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"What industrialization was to the 19th century, management is to the 20th. Almost unrecognized in 1900, management has become the central activity of our civilization. It employs a high proportion of our educated men and determines the pace and quality of our economic progress, the effectiveness of our government services and the strength of our national defense. The way we "manage," the way we shape our organizations, affects and reflects what our society is becoming."
The last hundred years have witnessed the dramatic genesis of management. Management has emerged as a profession. Management has moved from an unspoken, informal, ad hoc activity into one that is routinely analyzed and commented on from every angle possible. Management has emerged from the shadows to be recognized as one of the driving forces of economic and personal life. Its tentacles spread ever further. Nothing-no organization, no activity-now appears beyond the scope or ambition of management. There are, of course, differences in management between different organizations-mission defines strategy, after all, and strategy defines structure. But the differences between managing a chain of retail stores and managing a Roman Catholic diocese are amazingly fewer than either retail executives or bishops realize. The differences are mainly in application rather than in principles. The executives of all these organizations spend, for instance, about the same amount of their time on people problems-and the people problems are almost always the same.
is that management is multifaceted. Pinning it down is like nailing Jell-O. It is marketing. It is strategy. It is inspiring people. It is budgeting. It is organizing projects and commitments. It is a complex, highly personal, and now truly global calling.
November 1999 Stuart Crainer,
Twyford, Berkshire, United Kingdom
Frederick Winslow Taylor was a man of devotedly practical intent, a problem solver. Indeed, Taylor was the ultimate problem solver. In an age that produced more than its fair share of dilettantes, Taylor was a veritable Renaissance man. The breadth of his insights and interests is, even now in an age of hyberbole, astonishing.
While at Midvale Steel Company, Taylorlaid the basis for his theories of what became known as scientific management. It was scientific management (described by Taylor as "seventy-five percent science and twenty-five percent common sense") that made Taylor one of the most influential figures of the twentieth century. Even today his influence remains strong on many businesses throughout the world. 1997 Fortune article noted: "Taylor's influence is omnipresent: It's his ideas that determine how many burgers McDonalds's expects its flipper to flip or how many phone callers the phone company expects its operators to assist."
Peter Drunker has cited Taylor's thinking as "the most lasting contribution to America has made to Western thought since the Federalist Papers." Wasn't Henry Ford a bigger deal? No, says Drucker. The assembly line was simply a logical extension of scientific management."
Chapter 2: 1911-1920: Modern Times
Of course, as often the case, the man who made the great leap forward professed little interest in its historical significance. Henry Ford did things and then moved on. He did more than most.
Ford's break had come in 1893. The year was highly significant for the Ford family. Henry's only child, Edsel, was born and a month later Ford was appointed chief engineer of the main Detroit Edison Company plant. The Detroit electricity supply was presumably quite reliable--Ford found plenty of time to play around with his mechanical ideas. By the end of the year, Ford had created his first working gasoline engine. One thing led to another--1896 saw Ford's first horseless carriage, the four-horsepower Quadricycle. This involved a buggy frame precariously mounted on four bicycle wheels.
None of this put Ford ahead of the competition. Indeed, there was a flood of invention and development.
Ford's strategy was to develop a model and then sell it. This ensured a steady stream of finance as one bright idea followed another. Backers came and went until, in 1899, a group formed the Detroit Automobile Company. This eventually became the Henry Ford Company when Ford's backers departed, despairing at his constant quest for improvement.
Chapter 3: 1921-1930: Discovering The Organization
Alfred P. Sloan's examination of General Motors' organization was to prove the foundation for the achievements of the rest of his career. In 1923, Sloan became the company's president. Sloan's predecessor, du Pont, said at the time: "The greater part of the successful development of the Corporation's operations and the building of strong manufacturing and sales organization is due to Mr. Sloan. His election to the presidency is a natural and well merited recognition of his untiring and able efforts and successful achievement."
Over five decades, he reshaped General Motors and reinvented how it was managed. His major achievements are two fold. First, Sloan created a new cadre of highly professional, dispassionate, intelligent managers who made decisions on the basis of information available rather than always following their intuition.
"Alfred Sloan did for the upper layers of management what Henry Ford did for the shop floor: he turned it into a reliable, efficient, machine-like process," the Economist recently observed. Sloan, trained as an engineer, was driven by a love of systematic reasoning, of weighing up the pros and cons and then making a decision. He took the amateurism (and some of the fun) out of business and replaced it with sober, respectable professionalism.
Sloan's second achievement was no less important. He created new organizational form. The fruit of Sloan's organization study was an organizational model that combined the decentralized operations with coordinated, centralized policy control.
As a result of his organization study, in the early 20s Sloan organized the company into eight divisions--five car divisions and three component divisions. In the jargon (invented fifty years later) they were strategic business units.
