Lateral Management: A New Approach to Strategic Transformation in the Digital Era [1st ed.] 9783030464950, 9783030464967

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Future of Business and Finance

Roland Geschwill Martina Nieswandt

Lateral Management A New Approach to Strategic Transformation in the Digital Era

Future of Business and Finance

The Future of Business and Finance book series features professional works aimed at defining, describing and charting the future trends in these fields. The focus is mainly on strategic directions, technological advances, challenges and solutions which may affect the way we do business tomorrow, including the future of sustainability and governance practices. Mainly written by practitioners, consultants and academic thinkers, the books are intended to spark and inform further discussions and developments.

More information about this series at http://www.springer.com/series/16360

Roland Geschwill • Martina Nieswandt

Lateral Management A New Approach to Strategic Transformation in the Digital Era

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Roland Geschwill Denkwerkstatt für Manager Eppelheim, Germany

Martina Nieswandt Denkwerkstatt für Manager Eppelheim, Germany

ISSN 2662-2467 ISSN 2662-2475 (electronic) Future of Business and Finance ISBN 978-3-030-46495-0 ISBN 978-3-030-46496-7 (eBook) https://doi.org/10.1007/978-3-030-46496-7 Originally published with the title “Laterales Management”. Translation from the German language edition: Laterales Management 2nd Edition by Roland Geschwill and Martina Nieswandt, © Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020. Published by Springer International Publishing. All Rights Reserved. © Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Prologue: Mail-Order Companies Without Catalogues, Orchestras Without Conductors, Self-determined Footballers and Five Colours

From the Otto Catalogue to the Digital Otto Group Quelle, Neckermann and also Otto-Versand have been legendary mail-order companies in Germany. Only the Otto Group still exists. After reunification in Germany, all three mail-order companies still had annual sales increases of 40%. Quelle became insolvent in 2009. Otto secured the trademark rights of Neckermann in 2012. The Otto Group’s digital business surpassed the traditional retail business for the first time in 2010. With “About You”, it developed a unicorn: the start-up is capitalized with more than one billion euros and addresses young customers as an online retailer. Otto now works with a number of start-ups and finances them with venture capital. There was trouble in the house. Why do we cannibalize our business model with such companies? The answer: Better do it yourself before others do it. You can learn a lot from start-ups, especially in the fields of technology and culture, as the CEO Alexander Birken put it (Astheimer et al, 2018). Cultural change in an organization also means hierarchical overrides. In positive terms, this means working across hierarchies and companies. It is also necessary to re-sort “inherited claims”, which is always the most difficult process of cultural change. Responsible managers feel that their decision-making authority is limited, which rarely happens without friction and dispute on executive floors. Insiders report that Otto did not succeed in finding an external consulting company for the cultural re-start. At the pitch, all consultations had prefabricated concept ideas as to how the group should be culturally transformed. But the future needs an origin. Corporate cultures are unique entities, developing unique things is not compatible with ready-made concepts of what corporate cultures have to look like. No consulting firm had an inductive approach in its programme. Otto opted for monthly breaks for the Executive Board, which it called “seminars on corporate culture”. The aim was to create a design for the corporate culture of the Otto Group. In concrete terms, this means breaking down roles and power positions, questioning decisions and processes, confronting the critical feedback of middle management, not seeing contradiction as an insult to majesty, accepting checks and balances, allowing authorized disobedience and possibly correcting top-down decisions. Local cultural change teams have been set up to ensure that

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this does not only affect the upper management level. Cross-hierarchically and cross-functionally, they talk to those who are afraid of digital and cultural upheavals. Irritations are explicitly wanted. This also applies to power claims at the board level. “The fact that I have a monopoly on knowledge and that everything has to be coordinated at the highest level at all times is simply no longer an option today”, says Birken (Astheimer et al, 2018) and immediately adds that this does not mean anarchy. It is a simple truth among cultural specialists that there can be no hierarchy-free spaces in human civilization. And anarchy, after all, means the absence of domination. The answer to the old formal hierarchies is flexible competence hierarchies that come together to make certain decisions. Here, too, leadership is needed, i.e. individuals who ultimately assume responsibility. Driven by digitization, the Otto Group has found its own way of advancing technology and the new corporate culture. It was one of the first corporates to organize “screw-up” nights. Board members and employees were to talk about mistakes they were personally responsible for. After all, digitization without failure or a new culture of error is not possible. The Otto Group has adapted its experimental gene over generations. Although the pace of digitization is increasing, solutions are being found. It also means that you have to endure losses, if necessary, for years. But since 2016 Otto has been making profits again after several years of losses! “Creative Puzzle” In spring 2015, the sensation was perfect. At Bosch in Stuttgart, once one of the most conservative companies in the state, ties are no longer worn. Bosch boss Dr. Volkmar Denner was the first to take it off. Denner is a physicist and has been Chairman of the Management Board since 1 July 2012, previously Head of Research & Development. He not only brought a new sense of relaxation to the company, but also a new spirit of innovation. Even the excesses of bureaucracy were radically cut: the board also rescinded 100 instructions. Bosch has also made working hours more flexible. There is no longer any obligation to be present. Anyone can work from anywhere. However, he must log in and discuss this with his boss beforehand (Bollmann 2015). With a system he calls “Creative Puzzle”, the board of directors advertised that employees are more open to new things. Volkmar Denner and his colleagues on the Board of Management have come a long way to anchor not only the Swabian precision but also the speed and flexibility necessary for the digital economy at Bosch. Meanwhile, there is more than just symbols. Coworking spaces instead of traditional offices, the German [colloquial 2nd person], “du”, at the first two corporate levels and investments in digital business models such as e-mobility. In 2015, the research campus in Renningen was opened with 1,700 creative forces, including 500 doctoral students. “Like a university, our campus

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unites many faculties. Creative researchers should not only think and envision the future here. They should also be successful entrepreneurs. Renningen is the Stanford of Bosch. The centre is also a commitment to Germany as a technology location”, said Dr. Volkmar Denner at the opening ceremony. After all, in 2018, the company’s turnover rose from 50 to 77.8 billion euros. It was developed by 410,000 associates (Bosch.de 2018).

The Otto Group is on its way. The 656-page Otto catalogue in Spring/Summer 2019 was the last to be printed. “Our customers have abolished the catalogue themselves, because they used it less and less and have long since accessed our digital offers”, says Marc Opelt, Head of the individual Otto company, which previously operated under the name Otto-Versand (W&V Redaktion 2018). Customers and people in companies do things. They disrupt organizations and business models. Digitization offers only a playing board for both groups.

Orchestra Without Conductor Orchestras and athletes also need playing areas. While orchestras were long considered the classical equivalent of hierarchical work in organizations in terms of their order, this image has also had its cracks for the past 100 years. During our research we came across Persimfans, an orchestra that experimented in Russia without a conductor between 1922 and 1932. Persimfans was newly founded a few years ago and has also made concert tours through Germany. “Die Deutsche Kammerphilharmonie Bremen” was founded in the 1980s in Frankfurt as a self-determined music collective and has meanwhile become a successful model—and far beyond Germany: in the school of a focal point district, not only a concert hall with first-class acoustics was built in 2007, but also the award-winning Zukunftslabor (future laboratory), with which “Die Deutsche Kammerphilharmonie Bremen” sets completely new standards in music education. “Die Deutsche Kammerphilharmonie Bremen” is also committed to the promotion of young talent with its academy: within the framework of a 2-year training programme, young, talented instrumentalists are prepared for the artistic and diverse strategic challenges of the music profession in the twenty-first century. Academy members benefit from the knowledge and skills of a top orchestra and a proven external team of experts. “What is written here on the orchestra’s homepage is confirmed by many classical music lovers all over the world”.

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Digital, Self-determined Footballers In the first German edition of this book, we had still considered the sensational 7:1 in the semi-final of the German national soccer team against the Brazilian team at the World Cup 2014. The two coaches acted too differently on the sidelines. One of them left his team to do as much as possible, the other tried to intervene again and again. Carlos Dunga, who replaced Luiz Felipe Scolari as coach of the Brazilian national football team after the defeat, later explained in a revealing interview what the Brazilians had learned from this defeat: “You have to give freedom the player. Everyone has a basic responsibility in the team. If he wants to make an additional contribution, he has the right to do so. I can’t keep telling him, ‘Do this, do that. Shoot the ball, make a header! ‘That’s his decision. So, you have to make the player make more choices every time. There are some things I demand. But that includes initiative” (Farmbauer 2014). With this philosophy Carlos Dunga orients himself towards the German team. Since the preparations for the 2006 World Cup under Jürgen Klinsmann, their guiding principle has been “the responsible, open and interested player” (Jenewein 2008, p. 10). All team members were also involved in work and decision-making processes—from the regular player to the supplementary player. What we didn’t know back then: An SAP team prepared the German soccer players for every match with software called “Match Insights”. In the digital directory, all the qualities and weaknesses of the opponents were listed. The culture of play and digitization was already twinned at that time. This applies today to all football clubs on a large scale. Football has changed radically in the last 10 years. This does not only concern the sum of the transfer fees, the introduction of video evidence or the growing power of the player advisors. It concerns above all the way in which the coaching and functional teams prepare their players for the coming matches today. Players are no longer the executive organs of their coaches, but actors who quickly adapt to new game situations and make their own decisions on the field. It’s where they train. “Today’s players want information and solutions. They are trained quite differently compared to before, they are no longer recipients of orders, they are actively involved in order to educate themselves further”, says national coach Joachim Löw: “The players want to learn something about the player, also about their routes, the optimal partitioning of playing space in different game situations. There’s a lot of knowledge you didn’t have before” (Wittershagen 2017). SAP’s “Match Insights” software supports this learning process. The developers have worked them out together with football professionals in design thinking workshops. The programme takes football and tactics teaching in the Bundesliga to a new level. It uses cameras to collect and analyse data. It marks the precision of the passes, it records the time between getting the ball and passing it on and it records mileage and acceleration. The soccer player thus receives objective feedback on his performance. It is also prepared for upcoming enemies and tactical innovations. And the software enables an exchange between players, coaches and the functional team at eye level—teaching and learning works in all directions, not just top-down.

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In recent years, mobile tracking in football has been continuously improved. Up to 144 chips on players’ shoes and clothing and in the ball deliver 50,000 pieces of information per second to 12 antennas in a stadium. The location system RedFIR developed by the Fraunhofer Institute was installed in 2016 in the football stadiums of TSG 1899 Hoffenheim and 1. FC Nuremberg—with the aim of gaining more and more relevant data. This data is processed using the SAP platform HANA, which simultaneously displays the exact position of all players on a 3D surface and lists football-specific information such as ball possession, quality of passes, time between the taking of the ball and passing it on, goal shots and crosses, and much more. For several years now, physical data such as jump height, number of steps, meters run, skin temperature or speed of movement can be determined. The coaching staffs are thus informed about the current performance of each player almost in real time and can make decisions on formation, substitution or tactics on this basis. The DFB and FIFA have, however, banned digital analysis for in-game intervention. So far, games can only be analysed a posteriori—in retrospect.

The Five Colours of Clare W. Graves In 2014, the former McKinsey consultant Frederic Laloux published a list of companies in his book Reinventing Organizations (Laloux 2014), which he describes as “self-organized” and building on “self-managing employees”. The book has been much discussed in the management scene, as it shows examples of companies that actually function without executives and hierarchy. Laloux’s approach refers to the works of the religious philosophers Ken Wilber and Spiral Dynamics by Don Beck and Christopher Cowan, who had already drawn a map of business and society in the twenty-first century in this book in the 1990s. They proclaim a new form of leadership, a different canon of values that will lead to a reorientation of management. Critics argue that the concept has deterministic or cultural-religious traits. Laloux sees the history of organizations as quasi-evolutionary. The future is always open and not predetermined. It was interesting for us that the companies described in Laloux’s book show all the experiments that can be carried out in organizations. They go even further in their radicalism than lateral management. The actual basics of this theory of colour go back to the ingenious works of the developmental psychologist Clare W. Graves from the 1960s (http://www. clarewgraves.com). Graves imagines people’s childhood development in five phases or colours that build on each other. Jean Piaget for cognitive development and Sigmund Freud for the psychosexual development of young people have already developed similar designs for children growing up. The analogy has the following idea: people can develop further and/or regress like organizations. The aim of development is to live and work as a free, self-acting, autonomously acting personality. The same applies to organizations.

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Table 1. Organizational forms according to Frederic Laloux (Laloux 2014; edited by the authors) Colour/Organization

Current examples

Breakthrough

Red (impulsive) Constant exercise of power, reward and punishment

• Mafia • Street gangs • Tribal militias • France Télekom • Lehman Bothers • Catholic church • Military • Most government agencies • Public school system

• Division of labour • Command authority • People-oriented sanctions

Amber (conformist) Top-down command and control

• Multinational companies • Alphabet • Spotify • Ing-DIBA • Elite sports Green (pluralistic) • Culture-driven Focus on culture and empowerment to achieve organizations extraordinary employee motivation • dm markets • Gore Tex • Otto Group Teal (“evolutionary”) • Non-hierarchical Purpose-oriented decisions, holistic orientation organizations • Buurtzorg • Chronoflex • FAVI Orange (goal- and task-oriented) Management by objectives, command on control of “what”, freedom on the “how”

• Formal roles (stable and scalable hierarchies) • Processes (long-term perspective) • Bureaucracy • Decision delegation bottom to top • Innovation • Accountability • Meritocracy • Competition • Frequently matrix structure • Executive election • Value-driven culture • Stakeholder model • Culture of respect • Consensus models • Self-management • Transparent feedback culture • Small, autonomous groups • Striving for wholeness

Back to Laloux’s model: he describes the various forms of organization using a colour scale similar to that of Ken Wilber and assigns them to a historical epoch. We give a short overview and start directly in modern times (see Table 1). Companies practising lateral management would be placed on the colour scale between orange and teal—“empowerment organisations” with elements of self-management. Empowerment in the 1990s was a management concept that attempted to shift more decisions to the grassroots of an organization. In Reinventing Organizations, the company AES, an energy service provider with 40,000 people, is described. This company was self-organized in 1982 (teal) and is today again managed in a classic way (orange). There are such upheavals again and again. And many companies with a long biography would certainly be culturally overwhelmed by hard cuts and skipping organizational evolutionary stages.

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Table 2. Current and desired culture in German companies (study of Denkwerkstatt für Manager) Layers by Graves

Current culture

Desire for future culture

German companiesa

German companiesa

Red 10 1 Amber 43 25 Orange 39 34 Green 8 30 Teal 0 0 a Notes: Benchmarks according to Graves. Sample of 130 German companies of different sizes (focus: HR)

For established companies, the introduction of lateral management, cooperation at eye level in top management, is already a challenging step. Nevertheless, the confrontation with non-hierarchical, self-organized companies is worthwhile— especially for the founders of new, digital companies. It is not for nothing that many of the self-organized companies described by Frederic Laloux were founded on the (teal-) greenfield site. In this respect, they can provide cultural benefits as role models for start-ups. In more than 100 companies, we have now asked two questions to people with and without management functions in consulting with the Graves Charts: 1. How do you rate your organization today according to the colour scale? 2. In which corporate cultures would you like to live? Organizations always consist of several subcultures. We therefore asked the test persons to distribute 100% over a maximum of five colours (Table 2). This survey is part of a cultural analysis of an organization that shows how the company is run. The results are pretty sobering. More than 50% of today’s companies are run in an authoritarian and bureaucratic manner. This is unlikely to look any different in other countries. Modern management fights its way forward in organizations at a snail’s pace. The belief in old, traditional management methods seems to be set in stone. In a study published by the University of St. Gallen in 2019 in the Harvard Business Manager, the biographies of 411 German listed companies were researched. The researchers found that 92% have no digital experience at all and probably know few start-ups (Bruch 2019). If this is already the case at the top of companies, then new, non-hierarchical cultural experiences are also lacking in founding companies. The culture of start-ups is often very different from that of established companies. Courageous companies like Otto, which are undergoing fundamental transformation very quickly, are still the exception. Changing culture takes a lot of courage.

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References Astheimer, S., Knop, C., & Jansen, J. (2018). Es schmerzt zu sehen, wie man in alte Muster verfällt. Frankfurter Allgemeine Zeitung, 08.10.2018, p 22. Bollmann, R. (2015). Das Ende der Stechuhr. In Frankfurter Allgemeine Sonntagszeitung (09.08.2015, p. 25). Online: www.faz.net/aktuell/wirtschaft/smarte-arbeit/wo-hoert-arbeit-aufwo-faengt-privatleben-an-13740794.html. Bosch.de (2018). https://www.bosch-presse.de/pressportal/de/de/bosch-eroeffnet-neuen-fors chungscampus-in-renningen-42977.html. Bruch, H. et al. (2019). Auf digitaler Mission. Harvard Business Manager, Heft 4/2019, p. 20. Farmbauer, M. (2014). Ich habe bei null angefangen, Carlos Dunga im Interview, In: Frankfurter Allgemeine Zeitung, 24.11.2014. Online: www.faz.net/aktuell/sport/fussball/brasiliens-trainercarlos-dunga-im-interview-13282296.html. Jenewein, W. (2008). Das Klinsmann-Projekt, In: Harvard Business Manager, Juni 2008, p. 2 ff. Laloux, F. (2014). Reinventing organizations. A Guide to Creating Organizations Inspired by the Next Stage of Human Consciousness. Nelson Parker. Redaktion, W&V (2018). Abschied vom klassischen Otto-Katalog. Werben & Verkaufen, 16.11.2018. Online: https://www.wuv.de/marketing/abschied_vom_klassischen_otto_katalog. Wittershagen, M. (2017). Auf dem Weg zum Daten-Spiel. Frankfurter Allgemeine Zeitung, 26.12.2017. https://www.faz.net/aktuell/sport/fussball/bundesliga/fussball-auf-dem-weg-zumdaten-spiel-15344638.html.

The Book Summarized—For Readers With Little Time

Digitalization will change the economy and society just as dramatically as electrification did 100 years ago—with far-reaching consequences for companies, managers and people. 5G, Robotics, AI, 3D Printing, Blockchain, Quantum Computing and more are changing our lives. Some experts are speaking of the arrival of an innovation tsunami, whose first waves in the form of 4G, broadband Internet, the smartphone as a constant companion, streaming, cloud computing and digital photography has already changed our lives decisively today. In the working world today, simple, repetitive tasks are already performed by machines. Networked, intelligent means of production give an idea of where Industry 4.0 is heading. But digitization is not only changing production, but it is also changing products, distribution structures, marketing and markets. It is changing the way we work and how we live—and thus our corporate cultures. In fact, the digital revolution is a cultural revolution. Managers, employees and customers will communicate differently and in a new way: laterally, at eye level. This requires the courage to take personal responsibility at all levels in the organizations. What sounds simple is so hard to achieve. But it’s possible. Courageous managers have already been able to demonstrate this in their companies. They have rethought and redesigned institutions. These managers have empowered their employees to disobey, to feel the pleasure of controversy over the best ideas. The basis of self-responsibility is non-conformity. How this basis can be established is what we want to show in this book and encourage managers to participate in. Companies that manage to spread responsibility across many shoulders are measurably very successful. This is also shown by the many examples from a large number of companies in this book. In Chap. 1, we will describe the change of times and the effects on companies, managers and people. We focus on the cultural core functions in organizations: leadership, decision-making and collaboration. Digitalization is changing the way top management works in companies, it is exacerbating the already-difficult role of middle management, and it has a dramatic impact on the activities of employees and workers: serious estimates estimate that almost 60% of all jobs will change in the next few years. Joseph Schumpeter, who described the innovative power of capitalism in an incomparably fundamental way, was able to show that in times of creative

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destruction technological upheavals are always accompanied by organizational changes. While leadership and cooperation in the twentieth century were still hierarchically organized as: “The boss’s decision trumps all”, the digital future will be socially shaped by lateral management, by leadership at eye level. Horizontal communication will replace vertical misunderstanding in successful companies in the twenty-first century. Statement hierarchies are replaced by responsibility hierarchies. This means that the responsibility is transferred from a few at the top to many in the organization. The competitive and innovative pressures generated by digitization are forcing companies and institutions to reorganize work, knowledge, data and management. Today, innovative companies all over the world are looking for new organizational models. Lateral management is the model that fits the digital economy and its requirements. Lateral management means allowing diversity of goals and processes, making organizations more flexible, relying on the creativity of individuals and small groups and, above all, sharpening a sense of possibilities for the future. The principle of self-responsibility should be firmly anchored in organizations. This means that the management style must change both internally and externally. The story of Lehman Brothers with its difficult boss, Richard Fuld, who, as Chairman of the Board of Management in 2008, was instrumental in triggering a global economic crisis, shows how devastating it can be to “keep up the good old way” and stick to classic hierarchical management. Linear, I-driven management models are not the answer to the complexity of the markets of the future and certainly not to a fundamental reorientation of the economy and society in a digital economy. The global economic crisis of 2008 was not a crisis of capitalism, it was a management crisis! Learning from the crisis means changing management cultures. How we manage is becoming just as important as what we do. In Chap. 2, we will look back on the history of management ideas of the twentieth century and pay tribute to the approaches that have influenced the concept of lateral management. We will describe how Henry Ford and Max Weber became the forefathers of classical management. We are dedicated to the legendary management star Peter Drucker, the inventor of “Management by Objectives” and founder of rational, planning and thus classic management. Peter Drucker influenced a very large number of managers worldwide and still has a powerful international fan base today. We shall compare his ideas with those of Warren Bennis. Bennis understood the soulless, number-fixed management as an economic version of Max Weber’s bureaucracy and confronted classic management with the model of visionary leadership. Bennis’s position can best be summed up in the words of another management legend—Jack Welch, who was CEO of General Electric in the USA until 2001: “All management is people management”. This debate from the early 1990s was important because it was already carrying within it the seeds of lateral management. Chapter 3 then shows the cracks that gradually shook the basic assumptions of classical management. With the use of information technology since the 1970s, so-called bypass structures have developed in companies. Project management was

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born and happily conquered a place in companies as a kind of second hierarchy next to the classical staff lines organigrams. Many companies consequently created matrix organizations in order to legalize project structures—and thus accepted the complexity of established organizational structures. The official organigrams suddenly took on surreal, unreal forms. Besides them, informal structures developed in which important decisions were made for the companies. Changes in market structures also caused new, non-hierarchical responses from companies. Project responsibility was soon more important for the functioning of the organization than line responsibility. We particularly appreciate the concepts of former McKinsey consultants Tom Peters and Robert Waterman—and managers like Percy Barnevik—who tried to put their concepts into practice. At that time, the companies involved worked in small organizational units. The radical transfer of responsibility to those affected locally, the mobilization of management and emancipated knowledge workers, and especially the de-bureaucratization were the new driving forces in companies. The new organizational structures co-developed by Peters and Waterman were always unique: tailor-made for each respective company, its culture, the industry and its competitive conditions. Many ideas were successful, some too radical and ahead of their time. Nevertheless, there is much to learn from the experiments. The ideas of Peters and Waterman were the historical laboratories for managers who are currently redesigning organizations. Around the ideas of the sociologist Niklas Luhmann and positive psychology, a new form of consulting developed in Germany, which is called “systemic consulting”. Essentially, communication consultants developed concepts in management workshops that take the new, complex realities of work into account. The credo of this form of consulting was: Make those affected into participants in change processes! Courageous companies employed such advisory groups for a fundamental evolution of management. Especially the American consultant Harrison Owen and his counterpart in Germany, Reinhard Sprenger, talked about a non-patriarchal management model. Only self-responsibility leads to efficient organizations. Harrison Owen summarized this in the slogan: “To manage is to control, to lead is to liberate” (Owen 1999). The sociologists Stefan Kühl and Wolfgang Schnelle from the consulting firm “Metaplan” came up with a leadership concept in the past decade called “lateral leadership”. In the Harvard principles of negotiation, it has already been shown that conversations with customers at eye level follow different rules than classical, vertically influenced communication does. The answers from Kühl und Schnelle for companies were also due to a social debate: Looking back on failed large-scale projects in Berlin, Hamburg and Stuttgart for which the state is responsible, it becomes clear that timely thinking about better citizen participation would have led to better results. No major project of a municipality is passed today without citizen participation. The economy can also learn from this. Why should people as citizens be involved in important decisions, but not affected employees in companies?

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In Chap. 4, we then describe historical and current approaches of lateral organizations. Many companies today are looking for different models to transfer more self-responsibility to individuals and teams in order to bring innovations to market faster and respond more flexibly to market challenges. Those who have held management responsibilities for a long time know that in the history of industrial capitalism, entrepreneurs and managers all over the world have always worked on these issues. In addition to the constant improvement of processes, creativity and innovations, there were pioneering experiments with forms of participation in England and Scandinavia in the middle of the last century—and the companies that can be regarded as classic cases of lateral management: Ricardo Semler and the Semco system, Gore-Tex, Gerard Endenburg and the Mondragón Corporación Cooperativa (MCC). We will deal with organizational experiments of smaller, modern companies such as Five1, it-agile, Umantis, Betterplace Lab, CCP, Praemandatum, Kuentzle Rechtsanwälte, Vaude from Germany and Tele Haase from Vienna. We also describe large exemplary companies that are currently embarking on the path of sustainable cultural change: RAG AG, Bahlsen, AOK Baden-Württemberg, dm-drogerie markt, Procter & Gamble. Especially tech giants like Amazon, Apple, Facebook, Microsoft and Google are constantly transforming their culture. These companies have courageously advanced what can be shaped. We were particularly interested in the Google mother company, Alphabet. Using a concise empirical example, we show how important middle management is when it comes to cultural change processes in companies—and what role lateral structures play in this. After all, we devote ourselves to companies that completely dispense with leadership and rely entirely on the self-organization of their employees and self-controlling teams: the Dutch nursing service Buurtzorg, the foundry FAVI, Poult Biscuits and Cronoflex from France, Sun Hydraulics from Florida, Morning Star from California, the communications agency MINISTRY Group from Hamburg and, in the USA, the power plant operator AES. They are not only success models. We also show how and why concepts of self-organization can also fail. Harley Davidson was also a laterally managed company between 1981 and 1997 with a successful business model following an economic downturn. We draw the first conclusions from this about what contemporary organizations need to do to introduce lateral management structures. From the history of Peters and Waterman, the historical approaches to creating innovation, and especially the experiments in companies, individuals and teams to transfer more self-responsibility, we present in Chap. 5 our own concept of lateral management. We ask the questions: What should companies do to culturally meet the challenges of the digital economy and how can cultural progress be measured and developed? What do these changes mean for people in companies? And what do they mean for the managers? The journalist and social theorist Arthur Koestler (1905–1983) had the opinion that the quality of every society and thus every organization can be measured by the

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degree of its possible, permissible, individual freedom, as the absence of collective coercion. How much freedom does an organization give to the individual? This question applies particularly to the management level of contemporary companies in the twenty-first century. According to our experience, the design of togetherness and the conception of innovative breakthroughs are based on the individual and not on the collective. This applies to both companies and enterprises. Today, it is courageous managers who are driving important innovations and creating added value beyond the traditional organizational charts. Successful organizations create structures in which collaborating people can develop in freedom. At the same time, it is also the responsibility of these people to accept these freedoms and to develop themselves further. This all sounds very reasonable, however is so difficult to implement in management practice. Who doesn’t want to employ self-responsible, well-networked and innovative people at the important positions in the company today? In this chapter, we show how lateral management is introduced and how it works. We also appreciate Peter Drucker’s saying: “If you can’t measure it, you can’t manage it”. This also applies today to changes in management culture. We have developed measurement tools that can help accompany cultural change from hierarchical to lateral management at all levels: top management, middle management and employee level. Our own consulting company Denkwerkstatt für Manger has been developing the benchmarks since 2015, primarily in Germany. In contrast to the published literature on the subject of self-organization, most companies in Germany are still managed on a classic hierarchical basis. Contemporary, lateral guidance in reality takes place far less than it gets published about it. For managers looking for cultural excellence, this part of the book should be particularly exciting. In the field of cultural change, there is the greatest need for improvement in companies. The aim is to reduce reactive power so that companies can work faster, more unbureaucratically and across departments. Google measures management performance against two parameters: performance and work happiness. Many companies can measure performance professionally with Key Performance Indicators (KPI). Peter Drucker laid the foundations for this in the 1960s with the idea of target agreements in management. Measuring work happiness as well as performance is new. To this end, we have developed key figures that we call Key Culture Indicators (KCIs). We would like to show you how this works here. Why are both the classical and the lateral management models used in parallel in companies today, in the transition to the digital economy? The classic hierarchical variant is the discontinued model. But in areas where routine activities are carried out, classic management methods often still work as the best solution. In the creative areas where innovations are conceived and researched, in customer contact and in horizontally integrated companies, lateral management will be the success model. The principle here is to implement as much laterality as possible in organizations and to reduce classic management. We’ll show you how. We are also dedicated to those who are concerned about the threat posed by digital technology. But let’s show what opportunities the process of digitization

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offers companies, people and managers: more freedom, more individuality, more exciting jobs, more creativity and more innovative power. “There you go, Mary” The Internet retailer Amazon collects data about the work performance of its pickers and packers via the scanners as they drive through the huge warehouses. In Germany, the introduction of such tracking in companies led to long-lasting conflict between management and employees. Already in 2005, a small company in southern Germany solved these problems. There were also concerns there about the introduction of the software “Mary”. Mary is a language software that can be regarded as a forerunner of Siri or Alexa in the industrial sector. But there is no question of language assistance—Mary gives instructions. The company is called Aqua Römer and supplies the best sparkling water from the Swabian Alps. Logistically, this means that pallets of water crates must be provided for customers in the warehouse. Whereas in the past this was organized with notes labelled by workers, which were attached to the deliveries in an awkward way, today Mary knows what who has to put together for whom. While getting used to logging in with a voice command and following Mary’s instructions at launch was a problem, 10 years later the tracking analysis capabilities had evolved and could register personalized information in addition to logistics processes. These include above all emotional states such as behaviour under stress, nervousness, well-being, anger and joy. As the staff were already involved and involved in the introduction of Mary in 2005, it was possible to find satisfactory solutions as to which data would be tracked and which would not (narrated according to Budras 2019).

References Budras, C. (2019) Alles hört auf Marys Kommando. Frankfurter Allgemeine Sonntagszeitung, 02.06.2019, p. 20. Owen, H. (1999) The Spirit of Leadership. Liberating the Leader in Each of Us. Berrett-Koehler, San Francisco [1990].

Contents

1 Creative Destruction—The Digital Revolution and Its Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Little Lateral—The Commitment of People to Companies . . . Digital Revolution—The World Is Changing . . . . . . . . . . . . Creative Destruction—We Are in the Thick of It . . . . . . . . . The Power of Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . Digital Transformation—The Consequences for Companies . Top Managers—Captains Who no Longer Steer . . . . . . . . . . Middle Managers—Worn Down Between the Fronts . . . . . . Men and Employees—The Revolution Has Only just Begun . Everything Changes—But not the Organization . . . . . . . . . . Summary—And What Happens Next? . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2 A Brief History of the Management Ideas of the Twentieth Century . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Henry Ford—The True Stories . . . . . . . . . . . . . . . . . . . . . . . Max Weber—Correctly Understood but Misinterpreted . . . . . . Peter Drucker—The “Father of Modern Management” . . . . . . The Knowledge Worker Emerges . . . . . . . . . . . . . . . . . . . Warren Bennis—Leading Instead of Managing . . . . . . . . . . . . Summary—And What Happens Next? . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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3 Cracks in the World View of Classical Management . New Projects—IT Forces Bypass Structures . . . . . . . . . . Searching for Top Performances Too Early—Tom Peters and Robert Waterman . . . . . . . . . . . . . . . . . . . . . . . . . . The Practical Test—Percy Barnevik and ABB . . . . . . . . Tom Peters Describes the Practice of ABB’s Divisions as Follows (Peters 1992) . . . . . . . . . . . . . . . . . . . . . . . . Getting to Yes—Negotiating at Eye Level . . . . . . . . . . . Luhmann’s Heirs—Systemic Leadership . . . . . . . . . . . .

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Every Human Being an Individual—The Underestimated Power of Freedom . . . . . . . . . . . . . . . . . . . . . . . . . . . . At Eye Level—Lateral Guidance . . . . . . . . . . . . . . . . . . Dialogue with People—Civic Participation . . . . . . . . . . . Summary—And What Happens Next? . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4 A Brief History of Successful Lateral Organizations . . . . . . . . . . . Elliott Jaques and Glacier—A Successful Project That Nobody Wants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee Participation in Germany—The First Experiments . . . . . . . The Classics of Lateral Management—Ricardo Semler and the Semco System, Gore-Tex, Gerard Endenburg and Mondragón Corporación Cooperativa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ricardo Semler and Semco, Mechanical Engineering, Brazil . . . . . Gore-Tex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Endenburg Elektrotechniek, Rotterdam/Netherlands—The Concept of Sociocracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mondragón Corporación Cooperativa . . . . . . . . . . . . . . . . . . . . . . The Grassroots Movement—Five1, it-agile, Umantis, Betterplace Lab, CCP, Praemandatum, Kuentzle Attorneys, Tele Haase and Vaude . . . Five-one-one . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . it-agile GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Umantis and the Haufe Group . . . . . . . . . . . . . . . . . . . . . . . . . . . Betterplace Lab . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CCP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Praemandatum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kuentzle Attorneys at Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tele Haase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vaude . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Companies with a Role Model Function—RAG AG, Bahlsen, AOK Baden-Württemberg, dm-drogerie markt, Procter & Gamble, Google . RAG AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bahlsen GmbH & Co. KG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AOK Baden-Württemberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dm-Drogerie Markt GmbH & Co. KG . . . . . . . . . . . . . . . . . . . . . Procter & Gamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Google . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Importance of Middle Management—“German Real Estate” . . . .

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Structures That Allow Self-management—Buurtzorg, FAVI, Poult Biscuits, Cronoflex, Sun Hydraulics, Mornings Star, AES, MINISTRY Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buurtzorg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Favi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Poult Biscuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chronoflex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sun Hydraulics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ministry Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Morning Star . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Harley Davidson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AES (Applied Energy Services) . . . . . . . . . . . . . . . . . . . . . . . . . . Current Management Methods—Old Wine in New Skins? . . . . . . . . History of Management Methods . . . . . . . . . . . . . . . . . . . . . . . . . Summary—And What Happens Next? . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Lateral Management in the Twenty-First Century . . . . . . . It’s All a Question of Organization . . . . . . . . . . . . . . . . . . . . The Starting Position Today . . . . . . . . . . . . . . . . . . . . . . . . . What can Companies do to Culturally Meet the Challenges of the Digital Economy? . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introducing Lateral Management: What is Really Important Include Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Which Levels of the Company Should be Reached? . . . . . . What do These Changes Mean for People in Companies? . . . . Horror Scenarios and Hype Debates . . . . . . . . . . . . . . . . . . The Return of the Individual . . . . . . . . . . . . . . . . . . . . . . . Individual Freedom is the Goal . . . . . . . . . . . . . . . . . . . . . Individual Freedom Needs Laterality . . . . . . . . . . . . . . . . . Risks Exist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Networking is the Chance . . . . . . . . . . . . . . . . . . . . . . . . . Learn, Learn, Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . What do These Changes Mean for Managers? . . . . . . . . . . . . New Forms of Management and Personnel Development . . Situational Leadership in the Transition Phase . . . . . . . . . . How can Managers Develop Lateral Teams? . . . . . . . . . . . The Big Five of Classical and Lateral Management . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Epilogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

About the Authors

Dr. Roland Geschwill is a certified psychologist and management trainer. He has been advising managers since 1986 and is co-founder of the “Denkwerkstatt für Manager” in Mannheim. Some of his publications are Der Rhythmus der Innovation. Was Manager und Unternehmen von Jazzern und anderen Künstlern lernen können (“The Rhythm of Innovation. What Managers and Companies can learn from Jazz Musicians and other Artists”) and EdTech in Unternehmen. Lernen als Schlüssel für Innovation und Wachstum in Zeiten der Digitalisierung. (“EdTech in Companies. Learning as the Key to Innovation and Growth in the Era of Digital Transformation”). Martina Nieswandt is Managing Director and Co-Founder of the “Denkwerkstatt für Manager”. She leads several projects on lateral management. She published Fast Cultural Change. The Role and Influence of Middle Management and EdTech in Unternehmen. Lernen als Schlüssel für Innovation und Wachstum in Zeiten der Digitalisierung. (“EdTech in Companies. Learning as the Key to Innovation and Growth in the Era of Digital Transformation”) www.denkwerkstatt-manager.de.

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Little Lateral—The Commitment of People to Companies During the reading of the last chapter, you may have wondered what the digitization of football has to do with our economic world. Well, football has always been an indicator of social conditions. Because in the microcosm of football it is always about the relationship between the individual and the team, about business and emotion, about competing systems. For example, the former coach of the Argentinian national team, César Luis Menotti, and the German ex-football professional Günter Netzer stood for “left-wing football” in the 1970s and represented the spirit of the times. Jürgen Klinsmann’s DFB players redefined the “Brand Germany” in the “Summer Fairy Tale” 2006—and introduced the principle of self-responsibility into the DFB team, which had previously been characterized by hierarchies. What can we learn today from sport for a digital world? Let’s take a look at the business world: Do employees in companies today already make their own decisions, are their own initiatives rewarded, do they support each other in the teams and are highly motivated as a result? So, do they work under world-class conditions? Unfortunately, reality is different. At least the results of regularly conducted employee surveys show this. For the working climate barometer of the market research company IFAK, 2000 telephone interviews are conducted every 2 years with employees of companies from different industries and of different company sizes. The results are always similar and are basically like this: only 12% of employees in Germany have a positive relationship with their employer and are motivated to work for their company. Well over half of the employees do more or less “work by rule”. And every seventh person would prefer to dismiss their boss (Sueddeutsche.de 2010). The Gallup Institute also comes up with comparable results in its studies on “Employee Retention in Germany”. 15% have a high level of commitment to the company, 71% an average level and 14% no commitment at all. Gallup concludes from the results of the last study, which examines the year 2018 (Gallup 2018), that © Springer Nature Switzerland AG 2020 R. Geschwill and M. Nieswandt, Lateral Management, Future of Business and Finance, https://doi.org/10.1007/978-3-030-46496-7_1

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Fig. 1.1 Employees’ emotional attachment to their employer. Source Statista (2016)

in many companies existentially necessary best performances are not achieved. The Institute puts the economic damage resulting from the lack of commitment to German jobs at up to 103 billion euros. The reasons for these costs are, therefore, caused by weak employee loyalty, fluctuation, high absenteeism and low productivity. In many other countries, too, employees’ emotional attachment to their employer is not particularly high (Fig. 1.1). The study from 2016 shows similarly poor values for Germany as the current one. These testimonies to the reality of work in companies are, of course, also a slap in the face for the managers and executives acting in responsible positions. And they show that the beautiful guiding principles about leadership and cooperation, which adorn almost every company website, serve PR purposes rather than that they reflect the reality of the company. In the progressive executive floors, people are well aware that something has to change concerning the work motivation of the employees. Many organizations are trying to improve the situation. Further training measures for employees, development programmes for managers and internal employee surveys are to bring success here. Nine out of ten companies in Germany were very active in training their employees in 2016. This year, the company’s commitment to continuing vocational training reached a new record level. Each employee in Germany invests € 1,067 per year and each employee trains 17 h per year. Digital continuing education is on the rise. The total investment volume in 2016 amounted to an incredible 33.5 billion euros.

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At least 10% of this was invested in management training. Because common explanation patterns say that managers are to blame for the demotivation of workers and employees. They are not sufficiently qualified for their job. For this reason, all major companies in Germany offer qualified additional training for management. Even junior managers go through complicated selection procedures, management audits and multipart training courses. The company therefore invests a lot to improve communication between management and employees and the qualification and motivation of its employees. Only: It doesn’t change much. The results of the Gallup study cannot be ignored. Job satisfaction is still at basement level and employee loyalty to their company is low despite all the encouragement. This standstill is risky. It is creating bad moods. And working in a bad mood brings bad results. But what’s wrong? Why does the promotion of managers and employees come to nothing? Are the wrong measures selected? Or do they just work on the surface? Does the real problem lie deeper? In order to answer these questions, we also have to drill a little deeper. Because not only football is changing, our world is changing too. The economic and business world, in particular, is currently facing new challenges that it apparently cannot overcome with traditional models. The new sweeps like a storm over many industries and companies every day and often leaves a trail of destruction behind. The eye of the hurricane is the digital revolution.

Digital Revolution—The World Is Changing Everybody’s talking about the weather. Sometimes the predictions are right, but often not. There are phases when you can’t even say what the next 2 h will bring. Why are we talking about the weather now? “The pace of change in our economy and our culture is accelerating – fueled by global adoption of social, mobile, and other new technologies – and our visibility about the future is declining. […] Predicting what will happen next has gotten exponentially harder. Uncertainty has taken hold in boardrooms and cubicles, as executives and workers (employed and unemployed) struggle with core questions: Which competitive advantages have staying power? What skills matter most? How can you weigh risk and opportunity when the fundamentals of your business may change overnight?” (Safian 2012). What was described in Robert Safian’s article in the American business magazine Fast Company a few years ago is truly no exaggeration. The speed at which our world—especially the economy—is changing is breathtaking. We only have to look at the most prominent examples in various branches of industry, where traditional companies that had been market leaders for many years have been replaced by new companies within a very short time and new business models have revolutionized entire industries. Take photography, for example, George Eastman founded Kodak in 1880 in Rochester, New York State. Kodak developed film rolls for the analogue camera. After the first photo was taken in Paris in 1838, this was a brilliant business model.

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Analogue photographs were taken with silver halides and other chemicals. Kodak developed billions of photos. At the peak of analogue photography around the year 2000, the group employed 145,000 people. The company went bankrupt in 2012. What had happened? Of the 3.5 trillion photos taken between 1838 and 2013, 10% were taken in 2013 alone. Today, 2.5 to 3 billion people own a digital camera. According to estimates, more photos are taken every 2 min today than in the entire nineteenth century. Photography has been simplified and made convenient. Through digitalization, photography has become a mass culture. In 2012, Facebook bought Instagram, which had developed an app with which 130,000 million customers had already exchanged approximately 16 billion photos. Purchase price: around one billion euros. This app had been developed by just 15 people. Facebook employs around 5,000 people, including only 1,000 technicians (Brynjolfsson and McAfee 2014, p. 154 ff.). Take mobile phones and online commerce, for example, until 2007, companies such as Nokia and Motorola controlled the smartphone market. Today, completely different companies dominate the competition. The market leader is Samsung, but Apple has recently been overtaken by Huawei and is now only ranked third, with other Chinese manufacturers such as Xiaomi, Vivo and Oppo striving upwards (Manager Magazin 2019). When on Chinese “Singles’ Day 2017” the Chinese online retailer Alibaba processes 325,000 orders per second via its cloud and its payment service Alipay operationalizes this with 256,000 payments per second, then the world has changed. These examples are typical for many. The music industry was one of the first non-technical industries to be completely revolutionized by digitization. The rapid development of records, CDs, downloads and streams within only 25 years not only changed the product that migrated from the visible sound carrier to the immaterial data bundle in the cloud, but it also fundamentally changed the business models of artists, record companies and distribution service providers. The decline of many business models in the music industry is the inspiration for many industries. Although the German media giant Axel Springer Group still publishes print media such as Bild-Zeitung, HÖRZU and Rolling Stone, it is pushing ahead with the expansion of digital business models beyond traditional journalism, such as car, job and real estate portals. These areas now account for far more than half of the Group’s sales and even more of its profit (Saal 2015). Apparently with plans in mind did the company send some of its most important managers to Silicon Valley for months to learn. Former Bild editor-in-chief Kai Dieckmann even grew a “hipster” beard while there and, even after his return to Berlin, wore hooded sweatshirts rather than suits for a while. Amazon and Co. have turned the book market upside down. Large mergers and sales by publishers and booksellers, new e-book technologies and 90,000 new publications every year on the German book market cannot prevent new bankruptcies. Clinging to fixed book prices in Germany cannot stop change—it is like an anachronism in a globalized, digital world. Amazon has long since risen to

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become a major tech company and is now making good profits in the cloud business, among other things. Classical television is no longer the “campfire” in front of which the whole nation is sitting on Saturday evenings, getting warmed by watching popular TV shows. The younger generation is hanging around on YouTube or other digital channels. For Digital Natives, YouTubers and Influencers are the new superstars of our time. And, of course, social networks like Facebook, Instagram, Twitter and Co. have revolutionized our media usage behaviour even more. The digital revolution has also shaken up other industries that are far removed from the media—and with them our everyday lives: today you book your holiday online and bank transactions are handled from home. Online pharmacies are displacing the nice trustworthy chemist from next door, whom our parents went to. Digital companies such as Airbnb and Uber can only be slowed down by legislation, but not by the market. Pioneers such as Jeremy Rifkin or Erik Brynjolfsson and Andrew McAfee, scientists at the renowned MIT Sloan School of Management, have ventured to make further forecasts for various industries (Brynjolfsson and McAfee 2014, p. 40 ff.): • Banks and credit card companies will have to pass on more than 25% of their payments to companies such as Apple, Microsoft and others. In the future, payments will be made using smartphones, iPads and related technologies. In Germany, the startapp WireCard replaced Commerzbank in 2018 after 30 years in the DAX, Germany’s most important benchmark index. • Due to mass production (reproducible technology and consumer goods) workers will be replaced by IT and robots. Industrial production worldwide has been declining for years by around 1% a year. In production, the concept of the self-organizing, intelligent factory will prevail. • Industry 4.0 has been a reality for a long time already. Large companies such as Bosch, Google and Apple have established research cooperations. The autonomously driving car has been a functioning reality at Google for over 10 years, for trucks for 5 years. Which car brands we will buy in the future is uncertain. • Digitization means that in 10 years much more routine work can be done by computers. Even more demanding activities, such as 70% of all lawyer activities, will be available online. Computer performance has doubled every 18 months since the 1960s (Moore’s Law). This means that today amounts of data can be processed that were unthinkable 15 years ago. • Shopping on the Internet will account for 30% of the total economic purchasing volume in a few years. The mail-order company Quelle missed its entry into online trading and was dissolved in 2009. We have already presented the Otto Group’s success story. Market participants such as Amazon or Zalando are causing problems for established companies in Europe. They achieve a turnaround to profitability comparatively quickly. Food shopping online has already been successfully introduced. Here, too, Amazon is pushing its way into markets worldwide. Scanner cash registers, operated by the customers themselves, can

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already be found today in many supermarkets and in large DIY chains in Germany. • Start-ups are currently working on face and speech recognition software to select job applicants, among others. Paul Ekman already did the theoretical preliminary work on this in the 1970s. • The German start-up DeepL from Cologne has revolutionized translation typesetting software for languages. Translations can now be done in English with 99% quality at the touch of a button. • Important developments in the coming years will be biotechnologies. CRISPR/Cas9, synthetic biology, trans-cranial direct current simulation (tDCs), quantified self, nanoscan and much more. Since 2018, the genetic scissors have made it possible in South Korea to produce four genetically identical descendants for 100,000 US dollars from the genes of an ageing dog in a family. We could continue the list of lost companies, new business models, changed consumer habits and future prognoses indefinitely, but we would never be up to date. Reality is in the fast lane. And further far-reaching changes are still to come. These technologies will very soon change the economy and society: • • • • •

5G will increase the transmission speed for Internet users by a factor of 100. Robots will move into all areas of life. Artificial intelligence will determine our lives even more deeply. 3D printing will become standard in households like today’s paper printers. Blockchains will make payment transactions even more efficient.

Today we cannot even imagine what standardized traffic with air taxis will look like or how drones will deliver goods. There are few limits to the imagination. Digital masterminds like Sebastian Thrun claim that only 1% of the inventions that the digital transformation will make possible have been developed so far (Armbruster 2018).

Creative Destruction—We Are in the Thick of It What’s going on? All economic experts agree: We are in the midst of a social and economic upheaval—the digital revolution. And it doesn’t just affect technology, it fundamentally changes the way we live and work. The cards are being reshuffled at all levels all over the world. Digital transformation is sweeping away entire business models. There is no end in sight to this development. It does not stop at any industry. The question is not whether an industry is changing, but when and how quickly. What causes problems for companies today and frightens many people is not new, however. There have always been significant upheavals in the economic world. Since capitalism has established itself as the predominant economic form, it has constantly undergone

Creative Destruction—We Are in the Thick of It

7

new phases of upheaval—and still manages to adapt and change itself again and again. In the first half of the twentieth century, the ingenious economist Joseph Schumpeter examined the adaptability of the market economy more closely (Schumpeter 1983). He asked himself two crucial questions: How does capitalism generate the power to incessantly transform society and culture? And what is the function of innovation? Increasing productivity plays a decisive role in the constant renewal of capitalism. Robert Solow was awarded the Nobel Prize for Economics for his proof that the increase in overall economic performance can only be explained to a small extent by the increasing use of labour and capital. According to Solow, the average American today only has to work 11 h to produce as much as he would have done in a 40 h week in 1950. Jobs in Germany have become about a third more productive over the past 20 years. Productivity progress in the history of capitalism has taken place in three major innovative steps. With the invention of the steam engine in the middle of the eighteenth century, the first Industrial Revolution began, with the general electrification and the mass production of the work pieces, the second Industrial Revolution was initiated at the turn of the century. With the1 digitization of information and the acceleration of work processes, the third Industrial Revolution—also known as the “digital revolution“—is changing the way we live and work (see Table 1.1).2 How can make this clear to oneself, how does capitalism create these productivity advances? Joseph Schumpeter examined capitalist societies and came to fascinating conclusions. He understands economic development as market changes triggered by innovations. The entrepreneur pulls the economy out of its slumber—through new goods, new production processes, new organizational forms, the development of new raw material and sales markets, etc. The economy becomes more productive and accumulates more capital through the “creative destruction” of old business models, processes or organizational forms—through new ideas. The entrepreneur wants to earn money. However, he typically steps onto the scene without means, the entrepreneurial function is in principle not linked to asset ownership. He raises money from banks or, like today’s start-ups, from venture capitalists. The entrepreneurs of today’s world are the founders of SAP, they are Steve Jobs, Bill Gates and Larry Page and Sergey Brin of Google, they were formerly Gottlieb Daimler, Carl Benz, Henry Ford, Werner von Siemens or Robert Bosch and Thomas Edison, the founder of General Electric. Their goal was to develop new

1

Annotations. Depending on the interpretation, the start of the second Industrial Revolution has shifted to the 1870s or the beginning of the twentieth century. 2 Because new buzzwords bring attention, the digital revolution is also further subdivided in current discourses, even referred to as the fourth Industrial Revolution or “industry 4.0”. However, the technical innovation behind it is the same as that of the third Industrial Revolution: digitization.

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Table 1.1 The major industrial revolutions Development of the steam engine (James Watt) Generation and central distribution of electricity Digitization of information. Acceleration of work processes through IT

First industrial revolution Second industrial revolution Third industrial revolution

Until 1900 Around 1900 From 2000

ideas (to be creative) and to implement new ideas or bring them to the market (to be innovative). What we are experiencing at the moment means nothing other than the logical consequence of a capitalist development with the release of labour and the destruction of old business models—creative destruction. Multifunctional 3D printers, robots and many Internet sources of income are still a dream of the future. But the corporate stories of Kodak, Sony or entire industries such as the music industry or telecommunications show that the economy and society are already in the midst of the digital revolution. How long does such a radical change take? The economist Chad Syverson from the University of Chicago showed that even during the second Industrial Revolution it took about 30 years for the invention of electric power to have a full impact on the change in production conditions. While the increase in productivity through electrification was continuous until 1930, it suddenly made an iterative leap and changed the growth dynamics (see Fig. 1.2). This also had to do with the fact that the organization of work was changed. Chad Syverson now suspects that a similar leap is imminent in the digital revolution with ever better computing power and ever better computer companion inventions.

