Companies that ultimately win evolve their management models and experiment with the status quo, says bestselling author Gary Hamel.

Topic: Companies that win

Gary Hamel: I believe the companies that win over the next few years are going to be the companies that evolve their management models faster than their competitors.  And there are a lot of reasons to believe that there are, you know, good alternatives to the status quo.  One of the most successful companies over the last few years in India has been HCL Technologies, an Indian IT services company.  Their entire management model is built on the principle of reverse accountability.  In this company, an employee can fill out a ticket on their boss or an internal service provider, like HR, internal IT.

Say I don't agree with this decision or I don't believe I've been treated fairly, and only the employee can close that ticket when their concerns have been addressed.  Managers are measured and kind of tracked on the basis of how many tickets have been filled against them, how quickly are they closed.  And I could give you a half dozen other things that HCL is doing in that same spirit.  Radically different management model than you find, you know, in the average company today.

So clearly, it is possible.  There are alternatives to the status quo.  It's hard to imagine them, because management itself has not changed much during our working lifetimes.  Mostly we fiddled at the margins, but now we have to go beyond that.  I think the question is though, how do you innovate radically in management, without blowing up your organization?  And I would argue, like in any other area of human endeavor, we have to be able to experiment, right.  That's the way you do something radical and safe at the same time.

If you're a drug company, you don't start out by putting a new pharmaceutical in the water supply.  You start out by testing it in a simulation with rats, or whatever it may be. I think we have to think about management in the same way.  Typically, when we think about changing an HR system or a budgeting system, we give that project to a big team. We give them six months, we ask them to kind of tear it all apart and put it back together again.  That's a very risky proposition.  So risky that normally you only want to do something that's a small tweak, fairly incremental versus what you already have.

But I think there are ways of experimenting with management, of trying things in a low cost, particular period of time, particular corner in the organization, so you don't have to take those bet the company risks.  A few years back there was a vice president at Best Buy and he was looking at how the company did its forecasting.  Obviously in consumer electronics retailing, forecasting is very critical, particularly around that holiday selling period.  And typically those forecasts have been made by senior executives; the heads of the big merchandising units there at Best Buy.

And they got it usually about 90 percent accurate.  It sounds pretty good, but when you're talking about tens of billions of dollars, companies where margins are very thin, those variances are very, very expensive either way.  And so he did a little experiment.  He sent an e-mail around to several hundred colleagues, asked them—this was in August of 2005, asked them to predict the company's revenues in the last kind of six weeks of the year.  And then once they'd gotten into 2006, he went back and compared those forecasts, the wisdom of the masses versus the experts.

The experts were 93 percent right; not too bad.  This much larger group had been 99.9 percent right.  Now that was a little management experiment.  Best Buy is now on their third or fourth iteration of this kind of prediction process and they use it in a whole variety of ways.  But that management experiment started out -- it really took just a couple of hours of time getting the e-mails together, the only incentive was $100 gift card for the best guess.

Think about how do you do something radical in two hours and for $100 bucks.  We have to think about innovation and management just like we think about innovation products, services, on our websites, anywhere else.  Because the companies that win are going to be the companies that experiment more with how lead, organize, manage, structure.  And the ones that then take the best of those experiments ramp them up into their existing management systems. You do that, you're experimenting more broadly, you're applying the lessons more quickly, you're going to have an enormous advance in a world that is going to become increasingly hostile to management as usual.

Recorded on August 15, 2009