Over the last few decades, organisations have faced some huge challenges. These challenges have been based on two keystones: How to grow the business and; how to be a remarkable company for your customers and for your employees. For this reason, many corporations are trying to reinvent themselves in order to address these challenges. This article aims to share one of the options available to create this new version of organisations.
To be clear, we are talking about a new version of an organisation because most of the time it is necessary to leave old practices and thoughts behind. This is necessary because even though those old practices were extremely useful in the past, we must recognise that, some of them aren’t suitable to help us face the new reality. The Management 3.0 approach is designed to support organisations through this change.
What is Management 3.0?
Management 3.0 is an approach compiled by Jurgen Appelo a few years ago. Jurgen collected different practices and ideas, trialled in different companies around the world, and compiled the lessons learned into a pragmatic approach to change an organisation’s style of management. Let’s take a brief overview of management practices to understand the evolution to Management 3.0.In the Management 1.0, we had the traditional mindset of an organisation as a hierarchical structure.
This model was strongly based on the hierarchies and the command-control behaviour that was born out of the industrial age where the breakdown of labour into specialised tasks was prevalent. It is important to remember that this model was suitable for the factories and businesses in the industrial revolution and certainly helped the growth of those companies.
In the modern age however this model is no longer applicable and organisations are no longer able to rely on division of labour and central command to be successful. In Management 2.0, we continued with the Management 1.0 structure and behaviours but companies started to recognise the gaps and problems in the model and therefore adapted it with a few “add-ons” to address some of the deficiencies that they identified.
Models and practices like Balanced Scorecard, Six Sigma, Theory of Constraints, and Total Quality Management are good examples of these add-ons adopted in the 2.0 thinking. In this case, we saw many organisations adopting additional interesting tools/practices to help them to get more control, more predictability, more governance and more optimisation.
In terms of evolution, Management 2.0 was a good step, but it still relied on the old structures and behaviours of hierarchies, command-control, centralisation and specialisation.
What is Management 3.0 trying to solve?
These days companies are threatened with disruption, digitalisation and demand like never before. The problems are more complex and there needs to be a better way that organisations are managed to meet these challenges.
Before we start discussing Management 3.0, it’s important to take a brief look at what problem Management 3.0 is looking to address. The previous models worked on the assumption that even in a complicated system, it was possible to predict behaviour when things change and we can therefore use this understanding to “solve” problems in the system.
Unfortunately, as organisations have had to deal with more complexity and uncertainty it has become impossible to predict how change will affect their systems and so the traditional model of management falls apart. Managers are no longer able to employ “management best practices” and guarantee success.
Improve decision making in complex environments
Complex systems thinking is emerging as a way to deal with this uncertainty. Every year, many scientists, physicists, biologists, sociologists and philosophers have tried to gain knowledge under the label of Complexity.
Melanie Mitchell, in the book Complexity: A Guided Tour, describes that a complex system is “a system that exhibits nontrivial emergent and self-organizing behaviours”. It is a pretty good concept. Especially when she points out the nontrivial emergent behaviour. In other words, it’s hard to predict and to control the behaviour of a complex system.
In complex systems, the unpredictability of how change affects the system means we’ll often be surprised by the outcome. No matter how well planned or how deeply understood the method is, we can not avoid some unexpected behaviour or undetermined outcome.
So what can we do about it? Donella H. Meadows, in the famous book Thinking in Systems, pointed out that
“We can’t control systems or figure them out. But we can dance with them!”
Despite what the large majority of people are trying to do, in a complex system, it is better to try and learn from the inherent complexity than try and break the system down into less complex components.
The critical point of this discussion is that previous versions of the Management approach treated an organisation as a mechanical construct decomposed of small, interchangeable parts that come together to form the whole (e.g. a machine), whilst the new organisation is seen as an organic construct, with individual, collaborative cells that work together to achieve a shared outcome (e.g. a human body).
Treat organisations as organisms rather than mechanisms
John Young, the author of the book The Natural Economy, shared in an article the differences between Organism and Mechanism: “Take a physical organism, say the human body. It is composed of diverse parts, each having its own operation, and all contributing to the good of the whole body. Now, at first glance it might seem that it is essentially the same as a mechanism, say a motor car. This is not so, most basically because the physical organism is one substance, whereas the car is many substances combined by art. The car is an artificial whole, not a natural whole.”
Management 3.0 treats the organisation as if it were an organism rather than a mechanism. Now that we understand the problem with complexity we can focus on how Management 3.0 can help.
In a traditional organisation, with a hierarchical behaviour, the process of decisions, most of the time, is too slow. This process is slow because the intelligence of decision is centralised and specialised. This creates a series of bottlenecks in the process of making decisions.
The market is fast. Every day, the market demands quicker answers to problems and needs. If your decision-making capability is based on centralisation and specialisation, you will always spend time waiting for decisions from your boss or another specialist.
Decentralise and distribute the intelligence of decision making
Management 3.0 addresses this through the decentralisation or the distribution of the intelligence of decision. It doesn’t mean though, that everyone can change the name of the company or create a brand new vision/strategy for the entire organisation. It means that we can let the right people, make the right decision, at the right moment, with the right constraints, in the fastest possible manner, creating the maximum value for the organisation. Great challenge, right?
What is the role of ‘managers’ in Management 3.0?
If you are a manager reading this text right now, don’t be worried! Management 3.0 is not a movement to wave the #NoManagers or “Fire All the Managers” flags. Also, Management 3.0 is not a different type of communism or socialism.
Rather, Management 3.0 is a pragmatic way to transform the role of the Manager into an enabler for the collective intelligence of decision making. A Manager 3.0 fosters a good environment to help individuals and teams to use the best possible intelligence to make decisions.
It is important to notice that Management 3.0 is about attitude, not only about structure. Of course, having a more flexible and organic structure will foster a more decentralised process of decision making and consequently, your company will provide faster answers to the market.
Therefore, it is possible to put the 3.0 concepts into practice even in hierarchical organisations. We can adopt the 3.0 mindset regardless of a company’s structure. However, the manager plays one of the key roles in fostering this attitude. Jurgen reminds us that the aim of a manager is
“to improve the system, not the rules, nor the people. When you set the right constraints, rules and people will take care of themselves”.
Summary of the structures, thinking and behaviours for the Management 3.0 approach
To summarise the Management 3.0 concept, Jurgen developed an image with a monster called Martie. This picture shows the six visions of Management 3.0.
Each vision represents a key challenge to overcome in order to create a better environment. It is not a methodology or a series of steps to adopt the Management 3.0 thinking.
These visions represent a different point of view of the same problem. Think about an issue, like high turnover of employees. Probably, to address this sort of situation, there is causes and effects in:
- How inspired people are feeling?
- How empowered the team is?
- How explicit are the constraints to guide good decisions?
- How can people learn and develop new skills?
- How dynamic is the structure? How easy is it to scale good behaviours over the structure? How efficient is the communication and collaboration among teams and roles?
- How effective is the culture of continuous improvement?
It is not necessary to act in all of these visions to start 3.0 behaviour. Using any of the views on demand is possible. Also, Jurgen Appelo did an excellent job of compiling a small set of tools to help 3.0 practitioners. In the next blog, I’ll discuss each vision and these tools in-depth. However, the mindset is much more important than the tools. That was the aim of this brief piece of text.
