MANAGEMENT
get to ask that question, we’ve failed at managing anything.
To manage effectively, we must take a stake in what will be.
Right now, we’re failing to shape the future by incorporating
meaningful assumptions into our daily decisions.
Unsolvable Problem?
If life is uncertain, then what purpose does management as
a control and planning discipline play? We need not look
very far into the history of business for an answer.
The rise of the large-scale organization at the start of
the 20th century brought with it a need for control that was
foreign to the mind of most business practitioners of the
day. The industrial landscape was dramatically transformed
from one of small, local, several-person businesses to national corporations of mass production. Leading the way in
aiding this transformation was a mechanical engineer by the
name of Frederick Winslow Taylor. His production-efficien-cy theories, which formed the foundation of scientific management, were the perfect match for a business environment
in great need of new forms of bureaucratic and technical
controls. Ever since, the implications of Taylor’s scientific
approaches have played an immeasurable role in shaping
what we’ve come to understand as modern management.
But in a constantly changing world, aren’t we in need of
something more current and relevant than scientific management, which is a discipline almost exclusively focused on
the effectiveness of controls: control over personnel, control
over production, control over supply chains, control over innovation? Ultimately, efforts for absolute control fail and,
often, in the process, stifle innovation and creativity. Managing exclusively according to scientific methods is unbalanced. Scientific management is a facet of management, but
not all of it.
Acceptance and Advancement
The problem is that although and in spite of scientific management’s usefulness as a practical way to conduct business,
we have allowed it to dominate even the way we think about
running our businesses. We’ve allowed the allure of the idea
of control not only to dictate the practical ways in which we
manage, but we’ve also convinced ourselves that we have
levels of control that we actually don’t. The fact that there
is uncertainty should not be such a daunting reality. It’s a
part of life; so can we mature our organizations enough to
embrace it as opportunity?
As a fairly new discipline, ERM strives to break down the
silos that have existed in our corporate bureaucracies since
the advent of the large-scale industrial organization. ERM
challenges conventional wisdom, turning tried-and-true
practice upside down. Rather than viewing risk management as an oversight function, focused on compliance and
mitigating downside, ERM is interested in capitalizing on
the uncertainty with which we are constantly faced. If it’s
too difficult to leave the principles of scientific management
behind for dramatic overhaul – even in the aftermath of
continued corporate meltdown – then consider ERM as an
unthreatening way to begin thinking about the new iteration
of effective management.
Whether seen as a rogue trailblazer breaking existing
molds, or a change agent that sees possibilities and opportunities in places others have long abandoned, ERM promises
a mode of thinking that can help us leave behind the old and
stale scientific management principles of the last century.
It provides a balance between strict, control-based management and forward-thinking innovative management.
ERM offers a method for leaders to acknowledge, accept
and make sense of uncertainties, exploiting them to differentiate and strengthen their brands. ERM helps managers
justify strategic, long-term decisions that ensure stability and
future sustainability, rather than short-term pursuits for the
purpose of bolstering quarterly financial results. ERM enables organizations to challenge the accepted doctrine that
stakeholders are primarily concerned with immediate returns. We can begin to more effectively and systematically
consider the upside potential of uncertainty over the long
term, transforming what it means to manage and lead.
Can an organization continuously innovate while simultaneously managing the downside of uncertainty? Yes. ERM
can help effective managers do just that.
Denise Rotatori and Ralph Storti are ERM practitioners at Horizon Blue Cross
Blue Shield of New Jersey in Newark, New Jersey.
AUTHORS’ NOTES: When we refer to randomness and uncertainty,
we are referring not to computer simulations, but rather to what Nassim Nicholas Taleb discusses in his book, The Black Swan. For a detailed
exploration of the importance of innovation, see Gary Hamel’s The
Future of Management.
