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"Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen Universit

Keynote at Furtwangen University, Schwenningen campus, May 2011

NielsPflaeging
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"Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen Universit

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  1. Bye-byeManagement! Whymanagementisdispensable 8thBusinessTalks,HFU Villingen-Schwenningen,25.05.2011 NielsPflaeging BBTNAssociate&PresidenteMetaManagementGroup [ NielsPflaeging ] BetaCodexNetworkwwwbetacodex.org Econique–DiálogoCFO 18/19deMayo2009

  2. NielsPflaeging BBTNAssociate&PresidenteMetaManagementGroup Econique–DiálogoCFO 18/19deMayo2009

  3. NielsPflaeging BBTNAssociate&PresidenteMetaManagementGroup Econique–DiálogoCFO 18/19deMayo2009

  4. NielsPflaeging BBTNAssociate&PresidenteMetaManagementGroup Econique–DiálogoCFO 18/19deMayo2009

  5. 90% 90% PeterDrucker

  6. Industrialageends: ”Supplieshavethepower“, Evolutionofmassmarkets: Taylorismasthesuperiormodel Knowledgeeconomyadvances: ”Customershavethepower“, strongcompetition,individualizeddemand: decentralizedandadaptivemodelissuperior! high Now,allthesefactors areequallyimportant! Here,onlyefficiency mattered,really! Competitive successfactors (CSF) -Fastresponse -Innovation -Operationalexcellence -Customerintimacy -Greatplacetowork - Effective governance - Sustainedsuperior valuecreation/fin.perf. Characteristics 1.  Discontinuouschange 2.  Shortlifecycles 3.  Constantpressureonprices 4.  Lessloyalcustomers 5.  Choosyemployees 6.  Transparency, societalpressure   Highfinancial expectations Dynamics and complexity Characteristics •  Incrementalchange •  Longlifecycles •  Stableprices •  Loyalcustomers •  Choosyemployers •  „Managed“results low 1890 1980 1990 2000 2010 2030 2020 Mostorganizationsstilluseamanagementmodelthatwasdesigned forefficiency,whiletheproblemtodayiscomplexity.

  7. “commandandcontrol“ • Toocentralized • Tooinward-looking • Toolittlecustomer-oriented • Toobureaucratic • Toomuchfocusedoncontrol • Toofunctionallydivided • Tooslowandtime- consuming • Toode-motivating • …

  8. TheBetaCodex:The12newlawsofLeadership §1Freedomtoact §2Responsibility §3Governance §4PerformanceclimateResultculture §5Success §6Transparency §7Orientation §8Recognition §9Mentalpresence §10Decision-making §11Resourceusage §12Coordination ConnectednessnotDependency Cells Leadership notDepartments notManagement notDutyfulfillment notMaximization Fit IntelligenceflownotPoweraccumulation RelativeTargetsnotTop-downprescription Sharing notIncentives Preparedness notPlanning Consequence notBureaucracy Purpose-drivennotStatus-oriented MarketdynamicsnotCommands

  9. Sciences: Thoughtleaders (selected) Practice: Industryleaders (selected) StaffordBeer MargarethWheatley NiklasLuhmann W.EdwardsDeming KevinKelly RossAshby JosephBragdon … DouglasMcGregor ChrisArgyris JeffreyPfeffer ReinhardSprenger StephenCovey HowardGardner ViktorFrankl … Complexity theories Industry Social sciencesand HR Retail PeterDrucker TomPeters CharlesHandy JohnKotter PeterSenge ThomasDavenport PeterBlock … Leadership& change Services Strategy& Performance management Governments &NGOs HenryMintzberg GaryHamel JeremyHope MichaelHammer ThomasJohnson CharlesHorngren …

  10. Industry Retail Services Governments. &NGOs

  11. Periphery Center Decision Information Command Centralistcommandand control“collapses“in increasinglycomplex environments Impulse Reaction Source:GerhardWohland

  12. Thenotionof dividinganorganization intofunctions, andthendepartments, isfundamentallyflawed. Butwhatisthealternative?

  13. Whitepaper–MakingPerformanceManagementWork ©BetaCodexNetwork–Allrightsreserved

  14. Whitepaper–MakingPerformanceManagementWork ©BetaCodexNetwork–Allrightsreserved

  15. Whitepaper–MakingPerformanceManagementWork ©BetaCodexNetwork–Allrightsreserved

  16. Thebluepill:Fixed,negotiatedtargets Theredpill:Relative,self-adjustingtargets Target:absolute absoluteROCEin% (here:15%) Plan Target:relative Target relativeROCEin% (tomarket) Actual Actual Comparison: Market-Actual Comparison: Plan-Actual Target:„ROCE in%better thanmarket average” Most important competitor (28%) Most important competitor (28%) Market (25%) Market (25%) Actual (21%) Actual (21%) Plan (15%) [expected market Ø: 13%] [independent from expected market Ø] •  Interpretationwithinactual-actualcompa- rison:Performancewas4percentagepoints belowcompetition!>negativeinterpretation •  Absoluteassumptionsatthemomentof planningdon´tmatter. •  Targetsalwaysremainupdatedandrelevant! •  Interpretationwithintheplan-actual- comparison:Planwasoutperformedby6 percentagepoints>positiveinterpretation •  BetterROCEofthemarketaverageandthe mostimportantcompetitorremainunnoticed! Source: Niels Pfläging

