The Age of Management Crisis and the Knowledge We Now Need

We are living in an age of “management crisis”. This is because so many leaders are unaware of the appropriate knowledge to manage the complexity of the Digital Age. Fortunately, this knowledge already exists.

Knowledge, Theory and Experience

Management knowledge can only come from solid theory; this knowledge advances thanks to the continuous feedback that takes place between the theory and the experience gained from its application on the field.

Before I began working in the field of management, I was educated as a physicist. However, it is not necessary to be a scientist to appreciate that from Galileo Galilei and Newton onwards, all the things that we know (as opposed to those “that we think we know”) and any meaningful advance in the human condition came from formulating a Theory and validating its realm of applicability. It is called the Scientific Method and it is high time for Management to fully embrace it.

We can start by understanding that Knowledge is built on Theory, a set of assumptions that allow prediction.  A Theory has a realm of validity. This validity must be challenged by observation and the boundaries of its applicability must be constantly revised.

In order for Knowledge to be useful, it needs Operational Definitions because they provide a way of putting communicable meaning into a concept, of translating a concept into a measurement of some sort.

Why does Management need Theory? Because Management must be rooted in prediction: without theory, the job of managers becomes a “whack-a-mole” exercise devoid of any ability to predict the outcome of their actions. Management also needs Theory because nothing can be learnt from examples and experience without Theory; without it we would not be able to interpret the results of our observations. For this reason, studying case histories, as many Business Schools ask their students to do, makes little sense. And while thousands of examples do not make a Theory, one example that contradicts a theory is sufficient to redesign the boundaries of a Theory’s validity. This is how science advances.

The kind of Knowledge that we need to move out of the management crisis and that should inform leaders in Industry, Government, Healthcare and Education, was put forth by Dr. W. Edwards Deming (American statistician and physicist) in his seminal book The New Economics and takes the name of the Theory of Profound Knowledge (TPK).

What it advocates is for management to commit to taking a knowledge-based stance, to understand the “field of forces” that shape the reality of an organization and to position events within the right framework. TPK moves management from the quicksand of empiricism (experience, opinion, examples) to the safe shore of epistemology (Knowledge).

There are four foundational elements that make up Deming’s Theory. I have taken the intellectual liberty to (slightly) adapt Deming’s elements in light of the last 25 years of on-the-field development:

1. Systems Theory (how the whole can be bigger than its parts)
2. Theory of Variation (that provides a rational foundation for understanding process behavior)
3. Theory of Knowledge (how we know what we know – Philosophy of mind, Epistemology and Neuroscience, operate/act according to a theory so as to have a reasonable conceptual handle on the outcome of our actions)
4. Psychology of the individual and the organization, the role that emotions play in human cognition and behaviour (and massively impact process variation) as well as the collective psychology of the organization

A new paradigm of collaboration and sustainability

These four elements are all interdependent and what emerges from understanding how these interconnections operate is nothing short of a new organizational and economic paradigm.

This new paradigm is based on cooperation, whole system optimization, a win-win mindset all along the value chain, and openness and transparency in every aspect of work and business interaction. It calls for a radical overcoming of the silo mentality that still rules much of corporate life; it is firmly focused on designing, sourcing, producing and distributing goods and services that improve people’s lives; it rests on the assumption that humans are intrinsically motivated to do good, take pride in their work and have an innate desire to learn and be part of something bigger than themselves.

This New Economics that Dr. Deming brings is one of sustainability. It is a radical departure from the Wall Street fantasies of deregulation and greed. The sheer inability to understand the consequences of deregulation and greed have propelled us into the neurological meltdown we are still experiencing in terms of unsustainable inequality.

Sustainability is predicated upon our understanding the laws that govern complexity — what happens when we begin to interact. The New Economics becomes, then, an economics of integration, where the network-like nature of our economies is understood at its most fundamental level.

The New Economics is based on well-studied and understood elements of Knowledge; sadly, these are still largely ignored in Business School curricula that are still mainly based on Finance and Cost Accounting principles and the mindset of local optima that they create. As Dr. Deming used to say, “Business Schools teach how to raid NOT how to lead a company.”

So, why bother? Why this seemingly quixotic quest for “Profound Knowledge”?

The demands and opportunities of Digital

Digital technology is reshaping the way we cooperate through more meaningful interdependencies — the way we share information and the way we create possibilities for action. It is the natural consequence of the human drive towards better and more meaningful forms of interaction and communication. Its development was the inevitable, evolutionary outcome of the quest for understanding how our being together, in all its forms, can be enhanced.

Simple (and not so simple) technologies like, for example, APIs are a testament (and an incipit) to this worldview: a new covenant in the way we can share and collaborate.

In order to honor such a covenant and allow it to give birth to the wealth of possibilities it foreshadows, deliberate effort is required from the institutions that should embrace it. Industry, Government, Education, Healthcare, etc. must rise to the occasion and start rethinking themselves in light of these possibilities. This entails a fundamental shift in how we go about management: it requires both a new organizational design and a much more elevated form of organizational and individual consciousness.

This is an extract from the upcoming book ‘Moving the Chains’ by Dr. Domenico Lepore to be published 2019 by Business Expert Press. 

Intelligent Management, founded by  Dr. Domenico Lepore, helps leaders in organizations speed up flow, overcome silos, and  shift towards a whole system way of working through a synchronized  Network of Projects. We support our international clients through education, training and the Ess3ntial multi-project software to schedule competencies and unlock the potential of human resources. Based on our proprietary Decalogue methodology .

See our new books  The Human Constraint – a business novel purchased in 36 countries  so far and  ‘Quality, Involvement, Flow: The Systemic Organization’  from CRC Press, New York, by Dr. Domenico Lepore,  Dr. Angela Montgomery and Dr. Giovanni Siepe.