It seems as if the trades of the world are heading towards an increasingly automatic age. How might this affect leadership styles?

KNOWLEDGE @BI: Leadership styles

The man and the dog: As computers and robots became a reality in the 1970’s and 1980s, someone made a joking prediction of what future factories might look like: The only living creatures in the factory would be a man and a dog. The man would be there to feed the dog. The dog would watch the man and prevent him from messing up the automatic controls. The machines would do the rest.

The fear that machines will kill jobs is at least as old as book printing. So is the experience that such fears turn out to be unfounded. Supposedly, the manual copyists of books around Gutenberg’s time claimed that book printing would be “the end of the book industry”.

Until now, the technological revolutions have created more jobs than they have taken away, at least in the long run. Five hundred years after Gutenberg and 35 years after the PC, more people work with communication media today than any time before. Industrialism transformed most societies in the world, pulling hundreds of millions of people from the countryside into cities.

“The internet of things”: As we know today, these fears have re-emerged many times. They emerged during the British industrial revolution, and again with the dawn of the computer age. Now they are upon us again, this time called “the internet of things”. Trend watchers and economists are pointing out that the times are changing again, and point to the very real possibility that hundreds of professions may disappear due to technology. These are as diverse airline pilots, real estate agents, and journalists.

Personally, I choose to believe that the end of the world has been predicted too many times, and so I think new occupations will emerge. But it may take some time, and in the meantime one may wonder how the working life may change – and how this may affect leadership.

Uncertainty and leadership

“Leadership” is not, as many people think, something that has always been around. It emerged as a word after the shareholding company was invented as a permanent legal subject in Britain in 1842. Before “leadership”, people spoke about “officers”, “masters”, “clergy” and other non-transportable titles.

The shareholding company is an invention that let the owners focus on two things: First, how to maximize the returns on the invested capital, and second, how to prevent its loss. This means that any well-managed company would need to develop a way to face uncertainties of opportunities and losses.

The traditional way of handling uncertainty in professional trades has been through craftsmanship. The traditional maritime business is a good example. Until recent years, storms were fairly unpredictable at sea. The best way of handling this uncertainty was by building good ships and exerting good seamanship.

Uncertainty in modern global business is different. Unpleasant as a storm may be, it is more or less like the previous one, which means that the technology and seamanship can be improved for every storm (provided that the crew survived). Shifts in technologies are different – they can make previous constructions and management principles obsolete in just a few years.

There is only one thing that we can say for sure about the next technology: It will make the world more productive. In its turn, that usually implies a reduced need for labor and an increased need for knowledge.

Have a look at some examples: When the smoke-belching, powered ships overtook the beautiful sailing clippers, the increase in productivity was enormous. While there may still be a few jobs left at sea for unskilled hands, the ratio of officers to crew members changed dramatically. More complex technology made education and knowledge prevail and grow in importance.

A less famous transition was introduced by a single individual named Keith Tantlinger. He invented a small steel bracket that allowed steel boxes to be securely stacked on top of each other. By inventing the cargo container in 1950s (and giving away the technology to destroy other models), he sparked the globalization of running ports. Again, the unskilled left the docks but the loadmasters remained.

It is in the nature of capital that it will flow towards more productive technologies and systems. Productivity usually yields higher returns on investments and reduces the risk for bankruptcy. But new technologies are disruptive to the existing order. For that reason, they create a new type of uncertainty that is different from the uncertainties that faced earlier craftsmen. As the industrial revolution turned into investment capitalism in the 1850s, the English-speaking world invented the word “leadership” to describe how people influence companies and markets to new inventions and improved returns.

Leadership cultures

In all the debates about culture and leadership, people usually overlook the fact that “leadership” was invented with capitalism, which overturned the feudal societies everywhere. In that sense, “leadership” is linked to no-one’s culture in particular. It is just the logic of the shareholding company emerging as the primary way of creating jobs and surplus in most parts of the world.

Still, there were of course local differences in regions of the earth that made the introduction of “leadership” more or less easy in the beginning. With the risk of being seen as patriotic, I just want to cite a Scandinavian example. Two scientists, Bo Poulsen and Jelle van Lottum, explored hundreds of years of records from the British navy. Whenever the navy captured foreign ships as prizes of war, there had to be made a precise record of the ship and the nature of its crew. It is therefore possible to create a history of competence and productivity in the European maritime business.

There turned out to be wide regional differences in the nature of the crews. Very populous nations, such as the Southern European countries, tended to have larger crews with little education. Their officers were educated and were paid far better than their crew. In contrast, Scandinavian ships were sailing with more educated crew and their pay was more equal to their officers. This was more productive to the owners. These sailors were apparently also attractive as skilled labor in foreign ships.