  17. Onecannottalksensiblyaboutleadership,orpeoplemanagement, nordesigndecentmanagementprocesses,unlessweclarify beforehandourbeliefswithregardstowhat peopleinorganizationsarelike. Wehavetoarriveatasharedunderstandingofhumannature andoftheconsequencesofthatforourorganizations. Niels Pflaeging, Leading with Flexible Targets

  18. Theory TheoryX X vs. Theory TheoryY Y vs. DouglasMcGregor

  19. TheoryX TheoryY Attitude Peopledislikework, finditboring, andwillavoiditiftheycan. Peopleneedtoworkandwanttotake aninterestinit.Underrightconditions, theycanenjoyit. Direction Peoplewilldirectthemselves towardsatarget thattheyaccept. Responsibility Peoplemustbeforced orbribed tomaketherighteffort. Peoplewillseekandaccept responsibility,undertheright conditions. Peoplewouldratherbedirected thanacceptresponsibility, (whichtheyavoid). Motivation Peoplearemotivatedmainly bymoney andfearsabouttheirjobsecurity. Undertherightconditions,people aremotivatedbythedesiretorealize theirownpotential. Creativity Creativityandingenuityare widelydistributed andgrosslyunderused. Mostpeoplehavelittlecreativity- exceptwhenitcomestogetting roundrules. Source:DouglasMcGregor,‘TheHumanSideofEnterprise’,1960

  20. NielsPflaeging BBTNAssociate&PresidenteMetaManagementGroup Econique–DiálogoCFO 18/19deMayo2009

  21. Orgcharts PerformanceAppraisals Absenteeismmanagement Extrahours Meritocracy Time-basedworkcontracts Motivation/incentives Controlofworkhours Individualtargets Targetnegotiation Stellenbeschreibungen Careerplans/paths Salaryranges Knowledgemanagement Bonuses Competenceprofiling SuggestionSchemes Trainingbudgets Personnelcost PersonnelDevelopment 30 Vortrag:NielsPfläging AssessmentCenter

  22. TheBetaCodex: Thinkingandworking onthemodel, not inthemodel.

  23. Sustainingand deepeningofthe decentralizedmodel, throughgenerations Integration phase Evolution withinthedecentralized model (cultureof empowermentandtrust) Transformation throughradical decentralizationof decision-making Differentiation phase Stagnation withinthetayloristicmodel Lowdegreeofdecentralization/ empowerment Bureaucratization throughgrowinghierarchy andfunctionaldifferentiation Pioneering phase Highdegreeofdecentralization/ empowerment Severaldecadesold Foundation Timescale:organization'sage

  24. Thecaseofaradicallydecentralizedorganization: Handelsbanken–anextraordinaryleadershipphilosophy Themostimportantobjective withinHandelsbankenGroup: “HigherReturn on Equitythanthe averageofcomparablebanksin theNordicregionandEurope.” Maderealthrough: • Radicaldecentralization, whichinturnleadsto… • Bestcustomerservice • Lowestcost AlexanderVDokukin   Consistently–overaperiodof30years–oneofthemostsuccessfulbanksin Europe,measuredbyalmostallkeyperformanceindicators (e.g.ROE,TSR,EPS,Cost/Income,customersatisfaction,…) ROE=ReturnonEquity,TSR=TotalShareholderReturn,EPS=Earningspershare Whitepaper–MakingPerformanceManagementWork ©BetaCodexNetwork–Allrightsreserved

  25. How“radicaldecentralization“isbeingreflectedinthe company´sorganizationalstructureanddecision-making Principles Customers Customerintimacy Alargenetworkofself-managed teamswithfullresponsibilityfor customerresults 600branchmanagers (ProfitCenters) Freedomand capabilitytoact “Winning“culture,combinedwiththe freedomandabilitytoact 12regional managers (InvestCenters) Fast,open information systems Governanceand transparency Frameworkfordecisionmakingwith clearvalues,limitsandrelative targets,plustransparency CEO, productfirms, treasury,ITetc. Leadstomaximumcustomer satisfaction! customer satisfaction! Whitepaper–MakingPerformanceManagementWork Source: BBRT ©BetaCodexNetwork–Allrightsreserved

