David's Blog

You’re Gonna Need a Bigger Boat!

Sheriff Brody (Roy Scheider) sees the shark for the first time

Steven Spielberg’s 1975 movie, Jaws, tells the story of a seaside town whose shores are terrorized by a killer shark. After several fatal attacks, the town sheriff, played by Roy Scheider, sets out to hunt the monster in a dilapidated fishing boat, together with the local salt and a nerdy marine biologist. On his first close encounter with the terrifying beast a stunned Scheider retreats back into the cabin, muttering to the old salt, “You’re gonna need a bigger boat.”

I now use a clip from that movie to open my EMBA classes. I tell the participants that they are going to need a larger conceptual framework, a “bigger boat” to handle the colossal challenges that they and their people will face in the future. For there is a sense of a sea change in the complexity of the problems we are facing today, a feeling they have outgrown the ability of our concepts, methods and tools to handle them.

The Defects of (Anglo-American) Management Theory

In The Witch Doctors: Making Sense of the Management Gurus (2011) John Micklethwait (editor-in-chief of Bloomberg News) and Adrian Wooldridge (Bagehot columnist for The Economist) identified four defects in management theory:

  1. That it was constitutionally incapable of self-criticism
  2. Its terminology confuses rather than educates
  3. It rarely rises above common sense
  4. It is faddish and bedeviled by contradictions

They described the root cause of the problem as an “intellectual confusion at the heart of management theory; it has become … a battleground between two radically opposed philosophies. Management theorists usually belong to one of two rival schools… and management practice has oscillated wildly between these two positions.” They went on to name the two schools as scientific management on the one hand and humanistic management on the other, concluding that, “This, in essence, is the debate between “hard” and “soft” management.”

Hard Management’s Dominance Challenged

Today the hegemony of the hard style is being challenged as never before by a changing context, which includes climate change, growing concerns about sustainability and a digital revolution in information and communications technology. Many have experienced firsthand how the management methods used to control growth and scale in the industrial era can be at odds with those needed to nurture the creativity and innovation required in the digital one.

“Soft” management methods and approaches like agile and design thinking are now all the rage. Consultants recommend managers adopt “new principles” and move from “command-and-control” to “communicate-and-collaborate”.  Scientific management, they say, is “dead”.

It would be a mistake, however, for managers to try and follow any simplistic “from…to” advice. For the “battleground” metaphor used by Micklethwait and Woolridge is an apt one, and this battle will not end anytime soon.

We Are The Battleground

It’s time to recognize that the “intellectual confusion” in management between the hard and the soft is not a “bug” in the theory, but a feature of the human condition. It’s time to accept that our fundamentally divided nature is the essence of our humanity and that it is the practical weaving together of seemingly irreconcilable opposites that is the very warp and woof of our existence. It is also the secret of our success.

The tensions spiral through our lives as individuals, families, communities, organizations and societies and throughout our history as a species. They have grown in complexity as our languages, cultures and institutions have grown more complex. Like the twin arms of a double helix, the dualities coil through philosophy in general and the history of management thought. Here they are familiar: exploitation and exploration, intended and emergent, calculation and judgement, individual and team, performance and learning, detachment and immersion, mechanical and organic, hierarchy and network, rational and emotional, plan and story, plumbing and poetry….

Both…And Not Either/Or

I think a “bigger boat”, a more comprehensive management framework, has to address this root dilemma, not statically by trying to replace the “hard” with the “soft”, but dynamically by embracing and containing the scientific within the humanistic. It’s a both…and predicament, not an either/or choice. This will require a new appreciation of context, especially the roles that space, time, scale and technology play in our ability to relate to each other and thrive together.

We know, for example, that when people are working together in groups less than 150 in size, management can be informal, face-to-face and “humanistic”.  Place the same people and thousands of others like them inside a giant, dangerous technology like an integrated steel mill and that is a recipe for disaster: a much more formal, “scientific” approach will be required. But large, complex organizations need not become oppressive prisons. There are examples of integrated steel mills, like the Canadian firm Dofasco, whose culture is a weave of the hard and the soft. They may never be as agile as a music-sharing service like Spotify but they aren’t competing with them and compared with other integrated steel mills they are light years ahead.

Understanding Relationships: Figure-and-Ground

The challenge for managers is how to frame the relationship between the hard and the soft in their own situations. It’s all very well to talk of “balance” and “weave” but those are outcomes. How does one produce them?  Here it’s helpful to think of a relationship that alternates between figure and ground. When the one is in the foreground the other is always behind it and their positions can flex to-and-fro, depending on the circumstances.

This is how to understand the concept of hierarchy-on-demand popularized by Gore & Associates, makers of Gore-Tex. They are a global $4 Billion business organized in clusters of facilities, each of which has about 150 people. This allows a unique humanistic approach to management, but it cannot handle everything. When teams reach an impasse managers invoke hierarchy-on-demand, bringing into the foreground a formal structure to make either/or decisions. Once that situation has passed, however, managers and hierarchy fade into the ground. Think of a fishing net that normally lies flat but can be lifted at a node at any time to form a temporary hierarchy and then let go to sink back into a network.

Every manager, then, must be alert to these fine-grained, constantly changing relationships between the hard and the soft and govern their behaviour accordingly. Hierarchy, calculation, command, and constraint all have a role to play in management, but they must be contained within an egalitarian philosophy that values above all else judgement, care and the cultivation of people.

Safely confined in a “bigger boat”, scientific management can be an excellent servant: unconstrained and on its own, it makes for an oppressive, even tyrannical master.

This article is one in the “shape the debate” series relating to the 13th Global Peter Drucker Forum, under the theme “The Human Imperative” on November 10 + 17 (digital) and 18 + 19 (in person), 2021.

