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Managing in a Complex World

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A cooperation of following publishers

Böhlau Verlag · Wien · Köln · Weimar

Verlag Barbara Budrich · Opladen · Toronto

facultas · Wien

Wilhelm Fink · Paderborn

Narr Francke Attempto Verlag · Tübingen

Haupt Verlag · Bern

Verlag Julius Klinkhardt · Bad Heilbrunn

Mohr Siebeck · Tübingen

Ernst Reinhardt Verlag · München

Ferdinand Schöningh · Paderborn

Eugen Ulmer Verlag · Stuttgart

UVK Verlag · München

Vandenhoeck & Ruprecht · Göttingen

Waxmann · Münster · New York

wbv Publikation · Bielefeld

Johannes Rüegg-Stürm

Simon Grand

Managing in a Complex World

The St. Gallen Management Model

Haupt Verlag

Johannes Rüegg-Stürm is Professor of Organization Studies and Director of the Institute for Systemic Management and Public Governance at the University of St. Gallen (HSG), where he heads the Organization Studies Research Center. He has long-standing experience as a process facilitator, consultant, coach, member and president of boards of directors, speaker, and academic leader of entrepreneurial training initiatives for systemic management development.

Simon Grand is Associate Professor of Strategic Management and Management Innovation, Academic Director of the RISE Management Innovation Lab at the University of St. Gallen (HSG), and Research Fellow at the Zurich Center for Creative Economies of Zurich University of the Arts (ZHdK). As a management researcher, strategy designer and member of several boards of directors, he works with entrepreneurs and executives to develop entrepreneurial strategies and effective corporate governance and management practice.

This book was translated by Dr. Mark Kyburz & by Jay Binneweg, M.A. HSG.

Preface

Managing in a Complex World is based on “The St. Gallen Management Model” (SGMM). The SGMM follows a long and rich tradition of presenting in didactic form a theoretically and empirically sound examination of management abreast with current management practice and the latest research developments and findings. This book is a translation of the German original (published in September 2019).

At the end of the 1960s, it was a pioneering achievement to explore management – as the challenge of coping with complexity – from a systems theory perspective, which was quite unusual at the time (Ulrich, 1968). The resulting insights were made accessible to teaching and practice by Hans Ulrich and Walter Krieg (Ulrich & Krieg, 1972), two pioneering scholars at the University of St. Gallen (HSG), as the St. Gallen Management Model.

The SGMM has always intended to contribute to the holistic understanding and integrative treatment of complex management challenges in their unique and differentiated contexts. To this day, this concern has lost none of its relevance.

The present version of the SGMM draws on a long scientific tradition. In particular, it includes ideas and thoughts from several earlier publications: J. Rüegg-Stürm, The New St. Gallen Management Model (2004) and J. Rüegg-Stürm & S. Grand, Das St. Galler Management-Modell. Wissenschaftliche Grundlagen und Praxisbeispiele (2017). At the same time, it consolidates the fundamental insights of our empirical research in recent years and harnesses the scientific potential of practice theory and autopoietic social systems theory. In addition to outlining the scientific basis of the SGMM (Rüegg-Stürm & Grand, 2017), we have conceived this current edition as a working tool along stringent didactic lines. It also serves critical self-reflection for an in-depth examination of management.

The SGMM is available as a printed book and as an eBook. It supports both educational purposes and entrepreneurial practice in further developing organizational value creation. The SGMM also includes a number of didactic visualizations, which have been specially designed to facilitate working with the model. The visualizations can be downloaded from www.sgmm.ch. [5] The latest version of the SGMM distinguishes a task perspective from a practice perspective. Both perspectives are informed by current research in the social and cultural sciences. Both perspectives highlight key aspects of management practice and complement each other.

Our research partnerships with enterprises and organizations from highly diverse contexts (e.g., industrial groups, technology companies, design agencies, research organizations, hospitals, and public utilities) have time and again highlighted the importance of self-critically examining both one’s own understanding of management and management practice as lived and experienced every day. This examination of management provides unfamiliar perspectives on the interplay of environment, organization, and management practice. These perspectives enable those responsible for an organization to discover new possibilities for development and action.

In this sense, the SGMM cannot be “introduced” in an organization, but instead may serve as a tool to tackle specific tasks. The SGMM may help structure constructive debates about important entrepreneurial issues. And it may also serve as a source of inspiration for developing an organization-specific management model.

