Saturday, October 04, 2008

Saturday Morning Musings - the first five fallacies in modern management

I started my last post, Child abuse in Australia - a case of misused numbers?, as my usual Saturday Morning Musings, then decided that it would be better as a stand-alone post. I decided instead, still scratching at current pre-occupations, to provide a list of what I saw as the main fallacies in modern management.

Most have some good points. The problem lies in the way that we have come to interpret and apply them.

To avoid making this post too long, I have listed the first five fallacies. I will give the second five next week,

The Fallacy of Measurement

We live in a measurement age in which everything must be measured, quantified and in which only those things that can be measured attract real attention. Aided by the computer, the quantification movement that emerged in management has spread to every aspect of life. The problem is that many of the most important things are not easily measurable.

The Fallacy of Standards

The standards movement grew rapidly in parallel with the quantification movement, reaching its private sector peak in the 1980s or early 1990s. While its influence has declined somewhat in the private sector, its influence within public sector thinking is still pervasive.

The problem with standards lies in the way in which the term's different meanings have become confused. The establishment of standards, common specifications that would allow things to fit together, was important to industrial expansion. From this, the meaning was extended to cover fitness for purpose, so that a piece of equipment did what it was intended to do, and then to management systems.

In management, the combination of standards with measurement gave us concepts such as benchmarking and key performance indicators. This marked an implicit shift, in fact a confusion, between standards as fitness for purpose and standards as a device for performance improvement.

The standards movement retreated in the private sector as it became clear that some standards based approaches imposed costs without real gains. They have continued in the public sector in large part because those imposing the standards generally do not bear the costs.

The Fallacies of Uniformity and Consistency

The popular idea that uniformity and consistency are of themselves good things is a direct outcome of the standards movement. We can see this in the common assumption in Australian public policy that single national approaches are always better.

This is actually confused rubbish. Uniform national approaches may or may not be better. It depends upon the circumstances,

There is an odd tension between our belief for uniformity on one side, our support for the concept of the market with its core ideas of competition, choice and diversity on the other.

The Fallacy of Planning

The concept of planning within the private sector was popularised by Peter Drucker in particular. By the late 1960s there was a common belief that effective corporate planning created an environment that would allow sustained long term growth.

Within the public sector in the same period, we saw the growth of the idea of central planning - exemplified not just in the centrally planned economies, but in the global popularity of five year plans -as a way of achieving faster growth.

Longer term planning in the Drucker sense, unfairly I think, went into decline within the private sector as it became clear that that planning was not a panacea. However, with the evolution of a computer, planning morphed into a device for exercising central corporate control within big organisations.

There is no evidence that I know of to show that differences in planning techniques have any measurable impact on corporate performance. All large companies tend to apply the same type of planning approaches.

Within the public sector, failures within centrally planned economies effectively discredited the idea of central planning. At the same time, the evolving types of private sector planning joined with changes in public administration such as program budgeting (itself a child of the quantification movement) to morph into new and increasingly rigid public sector planning (control) techniques at agency levels.

There is a dreadful irony here. New concepts in public administration such as the New Zealand model intended to impose the equivalent of market disciplines and to improve effectiveness and responsiveness have in fact had the opposite effects.

The Fallacy of Control

Unlike past generations who knew that the world was an uncertain place, current Australians actually believe that Governments can (and should) control outcomes. See problem, fix problem.

The difficulty we face is that there is a very substantial difference between controlling change as compared to controlling our response to change. This is another area where a private sector management concept has been adopted in the public sector, in so doing turning into a strange new beast.

Risk management is quite a different concept from risk avoidance. In the first, we do something while trying to identify and manage risks. In the second, we don't do something because of the risks.

Risk management has a very long history. I am not quite sure without research as to when it emerged as a formal discipline. However, I do know that by at least the early 1990s it was sufficiently popular to become an identified consulting area.

As so often happens with management ideas, it was then taken up by the public sector.

I need to be very precise here. The concept of risk management had always been known within the public sector. It was just one of those things that you did as an automatic part of your work. What was new, was the adoption of the idea of risk management as a new focus area. All of a sudden, Australian Governments began talking about risk management as something new.

This had two effects. The first was the imposition by Government of new risk management requirements on the private sector, the second the desire to apply specific and mandated risk management techniques to internal Government activities. As a consequence, risk management moved from something that was done as part of something else to an identified and dominant activity in its own right.

This may sound like a semantic change, even a good thing. However, what it has meant in practice is that the risk focus has shifted from management to avoidance.

8 comments:

Lexcen said...

What about the obsession with cutting costs?

Jim Belshaw said...

Good one, Lexcen. Will add next post.

bobembry said...

To see what Peter Drucker (http://tinyurl.com/63kwng) really advocated check out his books and articles. For an outline of Management: Tasks, Responsibilities, Practices see http://tinyurl.com/2cof3n. A revised edition has been published but I haven't finished my table of contents outline yet (http://tinyurl.com/47fe3e). Almost no institutions on the planet have practiced or are practicing Drucker's view of management. If they were it would be "positively" obvious in our day to day lives—as opposed to "negatively obvious."

bobembry

Jim Belshaw said...

I am sure that you are right, Bob, although I am also sure that Professor Drucker would have been the first to acknowledge that some of his ideas (as with all of us) were creatures of their time.

bobembry said...

Yes, but he kept updating his world view. How about Management Challenges for the 21st Century, Managing in the Next Society, or The Definitive Drucker. And then there's Post-Capitalist Society. There's a reason he is regarded by informed people to be the leading thinker in the field—a functioning society. I can't think of anyone even close. The current economic mess is the result of people not applying his thinking. And then there is the issue of people reading what he wrote and fitting it into their preexisting mental patterns (Edward de Bono). I've got a shopping list of competing resources on my web site.

Jim Belshaw said...

Bob, what is the best site to access? I saw your earlier URL's, and did check your profile and professional site, but I am cautious about checking to far. Too many nasties around.

bobembry said...

All of my URLs are safe. My site has been indexed by Google. bobembry is part of all my URLs and is a keyword on many pages. If you wanted to find a book title you can enter the title and bobembry in the Google search box and probably get the URL to the page or my text site map. My introduction page is http://web.mac.com/bobembry/free/ but its scope is much broader than the current discussion.

Jim Belshaw said...

Thanks, Bob. I will read with interest.