It probably wouldn’t be a bad thing if more business people read science fiction. Some of the genre is, of course, pretty far out there and highly improbable. Still, it gets you thinking.  

The folks that really eat up science fiction (or speculative fiction, as devotees tend to prefer) many times look like refugees from the 1960s. I’ve been to the conventions – I’ve seen them. Most CEOs, by comparison, still tend to be a pretty staid bunch of folks. As a result, there is too often a standard mindset. When the future comes to us in a steady state fashion, an operational view of the world works well enough. Unfortunately, when a nonlinear event occurs – a natural disaster occurs, a financial bubble pops, a terrorist attacks, a power grid collapses – it is too late to be proactive. And putting out fires all day is no way to run a business. A shakeup in management styles and actions is not only a good idea, it’s inevitable. The old school boys will finally be run out of town.

Senior executives remain focused on the near-term for a variety of reasons. The obvious one is the pressure they get regarding stock price performance by some investors and most equity analysts. But there is also a tendency for senior management to focus on the near-term because the future is either hard predict (certainly true) or assumed to be a linear extrapolation of present trends.  

Speculative fiction is a great place to get ideas about a far too underutilized management tool known as scenario planning. Since we know the future is hard to predict, it’s important that we consider several futures. We don’t know which will come about, but we can plan to some degree for all of them. The funny thing is that in the process of planning for multiple futures, we might also just happen to have a hand in shaping the actual future (that eventually becomes the present) as well. A deep competency in scenario planning translates into a far more proactive approach than the alternative of doggedly pursuing an “obvious” future that is based on simplistic forecasts – and all too often fails to materialize.  

Yes, predicting the future is difficult. But just because issues are intractable doesn’t relieve management of its responsibility to address them. Success for organizations in the long-term means that long-term scenarios are essential to set intelligent strategy. The future belongs to those who see it before their competitors and claim it for themselves.

The late, great Peter Drucker asked lots of uncomfortable questions of senior executives, and because he was Drucker, the big chiefs were compelled to answer. What about the rest of us?

 For a long time, it was fashionable for senior managers to believe they knew everything. As a result of that posture, asking questions could be considered rude and impertinent. Even today, such imperious behaviors still occur to a surprising degree. The fall of Enron can be traced in part to Jeffrey Skilling’s resistance to dissenting opinion. He could dismiss questioning subordinates with a wave of the hand, along with the comment that, “they just don’t get it.” Bankruptcy followed soon after.

 Peter Drucker was an early advocate of new management behaviors that included being more receptive to employee feedback and granting employees more autonomy at work. Yet Drucker was also skeptical of the outsourcing of knowledge work, one of the higher-end service functions. Given more time, I wonder what Drucker would have said about the prospect of outsourcing – of all things – having a real impact on management behavior?

 Some of the inclusive management behaviors that Drucker recommended were optional for a long time. In the manufacturing age, where management dealt with machines as much as people, this is perhaps not surprising. However, the nature of services outsourcing will make collaborative, feedback-intensive management styles mandatory. Like so many other things that provide a point of differentiation early in a particular lifecycle (take automobile quality for example), they later become simply the price of admission. Ultimately, the greatest overall impact of outsourcing will, in fact, be to launch an entirely new class of manager. This manager will be collaborative, yet decisive. Open to dissent, yet ready to make tough decisions. And he or she will stick with those decisions long enough to track their impact as they propagate throughout the organization and into the marketplace.

 This seemingly disparate grouping of traits may appear paradoxical at first, but they are not. Managers and executives at either extreme go off the tracks. On the one hand, self-assured managers who never change their minds will miss important signals that would otherwise alert them to trouble ahead. As a result, many times they run the company into a ditch. Serious enough myopia can lead to the organization’s demise altogether. On the other hand, wishy-washy managers that parrot the viewpoint of the last person or guru they see will result in hopelessly confused employees and cause the organization as a whole to meander aimlessly.

 But can outsourcing really cause management behaviors to change? You bet.

 Of course, we see the obvious impacts of outsourcing well enough. It causes the relocation of jobs to other countries. It increases the level of competition and puts pressure on costs. But outsourcing has second-order effects that are not yet well-understood. Outsourcing will focus management on results. It will force managers to ask more questions and solicit more feedback. It will require that managers be more civil, because successful outsourcing requires good working relationships. In short, the nature of services outsourcing will render all those dysfunctional behaviors that could pass muster in manufacturing-dominated economies obsolete. After a hundred years of often haphazard application, management theory will at last fulfill its promise. Peter Drucker would have been pleased.

Political hacks love to denigrate outsourcing because it’s an easy target, and because most people still don’t understand the dynamics at work. A healthy economy is creating and destroying jobs all the time. The key is that more are created than destroyed over the long haul.

 For some jobs, the destruction means that they get shipped to another country, which will be glad to get them. Why? Because the operative comparison for many workers overseas isn’t a choice between a pampered cubicle or lush corner office. The operative comparison in developing countries is between a relatively clean, albeit perhaps not glamorous, white collar job created through offshoring enabled by technology on the one hand, or the grueling life on a subsistence farm on the other – or even a lack of employment altogether.

 If we G7 workers want to earn a “decent” wage, we had better do a decent job of adding value in a way that someone sitting 5000 miles away can’t easily replicate. If our displaced and disgruntled white collar brethren depend on populist commentators (e.g., Lou Dobbs of CNN fame) or populist politicians (e.g., U.S. Senator Chris Dodd) to solve the problem, they’ll all be chasing a cure-all that just isn’t there. The world is in the midst of a fundamental transformation with no comparable precedent for a hundred years (see Outsourcing and Management at www.thomastunstall.com). Trying to stem the tide of outsourcing will only encourage people to be complacent, and will result in a far nastier upheaval than the comparatively systematic economic restructuring going on now.

Managers of large firms and organizations constantly look for new ways to grow. The temptation to diversify is great. However, this strategy should be used with caution. What starts out as a search for “synergies” often ends up as a distraction that burdens the income statement with additional SG&A (sales, general and administrative) expenses. Diversification should be undertaken only when the new activities mesh with organizational strategy, which means that core competence is clearly understood. Can everyone in your organization articulate its core competency?

The full impact of outsourcing has yet to be realized. Even so, the really interesting story is not about how common it will continue to become. Rather, what is important is how outsourcing will change organizations and management styles. While it’s true that some managers and executives have been proactively converting from mechanistic styles to collaborative ones, others still cling to the old models because it's all they know. They've been told how to manage by previous generations – by people who continue to rely on myths and clichés that just won't work in the information age.

 Outsourcing takes personalities and idiosyncrasies out of the equation, and puts the emphasis on measurements. Outsourcing demands effectiveness and results. Outsourcing exposes the black box that has characterized organizations for decades.

 Disorganized or dysfunctional managers that could operate successfully inside the corporate black box will not survive as organizational boundaries become more porous. Outsourcing, just as do markets, provides transparency that will result in the overhaul of organizational structures. In the process, management styles will inexorably change for the better. The old school boys will be history.