"Reengineering is the search for new models of organizing work. Tradition counts for nothing. Reengineering is a new beginning."

Michael Hammer and James Champy, 1994¹

"We must move beyond change and embrace nothing less than the literal abandonment of the conventions that brought us to this point. Eradicate ’change’ from your vocabulary. Substitute ’abandonment’ or ’revolution’ instead."

Tom Peters, 1994²

"If I have seen further it is by standing on the shoulders of giants."

Sir Isaac Newton, 1676³

Which of the above views offers the best guide to successful management in the future? Must everything that has been done and learned up to this point be thrown away? Has nothing useful about good management been discovered from the experiences of the great corporations that have transformed life in this century? Is there no one on whose shoulders those interested in learning about and improving the practice of management can stand? Or is it possible that there is more wisdom in Newton’s 300-year-old advice than in contemporary calls for a complete revolution—can true progress come only from building on the achievements of the past?

If the debate about management was being judged by what people are saying as opposed to what successful corporations are doing, the answer would be clear. Conventional management is a failure. Radical transformation is the only feasible way forward. Again, to quote from Michael Hammer and James Champy’s best-seller, Reengineering the Corporation, "The alternative is for corporate America to close its doors and go out of business. The choice is that simple and that stark."⁴

The ideas behind such calls for radical change are often labeled "modern management," or a "new paradigm," and are generally considered a vast improvement over traditional notions of a hierarchically organized firm with defined processes, management structures, and responsibilities. We, however, take the contrary view. In this article, we first outline the ideas behind the calls for transformation and an entirely new approach, categorizing the numerous prevailing fads into five trails that managers are being urged to follow. Second, we explain why these trails have emerged, why they have found such a ready audience, and what is wrong with them. Finally, we propose an alternative, namely professional management, an approach that builds systematically and continuously on past achievements in the best traditions of other fields where great advances have been made.

Five trails

The calls for radical transformation and the adoption of a new paradigm reflect a number of commonly proposed fads about modern management: simplify, cut out, cut back, eliminate. Management is being made far too complex and radical surgery is warranted. The titles of the best-selling books tell the story: Maverick: The success story behind the world’s most unusual workplace,⁵ about the iconoclastic South American who transforms traditional manufacturing by letting the employees decide what to do and how; Made in Japan,⁶ the story of Akio Morita’s successful but un-Japanese leadership of Sony; Zapp! The Lightning of Empowerment,⁷ which describes how quality, productivity, and employee satisfaction are achieved by delegation and empowerment.

These fads can be summarized into five trails as follows:

1. Flatten the structure! Hierarchy is passé, flat is beautiful. Modern companies are like orchestras—one conductor and hundreds of players—not armies with long chains of command. Most organizations are hampered by too many levels of management between the board and the frontline employees who actually invent, make, sell, and provide services. Delayering—downsizing the ranks of middle management in particular—will improve communication, lower costs, speed up decision making, and better motivate all staff to contribute. Less management is better management. And fewer managers are the key.

2. The action approach. Don’t become immobilized by planning and analysis—management is action, not study or reflection: "ready, fire, aim," "do it, fix it, try it," "inspire, empower, lead," rather than "deliberate and administer." Action is always better than the dreaded "paralysis by analysis." Successful managers get their people to move, and from movement evolves strategy as decisions are made in real time. People at the front line have good instincts, opinions of customers are the source of most marketing opportunities, and by stimulating action via empowerment, managers unleash the energy and ideas that are otherwise ignored and stultified by rigorous planning. Put another way, those managers left in the flat organizations of the future shouldn’t try to plan, control, or think things through to any great level of detail. Instead they should set visions, like the oracles of old, and urge the people into action, letting the decisions take shape over time. Intuition, not analysis, is the guiding light.

3. Techniques for all. As problems arise, find the appropriate solution technique and apply it quickly. When the few managers left in place find that vision and intuition are not enough, the good manager need not go back to first principles or hard thinking but instead should pick up and religiously implement the "right" technique or program. This is "instant coffee" management—just open the can and add water—no work required. Modern approaches such as portfolio planning, value-based planning, niche strategies, total quality management, benchmarking, core process reengineering, and gainsharing provide fast and reliable answers to all the tough questions such as:

• What business are we really in and how do we compete?
• How can we get our staff to do things right the first time?
• How can we dramatically cut costs and waste?
• How can we provide the sales and service support our customers are demanding?
• How can we motivate people to innovate and contribute above and beyond the minimum demands of the job?