Acknowledgments

We have only been able to further develop the SGMM, presented between these covers, thanks to our inspiring cooperation with many colleagues from the scientific community, in particular the University of St. Gallen, and from business practice. On behalf of many colleagues, we would like to thank our team colleagues Simone von Wittken, Christian Erk, Marc Krautzberger, Matthias Mitterlechner, Torsten Schmid, Thomas Schumacher, and Harald Tuckermann. We also thank our colleagues Kuno Schedler, Thomas Bieger, Pietro Beritelli, Dirk Schäfer, Florian Hohmann, Mathias Müller, Thomas Friedli, Urs Fueglistaller, Thomas Zellweger, Alexander Fust, and Frank Halter. They are all personally committed to anchoring the tradition of the SGMM at the University of St. Gallen and play a key role in its further development through their work. Particularly inspiring and enriching was our intense exchange of ideas with Hansjörg Siegenthaler and Elisabeth Michel-Alder, as well as with Martha Feldman, Ann Langley, Ann Cunliffe, Robert Chia, Alfred Kieser, Henry Mintzberg, Davide Nicolini, and Rudolf Wimmer, in the context of our “Distinguished Management Scholar Series.” [6] While developing, realizing, and finalizing this text, we have received tireless support from our committed, professional, and patient project team. Special thanks go to Naomi Kink and Andreas Schwendener. They have supported us not only with excellent project management but also with many inspiring ideas, which have considerably enriched this book. We thank our translators, Jay Binneweg and Mark Kyburz, for their tireless commitment and painstaking attention to detail. We also wish to thank Victoria Hotz and Flavio Tschopp, who have provided valuable advice on making this book more accessible. Our very special thanks go to Monika Steiger for providing the conditions under which we are able to tackle our daily work at the Organization Studies Research Center of the Institute for Systemic Management and Public Governance (IMP-HSG).

We are grateful to the project team at Alltag (Gloria Weiss, Phillip Bührer, and Rachel Kühne), whose patience and creative inspiration have produced visual materials that works, as well as a neatly designed, aesthetically pleasing book. Finally, we wish to thank Matthias Haupt for being an excellent publisher.

We have co-authored this book from start to finish. The fact that our endeavor has borne fruit is not self-evident. It is not our achievement alone, but the result of a mixture of intellectual joy, trust, friendship and happiness, for which we are grateful.

St. Gallen, October 2019

Johannes Rüegg-Stürm & Simon Grand [7]

How best to approach this book

The St. Gallen Management Model (SGMM) is not simply a collection of conceptual frameworks. Instead, it presents two complementary perspectives on the interplay of environment, organization, and management in the form of an integrated model. Together, these interacting perspectives – the task perspective and the practice perspective – form the SGMM.

The task perspective focuses on the two core tasks of management: first, to provide business-oriented analysis; second, to design organizational value creation. As such, this perspective also examines the analytical tools needed to perform these tasks.

The practice perspective illuminates the fundamental cultural and communicative preconditions for management to achieve impact. We adopt this perspective to familiarize readers step-by-step with new ways of thinking about environment, organization, and management.

We are convinced that exploring innovative visions of the future and possibilities for action, and opening up to critical reflection what might otherwise be unquestioningly considered self-evident, requires developing new and thus unfamiliar forms of language and thought.

With this in mind, we hope that interested readers will approach this book unbiased. Working with the SGMM ought to serve two purposes: first, to generate new and helpful ways of thinking about management practice; second, to help deepen and reflect on these insights together with colleagues, perhaps also in connection with pursuing a degree or executive training in management. We hope, moreover, that the management practices established at a specific organization, as well as the associated challenges, may also become the subject of the kind of reflection suggested here.

We have provided several aids to support readers as they work through this book. The SGMM is structured according to a number of basic principles. Knowing these facilitates reading the book and working with the model. [9]

Important definitions and terms are italicized (and thus highlighted). They can also easily be found in the subject index.

The model categories of the SGMM are presented and explained in the introductions to the task perspective and the practice perspective. These two perspectives and their interplay become more understandable as readers become more familiar with the entire model. Conversely, a solid knowledge of the individual model categories promotes overall understanding of the model. Hence, we suggest that readers not only read through each chapter once, but also delve deeper into especially relevant sections.

Understanding the model will depend on one’s own grappling with its components and thus on one’s willingness to constructively and critically illumine specific topics based on one’s own work context.

