Ideas for new management practices and processes proliferate. A legion of management consultants parade through companies, selling new approaches to solve any ill that exists. As well as abundant supply, there is also huge demand. Managers worry their organization may be slipping behind competitors, and are eager to adopt the latest ideas.
Julian Birkinshaw, a professor at London Business School who earned his doctorate at the University of Western Ontario’s Richard Ivey School of Business, has studied the spread of management ideas and has a simple warning: Buyer beware. “A lot of these ideas tend to fail when spread widely,” he said in an interview.
It’s not that they are lousy ideas. Many are successful when first implemented.
He points to Six Sigma, a system aimed at eliminating flaws in the manufacturing process. Pioneered at Motorola, the telecommunications company successfully refined its process to the point that 99.99966 per cent of its products were manufactured free of defects.
General Electric picked up on the idea, and was also effective, given its engineering prowess. But as other companies adopted the system, they were less successful, either because Six Sigma didn’t fit their success formula (manufacturing defects were of less significance) or they implemented it poorly.
Each idea comes with a hype cycle, whether a few months or a number of years, in which everyone is jumping on the bandwagon. But eventually, the realization comes that not a lot of companies are really benefitting. Still, in a Harvard Business Review article, Prof. Birkinshaw notes: “You can often gain valuable insight from radical innovations, even if they fizzle out.”
Broadly speaking, there are two ways to borrow ideas from innovative companies: observe and apply, or extract the central idea.
Observe and apply is the most common approach. You just take the idea and plunk it into your own organization. That can work well when the idea is simple in scope. Prof. Birkinshaw cites GE’s process for finding a successor to former chief executive Jack Welch, which involved communicating openly about prospective candidates and having contingency plans if the also-rans left the company. That has been easy for other firms to copy and apply.
Observe and apply can also work when the originator and the copier are similar in their management model or way of thinking. Ideally, the companies will be in the same industry and in the same stage of their life cycle. But, often, companies aren’t similar.
For example, GE’s forced-ranking system – a performance management system in which 10 per cent of employees had to be rated unacceptably low and edged out of the company – worked for that company’s focus on individual accountability and competitiveness. “But it bombed in other companies. People were saying, ‘I am asked to collaborate with colleagues and now I’m under attack from it under this program,’ ” he said in the interview.
A better approach is usually to extract the essential principle behind a management innovation and import that to your organization. “What differences may exist between the new organizational context and the original becomes less important, and fewer adjustments are required for the principles to take root,” Prof. Birkinshaw writes.
When UBS Wealth Management decided in 2000 to borrow the idea of eliminating budgeting that Swedish bank Svenska Handelsbanken had originated a decade earlier, it didn’t copy the approach outright. UBS sent a team to study the Swedish operation and then adopted some of the ideas that fit its own culture.
To be successful using either approach, you need to know your organization well, Prof. Birkinshaw notes. You also should move slowly. “The first thing to be done when another company’s management experiment comes to your attention is nothing at all,” he writes. “It’s wise to wait for a couple of years before you even consider borrowing an idea, either in whole or in part.”
Give it time to succeed or fail – and for the faddish element to fade so you can evaluate the notion more effectively. “It’s very unlikely that acting immediately will make that much a difference,” he said in the interview. (That goes against the grain, of course: We are told that speed is essential these days.)
Next, figure out the underlying principle behind the innovation. Usually, the groundbreaking company is basing everything on a simple hypothesis, which you need to define and then test in your own organization with a small-scale experiment. Where possible, try for control groups, or before-and-after results. That will help you determine whether to go ahead.
“New management ideas are a mixed bag – there are some terrific ones, some useless ones, and then the middle category, the biggest one, with some good and some bad elements. Make sure you know which category the idea is in,” Prof. Birkinshaw concludes.
Special to The Globe and Mail
Harvey Schachter is a Battersea, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online work-life column Balance. E-mail Harvey Schachter