Democracy, Capitalism and Donald Trump: An Ecological Perspective Part I: Midnight Reckoning

Back in November 2016 I wrote a blog in the immediate aftermath of Donald Trump’s election. As a Canadian I thought the Americans had had an awful choice to make but was just as surprised as many others were, when the man I wanted to lose beat the woman I wanted to lose.

An ecological lens suggests that it’s helpful to look at abstract systems like democracy and capitalism as dynamic ecological processes, rather than as static structures. That is, both capitalism and democracy are configurations of complex adaptive social, economic and political systems that have their own internal dynamics, analogous to those of complex adaptive ecologies, like forests and estuaries.

From this perspective successful social enterprises, both political and commercial are conceived in passion, born in communities of trust, grow through the application of reason and mature in power. Here they tend to get stuck in systemic traps, structures and routines that conserve their habits and protect their success but render them inward-looking and insensitive to the small-scale changes that presage trouble.  In economic organizations the result is decline and possibly disruption by smaller, faster enterprises wielding new technology. In political bodies the result is gridlock which, if it persists, can lead to political disruption and insurrection.

In their two perceptive books, The Broken Branch (2009) and It’s Even Worse Than It Looks (2011), political scientists, Thomas Mann and Norman Orenstein gave us a broad overview of how the gridlock emerged in the American Congress. Most importantly, they outlined the changes that led to the polarization of its members and the emergence of a quasi-parliamentary system, built upon opposition, in a constitutional republic where the separation of powers demands negotiation and compromise to get anything done.

Continue reading…

Jonathan Sacks (1948-2020): Jewish Wisdom and Our Binocular Minds

The Binocular Mind

“And twofold always… May God us keep 

From single vision and Newton’s sleep!”

(William Blake, Double Vision)

Rabbi Lord Jonathan Sacks

I read with great sadness of Rabbi Lord Sacks’ sudden, untimely passing on November 7. His writings have been a source of inspiration and really helpful ideas to me. I discovered them only a few years ago, while continuing to work on my ecological perspective on management. Sacks’ thoughts on the moral and social ecologies that underpin the ability of human beings to cooperate and work together have been especially useful. They apply at the organizational level but have been even more helpful in extending the ecological framework “up” a few systems levels from there to that of society and the state – the level that Sacks was most interested in.

Sack’s writing reaffirmed for me the dual nature of human beings in society and the benefit of a binocular mind, like that suggested by an ecological/evolutionary perspective. (The New Ecology of Leadership (2012).

Continue reading…

Milton Friedman’s Philosophy: Invaluable at First but Deadly Afterward

Milton Friedman (1912-2006)

2020 marks the 50th  anniversary of Chicago economist Milton Friedman’s famous (or infamous, depending on your point-of-view) claim that the only social purpose of business is to increase profits. This doctrine proved immensely popular among corporate managers but has been increasingly challenged as being harmful to society. McGill management professor, Henry Mintzberg was an early critic and has been a consistent advocate of a broader approach to social purpose.

Victorian political commentator Walter Bagehot (1826-1877) once wrote “The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.” That describes Milton Friedman’s work – very helpful in the beginning but a hindrance subsequently.

I graduated from Chicago’s MBA program in 1972, imbued with the idea that management was all about the allocation of resources, as assessed by the Capital Asset Pricing Model (CAPM). I had majored in finance, studying with Gene Fama his newly-developed Efficient Market Hypothesis that was shaking up the world of finance. I was ready to change the world of management….

I soon found that practicing managers weren’t using theory to tell them what to do – they were using it to rationalize what they already wanted to do. Back then it was clear to young managers like me that the great post-war boom in economic activity was slackening and that the large corporations had accumulated a great deal of fat and were guided by a fuzzy sense of purpose that supported a relaxed ‘country-club’ approach by managers. We young Turks wanted to change that and make corporations more efficient. Fama and Friedman’s perspectives and theories proved invaluable in cutting through tired old stories with a powerful counter-narrative. The era of conglomerates, leveraged buyouts and private equity was launched on this new logic.

At first this new approach seemed very successful. Conglomerates thrived and their founders like “Tex” Thornton of Litton Industries, Hal Geneen of ITT and Jim Slater of Slater Walker (in the UK) became business folk heroes. The exploits of LBO firms like Kohlberg Kravis and Roberts (KKR), fueled by junk bonds, were celebrated in the press and their billionaire principals regarded as geniuses. But it didn’t last: monolithic concepts taken to their (il)logical conclusions never do. One has to take time, change and people into account: nothing lasts unless it is incessantly renewed.

It seems that enterprises (and both democracy and capitalism can be thought of as giant enterprises) are conceived in passion, born in communities of trust, grow through the application of reason and mature in power.  The young become old and success is followed by excess. Gradually control of the corporation was taken over by elites, who used concepts like Friedman’s to rationalize their actions. Ideas once used to challenge outdated attitudes were now used to justify the new, emergent status quo. In recent times in Anglo-American business the result has been the steady liquidation of productive enterprises, the creation of oligopolies and the emergence of a bloated financial sector. Value extraction has replaced value creation.

Deadly indeed, but we know the enemy and it’s not Milton Friedman: it’s us.


Austrian Economics and the Ecological Perspective

A few months ago I had the pleasure of meeting Hunter Hastings online. Hunter is an economist by training, a member of the Mises Institute and a follower of the Austrian School of economics. We got to chatting and he saw my presentation When the Science is Uncertain Turn to the Humanities, which I delivered for the I4J Leadership Group. As a result he asked me to do a podcast for the Mises institute

The podcast has now been published as Business School Fallacies: Acting Your Way To Better Thinking.

Thanks Hunter – it’s been a pleasure working with you!