The Old Buzz: During the last half of the 20th century, business leadership became an elite profession, dominated by managers who ruled their enterprises from the top down. Influenced by two World Wars and the Depression, organizational hierarchies were structured along military lines, with multi-layered structures to establish control through rules and processes. People climbed the ranks in search of power, status, money and perquisites, as described in William H. Whyte's 1956 classic, The Organization Man, and Sloan Wilson's 1955 novel, The Man in the Gray Flannel Suit.
The New Buzz: In the last quarter of the twentieth century the stock market became increasingly short-term, causing corporate leaders to concentrate on quarterly earnings, often to the exclusion of long-term growth. In the past decade it all blew up, from the ethical scandals exposed by Enron and WorldCom to the Wall Street meltdown. As a result, people lost trust in business leaders to build sustainable institutions instead of serving themselves and short-term shareholders.
A Better Response: What happened? The hierarchical model simply doesn't work anymore. The craftsman-apprentice model has been replaced by learning organizations, filled with knowledge workers who don't respond to "top down" leadership. Seeking opportunities to lead, young people are unwilling to spend ten years waiting in line. Most important, people are searching for genuine satisfaction and meaning from their work, not just money. For example, Medtronic's 38,000 employees are motivated by the company's mission of "restoring people to full life and health."
Oh yes, I see this old school way of doing business on a daily basis and in about as many forms as you can imagine. To a one, those organizations sell themselves short by not leveraging the power held implicitly by the people who were hired but never allowed to function in a manner that permitted more than a 1950s hamstrung response.
Closed door meetings. Seeking permission. Fear. These are hallmarks of organizations that are not likely to prosper now.
Consider the many organizations you see that fear social media for any one of a thousand fabricated reasons, none with the substance of a moon shadow.
A misspelled word in a public something! Oh the horror! The humanity!
But then there are the exceptions. Consider Southwest Air. That organization has fulltime employees whose job it to monitor Twitter for customer service concerns. Several other SWA employees do they same thing looking for ways to resolve customer issues at local airports.
Does anyone worry about the occassional misspelling in those 140 character missives? You can rest assured that perfect spelling is way low on the list preferred qualities.
Accuracy. Problem resolution. These are the valued qualities. I know this from personal experience with the organization.
Even the US Marines have this one figured out. The lowest grunt on the battlefield can halt the advance of the highest ranking officer when that grunt sees something the officer might have missed, and the wizened officer wants that grunt to speak up.
We don't see much of that kind of behavior in the old school management structures where father-knows-best is the preferred way of doing business.
Such companies will continue to muddle along, at least for a while. Even a blind hog will find an acorn now and again. But such companies are not likely to prosper as they might once have.
More to the point for the savvy investor: Such companies are naturally predisposed to leave a lot of money on the table, money that the better structured companies will quickly claim.
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