Chapter 4: 1931-1940: Discovering People
A gaunt Boston spinster, Mary Parker Follett's career was largely spent in social work though her books appeared regularly--The New State (1918), and influential description of Follett's brand of dynamic democracy, and Creative Experience (1924), Follett's first business-oriented book. In her later years she in great demand as a lecturer.
Generally ignored, Follett was decades ahead of her time. She was discussing issues such as teamworking and responsibility (now reborn empowerment) in the first decades of the twentieth century. Follett was a female, a liberal humanist in an era dominated by reactionary males intent on mechanizing the world of business.
The breadth and humanity of her work was a refreshing counter to the dehumanized visions of Taylor and others. "We should remember that we can never wholly separate the human from the mechanical sides," warned Follett in Dynamic Administration. The study of human relations in business and the study of human relations in business and the study of the technology of operating bound up together."
The simple thrust of Follett's thinking was that people were central to any business activity--or, indeed, to any other activity. "I think we should under departmentalize our thinking in regard to every problem that comes to us," said Follett. "I do not think that we have psychological and ethical and economic problems. We have human problems, with psychological, ethical and economical aspects, and as many others as you like."
Chapter 5: 1941-1950: Lessons In War
The epitome of the Japanese revival was the rise of Sony. Akio Morita (born 1921) was an officer in he Japanese Navy during the Second World War. Trained as a physicist and scientist, Morita could have followed family tradition and gone into sake production. (He refers to himself as "the first son and fifteenth generation heir to one of Japanese heir to one of Japan's finest and oldest sake-brewing families.") Instead he founded a company' with Masura Ibuka (1908-1997) immediately after the end of the war. The duo invested the equivalent of $530 and set themselves up in a bombed-out Tokyo department store. Ibuka was the technical expert, Morita the salesman. The company, was christened Tokyo Tsushin Kogyo KK (Tokyo Telecommunications Engineering Corporation). Not a good name to put on a product, Morita later ruminated. Initially, the company made radio parts and a rice cooker, among other things. Its rice cooker was unreliable. Today, Ibuka and Morita's organization is a $45 billion company with over 100,000 employees. According to one Harris poll, the company is America's most respected brand.
In 1957 the company produced a pocket-sized radio and a year later it renamed itself Sony (sonus is Latin for sound). The Sony name remains the prominent on all of its products.
Morita became famous as the acceptable face of Japanese industry. Sophisticated and entrepreneurial, he did not fit the Western stereotype of the uncreative, devoted Japanese corporate servant.
Morita and Sony's gift was to invent new markets. Describing what he called Sony's "pioneer spirit," Morita said: "Sony is a pioneer and never intends to follow others. Through progress, Sony wants to serve the whole world. It shall always be the seeker of the unknown ... Sony has a principle of respecting and encouraging one's ability ... and always tries to bring out the best in a person. This is the vital force of Sony."
Chapter 6: 1951-1960: Living The Dream
The corporate archetype of the 1950s was International Business Machines. IBM--"Big Blue"--became the apotheosis of the modern corporation. IBM executives were the living embodiment of corporate men. With their regulation somber suits, white shirts, plain ties, zeal for selling, and company song, IBMers played hard; they were loyal and had their loyalty reciprocated. (Loyalty is always reciprocated when things are going well.)
Thomas Watson Jr. brought a vision of the future to the company that his father, Thomas Watson Sr., had lacked. Under Watson Jr., the corporate culture, the company's values, and the company brand became all-important. They were the glue that kept a sprawling international company under control. The three basic beliefs on which IBM was built were give full consideration to the individual employee, spend a lot of time making customers happy, and go the last mile to do things right.
Beliefs, said Watson, never change. Change everything else, but never the basic truths on which the company is based--"If an organization is to meet the challenges of a changing world, it must be prepared to change everything itself except beliefs as it moves through corporate life... The only sacred cow in business should be its basic philosophy of doing business."
The growth of strong corporate cultures by powerful corporations was a significant development. It attached a level of meaning and importance never previously applied to companies. It was a recognition that companies shaped lives and were more than legal shells. Companies could create powerful worlds of their own.
Chapter 7: 1960-1970: Understanding Strategy
Peter Ferdinand Drucker was born in Austria in 1909. In Austria during the 1020s and 1930s Drucker witnesses the steady descent of Europe into chaos. This he attributed to inept management.
Drucker has been writing prolifically and bluntly challenging managers with his innovative and rigorous thinking ever since. The ideas he has contributed to management thinking are many and varied. Among the most significant emerged from Drucker's phenomenal 1954 book, The Practice of Management.
