These concerns are not new and have been around for decades. World is no longer as static as it once was. World economies no longer continually rise as they did in 1990s. Oil and sugar prices have doubled and come down 50% within 12 months.  Iron ore and copper prices escalates and fall depending on China. Consumers go from 4% saving rate to almost 0 savings rate and then back up to 4%. Showing wealth is important and then people begin to hide their wealth. Housing prices boom and then fall steeply.

Consumer and business credit goes from plentiful to scarce. Life time employment and company provided retirement goes to no job security and fund your own retirement. Employees may work for 6-10 organizations in their career. When they leave they take much knowledge which can not be quickly reproduced. Average employment of CEO or CFO is only 3 years. Most had a land line telephone. Now millions only use a cell phone and/or internet phone. China is now 2nd biggest economy. What happens in developing countries affects developed countries where it used to be developed countries affected developing countries. Very few industries and organizations have not been affected by all these massive changes. 
 
With all this change and volatility, we still attempt to successful manage organizations using traditional methods. These methods may have been appropriate at one time in a more static type of economy. However, many would agree we need to rethink what are best methods to successful manage organizations in the future.

John Hagel III & John Seely Brown in Six Fundamental Shifts in the Way We Work (HBR, August 17, 2010). The six shifts they mention are:

1. Management practices and corporate institutions are fundamentally broken. Most have not yet figured out how to compete more successfully.
2. Source of value creation is shifting from your stock of knowledge to flow of knowledge, and most executives lag in understanding what this means for their companies.
3. Management innovation is not enough: institutional innovation, exemplified by China’s open production and design models and India’s open distribution models, are needed.
4. A new kind of performance curve is emerging: collaboration curve brings together participants in a carefully designed environment to make rapid leaps in performance improvement.
5. Talent development is broader than training programs: People need to learn new skills and behaviors through their involvement in work of management systems such as strategic planning, process management, and measurement.
6. Passion is everything. According to authors’ survey in 2009, less than 20% of employees in U.S. industries say they are passionate about their work. “Passionate workers participate much more actively in knowledge flows that are the new key to value creation.”. “If you can help make your employees more passionate, you can create value in today’s economy.”

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I think one of main problems is we forget we live in 21st CENTURY. Organizations tend to focus more on current (and maybe the next) QUARTER, and long term "visionaries" dare to think about next year. Hardly any thought is given to next DECADE, and definitely not to CENTURY we live in. Management By Objectives (MBO) programs are tied to measurable results. To get MBO-related bonus this year, my objectives must be achieved within this year. As a result--we drive ourselves to think only about this year, rather than next year, and the years that follow. A few years ago, I was asked by my supervisor to meet objective of "grow business 20% year over year". I asked her "what about an objective of growing business 100% in 4 years?" She promised if I grew business 20% every year for next 4 years, it will grow 100% in 4 years (careful math will show business will actually grow 107%--even better...) I disagreed. There is whole different set of knobs and levers you have to turn and pull in order to grow business 100% in 4 years than set you use to grow business 20% next year. I fear we (US) is loosing its competitive advantage due to this short-term thinking, while other nations (China, Israel, India) continue to develop sustainable (long term) competitive advantage, even at expense of next quarter's revenue and profit.
Professor Yoram Solomon, Ph.D.,  University of Texas at Dallas.

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Why Every Employee is Responsible for Managing Risk

Why is every employee responsible for managing risk? Traditionally, we think of the insurance department in an organization to be responsible for the risk of fires and floods, business interruption insurance, general liability claims, etc. So why is EVERY EMPLOYEE responsible for risk? First of all we need to define "risk to what." Anything thing that will negatively impact revenue or profits is a risk factor. Since many employees think that management is responsible for revenue and profits, why should all employees think about decreasing risk?

Let's start with a simple example that happened to a major auto rental company. The chairman of a major Fortune 500 company was returning a car. The person checking the car and creating the bill was very rude to the Chairman. The next day, the chairman cancelled his company's auto rental agreement with this auto rental agency. According to the CFO, this contract was worth almost $2,000,000 of profit. So profit was reduced not by a senior executive, not by a manager, or even a supervisor, but profit and revenue was reduced by a first line employee.

In future blogs we will discuss other examples of employees reducing risks and then we will talk about how to implement programs so everyone is responsible for risk to profits and revenue.

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This blog is dedicated to finding better ways to successfully manage in 21st century.

Email us below your thoughts on how organizations can better manage in 21st century!