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

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[ Niels Pflaeging ] BetaCodex Network wwwbetacodex.org Bye-bye Management! Why management is dispensable 8th Business Talks, HFU Villingen-Schwenningen, 25.05.2011
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Keynote at Furtwangen University, Schwenningen campus, May 2011

Transcript of "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU...

Page 1: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Niels Pflaeging BBTN Associate & Presidente MetaManagement Group

Econique – Diálogo CFO 18/19 de Mayo 2009

[ Niels Pflaeging ] BetaCodex Network wwwbetacodex.org

Bye-bye Management! Why management is dispensable

8th Business Talks, HFU Villingen-Schwenningen, 25.05.2011

Page 2: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Niels Pflaeging BBTN Associate & Presidente MetaManagement Group

Econique – Diálogo CFO 18/19 de Mayo 2009

Page 3: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Niels Pflaeging BBTN Associate & Presidente MetaManagement Group

Econique – Diálogo CFO 18/19 de Mayo 2009

Page 4: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Niels Pflaeging BBTN Associate & Presidente MetaManagement Group

Econique – Diálogo CFO 18/19 de Mayo 2009

Page 5: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

90% Peter Drucker

Page 6: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 7: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Industrial age ends: ”Supplies have the power“, Evolution of mass markets: Taylorism as the superior model

Characteristics •  Incremental change •  Long life cycles •  Stable prices •  Loyal customers •  Choosy employers •  „Managed“ results

Dynamics and

complexity

1890 1980 1990

low

high

2000 2010 2020 2030

1.  Discontinuous change 2.  Short life cycles 3.  Constant pressure on prices 4.  Less loyal customers 5.  Choosy employees 6.  Transparency, societal pressure

  High financial expectations

Knowledge economy advances: ”Customers have the power“,

strong competition, individualized demand: decentralized and adaptive model is superior!

Competitive success factors (CSF) - Fast response - Innovation - Operational excellence - Customer intimacy - Great place to work -  Effective governance -  Sustained superior value creation/fin.perf.

Characteristics

Most organizations still use a management model that was designed for efficiency, while the problem today is complexity.

Now, all these factors are equally important!

Here, only efficiency mattered, really!

Page 8: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 9: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 10: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

“command and control“

• Too centralized • Too inward-looking • Too little customer-oriented • Too bureaucratic • Too much focused on control • Too functionally divided • Too slow and time-consuming • Too de-motivating • …

Page 11: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 12: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 13: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

The BetaCodex: The 12 new laws of Leadership

§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

Page 14: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Sciences: Thought leaders (selected)

Practice: Industry leaders

(selected)

Henry Mintzberg Gary Hamel Jeremy Hope Michael Hammer Thomas Johnson Charles Horngren …

Stafford Beer Margareth Wheatley Niklas Luhmann W. Edwards Deming Kevin Kelly Ross Ashby Joseph Bragdon …

Douglas McGregor Chris Argyris Jeffrey Pfeffer Reinhard Sprenger Stephen Covey Howard Gardner Viktor Frankl …

Peter Drucker Tom Peters Charles Handy John Kotter Peter Senge Thomas Davenport Peter Block …

Complexity theories

Social sciences and

HR

Leadership & change

Strategy & Performance management

Industry

Retail

Services

Governments & NGOs

Page 15: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Industry

Retail

Services

Governments. & NGOs

Page 16: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 17: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Periphery

Center

Information Decision

Impulse

Command

Reaction Centralist command and control “collapses“ in increasingly complex

environments

Source: Gerhard Wohland

Page 18: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

The notion of dividing an organization into functions, and then departments, is fundamentally flawed.

But what is the alternative?

Page 19: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 20: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Page 21: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 22: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Page 23: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Page 24: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

The blue pill: Fixed, negotiated targets

Most important competitor

(28%) Market (25%)

Plan (15%)

Actual (21%)

Target: absolute ROCE in % (here: 15%)

[expected market Ø: 13%]

Plan

Comparison: Plan-Actual

Actual

•  Interpretation within the plan-actual-comparison: Plan was outperformed by 6 percentage points > positive interpretation •  Better ROCE of the market average and the most important competitor remain unnoticed!

The red pill: Relative, self-adjusting targets

Target: relative ROCE in % (to market)

Most important competitor

(28%) Market (25%)

Target: „ROCE in % better than market average”

Actual (21%)

•  Interpretation within actual-actual compa-rison: Performance was 4 percentage points below competition! > negative interpretation •  Absolute assumptions at the moment of planning don´t matter. •  Targets always remain updated and relevant!