In The Practice of Management and the equally enormous Management: Tasks, Responsibilities and Practices (1973) Drucker established five basics of the managerial role: to set objectives, to organize, to motivate and communicate, to measure, and to develop people. "The function which distinguishes the manager above all others is his educational one," he wrote. "The one contribution he is uniquely expected to make is give others vision and ability to perform. It is vision and moral responsibility that, in last analysis, define the manager." This morality is reflected in the five areas identified by Drucker "in which practices are required to ensure the right spirit throughout the management organization":
1.There must be high performance requirements; no condoning of poor or mediocre performance; and rewards must be based on performance.
2.Each management job must be a rewarding job in itself rather than just a step on the promotion ladder.
3.There must be a rational and just promotional system.
4.Management needs a "charter" spelling out clearly who has the power to make "life-and-death" decisions affecting a manager; and there should be some way for a manager to appeal to a higher court.
5.In its appointments, management must demonstrate that it realizes that integrity is the one absolute requirement of a manager, the one quality that he has to bring with him and cannot be expected to acquire later on.
Chapter 8: 1971-1980: Organized Paralysis
In the car industry, too, inspiration could be found in Scandinavia--this time at the carmaker Volvo. The 1970s were generally good to Volvo. In 1970 it passed the two-million-car production mark and the following year it recorded its twentieth successive year of increased sales. When the first oil crisis hit, in 1973, Volvo's production rate was the highest in company's history.
Under new company president Pehr Gyllenhammar, Volvo began to experiment with its working practices. Volvo already had a greater level of industrial democracy than most of its competitors--employees were represented on the board of the company. Its new car plant in Kalmar used innovative production processes, including automatic carriers that transported car bodies. The plant was also designed so that workers could work together in small teams.
Volvo's interest in teamworking had been encouraged by its experiences at its Lundby truck plant. By 1974 this plant was working at full capacity. Volvo, however, needed to produce another four hundred trucks per year. To do so it set up a temporary plant at Arendal in Gotenborg. Volvo was unwilling to invest heavily in what was likely to be temporary facility. As a result, it decided to experiment with a new production method. This involved assigning a group of twelve the job of producing two trucks a day. This was thought to be ambitious. The group was given responsibility for assembly, materials handling, quality control, and correcting defects.
The experiment was an immediate success. The group produced two trucks per day with ease. Within four months assembly time was significantly reduced. The group spent their spare time examining what they had done and planning for the next day.
There were many skeptics. Volvo examined the quality of the trucks produced by the group. They found that they were of higher quality than those produced by conventional means. But still the skeptics won the day and the temporary plant remained just that--it was closed in 1977.
Chapter 9: 1981-1990-An Excellent Adventure
The other areas of rediscovery were concerned with injecting humanity back into management. Western companies had become disengaged from their customers and from their employees. A variety of thinkers and books promised to bring them back together again.
The most powerful of these was In Search of Excellence by Tom Peters and Robert Waterman, which appeared before an apparently uninterested public in October 1982. In Search of Excellence was a book with a simple formula and even simpler intention. The subtitle is straightforward: "Lessons from America's Best-Run Companies." Here is what works; here are successful companies, and this is why they are successful. "In a way, the whole notion behind our excellent company research is: If you really want to learn, watch the best. Watch what they're doing," said Waterman.
It's done all the time in sports, but to our minds it's done very little in business. In business--so far at least--it's been as if, in order, to learn how to succeed, you went out and looked at everybody else's mistakes and told yourself, 'Don't do that.'"
Chapter 10: 1999-2000-The New Balance of Power
Michael Dell made history when he became the youngest CEO over to run a Fortune 500 company. Along the way, he has joined the ranks of the most revered entrepreneurs in America--as the man who took the direct-sales model and elevated it to an art form. (In 1999, Dell Computer became fourth in Fortune's ranking of America's Most Admired Companies, behind GE, Coca-Cola, and Microsoft.)
The company Dell built is not the biggest in the world. Nor are its products the most innovative.
Dell is that rarity: a corporate model, the benchmark for how companies can be organized and managed to reap the full potential of technology.
Dell started young. By the age of thirteen, he had become a dab hand at taking apart the motherboard of his Apple 2 computer. But his interest in business predated even that. "I first experienced the power--and the rewards--of being direct when I was twelve years old," says Dell. "The father of my best friend n Houston was a pretty avid stamp collector, so naturally my friend and I wanted to get into stamp collecting, too.... I started reading stamp journals just for fun and soon began noticing stamp prices were rising. Before long, my interest in stamps began to shift from the joy of collecting to the idea that there was something here that my mother, stockbroker, would have termed a 'commercial opportunity.'"
By high school age, the fledgling entrepreneur had a new hobby--computers. While at the University of Texas, he rebuilt PCs and sold them. He business was kick-started with a $1000 investment. Dell is living proof that having too little capital is better than too much. It forced him to reinvent the computer industry. Dell's 16 percent share of the company is now worth some $5 billion.