The future of enterprise – 4 – Tomorrow’s managers

Bernard Ramanantsoa / Dean of HEC Paris / 2014-12-08

Should we imagine, come the 2030 horizon, new forms of entrepreneurial leadership? Even with the support of Big Data technologies, future managers and business leaders will have to cope with increasing complexity and uncertainty. The credo of there being a single one-best-way already belongs the past. Authority will no longer depend on who owns the knowledge. So, what will the skills and qualities of tomorrow’s managerial class look like?

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This article is the fourth of a series which will be published within the next three months.

ParisTech Review – In tomorrow’s enterprises, immersed as they will be in a far more digitized economy than the one we see today, the scale of relevant entities will no doubt decrease. You could be the manager of a team of 2 or 3 and still have a lot of influence in the company. As you see things, what new skills will a future manager have to acquire to prove efficient in a 2030 company?

Bernard Ramanantsoa, Dean of HEC Paris

Bernard Ramanantsoa – Despite (or with the help of) increased digitization, there will always be large corporate groups and within these, staff with higher levels of responsibility than others. An executive in charge of units with thousands reporting to him/her will continue to exercise a responsibility close to that he/she discharges today, even if the day-to-day working schedule and conditions will be very different in 2030 because of the effects of digitization. The real difference will always be the same: either one becomes an “admin”-manager, or a leader who inspires staff. Indeed, regretful as it may seem, there is no “universal theorem” that makes you become a leader or endows you to train leaders. Moreover, even though there are leaders in small sized enterprises and start-ups, major groups call for another quality, that of the “political touch” (in the good sense of the term). On a personal level, I was always deeply impressed by the analyses given by French sociologist Michel Crozier. As he saw it, power-intensive relationships constitute the main structuring element in major organizations. But, far from reproducing the organization chart, these power relationships rely on implicit data, notably in how we control “zones of uncertainty.” Crozier also showed how centralization and multiplication of red-tape rules tend to build up “bureaucratic vicious circles” that make the entire organization inflexible to change. Unfortunately, this sort of situation is here to stay. Trends like these will always exist and, indeed, while despising bureaucracy, individuals will keep trying to master their “zones of uncertainty.”

What qualities would you see in major corporate group managers by 2030?

Well, let’s begin with the simplest case. To reach a high-level managerial position in a difficult context, a person will need excellent managerial skills but also far more than this. In particular, he (or she) will need to be very sensitive to multi-cultural corporate make-up, i.e., able to take on board and measure the operational spin-off from cultural mixes and the performance lever they represent. They will also need to understand the complexity of their environment, to simplify it without lampooning the situation, and hand on the simplification to colleagues. Communication will be the key ingredient in their action. All told, the entrepreneurial world will not be radically different, but its complexity will increase, this is sure. That is what I see coming, unless – although I don’t believe it – a revolution destroys the established framework.

How do you see this new complexity coming to bear?

Firstly, we shall witness increased uncertainty and, in certain cases, an emerging chaotic situation. There will also be less and less referral to “best practice” or to the “one best way” that would save the day. Many managers still think they have discovered it and endeavour to apply it within their company. Some business schools continue to teach this kind of tool-box approaches as well. It is a delusion to think that everything can be rationalized or made homogenous. Some even think that globalization spells the end of cultural differences, with the advent of uniform behaviour everywhere. Except, maybe, for a few leaders who are truly capable of thinking global, it is my belief that local realities will continue to dominate the scene, both for consumers and for company colleagues. Hence the importance to endorse a multicultural approach. Should we even believe in the existence of the mythical “global” leaders? The influence of their native culture often remains very strong and they are not interchangeable. In a word, complexity will run counter to homogenization. And if I may insist, remember please that I’m talking about complexity and not complication; in other words, about how to integrate market strategies and regulations, reactivity and long-term policy thinking, how to simultaneously satisfy shareholders’ expectations, customer and colleagues’ aspirations, wherever they may be.

Big Data processing will certainly change the way future managers will face up to new forms of complexity. Does this imply that the CIO will take control?

In every major enterprise structure, two functions are rather mysterious: information systems and human resources. Everyone knows how important they are when it comes to shaping the organization and yet nobody knows how to train specifically for these functions. There is no “royal mile” for them. No major educational institution has emerged to lead in these fields, if we are to compare with a Wharton School and its champions in financial affairs. Still, it is obvious that enterprises in the future will have to rely on their capacity to attract talents and on digital world skills. Recruiting officers always ask me to make HEC students aware of these two functions, but this proves difficult given there is no well-defined theoretical corpus of thought on the question. And indeed, in general, companies do not like to recruit beginners in these two areas, which is a pity. Our young students really are remarkable at anticipating how markets lie and change. It is often they who ask me to add on specific courses to cover topics that they see in the making.

The complexity factor will lead to new profiles emerging, as for example today’s “data scientists,” but their boss will not need to know as much as they do about the subject and techniques. After all, no matter how ingenious a financial trader is as a mathematician, he/she always reports to a banker. In like manner, those who are capable of predicting trends and tastes are worth a fortune as artistic, advertising or cultural ‘creatives’ but the real power is elsewhere. It lies in a leader’s hands.

So, how do you see great leaders in 2030?

