How is the average organization doing? Not very well according to a number of recent books and reports. A few indicators provide quite a gloomy picture:
Return on assets and invested capitals dropped to 25% of its value in 1965 in the entire US market (see The Shift Index by John Hagel)
Firms are dying faster and faster with the average lifespan of companies listed in the S&P 500 index gone from 67 years in the 1920s to 15 years today (see Creative Disruption by Richard Foster)
Employee engagement ratio, a high level indicator of an organization’s health proved to affect performance outcomes, does not exceed on average 20%-30% (see Employee Engagement, Gallup or The Engagement Gap, Towers Perrin)
In one of the most enjoyable keynotes of the Social Business Forum 2012, Steve Denning (Author of Radical Management and Independent Management Consultant) explained why this is happening and especially what leaders should do to reverse the worrying trends. In this Social Business Thought Leaders series, we asked Steve to collapse some key suggestions in a 2 minutes video that we strongly recommend.
Steve discusses traditional management - that set of principles and practices born in the early 20th century and largely inspired by thinkers such as Frederick Taylor and Henry Ford - as the main responsible for the declining performance of modern organizations. While so many things have changed in the last 100 or so years, most companies are in fact still primarily focused on maximizing profits and efficiency, cutting costs, coordinating individuals top-down through command and control. The issue is, in a knowledge intensive, customer centred, turbulent market like the one we are experiencing, similar concepts are not just alienating employees' passion but also destroying the last source of competitive differentiation left: creativity and the innovative potential.
According to Steve Denning, in a phase change from old industrial to a creative, collaborative, knowledge economy, the answer is hidden in a whole new business ecosystem that puts the individual (both the employee and the customer) at the center of the organization. He calls this new paradigm Radical Management and in the video interview he articulates the huge challenges and amazing rewards our enterprises are facing during this inevitable transition.