Examining managerial obsolescence of an organisation

The issue of managerial obsolescence is an under-researched but important and compelling challenge of modern day business organisations. Hamlin (1999) describes managerial obsolescence as a modern organisational virus, implying that its unchecked spread can severely damage organisational health. This study examines managerial obsolescence in contemporary times with specific regard to its causes and organisational impact.

Peter Drucker and various other management gurus perceive managers to be the driving force behind organisational growth and the most important element of corporate success (Flaherty, 1999, p 12). Many of such managers, who have the potential to contribute to the growth and the performance of their organisations, however, become obsolescent and inadequate for their jobs (Gimeno, et al, 1997, p 750). Little is moreover done by their organisations to help them in combating such obsolescence challenges; they are usually sidelined in lesser demanding tasks or replaced by more aggressive and savvy competitors (Gimeno, et al, 1997, p 750). It is also quite surprising that little research has been conducted on the issue until now, despite the exponential growth of Human Resource Management theory and literature and their application in different areas of organisational activity (Gimeno, et al, 1997, p 750).

This essay investigates the issue of managerial obsolescence, with particular emphasis on its reasons and organisational impact, and attempts to marshal the various strategies that organisations can use to counter and combat its challenge.

Managerial Obsolescence

Managerial obsolescence occurs due to the development of a substantial gap between the requirements of a job and the skills and abilities of a manager to perform such a job competently; primarily because of his or her inability to keep up with the demands of the changing times (Harrison, 2009, p 62).

Most managers in the past entered into employment after short stints in college and progressively developed their skills and competencies, within organisations, through on job training and experience (Holbeche, 2006, p 13). Whilst such methods for grooming managers to assume organisational responsibilities continued for decades in Anglo-American firms, the explosion in management, financial, and technical education in the west after the closure of the Second World War led to the development of a sea change in such organisational attitudes (Holbeche, 2006, p 13). Mushrooming management institutes across the advanced nations started educating and training managers in order to enable them to assume and discharge their increasingly complex organisational responsibilities with adequate knowledge, skills and abilities (Harrison, 2009, p 62). Although the majority of contemporary managers now come into employment with solid education behind them in different areas like technology, human resources, finance, and business management, many of them still become victims of obsolescence and find it difficult to cope with changing and evolving job responsibilities (Harrison, 2009, p 62)

Such obsolescence was rare in the past when organisational and environmental change was slower and many business firms continued to sell the same products for years to the same markets in similar environmental circumstances (Holbeche, 2006, p 13). Managers in such organisations were called upon to perform routine managerial functions, punctuated by a little bit of troubleshooting during emergencies, and were by and large able to handle their slowly growing responsibilities with comfort (Holbeche, 2006, p 13). The rapidly changing contemporary business scenario however constantly challenges organisational managers to keep up with and adapt to changing internal and external environmental circumstances.

The world has experienced tremendous change over the course of the last few decades (Lawrence, 2007, p 88). Such changes have been political, economic and technological in nature. The collapse of the Soviet Union and the growth of neo-liberalism and western capitalism have profoundly changed the global political landscape (Lawrence, 2007, p 88). Economic liberalisation and the demolition of trade, financial, and physical barriers have made the business and economic environment intensely more challenging. The emergence of China, India, and other developing economies has resulted in the creation of numerous lower cost and equal skill production and service centres across the world. (Pett, et al, 2004, p 46).Huge new markets are emerging in the developing world. Astonishing technological advances, especially in the area of instantaneous communication technology, make it possible for people to communicate swiftly across continents and even larger distances (Harrison, 2009, p 86).

Such changes are not only providing contemporary organisations with numerous business opportunities, but are also challenging them to adapt to changing circumstances, master new technologies, exploit new business opportunities, ward off and counter threats from competitors and substitutes, and maintain and enhance competitive advantage (Harrison, 2009, p 86). These developments have not only resulted in the emergence and astonishing growth of new businesses like Microsoft, Google, Facebook, Nokia and Apple, but also led to the decline of once great organisations like General Motors, Ford and Chrysler. The challenges of these changing times, it must be realised, are not being faced by business organisations but by their managers. Modern day managers are under intense pressure to constantly adapt to the numerous changes that are occurring in their internal and external environment (Reid, et al, 2004, p 37).

