Monday, December 31, 2007

Down with Lean, Flat Organizations

Flat organizations lead to burnout and neurosis, not nimble efficiency. The important issue is empowerment, creativity and initiative, not efficiency. Let’s fall out of love with flat organizations.

Compare, for example, Dell Corporation and Southwest Airlines. Dell deserves great credit for its successes, but basically the company has had one good idea: custom-assembled (but otherwise commodity) PCs coming out of a lean supply chain, made efficient by the World Wide Web. This idea and its offshoots are at the end of their life cycle. Dell has discovered it doesn’t want individuals to order computers from its web site after all, because customers are not as susceptible to up-sells when they are not speaking with a live salesperson. Dell has similarly discovered unexpected competition from Apple, which has churned out product innovations at a steady clip and has moved customers beyond the desktop and laptop.

In the process, Dell has become known as a pressure-cooker workplace. Smart, amiable young people go to work at Dell and emerge as nervous wrecks. Their sacrifices have not kept Dell’s stock price anywhere near its historic peak. This is not exclusively a Dell problem. Lean organizations, by virtue of eliminating layers of management and work-in-progress inventories, are more communications-intensive than any historic enterprises. Emails arrive at a pace that forces managers to be modern equivalents of Lucy and Ethel in the chocolate factory.

Southwest Airlines is only somewhat lean (it never embraced the efficient hub-and-spoke route system), but its employees are empowered. Any employee at any level may have an idea and run with it, even spend money on it. Was the employee’s idea a good idea? The company worries about that later, after the customer’s problem has been solved. Almost uniquely in the industry, Southwest is solvent, it attracts creative employees whose ideas ultimately save the company money, and its fares have remained reasonable. It is among the few airlines that customers actually enjoy flying.

Most companies, of course, debate ideas before they are implemented. Here’s a research project that would advance organizational science: One employee has an out-of-the-box idea. How many people should s/he “run it past” before the idea is spiked, or massaged into bland uselessness? What is the magical length of a communication chain, below which an idea can turn into a useful experiment, and above which initiative is (inadvertently or not) punished?

Many companies use the "skunkworks" strategy, but no one has investigated when, why, and at what scale skunkworks work. Management grad students, take this one up.

Friday, December 28, 2007

Launch: The Conscious Manager Blog

Welcome to this page. I’ll be posting essays on management, technology, media criticism, and personal growth, from dateline locations worldwide. (Home bases are San Diego, Austin, and Maastricht.)

Why blog?

· First, I want to stay in touch with the loyal readers of my 2004-06 Euroblog, and make the Euroblog available to anyone who might enjoy it. It contains travel writing, photos, and political commentary from four continents.*

· Second, I’ve got some new books in the works, and I ask your feedback on excerpts that I’ll put here. I’ll run a contest to let you propose a title for one of these books.

· Third, readers of The Conscious Manager: Zen for Decision Makers (the book published by General Informatics in 2003) write to me with questions. It will be convenient, and helpful to a greater number of people, to publish the answers here.

Now I’ll introduce myself, my books, my links, and so on. And at the end of the column there might be room for a short essay of the kind I’ve promised.

I am a Professor at the Marshall Goldsmith School of Management at Alliant International University in San Diego. (I’ve been Vice Provost for Research at Alliant.) I also have professorships at Maastricht School of Management in the Netherlands, and at Pontificia Universidad Católica in Lima, Peru. I enjoy being a professor on three continents!

Before I get chronological, two important items:

I’ve trained in aikido for 35 years, and I’m moderately famous as an aikido teacher. I wrote the original Conscious Manager book to integrate my day job (executive management) with my life in Zen martial art.

I’ve recently become Senior Editor of Elsevier’s international journal Technological Forecasting & Social Change. (Added on January 8, 2011: I am now Editor-in-Chief.) This raises the profile of my op-ed and conference-panelist commentaries on trends in technology and management. When I’m inspired to such commentaries between conferences and newspaper gigs, I’ll blog them here.

Back to chronology: I spent the late ‘90s and early naughties at Oregon Graduate Institute as dean of its management school. Until 1995, I was Research Director at the IC2 Institute at the University of Texas at Austin. (Before that, I worked in the market research industry for a dozen years.) I’m still a Senior Fellow at IC2.

