the work were having serious fun.3
The fourth surprise was that it wasn’t limited to software development. Once this different way of managing got under way in one part of the company, it tended to spread to other parts of the company, even the entire firm. It was also widespread in some parts of auto manufacture and in successful start-ups. In fact, once I understood the principles, I started to see signs of it in many different sectors.
The final big surprise was that when I joined the dots and fully understood the elements, I realized that what I had stumbled on was more than a management technique. The idea was larger, with far-reaching economic, social, and ethical implications.
Overall, this was very different from the way most companies are currently run. As Mikkel Harbo, director of business development and operations at the Danish company Systematic Software told me, “Once you introduce this, it affects everything in the organization—the way you plan, the way you manage, the way you work. Everything is different. It changes the game fundamentally.”
It is for this reason that I call it radical management.4 It goes to the root of what makes things happen in the world. The workplaces that it creates are drastically different from traditional management. It implies fundamental shifts in how we think, speak, and act at work.
In this book, I am inviting you to take the journey that I have taken and learn what I have learned. It will mean spending time to think about what we are doing in organizations today and why. It will entail considering what kinds of organizations we want to create, as well as imagining why and how they could be very different from most organizations today—providing work that is much more productive and much more satisfying.
This book doesn’t offer a quick fix, because the nature and scale of the issues that we are dealing with in today’s workplaces are not susceptible to a quick fix.
Nor is this a book about what’s new, even though that is an eternally intriguing topic. When pursued exclusively, it results in a preoccupation with fads and trivia.
In this book, I am concerned with the questions: What is good? and Whom is it good for? Is it good for the organization? Is it good for those doing the work? Is it good for those for whom the work is done? Is it good for society at large? These are questions that cut deeply. They involve examining: What is true productivity for an organization? What is its source? What is needed to sustain it? What is responsibility? What does it mean to be genuinely authentic? What lifts up the human spirit and makes it sing?
The principles I describe in this book constitute a radical change from the way most organizations are currently managed. Standard managerial practices today systematically lead to organizational underperformance, disgruntled workers, and frustrated customers. Most proposals for reforming management advance one of those elements at the expense of the other two. The principles set out in this book magnify human capacity and simultaneously inspire high productivity, continuous innovation, deep job satisfaction, and client delight.
August 2010 Stephen Denning
Washington, D.C.
INTRODUCTION
“If a factory is torn down but the rationality which produced it is left standing, then that rationality will simply produce ‘ another factory.”
Robert Pirsig1
This is a book about a radically different way of managing. It’s about pulling apart the black box of traditional management and putting the pieces together in a way that creates continuous innovation and client delight. It involves a wholly different way of thinking, speaking, and acting at work. It leads to workplaces that are more productive and more fun. These workplaces feel different.
Given the deep change that has taken place in both the marketplace and the workplace, should we be surprised that we need different management today?
THE MARKETPLACE HAS CHANGED
In the marketplace, what worked yesterday—satisfying customers by offering average products or services with zero defects—is no longer good enough. Absence of defects is expected and lacks luster. Unless clients are delighted, they can—and will—go elsewhere. The bar has been raised.
To ensure long-term growth, firms must forge relationships with their customers and turn them into long-term supporters and advocates of the firm’s goods and services. They must continually find new and economical ways to provide goods or services that are differentiated, noteworthy, surprising, or remarkable. They need constant innovation.2
Delighting clients goes beyond reconfiguring the marketing department. 3 It means committing the entire organization, and everyone in it, to delighting clients as the firm’s principal goal and putting in place the management principles and practices needed to accomplish that goal.
THE WORKPLACE HAS ALSO CHANGED
“Management was originally invented,” management theorist Gary Hamel has noted, “to solve two problems: the first—getting semiskilled employees to perform repetitive activities competently, diligently, and efficiently; the second—coordinating those efforts in ways that enabled complex goods and services to be produced in large quantities. In a nutshell, the problems were efficiency and scale, and the solution was bureaucracy, with its hierarchical structure, cascading goals, precise role definitions, and elaborate rules and procedures.”4
With the continuing shift from semiskilled work to what economists call knowledge work, hierarchical bureaucracy is no longer a good solution. Its consequences are well known. It results in the talents, ingenuity, and inspiration of the workforce not being fully tapped. Only one in five workers is fully engaged in his or her work.5 For the organization, this means that the energies and insights of four out of five people in the workplace are being needlessly squandered. When the firm’s future depends on what knowledge workers can contribute, leaving talent unused becomes a serious productivity problem.
