The dying stars

Are the lights going out in the big corporations? Gavin Barrett considers the symptoms of decline

Astrophysicists have a dead-pan way of describing the death of bright stars. Sustainable core nuclear reaction fails, the star expands massively to become a red giant, only to implode to black hole state, from which neither light nor heat can escape. Other stars go cold and become inert debris, the stuff of eternity.

Sombre thoughts and precious little to do with management perhaps? But corporations, today as familiar as the brightest stars in the commercial firmament, are likely to be dying, but we and they may not yet know it.

Others have anticipated their fate and opted for break-up, while life can still be sustained. The recent quiet end to Lord Hanson's galaxy is an example.

There are four main types of terminal symptoms to watch out for.

The first is corporate inertia, the inability to do anything fast. This type has complex and dysfunctional decision processes that create, for example, product development cycles two or three times the length of the best-of-class players. Risk aversion and control are rated more highly than decisive and responsive processes. Whether this malaise is born of comfort, ignorance or incompetence is less clear, but I am satisfied that significant proportions of the management population are simply too busy to notice that the fundamentals of their markets have moved. When they last looked everything seemed fine.

Type one organisations populate financial services, the travel industry, the energy sector and government at every level.

The second symptomatic type is low on intellectual capital. They have a preference for the average recruit, conforming, safe, predictably educated and experienced and unlikely to challenge the status quo. A morbid fear of excellence and a deep-rooted suspicion of individual ambition, demands for intellectual stretch, variety, discontinuity and growth in personal marketability are readily discernible symptoms.

Type two organisations are, alas, found everywhere.

The third type have a fondness for structure - preferably of a permanent sort. Here we find wiring diagrams of great precision, job titles recognisable in Thackeray and Trollope, and hierarchical protocols designed to bleach out any wayward tendencies. Downward communication will be worthy and unintelligible. Upward communication is an aberration. Continuous process is what serious people do. Projects are a bit daring and best left to people who are expendable if things go wrong.

Type three organisations are, mercifully, harder to find, but universities and some former public enterprises come to mind.

The fourth and last type of terminal organisation is ill-informed. Ignorance is bliss and curiosity is vulgar. Better to trust to hard-won experience than to ask good questions. Objectivity is threatening, while ego is the key to real men's management. IT, if valued at all, puts a premium on the T and is best left to the technically-minded. Information is something that strategic planning look after. Any relationship between information, risk, decisiveness and customer preferences is unlikely to be recognised or understood.

Type four organisations have brands that once had a great day, and are now, for the rest of us, just childhood memories.

But this is the digital age, the heroic gateway to the millennium. Surely, all this is grotesque exaggeration.

After all, we know that Charles Handy is right and that knowledge workers, for example, must be treated to individual contracts and allowed to develop their competencies in order to maintain personal market value. And having expert core workers to be exemplary at contract and project management, so that expert knowledge is left to the out-sourced contractors, is commonplace.

Hollywood and British Airways have shown us the way, with consummate success to prove it.

But for many organisations there remain real challenges.

Information is arguably the biggest. The capacity of technology systems to deliver untold processing power, distributed wealth of data, and, above all, speed is growing exponentially. But what of our competence to use this capacity? From our survey work, it appears that the capacity-competence gap has widened further. Yet investment in capacity continues unabated. This yawning gap is both funded by shareholders and provides a neat, if unplanned, subsidy to organisations who have a narrower gap. The I in IT must achieve primacy in the investment case for technology resources.

Our work with management teams worldwide to address the means for developing well-informed executives is one of the most challenging and effective things we do. Knowing what was not known has a profound effect on all executives and, for those with foresight, is life-changing.

I put intellectual capital second. Clever people are in short supply. They are also a problem to handle - arrogant, too urgent, critical and temperamental.

And though they are still vital, there is little point in trying to recruit these people in any permanent sense. Just hire them, harness their originality and insight, then let them go - hire, bleed and fire.

Last, the issue of renewal. The Supernova corporation loses the will for renewal while talking non-stop about growth.

Professor James Utterback of The Sloan School at the Massachusetts Institute of Technology in his Cassandra-like text The Dynamics of Industrial Motivation (Harvard Business Press) also warns that many household brands have already lost the capacity to renew. Their obsession with size and volume/market growth has so dissipated the core energy that it may be hard for observers to detect any sign of intelligent life.

When some historian chances upon this piece in 2007 or, generously let us say 2017, will Microsoft, General Motors, AT&T, News Corporation, the BBC, Halifax or Deutsche Bank just be fond memories - the supernovas that failed to renew and headed for the black hole? I hope not, but the chances are that one or two will be no more

The author is acting head of PA Consulting Group's Sundridge Park Management Centre.

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