THE POLICEMAN’S lot is not a happy one. The force exhibits in extreme form the organisational stupidity that successive governments, particularly this one, have visited on all public services by imposing designs and procedures that make it impossible for them to learn. This is why, despite a 39 per cent increase in real resources over the past decade (an extra pounds 5bn) and a 25 per cent boost in manpower, effectiveness and morale has never been lower. The public now trusts the police less than it does doctors, teachers, judges or the NHS.

This is not their fault. ‘They, and we, deserve better,’ says Vanguard Consulting’s Richard Davis, who has worked on policing as a system with several forces. Will Sir Ronnie Flanagan’s long-awaited Review of Policing, which thudded on to ministerial desks last week, provide it? Not of itself, Davis believes. Flanagan knows policing is ‘at a crossroads’, the implication, rightly, being that it needs to change direction. Ultimately, however, he is himself too banged up in the dysfunctional system that created the problems to do more than tiptoe around the main issues.

Thus, the report doesn’t go near the fear of many insiders that the reforms introduced by David Blunkett as Home Secretary were, intentionally or not, an attack on the fundamental duty of protecting the public and in danger of turning the force into an executive arm of the state. They worried that the systematic removal of police discretion was making the service a creature of the inspection and compliance regime, and hence government, rather than the citizen.

Flanagan treats this as an issue of bureaucracy. Police bureaucracy is indeed grotesque – at any one time, notes Davis, out of a command unit of about 350 officers, just 10 will be out policing, the rest behind desks recording data and form-filling – a colossal waste of resources that urgently needs pruning. But it is a symptom, not a cause, and palliatives such as ‘civilianisation’ (recruiting civilian pen-pushers to take the place of officers behind desks) or less intensive incident recording are just that.

The cause of the bureaucracy is the Soviet-style ‘deliverology’ regime developed by the Prime Minister’s Delivery Unit under Tony Blair – ‘targets and terror’, as the equivalent became known in the NHS. In the police, the bureaucratic effects of deliverology were twofold. The first was that each target generated a standalone, ring-fenced sub-unit to deal with it. So every command unit has separate boxes for witness protection, offender management, domestic abuse, child protection, neighbourhood policing, crime prevention, intelligence, ‘volume’ crime, victim support, CID, firearms, licensing, schools liaison, together with the obligatory call centre with the forlorn task of routing calls to the right one (within 15 seconds). Co-ordination is a nightmare, with extra layers of staff drafted in to manage it.

Meanwhile, the target measurements being no help with public protection, their second effect is to generate an additional, valueless (value-eating, since it consumes resources) task of recording figures for government inspectors and auditors, the all-powerful apparatchiks of today’s public-service regime. Their word carrying such weight, a cadre of internal auditors has grown up within police forces whose sole job is to check useless figures before they are reported, still more wasteful bureaucracy that prevents police from doing their job.

Remarkably, without that hindrance the job is perfectly do-able. The astonishing real story about crime is this: when police demand is analysed locally, much of it is predictable by type, time and geography, and perpetrated not by shadowy master criminals but a few offenders of distinctly average intelligence, already known to the authorities via school, social services or the police themselves.

So local policing isn’t a nice-to-have, a sop to the public, it’s essential to doing the job properly. Where some brave officers have ignored the official boxes, worked out the local issues and positioned themselves to respond to it, what happens? Crime falls, officers have more time to respond to calls, public respect and engagement increase. Unfortunately, less crime conflicts with the official target of more detection, so a sergeant on a peaceful patch will come under heavy pressure at month-end for more arrests and detections. This leads to criminalisation of playground squabbles, mobile phone insults and other absurdities. ‘No wonder so many officers lose the will to live,’ sighs Davis.

Flanagan doesn’t deal with the baleful effects of deliverology perhaps politically he couldn’t. The best to be hoped for from the report, therefore, may be the cover it provides for a few enterprising officers to reassert obligation to the public rather than government and quietly reconstitute whatever initiative and discretion hasn’t been kicked out of them by the Home Office, their chiefs and HM Inspectorate of Constabulary.

The Observer, 17 February 2008

IF THERE’S one management platitude that should have been throttled at birth, it’s ‘what gets measured gets managed’. It’s not that it’s not true – it is – but it is often misunderstood, with disastrous consequences.

The full proposition is: ‘What gets measured gets managed – even when it’s pointless to measure and manage it, and even if it harms the purpose of the organisation to do so.’ In the truncated version, there are two lethal pitfalls. The first is the implication that management is only about measuring. Way back in 1956, the academic V F Ridgway famously noted the dysfunctional consequences of managers’ tendency to reduce as many as possible of their concerns to numbers.

Quality guru W Edwards Deming went further, putting ‘management by use only of visible figures, with little consideration of figures that are unknown or unknowable’ at No 5 in his list of seven deadly management diseases. Henry Mintzberg, the sanest of management educators, proposed that starting ‘from the premise that we can’t measure what matters’ gives managers the best chance of realistically facing up to their challenge.

