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 It is old and outdated and in need of an upgrade.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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