Managing Through Turbulent Times. Anthony Holmes
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At a later point in its lifespan the organisation drifts from maturity into decline, bringing a different but equally survival-threatening form of turbulence.
As the title suggests, in this book I concentrate on turbulence in the general economy (turbulent times) and comment on turbulence that is organisation specific only in passing.
For many obvious reasons we do not welcome, but seek to avoid, a phase in which our social stability diminishes and so we recognise a common interest in taking whatever action is necessary to restore stability as quickly as possible.
To some extent it matters little how or why this disorder arises. The important consideration is that it is a fact of life that cannot be ignored if stability is to be restored.
Is turbulence a bad thing?
The answer is; not necessarily so if it endures over the very short run. It is a seemingly unavoidable component of change without which there can be no progress.
So, if we want progress we must accept the end of the status quo and migration to something new. All journeys involve some disruption and the acceptance of greater risk.
However, if the turbulence is unexpected or of a magnitude or duration that undermines stability in fundamental ways then it is not regarded as progressive but as disruptive and potentially destructive to important elements of the established infrastructure.
Thus, if turbulence cannot be avoided, there is a general desire to contain it to a short and infrequent period, the onset of which is predictable.
You might imagine significant economic turbulence as a plague-like disease that infects the population. Irrespective of the social impact the consequence for the individual patient is debilitating, may be life-threatening and certainly requires treatment.
It is the degree of turbulence that determines whether it is a bad thing.
What do we want to accomplish from management activity in turbulent times?
Primarily we want to re-establish stability or at least to reduce the turmoil to a bearable level. But what, in the corporate arena, is a bearable level? It is the level at which the potential changes are unlikely to cause the business to collapse in the short to medium term. What this level is will differ from company to company and from country to country.
The most useful analogy is of an earthquake. Geophysical turbulence occurs all the time and most buildings cope with this background level. But there is a magnitude at which some buildings will collapse whereas others, that are more ‘flexible’, will survive in good shape. The greater the magnitude of the quake and the longer it endures, the fewer the buildings that are going to withstand the turbulence. Each building will have a unique threshold of maximum endurance at which its collapse will not be gradual but will probably be catastrophic.
As with buildings and earthquakes, so with companies.
Markets are never calm but the background turbulence is bearable. Indeed, our economic system would cease to function without fluctuations in price and supply as there would be no markets. Each company has a different tolerance to turbulence and although similar structures have been tested to destruction in previous unstable episodes, the lessons provided are often forgotten when designing new corporate structures.
We must also bear in mind that our social and economic systems have evolved to adapt only to a relatively slow rate of change and we call this progress, believe it to be necessary and design organisations, systems and protocols to manage this moderate change that we have come to regard as a stable condition.
Previous generations would regard our ‘stable’ rate of change as extremely turbulent and so it is clear that, given sufficient time, we adapt to become tolerant of a degree of turbulence that we once regarded as unbearable.
We are not equipped socially, technically or psychologically to live comfortably with turmoil significantly above our background level, so we are impelled to act in order to return our social and economic activity to comparative stability.
It is our inability to adapt quickly, magnified by institutional and contractual inflexibility, that makes these significant deviations from expected trends so threatening.
We also find it difficult to abandon the protocols that have served us well at the background level of turbulence and on which we have come to depend, and therefore tend to hold onto them until substantial change becomes not just desirable but irresistible.
For example, our objective is always to end wars and revolutions in order to terminate the social disruption that they cause. Similarly, we want to terminate economic turmoil as quickly as possible to minimise the risk that it may damage our financial wellbeing. We want to re-establish stability (the background level of turbulence) because we see this as a prerequisite for making orderly progress towards desirable social and financial goals.
We want to make progress because equilibrium is never more than a fragile, transitory state and moving forward is preferable to regression. Progress may be the raison d’être of the manager but moderating the rate of progress is necessary to feel in control.
Endnotes
1 For those of a scientific mind the second law of thermodynamics proves this for physical objects and I contend that social systems such as companies and states show a similar tendency towards increasing entropy. [return to text]
2 See Thomas Hobbes, Leviathan. [return to text]
3 Heraclitus; circa 544-483 BCE. [return to text]
4 Heraclitus, On the Universe. [return to text]
2. What are the limits to management?
In this chapter I want to consider the role of management. In chapter 3 I discuss how the practice of management alters throughout the corporate lifespan, and in chapter 4 how the psychology of managers changes as economic conditions deteriorate and the stability of their company is jeopardised.
The late Peter Drucker [5 ] has been called the most influential management thinker of modern times. His 1954 book entitled The Practice of Management was a seminal work which described what has become known as management theory.
According to Drucker it is the application of management that makes resources productive. Not capital. Not labour. But management.
He also said that the management function embraces certain basic beliefs of modern Western society, in particular the belief that it is possible to control man’s livelihood through the systematic organisation of economic resources.
John Kotter [6 ] states that the role of the manager is to perform the following four functions:
1 Planning: The science of logically deducing the means to achieve given ends.
2 Budgeting: Reducing plans to financial programmes.
3 Organising: Creating an organisational structure to facilitate the accomplishment of the plans.
4 Controlling: Monitoring progress to identify deviations from the plans and budgets, and implementing actions to rectify any adverse variance.
This summarises the rationalist practice of reductionism otherwise known as scientific management. All the functions described in the table above relate to the formulation and execution of a plan in a predictable climate and indicate why radical and unexpected changes to the anticipated operating environment disrupt the model. Usually these plans are based on data for earlier periods but are implemented in a subsequent period in which the operating environment will have changed, but only in subtle ways, that differ from that predicted.
When the economic system encounters a recession or some other significant negative event such as a major war (known as a high impact, low probability event or HILPE) then changes to the operating environment become rapid, occasionally sudden, and the effect on organisations