In the past few years, of course, spu rious measurement has proliferated beyond, well, measure. Although regulation comes into it, this is often the consequence of IT systems that can measure anything that moves – the number of telephone rings, how long calls take and cost and how many calls a person makes an hour, for instance. The figures can be on a manager’s desk the same evening.

But just because you can measure it, doesn’t mean you should. All the above, although standard in call centres, are generally pointless, because they only tell you about levels of activity, not about how well the call centre’s purpose is being achieved. Thus, a call centre may boast high productivity and low costs per call but that’s irrelevant if most of its activity is mopping up customer complaints about poor service. Activity measures prevent managers from seeing that cheaper calls aren’t the answer: better to improve the service so that they don’t need a call centre with all its associated costs in the first place.

It gets worse when activity measures form the basis of contracts with suppliers, as they often do in the hard-nosed-sounding guise of ‘payment by results’. Payment by results, whether for calls answered, appointments made or patients seen, is actually ‘payment by activity’ – activity that doesn’t necessarily advance and may actually obstruct the overall purpose. As in the call-centre example above, a contractor paid by ‘results’ (ie activity) has no incentive to improve service, which would reduce the number of calls, and hence payment, and every incentive to worsen it, by cutting the time spent on calls as they inexorably increase in number.

Here we encounter the second problem with the measurement-management equation. All too often in a kind of Gresham’s law (which said bad money drives out good), the easy-to-measure drives out the hard, even when the latter is more important. Strategy writer Igor Ansoff said: ‘Corporate managers start off trying to manage what they want, and finish up wanting what they can measure.’

What happens when bad measures drive out good is strikingly described in an article in the current Economic Journal. Investigating the effects of competition in the NHS, Carol Propper and her colleagues made an extraordinary discovery. Under competition, hospitals improved their patient waiting times. At the same time, the death-rate following emergency heart-attack admissions substantially increased. Why? As targets, waiting times were and are measured (and what gets measured gets managed, right?). Emergency heart-attack deaths were not tracked and therefore not managed. Even though no one would argue that the trade-off – shorter waiting times but more deaths – was anything but a travesty of NHS purpose, that’s what the choice of measure produced.

As the paper observes: ‘It seems unlikely that hospitals deliberately set out to decrease survival rates. What is more likely is that in response to competitive pressures on costs, hospitals cut services that affected [heart-attack] mortality rates, which were unobserved, in order to increase other activities which buyers could better observe.’

In other words, what gets measured, matters. Measures set up incentives that drive people’s behaviour. And woe to the organisation when that behaviour is at odds with its purpose. Imagine the cost to NHS morale (one of Deming’s unknown and unknowable figures) of the knowledge that managing to the measure resulted in more deaths – the grotesque opposite of its aims. Hospitals are the extreme example of a general case. As such, they allow us a definitive rephrasing of our least favourite management mantra. What gets measured gets managed – so be sure you have the right measures, because the wrong ones kill.

Yjr `pbserver, 10 February 2008

‘SPECULATORS MAY do no harm on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on the whirlpool of speculation. When the capital development of a country becomes the by-product of a casino, the job is likely to be ill done,’ wrote Keynes in 1936, during the depression that followed the Great Crash of 1929.

Writing today, he might add that a position where the economy is managed not to promote enterprise but to keep the whirlpool of speculation turning is beyond serious and becoming surreal.

Far be it from me to say I told you so (well, all right then), but the bill for entrusting the capital development of the country to the casino is now falling due – and the price will be high. As the waters drain out of the whirlpool, what’s left of the UK economic miracle makes a soggy sight.

It turns out the UK’s famous growth economy is built not on prudence and good management but on tick and soaraway property prices. The UK savings rate is negative: total personal debt is now around pounds 1.5 trillion and increasing at nearly 10 per cent a year. About pounds 1.2 trillion of that is mortgages as people chase house prices that nearly trebled in the decade to 2006 (in London, considerably more). We have thus managed the remarkable trick of transforming bricks and mortar into gauzy insubstantiality – a bubble containing thin air.

The architects of this transformation, of course, have been the City alchemists who, as we now know, vastly inflated the bubble by slicing, dicing and selling on the debt to other clever fools. But that is almost entirely the City’s function today. The time is long gone when its job was to provide a service to the economy it’s now the job of the rest of the economy to provide the material for its trades. Consider the foreign exchange market, where pounds 1 trillion is traded every day. Just 20 per cent of this is currency needed for trade or tourism. Eighty per cent is speculative – gambling, in other words. The tail has wagged the dog off its feet.

Even though the definition of a bubble is that the values are unreal, it’s the real world that gets to pick up the pieces. Even at the height of the credit boom, the City was uninterested in start-ups, much preferring buyouts of established firms on which it could weave its financial magic. Now, with the air hissing out of the bubble like a deflating tyre, the word is that start-up capital for the real economy is drying up.

