Why management is quackery. And what leadership for the 21st century must really look like - keynote at HFU Business School, Villingen-Schwenningen, December 2013

1. Why management is quackery. Niels Pflaeging
And what leadership for the 21st century
must really look like
Keynote at University Villingen-Schwenningen Villingen-Schwenningen/Germany, 19 December 2012
Illustrations used with kind permission by Jurgen Appelo

2. ?!
Typical questions about
work & organizations

3. ?!
Together, we are kind of dumb.
But why?

4. Not much healing going on here.
But still a great business

5. Thinking
Doing

6. The dependence model –
inherited from the
industrial age
Looks like a grid.
No coincidence.

7. There could be intelligent life in
the lower part of the pyramid…

8. Complicated/many rules >
Stupid behavior
Simple/few principles >
Complex behavior
Don´t do evil.

9. An organization

10. Most organizations are obsessed with individual performance.
But individual performance is a myth, actually.

11. We know that everyone in an organization is interconnected.
So performance and success are complex things…

12. Complexity and its consequences for
work and leadership

13. The impact of complexity on work:
Value creation has two parts
Dynamic part –
solution: man
Formal part –
solution: machine

14. high dynamic
Dynamic part
of value
creation
Solution: man
Age of
crafts manu-
facturing
Local markets,
high customi-
zation
Formal part of
value creation
Solution:
machine
1850/1900 t

15. high dynamic sluggishness/low dynamic
Dynamic part
of value
creation
Solution: man
Age of Age of
crafts manu- tayloristic
facturing industry
Local markets,
Spacious markets,
high customi-
little competition
zation
Formal part of
value creation
Solution:
machine
1850/1900 1970/80 t

16. high dynamic sluggishness/low dynamic high dynamic
Dynamic part
of value
creation
Solution: man
Age of Age of Age of
crafts manu- tayloristic global
facturing industry markets
Local markets, Outperformers exercise
Spacious markets, market pressure over
high customi-
little competition conventional companies
zation
Formal part of
value creation
Solution:
machine
1850/1900 1970/80 today t
The dominance of high dynamics and complexity is neither good or bad.
It‘s a historical fact.

17. Guess where in this “Taylor bathtub” timeline interdependence becomes vital!
Dynamic part
of value
creation
Solution: man
Age of Age of Age of
crafts manu- tayloristic global
facturing industry markets
Local markets, Outperformers exercise
Spacious markets, market pressure over
high customi-
little competition conventional companies
zation
Formal part of
value creation
Solution:
machine
1850/1900 1970/80 today t

18. “Socially dense market organization”. Is that possible?
Command, Radical transparency,
Problems,
control social density,
information
group pressure
Frame: values,
Frame: rules,
principles, roles,
responsibilities,
shared objectives
job descriptions

19. Industry
Retail
It is possible
Services
Governments
& NGOs

20. But…
We have to build consensus about human nature.
What are people like?

21. McGregor's critical distinction
Theory X Theory Y
Attitude
People dislike work, People need to work and want to take an interest
find it boring, and will avoid it if they can in it. Under right conditions, they enjoy it
Direction
People must be forced or bribed People will direct themselves
to make the right effort towards a target that they accept
Responsibility
People would rather be directed than accept People will seek and accept responsibility,
responsibility, (which they avoid) under the right conditions
Motivation
People are motivated mainly by money Under the right conditions, people are motivated
and fears about their job security by the desire to realize their own potential
Creativity
Most people have little creativity - except Creativity and ingenuity are widely distributed
when it comes to getting round rules and grossly underused
Source: Douglas McGregor, ‘The Human Side of Enterprise’, 1960

22. Behavior
Context
Human Nature
We have an observation problem

23. Power to the teams

24. Social density, or “peer pressure”

25. Success is not a zero-sum game
Low, or average performance High, or superior performance

26. Central coordination is luxury.
One you cannot afford in complexity

27. Product
Sales Back Office Management
Business team 2
Business team 1
Functional division: a bad idea
Business team 3

28. Everybody knows this kind of structure.
Disadvantage: It´s not actually real.

29. ?!
Structure No. 2
Structure No. 1
?!
Structure No. 3

30. This one is also well-known. Much more real

31. But this?

32. 2 Informal Structure
1 Formal Structure
3 Value Creation Structure

33. Now, this is real!

34. Market
Periphery
Center

35. Market
Periphery
Center

36. Market
Periphery
Center

37. Market
Periphery
!
Center
!
2 Information !
3 Decision
4 Command
1 Impulse
5 Reaction
Customer

38. Market
!
! Periphery
!
Center
Serves
the periphery, !
if needed
! !
1 Impulse
2 Decision
3 Reaction
Customer

39. Market (very powerful today)
Organization & teams

40. When markets lead, it´s good to have a periphery that´s in charge.
Decentralized decision-making becomes a question of survival

41. Periphery:
roles, influence…

42. Center: roles,
influence…

43. “Help the center lose its arrogance”.
Because it´s hard

44. Practice. Practice. Practice

45. The dependence model - The in(ter)dependence model:
nice illusion Where everyone can think. And
everyone has to!

46. Transparency & Improvement
Peer team comparisons
Comparisons w/previous periods
Dialogue & dissent
Pay by market value
Result sharing
…
Fixed & individual targets
Management by Objectives
Budgets & Plans
Performance appraisals
Pay by Position
Pay for Performance
Incentives & Bonuses
…

47. The 10.000 hour principle
For mastery and learning.
Pretty important

48. Winning: only together, not individually.
Celebrate results. Not meeting targets.

49. Independence at work:
Leadership means working on the system.
Not on people.

50. Organizing the work requires a new codex: based on scientific insight.
understanding of complexity & human nature
Law The In(ter)dependence The Dependence
model – Beta model – Alpha
§1 Freedom to act Connectedness not Dependency
§2 Responsibility Cells not Departments
§3 Governance Leadership not Management
§4 Performance climate Result culture not Duty fulfillment
§5 Success Fit not Maximization
§6 Transparency Intelligence flow not Power accumulation
§7 Orientation Relative Targets not Top-down prescription
§8 Recognition Sharing not Incentives
§9 Mental presence Preparedness not Planning
§10 Decision-making Consequence not Bureaucracy
§11 Resource usage Purpose-driven not Status-oriented
§12 Coordination Market dynamics not Commands

51. .!
.
Let´s bring independence to work.
It works.

52. !!
Niels Pflaeging,
www.nielspflaeging.com
www.betacodex.org
All illustrations: Jurgen Appelo www.noop.nl and Niels Pflaeging @NielsPflaeging