A New Management Challenge: Making Many Penny’s

by Michael Maccoby

This Article was published in: Research Technology Management, Vol. 40 No. 1 January February, 1997. pp.57-59.

It was adapted from Dr. Maccoby’s keynote speech to the World Future Society’s annual meeting, Washington, D.C. July 14, 1996.

In what way is the world of work changing? Are we riding the Third Wave of the information age as described by Alvin and Heidi Toffler and Newt Gingrich? Is there a shift as described by the Swedish consultant Bo Ekman, from an industrial paradigm focussed on manufacturing to a neo industrial learning paradigm? If there is a new wave or paradigm, if the logic of production is changing, what does it mean to people working in technology organizations and the their leaders?

According to statistics from the U.S. Department of Commerce, the shift in work appears to be from manufacturing to service. The same pattern is found by the OECD for Western Europe. But these categories are misleading especially for companies creating technology. Much service work uses and develops products, and much manufacturing customizes products adding value though engineering. Products are designed cooperatively with customers, using new information age tools. As James F. Moore shows in his recent book, The Death of Competition (New York, Harper Business, 1996), some of the most successful technology creating companies like Intel and Microsoft have developed mutually beneficial partnering relationships. According to Moore's ecological metaphor, their "co-evolution" is gained at the expense of companies which can no longer adapt to their new "business ecosystem".

The logic of manufacturing in the 20th century developed from the Scientific Management of F.W. Taylor to the Total Quality Management of W. Edwards Deming. It influenced family life, schooling and the values that shape the social character. The transformation to a new paradigm or logic announced by strategic thinkers is, I believe, gathering momentum. It involves an explosion in the use of information and telecommunication, but I believe that it is more than this.

The new logic, call it the logic of learning, changes the way managers need to think not only about product strategy, but also about the human side: skills, empowerment, motivation, relationships and leadership.

According to manufacturing logic, if the price is right, world class products are all it takes to succeed. But as products become commodities, profits require continuous innovation and partnering with suppliers, customers and distributors. Partnering demands learning about and with others. It requires relationships of trust based on shared values and mutual understanding.

According to manufacturing logic, quality means simply meeting the customer's specs. Continuous improvement will eliminate any defects. Manufacturers aim for perfection, or the closest thing to it, six sigmas from the mean.

However, this approach to quality runs the risk of doing the wrong thing right. As Russell Ackoff argues, it may be better to do the right thing wrong, because you can learn and improve with experience. This has been the strategies of Bill Gates at Microsoft and Andy Grove at Intel.

There is no single definition of quality that fits learning logic. Quality may mean helping business customers succeed, which requires understanding their business and, in many cases, the needs of their customers. Or it may mean delighting private customers with offerings they never imagined. Rather than continuous improvement, quality relationships stimulate continuous innovation of products, services, and processes. According to learning logic, research and development must partner with the frontline and customers.

An AT&T service technician I shall call Penny is the prototypical frontline employee for the age of learning. Penny controls a multi-million dollar business customer account. The customer likes dealing with her and has rejected the services of AT&T managers and account officers. Penny is invited to customer conferences and workshops. When she needs help in solving a customer problem, she consults other technicians whom she trusts.

What, then, is the role of Penny's managers? She knows more about the customer than they do. She is motivated by her responsibilities and relationships with the customer and co-workers. She knows her work is meaningful, since she receives continual positive feedback from the customer. She is empowered by her competence, tools and customer. It would seem the job of management is not to manage Penny, but to make many Penny's.

According to manufacturing logic, organization is hierarchical with functional stovepipes. According to learning logic, either frontline employees or cross functional heterarchical teams may focus on customer problems. Heterarchy means that leadership shifts according to who has the appropriate knowledge. Not only must teammembers learn with the customer, they must also learn enough about each other's contribution to understand its value. (see Knowledge Workers Need New Structure, RTM Jan-Feb '96)

The logic of manufacturing dictates constant movement back and forth from centralization to decentralization. Decentralized units are miniature versions of centralized units, with the same type of hierarchy. While top management propounds a strategy, in theory decentralized managers can interpret it in their own way. If their performance slips or they become too independent, the center can reassert its authority. In practice, decentralized units copy the centralized model. Measurements and processes enforce uniformity. In contrast, the logic of learning calls for interactive leadership based on pluralism. The center designs a strategic vision, and different units engage in a dialogue about how best to move toward this ideal. (see Interactive Dialogue as a Tool for Change, RTM Sept-Oct 1996). This dialogue recognizes that people and situations may differ significantly not only in different workplaces, but also with different customers. Both the center and the distributed units continually learn from each other and strategy continually evolves.

Along with the shift in technology and production logic, there is a changing social character in the workplace, as people adapt to the new paradigm. The typical social character adapted to the manufacturing logic was formed in families headed by a sole male wage earner, with mother at home. Managers took the paternal role at work, and individual achievement at work required meeting the expectations of these male authority figures.

The most dramatic social change in the second half of the 20th century has been the entry of women, and particularly mothers of small children into the workplace. At an early age, these children must learn interpersonal skills to get along with strangers in day-care centers. Computers are tools for the young to become independent of teachers. Comparing the values of the manufacturing social character with those of the learning social character, we find that men and women have become more alike. Both measure achievement as providing value for customers, rather than pleasing authorities. Teamwork and seeking help from colleagues is a natural way for them to work. They seek to make work more fun and are motivated by opportunities to innovate. They are not particularly loyal to the organization, and do not expect the company to be loyal to them. They see themselves as free agents, always on the look-out for a better offer. Even if they don't take it, the offer affirms their independence from the organization. The best innovators would love the chance to hook-up with a start-up and make their fortune.

Of course, all production logics, from farming and craft to manufacturing have required that people learn. The difference is that according to learning logic, the productive process involves continual learning as opposed to application of accumulated knowledge. Knowledge is not exclusively owned by subject matter experts. Frontline employees, like Penny are gaining knowledge that must be learned and applied by managers. The new social character develops the ability to learn, which means less arrogance and more humility, as well as increased insecurity.

Leaders also must keep learning not only from the organization but from other companies and the market. While Penny is an example of a frontline learner, Bill Gates may be the prototype of the business leader with the new social character. Both of his parents were professionals. Gates dropped out of Harvard College, indicating the self-developer's lack of respect for traditional authority. He has organized his own learning. While leaders with the older social character fear to display their uncertainty and attempt to project an image of omniscience, Gates recognized that he had underestimated the importance of the Internet and publicly reversed his strategy.

Like Gates, business leaders for the age of learning recognize their limitations in creating the future. Learning logic requires that they:

• Be alert to changes in the business environment and flexible enough to adapt quickly.

• Act as synthesizers or humanizers rather than analyzers or energizers (see From Analyzer to Humanizer--Raising the Level of Management Thinking RTM, September-October, 1994. pp. 57 59.), by communicating a systemic vision and implementing it interactively.

• Respect the creative needs of frontline employees and learn from them while providing them the opportunity to realize their own visions.

• Model a culture of creativity, where people learn from failures as well as successes. (Learning logic recognizes that there will inevitably be failures.)

That is the way for managers to make many Penny's and to develop future leaders for the age of learning.