The management of the future might be created by admitting the global interdependency and thus involving new standards followed by rules and regulations that will confirm interdependency to create broader well-being of society: putting new measures and governance systems in place.
The management will maybe in the future also involve a change in the way people run the organisations, and where do they put the emphasis: it’s about governance of organisation’s resources.
Evoli - Center for excellence in management was established as a NFP organisation to help organizations achieve good results. It moved from assisting the healthcare industry to all industries several years ago. Here is why this strategic decisions was made and what we learnt by doing that.
Slovenia is a small country in the EU making its way in all areas as best as it can. Particularly the health care system is one that stayed firmly public system of providing services and may just as well show itself as an advantage in the future. Many countries world-wide are making reforms of their healthcare following public health costs increases, maybe even enlarging the portion of public services in order to assure all citizens may have equal access to the system. But the health care providers are not result oriented in terms of investing the resources in the best possible way. Instead they became victims of mismanaged financing system, which disables all stakeholders from getting the greatest benefits. This fact is probably also the biggest issue in development of their management systems and is therefore continually lacking attention.
A big lesson from improving public healthcare in Slovenia was there is lack of will for managerial improvement of the system stakeholders. This put us into the decisions to shift to all industries, broaden the focus and share with all organizations what we believe creates extraordinary organizations.
After two years I can report much greater impact on the organizations, and also a greater cooperation and interest from the organisations in the healthcare sector.
Capitalism for me is a way how businesses manage capital. I do not think we need a new capitalism, but we need new management. Or to say better, businesses (all kinds of) must take management rightly, and not just in the context of the capital. I don't think we need a new management for a new millennium. Instead we have to start to exercise management in a way that we should have been doing it but we didn't because of many reasons, metrics and profit drive are among them. When considering what is wrong and what is right in today's world concerning management I believe two areas must be distinguished between.
First, there is a question of what is the drive for many organizations today. Profit and non-profit organisations, governmental or private, big or small, in any industry, probably in most countries in the world, the majority is »profit-driven«. Of course there are exceptions, different standards. But whether we like it or not – number one topic for an owner is the ROI of what they are doing. Unfortunately in many countries even the non-profit organisations are run as profit businesses, leaving only an incremental difference between both types.
I call this area the »WHAT« organisations are doing in the market. This reflects their primary objectives of why a particular organisation was established in the first place, what are the objectives, and so forth.
The second area is the way organisations operate on the markets – not only the businesses but any organisation involved in the society. This matters because any organisation can be run in such a way that it creates long-lasting results or just wastes resources without contributing to the whole (contributing only to an individual).
I call this question the »HOW« the organisations are doing in the market. This reflects how they are doing the business on the market, and how are people in the organisations working in their professional areas to achieve the aims and goals of the organisation. The how should concern the way people in the organisations create, run, develop and innovate their business or activities on the market in order to achieve long-lasting results and excel.
WHAT (on earth) an organisation is doing
More or less organisations make money to create shareholder’s value by achieving some kind of results. Or, if an organization was established as a public, NGO or NFP organisation, these try to “justify the budget spending” by achieving some kind of results.
Hopefully, in doing this the organisation is able to justify their existence on the market by delivering the results with such quality standards, that eventually customers are willing to pay for that performance.
But this cannot be the whole of the reason for operations. If looking at the sociological and psychological view of the organisation, even following the various trends and events in the world, I feel safe saying that creating only the profit without delivering a greater good to the society (i.e. creating long lasting results in the environment) will create society poorer. Maybe this will create a wealthier individual but a poorer environment and surrounding of the organisation. Proofs from the situations in the developing and the developed countries show that businesses are not as successful in such environment.
Slovenia as an ex-Yugoslavia market has many real life examples of that. We used to joke in the old times, that the communism is always a step before the capitalism. So it was. Production plant and facilities were created in places one would never create, because it was not an economic decision but a political. It was created for people to work not for any other reason or true economic purpose like fulfilling a market need. These decisions were basically political with no connections to real life needs or market requirements.
If I may make a blunt comparison against other systems in the world, which I think are quite successful in recovering and prospering an example can be found in nature. A tree or a plant grows well if it has the resources, then it creates “results”, and potentially has a successful growth in its life span. But it never destroys its environment, which enables it to grow. Instead it adds to the environment, nurtures it, and makes it fertile by giving habitat for other organisam that can benefit from that and help it in the same way. Basically it grows from the soil (with the environment) and takes care of the soil (of the environment). This is what businesses do not do always: they don’t always contribute and develop their own surrounding, which I think they always should. An ecosystem may be an example.
There are many initiatives throughout the world where individuals propose different kind of behaviour and purpose for organisations in the society.
Prof. Muhammad Yunus has been accredited the international Nobel prize in 2006 for his outstanding results in creating different setting for businesses. His idea of the social businesses is one way of looking at the big picture in which we live and how this may eventually develop into a more sustainable way of living in harmony between organisations, environment and people.
Chiara Lubich was an Italian Catholic leader and foundress of the Focolare Movement, which is an international organization that promotes the ideals of unity and universal brotherhood. Founded in 1943. Part of her work for the world of unity goes way into how and why organisations perform their activities in the society. She came up with actual definition of what are three basic roles (aims) of organisations in the world of unity: development of the organisation, taking care of others in needs, development of the structures and the society.
- help those in need financially, or offer them a job, taking action so that no one remains in need
- reinvest part of their profits in the business
- to develop the structures of the little cities of the Focolare Movement where people will learn how to live and work in a culture of giving
There are many other examples that show how resources can be used for creating value. Examples from other parts of the world. They do not show directly what or how to ensure the best way for the development of the society but they do have two things in common. First they are all focused to creating results instead of creating shareholder value. Second, they introduce social development and the role of organisations to create a greater benefit for the society. Thus, they tend to balance the shareholder value and the value for the greater society.
