For generations, science allowed us to think we could control nature. Today we know better (thanks to Chaos Theory). How could this make us better managers?

Sir Isaac New­ton’s determ­in­ist­ic claim that we can pre­dict future events with abso­lute cer­tainty stood firm for 300 years — then along came Kurt Gödel’s Incom­plete­ness The­or­em and Wern­er Heis­en­ber­g’s Uncer­tainty Prin­ciple. Apply­ing this new sci­ence to the most widely used man­age­ment style (i.e. dir­ect­ive) and com­par­ing it to more empower­ing tech­niques, I look at how this could inform man­age­ment tac­tics (as well as social media policy and cor­por­ate social responsibility).

The boring science‑y bit

mathematical formula written in chalk on blackboardIn 1931, Kurt Gödel declared a form­al proof that every sys­tem (even the all-empassing Prin­cipia Math­em­at­ica) con­tains incon­sist­ency, and is there­fore incom­plete. In 1927, Heis­en­ber­g’s uncer­tainty prin­ciple declared that all phys­ics (when examined closely enough) con­tains a degree of chaos. This was in con­trast with estab­lished New­to­ni­an determ­in­ism that saw the uni­verse as a giant clock — if we could only see the cogs in enough detail, we could pre­dict future move­ments. When com­bined with oth­er the­or­ies (such as ran­dom Browni­an Motion, Lorenz’ But­ter­fly Effect and Schrödinger’s Quantum Mech­an­ics), a move­ment developed that came to be known as Chaos The­ory. This embraces the idea that we can nev­er truly fore­see an out­come, because small fluc­tu­ations can cause large long-term effects.

More recently, in books on macro-eco­nom­ics such as Freako­nom­ics and The Tip­ping Point, there has been an under­stand­ing that growth can­not be infin­ite (e.g. the occupy move­ment) and an aware­ness of wider sus­tain­ab­il­ity issues. This isn’t a hippy-dippy resur­gence of 60’s flower-power — it’s actu­ally a nat­ur­al res­ult of look­ing ever more deeply at what was pre­vi­ously only thought of in abstract terms. Rick Lev­ine and Chris­toph­er Locke dis­cussed the prob­lems of dir­ect­ive man­age­ment styles in their book The Cluetrain Mani­festo. In it, a major study showed that although bark­ing orders at employ­ees often gen­er­ated high­er profits in the short term, (when com­pared with the long-term gains of more empath­ic man­age­ment tech­niques) it is actu­ally unprof­it­able in the long-term — the man­age­ment equi­val­ent of King Canute dar­ing the tide to change.

Today’s management structure prevents information flow

So how do these sci­entif­ic and high-level math­em­at­ics the­or­ies apply to man­age­ment styles — what could they pos­sibly both have in com­mon? In each case, they listened to the details — instead of ignor­ing them (because they did­n’t fit the estab­lished pat­tern). This often a pre­curs­or of innov­a­tion — and why smal­ler com­pan­ies can do this bet­ter than lar­ger ones. Chaos The­ory demon­strates that, (as a man­ager) it’s sci­en­tific­ally impossible to pre­dict what will hap­pen. Dir­ect­ive, short-term man­age­ment pat­terns don’t listen for the details — they determ­ine large-scale changes from pre­vi­ous exper­i­ence. As glob­al weath­er will testi­fy — what happened yes­ter­day — or last year — isn’t neces­sar­ily the best indic­at­or of what will hap­pen tomorrow.

Intern­al com­mu­nic­a­tions with­in multi-level man­age­ment organ­isa­tions are not con­struc­ted to allow these details to be filtered upwards. In a typ­ic­al man­age­ment meet­ing, there’s only time for the lar­ger prob­lems to be dis­cussed, so smal­ler prob­lems must be ignored — until they grow large enough to be on the agenda (requir­ing more expens­ive solu­tions). This is also true for many effi­ciency and stream­lin­ing pro­cesses — man­agers spend so little time on the ‘shop floor’ that they are unaware of improve­ments that are sug­ges­ted by those who are closest to the prob­lem — the workers.

When the going gets tough, the CEOs get out

What appears to be a quick easy fix (such as clos­ures and lay-offs) can show as instant profit on this year’s bal­ance sheet — pay­ing for the expens­ive CEO’s golden hand­shake, but will typ­ic­ally back-fire. In addi­tion, it pro­poses a ‘boom and bust’ men­tal­ity that causes many CEOs to lose their jobs (as soon as the bust hits). High drama makes for great head­lines, but poor man­age­ment. As with cli­mate change, there may be no single rad­ic­al solu­tion that solves a major prob­lem com­pletely — but a large num­ber of smal­ler improve­ments (when added togeth­er) can pre­vent the need for dra­mat­ic action.