Managers may use the SGMM to initiate fundamental processes of clarification and reflection, on the one hand in general conceptual terms and on the other in concrete design terms. The term “strategy” illustrates this particularly well:

The term “strategy,” which we introduce as a model category in the SGMM’s task perspective, has manifold meanings in science and practice. Managers must clarify which aspects, phenomena, and facts of organizational reality the term “strategy” represents and should be used for in daily practice. Hence, one needs to fundamentally clarify the meaning of strategy in general and define how strategy ought to be understood. This serves to develop a common understanding of strategy as a general concept among managers. [10]

On this basis, one needs to simultaneously clarify what a specific organization’s “strategy” consists of concretely. What is its core? How does it become visible? What is it meant to achieve? The SGMM’s practice perspective includes various considerations and forms of description. These facilitate precisely describing an established strategy in its complexity and “communitizing” its understanding by the responsible managers. This, in turn, is an important prerequisite for further developing a strategy, jointly and purposefully.

In order to help our readers develop a good overall understanding of the SGMM, we have cross-referenced important topics, terms, and illustrations. The four main chapters are abbreviated as follows:

Introduction: INT

Task perspective: TPP

Transition to the practice perspective: TRA

Practice perspective: PPP

Chapter abbreviations are followed by a reference to the corresponding section. For example, chapter 5.4.1 (“Cultural understanding”) in the task perspective is cross-referenced as follows: (→ TPP, 5.4.1).

In sum, the SGMM invites managers to work together with their teams on topics and challenges so as provide additional and novel scope for action and development with a view to advancing organizational value creation.

Saying that, the SGMM also invites teachers and students to experience, in a new way, the interplay of environment, organization, and management of organizations with which they may already be familiar, and to critically reflect on selected topics. Visit www.sgmm.ch for additional information and teaching materials. [11]

Preface

Acknowledgments

How best to approach this book

INTRODUCTION

1 Why is a detailed examination of management more important than ever?

2 Organizational Value Creation: The Key Reference Point of Management

2.1 Value Creation as Outcome and Process

2.2 Value Creation as Organizational Achievement

2.3 Primary and Supplementary Value Creation

2.4 Value Creation in Environment-Organization Interaction

2.5 Types of Organizations

2.6 Organizational Value Creation as Management Focus

3 The St. Gallen Management Model (SGMM)

3.1 What are Models for?

3.2 What does the SGMM achieve?

3.3 Overview of the SGMM

3.4 The Development of the SGMM

3.5 Environment, Organization, and Management: A Systems-Oriented View

3.5.1 What is a System?
3.5 2 The Importance of Context
3.5.3 The Importance of Interdependencies
3.5.4 Consequences for the Understanding of Management

THE TASK PERSPECTIVE

Overview

1 Environmental Spheres

1.1 Economy
1.2 Technology
1.3 Nature
1.4 Society
1.5 Relationships between Dynamic Environmental Spheres

2 Stakeholders

2.1 Individuals, Communities, and Organizations
2.2 Stakeholder Concepts
2.3 Interrelations between Different Stakeholder Concepts

3 Interaction Issues

3.1 Concerns and Interests
3.2 Norms and Values
3.3 Resources
3.4 The Importance of Interaction Issues for Normative and Strategic Orientation

4 Processes

4.1 The Growing Importance of Process-Oriented Design Work
4.2 Process-Oriented Design Concepts
4.3 Process Categories
4.3.1 Management Processes
4.3.2 Business Processes and Business Model
4.3.3 Support Processes
4.3.4 Financial Management Processes
4.4 Process Development

5 Structuring Forces

5.1 Governance

5.2 Strategy

5.2.1 Understanding Strategy
5.2.2 Important Aspects of Strategy Definition
5.2.3 Strategic Design Fields
5.2.4 Strategy Work: Outside-In and Inside-Out Perspectives
5.3 Structure
5.3.1 Understanding Structure
5.3.2 Differentiation and Integration
5.3.3 Visualizing Configuration: Organizational Charts
5.3.4 Functional Structure
5.3.5 Divisional Structure
5.3.6 Matrix Structure
5.3.7 Formal and Informal Organization

5.4 Culture

5.4.1 Understanding Culture
5.4.2 Organizational Culture: A Manifold Implicit Structuring Force
5.4.3 Subcultures
5.4.4 Designability of Organizational Culture

6 Development Modes

6.1 Optimization and Renewal
6.2 Effectiveness and Efficiency as Development Focus
6.3 Organizational Change: Content and Relationship Dimensions
6.4 Impact Intensity of Organizational Change

