The Industrial Revolution brought the decline of small-scale, cottage production and the rise of large, integrated businesses; Adam Smith’s invisible hand was replaced with what business historian Alfred D. Chandler Jr., called the “visible hand” of management. But now that pendulum appears to be swinging the other way — to a system of loose networks, virtual businesses and peer-to-peer interactions.
A supposed hallmark of the new economy has been the decline of managerial authority. Management gurus, consultants and pundits have proclaimed that hierarchy is out. Modern organizations such as online retailer Zappos have come to favor flat hierarchies with widely distributed authority.
And yet, given the demands of the current environment, authors Nicholai J. Foss and Peter G. Klein argue that managerial authority is still essential in situations where (1) decisions are time-sensitive; (2) key knowledge is concentrated within the management team; and (3) there is need for internal coordination. Such conditions, they observe, are also hallmarks of our networked, knowledge-intensive and
While it is true that many knowledge workers no longer need a boss to direct them to tasks or monitor their day-to-day progress, the authors contend that the role of managers and the definition of “authority” needs to change. Managers need to move away from specifying methods and processes in favor of defining the principles they want people to apply or the goals they want people to meet. In other words, the main task for top management is to define and implement the organizational rules of the game.
To be sure, procedures for defining rules and frameworks can themselves be delegated and nested. Indeed, when a company’s key assets are knowledge workers whose skills and behaviors are difficult to assess objectively, companies will need to increasingly rely on more subjective assessments of performance, which must be carried out by managers.