There are two critical elements required for a
successful business – revenue and returns. Without a positive cash flow and a
“bottom line” showing that income exceeds all costs and expenses, any operation
is doomed to failure.
We all know that economies go through cycles. Some researchers, working from historical data, have managed to predict both “booms” and “busts” with surprising accuracy. For about the last 100 years, these booms and busts can be illustrated as being overall periods of satisfactory returns interrupted by, around 1930, The Great Depression and, around 2009, The Global Financial Crisis. Of course, throughout these years there were a series of “ups” and “downs” but, overall, during these years most economies, at least in the western developed world, experienced reasonable growth and economic stability until impacted upon by either The Great Depression and/or The Global Financial Crisis.
The Great Depression, following as it did the First World War, ushered in a change in management practices. During the First World War men had travelled further than many of them had ever thought would happen. Those who survived the war had moved from small local communities to experience the sights and sounds of foreign countries and different cultural norms; they had lived with and shared conversations with people from the broadest possible range of experiences; and vast numbers had become disillusioned with the way in which they had been “managed” by the military in its various forms. There was a desire for change. The concept of conformance – “you will do this” – was under threat.
In the years following the Great Depression, researchers such as Elton Mayo, Abraham Maslow, Douglas McGregor, Frederick Herzberg, Clare Graves, Carl Rogers, BF Skinner and others suggested that different approaches in the way managers interacted with their staff could improve bottom line results. The days of the Humanistic Psychologists had arrived. People such as these suggested that rather than a ‘command and control” approach – one in which the manager or leader gave orders and everyone else immediately obeyed (a “you will” culture) – the sharing of information coupled with rewards for compliance and penalties for non-compliance would be an improved way of obtaining desired results. They advocated what could be described as a “will you” approach to obtaining results and, through such things as the growing emphasis on motivation, provided tools by which such conformance would become increasingly likely.
These two approaches – First Generation Leadership (“You will”) and Second Generation Leadership (“will you”) have served us well. Thanks to them we have experienced all of the successes (as well as all the failures) through the generations to the twenty-first century. They are tried and true approaches that have transformed societies and cultures by providing large numbers of people with wealth and influence beyond their once wildest dreams.
But during the 1960’s some shadows started to emerge. A key power base in this world of conformance was the ability to share or to withhold information. As long as data could be controlled through limited copies of printed material, and selective communications this was a very effective means of encouraging conformance: a wider use of computers and the introduction of ‘mini computers’ opened the door to information being more widely and more easily available. By the 1980’s with the introduction of the personal computer it had become impossible or impractical to close the door – the horse had bolted. By the end of the 1990’s the internet and mobile telephony were well entrenched and the ability to tightly control access to information was long gone.
The Global Financial Crisis that started in 2008 has focused attention on the inadequacy of the status quo in much the same way as did The Great Depression of the 1930’s. Just as happened in the 1930’s, we now know that the extant leadership and management approaches are no longer producing the results desired but, again as in the 1930’s, we are reluctant to abandon what we know has worked in the past.
For those people who went to school from about 1980 the world is different and their expectations are different from those of us who are older. We call these people “Gen Y”. Young people today have grown up in a world where they know they can access information readily. Gen Y people quickly learn to sort “information” from “misinformation” and their social networking on sites like LinkedIn, Plaxo, Facebook and Twitter ensures that individuals and sources offering scams and/or misinformation are quickly identified and shared. Gen Y people are not prepared to be “talked down to” or to be made feel inferior in any way. They are prepared to learn; they are prepared to “knuckle down” and do the hard yards; but Gen Y wants to know that what they are doing is worthwhile and they want to be involved not only in what they are doing but also with the people they are doing it with. Gen Y want to be engaged – and if they do not feel engaged, they will soon seek another situation in which they do feel valued and respected. The expectations of Gen Y are vastly different from those of their predecessors.
