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Management's New Gurus

Cover Story


A 1990s management quiz:

(1) Do you work in a "learning organization"?

(2) Is the boss talking about "business process reengineering"?

(3) Is your company's "organizational architecture" sound?

(4) Are you a "time-based competitor"?

(5) Is your company leveraging its "core competencies"?

Say what? If you aren't familiar with these buzzwords and the management gurus who coined them, you can hardly consider yourself today's thoroughly modern manager. Worse, you and your company may fail to gain competitive advantage from the thriving marketplace of business ideas.

Sure, you've read bits and pieces of Peter F. Drucker's 25 books, and you've digested the best of W. Edwards Deming's ideas about quality. But Drucker is now 82, Deming 91. Tom Peters, perhaps the most-quoted guru of the day, remains durable (page 50). But he has delivered much the same be-true-to-your-customer message for years. Yet the corporate landscape is shifting fast: Competition is increasingly global, technology is developing quickly, and the work force is changing profoundly.

NEW LINGO. These pressures are leaving managers hungrier than ever for fresh approaches. U.S. companies spent $13.9 billion on outside advice last year--up from $7 billion only five years ago. American readers shelled out more than $500 million last year on business books, the traditional calling card for any Drucker wannabe. That appetite for ideas is why a whole new generation of management gurus, mostly in their forties, is jockeying to take the place of the grand old men of American business thought.

These champions of change are creating a new business language, along with new ideas designed to help companies manage better. While most of these pundits are corporate outsiders--academics, consultants, and speech-givers--many already boast power and influence in boardrooms and on factory floors around the world. Among their client companies, there's a growing sense that the key resource of business isn't capital, personnel, or plant, but knowledge and information. "Ideas are key," says Robert W. Galvin, who as chairman of Motorola Inc. brought that company to the forefront ofthe quality movement. "We listen. We read. Management thinkers are very influential. They are the developers and promulgators of key ideas."

Of course, many new management ideas are yesterday's theories warmed over and disguised under a sauce of new buzzwords. Others are mere fads, feel-good illusions peddled by false prophets who convince managers that their solutions make large-scale change easy. "The gurus are selling hope, confidence, the future, and happiness, and all these guys are great sellers," cautions Michael A. Stephen, president of Aetna Life & Casualty Co.'s international operations. "But change is a painful process, and there's no gain without pain. I have the battle scars to prove it."

If much of what the gurus offer in their endless rounds of seminar-giving, speechifying, and scribbling is dross, there's real gold out there, too. A few of these new oracles of modern management are having a profound impact on some of the nation's biggest companies. For example, Eastman Kodak Co. and American Express Co. have heeded the preaching of Michael Hammer, who coined the term "reengineering" to describe the fundamental rethinking and radical redesign of a business system: Both of these companies have appointed senior officers for reengineering.

ESOTERICA. It's the same story at Xerox Corp. Chairman Paul A. Allaire is no pushover for fashionable B-school nostrums: Much current management literature is, he says, "pure rubbish." But not so the work of David Nadler, president of Delta Consulting Group and the hidden figure behind Xerox' major reorganization this year. An academic turned consultant, the 43-year-old Nadler is the current guru of organizational architecture, a term he uses to describe a new form of corporate structure that evolves around "autonomous work teams" in "high-performance work systems."

The lingo may be esoteric, but Allaire views Nadler's ideas as a means to provoke new thinking inside the company. "If you've been in a company long enough, you're part of the culture yourself, and it's hard to step back and listen to new ideas," Allaire says. "He can help facilitate the process and can provideperspective."

The new gurus aren't rewriting Drucker, the most enduring management thinker of our time. More often than not, they're updating him by adding new ideas and tools to what Drucker has called "the practice of management." Besides Nadler and Hammer, the hottest and most influential new gurus include Peter M. Senge, a soft-spoken researcher at Massachusetts Institute of Technology, who focuses on how managers and corporations learn; C.K. Prahalad, a University of Michigan professor who is shaking up strategic planning; Edward E. Lawler III, a California academic who's expanding the frontiers of employee empowerment; and George Stalk Jr., a consultant who is the chief proponent of time-based competition.

The new gurus aren't all proselytizing from the same text, but they do have several tenets in common. For starters, theirs is generally a sterner religion than the happy-talk evangelism of The One-Minute Manager, that one-minute best-seller of the 1980s. Nearly all these preachers shun incremental change. They urge managers to think in radical terms, dramatically overhauling entire operations at a stroke.