The rules of the behavioral game, forced on us by the uncertain, complex environment are changing at an ever increasing pace. The standard captain of industry (over a long period) was a person who knew almost everything about everything, the highest intellectual authority in his/her field of activities. This will become increasingly rare. Authority will no longer stem from knowledge, but from attitudes, personalities, charisma, the capacity to make others adhere to ideas, and above all else, the talent to encourage others to work well together. These new leaders will be passers, mobilizers and facilitators. But this should not surprise you, to the extent that is now commonplace. The really crucial question is to determine whether we shall have enough leaders to manage entrepreneurial mutation and associate changes. The making of a leader takes time and as we are coming more and more under pressure, we automatically become increasingly impatient. Given this context, we tend to choose the so-called leaders without giving them an appropriate preparation – and that’s one guaranteed way of crashing straight into the wall!

In short, is your position that we could see changes in technologies and strategies but that leadership will remain a stable concept?

It is true that the digital world unfolding is forcing new forms of competition, risk and temporality, yet the leaders of major companies will still focus on two vital responsibilities: corporate strategy and cost reduction. These responsibilities, however and as hitherto, will always lie with just the “happy few” I mentioned. Even though, at the bottom of the organization ladder, some operatives can gain in influence, the decision to invest in Africa or not, or to diversify products, this sort of irreversible decision lies with the group leader. Big Data technologies may help in the decision process, but will not replace it. At some point or another, decisions will be taken to comply with the need to differentiate one’s business from competitors in the field. You need divergent strategic plans to achieve this. The same applies to “cost killing.” If you recognize that that within the company power will remain to the shareholders, the management will still have to continuously demonstrate to them that the decisions taken are increasing the value of their assets. Decisions like these are not shared. When you invest, when you disinvest, when you reduce costs… the decision processes are not democratic nor can they be optimized, even with the help of digital tools.

Charles Handy,  an Irish born philosopher and specialist of organizational behaviours, described future enterprises as a three leaf shamrock (Irish clover): the first leaf is the core structure with a small number of highly qualified, highly skilled, permanent staff who receive excellent salaries and whose role it is to manage and direct the other two leaves: on one hand, a part-time flexible work-force and, on the other, the concentric circles of the company’s sub-contractors. In a nutshell, a company with no workers and only a few administrators and a general management echelon. Is it this sort of socially worrying model that you see coming?

Well, if I may pursue the metaphor a little further, I am sure future enterprises will need these highly articulate, highly cerebral corporate leaders, plus a few artists. And it is they that will work together and interact. But there have been attempts to set up “reduced” companies, viz., so-called ‘contract nodes’: with no physical existence, no offices, the company having only clients and no colleagues. This is the presupposition of certain economic theories: the business enterprise is to be seen as a one dimensional point with no human depth, a point through which product, processes and people simply pass – a simple infrastructure. Now, this may seem attractive from a theoretical point of view but in fact it would never work. A scheme like this simply ignores the social dimension of any human endeavour… and only mad hatter theoreticians could imagine simplifying reality and complexity to this degree, denying the human dimensions of any collective work. That is what an enterprise is all about, working together. That sort of approach chills the spine, as do certain aspects of Charles Handy’s vision. We have to exert caution here: we hear more and more the assertion that only 20% of a work force is “useful,” while the other 80% are deemed “useless.” The tenets of this position consider that the 80% do not really work: you just keep them busy. This is morally inacceptable.

Let us come back to training issues. Isn’t it a new challenge for management schools to train managers capable of mastering growing all this complexity and especially the rising power of expert systems and big data?

Tomorrow’s leaders will have be highly articulate, endowed with an extraordinary analytical power, i.e., capable of reasoning in both a hypothetical-deductive mode and an analogue, inductive mode. As I said earlier, learning here takes time. Associate training will cost more than today and the question already arises: who will foot the bill? The arguments that costs will decrease through use of digital techniques is a decoy: for high level courses, digital will be an extra component but certainly not a substitution. And, if you want to stay with the front-runners, you must continue to produce knowledge and not be content just to reproduce knowledge. This production will be expensive and for training purposes, we shall have to re-invent companionship and enable the “happy few”elite managers for tomorrow to travel extensively, so that they can integrate the multicultural dimensions of their new world. The next key question is how you choose the “happy few.” My hope is that it will not be reserved for an economic, well-heeled elite. But there again, nobody is really inclined to answer the question: who is going to pay for this?

How should efforts in future management training programmes be spread among enterprises, establishments and public authorities?

May I just repeat, the main challenge for us is to conjugate training in short-term skills with acquiring a long-term vision. This is all the more sensitive that the enterprises themselves are not necessarily asking for these exceptional profiles. What they want are technically qualified staff, fully operational from the very day they are recruited. Thirty year ago, these companies were taking the effort to really train intakes after hiring them. Today, unless you present at least a year’s accumulated experience in enterprise, it is proving very difficult to secure a job. In the interval and inasmuch as enterprises are naturally cunning entities, they massively look to the academic world to train their management prospects. They offer training placements, which is a rather cheap way to build up a workforce. Now, this is an excellent demonstration of cost killing! But in the long term, let us hope that the corporate world will not be satisfied – on a global scale – with just participating in training the so-called 20% useful workers.