Management 3.0: The Era of Complexity

I know. Management 3.0 is a silly name. We already have Web 2.0, Government 2.0, Project Management 2.0, Enterprise 2.0, and RSS 2.0. And interestingly enough, Gary Hamel’s Management 2.0 was one of the last to jump on the “2.0” bandwagon. So why do we need a “3.0” version number for management?

Actually, we don’t.

However, I believe that the “3.0” number conveys the right message about the direction that management is taking in the 21st century. The Management 3.0 name was first used by Terrence Seamon one year ago, though it hasn’t been picked up yet by others. Now I think it is time for a breakthrough. Allow me to explain:

Management 1.0 = Hierarchies

Some people call it Taylorism or scientific management, while other people call it command and control. But the basic idea has always been the same: an organization is designed and managed in a top-down fashion, and organizational power is in the hands of the few. Those at the top of the hierarchy have the highest salaries, the biggest egos, the biggest bonuses, and the most expensive chairs. Those at the very bottom have virtually nothing, little money, few responsibilities, and very little motivation to do a good job.

The shareholder value movement, promoted by top economists and business men like Milton Friedman and Jack Welch, was a perfect fit for this kind of management, because it gave shareholders a single wringable neck: the CEO. In exchange for his dangerous position the CEO was allowed to play with risky bonus schemes that had far more effect on personal wealth than organizational performance. As a side effect, and minor inconvenience, these dangerous bonus schemes also triggered a worldwide financial implosion. Oops!

I think we can safely conclude that Management 1.0, even though it is still the most widespread version, used in organizations all over the world, has a number of serious flaws. It is old and outdated and in need of an upgrade.

Management 2.0 = Models

Plenty of smart people realized that Management 1.0 didn’t work well enough on its own to produce any good results. And so they created numerous add-on models, most of which dealt with systems thinking and process improvement. Some of these models gained a semi-scientific status, like the Balanced Scorecard, BPR, Six Sigma, Theory of Constraints, and Total Quality Management. Being add-ons to Management 1.0 the models still assumed that organizations were managed from the top. And so they were created to help those at the top of the hierarchy to better design their organization. Sometimes the models worked, sometimes they didn’t. Some had a flimsy affair with science, while others had more affinity with religion.

At the same time there were different kinds of models that focused not on systems and science but on craft and art. Ideas like the 7 Habits, the 21 Laws of Leadership, and Good to Great listed basic values, principles, and guidelines for top managers, and then told them to practice and build experience. Again, these models were sometimes right, and sometimes not. Some models were created from research, others from personal experience, but they all had one thing in common: they aimed primarily at the ones with all the power, at the top of the hierarchy.

But working with the add-ons of Management 2.0 means that organizations still suffer from the inherent problems of Management 1.0. The basic architecture for problem solving has not changed. The organization is still seen as a hierarchy!

Management 3.0 = Complexity

In the 80’s and 90’s we saw the birth and rise of complex adaptive systems theory, or complexity science, first applied to mathematics and biology, and later to economics and sociology. It was a major breakthrough in systems thinking, bridging all sciences, and making some deep thinkers very happy. Stephen Hawking thought it was so important, that he called the 21st century the Century of Complexity. The first decade of this century saw a number of publications, like The Tipping Point, The Black Swan, and Freakonomics, all of them borrowing and popularizing concepts from complexity theory. And management researchers, including Ralph Stacey and David Snowden, found out that social complexity had some interesting things to say about organizational management.

One important insight is that all complex systems are networks and self-organizing systems. People may like to draw their organizations as hierarchies, but that doesn’t change the fact that organizations are actually networks. Social networks to be precise. And every time you want to solve a problem in an organization, you must treat it as a network. Because that’s what it is. A self-organizing network, not a hierarchy.

Second, complexity theory proves that, ultimately, all models are wrong. No matter how many diagrams, lists, or figures you throw at an organization, in the end they will always be wrong. Potentially useful, yes. But ultimately wrong. And thus, the models of Management 2.0 will always fail. Mind you, there’s no need to throw them all away! But neither is it wise to treat any of them as scientific truths, or religious dogmas.

T
hird, based on both scientific and empirical study, social complexity shows us that management is primarily about people and their relationships. Everything else in an organization pales when compared to the importance of people and their relationships!

Furthermore, we can now conclude that management is science and craft, models and experience. And we can learn that leadership is not “higher than” management. Nonsense! The job of a manager is to be leading and governing the self-organizing systems. To ensure that people are empowered and aligned.

Conclusion

Management 3.0 is just a silly name. Some of you will disagree with me and argue about version numbers. That’s ok, because version numbers are not important.