Another casualty of City culture is the patient, human and organisation-building skills that underpin success in the material economy. Alas, computers can’t do everything, even in finance. It’s telling that the most sophisticated surveillance technology was unable to spot Societe Generale’s rogue trader piling up $50bn of trades – but didn’t anyone notice his behaviour?

For contrast, turn for an instant to somewhere that, for the last 15 years, has been as sexy as Horlicks. Germany, throughout the go-go decade, has been regarded by Anglo-Saxons with barely concealed scorn. Who cared about making things when all that could be done in China? Well, Germany has just put out an economic report for 2008 noting that its resilience to external shocks has ‘improved substantially’. Engineering, its economic heart, is expecting growth of 5 per cent this year (11 per cent in 2007) jobs, too, will increase.

Overall, German unemployment remains high, but the country is still the world’s largest exporter. Alone among industrialised countries, it has increased its export market share since 2000. Not only is its manufacturing sector ‘defy ing the laws of economic gravity’, as one analyst put it, Germany also has high hopes for its unregarded services sector. It has twigged that manufacturing and services aren’t alternatives they travel together. So where German exporters boldly go, Deutsche Bank and SAP follow close after. Unfortunately for the UK, the reverse applies. With nothing to piggyback on, UK services are no longer expanding to offset manufacturing’s balance of payments deficit they add to it.

The jewel in the German economic crown is not the famous global names but the Mittelstand – the medium-sized, family-owned companies that employ 70 per cent of German workers and power its export performance. These firms thrive on long-term relationships with employees, customers, suppliers – and banks, which see their job as providing continuity and support rather than doing deals. This is why the private-equity ‘locusts’ arouse such fear in Germany: imported Anglo-Saxon attitudes would tear its economic fabric apart.

Back in the UK, timid recognition that there is still life outside the casino came with last week’s announcement of a boost to the UK’s apprenticeship scheme – partly, it is rumoured, under pressure from German employers, who persist, oddly, in seeing the UK as a manufacturing base. It seems churlish to carp. It is indeed welcome – just 25 years too late.

The Observer, 3 February 2008

THE BRITISH are passionate about their sport – look at the football fans of Newcastle United. Yet the place sport occupies in the nation’s heart is almost comically unmatched by the place it occupies in the national brain – look again at Newcastle, whose panicked directors have replaced the club’s manager four times in the past two years. Connecting the two – so that heart combines with head to yield the long-term success everyone wants – is the job of Peter Keen, the eager young performance head of UK Sport who is charged, among other things, with bringing home Olympic bacon at this year’s Beijing and, even more so, at the 2012 London games.

Keen, an ambitious cyclist turned academic turned coach, is both candid and realistic about his job. While the coach shares ownership of any sporting result, there’s no feeling of helplessness to match that of the person standing on the touchline waiting for the off: ‘You can’t even run it off,’ he sighs. ‘On the starting line, the coach is nothing – and if you believe otherwise you’re a risk to yourself and them.’

With no business background as such, Keen is refreshingly short on management speak. Yet he is long on the practical business of coaxing outstanding performance from promising athletes. Chosen in 1997 to set up a lottery-funded programme to develop high-potential cyclists, he masterminded the rise of the GB team in the world championship rankings from 13th in 1998 to 3rd in 2002 and first in 2005, coaching nine world-record and gold-medal holders along the way.

Is a similar trajectory possible for other Olympic sports? Yes, says Keen. He points to his own case, where the key – both personally and nationally – was lottery funding that enabled him to give up the day job and concentrate solely on coaching and the national cycling centre. Lottery funding of pounds 50m a year, matched by a similar amount from the Exchequer, has enabled UK Sport to provide the minimum platform without which systematic success is impossible – ‘not the nice-to-haves, but the essentials’ – and focus ruthlessly on the few athletes offering international ‘podium potential’.

With this aid, a number of other sports – rowing, sailing, equestrianism and to some extent athletics – have made the transformation to ‘full-on professional mode’, with the resources and ambition to compete with the very best. ‘With those, we’re putting the shiny roof on. Others are shaping up, while others again’ – an example is handball – ‘are just starting out.’

In Olympic terms, the seeds of today’s shoots were sown in the aftermath of the Atlanta games of 1996, where an expectant Britain won just one gold medal and found itself ‘at the bottom of division two’ at 36 in the medals table. In Sydney in 2000 it bounced back to 10th, with 10 gold medals, followed by a similar performance in Athens in 2004. And Beijing this September? Keen cautions against over-optimism. ‘But we’re back in the top 10,’ he says. ‘And although we can’t predict, we’re further ahead than before.’