WIDE NET. They also tend to agree that smaller is usually better. Most believe that management should organize itself on the basis of process, such as fulfilling an order, instead of functions, such as marketing or manufacturing. That takes an organization's focus off its own internal structure and puts it on meeting customers' needs, where it belongs. They generally agree that time can be squeezed out of every job; that self-managed teams throw more challenge and meaning into employment; and that companies sorely need to create networks of relationships with customers, suppliers, and competitors to gain greater competitive advantage.

Many of these thinkers also cast unusually wide conceptual nets, basing their ideas on theories and experiences borrowed from the nonbusiness world. Nadler, for example, takes much of his inspiration from the history and philosophy of architecture, which he uses as a metaphor to guide managers through change. Charles Handy, a popular British thinker, draws lessons from John Keats and George Bernard Shaw. In challenging managers to act more boldly, for instance, Handy notes that Shaw once observed that all progress depends on the unreasonable man.

The 44-year-old Hammer used his experience as a former computer-science professor to formulate his notion of reengineering. Hammer has crisscrossed the U.S. in the past year, giving more than 100 sermons on his precepts, which he unabashedly thinks of as commandments in a new management theology. "It's a theology because it requires a belief that there is a different way to do things," he says. "It requires faith."

Similarly, MIT's Senge uses psychology and education theory as metaphor in his concept of the "learning organization." He tells thousands of managers at the likes of Ford Motor, Federal Express, and Procter & Gamble that corporations, like people, vary in their ability to assess and learn from their experiences. "Learning disabilities hurt organizations and industries badly," says Senge, who offers up his own tenets for how executives and their companies can learn better.

STEPPING BACK. At their most provocative, some of the new gurus are turning conventional wisdom on its head. Only a few years ago, managers were sold the logic that strong leadership and enduring corporate cultures were good things. But several management thinkers now believe all the focus on leadership was wrong because it undermined the concept of empowerment. Today's best managers, the theory goes, must step back to allow their workers to assume alternating roles as leaders in teams.

The romantic view of the strong, omniscient leader is largely a myth, maintains Robert Kelley, a consultant and business professor. He estimates that leaders on average contribute no more than 20% to the success of an organization, while so-called followers are responsible for the remaining 80%. Yet all the thinking, study, and literature focus exclusively on how to produce leaders, he says, often to the detriment of others who assume more passive roles. Similarly, some gurus now say strong corporate cultures, with their ingrained traditions, prevent companies from changing rapidly in response to the times.

Even corporate strategy--once hatched by vast departments of corporate planners at headquarters and later moved down in the organization to line managers--has undergone a complete metamorphosis in recent years. Prahalad, a 51-year-old guru of global strategy, says executives too frequently think of strategy as "fit" instead of "stretch." Companies plot strategy on the basis of their ability to match their existing resources with their ambitions. "If they fit, however, there's no opportunity for creativity and innovation because you're scaling down your ambitions to fit your resources," says Prahalad, who advises AT&T, Kodak, and Philips. "Only when your aspirations and desires lie outside your resources does creativity occur, because you have to invent new ways of competing and change the rules of the game."

To foster that sort of thinking, the professor urges companies to focus on their "core competencies"--what they do best and what differentiates them from the competition. Then, he says, companies should search for ways to expand beyond their existing resources through licensing arrangements, strategic alliances, and supplier relationships. A case in point: Apple Computer Inc.'s alliance with Sony Corp. to manufacture Apple's highly successful Powerbook line of computers, which linked Apple's knack for designing easy-to-use products with Sony's miniaturization and the manufacturing knowhow necessary to make compact products.

Thanks to the freshness of his ideas, Indian-born Prahalad is regarded as the most influential thinker on strategy since Harvard business school's Michael E. Porter--no slouch as a guru himself. Prahalad, along with a London Business School colleague, now boasts his own video series and expects to publish his ideas in book form within the year.

RECYCLED? Yet much current management thinking sounds suspiciously recycled and repackaged. "High involvement," for example, is only the latest iteration of "empowerment," which in turn was just another name for an older notion. "The idea has been renamed more times than Elizabeth Taylor," laughs Lawler, one of the foremost thinkers in the arena of employee participation. "It all goes to the same issue: How do you move power, knowledge, information, and rewards downward in an organization?"

If the basic belief of empowerment isn't new, Lawler has advanced the ball with an appreciation for how profoundly a company must change to make empowerment work. It is extremely difficult, he says, for managers to give up authority and for employees to translate that surrender of power by higher-ups into lasting increases in productivity.