I’ve traveled for these universities throughout East Asia and western Europe, and to Mexico, Peru, Suriname, Egypt, Kuwait, Cyprus, and Tanzania. And have traveled still farther afield on vacations…

I’ve made some original research contributions in management science and applied statistics, and have won a bunch of awards for research and for promoting entrepreneurship. I authored the textbook Market-Oriented Technology Management: Innovating for Profit in Entrepreneurial Times (Springer Verlag, 2001; Amazon has just made it available in Kindle edition), and more recently a book on high-tech economic development, Social Culture and High-Tech Economic Development: The Technopolis Columns (Palgrave, 2006).

High tech economic development remains a passion. I consult on it for municipal and regional governments and NGOs, and sporadically edit Review of Technology & Economic Development – you can find back issues of RTED at Technopolis Times, my web page on the topic. In the same vein, I was a founder and former member of the Advisory Board of the Austin Technology Council, and was also a Board member for the Software Association of Oregon.

I’ve been married to Sue Phillips since 1979. One of our daughters is in law school in California, and the other is still in college at the University of Texas at Austin. Come May 2008, all four of us will be UT graduates. I attended UT and Tokyo Institute of Technology, earning the Ph.D. at Texas (1978) in mathematics and management science.

OK, here’s the contest:

The Conscious Manager: Zen for Decision Makers has just come out in e-book edition (pdf format) via Lulu Press. At $11.25, it’s more economical than the paper edition, but more risky to read in the bathtub.

Moreover, I’ve got enough chapters for a sequel. CM2? Son of the Conscious Manager? No, those won’t do. Send me your suggestions for a title for the new book, either as a comment on this blog page or via email at fp (@)

And send your questions about conscious management – I’ll try to answer them in this space.

And here’s the essay. Austin’s city council and the courts have just approved the conversion of Northcross Mall to a Wal-Mart superstore. I sent this letter last year to the San Diego Union-Tribune (the U-T, not to be confused with UT, which is a university in Texas!) when the same question arose here in California:

Dear Editor,

Your June 1 editorial in favor of Wal-Mart ignores the consensus of researchers: Economic growth depends on an influx of creative, young, college-educated people, and they are attracted by a city’s quality of life and distinctive culture. Any developer or retailer who makes San Diego look more like Omaha or Wilmington is an enemy of our city’s future.

Economic developers encourage the “traded sector” that brings money into San Diego from outside the city. (London, Paris, Tokyo, Milan, and New York are tourist shopping meccas – but not because they have Wal-Marts.) Two things create "destination shopping.” They are upscale boutiques and department stores, and a vital mix of small shops.

Researchers laud small-business entrepreneurship as another font of local economic growth, and independent retailers are an important part of the mix. In the Netherlands, many cities restrict store-opening hours to eleven per day. This has the effect of allowing one-person retail businesses to survive under conditions that are not profitable for big-box stores. Yes, prices can be high, but this is offset by the flow of tourist dollars into the shopping districts of Maastricht and other Dutch cities, and the resulting higher wages.

The U-T wants us to believe that Wal-Mart stores benefit the poor. Let’s look at that on two fronts, jobs and consumer prices. Yes, big-box stores can employ local youth at or near minimum wage. If the alternative for these youth is gang crime, then great. However, gang neighborhoods are not the areas most chains are looking to locate in. It is family-wage jobs that create community wealth by generating multiplier-effect jobs, and create stable communities by allowing parents to support families. Minimum-wage jobs without family-wage jobs do not constitute economic development.

As for prices, communities can organize food-distribution co-ops at prices that beat Wal-Mart’s.

Wal-Mart doesn’t just eliminate competing retailers. The University of Southern California's Stefan Schumacher notes that “by squeezing suppliers to cut wholesale costs, [Wal-Mart] has hastened the flight of U.S. manufacturing jobs overseas.” Who picks up the health care and unemployment costs of out-of-business American retailers and manufacturers (not to mention Wal-Mart employees working without benefits)? Right: It’s not Wal-Mart, it’s you and me, the taxpaying public.

Thus, big-box stores are not reducing costs, but are externalizing them – making society pay for things that used to be business expense items. Goods may be cheaper in the short run, but a deteriorating social fabric and community economy will cost more in the long run – and fixing them will be a public expense. Can you say “race to the bottom”?

* If you like to read travel blogs in reverse chron order, the final installment of the Euroblog is here, and you can click to earlier entries.