Scientific Management Is Past Its Peak

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(Of course, that would be a cosmically delicious irony: The overwhelming desire for an analytical world causing emotions to overwhelm analysis in predicting the arrival of said perfectly analytical world.)

Let me suggest an alternative trend—the rise of heuristics over algorithms; qualitative over quantitative research; judgment over analytics; creativity over crunching. Why would this be? Smart executives are beginning to recognize that the analytic, algorithmic approach to business has overreached. They read the crisp reports spit out of their ERP systems, and while they know exactly how many widgets they shipped to the Midwest the previous week, that isn't helping them figure out the next great thing that customers want.

Rather Revolting

While their CRM system lets them quantify the profitability of each and every customer, and on the basis of those data, enables them to approach each customer with a perfectly customized offer, they find customers don't feel wonderfully served but rather have the eerie feeling that Big Brother is watching them shop.

While they can draw on huge quantitative consumer research studies that are statistically significant beyond a shadow of a doubt, they wonder why products based on the results don't grab the targeted consumers. While executives think they are doing the right thing by managing the numbers for the sole purpose of 'maximizing shareholder value,' they are perplexed that employees don't find that to be a particularly inspiring reason for coming to work each day, and customers find the thought rather revolting.

While it would be crazy to argue that business management has not benefited from scientific methods, algorithms, and sophisticated software; the question is where is it going from here? And I believe the pendulum is swinging back.

Thoughtful executives are figuring out that algorithms and software, the focus of McKinsey Global Institute's enthusiasm, are at the end of a long chain that starts with mysteries such as: How do teenagers think about their cell phones? And guess what? They don't think of them as phones!

Seizing the Higher Ground

When we begin to understand mysteries, we develop heuristic ways of thinking about kids and their handheld networking devices cum fashion accessories. A lot farther down the road of understanding, we may be able to come up with an algorithm or two relating to kids and this product set—i.e., we must have a new generation of products on the shelves every six months or our market share will tend inexorably downward. And some time after that, we might be able to write software that helps us, for example, price the product line across the multiple distribution channels.

If executives want to focus on the software and algorithm end of the chain, they can manage exactly the way the McKinsey Global Institute suggests. However, while they are managing the well-understood parts of the business with dazzling efficiency, executives in other companies will be delving into the mysteries that define the future of the business, developing heuristics for understanding it, and by doing so, seizing the high ground for the future.

Who's Winning?

That is why a smart executive like Procter & Gamble (PG) CEO A.G. Lafley insists on doing in-home visits to consumers (or stream-side visits in rural China) wherever he travels. He isn't going to make billion-dollar decisions on the basis of a few in-home visits. He understands full well that what he sees isn't a representative sample. But he is delving into the mysteries of how products interact with his customers' lives in ways that a big quantitative, algorithmic survey never will.

He knows that his job as CEO is to keep pointing his company up towards the mysteries and heuristics and not let it fall prey to a focus on "algorithmic decision-making techniques and using highly sophisticated software." He and others like him are winning, and that is why I believe that the pendulum is swinging away from, not towards, the extremes of "scientific management."

Roger Martin has served as dean of the Joseph L. Rotman School of Management at the University of Toronto since 1998. He was previously a director and co-head of Monitor Company, a global strategy consulting firm based in Cambridge, Mass. He is director of Thomson Corporation and Research in Motion and has just published his second book, The Opposable Mind (Harvard Business School Press).