For the customers of these organizations, the situation is similarly grim: a firm full of people who are not fully engaged in their work is not much fun to deal with. Although firms talk about customer service and responsiveness, they are more often engaged in one-way communications. The recorded message might say, “Your call is important to us,” but customers know that it isn’t.
THE SYSTEM IS THE PROBLEM
I argue in this book that the problems of today’s workplace are not the personal fault of the individual managers. They are largely the fault of the system they are implementing, which relentlessly constrains the capacity of people to contribute, limits the firm’s productivity, and practically guarantees that clients will be dissatisfied. The mental model of management that these companies are pursuing, with interlocking attitudes and practices, methodically prevents any individual management fix from permanently taking hold.
In the chapters ahead, I introduce a very different way of managing. I offer one extraordinary example after another: software developers, car manufacturers, house builders, staff in a call center, and songwriters, among others. And I will show people having serious fun in their work and becoming steadily better at doing it.
The emerging approach to managing is proving to be not only more productive than traditional management. It also liberates the energies, insights, and passions of people. It creates workplaces that enable the human spirit. It delights clients and creates shining eyes among the people doing the work.
This is not about firms becoming more productive by having people work longer hours or by downsizing or outsourcing. It’s about deploying energies differently. In some areas, managers have to do more. In other areas, they need to do less. Overall they will have to act on the basis of principles that are quite different from those of today’s traditional managers.
THE SEVEN PRINCIPLES OF RADICAL MANAGEMENT
The seven principles I describe form a self-reinforcing sequence (Figure I.1). Radical management begins by getting the goal right: the purpose of work is to delight clients, not merely to produce goods or services or make money for shareholders (Principle #1).
FIGURE I.1 Radical Management: The Seven Basic Principles of Continuous Innovation
Focusing on client delight leads to self-organizing teams, because client delight requires continuous innovation, and a self-organizing team is the management arrangement most likely to generate continuous innovation (Principle #2).
This leads to working in client-driven iterations, because delighting clients can be approached only by successive approximations. And self-organizing teams, being life forms that live on the edge of chaos, need checkpoints to see whether they are evolving positively or slipping over the edge into chaos (Principle #3).
Similarly, client-driven iterations focus on delivering value to clients by the end of each iteration. They force closure and enable frequent client feedback (Principle #4).
Self-organizing teams that are working in an iterative fashion both enable and require radical transparency (Principle #5) so that the teams go on improving of their own accord (Principle #6).
An underlying requirement of all of these principles is interactive communication (Principle #7). Unless managers and workers are communicating interactively, using authentic narratives, open-ended questions, and deep listening, rather than treating people as things to be manipulated, none of the other principles work.
When self-organizing teams are set up and supported by implementing these principles, they naturally evolve into high-performance teams that are significantly more productive than the norm and deeply satisfying to workers.
Together the principles constitute a radical shift in the practice of management and an approach that is well adapted to meet the challenges of the twenty-first-century organization.
PRINCIPLES AND PRACTICES
These principles comprise the seven most important elements of radical management. At the end of each chapter, I describe a large number of practices—more than seventy of them in total—that offer some of the ways to go about implementing the principles. Some practices support more than one principle.
The principles are more fundamental than the practices. If you think about the principles enough, you should be able to deduce the practices from them. If you keep the seven principles steadily in mind, you shouldn’t go too far wrong.
Thus, in implementation, it’s important to focus on the spirit of radical management and not get lost in the fine print. Even if you’re not doing all of the seventy-plus practices yet are living the seven principles, that’s still radical management. However, if you are doing lots of the practices but not living some of the principles, then you should probably ask yourself whether you still have at least one foot in the land of traditional management.
This is not a book about praising famous firms or the current media darlings. Instead I discuss how ordinary people become extraordinary and how every firm can continuously reinvent itself. Rather than talking about prodigies or celebrities, I describe a way of working that is broadly available to all.
The organizations that I cite in the book have embarked on journeys. They are all at different stages of the journey, and none of them has in any permanent sense “arrived.” We will see more than one company that implemented the principles for a period and then lost its way. Implementing the principles requires constant energy and attention.