The failures of managers to keep pace with and adapt to these changes results in their obsolescence and to the development of inability to cope with new and evolving assignments and work pressures (Reid, et al, 2004, p 37). Such managerial obsolescence has numerous repercussions, both for the organisations in which these managers work, as well as for their personal careers. Managerial obsolescence is associated with psychological issues like loss of self esteem, lack of self worth, resentment with peers and depression (Reid, et al, 2004, p 37).

Whilst managerial obsolescence is a very real contemporary challenge, it is surprising that little research has occurred on the subject until now. This is all the more surprising considering the rapid growth of HRM theory over the last few decades and the parallel work that has occurred in the area of behavioural management and behavioural finance (Reid, et al, 2004, p 37).

Role of Managers and Organisational Impact of Managerial Obsolescence

Managerial obsolescence directly impacts the ability of managers at different levels to meet their organisational responsibilities with competence and confidence (Snyder & Duarte, 2003, p 112). Such obsolescence has slow moving and imperceptible, but finally devastating, impact on organisational growth and performance, primarily because of the criticality of managers to various aspects of organisational functioning (Snyder & Duarte, 2003, p 112).

Managers play numerous roles in the functioning of organisations. They are responsible, first for the deciding of organisational objectives, then for the formulation of organisational strategies for reaching such objectives, and finally for the effective implementation of such strategies (Teece, 2002, p 76). Apart from such broad functions, managers constantly contribute in various ways towards organisational work and enhancement of competitive advantage. They are responsible for maintenance and enhancement of improvement of business efficiencies in terms of generation of profits. They have to, not just, perform and produce results, but also do so in the most effective and efficient manner (Teece, 2002, p 76).

They are responsible for efficient utilisation of resources, which in turn results in achievement of organisational profits (Sims, 2002, p 54). Generation of profits is essential for up-gradation of resources, business expansion, payment of dividends, and maximisation of shareholder wealth (Teece, 2002, p 76). Apart from generation of profits, contemporary managers are responsible for meeting and overcoming the challenges of increasing competition (Sims, 2002, p 54). Competition in business is constantly increasing on account of greater numbers of competitors, more and better products and services, ever increasing product variety, and empowered customers (Teece, 2002, p 76). Modern day customers are not just well informed about their rights and the many competing products available in the market; they also, for all practical purposes, drive contemporary business (Sims, 2002, p 54). Whilst modern day managers can access greater markets and more affluent customers, they are also responsible for meeting ever increasing customer expectations and demands (Teece, 2002, p 76).

Managers are also responsible for meeting the various legal and regulatory demands that are faced by contemporary organisations (Snyder & Duarte, 2003, p 112). The contemporary economic and legal environment is becoming increasingly regulated on account of greater legal, regulatory and environmental concerns, and managers are responsible for ensuring the satisfactory meeting of such demands. The failure of managers to meet such regulatory and environmental concerns can result in severe penalties, bad publicity, poor image and adverse repercussions in share markets (Snyder & Duarte, 2003, p 112).

Modern day managers are furthermore responsible for building the human potential and capital of their organisations (Holbeche, 2006, p 41). It is widely accepted the humans constitute the most critical of organisational resources and that no amount of money or material can be deployed effectively without effective human intervention and control (Sims, 2002, p 54). Managers are not only responsible for attracting, recruiting and retaining the best available talent, but in grooming them to assume positions of increasing responsibility in future (Holbeche, 2006, p 41). Modern day management experts feel that in circumstances where different organisations have access to similar capital resources, the differences in competitive advantage between such firms is essentially provided by managers. Organisational managers are thus responsible for ensuring that in-house talent is retained, groomed and nurtured adequately in order to bring about competitive advantage (Holbeche, 2006, p 41).

One of the most important roles of mangers is to foster and bring about innovation. Peter Drucker has repeatedly stressed in his various writings that one of the most important tasks of managers concerns the systematic discarding and destruction of entrenched traditions, customs and products and the bringing about of organisational innovation in products, services and processes (Flaherty, 1999, p 43). Drucker stresses that organisations that are not innovative but dominated by tradition and convention will inevitably be outmanoeuvred and left behind in the rapidly changing global economy. Effective managers must thus constantly build environments that foster and encourage innovation in various organisational areas (Flaherty, 1999, p 43).

