Professor Vlatka Hlupic

With the deepening economic crisis, increased complexity, volatility and pace of change, it is obvious that traditional leadership paradigms do not work in these turbulent business environments. There is a dramatic need for a new mindset and leadership skills. Traditional leadership approaches have been based on the Newtonian machine model that focuses on hierarchical linearity, a culture based on rules, command and control and formal relationships. Whilst this approach might work well in predictable and stable environments, there is ample research evidence that in dynamic and complex, knowledge-based environments this traditional approach inhibits innovation and decreases motivation and productivity.

In this article, Professor Vlatka Hlupic and her co-authors argue that eschewing control and allowing employees to self-organize can rapidly boost innovation and success at knowledge based firms, even during crises. Although various business researchers have proposed reduction of managerial control as a means of engaging knowledge workers and stimulating innovation, there is little evidence on how to implement such an approach or what consequences are likely to emerge. This article provides compelling evidence from two companies, CSC Germany and ANADIGICS, that if implemented properly, this counterintuitive idea can dramatically improve results.

CSC Germany, a division of the $17 billion worldwide IT consulting and services firm, at first took the usual approach of increasing control and efficiency in response to poor financial performance in 2007, but the result was a further decline. Then the division’s leaders did the opposite, they relaxed control and gave employees the freedom to do things as they saw fit, and the outcome was an astonishing success, with substantial increase in the profit margin in the first and subsequent years. Similar results were achieved in ANADIGICS, an USA based company specializing in 3G wireless technology.

The article describes how this new leadership approach was implemented in both companies and what results emerged as a consequence of this new approach. The authors conclude that relaxation of control can benefit any knowledge based company. This is particularly critical when the company begins to miss opportunities because it cannot understand or respond to market demands, when employees’ creativity is inhibited because they feel pressure from control and when business is facing crisis. In these circumstances, relaxing of the control, eschewing the formal power and encouraging mutualism and interactions is the best way to unleash the power of employees’ creativity and their intrinsic motivation.

If you are interested in knowing more about leadership strategies to benefit knowledge based companies, please send a message to Dr. Magda Hercheui (m.hercheui@westminster.ac.uk). NMK is currently preparing future courses and events and we will take your interests into account when designing these.