A New Manifesto for A New Manifesto for ManagementManagement

Ken AbbottKen AbbottRobert Best Robert Best Rem BrownRem Brown

Marianne GardnerMarianne GardnerYing JinYing Jin

Rachel ToddRachel Todd

October 10, 2007

AgendaIntroduction & Rules of Game Robert Best

Rock and a Hard Place Ken Abbott

New Management Philosophy Rachel Todd

Creating Value Marianne Gardner

Building Shared Destiny Relationships Ying Jin

Conclusion Rem Brown

IntroductionIntroduction

Rules of the game:Rules of the game:1.1. Break into presentation teamsBreak into presentation teams2.2. Questions will be asked during the Questions will be asked during the

presentation – first bark gets to answer…Yes presentation – first bark gets to answer…Yes it’s degrading…but fun!it’s degrading…but fun!

3.3. Questions at end of sections for pointsQuestions at end of sections for points4.4. Most points at end wins! (There are prizes)Most points at end wins! (There are prizes)5.5. We reserve the right to penalize for bad We reserve the right to penalize for bad

behaviorbehavior

The Dominant PhilosophyThe Dominant PhilosophyOld Management

Paradigm, 3S’s

Employee loyalty shatteredMgmt confidence to cut not create

Changing environment:Shareholder vociferousnessGlobalizationFocus on operating efficiencies

Value Extraction

• Outsourcing• Downsizing• Aggressive cost cutting• Buybacks – not investing

Path to competitive mutual destruction: Game theory: lose-lose

IMPACTS

END RESULT

• Strategy• Structure• Systems

Getting StuckGetting Stuck

MgmtDoctrine

Old school: make management predictable, systematic and structured

TechnologyMarketsInnovation

Old school can’t keep pace

Harold Geenen of ITT stated he was building a system that: “ A monkey will be able to run when I’m gone”

Click on chimp

Getting StuckGetting Stuck

Academic Theory

Static Efficiency:•Exploit economic options•Moving resources to highest value add

Theory of competition: Appropriate Value

Strategy: Grab all you can (even at the expense of other stakeholders)

The ConflictThe Conflict

The Company

Create Profits

Create Societal

Benefits

Interests of company are incompatible with interests of society under the Old Model

Conclusion: Need a new management model

Imperfect Competition

Perfect Competition

The Quiz…The Quiz…

• From the video: What percentage of From the video: What percentage of investment was made into lottery tickets? investment was made into lottery tickets? (100 pts)(100 pts)

• From the reading…Who was credited with From the reading…Who was credited with the 3S strategy of the dominant management the 3S strategy of the dominant management paradigm? (100 pts)paradigm? (100 pts)

Answers 85%

Alfred P. Sloan

New Management PhilosophyNew Management PhilosophyModern Societies as organizational economiesModern Societies as organizational economies

““That is, most of the value is created not by That is, most of the value is created not by individuals transacting individually in the market, individuals transacting individually in the market, as in the economists’ ideal, but by organizations as in the economists’ ideal, but by organizations involving people acting collectively, with their involving people acting collectively, with their motives empowered and their actions coordinated motives empowered and their actions coordinated by their companies purpose”by their companies purpose”

-Nobel Laureate Herbert Simon-Nobel Laureate Herbert Simon

New Management PhilosophyNew Management Philosophy• Companies by nature are inefficientCompanies by nature are inefficient

• Exists to provide a haven from the laws/market to Exists to provide a haven from the laws/market to allow humans to do something markets are not allow humans to do something markets are not very good at…very good at…

INNOVATE!INNOVATE!