Keen’s headline focus is, of course, 2012 – ‘the most massive thing to happen to UK Olympic sport’. Meeting the challenge is not rocket science, he says: any sport worthy of the name requires eight or more years to master, and a semi-institutionalised system to instil it. He points to the triumphant France football team of 1998, almost all of whom were graduates of a central national academy. For London, the die is mostly already cast: ‘You know 90 per cent of the top performers six years out.’

In most people’s eyes, particularly athletes, the London Olympics are an entirely dominant end. For Keen, however, they are also a vital means towards broader, more permanent change. It’s not just about honing and refining an elite group, he insists. If a talented teenager wants to be a soldier or a musician, he reasons, there is an established educational path to move down, from apprenticeship to mastery. Why not in sport?

‘I believe passionately in the value of sport to society,’ he says. ‘There’s something fundamental about moving, running, swimming. But while we love it, we don’t really understand it.’ Hence the perennially disappointed ambitions of England football teams and the impossibility of finding an English coach to manage them – ‘2012 is about bringing all that to life’.

But, with funding uncertain after that, for successful sports the London showcase is also a once-in-a-lifetime opportunity to suck in the commercial support that will consolidate the infrastructures – teams, academies, coaches, grounds and events – that have been put in place, and maybe lay the foundations for new ones. Thus, as ever, commercial success depends on performance and performance depends on investment in a system to support and amplify individual talent. Simple in theory – but if he pulls it off, Keen will deserve his own gold medal.

The Observer, 27 January 2008

RESPONSES TO last week’s piece on surveillance and outsourcing management to computers yielded much food for thought – mostly depressing. Most correspondents thought the dangers under rather than overstated.

One wanted to start a movement against the whole paraphernalia of command-and-control management, including computers and targets. Another ended his message: ‘Of course I’m using a Hotmail account from my home computer because I wouldn’t want my work account to log this message. For a civil servant, communicating with journalists is not usually encouraged.’

However, the most graphic description of the dark places such trends lead to came from a trade union official representing NHS Direct staff. He recounted how – against a background of rising call numbers – to cut costs NHS Direct first downsized and restructured its call centres to bring in more non-nursing staff, then launched a drive to standardise shift patterns and other working practices. The vehicle was a central, computerised scheduling system that ‘manages’ everything from shift patterns and annual leave to tea breaks.

This leaves local managers with little discretion – but it does allow countrywide performance comparisons against health department targets. ‘So we have the worst of all worlds – disengaged workforce, fed-up line managers, and management by targets driven by computer software!’ If I’d set out to write a list of everything wrong with modern management, I couldn’t have done better.

Of course, there are some areas where you want computers to help make decisions: flying a jet and running a nuclear power station, for instance. And in some specific domains, such as predictions and diagnostics, computers can do a better job than humans.

Yet while computers are wonderful at some things, they are hopeless at others. It is telling that although they can out-compute humans at chess, they lose at poker. In conditions of ambiguity and partial information, they are adrift. While computers are good at routine and bad at variety, people are the reverse. So what do we do? We get computers to compress variety into the standard formats they can handle (hence all those ‘For option A press 1, for option B press 2…’ interactive telephone answering systems) and get people to read out scripts: exactly the wrong (and most expensive) way to provide a service.

The ability to decide how and where to use computer aids – to ‘manage by wire’ – may be a defining quality for today’s managers. But it is one that too many appear unaware of. A previous correspondent, a course leader, noted that ‘even at department level, management is becoming a detached elite, unengaged with the day-to-issues, setting destructive and unattainable targets and demanding their fulfilment whatever the cost, both to workers and the organisation’. The gap is even greater at the top level, the message perfectly conveyed in ever-widening pay differentials they are literally worlds apart.

There’s a Japanese expression, genchi genbutsu , which roughly translates as ‘go and see for yourself’, or ‘go to the source’. Behind it is the idea that any report, say, about a problem on the shop floor is by its nature an abstraction, separated from its context. For that reason, a ‘solution’ dreamed up at head office, where the report is received, is doubly abstracted from the source – with results like those seen at NHS Direct.

Properly understood, genchi genbutsu isn’t a licence for top management interference, but the reverse: a licence to understand the work and help those doing it to resolve the issue. It is the opposite of Gordon Brown mandating a ‘deep clean’ for all UK hospitals on the spur of the moment – did he go to the source to find out how MRSA is spread? – because it is based on understanding, not opinion. This is the logic, as in many Japanese companies, behind making new managers spend the first six months on the line and selling products before being allowed behind a desk and of thinking of the plant as a living, changing thing, rather than a cost-centre or a collection of boxes on a form.

A good role model was the late Sir John Harvey-Jones, the former ICI chairman, who represented most of what’s best about modern British management. The opposite of the manager as geek or bureaucrat, Harvey-Jones was also much more than the bluff extrovert sometimes portrayed. He was both straightforward and subtle, a rare combination. Those who worked for him appreciated his willingness to shoulder hard decisions but always explain them face to face. He was equally capable of leading from the front and allowing others to take the credit. His Troubleshooter TV series was a kind of genchi genbutsu in action. In the days of management-by-wire, such qualities become more, not less, critical. Now, more than ever, he will be missed.