East is good, West is bad. They do it this way in Japan, and look at their successes— or so the story goes

4. The corporate clan. Model the organization to be more like a happy family than a hierarchy. Create a corporate culture that guides and encourages. Burn the rule books and procedures manuals. Operate as a clan in which people implicitly understand what is right and wrong and what is good and bad. Rely on the culture to bring out the best in everyone. East is good, West is bad. They do it this way in Japan, and look at their successes—or so the story goes.

5. The board of directors as watchdogs. Fix the board to scrutinize management actions and decisions better. Good management flows into the firm from the board of directors. Unless managers are under the continual scrutiny of a tough-minded board of independent directors, they will fail to perform and, in the worst cases, steal the silver. It is argued that in many companies management has "captured" the board, which then becomes an acquiescent partner in schemes that enrich management or promote their interests ahead of those of shareholders. The remedy: separate the roles of chairman of the board and chief executive and then have the nonexecutive chairman supported by a board with a clear majority of outside part-time directors independent of management influence. The chief executive and possibly one other executive such as the top financial officer or top operating executive are the only managers who should be board members, and they ought not serve on committees dealing with board composition, executive remuneration, or auditing. In other words, good management depends on removing management’s influence from the boardroom and leaving the direction of the corporation firmly in the hands of part-time outsiders.⁸

The influence of the five false trails on management thought and practice is reflected in language. As Exhibit 1 shows, contemporary management-speak has picked up ingredients of each of the trails. Many of these language shifts are positive, a response to changes in the forces that shape businesses such as increased global competition and new information, communication, and production technologies. But in other respects, the changing language represents a pendulum that has swung too far towards simplifying and inevitably trivializing management, replacing ideas and actions based on sound reasoning with fads and dogma.

The trouble with fads

What’s wrong with these ideas? Aren’t they simply putting into words what the best managers and firms are doing? For example, everyone is flattening structures: look at General Electric, General Motors, IBM, ICI. Or look at newer, hot firms like Nike, Microsoft, or Benetton where structures have always been flat. Similarly, the action approach is eloquently expounded by numerous highly regarded managers, from Townsend in his Up the Organization⁹ to Iacocca¹⁰ with his impatience and irreverence for process. "Ready, aim, fire" is for old fuddy-duddies: it is "ready, fire, aim" that characterizes successful modern management.

Techniques, too, are well supported. Quality—think of Motorola or Florida Power & Light. Benchmarking—Xerox and Procter & Gamble are leading exponents. Value-based planning wins endorsements from senior executives at Pepsico, Merrill Lynch, Lloyds Bank, and Northwest Airlines. Reengineering is blessed by Peter Drucker and put to effective use by Hallmark and Taco Bell. Clans and culture are advocated as an alternative to traditional management on the basis of successes such as McDonald’s, Apple, and Nike. And tough action by independent directors is seen as the only way to stop the fish rotting from the head down. Isn’t that what saved General Motors, IBM, American Express, and Littlewoods, to name a few cases where boards of directors have replaced CEOs, often after pressure from institutional shareholders?

The problem is that the message is so appealing that it goes down like peaches and cream

Practitioners and writers are thus giving these trails the status of the present-day conventional wisdom. The case is put so simply, forcefully, and fashionably that any other view sounds untenable, or even politically incorrect. The combined effect however is to overthrow much of the sound thinking on good management that has been built up over the years. If followed, the five trails and their underlying fads and prescriptions tear down the sophisticated formal organization and decision systems that corporations have evolved and which make management effective. The problem is that the message is so appealing that it goes down like peaches and cream. The clarity of the message can lull the listener into an uncritical reception, such that they begin to nod along. Since everybody is saying these sort of things surely they must be right.

But are they? Can any one idea or even five ideas explain the past success of firms as diverse as General Electric and McDonald’s? And even if the past can be explained, does it follow that what worked in the past will work in the future? Consider for example the case of Wal-Mart. Wal-Mart is special. Year after year, sales, profits, and shareholder returns from this massive group of discount stores increase, defying economic cycles and the woes that seem to beset other retailers from time to time. Some argue the reason is market power: Wal-Mart built its business by opening stores mainly in small communities where there was less competition. Once a Wal-Mart store opened in a small town there was no room for another similar retailer. Others point to its systems: electronic linkages with suppliers that keep the shelves well-stocked at minimal cost. Another explanation is highly motivated staff, inspired by the late Sam Walton’s habit of driving around in a pickup truck visiting stores, and supported by concepts like teamwork and delegation. Paying attention to customers is also mentioned: at Wal-Mart customers really do come first. And of course leadership, the most intangible but perhaps most potent factor in management, cannot be ignored.