HOW businesses are run
A completely different thing is the way organisations are managed when they try to achieve results and create value. The way the organisations are run has nothing to do with the legal form or professional association. The way organisations are run is related to whether they are only professionally excellent organisations (and thus capable of competing on a market) or they are also people and socially excellent (and thus capable of competing in life).
An organisation is not equally competent in social terms if they perform only the market role or if it performs also the social role. In order to clearly say the message, there is the need to seek answer to a question, is this company executing its role in the society at its best, or is there a reason we would prefer to have another organisation, which can deliver the same role better?
From the experience I have in working with clients and developing my company, an organisation creates long-lasting results when it focuses not only on the professional side of the business, but ensures to continually improve its productivity, relations, quality and the management/leadership.
Claus Møller is a Danish management consultant, who gained international success in developing organisations world-wide. His concept of the focus areas is a rich source of inspiration, concepts and techniques for managers in seeking new ways of how developing organisation’s competences in these general areas (and complementary to the professional areas of the business). His General Business Excellence model is giving clear guidelines and recommendations to managers. However, everyone has to find its own way in creating long-lasting results, but the major rules remain the same in all organisations.
General Business Excellence
Why excellence in conducting business is needed? In my opinion leaving the survival of organisations solely to the market (e.g. customers) is not enough. Surviving on the market may be a minimum requirement. I believe the task of managers is not to run the organisations but to create excellent organisations that bring value to all stakeholders.
This is where organisations hit the wall. We never defined what an excellence is. But an easy going decision may be the following. Excellence defines an organisation that is capable of exceling in what they do on the market and creating long-lasting results. The history teaches us the same lesson over and over again. Not every kind of management creates excellent organisations or excellent results.
It was not so even in ancient history (Greek, Roman, etc.) which provides us with many examples of civilizations unable to sustain mutual satisfaction between all stakeholders and continue to develop. Not even in recent past. Many companies prove management may not add value to excel in the business but add value in such a way that it helps shorten the life-span of the organisation.
The General Business Excellence implies that the organisation knows and understands what it takes to be successful in any business. It implies that the organisation, the managers, teams, employees know, what it generally takes to add value, solve problems, make good decisions, communicate well, enhance quality, inspire people and mobilise their energy, establish and maintain good relationships, apply appropriate management principles, etc. These topics are not definite. There are many more. But they are put together into four areas, which are what managers must focus in order to create long-lasting results.
The General Business Excellence aims at development of organisations, teams and individuals on the areas of productivity (adding value in all activities), relationships (creating and maininting good relations), quality (creating customer loyalty), and management (developing managerial behaviour and employeeship).
CREATING A BLEND
People generally talk a shift is needed to “save the world” in business. But it is actually about creating innovation and development in management. It has not happened for last one hundred years or more. All aspects of science have improved tremendously; psychology, medical, IT, not to mention physics, chemistry, etc. they all allow us to live differently today from what our grandfathers lived. But we still work in the same organisations as we used to when Taylor thought it would be good to try to improve some things in the production line.
Peter Drucker said the greatest danger in times of turbulence is not the turbulence , but it is to act with yesterday’s logic. Unfortunately this is what we are still doing today, although we are basically aware of failure in the end.
The main idea of the General Business Excellence is to start the management innovation in the organizations. And they should focus in fulfilling the basic roles the organizations have: create value, help others in need, and help build the infrastructure the society needs.
There are several views and initiatives that distinguish such organizations, and I find in them af few common characteristics:
- The shareholder value is important but not the most important aim. Stakeholder value can be just as important aim.
- They recognize that building infrastructure and society helps the organization to improve and perform better, create long-lasting results, and sustainability.
- They seek opportunities to give more instead of have more, and thus gain from the experience and opportunities the giving creates for the business (just as many non-profit organisations benefit in managing to create the reputation, image, or other intangible assets).
The real issue the world needs to find the answer is the philosophy of the unlimited growth of GDP. I am convinced there is no such thing as unlimited growth. Many companies have already faced limitations to “double digit” growth. Maybe the notion and the idea of the “steady state economy” can be used, maybe another one. But the idea is we can spend only what we create. The planet can create something more, but cannot consume or spend everything, thus waste of resources and the equilibrium are imminent. So, what is the right equilibrium of the global economic model? Unless the system admits the need to produce more in order to help the system parts that need the help, systems in nature always eliminate and replace such parts. There must be the idea that we create more but the “excess is shared freely”. Until now, it is shared but only with those who can afford it or simply wasted. We can create as much as we can productively use, reuse and recycle. But not more. Instead of producing low quality but high quantity the aim should be high quality and less quantity.
John Stuart Mill was writing this in 18th century, and is still relevant today. At least the mankind is obviously posing similar questions today as it was almost 300 hundred years ago.
The first thought worth exploring would be the metrics, taxation, and financial markets that need to support the idea of encouraging organizational growth, contributions to the people in need, and building the societal infrastructure to achieve future growth.
Second thought must go toward organisation’s management and/or leadership. I call it the management system that is in place in an organisation (similarly as many other systems are in place in an organisation: invoicing system, information system, purchasing, merchandising, etc.). What is the aim of the management system? In fact there is only one aim: to achieve long-lasting results. This means developing employees in the General Business Excellence areas through education and training. And the thought must be about developing such organisations with such management system that will utilise the resources in the best possible manner to achieve them.
My firend Claus M.