The Observer, 20 January 2008

MORE THAN half of all UK employees – 52 per cent – are now subject to computer surveillance at work, according to research from the Economic and Social Research Council’s ‘Future of Work’ programme. That’s a remarkable figure, and it has led to a sharp increase in strain among those being monitored – particularly white-collar administrative staff.

‘This is a complete surprise – it came from nowhere. It’s a revolution in our work practices,’ says the LSE’s Pat McGovern, one of the researchers.

So what’s going on? The rhetoric around office technology emphasises its supposed liberation and empowerment: computers remove routine and leave people free to be creative, and remote working delivers individuals from ‘presenteeism’ and allows them to be productive in their own way. But, as another researcher says: ‘Now for the first time we can see how this development is damaging employees’ wellbeing.’

It seems to be part of a complex shift in employment relations. Instead of cutting full-time jobs and using the market to reduce costs, British employers have been devising new ways of keeping their employees, but getting more out of them. Many of the techniques they use – teamwork, performance management and pay, individual development – form part of the bundle of human-resource management (HRM) practices many believe contribute to the much touted ‘high-performance workplace’. Yet the effect seems to be negated when computers rather than people do the managing.

Job satisfaction is falling, too. The damage is especially evident down the office pecking order. The research finds a strong class bias in job outcomes under the new regime, because the combination of IT advances and individualised HRM policies has greatly increased both the number of low-level computer-mediated jobs and the visibility of workers’ performance. ‘Everything is logged, so people become much more accountable,’ notes Warwick Business School’s Professor Harry Scarbrough, who studies the evolution of the knowledge economy.

The result is a tightening of the performance screw, with an extra ratchet or two for those at the bottom of the ladder who are no longer covered by trade union representation. While managers and professionals are well placed to strike individual pay bargains, the lower-paid -especially women – tend to be left out in the cold. The divergence is exacerbated by the computer-generated tendency to centralise information and intensify hierarchy: managers see the performance figures, lowly employees don’t. The consequence, finds the research, is increasing earnings inequality. Substantial pay rises for most managers contrasts with static or even declining wages for low-end computer-monitored workers, who are working harder, and longer hours, into the bargain.

Hence the strain. In effect, today’s employment anxieties are not about being out of work: they’re about the job itself being more demanding, and the rewards more unequal. The unease is not too surprising. One of the casualties of surveillance is trust: this is true even when people don’t know if they are being watched or not. In addition, while technology achieves marvels in compressing time and space, it doesn’t do intimacy it’s hard to build trust by remote.

And perhaps, speculates Scarbrough, that’s the point. Is surveillance by computer the virtual equivalent of Jeremy Bentham’s ‘panopticon’ (a prison whose inmates could all be watched from a central point without their knowing), by means of which employers can keep the advantages of employment continu ity and tight job control without the cost of trust-building measures such as pensions and career structures?

McGovern is not so sure. He believes many of the HR practices are genuine. However, in a more general way the dehumanising consequences of embedding ever more management routines in IT systems are too obvious to miss. ‘Human resources management’ by computer is a travesty, a contradiction in terms. Computers are terrible at making fine judgments: see the spectacular junior-doctors fiasco last year. But even substituting computers for routine matters such as scheduling work rotas and holidays can lead to feelings of disengagement and even coercion: the essence of machine bureaucracy.

The effects on managers are potentially just as pernicious. One obvious danger is that managers manage what’s measured for them, rather than decide themselves what to focus on. That stands for a broader peril. Reliance on computers is an invitation to managers to switch off their brains. It is also an abnegation of their real responsibility: the duty of care to those they manage. Managing by machine may be easier, but the prospect it raises – of a generation of managers being denied the opportunity (and obligation) to use common sense, experience and method as the primary tools of their trade – is an unsettling one.

The Observer, 13 January 2008

LET’S START 2008 with a tribute to those without whom this column could not exist – you. When I began writing it 13 years ago, my elation at landing the job was quickly tempered by the realisation that, like cooking in a restaurant, a column was a regular obligation. You couldn’t have a week off when you ran out of ideas. I wrote down the half-dozen subjects I could think of at the time then broke into a cold sweat: what would I write about when those dried up?

I needn’t have worried. The problem was solved by the (in retrospect) inspired decision to attach an email address to the piece. It certainly wasn’t a strategic decision – I don’t remember making it at all – but it was crucial, because it triggered first a trickle, then a steady flow of ideas and commentary from readers that has been the column’s lifeblood ever since.

It also changed the nature of the exercise. If readers were providing some of the direction and motive force, it was no longer the one-way pontification of someone pretending to be an ‘expert’: it was a two-way conversation, more like a joint voyage of discovery.