1915 = 100

Year 1890 180

1900

1910

1920

1930

1940

era of electrification (continued) 160 140

electrification epoch (gray line, upper time scale)

120

1995 = 100

100 80 60

second machine age (green line, bottom time scale)

40

1970

1980

1990

2000

2010

Year

Fig. 1.2 Labour productivity in two epochs. Source Brynjolfsson; McAfee, p.126

2020

The Power of Innovation

9

The Power of Innovation With globalization, a new round in the race for innovation seems to have begun. On the evening of his re-election in 2012, Barack Obama formulated the most important economic policy goal as follows: “The USA must consolidate its innovative leadership worldwide”. Innovation leaders like Apple, BMW and entrepreneurs like Steve Jobs demonstrated at the beginning of the twenty-first century the importance of innovation for prosperity. Everyone wants to be creative and innovative today, wants to emulate Apple—at least they say so. The electronics, health, technology, software, pharmaceutical and chemical industries conduct intensive research. Governments, universities and companies invest almost one trillion euros annually in research and development (Destatis—Statistisches Bundesamt 2017). In Germany, this is 3% of the gross domestic product. In 2017, companies invested 9.3% more in their own research. Over 10% of future sales are to be generated with new products (Zentrum für Europäische Wirtschaftsforschung 2015; Stifterverband für die deutsche Wissenschaft 2018). Venture capitalists are looking for the entrepreneurial beacons of tomorrow. Governments employ entire staffs of innovation consultants and award innovation prizes to companies and young talent. Consulting companies determine their favourites in specially advertised innovation indices (Boston Consulting Group, Bundesverband der Deutschen Industrie, Deutsche Telekom Stiftung, Fraunhofer Institute, etc.). While creativity, in particular, had recently become an attribute of successful management, it is suddenly once again the focus of almost all companies and their self-representations on their homepages. The importance of innovation today is undisputed among economists. But how do we achieve innovations? According to Schumpeter: 1. There is a difference between invention and innovation, economically and sociologically. Often the change of a process or the organization is more important than the invention itself. 2. One innovation entails other innovations. Schumpeter’s favourite example is the construction of the nineteenth-century railways in the USA and the development of the West. The construction required large investments and a new industry was born: the investment banks. 3. Innovation takes place in cycles: at first development is slow, and then comes a sudden hype and finally destruction sets in. In the beginning, a company almost has a monopoly as a leader in cost, product, quality and processes, then other market partners appear and are cheaper, better and faster than the former monopolist. Think of the European mobile phone provider Nokia, which— bought by Microsoft—now plays only an insignificant role in the mobile phone market. 4. In order to create successful innovations, it is always necessary to experiment and fail. Mistakes are in the field of innovation, learning opportunities. If something does not work, the question often arises: How can we make it work

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anyway? This is true for both products and organizations, especially today, as groundbreaking, disruptive innovations are unlikely. Disruptive innovations were the water closet, penicillin and the steam engine. Incremental innovations, on the other hand, are so-called adaptation innovations, they reassemble already existing ideas, inventions or innovations. Today it is a matter of mobilizing the creative forces in companies for incremental or evolutionary innovations. One example of a successful adaptation innovation is the Waze navigation system: the founder, Ehud Shabtai, was dissatisfied with conventional systems, as they repeatedly led him to his destination on main roads and motorways, and not by the quickest route (via hidden paths). He wanted the exact representation of the road system, the current traffic situation and all important information available to the driver. After 2008, he used the iPhone as his existing technology. Today, about 30 million Americans and 110 million users worldwide have Waze on their smartphones and send real-time information about speed and traffic jams. Waze uses this to calculate the fastest route from A to B. The cartography has already been done. Even the algorithm for the fastest track was not new. The only new thing was to use the information of the road users for the navigation system. Other providers have now copied the business model. Experts estimate that the potential of designing adaptation innovations as by Waze is still infinitely great. Only 10% of the possible combinations on the Internet are used. A lot of evolution can be expected there in the coming years.

What capitalism has achieved

Today, we can look back at what capitalism has achieved over the past 100 years and draw a preliminary balance: Capitalism has managed to renew itself time and again through the continuous increase in productivity through innovation. The permanent increase in prosperity and, last but not least, ever-decreasing working hours are not entirely unimportant for the acceptance by people and the fact that the economic system is virtually unrivalled today. In 1950, the disposable income per inhabitant in Germany was 3,471 euros in today’s value—per year! After 10 years, the amount was doubled and between 1950 and 1991 it had quintupled. Even after reunification, gross real income increased significantly, albeit in smaller steps.3 Until the first Industrial Revolution, it had taken about 630 years for private income in Western Europe and North America to double in real terms, but today it doubles every 50 years. In the USA, even every 40 years and in Japan every 25 years. Imagine you would have to make do with one-twentieth of your income and live your land. While 200 years ago more than 80% of all people worked in agriculture, today the figure in Germany is less than 4%. Nevertheless, the 3

Disposable income per inhabitant in 2008 prices, in euro. Cf. Institut der deutschen Wirtschaft Cologne: “IW Dossier: Prosperity in Germany”.

The Power of Innovation

11

supply of food in terms of quantity and quality is incomparably better than at that time. No one wants to work one’s way through the field as people did 200 years ago. With industrialization, both society and work changed: in factories, offices, on the street and later in the virtual realm of the Internet. Not only employment in agriculture is declining, but also employment in industry. In the mid-1960s, 49.2% of employees in Germany worked in production, 40.1% in the service sector and 10.7% in agriculture. This has changed considerably since then. Today, 30.7% work in industry, 68.6% in services and 0.7% in agriculture. Worldwide, industrial labour has been shrinking by approx. 1% annually for 15 years, not only in Germany (Lotter 2015; CIA 2017). Nevertheless, 80% of the world’s population live in relative poverty, about half of which has less than $2 a day. A scandal for which the wealthy and the rulers in countries, with an impoverished majority of the population, are primarily responsible. However, the productive power of capitalism is and was a blessing for the prosperity of mankind. Today, more than 7 billion people live on earth, twice as many as 50 years ago. And according to studies by the Food and Agriculture Organization (FAO), there is actually enough food worldwide to feed the world’s population. Capitalism undoubtedly ensures that innovations and thus prosperity are created; it is not responsible for the unequal distribution of goods. Creation and distribution are two different processes. There have also been significant improvements in terms of working time: Until the 1960s, Saturday was a normal working day in Germany, people were working for an average of 44.6 h a week. Today it’s 6 h less. And where there were 2 weeks of holiday a year, for the first time from 1960 onwards, today it is 5 weeks or more. After the Second World War, factory workers worked 60 h a week and managers 40 h (Budras 2015). That, we think, is more the other way around today.

Digital Transformation—The Consequences for Companies Nothing remains as it is: The creative destruction in our economy through digitalization is changing everything. It has far-reaching consequences for companies, top managers and middle managers as well as for the people who work in the companies. What has digitization changed at these different levels today? And what will it do in the future? At the beginning of the digital revolution, information technology initially had a supporting function in companies. Hardware and software helped to automate production processes and also became irreplaceable helpers in office work. IT gradually conquered all areas of the company. It became necessary to manage the

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IT infrastructure: administration, maintenance, staff training, etc. had to be organized. IT was also used for communication and information management: Intranet, mails, messages, virtual conferences replaced pneumatic mail, circulars and meetings. (But of course other meetings were added.) Digital technology is also changing production. Robots work fast, error-free, do not get tired even after a 24 h day and are not unionized. The Internet, mobile computers and cloud computing will once again decisively change the automated industrial production process. Networked, computerized robots communicate independently with each other, with the ordering of goods, with the warehouse, the transport systems, quality control and so on: Industry 4.0 or the “Internet of Things” are ubiquitous catchwords. Implementing such self-controlling systems in the plant is initially expensive, but the advantages are obvious. In the long run, production costs are reduced because, for example, various orders can be bundled, mass customization can be used to satisfy individual customer needs, and production and delivery times can be planned precisely. In the future, robots will take over more and more activities, not just the very simple ones. “The question is not whether to do it, but who will be the first to do it” says the CEO of robot manufacturer KUKA, Till Reuter (Jung 2014). Almost all companies are affected by Industry 4.0, including SMEs. Matthias Kammüller. “Time is short: The first fully digitalised factory will be built in five years, predicted Matthias Kammüller, Managing Director of machine tool manufacturer Trumpf…” (Giersberg 2015). The distribution of classic goods increasingly takes place after an online order. Purely digital products like most media only need a broadband connection and no delivery service at all—not even drones. In marketing and advertising, priorities have shifted towards digital formats. Placing an ad in a print medium is no longer of much use today and has become a status symbol within the industry for many companies. Instead of classic advertising, there are other things: emotional customer loyalty through communities without an obvious invitation to buy, for example, Jägermeister organizes club tours for bands, Red Bull is involved in lifestyle and sports. Other companies are committed to social or environmental issues to ensure that their brands have a positive image. With the help of big data, companies can identify where trends are turning into mass phenomena and thus control their marketing activities in a targeted manner. Digitalization is bringing about major changes, especially in products and services. We have mentioned the examples of photography and mobile telephony. The business models of most media companies in the music, book, newspaper and film industries have also been turned upside down. Many companies had to painfully experience that old business models cannot simply be transferred into the digital world. A photo today is not just a photo stored in pixels instead of film. Today, a digital camera is supplemented by a wide range of digital services, some of which are free of charge, from image processing to ordering a poster at the touch of a button. A digital book is not simply a text that is read on an e-reader instead of between two

Digital Transformation—The Consequences for Companies

13

book covers. What can it be? Even today, the book industry still does not know this for sure. Perhaps the music industry is a role model: today very few music listeners want to own a sound carrier. It is enough for them to have the opportunity at any time to listen to the musical piece of their choice, and exchange ideas with others. Access is more important than possession. This is precisely why the battle for supremacy among streaming services is now taking place. It remains to be seen whether Apple will be able to threaten the market leader Spotify with Apple Music —or perhaps another, more customer- and artist-friendly provider that we don’t know of yet. Digitization also has a decisive influence on customer relationships. Companies now have the opportunity to use web profiles to determine the needs of their customers, their behaviour and their preferences. This enables not only individualized advertising, but above all individualized offers. Mass customization promises its customers products that meet their individual requirements 100%. But this process is not a one-way street. Those who do not react quickly and reliably to customer enquiries will soon not only have one less customer. Today nobody can be put off with a “I have to ask the boss” any more. If, in order to solve a customer problem, several hierarchical levels have to be included, this is slow and inefficient—and for the customer it is pure horror. Customers nowadays demand that companies address them individually and that they always receive new, unique and better product offers tailored to their needs. Bulk goods are out. This means for the companies: Innovation is the magic word. And the decisive factor is how quickly innovation is pushed forward. Older companies, often rich in tradition, which have built up a hierarchical structure with complicated organizational charts for decades, find this difficult and are clearly at a disadvantage compared to lean start-ups. Beth Comstock, Chief Marketing Officer at General Electric, says: “Our traditional teams are too slow. We’re not innovating fast enough. We need to systematize change”. And Susan Peters, who oversees GE’s executive-development, adds: “The pace of change is pretty amazing. There’s a need to be less hierarchical and to rely more on teams. This has all increased in the last couple of years” (Both quotes: Safian 2012). “Digital Accelerator”

Oliver Bäte, ex-McKinsey consultant and CEO of Allianz, Europe’s largest insurer, was concerned about whether his company was giving digitalization sufficient importance. Like Tom Peters once did, he travelled through the 70 national companies and spoke with the company’s employees. He came up with many good ideas. Indian colleagues had invented a revolutionary app with which the customer can photograph the bump after a car accident. The app then provides him with a damage diagnosis, a cost estimate and workshops in his area. The entire process is carried out on the smartphone.

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With this innovation the customer would not have to fill out any forms or get himself dizzy asking questions in telephone hotlines. The company could save process costs, personnel and time by using the app. Sounds simple!? “Only, how do I do something like that? How do I teach this to a large organization with its dozens of local sovereigns? Bäte asked such questions on his listening tour to an old McKinsey buddy, who today travels around the globe as a free radical: young billionaire Oliver Samwer and his holding ‘Rocket Internet’ produce startups in series. His recommendation to Bäte: set up the project, go through the exercises, set the pace, come hell or high water. This is easier to say for Samwer’s hangouts than for the nested Allianz, where the wild thinkers are not exactly at home. Bäte has therefore started a ‘Digital Accelerator’, a unit outside the hierarchy. The Allianz insurance under him should become faster and more colourful […]” (Meck 2015).

Top Managers—Captains Who no Longer Steer The manager’s view of the world was still clearly structured in the past: classical, vertical management was based on scientific, rational planning, and whoever stood at the top of the hierarchy had power. The requirement profile for the exercise of power was roughly as follows: whoever is at the top of an organization and wants to exercise power should be the best educated person, have as much relevant information as possible for the exercise of the job at the top, have control over all essential activities in the market and working environment and be able to solve conflicts of objectives in particular. Many operated according to this recipe—more or less successfully. Of course, the classic management model has never been 100% true to business reality. In the 1960s, Nobel Prize winner Friedrich von Hayek spoke of the “limited nature of knowledge” of market participants. This leads to the fact that for the management experimentation is a safer way to go about doing things than rational planning. When making decisions about future actions, a manager with a purely economic background never has all the necessary information at his disposal. At the end of the twentieth century, the former McKinsey consultants Tom Peters and Robert Waterman saw enormous things ahead for companies: they doubted the controllability of future markets and companies. These would become far too complex to remain manageable. Today, we have to state: Peters and Waterman were right about that. Until the bankruptcy of Lehman Brothers Bank in 2008, many markets were still characterized by high growth and low market fluctuations, but top managers are currently confronted with a new reality. It is characterized by growth and market fluctuations

Top Managers—Captains Who no Longer Steer

15

in ever shorter, unpredictable cycles. Even medium-term planning will thus become obsolete, and economic forecasts in this environment will go wrong—as will the weather forecast. American business magazines report that in the past 10 years only about 10% of planned corporate strategies have actually been implemented—or less, as Tom Peters suspects (Scheuss 2012, p. 380). Realistic corporate strategy was yesterday’s strategy, today it’s more of a “We’re moving forward”, as Canadian management professor Henry Mintzberg once called it in reference to Robert Musil.4 But how exactly are managers working at the top of the company today, in these turbulent times of upheaval? Unfortunately, that’s largely in the dark. Whether scientists or journalists—anyone who wants to know more about the concrete activities of the superiors will soon have to give up because of the personal counter-espionage services of these people: secretariats, assistants, press officers and whatever they might be called. Rarely do top managers provide information as René Obermann, the former Telekom boss in Germany, did: “As board members we work everywhere today, even during the ten-minute wait on the platform or at night while watching the news in front of the television. Over the years tunnel vision develops, one thinks and talks only about the business and loses energy and empathy for friends and family. Then you think you’re Superman, and in reality you are a sorry case. Until one day private structures and all that pompousness about power dissolves into thin air and one notices that one is completely alone” (Willenbrock 2014). There are managers who have resigned from the executive board position in a DAX company because they saw hardly any real opportunities to shape the company there. Control over markets had long since slipped away, and the conflicting goals often needed to be decided directly on the spot rather than at the top of the company. Olaf Gersemann, journalist at the German newspaper Welt, expresses the new excessive demands as follows: “Years ago, those who stood at the head of large corporations still felt like they were the ‘Masters of the Universe’, as rulers who could determine almost everything and achieve even more”. But times have changed: “The economic elite, at least of the western industrialized countries, feels besieged, insecure, and in some cases overburdened. Within a short time, a notion of omnipotence has turned into feelings of helplessness, and hyperactivity has often been replaced by a downright rigidity of shock – with consequences that extend far beyond the executive floors” (Gersemann 2015). Those who manage companies responsibly in the twenty-first century are moving at an ever-faster pace in increasingly complex contexts and are experiencing a persistent lack of time and their own creativity. The basic feeling in everyday working life is dominated by a mixture of loss of time, long working hours, externally determined Apple and Microsoft communication, reactive power, chance and any kind of achievement of objectives. There is little room for

Mintzberg quoted Robert Musil’s lecture “Der Dichter und diese Zeit” of 1936 (Musil 1978), albeit in a different context.

4

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inspiration, creativity and innovation. Top managers increasingly feel that they are being driven by others. Even the self-optimization tools such as “time management”, which were still praised a few years ago as a panacea, only functioned in times when work design could be planned. Nor did the collective depressing reminder that time management had to be “taken seriously” in the end do any good. Soon there is yet another new bandwagon: “Simplify” was the new magic word on many slides of internal or external seminars. Of course, in an increasingly complex world with no prospect of improvement. The increasing complexity of the markets, the diminishing ability to plan and the horrendous acceleration of work processes lead to the fact that the requirement profile of the exercise of power described above over-taxes the individual. Real power in organizations is exercised by many. The knowledge in organizations has long been distributed among many. What an organization really knows in its entirety can hardly be overlooked or even mastered by a single top manager today. At the top of the company, there is also always the risk of being presented one side of things by the direct reporters. Conformists are attracted to the powerful like wasps are attracted to jam. How limited must the “limitedness of knowledge”, as described by Friedrich von Hayek more than 50 years ago, be today? In the new, digital world of the twenty-first century, managers never have all the information they need to make decisions, even though their decision templates—often shortened PowerPoint slides trimmed to “Simplify”—suggest. However, these cannot do justice to the complexity of the issues at hand. The dilemma of many organizations today is that their formal organizational charts are still as structured as they were at the time of rational corporate planning: as if it still made sense to be able to decide and control at the top. Such an organizational form must almost inevitably overburden the top managers of today. Nevertheless, strength and clear statements are expected from them and decisions are required. A hubris that many top managers are well aware of. The conditions for instruction cultures from top to bottom have long since ceased to exist. Neither a Federal Chancellor nor a chairperson of the board of management actually has any power today. Top people are involved in an interweaving of complex power relationships that limits the importance of the individual.

The Downfall of Lehman Brothers

The failure of the Lehman Brothers Bank in 2008 is a striking example of the power and powerlessness of a person at the head of an organization. The economic damage to the global economy was significant. The catastrophe has a name: “Sir Richard” “Dick” Fuld. He actually believed he had the power, information, knowledge and conflict resolution mechanisms to lead one of the most successful banks of the twentieth century into the future. The consequences of his destructive omnipotence are well known. Fuld symbolizes the

Top Managers—Captains Who no Longer Steer

failure of outdated leadership and instruction hierarchies. The Fulds of this world have long since been discontinued. The bankruptcy of the fourth-largest US bank in September 2008 caused probably the most severe economic crisis at the beginning of the twenty-first century. It is closely interwoven with the self-opinionated leadership style of the CEO “Sir Richard” “Dick” Fuld. Here are a few anecdotes of his work: • Risk manager Madelyn Antoncic warned Fuld back in 2005 that his bank was on the verge of economic collapse with its mortgage prescriptions. The CEO told her to “keep her mouth shut”, shut her out of important board meetings and finally fired her in 2007: too disquieting! • Already on 9 February 2007, 45 managers from Lehman discussed the dangers of the so-called subprime bonds without any debt. There would be no financial means to secure the loans sufficiently, and one would run up against an iceberg like the Titanic. Nothing was decided. You’re careful in instruction hierarchies. If you’re too open, you’ve lost your mind. Where potentates rule, fear rules. • The boss kept only a small circle of “confidants” who did not dare to contradict him. Among them was Joseph Gregory, the company’s number two. Employees gave him the nickname “Darth Vader”. He was the henchman for his boss and acted as manager of the operational business. Which meant he reprimanded and fired employees. Fuld did not want to get his hands dirty. • The boss had for a long time been distant to his managers. He resided on the 30th floor of the company headquarters in New York, designed by architects, a wood-panelled palace in the sky. It had its own bathing area, specially reserved lift, VIP access, bodyguards. For Fuld, “every day was battle and war”. The supervisory boards knew of his tyrannical leadership style during the 14 years that he headed the bank. In August 2008, there was a whole wall in Lehman House on which the staff pinched ironic caricatures about the Fuld leadership style. • As recently as April 2008, Fuld ruled over former US Treasury Secretary Paulson, an ex-banker: “I don’t need you to tell me how I run my business” (Geo Epoch 2014). Paulson’s advice at the time was that Lehman should reduce his risks and then support the Treasury with state aid. It is well known that the US government then dropped the bank 6 months later. By the way, Fuld declared in his first public speech in the USA after the bankruptcy in 2015 that others were to blame for the downfall of the Lehman Brothers. This did not surprise many people who knew his management style.

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Middle Managers—Worn Down Between the Fronts Of the approximately four million managers in Germany (Fröhlich 2015), most belong to middle management. Middle managers generally find themselves in a dilemma: they bear responsibility, but are often not equipped with the necessary decision-making authority. If something goes wrong, it’s usually the middle managers who are to blame. If something works well, the superior top manager gets the credit. After all, he made the right decision in the end. That’s frustrating. Managers in the sandwich positions receive instructions and are responsible for implementing them, passing them on downwards and encouraging their employees to perform at their best. In the past, they did not always have a good reputation. When lean management became fashionable in the 1990s, the business media prominently called it the “clay layer”. Middle managers are the supposedly impermeable, encrusted layer between the board and employees who use their power not to let ideas rise up from below. The importance of the middle management level is no longer denied by anyone today. Instead, nothing would work without them. “Today, middle management is supposed to play an active hinge role. Team leaders, group leaders, project managers and department heads are the link between all strategic plans and goals and what happens every day in the individual departments, what the employees think and what they do”, says Ruedy Baarfuss of Malik Management Zentrum St. Gallen (Hockling 2012). Especially during times of economic upheaval, middle managers are under constant pressure—from above as well as from below. On the one hand, they should quickly push through necessary changes; on the other hand, they should take the fears of the employees seriously and motivate them at the same time. There is little time to develop your own visions, to be creative, to work independently and to give an impetus for improvements, new products and other innovations. Anyone who constantly has the feeling that they are being crushed between the interests of bosses and employees without being able to bring about their own ideas will probably inevitably diminish their connection to the company—middle managers also contribute to the poor results in the Gallup and Co. surveys. If the organization of a company is to be changed, middle management is central to the success of such plans. This shows the “double cliff phenomenon”. This means the following: If changes are planned in organizations, then the top level is usually enthusiastic: 90% of the upper management agree with the plans. Middle management is only 50% in favour of these measures, and the shop floor is less than 30% in favour of the planned measures (see Fig. 1.3). Anyone who wants to introduce innovations into organizations knows of these pitfalls. First, there are the flashy PowerPoint slides with the somewhat outdated title “Change Management”, which garnish many board resolutions. In the following workshops, eager project managers look into the empty eyes of the middle managers, who consider how to integrate the new ideas into their already stressful daily routines. Hardly anyone dares to say with so much “this is important” being voiced that he would like to make the change better not at all or only later. In

Principle approval regarding changes

Middle Managers—Worn Down Between the Fronts

19

Upper consent abort

Lower consent abort

Top Management

Senior Management

Middle Management

Sceptical walk-on part

Lower Management

Work Force

Fig. 1.3 Double cliff phenomenon. Source © Capgemini Consulting (2010), p. 46

middle management, the slogan is: “quick and dirty”. So they try to pull through the process of change somehow. The results then also have the corresponding quality. Most managers are not satisfied with this. If the middle managers were really convinced, if they would be at least heard before a new plan was developed, then the chances of implementation would certainly be greater. Because then the middle managers could also bring the employees on board. How this can work will be explained elsewhere in this book (see the example of “German Real Estate”, page XX). Tabula Rasa

By Holger Steltzner, Frankfurter Allgemeine Zeitung, 24 September 2015: Martin Winterkorn was unstoppable. It wasn’t about what the CEO of VW knew in detail. It was also not about the ‘political’ responsibility that every board member bears. The point is that Winterkorn, as long-standing boss, created a corporate culture in which fraud flourished. Before the test drive with the two ‘old ones’ even proud development engineers trembled (in addition to Winterkorn the former chairman of the supervisory board Ferdinand Piëch also examined every new car until the two quarrelled in spring). In a climate of pressure to perform and intimidation, people tend to trick others. It is then only a small step to cheating, as now the shocked and disappointed customers, the public and many governments are angered by. The long struggle of the Executive Committee, which prepared the Supervisory Board meeting, shows how difficult the Supervisory Board found it to separate itself from Winterkorn. Volkswagen owes Winterkorn a lot; he and Piëch made VW the largest car manufacturer in the world. However, the Supervisory Board let the two ‘old men’ manage the global group in the manner of landowners—and became dependent. In view of the importance of VW for the country as well, this is an untenable situation …

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Men and Employees—The Revolution Has Only just Begun Jobs and activities are also changing radically as a result of the digital transformation. As early as 2013, British scientists Carl Benedikt Frey and Michael Osborne warned in their study “The Future of Employment” (Fry and Osborne 2013) that 47% of existing jobs in the USA were at stake. The study made major headlines. Economists at ING-DiBa-Bank recalculated the results of the study using the employment statistics of the Federal Employment Agency according to the classification of occupations—and arrived at even more dramatic results (ING-DiBa AG 2015, p. 1): For Germany, it is estimated that 59% of all jobs will no longer exist within the next 10–20 years. 30 million jobs have been analysed, 18 million are at risk due to increasing digitalization. Automation has more potential for rationalization in Germany than in the initial study by Harvard economists in the Anglo-American region.5 In itself, this is nothing new, the world is changing, and there are many lost professions: from tinkerers, horse-jammers, chair-wearers or cartwrights one has perhaps heard of these in proverbs or fairy tales. Stenotypists, as a profession, are still known by older people. What used to take centuries, however, is now happening more and more rapidly. Today, the activities of office and ancillary workers (85.7%) and plant and machine operators, assembly workers (69.2%), service and sales workers (68%), craftsmen (63%) and technical workers (50%) are acutely threatened with extinction, while management activities are only 11%, according to the ING-DiBa study. Threatened by extinction can be, for example, the activities of office workers, accountants, cashiers, postmen and parcel couriers, “pickers” and warehouse workers in logistics companies and the activities of the already frequently mentioned employees in travel agencies. Above all, simple, repetitive activities will increasingly be replaced by machines. But that doesn’t mean that 60% of people will be without a job. Occupations and activities are changing. New jobs emerge, others grow together. Whoever had been a car mechanic just a few years ago is now—as a result of digitalization—the mechatronics engineer. The editor becomes the online editor or the cross-media editor. An anthropomatist, quasi-anthropologist and mathematician in one, tries “to design technology in such a way that man can easily master it and derive the optimum benefit from it” (Stehr 2015), for example, with household robots. Completely new professions are the Social Media Manager or the Big Data Scientist, which is almost taken for granted today. What will be considered a profession with a future in 5 years’ time? We may not know it today. There are consequences: We’ll have to keep learning new things. No matter how successful vocational training in the dual system, which is still deified in Germany, there is no guarantee that it will be up to date a few years into the future. Also, the knowledge acquired today in regulated, school-like studying has only a 5 Even if the scientists’ prognosis is not as accurate: jobs and activities will change fundamentally. The investigations by Frey and Osborne are important pointers into the future. However, the future can be shaped. Anyone can use the remaining time to adapt to change.

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limited expiration date. What is more important is to be able to analyse and solve new, complex tasks in the profession and to bring knowledge and working techniques up to date. The motto is: Learn, learn, learn. The employment biographies of many 40-year-olds and those younger today take this development into account: the “workplace for life” is a phased-out model. While changing your job still promised security to the generation of our fathers and mothers, today this is often regarded as a flaw: Those who do not change their job or company every few years are suspected of being less flexible and as not being interested in new things. In the future, it will become almost normal for modern knowledge workers to switch back and forth between being employees, freelancers and going through periods to further their qualification. On the one hand, such models are exciting and entertaining; on the other hand, the pressure to constantly learn new things is naturally great. Self-management becomes the core qualification (Deutsche Telekom AG; University of St. Gallen 2015). But flexibility and openness offer more opportunities to play a role in the labour market of the future than the desire for a classic nine-to-five job. The clock can’t be turned back. Thinking in terms of opportunity instead of sentimentality is the order of the day. People who understand this will often have a better position on the labour market in the future than their parents’ generation. Qualified, flexible knowledge workers who have a desire for new things and change—and for whom insecurity means more challenge and fun than frustration and fear—are in demand. These people are no longer petitioners to the personnel of companies begging for a job. No, they can choose the company they want to work for. And dictate conditions that were previously unthinkable, such as far-reaching responsibility and decision-making authority, flexible working hours without compulsory attendance, a 4-day week, regular self-selected qualification measures and much more. Let’s stop dreaming first: such conditions today are offered only by the most progressive companies, mostly start-ups, run by people who think similarly. If a modern, digital knowledge worker comes today into a dusty organization that functions according to the hierarchical rules of the last century, disillusionment quickly returns. And that means, frustration, (inner) dismissal—and in the end there are again survey results as in the Gallup study mentioned at the beginning of the chapter.

Everything Changes—But not the Organization A top management that is too strongly determined by others, middle managers that act too little on their own responsibility and employees who commit themselves to the company below their skill level and abilities—something is going wrong in our companies and organizations. And even attempts to change something are usually doomed to failure. For it is not possible to fill a necessary change with meaning for all those involved. The already condensed workload of all, a not or only

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insufficiently existing participation of these concerned in decisions, all this leads to growing rejection. It should be noted that the increasing complexity of work processes over-taxes large groups of employees and parts of the management in organizations. This raises the question of how to ensure that more employees and managers enjoy their work. Yes, contrary to what some consultants and managers claim, fun at work is important! Communication in the work environment today is often far too tense. Work must become interesting again through the absence of boredom. Work should be exciting. Work can arouse curiosity. Work is the desire for performance and success—and work makes sense. Companies must constantly renew themselves and their business models in order to be able to react to rapidly changing markets. But a lot of people have a hard time with that. Global competition has made former model companies disappear from the market. Other companies have become the most important and valuable in the world within 10 or 20 years—just think of Amazon, Apple, Facebook, Google and others. These digital companies work differently than traditional ones: they act more flexibly and faster. They are able to develop innovations faster and bring them to market. They, and even more rapidly growing start-ups, today have very little to do with the old industry when it comes to responsibility in decision-making processes or corporate organization. However, the majority of companies still operate with an organizational model that dates back to the last century. With rigid instruction hierarchies cast in organigrams. With few decision-making options for those who are operationally active. Many traditional companies are like sluggish steamers, unable to respond appropriately to changing market situations. If they don’t want to fail, they have to act. The digital revolution brings a high degree of complexity to future work tasks (Deutsche Telekom AG; University of St. Gallen 2015)—it calls for new forms of organization and probably also for a new concept of work. Solutions are currently being sought at many levels to find new, functioning models of cooperation (other than the old instruction hierarchy). Oliver Kelkar, Head of Innovation Management at Porsche company MHP, puts it in a nutshell: “There’s no point in talking about robots if you don’t think about personal responsibility, individualization, autonomy and flexible projects” (Lotter 2015, p. 40). The discourse that is conducted in the industrialized countries and in many companies is an important step towards shaping the future. In many studies and comments on the digital revolution, it is repeatedly stated that hierarchies must change in organizations or that work must be reinvented (Frank and Hübschen 2015, p. 70 ff.). What is missing is the radical question of the meaning of work: How is it possible to generate as much self-determined work as possible in organizations? Some companies are asking themselves this question today. Some again found themselves and successfully experiment with freedom of hierarchy. Established companies shift decisions to many people in the company. Decisions are made where fast, competent and customer-oriented solutions have to be achieved. The successful, established companies rely here on the consultative individual decision.

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Absolute top companies today are trimmed to unstable markets and made more flexible with regard to all possible developments. These successful companies have long since abandoned one-dimensional strategic planning and hierarchical, vertical management under the conditions of globalization and digitization. In the face of complex issues, the skills and experience of many are needed. Contemporary companies therefore rely on laterality and leadership at eye level. In general, every company must find its way into the digital age based on its history, business model, management level and culture. Knowing what others do helps. The sentence of Georg Christoph Lichtenberg from the eighteenth century applies again: “It is not said that things will get better if they change; but if they want to get better, they must change”. If things are to get better, a timely discourse on the changes is a good solution. In such times, the most noble task in a company is to rethink the organization of leadership and cooperation at eye level and to act accordingly. It is time for new, powerful organizational models to finally find their way into companies—for the benefit of all. In this book, we dedicate ourselves to such a sustainable model that fits the new economic conditions in the digital economy, which actually creates the shift from the instruction hierarchy to the responsibility hierarchy: lateral management. A spectre is haunting the companies. The spectre of digital transformation. All the powers of old management have entered into a holy alliance against it. […] It is high time that the progressive forces in economy and society, in enterprises, consulting firms and trade unions should openly, in the face of the whole world, publish their views, their aims, their tendencies, and meet this nursery tale of the spectre of digital transformation with a concept of lateral management, with more personal responsibility in the core functions of leading, deciding and cooperating.

Exceptionally Brutal

The former France Télécom management team was sued for systematic harassment in 2019. Since 2006 there have been a number of suicides of people working for the company. Remy L. burned himself in front of the company headquarters in 2011, Jean Michel L. threw himself in front of a train in 2008 and Michel D. made it clear in a suicide note in 2009: “I am taking my life because of my employer France Télécom!” The accused are former CEO Didier Lombard and six of his former colleagues. In 3 years, the workforce was to be reduced from 120,000 to 98,000 employees. Following a privatization in 2006, he had announced to his division heads that he would enforce the planned personnel adjustments one way or the other. This meant systematic bullying and putting pressure on people to quit. The division heads concerned are said to have received training to force their employees out of the company and isolate them in the teams. Mr. Lombard said literally: “I pushed through the job cut. People go out the door or the window!” In the process, a total of 19 suicides and 12 trials are negotiated (FAZ 2019).

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Bullying is also a criminal offence in France. Maximum sentence 1 year in prison and up to 15,000 €.

Summary—And What Happens Next? The Otto Group in Germany has dared to change its culture and to radically change its business model. “Die Mannschaft”, the football team from Germany, became world soccer champion in 2014 with players acting on their own responsibility, a self-steering team and lateral management structures in the “team behind the team”. Digitalization in sport has been progressing for years and goes hand in hand with athletes acting on their own responsibility. Such modern and efficient structures have not yet established themselves in many organizations and companies. The instruction hierarchy, which is still frequently encountered, leads to excessive demands and demotivation on all those involved, especially in times of digitalization: top managers, middle managers and employees. In extreme cases, as with Lehman Brothers, it brings unacceptable managers to the top of one of the oldest and most successful companies in the world, destroys the bank and destroys billions of dollars in a global economic crisis triggered by authoritarian behaviour. Or, as with France Télécom, managers with a similar basic psychological structure drive people to commit suicide. Top managers lose their nerve under stress. Why is that? The digital revolution is completely transforming the economy and society—similar to the first and second Industrial Revolutions. We are in the middle of this process of upheaval. The markets are permanently unstable, business models of entire industries and many companies are breaking away, new ones are emerging. Developing innovations becomes a key task. All this requires new organizational structures in companies. The answer is lateral management. In lateral organizations, work is carried out at eye level. Johann Wolfgang von Goethe was of the opinion that everything important had by his time already been thought up. You just have to find it. A charming thought. Also, management and the theories behind it always have history. They are an expression of their time—and subject to upheavals just as much as the economy and society. So, lateral management is not being reinvented today, it builds on many experiments, ideas and challenges. If you don’t want to repeat mistakes, you should know the story. This applies to management and even more so to companies. We will therefore first focus on the history of classical management theory, pioneers like Henry Ford and thought leaders like Max Weber—who laid the foundation for the second Industrial Revolution. As a result, the legendary management “father”, Peter Drucker, set the standards before Warren Bennis—no less popular—with his theory of leadership in contrast to management in the previously

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rather technocratic management theory puts the focus back on those for whose benefit all economic activities happen primarily: the people. A somewhat unusual suggestion: You can also skip the following chapter and start right away with Chap. 3. This is especially true for those who have been involved with the second Industrial Revolution and its management thinkers. While writing this book, we discussed whether we should not place the chapter last. However, we have decided that the future needs an origin—lateral management can be better understood if you have become acquainted with the ideas of classical management.

References Armbruster, A. (2018). 99 Prozent der tollen Erfindungen fehlen noch. Sebastian Thrun im Gespräch, Frankfurter Allgemeine Zeitung, 6.2.2018, p 22. https://www.faz.net/aktuell/ wirtschaft/diginomics/silicon-valley-informatiker-sebastian-thrun-im-interview-15434178/ausdeutschland-ins-silicon-15434319.html. Brynjolfsson, E., & McAfee, A. (2014). The second machine age. work, progress and prosperity in a time of brilliant technologies. New York: W. W. Norton & Company. Budras, C. (2015, May 5) Hätten Sie kurz Zeit? In Frankfurter Allgemeine Sonntagszeitung. www. faz.net/aktuell/wirtschaft/atemlos/was-wir-gegen-stress-und-zeitnot-tun-koennen-13511633. html. Capgemini Consulting. (2010). Change management studie 2010, Berlin. CIA. (2017). The world Factbook. Field listing: GDP–composition, by sector of origin. https:// www.cia.gov/library/publications/the-world-factbook/fields/214.html. Destatis–Statistisches Bundesamt. (2017). Interne Ausgaben für Forschung und Entwicklung nach Sektoren und Berichtsjahren. https://www.destatis.de/DE/Themen/Gesellschaft-Umwelt/ Bildung-Forschung-Kultur/Forschung-Entwicklung/Tabellen/forschung-entwicklung-sektoren. html. Deutsche Telekom AG, University of St. Gallen. (2015). Arbeit 4.0: Megatrends digitaler Arbeit der Zukunft, Retrieved August, 2015, from www.telekom.com/static/-/285820/1/150902Studie-St.-Gallen-si. FAZ. (2019). Gericht arbeitet Suizidserie bei France Télcóm auf. Frankfurter Allgemeine Zeitung, 7. Mai 2019, p. 20. Frank, E., & Hübschen, T. (2015). Out of Office. Redline, Landsberg am Lech: Warum wir Arbeit neu erfinden müssen. Fry, C. B., Osborne, M. A. (2013, September 17). The future of employment. How suspectible are jobs to computerisation? www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_ Employment.pdf. Gallup. (2018). Engagement Index Deutschland. https://www.gallup.de/183104/engagementindex-deutschland.aspx. Gersemann, O. (2015, Januarry 25). Die überforderte Elite, In Welt am Sonntag, Ausgabe 4, p 1. www.welt.de/print/wams/wirtschaft/article136743012/Die-ueberforderte-Elite.html. Geo Epoche. (2014). Finanzkapitalismus: Im Zeitalter der Gier, In Geo Epoche Nr. 69/2014, p 126 ff. Giersberg G (2015, November 9) » Die erste volldigitalisierte Fabrik gibt es in fünf Jahren Plattform Industrie 4.0 hilft dem Mittelstand und knüpft globale Kontakte « , in: Frankfurter Allgemeine Sonntagszeitung, p 18. Hockling, S. (2012, June 14). Führen in der Sandwichposition. In Zeit Online. www.zeit.de/ karriere/beruf/2012-06/chefsache-mittleres-management.

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ING-DiBa AG. (2015, April 30). Die Roboter kommen. Folgen der Automatisierung für den deutschen Arbeitsmarkt. Frankfurt am Main. www.ing-diba.de/imperia/md/content/pw/content/ ueber_uns/presse/pdf/ing_diba_economic_research_die_roboter_kommen.pdf. Jung, A. (2014). Die Menschmaschinen. In Der Spiegel 23/2014, p 70 ff. www.spiegel.de/spiegel/ print/d-127307915.html. Lotter, W. (2015). Schichtwechsel. In brand eins 07/2015, p 31 ff. www.brandeins.de/archiv/2015/ maschinen/wolf-lotter-industrie-4-0-wissensgesellschaft-schichtwechsel. Manager Magazin. (2019, January 5). Huawei greift nach Weltspitze bei Smartphones. Manager Magazin. https://www.manager-magazin.de/unternehmen/industrie/huawei-gewinnt-gegenapple-und-samsung-marktanteile-bei-smartphones-a-1265324.html. Meck, G. (2015, May 5). Schneller, bunter, weiter. In Frankfurter Allgemeine Sonntagszeitung, p 30. Musil, R. (1978). Essays und Reden. Gesammelte Werke in neun Bänden, Bd. 8, Kapitel V. Rowohlt, Reinbek. Saal, M. (2015, April 7). Umsatzanteil des Digital-Geschäfts klettert auf 60%. Horizont.de. www. horizont.net/medien/nachrichten/Axel-Springer-Umsatzanteil-des-Digital-Geschaefts-klettertauf-60-%-134259. Safian, R. (2012). This is generation flux: Meet the pioneers oft the new (and chaotic) frontier of business. In: Fast Company, Issue 162. Retrieved February, 2012, from www.fastcompany. com/1802732/generation-flux-meet-pioneers-new-and-chaotic-frontier-business. Scheuss, R. (2012). Handbuch der Strategien. 220 Konzepte der weltbesten Vordenker. Campus, Frankfurt am Main [2008]. Schumpeter, J. A. (1983). The Theory of Economic Development (Trans. books). New Jersey. (Translated from the 1911 original German: Theorie der wirtschaftlichen Entwicklung). Seyda, S., & Werner, D. (2014). IW-Weiterbildungsbericht 2014–Höheres Engagement und mehr Investitionen in betriebliche Weiterbildung. In IW-Trends 4/2014, Dezember 2014, p. 2 ff. Statista. (2016). https://de.statista.com/statistik/daten/studie/584317/umfrage/emotionale-bindungan-den-arbeitgeber-in-den-fuehrenden-industrielaendern/. Stehr, C. (2015, August 27). Einer muss der Erste sein. In Spiegel Online. www.spiegel.de/ karriere/berufsleben/anthropomatiker-ein-beruf-der-zukunft-a-1049759.html. Sueddeutsche.de (2010). www.sueddeutsche.de/karriere/arbeitszufriedenheit-frust-im-buero-1. 220013. Willenbrock, H. (2014). Der getaktete Mensch. In brand eins 02/2014, p 128 ff. www.brandeins. de/archiv/2014/werbung/der-getaktete-mensch/. Zentrum für Europäische Wirtschaftsforschung (2015) Innovationsverhalten der deutschen Wirtschaft. Mannheim. Retrieved Januar, 2015, from ftp.zew.de/pub/zew-docs/mip/14/mip_ 2014.pdf.

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At the turn of the century, around 1900, a new working class gradually introduced itself into the modern production lines. Managers also appeared in new guises. At the end of the nineteenth century, when the “manager” was head of a variety theatre in the USA, managers took over the management of factories, companies and banks without being personally and economically liable for mistakes. Joseph Schumpeter, who died in 1950, was very unhappy about this development. It did not fit into his historical analyses from which he had developed the concept of capitalism. Capital and risk belonged together until then—this conjunction no longer applied. With the advent of managers, the round of the second Industrial Revolution began. Family entrepreneurs were no longer able to reflect the diversity of specializations in a company management and made use of well-trained employees. Managers were salaried executives whose job it was to increase profits, manage and represent companies. The triumphal march of the knowledge workers began (McGrath 2014). In the first generation of industrial capitalism, machines, land and means of production still made up the value of a company; now it was primarily the know-how of the employees that formed the value of the company. At the end of the day, the capital left the company with the people. Jobs with reproductive activities decreased—creative, specialized one-offs and co-thinkers producing small series increased. Before this process accelerated, two important people appeared on the scene. One was the entrepreneur Henry Ford and the other the sociologist Max Weber. Both of them developed the principles of rational division of labour and planning for mass production and public administration, respectively. One published practically, the other theoretically—yes, even posthumously, by his widow.

© Springer Nature Switzerland AG 2020 R. Geschwill and M. Nieswandt, Lateral Management, Future of Business and Finance, https://doi.org/10.1007/978-3-030-46496-7_2

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Henry Ford—The True Stories Henry Ford is regarded as the personified myth of mass production and stands here as an example of the first generation of entrepreneurs of industrial capitalism. He came from a family that had immigrated to the USA from Ireland. At a young age, he went to Detroit, worked as an engineer in one of Thomas Edison’s companies and quickly rose to Managing Director due to his organizational talent. His strengths lay in his intuition for successful innovations, the rationalization of work processes and the correct assessment of market developments. His weakness was social competence. Ford was regarded as primitive, blatant, unfriendly and personally unappealing. However, he correctly assessed the mass market for automobiles. In the phase before the mass production of cars, cars were regarded as symbols of luxury and status and were manufactured in small factories with no division of labour. Henry Ford combined assembly line production with the division of labour. He thus increased the annual production of the legendary “Model T” from 19,000 units in 1910 to 1,000,000 cars in 1928. He paid double and triple wages to attract well-trained employees for monotonous work. He wanted to become independent of suppliers and at times even owned mines and coal-fired power stations for energy production. Ford was a closed production system that controlled all value chains in the group. Henry Ford essentially used adaptation innovations for the success of the Ford Company. The assembly line had already been invented 30 years before industrial use in car production, namely, for beer bottling. There has already been a division of labour in many other industrial sectors and in mining. Ford had already become familiar with the economic success of improvement programs as a manager during the manufacture of lamps in the USA and Europe. Henry Ford’s achievement lies in the consistent implementation of such modern methods for mass production. His motivation for building the empire was to make money. Before Ford, Frederick Taylor, among others, had established “scientific management” as a rational management method that consisted of measuring and evaluating individual work processes with the aim of optimizing them. Henry Ford translated these measurement methods into practical management. Assertiveness and ruthlessness were the order of the day at Ford. He used illegal means to force business partners out of the company, successfully litigated against syndicates and blackmailed renegade suppliers. His personnel manager in the 1930s and 1940s, Harry Bennett, was a notorious thug who had stubborn trade unionists beaten up or even murdered by criminals. At the same time, the Ford Company was a very social employer that carried out exemplary disability integration and founded scientific institutes. Towards the end of his life, Henry Ford became difficult, which one would probably call today senility from old age.

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Sales figures fell during this period; the production facilities were lagging behind and became less and less competitive. Ford’s son, Edsel, failed in his attempt to restructure the company and died, exhausted from fighting his father, at the age of 49. When the old patriarch wanted to make the infamous Harry Bennett chairman of the board after the son’s death, it was his wife Clara Ford and Edsel’s widow, Eleonore, who removed Henry Ford from power in the company (Wilson 2013). Stuart Crainer describes Ford’s way of thinking as follows: In My Life and Work Ford gives a chilling insight into his own unforgiving logic. He calculates that the production of a Model T requires over 8,000 different operations. Of these 949 require ‘trong, able-bodied, and practically physically perfect men’ and 3,338 require ‘ordinary physical strength’. The remainder, says Ford, could be undertaken by ‘women or older children’, and ‘we found that 670 couldt be filled by legless men, 2,637 by one-legged men, two by armless men, 715 by one-armed and 10 by blind men’ (Crainer 1997, p. 102).

Henry Ford was an ingenious entrepreneur, a workman dedicated to every detail of the company, and an industrial boss who sought sole power and responsibility within the company. Henry Ford’s social side was calculation and marketing for the company. In the 1920s, he was a popular hero in the USA, who only manoeuvred himself into an outsider position through his statements as a Jew-hater and by irrational political scolding. Second-generation industrial capitalism produced those types who were willing to take risks and used their undivided commitment for their ideas.

Max Weber—Correctly Understood but Misinterpreted Parallel to the production of mass goods, state administrations developed which set the framework for industrial capitalism. The primary sector of the economy also included the legal organization of markets (regulation, legal certainty) and the social organization of pensions, health and employment. The sciences of the nineteenth century were initially not prepared for the developments of industrial capitalism. The biography of Max Weber shows the academic turmoil of those years. Today, Max Weber is often regarded as the founder of sociology; in fact, he was initially a lawyer, economist and historian. He received his doctorate from the Berlin commercial lawyer Levin Goldschmidt on the emergence of the general partnership in the High Middle Ages and his habilitation from the national economist and Berlin statistician August Meitzen on Roman agricultural conditions. For both works, he had to familiarize himself with the state and private law of the respective epochs. Max Weber only became interested in sociology in 1891 when he became a private lecturer on the situation of agricultural workers in the German East. He interviewed more than 3,000 landowners about the economic and social changes for farmworkers. The 900-page result of the study made the lawyer known as a social scientist virtually overnight. The study did not need to hide behind the work of

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Friedrich Engels, The Condition of the Working Class in England, which was published some 50 years earlier. It showed the immediate upheavals of the first Industrial Revolution from the “victims’ side”, the agricultural workers living in free, precarious working conditions after Stein’s reform (Weber 1984). This little scientific-historical excursion is important to understand how Max Weber’s writings influenced the development of parallel structures to industrial capitalist enterprises in public administration. While the first large production companies such as Ford plants were structured as management, planning and decision-making hierarchies, public administrations with specialized civil servants were also set up as administrative hierarchies—or rather as linear hierarchical staff line organizations. In fact, administrations were organized in such a way that all decisions were made at the top management level. The lower officials worked for the upper officials, and the latter then made both operational and strategic decisions. This version of the exercise of domination and power as the boss’s decision trumps all is only one of the many variants of how administration can function in the nearly 900 pages of Weber’s main work Economy and Society. It is Max Weber’s achievement to have thought about all varieties of the exercise of power in a democratic state. The cooperative and lateral forms of exercising power were also considered possible by him. The fact that the form of an instruction bureaucracy has ultimately prevailed cannot be explained by Max Weber alone. Max Weber described the conditions of domination in a society undergoing radical change. With his analyses of power, he influenced great sociologists such as Talcott Parsons and ultimately Niklas Luhmann. With his sociological studies, he gave the empirical tools of the trade to generations of sociologists to describe the economy and society. His life’s work provides the framework for the shaping of power and decision-making relationships in organizations. Weber has never prejudiced these circumstances. As a result of his posthumously published works by his wife, he influenced many democratically minded administrative scientists, especially in Germany, who introduced Weber’s ideas into the administration. In particular, the factors of documentation as a reporting system and the incorruptibility or public neutrality of civil servants are an important component of a functioning administration. While the economy in the second generation of industrial capitalism in the late twentieth century largely overcame the factory model, some administrations today still function as command hierarchies out of touch with our times. The parallel symbolism of the factory model and the public administration as a boring, ultimately irrational, dysfunctional system of rule was already evident at the beginning of the twentieth century in Franz Kafka’s works The Castle und The Trial which are part of world literature. And the idea of being able to compete with command takers and commanders in dynamic, global markets turned out to be fragile as early as the 1920s. The engineer Richard Lang and the industrial psychologist Willy Hellpach experimented as early as 1922 in Germany with group manufacturing (Lang and Hellpach 1922) in order to break the hostility to innovation and the monotony of factory work.

