Friday, January 30, 2015

Management: awaiting the new paradigm

We have heard a great deal about the shift from the top-down model to a more decentralised one, the dismantling of hierarchy and the importance of self-driven teams. But very little of this is happening on the ground, as a report in the FT highlights. The astonishing thing is that the old, centralised model persists in the corporate world despite evidence that it's not producing results:

Returns are diminishing, while the number of listed companies has shrunk by more than half in 15 years. In that sense the fears seem justified: despite bulging coffers, quoted companies are investing too little and distributing too much in dividends and share buybacks to survive in the long term, let alone create the new products, markets and jobs economies require for sustainable growth.

What could be the reason? One is, of course, inertia and the power of the unknown. The other is that companies apparently don't know how to put in place the measures needed to make the team-driven model happen. The second is rubbish.There are plenty of models available on the new paradigm. It simply doesn't suit top management to make the shift. People at the top are concerned only about how to make their pile in the five or six years they are at the helm.They lack the motivation to worry about the long-term future of their companies.

What make bring about change? Not investor pressure because most investors too are focused only on the short-term. Real change can come about only from the NextGen crowd. Younger people don't want to be ordered around, they want challenge and fulfilment in their jobs and they need a sense of purpose. They will gravitate towards companies that provide these. Some of it is already happening. When more of the older model companies find they are losing their ability to perform, we can expect to see the present model of management being dismantled.

1 comment:

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