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julian-birkinshaw's picture

What is your Management Model?

One enduring change in the management lexicon brought about by the dotcom revolution was the term business model—how a firm makes money. The concept had been in existence for decades, but the competition between "old" and "new" economy firms, with very different business models, helped to demonstrate its importance as a way of thinking about the basic choices firms make when it comes to their sources of revenue, their cost structure, and their make-or-buy options.

In the post-dotcom era, firms have continued to experiment with new business models, with some success. But genuinely new business models are hard to come by, and they aren’t as easily defended as they once were. Firms are therefore on the lookout for new forms of competitive advantage—they are looking for sources of distinctiveness that are enduring and hard to copy.

One intriguing possibility, as suggested by many of the company stories described in the MIX, is the idea that a firm’s Management Model can become a source of advantage. In fact, I would suggest that asking, "What is your Management Model?" is almost as important as asking "What is your business model?" 

A Management Model is simply the set of choices made by executives about how the work of management gets done—about how they define objectives, motivate effort, coordinate activities, and allocate resources.

Notice two key features. First defining your Management Model is about making choices. In the airline industry there are several coexisting business models, and every firm knows it has to make an explicit choice about which one to adopt. Similarly, some industries already feature competing Management Models. For example, Linux, Google, and Microsoft all operate with very different Management Models (Linux is run through an open-source software community; Google has a highly-informal, university-like model; Microsoft has a more traditional, hierarchical structure), yet they compete head-to-head in the desktop operating system market. And Toyota operated for decades with a different Management Model from those of GM and Ford, despite having a very similar business model.

Second, we can put some structure around the concept by suggesting that the discipline of management has four specific dimensions. Managers have to decide where their organization—or their department or unit—is going (define objectives), and they have to get people to agree to go in that direction (motivate effort). The means by which they do this is to manage across (coordinate activities) and to manage down (making decisions).  The framework, illustrated below, helps make this clear.

The four dimensions of management
The four dimensions of management
For each of the four dimensions, it is possible to identify different principles by which that activity is undertaken.  On the left side, we see what might be called "traditional" principles that everyone can recognise. On the right side, we see "alternative" principles that are less well-known but are arguably more relevant to today’s fast-moving business environment. 
 

  • Choices about how activities are coordinated in the firm. Do managers focus on using formal and well-structured management processes to deliver outputs?  Or do they encourage a process of informal and spontaneous coordination through mutual adjustment?
  • Choices about how decisions are made in the firm. Do managers take personal responsibility for decision making, and rely primarily on their own deep knowledge and experience?  Or do they prefer to tap into the disparate knowledge of their subordinates and assign collective responsibility?
  • Choices about the nature of the objectives the firm pursues.  Do managers have a clear set of short-term goals for the firm? Or do they pursue an oblique, or indirect, path through the definition of a higher-level and longer-term set of objectives?
  • Choices about how individuals are motivated to pursue these objectives. Do managers attempt to hire and retain good people by making extrinsic rewards, such as salary, benefits, and bonuses attractive? Or do they focus on intrinsic rewards such as the opportunity to contribute to society, a feeling of achievement, or peer recognition?

Of course the alternative principle in each case seems more alluring, but actually I don’t believe all firms should be seeking to move that way—the traditional principles have served large successful firms such as Exxon and Walmart well for decades. The point, rather, is to suggest that by understanding the spectrum of choices available, executives are in a position to make more enlightened decisions about whether and how to change.  It’s also worth noting that these are rarely either-or choices. In many progressive firms managers are attempting to do both— to motivate people through a combination of intrinsic and extrinsic rewards, for example.  In my experience, firms never reach a position of delivering on both sides to the maximal level, because they involve tradeoffs and choices.  So it is useful–for the sake of exposition–to consider the two poles on each dimension separately.

The bottom line here: there is no sure recipe for success in developing your management model—there are many valid approaches—but one sure recipe for trouble is to not give some considered thought to the choices you are making.

Questions to consider:
 

  • What's the best way to balance traditional and "alternative" Management Models?
  • How would you initiate the conversation about evolving your Management Model in your organization?
  • What's more important: business model or management model? And how are they linked?
  • What examples have you come across of particularly effective Management Models?

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koshy-samuel's picture

Our future expectations have changed with technology, people and process driving into new era of mind networking, collective wisdom, crowd information management, decision making and innovations waiting to happen 2014 and beyond...

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jay-weiser's picture
Julian -
This was a thought provoking article.  By way of background, I have had almost 10 years of experience consulting with Fortune 500 organizations in the area of strategy management for the Palladium Group (formerly Balanced Scorecard Collaborative which was started by Robert Kaplan and David Norton). 

Having cut my teeth applying and modifying their tools of the trade with large "traditionally" management companies, I constantly saw the struggle with new approaches to management where decision making is more distributed (or should be), where understanding is essential versus just following orders, and where organizations could benefit from emerging and collective wisdom versus just the old "tried and true" approaches.  Your article made me wonder - so do strategy management principles as espoused by Kaplan and Norton still hold in the new economy (even for older businesses)?  What new ideas need to be considered?

As I have thought throughout my consulting career, there is not one black and white answer.  It is not either / or - but both / and.  For example, cookie cutter alignment rarely works and can hinder full engagement.  On the other hand, I do not think "obliquity" works by itself either.  I think what is needed is a combination of the two - maybe "obliquity within some defined framework or bounds".  The world is gray and our solutions need to be as such.  I think we need to merge and integrate the ideas from both the "old world" and the "new world".

I look forward to hearing what other practitioners and thought leaders have to say and how it can be applied in the real world.

elad-sherf's picture

Hello Julian,
Very interesting model. I think it describes well some of the choices managers need to make. I also like the fact that it is, like the full range of leadership model, does not imply that there is one right way, but that it is a choice over a spectrum.
Building on that point, it is implied that the choices made, while not right or wrong by themselves, are distinct. However, I think the key lies in recognizing the right mix and actually finding different areas in the organization where different choices are made according to the needs and conditions, For example, a production unit, should not be managed the same as the R&D unit. And even in those two, it depends on the content and the people.
I think my comment goes especially to the issue of managing decisions. You write: "Do managers take personal responsibility for decision making, and rely primarily on their own deep knowledge and experience?  Or do they prefer to tap into the disparate knowledge of their subordinates and assign collective responsibility?"
While taping into the collective disparate knowledge is essential, responsibility should still stay with the manager... there is no disparity between them... and relying on deep knowledge is not contrary to tapping other people's knowledge... it is by embracing both ends of the continuum together and/or deliberately choosing  to employ one or the other, that we differentiate ourselves.
I am interested to hear your thoughts about these issues.
Thanks for sharing the model.
Elad

dominique-turcq's picture
The "management model", a very good concept, leads to an other one on which I have been working for the last few years with several clients where I assisted organization changes issues towards more collaboration: the "collaborative model". 
Every corporation has a  series of "collaborative models" inside its organization. When one wants to change for more collaboration, namely by using modern 2.0 tools, it is important to identify on which existing collaborative model any new approach will land. 
For instance:
- some collaborative models are highly competitive (our team vs their team)
- some are on the contrary very open ( discounting NIH is a professional mistake)
- some are very informal network based (our clique collaborates but not with other cliques)
 
All these models are acceptable as such and have to be considered as an important starting base for any change. Organizations with highly competitive collaborative models in their genes will not easily switch to a very open collaborative model.
Thanks for the post
Dominique Turcq