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Peter Drucker—The “Father of Modern Management” It is difficult to adequately appreciate Peter Drucker. From 1939 to 2004, he wrote 40 books, co-authored five books and still has a large global following. His groundbreaking ideas are indispensable in an important discussion on the subject of corporate management. Actually, Drucker said everything important about our topic. He wrote about the rise of knowledge work as early as 1957 in his book The Landmarks of Tomorrow (Drucker 1957). And he was of the opinion that industrial capitalism would dissolve and that communication relations would take on a new form—a form of management. That was long before the release of Jeremy Rifkin’s ideas (Rifkin 2011). Drucker was unaware of the computer world as a lucrative business model—one of his few mistakes. This was due to the fact that the breakthrough age of digitization was yet to come. In retrospect, misjudgements are always easy to comment on. Nevertheless, it is important to reduce this man’s ideas to the substance without flattening them. What are the most important results of Peter Drucker’s work? Peter Drucker immigrated from Austria to the USA in the 1930s and accompanied managers—mainly in the automotive industry—at work there. Methodologically, one would call this today “action research” or “participatory observation”. During this “over-the-shoulder-look”, he found, among other things, important references to target agreements and subsequently published the concept. Target agreements were conceived as an instrument that makes the performance measurement of employees independent of the personal sympathies of the respective manager. In the best case, target agreements are a motivational instrument. Employees receive an orientation regarding their performance and development target through the expected results in the future, according to which they can align their activities. At the end of a defined period, an assessment is made of whether and how the objectives have been achieved and new objectives are agreed upon. According to the principle of “Management by Objectives”, various types of target agreements such as assignment control during the year and strategic target systems such as the balanced scorecard were developed as further developments. Peter Drucker has certainly done a lot for the creation of value in companies with his “in-target thinking”. His idea culminated in the sentence: “If you can’t measure it, you can’t manage it”. And this dogma is carved in stone for all subsequent management generations and has influenced them. Many controllers owe their professional existence to this idea. In Europe, it was especially Fredmund Malik and the Management Center St. Gallen that made this edifice of ideas socially acceptable. Managers think and act according to models of rational management. A good manager needs to learn management, as something beyond knowledge and initial qualification. This was a clear commitment to the manager as a generalist, to “general management”. A manager could lead today in the consumer goods industry, tomorrow in the automotive industry and the day after tomorrow in a

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service company. The main components of his work were measuring and optimizing work performance. In Drucker’s works, there are also contradictions owed to the work of writing over six decades and changing ways of thinking over that period of time. His work can be interpreted very differently, depending on the phase of his life. Drucker’s role model of the manager remains contradictory. On the one hand, he is a creative, self-confident doer, who does not only pass through instructions. On the other hand, he is committed to hierarchies—and therefore adaptation was an important prerequisite for being able to do this job well. Drucker’s first management concept ultimately relied on an instruction hierarchy. In the follow-up concepts, this was supplemented, among other things, by the idea of teamwork. However, teamwork does not fit consistently with the manager’s doer image. Another of Drucker’s later constructs is that the manager should be willing to take risks and make decisions. That would be the image of the manager as an entrepreneur. This picture stands in contrast to the 1956 cartoon of Organization Man (Whyte 1956) by William Whyte, which Whyte drew especially for administrations and sciences. German author Christoph Bartmann describes the employee’s type of life according to Whyte as follows: “One finds the Organization Man in a large, often public company, one finds him in the public sector, in a bank or in a knowledge organization. You can recognize him by the fact that he has no special qualities. He strives for security, for a certain reliable prosperity and for an occupation that saves him from physical work and makes moderate mental demands” (Bartmann 2012. p. 123). This criticism is directed at the manager of the second Industrial Revolution in a hard way. Somehow the descriptive label of being the boring “administrator” gets attached to him—and that is the opposite of entrepreneurship. In the case of Christoph Bartmann, it is even said that the bureaucracy has not disappeared with the management, and it has “merely been adapted to the latest scientific standards” (Bartmann 2012, p. 122). In the USA, from the 1960s to the 1980s, Drucker was seen as the lecturer getting the highest fees. At the same time, he preached ethical obligations to top managers—for example, that they should not earn more than thirty times as much as a worker. Unfortunately, these aspects are often neglected in the European reception of Drucker’s teaching. Peter Drucker has influenced entire generations of managers and given a name to the status of this occupational group. In Europe, too, almost all managers of DAX companies were trained according to Drucker’s basic teachings, even though some trainers market their basic ideas as their own. The entire MBA industry owes its wages and bread to this management doyen. Even if we follow the concept of lateral management in this book, we are of the opinion that many active managers would be well advised to first learn and apply the craft of Drucker. Companies that still work classically in the second industrial sector are well advised to use the management tools that are easy to learn. Actually, the application of classical management methods is the basis for lateral management. This was also our own learning history.

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The Knowledge Worker Emerges In organizations, there are routine activities that require things to be done systematically. That sounds boring, and it often is. Organizational sociologists speak of the factory model in this context. The factory model is characterized by the fact that it consists of routines, repetitive workflows. In such organizations, there is a well-structured instruction culture. Even administrations with their traditional decision-making structure that were set up as a delegation according to the ideas of the German sociologist Max Weber correspond to the factory model. Later, the knowledge model emerged as a supplement to the factory model. The knowledge model of organizations is based, among other things, on the legendary motivation study by Frederick Herzberg, the “Pittsburgh Study”. As early as the late 1950s, the results of surveys of technical and commercial employees indicated for the first time that values such as independent work, personal responsibility and career development were more important motivators than the traditional values of factory workers such as security or pay. The class of knowledge workers was born: employees who are committed, hard-working and interested, who strive to take on responsibility, who set themselves goals independently, who are intrinsically motivated, proactive, who experience their work positively and who have fun and joy at work. After the motivational researcher Douglas McGregor they are also called “Y-Types” (McGregor 1985). Drucker captured the trend in 1969 and wrote in his classic The Age of Discontinuity (Drucker 1969) about the minds, minds and knowledge workers. At that time they were considered by him to be the most important class in global competition in the future, a future which the post-capitalist society will create—workers who can choose their own working conditions and employers worldwide because their knowledge is in demand. Until then, discussions about knowledge workers had been more academic, but now they have found their way into management. Today, it is estimated that in Germany about half of all employees belong to the group of knowledge workers. Factory models are organizational models that are being discontinued. Digitization is the nail in the coffin for the model. The easiest way to replace routine tasks is to use robots and computers.

Warren Bennis—Leading Instead of Managing The US economist Warren Bennis was particularly interested in leadership theory. For him, leadership stood in contrast to management (see Table 2.1). In his opinion, knowledge workers did not want to be “managed”, but “led”. Bennis was of the opinion that every manager had to position himself whether he wanted to work more in the direction of management (= Drucker) or more in the direction of leadership (= Bennis).

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Table 1 Ten fundamental contradictions between leadership and management after Bennis (1997) Rate it on a scale from 0 to 10 0 1 2 3 4 5 6 7 8 9 10 The manager maintains The manager focuses on systems and structures The manager relies on control The manager has a short-range view The manager asks how and when The manager has his or her eye always on the bottom line The manager imitates The manager accepts the status quo The manager is the classic good soldier The manager does things right 0 1 2 3 4 5 6 7 8 9 10

The leader develops The leader focuses on people The leader inspires trust The leader has a long-range perspective The leader asks what and why The leader’s eye is on the horizon The The The The

leader leader leader leader

originates challenges it is his or her own person does the right thing

The confrontation between the ideas of management and leadership, which took place more than 30 years ago, is hardly comprehensible for today’s generation. Bennis and his co-author Burt Nanus used the model of the four aspects of a leadership personality (Bennis Nanus 1985) to illustrate once again in condensed form what successful leaders have to achieve: • Attracting attention through a vision that creates a need for others to join it; • Communicating meaning through simple, clear communication of the vision, which fascinates and inspires others to follow it; • Creating trust through reliability, integrity and clarity of one’s own position; • Self-management as a learning person through feedback, listening and setbacks. With these four aspects, Warren Bennis is setting a further counterpoint to the representatives of classical management. For him, managers are soulless beings, conformists, copies, keepers and bores. Leading executives are the real leaders and have the exciting topics. Just what we expect from a manager and what we expect from a leader could already lead to a very, very long debate. On the one side are the bureaucrats who organize routine and the controllers—on the other there are the developers, innovators and visionaries. But the truth is, we have to be able to do both: Management and leadership! In the twenty-first century, managers will have to deal with different people and different strategic and organizational tasks. And they will switch back and forth between management and leadership, depending on the audience and question.

Warren Bennis—Leading Instead of Managing

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Vapiano: Italian food search corporate culture

The pizza chain Vapiano was founded in 2002. The investors: German money aristocracy—the heirs of the coffee empire Tchibo and the hairdresser service company Wella. Noble restaurant design, front cooking and self-service initially led to success. The promise of the noble fast food chain was: “… like a nice evening with friends where you cook and eat together”. At the beginning of 2019, the company had 7,000 employees in 25 countries with a turnover of a quarter of a billion euros. Vapiano goes public in the summer of 2017. The price for the share at the premiere will be set at €23. In mid-2019, the share price floats at 5 euros. The shareholders are to inject 30 million euros. What happened? At first, there were rumours that the work time accounts of employees had been manipulated by the management. In addition, there was high work pressure, poor pay and difficult handling of conflict situations. This resulted in high fluctuation rates and a great deal of anger among employees. Anger arose. Employees of the restaurants in Berlin, Frankfurt, Hanover, Cologne and Munich claimed that customers had been served spoiled pasta and foul-smelling chicken meat. Cheap shrimps were sold as expensive scampi. When customers then put videos on the net in which mice ran through Vapiano kitchens during front cooking, the damage to their image was particularly great. The situation came to a head. Even founders jumped off. Too much testosterone, too many crazy ideas, says a confidant.

Summary—And What Happens Next? In the field of management and executive development, the respective organizational models were delivered for each Industrial Revolution. The organization of work in Henry Ford’s factories and Max Weber’s work, both practical and theoretical, prepared the ground for the second Industrial Revolution and shaped work in the factory and administration. In the last century, Peter Drucker and Warren Bennis have provided the essential ideas for management and leadership for the period of the second Industrial Revolution. In the USA, both became veritable pop stars for business leaders. The debate about management and leadership—which were irreconcilably opposed— was open. Yet, both Drucker and Bennis thought in vertical-hierarchical categories. Lead from top to bottom. Warren Bennis in particular felt that the class of knowledge workers was becoming more and more important. The best person to earn money was one who was well educated, had specialist knowledge and was

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personally well networked in a field of work. There were still bosses. However, the new knowledge workers made new, different demands on companies. Organizations had to face these challenges. Joseph Schumpeter stated that innovations always go hand in hand with new forms of organization. The enforcement of a technical or organizational innovation in the production process is “the decisive turning point”, not already the corresponding invention (Schumpeter 1983). This is the way one can imagine the changes in organizations in the age of digitalization—the third Industrial Revolution. Some try something and change the organization. Contradictions occur and above all irritations. Some even already know how things work differently—but come too early with their criticism. When the contradictions became apparent, the classical models of rational management and scientific management came under pressure. There were cracks in the model. The more digitalization changes the economy, administration and everyday life of people, the larger these cracks will become. They’re not just cosmetically hideable any more. Where the knowledge worker increasingly operates at eye level with the company, new leadership and management tools are needed, those that turn companies and employees into equal partners. As early as the early 1980s, two management consultants were looking for suitable organizational forms for the future. They travelled to companies around the world, collecting promising approaches and astounding the expert world with a book that made history: In Search of Excellence by Tom Peters and Robert Waterman. Not long after this publication, there were radical organizational changes in the corporate world that followed similar approaches to those of Peters and Waterman. A prominent example is the work of Percy Barnevik at Asea Brown Boveri (ABB): He reduced the size of the head office, abolished hierarchical levels and shifted decision-making authority from the top of the company to division managers and middle management at the production site. Even though Peters and Waterman as well as Barnevik are controversial among many experts today—they have prepared the ground for today’s management theory. As so often happens when someone is ahead of his time, their ideas have polarized. And yet they let something shine that today—some 30 years later—is recognized and mature enough to meet the reality of our global digital economy. Other concepts also took account of changing economic and social conditions and were important forerunners of the idea of lateral management: the Harvard concept pursued the principle of “at eye level” for negotiations for the first time, the concept of systemic leadership influenced by Niklas Luhmann’s systems theory took over the programs of consultants and thus also those of many companies. Harrison Owen and Reinhard Sprenger in Germany placed the freedom of the individual and thus a departure from a strict hierarchy of instructions at the centre of their influential ideas. Finally, concepts of lateral leadership were developed. Even if not all concepts are equally influential or even comprehensible, they have one thing in common: they have reinforced the cracks in the programs of the old management theory and ensured that something new can emerge. In the following chapter, we look at the approaches that have paved the way for lateral management in response to the digital challenge.

References

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References Bartmann, C. (2012). Leben im Büro. Hanser, München: Die schöne neue Welt der Angestellten. Bennis, W. (1997). Managing People Is Like Herding Cats: Warren Bennis on Leadership. Provo: Executive Excellence Pub. Bennis, W., Nanus, B. (1986). Leaders. The Strategies for Taking Charge. London: Harper & Row Crainer, S. (1997). The Ultimate Business Library. Oxford: Capstone Publishing. Drucker, P. F. (1959). The Landmarks of Tomorrow. New York: Harper & Brothers. Drucker, P. F. (1969). The Age of Discontinuity: Guidelines to Our Changing Society. New York: Harper & Row. Heuer, S. (2013) Das Silicon-Valley-Paradox. In brand eins 06/2013, p 64 ff. www.brandeins.de/ archiv/2013/motivation/das-silicon-valley-paradox. Lang, R., & Hellpach, W. (1922). Gruppenfabrikation. Berlin: Julius Springer. McGrath, R. G. (2014, July 30). Management’s Three Eras: A Brief History. In Harvard Business Review. https://hbr.org/2014/07/managements-three-eras-a-brief-history. McGregor, D. (1985). The Human Side of Enterprise. 25th Anniversary Printing. Boston: McGraw-Hill[1960]. Rifkin J (2011) The Third Industrial Revolution. How Lateral Power is Transforming Energy, the Economy, and the World. London: Palgrave McMillan. Schumpeter, J. A. (1983) The Theorie of Economic Development (Tran. Books) New Jersey. (Translated from the 1911 original German: Theorie der wirtschaftlichen Entwicklung). Weber, M. (1994). Die Lage der Landarbeiter im ostelbischen Deutschland. Max Weber Gesamtausgabe, Band I/3,1, Hrsg. v. Martin Riesebrodt. Mohr Siebeck, Tübingen [1892]. Weiguny, B. (2019, May 19). Das Fiasko von Vapiano. In Frankfurter Allgemeine Sonntagszeitung, S.23. Whyte, W. H. (1956). The Organization Man. New York: Simon & Schuster. Wilson, A. (2013, June 2). The rise and fall of Harry Bennett. In Automotive News. www. autonews.com/article/20030602/SUB/306020843/the-rise-and-fall-of-harry-bennett.

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Cracks in the World View of Classical Management

New Projects—IT Forces Bypass Structures In the 1970s, information technology began its triumphant march through German companies. At first electronic data processing, which was unpopular with traditionalists, was only seen as a cost factor, but this soon changed. In all corporate forms, Weber’s staff and line model and Ford’s logic of division of labour and hierarchization of workflows came under functional pressure. Central organizational units were hectically founded to take over coordination across the lines. Only in this way was it possible for top management to control the changes. What had happened? Through the use of IT, business-relevant tasks were subjected to such complex and rapid changes that all units of an organization were involved in the conception and introduction of IT—and still are today. As a consequence, decisions concerning the introduction of IT are organized in so-called indirect (cross-sectional) areas. Since the introduction of IT about 40 years ago, more and more tasks have been shifted to projects and project-like structures—so-called bypass structures. While in the direct areas the tasks in the line were handled by one department, in projects, resources from other departments were also used. In fact, many of these institutions have established parallel organizations to the line. Almost all private companies at that time already worked very frequently in projects and with project management. For many organizations, this was a complete break with the organizational ideas of Max and Henry. Project work will continue to increase in all companies in the coming years, as digitization will make many routine IT tasks (administrative tasks, documentation obligations) obsolete. Agile bypass organizations will then be the rule rather than the exception. However, even project management as the miracle weapon of the bypass organization has lost its allure in the meantime. Once regarded as a showpiece discipline of planning, it now has a bad reputation. Many major projects are not completed on time and within budget. Even in the model industry in project planning and management worldwide—the oil and gas industry—only 34% of all © Springer Nature Switzerland AG 2020 R. Geschwill and M. Nieswandt, Lateral Management, Future of Business and Finance, https://doi.org/10.1007/978-3-030-46496-7_3

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projects achieve the targets within the scope of a 25% deviation. All others are exceeding their budget and time targets even more. The longer the projects last, the higher the deviations from the original project plan. When projects in organizations come to an end, they are often improvised to the best of their abilities and no longer work according to a given plan. Plan ability is what the project management manual says. Project success is what is achieved in the last 3 months of a project through improvisation. Today, the complexity of workflows can no longer be controlled by setting up projects. Project management remains what it always was: Bypass. Today, however, organizations need structures in which bypasses are no longer necessary.

About authority and hierarchy

The main criticism of lateral management is that people have a hunger for authority and hierarchy. There is the argument that humans are tribal monkeys and that they are organized hierarchically. Stanford Professor Robert Sabolsky lived with baboons in Kenya. He succeeded in becoming a recognized member of a horde. Baboons are considered particularly hierarchy oriented and aggressive. One became leader with characteristics of brutality, great muscle strength and enormous incisors. Then it happened. The particularly aggressive alpha animals invaded a settlement and ate from garbage cans. This food was contaminated, and the animals died of tuberculosis germs. The leadership was eliminated. A few years ago, male baboons from other hordes had been integrated into the group, which subordinated themselves to the alphas and were therefore not very aggressive. They now took over the Horde as a collective, so to speak, and practised more social balance. There were less battles for rank, which always cost a lot of energy. Robert Sobolsky says that if the baboons were to succeed, that would have to be possible for humans. Socially, we are experiencing a turning point in Europe. The classic authorities are being questioned more and more. Top-down decisions can rarely still be enforced without participation in politics and society. Authority requires trust. Dignity, influence, conviction and voluntary submission, which is what authority means in Latin, are no longer taken for granted in Europe today. Authority must be acquired and today requires mutual control or, as it is called in the USA, checks and balances. Basically, it is also clear that humans are not monkeys. (narrated according to 3SAT 2017).

Searching for Top Performances Too Early—Tom Peters and Robert Waterman Until the 1980s, Tom Peters and Robert Waterman were consultants at the then-leading consulting company McKinsey in the USA. In 1976, Ron Daniel became the new managing director of the company. He had the order to readjust the

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business model. During these years, McKinsey was confronted with new competitors such as the Boston Consulting Group and Bain & Company. The new CEO initiated a business strategy project. Under the direction of Bob Waterman, a number of very prominent consultants were able to gather there to conduct unconventional research and were given a lot of time, money and management contacts. One of the members of the group was Kenichi Ohmae, who later became a Japanese government advisor and provided special input on Japanese management approaches, which in those years were highly popular in management and politics, thanks to the strengthening of the Japanese economy. Peters had only joined McKinsey in the 1970s, but Waterman had worked there since 1963 and had already risen to director in the strict hierarchy. He gave particularly Tom Peters a lot of space. In 1977, Peter visited 12 economic universities around the world to obtain ideas for the creation of contemporary organizational cultures. He especially liked the discussions with Einar Thorsrud, “a former war-time resistance leader and friend of Eric Trist, the British champion of industrial democracy. Thorsrud was founder of the Arbeidspsykologisk Institut in Oslo which had become the focal point for Scandinavian experiments in industrial democracy. At the time of Peters’ visit, Thorsrud was applying the ideas of self-government to work teams on on Norwegian oil tankers (Crainer 1997, p. 13)”. Peters is said to have been very impressed by this research. He later relied heavily on self-reliant teams in his consulting work and repeatedly places teamwork at the forefront of successful corporate innovation in his books. In addition to these visits, one of the reference projects that led to the core theses in the book In Search of Excellence was the assignment of an organizational study to Siemens in Munich. Interestingly, McKinsey failed to present the results of this study to the Siemens Executive Board in Munich. The same happened with presentations in other companies. Terms such as people, participation, trust, customers, listening, service, quality, “Management by Walking Around” had not yet undergone a boom on executive floors at that time. I guess the time wasn’t right. The project group had researched for 3 years, and there was still no significant contract for McKinsey as a result of these studies. This was not acceptable for the successful consulting firm. What ideas by Peters and Waterman shook the traditionalists at the top so much? “Treating people—not money, machines or minds—as the natural resource may be the key to it all”. In this way, the two summed things up in In Search of Excellence (Peters and Waterman 1982, p. 51). In the future, the economy will be about shifting decisions to the basis, about fewer decisions from above, about more customer orientation and about a completely new management style. At a gut level, all of us know that much more goes into the process of keeping a large organization vital and responsive than the policy statements, new strategies, plans, budgets, and organization charts can possibly depict. But all too often we behave as though we don’t know it. If we want change, we fiddle with the strategy. Or we change the structure. Perhaps the time has come to change our ways (Peters and Waterman 1982, p. 22).

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Managers and employees should become subjects again and not objects; they should have fun experimenting and reduce bureaucracy to a minimum. In the tradition of William Whyte, Peters and Waterman in the 1980s called on the manager get rid of his boring bureaucratic image and become a lateral thinker and an agent of the Order of Disobedience: The hard leadership style that had been customary in the USA until then—fast lay-offs and fast profits—was to be replaced by a “soft style”, the authors recommended. “Treat people as adults. Treat them as partners; treat them with dignity; treat them with respect” (Peters and Waterman 1982, p. 221) was Peters’ and Waterman’s message to the managers. The two developed an idea of the manager as an “enfant terrible”, someone who is contradictory, chaotically structured, riotous, reluctant to obey instructions and as someone who constantly pushes change—civil disobedience. The merits of the two McKinsey consultants lay in the provocation. The formulation of the antithesis to the rational management concept, the belief of the powerful that they have everything under control. Misconception was branded as irrational. When the search for excellence appeared in the USA in 1982, there was a real hype there and in Europe about Japanese production and improvement processes. But the success of Japanese companies is by no means due to any “Far Eastern secrets”, according to Peters and Waterman. The two McKinsey consultants had worked with the strategy expert and later Japanese government consultant Kenichi Ohmae and quote him in their book: “Most Japanese corporations lack even an approximation of an organization chart. […] Honda, for instance … is not clear how it is organized, except that it uses project teams quite frequently … Innovation typically occurs at the interface, requiring multiple disciplines. Thus, the flexible Japanese organization has now, especially, become an asset” (Peters and Waterman 1982, p. 61). Unfortunately, the strategic reception of Japanese companies had hardly taken place in the West. In this context, the two authors have formulated theses that would only become truly significant 40 years later: Democracy and markets are untidy, but effective. American democracy is an eternally unfinished, messy experiment. Markets are far too complex to comprehend; their evolution is not pretty. But despite—or because of—their messiness, American democracy and markets both work (Peters 1995).

There is so much economic knowledge, so much democratic awareness, politics, psychology, sociology and vision in this formulation that the formulation almost reaches ignition: first of all the Viennese School with the concept of Friedrich von Hayek, the “limited nature of knowledge”. Hayek argues that market participants never have complete information about the market, information regarding, for instance, price, scarcity, quality and time/location of a product—and still markets work. There we find Niklas Luhmann’s ideas for overcoming complexity as a process of communication and negotiation of different interests. Tom Peters was a fan of Hayek’s ideas. Finally, the commitment to democracy is an unfinished, sometimes chaotic form of rule, which has asserted itself worldwide over the past 50 years as the most successful and peace ensuring form of government. With this formulation alone,

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Peters and Waterman in principle anticipate lateral management. The provocations of both undermined radically the basic understanding of classical management ideas. Shortly after the publication of In Search of Excellence, the book received the recognition it deserved. The book was a turning point in the American management discussion, which in the early 1980s was marked by sharp criticism of top managers and their methods, which were not competing well against Japanese companies. Peters and Waterman’s criticism of the managers was not very flattering for them either, but there were many examples of companies mentioned in the book that did a very good job. Especially, the younger generation of managers was fascinated by the book. There were convinced supporters who advertised the book and tried to missionize others. Detractors suspected that about half of the books sold were given by supporters to management colleagues or by aunts’ nephews who had just completed an MBA. You have to know that especially the many large American companies at that time were run by rather cold, egocentric top managers. The middle management in companies created hope for cultural changes. Woodstock, hippies and the activities against the Vietnam War had with lasting effects changed the culture in the USA at the gates of the companies. But in the companies one still felt the cold of the US military, which thought in categories of the cold war. So the saviour of General Electric, Jack Welch, did not have the nickname “Iron Jack” for nothing. In their search for excellence, they hoped for better times, for a different culture of leadership and cooperation. It was the right book at the right time; it sold a million copies in a year and was at the top of the American non-fiction bestseller list for months—sensational for a management book.

In Search of Excellence

The eight fundamental attributes, commented from today’s perspective 1. A bias for action Behind it is concealed a radical criticism of the bureaucracy and the documentation frenzy of many large companies at that time. Decisions should be made in small local units. 2. Close to the customer This point was quite a sensation at the time, as many companies had lost sight of their customers. Cars were built according to technical criteria; customer needs were of secondary importance. Managers who read the book at the time and still remember it today, especially mention this point as the most important new thought.

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3. Autonomy and entrepreneurship In politics, it was the time of Margaret Thatcher and later of Ronald Reagan. The economy was to be liberalized and freed from too much bureaucracy. This also was on par with the zeitgeist in organizations: less centralism, more decentralized decision-making freedom at the grassroots level. 4. Productivity through people The book talks about people and not about employees. Man should become a subject in the production process. His opinion should be asked. 5. Hands-on, value-driven Visionary companies are more successful in the market. This is empirically confirmed. 6. Stick to the knitting Concentrating on the core business is a corporate strategy—as is diversification. Both can be useful. 7. Simple form, lean staff Who wouldn’t want that in a complex world. Unfortunately, this is so difficult to realize. 8. Simultaneous loose-tight properties That’s the weakest point of the concept. What does that mean in practice? After that, managers can behave arbitrarily.

If you read the book today, it all seems a bit strange. Stuart Crainer even calls the eight basic attributes “all-embracing truisms” (Crainer 1997, p. 70). In 1992, 10 years after publication of In Search of Excellence, Tom Peters published a summary which suggests humility after 10 years as a consultant (Peters 1992, p. 89 ff). 1. Changing a large organization is not a pleasure, even with clear signals on the market. 2. The bureaucracy must be mercilessly smashed. 3. Without radical surgery, adaptation is unlikely to be possible. 4. Listening to customers is not a panacea. 5. The search for the right models is a must. The learning curve of Tom Peters was also determined by various publications in the USA that tried to prove that the companies described in In Search of Excellence were not so successful 10 years later. But 10 years is a long time in economic

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history. In such a time period, about one-third of all companies leaves the DAX because they no longer meet the economic requirements. In the 10 years before the publication of In Search of Excellence, one-third of all Fortune 500 companies in the USA had also disappeared through takeover or bankruptcy. Former IBM boss and McKinsey colleague Lou Gerstner also seriously doubts the seriousness of the idea that the stability of companies in a capitalist economic order is an important value: “My view is that you perpetuate success by continuing to run scared, not by looking back at what made you great, but looking forward at what is going to make you ungreat, so that you are constantly focusing on the challenges that keep you humble, hungry and nimble” (Crainer 1997, p. 157). The harsh criticism in the 1990s that many of the companies were no longer at the top 10 years later is therefore very weak and seems somewhat constructed. By the way, the companies described by Peters and Waterman were not so unsuccessful at all. The whole discussion would actually be funny if it hadn’t been so serious in the USA. This is a discussion that could certainly also take place about lateral management in the future. If you have big designs, you must always expect that people with small designs will use their energy to question the big designs. At the end of the day, it’s the impact story of a book that’s important. The impact of In Search of Excellence led courageous managers to start thinking about organizational structures in companies. Tom Peters advised ABB in Germany and CEO Percy Barnevik there.

Iron Jack

Tom Peters was critical of Jack Welch when he took over as CEO of General Electric in 1981. In the late 1990s, he apologized with the legendary result formula Jack Welch 1 Tom Peters 0 The balance sheet of Jack Welch: • Towards the end of the 1980s, 100 of the original 2,100 employees were still working at the corporate headquarters. • During his time as CEO, he downsized the number of employees in the Group as a whole by half, namely to 220,000. • The number of top managers was reduced from 700 to 400 between 1981 and 1994. • Management levels were reduced and made lean, from nine to four. • When Welch started his job, there were six employees per manager, and when he left the company there was an average of 14 employees. Lean management today means leading more than 20 employees. It can only be done laterally.

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• Revenues increased by more than 100% from $27 to $60 billion during these years. The Financial Times commented: “Since the only way for a single person to ‘manage’ two dozen people is to allow them more independence, management GE really has changed from being a ‘command and control’ function to one of mainly ‘coaching people’, an—providing their type of task allows it —unleashing their initiative as completely as possible” (Crainer 1997, p. 159).

The Practical Test—Percy Barnevik and ABB The merger of Brown, Boverie & Cie. (BBC) with the Swedish electronics group ASEA in 1988 still has repercussions today—for example, in the city of Mannheim. For the Swiss BBC Group, the power plant site in Mannheim has been the ultimate innovation location since 1900. Even today, the companies that emerged from the BBC still house the busts of the company’s legendary inventors—contemporary witnesses to the second Industrial Revolution. The BBC generators were the pride of the people and were considered “indestructible”. Working for BBC was a life-long task—and then came the merger with the Swedes. BBC had simply missed the warning signs. There were no innovations, and the patriarchal style of leadership was no longer contemporary. The excessive bureaucracy and documentation rituals stifled being able to concentrate on the new. There have been many attempts at reorganization. They all failed. Regional journalists are still stunned by Percy Barnevik’s accomplishments, the company’s then CEO. What had happened? Barnevik implemented much of what Tom Peters had planned: “Tom is also anti-hierarchy and anti-headquarters—another theme that is close to my heart. Hierarchies just get in the way of business, cutting off managers from their customers, insulating them from the market and creating slow bureaucracies” (Crainer 1997, p. 239). After the merger on 8 February 1988, the 4,000 jobs at the Zurich headquarters were reduced to 200 within 1 year. The 215,000 employees of the new group were divided into 5,000 largely independent profit centres with an average of 50 employees. Following the reorganization, there were eight business segments with 65 business segments and 1,300 independent companies. As with General Electric with Jack Welch as CEO, there were only four management levels. Barnevik himself led a board of 13. There were still 250 business unit managers and 100 country managers responsible for strategic issues. The 5,000 managers of the profit centres were largely responsible for their own operating results.

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From the business section of the Mannheimer Morgen daily newspaper, 30 April 2015: Around 4,300 people work for the electrical engineering group in the Rhine-Neckar region. Locations are Mannheim (headquarters), Ladenburg (research) and Heidelberg (Stotz contact, circuit breakers). ABB (Asea Brown Boveri) was created in 1987 from the merger of Brown, Boveri & Cie (BBC, Switzerland) and Allmänna Svenska Elektriska Aktiebolaget (ASEA, Sweden). The CEO then, Percy Barnevik, dismantled ABB into thousands of individual parts. Divisions were merged into new companies, examples of which are Alstom [today: General Electric] (power plant construction) and Bombardier (railway technology). In the meantime, the group has specialised in energy technology and automation. ABB employs 10,000 people in Germany and 150,000 in 100 countries worldwide (Jungert 2015).

Barnevik was born in the southern Swedish Province, son of the owner of a small printing house. He is quoted as saying that he regarded the 5,000 profit centres as 5,000 independent print shops. They were led by five people: the manager of the profit centre and four other colleagues. The aim of introducing smaller units was to improve the competitiveness of the entire company by motivating the (mainly technical) employees involved in the direct customer business. The concept was a very simple and comprehensible organizational structure that separated operational management business from strategic business. The strategic management positions had overlaps in their fields of work, so that communication about changes during implementation was necessary. There were therefore no strategic decisions without networking. In the funnel models of the classical hierarchical organization, on the other hand, there are often strategic solo runs of staff departments that only depict the realities of these individual managers. The ABB model, on the other hand, aimed to introduce several perspectives into decisions which were introduced by the responsibility of several managers. The division managers and country managers had to network laterally on strategic issues. For example, a business unit manager who was planning a rationalization had to sell it to the country managers and other managers at his hierarchical level.

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Tom Peters Describes the Practice of ABB’s Divisions as Follows (Peters 1992) • The staff is limited. • They are located where it makes sense. This does not always mean in corporate headquarters, but rather in the vicinity of the operative centres. • Responsibility for the achievement of targets lies with the profit centres and not with those heading the division, which gives the decentralized units a lot of power and responsibility. • These forms of organization were conceived to counter-weigh matrix organizations, so that central units are not able to shift human resources in the production plants. Percy Barnevik had developed an organizational concept which, in its radicalism for large corporations at that time, could only be equated worldwide with that of General Electric. However, while Jack Welch led the company in those years with his own ideas and decisions, Barnevik relied more on laterality, which was strongly based on Tom Peters’ five basic beliefs: 1. Turn dwarves into giants by trusting them to do something. Barnevik was particularly keen to develop the passion for the product among the grassroots staff. When we worked as consultants for Alstom—a company spun off from ABB in 2000, now General Electric—in Mannheim about 10 years later, we could often still see this enthusiasm for the product among the technically oriented employees. 2. Bureaucracy must be radically dismantled. On this question, Percy Barnevik and Tom Peter were brothers in spirit. An organizational model had to reflect this idea. 3. Without radical surgery, adaptation is unlikely to be possible. The radicalism with which ABB was transformed into a new organizational form within a year speaks volumes for this doctrine. 4. The search for the right organizational models is a must. The new organizational model described above by Peters corresponded to the above ideas. The clarity and simplicity of the structure are particularly impressive. Barnevik would have liked to have formed even more small, autonomous operational units. However, he was deterred by the bureaucracy involved in setting up these companies. 5. Customer orientation and loyalty are achieved through direct market cultivation by small, self-responsible teams. As part of the research on this book, we also spoke with managers who had worked with Percy Barnevik in the 1990s. In the end, Barnevik had to leave the company because of heavy losses. The ABB mission had failed. The shift from a centralist instruction culture to a decentralized, self-regulating organization had been too radical. The many subsidiary companies competed against each other with some customers, which was counterproductive when setting prices. We will later

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see from the example of Procter & Gamble that internal competition can also be cannibalized and made more successful (see page XX). But Barnevik failed not only because of the radical nature of the structural changes, as the managers told us. His failure was also due to his personality. Barnevik was a control freak who found it hard to trust the teams. Sometimes, it happens that ambitious new model ideas are too much of a burden on one’s own personality. Evolution is better than revolution. To gently develop something new instead of smashing everything old, even if you have big plans. However, the managers we interviewed all felt that ABB’s early days were among the best in their management careers. We were often told of workshops in which discussions were as radical and open as these people were never again able to experience in their professional lives. When it comes to awakening emotions for working in an organization, when it comes to awakening passion for products and services, when it comes to fundamentally talking about the future and innovations again and thus readjusting leadership, decision-making and collaboration, Tom Peters’ ideas are the oxygen tent of many organizations in the twenty-first century.

Getting to Yes—Negotiating at Eye Level Contact with customers has actually always taken place at eye level. Negotiations between business partners used to be different. Everyone was anxious to gain advantage or even to rip off one another. Only the Harvard principles of negotiation relied on fair negotiations at eye level, which did not result in one winner and one loser from a negotiation, but two winners. The Harvard principles of negotiation were the result of many years of research by Roger Fisher and William Ury of the Harvard Law School in the USA. Fisher and Ury found—around the same time that Peters and Waterman were investigating the top-performing companies—that the same factors always lead to success or failure in negotiations, regardless of time, circumstances or negotiating partners. They developed a method that can be used in any type of negotiation, not only in customer contact. In this respect, it is the first concept for lateral negotiation—and important for the ideas of lateral management. The focus here is on principled negotiating. Before that, there was a discussion about “hard” and “soft” negotiation. Both ideas stood for positions of power based on either dominance or inferiority. This discussion about the right negotiating style was theoretically concluded with the Harvard concept, because both ways, hard and soft, lead only very limitedly to success. The concept shows, in fact, that dominance in the conduct of conversations is quite a burden for good negotiation results. It’s much more about balancing. In the Harvard negotiation concept, there is the beautiful motto: “Soft on the people, hard on the problem”. Both, showing hardness and creating trust, are the poles between which a negotiator must move.

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Table 3.1 The four Principles of Harvard Negotiations (Fisher and Ury 1981) 1. 2. 3. 4.

Separate the people from the problem Focus on interests, not on positions Generate a variety of possibilities before making a decision Define objective standards as the criteria for making the decision

Negotiations based on the Harvard concept are essentially based on four central negotiating maxims. The authors formulate these basic elements, which should be observed by the negotiating parties in a concrete negotiation situation, as presented in Table 3.1. Managers who negotiated according to the Harvard concept were already living in two worlds in the 1980s: On the one hand, they managed employees in a classic vertical manner in accordance with management law—and on the other hand, they negotiated horizontally at eye level with many market partners. The Harvard negotiation concept was already standard in every modern management development program in the 1980s. It was another milestone in getting away from the instruction hierarchy and moving towards lateral management.

Luhmann’s Heirs—Systemic Leadership In the 1980s, consulting groups were formed that focused on organizational consulting. Not strategy, not IT, not sales and not technology were on offer there, but the idea to improve communication in companies. This should lead to better clarification of differences of opinion and interests—i.e. conflicts—and to joint agreements being reached and subsequently implemented by everyone. Instead of PowerPoint slides and curve charts, these consultants had flip charts, pinboards and pens for visualizing ideas. The first companies of this kind in Germany had names such as Metaplan, Connecta and Beratergruppe Neuwaldegg. During this time, institutes trained internal and external consultants in systemic theory. The Bielefeld sociology professor Niklas Luhmann is regarded as the intellectual father. Various concepts of systemic therapy existed, among others by Helm Stierlin from Heidelberg, the “Milan Model” by Mara Selvini Palazzoli— both family therapeutic approaches—and the psychoanalytic-systemic approach by Peter Fürstenau in Düsseldorf. These also founded institutes and offered training courses, which many European managers attended. Niklas Luhmann had studied sociology with Talcott Parsons at Harvard after a legal education. From 1925 to 1927, Parsons had worked at the University of Heidelberg with Max Weber, whose work had impressed him greatly. Niklas Luhmann developed a systems theory and also made use of the model of radical constructivism. Accordingly, no objective opinions are exchanged in communication actions, but people with complex interests and different realities always negotiate with each other. That could be summed up in the sentence: We live in one world, but in

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different realities. Ultimately, successful negotiations are achieved if the negotiators trust each other. In addition to the consideration of social power—which is always present—trust is the key to resolving conflicts. The second and especially the third Industrial Revolution are characterized by the fact that economies are becoming more complex. The increase in complexity also increases the number of participants in communication processes. Linear, simple decisions decrease, and complex decisions increase. Peters and Waterman had already taken this into account with their 7S model in In Search of Excellence (Peters and Waterman 1982, p. 32). 7S is the heart of the book and was newly developed by McKinsey (see also Fig. 3.1). Looking at the model, it becomes clear that so-called soft and hard factors of strategic corporate management are interrelated: Hard factors are structure, strategy and system; soft factors are self-image, special knowledge, style and permanent staff. In organizations, each S is represented by a specific department, which develops its own reality of its company from its perspective. These realities can be very far apart. If a company changes one building block, this has consequences for the other 6S. In such an interdependent constellation, linear management is simply not possible. In such complex contexts, top-down control—as is the case with Max Weber and Henry Ford—would exponentially increase the bureaucratic effort required to convey the information necessary for decisions by a factor of seven. If an organization according to this bureaucratic model would seriously want to implement a 7S strategy, it would mutate into a bureaucracy monster. That’s both theoretical and practical nonsense. Percy Barnevik’s responses at ABB in the 1990s were aimed at radical de-bureaucratization, small organizational units and shifting decision-making responsibility to the grassroots—to avoid such a bureaucratization process.

Hard success factors Structure: Organizational Structure System: Business Processes and Procedures

Strategy: Strategic corporate orientation Self-image: corporate vision Special knowledge: core competencies Permanent staff: Employees and personnel development

Style: Corporate culture and leadership style

Soft success factors

Fig. 3.1 The McKinsey-7S model ( Source Sztuka 2015)

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Systemic leadership is an oxymoron, something like black mould or a learning organization. It connects pairs of opposites that cannot actually be connected. Organizations can’t learn, only individuals. Orthodox systemists would say that a manager can design systems in which personal responsibility and leadership can be lived, but that leading people is impossible, because they make their own decisions within their own realities. The more complex the tasks of people in companies are, the more difficult it is to control them. In complex leadership situations, a manager can exercise little control. Imagine your employees are working all across the world, as is the case today in many international companies. Control is limited and possible in certain time zones via phone or Skype. The more specialized the employees are, the more difficult it becomes to exercise control. However, control is an important prerequisite for classical management to function properly. A hierarchical, linear management model follows rules that are no longer in place in many organizations today. At least the activities of many knowledge workers are hardly controllable with classical leadership ideas. Almost all large- and medium-sized companies now employ organizational consultants who support internal corporate communications. Systemic consultant training is often obligatory for this purpose. Companies, projects, teams and individual managers should improve their performance through these forms of consulting. Many of the consulting groups mentioned above have also dealt with Luhmann’s ideas and are very good at business. Today, the concepts are mediation, team development (Scrum), project coach (Agile Management), individual consulting (Coaches), workshop, etc. The concepts of systemic leadership and systemic organizational consulting show a further crack in the concept of classical management. It was a matter of changing the system. Anyone who really wants to be prepared for digital transformation in the twenty-first century must think big. There must be no cultural taboos in an organization if it wants to get fit for the tasks ahead. The aim is to sharpen the sense of potential, to think what is ideal. Peter Drucker once wrote the book The Effective Executive (Drucker 1967). But today it is important for companies to think “the effective organization”. Upheavals need great designs. And the systemic approach is helpful. The employment of many who attended systemic training on weekends was a response to the changing conditions in the markets and organizations.

Upheavals: Free Jazz

The US saxophonist Ornette Coleman, “one of the greatest jazz melodists, oriented his solos solely on the power of his associations, the emotional content of a piece and the spontaneous listening to each other and reacting within a band collective. For he practised a deeply democratic music, in which all members of his ensembles interacted in mutual exchange of ideas according to a principle of permanent speech and counter-speech” (Spindler 2015).

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In 1960, he published a 37 min collective improvisation of his band and another quartet around bass clarinettist Eric Dolphy entitled “Free Jazz”, which was intended to change the jazz and musical and playing habits of an entire generation of musicians. Before 1960, classical jazz had come into its own with bebop. Bebop had many conventions and a strict set of tonality rules. Jazz had been invented around the turn of the century by black musicians who knew no notes or music theory, but expressed their emotionality and joy of life in music. But the music was rigid and had missed connecting itself to contemporary forms of music like Rock ‘n’ Roll or Beat. “Free Jazz” broke with conventions and brought jazz back to its roots, where the individual talent was more important than the collective—but the others in the band inspired the individual to excellence. Ornette Coleman was self-taught. He perceived conventions and rules as straitjackets that restricted his ability to express himself. “With all its radicality, his music was deeply rooted in the tradition of the blues. Its harmonic ambiguity and expressive tone with all its archaic squeeze and growl sounds has been transferred into modernity by the […] saxophonist” (Spindler 2015). “Let’s play music and not its background” was his musical message. With it, he revolutionized a frozen music scene. Jazz attracted many of these musicians, as did Miles Davis. These nonconformists confronted the rigidity with the actual brand core of jazz. That was the confidence in the abilities of the individual musician, their development potential within the team and the freedom of improvisation. “Free Jazz” was the signal of mutability. Lateral management can learn a great deal from these jazz stories for overcoming the ossification of organizations.

Every Human Being an Individual—The Underestimated Power of Freedom The Austro-Hungarian writer Arthur Koestler (1905–1983) was of the opinion that the quality of every society and thus every organization is measured by the degree of its possible, permitted, individual freedom—as the absence of collective coercion. Transferred to modern organizations this means: A lot offreedom in the organization means high quality in management. The value of freedom is still underestimated today in our society as well as in organizations as a motivational force for individuals and teams. It almost seems as if only the absence of freedom reveals its meaning. Authors such as Harrison Owen and Reinhard Sprenger have already stated some time ago that hierarchical structures, coercion and control in innovation-driven companies are not the appropriate means of exploiting the potential of qualified knowledge workers. The classic management of the twentieth

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century restricts not only the freedom of the individual, but ultimately also the success of the company. Rather, the two management consultants are banking on the greatest possible freedom. Their approaches start from regarding the employee as an individual. Real innovation and creativity will be possible through emancipated freelancers. Those who accept creativity and innovation as the basis for an organization’s prosperity have only one way, which is to emancipate its employees and management. Harrison Owen, the founder of the workshop form “Open Space Technology”, was the first to formulate this with his famous phrase to put this into perspective: To manage is to control, to lead is to liberate (Owen 1999).

The transition from a management organization of the twentieth century to a lateral leadership culture of the twenty-first century cannot be better summarized in one sentence. Those who control must first mistrust per se. Harrison Owen, on the other hand, emphasizes freedom. Control becomes the residual item of a backward-looking management. According to Harrison Owen, the goal of successful companies must be to emancipate their managers and employees. Control is only unavoidable if everything has gone wrong beforehand. The presence of control is a sign of bad management. Or: Those who have established many control mechanisms as managers have not been able to qualify their employees as decision-makers. Those who do not employ employees who act on their own responsibility must ask themselves what they have contributed to this. Even to a management expert like Reinhard Sprenger, it is of course clear that not all people want to take responsibility for freedom—not in their private lives, but above all not at work. Often they are prevented by constraints, motivation and qualification from really exercising freedom options in organizations. For the implementation of lateral management, it is important to deepen this thought and to deal with leadership styles. Above all, the situational management style—now the standard for management training in large- and medium-sized companies in Germany—is of particular importance. The core message is that the goal of all management activities is to let employees work autonomously. For both employees and managers, this is the first development goal. But anyone who has years of experience with: the boss’s decision trumps all will need time to trust new cooperation and mistake-making cultures. Some find it more difficult than others to do so because of previous experience. The conditioning through strict instruction cultures is formative. Self-responsibility requires self-confidence. And building this takes time to unlearn. Reinhard Sprenger: “I would like to give you a thought […]: You have freely chosen your life as it is now. This everyday life, this job, this boss, these colleagues, […] all this and all the other circumstances as well as the circumstances surrounding your life: you have chosen them. You have decided everything that is now and thus chosen it yourself—and you can also deselect all this again. There would then be another price to pay. It’s up to you to decide how high it is. This is how our freedom of choice can be summed up” (Sprenger 2013, p. 18 f.).

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Sprenger: Creating choices instead of an everything under control mentality

In his book, Aufstand des Individuums Reinhard Sprenger impressively expressed the importance of freedom in companies in today’s economic world: Under the expected economic conditions, we need more freedom, personal responsibility, initiative and entrepreneurial strength. For the organization, this means above all letting go: From the everything within the grasp mentality, from the planning excesses, the mistrust stagings, the over-regulations, the misguided corporate culture, the chasing role in the self-image of many superiors. […] If you really want to acknowledge entrepreneurship, you have to let the ‘genie out of the bottle’. That is, open up choices. Entrepreneurship can only develop if action in companies is not completely determined by directives, regulations, guidelines, decrees, ordinances and directives. Only freedom makes responsible. You must build small units, promote diversity, tolerate failure as an inevitable side effect. To stand up for more originality, for more freedom, for more intentional and deliberately permitted uncertainty (Sprenger 2005, p. 59 f).

At Eye Level—Lateral Guidance We have seen how and why hierarchical leadership in companies has seriously fallen into a crisis in recent years. Today, hierarchical decisions are hardly taken literally by well-qualified people. Around 10 years ago, organizational consultants Stefan Kühl and Thomas Schnelle developed lateral concepts on the subject of “leadership without hierarchy” (Kühl and Schnelle 2009). This is essentially a seminar concept with the help of which people who have no formal authority to issue instructions can learn to take the lead in projects, in matrix structures, in negotiations with equal partners and other lateral situations, and ultimately to assert themselves. Lateral guidance means leading at eye level. According to Kühl und Schnelle, the first important step in this direction is to deal with the complex, conflict-prone interaction of the three pillars of lateral guidance: understanding, power and trust. Understanding means understanding each other’s thinking in such a way that new possibilities for action can be opened up. Trust is first and foremost a kind of advance payment which grows when it is reciprocated. Power also plays a role in the concept of lateral leadership—not hierarchically, however, but through expert knowledge, informal internal communication or the use of contacts. In contrast to classical management, these are informal mechanisms of influence. Understanding, power and trust can strengthen but also hinder each other. Their relationship with each other changes constantly. When leading laterally, it is important to find the right mixture for each situation.

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In the seminar context, there are six essential elements which are practised with the participants. These elements follow a completely different logic of negotiation. The concept has several surprises in store, some of which counteract the current logic of negotiations. Thus, it is noticeable that those who lead laterally should involve the other in the decision-making process in order to win their trust. This idea would even be considered absurd in the Harvard negotiation concept. Stefan Kühl and Wolfgang Schnelle are sociologists and draw from this discipline some interesting communication ideas for the concept of “lateral leadership”. When we speak of “negotiation” in the following, it is a sociological term. Every conversation, even every leadership conversation, can be regarded as a negotiation. Especially when leading on eye level, it is preferable to regard conversations as negotiations, because these meet more the idea of domination-free communication. The six elements of lateral guiding are as follows: 1. 2. 3. 4. 5. 6.

Bet on partial understanding, not on basic consensus! Use the logic of contingency! Stimulate doubts and contradictions! Apply methods of discourse! Consider lateral leadership as a (micro-)political process! Prepare lateral negotiations!

1. Bet on partial understanding, not on basic consensus! There are negotiations in which there are conflicting interests, but the negotiations are not necessarily conducted from very different positions. Examples of this are the interests of the employee side and the employer side in negotiations. There will be more compromises than common interests in such negotiations. Partial understanding in this context means that the parties agree on the issues they can solve and that both parties move towards each other as far as possible, taking into account what is feasible. In practice, in such negotiations a conflict package is broken down into individual parts, and it is looked at where there are opportunities for rapprochement and what is not likely to be negotiable. 2. Use the logic of contingency! Contingency describes the fundamental openness and uncertainty of human life experiences. Lateral leadership is marked by surprises and common solutions that were only able to be developed in conversation. Both sides are preparing for lateral talks, but neither of them knows what the other side is planning and how it will actually behave. Lateral guidance sometimes leads to solutions to problems that no one previously thought possible. The basic idea is: It can work like this, but also differently, “but not arbitrarily”. One variant, for example, is working with maximum and minimum plans. It’s like selling used cars. Negotiations are begun with a minimum price in mind below which the car will not be sold, and then negotiations are opened by stating a maximum. In lateral management, different solutions are

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developed and evaluated in advance. In the trial, we then look at what works and what doesn’t. 3. Stimulate doubts and contradictions! This point is about addressing difficult issues and not about presenting certain points of view in a smooth and one-sided way, rather, for example, as pros and cons. One thing speaks for this solution; another speaks against it. This gets the partner involved in finding a solution to the problem. The presentation of finished concepts is even dispensed with. Rather, the others are more likely to be involved in solving the problem. The others then see the result of the conversation as the solution they have worked out together, and the feeling does not arise that one can do no more than agree to a perfectly prepared problem solution and is thereby (pseudo-)involved. That creates trust. 4. Apply methods of discourse! There are also methods in lateral guidance that are suitable for developing joint solutions. First, there are moderation methods (brainstorming, clusters, evaluation, 6-3-5, etc.). There is the Harvard method of working out different interests and not the emphasis on different points of view. A further method is to conclude partial compromises and to isolate differences within what is to be negotiated, as already described under point 1. 5. Consider lateral leadership as a (micro-)political process This is probably the most important point in lateral guidance. It is about accepting and reflecting one’s own role in conversations at eye level. This means first of all to accept that the partners are endowed with a certain power. Those who do not accept this often put partners in difficult situations. Partners often start power games when they see their interests threatened, so it is important to analyse and understand these games. Those who lead laterally are always also (informal) power players and must know their and the interests involved. Here, as in politics, it is important to form “playing fields” (feedback talks, individual talks, small groups, etc.) in which the conflicts can come to light without the need for power games. Experienced colleagues coordinate certain conflict issues with those responsible before discussing them in large rounds. Particularly important is also the following sentence about lateral leading: Do not always win—do not always lose. This means that those who lead laterally enter complex situations, some of which are not controllable. Failure to assert oneself can even be very useful. Sometimes, it is in the interest of the overall organization to move away from the ideal solution idea that one has and to agree on a solution approach that can be implemented with a reasonable effort. However, in many cases, this does not correspond to the management logic of “always having to win”.