This section attempts to provide a brief overview of managerial responsibilities and the criticality of managers in the effective functioning of organisations. Managerial obsolescence brings about situations in which managers are unable to handle their multifarious responsibilities and various environmental challenges. Such obsolescence will obviously reduce the capacity of organisations to fix relevant objectives, formulate appropriate strategies and implement them effectively. It will also reduce organisational ability for achievement of operational efficiencies, generation of profits and achievement of competitive advantage. Organisations, peopled by managers who do not change with the times, will be unable to develop and build human capital or to develop environments that foster and encourage innovation.

Such managerial obsolescence, whilst invisible, can truly wreak havoc upon organisational working, processes and ambitions and bring about the decline and demise of otherwise well capitalised and well resourced organisations. Managerial obsolescence is particularly dangerous because it is not regarded as a concrete and real organisational threat. It tends to creep slowly and steadily across an organisation like an invisible virus (Hamlin 1999) and destroys it from its very innards.

Such obsolescence is not restricted to the lower and middle ranks of managers but can extend all the way to the top. When Jack Welch took over as CEO of GE in 1981, he found himself in charge of a huge organisation that was rapidly becoming uncompetitive because of traditional and conservative management thinking and was burdened by managerial refusal to confront modern day realities and bring about necessary organisational change (Byrne, 1998, p 1-2). Much of Welch’s path breaking initiatives at GE concerned the elimination of managerial obsolescence through appropriate organisational structuring, HR management, introduction of new products and the fostering of innovation (Byrne, 1998, p 1-2).

Whilst managerial obsolescence can dramatically reduce organisational effectiveness, it can also bring about adverse repercussions for the involved people. Obsolescence often leads to side tracking of employees and even to their demotion, retirement or redundancy (Reid, et al, 2004, p 37). Such people are also the first to go during organisational downsizing and to be offered the benefits of voluntary retirement schemes. Apart from such obviously negative repercussions, they are also more likely to suffer from lack of self esteem and depression (Reid, et al, 2004, p 40).

Reasons for Managerial Obsolescence

Managerial obsolescence occurs on account of different reasons that concern (a) the individual managers, (b) the organisations they work for, and (c) broad societal features (Bragg, 1999, p 63). Individual managers tend to become obsolescent because of a range of cognitive aspects like (a) their feelings of comfort with their existing environments, (b) resistance to change, (c) apprehension about assuming new responsibilities, (d) disinclination to learn new methods and tools, (e) lack of awareness of the changes occurring around them, and finally (e) the very denial of obsolescence (Bragg, 1999, p 87). Most contemporary managers, as has been pointed out earlier, begin their careers with a certain amount of professional and general education in different areas of organisational work. Their further development as managers however depends extensively on their own attitudes towards their careers and their perceptions about their environments (Bragg, 1999, p 87).

Whilst employing organisations can and do offer various types of organisational training, much of the absorption of such training depend upon the willingness and attitudes of managers (Chirico & Salvato, 2008, p 169). The rapidly changing internal environments of modern day organisations, especially in areas of technology, aided work processes, constantly creates demands on managers. Behavioural experts state that the willingness of managers to accept and adapt to such changes largely depends upon their openness to change, their relations with their peers and their attitudes towards work (Chirico & Salvato, 2008, p 169). Ambitious individuals are far more open to such changes and are more ready to grab learning opportunities than managers who are satisfied with their jobs and enjoy high levels of complacency. Behavioural experts also stress that managerial obsolescence is often not the result of one particular personality trait but arises out of the interplay of various attitudes that inhibit managers from learning new skills and from constantly adapting to their changing environments (Chirico & Salvato, 2008, p 169).