Task Perspective: Core Statements

TRANSITION TO THE PRACTICE PERSPECTIVE

1 Organization and Management: A Complexity-Appropriate Approach

2 Increasing Complexity and Experiencing Contingency

2.1 Hallmarks of Management Work: Volatility, Uncertainty, Complexity, Ambiguity

2.2 The Enlightenment: Driver of Innovation and Change

2.2.1 The Rise of Stabilizing Institutions
2.2.2 Innovation Dynamics as Driver of Progress

2.3 The Multi-Option Society: A Challenge for Management Practice

2.4 Consequences of Increasing Complexity for Value Creation

3 Practice Perspective: Scientific Foundations

3.1 Practice Theory

3.2 Autopoietic Social Systems Theory

3.3 Common Features of Practice Theory and Autopoietic Social Systems Theory

THE PRACTICE PERSPECTIVE

Overview

1 Value Creation

1.1 Differentiation

1.2 Resource Configuration

1.3 Value Creation Processes

1.4 Decision-Making Practice

1.4.1 Decisions as Heavily Preconditioned Communication Processes
1.4.2 Decision-Making Necessities
1.4.3 Processing Forms
1.4.4 Decision-Making Capacity

1.5 Relationship Culture

2 Orientation Framework

2.1 Operational Orientation

2.2 Strategic Orientation

2.3 Normative Orientation

3 Environment

3.1 Environmental Spheres

3.2 Stakeholders

3.3 Conditions for Existence

3.3.1 Possibilities
3.3.2 Expectations
3.3.3 Resources

4 Management Practice

4.1 The SGMM’s Understanding of Management

4.2 Manager Communities

4.3 Design Platforms

4.4 Design Practices

4.5 Language of Reflection

4.6 Key Manifestations of Management Practice

Practice Perspective: Core Statements

EPILOGUE

List of figures

References

Subject index

INTRODUCTION

1 Why is a detailed examination of management more important than ever?

The term “management” is ubiquitous nowadays. Nevertheless, what management really is, or rather what its core is, often remains vague. Thirty years ago, Hans Ulrich spoke of a “societal function that is not understood” (Ulrich, 1984). He thus highlighted that although management is highly important, not only economically but also societally, its importance is often not explicitly addressed. Second, he indicated that the core of management is actually far from obvious (Malik, 2013; Tsoukas, 1994; Watson, 1994). We consider this unsatisfactory. Not only because management is so omnipresent today but also because it is becoming increasingly important and demanding (Cunliffe, 2014; Mintzberg, 2009; Ulrich, 1984).

Here we mean the core purpose of management, which often remains undefined in business administration (Malik, 2013; Ulrich, 1984): to shape value creation through division of labor, as today’s organizations do in the form of products and services for specific value creation addressees (customers, citizens, patients, students, etc.). Such value creation is increasingly preconditioned. It depends on specific knowledge, complex integrated processes, elaborate technical expertise, and sophisticated physical and technological infrastructures. Often, value creation also involves a large variety of actors, who may perceive and evaluate the value of value creation very differently in its overall context.

The three examples below illustrate just how diverse and complex modern value creation is:

Take a young biotech enterprise: Its basic value creation may lie in developing new medication for cardiovascular disorders. Central to this value creation are scientific findings on mechanisms of action in the human body, new R&D processes (e.g., from systems biology), and new technologies (e.g., digital simulation models). These are sometimes developed by the company itself, sometimes in partnerships with other startups and established corporations, and sometimes are also taken over from these. At the same time, it is important to attract the best employees in the relevant fields of knowledge and to secure the necessary financial resources in several funding rounds. The key tasks – structuring this complexity, setting the right priorities, and establishing robust partner relationships with different stakeholders – all require effective management practice. [20]

Or an orchestra: Its central value creation may lie in performing excellent concerts and going on successful tours, or in producing special recordings. Yet societal changes and digitalization are fundamentally changing the context of value creation: Concerts must reach new target groups (e.g., younger generations), tours intensify competition among orchestras (such competition is often global), the distribution of recordings is subject to new technical conditions (streaming, YouTube, etc.) and to altered economic rules of the game involving completely new business models. At the same time, orchestras need to keep offering traditional concerts and reinterpreting music for the present. These changes and the associated uncertainties must be carefully addressed by effective management practice.