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6. Prepare lateral negotiations! Lateral leadership requires a great deal of sensitivity and social competence. Reflection as preparation for a discussion is a good prerequisite for success. Of course, this applies to all important conversations. With lateral leadership, however, it means anticipating the positions of the partners in advance, playing through different solutions in advance and, in particular, showing flexibility in the discussions. Lateral conversation is a bit like jazz. Everyone has their sheet music with them, but nobody knows exactly how the notes are played today, and yet most of the time a good sound experience comes out. The concept of Stefan Kühl and Wolfgang Schnelle is a good approach to practice leadership at eye level in seminars. Role plays can be used to train useful and conducive behaviours, which can then be put into practice. For people who lead without power, this is very helpful as it gives them communication skills that improve their performance. Leadership without power, however, also has limits for the individual. As a rule, those who lead in this way also negotiate with those in power in instruction hierarchies. Then, from a psychological point of view, the position is often that of powerlessness. Of the triad of understanding, power and trust, only understanding and trust remain. In individual cases, this sounds like the principle of hope. Eye level as the basis for communication in a spirit of partnership is not guaranteed, as the framework conditions are characterized by a vertical hierarchy. It is the aim of this book to create the framework conditions in organizations so that eye level is actually possible. In sociological terms, this requires a change in the organizational context. This means that it is the management’s task to establish the framework conditions for leadership at eye level in the organization. That’s what this book is about.

Dialogue with People—Civic Participation Not only in companies does the old instruction hierarchy function less and less. Local, regional or socio-political decisions are also increasingly called into question if they are simply taken “from above” by the relevant administrative apparatuses. It is also irrelevant that elected representatives are or were elected by the people. The construction of power lines, the airport extension in Frankfurt, urban development projects in all major cities—there is hardly a major project in which citizens do not insist on participation. One must also state here: Many questions are far too complex for decision-makers in politics and administration to be able to form a comprehensive picture, absorb all relevant information and even weigh it up. Large and controversial projects in particular are therefore hardly conceivable and enforceable today without citizen participation.

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Here, too, digitization plays a major role: all relevant information is theoretically accessible to every citizen. The archive of world knowledge is transparent and in principle open to all people. The knowledge of the people affected is then many times greater than the knowledge of the people’s representatives, which has already been filtered and simplified by lobbyists and regular voters. It is not for nothing that the question of the extent and nature of civic participation has become a topic to which no relevant party in the Federal Republic of Germany has closed its doors. Jürgen Habermas, one of the mentors of the Frankfurt School of Sociology, coined the term “deliberative democracy” (Habermas 1996), which means that citizens should participate directly in politics between two elections. In addition to elections, there are various forms of direct democracy in Switzerland, such as citizens’ referendums. Max Frisch therefore also admitted: “Democracy means interfering in one’s own affairs”. Different state constitutions in Germany today also permit such decisions with different approval quorums. The Handbuch Bürgerbeteiligung (“Citizen Participation Handbook”) (Nanz and Fritsche 2012) lists around 20 forms of participation for public projects. Municipalities that hold themselves in high esteem today therefore have a specialist area of civic participation. The German Federal Agency for Civic Education supports a wide range of citizen participation activities. Political involvement of the citizens of a state means more political awareness, and thus the democratic state would also be supported by its members. With the “principle of controversy”—shortened to the inclusion of different points of view and information to clarify one’s own point of view and develop one’s own ability to solve problems—and the “prohibition of overpowering”—the possibility of forming one’s own opinion and independent competence to act—concepts were also developed which are interesting for companies. At the Federal Congress “Ungleichheiten in der Demokratie” (“Inequalities in Democracy”), forms of participation in society are discussed every 3 years. In number and intensity, citizen participation has risen sharply in Germany over the past 10 years. Such a social development also influences the economy—and vice versa. In any case, companies use participation and negotiations at eye level, essentially already in dialogue with customers. Dialogue with all people—as internal marketing and as genuine participation in decision-making processes—is a younger facet of management.

Summary—And What Happens Next? The increasing digitalization of the business segments posed considerable challenges for the classical hierarchical staff line organization, which led to more and more bypass or parallel organizations. Tom Peters and Robert Waterman, two former McKinsey consultants, wrote a bestseller in 1982, In Search of Excellence. A non-fiction book with a circulation of millions was a sensation even in the USA at the time. As early as the 1980s, they

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doubted the ability of established hierarchical organizations to function and called on leaders to disobey civil law. With many of their ideas, they were then ahead of their time. Nevertheless, their contribution to economic history as radical lateral thinking is important. Today’s changes can be better managed with the knowledge of management history. In Stuart Crainer’s Tom Peters Phenomenon, we found the sentence: “The only thing worse than slavishly following management theory is ignoring it completely” (In Defence of a Guru 1994). Of particular interest for lateral management in this context is the story of the impact of Tom Peters’ consultation, which can gratefully be read very conclusively in the biography of Crainer (1997, p. 237 ff). Especially, the implementation at ABB in the years after 1987 by Percy Barnevik, who was advised by Tom Peters, is an important chapter in the history of lateral management. In 1992, Barnevik assumed that two-thirds of all large European companies would no longer exist after a period of 10 years. That prediction was wrong. However, during this time they were all reorganized in a massive way. Due to digitalization in the twenty-first century, companies are facing an even greater turning point. Everyone who is responsible in organizations knows this today. Tom Peters has shown with his consulting how responsible people can deal with challenges in times of change. The reorganization of ABB was one such case. Radically rethinking hierarchical processes in companies is the core task of our time. One inspiration for this is the Harvard negotiation concept, which transferred the eye-to-eye principle of company–customer relationships to negotiations between business partners. Classical management got additional cracks in its functionality. Even the core methods of successful, Western, rational project management and strategy building were believed not to be sustainable by top consultants at the turn of the century. Systemic Consulting, influenced by the ideas of the sociologist Niklas Luhmann, therefore deserves to turn those affected into participants in change processes. Harrison Owen and Reinhard Sprenger point to the motivational power of freedom in organizations. The sociologists from “Metaplan”, Stefan Kühl and Wolfgang Schnelle, have already presented a training concept for lateral leadership (leadership without superior function) for leadership without power. The future needs an origin. The next chapter therefore deals with the pioneers of lateral organizations: Ricardo Semler and the Semco system, Gore-Tex, Gerard Endenburg and the Mondragon Corporación Cooperativa (MCC). We will deal with organizational experiments of smaller, modern companies, the so-called grassroots movement. We describe in more detail six large companies that are breaking new ground in cultural change: RAG AG, Bahlsen, AOK Baden-Württemberg, dm-drogerie markt, Procter & Gamble and Google. These companies have courageously advanced what can be shaped. We are dedicated to companies that focus entirely on employee self-organization and that have influenced the French organizational psychologists Issac Getz and Brian Carney and Frederic Laloux’ management concept.

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Finally, we examine the role of middle management in cultural change processes using an empirical example and comment on current management methods that are not as new as they themselves promise.

References 3Sat (2017). “Sehnsucht nach Autorität”. https://www.youtube.com/watch?v=N9P1SsffCQM. Crainer, S. (1997). The Tom Peters phenomenon. Corporate man to corporate skunk. Capstone: Oxford. Drucker, P. F. (1967). The effective executive. New York: Harper & Row. Fisher, R., & Ury, W. (1981). Getting to yes. Negotiating agreement without giving in. Boston: Houghton Mifflin. Habermas, J. (1996). Drei normative Modelle der Demokratie: Zum Begriff deliberativer Demokratie, in: Die Einbeziehung des Anderen. Studien zur politischen Theorie. Suhrkamp, Frankfurt am Main 1996, p. 277 ff. In Defence of a Guru. (1994). In: The Economist, 29.02.1994. Jungert, A. (2015). ABB kündigt weiteren Jobabbau an. In: Mannheimer Morgen, 30.04.2015. www.morgenweb.de/nachrichten/wirtschaft/regionale-wirtschaft/abb-kundigt-weiterenjobabbau-an-1.2222972. Kühl, S., Schnelle, T. (2009). Führen ohne Hierarchie. In: OrganisationsEntwicklung, 2/09. http:// archiv.metaplan.de/wp-content/uploads/2013/10/2009_-_OrganisationsEntwicklung_02_09. pdf. Laloux, F. (2014). Reinventing organizations. A guide to creating organizations inspired by the next stage of human consciousness. Nelson Parker. Nanz, P., Fritsche, M. (2012). Handbuch Bürgerbeteiligung. Verfahren und Akteure, Chancen und Grenzen. Schriftenreihe Bundeszentrale für politische Bildung, Band 1200, Bonn. Owen, H. (1999). The Spirit of Leadership. Liberating the Leader in Each of Us. San Francisco: Berrett-Koehler [1990]. Peters, T. (1992). Liberation management. Necessary disorganization for the nanosecond nineties. New York: Knopf. Peters, T. (1995). The pursuit of WOW! every person s guide to topsy-turvy times. USA, New York: Random House. Peters, T., & Waterman, R. (1982). In search of excellence. Lessons from America’s best-run companies. New York: Harper & Row. Spindler, G. (2015). Revolutionäre Melodienkraft. In Mannheimer Morgen, 12.06.2015. www. morgenweb.de/nachrichten/kultur/regionale-kultur/revolutionare-melodienkraft-1.2286461. Sprenger, R. K. (2005). Aufstand des Individuums. Warum wir Führung komplett neu denken müssen. Limitierte Sonderausgabe. Campus, Frankfurt am Main. Sprenger, R. K. (2013). An der Freiheit des anderen kommt keiner vorbei. Das Beste von Reinhard K. Sprenger. Campus, Frankfurt am Main. Sztuka, A. (2015). 7-S-Modell von McKinsey. www.manager-wiki.com/strategie-grundlagen/33swot-analyse.

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Lateral management is based on the principle of self-responsibility. The idea behind this is that people in companies work more motivated if they can take responsibility and make their own decisions. Tom Peters and Bob Waterman describe eight outstanding characteristics of top companies in In Search of Excellence. One is called: Productivity through people. Tom Peters reports of an employee at General Motors who had been dismissed after 16 years and who had never been seriously talked to about how he could do his job better (Crainer 1997, p. 48). One of the basic messages of In Search of Excellence was that people have the potential they want to bring to organizations. Tom Peters researched self-responsible structures in Europe and Japan because he was enthusiastic about these ideas (Crainer 1997). In the meantime, many organizations have gained experience with self-responsible work. Procter & Gamble, a pioneer of self-reliant working practices, was one of Peters and Waterman’s favourites, and Bob Waterman, in particular, declared it a model company in the 1990s (Waterman 1994, p. 65 ff., 267 ff.). Today, there is much more empirical material about self-responsible work. Some companies have done pioneering work here, especially since the 1990s. Many work with self-responsible groups as the core of leadership, decision-making and cooperation. Companies that are successful today prefer the consultative individual decision and rely on the emancipation of middle management. The decision is to be distributed from the top of the company to many responsible managers. Before this book answers the question of what companies and people can do in times of the digital revolution, it is certainly worth taking a look at existing workshops where people take responsibility for their own work. We’ll look into the questions here: What were the occasions to work independently at eye level? What was obstructive, what beneficial? What are the motives and the results of independent work? What are the enemies of self-responsibility? The idea of involving employees was already influenced by early socialists at the time of the first Industrial Revolution. Henri de Saint-Simon, Robert Owen, Pierre-Joseph Proudhon and Charles Fourier were among their most famous representatives. Robert Owen, for example, experimented with the first forms of © Springer Nature Switzerland AG 2020 R. Geschwill and M. Nieswandt, Lateral Management, Future of Business and Finance, https://doi.org/10.1007/978-3-030-46496-7_4

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participation around 1800 in his factory in England and is regarded as the founder of the cooperative system. It is noteworthy that his company recorded large increases in productivity, also because he improved working conditions. With the second Industrial Revolution, participation models from the labour movement (bottom-up method) entered the scene. Initially, workers wanted to improve working conditions in their companies. It was not until the 1950s, when coal and steel co-determination became law, that strong rights for employees were implemented as co-determination. IG Metall in Germany was the largest single trade union in the world in the 1960s and was regarded as very assertive. In England, entrepreneurs began experimenting with employee participation after 1945. In Germany, the first companies started doing so in the 1970s, in the aftermath of the student movement. In Germany, companies such as the PSI AG in Berlin, the Hoppmann car dealership in Siegerland and the pharmaceutical and cosmetics manufacturer WALA in the Göppingen District then established themselves. The daily tageszeitung and weekly magazine Der Spiegel, in particular, distinguished themselves with participation models for journalists. It is yet a further step from employee participation to labour issues to the participation of people in decision-making processes in companies. Groundbreaking in this respect were the investigations by Elliott Jaques and his Tavistock Institute into precursors of such models at the Glacier Metal Company. In the international arena, a number of companies with elements of lateral management have made a name for themselves: above all Ricardo Semler in Brazil, Gerard Endenburg in the Netherlands, the married couple Gore—who founded Gore-Tex—and the Spanish cooperative MCC found by the priest Antonio Cancelo. Here it was individual personalities who helped real laterality achieve its breakthrough. The aim in these companies was to give employees and managers more personal responsibility and to set up small, self-regulating team structures. Strategic changes always go hand in hand with organizational changes. Between 1981 and 1997, Harley Davidson in the USA also belonged to group of progressive companies. Many smaller companies, like start-ups, are now experimenting with a variety of lateral organizational models—especially in the IT and consulting scene. Well-trained knowledge workers want to have a say in the workplace. These companies—certainly just a few among many others—have been grouped together under the name “grassroots movement”. In this context, we will also subject innovation projects such as “Design Thinking”, “Agile Management”, “Scrum”, “FEDEX 24” to a historical analysis of innovation models. In doing so, we will clarify the question of whether these models do not really address only the symptoms rather than questioning the concepts. People without power often lack the potential to assert their ideas in companies. There is a danger that people in organizations will invest a lot of energy in good ideas, but that the framework conditions for implementation will be lacking. It takes big designs, like Peters’ and Waterman’s. If the framework conditions are not

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right, well-meaning approaches and actions produce losers at all levels. Often dwarfs are conditioned here; it is not giants that are being developed. At the same time, companies such as the Dutch ING-DiBa or the Swedish music stream service provider Spotify manage their companies agilely. These concepts go far beyond agile micromanagement, as we find it in some German companies (Organizational Development 2/2019, p. 56). Some companies that have already developed lateral cultures will be examined in more detail. Historically, RAG AG—formerly Ruhrkohle AG—took the first systematic step here, with the job cuts affecting 100,000 employees. As a family business, Bahlsen AG from Hanover has placed the restructuring of the company in the hands of middle management and has undertaken a strategic and cultural reorientation. Procter & Gamble has been experimenting with self-controlled groups since the 1960s. The international corporation with more than 100,000 employees has already been described by Tom Peters and Bob Waterman as the most culturally innovative company. Therefore, lateral management is regarded as a central competitive factor. In the field of corporations under public law, the AOK Baden-Württemberg as the central institution of the statutory health insurance in Germany has taken a radical step, away from a Max Weber bureaucracy towards becoming a modern service company as an organization. Strategic decisions have been consistently accompanied by lateral organizational changes since 2012. A precursor to these developments was the Belgian Ministry of Social Affairs as early as 2002. The dm markets, with their decentralized management strategy, have been regarded as model companies since the 1980s. As a technology company, Google’s idea of assessing managers’ performance and employee appetite for reorientation of leadership and cooperation was a key factor in the decision. The bottom-up assessment of executives seems to be a well-suited method to improve the effectiveness of lateral management. Subsequently, we will devote ourselves to the cultural change of a medium-sized company; therefore, all operational decision-making processes were transferred to the middle management with great success and thus a lateral management structure was basically introduced. This process of cultural change was scientifically accompanied and evaluated over 2 years. This was the first time that empirical data on a longer period of cultural change were available. Finally, we take a look at companies that break with traditional management structures and focus completely on self-organization—without a hierarchy and without executives: the Dutch nursing service Buurtzorg, the French die-casting foundry FAVI, Poult Biscuits, Cronoflex, Sun Hydraulics in Florida, the MINISTRY Group—an agency for digital communication in Hamburg—the Mornings Star trading company for tomatoes in California, Harley Davidson and the international energy service provider AES. Some of these companies were described by French organizational psychologist Issac Getz and Brian Carney in the book Freedom INC. and former McKinsey consultant Laloux in Reinventing Organizations. The examples of AES and the MINISTRY Group show that lateral guidance models can also fail.

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Elliott Jaques and Glacier—A Successful Project That Nobody Wants The Canadian psychologist Elliott Jaques stayed in England after the Second World War and found the interdisciplinary Tavistock Institute of Human Relations in London together with others. He also led the influential research project on the use of democratic structures in companies at the Glacier Metal Company. Wilfried Brown—himself a management expert and later a cabinet member in Harold Wilson’s British Labour government—was the company’s managing director. The Glacier project (Jaques 1951) was a great success at the time, relying on employees to take responsibility for themselves and—truly revolutionary at the time —removing the time clock to manage based on trust rather than control. The regulation on decision-making authority was very courageous: Strategic decisions could only be made if all elected employee representatives agreed. In the first 5 years of the study, all processes worked and the company was profitable. Its works constitution was exceptionally progressive at that time. This was probably also the reason why no other company wanted to adopt this organizational form. Elliott Jaques elegantly solved one of the most difficult questions of responsibility in lateral management: Who decides what? Here it is a matter of building up as little additional bureaucracy as possible. For Glacier, the period between the decision being taken and its impact on the customer was taken as a criterion. The shorter the period, the greater the freedom of decision for the actor. Quickly effective operational decisions could then be made at the local level, while strategic decisions with long-term effects could be made at top management level. Today, many companies have so-called budget frameworks that regulate decision-making competencies. According to Elliott Jaques, it could be proposed to establish a decision matrix based on the duration of the decision (short–long) and the budget level to be used by responsible decision-makers in a lateral organization. Three aspects could be verified by the project (Handelsblatt Management Bibliothek 2005, p. 93): • the observation that conventional organigrams are largely overestimated for the functioning of an organization or—as the authors thought—useless and superfluous; • the realization that the corporate culture is of great importance for the success of an organization—something that was considered new at the time; • the conclusion that fairness and win-win situations for employees and management have a positive impact on a company’s results. Elliott continued his research at the Tavistock Institute of Human Resources. In Scandinavia, especially in Sweden, there was a similar tradition of experimenting with new forms of work. In the 1960s, team experiments were carried out at Saab, among others—projects to “humanise the world of work”. In

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semi-autonomous groups, assembly lines were abolished and cars were produced on rotundas. Every worker should be familiar with all the steps involved in production. Weekly group meetings were held to determine who produced how much, when, and what they had learned. However, no decision was taken in the group meetings on the amount of the salary—hence the term “semi-autonomous”. Even today there is a dispute among experts about the better solution. Even in one of the largest team projects in Germany with 3,000 employees, semi-autonomous, democratically legitimized groups with elected team spokespersons were successfully installed in Postbank AG’s payment transactions between 1992 and 1996. Tavistock was undisputedly a pioneer of scientific research that aimed for more self-responsibility, networking and freedom from hierarchy.

Employee Participation in Germany—The First Experiments In Germany, there are historically seven first mover companies with regard to employee participation models, of which Photo Porst is now off the market and the business of the solar technology manufacturer Wagner & Co. is now conducted by other owners. Five companies are still active today. In 1974, the Berlin-based software company PSI was the first company to introduce an employee participation programme after its conversion into a stock corporation. Democratic structures were established—only employees could acquire shares. Until 1998, about 60% of the employees had a stake in their company, but the IPO in the same year softened the concept. Today RWE also operates there as a co-owner, the group has 1,700 employees and a turnover of approx. 180 million euros. In Bad Boll, Baden-Württemberg, there is WALA Heilmittel GmbH with 700 employees and an annual turnover of around 100 million euros. The company is committed to anthroposophy and its image of the human being. Other companies with an anthroposophical background in Germany are the dm drugstores and Alnatura, a food chain aimed at healthy nutrition. Both companies attach great importance to human being orientation. Radical decentralization projects were carried out at dm in the 1990s (“All power to the branches”). Hoppmann Autohaus GmbH in Siegen with 300 employees was also one of the first companies with employee participation. At the end of the 1970s, Klaus Hoppmann transferred his ownership shares to the “Democracy in Everyday Life” Foundation. He was impressed by the early socialists and wanted to promote the ideas of people’s participation in the company in strategic decisions. The weekly magazine, Der Spiegel from Hamburg, has had an employee share of 50.1% since the 1960s. The daily newspaper tageszeitung also operates with forms of participation. The structure of the taz seems to be very stable, after several fierce conflicts in the early 1990s and 2000s, while the Spiegel’s chief editors have changed several times since 2013. Much of it is living organizational development history.

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The Classics of Lateral Management—Ricardo Semler and the Semco System, Gore-Tex, Gerard Endenburg and Mondragón Corporación Cooperativa Since the 1990s, some companies around the world have redesigned the triad of leadership, decision-making and collaboration. It was often individuals who initiated these changes and implemented incredible management concepts. It is very rewarding to deal with these companies, as the experiments with new forms of cooperation are particularly important for lateral management. You can see what worked, what didn’t work and why not—and which ideas may not have been tested yet.

Ricardo Semler and Semco, Mechanical Engineering, Brazil No compulsory attendance, self-determined salaries, organization in small groups and almost no hierarchy—is that possible? Great ideas are best told in stories (Rüther 2011): Ricardo Semler took over his father’s mechanical engineering company in 1983 with a turnover of around 4 million euros. The economic existence of the company was in jeopardy. Right from the start, Semler fired more than half of the management. Ricardo Semler worked through weekends and took little time for himself, as he describes it in his second book, The Seven Day Weekend (Semler 2003). After 5 years, his health was so bad that things couldn’t go on like this. He decided to completely transform the company and radically delegate responsibility to employees and teams. From the mid-1990s, he himself only worked as a part-time CEO. When he left the company in 2003, Semco had a turnover of 220 million euros and 3,000 employees. From 1993 to 2003, there were annual sales increases of between 25 and 40% and a profit growth of 600%. The lateral principles of the company: • Decisions on all important topics are made in teams of 5–20 employees (budget, salaries, working hours, strategy: sales, customers, products, innovations, hiring, dismissals). • Employees make decisions on their own responsibility. These have to justify this only to the team. • Flexible working hours and locations (home office, use of offices spread across the site, no working time control). • Little bureaucracy (reports are a maximum of one-page long). There are three levels of responsibility hierarchy: • Consultant (inner circle of six persons, Ricardo Semler was a member here); • Partners (heads of business units, a maximum of 150 employees); • Colleagues (organized in six to twelve teams per business unit).

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Semco now works in several very different business areas, in addition to industrial mechanical engineering, the company also specializes in HR services. Semco describes its corporate culture in ten points, and there are also six so-called principles. All this reads like a manifesto of lateral leadership with the call to encourage participation, to be cheeky to foster creativity, to make quick and transparent decisions, to reflect regularly on one’s own work and—we remember Peters and Waterman—to treat employees as adults. Semco is the classic case of a new organizational structure that radically relies on self-responsibility. Company units were limited to 150 employees. These business units, led by small management boards, made all the important decisions for the enterprise. In this respect, there was a kind of middle management which prepared strategic decisions such as financial controlling, customer acquisition, investments, etc. Unfortunately, we do not know what role these boards actually played in terms of leadership, decision-making and collaboration. The concept of self-responsibility as adopted by Ricardo Semler essentially refers to the self-responsible work of individual employees in the design of work and assignments and participation in the fields of leadership, decision-making and cooperation. That was really groundbreaking in the 1990s. We believe that Semco had both group decision structures and individual management decisions. By the way: Tom Peters was very impressed by Semco.

Gore-Tex Who doesn’t know Gore-Tex? Water-repellent textiles for shoes and clothing. What is less well known is that the corporate culture is completely different from that of comparable companies. The CEO is elected. The employees are partners. The company’s founders, the couple Bill and Vieve Gore, have shaped its self-image. Their conviction: Employees are at their best when their tasks are not precisely specified, but when a company gives them a lot of freedom and personal responsibility and thus motivates them. One member of the German management team puts it this way: “We believe in the ability of each individual and want everyone to be able to develop accordingly” (Fröndhoff 2006). Gore renounces the strict hierarchy that is otherwise common in American companies and everything that entails a lot of bureaucracy. There is no formal order of group, department and area leaders and no fixed job descriptions. Typical for Gore’s organization are small teams that organize themselves, develop and distribute their tasks and jobs themselves. They do not rely on managers, but on self-organization. The company itself calls this “lattice communication structure”—“in this structure, we collaborate and build connections without the constraints of traditional chains of command” (Gore.com 2015). The hierarchy of responsibilities is determined by the tasks and the area to be worked on—and of course by success figures. Working in teams has been a well-rehearsed process since the company was founded.

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They thus rely on symmetrical, lateral communication structures. The company is very successful in a difficult market with numerous competitors.

Endenburg Elektrotechniek, Rotterdam/Netherlands—The Concept of Sociocracy Endenburg Elektrotechniek is a service provider for the shipyard industry. Especially in the 1990s, many representatives of large companies made a pilgrimage to the Netherlands to look at the participation model. The basic idea of sociocracy goes back to the ideas of reform pedagogue Kees Boeke. The later Queen Beatrix and also Gerard Endenburg were taught in his school. In the 1970s, Endenburg was faced with the task of restructuring the company in the face of a catastrophic order situation. Sociocracy is an organizational model that is based on the fact that participation motivates people better. Gerard Endenburg experimented with this model in his own company. He wanted to create an organization in which managers and employees work together laterally and effectively. Since the mid-1970s Endenburg’s approach has been disseminated by the Sociocracy Group in the Netherlands and applied in other companies. In the 1990s, there was a real hype about this model, and even Shell experimented with this form of organization. The Four Basic Principles of Sociocracy (Gottschall 2013): 1. Consent as the predominant principle for decision-making. This model by Kees Boeke touches on one of the most important points of lateral management. Decision-making structures must be fast and effective. Consensus decisions are a step forward in the sense that managers inform about decision possibilities, but if no important objections are raised, the decision can then be made and implemented quickly. Unanimous decisions at any price are not the goal here. Consensus must be learned in companies and can also be adopted as a method by non-sociocratic organizations. 2. A circle structure is superimposed onto the existing line structure. Employees and managers are integrated in circles (teams) that work laterally without a hierarchy and assume certain responsibilities. In addition to managers, elected employees also assume equal responsibility in these management teams. The teams work on their own responsibility. 3. The double linking of circles is the form of networking of different teams in the model of sociocracy. There are group circuits, auxiliary circuits, department circuits, an operating circuit and a top circuit which are linked together and enable control from above—by ladders used—and from below—by selected delegates. 4. There are sociocratic elections of district members and representatives, division of functions and tasks according to the consensus principle, in open discussion. The responsibility of the different teams is also determined there.

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Sociocracy is an organizational experiment that has received much attention in the Netherlands. But the real breakthrough never came. The fact that the experiments at Shell were terminated in the 1990s by a new management team has particularly harmed the sociocracy movement. From the point of view of organizational development in the twenty-first century, the process of sociocratic elections seems time-consuming. Nor does the theoretical model seem to have led to medium-sized and larger companies adopting the sociocracy model. Due to the many regulations, sociocracy somehow sounds like bureaucracy with many coordination processes. Anyone who has dealt with ABB, Semco or Gore-Tex in the 1990s also sees a lack of vision in the description of the sociocratic models—in jazz one would say: the groove. The model, due to the descriptive term, comes across as very bland. This is unfair from a conceptual point of view, because many basic ideas of lateral management in sociocracy have been thoroughly elaborated and empirically evaluated. Sociocracy works has had more than 50 years of success. The European shipyard construction market has been subject to major economic turbulence over the past 20 years. Nevertheless, the organizational model of sociocracy has successfully survived. In Germany, the consulting firm next U is working very successfully with the sociocracy model (see Sattelberger et al. 2015, p. 231; Schröder and Oestereich 2019).

Mondragón Corporación Cooperativa The cooperative is named after a town near the Basque town of Mondragón, approximately 50 kilometres from Bilbao. It goes back to the initiative of the Catholic priest José Maria Arizmendiarrieta and developed into the largest Basque company and the tenth largest group of companies in Spain (Vögeli 2011). When Arizmendiarrieta came to Mondragón—in Basque: Arrasate—in 1941, the city was in bad shape, severely hit by war and civil war. Youth unemployment was very high. In the mid-1950s, a cooperative began building gas and electric stoves. Today it has around 100 individual cooperatives, over 250 companies and facilities in over 40 countries, employing around 75,000 people. They are active in four areas: Industry, commerce, finance and knowledge. The spectrum ranges from operating its own bank and social fund to producing household appliances, supplier parts for the automotive industry, robot systems and other high-tech products, it has its own department store chain and its own university.1 The charismatic founder Arizmendiarrieta emphasized the values of solidarity in the Catholic-Christian community. The companies are democratically brought about and run by economic committees. They belong to the comrades—and they elect the people who work in the steering committees. Vice versa, the management is obliged to account to the comrades for their work.

For current figures, see the company’s website: www.mondragon-corporation.com.

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In the twenty-first century, the cooperative has had to reorient itself: Certain works are outsourced to low-wage countries, as otherwise the individual companies would not have been able to survive on the market. This naturally leads to damage to the self-image of the organization. Economic and socio-ethical interests are at odds with one another: “The compulsion to follow the market led to production facilities having to be outsourced. The increasing outsourcing in turn led to discussions among the members of the cooperative in Mondragón. We want to expand in a global economic environment. We have set up production facilities in Brazil, China and Mexico for this purpose. But how do we do this so that they do not become workers for us, but comrades, just like us?” (Hafner 2008, p. 96). José A. Mikeo, Director of the Foundation for the Revival of the Solidarity Character of Cooperatives, said in an interview with Astrid Hafner, who researched the company scientifically. The following criteria (Hafner 2008, p. 98) were developed as proposed solutions: 1. Transparency of information: All employees receive monthly information about the cooperative’s economic constitution. 2. Cooperative management model: Even without participation in the company and its profits, employees should have an operational and strategic influence. 3. Reference values: The aim is to transfer 30% of ownership to employees in the long term. 4. Contribution to local development: 1–5% of the profit must go to the development of the place where the factory is located. The interesting thing about the cooperatives in Mondragón is that such developments are discussed and reflected in the steering committees. The balance between meaning and economic requirements is thus an integral part of the strategic orientation. The motivation of those involved is boosted by these balances. Those who demand performance must offer meaning. This leadership principle is implemented here. The meaning is based on three principles that the Mondragón-Cooperative system lives by: the principle of identity, the principle of democracy and the principle of solidarity. The principle of identity: The basically insoluble contradiction between capital and labour is softened to the extent that every worker also participates as a comrade in the means of production. The personal identification with the work and the company becomes the focus of attention. This is intended to increase motivation to produce a good quality of work and to ensure that continuous improvements are made to products and processes. The principle of democracy: “In larger companies, more everyday decisions are made by democratically constituted representatives. Corporate policy and work organization are discussed at a non-hierarchical level. Initiative and participation are encouraged. In addition, such democratization impulses also create a new awareness of participation and participation at the political level” (Hafner 2008, p. 25).

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The principle of solidarity: “In the solidarity economy, the principle of solidarity refers to the interests of the members overriding the interests of capital. Internal solidarity involves a horizontal distribution of income and profit. But solidarity at the local level, such as the construction of schools, universities and other educational institutions or the construction of hospitals, all financed with the money generated jointly, is also taken into account. On an international level, this principle includes networking with other cooperatives and societies, the exchange of knowledge and the promotion of solidarity economic projects for the constitution of new, solidarity economic initiatives and enterprises. These activities aim at raising awareness as well as at the emergence of a counter-public and a social movement as a whole” (Hafner 2008, p. 26).

Benedictine Monastery Einsiedeln in Switzerland

Already Benedict of Nursia described leadership principles in a multi-volume work in the sixth century. His successors are still living grassroots democratic models of management today. The best-known Benedictine for executives is their abbot primate Notker Wolf, who also appears on television as a very experienced rock guitarist. Wolf explains the teachings of Saint Benedict from the sixth century as value-oriented leadership to managers, pointing out that he also manages a multinational corporation with several thousand employees. Benedictine monasteries are managed laterally, i.e. the brotherhood has the last word in the monastery. When the Einsiedeln monastery ran into financial difficulties in 2012, they hired McKinsey as a consulting firm and they restructured the monastery’s own business. The consulting firm reported to an advisory board of very renowned managers. Here, classic process chains and product yields were analysed and suggestions were made to improve them. The abbot responsible at the time, Martin Werlen, assessed this cooperation as very positive. Like the Mondragón cooperative, monasteries are also very forward-looking. The democratic, lateral constitutions are not an obstacle to modernizing companies and taking tough steps towards restructuring.

The Grassroots Movement—Five1, it-agile, Umantis, Betterplace Lab, CCP, Praemandatum, Kuentzle Attorneys, Tele Haase and Vaude Five-one-one The software company Five1 was founded in 2008 as an SAP consultancy. 55 employees and 4 founders shape the company. It is characteristic of them that the teams choose their team leaders themselves. The work is structured in projects.

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Attracting and retaining SAP specialists is difficult. Executives who are poorly evaluated by their employees leave the company at some point. While comparable companies complain about a high fluctuation rate, Five1’s last fluctuation rate was close to zero. And this despite the fact that the company is headquartered in Walldorf, the city of the largest German software company SAP. Competition for highly qualified workers is particularly fierce there. In 2018 and 2019, the company was recognized as one of the best employers in the state of Baden-Württemberg.

it-agile GmbH it-agile GmbH (narrated according to Sywottek 2014) in Hamburg develops software and advises companies in this segment. Here the employees decide on almost all operational matters. Projects are carried out in project teams. As with Gore-Tex, there is an employee participation company and the managing director is elected. The 30 employees hold 63% of the company shares. The employees agree on the remuneration and the project participation. The managing director decides on strategic topics such as marketing and sales. These are topics for which software developers have little time anyway, as they are tied up with their resources in operational projects. Who does which job in which project is also decided by the managing director. After the start of the project, the employees decide on the operational control in the team. Since it-agile can look back on more than 10 years on the market, there has been moulting in the history of the company. This was not always easy for the management to describe in their own words and meant above all letting go and not worrying. From it-agile, organizations can learn something about the development of hierarchies of responsibility and conflict regulation in case of disagreements. • Lateral companies need responsibility structures. With it-agile the mistake was making these structures too complex. Today there are clear responsibilities and everyone knows who is responsible for what. This gives the organization and the individual a feeling of security. Employees report that this can sometimes be very strenuous, but no one wants to work in other structures any more. • Lateral companies need conflict regulation. If no decision is reached, bodies must meet and reach decisions quickly. Speed is a relevant differentiator in the market today. At it-agile, such a body was created that is able to act and make decisions quickly.

Umantis and the Haufe Group The Swiss company Umantis has 150 employees, all executives are elected. The company thus has a radical democratic constitution. Nothing changed when the company was taken over by the Freiburg Haufe Group. On the contrary, in a

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crisis-ridden industry, the media company managed to make the leap from a publisher of loose-leaf publications and books to a digital company. It not only changed products (databases, apps) and sales structures, but also its own organizational structure. Haufe’s turnover increased from 50 to almost 300 million Euro between 1990 and 2015, the number of employees grew from 330 to almost 5,000 (Haufe.de 2015). This growth is, of course, also due to a number of acquisitions—such as the acquisition of Umantis, the software company Lexware or the specialist publisher Schäffer-Poeschel. It is noteworthy that Haufe’s acquisitions allow very different organizational models and management structures to run in parallel. Umantis operates its own organizational laboratory, in which lateral management is practised, and is thus regarded as a model for the future and a role model. In a traditional publishing house, however, it takes a little longer to introduce lateral structures. Joachim Rotzinger, member of the management board of Haufe-Lexware GmbH & Co KG, explains this as follows: “Experience that we have gained at Haufe over the past 15 years cannot be made up within a few months in a company that comes from a more traditional environment” (Sywottek 2015).

Betterplace Lab Betterplace Lab is a donation platform based in Berlin and should not be confused with Better Place, the battery factory from Palo Alto. The platform can be used by charitable aid projects to collect donations. At the same time, interested donors can find and support both international and small local aid projects. The goal is to bring people and organizations who want to help directly together with the people and organizations who need help. Digital helpers are made available to the helper organizations so that small altruistic organizations can also carry out online fundraising. Since its launch in 2007, the platform has donated over 56 million euros to over 24,000 social projects, including 13.4 million in 2017, according to the 2017 Annual Report (Gut.org 2018). The Betterplace Lab research group works without a formal hierarchy in so-called competence hierarchies. What is exciting about Betterplace Lab is that the organization is based on the concept of the Holacracy and Frederic Laloux. It was important for the company to first have a theoretical framework before it defined responsible work in practice. The core of personal responsibility lies in three very remarkable ideas. Betterplace Lab goes very interesting ways to solve conflicts, to give feedback with the aim of transparency and especially to negotiate income in a team. Conflict resolution: There are differences of opinion in every company. Betterplace Lab has a four-step process for resolving disagreements. First of all, every employee should look at himself/herself to see where his/her own contribution to the conflict lies. More than 80% of all conflicts are solved by people asking themselves this question instead of pointing the finger at others. The second is a

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discussion in which the parties to the conflict look at what the conflict consists of and what solutions might look like. If the differences of opinion cannot be clarified in this way, a neutral third party from the company can be called in and advised in step three. It’s a kind of supervision. If there is no agreement even after consultation with a colleague, a decision is made in stage 4 by a neutral colleague, which both have to accept. The process is very effective, as we learned in several discussions with Betterplace Lab managers. Feedback: The company attaches great importance to personal feedback on working hours, performance in projects and the amount of personal commitment. In the projects, there is open, transparent feedback from both the project manager and the employees. It is possible that project managers may also take on risks in projects. That can also mean taking responsibility for losses in projects. There are also so-called “overviewers”. For example, this could be someone with a business background who has an insight into income and expenses. An overviewer reports back on the financial position of the company. However, the project managers are responsible. Salaries: The amount of the salary is determined in the projects in the team. In particular, personal parameters are defined, such as how much a person can achieve, how much he would like to achieve personally and family-wise, and what level of performance a person possesses. These parameters are renegotiated from year to year. Salaries range from 1,500 to up to 8,000 € per month.

CCP Gernot Pflüger founded the design studio for web-based digital-visual communication based in Offenbach in the 1990s. He loves a clear language: “No, we are not a self-governing, anti-authoritarian children’s shop or a state-subsidised screwdriver collective made up of unemployed idealists who realize their dream of a bicycle shop … We are not a hobby group, not an allotment garden club, and no, not a sect either, but by and large a perfectly normal company … Rather, we provide engineering and architectural services. We build whole conference centres. For larger projects, we are more often involved with more than 100 people. PPT had three principles: 1. absence of hierarchy; 2. equal pay for all people at PPT; 3. Transparency. The company regards itself as a corporate democracy. Especially in an economic crisis, Gernot Pflüger describes how the cohesion of the community grew. This went so far that employees waived their salary in the crisis. PPT has made the experience that good interpersonal communication and the focus on values such as freedom, self-determination and equality lead to the fact that even crises can be managed together in a positive way. Invested trust is returned.

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Praemandatum Praemandatum (narrated according to Kreller 2015) is an IT company from Hanover that sees employee participation models as a democratic project. The company was founded by Peter Leppelt and operates in the field of IT consulting. Every Tuesday at 3 p.m. there is a plenary meeting and everything is decided there. The employees are thus involved in all decisions, the turnover has recently increased fivefold and the number of employees has tripled, the profits are distributed to the employees and invested in growth. What is interesting about this young project is that the meetings work directly with software that converts the assumption of responsibility into e-tickets. This provides monitoring of all agreed activities.

Kuentzle Attorneys at Law The law firm Kuentzle Rechtsanwälte from Karlsruhe specializes in providing legal advice to companies. In our opinion, it is a lateral consulting firm. Every Thursday morning the parliament of the commercial lawyers employed there meets. Decisions are made about everything—from the purchase of still water to investments in conversion and new hires. In the company, you only get an employment contract if you have passed an exceptionally good bar exam. The demands on lawyers are high, also on their social competence. Here, too, lateral participation is sometimes experienced as exhausting. Setbacks are the order of the day. Nevertheless, no participant wants to work in a partner company with hierarchical rules and bureaucratic hurdles or in a person-managed law firm with one or a few founders. In 2019, Kuentzle Rechtsanwälte had 26 lawyers.2 The firm was founded by Wolfgang Kuentzle in the 1970s as a partnership. Around 2010 he withdrew more and more from the company, but remained a partner. Young lawyers who joined the company changed the structure and introduced the Thursday round. At the same time, there is a partner round in which economic decisions are made by mutual agreement. Employment contracts are also formally fixed by law and partner matters are regulated here. Transparency is writ large, the business figures are known to every lawyer. The Thursday round was actually the company’s most important decision-making body. Ideas were born here, topics placed, discussions initiated and important decisions made or prepared. Various responsibilities such as qualification, finance, infrastructure, IT, etc. were the responsibility of members of the Thursday round. Otherwise, the lawyers work in teams of specialists or companies and are highly specialized. In this respect, there is both a project structure and an organizational form for higher level project and customer tasks. The company has developed a lateral organizational structure from the grassroots democratic beginnings, which were characterized by the Thursday round as an

For current figures see www.kuentzle-rechtsanwaelte.de.

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artefact, which now functions stably. Particular emphasis is placed on human resources today. Since 2018, the onboarding of young talent has played a particularly important role. Not every lawyer is suitable for work in a lateral organization. Laterality means that complexity grows. Complexity in management often also means having to endure personal tensions and very different interests and ambiguities in the discourse. To deal with it professionally requires mature, strong personalities. The example of Kuentzle Rechtsanwälte shows that lateral management is also possible and practicable in consulting firms. “Exodus From the Grand Chancellery”

Under this heading the Frankfurter Allgemeine Sonntagszeitung described the loss of many highly paid lawyers at Clifford Chance in Germany (Budras and Jahn 2015). What had happened? The major law firm undertook a change of strategy. Away from the full-service law firm to legal products that are regarded as excellent assignments: Class instead of mass. As a result, it is estimated that 15% of the partners leave the company after restructuring. Lawyers are specialists and bound to certain fields of law. When large law firms restructure, lawyers know that the job often has to be changed as well. In commercial law firms, 12–15 h of working time per day and 6-day weeks are no exception. The question of meaning often comes up today, especially for very well-trained knowledge workers. In which organization do I want to work and how do I want to have a say? The alternatives are often the public service—which attracts fewer and fewer top lawyers—or employment as a lawyer in a company. So far, the sector is still organized as a medium-sized enterprise. Many law firms had founding personalities whose patriarchal management spirit remains in the organization even after their departure. Founders who actively participate in a change of management style are kind of the exception. But the traffic lights in law firms and consulting firms are on green. That means change. Experiments with lateral forms of organization are increasing.

Tele Haase Five years ago, the Viennese technology company Tele Haase abolished all executive positions and let its 85 employees work completely independently. Managing director Markus Stelzmann remembers an elaborate process that changed the company from the ground up:

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“A few years ago we had an aha experience. We asked ourselves: Is it really all about growth? Up to where do we still want to grow? Is sales the only goal? These thoughts have triggered a veritable revolution. We questioned the classic hierarchies between employees and superiors and decided to give our employees much more freedom. We wanted to hold the individual accountable so that the creative potential in the company would increase. We were convinced that this was the only way to create the right ideas that would keep us competitive—and at the same time give meaning to the individual. So, Tele Haase became a ‘company without a boss’—and that was a good thing”. “For years, I was the classic executive director type. I decided, I signed, I decided. If employees didn’t support the organization enough in my eyes, I fired them. There were many conflicts, and I made some hard choices. At every opportunity I said clearly: ‘I decide!’ Today I see myself as a member of an organisation, just like any other employee. My managing director’s office has been transformed into a hub, I now sit in the open-plan office next to our HR department or work from home. I negotiate with banks, set up subcontractors or advise employees if they do not make progress. I don’t decide. They have to find the solution to a problem themselves. They are responsible for their area. Meanwhile this works out so well that I can travel longer without being afraid that everything will go down the drain. But it was a learning process” (Osterhues 2018). At Tele Haase, too, it was initially difficult for the employees to work independently. 30% of colleagues have left the company. Today, employees have budget responsibility. Those who are responsible for important projects also receive more salary.

Vaude The outdoor clothing company was founded in 1974 by Albrecht von Dewitz. The management was taken over by his daughter Antje in 2009. Similar to Semco, the new managing director felt compelled to change the management style from “taking care of everything” to a participative, democratic management style. Antje von Dewitz has four children. There was no room for a 50 h week or more. Responsibility within the company is spread across many shoulders. At Vaude, 50% of people work part time. Satisfied employees are the basis of successful work. However, there is also a clear profile of requirements. In order for people to be able to work on their own responsibility, great importance is attached to high social skills even at the recruitment stage. You will only be hired if you can solve conflicts well, communicate well and like open feedback. Feedback is also provided by Vaude in self-reliant groups, so teamwork is an important feature in recruitment. People who start at Vaude even forgo higher wages, which they might get paid in other companies. For people, the possibilities of self-determination of work and time, mutual respect and solidarity are more important than the level of salary.

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Companies with a Role Model Function—RAG AG, Bahlsen, AOK Baden-Württemberg, dm-drogerie markt, Procter & Gamble, Google Some organizations are already experimenting with lateral management, with more participation of leaders and people, which ultimately means nothing more than democratization through hierarchies of responsibility. Here we present companies that are going the way to more laterality. We choose these companies because they break new ground and radically challenge the organization of leadership, decision-making and collaboration. Companies are experimenting with new models of participation to improve self-responsibility and networking within organizations. The five companies have very different business models, strategic challenges, competitive conditions, participation structures, histories and corporate cultures. Both the first lateral companies in the twentieth century and the five companies described by us show that lateral management can make its contribution to value creation in very different organizations.

RAG AG Let those affected become participants, and that with massive job cuts—is that possible? There is a historical example of this happening which, unfortunately, has received little recognition in literature. Peter Schrimpf was a member of the Management Board of RAG AG with responsibility for human resources. When the German federal government decided in the 1990s to withdraw from subsidizing German coal mining, it was clear that the company—at that time still known as Ruhrkohle AG—would cut around 100,000 jobs by 2018. How does a board of directors send such bad news to the workforce? The impositions on local employees were tough. When mines were closed, the workforce had to accept jobs that were far away, in other mines. And yet the managers ought to take care of every miner and his perspective in this process. Peter Schrimpf reports that the employee meetings at which the consequences of job cuts were reported were very turbulent. Ruhrkohle AG chose the path of complete transparency. It only helped to speak plainly, to present the facts to the people and to appeal to the cohesion of the miners even in these difficult times. You have to imagine that: The colliery is closed down one colliery at a time and the Board of Management relies on employee motivation. Two premises are important for the assessment of this remarkable procedure by the management with regard to lateral leadership: Firstly, companies in the hard coal mining industry in Germany are traditionally model companies in terms of the participation of the works council in company decisions, so that it was possible to fall back on practiced structures here. And in dangerous underground work, there is

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a special relationship of having to rely on each other between people and managers (climbers) based on mutual trust and reliability. Managers were evaluated with 360° feedback from employees, superiors, colleagues, customers, with the employee barometer—the evaluation by the miners regarding fairness in the workplace—having a special weight. Executives who had been poorly assessed by the miners were replaced. As far as job cuts are concerned, this project was a treasure trove for further projects, such as the job cuts in nuclear facilities currently imminent as a result of the energy system transformation. Self-reliant work and teamwork are therefore essential for survival in this job. Mistakes here are often the cause of accidents that threaten the very existence of the company. We would classify this kind of activity in the HROs (High Reliability Organizations) researched by Karl Weick. Through this kind of work something like a mutual cooperation arose, which makes it possible to communicate even difficult measure in terms of change. The management performance at the German RAG AG with the goal of massive job cuts is certainly encouraging for all those who strive for a lateral cultural change in companies. At the beginning of the 1990s, Ruhrkohle AG was faced with the task of carrying out massive job cuts and at the same time, together with the people concerned, shaping their motivation and perspectives for the time after employment in the company. Personnel development focused on people’s exit strategies, such as retirement or qualification for other tasks. Ruhrkohle AG and later the RAG AG developed the master plan how a management has to deal with people in phases of personnel reduction through digitalization. Here, managers have the task of positively shaping one of the five classic roles of a manager: Managers are the first personnel developers in the company. They support people on a temporary basis and they develop them for their careers in other employment relationships. This kingly task of being a human developer is more fun than the hard dismantling programmes that many people have experienced in recent years. We know personnel managers who conducted more than 1,000 redundancy interviews in the 1990s and the following years. That is anything but a leisure activity. Often people were dismissed into a lack of perspective. Lateral management relies on separation, development and on a culture of perspectives. By evaluating the managers at RAG AG in the employee barometer, the people in the organization become the controllers of their own destinies. They could evaluate their bosses without having to take a detour via gallup studies to thereby express their feelings. The management performance at RAG AG shows the right way into the digital economy.