I rarely use Japanese terms like kanban or kaizan, although Japanese firms have made an enormous contribution to management thinking and practice. My goal is to communicate certain truths that transcend any particular country or culture.
I also make sparing use of the terminology that is widespread in software development, under the labels of “Agile” and “Scrum,” with terms like scrum-masters, product owners, burndown charts, and sprints. Software developers deserve credit for advancing some of the thinking described in this book to its fullest extent. Their terminologies were deliberately chosen to differentiate this way of developing software from the roles and practices of traditional management.6 The terminology has been helpful in software development. My goal here is to explain in plain language how the underlying managerial principles and practices have roots in many different fields and apply to all sectors of the economy.
Some critics will say that the principles and practices I describe are not possible, that they embody an unbelievable utopia, or that they have already been tried and shown not to work. They will give a thousand reasons that we have no choice but to keep on managing the way we always have, with stunted productivity, dispirited workers, and frustrated customers.
It would be easier to accept that version of events if scores of organizations were not already practicing the principles of radical management and achieving extraordinary performance.
WHO THIS BOOK IS FOR
This book is intended for:
• Leaders and managers who want to reinvent the workplace and inspire extraordinary productivity, continuous innovation, deep job satisfaction, and client delight—all simultaneously
• Leaders and managers who want to lift their game and create organizations that buzz with extraordinary energy, excitement, innovation, and genuine high performance
• Leaders and managers who want to run established organizations with the energy and innovativeness of a start-up
• Anyone trying to understand how software developers practicing Scrum and Agile or manufacturers implementing lean production achieve extraordinary gains in productivity, and how to apply what they do to general management
• Anyone who wants to make leadership storytelling an integral part of the culture of an organization.
In short, this book is intended for those who wish to enjoy a life filled with passion, excitement, and productivity and create that for others. This is about taking charge of your life and experiencing the spirit and the exhilaration of extraordinary performance.
THE DIFFERENCES BETWEEN TRADITIONAL AND RADICAL MANAGEMENT
The differences between traditional management and radical management are stark. They flow from different goals. They involve different modalities. They have different consequences, as this table shows:
| Traditional Management | Radical Management |
---|
Goal | The purpose of work is to produce goods or services. | Focus work on delighting the client. |
How work is organized | Work is done by individuals reporting to bosses. | Do work through self-organizing teams. |
Plan | Work is done in accordance with a comprehensive plan. | Do work in client-driven iterations aimed at continuous innovation. |
Measuring progress | As work proceeds, provide progress reports of what is under way. | Deliver value to clients each iteration. |
What is communicated | Communications cover what people need to know. | Be totally open about impediments to improvement. |
Improvement | Bosses are responsible for productivity. | Create a context for continuous self- improvement by the team itself. |
How it is communicated | One-way communication: send people messages, and tell them what to do. | Communicate interactively through stories, questions, and conversations. |
Principal focus of competition | Cost reduction: economies of scale, downsizing, outsourcing. | Time: deliver more value to the client sooner. |
Consequence | Rates of return on assets steadily decline. Innovation is stunted. Four in five workers are not fully engaged in their jobs. Customers receive average products and services. | Continuous innovation: self-organizing teams normally evolve into high-performance teams, focused on delighting clients, with above-average productivity and deep job satisfaction. |
1
MANAGEMENT TODAY
Tomorrow’s business imperatives lie outside the performance envelope of today’s bureaucracy-infused management practices.
Gary Hamel1
“Can you think of a time in your life when you were in a group where everyone was pulling together and the group was vibrantly alive and extraordinarily productive, when it was all for one and one for all? And after it ended—even long after it ended—you went on having reunions with the other people in the group because the experience had been so meaningful? Can you think of a time like that?” I have asked hundreds of people in many countries and all walks of life these questions, and almost all of them could recall at least one such experience.
It might have been in the workplace, at school, in a community, or in a network. The duration may have been long or brief. Generally the groups they mentioned were small. Sometimes the experience was recent, sometimes a long time ago. Sometimes it was listening to the experiences of others that jogged their own memory. But in the end, almost no one said that they didn’t know what I was talking about.
Then I would ask another question: “Are you in such a group right now in your workplace?” The answer to this question was usually very different. Few of them said that they were having such an experience in the workplace at this time.
Why is that? Why is the modern workplace dispiriting for so many of the people who work there?