Organisational factors also play important roles in the development of such obsolescence. Obsolescence can develop in the presence of mismatches between individuals and their jobs (Dosi, et al, 2001, p 141). Such mismatches can result in circumstances where the abilities of individuals do not match with job requirements and thus prove to be inadequate. The lack of autonomy to managers can also lead to slower development of skills and abilities and to consequent obsolescence. Organisational experts also associate the onset of obsolescence with non involvement of managers in decision making roles (Dosi, et al, 2001, p 141). The concentration of power and authority in autocratic organisations is generally at the top and the bulk of other employees are expected to meet routine obligations. Such organisational circumstances reduce the inclination of managers to assume new responsibilities or learn new skills, and accelerate organisational obsolescence (Lever, 1997, p 37). Obsolescence can also occur on account of unhappy relationships with non supportive seniors, as well as on account of inappropriate HR policies and practices. Inappropriate policies, with regard to performance appraisal and remuneration and reward, can result in de-motivation, loss of job interest and setting in of obsolescence (Lever, 1997, p 37). Excessive departmentalisation within organisations results in the development of organisational silos that restrict communication, collaboration, and exchange of knowledge between managers. Such seclusion results in depriving them of important organisation and is a causative factor in obsolescence (Burke & Steensma, 1998, p 86).

It is also important to note that obsolescence in organisations is dangerous because it sets in slowly and imperceptivity and often without the knowledge of the people involved. Many managers are unlikely to believe in the reducing worth of their abilities to their organisations and thus do not engage in taking any concrete steps to counter such developments (Burke & Steensma, 1998, p 86)

Countering Managerial Obsolescence

It is obvious from the above that the countering of managerial obsolescence requires both individual and organisational efforts (Sorensen & Stuart, 2000, p 81). Corporations are liable to suffer extensively and in unforeseen ways on account of managerial obsolescence. Most organisations however refuse to recognise the danger and do not take steps to counter or postpone such obsolescence (Sims, 2002, p 54). Corporations and business firms can in the first place combat obsolescence by the development of appropriate HR strategies for selection, recruitment and orientation of people (Holbeche, 2006, p 13). It is important to choose people carefully and ensure that they are given appropriate responsibilities that will enable them to make the best use of their talents. HR policies for growth of managers must also encourage and reward initiative and performance. Organisations like the Ritz Carlton group of hotels engage in constant retraining of all their managers, irrespective of their levels to ensure inculcation of new skills and technologies (Holbeche, 2006, p 77).

Whilst many organisations are developing sophisticated corporate training programmes, others are making efforts to develop into learning organisations through the introduction of different tools and techniques to tap and institutionalise both the explicit and implicit knowledge of their employees (Harrison, 2009, p 62). The use of communities of practice by some progressive organisations has proved to be immensely beneficial in improving organisational learning and in the development of knowledge and skills of managers (Stewart, 1999, p 46).

Although corporations can reduce the incidence of managerial obsolescence by adopting a range of HR and organisational strategies to improve the knowledge, skills and abilities of managers to adapt to changes in job requirements, the success of such efforts is also largely dependent upon the attitudes of individual managers (Reid, et al, 2004, p 37).

Individual managers should take steps to develop personal goals for expansion of knowledge, skills and abilities. The development of openness towards new ideas and developments and the willingness to engage in constant education and learning, both informal and formal can help significantly in overcoming individual obsolescence (Teece, 2002, p 76). Such attitudes are also likely to spread across organisations and help in the development of an organisational learning culture.

Conclusions

Managerial obsolescence, the topic of this essay, is an important contemporary organisational challenge that needs to be purposefully and comprehensively managed by business organisations.

Obsolescence comes about on account of a number of individual and organisational reasons and has the potential to steadily undermine the effectiveness and competitiveness of organisations. Apart from having adverse consequences on larger organisational health, managerial obsolescence also affects the careers and growth prospects of individual managers and can lead to their being sidelined, demoted or removed from employment.

With the majority of individuals reducing their contact with formal structured learning after joining employment, the onus of lessening managerial obsolescence rests primarily with organisational managements. Organisations need to recognise the various dangers and risks that can emanate from the progression of managerial obsolescence and to take various steps to reduce its incidence.

The adoption of thoughtful HR policies in areas of recruitment and selection, job allocation, reward and remuneration, performance appraisal and promotions can significantly help in reducing managerial obsolescence. The development of imaginatively planned and properly implemented training programmes has also been seen to be effective in countering managerial obsolescence. Progressive organisations are strategically disseminating and institutionalising tacit and implicit organisational knowledge through various learning organisation techniques.

With change being a modern day phenomenon, both organisations and managers must continuously work towards improvement and enhancement of managerial skills and knowledge. The failure to do so can lead to extremely unfortunate individual and organisational repercussions.