Bahlsen GmbH & Co. KG A team from McKinsey analysed Bahlsen, the German market leader for sweet biscuits, for several months (narrated according to Täubner 2014). The profitability of the company was to be improved. Competitors Mondelez (formerly Kraft, with

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the Milka product range) invested heavily in Europe, and Griesson—de Beukelaer also made it difficult for the company to survive. Some Bahlsen plants were to be closed down—according to the consultants’ plan—and the product portfolio was to be adjusted. Cost reduction was the order of the day. The head of the family business, Werner Bahlsen, invited the upper and middle management in March 2012 to present the restructuring concept to them. This was followed by a discussion in which the managers present made it clear that it was probably better for them to take charge of the restructuring themselves. A management team was to be set up to reorganize Bahlsen GmbH & Co KG with its around 2,500 employees and a turnover of 526 million euros under its own control. “It became obvious that we had done something wrong”, says Werner Bahlsen. “The process we initiated with McKinsey was not a Bahlsen project. Our people weren’t on board” (Täubner 2014). Bahlsen, 65 years old, was wise enough to trust his management. An internal project manager initiated ten working groups, each dedicated to a specific topic, such as the development of a new sales strategy, new production structures or new management principles. Only overriding strategic goals were specified. The groups were led by internal managers and each consisted of around ten persons. The employees in the departments were informed about the group work by the managers—suggestions and tips from the staff were explicitly wanted. The middle management reorganized the company in this way. As external consultants, specialists for change and management architectures and organizational culture developers worked together. The project at Bahlsen is a milestone for the concept of lateral management. Bahlsen, like Gore-Tex or Semco, shows that it is quite possible to introduce more autonomous management structures even in family-run companies. Maybe it’s easier there, too? Especially in family businesses—because of the often strong attachment of people to their company—lateral management seems to be a very suitable concept. However, managers like Werner Bahlsen, who can let go, and family entrepreneurs, who dare to try new things and break up old structures, are needed. The organization had to be strategically realigned. The usual way is to bring in an external consulting firm for the analysis. Internal managers are often not in a position to do this because they are far too closely involved in internal power and relationship networks. However, the implementation, which accounts for 90% of the success of a successful restructuring, is the responsibility of internal managers. This makes middle management an agent of change. It worked at Bahlsen’s. Medium-sized companies, which employ about 85% of all people in Germany, thus have an important new, successful organizational model under very tough competitive conditions. The hierarchical model of the family entrepreneur who decides everything was a thing of the past. It is often more interesting to be a middle manager in a family business than in a large organization. It means making faster, more responsible decisions. You have more creative freedom and a say. If there are often long decision paths in large companies, the implementation speed in family businesses is often higher.

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At Bahlsen, employees were also involved in so-called cross-hierarchical working groups in the preparation and implementation of the restructuring. In this way, they helped shape the change process. The company has evolved since those days. Werner Bahlsen has since retired from active management. Bahlsen has been back in the black for years. The spirit from the mobilization of upper and middle management seems to remain active. The next generation, Verena Bahlsen, leads the start-up “Hermanns” in Berlin. It’s like a future lab for healthy food. Bahlsen has 2,900 employees in 2018 and a turnover of 545 million euros.

Top 500 Family Businesses in Germany

The study by the Foundation for Family Businesses in Germany and Europe on the economic significance of family businesses also identifies the 500 largest family businesses and compares their turnover and employment development with the key figures of non-family DAX companies. – In 2016, more than five million people worked in the TOP 500 family companies (by employees) worldwide. – The 500 family businesses with the highest turnover worldwide generated a turnover of more than 1,106 billion euros.

It is clear that family businesses create jobs. Between 2007 and 2016, the top 500 family companies in Germany created around half a million jobs—an increase of 23%, while the DAX 27 companies recorded a growth of four percent in the same period (Family business.de 2019).

AOK Baden-Württemberg This organization is a public corporation. The statutory health insurance fund has its head office in Stuttgart and since 2007 has been divided into 14 decentralized district head offices with 230 branch offices and the head office. With approx. 11,000 employees, more than 4.4 million insured persons and a market share of 42.2%, the company is the market leader and the largest statutory health insurance company in its federal state. It pays out around 11 billion euros per year in health and long-term care insurance benefits (Krankenkassen.de 2018). While competitors such as BARMER GEK or Techniker Krankenkasse are massively reducing the number of information centres on site, AOK Baden-Württemberg wants to maintain or even further improve its closeness to customers and the quality of its advice on site. In 2014, a project called “GESUNDNAH” was launched to communicate to the insured how important this service offered by AOK Baden-Württemberg is.

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In 2012, the Executive Board opted for a new way of cooperation between centralized and decentralized areas. Previously there had been a round of talks with the 14 managing directors of the district head offices, and now a management committee with 50 top executives has been created. This body brought together the senior managers of the head office and the decentralized organizations. Important questions should be deliberately dealt with in joint committees and projects. Corporate headquarters are often experienced as remote—the words of the former chairman of Daimler-Benz, Jürgen Schrempp, who once called the headquarters in Stuttgart-Möhringen “Bullshit Castle”, became famous. Conversely, decentralized corporate units often do not provide strategic impulses or change impulses for the overall organization. The cooperation of central and decentralized units is a broad field in all organizations to achieve value-adding innovations for companies and always in the focus of improvements. In 2013, the head office was also restructured. In public companies, it is usually the case that one board member decides everything and so-called consulting documents are prepared by the second management level for this decision-making process—a classic Max Weber organizational structure. The board members Dr. Christopher Hermann and Siegmar Nesch decided to break with tradition and to let the hierarchically next management levels be responsible for all operational decisions in the future. The reason for this was that decisions often require coordination between different managers in the company. This means that at this level of management there should be networking and self-responsibility. Logically, target agreements with resources and budgets were then also made available. Managing directors in the district head offices already had similar responsibilities. The changes were accompanied by a management culture development project, which included the following actions: • Introduction of target discussions in top management with 180° feedback (from superiors, employees) as self-reflection. • Modification of the signing obligations in the organization manual in order to be able to make legally binding agreements. • Reorientation of committees in joint central and decentralized composition with decision-making authority for various business segments. This is tantamount to democratizing decisions. Participation and consultation are mandatory in the committees and the subordinated bodies and thematic sponsorships. • There is a so-called “lead management” for all specialist topics. These are held by persons who bear the responsibility for the decision. They decide after consulting colleagues (individual consultative decision). • 720 executives were trained in lateral management and leadership in large groups. The courses worked with company-specific case studies, which are often used in MBA programmes in the USA. • Since 2013, the management culture process has been evaluated both quantitatively and qualitatively on an annual basis. The survey results are evaluated by the management and regarded as learning with regard to the progress of the project. As a consequence, changes are made to the project. This makes cultural

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development measurable. For years, there has also been an employee barometer that measures how employees themselves experience leadership and cooperation. • The project is managed internally. In various project phases, around 50 managers from the first three levels of the company were involved in project work and control. External support as organizational developers and moderators. The project is probably one of the best evaluated lateral management projects in Germany. Surveys of the participants on the progress of the project are regularly carried out and evaluated. The AOK Baden-Württemberg had recognized: The instruction hierarchy, as it is still lived in many public organizations today, no longer suited the modern service company affected by digitization. The aim was to speed up and improve decision-making processes and to improve the networking of decision-makers. It simply makes more sense if the right experts sit down together and consult together the complex pros and cons in an upcoming decision and then make the decision immediately. Very important: Because subordinate hierarchical levels are involved in the decision-making process, the implementation of the decision is also simplified. A very sensitive point in this context is who is responsible for the decision. All successful lateral companies such as Endenburg or Semco also established new structures. The establishment of leadership by selected second- or third-level managers created hierarchies of responsibility that became operational very quickly. Parallel to the cultural development, a competence model was introduced at the AOK Baden-Württemberg which formulated the expectations of managers. The model includes competencies of both classical and lateral management. Both management formats are used in parallel. In the AOK Baden-Württemberg, lateral management essentially refers to the management level. The majority of the people in the company continue to be classically managed. In order for lateral management to work, special attention is given to appreciation and a culture of conflict. A paradox that Tom Peters already liked—and that makes sense especially in large German companies. It is precisely here that the history of many organizations is characterized by conformity and a bureaucratic safeguarding of strategies on the management side. Mistakes were followed by punishment rituals, which were not in the least regarded as learning opportunities by management. In hierarchical cultures, fighting while maintaining respect was not the first choice. With the AOK Baden-Württemberg, a company from the public sector has successfully embarked on the path of lateral management. This is remarkable inasmuch as this economic sector will have to reposition itself again and again in the coming years as a result of the digital economy. The company set a high pace in the radicality and consistency of the introduction of lateral management in almost two and a half years. The large organization with about 11,000 people has changed on a whole. This is not a matter of course. When you talk to managers from large companies today, they often don’t dare to make

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such courageous changes. In addition, statutory health insurance funds are subject to many parameters that management finds difficult to influence. This includes a legislator who can significantly change a year’s target planning with binding initiatives. And that always hits the cost side. At the same time, it is important to keep premiums stable, maintain a customer-friendly range of services and maintain a high-quality level of care. The company is subject to considerable documentation obligations like any public company, which limits the reduction of office workplaces from the outset. At the same time, various interest groups are available to participate in the public self-administration. If a cultural change succeeds in such an organization, it is likely to be even more possible in less complex and less regulated business models. The introduction of lateral management was accompanied by quantitative and qualitative surveys, which are available to us. It is trivial to point out that 14 decentralized organizations and one centre have different learning speeds. This leads to setbacks at one point or another. But in 2 years all values, even from critical fields, have clearly changed into positive ones. The company has a 180° perspective with an employee barometer and the measurements indicating cultural change. Managers at all levels do not want to return to the pre-lateral world of instruction. More decision-making possibilities of your own, improved clarity of objectives, improved conflict culture and particularly improved networking were consistently rated to be much better by the managers. The results in the employee barometers have also increased over the past 3 years —while customer satisfaction levels have remained at a consistently high level. This is impressive inasmuch as jobs have been concentrated in recent years.

The Undertow Towards Culture in the Company and How It Develops

Interview with Dr. Christopher Hermann, CEO of AOK Baden-Württemberg until 2019. Health insurance company sounds like instruction hierarchy and administrative action. Is lateral management absent? The AOK Baden-Württemberg is a service company. But who in politics, business or administration can make any progress with the instruction hierarchy today? In a digital world in which information is permanently available in abundance, there is no sustainable way to gain anything from an instruction culture. The flexibility required today cannot be prescribed, but must ultimately be provided by each individual from his or her own and lived with inner conviction. So lateral management is the solution? Terms to or fro. I am firmly convinced that managers must be able to determine when “negotiation” and when “direction” is appropriate and goal-oriented. This requires experience and above all one’s own answer to the

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question: “How can I best meet the demands placed upon me? “Despite many different influencing factors, the solution does not lie in the other individual, but really in oneself. And the AOK Baden-Württemberg has managed to answer these questions? Such processes cannot be successfully managed by “flipping the switch”, but at best brought to the start. AOK Baden-Württemberg has gone beyond this position and positive developments towards self-responsibility and decision-making processes are clearly visible. In concrete terms? Far too often, for example, changes are only made in companies or organizations when there are events that make changes unavoidable. AOK Baden-Württemberg did not need this impetus. I am happy about that. Because we all know that cultural changes in companies take a lot of patience and therefore also some time in the management. Top business results, more efficiency, employee identification with their tasks and all the other attributes that characterize a successful and long-term stable company cannot be achieved overnight. “Sowing today and harvesting the day after tomorrow” is the motto. So are creativity and hierarchy mutually exclusive? Or to put it another way: Is a lateral approach the prerequisite for creative processes? There’s certainly a lot to this assessment. I’m convinced that creativity has to prove itself in everyday business. It’s said very quickly, but it’s anything but done quickly. Creativity starts when employees try to really understand each other, for example, when it involves common project goals. Does this mean that the management process is a process of understanding? If you like, yes. Because if you want to understand others, you not only deal with positions, but also with the interests behind them. They ask questions, they discuss, they strive in the end for the right direction. AOK Baden-Württemberg is on the right track. Were there no reservations in the company? If you take stock, you get to the point of learning new things and saying goodbye to outdated ones. Both require persuasiveness and the will to make decisions. That’s why it’s right to take the path from managers towards employees. This creates a pull towards cultural issues at all levels of the company that does not break down. Was the success recognizable for you? I can only say that in discussions, committee meetings and conferences, questions and the classification of employees play an important role. Internal, anonymous surveys of managers and a comprehensive employee barometer also regularly provide valid information on where the company stands in the cultural process. This is not only a gain in knowledge, but also provides topics for the future.

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Which of the three most important tips do you have for companies that also want to start a cultural process? I am very careful with patent solutions. In my experience, nothing gets going here without the conviction of the leading management that investing in cultural work is the basis for sustainable corporate success. The upper management level has to be the first to support the development and is therefore always in the thick of things. Last but not least, there is a need for parallel evaluations that determine the respective status and make it easier to readjust.

Dm-Drogerie Markt GmbH & Co. KG dm-drogerie markt is a radically decentralized company in which the hierarchical pyramid was abolished in 1989 with the striking change programme “All power to the branches”. Götz Werner, the company’s founder, tells in his autobiography (Werner 2013) that this project had its origin in an article in the Frankfurter Allgemeine Zeitung. The article described the idea of turning employees into co-entrepreneurs. The initiative manager at dm, Marco Mescoli, came from Ernst & Young and had experience working in various companies. With the programme to give branch managers a high level of decision-making authority, it was clear that central sales structures would be dismantled. Back then, with 350 branches, a brave step. In 2019, dm had more than 3,500 stores in Europe, in which 61,700 people generated sales of over 5.5 billion euros (dm.de 2019). Before the restructuring in 1989, a sales manager was responsible for five branches, then for 25. Logically, the competences had to be reorganized on site. The store managers now decided on settings, product focal points in the store and shop design. The new local responsibility gave a boost to the motivation of the people who now regarded the branch as their company. Götz Werner describes the changes in the group of sales managers as follows: “There were three reaction patterns to change in middle management. Some left the company because they did not trust the new structure of herding fleas and did not want to have to learn again”. Another group left sales, but took over other tasks within the group. With the tenfold expansion of the branch network, there were enough responsible tasks in the interior of the company. The third group found the responsibility for a budget of approximately 40 million euros really interesting and understood the decentralized delegation of responsibility as a great adventure. The adventure was extremely successful. Since the 1970s, the dm stores have had two major branch competitors: Rossmann and Schlecker. The Schlecker stores positioned themselves as low-cost suppliers of drug-store articles in the 8,000 European stores. Company founder Anton Schlecker often had the last word in management. Instruction hierarchy and

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low-price strategy led to insolvency in 2011. The rescue attempts of the two entrepreneur children of the founder came too late at that time. A culture cannot be changed in the short term. Schlecker could not oppose the competitive advantages of dm—high personal responsibility, fast and decentralized decisions and especially of the “entrepreneurs’” properly managed branches—in anything. The implementation of the responsibility structure at dm is interesting. Branch managers decide almost everything themselves, but have a so-called consultation obligation before making a decision. This means informing others in the company before making a decision. We will describe this later as the simple responsibility structure of I and We (see page XX). Another we-factor was that the people in the branches identified with their dm team. The sense of community in such small work units is meaningful. With the organizational revolution in 1989, as many of them felt about it in the company, dm had become a lateral company. At that time, responsibility in the branches was still hierarchical. Today, the teams decide on the hiring and evaluation of colleagues. The target image of management is leadership towards self-management—and thus towards personal responsibility. At dm there are other very clever ideas. One is the “learning branch”, which trainees organize on their own responsibility. They are to learn to take responsibility there. The initial training at dm also includes a final event at which the trainees become actors. Every year, the trainees of the dm drug-store markets stage theatre, music and dance in 90 workshops with 170 artists at various locations in Germany. Regional art locations are then rented and artists and themes selected. The artists are actors, dancers, cultural educators and musicians. Of course, dm also measures and evaluates things. There is a customer monitor. The company attaches great importance to occupying the first places in customer rankings. dm also developed the industry’s leading cost accounting model very early on. The company dm is a lateral company that has its strengths as an organization in the resoluteness of its decentralization. The decision model is simple. Managers make their own decisions and obtain prior information from colleagues and the market (obligation to consult). As sales managers, the managers are responsible for tens of millions of euros, which many board members in comparable companies do not have. The taking on of responsibility is fun for this group of middle management. The people in the organization work at dm. You work in a company, for the team, for a good price–performance ratio, good products and a company with lived values. And they work in a company that they can improve themselves. Innovation is the day-to-day business there.

Procter & Gamble As the new CEO, Durk Jager started his career at Procter & Gamble in 1999 with a video message to all managers worldwide: “Now I can finally say what’s been on my mind for a long time: How often do we sit in a meeting—and on the table sits a

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thick, steaming, smelly elk that no one talks about. Everybody sees it, everybody knows it and everybody does funny pull-ups to talk around him!” (Brandes 2014, p. 156, translated by the authors). The aim of this video message was to combat conformity within the company. It was a remarkable statement in the history of P&G—which had always experimented with establishing a lateral conflict culture and thus counteracting conformity. In 2014, 118,000 people worked for P&G worldwide in 70 countries and 10,000 of these in Germany. Since the acquisition of Gillette in 2005, Procter & Gamble has been the world’s largest non-food consumer goods group with sales of over 80 billion US dollars. It mainly manufactures products from the detergent and cleaning agent sector as well as from the cosmetics and body care sector. The company’s roots date back to 1837, when it was founded by the Europeans William Procter and James Gamble in Cincinnati, Ohio, where the company is still headquartered today. Jager was CEO at P&G for only 2 years. Today’s CEO Alan Lafley has headed the company since 2000, and P&G continues to launch cultural initiatives in the countries. Each country organization should initiate cultural projects on an annual basis. The management at the head office in Bad Schwalbach/Taunus once decided to abolish the cashiers in the canteen. Everyone should scan their own contribution. This proof of trust in people seems to have worked. For Tom Peters and Robert Waterman, P&G has always been a key company for innovation, product quality and corporate culture (Peters and Waterman 1982, p. 103). These three things have been inextricably linked since the foundation. Business integrity and fair treatment of people in the company have always been lateral elements in leadership, decision-making and collaboration. We now highlight some of the cultural milestones that have been set by the company. Working in autonomous teams: In 1953, a certain David Swanson joined Procter & Gamble. He was a student of the motivational psychologist Douglas McGregor, who had proven in various companies that the recruitment of self-motivated, self-directed, committed employees (“Y-types”) contributes to productivity increases of 30 to 40%. The difficulty here is to change basic beliefs. Managers and employees must be convinced that self-guidance works. Swanson has spent his working life at P&G establishing autonomous teams in different parts of the company (Waterman 1994). The old type of boss was to be replaced. Managers were to now encourage employees to make their own decisions. The work organization that P&G began in the 1960s already had many progressive elements. The self-organized teams controlled the production, had contact to customers and hired people together. In addition, the teams coordinated with each other. We would call the latter networking today. The transfers from one shift to the next are particularly important in production. These were also part of the self-organization. While the bosses used to organize this, it later became the task of the teams. The experience gained was so valuable to the company that until the 1970s it was forbidden to publish anything about the success of the teams. P&G felt that group self-management was the key competitive advantage of the company. The

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development of X-types from managers and employees who followed instructions and rules to Y-types was the central challenge for David Swanson. The following lessons, among others, can be derived from these experiences: • Radical change in the basic beliefs of all those involved is a prerequisite for success. Pettiness also leads to very small results. • Depending on the degree of maturity of the management, the duration of the cultural changes has to be assessed. As a rule, cultural changes were already established in 2 years. P&G also tried to change stubborn denial cultures. Looking back, David Swanson said that such factories should have been closed rather than invested in. • Transparency of cultural changes as best practice is the successful way to generate enthusiasm for the new culture in other areas of the company as well. Managers were purposefully given the opportunity to sit in on companies with the new culture. The introduction of self-controlled teams took place successively in the plants. Streamlining bureaucracy: As a reporting form, the one-page memorandum is the only permitted form of written communication. Papers longer than one page will be returned by the board. The aim is to discipline managers so that they write comprehensibly and construct texts with questions in such a way that the texts are easy to read (Peters and Waterman 1982, p. 182 f.). This could be transferred today to the writing of e-mails and PowerPoint charts. The one-page memorandum was also the template for Semco’s reporting. Institutionalizing conflicts: Procter & Gamble had already introduced internal competitions between the company’s individual brands in 1931. A vocabulary with terms such as “counterpartism”, “creative conflict” or “the abrasion of ideas” (Peters and Waterman 1982, p. 203) is spun around this competition. The cannibalization of brother and sister brands seems to have been really fun for brand managers at P&G. It actually contradicts any rational business management approach. Internal competition, however, creates a climate of conflict culture that is “officially and institutionally” lived in the company. Entire departments derive their fun from these differences of opinion and this competition. P&G has succeeded in transforming these conflicts into constructive motivation. No taboos: Peters and Waterman also describe that P&G has managed to talk about unwritten laws that prohibit certain things from being done within a company based on certain beliefs. Peters and Waterman point out that pay for performance and the diversity of skill and will were hot topics in the P&G teams. Exactly these topics were discussed and decided transparently. We could continue this list of successful cultural changes even further. But it already shows that strategy and organization have always belonged together at P&G. The company invested enormous resources in organizational experiments and was successful in doing so. The lateral tradition is continued to this day and in some

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places is exaggerated. An example: Some years ago, on the American homepage one could have read: “The consumer is boss”. Of course, this is nonsense and does not reflect the actual balance of power here either. Probably P&G is a kind of self-reminder to show humility to get the customer to feel a sense of power by not negotiating too self-confidently.

Procter & Gamble

Procter & Gamble excels not only in the way the company is managed, but especially in the way it deals with creativity, innovation and researching customer needs. In these fields, the company is proceeding very experimentally, almost scientifically. The story of how P&G developed the Pampers brand is famous (Das Management-Buch 2015, p. 38). Disposable diapers have been available in the USA since 1949 from Johnson & Johnson under the CHUX brand. P&G observed the market for 5 years and invested heavily in competitor analysis. The focus was on the problems of CHUX and the product. Only when P&G had developed a diaper that absorbed more liquid, closed tighter, was more comfortable to wear, cheaper to produce and could be sold in several sizes did they enter the market. Being innovative doesn’t always mean being first. In 2014, Forbes magazine rated the brand value of Pampers at 7.5 billion euros. The diapers are worn by 25 million young children in 100 countries. The CHUX brand, on the other hand, was withdrawn from the market by Johnson & Johnson in the 1970s. This experimental approach is still part of the identity core of P&G today. The company constantly encourages its employees to look for new ideas outside their own company. CEO Alan Lafley temporarily let employees live with customers to explore their needs (Das Management-Buch 2015, p. 89). Robert McDonald, then CEO, pushed investments in digital processes back in 2011. It was important to him at the time to link information from the store shelf to product planning and distribution of the goods (Das ManagementBuch 2015, p. 233). These are more than the ideas of a merchandise management system. Digital tools should change the way P&G innovates. Procter & Gamble has a long tradition of experimenting with new organizational models. These experiments led to considerable competitive advantages. This trial and error and the time given to managers to try out new forms of work have paid off for the company in business terms. At the beginning of the chapter, we introduced companies that are looking for new forms of leadership, decision-making and collaboration. And some companies that have already implemented this very successfully, such as Endenburg, Semco, Gore-Tex or Mondragón. With all these companies, Procter & Gamble has in common that there is a spirit for restructuring the organization as experimentation. The digitalization of economy and society needs this experimental spirit. It’s not about finding ready-made solutions, it’s about development. P&G has solved important lateral issues in this way:

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• Who decides? If possible, those affected should be on site. • How do we create forums for differences of opinion? Internal competition is welcome as a driving force and motivation to do things better. Taboos are addressed and solutions provided. • How do we avoid bureaucracy? Reports are written short and sweet. Procter & Gamble is one of the largest companies in the world. To move such large tankers in times of creative destruction—like today during digitalization—is not possible overnight. It takes visible, small steps to create a successful organization. That is the tradition of P&G. It’s never too late to start. What the dm markets have succeeded in doing has made P&G a successful market player in a globalized world. Every new technology needs an organizational equivalent. This requires the experimental spirit of a management team. For management, this means cultivating a leadership style that radically delegates responsibility. Operationally, as far as possible, everything is taken care of on site. Where CEOs usually expect processes to be standardized across all organizational units, the company demands that managerial personalities go their own way and think and act entrepreneurially. Uniform standards exist only for the topics of quality, finance and compliance. The rest is the responsibility of individual competent managers.

Google From a cultural perspective, tech giants like the Google mother Alphabet, Amazon, Apple, Facebook or Microsoft are exceptional companies with their highly qualified employees. Everyone must change quickly and react to changes in the rapidly growing competition. Amazon is also breaking new ground in management methods. Insiders report that the form of meetings or management decisions is very different from comparable companies. In meetings, PowerPoint slides are not interpreted by the person who created them. They are first read silently by those present, and then discussed. Many such processes are standardized there. Amazon also wants to have an empty space in every meeting that makes the presence of the customer clear and thus helps to ensure that the customer is always the focus of decisions. Since his arrival as Microsoft CEO in 2014, Satya Nadella has attached particular importance to cultural change within the company. He distributed The Hard Thing About Hard Things by Horowitz (2014), a slim guide for founders, among his employees. “We no longer live in a world that revolves around the PC. Computers are becoming more and more omnipresent, artificial intelligence more and more a part of our environment, because computers can observe, collect data and convert the feedback gained into new insights”, says Satya Nadella in his book Hit Refresh (Nadella 2017). And indeed, Microsoft is making rapid progress on the subject of Female Shift. As early as 2016, 53% of participants in top management courses were women,

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compared with only 17% at German companies. From the tech giants one hears again and again of such individual success initiatives. The reason for this is that there is brutal competition for the best minds in the industry. Top managers and even experts look closely at the corporate culture. No other company documents as well what they do differently culturally as Google. In his book Work Rules (Bock 2015) published in 2013, the former head of human resources, Lazlo Bock, described how the company systematically posed and answered fundamental questions about corporate culture from the point of view of people management. The answers are groundbreaking. We would like to highlight the ideas on management performance, feedback and OKRs (Objectives and Key Results).

Management Performance Google’s internal research found that performance does not have a normal distribution across the enterprise, but that 20% of people generate 80% of the profits. The question of how a company deals with the upper and lower 20% of managers is exciting. Jack Welsh is said to have regularly sacked the “less efficient” sales people, the lower 20% on the scale, in the 1980s. Google took a different path here until 2013. Google investigated what particularly successful managers do differently from others. It came out that successful managers did not only conduct their work according to hard performance indicators, but that they attach particular importance to “Employee Happiness”. Through research, Google has identified a total of eight habits that distinguish and guide the best managers who have achieved both excellent performance and employee happiness with their teams: 1. 2. 3. 4. 5. 6. 7. 8.

Be a good coach. Empower your team and don’t micromanage. Express interest in team members’ success and personal well-being. Don’t be a sissy: be productive and results-oriented. Be a good communicator and listen to your team. Help your employees with career development. Have a clear vision and strategy for the team. Have key technical skills so you can help advise the team.

Instead of laying off the bottom 20% of managers, Google Human Resources managed to get the best managers to coach the bad ones according to the eight principles of success mentioned above and orientated the entire training according to these rules. In this way, the lowest 5% were raised to a mediocre level within 2 years. That can be considered a good success.

Feedback The next logical step was to measure not only management performance but also work happiness. To this end, regular feedback is given from employees to the respective managers.

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The questions and the individual categories that are rated by the employees vary at Google. Thus, the surveys remain interesting for the employees because the focus of content can be adapted to current circumstances. In recent years, Google has dealt with topics such as female shift, ethical work, credible dealings with managers who had broken rules, and political issues that moved employees. These topics can also be included in the current assessment of the management of an executive feedback.3 At Google, the results on work happiness were published transparently on the intranet by the majority of managers. It’s voluntary.

OKRs (Objectives and Key Results) We owe Peter Drucker the insight that people who have goals (formulated) achieve better results than people who work without clear goals. From this, he developed the method of Management by Objectives. Originally, target agreements were an instrument for Peter Drucker to motivate performance. In today’s management practice, there is usually a sophisticated system of objectives with little or no scope for negotiation. A large number of targets are defined for 1 year, which serve as the basis for the financial year. As a rule, these are not adjusted during the year—even in the event of changes in the market. Thereby the motivating usefulness of the original idea unfortunately gets lost. Some companies have therefore completely abolished target agreements, others are working with new forms, such as Google’s OKRs: They are intended to motivate teams to pursue their goals and make them more flexible on a weekly basis. The OKR method can be used at any level in the company: in the entire company, divisions, departments or projects, and it can be differentiated down to the individual employee. OKRs are about combining motivation, flexibility, learning and goal orientation. For this purpose, individual organizational units agree on quarterly goals that they want to achieve in the respective quarter (Objective = “What you want to do”). In order to ensure focus, a maximum of three objectives should be agreed upon. These will not be changed during the quarter. The goals should be inspiring and have the potential to gather the workforce behind them. Goals in the sense of OKR are good when people are greedy to achieve them. With conventional target systems, qualitative targets are usually not taken into account. Objectives in the sense of OKRs should also be motivating, qualitative goals. An example of this would be: “We want to develop the most innovative training program in the industry”. What is important is the discussion and negotiation process within the Group as to which objectives are best suited and meaningful in the coming quarter. The key results serve to answer the question how to recognize that you have reached the respective goal. These key results are usually quantitative in nature and formulated accordingly. But here, too, there are differences to the classic target system: A maximum of three key results should be defined for each objective. If 3

In this context, the think tank for managers uses a cross-company comparison with the Lateral Culture Index® (LCI) in its projects. We will describe this later in the book.

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Priori es this week that affect the OKRs: P1: ………… P1: ………… P1: must be P1: ………… done P2: ………… P2: can be P2: ………… done

Objec ve: To become the most innovaƟve unit in our company.

Ac vi es for the next 4 weeks (Pipeline): Item 1: Item 2: Item 3: Item 4. Item 5:

Health metrics: Things that we must not lose sight of while trying to achieve the goal, e.g.:

Key Result 1:……….. Key Result 2:………… Key Result 3: …………

5/10 5/10 5/10

Fig. 4.1 Example of an OKR matrix

there is more, the focus on the essentials is lost. In management training, we have all learned to formulate SMART objectives (specific, measurable, ambitious, realistic and timed). Basically, this also applies to the Key Results. But there is an adjustment here: Good key results should be so ambitious that one cannot be 100% sure to achieve them (100% security would correspond to a confidence level of 10). This distinguishes them fundamentally from classic MbO target agreements. With OKRs, the chance of achieving the respective key result is assessed together in the team. In Fig. 4.1 in the top right square, for example, the confidence level is 5, which corresponds to a 50% chance. That’s ambitious, but it’s deliberate. Good key results should inspire people and also make them a little anxious whether they can really achieve them. It has proved successful to set the chance of reaching the key results between 50 and 70%. It often happens that we lose sight of other important things when we concentrate on a certain goal—we can even get worse. Therefore, in the next step (square bottom right), so-called Health Metrics are defined. These are things that need to be kept at the current level and that we must never lose sight of. Figure 4.1, for example, deals with customer satisfaction and customer acquisition. However, it can also cover aspects such as employee health.

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The objectives and key results will be defined at the beginning of the quarter. The members of the group meet weekly. One of these meetings is to see how far they’ve come. Achieved results are celebrated and the past week is reflected back upon. It is also then checked to what extent the trust level for the respective key results has changed. At the beginning of the week, weekly priorities for each member of the group remind them of the tasks that will help them achieve their goals during the week. That keeps everyone in targeted activity. The manager also discusses the priorities with her team on a weekly basis (top left square). Things are recorded that have to be done this week in order to achieve the goals. Three top priorities are defined (P1 = must be done) and 2 with a slightly lower meaning (P2 = can be done). Also it is noted which tasks (no trifles!) are in the pipeline in the next 4 weeks. These form, so to speak, the basis for the priority lists in the following week (square at the bottom left). In order to achieve truly self-reliant work in companies, new ways of dealing with target agreements in companies are needed. Many companies have now abandoned the classic target cascade with the annual exercise at the beginning of the year to assign targets in the hierarchy from top to bottom. In Germany, Infineon and SAP did this early. But what is the alternative? Laszlo Bock has opened up two important perspectives here. On the one hand, in lateral organizations, it is necessary to conduct an honest discourse on the subject of management performance. It is not only about Key Performance Indices (KPI) but also about Work Happiness Indices. The time of slave drivers in management, who subordinate everything to individual performance in organizations, is over. Employees want to be part of the journey. And the dialogue with them about performance, health, safety, self-efficacy, motivation and “being happy at work” is just as important as the KPIs, which are based solely on business figures, data and facts. How Key Culture Indices (KCIs) can be measured is described in Chap. 5.

The Importance of Middle Management—“German Real Estate” Within the framework of a research project, Martina Nieswandt was able to intensively follow the cultural change in a medium-sized organization between 2008 and 2011 (Nieswandt 2015). The medium-sized company—we call it German Real Estate4—planned the introduction of lateral management structures. The study focused explicitly on the perspective of middle management. This is new: while the influence of top management on change processes has been very well researched scientifically, the role and influence of middle management (especially on changes in culture) has been little researched up to this point.

4

The actual name of the company was made anonymous—also in the research work.

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One of the aims of the medium-sized company was to avoid having to delegate operational decisions upwards as a result of the change. They should be taken by middle management. Cooperation should also be promoted across sectoral boundaries. Basically, this introduced a lateral management structure. The introduction of lateral management always means a radical cultural change. To fill such a culture with life, it is not enough to develop cultural guidelines with a classic change management approach and then roll them out. Only when lateral procedures are lived out in day-to-day operations can these be sustainably incorporated into the culture. For the introduction of lateral structures, German Real Estate worked with middle management in workshops, among other things. That wasn’t easy. At first, the managers did not trust the new openness. But in the end it was possible to convince the managers that the chosen path was rocky but the right one for the success and thus the preservation of the company. Gradually, the managers reached for the new decision-making powers. This led to a sudden and constructive dispute within the organization. The managing directors were also contradicted. The decisions were finally taken at the levels for which they were responsible. And the economic results have improved. The managers at German Real Estate were knowledge workers. They were highly qualified and basically had a high intrinsic motivation. In previous years, however, this had no longer been discernible, as the old structures reprimanded all attempts to act autonomously. We accompanied the project by measuring cultural change as quantitative and qualitative surveys of all participants (managers and employees) for 3 years from 2008 to 2011. Two findings are particularly interesting: middle management plays a special role in cultural change in a company and has a considerable influence on implementation and success. If the top management cannot win over this management level, much remains piecemeal. What was also surprising was that the cultural change—the move away from a culture characterized by mistrust to a culture of trust and independent decision-making—had to be accomplished within only 2 years. Most experts think that such a profound change in organizations takes much longer: 7 years or even 20 or 30 years. What were the success factors for this successful cultural change, which also took place in a relatively short time without ignoring the complexity? 1. There was a courageous top management that was prepared to accept cultural change and setbacks. 2. Intensive work was carried out with middle management. In addition to the tools of the trade from classical guidance, the requirements of lateral guidance were also addressed. The groups were formed on an interdepartmental basis and the requirements of lateral management were conveyed, particularly in interdepartmental work contexts and interfaces. A firm component of the management training was also the reflection on one’s own and fundamental management behaviour. This made it possible to comprehensively convey and deepen the new demands placed on the behaviour of managers. The topic of organizational

The Importance of Middle Management—“German Real Estate”

3.

4.

5. 6. 7.

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culture and daily actions was not discussed separately, but rather as a coherent unit. After only a short time, managers began to actively demand their newly acquired competencies as soon as someone reverted to old behaviour. Another important success factor was the regular evaluation through quantitative employee surveys as well as the conducting of qualitative interviews. The results were made transparent for all participants. Nor did the change stop at the management level. Rather, it was important for managers to pass on the freedom to make decisions to their employees according to their tasks and abilities. The management strengthened the trust in the company by symbolically passing on highly sensitive information about the business policy and the success of the company to employees and managers. Trust was never broken, and we could see how proud managers and employees were of it. The transparency of results in this company was of an unprecedented quality. A non-conformist culture of debate and criticism was promoted. Hierarchies of responsibility were clearly defined, so that all participants knew what they had to answer for and decide and where the limits were. Approximately, 20% of the managers did not find their way around this new lateral system and left the company in the 2 years of cultural upheaval. Lateral management reveals leadership and performance deficits in a transparent manner. You have to be able to deal with that.

In 2016, 10 years after the start of research, managers were again asked about the success of cultural change. The samples were managers who had already worked for the company for 10 years. All those involved saw cultural change as the decisive basis for the economic success of the company today. The success of the project was documented by a human resources management team in 2016.

Pretty Cool

“Siemens boss Joe Kaeser spent formative years in Silicon Valley. Now he returns there to explore: Does a traditional German company have a chance in the age of Google, Uber & Co.? Joe Kaeser fights fatigue with a double espresso. On Saturday he returned from China with the Chancellor. On Sunday he went for a few hours to Madrid, on Monday, at noon, he was waiting in the First-Class Lounge for the plane from Munich to San Francisco. All in all, that’s 16 h time shift. Kaeser’s in high spirits. He likes Silicon Valley. He has lived there for 5 years … Kaeser, … who admits in a foreign country how exhausting such a corporate restructuring is, explaining to the Americans what a ‘clay layer’ is, the resistance in middle management, somewhere between top management and ordinary employees: ‘We will break this resistance if necessary’ He fired managers he considered incompetent or unwilling up to the board of directors. Bad blood and bad talk were the result: Kaeser was

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unapproachable, hid behind his court and otherwise pulled off a one-man show, it was said. All nonsense, according to the Lower Bavarian, who suspects that the grumbling will not cease that quickly, the world is not after it …” (Meck 2015).

Structures That Allow Self-management—Buurtzorg, FAVI, Poult Biscuits, Cronoflex, Sun Hydraulics, Mornings Star, AES, MINISTRY Group In the discussion about lateral management, we heard again and again: Completely without a hierarchy, that is not possible! Today we know, that’s possible! There are companies in many industries and of different sizes that are successful without having a hierarchical structure. Reinhard Sprenger is also of the opinion that leadership must always have the goal of exposing people’s potential to lead themselves and thus ultimately determine their own lives. Unfortunately, there is little empirical evidence in his works to show whether self-determination actually works in companies. But the following lines can be read in his book Aufstand des Individuums, published in 2000: “A few years ago, the Böblinger printed circuit board factory of Hewlett Packard carried out an experiment about which surprisingly little was published. All superiors were relieved of their personnel responsibility, special tasks were given to them and the approximately 400 employees of the plant were asked to organize themselves in every way. The only requirement was that the rejection rate should not rise and productivity should not fall. What did the employees do? They immediately established new leaders, who were now elected by them. The result? Productivity increased by 18% in the first year (with a stable number of employees) and by almost 30% in the second year. I think it is time to finally trust people with something: that they have a self-imposed quality standard for their work and that they are neither refusers of performance nor illiterates of organisation” (Sprenger 2000, p. 194). In the reception of the book, however, a limitation is stated that it is not certain whether what is to be read here actually corresponds to the facts. The following companies have taken self-responsibility and experimentation with competence hierarchies instead of formal hierarchies seriously.

Buurtzorg Buurtzorg, with 10,000 nurses and 4,000 domestic workers, is the largest Dutch company for outpatient, domestic nursing care. In outpatient care, the company has a market share of 25% in the Netherlands. It was founded in 2006 by Jos de Blok, who had previously worked as an employed nurse and manager for 10 years. Since

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he saw little chance of changing a company from the inside out as a care manager, he founded Buurtzorg. An outpatient nursing service had previously been managed centrally. With the professionalization of outpatient care, the reporting system on finances, travel times, treatment times and quality standards of care has been expanded more and more in recent years. Companies reacted with central planning and hierarchical organizational structures. There’s no such thing at Buurtzorg. The company has been expanding since 2015 and has also been active in Germany since 2017.

Self-controlling Teams The teams of approximately 8–12 nurses are each responsible for 50 customers and decide everything: personnel matters, work and leisure plans, admission of new patients, renting real estate, etc. More than 600 teams work for the company. The organization has grown rapidly in recent years. From ten employees in 2006 to more than 7,000 in 2014 and 10,000 in 2018, new teams will be formed and nurses from hierarchical organizations will encounter Buurtzorg structures, and they will have to learn many new things: working independently and assuming responsibility in a team. The organization provides team trainers for this purpose. This support can also be obtained by a team if it cannot solve internal disagreements or personal problems between team members. Business Success The company consistently focuses on active care. The aim is for patients to do as much as possible on their own and to rely as little as possible on external help. All Buurtzorg nurses are obliged to take sufficient time for the patients. Now, as an economist, one would normally assume that autonomous work and time for patients would not pay off. The auditing firm Ernst & Young arrived at the opposite valuation in 2009. Buurtzorg nurses need 40% less working hours per patient. How is that possible? Patients stay only half as long in care as in other care services. Because through active care they recover faster. The Buurtzorg model also has clear advantages in terms of employee retention: Staff turnover rates are 33% lower and absenteeism 60% lower than at other companies in the sector (Laloux 2015). Ernst & Young found that Buurtzorg saves the state about 2 billion euros a year. The company now has two-thirds of the market in the Netherlands. While in Germany nursing staff are desperately sought after, people want to work in the Buurtzorg structures. The company regularly receives awards for being the most employee-friendly company in the Netherlands. A Small, Powerless Headquarters, No Middle Management, No Superiors Self-controlling teams do not have superiors on the team. But there is no formal hierarchy in these teams either. Of course, there are differences between nurses in terms of their experience and qualifications. The concept of self-controlling teams is based on the fact that constructive forces prevail. The decision-making process is

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similar to that of the sociocracy with its “Consent” decisions: If there are no objections in principle, a proposal is adopted. At Buurtzorg, there is also no middle management with control tasks. The teams have the task of networking with each other. For certain issues, it is necessary to seek advice from other teams. Nevertheless, there is a headquarters with 50 employees and 21 coaches without formal hierarchical power. For the coaches there is not even a job description or a requirement profile. Every coach looks for his or her own consulting field in the organization and tries to create added value with it. A coach supervises around 40–50 teams and can be requested by the teams for supervision. With this concept, Buurtzorg wants to prevent the central office from becoming independent and following the tendency to expand more and more and to centralize power. In recent years, the central areas of many organizations have expanded considerably. What was once planned to support the line in the areas of personnel, finance, purchasing, strategy, quality, risk management, etc., always carries the risk of becoming independent. By building knowledge, designing rules and processes, and finding apparent shortcomings in the organization, these expert consultants attract decisions. In fact, they thus exercise structural power and limit the power of the so-called direct, often decentralized areas. The Buurtzorg company is certainly a gem in terms of self-organization. In the scale of Frederic Laloux it would get a deep petrol designated as its colour. The company will be 15 years old in 2022 and has grown enormously. It’s a start-up that’s become a mature organization. There’s also a lot going on here in Germany: Dominik Pauly, a former manager at global players with team leaders in Asia, America and Europe, is developing a nursing service in Weinheim, Baden-Württemberg, similar to Buurtzorg’s pattern. Buurtzorg itself took over Sander Pflege GmbH in Steinfurt in 2017 and opened further locations under the name Buurtzorg Germany in Hörstel, Lotte, Emsdetten and Münster. Further pilot projects are planned in the German federal states of North Rhine-Westphalia and Bavaria, which will be evaluated after a certain period of time. Pilot projects in Germany are necessary because of the state-controlled supply. Every citizen in Germany is covered by health insurance and has a legal claim to medical care and care in old age. Subsidiarity is a fundamental principle of German social legislation. In Germany, for example, it is important to create the conditions for daring to undertake such experiments. The implementation of the idea of subsidiarity as a courageous reorganization and as an experiment would be an exciting task for the professionals of voluntary welfare work in Germany. The supply in Germany is very complex and bureaucratic. For example, an organization chart is prescribed in nursing facilities, which does not exist in Buurtzorg organizations because of the non-hierarchical nature of their work. Because of this, every new Buurtzorg organization needs a kind of special permit stating that there is no such thing as a nursing service management in their case. Experiments in the social field are particularly suitable for self-organization. Buurtzorg means something like neighbourhood care. In Germany, those responsible at Buurtzorg are basically experiencing a kind of culture of mistrust. Where

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there is a lot of control and bureaucratic justification for it, there is no trust in people. Buurtzorg’s concept is fundamentally different. It assumes that people who care for others want the best for them. Therefore, caregivers in the Netherlands have both budget and time sovereignty. Each nurse decides how long he spends with the client and which nursing measures he carries out. This is different in Germany, where there is budgeting, which at the end of the year often also leads to outpatient nursing facilities considering how to accommodate still available budgets as services with the nursing staff. Buurtzorg has a different approach here. The aim of the company is to reduce care services and to make older people more independent of care. The principles of buurtzorg in germany are among others: • • • • • •

High personal responsibility for the caregivers. Advance of trust to the employees of the nursing services. Direct communication between employees. Transparency of the tasks and results of care. Feedback between employees. Solutions to differences of opinion (conflicts).

There is a great deal of criticism among experts about the transferability of the model to Germany. They claim that self-organized work requires a high level of qualification on the part of the employees. Nurses in the Netherlands, unlike nurses in Germany, have a bachelor’s degree. A few years ago Buurtzorg took over a service provider with 4,000 domestic workers. Jos de Blok made it a condition of the takeover that the management would be dismissed. At the start of the takeover, a workshop was held with the employees in which the lateral organizational forms of Buurtzorg were explained and the participants were then to organize themselves in this way. The experiment succeeded. More important than a Bachelor’s degree is the social competence involved in making independent decisions, in being able to solve conflicts, to give socially adequate feedback and to like people in principle.

Favi FAVI S.A. north of Paris is a die-casting foundry with 400 employees. According to FAVI (Favi.com 2015), FAVI is the world’s largest supplier of die-cast copper alloy components. The main business field, however, is the production of gear forks. FAVI S.A. works for the automotive and water industry and in the areas of sanitary, locking, fitting, fittings and components for the electrical industry. The company was founded in 1957 and, with the arrival of Jean-François Zobrist as Managing Director in 1983, was reorganized into a self-controlled factory. At that time, FAVI employed 80 factory workers and the company was organized strictly hierarchically. The workers were subordinated to a team leader, who in turn reported to a workshop manager, a workshop manager, who in turn took his orders from a department manager, and this went all the way up to the production

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manager, who was hierarchically below a managing director. All in all that meant five hierarchy levels for 80 employees! There were also cross-sectional functions such as sales, planning, construction, personnel and finance. Jean-François Zobrist abolished all these hierarchical levels. He formed teams for specific customer groups, support teams with the cross-sectional areas, the maintenance team, the foundry team and others. The sales team was even completely dissolved. Instead, every team had client managers. The teams organized themselves in completely self-determined ways, similar to Buurtzorg 20 years later. The unbundling of complex structures—at that time still with little IT—was a great challenge for the organization and meant for each individual: learn, learn, learn. Hierarchical working meant: A boss tells the subordinate what to do. Self-organized work means: I have to take care of my own work and coordinate with others. The basic idea of Jean-François Zobrist was that a hierarchical organization divides a workforce into the powerful and the powerless, the responsible and those not responsible, the giants and the dwarves. In 1971, psychologists Philip Zimbardo, Craig Haney and Curtis Banks at Stanford University were able to show how quickly such roles were assumed. They simulated a prison and put 24 students in two groups: Prisoners and guards. Already, after a short time, the roles were very solid. Formerly free, independent people behaved like powerless prisoners or used power like authoritarian closers of jail cells. The latter harassed their fellow students to such an extent that the experiment, which was originally supposed to last for 2 weeks, had to be abandoned after just 6 days. By the way, the story became well known beyond the experts’ circles through a novel as well as a film adaptation with well-known German actors. And even here one could observe that during the breaks between shots the actors kept themselves separated according to the group of the overseers, the closers and the group of the prisoners and thus remained in their assumed roles. Organigrams create two types of people in organizations. On the one hand, the powerful who want to secure their power. In the negative case, they develop personal ambition, rule out of fear of loss of power by playing power games against third parties and overestimate their omnipotence. Any failure to exercise power leads to even more distrust. The powerless, on the other hand, react in their powerlessness to the exercise of power with adaptation (conformity), resignation and anger. At FAVI, Jean-François Zobrist wanted to break with this division of the workforce. That was brave. For foundries often employ people who accept hard physical work and who, on the other hand, are less inclined to participate intellectually in a particular form of work. The aim of self-organization at FAVI was to end the division into two employee groups.

Meeting Culture As with Buurtzorg, there are no middle managers at FAVI. Cross-section teams have only an advisory function. But it seems that in a technically oriented company the group dynamics in the teams work differently. FAVI attaches importance to a

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few short meetings. Each team has its own meeting schedule, which provides for three types of meetings: 1. a brief discussion at the start of the shift to clarify the tasks and challenges ahead; 2. a weekly meeting with the customer manager to discuss the order situation and customer requirements; 3. a monthly meeting without fixed content; here everyone has the opportunity to suggest topics, optimize processes and present personal concerns. There is also the opportunity to meet other teams or hold bilateral talks. These meetings are self-organized and therefore not rigid. An example of cross-team meetings: members designated by the teams meet to exchange staff when there are inequalities in the workload. These meetings, which last only a few minutes, take place at very short, almost regular intervals. FAVI has been working as a self-organized company for more than 30 years— even after Jean-François Zobrist left the company in 2009. What is interesting about the company is that it has changed from a company characterized by a strictly hierarchical division of labour to a self-regulating company. The success factors were the mission of a charismatic boss and the high motivation of the employees to live a new, self-determined organizational form. The company for a time had 500 employees. This number of people can obviously also be organized successfully on their own.

Poult Biscuits Founded in 1883 in Montauban, France, Poult Biscuits became one of the most important biscuit factories in Europe. In 2001, the company ran into economic difficulties. The former investment banker Carlos Vekaraen became CEO and invited the staff to a large workshop in 2006. After several months, the employees decided to abolish management. The counter-project was a workers’ democracy. The economics professor Issac Getz calls this form of enterprise “liberated companies”. The company had been managed very hierarchically before the change. There had been a lot of control with decisions made from above. The new work organization supported by the workforce means that all decisions, including investments, are made in small teams. Employees were trained to take over the tasks of controlling the company, which had previously been carried out by the managers. By 2014, the company had achieved an annual increase in turnover of 12%. Today it belongs to Biscuits International, a Dutch company.

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Chronoflex Any company that uses hydraulics—construction, civil engineering, rental, transport, handling, industry, waste treatment—can see itself confronted with a hydraulic hose rupture due to damage or blocking. When this happens, the device becomes unusable. It can shut down an entire location and its team. Chronoflex from Nantes is the leading service provider for hydraulics in France and also operates internationally. The company was classically managed until 2012. When redundancies were imminent in an economic crisis, the company’s owner Alexandre Gerard decided to hold a workshop with the entire workforce. He announced that all management posts would be abolished. Like Poult Biscuits, the workforce opted for new structures and introduced small teams called speedboats. The company divides its workforce into direct areas that provide on-site service to customers and indirect areas that support the service from its headquarters in Nantes. It is interesting to note that at a very early stage in this process the question of payment was raised by the workforce. If employees are to take on more responsibility, then they should also share in the company’s success. The story of Chronoflex is told like this. Alexandre Gerard went on a world tour for 1 year after the restructuring. As an artefact, he wanted to show that he was completely withdrawing from corporate management. At the beginning of his trip, information reached him via the news concerning the company that there is a team in it that was changing the salary structure. The new scheme provided that both the direct and indirect sectors would contribute 15% to the company’s overall profits. Gerard allowed it to happen, and it’s still in place today. The risk for the entrepreneur was low because it was a profit-sharing scheme. As a result, the company was not only successfully restructured, but sales and profits increased by 15% annually. The company is prospering.

Sun Hydraulics Sun Hydraulics, headquartered in Florida/USA, produces and designs screw-in valves and valve housings. The company has been listed on the stock exchange since 1997; it was founded in 1970 and, according to Frederic Leloux, has 900 employees. One of the two founders, the engineer Bob Koski, wanted to create a “healthy, self-managed and informal corporate culture” (Laloux 2015). The company has been making profits for 38 years and is one of the most popular potential employers for engineering graduates—because of the great working atmosphere. Sun is a project organization. Engineers design product adaptations for valves of all types—whether valves for printer cartridges, lowering brake holding valves, three-way pressure valves or screw-in valves. The products are innovative adaptation products, many unique specimens. Often 100 projects run in parallel.