Which of these explanations is the real cause of Wal-Mart’s sustained success? Are all the factors important, are some more important than others, or is there another explanation yet to be discovered?

The honest answer is all of the above. Wal-Mart represents a combination of factors—a thousand infinitesimal actions and decisions—that together have led to its unusual success. A professional seeks to learn from these factors, recognizing that they were developed over more than 25 years and are underpinned by a thoroughness in execution that is the antithesis of fads and quick fixes. Nor does a professional assume that the factors that worked in the past will continue to work in the future.

Why then do otherwise hard-nosed and smart managers pick up so willingly on the five false trails and these underlying fads? In a thoughtful review of the emergence and contributions of management "gurus," Andrzej Huczynski a management academic from the University of Glasgow Business School, concluded that "Despite the interest in the timeless procession of business and management fads in the United States and Britain, no convincing explanation of the phenomena has yet been produced."¹¹ But he notes that management is a fertile field for fads and quick fixes because the problems are intractable, yet the pressure to be seen to be "doing something" is intense. A manager using the latest technique supported by an eminent expert or who is following the widely applauded prescriptions of a best-

selling book can hardly be criticized, while one who ignores the latest trend risks being judged old-fashioned and unprofessional. Moreover, because many management problems are complex and persistent, executives often become frustrated. Therefore the assertion that management is being overcomplicated, that there is a need and way to cut through the web, finds a ready audience.

When examined closely however, the five trails are shaky or dangerous. They are built on germs of good ideas (Exhibit 2). But the ideas become false trails when taken too far, as they so often are today. We see the trails as anti-management. They imply that management is actually simple and requires few managers, preferably under close control by the board. Thus the false trails contribute to a negative attitude to managers and management in the public mind. This, in turn, fosters an atmosphere ripe for outside intervention in corporate management. While the trails aim to improve the performance of our corporations, they are frequently counterproductive and undermine international business competitiveness.

Why are we "mad as hell" about this promulgation of the false trails? Because in our view, good management is important to the success of firms and of societies. Moreover, we contend that there is an alternative to the view of good management embedded in the five false trails.

Staying on the professional track

If we had to put our alternative into one phrase, it would be "professional management." In using this phrase, our aim is to learn from and build on the positive characteristics of other more developed professions such as engineering, medicine, veterinary science, law, or architecture. These professions have evolved and continue to exist because societies value the impartial and expert application of skill and knowledge. When a profession is seen to depart from core values, its status and legitimacy is immediately attacked, as the current debate about the legal profession illustrates graphically. There is no reason that the field of management could not earn the same respect as other professional groups.

In our view, a respected profession is distinguished by a number of core values, each of which raises important questions for the practice and teaching of management.

• Professions tend to be based on lofty ideals that transcend self-interest. These ideals might include service to others, creating new knowledge, or, in the case of management, the building and sustaining of important, socially productive organizations. Great corporations are important institutions both nationally and internationally. Their success determines how well societies are able to improve their lot, and whether today’s investors will be tomorrow’s comfortable retirees. Professionals in pursuit of such a lofty ideal find intrinsic worth and pleasure in their work, and while good performance brings its rewards, a professional would not sacrifice the ideal for monetary gain.
• Professionals give form to their ideals by mastering a craft or body of knowledge. Such mastery takes years of learning and experience. There is rarely, if ever, a single best way to acquire the knowledge. Both college and graduate education as well as the school of hard knocks are important.
• A professional body of knowledge is based on sound reasoning, not dogma or unproven rules. However, professionals recognize that there are different kinds of reasoning, all of which have a role to play. Sometimes reasoning is based on the analysis of data, sometimes it entails critical analysis of precedents and cases, and sometimes it reflects aesthetic and qualitative factors, as in product design or architecture. Professionals do not shy from understanding the basis of the knowledge they seek to apply, and are willing and able to criticize current beliefs.
• Reasoning, especially in fields such as management, rests on the ability to use language clearly and precisely. In management people often use the same words, but mean quite different things because they have different agendas and interests. For example, a manager agreeing to "participation" with a work group may mean quick consultation before a decision is taken by him. The work group, however, may think they have been given a veto right over any action, or that only they can decide what is to be done. Without clear language, effective communication and sound decision making becomes impossible, the body of knowledge about effective management cannot be advanced, and dogma prevails.
• Professions operate according to high ethical and technical standards. They respect both the letter and the spirit of the laws that govern their operations. And they expect that all members of the profession acquire and apply their knowledge and skill carefully and diligently.