Or a hospital: Its central value creation lies in treating and healing patients. Medical and technical progress is leading to increasing specialization among doctors, nurses, therapists, etc. At the same time, technological support is growing in various areas (diagnosis, treatment, and patient data management). While medical records must now be kept electronically, patients may obtain wide-ranging information about their illnesses online. This is changing the relationship between health professionals and patients from a patronal relationship to a partnership. In addition, the growth in new treatment options, with corresponding resource requirements, substantially exceeds the financial resources flowing into healthcare through tax revenues, health insurance premiums, and self-paying patients.

As a result, not only treatment decisions are becoming more complex, but so are decisions associated with devising treatment offerings, as well as developing and efficiently using physical and technical infrastructures, medical devices, IT systems, etc. Medical or care-related knowhow alone no longer suffices to meet this challenge. What is required is effective management practice, one capable of integrating changing treatment options, associated patient expectations, and the ambitions and demands of different professions to advance innovative patient-centric value creation.

Against the background of these three examples, chapter 2 explains in detail the key reference point of management: organizational value creation. Chapter 3 introduces the SGMM, illustrates the purposes of management models, and explains how the SGMM came about. [21]

2 Organizational Value Creation: The Key Reference Point of Management

2.1 Value Creation as Outcome and Process

Management is not an end in itself, but always concerns organizational value creation. The term value creation refers to two distinct, yet closely related issues:

On the one hand, value creation means the outcome of value creation, i.e., products or services (or effects in general), from which value creation addressees (e.g., customers, patients, or a concert audience) can derive a specific benefit.

On the other, value creation means the value creation process, i.e., all activities leading to the outcome of value creation (such activities include inbound logistics, production and outgoing logistics, marketing, distribution, and customer service). Any value creation process can be greatly simplified and schematized as a “value chain” (Figure 1).

When the SGMM speaks of value creation, we always mean both aspects, because the outcome can never be understood and designed without the process.

img3.jpg

Figure 1: Value chain (Porter, 1985: 37) [22]

2.2 Value Creation as Organizational Achievement

When an organization or a network of organizations creates value through division of labor, we speak of organizational value creation. Precisely this organizational value creation is the key point of reference for management.

Organizational value creation refers not only to what private enterprises achieve for their customers. Depending on organizational value creation and the environmental context, other types of organizations can be distinguished (→ INT, 2.5): nonprofit organizations (e.g., a purchasing cooperative), nongovernmental organizations (e.g., the ICRC), governmental organizations (e.g., public administration, schools, railways, post offices, the police, or the army). Such types of organizations often appear in mixed forms.

Nowadays, organizational value creation mostly has four basic characteristics: (1) coordinated division of labor; (2) specialization; (3) spatial and temporal distributedness; (4) the institutionalization of reliable cooperation.

These four characteristics are closely interconnected.

In terms of the value creation outcome, division of labor means that an end product (e.g., a car) is divided into modules, each performing specific subfunctions for overall value creation. Similarly, an insurance service can be split into specific individual tasks and modularized task bundles. In terms of the value creation process, division of labor means that overall value creation, i.e., the activities required to manufacture a product or provide a service, is divided not only among different people but also among different subprocesses or organizations, which cooperate with each other in value creation chains (Figure 2).

img4.jpg

Figure 2: Textile value creation chain [23]

Division of labor, i.e., dividing overall value creation into subtasks, subprocesses and subfunctions, has one major advantage: It enables specialization, i.e., developing and applying specialized knowledge and skills. A task is not only distributed identically among a large number of actors. These actors, whether individuals, communities or organizations, may and must consciously endeavor to specialize. While the involved actors now only master specific individual activities of overall value creation, their in-depth competence and experience means they excel at their task.

Actor specialization often coincides with specializing the overall resource configuration. By resource configuration, we mean all the prerequisites that are available over time and whose interplay leads to developing, producing, and providing specific products and services. Such preconditions include financial resources, physical and technological infrastructures, location conditions, knowledge and know-how, permits or rights (e.g., licenses).

Another characteristic of organizational value creation, in its intra- and interorganizational division of labor and specialization, is its spatial and temporal distributedness. Thus, different value creation activities are distributed sequentially or in parallel, staggered over time, and performed in various places (e.g., locations, buildings, rooms).