[independent from expected

market Ø]

Target Actual

Comparison: Market-Actual

Source: Niels Pfläging

Page 25: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

One cannot talk sensibly about leadership, or people management, nor design decent management processes, unless we clarify beforehand our beliefs with regards to what people in organizations are like.

We have to arrive at a shared understanding of human nature and of the consequences of that for our organizations.

Niels Pflaeging, Leading with Flexible Targets

Page 26: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

vs. Theory Y

Douglas McGregor

Theory X

Page 27: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Theory X Theory Y

People need to work and want to take an interest in it. Under right conditions, they can enjoy it.

People will direct themselves towards a target that they accept.

People will seek and accept responsibility, under the right conditions.

Under the right conditions, people are motivated by the desire to realize their own potential.

Creativity and ingenuity are widely distributed and grossly underused.

People dislike work, find it boring, and will avoid it if they can.

People must be forced or bribed to make the right effort.

People would rather be directed than accept responsibility, (which they avoid).

People are motivated mainly by money and fears about their job security.

Most people have little creativity - except when it comes to getting round rules.

Source: Douglas McGregor, ‘The Human Side of Enterprise’, 1960

Attitude

Direction

Responsibility

Creativity

Motivation

Page 28: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 29: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Niels Pflaeging BBTN Associate & Presidente MetaManagement Group

Econique – Diálogo CFO 18/19 de Mayo 2009

Page 30: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Vortrag: Niels Pfläging

30

Assessment Center

Meritocracy

Time-based work contracts

Control of work hours

Stellenbeschreibungen

Competence profiling

Motivation/incentives

Individual targets

Performance Appraisals

Salary ranges

Training budgets Personnel Development

Org charts

Target negotiation

Absenteeism management

Personnel cost

Suggestion Schemes Knowledge management

Career plans/paths

Extra hours

Bonuses

Page 31: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 32: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

on the model,

The BetaCodex: Thinking and working

in the model. not

Page 33: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Foundation Several decades old Time scale: organization's age

Low degree of decentralization/ empowerment

Differentiation phase

Stagnation within the tayloristic model

Integration phase

High degree of decentralization/ empowerment

Sustaining and deepening of the decentralized model, through generations

Transformation through radical decentralization of decision-making

Pioneering phase

Bureaucratization through growing hierarchy and functional differentiation

Evolution within the decentralized model (culture of empowerment and trust)

Page 34: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 35: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 36: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

The case of a radically decentralized organization: Handelsbanken – an extraordinary leadership philosophy

ROE = Return on Equity, TSR = Total Shareholder Return, EPS = Earnings per share

  Consistently – over a period of 30 years – one of the most successful banks in Europe, measured by almost all key performance indicators (e.g. ROE, TSR, EPS, Cost/Income, customer satisfaction, …)

The most important objective within Handelsbanken Group: “Higher Return on Equity than the average of comparable banks in the Nordic region and Europe.”

Made real through:

•  Radical decentralization, which in turn leads to…

•  Best customer service •  Lowest cost

Alexander V Dokukin

Page 37: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Customers

600 branch managers (Profit Centers)

12 regional managers

(Invest Centers)

CEO, product firms, treasury, IT etc.

Fast, open information systems

Governance and transparency

Framework for decision making with clear values, limits and relative targets, plus transparency

Freedom and capability to act

“Winning“ culture, combined with the freedom and ability to act

Customer intimacy A large network of self-managed teams with full responsibility for

customer results

Principles

How “radical decentralization“ is being reflected in the company´s organizational structure and decision-making

Leads to maximum customer satisfaction!

Source: BBRT

Page 38: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Relative target definition through “league tables“ (rankings) – instead of planned, fixed targets and internal negotiation

Bank to bank Return on Equity (RoE)

1.  Bank D 31%

2.  Bank J 24%

3.  Bank I 20%

4.  Bank B 18%

5.  Bank E 15%

6.  Bank F 13%

7.  Bank C 12%

8.  Bank H 10%

9.  Bank G 8%

10.  Bank A (2%)

Region to region Return on Assets(RoA)etc.

1.  Region A 38% 2.  Region C 27% 3.  Region H 20% 4.  Region B 17% 5.  Region F 15% 6.  Region E 12% 7.  Region J 10% 8.  Region I 7% 9.  Region G 6% 10.  Region D (5%)

Branch to branch Cost/income ratio etc.

1.  Branch J 28% 2.  Branch D 32% 3.  Branch E 37% 4.  Branch A 39% 5.  Branch I 41% 6.  Branch F 45% 7.  Branch C 54% 8.  Branch G 65% 9.  Branch H 72% 10.  Branch B 87%

Leads to lowest operational cost!