And many of us already knew that hierarchies are bad and that networks are real. That management is about empowering people, and also giving them a direction. That models only work depending on the context. And that “leadership” is just a trendy name for managers doing the right thing and doing things right.

But network thinking adds a new dimension to our existing vocabulary. The concept of social complex systems makes us realize that we are all participants in self-organizing systems. All of us have to lead and rule in some ways. We are all “3.0 managers”.

I think it’s nice to have a new name. Names and versions can be powerful. The “3.0” version indicates that management is taking charge again. It usually takes Microsoft three versions of a product to get things right and make their product actually usable. Thanks to social complexity management has, in its third incarnation, finally found a solid scientific foundation for the future. None of the earlier models have to be unlearned, because many of them are still usable. We just have to replace assumptions of hierarchies with networks, and complex systems thinking. Because the 21st century is the Age of Complexity. And Management 3.0 will be the Era of Complexity.

This article will be part of the book Management 3.0: Leading Agile Developers, Developing Agile Leaders. You can follow its progress here.

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  • http://www.davidzinger.com David Zinger

    Maybe we have to wait for Management 3.0 with Service Pack 1.
    I would agree with the movement to self-organizing and also complexity.
    In some ways the paradoxical response is to go small, simple, and significant in our management approaches when we are dealing with complexity.
    Management used to be about getting work done through people and not it is getting work done with people.
    I am admittedly very biased but I believe engagement will not be an extra in the workplace but a fundamental way of working and managing.
    David

  • http://learningvoyager.blogspot.com Terrence Seamon

    Jurgen,
    Nicely argued!
    And thanks for the nod. You made my day with that.
    I’ll be interested in your book.
    Best wishes for 2010!
    Terry

  • http://www.jimestill.com Jim Estill

    So is 4.0 the era of simplicity or simplification. Complexity tends to increase cost, slow things down and not generally add value.
    We need to transcend that to arrive at simplicity

  • http://profile.typepad.com/jurgenappelo Jurgen Appelo

    No, that’s not what I mean.
    There is a difference between complexity and complicatedness. You are referring to (what scientists would call) complicatedness.
    I agree that complicatedness is a bad thing.
    I’m not talking about complicatedness. I’m talking about the scientific notion of complexity. Even bacteria are complex systems.
    No matter how simple you make an organization, it will always be a complex system.
    See: Simple vs. Complicated vs. Complex vs. Chaotic
    http://noop.nl/2008/08/simple-vs-complicated-vs-complex-vs-chaotic.html

  • http://profile.typepad.com/scrumology Scrumology

    Hi Jurgen,
    A very interesting article. I find most interesting that you separate out the the different styles of management into 1.0, 2.0 and 3.0. To me these are arbitrary delineations and management has always been about managing complexity and networking.
    Successful career orientated managers intuitively understand that hierarchies are an artifact of large organizations and that the real way forward is thought /who/ they know rather than /what/ they know. There’s even Dummies book about it: http://bit.ly/8Jt8Gz (link to Amazon)
    And although it’s helpful to understand that we are all participants in self-organizing systems, an individuals action is often dominated by the organizational culture. Without changing the organizational culture, the noble intentions of an individual are often in vain. Bob Sutton wrote an excellent blog post about exactly this point: http://bit.ly/898J7s
    In my view, real leadership is not in managing complexity, but in changing the system.
    Best regards,
    Kane
    http://Scrumology.com

  • http://profile.typepad.com/jurgenappelo Jurgen Appelo

    In last week’s blog post I said the same: good managers are not managers of people, but managers of the system:
    http://noop.nl/2009/12/yes-good-managers-are-manipulators.html
    Managing complexity can only be done by managing the system.
    So I think we agree after all. 🙂

  • http://www.recoveringleader.com/ David Peck

    Jurgen:
    I think this is an excellent idea, and begins to cover the ‘what’ — I’d be interested in seeing you take it further into the ‘so what?’ and even more importantly the ‘now what?’
    Keep up the good thinking,
    David Peck
    The Recovering Leader