Why do we see symptoms of management malfunction everywhere? Why is innovation slowing? Why are knowledge workers so disgruntled? Why do most of the so-called reforms of work make things worse, not better? Why is service to customers deteriorating? Why are some firms addicted to “bad profits,” that is, profits that are made at the expense of customer satisfaction? Why do repeated crises seem to come from nowhere without warning from those who should have known better?2
Why are so many smart people working so hard yet producing results that no one really wants?
To answer these questions, we have to go beyond thinking about management in abstract terms and see what’s really going on in today’s workplace. When it comes to a subject as vast and controversial as this, I cannot hope to present a comprehensive picture. What I can do is show a couple of narrative snapshots that reveal why I have reached the verdict that I have.
The following five accounts are inspired by actual events, though they do not depict any actual person or firm. It is for you, the reader, to discern to what extent they depict the reality of today’s workplaces.
THE ABSTRACT WRITER
When Paul took a job as an editorial assistant for an online publisher, his role was to prepare summaries of business books that executives were too busy to read. The publisher sold the summaries to subscribers, who could view them online.3
Paul had recently graduated from college and was happy to have a job after an extended period of job hunting. He saw it as an opportunity to understand publishing and gain an in-depth view of the world of books.
On that first day when he was shown to his cubicle, Paul was optimistic. He now had a place in the world where he could think and make a contribution to the corpus of human knowledge in a real company with actual employees. Despite his skepticism about organizations, Paul went out and bought a suit.
His feelings toward the job changed as he actually experienced the work, which entailed reading each book and completing a table that analyzed the book on seven dimensions. His initial quota was three books per day. After the first six months, his quota was accelerated to four books per day and then, after a year, to five. The pace demanded total concentration yet precluded reflecting on the meaning of what he was reading.
He was not allowed to duplicate the careful summary of the book that the author and the publisher had included on the book’s back cover. The fees that his firm was charging required his summary to be different.
Meeting his quota meant suppressing his inclination to think and ignoring any sense of responsibility to the book’s author or to eventual subscribers who might be deluded into thinking that his summary reflected the content of the book.
He received no indication that subscribers ever read his summaries. He suspected that they were too busy to read them, just as they were too busy to read the books themselves. But purchasing a subscription for a hefty fee relieved their conscience of the need to read anything. He came to see that keeping his job required setting aside any personal concerns about the value of his work.
Paul worked alone. His only respite from the daily grind consisted of lunches with his fellow workers, who were equally dispirited by the working conditions. They confessed on occasion to committing sabotage or taking drugs to relieve the tedium.
He noted that there was no quality control of the work in the sense of anyone reviewing whether his summary accurately reflected the content of the books he reviewed. His supervisor, Anne, approved his work according to generic standards of grammar and formatting without, as far as he could detect, ever having actually verified the content.
Anne seemed to be a decent person. Yet his efforts to turn her decency into meaning for his own work proved fruitless. Her advice was to keep his head down and get on with the summaries.
Paul had taken the job expecting that he would learn a lot. But learning was incompatible with the pace of work that was imposed.
The firm continued to increase the number of subscribers through sales pitches that made harried executives feel guilty for failing to keep up in their reading. The pitches implied that by subscribing to the service, they would be automatically up to date, in the same way that commercials for exercise machines imply that buying the machine will make you fit. The firm had calibrated the workload and the quality of his output to a level that was just good enough to keep subscribers from abandoning their subscriptions.
It was not that the firm or the executives who ran it were being in any sense greedy or immoral by pushing Paul’s production goal to the limit. They were simply playing their role in a system that practically guaranteed that any subscribers who ever tried to get value from the service would be exasperated.
THE AUDITOR
When Alan completed his tenth year with one of the world’s top global audit firms, he was relieved to see that he still had job security even if the work was inherently dull.4
When he looked back on the ten years of audits he had completed, one job merged into another in his memory. He could recall nothing remarkable—nothing that he could look back on and say that he had made a difference.
He had done his job competently. It was a solid job, which he was at no risk of losing provided that he kept playing the game. He could see his life at the firm stretching ahead for a couple of decades. He would have the chance of advancing up the managerial ladder several rungs. He could write the biography of his entire life right now.
He was conscious of the steadily increasing pressure to get the audits done faster. He wasn’t sure where this would lead. He was experienced, and so more was expected of him. He recalled his early days when he had taken pride in spotting problems that needed to be resolved. Now the pressure was to get the job done on schedule or, preferably, ahead of schedule. A good audit was a smooth audit with no complications.
