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"DO NOT try to manage third generation strategies with second generation organisations and first generation managers," warned Sumantra Ghoshal while taking the first executive education programme on ‘human resource strategy in transforming organisations' at the Indian School of Business, Hyderabad.

 

While Ghoshal talked, senior HR managers from India Inc listened in rapt attention, to instances of billion dollar corporate successes - as distinct from each other as chalk and cheese, but with the same underlying philosophy: moving beyond strategy, structure and systems, to purpose, process and people. "Be it General Electric and Intel in the US, or Canon in Japan, or Asea Brown Boveri (ABB) in Europe, they're examples of out-of-the-box thinking that led to experimentation and creation of new models of organising and managing a corporation," declared Ghoshal.

 

The real challenge for managers, emphasises Ghoshal, is in trying to manage the talent of the company. In 1981, Welch inherited a company that had been declared the ‘best-managed company in the world' in the same year as the man at the helm - Welch's predecessor - was designated ‘CEO of the decade'. The challenge for Welch could not have been bigger. Yet he rose to the occasion, riding on the back of his people-centric strategies, and made GE the ‘most admired company in the world'. Said a much younger Jack Welch then: "Pick the right people - high spirited and entrepreneurial - and produce world class products. Be better than the best - in people and in products."

 

To drive home his point, Ghoshal compared GE to its rival, Westinghouse. Both started their journey in 1971 with less than $10 billion in revenue. Today, when GE has a turnover of over $100 billion, Westinghouse no longer exists, even though both companies followed almost identical strategies and structures over different points in time.

 

The difference, explained Ghoshal, lay in a new management philosophy, that moved beyond the old management doctrine of the three S's to the new one of the three P's: purpose, process and people. Many people make the mistake of treating them as substitutes, they are not. The trick is to supplement the S-doctrine with the P-doctrine.

 

To supplement his belief, Ghoshal falls back on someone who has been there and done that: Intel's Andy Grove: "Our most important strategic decision was made not in response to some clear-sighted corporate vision, but by the marketing and investment decisions of front-line managers who really knew what was going on… We need to soften the strategic focus at the top so we can generate new possibilities from within the organization."

 

It is misleading to believe that the top management is about formulating strategy and building structures and systems. There are limits to top managers playing strategic gurus, structural architects and systems engineers. Revitalise your strategy, invert the pyramid of organisational structures and reengineer the corporate systems, and then see the results.

 

"You cannot renew a company without revitalising its people," advises Ghoshal. Revitalisation means changing the context that managers are creating around their people. GE did the same. While it was on a rationalisation path from 1981-86, it changed its strategy to revitalisation between 1987-88 and 1995-96. The need for renewal comes from the fact that work environments are full of constraints, control, compliance and contract. This makes it difficult for employees to show initiative, learning, experimenting, or cooperation. The context has to be renewed, from compliance to discipline; from constraint to stretch; from control to support and from contract to trust.

 

Yes, we are talking about changing, radically. Ghoshal quotes Welch in 1985: "Bureaucracies have to have quantum changes. Incremental changes can be resisted by those who oppose it." Topple the existing structures, change the present roles. The top manager's new role would be to create the context for renewal, not to control strategy.

 

Similarly, employees will have to take responsibility of the company's competitiveness and their own learning, and progress beyond being implementers of strategic decisions taken by the top management.