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How does a “normal” company manage such diverse projects according to customer wishes? Prioritization, budgeting, quality control, product release and work preparation are often centrally controlled using project software as Gantt charts or network plans. This means that written information must be centralized promptly so that top-down prioritized decisions can be made. It’s all completely different at Sun Hydraulics. There is no master plan and no central planning process. There is no top management interested in understanding how projects develop, let alone one being interested in controlling them. You don’t have to plan a project, get approval for it, inform the sales department or explain deviations afterwards. More than four-fifths of all projects do not even have time or budget plans. This is a horror scenario for any student of project management. Projects that exceed the budget are not evaluated and there is no search for culprits. That’s considered a waste of time there. You don’t believe that one or a few central decisions will make you better, but you put your trust in swarm intelligence. Some projects die according to the “law of two feet”: If no one cares about them, then they will probably be unimportant or unprofitable and will never be realized. Self-developing projects with self-leading engineers, that is the breathtaking message of Sun Hydraulics. And it works. Sun Hydraulics has perfected this approach in 45 years. This means that three generations are already working independently. New employees get to know this form of work from experienced employees. The company thus has a hierarchy of competencies, responsibilities or implementation. This work is not hierarchy-free. Only every man is a boss. Everyone makes decisions for the entire company and involves others in the process.

Ministry Group Founded in 1999, the MINISTRY Group is a digital communications agency and one of the ten largest online agencies in Germany. Its customers include the Otto Group and Fiat. In 2014, 53 employees generated sales of 3.5 million euros. The number of employees was doubled in 2013 and 2014. In order to cope with growth, the company established non-hierarchical structures. An article in the business magazine brand eins from March 2015 (Dahlmann 2015) describes how difficult it is even in a very small company to change from an instruction culture to a self-responsible culture. Management, consisting of three people, felt in 2013 that something had to change. All three were so involved in the operational business that they had little time to strategically develop the company. This means that a management does not manage the business, but works rather like a senior clerk. When companies grow, that’s the wrong focus. One day all employees were brought together for breakfast, and the managing directors explained to the bewildered employees that in future they would have to make all the operational decisions themselves—from project planning and responsibility to budgeting and hiring new employees.

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The managing directors organized the people into teams and initially assumed that the team members would organize themselves. The opposite occurred. There was frustration when orders and processes didn’t work. Any misguided development confirmed that self-control was a bad idea for the MINISTRY Group. After 6 months, some of the teams had the courage to inform the managing directors of their lack of understanding for the reorganization. They perceived the new freedoms as the destruction of functioning processes and actually asked the three bosses to act like bosses again. The management noticed that they had not succeeded in convincing people of the new way of working. They then spoke to each individual team and appointed a team leader. An intermediate step on the way to self-control. The company wants to continue along this path, even if there are always setbacks. One effect of change today is that many employees first ask their colleagues before they go to the team leader. The managing directors report that today 50 people observe the market and no longer just three—and that 50 people also see more than three managing directors. This example from the MINISTRY Group shows that radical organizational concepts such as self-organization are not always easy to implement—even in small companies. It often takes intermediate steps. This also applies to the introduction of lateral management, which can replace the instruction culture in large companies after 2–3 years. But the concept must be implemented at the management level, not at the employee level.

Morning Star Our mission is to produce tomato products and services which consistently achieve the quality and service expectations of our customers in a cost effective, environmentally responsible manner. We will provide bulk-packaged products for food processors and customer-branded, finished products to the food service and retail trade (http:// morningstarco.com, translation by the authors).

Morning Star’s mission statement does not exactly sound like a revolution in collaboration and reflection on a particular organizational model. If you click further on the website, you will find all kinds of tomato products and customer information on the button “Self-Management”: The Morning Star Company was built on a fundational philosophy of Self-Management. We envision an organization of self-managing professionals who initiate communication and coordination of their activities with fellow colleagues, customers, suppliers and fellow industry participants, absent directives from others. For colleagues to find joy and excitement utilizing their unique talents and to weave those talents into activities which complement and strengthen fellow colleagues’ activities. And for colleagues to take personal responsibility and hold themselves accountable for achieving our Mission. We hold this vision dear, and are committed to perfecting our organization through the principles and systems that we have endeavored to implement within our affiliates. To learn more about Self-Management, please visit the website for our affiliate, the Self Management Institute.

That sounds more like an idea to design organizations differently.

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In the USA, there are always beautiful stories about good business ideas—also at Morning Star. The company was founded in the 1970s. Twenty years later, CEO Chris Rufer called the employees of his Californian farm together in a dusty construction wagon. He had an idea. Rufer shouted to his about two dozen colleagues: “There will be no boss anymore!” By 2017, around 400 employees and 300 farmers were already working for the company. It is the number 2 worldwide in the highly competitive tomato paste market and the market leader in the USA (Schröder and Oestereich 2019). The only idea the new organization has to lead it on is its mission statement. His colleagues felt this idea was radical at the time. Morning Star initially had two basic principles: 1. People should not use coercion or violence against each other. 2. People should stick to the agreements they have made. The business model of the company is very simple. Essentially, tomatoes are produced, harvested, processed and resold in various products. The organization wants fast decision-making, little bureaucracy and simple processes. The way to this is radical self-organization and the possibility to make your own decisions. When machines are bought, it is not the management that decides, but the person who needs the machine. He’ll arrange for payment to be made. Of course, there are budgets and controlling as well. But without management. The people decide according to common sense and to the best of their knowledge and conscience in the spirit of the company. Morning Star has so-called council meetings. Employees meet there regularly to discuss topics such as energy, packaging, raw material procurement, products and production topics. An important prerequisite is the qualification of the individual. Former manager Doug Kirkpatrick remembers that Morning Star employees were given a kind of “Mini Master of Administration”. Planning, organization and controlling with key figures were learned in small groups. The topic Organization is about lateral leading and making decisions. Controlling has the time to allocate content, personnel and finances. What can you learn from Morning Star? The special thing about Morning Star is that the focus is on people. Thus, there is the credo of good collaboration, the ability to work in a team, cross-departmental thinking and especially respectful interaction —similar to FAVI. The most important thing is dealing with people, also during hiring and onboarding. The principle of training is that in self-organization everyone is a manager. In production companies, it is often claimed that self-organization is only possible with complex business models, as is the case with large tech companies. FAVI, Poult Biscuits, Cronoflex and Morning Star are proof to the contrary. Perhaps these simple organizational forms are even better suited for lateral management than complex organizations. Empirically, the self-organization skewers have long been refuted. If managers really want to be economically successful with these

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companies, they must seriously change the corporate culture. As with Morning Star, seriousness begins with a different view of humanity. The American organizational psychologist Douglas McGregor had already experimented with and researched this image of man in the USA in the 1950s. He distinguished between X- and Y-managers. X-managers are the ones Morning Star decided against in 1990. They organize people and take away the freedom of self-organization. Y-managers allow this freedom and receive trust and performance from the people in return. Self-organization turns dwarves into giants and makes the company economically successful. X-managers prevent companies from succeeding. What fun it would have been for Douglas, who died far too early in 1963, to read about these examples of companies that more than confirm his ideas. The idea of personal responsibility of people and their idea of personal freedom still belong to the most important achievements of business and economics. Their founder Stuart Mill was still aware of that.

Harley Davidson It was already difficult in the golden 70s to sell large motorcycles to customers in the industrial countries. At the beginning of the 1980s at the latest, competition from Japan was growing stronger. Honda and Kawasaki, in particular, came onto the market with powerful new machines, which attracted a young, solvent potential buyers. Richard Teerlink became CEO of Harley Davidson in 1981. In 1983, the market share in the USA fell from 70 to 23%. The company wrote deficits. In public limited companies, things get very uncomfortable, when bad numbers become known, at the top of the company. But Teerlink did something unusual for the time in the industrial sector. He came from the service industry and studied what made the competition from the Far East so different. He studied Kaizen, the good way. And he studied it properly. While the European adaptation of kaizen is rather associated with lean, i.e. saving and fighting waste (the 5S method and its allies), he observed the world view in Japanese production. Kaizen focuses on innovation through people who work in the organization. Richard Teerlink worked for the company as CEO until 1997. And as you have come to suspect: it was a success story. The people at Harley Davidson burned for the company, and all you had to do was wake up the giant in them. The continuous improvement process of those years had little to do with the micromanagement of many CIP processes that could otherwise be experienced around the world. Harley Davidson employees devised new customer strategies and presented them to the company. One of these Kaizen workshops gave rise to the idea of finding the Harley Davidson Club. Today, everyone knows the super rallies in many countries where Harley fans meet and drive together. This form of customer loyalty was new at the time. Branding was a foreign word for many companies, especially when it came to mobilizing users.

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A saying by Teerling that became famous was: “For change to occur, the first to change must be managers”. These five factors were important to him for the development of the company (Montserrat 2009): • • • • •

Being the case of what happens in the world. Responsibility for each individual company. Training and lifelong learning. Personal involvement in the projects. Mutual appreciation between the whole team.

Fifty years later this seems very modern. In a legendary interview with the American journal Frontline (Frontline 1998), Teerlink describes the reality of corporate restructuring in the USA from his point of view. The press often reports on the dismissal of several thousand people. Little gets reported on when companies —like Harley between 1983 and 85—overcome crises with the concept of employee mobilization. He believes that throwing people out is a rather simple management model, which leads more often to the liquidation of companies than the concept of shaping the restructuring together with the people in the organization. In such a situation, however, it is difficult to convince people of the opportunities offered by restructuring. After all, building trust in an economic emergency is usually not easy. When Richard Teerlink had to leave the company involuntarily in 1997, many disliked this step. He had succeeded in winning the trust of the employees for his path. It is thus an example of how lateral management is possible even in the restructuring of companies with good framework conditions. Today, Harley Davidson is again a hierarchically managed company that fights hard on the luxury motorcycle market.

AES (Applied Energy Services) AES operates power plants and was founded in 1982. As a Fortune 200 company, it is regarded as one of the largest energy service providers. According to its own information, the company operates in 18 countries, employs 18,500 people and has a turnover of 17 billion US dollars (AES 2015). Dennis Bakke, the founding managing director, made the following remark: “Why do so many people work so hard to escape to Disneyland? Why are video games more popular than work? […] Why do many workers spend years dreaming about and planning for retirement? The reason is simple and dispiriting. We have made the workplace a frustrating and joyless place where people where people do what they’re told and have few ways to participate in decisions or fully use their talents. As a result, they naturally gravitate to pursuits in which they can exercise a measure of control over their lives …” (Laloux 2015, p. 59). AES was radically decentralized and decision-making was based on consistent self-management. There was no middle management and little central control.

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Dennis Bakke’s credo was: “Having fun at work”. In 1991, the company was the star of Wall Street, the share was valued at 70 US dollars. With the bursting of the dotcom bubble in 2000, the share price fell to 26 US dollars. And in the wake of the Enron bankruptcy, which led to a drop in all energy shares, the AES share was only worth 5 US dollars. Dennis Bakke was appointed Co-Chairman in his last year as Chairman of the Board by the shareholders and his colleagues on the Board. In the stock market crisis, he disagreed with his colleague on all points. After only 9 months of model business management as “Two in a Box” he gave up unnerved. The failure of this tried and tested organizational model was due to the fact that top managers and shareholders who were not convinced of the need for self-management in bad times were responsible. In the USA, shareholders have a particularly large amount of power and can also have a say in the operational orientation of an organization. Companies are always subject to market fluctuations, which lead to sales crises and slumps in profits. Fast-growing organizations and companies that play in the first two leagues of a market segment must invest in innovation. In capitalism, this means getting involved with investors—i.e. foreign money. However, investors usually want to have a say. This means that good business and organizational models can also fail in themselves. It is important for management to select investors very carefully and to limit their influence. Another important prerequisite for maintaining new organizational structures is the commitment to the models in top management. The larger the organizations become, the more diverse the board’s tasks become. The more board members there are, the greater the risk that in times of crisis—when nerves are often shattered—the organizational model will be held responsible for the crisis. In this situation, Dennis Bakke held in-depth discussions with each individual member of the Board of Management and achieved a self-commitment to the model of “self-responsible work” for each of them. Nevertheless, some of them could not hold their ground later in the negotiations with the investors. Dennis Bakke lost a classic power struggle in top management. The lessons to be learnt? That in addition to the commitment to the organizational model, it is important for all new board members to form with a smaller amount of board members in such companies who also trust each other, and that crisis simulations for the organizational model are conducted in when times are good. At Peters and Waterman, we saw that about a third of the companies they surveyed were no longer economically at the top after 10 years. However, this is not the fault of the organizational models, but of the changing markets. In this sense, it should be noted that the self-organization of AES has worked for 20 years and has brought growth and exciting jobs. Looking at the homepage of AES today, this story, 13 years after the departure of Dennis Bakke, seems to have been erased from their history. Organizations of the twenty-first century could have learned a lot from the 20 years of self-organization at AES. Since the energy sector is currently in a transition from traditional fossil-based to renewable generation and AES appears to

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focus on traditional generation, crises are the order of the day. Perhaps someone in the company will remember Bakke’s ideas and his 20-year economic success story in a coming crisis.

Current Management Methods—Old Wine in New Skins? The examples have shown that there is also a lateral tradition in business practice. Some companies experimented early on with new, employee-centred forms of organization. This development took off with the resounding success of Peters’ and Waterman’s In search of excellence. And with the digital revolution of our time, the search for other forms of organization is entering a new phase. Dieter Rösner from the Contrarian consulting group put it this way: “The managers I talk to today instinctively feel that something is not right. Your companies are earning better than ever before, so the system is optimized and working. And yet it is grinding somewhere. Most companies have gone into business for themselves, they have become machines and deliver—but always the same thing. Internal processes are not becoming leaner, but more bureaucratic. At the same time, the market outside is changing. […] And in fact, some top managers are starting to increase the internal pressure because they are looking at what is happening outside and notice: Something’s spinning. The result is the new and at the same time old demand: projects should be completed faster, after all, the market insists on it: the message is acceleration” (Gloger and Rösner 2014, p. 4). The consulting groups bring this uncertainty and the search for new organizational forms into play: They promise something like a master plan when companies —still unstructured—are looking for something new. The consultants then invent modern-looking buzzwords and advertising slogans, and new Anglicisms are particularly good in this context. They suggest that new methods and formats are the answers to newly emerging questions. The companies then like to buy these labels. This has the advantage that you act as if you were working on the changes. At the moment there are lots of these new labels. Some companies are experimenting with Scrum. The term actually refers to the coming together in American football during which the athletes discuss their next move. As a set of methods for organizations, Scrum is offered as a modern cross between moderation and group work methods. Scrum Masters are trained to lead teams. The masters then advise the teams. There are some moderation methods that are used. Others try Agile Management—primarily in IT and product development. The method set combines modern project management knowledge with Kaizen and creative methods. In the past, IT projects took 6–15 months and were marked with milestones, today they are replaced by so-called agile “sprints”. This means that the results of the project are first evaluated after a pre-defined period of time—a few days, weeks or months. Then it is decided whether the project will be continued in

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this way or whether it will be continued differently or not at all. However, the idea of sprints is a method that has long been used in classical project management. It is known there as the “crisis anticipation” (iterative loops) or critical incident technique. Every well-managed project suffers setbacks. These are project phases in which things happen that were not expected or planned. These setbacks are then good opportunities to think about methods, processes and the communication of the project (“Target Audit”). The results presented there are based on a telephone survey conducted by TNS Infratest on behalf of Haufe and the consulting firm Promerit in April and May 2017. A total of 1,812 employees and 1,006 managers from companies with more than 100 employees in Germany, Austria and Switzerland were surveyed. The results show that 10% of employees and 30% of managers use agile methods. A similar picture can be seen in the prevalence of agile project work: this is rather rare from the employees’ point of view (IT: 11%; sales: 10%; research and development: 10%; marketing: 10%; production: 9%; purchasing: 7%). An increase over time is just as unlikely as the spread of cross-divisional project teams with agile structures (10%). That’s why some companies like Deutsche Bahn are starting to create agile islands. This means that some parts of the company work with Scrum teams and in agile projects, but the majority of the organization does not. That means a split in the organization. Internally, those areas that work agilely are often regarded as elitist and special—with all the distortions that such a division can bring with it (envy, exclusion, clique formation…). As a method to develop whole organizations differently, agility became known mainly through the music streaming service Spotify. The Swedish company is growing fast and has a very hip corporate culture. Spotify was founded in 2006 by Daniel Ek in Stockholm and had 60 million users in 2018, 15 million of which were premium customers. 1200 employees in Sweden and the USA have generated profits for the first time since 2018. The company value is estimated at 4 billion euros. Spotify is now listed on the stock exchange. Spotify is the mother of a new work organization called agile work. A good employee at Spotify in • 70% of cases makes the same decisions as his boss; • 20% of cases makes better decisions … (because he has more ideas); • 10% of cases makes worse decisions than his boss. “All you have to have are bright minds”, says Daniel Ek. “Only if we fail faster than the others will we learn faster. Only then will our product be better than the competition’s product—faster”. As in many new forms of organization, there are cultural principles at Spotify: • Mutual respect and recognition as a “no-blame-culture”. • Community before Hierarchy. • Autonomy of the group is more important than individual authority.

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• The challenge of consensus culture. • Error-friendly environment supported by “Failure Walls” (publication of failures) and experiment weeks. • Spatial design of the working environment—Promotion of cooperation. • Direct decision-making, also past committees and management levels. The organization takes place across divisions and in different function groups in squads (cross-functional teams with the same objectives), tribes (groups of squads with similar content), chapters (group of specialists working in the individual squads) and guilds (interest groups open to all). Teams (squads) work autonomously within the framework of long-term and short-term goals, internal goals, product strategy (quarterly comparison). Squads freely select the agile methods and processes (Scrum, Kanban, etc.). The Product Owner defines topics. He’s being “reported”. This results in flexible competence hierarchies. Spotify’s core business is its vision of handling every customer request for a piece of music. The system learns through every experience of a product owner how to make such a search faster and more efficient. Projects are divided into sprints. The planning time is thus to be shortened compared to classical project management. Agile projects are often started experimentally, and it is decided after only a short time whether further investments will be made. In principle, projects can fail and are then terminated. A project with high costs and reactive power can be terminated. Agile methods have also found their way into the financial sector. Bank ING-DiBa recognized that agility is a way of organizing companies in a different hierarchical way. ING-Diba emerged from the German Direktbank in the 1990s, a bank that used to make its money with checking accounts. For a few years now, it has been almost impossible to do this with a free checking account in Germany due to low interest rates. It is therefore necessary for the company to develop new financial products that pay off. And that was the problem: product development took far too long. The relevant departments, usually two to four, had to agree. Each division tested the new product and a lot of time passed before approval. Especially FinTech’s new financial products developed much more agile (faster, less complicated, more flexible) for the market. Since 2017, the bank in Germany has also been restructured. First, the board rooms were symbolically merged. In fact, the walls between the offices were torn down and transformed into an open-plan office. In practice, agile product development teams were formed with two project managers and employees from each of the areas who had to agree beforehand. The employees of the divisions in the project could make decisions directly without having to obtain the approval of the division head. Product development is now running at a speed similar to that of Fintechs. The collaboration between the IT department and the projects has become much faster and more efficient. From the idea to the implementation and success control, everything is the responsibility of the project teams. The individual tasks are

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subdivided into “user stories” and worked out in sprints by small teams. In fact, it is a reorganization of cross-cutting cooperation—and this is called agility. Similar to Spotify, more agile cooperation between teams and tribes is to emerge as a flexible hierarchy and projects are to be shortened. This form of agility leads to speed and flexibility in the company through more personal responsibility. In this context, the label “Agility” can actually lead to lateral forms of organization in the best sense of the word. Originally, IT project developers had a big vision with agile projects. Those who wrote the agile manifesto did not have small agile methods in mind. Their ideas then turned into a consultant hype. Spotify and ING-DIBA, with their understanding of agile organizations, are more in line with this vision.

Manifesto for Agile Software Development

We are uncovering better ways of developing software by doing it and helping others do it. Through this work we have come to value: Individuals and interactions over processes and tools Working software over comprehensive documentation Customer collaboration over contract negotiation Responding to change over following a plan That is, while there is value in the items on the right, we value the items on the left more (https://agilemanifesto.org). Design Thinking is an innovation method that has become particularly popular in Germany thanks to SAP and its Chairman of the Supervisory Board Hasso Plattner. According to the legend, the roots of Design Thinking lie in the Silicon Valley management forge in the environment of the engineering faculty at Stanford University. The marketing was taken over by the innovation agency IDEO in 1991, which attempted to generate innovation through interdisciplinary groups using a special set of methods. New ideas are to be transformed into economic successes. Three perspectives are relevant from the perspective of Design Thinking: 1. Desirability: The new idea is checked to see whether it appeals to users. 2. Feasibility: It is checked whether the idea is feasible under the given framework conditions (materials, physical conditions, maturity of the markets). 3. Economic efficiency: The idea is checked to see whether it can be implemented economically. The question of whether the innovation is worthwhile is analysed. This requires the competence of the team members. Individuals should have both in-depth specialist knowledge and broad knowledge beyond industries and specialist areas and have a special interest in developing new ideas. Design Thinking is applied in the open spaces created for this purpose. This actually means rooms:

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flexible furniture that creates a special creative atmosphere and visualization possibilities. Music at work is important. The aim is to stimulate a creative culture. Teamwork and the exchange of ideas are core elements of innovative work. The teams are low in hierarchy and interdisciplinary and have a respectful work culture. In Design Thinking, an ideal-typical “persona” is created that can draw concrete benefit from the innovation. Finally, a prototype of the product is developed. At first presentation, this should be quite unfinished. It’s about doing and less about theoretical conceptualizing. Design Thinking is a very practical project management method that promises to turn good new ideas into innovations. In terms of methodology, what is particularly appealing is that users are involved in the planning of the innovation at an early stage and that prototypes are also built unfinished at the start of the planning phase. In terms of scientific methodology, qualitative interviews (with users) and systemic interviews with the perspectives of interdisciplinary experts are used. As in science, projects can also fail and advance planning is not exaggerated. The path is created by walking and at the end comes the product. In contrast to structured planning, this is called a process-oriented approach. However, failure as a project is quite nice as an idea in the corporate context. In science, it is the case that one researches something new and then comes to the conclusion that it doesn’t work! In business practice, projects are evaluated according to the target categories of time, quality, finance (return on investment) and resource consumption (personnel, materials, logistics). Here, too, an indication is needed as to what is achieved in business terms in the projects. Design Thinking always refers to Apple and Steve Jobs. They had a yield of 50 cents on one US dollar there. Holacracy is an organizational theory in which powers and decision-making are distributed among self-organizing teams rather than through a traditional management hierarchy. According to information on the official website, Holacracy is an adaptable self-management practice for organizations that allow more autonomy and self-responsibility for teams and individuals, thus enabling an individualized decision-making process. More than 1000 organizations would work according to the Holacracy model. The idea, however, was not new. Holacracy was actually the idea of Brian Robertson, a software developer and founder of Ternary Software. His company had already been experimenting with alternative, more democratic organizational structures since its foundation. In 2007, Holacracy was presented to the public for the first time, followed in 2010 by Robertson’s Holacracy Constitution, which was to provide the basis for the development of new corporate cultures. Many myths surround Holacracy. Both those who favour grassroots democratic forms of organization and those who consider these ideas to be the downfall of capitalism are considered to be prime examples of best corporate governance and the opposite. The American online retailer Zappos, considered the most famous example of Holacracy, was also both celebrated and criticized: “The successful fashion startup from Las Vegas wanted to become a radically good, exemplary company and by 2015 had abolished all executive positions. In future, employees should determine all work processes themselves. The result was chaos and endless

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debates, everyone was dissatisfied, many resigned. Nothing is known about new success stories. The Taylorist form of work organisation is still unbeaten when it comes to efficiently completing tasks” (Anderson 2019). The organizational framework of Holacracy looks like this: • Work in “roles”: In Holacracy, work is divided by roles. A role has a specific purpose that is aligned with the purpose of the company. Roles usually have defined responsibilities and can have sovereignty over specific decision areas or material resources. A team member can perform multiple roles simultaneously. • Roles form “circles”: Roles that belong together form a circle. Circles organize themselves as far as possible: they define their own structure (division of roles) and develop it further, e.g. by creating new roles, changing role definitions or responsibilities or abolishing roles that are no longer needed. • Tactical meetings and governance meetings: Holacracy defines two types of meetings: In tactical meetings, the members of a circle bring each other up to date. They check the progress of ongoing projects and work on points of friction. New projects can be started and existing projects can be prioritized differently. The structure of the circle is further developed in governance meetings: Roles are changed or newly created (cf. Röll 2016). The Holacracy method was introduced at Swisscom, the leading Swiss telecommunications company, in 2017. The aim was to create more self-organization for the people in the company. The results are partly sobering. During the project, confidence in the methods for one’s own area fell significantly. In the fields of innovative ability, job satisfaction, cooperation at the interfaces and social relations, hardly anything has changed in the course of the project. In the field of quality and efficiency, however, the length of discussion rounds seems to have shortened and the tasks of prioritization and results orientation have improved. The evaluation of internal customers for the reference group has deteriorated in the areas of qualification, completeness of information, delivery and comprehensibility of information. It was particularly criticized that the employees of the reference group would perform their tasks and roles less effectively than before. The focus of Holacracy at Swisscom was still a Purpose-Debate. Employees should look into the question of what the purpose of their work is, and the answers to this question should result in increased individual commitment. Work should then serve a higher purpose. What may still work for companies such as Greenpeace (“saving the Earth by protecting the environment”) will be difficult for people to accept for many industrial and service jobs. At the base of companies, the purpose of work is sometimes about more profane things. This includes earning money, feeding the family or doing a good technical job. Organizational models with a moral superstructure bear all the signs of failure. Holacracy has demystified itself in many ways as a lateral method, as Swisscom’s experience has shown. The approach is simply naive. As a serious model for the creation of new working structures it has, in our opinion, taken care of itself. And if you take a closer look at the “official” website, you will also find a wide

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range of seminars for people who want to introduce Holacracy into organizations. There is now a Holacracy industry that sells the model as a consulting product. We have most certainly listed here only a fraction of the instruments that are currently on the market and are celebrated by consultants. Anyone who has been around for some time has the feeling that something is repeating itself. Scrum, Agile Management, Design Thinking, Holacracy and Co. must all be measured against their historical predecessors. Therefore, we would like to show at this point with a small insertion about historical management methods that much of what sounds new here has at least in parts already been implemented and used before at some stage in time. Some companies would be well advised to stick to their own history and use tools that have already been successfully used instead of introducing new ones.

History of Management Methods The management history of the twentieth century is paved with innovation models and methods such as Quality Circles, Kaizen, Quality Function Deployment (QFD), Poka Yoke, Kanban, Total Quality Management (TQM), Idea Competitions, Company Suggestion Scheme, Creativity Seminars, Brainstorming, SemiAutonomous Groups, Lean Management, Six Sigma, Business Reengineering, Open Space Technology, Future Search Conference, World Café, TRIZ and many more. Recently, Creative Puzzle, Design Thinking, Scrum, Agile Management and others have been added. They are all aimed at optimizing work processes, quality and consumption, generating ideas or creating innovations. As is well known, industrial history began with an assassination attempt on the creativity of the employees. Henry Ford and other industrialists built factories in which production was to be based on the division of labour. But only a few workers wanted to do monotonous work on assembly lines. Dedicated technicians also preferred to assemble cars in small workshops. There everyone could do everything, learn a lot, experiment and be creative. But Ford paid double and triple wages. Only in this way was he able to “force” qualified workers into his factories. As early as the 1950s, creativity research was fashionable in the USA, primarily because of its pioneer, the American intelligence researcher Joy Guilford. Guilford developed methods to make creativity measurable. He established divergent thinking (unclear problem, several approaches to solutions)—in contrast to the more common convergent thinking (clear problem, clear solution) that fits Ford and Weber. At the latest with the Sputnik shock, there was public discussion in the USA about how to become more creative and innovative. Russian missiles had conquered space before the US-Americans. The supremacy of the USA was in danger —the country was hard hit. That was the hour of the ICSC: at the International Center for Studies in Creativity at the Buffalo State University New York, several groundbreaking creativity methods for the production of new ideas were developed. These are associated with the name Alex Osborn, and one of the methods invented there is brainstorming. The Institute was founded in 1954 as a foundation and has

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also offered university education since 1967. With more than 12,000 entries, the ICSC has the world’s largest collection of literature on creativity. Brainstorming is still used in most companies today. But mostly in a vulgarized form that no longer has much to do with Osborn’s original idea and often degenerates into unstructured association hopping. Everyone who regularly sits in creativity meetings knows these tedious events that are unpopular with all participants. Brainstorming can still be useful—if the process with the so-called Osborn list is used for further processing of the ideas. Unfortunately, that happens far too rarely. But many consultants still live very well off Osborn’s ideas today.

Osborns Checklist for Brainstorming

1. Put to other uses? New ways to use as is? Other uses if modified? 2. Adapt? What else is like this? What other idea does this suggest? Does past offer parallel? What could I copy? Whom could I emulate? 3. Modify? New twist? Change meaning, colour, motion, odour, taste, form, shape? Other changes? 4. Magnify? What to add? More time? Greater frequency? Stronger? Higher? Larger? Longer? Thicker? Heavier? Extra value? Plus ingredient? Duplicate? Multiply? Exaggerate? 5. Minify? What to subtract? Smaller? Condensed? Miniature? Lower? Shorter? Narrower? Lighter? Omit? Streamline? Split up? Understate? Less frequent? 6. Substitute? Who else instead? What else instead? Other ingredient? Other material? Other process? Other power? Other place? Other approach? Other tone of voice? Other time? 7. Rearrange? Interchange components? Other pattern? Other layout? Other sequence? Transpose cause and effect? Change place? Change schedule? Earlier? Later? 8. Reverse? Transpose positive and negative? How about opposites? Turn it backward, upside down, inside out? Reverse roles? Change shoes? Turn tables? Turn other cheek? 9. Combine? How about a blend, an alloy, an assortment, an ensemble? Combine units?

From the 1980s onwards, the Japanese wave rolled over American and European companies. Quality circles and, in particular, Kaizen (“Change for better”) were the order of the day. Employees were brought together in teams to optimize the quality of their work. As a rule, they sat down together every 14 days to discuss savings and improvements. Such groups then worked with tools such as the 5Ws and 2 Hs (what, why, where, when, who, how much, how) or the 3Mu checklist (Muda, Muri, Mura: waste, overload, deviation) or the seven types of waste (material movement/transport,

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stock/inventory, movement/motion, waiting/waiting, overproduction/overproduction, incorrect processes/overprocessing, scrap and rework/defects) to develop suggestions for improvement. The Quality Function Deployment, in which customers and suppliers were asked about quality and processes in their own organization in a complex process, was somewhat more demanding. Conclusions were drawn from the data collected and, if things went well, the new suggestions were transferred to the process organization. Those who are interested in these and other approaches can read much of it in books like The Toyota Way (Liker 2004). The focus of all these programmes is on group activities to generate new ideas. In this way, employees at all levels should become creative. The teaching of creativity techniques for managers continued to be very popular, especially in the USA. With his “six thinking hats”, the physician Edward de Bono is considered the most important creative trainer of recent years there. In a kind of group discussion, each participant takes on a different role, symbolized by a coloured hat. Each of the six hats corresponds to a different perspective and a different way of thinking—from analytical thinking to ordering to emotional thinking. Also coming from the USA are the approaches of the so-called large group workshops, which played an important role in the 1990s. The aim was to search for different solutions for the future of the company (Future Search Conference, FSC for short) or new ideas (Open Space Technology, OST for short) with up to 500 employees. These procedures usually work through a strong emotionalization of the participants and sometimes achieve very good results. Especially the OST, where the break is made the content of the workshop, is said to have solved some technology problems in a groundbreaking way. The World Café Conference is also a feasible, somewhat more up-to-date form of the large group conference. These methods have to be adapted to the specific company and the objectives of the workshop. There are about 100 different designs for large groups. In the tradition of quality improvements, solutions such as Six Sigma. Developed at Motorola in the 1980s and later perfected at General Electric under Jack Welch, the process aims to correct manufacturing errors (factory model) by using specific statistical tools, interviewing competent personnel and standardized procedures. The goal is to achieve production without errors. The process also builds on people’s qualifications. As in the Budo sports, employees are trained as green belts and black belts. The trainees analyse the errors using the tools they have learned and work out implementation proposals on how these errors can be rectified in the future. Six Sigma projects are usually initiated and supported by top management to ensure that proposals are actually implemented. Lean as an improvement project for routine processes (factory model) works similarly. After the fall of the Iron Curtain, the hour of the Russian engineer Genrich Altschuller had also come. He dealt with the question: How does an invention come into being? By 1989, he had developed ideas, processes and methods for inventive problem-solving in the USSR. But he was banished twice. It was not until 1989 that he was able to start implementing his solutions in the USA. Its models are patented under the TRIZ and ARIZ brands. As methods, they are highly structured and

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primarily serve to implement technical ideas, making them important for innovation work in companies. These models are still being used in the USA today. Genrich Altschuller, the ingenious creator of TRIZ (Theory of Inventive Problem Solving), studied many thousands of inventions and classified them according to their degree of innovation: • Stage 5: Major inventions (discoveries): 1%. Discoveries are fundamentally new scientific discoveries which, for example, generate new communicative or technical systems (e.g. the von Neumann computing machine as a computer, Einstein/Heisenberg quantum physics as the basis for the mobile telephone). • Stage 4: Macro-inventions (novel improvements): 4% Mapping of new technical or communicative systems by separation from another scientific field. Einstein was of the opinion that problems could often not be solved with existing methods and ways of thinking. • Stage 3: Average inventions (significant improvements): 18%. Both problem and solution method are already known through using existing methods or combinations of different methods. • Stage 2: Ordinary inventions (simple improvements): > 45% Solutions are found by standardized procedures in a known technology. According to Altschuller, this requires expertise as methodological knowledge, whereby the results are achieved through many experiments. This applies, for example, to genetic research. • Stage 1: Micro-inventions (partial solutions): 32 At this level, solutions are found both by specialists and by non-experts that do not require the resolution of contradictions. Apps for iPhones are developed by minors who can familiarize themselves with a subject relatively quickly and easily. In this way, Altschuller classifies levels of difficulty in technical invention and postulates that level 4 solutions and higher can only be achieved through a systematic and methodical approach. His measure was the number of trial-and-error attempts that eventually led to the success of the invention. According to Altschuller, 95% of all technical problems are not too complicated and can be solved in groups by systematic and exact methodical application of knowledge (quality circles, kaizen). Both Altschuller’s research and that of his successors, in particular, represent milestones in solving technical problems. This describes methodical ways of technical creativity. TRIZ therefore always works on the level of creativity, not on the level of innovation.

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Summary—And What Happens Next? Something’s growing in many places. Lateral management can look back on a long tradition of experimenting in companies. New participation structures based on self-responsibility and networking are being implemented in various countries. We have shown which concepts are currently in circulation to introduce lateral management approaches. Some companies are reluctant to work on small improvements, others have launched far-reaching projects to complement their excellent business models with the appropriate management culture. They thus follow Peters’ and Waterman’s basic ideas that a new organization should be considered with every new strategy. We have introduced many companies, hopefully they will give suggestions for further ones. In the following chapter, we will deal with how lateral management can be introduced in a company, in which steps the process from classic hierarchical to lateral management can best be managed, and how success can be measured. We submit the following key questions: 1. What can companies do to culturally meet the challenges of the digital economy and how can we measure or track this? 2. What do these changes mean for people? 3. What do these changes mean for managers? Finally, we compare the Big Five of classical management with the principles of lateral management and will thus once again highlight the advantages of the new concept in times of digitalization.

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Nadella, S. (2017). Hit refresh. The quest to rediscover Microsoft’s soul and imagine a better future for everyone. London: William Collins. Nieswandt, M. (2015). Fast cultural change. The role and influence of middle management. Basingstoke: Palgrave Macmillan. Osterhues, N. (2018, July 11). Firma ohne Chefs – geht das?“ Faktor A, das Arbeitgebermagazin. Online: https://faktor-a.arbeitsagentur.de/richtig-fuehren/firma-ohne-chefs-tele-haase/. Peters, T., & Waterman, R. (1982). In search of excellence. Lessons from America’s best-run companies. New York: Harper & Row. Pflüger, G. (2009). Erfolg ohne Chef. Wie Arbeit aussieht, die sich Mitarbeiter wünschen. Berlin: Econ. Röll, J. (2016, June 15). Wie funktioniert ein Holacracy Governance Meeting? Structure & Process.Online: http://structureprocess.com/de/blog/wie-funktioniert-ein-holacracy-governa nce-meeting/. Rüther, C. (2011). Ricardo Semler und Semco: Behandle Deine Mitarbeiter wie Erwachsene. Online: www.christianruether.com/2011/03/ricardo-semler-und-semco-behandle-deine-mitarbeiter-wie-erwachsene. Sattelberger, T., Welpe, I., & Boes, A. (2015). Das demokratische Unternehmen. Neue Arbeitsund Führungskulturen im Zeitalter digitaler Wirtschaft. München: Haufe. Schröder, C., & Oestereich, B. (2019). Die Organisation der Selbstorganisation. Einsichten aus der Praxis. In OrganisationsEntwicklung, Nr. 2/2019. Semler, R. (2003). The seven-day weekend. Changing the way work works. New York: Portfolio. Service der Bundesagentur für Arbeit; Interview mit Markus Stelzmann von Tele Haase, October 22 2018. Sprenger, R. K. (2000). Aufstand des Individuums. Warum wir Führung komplett neu denken müssen. Limitierte Sonderausgabe. Frankfurt am Main: Campus. Sywottek, C. (2014). Cool und beängstigend. In: brand eins 09/2014, p. 128 ff. Online: www. brandeins.de/archiv/2014/arbeit/it-agile-softwareentwicklung-demokratische-firma-cool-undbeaengstigend. Täubner, M. (2014). Aufruhr in der Keksfabrik. In brand eins 10/2014, p. 50 ff. Online: www. brandeins.de/archiv/2014/vertrauen/bahlsen-umstrukturierung-aufruhr-in-der-keksfabrik. Vögeli, E. (2011, October 17). Mondragón Corporación Cooperativa – Ein genossenschaftliches Erfolgsmodell sozialverträglichen Wirtschaftens im spanischen Baskenland. In Zeitfragen Nr. 42 vom. Online: www.zeit-fragen.ch/index.php?id=445. Waterman, R. H. (1994). The frontiers of excellence. London: Nicholas Brealey Publishing. Werner, G. (2013). Womit ich nie gerechnet habe. Die Autobiographie. Berlin: Econ.

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Lateral Management in the Twenty-First Century

It’s All a Question of Organization If one looks at studies on digital transformation, then new forms of leadership and cooperation seem to play hardly any role in companies. In a 2015 study conducted by Cisco together with the International Institute for Management Development (Global Center for Digital Business Transformation 2015), more than 1000 decision-makers from 12 industries and 13 countries were interviewed. The survey focused on costs, platforms, risks of business models and IT processes in the network. For these managers and their colleagues, who were also interviewed on behalf of Ernst & Young (2015) about the consequences of digitization, the digital transformation initially appears to be a technical and cost-controlled change. The people in the organizations apparently play no or only a minor role. But who actually creates the new products and innovations? These should then be the clever minds in the companies. Nevertheless, in many organizations and the current consulting scene, the motto seems to be “Keep it up”—a continuation of the management of the twentieth century as a solution to the challenges of the twenty-first century. We prophesy: This won’t work! Until recently, the fact that in the course of digitization the forms of organization also had to be changed was only discussed in specialist circles of organizational consultants. In1 recent years, more and more companies have become courageous and implement concepts of lateral management. The number of corporate publications on these topics has multiplied.

1

For example in the trade magazine Organisationsentwicklung, issue 3/2015.

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Nevertheless, while many managers today are signing up for the need to address the challenges of digital transformation, they are also reluctant to accept the consequences. They preach water and drink wine. Cultural changes are considered too complex and too lengthy to implement. Under pressure, they prefer to return to the old order. Organigrams connote alleged security. They set the signal: Everything will remain the same. It’s just going to change a little, if at all. The growing economic pressure on companies today, however, seems to be causing a renaissance of the commanding, dominant management style among some superiors: In a long-term study, economics professor Sonja Bischoff found that in 1998, 80% of managers were still more likely to cultivate a cooperative management style in their self-awareness, but 10 years later only half did so (Niejahr and Rohrbeck 2014). What’s the matter with you? In recent years, many managers have experienced the process from the classical hierarchy to more laterality in management—but mostly only as half-hearted, rash attempts to repair something that actually needs to be set up anew. Anyone who wants to redesign has to pause and think wisely about how this can work. Ralph Bollmann, business correspondent for the Frankfurter Allgemeine Sonntagszeitung, dealt in detail with historical reforms. He noted that the reforms that were most successful in Germany were those that were carried out with a steady hand and unspectacularly. Reforms were long-term and geared to sustainability (Bollmann 2008), as are the cultural changes at RAG AG, Bahlsen, AOK Baden-Württemberg, dm-drogerie markt, Sun Hydraulics, Google (Alphabet) and Procter & Gamble.

The Starting Position Today With their generally well-trained and qualified employees, European companies have good chances of mastering the challenges of the digitalization of the economy with new organizational structures. But this change requires a departure from traditional management models with their division into managers and employees and thus into those with responsibility and those without. What were once models of empowerment, the delegation of responsibility to employees, will become the determining model in the twenty-first century. Responsibility is shifted as far down as possible. For this, all managers and employees must think in responsibility hierarchies instead of instruction hierarchies. In particular, top management must initiate and sustain these changes. Lateral Management is a concept that combines historical, formerly avant-garde models of decentralized assumption of responsibility with new, tried and tested management culture developments, even in existing organizations. We were there ourselves when several companies successfully established lateral management. In times of creative destruction, it is almost the duty of companies to reorient themselves. This means rethinking leadership, decision-making and cooperation and creating the organizational framework for them. Then it will also be possible to reduce bureaucracy, develop innovations and react flexibly to rapidly changing markets.

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Each company should proceed individually—cultural change concepts cannot simply be imposed. Consequently, this means giving the individual the greatest possible responsibility and sovereignty for shaping his or her life within the organization. People, too, will reorient themselves in their organization under changing conditions. They don’t need a patron or governess to tell them how to find their way in the digital world. However, they need discourse with colleagues from all areas of their organization. And above all, they have one thing to learn. Only those who learn to make their own decisions acquire the social and methodological skills needed to act successfully in an ever-changing world. It is necessary to sharpen the sense of possibility in order to work differently and to start anew. The digital revolution is in actual fact evolutionary. It takes place gradually, even as the speed increases. The process of major economic upheavals takes about 30 years. There is, therefore, plenty of time for reflection, qualification and restructuring. Above all, there is also scope for planning lateral organizational changes. These can also be introduced step by step. AOK Baden-Württemberg has decided to introduce lateral management first and only in a second step to establish more self-responsible structures at the grassroots level. New companies such as Buurtzorg can more easily introduce lateral structures at the employee level immediately. Each organization must develop its own master plan here. This can be done with a steady hand, but not during sleep. It takes time, but it can’t wait forever. It’s doable in periods of 2 years if the top management wants it. We shall now look in more detail at how companies, people and managers can meet the challenges of the digital economy through lateral management.

What can Companies do to Culturally Meet the Challenges of the Digital Economy? There are progressive companies today that are considering establishing a Chief Digital Officer (CDO) in top management—or have already done so. Other companies have installed a Digital Innovation Officer (DIO) at board level. No matter what you call the position, the demands made on such a manager must not be linked exclusively to technical and business know-how. What is needed here are people with diverse experience of credible transformation processes and experiences with genuine participation and the willingness to promote and demand it. Digitalization is a cultural trend and as such cannot be “managed” by a single executive any more than innovation. In recent years, many change projects have been carried out in organizations on the subject of “participation”. That sounds good at first. But the truth is: they were often pure pseudo-events, which in the end were only good for burning money. Stefan Kühl reports that in the end many projects were not checked for their effectiveness at all. 90% of those responsible were not even interested (Kühl and Moldaschl 2010, p. 31). Change management has long been used as a metaphor for successful transformations.

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Transformations, which we call lateral management, only work with a top management one can believe in and a real participation of people in projects and in everyday business life. The top managers must really want to readjust and exemplify the triad: leadership, decision-making and cooperation: away from the instruction hierarchy towards the responsibility hierarchy. This is a multi-year project in established companies. The aim is to develop a target projection that2 defines laterality and culture: What does laterality mean? And in which fields should lateral management be effective in the future? Will it be effective in management, among employees, with customers, suppliers; and in particular: how can we measure laterality? The answer to these questions depends in particular on the maturity of the management and the respective business model.

Introducing Lateral Management: What is Really Important These are the most important parameters: 1. 2. 3. 4. 5.

Measure culture changes. Start top-down. Radically hand over responsibility to upper and middle management. Establish a hierarchy of responsibilities instead of a formal hierarchy. Develop clear target projections.

1. Measure cultural change with Key Culture Indicators (KCI) According to Peter Drucker, performance expectations of managers have been measured in target agreements since the early 1960s. Target expectations are often agreed upon top-down at the beginning of the year between managers of different hierarchical levels, for example, between department manager and team leader. Key Performance Indicators (KPIs) are used in order not to lose ground in many annual targets. These figures are used as a dashboard to monitor management performance and identify deviations from the target plan. KPIs are therefore highly aggregated sets of figures for top management to control a company. In all large companies, controlling areas have been established in order to keep the management performance and thus the development of the company’s key figures up to date. Top management can thus control the company. Examples of KPIs are among others: • • • •

2

Sales/return on sales/return on invest/contribution margins. Number of pieces per day/month/year in production. Number of reports about the company in the media. Number of innovations as research and development projects.

In this context, culture means everything that is not professional.

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If lateral management is to be established, however, then cultural factors are just as important for corporate management as business ratios that measure output. Cultural indicators show how motivated employees are, how strong their loyalty to the company is or how leadership is currently experienced in the company. Such a thing rarely exists in organizations as a dashboard. To steer change towards a lateral culture, Denkwerkstatt für Manager from Mannheim has developed a dashboard for Key Culture Indices (KCIs) and introduced it into companies. So far, organizations have implemented more partial solutions to get in touch with the mood at the bottom of the organization. In most companies, surveys on employee satisfaction (best place to work, etc.) or employee retention (Gallup, etc.) take place annually both at the employee level and at different management levels. The AOK Baden-Württemberg has an employee barometer. Every 4 months, employees answer standardized questions on how satisfied they are with their work in the area. These were the first attempts at solving the problem. The most pragmatic solution from Lazlo Block (Google) to include KPIs and KCIs in the management evaluation in parallel convinced us. Peter Drucker’s credo —“what you can’t measure, you can’t manage”—also applies to corporate culture. When measuring KCIs, qualitative and quantitative survey methods are used: about 90% quantitative measurements and about 10% qualitative surveys. However, the complexity of the concept of culture for organizations is particularly difficult when measuring corporate culture. The think tank for managers has evaluated more than 100 cultural concepts for the creation of the Lateral Culture Index® (LCI—which we present in the next section). In the meantime, we have developed five important parameters for the standardized measurement of KCIs in companies together with a number of partner companies. Parameters for KCIs: • Feedback to all managers of the company. How satisfied are employees with their leadership in comparison to other companies (for example, in the same industry, of the same size (LCI))? • Publication rate of management feedback. • Results and participation rate of employees in the three Happiness Questions per week. • Health rate. • Number of successful cross-departmental collaborations. • Employee retention. • Include customers.

Feedback to All Managers of the Company. How Satisfied are Employees with Their Leadership in Comparison to Other Companies (for Example, in the Same Industry, of the Same Size (LCI))? With the “Denkwerkstatt”, we have developed the Lateral Culture Index as the core of the KCIs. The first version of the Lateral Culture Index was based on extensive literature research, a large number of expert surveys and numerous workshops with

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managers from various industries. Initially, 17 relevant characteristic areas could be identified, which consisted of 120 different questions. Subsequently, these questions were tested theoretically by means of a quantitative survey using questionnaires with 100 managers. With the help of an explorative factor analysis with main component method and Varimax rotation, the existing 17 factors could be reduced to the following seven decisive factors (consisting of 88 questions): • • • • • • •

Leading at eye level. Culture of ideas and openness for improvements and innovations. Room for manoeuvre and freedom of decision (organizational). Personal responsibility and independence (personnel). Flexibility and variety. Complaint culture. Transparency of objectives.

The internal consistency of the items lies with a Cronbach Alpha from 0.76 to 0.94 in an acceptable to excellent range, and the dimensions together clarify 53.66% of the variance (r 2 ¼ 53:66). The method thus enables a valid measurement of the lateral culture in the company and is also suitable as a monitoring instrument for change processes. Empirical data are now available from more than 250 companies, which allow benchmarks to be set for the degree of laterality of an organization according to industries and company sizes. The results of the LCI are the core of KCIs. Figure 5.1 shows the comparison of a company with the industry benchmark. These values can be displayed for individual departments or teams. After a multiple measurement, it is possible to follow the development of the KCIs.

Comparison: Lateral Culture Index (LCI) of a sample company with the overall sample Skala von 1:"triŏ gar nicht zu " bis 10: "triŏ voll zu"

10.00 9.00 8.00 7.00 6.00 5.00

6.99

7.40

6.89

6.70

6.29

5.95

5.90 4.89

4.67 4.01

4.55

4.40

4.29

4.18

4.00 3.00 2.00 1.00

Company A

total sample

Fig. 5.1 Comparison: Lateral Culture Index (LCI) of a sample company with the overall sample

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Publication Rate of Management Feedback For Lazlo Bock, transparency and the discourse about executive feedback was a particularly important element in enforcing KCIs in companies. At Google, the publication of the results was voluntary. Nevertheless, the social pressure on managers to publish the results is enormous. At Google, 99% of all managers are said to have published their results transparently on the net. The Management Board was fully involved. Results and Participation—Employee Participation in the Three Happiness Questions Per Week If the LCI measures the degree of laterality in the company annually or half-yearly, more indices are needed to manage the corporate culture. All employees now have smartphones that can be used for quick checks. During the three Happiness Questions per week (3HQpw), employees are asked three questions about their personal happiness at work every Thursday at 3 pm. The questions vary from week to week. They do, however, repeatedly provide top management with information on the current mood and motivation of employees. Every year, the employees are asked more than 150 questions to spontaneously answer with regard to the management culture. In the background, an algorithm is running which, in addition to the seven factors of the LCI for laterality, evaluates other relevant cultural dimensions in the company such as employee loyalty, health and willingness to change. LCI and 3HQpw are the perfect prerequisites for a cultural dashboard for top management. Health Rate An important indicator, which is well documented in all companies, is the health rate or the number of absent days in a company. Health professionals attach great importance to the correlation between the health rate and factors such as employee retention or motivation for KCIs. These data are well documented in German companies and therefore easily available. In addition to health, occupational safety data also play an important role in US companies. Table 5.1 shows the days absent by industry as an example. Number of Successful Cross-Departmental Collaborations In our empirical surveys on lateral corporate cultures, we have repeatedly come across a dimension that is of existential importance for companies today. Almost all classic companies have emerged as staff line organizations with fixed boundaries and responsibilities of departments or areas. It has been shown, particularly in service organizations, that a sharp demarcation of areas in companies leads to reactive power. The examples of Procter & Gamble or the introduction of agile methods in the banking industry have shown that in the digital age cross-departmental work must be accelerated. In our surveys, we used another measuring instrument for lateral leadership to ask how people are led in their area and how they work together with their most difficult partner area. There is a difference between the self-perception in one’s own

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Table 5.1 Absentee days in German companies by sector Branch Agriculture and forestry Food and pleasure Wood, paper, print Chemistry Metal production Mechanical engineering Vehicle construction Energy and water supply, waste disposal Building Car trade and repair Transport and storage Hospitality industry Information and communication Finance and insurance Real estate and housing Professional services Public administration, armed forces, social insurance Education and teaching Health and social services Source Federal Government Germany

Days absent due to illness 2016 Total Men Women 16.1 21.6 21.6 21.3 22.3 18. 19.8 22.1 19.8 17.9 23.0 14.3 12.4 13.8 16.2 12.2 22.4 16.9 20.8

15.5 21.3 21.9 21.2 22.5 18.8 19.6 23.0 20.6 17.3 22.3 11.3 11.1 11.8 16.3 11.4 23.6 13.5 18.4

18.0 22.0 20.8 21.6 21.4 17.2 20.9 18.2 13.2 18.5 25.2 16.7 14.6 15.1 16.1 12.9 21.6 18.1 21.3

team and the external perception of others by teams: Self-perception is consistently more positive (cf. Fig. 5.2). In about 50% of all companies, data show that collaboration is significantly poor. In the discussion about corporate culture, solution-oriented cooperation between departments is decisive for the company’s results. The cross-functional cooperation experienced in an organization is therefore an important KCI.

