Management - The Essence of the Craft

Author\'s Preface to the English Edition 2010In this book I am presenting a new kind of management for a new kind of world. It is my concept of right and good management for functioning organizations in functioning societies of exceeding complexity. The need for such a concept arises because conventional management - by which, basically, I mean the US-type management theory and practice now applied worldwide - has come to its very limits as it is unable to deal with the consequences of its own success. The result of its tremendous achievements is a world of inextricably interrelated dynamic systems which are incomprehensibly complex. This has largely been ignored by the dominating US management approach because it was never designed for such conditions. It now fails exactly for this reason, thereby causing the present crisis. I have actually been predicting this for years in many of my publications, including the German version of this book which was first published in 2005. The fact that success almost inevitably breeds its own failure is often overlooked, although it is well known in many fields and in particular in those that accept complexity explicitly as their research subject such as biology or ecology. Albert Einstein already remarked that one cannot solve problems with the same methods which produced them. Failure to manage complexity as the major cause of the worldcrisis What, at present, a majority - at least in the West - considers to be a mere financial crisis can probably be much better understood if it is looked at from an altogether different perspective: the failure to understand and manage complexity. Business and society seem to be undergoing one of the most fundamental transformations in history. Only on the surface, and only if perceived in conventional categories, do present changes appear to be financial and economic in nature. What is happening might better be understood as an Old World dying because a New World is being born. Therewill hardly be any bridges back to the old state of affairs. Perhaps the most practical premise to navigate by is that whatever can change will change. If so, we are witnessing no less than the almost complete collapse of the formerly so efficient US management approach, which was developed mainly in the context of business administration and taught in business schools as the ultimate wisdom with regard to the running of corporations in a world where its premises applied to an ever lesser degree. Its realities have already been changing for quite some time but this went largely unnoticed because most people tend to see only the old familiar patterns in the new realities.We are experiencing in particular the failure of the US-type of corporate governance and the kind of top management which is dominated almost exclusively by financial variables only. We see the collapse of the shareholder value approach, which due to its short term profit orientation is largely ignoring the customer and is hostile to future-oriented investing and innovating, thereby systematically misdirecting the allocation of societal resources. The failure of the US-approach is, among other aspects, the consequence of mistaking financial investment for real investment, thereby undermining the former strengths of the US-economy, of confusing mountains of bad debts with sustainable wealth, and of failing to distinguish between healthy and pathological growth. Ironically, what collapsed first was the financial system which appeared to be the most highly developed and sophisticated system ever designed. It was believed to be free of systemic risk by most experts and run by the world\'s most excellent executives educated in what were thought to be the best universities and business schools worldwide. However, complex systems have properties and laws of their own. Their driving forces - if systematically ignored - make them inevitably go out of control. Such systems are incomputable and unpredictable