After starting as hunters and gatherers, humanity has economically evolved from the agricultural age (ca. 10,000 BC) and the industrial age (ca. 250 years ago) to the knowledge age (ca. 50 years ago). During the past decade, we have jumped up a further level into the innovation age. In this new age, the critical means of production are not tools (hunters and gatherers), land and domesticated animals (agricultural age), energy and machines (industrial age), or data and information management systems (knowledge age) — they are know-how (knowledge, skills, and experiences), concepts and ideas. Likewise, firms’ key competitive advantage will no longer be economies of scale (industrial age) or economies of scope (knowledge age), but the ability to use the know-how mentioned above to create novel, original, and meaningful innovations.
Interestingly, most people fail to notice that innovation always begins with ideas that initially flow from the brains of individuals, who then cooperate with others to transform these into innovations. Unsurprisingly, the innovation age elevates the importance of people. Today, let’s explore how “people management” has evolved through the ages and may develop further in the innovation economy.
People management in the hunter and gather society
In Paleolithic times, humans lived together in typically nomadic, largely egalitarian bands of several dozen members. Hunter-gatherers aimed to jointly survive and thrive in a world full of dangerous predators by covering each other’s back and collaboratively foraging (collecting wild plants and pursuing wild animals). Primal humans used tools for big game hunting (mostly done by males) and gathering fruits, roots, and leaves (mostly done by females). Interestingly, modern anthropologists studying hunter-gatherer groups discovered that the more challenging the environment a band lives in, the greater the variety of their tools. Clearly, in an “all or nothing” line of work, creativity and good teamwork decided if a hunting day ended with a reward or not. In a hunting group, every single individual mattered and was valued. Little wonder that hunter-gatherers did not have permanent leaders, and in any situation, the person taking the initiative depended on the task being performed.
People management in the agricultural age
With the beginning of the agricultural age, humans shifted from a nomadic lifestyle of hunting and gathering to one of agriculture and settlement. Hunters became farmers who cooperatively sowed, nurtured, and reaped crops on a slice of land and herded domesticated animals following a repetitive seasonal rhythm. Agricultural societies learned how to store food supplies and trade these for other goods. This shift allowed for denser populations and led to a specialization of labor, higher productivity, and the creation of increasingly sophisticated buildings, tools, and weapons. It also gave rise to the concept of property ownership and the emergence of the first cities, governments, and military forces formed to protect people and resources.
Consequently, while human cooperation between the various new roles (pheasants, traders, and artisans) was still widespread, a hierarchy determined by property ownership and class status emerged that began to “manage” individuals’ efforts.
People management in the industrial age
In the industrial age, companies began to mass-produce standardized goods using energy-powered machines. The new industrial factories required lots of hands, firstly to dig out the coal needed to run the machines, and then operate these. So, many farm laborers became lowly-skilled mine or factory workers, whereby an individual worker was quickly displaceable as the work was standardized and straightforward. Workers’ sole motivation to show up at the factory gate was the desire to make enough for their families to get by every day. Typically, workers were paid their meager wages at the end of the day (and later at the end of a week or month) for the hours they’d worked or the output they’d produced.
After the management domain developed in the late 19th century in the form of Scientific Management, “personnel” first emerged as a sub-unit of finance and accounting, whereby “bean counters” focused more on hours, outputs and wages rather than on the needs of people. This perspective expanded with the emergence of the Human Relations Movement in the mid-twentieth century. Subsequently, Human Resources Management became a separate corporate function responsible for hiring, administering, paying, and firing workers. (Notice how this name indicates that industrial workers were seen as a production resource similar to input materials.)
In the relatively static, predictable business world of the industrial age, a steep management hierarchy directed the efforts of a vast number of workers following a command and control style that later gave way to Henri Fayol’s managerial functions (planning, organizing, directing, and controlling).
People management in the knowledge age
In the knowledge age, companies devised new ways to more effectively process data, information, and knowledge with information management systems. Compared to the low-skilled “blue collar workers” of the industrial age, the well-educated and highly-skilled knowledge workers (management guru Peter Drucker’s new name for “white-collar workers”) gained in their relative importance. They were paid fairly good monthly salaries, and making money tended to be their primary motivation On the other hand, automation of at first industrial and later administrative processes led to “rightsizing exercises” of the workforce during the 1980s and 1990s.
In a steadily changing and accelerating business environment of the 1990s and 2000s, Talent Management emerged as a new label for the people management function. It expanded to include activities such as acquiring, onboarding, managing, developing (through training, coaching, and mentoring), motivating (often using KPI-performance agreements and quarterly or annual review exercises), and finally “outplacing” these well-educated and -paid knowledge workers to replace them with younger, cheaper, yet less experienced bloodstock.
People management in the innovation age
In the first half of the 21st century, businesses need to maneuver a VUCA (volatility, uncertainty, complexity, ambiguity) world that SUCCS (i.e., is characterized by speed, uncertainty, complexity, change, and surprise). In the innovation age, an organization’s success and survival depend on its ability to create and transform existing and freshly emerging knowledge into meaningful innovations. So, former knowledge workers need to evolve into co-creators and gain further in their importance. Interestingly, people management has a new name: Human Capital Management, indicating that humans are now seen as assets of a company (although they’ have yet to be listed on the firm’s balance sheet).
Progressive firms signal the increased importance of the human factor for their business success by creating a C-level role for the people function (called Chief People Officer or Chief Human Capital Officer), whose job it is to woo, convince, onboard, align, develop, and adequately reward agile, smart co-creators. These are first and foremost motivated to join those organizations that make meaning (while making money is only of secondary importance). They cooperate in lean but keen teams led by the individual who’s best qualified for a given project. Moreover, creative leaders embody authenticity, talent, skills, experience, passion, and a track record of successful outputs.
The people management style in these innovative firms will be a mix of self- and team management focused on achieving monthly to quarterly output targets that contribute to the successful pursuit of a worthy long-term cause. The payment level in these meritocratic organizations is medium to high and linked to individual, team, and company performance.
Conclusion: Back to the beginnings?
I gained fascinating insights from exploring the historical evolution of people management throughout the different economic ages: People management in the highly dynamic business environment of the innovation age seems to resemble in many ways the egalitarian and cooperative, flexible and agile, skills-based and creative approach of primal hunters. What insights did you gain? And what level is your organization operating on with regards to its people management? Is it still stuck in the industrial age? Or the knowledge age? Or have you already embraced the new people management paradigm of the innovation age?
Progressive organizations have already begun embracing the concept of human capital management, which will gain renewed momentum in the coming years. For that reason, we will explore this topic in the next article two weeks from today.
You can find a longer description of our human economic evolution in my upcoming book “The Executive’s Guide to Innovation” (click here for more information and preorders).
How can we support you in your efforts to get your business ready for success in the innovation age? Contact us to jointly explore how Thinkergy may help you deliver on your innovation agenda in 2021 and beyond.