There are oth­er ways to solve this prob­lem more cre­at­ively — Dav­id Cote (Hon­ey­well)Dan Price (Grav­ity) and Bob Chap­man (Barry-Weh­miller) per­haps being the most fam­ous examples, but in recent times Fed­Ex, Hew­lett-Pack­ard, and The New York Times have all cut base pay (with most lower­ing man­age­ment salar­ies more than work­ers) instead of let­ting people go. Even Larry and Sergey at Google only take a $1 annu­al salary. In Japan, a pop­u­lar belief in busi­ness eth­ics is that busi­nesses (and people) who pur­sue money first even­tu­ally fail – most not­ably employed by Haruka Nishi­matsu, who humbly wait­ing in line for food with his employ­ees and took the bus to work when times got tough, as good lead­ers should fight along­side their troops. Simon Sinek used a sim­il­ar battle-based ana­logy (but the same fam­ily motif) as the basis of his book Lead­ers Eat Last.

Since the 1980s, much of busi­ness ideo­logy has been influ­enced by mil­it­ary tech­niques (e.g. goals, strategy, object­ives, tac­tics) — how­ever, the com­rade­ship factor has been con­veni­ently left out. This just does­n’t add up.

Social media — “The Truth Will Out”

Tax avoid­ance schemes even­tu­ally come home to roost. Get­ting the state to pay for Wal­mart’s employ­ee bene­fits (while the com­pany makes record profits) is just not sus­tain­able — and the new-found power of con­sumers in social media is the best place to dis­rupt this sort of care­fully-planned (and determ­in­ist­ic) mar­ket­ing plan. Social media closes the feed­back loop, allow­ing inform­a­tion to freely bubble to the top.

From Wil­li­am J. Conaty, who ran human resources at Gen­er­al Elec­tric (GE) for 14 years:

“People have long memor­ies. They’ll remem­ber wheth­er they think they were dealt with equitably.” 

CSR and fair compensation

Man wearing suit and tie stares into camera, as dirt road recedes into the distanceWhat, then is the most sci­en­tific­ally accur­ate man­age­ment style that best depicts a mod­el of real­ity? How can we take advant­age of broad advance­ments in sci­ence and math­em­at­ics to be more effect­ive, bet­ter under­stood, with more cus­tom­ers, and achieve high­er profits (with hap­pi­er and more motiv­ated staff)?

Simple — be more humane when man­aging fel­low humans. This is the use of sup­port­ive instead of dir­ect­ive man­age­ment tech­niques. In a busi­ness sense, it leads to more profit. For employ­ees, they are hap­pi­er and feel val­ued. Cus­tom­ers bene­fit through a bet­ter level of service.

This is why Henry Ford doubled the min­im­um wage in 1914, why the Cad­bury broth­ers cre­ated the town of Bourn­ville for their staff and pion­eered pen­sions in 1879, and more recently Face­book have cre­ated their own com­pany town — these (even­tu­ally) lead to high­er profits. Fair com­pens­a­tion (and recog­ni­tion — which is free, after all) is often all that employ­ees ask for. These are some of the earli­est examples of Cor­por­ate Social Respons­ib­il­ity — which seems these days to be com­pletely divorced from employ­ee bene­fits, and has turned into a form of cor­por­ate phil­an­thropy (i.e. for those out­side the com­pany) instead.

Typ­ic­ally, smal­ler fam­ily-run busi­nesses sup­port their employ­ees, and listen to cus­tom­er and pro­duc­tion’s poten­tial prob­lems — and are thus able to fix them while still in their infancy. This long-term approach is often lam­basted by more ‘profit-driv­en’ man­age­ment exec­ut­ives — but we should be think­ing in terms of being in sync with our cus­tom­ers, cli­ents and col­leagues for dec­ades — not try­ing to rip them off as quickly as pos­sible and hop­ing there’ll be a new suck­er born every minute.

Business relationships are a conversation (not an argument)

By free­ing up the inform­a­tion flow, respect­ing each oth­er­’s prac­tic­al, man­age­ment, and user exper­i­ence, we can cre­ate highly-optim­ised yet flu­id and respons­ive solu­tions that evolve organ­ic­ally over time. By listen­ing to our col­leagues, we learn to embrace chaos — and respond quickly to the unknown because we knew it was always there.

In our new know­ledge eco­nomy, thought­ful applic­a­tion of new sci­ences and tech­no­logy using the above tech­niques will inev­it­ably lead to brand loy­alty, less employ­ee churn, deep­er cus­tom­er engage­ment and high­er profit margins.

Isn’t that what we all want?

But how?

The best way to go with the (chaot­ic) flow isn’t to throw your hands up in des­pair — roll up your sleeves, use good judge­ment and demon­strate lead­er­ship. It’s best encap­su­lated by Saint-Exupéry (author of The Little Prince) in this TED talk by Julia Galef about the ‘Scout Mindset’:

“If you want to build a ship, don’t drum up your men to col­lect wood and give orders and dis­trib­ute the work. Instead, teach them to yearn for the vast and end­less sea.”