Members of a profession thus tend to be highly skilled, independent, and able to balance a loyalty to the ideals of their calling with the demands of those who hire them. The blindly obedient "corporation man" could not be a professional. Nor could the person who flits from one quick fix to another, or unquestioningly accepts dogma.

How would a professional deal with the fads reflected in the five false trails? Clearly, a professional would not simply cast the five trails aside. Instead, he or she would seek out the ideas of value, skillfully navigating some of the more pronounced fads and fallacies of modern management and choosing elements that fit the needs and situation of the specific firm at a specific time. In our view a professional would draw from each trail the positive ideas set out in Exhibit 2, but would apply even these ideas carefully and selectively.

The impact on firms

Not taking the professional approach and blindly following the five false trails is costly both to firms and to society as a whole. The performance of firms is undermined in two ways.

Planning—as opposed to acting—can be easily ridiculed as "over-intellectualizing" by those who find any form of rigorous thinking objectionable

First, the five false trails can encourage managers to do the wrong things for their specific situation—to train for swimming when the race is to be held on land. For every case where each of the five trails may be true there is another where each is wrong. For example, flat structures are no guarantee of high performance, and may put some parts of a business at risk. Who would feel confident flying in an airliner if the different maintenance crews handling the planes acted independently of each other or if, instead of centralized air traffic control, the people flying the airplane acted autonomously from the work group in the control tower? Planning—as opposed to acting—can be easily ridiculed as "over-intellectualizing" by those who find any form of rigorous thinking objectionable, but how else can the complex set of activities needed to deliver modern products and services in many large firms be coordinated? Techniques are no better than their application—that is why most reengineering or quality initiatives fail. Similarly, equating the management of a business with the culture of family life or tribal rituals can often be simplistic or worse, in that it denies the internal diversity that is an asset for the modern corporation. And finally, one-line prescriptions for how to structure boards of directors have been around for decades, yet there is reason to believe that they are irrelevant or acting on them might harm rather than help. Creating a winning corporation isn’t as easy as appointing a board of nonexecutive directors.

Techniques are no better than their application—that is why most reengineering or quality initiatives fail

Second, even when the trail heads in the right direction, its prescriptions implicitly encourage poor implementation. Why? Because managers who believe the potions will work instantly fail to persevere when results don’t appear quickly. Also, because these managers think the trail is easy, they take on too many initiatives—an overdose of instant remedies. Overly optimistic time frames and work overload follow from damaging platitudes such as "flatten structure" or "action counts." Hence, most of the false trails either don’t go anywhere or they hold up progress.

Jack Welch’s story at General Electric illustrates the point.¹² It took over four years for Welch’s efforts to begin to bear fruit in terms of productivity, despite a spate of activity and many hard decisions in his early years as CEO. When Welch was appointed in 1981, productivity across GE was increasing at about 1 to 2 percent per annum. Welch set a 6 percent per annum goal for improving productivity, and by all accounts drove the organization relentlessly to achieve it. However, in 1986, productivity growth still hovered around 2 percent. The big jump did not occur until 1987—six years after Welch’s appointment—when 5 percent was achieved. The 6 percent target was finally met in 1989.

Most managers, however, after two years of effort without dazzling results, tend to lose confidence in the idea they began with, and start looking for another solution. Nor are investors and fund managers, at least in the West, likely to remain patient for long periods. The experience of the Japanese and the Americans with total quality management shows this. In the 1960s, the Japanese were working on quality, while the Americans were into management by objectives. In the 1970s, the Americans adopted T-Groups and participation, while the Japanese continued to strive for quality. In the 1980s, the Americans shifted to strategic planning, mergers, and restructuring. Meanwhile the Japanese stuck with managing quality. Eventually the Americans discovered "total quality management" and wondered why the Japanese were so far ahead in managing for quality. The good news is that after ten or more years of change in major firms, many US companies are catching up, and some, like Motorola, are forging ahead.