Maintaining consensus and preventing any conflict that might slow the work down was a constant preoccupation. He sometimes felt as though he was walking on eggshells, a feeling accentuated by the sessions on political correctness that he was required to attend.
The work itself was carried out in work groups called teams, but essentially all members of the team handled their part of the work alone. At the team meetings, everyone demonstrated a kind of complaisant affability with fellow team members: keeping off their turf and making sure that they kept off his.
He listened to the CEO talk about the audit function as a critical pillar of the financial system, although this kind of talk had become less frequent since the financial meltdown. He was aware that if he left the firm, someone else would step in and take his place. No one would notice the difference.
The firm purported to take an interest in his mental well-being. He had access to a help hotline, as well as to karaoke competitions to stimulate creativity. He could also compete in an employee-of-the-month program that treated winners with harbor cruises and dinners with the CEO.
He had no difficulty in maintaining the mask of shallow cheerfulness that kept the office running smoothly. He participated in the retreats and played along with the team-building exercises that took place there. It passed the time, and occasionally it was fun. But in the end, it was a game. When he got back to the workplace, there was no discernible change.
When he thought about it, he was puzzled as to why so much time was spent on these efforts at contrived conviviality and so little time on real work.
At the end of a day, Alan was back in his apartment, at a loss. The interactions of the office had kept him on his toes throughout the day. Now he was drained, but also impatient and restless. He was in no state to do anything as heavy as reading a book. The usual solution was a couple of quick drinks, followed by a police procedural on television.
THE SOFTWARE DEVELOPER
Nathalie, a software developer, is the head of corporate Internet solutions for a major insurance company.5 When she inherited the software development team, it was facing a typical set of problems—software was late, over budget, and full of bugs. So she set about fixing the problems by introducing practices known as Scrum and Agile. She placed confidence in self-organizing teams that performed work in an iterative fashion, and the team rapidly became more responsive, efficient, and effective. After six months, the team had proved itself increasingly capable of delivering whatever software management wanted.
It gradually became apparent that the real problem wasn’t in the team at all. Rather, the organization could not make up its mind what it wanted.
The firm provided a full range of financial services. As a large conglomerate, the varied product lines and distribution channels would have presented a challenge for any team charged with improving customer experience across the board. For many years, the operating model had been a loose federation that provided each company with a great deal of autonomy. At one time, scores of Web sites were associated with the firm.
Nathalie’s team was charged with consolidating and improving the user experience of the firm’s Web site. Although things began well, she could see problems. Under the Agile and Scrum methodologies, management was supposed to specify what software it wanted developed in the next monthly work period. But the various departments found it difficult to agree on what should be done. The implementation period would often start without the organization having reached agreement on what precisely should be developed. As a result, the software development team would begin working on something, only to find that the signals changed when it was halfway along with the work.
The group responsible for setting priorities was composed of representatives of interested departments. But the individuals in the group had no mandate to make decisions on behalf of their departments, and if they did, they were likely to be second-guessed. Time-consuming checking back with their constituencies slowed decision making to a crawl, and often a halt.
Compounding the problem was the fact that a duo of senior managers affectionately known within the firm as the Gruesome Twosome weren’t happy. The Gruesome Twosome insisted on signing off at certain critical decision points, and during their reviews, they would often second-guess the instructions that had been given to the team of software developers. As their interventions became more frequent and disruptive, the group charged with setting priorities became less willing to make decisions for fear of being reversed upstairs.
Nor were the Gruesome Twosome’s decisions entirely clear: the group setting priorities had no way of getting clarification from them and was unwilling to substitute its own judgment. So like the oracle at Delphi, the group deployed an ambiguous dialect that enabled them to be on the right side of the winning decision whatever it turned out to be.
Nathalie came to see that no one was held to what they had said in a previous meeting because everyone knew that decisions were provisional. The only constant was deniability. The more troublesome a problem was, the vaguer the language became.
Nathalie knew that her team of software developers was working well, but it wasn’t productive because the firm couldn’t make up its mind what it wanted.
THE BANKER
Ben had entered banking with a romantic notion of the profession.6 He had in his mind an image of bankers as pillars of the community. He imagined that he would be adding value to society by contributing his skills and judgment to the complex issue of which borrowers could be entrusted with money.