Labor-division-based value creation depends on reliable, well-functioning collaboration. Enduring, robust, and goal-oriented collaboration needs to be institutionalized within an organization. By institutionalization, we mean developing a certain, lastingly stable, and person-independent practice (e.g., in a democracy, popular votes and electing members of parliament). Repeated enforcement makes such practices collectively self-evident. They can be based on both implicit rules and formalized regulations (→ TRA, 2.1 and 3.1).

Thus, institutionalizing labor-division-based collaboration enables this cooperation to be practiced as independently as possible of specific individuals. To this end, organizations serve as structured spaces of action for lastingly stabilizing labor-division-based cooperation (Barnard, 1938).

2.3 Primary and Supplementary Value Creation

Products, services, and other value creation outcomes must create added value (benefit) for their target groups. Target groups are the key addressees of organizational value creation. They include certain customer groups (for companies), citizens (for public administration), students and research [24] partners (for universities), parties to a conflict (in courts of law), or patients (in hospitals). Thus, an outcome-centered understanding of value creation focuses primarily on how organizational value creation impacts target groups. Examples include material products (vehicles, computers, household items, textiles, semiconductor components, agricultural products, books, etc.) or immaterial services (financial services, overnight accommodation, educational services, etc.). We call target group-oriented value creation primary value creation.

This refers to those impacts of an organization’s activities that are related to its basic purpose, i.e., its core function. For example, an economic organization (enterprise) aims to satisfy customer needs, a political organization (e.g., party) seeks to form majorities, in order to meet public concerns, and a scientific organization (e.g., university) strives to generate new knowledge.

At the same time, organizations achieve much that extends beyond primary value creation and represents additional value creation: They create jobs, pay taxes, form a place of belonging, help establish meaningful employee identity, contribute substantially to occupational pension funds, and serve the common good. Thus, today’s organizations, as stabilizing institutions, are important pillars of modern society.

2.4 Value Creation in Environment-Organization Interaction

Organizational value creation arises from the coordinated interaction between an organization and its environment and must continuously evolve. Accordingly, developing and utilizing a specific environment is inseparably linked to organizational value creation.

An organization’s environment is not simply an undefined space surrounding that organization. According to the SGMM, that environment is rather the space of possibilities and expectations specifically relevant to an organization. Organizations need to purposefully open up this existence-relevant space and shape it entrepreneurially. This requires developing robust relationships with specific stakeholders, most of all with the organization’s target groups as its primary value creation addressees. For instance, establishing an innovation partnership with a technical university also opens up new product innovation possibilities for an enterprise. These possibilities need to be concretized in the product development process as innovative product characteristics and subsequently purposefully utilized. How an organization performs these tasks opens up its specific environment while new possibilities also arise for a university if its partnering enterprise [25] provides funding. Enterprise and university become relevant environments for each other. We understand their interplay, i.e., how these two organizations develop in relation to each other, as co-evolution.

Thus, organizational value creation, as a key point of reference for management, always focuses on design and on development. This dual focus encompasses organization and environment – with a view to enabling their sustainable co-evolution.

2.5 Types of Organizations

Not all organizations are identical. Essentially, an organization defines itself in terms of its primary value creation: What does this consist of? And which specific environment is this value creation oriented toward? The SGMM understands the primary environment as the environment toward which an organization’s primary value creation is oriented.

Primary value creation and the primary environment shape an organization’s identity and self-concept. This also includes how it deals with the concerns, interests, demands, and disturbances it faces. The terms primary value creation and primary environment also indicate that organizations can have several purposes or functions. They can be multi-purpose or multi-function systems required to cope with manifold heterogeneous expectations.

Overall, organizations can be typified in terms of three main distinctions: First, some organizations align their primary value creation with markets (the economy as an environmental sphere), while others provide a different type of primary value creation. Second, organizations whose value creation aims to achieve a financially realizable increase in value for their owners, while others emphasize other values. Third, some organizations are privately owned, others publicly.

On this basis, we distinguish six types of organizations:

First, organizations are enterprises if they align their value creation with markets and thus with the economy as their environmental sphere. They generate added value for their owners. They are privately owned. Enterprise ownership is more or less fully tradable in the form of shares or other forms of participation.

Second, organizations are public enterprises if the state is either the owner or at least a majority shareholder. Such enterprises must align themselves [26] simultaneously with two environmental spheres: politics and the economy. Typically, public enterprises include the state postal service, state railway, state providers of communication services or public water supply and waste disposal. Their value creation is (at least partially) state-regulated, e.g., if critical infrastructures or politically desired services (public service) are concerned.