  26. Relativetargetdefinitionthrough“leaguetables“ (rankings) – insteadofplanned,fixedtargetsandinternalnegotiation Banktobank Return on Equity (RoE) Regiontoregion Return on Assets(RoA)etc. Principles 1.  2.  3.  4.  5.  6.  7.  8.  9.  10.  BankD BankJ BankI BankB BankE BankF BankC BankH BankG BankA 31% 24% 20% 18% 15% 13% 12% 10% 8% (2%) Branchtobranch Cost/income ratio etc. 1.  2.  3.  4.  5.  6.  7.  8.  9.  10.  RegionA RegionC RegionH RegionB RegionF RegionE RegionJ RegionI RegionG RegionD 38% 27% 20% 17% 15% 12% 10% 7% 6% (5%) Relativetargetsand relativecompensation 1.  2.  3.  4.  5.  6.  7.  8.  9.  10.  BranchJ28% BranchD32% BranchE37% BranchA39% BranchI41% BranchF45% BranchC54% BranchG65% BranchH72% BranchB87% Continuouspreparation/ socialcontrol “Ondemand“flowof resources/ dynamiccoordination Leadstolowestoperational operational cost cost! ! Whitepaper–MakingPerformanceManagementWork ©BetaCodexNetwork–Allrightsreserved

  27. Flexiblecoordinationandresources“ondemand“- insteadofallocationsandbudgets Headquarters/ Region Branchesacquireresources throughinternalmarkets Resources (IT,HRetc.) Customer demand Branch Branchesaloneare responsibleforefficient useofresources Branches decideover necessary resourcelevels Branches observe customer demand Leadstoeradicatingandavoiding waste! avoiding waste! Whitepaper–MakingPerformanceManagementWork Source: BBRT ©BetaCodexNetwork–Allrightsreserved

  28. Let'sstartwithcompensationthen. Firstofall,let'sbeclear.Carrotsdon'twork. Theymightbeattheintellectofdonkeys.Buttheycertainly don'ttrickhumanbeings,whoallhave“TheoryY” wiringinsidethem.Incentivessimplydon't haveapositiveinfluenceonorganizational performance.Fullstop. Sowhydosomanyofusstillapply inthecarrot-and-stickmethodwithpeople? Whitepaper–MakingPerformanceManagementWork ©BetaCodexNetwork–Allrightsreserved

  29. Bonus limit Bonus hurdle Variable area “Ceiling” Commonpractice: „Payforperformance“ compensation profilewithfixed performancecontract: Createsmaniuplation incentiveinanysituation! Reduction incentive:Lower resultevenmore Maximization incentive:Anticipate results Reductionincentive: postponeresultsto nextperiod Salary/ bonus Basesalary 80% oftarget 100%: target 120% oftarget Performanceas% oftargetrealization Linearcompensationcurvewithoutbreaks: variablecompensationbecomes decoupledfromtargets Abettermodel:Result orientedcompensation profilewithrelative performance contracts: Noincentiveto manipulation. Salary/ bonus Freefrom incentivetomanipulate Actual result#1 Actual result#2 Actual result#3 Performancein relativeevaluation Source: Michael Jensen

  30. 1verysimpleprinciple: Alwaysdisconnectcompensationfromtargets. Always.

  31. Pay-for-performanceisanoutgrowthofbehaviorism,whichis focusedonindividualorganisms,notsystems-and,truetoitsname, looksonlyatbehaviors,notatreasonsandmotivesandthepeoplewho havethem. ItellFortune500executives (oratleastthosefoolishenoughtoaskme) thatthebestformulaforcompensationisthis:Paypeoplewell,paythem fairly,andthendoeverythingpossibletohelpthemforgetaboutmoney. Howshouldwerewardourstaff?Notatall!Theyarenotourpets. Paythemwell,respectandtrustthem,freethemfromdisturbance, providethemwithallavailableinformationandsupporttoperform onthehighestpossiblelevel. Alfie Kohn, Sociologist 1.  Paypeoplewell 2.  Paypeoplefairly 3.  Andthendoeverythingpossibletotakemoneyoffpeoplesminds! Allpay-for-performanceplansviolatethatlastprecept!

  32. 1verysimpleprinciple: Neverusebonusesandincentives. Applyprofitsharingand/orshareholdingconcepts forcommunity.

  33. 1verysimpleprinciple: Paytheperson.Nottheposition. Always.

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  35. Companies. Don´t Need. Planning. Period. EineKonsequenzausdemKodex.

  36. Managementprocessesincommandandcontrol organizationsare“straightjackets” “Fixed”performancecontract Strategy •  Period [Fixed] Strategic learningcycle •  Targets •  Compensation •  Plan •  Resources [Fixed] [Fixed] Annualplan Fixed Performance Contract [Fixed] [Fixed] Budget •  Coordination •  Control •  Agreedthrough •  Signedby: [Fixed] [Fixed] Management controlcycle [Negotiation] [Manager/Director] Control Tayloristicmanagementworkslikethis:Ascentralistic-burocratic hierarchies heldtogetherthrougharegimeoffixed performance contracts! centralistic-burocratic hierarchies, fixed performance contracts! Whitepaper–MakingPerformanceManagementWork Source: BBRT ©BetaCodexNetwork–Allrightsreserved

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