Management in the 21st century

Management in the 21st century
Nirvikar Singh
Posted online: 2008-01-03 00:00:00+05:30

Academic writing for newspapers are free of the compulsions of work-a-day journalists, and can take a longer view of matters, in keeping with the standing of universities (for example, Al-Azhar, Bologna and Oxford) as among the oldest continuously functioning institutions in the world. At the beginning of the year, when there are many prognostications of what 2008 holds in store, I’d like to take an even longer period for my predictions. This means looking at broad trends rather than specific events—though understanding these trends can sometimes guide the particular.

With my own university planning a new management school for Silicon Valley, I have been giving some thought to the nature of management, and how it is changing, along with changes in the nature of the firm itself. The issue has great importance for India’s development, because it is human ingenuity in creating and managing organisations that harnesses for material gain the fruits of our parallel ingenuity in understanding and mastering the natural world. India’s managers, at home and in key positions in the US and elsewhere, have proved themselves to be world class whenever given a chance.

Even hunter-gatherers and early farmers had to manage resources, tools and teams, but modern challenges of management begin with the Industrial Revolution. The factory system and the assembly line required close coordination of workers and machines in those factories, to manufacture ever more complex goods in ever increasing variety. In some ways, this process continued through almost two centuries, culminating in the great corporations that dominated the industrial economies of the world, making steel, automobiles and engineering goods. As graduate management education became professionalised after the Second World War, managers were trained to work within these large corporate hierarchies, with the ethos of the factory system and assembly line pervading the head office as well.

If the first phase of professional management was associated most with labour and materials, the second saw finance come to the fore. Basic financial innovations such as limited liability shares are much older, but the 1980s saw an explosion of financial markets and instruments. Finance became a preeminent management topic, and its importance was illustrated by the entry of industrial and retail firms into areas of finance such as consumer credit and mortgages, in addition to the further rise of already prominent financial firms. Perhaps the worst side of the fascination with finance came with old-line energy firm Enron, which went from building power plants to engaging in complicated financial shenanigans that quickly led it to ruin.

After materials, labour and capital, what is left? The final factor of production, one that will be the focus of management in the next century, is knowledge. I use this term to include data and information, and embodied (such as skills) as well as disembodied (blueprints) knowledge. Silicon Valley illustrates the importance of knowledge as the next frontier of management. The region has been the centre of crucial innovations in information technology that have made it possible to create global value networks, putting very different demands on managers than the hierarchical corporations that marked the last century. Managing in Silicon Valley is about technology, talent and teams. Factory production is still important, of course, but it has been routinised, outsourced and offshored, leaving at home the tougher issues of managing creativity and collaboration across cultures, languages and time zones. What are some specific areas of importance for managing in a knowledge-based economy? Intellectual property management is one example. Another is information analytics, including techniques of data mining and filtering. Perhaps the most challenging area of all is that of managing collaboration among highly skilled, widely dispersed individuals—the “creative class” that ultimately drives wealth creation. In the old-style corporation, “personnel” evolved into “human resources.” The new name may stick, but it will be more like “human capital” management. In many cases, the concepts and tools of finance will continue to be important, but the best managers will also need to understand the drivers of technology and talent.

At their best, Indians are adaptable as well as adept. Adaptability comes from growing up in a society with a permanent overlay of a foreign language and culture, together with an unparalleled degree of domestic diversity. Some of the most successful among those Indians in corporate management (and in academia) have combined an undergraduate technical background with graduate management education, which serves the demands of the knowledge-based economy well. While the US will continue to hold its global lead in graduate education for a long time, it will be interesting to see if India can develop the right kinds of graduate management education, and on a much larger scale than before. This is important because these managers will be in charge of the many new global firms that India must create if its economy is to keep growing rapidly for decades. Of course, innovations in higher education that prepare India’s economy for the coming century require, first of all, a simple, if massive expansion of capacity. That will require a totally new regulatory and funding model, which remains to be developed.