Third, organizations are public organizations if, in contrast to public enterprises, they do not orient themselves toward the economy, but instead create sovereign value (e.g., public security). Based on a government mandate, this type of value creation is oriented toward the environmental spheres of politics and law. Examples of public organizations include the army and police or public administrations (e.g., building authorities, citizen registration offices, inland revenue, etc.).

Fourth, organizations are nongovernmental organizations (NGOs) if they are typically oriented toward the environmental spheres of the public and ethics, but if their value creation – in contrast to public organizations – is not legitimized by a state mandate. NGOs are oriented toward societal concerns (e.g., the protection of human rights, nature, or animals).

Fifth, organizations are nonprofit organizations (NPOs) if their foundation and continued existence are motivated not by increasing value for their owners but by collective self-help or by added societal, cultural, symbolic, or intellectual value. Typical organizations include ones committed to their members’ concerns (e.g., cultural associations, sports clubs, neighborhood and elderly aid associations, etc.).

Sixth, organizations are pluralistic organizations if several of the above organizational characteristics apply simultaneously (e.g., public hospitals or private universities). Their value creation is typically characterized by multiple orientations toward several environmental spheres, by heterogeneous notions of success, and often also by hybrid ownership. In such organizations, effective management as a reflective design practice is associated with special challenges.

In sum, different organizations are characterized by different environmental orientations. These environmental orientations also exhibit specific notions of valuation and success. While efficiency and productivity standards are hugely important in the economy, other criteria are central in politics (e.g., obtaining a majority, increasing power). Key criteria in public administration, as such oriented toward politics and law, include the rule of law, equality of rights, and legal certainty. [27]

Consequently, these organizations have different identities, rationality criteria, and performance measures with regard to gauging and evaluating appropriate, meaningful, legitimate, reasonable, and desirable action (Schedler & Rüegg-Stürm, 2014).

2.6 Organizational Value Creation as Management Focus

Every organizational value creation first needs to “settle down” (i.e., find its place) in a complex world, in order to occur with a certain self-evidence. Changes in an organization’s environment and new opportunities mean that its value creation also needs to be constantly scrutinized, reflected on, and further developed. Precisely this is the responsibility of management. Accordingly, the SGMM defines management as a reflective design practice.

This demand – to reflectively design organizational value creation – must include management itself and is crucial for two reasons: Not only is management becoming more important from a societal viewpoint, but also ever more demanding and controversial. Thus, organizations and scholarship need to develop a differentiated understanding of what constitutes effective and responsible management.

The SGMM addresses this pressing need by describing the multifaceted nature of management and its manifold prerequisites both linguistically and visually. Our aim is to enable managers to carefully reflect on their own management practice.

3 The St. Gallen Management Model (SGMM)

3.1 What are Models for?

Models are created if interrelations are either not obvious or very complex, and if no robust understanding of a subject can be taken for granted, but instead calls for explicit collaborative reflection and orientation. Models serve to better understand complex interconnections and to simulate future possibilities. They support anticipating or reconstructing possible developments through purposeful abstraction and simplification, and thus help strengthen our imagination. [28]

For instance, terrain models help gauge a new highway’s acoustic and traffic impacts prior to construction. Architectural models serve to assess a building’s aesthetic and functional qualities in advance. The same applies to aircraft models. Formal econometric models help assess the impact of economic policy measures before implementation. Chemical and physical models are used to estimate the functionality and dynamics of novel substances before production and usage.

Thus, models help collaboratively develop a better understanding of complex interrelations. At the same time, they involve simplification and abstraction so as to clarify important relationships and dependencies. The SGMM also needs to be understood in this sense. It represents a frame of reference that includes helpful descriptive categories, a “Leerstellengerüst für Sinnvolles” (Ulrich & Krieg, 1972). The SGMM aims to open up the interplay of management practice and organizational value creation for a dynamic environment to close scrutiny, be it in management practice (by managers) or in teaching (by teachers and students).

3.2 What does the SGMM achieve?

The SGMM does not represent an idealized corporate reality. It endeavors, instead, to strengthen the collective imagination of those facing management challenges. We intend the SGMM to help actors jointly recognize new impact dynamics and possibilities, by enabling careful reflection and by anticipating cause-and-effect relations hard to fathom. Thus, the SGMM contributes to focusing attention on how management becomes effective. It does so through conscious selection and simplification. In this sense, the SGMM cannot be “implemented.” Rather, it needs to be understood as a perspective and as a way of thinking that helps organizations shape and develop themselves.