  • http://www.ilsa-consulting.com Kai Neumann

    Great thread, thank you very much! So some say we need to face complexity, some they we did so all the time, and some say we should put it simple. Sure, there’s a difference between complexity and complicatedness. Both termini have in common variety, the number of possible states. So for our products we should keep the variety low. The variety on the market, the variety of the human beings around us, etc. though, is by natural high. To be successful e.g. with our political decisions we have to face this variety and increase our own variety. That’s W.R. Ashby’s Law.
    Frankly, to put everything simple is the reason for most of the demises and catastrophes on earth, and the failures in business, politics, and even our private lives. In my workshops I take that day’s newspaper and there is no page where we cannot find a problem that couldn’t be explained by the lack of grasping the interplay of a number of factors.
    It is known that we face a limit if want to grasp the dynamic interplay of more than four factors. Then we need the help of a software. But most decision makers, of course, don’t want to use a computer to think. Therefore they argue for continuation of mono-causal thinking, keeping everything simple with executive summaries, and even keep on relying on their guts feeling. (gut feelings only work for some limited challenges, though some people try to sell you different….)
    We feel better if we say that something is too complex to be analyzed. To analyze something needs to make assumptions, add knowledge and take the effort of thinking. Nevertheless as the world is really changing with an ever more dynamic we need to adapt. Call it Management 3.0 or whatever you like or need to call it to sell it. It is definitely a new culture of thinking, working and communication to visualize and analyze the interplay of factors of a complex situation. As it takes a while for the key players in business and politics we (look for KNOW-WHY and CONSIDEO MODELER) are spreading this not only via first movers all over the world but via already hundreds of schools and universities for the generation of decision makers ahead.
    So, please put your words and your products simple, but not your perception of the complexity and the longterm developments of the word.
    Gain insights – get success
    Kai

  • http://profile.typepad.com/scrumology Scrumology

    Yes, I think we agree on some things. And perhaps our differences are simply a matter of words and semantics. The point that I’m trying to make is that leaders *change* the system … not simply *manage* an existing system.
    In the words of Pink Floyd “tear down the wall.”
    Best regards,
    Kane
    http://Scrumology.com

  • Oddbjørn

    I think there’s a close parallel to the PM 2.0 movement here — dismissing the good elements of prior practices just because some elements are flawed (re: Glen Alleman’s critique of PM2.0).
    A better understanding of the forces that shape our environment has nothing to do with hiearchy, so I think you’re too quick to dismiss systems thinking. While it is utopic to believe that a single systems model will be able to encapsulate all the elements (ordered and unordered) of the “system”, I think some of the concepts from both systems thinking and system dynamics are useful — even in a so-called “3.0” world.

  • http://management.curiouscatblog.net/2010/01/24/management-improvement-carnival-86/ Curious Cat Management Improvement Blog

    Management Improvement Carnival #86

    The collection of posts from 10 blogs that made up the 2009 annual management blog are counted as Management Improvement Carnival #85, making this post #86. Are Slogans Always Bad or Can They Inspire? by Mark Graban Why are slogans bad? …

  • http://www.fourth-medium.com Mark Kennaley

    What an amazing coincidence…
    I am about to release a book called SDLC 3.0: Beyond a Tacit Understanding of Agile. But my “3.0” label is intended to reflect the need for a merge of software engineering practices due to the legacy of branching – check out my blog at http://www.fourth-medium.com/wordpress
    It would appear however that we share some similar philosophies. But I come from a hard engineering background, so I am introducing some of the kinds of ideas that inspired Jay W. Forrester at MIT in his Social Dynamics work.
    Cheers.
    Mark Kennaley
    President & Principal Consultant
    Fourth Medium Consulting Inc.

  • http://profile.typepad.com/john107 John

    Okay, a complex adaptive system, is both complex and adaptive (Matuarana), it has the ability to work with contradiction and paradox, to be multi-faceted and multi-directional, and it doesn’t require management; as it is adaptive to the emerging environment, this ensures its ability to function and produce acceptable outcomes as well as its survival.
    I wonder where ‘managers manage systems’ fits into here? Why do we need to manage something that is able to adapt and move forward in its own best interests?
    People are complex, adaptive systems, are they not? They also participate in chaotic processes, being dynamic, subject to stimulus that can alter their patterns of behaviour and likely to return to a balanced state. Why do they need to be managed? People are the organisation. Without people, an organisation is nothing more than a title and an empty car park. Yet the term organisation implies people need to be organised (by managers?) – or is that self-organised?
    I wonder is simplicity is a denial of complexity, an abdication of our responsibility to be adaptive, to go with the flow rather than remain in the past?
    I wonder if titles such as 1.0, 2.0 and 3.0 like Baby Boomers and Gen Y and many other media-driven tidbits can cause people to miss the point altogether – that its not the label that matters, its outcome. The process used, from which era or which model is secondary to the outcome. The future is nothing more than an accumulation of our past experiences.
    John Coxon
    Taking You From Frontline Manager to CEO

  • http://profile.typepad.com/jurgenappelo Jurgen Appelo

    John,
    It’s not people who need management. It’s shareholders/owners of a business who need management of their business. That’s why employees are confronted with management. Management is the line where authority flows from shareholders to employees.
    If there is no management, people could do anything they want. Including hiring their own family, or running away with the cash.
    Don’t think that complex adaptive systems always seek positive outcomes. They don’t. CAS are valueless. They don’t care about outcomes. But shareholders do!
    Jurgen

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