But it wasn’t only a conversation. It was also, and much more powerfully, a system, a feedback loop in which ideas and the direction of travel were constantly adjusted by interaction with readers and fed back into new ideas. Obvious, elementary even, but it soon became clear that above and beyond generating ideas the loop was an extraordinarily powerful vehicle for learning. Just how powerful was revealed when a reader commented that the column was not only describing others’ new management ideas as they emerged, it was also putting them in a framework and suggesting why they were good or bad. In short, it could connect them.

The point of relating all this is that over time the product of this two-way traffic has coalesced into what I have come to think of as The Observer‘s guide to management – a bit like the paper’s style guide, a practical, joined-up, and (I hope) radical way of thinking about the grammar and language of management.

What does The Observer‘s model of management look like? Well, it doesn’t much resemble anything taught at business schools (with one or two honourable exceptions). As befits its origins, it begins with the customer, and is based on systems principles.

In good Observer tradition, its hostility to the conventional command-and-control, targets-and-inspection-driven management regime that currently dominates both public and private sectors is based on optimism. Human nature is irreducibly self-interested and opportunist, the dominant theory runs, and requires hierarchical control to prevent people from subverting the organisation to their own ends.

But myriad reader reactions confirm that humans are not the desiccated automatons assumed by the standard model and they despair at the arid bureaucratic constraints imposed in its name. On the contrary, people long to do a good job and be proud of their work. In turn, it is management’s job to recognise and reinforce this positive behaviour, not just structure their organisations to prevent the negative.

And, as the feedback shows, they can. First, because, as human are intentional rather than mechanical systems, organisations can take advantage of human realities ignored by conventional management such as self-fulfilling prophecies (trusting systems beget trusting people, just as the reverse is true). Second, because the opposite of top-down command and control is not bottom-up anarchy, as many assume: it is inside-out. If the organisation is built to face outwards, towards the customer rather than the chief executive, as at present, hierarchy becomes less necessary because it is the customer who exerts the discipline.

This is the opposite of soft and woolly ‘people management’. On the contrary, where customers can ‘pull’ what they need from the organisation without friction or barriers, wasted effort of all kinds can be rigorously stripped out and, critically, the capacity of the system increases. Again, readers in public and private sectors have shown with hard examples that by abolishing activity targets and improving flow through the system, results can be predictably achieved that make the targets look laughable.

Ironically, for all its macho emphasis on hard-nosed ‘reality’, it is conventional management that is a failed experiment in sterile, numbers-driven theory. Observer management, in keeping with the paper as a whole, seeks to reinstate the man (and woman) in management, and put people back in charge of their organisations, rather than vice versa.

It would be absurd to pretend we’ve done more than make a start in rolling back the accumulated weight of 50 years. But emails every week confirm it’s necessary and, in innumerable small ways, possible. So thanks to everyone who has ever written to the address below. Let’s see where we get in the next 10 years.

The Observer, 6 Jamnuary 2008

IT’S 2008 (ALMOST), and time for some management reappraisals. On the one hand, the excesses of the private equity era are so last year – its end being signalled by the disappearance of Martin Lukes, head of a-b global and hero of the FT’s email soap, behind bars at Christmas. So if management by sticks, carrots and over-the-top exhortation is over, it’s back to basics. But, on the other hand, just what are the basics today?

Every half-way successful business knows that it is just that: half-way to doing what it could. At least half the energy, intelligence and creativity of its people is leaching away unused. Improving co-ordination and flexibility, speeding up innovation and reacting faster to changing customer needs calls for engagement, initiative and creativity. But these are just the things that conventional organisation – ‘Management 1.0’, command and control or whatever – doesn’t do. In fact, it destroys them. So what next?

One option that companies longingly consider is trying to make themselves more like markets. After all, markets are unsentimental at weeding out inefficiencies and great at allocating resources. A market-like company would surely move faster, adapt more quickly and be more efficient than a conventional hierarchy.

But although tempting, imitating markets leads companies to a dead end. Think about it. The point about organisations is that they aren’t markets, otherwise they wouldn’t need to exist. The vigour of capitalism is the result of the interaction of both markets and companies, each doing its different thing. Companies and markets differ in three main ways. First, companies innovate and make strategies while markets can’t, since, second, while companies have purpose and intention, markets don’t. Third, markets are about self-interest and competition, while organisations are about collective interest, based ultimately on trust and forbearance.

As the late Sumantra Ghoshal put it, an economy without organisations would be unbearably coercive, while an economy without markets would be unbearably bureaucratic. Each disciplines each other in what economist Joseph Schumpeter called capitalism’s ‘waves of creative destruction’. A company innovates and creates an advantage, for which it can charge high prices; the market then competes the advantage away, to the benefit of society as a whole.