We also see the SGMM as a language that facilitates understanding and (collaborative) reflection. As such, it helps to understand the complex nature of management and to practice it responsibly – both in general and in very specific situations.

The SGMM describes fundamental aspects of management. It spells out perspectives on management in context and provides corresponding visual illustrations. It enables actors to carefully consider their experiences of management practice. This makes the SGMM one of the few management models to explicitly subject management as such to reflection. The SGMM understands such reflection as an essential prerequisite for effectively and responsibly designing organizational value creation. [29]

Thus, the SGMM has two key functions: description and reflection / design. We intend the SGMM to enable critically and constructively reflecting on and advancing management practice. Our aim is that the model will as such effectively and responsibly expand not only an organization’s entrepreneurial repertoire of possibilities for action and development but also the management practice responsible for creating those possibilities.

3.3 Overview of the SGMM

The SGMM holds that the key point of reference for management is to design and advance organizational value creation. Value creation, so the SGMM, occurs through an organization’s interaction (co-evolution) with its environment – including avoiding unwanted side effects (e.g., stress or environmental burdens). Depending on its history, environmental embeddedness and value creation, an organization requires a very specific management practice to design and advance its organizational value creation.

The SGMM distinguishes two perspectives on organizational value creation: a task perspective and a practice perspective. This distinction pertains to the historical development of business administration, i.e., management science.

The task perspective assumes that an organization’s core – task-centered, labor-division-based human interaction, between individuals with different qualifications, educational and professional backgrounds – quite simply functions. Further, this perspective assumes that organizational value creation and its development can be influenced, unproblematically, from the outside. The founder of German-language business administration, Erich Gutenberg, formulated this idea in his groundbreaking postdoctoral thesis (Gutenberg, 1929: 26; our translation and emphasis):

“Hence, the enterprise as an object of business administration cannot directly be the empirical enterprise. The assumption must be made that the organization of the enterprise functions perfectly. This assumption eliminates the organization as a source of its own problems and removes it from its scientifically and practically significant position to the extent that it can no longer create difficulties for theoretical deliberations.”

Many business models, concepts, and frameworks are dominated by an economic approach to organizations. As such, they emphasize efficiency, i.e., cost-benefit considerations. [30]

From a task perspective, organizations are clearly identifiable entities consisting of tasks and problems capable of being systematically captured analytically and processed rationally. This perspective also suggests that concepts and “instruments,” such as the marketing mix, five-forces analysis or financial ratio analyses, if correctly understood and applied by the responsible employees, contribute to good decisions and thus sustain an organization’s success. Hence, the task perspective relies on the unproblematic possibility of organizations being rationally designable and controllable. The blind spot of this perspective is the demanding preconditions for management to become effective.

However, already Gutenberg realized the shortcomings of this perspective (Gutenberg, 1929: 26; our translation and emphasis):

“Assuming such a perfectly functioning organization, which ensures smoothly executing the basic business processes, does not mean negating, but only neutralizing the organization’s problems. The stance presented here will give rise to a wealth of arguments that privileges research questions about the organization.”

Gutenberg’s demand is addressed by the SGMM’s practice perspective. This second perspective focuses on what the task perspective, by assuming that organizations simply function, largely leaves unmentioned: the complex socio-cultural preconditions and practices of labor-division-based cooperation. Concretely, it is anything but self-evident that communication succeeds, or that timely, robust decisions keep being made and take effect in daily business, or that organizations can innovatively change and develop entrepreneurially. All of this instead requires particular reflective and communicative efforts while carefully heeding complex, ephemeral, confusing, and often elusive organizational events.

The SGMM’s two perspectives view environment, organization, and management in different ways. Consequently, certain descriptive categories appear in both perspectives, sometimes with slightly different meanings – similar to looking at the same object from different angles.

The task perspective applies an analytical and design process that focuses on facts and contents. This process contributes to elaborating a differentiated sense of the possibilities for successfully advancing existing organizational value creation while accounting for diverse influencing factors and effects. This analytical and design process enables using diverse business concepts and frameworks. [31]

The practice perspective, on the other hand, helps critically reflect on the manifold resource-related and cultural prerequisites for effectively realizing convincing design options. This enables developing ways of working simultaneously on the necessary preconditions for and means of realizing existing design options, as well-considered and as effectively as possible.