The Second Generation Leadership world wants to maintain a hierarchy in which those at the top have power and are able to use it. These leaders are used to being able to control who knows what and when they know it – and this includes the right to provide partial or misleading information if they deem it the best approach in terms of maintaining their power base and in terms of the goals to be achieved. When these leaders ask for input or say they welcome questions and discussion it is generally with the unstated proviso that no-one will seriously question the “what” or “how” of that which is to be done - although they may tinker around the edges. These leaders may see alternative suggestions as “disloyalty” or “lack of team approach” and they are very likely to punish (usually in a covert way) those who transgress the (mainly) unwritten golden rule that “he who has the gold makes the rules”.
All this is not something that fits the world of Gen Y.
Gen Y works from the premise that authenticity is important – both in themselves and in their leaders. If there is a request for input and suggestions, then they feel very comfortable in giving such input or in making suggestions. In the main they are not interested in second guessing the leader – they want to be authentic and they believe they have a right to say what they think or to question that which is dubious, doubtful, or unclear. Just visit any of the social networking sites such as Facebook or Twitter on the internet and it is clear that these people are far more prepared to share information about who they are, their experiences, concerns and issues, and about what they have been doing than are their parents’ generation. For those of us brought up in a First Generation Leadership or a Second Generation Leadership world much of this disclosure is at least discomforting and often horrifying. To Gen Y it is as natural as eating and breathing – it is part of life.
Not surprisingly Gen Y finds rigid reporting structures and narrow sources of information to be a foreign concept. Their whole life has been lived in a world of personal computers, mobile phones, the internet, social networking, and the like. They have learned that by using the internet and the search engine of their choice they can find out almost anything about anyone at any time – and some of what they find out will even be accurate! Gen Y has an expectation that information will be readily available and that they will be involved in determining the accuracy and utility of such information. As I have said, their expectancy is that they will be engaged both with what they do and with those they are doing it with.
If we want to again maximise the probability of achieving desired results on a long-term basis we need to find a new management / leadership approach. Just as The Great Depression lead to the development of Second Generation Leadership, so the Global Financial Crisis needs to lead to the development of Third Generation Leadership.
The effects of our failure to develop this new approach are already being seen.
In the for-profit arena we are finding increasing competition to established businesses coming from start-ups that are not limited by huge infrastructure costs – the retail industry is a case in point. For more than 20 years retailers and service providers have been reducing the level of customer service in their quest to reduce costs and maintain profitability. Despite various “loyalty schemes”, people have learned to ‘shop around’ and as goods have become increasingly commoditised price and ease of access have soared into ascendancy. Businesses such as Airlines and major Department Stores are finding it more and more difficult to maintain desired levels of profitability and their woes are even more felt by smaller operators – most of whom do not have the financial depth to survive any extensive downturn in sales revenue and profits. On-line competition offering better prices and rapid service is increasing in popularity and causing many problems for established retailers.
And the not-for-profit sector is not immune. While money is invariably made available for major disaster relief, those charities who work day-in and day-out with the disadvantaged in society are finding less money available than once was the case. The same is true for those organisations depending on donations for medical research and similar critical matters. There is less discretionary money available because of reduced commercial profitability or because of tightening personal financial circumstances and those most in need bear the brunt of the suffering.
A Third Generation Leadership approach can help address these issues.
Third Generation Leadership moves the emphasis away from an emphasis on power and hierarchy to an emphasis on engagement and true teamwork. Third Generation Leadership seeks to ensure everyone is provided with all relevant information and that other people’s viewpoints are clearly listened to and discussed. Third Generation Leadership provides approaches that can harness the energies of everyone involved so that, together, people can and will achieve desired results.
And Third Generation Leadership provides results. A major international bank added $27 million to its revenues when it tried the approach in one small business banking unit. A supplier of construction material was able to increase revenues significantly by raising the price of a basic building commodity at a time when competitors were selling on price. A professional services firm was able to improve profitability and charge premium rates to an increasing number of clients at a time when their services were under intense competition. All three organisations found that, in addition to increasing the “top line”, extra “bottom line” results were also obtained because internal costs were reduced.
Large or small business: for-profit or not-for-profit organisation: tomorrow’s successful operations will be those that move to a new leadership and management approach.