Employee Retention This factor has now been well investigated by the work of business psychologist Oswald Neuberger on employee satisfaction and by consulting firms such as Gallup and IFAK. The results are presented in Chap. 1, so we will not go into them further here.

Include Customers It is one of the great dangers of introducing lateral management that the focus on the customer is lost. It is therefore recommended that customer interviews be conducted

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Fig. 5.2 Self-perception versus external perception in the implementation of lateral leadership

as part of a culture change process. It is very interesting how customers see the corporate culture from the outside. In a current project, the customers confirmed that the disproportion in leading employees in dealing with customers was also lived. Two cultural analyses were randomly carried out in the company by two consulting groups. We examined the management culture and the other company the culture of the company in dealing with customers and suppliers. The comparability of the results was astounding. The old management principle that management and customer culture are two sides of the same coin was empirically confirmed here by chance. Therefore, it is important to check again and again when introducing lateral management how the measures affect customers. There is a myth that Jeff Bezos left one chair empty at every meeting at Amazon. This chair was for an imaginary customer. He was always present—an observer who silently wondered what the meeting would do for him as a client.

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2. Start top-down The top management boards of the successful companies we have described have decided to fundamentally change the culture of the organization. It did not matter that their business and organizational models were very different. “Self-reliant structures” top-down: This is a paradox that Tom Peters would love (Crainer 1997, p. 243). In established organizations, however, the introduction will hardly work differently. Even at Bahlsen, where the upper and middle management took charge of the restructuring, a Werner Bahlsen was needed who accepted and actively supported it. All five companies have in common that they still function that way today because the cultural change was introduced top-down and the management immediately set a good example in implementing the concept. Middle management can only become more self-responsible and a catalyst for cultural change if the top management embodies the new beginning and really lets go in a believable manner. Letting go means actually transferring responsibility and only taking care of the important strategic decisions. A short anecdote: In our first lateral project, the top 50 of the organization were to be trained in lateral management. Today, we know that this can only be enforced if the first company level makes this mandatory. At that time, however, we initially had scruples in the discussion rounds about introducing a new form of organization aimed at more freedom and self-responsibility, starting with a compulsory seminar. The internal managers in the team convinced us after a while that it wouldn’t work without commitment. Again only the usual seminar junkies would have come to the events or those already convinced. We would never have come across managers with only limited enthusiasm for dealing with leadership issues. For a change of culture, however, a discourse with all relevant responsible persons is needed. Again, this was a paradoxical intervention. Seminars “on independent leadership” were mandatory for top managers. Let us remember: Statistically, one-third of managers agree with a cultural change, one-third wait and another third oppose it. However, it is important that the majority of management participate. Discussions and controversies are expressly desired. If there is no friction, no grave silence in a discussion group, then the change will be wrong or it will have no effect. Each of the three groups has his or her role, which contributes to the success of the cause, as a driver, supporter or constructive opponent. But without a courageous management at the top of the organization, with which a project team can also reflect critical aspects of change, a new management style will fail in any company. Cultural changes are always a matter of trust. Trust is quickly broken, but very difficult to win. Instruction hierarchies are cultures of distrust per se. And such cultures are the starting point for new ideas in many companies. If top managers do not want to fall into the trap of the double cliff phenomenon—that is, if they fail to convince the second and third management levels of the upcoming cultural changes—they will fail. Lateral management stands or falls with a believable top management.

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Roles of managers in cultural change projects

Klaus Doppler, the doyen of classical change management in Germany, named three important roles of managers in projects (Doppler et al. 2002, p. 308) that are needed for success. 1. Driver Managers who advance lateral management with ideas, concepts and innovations. These people are usually convinced of lateral management and are constantly developing new ideas to implement the new culture. 2. Supporter Managers who promote the project and convince others of the importance of the project. In various management forums, they bring in the new topics and argue for their implementation. Supporters are the marketing experts of a cultural project. 3. Constructive opponents No project team is omniscient. No project plan is sacred. Constructive opponents criticize project ideas and use their criticism to push project management to top performance. These people are extremely important for a discourse. If it is possible to convince this group, it is usually possible to bring about a cultural change. Constructive opponents often find it difficult to find acceptance in organizations. Their comments are often connoted as belonging to the past or resistive. However, these custodians are often well networked within the company and are clever sensors for the risks of cultural change. At Procter & Gamble, experience with these people has been particularly advantageous for the establishment of self-controlling teams provided they have succeeded in convincing this group.

3. Radically hand over responsibility to upper and middle management Once the starting signal for lateral management has been given top-down, the next concrete step is to transfer all responsibility to the next levels of management. However, this is no longer a top-down process. How and by whom responsibilities will be assumed in the future will be decided with the participation of the following management levels. It is the result of a negotiation process—whereby in established companies technical responsibilities (e.g. production, sales, marketing, purchasing, controlling, personnel, etc.) are normally defined. In this context, lateral management in particular means that people are given responsibility who can make

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competent, quick and customer-oriented decisions in a company. As a rule, these persons are at the bottom of the hierarchy. At Bahlsen, the negotiations on responsibilities were conceived by a (project) steering group in which the various hierarchical levels were represented. This is classic project work, as it is frequently used in companies today. There is a suitable method for the conception of lateral management to determine what a manager will decide: Let us assume that there are three levels of responsibility in a company (management, divisional and departmental management). Then a department head could write down all decisions made in his department and then prioritize them: What do its employees decide? What does he decide himself? What does the division manager and what does management decide? The head of department then answers the question of what would happen if he or his employees were to make all decisions independently. The goal is for him to decide as much as possible for himself. It is incredible how many decisions can actually be made at the end of such a discourse down in a hierarchy of responsibilities. This makes a company fast, efficient, successful and customer-oriented—and thus fit for the digital economy. 4. Establish a hierarchy of responsibilities instead of a formal hierarchy One of the strengths of Sun Microsystems’ projects is that they do not require external, central planning. In this company, the people concerned plan themselves, always with a view to the customer and the project implementation. In the Better Place team in Berlin, projects are distributed to the people in the team who have the best experience in comparable projects. This sounds radical to established companies. Nevertheless, there is the possibility of rotation in management. At Bosch, a board candidate must have worked in four different areas in order to be shortlisted. We have established comparable career developments in our projects. In the tech industry, it is common to apply for new projects every 2 years. This automatically establishes hierarchies of responsibility. Rotations enrich management with experience and at the same time show which managers can take on which responsibilities in different areas.

Reection sheet: Consultation obligation in a change project

• What is the purpose in 30 words? • Who is the client and who is in charge of the change project? • What are the financial and qualitative objectives of the activity (SMART) and what are the framework conditions for achieving them? • Which resources, derived from the objectives, are planned (time, finances, quality, personnel)? • How was the significance of the company as a whole decided? • Which persons are affected by the request? • How are these laterally integrated?

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How urgent and how important is it to make resources available? How do project goals and overall results compete for resources? What are the lines of conflict? Which conflict solutions have been chosen so far? Which alternatives to resource allocation were considered?

5. Develop clear target projections If you want to change a management culture, you have to clearly tell those responsible for an organization what you expect from them. In Table 5.2, we show what such an expectation of management might look like. What is easy to read and easy to approve, however, is difficult to implement in a company. We selected the chart as in a case study in which a company wanted to replace an instruction hierarchy almost completely with responsibility structures. In such a

Table 5.2 Target projection Common goals

Rejection

Performance motivation Leadership style Delegation of responsibility Leadership decisions Check Flow of information Prioritize Personal meetings Learning new things Ability to manage conflicts Interpersonal understanding Mutual appreciation Cross-divisional cooperation

Pressure from “above” ordering, dominant Work according to regulations Authoritarian decisions of the superior Manifold control Too little

X

Affirmation X Self-controlling

X X

X

Reasoning and persuasive Self-controlling operation X Participation of the team/management X Self-responsibility Too extensive

Actionistically Inefficiently Little

X Strategically X Efficiently X A lot

Social adaptation, conformity Mistrust

X An open and constructive culture of debate X Trust

Missing

X High

Low

X High

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case, lateral management only works if almost all crosses are placed on the right side. Ultimately, it is a diagnostic tool that all committees—from the Executive Board to the upper, middle and lower management—can use. For example, in a two- to five-member board of directors, each member could first give ratings on his or her own and then the various ratings could be compared: Where are there matches? Where are there how many deviations? Together, we could then work on how to implement more laterality in the body. Another benefit of the chart is that it can be used to determine the maturity level for a culture in certain areas—service, production, sales, purchasing, etc.—and then to contrast this with the actual profile and a target profile. It is important in this context that this change is regarded as a set target projection for the relevant target groups. It is quite possible that different areas in companies also have different learning speeds. However, there cannot be different target projections. Such charts also have the advantage that any manager can use them to undergo a leadership style analysis. He may ask himself: To what extent am I personally at eye level with others? What do I need to improve? It is promising if he allows close confidants to give him feedback on how they see him personally. In this way, he can compare his self-image with that of others and arrive at a more realistic assessment of his leadership performance. We will comment in detail on the individual items in the description of middle management (see p. XX). The chart can also be used to evaluate the collaboration among a team of managers or the leadership style of the boss. Based on the evaluation of the answers of different team members, the team itself or its leader receives feedback on the status quo on the way to lateral management.

Which Levels of the Company Should be Reached? A clear target projection also includes deciding which target groups should work laterally. In principle, there are two models for introducing self-responsible structures through lateral management in an organization: Either at the management level or further extended to the employee level. Bahlsen and AOK Baden-Württemberg have opted for the first model, Semco and ABB in the 1990s and AES, Gore-Tex, FAVI, Morning Star and Buurtzorg for the more radical model. We believe that it is more effective to introduce the management model in existing companies, only when self-responsible management structures are established and working is the transfer to the next hierarchy levels realistic. At AOK Baden-Württemberg, lateral management was first introduced at the top level of the first 50 executives and the Executive Board and then established in upper and middle management. Lateral management is based on managers who act on their own responsibility and who network in complex decisions, thereby involving neighbouring areas in the company, customers and suppliers in the decision-making process. This raises the

What can Companies do to Culturally Meet the Challenges … Fig. 5.3 The TCI triangle according to Ruth Cohn

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THEMA

I

We

fundamental question of basic philosophical assumptions about cooperation and the importance of the individual in a company. We refer to an approach of the psychoanalyst Cohn (1975), which describes cooperation with the parameters “theme”, “I” and “We”. These three parameters correlate with each other (see Fig. 5.3). If you want to transfer this model to a corporate culture, then this means a three-way division: • The topic describes the business object of an enterprise, i.e. the products, the capital resources, the requirements to the industry, the customer relations and the processes, which distinguish an enterprise. • The ego means the individual in an organization, his or her freedom to make decisions and his or her competencies. • The We refers to the relationships between individuals in a company and the formal regulations and formats: How are decisions made? How to communicate? And how do we stand hierarchically to each other? Taking Buurtzorg as an example: The topic is the care of the sick and disabled. The I’s are the individual team members with their different abilities. The We describes that all caregivers have the same voice, the relationships between them are equal (lateral) and decisions are made by individuals (egos)—but before a decision is made, other persons relevant to the decision must be consulted. Lateral management has an entrepreneurial approach that says that the shaping of togetherness and the initiative for performance and innovation comes from the individual, not from the collective, a group or a team. The drivers of innovation and value creation are always individual managers. However, the company treats all managers equally and trusts them to contribute to value creation and innovation and to develop towards more accountability. In the world of the twenty-first century, however, entrepreneurial decisions are so complex that no manager, no matter where in the company, has access to all relevant information. He must therefore network within and outside the company or consult others in order to obtain the information relevant to the decision. In this respect, there is an obligation to consult.

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Lateral management is based on the ego, whose task is to involve the We in the decision-making process. This ensures that complex decision-making processes are made in a timely, technically sound and networked manner. Lateral organizations must not decide more slowly than classic management organizations—on the contrary, they must be faster. All successful lateral companies have solved the questions after the decision-making process. At Semco or ABB under Barnevik, the 50-person companies were led by a small management team in which the decision-makers were responsible for the topics. At Endenburg, all parties involved are informed of a decision that has been made. If there is no feedback or objection, it shall be deemed accepted and is implemented immediately. At the AOK Baden-Württemberg, there is a so-called lead management team that ultimately makes the decision and is responsible for complex projects or issues. In early research at the Glacier Metal Company, decisions were made based on the length of the implementation period: the shorter the implementation period, the deeper in the hierarchy of responsibilities decisions could be made. The principle applies to all lateral organizations: decisions are made locally by individual responsible persons who have specialist competence. In classical management, decision-makers were always at the top of the company, but in a hierarchy of responsibilities, decisions are made by many. How decisions are made is one of the key questions of lateral management. Karl Weick reports (Weick and Sutcliffe 2001) how this works in high-reliability organizations (HROs): On aircraft carriers, for example, the person who instructs the aircraft decides whether take-off and landing are to be carried out or aborted. Other HROs include medical emergency stations, nuclear power plants and airlines. Such HROs are role models in the digital economy for all companies and their employees. They have to cope with unpredictable challenges time and again and adapt to rapidly changing market and environmental conditions. It is best, says Weick, to postpone the decisions on the experts on the front line. In organizations with a consistently decentralized structure, decision-makers are obliged to consult each other. They call it proposal, advice process (AES), advice (dm-drogerie markt), recommendation, Waterline (Gore-Tex) or Nemawashi (Toyota) (Pflägling 2014). Likewise, the principle of consultative individual decision-making applies in all companies. A person is responsible for his decision. In contrast to the statement hierarchy, however, fewer decisions are made at the top. The decisions are made by emancipated managers at many levels of the responsibility hierarchy. Ultimately, giants are needed as managers who are willing to develop further and learn permanently. Self-responsibility requires self-confidence. Learning means in particular to reflect one’s own behaviour. Thus, the idea of lateral management stands and falls with the subjective factor. In our opinion, management is carried out by competent individuals, by assuming responsibility and ultimately by taking responsibility for decisions.

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What do These Changes Mean for People in Companies? When forecasts say that almost 60% of all existing jobs are endangered by the digitalization of the economy, this is first of all a threat. And threats scare people. Losing one’s job, worrying about being socially excluded, the question of whether one can continue to earn one’s living, or a lack of career prospects—these are all fears that must be taken seriously. Before a fundamental social change begins, it is the intellectual elites who play through the new. In the eighteenth and nineteenth centuries, these were Adam Smith, Karl Marx and Max Weber3—at the beginning of the twentieth century John Keynes and Joseph Schumpeter. The intellectual and social debate about the digital revolution is by now fully underway. Here—as in all times of great upheaval—the scene is divided into two camps: “Angst & Schrecken” (fear and terror) and “Hype & Jubel” (hype and jubilation).

Horror Scenarios and Hype Debates Some protagonists, such as the Fraunhofer Institute for Industrial Engineering and Organization and the Technical Learning Workshop at Darmstadt University of Technology (Wetzel 2015, p. 17 ff.), see the effects of digitization as positive, while the “Münchner Kreis”, an association of researchers and company representatives, the economic historian Komlos (2014) and especially the employee organization International Labour Organization (ILO 2015) assume that digitization will lead to major disadvantages for employees. The ILO, for example, conjures up the paradisal conditions in Germany, where 64% of all employees have a permanent job and 12% a part-time job. Worldwide, only one in four employees would have a permanent job. Paradise, however, is threatened! These two conflicting points of view can also be found among the German trade unions, which have recently discovered digitization as an object of discourse. Frank Bsirske, head of Ver.di, describes the consequences of digitization in apocalyptic ways: It promotes “social exclusion, de-democratisation, total surveillance, the disenfranchisement of employees, job cuts, precarisation of employment relationships, intensification of work and de-limitation of work” (Bollmann 2015). Detlef Wetzel, chairman of the IG-Metall trade union, takes a more differentiated and relaxed view of this in his book Arbeit 4.0 (Wetzel 2015) and Lothar Schröder, Ver. di’s colleague on the executive board (Molitor 2015). Wetzel believes that Germany in its industrial tradition has had many success stories in situations of economic upheaval and will also win the digital round. The two opposing positions have a long tradition in the trade union movement. In Germany, employee interests are represented by works councils, and their rights 3

Max Weber was already early occupied with the agricultural workers in East Germany in the nineteenth century, so that we locate him in the nineteenth century, although his important works were only published in the twentieth century—partly posthumously.

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are guaranteed by law. Works councils can exercise this mandate in two ways: constructive or destructive. Of course, works councils would never formulate that in that way. In the language of the works councils, this means acting as a strategic partner or protective power. Strategic partners are, for example, the often very well-trained works councils of the Metalworkers’ Union. They have a well-organized workforce and intelligent negotiation strategies in collective bargaining conflicts. At the same time, many works councils in companies are working on strategic issues such as the market, globalization, demographics, integration or costs and are working hand in hand with the management. In 2014, the VW works council made proposals for a savings program of several billion euros. At BMW, there is even the legend that in the 1950s the works council saved the company in negotiations with the Quandt family. The protective power idea is the old trade union vision of solidarity with the weak, who must be supported. This idea seems to have fallen from grace and is seen as out of step with current affairs in Germany today. Protective powers represent the interests of an immature workforce, which it cannot represent itself. Works councils as protective powers see their priorities in representing and supporting weak workers vis-à-vis employers, management or individual managers. In this way, injustice is to be prevented bureaucratically. Little works without the examination of performance-relevant, individually evaluable parameters by the employee side. It blocks everything that can be regarded as performance measurement for the individual employee. The formation of fronts into good and evil is the program here. The protective power idea with its consequence of the blockade of management is today hardly represented by professional employee representatives in private-sector companies. Here, too, the path goes in the direction of more laterality. Successful negotiations are achieved at eye level between “capital” and “labour”, as Willy Brandt once called it. The discourse about digitalization in the business press is different. There is hardly a magazine of the genre today that has not used the catchword “Industry 4.0” as a lead in recent years. Even the smallest information then becomes a megatrend. This hysterical side of discourse typifies events during social upheavals. The opportunities and risks of the new are then commented on alternately. The opinion makers always play with the fears of their customers. Everything that seems a threat sells well. But fear paralyses thinking and acting. Dimension and centre provide thinking and design options. In the social and intellectual debate about the digital revolution today, there are basically two positions: the pessimists and the optimists. This is important because the question that arises for every human being is with what attitude he or she will meet these changes. The pessimists are authors like Andrew Keen and Jaron Lanier. They are already predicting the downfall of enlightenment and democracy when they look at the consequences of digitization. The Internet isolates people and prevents competition. The centre of society disappears; the average becomes a thing of the past. Those who do not manage to become entrepreneurs have lost.

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Furthermore, the data collection frenzy of companies and especially of state secret services is experienced as a threat to individual freedom. The revelations of Edward Snowden, Chelsea Manning and WikiLeaks realistically trace these dangers. George Orwell’s vision is the favourite reading of pessimistic apocalyptics of doom. They think that 1984 will take place 50 years later—2034—with all his horror pictures of obstructive, state surveillance. Two publications on artificial intelligence were published in 2018 that focus on fear and terror. Yvonne Hofstetter in Germany with The End of Democracy. How Artificial Intelligence Takes Over Politics and Disempowers Us and Cathy O’Neil in North America with Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy. Approximately, every 5 years there is the same scam of trying to discredit new technologies. What we will actually experience in the years to come means nothing more than the logical consequence of creative destruction—a capitalist evolution. However, this is not available in relaxation mode: work is released. Particularly monotonous, simple activities, but also service activities are eliminated. The industrial precariat will be followed by a digital one. But if you believe experts, it won’t get any bigger. What will happen to the people who have carried out these activities or who still carry them out today will have to be the subject of a social debate. Hannah Arendt predicted the end of work as we know it more than 50 years ago. The goal is more democracy, more social commitment and more participation in democratic processes. That would be progress—and an optimistic expectation for the future. The ideas of Jaron Lanier and Andrew Keen point to the possible dangers that any technological revolution can trigger. Historically, however, they have been part of a series of progress concerns the constructive contribution of which for coping with far-reaching change processes was usually very small. In the eighteenth and nineteenth centuries, there were Luddites who destroyed technically superior looms and machines to save jobs. In the authorized Steve Jobs biography, author Walter Isaacson reports that the discussion “Pros and Cons of IT” had already been conducted in the California hippie movement in the early 1970s. Even then, there were apologists who thought IT was devil’s work. The founders of Apple decided to focus on the positive benefits of information technology. They finally came out on top. The computer, the mobile phone and the Internet are very helpful for many people. I guess nobody wants to be without them today.

Of positive and negative visions of the future

“The only thing I know with the greatest certainty as a futurologist is that an optimist will have a good future and a pessimist a bad one”. Walter Wacker As long as admonishers like Jaron Lanier receive the Peace Prize of the German book trade, the public danger of Big Brother is relatively low.

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The situation is different with the public persecution of people who were involved in WikiLeaks or who, like Edward Snowden or Chelsea Manning, have rendered outstanding services to freedom of opinion and information transparency. The persecution of these persons or the conviction of Manning is a socio-political scandal. For the USA, these excesses are certainly not a format to position itself as a first mover in the field of personal freedom, data security, public data transparency and data availability in the future. What are the conclusions for each individual from this debate? People have two choices. You can take the side of the optimists or the side of the pessimists. Or as Steve Jobs called it: to opt for the constructive or the destructive side. The pessimistic-destructive side will tend to lament progress. The optimistic-constructive side will accept progress and draw the best from it. If you want to go through life with as little fear as possible, then you should take an optimistic-constructive approach, and if not … well, that’s fine. One of the last Western Roman emperors, Marc Aurel, said: “The happiness of your life depends on the nature of your thoughts!”

The Return of the Individual In the age of the digitalized economy, knowledge workers are becoming more and more important. Technical experts have implicit, not easily reproducible knowledge. Their competences are often tied to their own person. One of the strengths of the German economy is that there are many very well-trained knowledge workers in different sectors. The group of these knowledge workers makes up for more than 50% of the jobs in Germany—and the trend is rising (Frank and Hübschen 2015, p. 67). Labour researchers speak of the subjectification of labour. Work is part of self-realization. Knowledge workers demand and determine their own lives. As a rule, well-qualified people can choose their employer. You want to combine professional and private life in a meaningful way. Adapting work to the personal needs of the individual is the real challenge in the digital revolution. Knowledge workers are not mere co-decision-makers, but designers. To find a suitable employer, knowledge workers do not need Gallup retention studies. This group of workers is very careful to monitor how organizations are structured and what development opportunities they offer them. Their “job hopping” and “cherry picking” is a completely new challenge for the HR department in companies (Deutsche Telekom AG; University of St. Gallen 2015). In addition to the subjectification of labour, the digitalization of the economy is also accompanied by individualization at the product level. What began with individual mobile phone pouches is now being continued on the Internet when buying a car, delivering groceries or choosing clothes. In Germany, individualization is a social megatrend that is being promoted in extreme ways by digitalization and mass customization. This also applies to housing, sport, leisure and culture.

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The pessimists would describe subjectivation as isolation, the optimists as a chance to realize one’s full potential: To be what you want to be and to have time to develop and control your life.

Individual Freedom is the Goal The value of freedom is underestimated today in society as well as in organizations as a motivational force for individuals and groups. This is especially true for knowledge workers. The complete flexibilization of work is no longer a horror scenario, it almost gets demanded. Working in offices has a lot to do with the old office world, being physically present is no longer necessary today for the provision of services, and for some years there has been the possibility of working from anywhere with a laptop, smartphone and tablet, according to Microsoft managers Elke Frank and Thorsten Hübschen in their book Out of Office (Frank and Hübschen 2015). Microsoft would be glad to offer the corresponding products enabling this freedom and would even exemplify the flexibilization in the new headquarters in Munich-Schwabing. Added to this: the employees were even allowed to get involved in selecting the location and furnishing the house. The first statement is somewhat surprising, since in the USA the freedom to work from anywhere has recently been severely restricted again. In the international management discussion about flexible working hours, the Ice Age is back. Particularly, in the USA, the fundamental regression in terms of freedom in companies such as Best Buy is being discussed (Bhasin 2013). They had introduced a Results-Only Work Environment (ROWE) in 2007. Many companies followed suit. The motto: No matter where you work, the main thing is that the results are right. In 2013, the programs at Best Buy and Yahoo were discontinued with a lot of press hype. The protest was significant: “We said it right away that too much freedom is not possible”! “But the results were right!”—etc. Europe is also struggling with flexible working hours. The EU Working Time Directive allows a maximum of 48 h of work per week and stipulates a daily rest period of at least 11 consecutive hours (Europäische Kommission 2015). There are two opinions on this issue. Some want the strict EU directives to remain in place: “You have to protect the large number of average workers and you don’t make laws restricting those who like to work for 14 h on a project. They’ll do what they want to do anyway!” The others think that these regulations are outdated: “They date back to a time when most people had to work hard physically! I want to work today when I want to”. The German government has already approved exceptions: Work on offshore wind turbines may be carried out 12 h a day and on Sundays and public holidays. At the Darmstädter Software AG, half of the employees have been working to achieve goals and not according to time schedules since 2014. However, they have to document every activity that goes beyond eight hours—which some people do not like because of the bureaucratic work involved. But a little more freedom is always possible, and so in Germany there is a kind of ROWE light in southern

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Hesse. Many companies have now followed suit and have also made the working hours of their knowledge workers more flexible. At Vaude, 50% of employees work part-time. A total of 11% of all Germans work in the home office. This fits into today’s time and into the attitude towards life of very well-educated people. If companies succeed in combining these freedoms with the assumption of responsibility for the goals and results of the individual and the company, this would come very close to the goals of Western European enlightenment of people’s self-determined lives. This had previously been granted more to the self-employed than to employees. In this respect, Elke Frank and Thorsten Hübschen are right with the subtitle of their book: “Why we have to reinvent work”.

Individual Freedom Needs Laterality Individual freedom, even if it is only a flexibilization of working time or location, needs a new equivalent in work organization. When’s the team meeting? How many team meetings are necessary? How do we distribute information? Who makes how decisions and has what goals? All this will change the organization even more profoundly. We assume that leadership in the future will mean considerably more self-management and more networking at interfaces, and that instruction hierarchies are replaced by responsibility hierarchies. Any well-trained employee can then choose companies that are managed laterally. Leading at eye level will become an important competitive advantage in the battle for the best. Smart HR directors are already building career paths that provide knowledge workers with the framework conditions they need to develop successfully in organizations. Laterally qualified managers carry out these progressive concepts as leadership at eye level.

Risks Exist It is not fair to discredit every admonisher of the digital revolution with the label “German Angst”. There are risks that must be taken very seriously. This will show whether John Komlos, a former economic historian at the Ludwig Maximilian University in Munich, is right in saying that Schumpeter’s creative destruction will be more destructive in the future than it was in past periods of upheaval. Knowing the achievements of capitalism since 1800 is a very daring thesis. Nevertheless, nobody can predict today whether there will be more jobs in 2030 than today. That depends on many factors. There are also risks associated with digitization that have already led to disappointment. One of the biggest disappointments was experienced by the first users of the Internet, such as the authors of The Cluetrain Manifesto4 (Levine et al. 2000). 4

The Cluetrain Manifesto is available as a book or as a free online version: www.cluetrain.com/ book/index.html.

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Like many other pioneers, they saw the Internet as a kind of transparent source of information for everyone. The network should be democratic and anti-monopolistic. In particular, there should be complete, decentralized freedom of information and expression. Meanwhile, with Amazon, Apple, Google, Facebook and Microsoft, American corporations have emerged that are striving for domination and a monopoly on information on the Internet. Christoph Keese also describes this in his book Silicon Valley. However, the claims of corporations and the enforcement of their claims are two very different pairs of boots. Yandex (Russia) and Alibaba (China) are the number one search engines in their respective countries. Furthermore, the activities of Google and Microsoft are in the focus of the anti-monopoly authorities in Europe. Nevertheless, the security of network data vis-à-vis companies and particularly vis-à-vis states will be one of the most important facets of the social discourse on digitization. This will show whether the democratic rights of the individual are being respected. Today, individuals can already do a lot to cover up their traces on the Internet. The younger generations who have grown up with the Internet are spreading their data widely. They began doing this early, because their parents were not to catch them red-handed after they had been on “forbidden” sides. Many younger colleagues have five to ten e-mail addresses, use multiple social media formats, different computers with different IP addresses and aliases, and security software like Tor. An algorithm has a bit more difficulty finding, analysing and bundling the data of these users. A further risk exists for those persons who do not have any affinity to digitization. These could be the losers to progress in the third Industrial Revolution. In the digital world, individuals in particular will always have to reorient themselves. Today’s criticism of the effects of the digital economy can be reduced to four basic theses: 1. People are too stupid to handle the Internet and complex IT properly. 2. The machines will eventually dominate humans. 3. The workplaces will be made more flexible—in the future, work will be done always and everywhere, without rest. 4. The digital revolution is causing wage dumping. 1. People are too stupid to handle the Internet and complex IT properly Again and again, studies appear claiming that our little ones sit for too long in front of the computer, smartphone or tablet. Concentration disorders are the result and motor illiteracy. The children could log into a computer but could neither swim nor ride a bike. Even many adults would leave indelible traces on the Internet. The web would then contain photos of people in questionable contexts and feature documents with spelling mistakes and also idiotic content that will then exclude these poor people from job possibilities. What a scandal!

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All this is substantiated by investigations from small samples, snapshots and individual case analyses. There is little scientific evidence behind this. Admittedly, it is true that individuals do nonsense using the new media. The fact that people are too stupid to deal adequately with new media in the long term has been empirically refuted.

Digital and networked learning

Do you know the town of Niederhasli in the canton of Zurich? Probably not. New forms of learning have been practised in the secondary school there since 2013. Students no longer have to pack dozens of books in their bags— they have an iPad. Every student gets one on his first day of school. Teaching is different from traditional schools: The pupils use a digital learning platform; they are networked with each other and chat during lessons. The chat is visible to everyone in real time, including the teacher. He sees where he has to explain or correct something. Marco Stühlinger, Head of Secondary Education, sees this as a win-win situation. The students get immediate feedback. They know immediately after editing a task what they have done right or wrong and how they are able to improve. That’s a real learning asset. Networked working means more efficiency, but it also promotes exchange and communication among each other. In Niederhasli, frontal teaching was changed—and investments were made in teaching materials, infrastructure, equipment and software. To this end, the school has provided resources, invested in personnel and structural measures, including ultra-fast Internet. It may seem paradoxical. Although students sit in front of their digital devices, they work together more than before that. They’re practising their social skills. And also the teacher finds a new role, away from frontal teaching towards coaching. The learners then also become teachers: The student Christoph shows the others how to program computer games at the “Makers Space” day. In autumn, Christoph wants to start an apprenticeship as an electronics technician. Did the school prepare him for what’s to come? “I think you can get quite a lot out of it if you use it right. I learned a lot during that time. I learned how to get good feedback. How to constantly improve yourself. I learned how to work with an iPad and how to work independently. We have normal learning goals, but we solve everything ourselves”. Sandra Monroy, the president of the school’s care service, says: “It’s not really the school model that has been changed, it’s a change in attitude that has taken place. How should school be made more contemporary?” And contemporary means in Niederhasli: Digitization and cooperation. (Source Erne 2019).

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History shows that people are very well able to acquire the benefits of new media. The art of printing was a great advance for mankind and contributed significantly to the fact that many people were provided with information and learned to read at all. Today, most people on Earth can read. Radio and television had a similar function in the dissemination of information—and were initially equally controversial. The Internet allows dialogical communication and is an important information and discussion forum for many. While classic television was one-way street communication, on the Internet, transmitters and receivers can enter into dialogue with each other or exchange roles. That people have difficulty getting used to new technologies is really not new. The forefather of this technology research is Marshall McLuhan. Since the 1940s, he has been concerned with the question of what the “new” media (i.e. technologies, then television) do with people. In his view, they (the people) are fed far too quickly with new technology and have to complete an immense amount of learning and adaptation. The first televisions interrupted forms of evening communication such as games, conversations and shared hobbies during broadcasting time. They changed people’s roles. Communicators became TV viewers. As a result of his research, McLuhan foresaw the development of the Internet and discussed the “Global Village” in the early 1950s, where everyone is connected to everyone in the world. However, he was also able to show the benefits that each new medium brought as an improvement in life. Marshall McLuhan also cites the reason for the difficulties in adapting to new technologies: “Our Age of Anxiety is, in great part, the result of trying to do today’s job with yesterday’s tools and yesterday’s concepts” (McLuhan 1968). What can people learn from Marshall McLuhan’s research? 1. Don’t let them scare you. So far, mankind has always succeeded in adapting to new media. Fear is a bad advisor when people want to learn. 2. New media will prevail. Those who do not use them have social and economic disadvantages. 3. Take a look at the new media and use them to improve your living and working standards. 4. Use user-friendly IT. Make learning easy for yourself. 5. Plan time for learning. IT will change so rapidly in the coming years that there are many new things to discover.

Marshall McLuhan—his fundamental ideas

Marshall McLuhan dealt with media and their effects on people and society and is regarded as the “father of media studies”. Here are his basic ideas, adapted for the twenty-first century: 1. All media are extensions of a person’s mental or physical ability. – The wheel is the extension of the foot.

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– The book is the extension of the eye. – Clothing is an extension of the skin. – The electrical circuit is an extension of the central nervous system, and the telephone and mobile phone are an extension of space-independent communication. – The Internet is an extension of knowledge and freely available information. 2. The medium is more important than the content. Societies have always been shaped more by the nature of the media by with which men communicate than by the content of the communication. The alphabet, for instance, is a technology that is absorbed by the very young child in a completely unconscious manner, an osmosis so to speak. Words and the meaning of words predispose the child to think and act automatically in certain ways. The alphabet and print technology fostered and encouraged a fragmenting process, a process of specialism and detachment (McLuhan 1967).

And the technology of electronics promotes trends of association (Facebook, Twitter, others).

2. Machines will eventually come to dominate humans. There is much speculation that computers will eventually dominate the world. First of all, these are science fictions—science fiction. Perry Rhodan readers like to enter a virtual world, and virtual worlds also enjoy great popularity on the Internet. But they are simulated worlds and not real worlds. Which one of these will ever be real, we’ll see. The following story shows how speculations can go wrong. In 1997, the then world chess champion Garri Kasparov lost against the IBM computer “Deep Blue”. So it was clear: The machine is better than the best living chess player in the world. Anxious people were afraid of the superior digital machine. It came differently. “Deep Blue” is now chess machine “Hydra”. According to Moore’s law, the computing power of computers—as of 2015—has doubled 12 times since 1997. The water snake can now also process information much better. And then this: “Hydra” is regularly beaten by the combination of a mediocre chess player and a laptop with simple computing power. This combination is unbeatable, as Hydra can still double a lot of computing power (told after Brynjolfsson and McAfee 2014). This applies not only to chess, but also to all other activities. On the job market, employees without IT skills will be less and less needed in the future. Nevertheless,

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the thesis is wrong that the machine will dominate man for the foreseeable future. The man–machine combination is better than the best machine. This combination is controlled by humans. The spirit of the machine, that’s what we are. And it’s going to stay that way for a long time. But without the machine, hardly anything is possible. 3. The workplaces will be made more flexible—in the future work will be done always and everywhere, without rest. When they stroll through the cafés in European metropolises, you will always find people working there with laptops and smartphones. In Japanese companies like Toyota, there are hardly any separate offices for employees. When they arrive at the company, they log into the company network with their laptop at a long table. There are 50 other users at the table. According to official statistics, the number of home jobs in Germany has been stable since the mid-1990s. About 500,000 people occasionally work from home (Gersemann and Wisdorff 2014). But if we are honest, in reality there are far more people working at home in Germany. Who doesn’t pick up their mobile phone at the weekend to make business calls, or is preparing something for the coming week? For a long time, there was a strict separation between work and private life in Germany. This tradition does not exist in many other countries. However, the flexibilization of working hours has aligned itself with other countries in recent years. We have long become accustomed to longer shop opening hours and 24 h service hotlines. Permanent professional availability will continue to increase. Private permanent accessibility is already part of everyday life today. There are plenty of admonishers who think it’s harmful. The human being is not only homo oeconomicus, the human being also needs rest periods. Permanent accessibility has limits. A few years ago, it was decided on the executive floors of Daimler and Volkswagen that the electronic devices must be switched off at the management level at the weekend. From the point of view of lateral management, this was a strange decision. If people want to lead a self-determined life, then good time management is an important prerequisite. And who, it may be asked, is responsible for this time management? We think it’s the people themselves. And these determine when the devices are to be switched on and off. In the Ford factory, the assembly line workers were given time by the rhythm of the machines. Until 30 years ago, there were fixed working hours in Germany. Today, these are made more flexible in almost all companies, unless objective circumstances prevent it. For years, making working hours more flexible has meant working less and at the time people want. So where does the fear of working more flexibly come from? In Europe, there are clear regulations concerning the flexibilization of working hours. The discussion about this topic is a sham debate in this country, and it is often about the preservation of vested rights. It’s about enforcing interests. In principle, it must be in the interest of people to have their time at their disposal

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independently. Flexibilization is therefore to be welcomed, as this means scope for shaping the life cycle. This is an important advance over Fordism, over factory work and over the time clock. On an individual level, it can be natural for people to exploit themselves and work around the clock. But digitalization can’t help it. We humans ourselves determine how we use time. Time managers recommend that you check at the end of each year how you have spent your time throughout the year—and what it is you want to change. When media change and people use them, it is all the more important to reflect on how to deal with them. Alvin Toffler published a book in 1970 entitled Future Shock (Toffler 1970) in which he postulated a new lifestyle for the twenty-first century. If the twentieth century was characterized by people having more and more and wanting to experience and try out new things, man would turn the tables in the coming century. They would say “no” to new media more often. From today’s point of view, don’t buy a new smartphone or tablet, don’t book an online service, etc. Technical changes would only be made if they really improve the quality of life and work. Man in the twenty-first century knows the technical possibilities that exist—but uses only a few. The trend towards things and media working in an “analogue” way is actually spreading further and further in leisure and consumer behaviour: Trends like Urban Gardening, the Craft-Beer movement and holidays without Internet connection; this is the new luxury of the Digital Natives. 4. The digital revolution is causing wage dumping. In Silicon Valley, Christoph Keese describes Marie R. (Keese 2014, p. 228), who lives in the Philippines. She works as a clickworker in one of the new professions created by the digital economy. She does not have a permanent employer but applies for contracts in response to requests for proposals on Internet platforms. She belongs to the digital avant-garde, and she sells her services for 4 US $ per hour. She accepts conditions such as electronic monitoring at her workplace and a public evaluation of her work by customers on the Internet. From her income, she can live well in Pangasinan. She competes on the platforms with competitors around the world. Internet platforms for job placement are abundant nowadays, for example, for car-sharing agencies, handicrafts, design contracts, art, marketing campaigns, Internet services and much more. The platforms award a prize to the person with the best ideas, the best quality or the best price. Work is given without limitations via the net. First of all, this supports the thesis that the digital revolution entails wage dumping. Contracts are awarded to those with the best price, and the process is transparent. Christoph Keese notes that this employment agency is still in its infancy. We have heard that story a little differently. The large, globally active IT companies have been working with extended workbenches and freelancers for years. They act similar to the platforms described by Keese. This can quickly spread to other

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industries as a result of digitalization. As in the international arena, this is the case in other sectors of the economy at national level. In journalism, in further education, in advertising communication and in cooperation with consulting firms, it is even the norm. The Axel Springer publishing house, in whose management Keese works, will do exactly the same. The industry produces with contract work. It’s all nothing new. The digitalization of the economy only makes this form of work more transparent and thus makes it visible that there is a wage gap between different regions. A worker in Bulgaria earns considerably less than one in Germany. Already today, jobs in Germany are competing with others worldwide. According to the European Commission, the self-employment rate in 2014 was 15.6% in Europe, 10.3% in Germany and 27% in Bulgaria. These self-employed people are already selling their work on the market today. They do this through invitations to tender, acquisition and personal contacts. A good education, few exchangeable products, a good quality of work and fees that are as high as possible on the market help. Now there are even more acquisition opportunities via platforms. What’s the difference? Those who are good will not have to use these platforms anyway. Companies must make an effort to find the really good freelancers. The platforms also have advantages for the labour market. People can test their market value there. Often, pupils, students and people looking for additional opportunities use the platforms. They experiment with their ideas and try to make money with them. Platforms can be used as an introduction to self-employment or as a sideline. There are people today who secure their income with Internet commerce and use Web platforms to sell their products. The Internet can also be understood as a large marketplace. Platforms on the Internet can be used to test what opportunities exist in the labour market. At best, an independent activity is the result. The self-employed generally have a high level of job satisfaction, which is reflected in a very low rate of absenteeism (AOK-Bundesverband 2015). Lateral management has the idea of creating more job satisfaction and thus commitment in the company through more self-responsible work. This works in companies such as Buurtzorg, the dm markets, Sun Hydraulics, Gore-Tex and many others. Such working structures will become more widespread in the coming years. People who were independent in their work biographies are worth their weight in gold for lateral organizations. They are used to working independently. Platforms that create transparency about market services will compete with traditional forms of employment. This could mean that people could also choose between different employment offers. The prerequisite for this is of course a good qualification or learning, learning, learning. The latter, by the way, comes from Lenin—and he knew how to win in revolutions.

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What to do to survive in the digital revolution or: What would Marshall McLuhan advise us today?

1. People first react to new media and technologies with fear and a feeling of insecurity. This uncertainty is reinforced by media (propaganda) and books that warn against media use. Fear is a bad advisor for learning. The best strategy is to communicate and network with like-minded people about the sensible use of new media. It’s fun, and fun is fear-reducing. 2. Deal with the new media (technologies). They are more important than the content they transport. Get fit for the new media. That means learning, learning, learning. This also benefits you in your professional context. 3. The sooner you find out how best to make use of the media, the more successful you will be and the more adaptable the new media will be to your needs. The use of television is a routine today. In addition, the Internet as a dialogue medium is much more exciting and faster than television today. TV ratings are going down. Television and computer are merging. Users will determine the media selection in the future. This democratizes the media. 4. Create a context of routines in the new media (favourite sites, important information sites, media life limits, etc.). 5. Media are not creative. Google only produces passive knowledge. Find discussion groups outside the technologies in which you can be creative (literary circles, art and music, crafts, sports, hobbies, clubs, religion). This will sharpen your senses for innovations outside the new media. 6. In fact, brain structures change with the purchase of new media. McLuhan calls this amputation of old abilities. This could already be seen in the 1970s, when electronic pocket calculators appeared in schools. At that time, many students’ arithmetic and memory skills were diminishing. Memory is like a muscle that needs to be trained. Don’t just trust the new media, but look for ways to train your memory (remember appointments, memorize phone numbers or names, play Sudoku, Memory, Trivial Pursuit, etc.). 7. Do everything that is fun on the Internet and with the new media. Discover new pages. The offer is huge and infinite. Get to know new things. 8. Deal with Internet security (e-mails, bank accounts, payment transactions). Meanwhile, there are also possibilities for normal users to surf the net safely. Update your firewall regularly. There are alternatives to all sides. 9. Media can be switched off. In 1949, television was only possible to a very limited extent, if at all. Create net-free times. You can also leave the house without a mobile phone and then not be reachable. You can turn off the music when driving a car. Treat yourself to media-free times.

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Networking is the Chance If the subjectification of work increases, then the subject—the human beings—will also find forms to reorient themselves. One possibility is networking. While access to information (libraries, insider information, special credit agencies, etc.) was very difficult in the period before digitization, the Internet has created transparent information and communication opportunities that no one would want to do without today. The real chance through the Internet is to network and to use the networking also professionally. When companies and machines network, so can the smallest unit in the company, the individual human being.

Network exercise

We have adapted a good exercise for personal networking from Doppler et al. (2002, p. 410): Step 1: Create a mind map with yourself in the centre. Complete all companies, associations, contacts or clubs where you have met interesting people, who are economically successful and with whom you can network professionally, and ask yourself the following questions: • Who are my next and next higher bosses? • Who are the important people in the neighbouring areas? • Who do I know, even if only indirectly, from among our customers? • Who do I know from my training or studies? • Who have I met at training courses or trade fairs? • What kind of people have I met in extra-occupational contacts? • Who of these people is important for my personal development? • What contacts do my partners have? • Who have I met through social networks? • Which social networks are interesting on the Internet? • Which people have impressed me and which have disappointed me? • Who has helped or promoted me? • Which contacts can I expand? Step 2: When you have answered these questions, form clusters. Assign headings to the persons, such as power, influence, information, networking ability, promotion, qualification, guidebook, etc. Step 3: After that, you have headings and, below them, people who belong to your network. Now you assign a total of 15 points (maximum 3 per person) and rank the persons in a ranking order.

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Step 4: Create an action plan for your network that includes which contacts you want to maintain, expand and neglect and which activities you want to undertake with whom and when! Step 5: You implement this plan! Principles of Networking: • • • • • •

Networks are the assets of people in a digital world! Networks only work if they are maintained! Networks become more valuable if you don’t use them! Networks work well when you invest more than you get out! Networks are based on trust! Trust cannot be borrowed (be careful when recommending third parties in networks)! • Networks work silently and shy away from boasting!

Learn, Learn, Learn If there are frequent job changes in the future in the employment biographies, then there will be free times in which people can further educate themselves. Qualification will play a central role in professional life. New learning of occupations, supplementary learning to already existing skills and, in particular, permeability to university level educational offerings will become the norm. Companies will submit offers to their employees on how they can further qualify for future tasks. However, it will also be the task of the people themselves to invest more money in their own qualifications. Educational researchers agree that there is no higher return on personal investment than investment in education. Successful personalities in the Industrial Revolutions who have made it to prosperity and success have always benefited from improved education and training. At this point, everyone can ask themselves whether they are investing enough time and money in continuing education, seminars, reading, Internet research, workshops and other forms of learning. It has now become common practice for people to work on their own fitness and personal nutrition. Little attention is paid to the fact that the brain—like a muscle—also has to be trained daily. There are managers who have negotiated 10 paid days a year in their employment contracts for their personal development. That’s well-invested time. Learning today is no longer repetitive learning like in the past. Today, we network with others in order to exchange information on the important topics of life. Networks can also be learning and thinking networks, which are gaining in importance especially in the USA under the keyword Educational Technology (“EdTech”).

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These are online learning platforms on which a huge range of further training courses has been created. More and more students are using the online platform Sofatutor.de in Germany to improve their qualifications. A further example is the learning of languages in the net; this goes free of charge by Audiotape, for example, with www.goethe-verlag.com/DE/ or with commercial offers such as Rosettastone. de, babbel.com or duolingo.com. Everyone can see for themselves how good these learning programs have become in the meantime.

The most important learning platforms

The most important Massive Open Online Courses come from the following providers (see Nieswandt et al. 2019): • Coursera is the world’s largest MOOC platform with more than 37 million participants worldwide. Many course contents come from elite universities, including Stanford, Princeton, Yale, London, Munich, Zurich and Geneva. (https://de.coursera.org). • edX is number 2 in the ranking with around 18 million learners. edX also cooperates with numerous elite universities, e.g. Harvard, MIT, Berkeley, Oxford, RWTH Aachen, TU Munich, ETH Zurich (https://www.edx.org). • Udacity was used by around 10 million learners in 2018. The platform is largely specialized in computer science topics—for example, artificial intelligence—and cooperates with companies such as Google, Facebook, Daimler and Bosch (https://eu.udacity.com). • FutureLearn from Great Britain is the largest European MOOC platform with 8.7 million users. It cooperates primarily with British and European universities (https://www.futurelearn.com). • openHPI is the MOOC platform of the Hasso Plattner Institute in Potsdam. There, the main focus is on IT and IT topics (https://open.hpi.de). • oncampus is a MOOC provider of the Technical University Lübeck in cooperation with other universities with different topics (https://www. oncampus.de).

In Europe, the provider FunMOOC (https://www.fun-mooc.fr) is best known for online courses in French, while Miríada X (https://miriadax.net), for example, offers courses in Spanish. MOOCs now exist in numerous countries, with China in particular on the rise. The MOOC platform XuetangX (http://www.xuetangx.com) already had 14 million users in 2018. MOOCs are also emerging in emerging markets in cooperation with local universities.

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What are the most popular online platforms?

MOOCs reach a lot of people, individual online courses have, believe it or not, more than one million participants. The world’s most popular courses are the following: • • • • • • •

Learning how to Learn (UC San Diego/Coursera). Machine Learning (Stanford University/Coursera). Introduction to Computer Science (Harvard University/EdX). Justice (Harvard/edX). The Science of Happiness (Berkeley/edX). Intro to Artificial Intelligence (Udacity). Elements of AI (Helsinki University).

These are great opportunities in a digital world! The digital world produces an incredible variety of educational opportunities unique in history. Germany produces up to 90,000 books a year. The Internet makes information transparent—these are states of which our ancestors could only have dreamt of. Universities, publishing houses and other educational institutions offer a variety of lectures, talks and information that people can use for their own further education. However, this information has its particular benefit only in the qualified exchange with others. No one can read 90,000 books a year. In addition, important books may appear abroad. That would mean reading more. The important question, therefore, is how do I prioritize the important issues? Everyone has preferred areas of interest, personal strengths and an environment of people who work on similar topics to themselves. While work, fitness and nutrition are routines for many people, learning is often random. Learning is the central task in the digitalized world. Everyone can organize learning for themselves and define their personal learning goals.

Formulate your personal learning goals

• • • • • • • • •

Which learning topics interest me? Which information websites do I visit regularly? Which seminars will I attend this year? Which congresses will I attend? Where will I train at my workplace? Where do I use my learning networks? Where will I give lectures and how will I prepare for them? What will I publish? What books will I read, and how often will I visit bookstores and libraries and publishing websites?

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• With which educational institutions do I cooperate or in which alumni networks am I? • How do I prioritize my annual learning plan? • What learning times do I reserve?

If digitalization increasingly leads to subjectivation, then the individual must also develop intellectually. The possibilities for this are created by digitization itself. The individual can use it. Knowledge is particularly valuable when it is implicit, human-bound knowledge. This knowledge must be developed. Personal development is the real software of the digital revolution. Designing the individual learning program for mental fitness is the challenge and will become more important as the digital revolution progresses.