"You've got to change the whole system," says Lawler, director of the University of Southern California's Center for Effective Organizations, which works with TRW, Hewlett-Packard, and Digital Equipment. "You create small business units, you flatten the organization, you change the work systems and the design, and you change the role of the manager." Lawler has advised General Mills Inc. on how to set up self-managed teams to run several plants. At some beverage plants, for example, four shifts of 20-person teams are informed of marketing plans and production costs. "They have at their fingertips all the data that would normally be held by management," says Daryl D. David, a human resources director. The self-managed teams do everything from scheduling production to rejecting products not up to quality standards, and they receive bonuses based on plant performance. Some 60% of General Mills' plants have been converted to such "high-performance work systems." The approach has produced significant gains in productivity, and the company is now moving to spread it to all operations.

While many of the new gurus are advocates of radical restructuring, that doesn't mean they applaud the downsizing so many corporations went through in the past few years. In the view of many, those maneuverings may have lowered overhead costs but did not necessarily make businesses more productive or responsive to the market. "If all you try to do is flatten your existing organization," says Hammer, "you'll kill it. The fat is not waiting around on top to be cut. It's marbled in, and the only way you get it out is by grinding it out and frying it out." Translation: Companies need to redesign totally--or reengineer--how the work gets done.

Hammer, a former IBM software engineer who taught computer science at MIT, began formulating his idea of rethinking work in the mid-1970s, when he was consulting with Citibank and Xerox on the use of information systems. "Most organizations were using computers to automate antiquated paper practices," he says. "They were merely paving cowpaths." Believing that companies should use technology to rethink the way they did business, not simply to automate current practice, he quit his MIT job in 1982 to launch his own Cambridge (Mass.) consulting firm. But it wasn't until 1987 that he thought of the term "reengineering" to describe how companies must radically redesign work.

FIEFDOMS. After he published an article on the subject two years ago in Harvard Business Review, Hammer found himself and his ideas hot property. More than 1,500 managers and executives have since rushed to attend his three-day seminars. He has signed a contract with HarperCollins Publishers Inc., which expects to publish his book on reengineering early next year.

Behind the hoopla is an intriguing idea: that companies should be organized around process instead of function. "Something as simple as filling an order might go through a dozen different functions in some companies," Hammer says. "Each has its own fiefdom with its own concerns and objectives." Such function-based organization introduces errors, adds costs, and causes delays.

Hammer's reengineering approach offers ways to streamline--an alluring notion to cost-conscious managers. ITT Sheraton Corp., with 450 hotels around the world, is in the midst of reengineering its operations. Executive Vice-President John W. Herold Jr. was impressed by Hammer's spiel a few years ago. Herold invited him to headquarters to talk with senior management, then dispatched 22 of his top operating executives to Hammer's three-day seminars.

The upshot: "We threw away the book and invented a new hotel," says Herold. The typical 300-room Sheraton Hotel had required up to 40 managers and 200 employees. By eliminating narrowly defined jobs and rethinking antiquated procedures, ITT found it could run a reengineered version of 250 suites with only 14 managers and 140 employees--with higher customer satisfaction. "We redesigned the processes of the company and eliminated everything we didn't need to do," says Herold. "Most of the managers were filling out reports for bosses."

TIME PRESSURE. Hammer's ideas overlap somewhat with another hot movement in management thinking: the push for time-based competition. The chief proponent of the idea, George Stalk, and his partners at Boston Consulting Group Inc. had been startled in the late 1970s by how much faster several Japanese companies got products to market than did their U.S. competitors. In one consulting study after another, Stalk heard clients talk about the speed of development. "What made it connect was that everyone knew time was important to business, but no one knew how to manage time," he says.

By 1985, he had thought up the term "time-based competition" to describe the focus of his consulting efforts. In the late 1980s, Stalk was regularly mapping, measuring, and monitoring a given process--whether it was the development of a product or the fulfillment of an order--to form the basis of a time-based competition practice of some 12 consultants within BCG. Today, more than 100 consultants at BCG alone largely work with major corporate clients to implement the idea, at fees of about $250 an hour. And Stalk's catchy phrase has spawned a litter of similar terms todescribe the same thing, from "cycle-time reduction" to "time-compression management."

Whatever the phrases, they are all familiar to Nadler, who has captured a strong corporate following for his advice on organizational design. The former Columbia University business school professor established New York's Delta Consulting in 1981 as an alternative to such strategy-based shops as McKinsey & Co., Bain & Co., and Stalk's BCG. His idea: to bring together the strategic issues with the behavioral dynamics oforganizations.

The philosophical framework for his firm is what he dubs the "congruence model of effectiveness." It's how the four key elements of an organization--work, people, the formal structure of a company, and the informal structure and process--fit together. Sound a bit dense? Says Nadler: "It's a language system, a way to take something complex and overwhelming and make it easy for managers to understand."