As it turned out, Ben’s role as a banker was different. Since the mortgage he arranged would be sold by his bank to some other financial institution, the creditworthiness of the applicant was essentially irrelevant. His bank had little interest in whether the loan would ever be repaid. Its focus was on the fees it got from originating the loan. The mortgages would be bundled together and sold to investors somewhere else in the world.
In his imagined role as a banker, his job would have depended on his judgment as to who could be trusted. But as his job evolved, his bank was pressed by both Wall Street and Washington to pursue new kinds of loans in which the borrowers didn’t even need to pretend that they had any income or assets, let alone present evidence of their existence. Trust simply didn’t enter into the picture.
If Ben had paused to ask himself what he was doing writing loans that had little hope of being repaid, he might have replied that he was assisting citizens buy their own home. He was helping unprecedented quantities of capital find a safe resting place. He was doing his part in relieving the enormous worldwide hunger for mortgage-backed securities among investors. The fees associated with the transactions were making money for everyone. The process of lending had to go on. Even better, in some cases, the banks were able to make financial bets against the shaky instruments that they themselves had created and thus make another handsome profit when those instruments went bad.
Remarkably, little changed in Ben’s world after the meltdown of 2008. Within months, he was again being pressed to lend to buyers who put no more than 5 percent of their own money in the deal. Everyone could see that most of those who had caused the meltdown had walked away immensely rich from the bonuses they had earned in the good years, even though their high-risk strategies had devastated their companies as well as a large part of the financial system. Bank executives continued to be lavishly rewarded when they delivered juicy short-term profits. They were still in no jeopardy if their firms incurred losses later.
Why should Ben question the system in which he worked when he was helping make so much money? Raising questions about the system wasn’t in his job description.
THE CONSULTANT
When Connie made partner in the prestigious global consulting firm where she worked, it was a happy, but not unexpected, day. She had been first in her class at prep school and at the Ivy League college she attended.7 She wasn’t surprised to be recruited into the Firm, as it was known, which thought of itself as first in its field. She had made steady progress climbing the managerial ladder.
On becoming partner, she had been on top of the world. The perks; the first-class travel; the corner office; the respect of her juniors, her fellow partners, and her bosses: these were everything that she had wanted. Nevertheless, the pressure of work was phenomenal. She was working close to seventy hours a week. Everyone else at the Firm did too. It was the way things were.
Her field was business strategy, and she was now a global practice leader. Because she was following so many projects, it took her quite some time to catch up to where she was on any piece of work.
She derived satisfaction from being a partner, someone whom CEOs listened to with respect, and at such moments, she felt like the queen of the universe. At other moments, she realized that she had no real life outside work. Nevertheless, she welcomed her role as someone who embodied the corporate culture, having mastered its intricacies.
She exhibited a high level of buy-in to the firm’s mission and did so willingly. Any division between private life and work life had disappeared long ago. The Firm was the controlling unit of her personality. It gave purpose to her life.
On many occasions, she had shown herself ready to put the team objectives ahead of her personal interests, while at the same time making sure that her turf was not significantly at risk and that her career concerns were also taken care of. She believed that the Firm had a higher purpose in terms of making the world a better place, even if the specific content of what that meant was ambiguous.
Some years ago, cross-functional teams had been introduced, and at first, everyone had wondered what that might mean. It soon became apparent that despite talk of teams and teamwork, cross-functional teams were simply another way to divide and conquer.
In the Firm, everything was, on the surface, very collegial. In fact, everyone was exquisitely sensitive to the pecking order in the hierarchy and the consequent division of labor. The thought that anyone should help someone outside their own territory or make suggestions about her work would have been seen as bizarre. The possibility that everyone on a team would pitch in so that the team got the most important task done first would have been a real sea change.
When the team spent time together, the talk was rarely about the work. In fact, they would talk about anything except the work, and then go off and do their own thing.
Whether anyone advanced up the hierarchy and made partner or beyond was determined as much by an ability to fit in as it was by actual performance on the job. It had been this way at school, where her role as chair of the senior fund and champion money raiser for the school’s annual charity drive had been at least as important as her stellar grade point average. It had shown that she was a joiner, a team player, a rounded package. Her self-assessment as a successful young woman had been reinforced by the rewards dispensed by the gatekeeping institutions. This had resulted in a smooth, frictionless path of scholarships, internships, a job at a prestigious consulting firm, and now partner at the Firm. She had accomplished this—happily—without ever having to assert independence, demonstrate intellectual adventurousness, or take a stand against authority.
