Summary
Managing organisations has remained in the Dark Ages. The Industrial Age of the 19th Century and has not changed since the days of Adam Smith's divisions of labour and Henry Ford's economies of scale.
Not much has changed in the last 80-90 years and now cracks are appearing as the Information Age is placing new demands on businesses and management against a background of volatile markets and the increasing pace of globalisation.
Analysis
Today’s management processes are designed around division of labour principles, the economies of scaleand standard rate/cost card systems– techniques and processes used to track the allocation of all costs involved in making products.
The first management processes used rate or cost cards that predicted the effort to make things (products) in terms of time and labour and equipment (asset) use. Actual activity was measured and then compared the rate card to produce a variance to track performance as a means to monitor cost efficiency. A system today we call Standard Costing and the primary activity at the heart of most finance and accounting systems.
The first management processes used rate or cost cards that predicted the effort to make things (products) in terms of time and labour and equipment (asset) use. Actual activity was measured and then compared the rate card to produce a variance to track performance as a means to monitor cost efficiency. A system today we call Standard Costing and the primary activity at the heart of most finance and accounting systems.
Other 19th Century thinking involved so called economies of scale - where the core principal is the make products in large volumes and long production runs, buying bulk materials as a means to lower units costs, maximising machine time and overheads. Today we recognise this as PUSH manufacturing, making lots of products regardless very often of customer orders. Products that end up being stored in warehouses which ties up lots of cash. 95% of manufacturing businesses operate this way.
In the 1960's and 1970 computers moved out of the scientific world into the business world and early business systems were designed to replicated these early processes and techniques - the automation age of replicating manual processes..
These systems were designed at a time when computer memory was expensive and closely followed the old manual card rating and costing systems we now recognise as Standard Costing. From these early moves to automate manual processes the era of Enterprise Resource Planning or 'ERP' was born. Computer systems that were designed to capture and track all activities, costs and information related to the allocation of these costs, overheads and resources, and to report on them in detail, every movement of materials, people and use of assets.
Centralised computer systems (mainframes) were the prevalent architecture of the day and even after the arrival of Personal Computers in 1981, staff did their work on computer terminals all linked to a big machine, where the data on all these costs and movements were held centrally. Easch computer screen represented a job, a specific task, where staff had no visibility for the end to end process or how their task was part of the bigger picture. In fact staff were encouraged not to think and not concern themselves with what other staff in other departments and business units did and these early computer systems were designed to carry on the tradition of divisions of labour, propagating divisive work patterns, work environment and cultures.
For the past 30 years despite technology advancements, businesses are still managed and organised around hierarchical structures, old thinking from the days of Adam Smith now reinforced by ERP, CRM (Customer Relationship Management), HR (Human Resource Management) and other systems - Oracle, SAP, JDE. Each delivering task orientated management processes, reliant on breaking each job and work packages and then into tasks centred on computer versions of business process known as transactions.
It is sounded like a step forward at the time however this so called advancement unknowingly created a legacy organisations are wrestling with today. Bloated back office finance and accounting and HR functions where staff spend most of their time data entering, checking, chasing errors and reporting on things that have no meaningful use, rather than working efficiently and in a collaborative way.
A recent study in the US found that only 20% of staff in organisation feel engaged in their job. It can therefore come as no surprise to learn that people often endure their work as a necessity to earn money, remaining in their task orientated box, completing work packages and doing the work in a way that was designed decades ago.
In the 1960's and 1970 computers moved out of the scientific world into the business world and early business systems were designed to replicated these early processes and techniques - the automation age of replicating manual processes..
These systems were designed at a time when computer memory was expensive and closely followed the old manual card rating and costing systems we now recognise as Standard Costing. From these early moves to automate manual processes the era of Enterprise Resource Planning or 'ERP' was born. Computer systems that were designed to capture and track all activities, costs and information related to the allocation of these costs, overheads and resources, and to report on them in detail, every movement of materials, people and use of assets.
Centralised computer systems (mainframes) were the prevalent architecture of the day and even after the arrival of Personal Computers in 1981, staff did their work on computer terminals all linked to a big machine, where the data on all these costs and movements were held centrally. Easch computer screen represented a job, a specific task, where staff had no visibility for the end to end process or how their task was part of the bigger picture. In fact staff were encouraged not to think and not concern themselves with what other staff in other departments and business units did and these early computer systems were designed to carry on the tradition of divisions of labour, propagating divisive work patterns, work environment and cultures.
For the past 30 years despite technology advancements, businesses are still managed and organised around hierarchical structures, old thinking from the days of Adam Smith now reinforced by ERP, CRM (Customer Relationship Management), HR (Human Resource Management) and other systems - Oracle, SAP, JDE. Each delivering task orientated management processes, reliant on breaking each job and work packages and then into tasks centred on computer versions of business process known as transactions.
