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Talk about a Revolution

A top management guru's latest big idea.
Morice Mendoza, CFO Europe Magazine
November 5, 2007

Add management guru Gary Hamel's name to the list of proselytisers for a radical change in management philosophy. "We're prisoners of the industrial age management model," he laments, in an interview with CFO Europe. "The idea that companies are run as hierarchies, that their people are not very creative and that wisdom correlates with higher rank — all of this goes back decades."

Hamel, best known for developing the idea of "core competencies," argues in his new book, The Future of Management (Harvard Business School Press), that CFOs and other top managers should throw off their management manual shackles and experiment with new models to foster fast-thinking and new ideas. His manifesto seeks innovation in organisational structure, decision-making and resource allocation, as well as people motivation, in order "to get innovation out of everyone every day," he says.

Old ways are entrenched because ambitious managers play it safe and are driven by politics. "People at the top of organisations got there by climbing the ladder. They know how to exert their influence and win power in traditional ways," Hamel says. "Any new management idea that would result in the dilution of their executive authority is a scary thought to senior leaders."

Hamel has been developing the idea for more than a decade. Competing for the Future, a bestseller co-written with CK Prahalad in 1996, and Leading the Revolution in 2002 were earlier paeans to management innovation, helping to propel him to guru status. Recently, as a visiting professor at London Business School, Hamel has been test-driving new models with companies at his Management Innovation Lab. The experiments require executives to focus on two "vectors": enabling people to do their best work and aggregating that individual effort into a cohesive whole.

Of the practices Hamel criticises, "allocational rigidities" will be familiar to CFOs — that is the regular skirmishes, particularly during annual budgeting, when people with ideas must win support to get money for projects. It's usually "the top team," rather than more junior staffers, who win the funding pot and this doesn't foster innovation. "CFOs and the top team can make decisions about acquisitions and other critical challenges, but it's in the layers below that they will find new ideas," he says.

Some companies already understand this. Royal Dutch Shell, for example, has replaced its traditional capital budget with allocation based on a peer review panel. "They'd award $20m for 30 days for a person to test an idea on customers and so on. If it looked promising they'd get another $20m for another 30 days," Hamel explains. "Every employee competed on an equal footing, was reviewed by peers and decisions were made in five days."

Hamel's dream of "businesses where the renegades always trump the reactionaries," might be utopian, but he's winning converts.