Connie did the same work as her subordinates, only she was better at it than they were. She knew precisely how the Firm liked to have strategy analyzed, the way the analysis should be laid out, which points to emphasize and which to slide over. It was a Firm-specific expertise that had taken her years to acquire. The fact that the finer points of this particular expertise were sometimes lost on her clients was irrelevant. Satisfying the internal quality requirements was ultimately more important to her career than delighting the client: the client might be gone tomorrow, but the Firm would still be there, glorious in its unchangeability, its rocklike permanence, its prestige, its power to set the agenda. If the job took longer in order to satisfy the Firm’s internal requirements, that was what was involved in working with the Firm; that’s how clients got the Firm’s legendary quality, the basis of its global reputation.
Within the Firm, the best proposals were those that resolved every issue down to the last detail. Curiously, the more detailed the Firm’s proposal, the less the client seemed to understand or own it, let alone persuade its own staff to implement it.
The bottom line of her performance was none of those things: it was whether the work that she did or supervised met the requirements of the Firm. She had seen cases where managers had cut corners in terms of the Firm’s requirements to meet the perceived need of a client. The consequence for the managers in question had been a permanent blot on their record that no amount of client delight could remove.
She was vaguely aware that this way of working was not very productive. Far too much time was spent politicking. She could see that her career, which was currently flourishing, depended on a network of personal relationships up and down the hierarchy. Because the criteria of evaluation were nebulous, she spent a good deal of her time managing what other people thought of her. Despite her success, she had never gotten over the sense of being on perpetual probation, acutely aware that at any moment, a rearrangement of the players might result in a different clan having control of the levers of power in a way that could cripple her career. The specter of arbitrary disaster was never far away.
When she sat back and reflected on her situation, late at night, hard at work on a client proposal, she was not unwilling to admit that her quality of life was appalling. She had more than enough money, but she saw little of her family, who understood that she was doing it all for them.
Despite these issues, she was pleased to see that the Firm’s recommendations were always accepted by the client’s top people, even if implementation down the line was a problem. Down the line, the people weren’t committed to it. They didn’t see it as their solution, even though the Firm’s report showed that it was the right thing to do. Nevertheless, when a company was in trouble, it was reassuring to know that they would always come back to the Firm, which remained the gold standard, a legend in its own time.
No one was ever faulted for hiring the Firm. It was the ideal insurance policy for any CEO.
THE PARADOX OF MANAGERIAL SUCCESS
Thirty years ago, these job situations might have been considered good enough. People are getting paid. Managers are getting the job done. The firms are making money. To be sure, the work isn’t particularly fulfilling. It could even be seen as dispiriting and demeaning. But whoever promised fulfillment in work? A salary, yes. But fulfillment? Whoever said that was part of the package?
Even today, some might see nothing anomalous or disturbing in such unproductive working conditions, the lack of personal responsibility for what is being done, the systematic inattention to the outcome of work, or the lack of centrality of the client. Yet viewed through the lens of the twenty-first century, these situations are unsustainable. The work is not as productive as it could be. Innovation is stifled. Managers are trapped. Customers are dissatisfied. Brand liabilities that accrue from pursuing “bad profits” are accumulating in the background. Any kind of moral compass is absent.
The performance of these workplaces is suboptimal, but not because workers are unwilling or because managers are lackadaisical. Everyone is working hard. Yet the workers feel used. The managers feel just as much victims as the workers. And the customers end up getting the short end of the stick. Whether the participants realize it or not, these workplaces are quietly dying.
Paradoxically, the traditional system of management depicted here has been extraordinarily successful economically. Over the twentieth century, it resulted in a fifty-fold increase in the productivity of workers and a massive increase in the standard of living in the developed countries.8 This way of managing was considered a model for businesses and public sector organizations throughout the twentieth century. In many ways, the modern corporation is a stunning economic accomplishment.
That this way of working is no longer perceived to be performing well enough is not due to some failure of implementation or some personal delinquency of the individuals involved. Rather, the world has shifted beyond the limits of the system to adjust and evolve. This way of working was good enough for the conditions that existed for much of the previous century. It’s not good enough today because the world has changed. We have changed.