Relative targets and relative compensation

Continuous preparation/ social control

“On demand“ flow of resources/

dynamic coordination

Principles

Page 39: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Headquarters/ Region

Branches acquire resources through internal markets

Flexible coordination and resources “on demand“ - instead of allocations and budgets

Customer demand

Branches observe customer demand

Resources (IT, HR etc.)

Branches decide over necessary resource levels

Branch

Branches alone are responsible for efficient

use of resources

Leads to eradicating and avoiding waste!

Source: BBRT

Page 40: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Let's start with compensation then. First of all, let's be clear. Carrots don't work. They might beat the intellect of donkeys. But they certainly don't trick human beings, who all have “Theory Y” wiring inside them. Incentives simply don't have a positive influence on organizational performance. Full stop.

So why do so many of us still apply in the carrot-and-stick method with people?

Page 41: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Variable area “Ceiling”

Bonus hurdle

100%: target

80% of target

120% of target

Base salary

Performance as % of target realization

Salary/ bonus

Common practice: „Pay for performance“ compensation profile with fixed performance contract: Creates maniuplation incentive in any situation!

Bonus limit

Reduction incentive: Lower result even more

Reduction incentive: postpone results to next period

Maximization incentive: Anticipate

results

Actual result #2

Actual result #1

Actual result #3

Performance in relative evaluation

Salary/ bonus

A better model: Result oriented compensation profile with relative performance contracts: No incentive to manipulation.

Linear compensation curve without breaks: variable compensation becomes decoupled from targets

Free from incentive to manipulate

Source: Michael Jensen

Page 42: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

1 very simple principle: Always disconnect compensation from targets. Always.

Page 43: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

1.  Pay people well 2.  Pay people fairly 3.  And then do everything possible to take money off peoples minds! All pay-for-performance plans violate that last precept!

Pay-for-performance is an outgrowth of behaviorism, which is focused on individual organisms, not systems - and, true to its name, looks only at behaviors, not at reasons and motives and the people who have them.

I tell Fortune 500 executives (or at least those foolish enough to ask me) that the best formula for compensation is this: Pay people well, pay them fairly, and then do everything possible to help them forget about money.

How should we reward our staff? Not at all! They are not our pets. Pay them well, respect and trust them, free them from disturbance, provide them with all available information and support to perform on the highest possible level. Alfie Kohn, Sociologist

Page 44: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

1 very simple principle: Never use bonuses and incentives. Apply profit sharing and/or shareholding concepts for community.

Page 45: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

1 very simple principle: Pay the person. Not the position. Always.

Page 46: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Page 47: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Eine Konsequenz aus dem Kodex.

Planning. Don´t

Companies. Need.

Period.

Page 48: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Management control cycle

Budget

Strategy

Strategic learning cycle

Annual plan

Control

Management processes in command and control organizations are “straight jackets”

Fixed Performance Contract

“Fixed” performance contract •  Period [Fixed]

•  Targets [Fixed]

•  Compensation [Fixed]

•  Plan [Fixed]

•  Resources [Fixed]

•  Coordination [Fixed]

•  Control [Fixed]

•  Agreed through [Negotiation]

•  Signed by: [Manager/Director]

Source: BBRT

Tayloristic management works like this: As centralistic-burocratic hierarchies, held together through a regime of fixed performance contracts!

Page 49: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 50: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Page 51: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Page 52: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Page 53: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

“I will prepare myself and my time must come.”

Abraham Lincoln

Page 54: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

“I don´t know if it is possible.

What I know: It is necessary.“

Tom Peters

Today we already know for sure it is possible.

And we have also learned how it can be done.

Page 55: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

What waiting for?

are we

Page 56: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

© BetaCodex Network – All rights reserved White paper – Making Performance Management Work

Page 57: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 58: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)
Page 59: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

Neues Paper

Page 60: "Bye-bye Management! Why management is dispensable", keynote & workshop with Niels Pflaeging at HFU Furtwangen University (Schwenningen/D)

www.betacodex.org

A selection of associates:

Make it real!

Niels Pfläging MetaManagement Group

Sao Paulo- New York - Wiesbaden [email protected] Skype: npflaeging www.nielspflaeging.com

Silke Hermann Insights Group Deutschland

Wiesbaden – New York [email protected] Skype: silkehermann www.insights-group.de

Sonja D´Angelo Sapiens Consulting

Switzerland [email protected] Skype: Sonja D´Angelo www.sapiens.ch