It follows that for companies to imitate markets is to betray their ‘company-ness’. Organisations exist to provide a (temporary) shelter from market pressures in which people can do the things markets can’t: innovate and strategise. The better they do that, the more they remove themselves from market pressures. Look at Apple.

‘Never teach a pig to sing. It wastes your time, and annoys the pig.’ Rather than trying to make their organisations into inferior markets, companies would do better studying those of their peers that most emphasise their distinctiveness, even eccentricity, as organisations. A surprising number of outstanding performers are organisational outliers – those that do things differently from the textbook. Toyota is one such. It focuses on making it easier for customers, whether external or internal, to ‘pull’ what they need from the organisation.

Or take WL Gore, maker of Gore-Tex, a pounds 1bn-a-year private company that has been profitable for 50 years. As described by Gary Hamel in The Future of Management, Gore has no organisational chart and no management layers. ‘Few people have titles and no one has a boss… The core operating units at Gore are small, self-managing teams.’

In that it is similar to Whole Foods, the fast-growing US organic supermarket chain, where all key operating decisions – including pricing, ordering and staffing – are devolved not only to individual stores, but departmental teams within the stores who are closest to the customer. To aid decision-making, Whole Foods maintains open books: all teams have access to necessary commercial and operating information. Salary details are available to everyone. No executive can make more than 19 times average pay (current ratios in large US companies are 400 times) and 95 per cent of stock options have gone to non-executives.

There are plenty more examples of organisations whose success has come from turning the orthodoxies upside down: always radically decentralising responsibility and leadership, and generating their own distinctive certainties, rather than pursuing generic alternatives such as the market. Google is one; the Brazilian Semco, where there is no company rule book, another; Linux and the open source movement, now reportedly comprising 150,000 projects and 1.6 million people, another. Much of their secret lies in their self-confidence as organisations, reflected in management frameworks that allow them to control their own destiny but also in the timorousness or wrongheadedness of their peers that fail to do the same.

The Observer, 30 Demcember 2008

THE LATE Peter Drucker claimed to have invented the term ‘the knowledge economy’ in the 1960s. Whereas industrial-age workers toiled with their hands and produced ‘stuff’, he posited, today’s employees work with their brains and produce ideas and knowledge. Even in the material world, success has increasingly come to depend on knowledge: an iPod (and Apple) or Yaris (and Toyota) win by delivering more, and better, crystallised ideas per buck than rivals.

But in other domains ideas about managing knowledge still seem stuck in the industrial age. In 1994, an influential publication distinguished two main approaches to the creation of knowledge. ‘Mode 1’ regards it as an economic commodity – dematerialised ‘stuff’ – and treats it as a production-line issue: ramping up production of ideas in university research departments (increasingly funded by industry), handing them on to company development labs through spin-outs and knowledge transfer activities, where they are translated into marketable products or services.

‘Mode 1’ is ‘hard’, linear, and simple. That’s why government and many business people like it. It has become pervasive, particularly in the public sector. University research and teaching assessments are based on this approach to knowledge, of which Dickens’ oppressive schoolmaster Thomas Gradgrind would have been proud. Even in the humanities, whole areas of study are increasingly specified by the funding research councils.

However, there is increasing evidence that Mode 1 is not just simple: for any of the messy, boundary-spanning issues we face – the ageing of the population, climate change, sustainable energy and global security, funding for which the Department for Innovation, Universities and Skills (DIUS) proudly announced last week – it is simplistic. For these kinds of problems, we need ‘Mode 2’.

Whereas ‘Mode 1’s’ vision of a lab-to-market supply chain is a closed innovation model, Mode 2 is open, diffuse – and much more difficult to command. Knowledge is not produced simply by researchers but by the collision of many scientific, professional, managerial and societal influences, each with its own distinctive angle. Mode 2 is not simply about producing knowledge: it is about absorbing, applying and creatively modifying it into often wholly unpredictable innovations. The iPod, Linux and Google are Mode 2 innovations, products of a melting pot rather than a machine, and of social ties rather than instrumental relationships. This is why it often happens in spontaneous clusters, such as Silicon Valley or Silicon Fen.

How incompatible Mode 1 mechanisms are to Mode 2 initiatives emerges from a study of the government’s Genetic Knowledge Parks (GKP) initiative, by the Evolution of Business Knowledge programme of the Economic and Social Research Council. This had brave beginnings. It emerged in around 2001 from concerns about scientific directions in the wake of BSE and GM foods. Genetic knowledge was obviously important across the biomedical field a correspondingly wide range of stakeholders were co-opted into the arrangements for the parks.

Unfortunately, with no clear lead from the centre, different departments imposed conflicting agendas and priorities. Then the funding process for the new organisations led to fierce competition between existing research centres that had previously co-operated as part of a dispersed, informal research network spread over a number of universities and institutions. Worse, under the new rules the groupings had to be regional, cutting across organic national and even international ties.