It is sounded like a step forward at the time however this so called advancement unknowingly created a legacy organisations are wrestling with today. Bloated back office finance and accounting and HR functions where staff spend most of their time data entering, checking, chasing errors and reporting on things that have no meaningful use, rather than working efficiently and in a collaborative way.
A recent study in the US found that only 20% of staff in organisation feel engaged in their job. It can therefore come as no surprise to learn that people often endure their work as a necessity to earn money, remaining in their task orientated box, completing work packages and doing the work in a way that was designed decades ago.
The number one board room issue right now for CEO's is to improve Organisational and Operational Alignment. Leadership teams get frustrated that their best made plans, strategies and messages do not get followed, the messages diluted as the information is communicated down through the organisation. Diluted and often ignored although many staff and middle managers may want to comply; the very business processes enforced by transaction based computer systems and process will not allow staff to make changes and cannot deliver the right information at the right time and place to support decision making.
CEO’s and leadership teams have few options and many recognise everything about the way we manage and run things today suggests they will have little or no chance of success. The reason it is Industrial Age management thinking. Leadership teams recognise a need to move forward, a need to embrace the Information (Digital) Age and want to do something about it. However often give up after a series of initiatives and projects aimed at delivering organisational change, to encourage collaboration and team work wither and die on the vine delivering no step change improvements in organisational efficiency and performance.
Better collaboration amongst divisions and business units, closer working between functions and teams, the entire business pursuing common goals and objectives, where their performance can be measured on a daily basis... In today’s Digital Economy this sounds perfectly sensible. So then why have only a few companies managed to get there...
The primary issue is getting at company data and turning this into useful, and timely information to aid decision making. The data exists in silos and computer systems that do not talk to one another. The data is often incomplete, error prone and there are many sources of data - which has not yet become information.
CEO's and CFO's have now realised the very computer systems they purchased to help them manage the performance of the organisation is now the number one reason that is preventing the organisation moving forward. The very existence of these transaction capturing systems reinforces the old ways of doing things, old ways of organising and delivering work packages and by their very nature create work environments for staff that are disempowering, monotonous with little chance of engaging the people that do the work. In most cases creating silo mentality, a non collaborative culture that in a world of volatile markets and fluctuating demand can have devastating outcomes as businesses cannot adjust quickly enough to new ways of working and economic trends.
The good news for management is it doesn't’t have to be this way. It is possible to build 21st Century businesses and design new ways of packaging work and managing outcomes. Organisations can get off the treadmill of expensive software upgrades that always seen to promise improvements but never delivers. Investment in these systems can now be halted.
It is now possible to get all data from all company sources and turn this into useful and timely information in way that will enable management to design new management processes, systems and package the work in an entirely different way. Work that reflects the strategies and objectives of the management team that can be measured and monitored, work packages that really engage staff and dynamically shows how their contribution can make a difference.
The good news is there have been two major advancements in technology that can start to undo the legacy created by these old transaction based computer systems that mirror behaviours of 19th Century attitudes to work, staff and making products. Changes that not only provides a means for management teams to design 21st Century management processes for a Digital Information Age but also to step back and redefine how work is done, by whom and the measurement progress and performance based on outcomes that produce value for all stakeholders and customers...
Better collaboration amongst divisions and business units, closer working between functions and teams, the entire business pursuing common goals and objectives, where their performance can be measured on a daily basis... In today’s Digital Economy this sounds perfectly sensible. So then why have only a few companies managed to get there...
The primary issue is getting at company data and turning this into useful, and timely information to aid decision making. The data exists in silos and computer systems that do not talk to one another. The data is often incomplete, error prone and there are many sources of data - which has not yet become information.
CEO's and CFO's have now realised the very computer systems they purchased to help them manage the performance of the organisation is now the number one reason that is preventing the organisation moving forward. The very existence of these transaction capturing systems reinforces the old ways of doing things, old ways of organising and delivering work packages and by their very nature create work environments for staff that are disempowering, monotonous with little chance of engaging the people that do the work. In most cases creating silo mentality, a non collaborative culture that in a world of volatile markets and fluctuating demand can have devastating outcomes as businesses cannot adjust quickly enough to new ways of working and economic trends.
The good news for management is it doesn't’t have to be this way. It is possible to build 21st Century businesses and design new ways of packaging work and managing outcomes. Organisations can get off the treadmill of expensive software upgrades that always seen to promise improvements but never delivers. Investment in these systems can now be halted.
It is now possible to get all data from all company sources and turn this into useful and timely information in way that will enable management to design new management processes, systems and package the work in an entirely different way. Work that reflects the strategies and objectives of the management team that can be measured and monitored, work packages that really engage staff and dynamically shows how their contribution can make a difference.
The good news is there have been two major advancements in technology that can start to undo the legacy created by these old transaction based computer systems that mirror behaviours of 19th Century attitudes to work, staff and making products. Changes that not only provides a means for management teams to design 21st Century management processes for a Digital Information Age but also to step back and redefine how work is done, by whom and the measurement progress and performance based on outcomes that produce value for all stakeholders and customers...
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