What do These Changes Mean for Managers? The ING-DiBa study (ING-DiBa AG 2015) estimates that around 11% of executive jobs are at risk as a result of digitization. In our estimation, that is only half the truth. While some activities will be eliminated, more management functions will be needed to meet the new challenges posed by the digital economy. Complex systems—and these are companies in a digital world—need more managers than classic hierarchical systems. The hierarchy of instructions had advantages in linear and complicated, but not very complex organizations, where decisions could be made quickly from top to bottom and without regard for losses. Complex organizations must network internally and externally. This requires more and not less responsibility. The usefulness of organizational charts for the assumption of responsibility by many is overestimated. In responsibility hierarchies, it does not matter whether a manager is leading employees or not—and if so, how many. In these, it is only important that he makes as many right decisions as possible and initiates real innovations. Management will take place at many levels and interfaces. Managers are then experts, managers or both at the same time. Rotation into other functions every 3–5 years is also conceivable. The advantage for the managers involved would be that they would be able to take responsibility for many things—projects, teams, content and special activities—alternately. In this way, they get considerable know-how and thereby also invest in their personal future. They constantly familiarize themselves with new issues. This also means that managers will turn to new forms of management development, see the activities for which they are responsible as learning opportunities, qualify themselves through self-directed further training and develop in networking with other areas.

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New Forms of Management and Personnel Development In the digital transformation, the existing management images are also changing: The manager thinks and works like an entrepreneur, networks within the company, with customers and suppliers, drives topics, teams and innovations, has the successful, long-term development of the company as his goal and delegates responsibility radically to individuals. That’s more than going from Peter Drucker to Warren Bennis. Whereas management previously had the task of achieving maximum value creation with insufficient resources in a stable environment, it now has to do so more quickly in a complex, rapidly changing environment. The lateral manager is a developer: he develops himself, the people he works with and the organization. This also means that the full responsibility for personnel and costs passes from the very top to the manager and his team. Within the team, costs and revenues are transparent and are the responsibility of individual team members. Ideally, the team consists of personalities who also correspond to this management picture. The manager promotes this development image. Ultimately, his goal is to make himself superfluous and to take on other tasks in the organization after successfully completing an activity. The team is constantly restructuring. Everything’s in flux. Tasks are regarded as temporary activities. The focus is always on creating the greatest possible long-term benefit for the company. This claim is still a long way from the actual expectations managers have today. Self- and area-optimization and finally the clinging to decision-making power are still in the foreground. Managers often see themselves in a position to fight for the jobs in their area or department, instead of discussing with the people involved the desirable reduction of jobs as a result of digitization. If it stays that way, it’ll be dangerous for managers. We remember the 1990s, when middle management was described as a layer of clay or “paralysis” and thinned out. This meant that while middle managers would convey decisions from top to bottom, they would not let ideas pass from bottom to top. Lateral management now demands a completely different management and leadership style. In the digital transformation, as many people as possible in a company should become innovators and question the added value of their own activities. This is only possible with a great deal of freedom and decision-making authority, and especially with full transparency about the economic efficiency of the workplaces. Not all managers will manage this change in behaviour. A concrete example: At dm, several sales managers left the company after such a readjustment, reported (Werner 2013), founder of what is now the largest drug-store group in Europe. Letting go, dealing with people at eye level with all consequences, is an imposition! In the future, an important part of the management work will be to discuss with the teams the status of digitization and thus the future viability of the jobs. The dismantling of old structures and the development of new fields of activity will take place successively, in parallel and unexpectedly. “The existing, highly selective, silo-like departmental and divisional structures will labour under these new requirements” (Ley 2015), as the entrepreneur and strategy consultant Hannes Ley put it. Managers become crisis managers in a positive sense. Restructuring becomes

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the norm. It is important for companies to make resources available for the further development of their employees. RAG AG, with its form of restructuring over the past 25 years, is the inspiration behind this development. Every manager there had the task of personally looking after the individual people in his area of responsibility and developing new perspectives with them after the reduction of tasks. For management, this means that it is measured both by the achievement of objectives and by the evaluation of lateral progress by its employees, as we described at the beginning of this chapter.

Situational Leadership in the Transition Phase If one asks executives in Germany today about well-known leadership styles, then the authoritarian, democratic and laissez-faire leadership styles are still mentioned. Even the basic idea that people can be attributed to a certain style of leadership is very questionable. In contrast, authors such as Hersey, Blanchard and Fiedler have developed concepts that entered many German management seminars in the 1990s under the name “situational leadership style”. The models were also known as “GRID models”. This development is also important for the introduction of lateral management: in the transformation phase, managers will have to lead both laterally and classically hierarchically, depending on the team. On the one hand, Fig. 5.4 mentions two leadership styles that are referred to as employee-oriented or fact-oriented leadership styles. On the other hand, it mentions two evaluation parameters for employees, which are described as ability

Ability (employees) 10

Employeeoriented leadership style 5

0

5

0

Executive as motivator / supporter

Executive as manager of complex leadership situations

Little leadership necessary

Executive as teacher and challenger

5 Issue-oriented leadership style

Fig. 5.4 What do we mean by a situational leadership style?

Willingness (employees)

10

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(qualification for the tasks) and willingness (intrinsic motivation for the task). The rating scale ranges from 1 (low) to 10 (well above average). Executives with high scores in the employee-oriented management style have above-average social skills: Empathy, goal-oriented conversation, conflict ambiguity and conflict resolution skills. Executives with high ratings in a fact-oriented management style have above-average professional competence in their field. They are good at thinking in terms of goals, organizing themselves, delegating, making decisions and exercising control. The highlight of this model is now that not only the characteristics of the leadership styles of the manager are relevant for the application of a style, but also the assessment of the employee. This results in a four-field matrix that allows the executive to apply different options to a leadership style. Down left: Reinhard Sprenger is of the opinion that managers should trust employees to make their own decisions. Too much intervention would lead to demotivation. Leadership upsets those employees who are highly motivated and highly qualified for their tasks. Looking at the more recent leadership literature (Sprenger, Owen, etc.), one gets the impression that the overwhelming majority of employees belong to this field. If this were a reality, one would only need very few managers, who only create strategic framework conditions at the upper decision-making levels and completely stay out of the operative day-to-day business. This would mean that only Y-types work in the organization. Top left: How can it happen in organizations that highly qualified employees are not very motivated? This is a question that managers from the field can answer very quickly. The demotivation situations can have very different reasons. Some examples: • • • •

Employees have been doing the same thing for years. Employees were not considered for newly advertised jobs or promotion options. The private life situation has changed (children, partnership, care situations). Other priorities are in the foreground (house building, social commitment, hobbies …). • The cooperation does not work (any more). In this model, a manager is needed who has very high social skills and is able to retain and develop highly qualified people. They must be able to put themself in the shoes of others, to develop empathy. Down right: If organizations change, if new people come into the company or if people from parental leave, care or part-time work return to the job, they may be highly motivated but lack the appropriate qualifications. In this case, it is the manager’s task to develop and implement learning and development programs that enable the employee to do his job. The management style then corresponds to that of a teacher with all possibilities of performance and learning control as well as forms of sanctioning.

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Top right: The topic is often not felt right to be talked about, but in all organizations there are employees who are neither qualified for their tasks nor motivated to take on their tasks. In some companies, the discussion is conducted under the title “Dealing with lower performers”. For the classic manager, there is usually a dilemma in the management process: Investing in the leadership of these employees means providing significant personal resources that may block them for other management activities. Experience has shown that the output of this increased leadership activity is not very efficient for the overall area of responsibility. If the manager demands performance from the majority of employees, but accepts those who under-perform, this may lead to demotivation of the top performers—especially if both groups are paid equally. In practice, the situational leadership model helps managers to adopt different attitudes in employee development and thus also to apply different leadership styles —depending on the initial situation. Prior to interviews, the manager can determine in each case how he assesses the respective employees in this context. At the same time, he can work on his own social and professional competence. The goal must be to form a team in which as many employees as possible are highly qualified and highly motivated. When a team is transformed into lateral structures, the assessment of the people in the team and the discourse about the change is very practical and useful. Managers can use the model to generally assess where they place their entire team in the four-field matrix. If the idea is lost, the entire management team can then try to determine the degree of maturity of all teams through a joint evaluation. In this way, it would also be possible to assess different forms of laterality in an organization. In order to design a powerful lateral organization, however, the goal must be to develop all employees left down to Y-types. When introducing lateral management, it would be naive to assume that all employees are Y-types. It is also not possible to fill every position with new and exclusively Y-types. Only start-ups that have no tradition in the culture of hierarchical leadership can do this. This means that lateral management needs development programs for all participants and a discussion about qualification and motivation today and tomorrow. The focus is on the proposition that the ego is inherently motivated to develop. Since innovation and creativity are important fields of development in a lateral organization, the situational leadership style can also be adapted for this purpose. Figure 5.5 shows a model of the dichotomous world of a lateral manager. At the top right are people who can hardly be won over for creative and innovative activities and who see their job as more of a routine job that requires little personal commitment. This is where the classic management methods of target control, instruction and monitoring come into their own. In Douglas McGregor’s language, they’re X-types. At the bottom right in the matrix and at the top left are fields of development in the areas of motivation or subject-specific learning. The objectives in these two fields are the development of new ideas for the field of work and the implementation of new ideas in products, shorter processes, better quality or organizational changes. Progress in these learning fields is a recurring theme in

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5 Lateral Management in the Twenty-First Century Being innovative and creative (Employees) 10

5

0

Use for routine work

Manager as coach Release motivational barriers Employee-oriented leadership style

5 Wanting

5 Goal of lateral management

Develop towards creativity and innovation processes

Little leadership necessary

0

Learn, learn, learn

5

10

Subject oriented leadership style

Fig. 5.5 How do you define your management style?

employee development meetings and team meetings. Below on the left are the highly motivated, qualified employees who hardly need to be managed. What does lateral management mean by a team? This can be a regular management team, which, for example, consists of function holders of a department, but it can also be a horizontal team, which is located on a management level. Since there are managers in the teams who are responsible for certain decisions, they lead these teams.

How can Managers Develop Lateral Teams? In team meetings, the following chart (Table 5.3), which we have already got to know, can be used. It contains the core elements of lateral management. First, however, the lateral manager will have to clarify the status quo for himself. In doing so, he can first mark the level at which he and his team are located towards lateral management. The team members should do the same at the same time. Then we look where there are similarities and where there are deviations. After this discourse, an action plan will be developed to improve lateral management. Similar procedures are already used by managers as feedback management. This established form can also be used for lateral management. Let’s go into the individual points in more detail.

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Table 5.3 Target projection Common goals

Rejection

Performance motivation Leadership style

Pressure from “above” Ordering, dominant

Delegation of responsibility Leadership decisions

Work according to regulations Authoritarian decisions of the superior Manifold control Too little

Check Flow of information Prioritize Personal meetings Learning new things Ability to manage conflicts Interpersonal understanding Mutual appreciation Cross-divisional cooperation

X

X X X

Reasoning and persuasive Self-controlling operation Participation of the team/management Self-responsibility Too extensive

X X

Strategically Efficiently

X

Social adaptation, conformity

Self-controlling

X X

Actionistically Inefficiently Little

Affirmation X

A lot X

An open and constructive culture of debate Trust

Missing

X

High

Low

X

High

Mistrust

X

Common Goals: Rejection Versus Affirmation Thinking in terms of goals was probably the most important contribution Peter Drucker made to creating value for companies. But it is also an important prerequisite for success in lateral management. While in classical management the goals are set by the boss, here it is necessary to find an agreement for them with team members, department colleagues or project members. In lateral management, the participants need to commit themselves to future expectations. Without a common projection of what is to be achieved in the team and how it is to be achieved, management at eye level does not work. Agreed goals are therefore part of reflection for all team members throughout the year. Where do we stand and what else do we have to do to achieve our goals? In our view, this particularly affects the management teams. Ideally, the goals are accepted by all team members. Goals that people consider unattainable, Utopian, not in line with the market, which they do not accept, are not pursued.

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Performance Motivation: Pressure “From Above” Versus Self-controlling A core element in lateral management is self-control. It means assuming as much responsibility and decision-making authority as possible for the individual manager. In the previous section of the chapter, the exercise that someone can take on as much personal responsibility as possible was discussed and three questions were answered: • What is decided in my department? • Who decides what? • And what if I decided everything myself? If the answer to the latter question was completely positive, the item would be set to the far right on the scale. Performance motivation is based on the assumption that people who are allowed to make their own decisions do the same. Performance motivation in this context is not a personality trait, but rather permission to make decisions independently.

Leadership Style: Commanding, Dominant Versus Reasoning and Convincing Lateral management needs a leadership style that is both reasoning and persuasive. Ideally, however, we did not put our cross entirely on the right side here. This has to do with two aspects, on the one hand with the concept of lateral leadership. Leading does not mean moderating. The leader of a management team is not neutral; he has a different position due to his experience and his area of responsibility. While a classic moderator is non-partisan, the lateral leader is always a member of a team and therefore partisan. In this sense, he also tries to assert himself with his ideas. In this context, lateral leadership actually means leading and not moderating. Dominant, commanding leadership, however, leads to distrust in lateral management. When decisions are made, those who have been involved have a right to know what the reasons for the relevant decisions were. Not every decision needs to be discussed in groups or meetings. Only decisions that are highly relevant to the team are to be discussed there. Lateral management claims to be faster than an instruction hierarchy. This seems to us to have been solved particularly well with the company FAVI. Meetings are used very sparingly here and only for really relevant topics. Then, however, the important decisions must also be convincingly justified. Delegation of Responsibility: Working According to Regulations Versus Independent Working In this field, it is clear that the goal of lateral management is the self-responsible work of managers. The word, delegation, is problematic in this context. Reinhard Sprenger and Frederic Laloux point out that delegation is always a granting of responsibility. The boss hands over part of his responsibility to employees. Delegation is common practice in classical management and thus part of the instruction

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hierarchy. The classic delegation was developed at the Management Academy in Bad Harzburg and was a very successful, classic management instrument. In lateral management, however, responsibility delegation means something else. The point is that responsibilities are defined for each individual manager and the achievement of objectives can also be measured. Delegation of responsibility in this sense does not depend on the goodwill of the boss but is part of the responsibility portfolio of a manager. Also here the cross is not made at the far right. This is because there will always be regulations in organizations that set limits to independent work. In lateral organizations, there are few limits that are relevant for assuming responsibility. However, lateral management is characterized by the fact that regulations and rules are pushed back so far that there is as much leeway as possible for managers to decide for themselves.

Leadership Decisions: Authoritative Decision of Superiors Versus Involvement of the Team or Management We have already emphasized the importance of decision-making with the involvement of the management team under the heading of leadership style. There’s nothing to add. Lateral management thrives on the transparency of decisions and the assumption of responsibility by many and not by individuals. In times of digitalization, it is important to spread the weight of responsibility across many shoulders. It is important that responsibilities in the management team are distributed according to competence, task, diversity and resilience. In lateral management, several individuals decide what had previously been decided by only one. Control: Manifold Control Versus Self-responsibility In classical management, control is exercised by the superior. Lateral management relies on non-hierarchical self-control. Control always means bureaucracy. Self-responsibility will always have to be the goal in lateral organizations. In practice, putting the cross on the far right is a utopian. Many organizations have documentation obligations; this applies to the energy sector (power plants, grids), to the public sector, to companies in the area of occupational safety and to many personnel matters. In the previous chapter, we pointed out that in lateral organizations there are central control instruments (finance, quality, IT, language, corporate story) which, similar to classical management, require a functioning reporting system. The writing of such reports is necessary in every large management organization; otherwise, there would be a lack of transparency. It might be helpful to keep the reports slim and clear—as with Procter & Gamble with their one-page reports. However, every company will move its cross as far to the right as the business model allows. Information Flow: Too Little Versus Too Comprehensive In the age of digitalization, prioritizing the flow of information is a parameter for the functioning of an organization. According to a study conducted by the

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management consultancy Bain & Company Germany in 2014 (Bain & Company Germany 2014), a manager in Germany receives 30,000 e-mails per year. It is therefore all but vital to organize this flow of information efficiently. On the one hand, classic prioritization instruments (ABC analysis, spam folders, “Getting Things Done”) have been developed for this purpose; on the other hand, there are possibilities to design e-mails well, as with classic letters. Good means above all short, with concise subject line, individual address, short texts, few attachments, and a conversation preceding the mail. Since lateral management is intended to speed up processes compared to classical management, improving the flow of information is an ongoing task and a recurring theme. Another important question in this context is: Does everyone have to be informed about everything, and does everyone have to read everything? We have placed the cross in the middle, because it is always about balances. Too little information is just as bad as too much information. It is important that the relevant information arrives.

Setting Priorities: Actionistic Versus Strategic Companies have operational and strategic tasks. Operating activities relate to day-to-day business and routines. Strategic tasks, for example, concern mediumand long-term improvements in a department. Warren Bennis talks about visions and long-term perspectives in this context. In times of fundamental changes, such as today through digitization, it is necessary to give guidance. Few people have learned to deal with constant, rapid change. By the way: The oldest “leadership bible” of Benedict of Nursia from the sixth century states that the abbot should keep calm especially in times of crisis. Setting strategic priorities, i.e. recording a medium- and long-term plan for a department, creates orientation in a complex world. The priorities that are to be achieved are also presented here. That all sounds very logical at first. However, the practice in companies varies considerably from sector to sector. There are fast (actionist) and slow (strategic) industries. In retail, product ranges are changed from one day to the next. In power plant construction, decisions have very long-term effects. The approval of a power plant takes 2–4 years, the construction another 3–4 years and the management 25 years. In Chap. 4, we reported on the work of Elliott Jaques, who provided decision-makers with competencies based on the long-term nature of the effects. Those who have short-term effects can be hit by people at the bottom of the hierarchy. The more long-term the effects are, the further up the pyramid a decision has to be made. In lateral organizations, it is advantageous if priorities do not change too often and if the management succeeds in achieving stability through a long-term strategic orientation despite all the changes. At a time when project management is talking about Agile—the idea of making projects more flexible—this sounds a bit antiquated. However, too frequent changes in priorities (actionism) are a sign that management has not correctly assessed future challenges. Strategy, long-term goals and a good vision for the department are therefore still extremely important.

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We have also placed the cross on the far right here. This setting is a real challenge for many organizations and at the same time a desirable goal. In a management team, the discourse on the balance between actionism and long-term strategic development is a good basis for thinking about the basic orientation of a department, for example. Now at the latest, in times of digitalization, companies are complex systems and should have an interest in becoming robust. However, robustness only exists if the system meets the challenges.

Discussion Rounds: Inefficient Versus Efficient Lateral management has an Achilles heel. It’s an exuberant culture of conversation. Because networking is on the rise, it is thought that more frequent and longer meetings are needed to manage the greater need for communication. It is possible that meetings are kept rather short—this is shown by the example of FAVI. The teams met there only once a month. At interfaces, bilateral discussions tended to take place rather than large rounds. Making communication efficient, short, exciting and result-oriented is an important challenge, especially for lateral managers. Long, inefficient meetings with low decision quality disavow any management style. In lateral management, it is important that the relevant persons take part in discussion rounds and that as little information as possible is exchanged there. The exchange of information may normally take place in writing. To prepare meetings for lateral management, we have created an IMBV matrix (see Fig. 5.6), which represents a structural aid. There are four fundamental elements in the discussion round

Answer the following questions when creating the agenda and in the results log: • How much information is necessary and who needs to be informed (lectures, papers)? • At what points should who be involved? • Who is responsible at what points? • Who should provide input at which points and by when?

New Learning: Little Versus Much In the digital economy, learning new behaviours, attitudes and beliefs is the key issue in developing management. If digitization is the sister of laterality, then learning new management is her brother. To do this, managers need a new, self-organizing learning environment that sees learning as a non-repetitive exercise. Some time ago, a study by Dyer, Gregersen and Christensen caused a sensation in the USA (Dyer et al. 2010). These researchers examined 500 prominent innovators and found that a large number of Montessori students were among them. In these schools, according to authors Erik

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Fig. 5.6 IBMV matrix

Information

Cooperation

Involvement

Responsibility

Brynjolfsson and Andrew McAfee, you learn to approach things differently than others. Instead of rules and regulations, students should be self-motivated and question what is happening in the world (Brynjolfsson and McAfee 2014). Montessori schools were attended by the founders of Google (Larry Page and Sergey Brin), Amazon (Jeff Bezos) and Wikipedia (Jimmy Wales). The classical school teaches arithmetic, writing and reading: repetitive forms of learning which the British had introduced to administer their world empire around 1825. Repetitive forms of learning which, when introduced in Germany in the eighteenth century, were primarily intended to benefit the military. At the beginning of the twenty-first century, these repetitive forms of learning are only the prelude to the actual, unstructured, self-organized learning. Self-organized corporate structures also need self-organized learning structures. Management teams that do not develop technically, managerially, methodically and socially will soon become superfluous. Middle management must make its way to this end. Learning must become an integral part of its agenda. It is not only organizations and people in the company that need to be developed. Managers have to develop, too. That was already a demand made by the late Peter Drucker. Learning takes place on the job (experiments, Internet, workshops), off the job (benchmarking, seminars, symposia, congresses, forums) and near the job (university activities, associations, teaching, bachelor’s, master’s and doctoral studies). We didn’t put the cross on the far right. That’s because we don’t want to promote seminar tourism for managers. Seminars should be top seminars on important topics. Managers should only attend such seminars and workshops from the first series of management trainers. What we are also seeing is a surplus of professors doing qualification measures as part-time jobs. This can only work for complex companies

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in the field of research and development. Otherwise, universities and management practice have too little in common. At the very least, university teachers should have management experience when attending their seminars.

Conflict Ability: Social Adaptation Versus Open and Constructive Conflict Culture The history of instruction hierarchies is a history of social adaptation and adaptation to superiors. The rational management developed by Frederick Taylor and Henry Ford was based on adaptation and obedient implementation. In such corporate cultures, managers are perceived as instantaneous water heaters, as people without opinions of their own or points of view. The learning experiences of many managers are those of the victims of Richard Fuld and his accomplices. Many have experienced such a type of top manager. In socio-psychological research, a distinction is made between conformism towards superiors and social adaptation. Both phenomena are well researched, e.g. in the Ash and Milgram experiments. Social conformity can only be changed by an open culture of conflict. It should normally be the case that dissenting opinions are weighed up against each other. That sounds exhausting at first, but it is worth it for organizations that operate in complex environments. Conformity in many organizations is the conditioned gene code of executives and a stubborn enemy of lateral management. In manager meetings or trainings, there is the possibility to make conformity itself the topic. It is important that individuals experience the destructive forces of conformity in management cultures. Fighting seriously with fun, making differences clear and only looking for solutions after confrontation with divergent opinions is the learning program for many management teams. This is an important prerequisite for dialogue at eye level. That’s why we made the cross at the farthest point on the right-hand side. The Ash Experiment on Social Conformity and Stanley Milgram’s Studies on Adapting to Authority

Both experiments deal with the dangers of social adaptation, in the technical language of psychologists: “social conformity”. In classical leadership, there is always the danger of adaptation to authorities (i.e. to the opinion of bosses). During the Milgram experiments, test subjects (as teachers) were to punish pupils (real actors) with electric shocks for misconduct (non-learning). It started with a few volts and from 150 volts upwards the actors simulated screams and pain. The highlight of the experiment was the following: If the test subjects had doubts about increasing the current dose, a test leader (authority) intervened and pointed out to the test subjects that this was an important experiment and that they had to continue. 70–80% of all test participants were prepared to give the fatal maximum doses of over 480 V.

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The experiment was carried out in many countries and had equally high quotas everywhere. In a more recent experiment, the absolute rate of adaptation was the same, but at 32% of subjects, twice as many generally refused to participate in the experiment as in the early 1970s, after having been explained to them. Conformity with authorities can be reduced in classical management by managers not only gathering yes-men around them, but also colleagues who express constructive criticism. In the Ash experiment, one test subject was originally called into a group of other paid test subjects to “officially” participate in a scientific experiment on colour determination. The group was so briefed that whenever the colour blue appeared on the test monitor, everyone would draw the green card. With all other colours, the “correct” colour cards were drawn. The individual subject had first drawn the blue card, and one was curious as to when he or she would also draw the green card and thus adapt socially. The result: Approximately, 50% of the test persons adapt already after the first round. Social compliance is one of the biggest threats to lateral management. It is successful when one’s own opinions and points of view are represented self-confidently and do not sink into premature adjustment. There are still variants of the Ash experiment that tend to make one culturally pessimistic with regard to the functioning of lateral organizations. The experimenters wanted to know if there was such a thing as a “false consensus” and developed some very interesting experiments to find this out. One was about wine tasting (Pinker 2011): Each participant was presented with three glasses of wine. The wine came from the same bottle for all, but one glass was mixed with vinegar. As in the Ash experiment, the fake participants praised the vinegar-tainted wine—and the expected adaptation processes took place. However, there was yet another participant, who had been initiated before, who praised the good wine at the end of the tasting and not the vinegar wine. Four fraudulent participants thus expressed themselves positively about the vinegar wine, the test subject in 50% of the cases then also commented positively, and then the sixth, “bought” participant had a different opinion. Now it was time for the participants of the wine tasting to evaluate each other and thus give feedback: partly in secret, partly publicly. And it came how it had to come. If the “not bought” participants had publicly committed themselves to an evaluation of the vinegar-tainted wine, then they were not prepared to revise their judgement after the last participant’s expression of opinion on the good wine that is clearly recognizable for all taste buds. With a vinegar sour face, they still held on to their points of view. However, if they had given their feedback in disguise, they were usually prepared to revise their verdict.

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Interpersonal Understanding: Distrust Versus Trust In complex organizations with large and differentiated leadership spans, where people work in changing locations and at different times, managers have to establish trust. We have identified eight aspects that show how trust can be created by management on a symbolic level: • Mistakes made by employees are usually caused by misconduct on the part of managers: the culture of error is a sensitive issue in lateral management. Since complex management systems require a lot of experimentation and testing, errors are the order of the day. Nassim Taleb says that learning by mistake makes fragile systems robust. However, a company that makes a lot of mistakes and does not learn from the mistakes in any particular way is also doomed to failure. There is, however, an automatism in managers to first look for errors in others— not infrequently in employees. First of all, clever managers ask themselves what their contribution was to the employees’ mistakes. That creates trust. • Manager mistakes are manager mistakes: Weak managers try to hold others accountable for their own mistakes. It is more positive to make your own mistakes transparent in the team. So the manager is not always the one who knows everything and can do everything. At the same time, it creates an atmosphere in which mistakes can be discussed openly. This is often a sign of strength and creates trust. • Employees’ successes are employees’ successes: This makes sense and means that the management performance of individuals or teams is communicated internally, upwards and externally. People learn from success. Communicated success creates trust in the person. • The successes of managers are addressed in the “we” form: The successes of managers in prominent positions are often prepared by fellow thinkers and teams. They are often finalized by managers but are the product of many. Therefore, the phrasing of “I” phrases should occur as rarely as possible in the language used by managers. • Those who are interested in trust must be honest and genuine: The term integrity is described as “decency, honesty, immaculateness, righteousness, probity, integrity, incorruptibility, trustworthiness and reliability”. Integrity is a value that is experiencing a renaissance today, especially in lateral management. Lateral managers are personalities with corners and edges, but with values. Conformity is not their thing. These managers can also deal with their strengths and weaknesses self-ironically. The opposite would be for managers to trick, manipulate and violate these values. This can go well for a while but does not create trust in the long term. Once trust is broken, it’s very hard to regain it. • It is important to treat people with respect: This point is self-explanatory and at the same time so important. Especially in phases when things become difficult, mistakes happen or bullshit is done; appreciative interaction with each other is a must. If something goes wrong, it doesn’t have to be the manager’s first question: What went wrong? It can also be the question: What did you do right? When things go wrong for the first time, there will be good reasons. The

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following questions are then: What do you learn from it? So, what do we do now? If mistakes are repeated, learning does not seem to work or the context is wrong. Here, too, appreciation is the key to opening people up. • Those who rely on trust must be prepared for disappointments: Reinhard Sprenger rightly emphasized this point in his book Vertrauen führt (“Trust leads”). Trusting others makes you vulnerable. In lateral leading, the manager will happen more often. In a management program that requires people to take full responsibility for their work, everyone will experience setbacks. Namely, when people are overwhelmed or have overwhelmed themselves. It’s part of the learning program. But mistakes also happen in classic hierarchical organizations. Only there, mistakes are intransparent. Who does not know from such systems the cover-up of undesirable developments? Through a more open culture of error, lateral management has the chance that learning by error is possible. Classically, hierarchical managers often reach their limits here and have a large learning program ahead of them. • Managers ensure that they experience breaches of trust and respond appropriately. Managers aren’t naive! Learning has its limits in the field of cultures of trust. Namely, when the trust of others is broken. Companies therefore have a variety of games that have been learned in classical hierarchies. Tricks, deception and camouflage were the metaphors for avoiding assumption of responsibility. One variant that is particularly irritating in lateral management is the disclosure of confidential information to third parties. Lateral management needs transparency and open discourse. This means that there must be room for open discussion about controversies within the company. This can also lead to very different assessments of people, perceptions and processes. If confidential information or discussion statuses are passed on to third parties, then this is poison for further open discussions. Here, too, it is important to seek dialogue as early as possible. It is a good idea to do this in private and not in front of the team. In such conversations, difficult topics can sometimes be solved. We didn’t put the cross to the right, because there is complete trust only very rarely in industrial relations.

Interdisciplinary Cooperation: Insufficient Versus Efficient In addition to the idea of strengthening more self-reliance in companies, lateral management also includes the obligation to consult. At management level, this means that where in the classic statement hierarchy, for example, the superior of two department heads previously made a decision, this is now made by one of the two department heads. The managers involved determine which of the two is responsible for this. The colleague works with us. In all of the lateral companies we examined, this definition exists. At Endenburg the choice is made, at the dm drug-stores the responsibilities result from the decentralized market structures and at Buurtzorg the team defines the responsibilities. Individuals make decisions with the involvement of interface partners. The following applies: no meeting without a “lead management”, as it is called at the AOK Baden-Württemberg. There, the

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Executive Board determines responsibility for important interface issues. Just like the IBMV matrix, which documents who has to be informed, who works how much and who is responsible for what, it is also a good instrument for resource clarification here. We have placed the cross on the far right because cross-departmental cooperation in lateral management simply has to work. This is the best way to deal with complex topics in a company.

Assertion of Interests in Cross-Functional Cooperation: Self-interest (Team, Department, Business Unit) Versus Company Interest (Organization) It is important for management teams to formulate their position when working together across departments. What are the objectives of each person for his or her area or department? Where are own interests affected? Where should resources be provided? And what is your own contribution to success? Interdisciplinary cooperation always means “struggle for resources and power”. For a successful lateral management, it can be dangerous if it does not come to a result. In the worst case, decision-making processes would be delayed—or there would be no decision at all. In the classical instruction hierarchy, there was a superior for such situations who ultimately intervened. Jim Collins spent many years researching successful companies and developing the concept of Levels 4 and 5 managers (Collins and Haas 2015). Level 4 managers are me and department oriented. Level 5 managers focus on the long-term interests of the company. The latter are the ones that lateral management needs. Unfortunately, this is not trivial in practice either. Who determines what is in the company’s and its own interests? There’s no objective measure here. First of all, it is the person who has the power to take responsibility who is also responsible for decisions. As in the previous point, this is regulated in lateral organizations. Whoever has power must also bear the responsibility. He is also responsible for the best solution for the overall organization. Now there are always situations in which departments are not satisfied with the solutions that they were involved in finding. Here only the possibility of self-reflection remains, if one does not bear responsibility oneself. It makes sense to discuss in the management team whether you yourself have contributed everything to achieving the best solution for the company. Here, it says: don’t always win, don’t always lose. Such reflection can also help a management team to accept the correctness of a decision afterwards.

The Big Five of Classical and Lateral Management In Chap. 2, we acknowledged the advantages of classical management and its doyen Peter Drucker. Drucker’s work has enabled many managers to do their job well in the company. In the following, we try to illustrate how the world of lateral management can be understood in contrast to the “old” world of classical

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Table 5.4 Classical versus lateral management

1. 2. 3. 4. 5.

Classic/Old

Lateral/New

Set goals Organize yourself Delegate and communicate Decision-making Check

Think in terms of goals Organize yourself Convince Decision-making Work with commitments

management using the “Big Five” of classical management. For managers, this comparison makes sense insofar as we live in transitional periods. There are areas in the company where classical management will still be practiced—and there are areas where lateral management will be used. It is good to know what you are doing in which area (see Table 5.4). 1. Set goals (classic old) Former German Chancellor Helmut Kohl is said to have summed up the objective discussion as follows: “What is important is what comes out at the end”. Achieving results is a top priority for managers. If the numbers are wrong, then his job is at risk and he must take action to improve the numbers. This can easily be compared to the workstation of a football trainer: If the results are not correct, then “grab the usual mechanisms”, lay-offs are part of the business. Develop vision: There is often confusion in management about the terms vision, goals, strategy and implementation. Vision: Goals: Strategy: Implementation:

Vision of the department, its main task or its contribution to value creation. What goals do we want to set in order to achieve this vision? How do we proceed to achieve the individual goals? What are we doing concretely to implement the strategy?

If the one who demands performance has to explain the meaning, then a manager of classic character must also develop a vision for his field of work and derive the next steps—goals, strategy and their implementation—from this. This gives the team an orientation as to what is at stake in the department and what the expectations of the individual workplaces are. Goals are therefore ideally derived from a vision. 2. Think in terms of goals (lateral new) Peter Drucker coined the term “Management by Objectives”. In this context, thinking in terms of goals means that before every conversation or meeting, when writing every e-mail, a manager first thinks about what he wants to achieve with it. Rigid, annual target agreements are no longer the first choice in many modern companies. Some companies, such as Infinion, have even abolished them. In our opinion, the discursive setting of goals is indispensable in the process of lateral

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leadership. In lateral leadership, too, there are responsible parties (lead managers, process owners, etc.) who are dependent on expectations being jointly and bindingly agreed upon as goals in the future. Deviations from objectives, as provided for in the “Agile” management concept, must be justified retrospectively. In this respect, lateral leadership always also means designing an open process. In the project language, such deviations from objectives used to be called “iterative loops”. Four aspects seem important to us here. Develop visions with others: In lateral leadership, it is important to discuss the meaning and purpose of the project with the partners. We call this clarification of the order a vision, which then flows into target agreements. First, the different interests and possible approaches are clarified and then who can contribute what to what point and what not. The basic idea of this part of the target agreement can be found in the management principle: Those who demand performance must make sense. Only the common sense of an action motivates those involved. Agree goals: Objectives are always agreed in writing for lateral guidance. The assumption of responsibility leads to clarity of responsibility. Binding goals are formulated in SMART and the goal categories time, resources, quality and costs are mapped. Participate: Participation is important in principle, as complexity can be better managed by several. It should be noted that only those who contribute to solving the challenge will be involved. There’s no need for anyone to be involved in anything. The group sizes of a maximum of six people have proven their worth. Partial elaborations by individuals, couples or small groups are welcome. Share: Working laterally means sharing. Knowledge and competence are made available to other participants. 3. Organize yourself (classic old) This point was particularly important to Peter Drucker. No matter where in the world, those managers who can organize themselves well are the most successful. In Germany, the publications of Lothar Seiwert and David Allen are especially found under the label “Zeitmanagement”. Managers today live under a new pressure of performance, time and behaviour: • • • • • • • • •

A working day of ten to twelve hours is normal. Weekend work is common. Holiday and relaxation phases are shortened. Teamwork in ever shorter cycles with ever fewer employees is common. The coordination of family or relationship and job is more complex. Permanent availability is expected (smartphone, iPad, etc.). Permanent learning is expected. Mobility, fitness and emotional balance are required. Achievement of objectives is assumed.

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High

180

B-tasks

A-tasks

Schedule!

Do them now!

(e.g. further training)

(e.g. emergency with

Importance

the customer)

C-tasks

Courage to leave gaps!

Delegate!

(e.g. favours)

(e.g. monthly report)

Low

Trash

Low

Urgency

High

Fig. 5.7 Setting priorities according to the Eisenhower principle

Set priorities: Today, a manager receives around 30,000 e-mails a year, which consultants have calculated across all industries and company sizes. The pressure for self-organization makes it necessary to set priorities. It helps to log its activities and to evaluate them once a year according to the Eisenhower principle and to adjust its time management (see Fig. 5.7). 4. Organize yourself (lateral new) In lateral guidance, where several are involved, self-organization is all the more important. Laterality erodes without discipline. This is an important prerequisite for laterality. Here, digital solutions are an important prerequisite for success. Set priorities: When thinking in terms of objectives, it is always necessary to think in terms of individual priorities. With lateral guidance, there is often the danger that too much small work is done and therefore too many resources are consumed. Lateral leadership means achieving results with scarce resources. This can only be done with clearly agreed priorities. Trust instead of delegation: Delegation is not required for lateral guidance. Responsibilities are assumed in the cooperation, or they result from the employment contract. Lateral leadership is based on trust and on people wanting to achieve good results. If the results are not achieved in the agreed time and quality, the parameters

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of qualification and motivation must be discussed during lateral management. The requirements for lateral guidance are high already as it is. Achieve speed: Good self-organization always also means to become faster as a result. Lateral, non-hierarchical leadership must lead to a de-bureaucratization in the medium term. If it leads to more bureaucracy, then there is something wrong with the framework conditions. Mistakes are welcome learning opportunities. Learning takes time and at the same time must be fast. Accept contradictions and work with them: Lateral leading always meets contradictions. Contingency means that different methods can be applied or that different solutions can be found. But contradictions are normal. They are addressed and either cleared out or accepted. Lateral management always means dealing with imponderables. 5. Delegate and communicate (classic old) Delegate: Delegating tasks is a personnel development activity of managers. In the 1960s, the delegation was mainly introduced to German management by the Management Academy in Bad Harzburg. Here are a few principles for the good delegation: • • • •

Prepare delegations to employees in writing (time, quality, budget, resources). Note the delegation continuum (see Fig. 5.8). Delegation requires discussion and often conviction. Delegate to everyone on the team, not just those with the best qualifications, the highest motivation or those you expect the least resistance from. • Delegations are carried out during the time independently by the employee. • Even if the delegation has produced good results, there will be a feedback discussion. Communicate: To lead also means to like people. This applies in principle to all forms of leadership and management. In classical leadership, the instruments of “situational leadership” and the very old definition of leadership (“operative leadership is the goal-oriented shaping of social relationships in a complex world of changing markets and business cycles”) are very important in the application and clarification of roles. Managers must also ensure that each employee has the information relevant to the performance of his or her role and is trained. A manager’s toolbox also includes goal-oriented communication: • • • • •

There is enough time for the preparation. The goal and strategy of the interview are known. Call shares are distributed (2/3–1/3). Disturbances are not possible. Punctual start is guaranteed.

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10 Great degrees of freedom

Medium degrees of freedom

Low degrees of freedom

Very low degrees of freedom

Level of maturity 5 of the employee

0 5

10

Difficulty of the task

Fig. 5.8 Delegation continuum

• • • • •

Documents are complete. Openness is to be expected. Exchange of opinions takes place. There’s a result. An action plan has been agreed.

6. Convince (lateral new) To lead laterally means to lead laterally. It’s not about moderation; it’s about real leadership. Others must be convinced of the best ideas, the best way, the best design. People like: This applies in principle to all forms of leadership, but even more so to lateral leadership. If you don’t like to fight for the best way with others, if you enjoy debates and controversies, you will quickly fall behind. Develop creative solutions with others: Creativity is the development of ideas. Successful creativity processes can be developed in dialogue, with introverted people or alone. It is important that new, unusual ideas can take hold of space, even if they sometimes appear oblique or very different. Self-developed, surprising, creative and ultimately successful ideas strengthen the confidence in the performance of individuals and groups.

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Fighting and provoking: Controversies are welcome and fun when leading laterally. The task of managers is to challenge others to achieve the impossible by provoking them in the sense of Steve Jobs. Anyone who has ever experienced such a lateral spirit cannot get enough of it. You want to stage yourself: For lateral leadership, a high willingness to get involved is an important prerequisite for success. It is advantageous when individuals enjoy debates as a pleasure of self-dramatization. 7. Decision-making (classic old) Deciding in classical management makes you lonely. Already in the time of Benedict of Nursia in the fifth century, the abbot should listen to all opinions of the brothers and then if necessary make a decision against the majority vote. Classical decision-making structures oblige managers, the higher they are in the hierarchy, to make higher value decisions. They also have a correspondingly higher decision-making framework for this. As a rule, financial limits are laid down in an organization manual depending on the position or task. In many organizations, the four-eye principle applies, since individual managers are not completely trusted (and also due to some legal regulations). There are a few important hints for decision planning. • Only involve those who can contribute to the solution. • For a decision, you do not need all information (“80/20 principle”). More information only gives a false security. • Get used to making quick decisions. Deciding is a learning project. • Always include an implementation plan and feedback loops in the decision. • Decisions that have turned out to be wrong can be reversed. • Use visualization techniques for the decision (decision trees, flowcharts, etc.). • Good decisions are usually intuitive decisions. The psychological-academic community is also divided on this point. Daniel Kahneman comes to the conclusion that human decisions are subject to multiple false perceptions, and proves this in his publications through a whole series of examples and experiments. His scientific opponent is Gerd Gigerenzer, who, as a former director of the Max Planck Institute for Psychology in Germany, is not a lightweight. Gigerenzer’s experimental research suggests that intuition created by experience makes decisions better—after you’ve studied a topic intensively and weighed up important prioritized data. Making decisions on complex economic issues today is always a matter of uncertainty. That’s why it’s called decision-making. From our cooperation with top executives, we have gained the impression that this is indeed the case.

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8. Decision-making (lateral new) Lateral management means making decision-making structures more flexible and letting competent specialist teams decide. Operational decisions are always made locally and across teams, departments and divisions. There is an obligation to consult. In this way, employees also become decision-makers in lateral organizations. There is always a lead manager or a process manager who drives the decision. The “high delegation” of decisions is the exception rather than the rule. Strategic decisions are made at the upper levels, with the final decision made by the chairman or the top management team. Tolerate complexity: In lateral leadership, a variety of perspectives are taken into account when making decisions and the cause of lateral leadership, the increase in complexity in everyday leadership, is taken into account. While in classical management the increasing economic complexity can hardly be mapped out, and long, hierarchical coordination processes occur, lateral management leads to faster, qualitatively better decisions. The tolerance for complexity leads to a decisive change of perspective. Complexity is the inclusion of many relevant perspectives to solve a problem. Making mistakes transparent: Classical management has little fault tolerance. Zero defects or Six Sigma are the programs of the past era. Many people in companies are characterized by low tolerance for errors and avoid talking about these at all. Making errors transparent, especially through the upper levels of responsibility, reduces anxiety. They are often a symbol of an innovative culture of experimental failure. Think globally, decide locally: Operational decisions by those affected on site must be reconciled with strategic decisions. That won’t always work. Nevertheless, it is important that the overarching strategies are known when making local decisions. At Spotify, this is guaranteed by a hierarchy of teams as troops, associations and guilds. The Mondragón cooperatives had democratically legitimated superordinate bodies. At Semco, there were board managers who visited the teams and provided information on strategic options. 9. Check (classic old) Control is the heart of classical management. There are two types: paranoid over-control and non-control. Both are wrong. In classical management, all employees are used to everything being transparent and to the boss controlling them at least on a random basis. Employees are thus conditioned for feedback on their work performance. It makes little sense to agree on goals and then not to check them for accessibility. Evaluate and mirror results: Regular feedback discussions take place, which revolve around the achievement of the target agreements. It is advantageous if the employee presents his or her results himself or herself. Control depends on the

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qualification and motivation of the employee. An employee who is just starting out needs more support than his or her experienced, motivated colleagues. 10. Work with commitments (lateral new) Whether decisions are actually taken or not is a question of survival for lateral organizations, especially after a reorganization of the structures of responsibility. In principle, it is necessary to rely on voluntary commitments. In our experience, the risks of wrong decisions are lower than the effects of non-decisions. Here, it is important that managers monitor important decisions of their team. Regular presentations with milestones are established processes here. If self-commitments are not complied with, please inquire. Search and give feedback: In classical management, the word “control” would appear here. This is not a trivial semantic differentiation. Feedback structures have a high degree of voluntariness and self-responsibility—in contrast to control. Controlled from the outside by controllers and auditors. It does not matter to these departments whether they check lateral or classic decision processes or results. To lead laterally means to be a sparring partner for those who decide. The twin of feedback is self-reflection. Self-control before external control: Lateral management relies on the ability of employees in companies. Sprenger reads it this way: “I think it’s time to finally trust people with something: that they have a self-imposed quality standard for their work and that they are neither refusers of performance nor illiterates about organization” (Sprenger 2000, p. 195). Total transparency of results: The prerequisite for self-monitoring is that all available performance data is made available. Today, this can be easily achieved through IT. In Germany, it is important to agree on framework conditions with the social partner for this. Some companies still use variants of 360° feedback to supplement an assessment of work performance. This makes sense in the management area, as long as it can be carried out unbureaucratically. AOK Baden-Württemberg works with target agreements and feedback structures such as employee barometers, self-assessment and peer assessment. Reporting and documentation: Another form of feedback is the reports on results. A reporting and documentation system exists in many organizations. If there are any ambiguities, you should ask for or try to bring about a conversation to resolve these. The new reporting system must be kept lean at all costs. Only accept Y-types: Lateral leadership places high expectations on executives and top performers in organizations. One prerequisite is that these people are highly motivated, well qualified and particularly willing to work independently. Douglas McGregor called them Y-types. Lateral leadership also means developing people. This includes talking to them about their learning development. The company usually provides competence models that describe the expectations of learning.

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Doing the “right thing” stands above any return target

Interview with Dominik Pauly, long-time manager and today entrepreneur. What are the different positions you have held as a manager in your life? I gained my first experience as a Pricing Manager at Procter & Gamble before founding my first marketing company in 2000 and hiring staff there for the first time. At Dell in 2003 I led the tender management in the sales department with ten employees; later I helped to set up the new location in Halle as Finance Manager. As Director of Business Operations, I joined Hitachi Data Systems in 2008, then took over the German and later the Southern European finance division, and most recently led global service teams to improve and harmonize business processes. In 2014, I founded our outpatient nursing service together with my partner as a member of the Executive Board. It is based on our personal work concept: to do the right thing for employees and customers without putting the numbers in the foreground. What were the positive experiences? I have always been inspired by those of my superiors with whom I had a very human connection, from whom I could learn a lot and who gave me sufficient freedom to find my own ways. A particularly positive experience was that I quickly learned to delegate as much responsibility as possible to the members of my teams, so that I supported them but did not stand in their way. I had been allowed to make this experience myself and could now see how they blossomed and work processes became leaner overall through more direct paths. The resulting time savings also had the positive effect that I could concentrate on initiating meaningful projects for which there was otherwise no time. What do you think are the challenges for a middle manager today? To find or create an environment in which one is not “used” most of the time as an executive of the top management’s guidelines, but can make a difference by developing one’s own talents and, above all, the talents of one’s employees. This means that the degree of the right decisions—in the sense of the company and the employees—is as high as possible. To achieve this, teams should be given room to manoeuvre, be allowed to assume more responsibility, and middle management should be allowed to support them and demand the same from their superiors. What do you mean by “eye level management”? From my point of view, classical hierarchies are a rigid construct that has grown old. Distances between the employees who know what is needed and the decision-makers are long and full of barriers due to hierarchical levels. Thus, in an increasingly complex world, good ideas and initiatives are far too often difficult to attract attention in order to be realized. The basic idea of bionics could also help us in the organization of the working world: to create looser and at the same time more stable structures. Leading at eye level means to perceive my counterpart as a human being, to be interested in his views and

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thoughts and to allow them to lead to a better decision for a currently discussed topic than my previous opinion. What should a manager do, what not? A manager should be aware that with increasing responsibility or hierarchy level he has more responsibility for the people in his area. Doing the “right thing” in the interests of employees, customers and the company should be the goal of every return on investment. He should not simply accept guidelines that do not make sense from his point of view. How would you like to work in the future? Thomas Friedman writes in his book The World is Flat that in our highly engineered world of work two types of skills are gaining in importance: “High Touch” and “High Concept”. I would therefore like to see a working environment in which, in addition to the mind, above all intuition and the heart receive more and more attention and can be used as equally important as much as possible.

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Epilogue

Digitalization is dramatically changing the economy and society. Companies today are faced with complex issues. Therefore, the competences and experiences of many are needed. Contemporary companies therefore rely on laterality and leadership at eye level. Empirical studies have shown that lateral management, as the assumption of responsibility by middle management, can be the significant success factor in change processes. While leadership and cooperation were still hierarchically organized in the twentieth century, the future will be networked. Management will no longer be vertical, but horizontal. With this book we would like to set impulses. For us, the discourse with entrepreneurs and managers is more important than proposing a “single right” solution for the implementation of lateral management. They don’t exist anyway. Each company will create its own unique piece that fits its organization, business purpose and industry. If companies succeed in thinking more deeply about leadership, decision-making and cooperation and in questioning supposedly oh so new management fashions, then these organizations will also win the round of digitization of the economy. The European Enlightenment has created the best conditions for people to work together on their own responsibility, in freedom and at eye level. Lateral management is an exciting way of implementing that. This can be used by those responsible not only to win football world championships. The book is the result of a research project that Martina Nieswandt began in 2007 with a doctoral degree at the University of Surrey. Dr. Jürgen Büllesbach from the Schörghuber Group in Munich and Prof. Siegfried Schoppe from Hamburg had encouraged her to do this work. Professor Mark MK Saunders, who now teaches in Birmingham, was the meticulous doctoral supervisor who provided her with many critical comments and assistance. Following this work, we learned a lot from our customers. In lateral management projects, we were able to get to know the pitfalls of implementing great ideas. The discussions with managers in the project teams were milestones for us and have changed both sides in a lasting way. The management training courses we have conducted, the team development and, in particular, the personal encounters in projects and coaching sessions also take everyone a step further. It is impressive how much energy and creativity there is in managers.

© Springer Nature Switzerland AG 2020 R. Geschwill and M. Nieswandt, Lateral Management, Future of Business and Finance, https://doi.org/10.1007/978-3-030-46496-7

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A book is always the product of many. Two people have written it and are responsible for the content. However, we have had many that we have consulted. There’s Springer Gabler, the publisher we’ve been associated with for years. When program director Juliane Wagner told us that the publishing house was starting a series of non-fiction books in the field of business and society, we were immediately thrilled to take part. The management discourse needs such impulses in stormy times—needs an end to “Keep going as always”. Through Springer Gabler, we also got to know Thorsten Schulte and Dr. Michael Gestmann. Thorsten Schulte gave us excellent editorial advice. Michael Gestmann is a marketing professional and discussed the title and possible readership with us in particular. Very important were the discussions with managers at our symposia, which we hold every year in the “think tank for managers”. This trains the concentrated view of this complex profession in times of change. In the “think tank for managers”, we live the culture of expressing differences of opinion in a very controversial way. We will continue to do so with Andreas Pfeiffer and Claudio Thunsdorff. Hans-Peter Theilig is also very important in this context. Hans-Peter supports us in media design, which is indispensable in times of digitalization. Thank you all for that!