The centre’s desire for ‘accountability’ led to classic Mode 1 monitoring and control arrangements, complete with targets and standards (‘name the major scientific advances you have made in the past 12 months…’). Not surprisingly, these measures created fear and loathing among researchers and a crisis of governance and quality control at the centre, leading to pressures for even more monitoring and control. So the GKPs turned inward to concentrate on their own survival, further undermining collaboration. After five years and pounds 15m, the government pulled the funding plug.

This tale has powerful implications for many other areas of public and private endeavour – indeed for every domain where part of the object is to discover and learn from ‘what works’. That might include, for example, the NHS as well as the ‘big issues’ singled out by the DIUS. In all these, the challenge is not so much creating brilliant new science but getting different groups to work together to shape the ideas and bring them to practical fruition. Using the Gradgrind model in such circumstances is worse than ineffective it can actually destroy the capacity for innovation. The knowledge economy cannot be run on 19th-century management lines. It’s not just knowledge creation that urgently needs a Mode 2.

The Observer, 23 December 2007

OPTIMISTS ASSUME that management is a linear story of progress – slow perhaps, but we’re getting better at it all the time. This is certainly the message you’d take from its public texts (books promising the secrets of success, prospectuses of business schools, the ‘solution-speak’ of IT firms and consultancies): with more information and research at his/her fingertips than ever, it’s the best a manager can be.

Or maybe not. According to the Chartered Management Institute, which published its 2007 Quality of Working Life report last week, the most commonly experienced management styles in the UK are bureaucratic (the experience of 40 per cent of respondents), reactive (37 per cent) and authoritarian (30 per cent), while just 17 per cent of the 1,500 managers polled experienced management as innovative, 15 per cent as trusting and 13 per cent as entrepreneurial.

These averages hide huge differences in perception: what directors and senior managers saw as accessible, empowering and consensual, junior ranks judged bureaucratic (half the sample), reactive (38 per cent) and authoritarian (40 per cent).

What’s more, management is becoming more overbearing and controlling. Compared with three years ago, all three of the negative rankings have increased. This is ‘clearly disappointing’, says Jo Causon, CMI director of corporate affairs, who points out there will be knock-on effects for engagement, innovation and productivity. While leadership needs to be situational – an emergency service will likely be more directive than a research lab – coercive and rule-bound styles do not bode well for a service-based knowledge economy in which organisations depend on discretionary effort and initiative for excellence rather than obedient compliance with orders.

Why is command-and-control management on the rise, when the report shows evidence that it is associated with declining rather than growing organisations, and that it is self-reinforcing (and, in the long term, defeating)? Why, when domineering management elicits a hostile reaction, does that appear, to a command-and-control management, to justify further controls, and so on?

One reason, Causon suggests, is recruitment and retention. Four-fifths of organisations have problems finding and keeping the right people, according to other CMI research. This means that many companies are operating with underqualified, or at least inappropriately qualified staff. Square pegs in round holes don’t product good results, resulting in managerial browbeating or worse.

A more general reason, believes Lancaster Business School’s Professor Cary Cooper, the report’s co-author, is the creeping, and misguided, importing by UK plc of US business mores. In an increasing number of companies, boards seem to feel they need ‘robust’ management style to deliver bottom-line, short-term results, he says. ‘From shop-floor to top floor, there’s pervasive employment insecurity: long hours, people as disposable assets, no psychological contract – we’ll pay you OK as long as you’re delivering, but don’t expect any employment commitment in return.’

The longer-term consequences are unhealthy. Cooper regrets the mismatch with an overall culture that’s, in general, more caring: ‘A more balanced management style, with employment security and a functioning psychological contract, is more likely to deliver the goods for the UK in the medium term.’

It’s little surprise to note that public-sector management styles score highest on the bureaucratic, reactive and authoritarian measures and lowest on the accessible, empowering, innovative and trusting ones. Cooper is encouraged by the new emphasis the civil service is bringing to developing leaders rather than managers, but the CMI findings suggest just how far there is still to go.

In truth, the deeper reality may be that command-and-control management lives on for the simple reason that, despite the rhetoric, 99 per cent of employees, whether in public or private sector, work in command-and-control organisations: in effect, centrally planned dictatorships that are set up to take orders from the CEO rather than the customer. These organisations don’t work very well – they can’t – and when push comes to shove, as it naturally often does, the knee-jerk reaction is to tighten the reins, not slacken them.

But, as even Tony Blair recognised, flogging the system only gets you so far. This isn’t management progress – it’s the reverse, a manifestation of the desperation of the old model rather than a move towards the new. Will we look back at it as the last gasp of a played-out system, a staging point between the collapse of management 1.0 and the emergence of management 2.0 – or the start of a new management dark age, based on hidden, and not so hidden, coercion? It’s up to us. History suggests that the outcome is not a foregone conclusion.

The Observer, 16 December 2007