That system is used to study an existing company and to then design the "organizational architecture" of a new one. Allaire of Xerox, for example, is said to walk around the company with a sketch of the congruence model in one of his notebooks. Xerox used Nadler's methodology to guide it through its latest reorganization, which breaks the company into smaller, more autonomous, and theoretically more responsive units.

The internal group of Xerox managers who developed the new architecture of the company called itself the "future-tecture" team. Over the 15 months of the project, Nadler worked closely with the team. One result: A new, three-level organization chart shows Xerox' corporate staff at the bottom, supporting the business teams and districts at the top. More important, profit-and-loss responsibility, once focused in the chief executive's suite, has moved down to 20 business-team general managers. Units and teams now have complete beginning-to-end responsibility for a Xerox product.

PLAYING GAMES. No matter how dazzling the insight or brilliant the theory, however, it will be of little use if an organization and its people can't learn from it. That's where the idea of the "learning organization," popularized by Senge, comes in. One way to improve learning, he says, is to create opportunities for managers to practice in a risk-free environment, not unlike a rehearsal for an actor or an exhibition game for a ball player. "People who have studied how human beings learn come again and again to the world of play or what we call a practice field," says Senge. "By moving managers between a performance field and a practice field, you can improve the learning process."

To do that, Senge brings senior executives and front-line managers together to play simulation games that allow them to gain better insights into how each of their decisions affects the others. His approach is being used by managers at numerous companies, from Ford to Federal Express. And he has many enthusiastic supporters in the business community. As chief executive of Hanover Insurance Co., William J. O'Brien used Senge as a consultant for eight years to teach his management team such techniques. "I'm not saying it gives absolute answers, but it gives the human mind a more informed way to look at business," says O'Brien.

For every Senge or Nadler who has already won the ears of the corporate elite, there are dozens of other aspirants who hope someday to become the next Drucker or Deming. Some of them and their ideas will go the way of the hula-hoop. But others are likely to have a lasting impact on the practice of management and the shape of U.S. corporations. Whether or not you agree with them, that fact alone makes the current crop of pundits worth listening to.TENETS OF THE NEW GURUS


A conceptual framework for the organization of the future, it's the notion that

learning is central to success. Management needs to see the big picture, to

escape linear thinking, and to understand subtle interrelationships


The term for a fundamental rethinking and radical redesign of a business

system. Urges an overhaul of job designs, organizational structures, and

management systems. Work should be organized around outcomes, not tasks or



The idea is for companies to identify and organize around what they do best.

Corporate strategy should be based not on products or markets, but on

competencies that give a company access to several markets and are difficult

for competitors to imitate


A metaphor that forces managers to think more broadly about organization in

terms of how work, people, and formal and informal structures fit together.

Leads to autonomous work teams and strategic alliances


The belief that time is the equivalent of money, productivity, quality, and

innovation. Proponents argue that time, like costs, is manageable and a source

of competitive advantage throughout every process in the organization



CHARLES HANDY Half philosopher, half futurist, this clever British thinker

maintains that "discontinuous change" requires dramatically new approaches to

work and organization. A lecturer at the London Business School, Handy, 60, is

the author of The Age of Unreason, a handbook loaded with new, catchy phrases

to help managers cope with change

JOHN KOTTER The Harvard Business School's guru on leadership, he believes that

most U.S. companies are overmanaged and underled. Kotter, 45, says that

organizations need to combine strong leadership--defined as the ability to a

changing environment--with strong management, or the ability to cope with


EDWARD E. LAWLER III He dislikes the term "empowerment," but this guru at the

University of Southern California is one of the foremost thinkers in what is

now called "high-performance involvement." Lawler, 54, advises companies to

break themselves down into small units, give employees exceptional say in what

they do, and reward them for taking responsibility

C.K. PRAHALAD A brilliant teacher at the University of Michigan, Prahalad may

well be the most influential thinker on corporate strategy today. With Gary

Hamill, a colleague at the London Business School, Prahalad, 51, urges firms to

focus their strategies around "core competencies"--what they do best--and to

leverage those and future competencies

GERALD ROSS Co-founder of a Greenwich (Conn.) consulting firm called Change Lab

International, Ross is a change-management expert who has worked with such

companies as Aetna Life & Casualty and Bristol-Myers Squibb. Ross, 48,

maintains that the "new molecular organization will be built around markets,

not products or functions"

SHOSHANNA ZUBOFF Author of In the Age of the Smart Machine, this thoughtful

Harvard business school professor speaks of the need not to "automate" but to

"informate"--to use smart machines in interaction with smart people. Zuboff,

40, is currently studying "model companies" that employ technology to change

the nature of work


John A. Byrne in New York

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