The Evolution of Management Needs to be digital

As a rule, one of the fundamental bases for having a good and prosperous business is good and efficient administration. Nowadays, when the future becomes our present, when the market is undergoing a huge digital transformation, this means that management also needs to evolve. Otherwise we will make our business a self-fulfilling prophecy of what the American serial entrepreneur David S. Rose said:

“Toda a organização desenhada para o sucesso no século 20, está fadada ao“Every organization designed for success in the 20th century is doomed to fail in the 21st century.” fracasso no século 21.”

How has management evolved in recent decades and which should be the management that is most in line with the changes brought about by digital transformations in business?

What we are used to calling management has its origins in the changes in the modes of production inaugurated in the Industrial Revolution (sometime between 1820 and 1840), which had as one of the first systematizers the North American engineer, Frederick Taylor (1856 – 1915), considered the father of scientific administration. In this new system of work organization, also called Taylorism, the focus is on achieving maximum production and yield with minimum effort, characterized by an emphasis on tasks.

In the same scenario we have Henry Ford (1863 – 1947), founder of the Ford Motor Company, who observes that the capitalism system is articulated between two axes: that of mass consumption on the one hand and mass production on the other. From this we have the creation of assembly lines, standardization, simplification and hierarchical verticalization, then Fordism was born, a term created by him.

All of this I call classic management, a very typical model of the industrialization era, which favored productivity, with an increase in production speed, creating procedures and processes, where everything was considered a resource, even human labor. Management’s goals were based on minimizing errors. To make mistakes is bad. Standardization, processes, repetition and reduction of the standard deviation was what was desired. The goals were completely vertical, in a hierarchical and very punitive structure.

Over time, management needed to reinvent itself and be a little more comprehensive than just focusing on industrial production and productivity processes. It was also necessary to think about evaluating the efficiency of processes, overproduction, bottlenecks in logistics and waste. In Japan, right after World War II, management focused on continuous improvement and quality, whose main representative is the Toyota Production System (Toyotism), developed by Toyota between 1947 and 1975.

In this same context, now in the USA, Peter Drucker (1909 – 2005) created and popularized the MBO (Management by Objectives) concept in his classic 1954 “The Practice of Management”. management of goals and results with a very clear focus on the organizational objective, clarity of roles and responsibilities, increased self-accountability, empowerment, motivation, bonuses and competition. Much of the current management is heavily influenced by Drucker’s MBO.

Later in 1981, George Doran came up with the SMART model for proper goal setting. And then there are the KPIs (Key Performance Indicators) used to measure the performance of a company’s processes and, with this information, collaborate so that it achieves its goals.

And in 1988, professors Robert Kaplan and David Norton, from the Harvard Business School, offered the market a solution to manage business progress with the understanding that an organization is a complex system that has many dimensions, and cannot be summarized by month-end billing or period profitability. The Balanced Scorecard then appears. A way of managing from four perspectives: financial, processes, learning and customer.

This second moment I call modern management. Organizations understand that a more attentive perception of active employee participation is needed. Humans gain strength, need to be motivated and rewarded for their performance. However, management and goals are still focused on the hierarchy, goals mostly cascaded, their definition comes only from the direction, following the top-down model. However, systems are much less punitive and the employee is heard in product and process improvements.

Until we reached the effervescence of companies in Silicon Valley, characterized as digital businesses, with high growth rate, very innovative and with very young and disruptive managers. In this microcosm, appears a Hungarian, naturalized North American, named Andrew Grove (1936 – 2016), who became known as CEO of Intel Corporation. He revolutionized and updated Peter Drucker’s (MBO) modern management and developed a results-based management model, very well presented in his 1983 book “High Output Management”.

Later John Doerr took the concepts to Google creating what is meant by OKR (Objectives and Key Results), there was success in adoption. The OKRs were responsible for Google’s growth and are in the organization’s DNA. OKR is a complete goal management system, it has artifacts, events and roles. It’s a simple approach to creating alignment and engagement around measurable goals.

Finally, we come to what I like to call digital management. Not least because a more modern world and society, a market transformed by technological revolutions, deserve management in the same style.

Today more than ever, organizations are treated as complex systems. The answers are not just in the manager. Management is shared with self-organizing teams. And the manager who is only a manager and not a leader does not survive in this ecosystem. Making mistakes is not bad, as long as professionals are able to generate fast learning. Variability is important for innovation, so spaces and speech opportunities are very desirable. All of this brings down the edifice built by decades of hierarchy and power based only on the highest and highest paid office.

OKRs help organizations transform to this new management paradigm. Short experiment cycles, optimization to make mistakes and learn, increased engagement and the advent of a more inclusive and flexible culture, where power and information are decentralized. People are free to set organizational goals.

I hope this text has helped you to travel through the time in which management has evolved. And I hope I didn’t lose you early on in the industrial revolution. I know that it is not simple to change management models, because it is not just about changing the mental model of managers, it is necessary to change many things within the organization itself and this is sometimes confusing and takes time. But it’s so worth it!

Marcelo Policarpo
Founder and CEO at Exponentia Consultoria

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