A competent and productive crew made the Scandinavian maritime business far bigger than the population should suggest. A small country such as Norway had one of the world’s biggest merchant fleets at the beginning of the 20th century. Part of the success was the ability to sail with fewer hands per ton of cargo. One may object that Norway’s maritime industry eventually had to give way to cheap labor in East Asia. This is only partly true. A more correct description is that the competence-based organizations in Scandinavia slowly turned away from shipping. There was more value to be created by such systems in other industries such as offshore and IT.

Productivity and leadership styles

My point here is that productivity and competence go along with certain types of leadership. Solving a problems with many, but unskilled hands is an expensive way of doing things. Some reasons for this:

  • Even if labor is cheap, the management and co-ordination of people is expensive. Management is strictly speaking only a cost – it does not produce anything more than labor itself. If you can take away management and keep the same output, you are more productive by definition.
  • Lack of skill implies reduced flexibility in the organization. The more specific tasks people are trained to do, the more you need managers and coordination when unforeseen situations appear.
  • Control systems have a tendency to induce passivity in those controlled. People get used to wait for orders, since spontaneous action is often criticized for being sub-optimal or violating rules.
  • The sum of hierarchy, lack of skills and control mechanisms has a tendency to reduce trust. There is usually a bigger gap in salaries, signaling different interests between the controllers and controlled. As show in many types of leadership studies, this situation often becomes a self-fulfilling prophecy. Those in control do not trust the controlled, and the controlled on their side take care of their own interests. This can create large, unproductive “shadow-organizations” – organizations within the organization.

More productive types of leadership need to embrace competence and work relationships that are compatible with lean organizations. To reduce headcount, to be flexible and innovative, and to make effective use of competence, there needs to be a leadership culture that supports such features of the organization.

Flatter hierarchies, open communication practices and alignment of incentives are not inventions of a “soft” management culture and hippies.  Such developments are part of the modern growth of productivity – by putting knowledge to work. On the other hand, there is no reason to be naïve. Any organization needs to guard itself against opportunism, shoddy work practices and other types of chaos. It is precisely the balancing acts of these considerations that create the distinct leadership cultures of successful technological inventions.

Modern leadership cultures naturally need to develop from the cultural roots of its participants. All cultures bring with them benefits and handicaps in the adoption of more productive leadership cultures. In my example from the Scandinavian maritime industry above, we cannot know whether the flatter, leaner patterns of organization came first, or if they developed out of necessity. Personally, I am in favor of the latter. I believe economic necessities, such as a lack of manpower, exert a creative strain on people who need to make a living. Having access to an ocean of cheap labor does not create a sense of urgency, since any problem can be solved by sending in a busload of fresh hands – along with an unproductive manager who is paid better than others for watching them work.

In the feudal economies, such differences in resources and their cultural representations could go on for centuries. In the modern global capitalism, most companies are by definition short of hands. Their shareholders and CFOs  will continuously look for ways of reducing slack. That means cutting over-capacity and to have the remaining people create more value.

The future of leadership

In the results-oriented logic of the shareholding company, there will be a continuous demand for more effective ways of employing capital. As more and more tasks are being automatized, there are only two things we can be sure of about tomorrow’s workplace: It will imply knowledge, and it will be the kind of knowledge that we cannot leave to machines.

In the opening story above, the controlling functions of the organizations are jokingly left to the man and the dog alone at the factory (or in a fully automated international port). That is admittedly an exaggeration.

But imagine what all other people would be doing in that kind of world: They would be attending to the core of human business, and what is that? In my childhood, our teachers continuously told us that we could not live from cutting each other’s hair, i.e., from the service industry. It now turns out that producing services is actually a very good thing to do. Even the government of China wants to make that huge country less dependent on physical manufacturing and creative in a service economy. Healthcare service is a huge challenge globally. Apple changed its industry by making digital gadgets a fun experience, integrating entertainment and technology. In Norway, taking tourists on whale safaris seems more profitable than killing the whales and selling the meat. Value is created by innovation in experiences, communication and quality of life.

It is only natural that the future of leadership will be linked to this development. A productive and innovative leadership culture implies trust, good communication skills, empowerment and a unified vision of purpose. Management of assets, health and safety must always require control and authority. The balancing act is to keep this from creating a fat and unproductive layer of inefficient management.  

“Leadership” is a word we invented to remind managers of how humans can be mobilized to perform in the face of uncertainty. It should itself be the target of innovative practices, tuning in to the value creation of tomorrow’s workplace. A leadership culture that nurtures competence and empowerment in this way can only welcome the next storm of technological innovation.

Reference:

This article is published in HELM Magazine Issue No. 1/2014. HELM Magazine is a customer magazine published by Wilhelmsen Ships Service.

Comments?:

Send your comments and questions regarding this article by E-mail to forskning@bi.no

Text: Jan Ketil Arnulf is the Associate Dean to the BI-Fudan MBA program in Shanghai and is an Associate Professor at BI Norwegian Business School.

Questions about this article? Other questions? Contact BI Business Review

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