Management in the 2040s

The standard method to assess the future is through the type and function of technologies. The starting point is the way new technologies modify processes and thereby rebalance requirements and outputs. An alternative approach is to examine how executive management will adapt to technological innovation, because management maintains longstanding principles and objectives that are noteworthy in the implementation of technologies.

The rate of change can appear dazzling and complicate accurate perceptions and understanding of long-running forces. The way to solve this common problem is to use fundamental principles, or axioms, in order to forecast a plausible view of the future. This method was done in a 1958 Harvard Business Review article (‘Management in the 1980s’, Harold J. Leavitt & Thomas L. Whisler, https://hbr.org/1958/11/management-in-the-1980s), in what transpired to be a remarkably prescient examination on the state of management in the 1980s. The article is also notable for using the phrase ‘information technology’ for the first time.

We propose, in similar spirit, a generational look into the future using the same principles. It should not be read literally. Twenty-five years is too distant to be confident of any forecast and the 1958 paper more closely modelled the 1990s, which demonstrates that forecasts can miss, although not be entirely useless.

As such, this article can be interpreted and used as a narrative that describes and explains the underlying rationale for management decisions and, to a degree, why technology choices will likely dominate organisations. It should be emphasised that the 1958 paper focused on business in the industrial sector, which ought to be borne in mind when interpreting implications for the service or public sector.

In the 1958 article, three technology typologies were the basis on which four outcomes were produced. These were:

1. Information technology should move the boundary between planning and performance upward. Planning will be given to as yet largely non-existent specialists.
2. Large industrial organisations will recentralise, and top managers will take on an even larger proportion of the innovating, planning, and other ‘creative’ functions.
3. A reorganisation of middle management with certain classes of middle-management jobs moving downward in status while other classes move upward into the top-management group.
4. The line separating the top from the middle of the organisation will be drawn more clearly and impenetrably than ever.

Some details aside, the outcomes are close to the market economy and business structure that emerged about 25 years ago: the concentration of influence at the top; a discernible shift by corporations to creative planning and innovation; and reorganisation of middle management. To a degree technology enabled the process. A more mature market was another necessary feature. Its products aside, a corporation such as Apple could not have existed in 1960.

Surprisingly, no empirical evidence was offered to support the conclusions, just two predictive axioms. The axioms tacitly suggest a deep knowledge about corporate culture and how decisions are made. The axioms were:

1. Management’s need to control information is accelerated with technology and leads to centralisation. It allows the top management to digest, and act on, a wider range of problems and extends top management’s control over the decision processes of subordinates.
2. Elimination of costs in order to achieve greater efficiency, which leads to the removal and restructuring of middle management.

In broad terms, the 1958 analysis turned out to be true but not because all elements of the analysis were correct. The paper does not refer to basic financial reasoning for investment or management decisions and offers a vision of perfect efficiency from technology, an image that endures. The introduction of technology is viewed as an enhancement of business process performance. It is not understood or explained as significant in terms of what is currently known as disruptive, although the concept of creative destruction precedes the paper by more than a decade.

Time and circumstances exerted an influence too. US Treasury 10-year bond yields peaked in 1981, and this was instrumental in removing middle management along with manufacturing in the US at the same time that enterprise technology was reaching mass penetration. The analysis is reliant on the speculated capabilities of technology, sometimes presented as real, or even as having been realised, and hence why management acts in a certain way.

Despite some shortcomings, the axioms are still recognisable as strong motives within current business practice. Applying them to the period up to the 2040s may be illustrative in how management may structure organisations in future.

Axiom 1: Management’s need to control information is accelerated with technology and extends top management’s regulation over the decision processes of subordinates:

• Outcome 1: More investment in technologies to absorb all types of information and data. Interpretative tools for analysis. Big data, CRM customer experience, social media all represent this view.
• Outcome 2: Use of vast exterior expertise: engineers, business analysts/strategists, various digital expertise on moving needs basis, psychologists, anthropologists etc. The skill sets are specialised and highly sophisticated.

Axiom 2: Elimination of costs in order to achieve greater efficiency, which leads to the removal and restructuring of middle management:

• Outcome 1: Algorithm-dependent businesses and/or automation extending into many retail customer verticals.
• Outcome 2: Routine process work disappears, though not entirely. Middle management moves to services sector: health, hospitality.

It should be noted that this may reflect what does occur in the 2050s.

The most critical factor in the table is demography. With a declining workforce and an ageing population, larger economic forces are thrust on management. An investment bank, Morgan Stanley, believes that population dynamics, in conjunction with an end to the 30-year bond boom, will see labour become more costly, thus inducing businesses to invest in technologies. The deployment of technology may be necessary to ensure durability. It is not certain if this monetary perspective is how organisations will respond.

Over the next 2–3 years, some of the themes I’ve covered here are likely to rise in priority. Actions and decisions may not occur immediately but the readiness of organisations to examine new choices in the light of strategies and the technologies ought to be exercised. Executives can explore the following areas:

• The organisation’s strategic future, which may already be framed in the current strategic direction of the organisation but will be revised over time accounting new for conditions and criteria.
• The organisation’s evolving functions and connections with stakeholders or the market.
• The skills required and the tool sets to fulfil the overall direction.

Guy Cranswick is an IBRS advisor who covers Google (Apps and Search), broadband/NBN, Web 2.0 technology, government and channel strategy, including areas of business productivity. He has worked both in Australia and overseas for many major analysis firms.

Image courtesy k rup under CC