As I wrote about previously, one of the most fascinating ways to look at business is by using the lens of technology. I previously reflected that business is really the story of technology. The two are so closely intertwined that it’s impossible to separate one from the other.
The Industrial Revolution gave business leaders the structure and opportunity to begin using technology at a much greater capacity to increase output and profits. We also started to view people less as individuals, and more as tiny cogs in a giant industrial machine.
In the early 20th century, we started to see the roots of modern management styles. I’d argue that this began with the scientific management era sparked by thinkers like Frederick Winslow Taylor. His goal was to optimize business operations through the systematic measurement of work, the specialization of labor, and the elimination of waste. This era marked the rise of management as a distinct field of study and practice.
A Focus on Optimization
By the 1970s and 1980s, business was in full “optimization mode,” which is to say, the most successful companies were those able to adopt mathematical modeling and statistical analysis to help make business decisions. Linear programming was widely used for optimizing resource allocation and you saw the rise of conglomerates made up of other companies.
The best example was General Electric (GE), which saw incredible success due to the business acumen of its legendary Chairman and CEO, Jack Welch, who ran the company in the 1980s and 1990s. He was so powerful that you can almost divide business into pre-Jack Welch and post-Jack Welch eras.
Much of this was spawned by a notion of EVA, also called Economic Value Added, which is a financial formula measuring the wealth a company creates. When a company measures its success by this metric, every decision is determined by whether it helps drive the price share forward and optimize the company financially.
This decision-making matrix can get very granular as well as impersonal. For example, when the driving metric of a company is making everything profitable, that determines whether you might use a pen or a pencil on a given day. The people element takes a backseat to what drives profit.
Another type of optimization focused on manufacturing and supply chains. This was called “Six Sigma,” which is concerned with reducing the amount of waste in a given setting. We were no longer going to build a bunch of stuff, put it in a warehouse, and hope customers buy it. Pioneered by Toyota, we were now going to focus on getting lean and doing “just in time” (JIT) manufacturing, optimizing our processes, and trying to eliminate as many defects as possible.
The Humanity in Human Resources
While these optimization methods led to more efficient business operations, they also made jobs more rigid, siloed, and structured, potentially reducing the scope for creativity and autonomy. The trend continues with HR leading us down a data-driven future as it relates to the optimization of people.
The very title “HR” is a clue to where business has been heading all along. Is “Human Resources” a department that makes sure employees have resources … or are humans simply “resources” to ensure the bigger mission of the company?
That’s certainly the way many employees feel. Just ask all the Hollywood writers and actors who are currently striking. They absolutely don’t feel like “humans” who are respected and treated fairly by the bigger system. The strike shouldn’t come as a surprise, though. It’s simply a system of a much broader issue, which is the unique contribution that humans bring to the table.
In spite of whatever technology we have available, nothing can replace the human element in business, whether it’s Hollywood or the board room. People are the greatest resource we will ever have, and we must treat them as such. The very heart and soul of business is at stake.