New Management PhilosophyNew Management Philosophy• Companies as Value CreatorsCompanies as Value Creators

• 3M or ABB3M or ABB• Good innovationGood innovation

• Westinghouse or NortonWestinghouse or Norton• Lacking innovationLacking innovation

• Innovation is needed to create new Innovation is needed to create new products/servicesproducts/services

• Competitive AdvantageCompetitive Advantage

Innovative CompaniesInnovative Companies

New Management PhilosophyNew Management Philosophy

3 “S”s give way to 3 “P”s3 “S”s give way to 3 “P”s

“ “S”sS”s “P”s “P”sStrategyStrategy PurposePurposeStructureStructure ProcessProcessSystemsSystems PeoplePeople

• Innovation: Which company invented the Innovation: Which company invented the GUI that eventually became Microsoft GUI that eventually became Microsoft windows?windows?(100 pts)(100 pts)

• Patents: As of October 9, 2007 what was the Patents: As of October 9, 2007 what was the number of the most recently issued patent? number of the most recently issued patent? (100 pts to closest team)(100 pts to closest team)

The Quiz…The Quiz…

AnswersAnswers• XeroxXerox

• 7,281,274 Electronic media distribution system

Job SecurityJob Security

• Job security in exchange for employee loyaltyJob security in exchange for employee loyalty• Specific employee skills that are unique to Specific employee skills that are unique to

companycompany= productivity and efficiency to employer= productivity and efficiency to employer = limits employee value to other employers = limits employee value to other employers

• Both parties require employment security to Both parties require employment security to make commitmentmake commitment

Job SecurityJob Security

• Viable in stable world of sustained competitive Viable in stable world of sustained competitive advantageadvantage

• This type of feudal loyalty is outdated in This type of feudal loyalty is outdated in today’s business environmenttoday’s business environment• hyper-competitionhyper-competition• displacement of workers in global economydisplacement of workers in global economy

The New Moral ContractThe New Moral Contract

• Free market – hire and fire poor alternativeFree market – hire and fire poor alternative• Hyper-competition and change create need for Hyper-competition and change create need for

teamwork and trustteamwork and trust• Teamwork and trust cannot be fostered in Teamwork and trust cannot be fostered in

atmosphere of self-interestatmosphere of self-interest• Value creation and innovation require Value creation and innovation require

confidence in collective gainconfidence in collective gain

The New Moral ContractThe New Moral Contract

• New contract - mutually satisfyingNew contract - mutually satisfying• Employer has best jobs for most competitiveEmployer has best jobs for most competitive• Employees take responsibility to be competitive Employees take responsibility to be competitive

and compete for the companyand compete for the company• In turn company invests in employee training In turn company invests in employee training

which increases value to company and enhances which increases value to company and enhances employee value outside the companyemployee value outside the company

• Employees stay because their job is excitingEmployees stay because their job is exciting

New Contract is Not New Contract is Not • Not a catchy slogan which releases managers Not a catchy slogan which releases managers

from protecting employees jobsfrom protecting employees jobs

• Not an act of altruismNot an act of altruism

• Not a program installed by HR DepartmentNot a program installed by HR Department

Employer BrandingEmployer Branding What is employer branding?What is employer branding? Does it matter?Does it matter? Gives employers a competitive advantageGives employers a competitive advantage Attract hire and retain the right “fit”Attract hire and retain the right “fit” Employer branding impacts bottom lineEmployer branding impacts bottom line

http://money.cnn.com/magazines/fortune/bestcompanies/2007/

What company instituted the “Individual Dignity Entitlement Program” or IDE? (100 pts)

What is the name of this company’s much imitated total quality initiative? (100 pts)

The Quiz…The Quiz…

Answers Motorola

Six Sigma

Building Shared Destiny Building Shared Destiny RelationshipsRelationships

• What is the shared destiny relationship?What is the shared destiny relationship?• Company examplesCompany examples• The result of the shared destiny relationshipThe result of the shared destiny relationship• Lost legitimacyLost legitimacy

A company that has a “value-creation” focus is _____________________. (100 pts)

The text gives us three companies that create value for themselves and others. Name them. (100 pts)

The Quiz…The Quiz…

Answers building shared relationships.

Canon, Intel and Kao

ConclusionConclusion• Key Themes Key Themes

• Value Appropriation vs. Value CreationValue Appropriation vs. Value Creation• All About Innovation All About Innovation • New Moral ContractNew Moral Contract

• Teamwork & Innovation Exercise!!!Teamwork & Innovation Exercise!!!

And The Winner Is …And The Winner Is …