services – is completely overhauling management styles, we need to
take a step back to see how we got here in the first place.
As the large corporation blossomed in the late 1800s, it was first
modeled as a stiff hierarchy, not much different than a sole
proprietorship writ large. The only examples it could draw from were
the religious, governmental and military institutions that had been in
place for centuries. Then in the 1920s, Alfred Sloan at General
Motors, along with a handful of other innovative companies, crafted
what we now know as a multi-divisional form. This new organizational
design left finance and strategy functions at headquarters, but pushed
operations and other tactical functions into the hands of field
personnel. Large companies were able to grow even larger and manage
ever greater scope because they were more nimble than their
comparatively hierarchical counterparts.
Although the structure of the large organization changed, it was only
a first step. Even into the late 20th century the old hierarchical,
manufacturing-oriented management styles endured. A lot of those old-
school boys are still with us. Such antiquated management styles may
have been okay during the manufacturing era, but the emphasis on
services changes everything. When services used to be classified as
merely overhead, they made up a small percentage of overall costs
relative to raw materials and direct labor. They were safely ensconced
within the walls of the old-style organization.
Now services are the products, and they contain a huge people
component. The ability to readily outsource services, which now
comprise over 80% of the economy in terms of employment, will strip
down the old corporation to its core. All of the attendant functions
and non-related processes will be turned over to specialists, and as a
result more and more work will get done outside corporate boundaries.
This speaks to functions that were formerly housed in the SG&A (sales,
general and administrative) line entry on a company's profit and loss
statement: human resources, for example. Many finance and accounting
functions. Routine transaction processing. None of these functions are
core competencies for most organizations, so they will be farmed out
to companies where they are core. Executives and professionals will
manage services across a growing global network of other organizations
resembling nothing that has been seen before.
This change in governance may seem unremarkable, but it will have a
huge impact on management practice. Management behavior will be forced
to change at long last – not because of goodwill or altruistic
intentions on the part of management – but rather through the
discipline of the market, the nature of the new rules of competition
and the pervasiveness of services outsourcing. And make no mistake –
the lessons will be harsh.
Because the old governance mechanisms won't work anymore as
outsourcing and cross-organizational relationships become far more
important, new management competencies will be required. Working with
other organizations requires skills that many traditional managers
just don't have. Internal departments, for example, can be managed by
whim or fiat. External suppliers can't and won't operate in such a
fashion. The upshot will be that old authoritarian management styles
will prove ineffective - even laughable. Strong working relationships
will win the day; idiosyncratic, ego-driven personalities will be an
expensive luxury that few can afford.
While in the 20th century it was hard to communicate across
organizational boundaries, nowadays we can easily trade or obtain
information, skills, or services across the globe by tapping expertise
in hundreds of thousands of organizations. Managers still relying too
much on in-house resources will find themselves at a distinct
competitive disadvantage. So clearly, organizations – even smaller
ones – will become dispersed and porous as more transactions occur
across organizational boundaries. The extended organization is posing
new challenges for managers and will require new skills to be
successful.
Many of these new skill sets will be outside our traditional comfort
zones. Learning Mandarin, Cantonese or other Eastern dialects/
languages, for example, will present significant challenges to most
people in the West. Diligence in the more quantitatively oriented
disciplines is also lagging for developed countries, particularly the
U.S.
If in fact many skills have become obsolete or commoditized, it's fair
to ask what skills will be in demand ten years from now. Below is a
list of some possibilities:
< Soft Skills >
- Cultural Awareness
- Global Diversity
- Foreign Languages
- Willingness to Travel
- Humanities
- Change Management
- People Management
- Strong Ability to Communicate
- Continual Collaboration
< Technical Skills >
- Software as a Service
- Technical Certification (e.g., ITIL, COBIT)
- Financial Analytics
- Spend Management in Procurement
- Project Management
- Life Sciences: Impact of Nanotechnology
- Commercial Terms and Contracts
- Industrial Engineering/Operations Management
Both soft and hard skills will be required. Computer savvy alone won't
cut it. Being a great engineer without the ability to work effectively
with people from different cultures will not be enough. The workers of
the 21st century will have to have specialist skills as the price of
admission, but they will also have to have people skills. That's what
it will take to be successful in the next phase of economic evolution:
new specialist skills, new people-oriented management styles, new
flexible organizational structures. These are the new realities. The
grim alternative is to face obsolescence or marginalization, both as
organizations and as individuals.
Greater collaboration will become a must because it improves
coordination. Management will be more systematic by being focused on
outputs, process interfaces, and clear rules of engagement – all of
which go part and parcel with outsourcing. Strong working
relationships combined with a portfolio of skills decidedly different
from those of the last century will spell success in the new economy.
In the years ahead, watch the old-school managers and executives
retire early or be forced to bring new mindsets to the game. Many old-
school boys have become casualties already. Will you be next?
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