Gary Hamel & Michele Zanini
If we continue to assume that some people are intelligent or creative, while most are not, and continue to see intelligence and creativity as fixed, personal possessions, the options for the needed large-scale systemic changes will be few.
Belief systems are contagious. If, over an extended period of time, people are treated as if they are intelligent, they actually become more so. The opposite can also be true.
Success in life has been seen governed by two concepts: skills and effort; how bright you are and how hard you work. Recently, researchers have claimed that there is a third and decisive concept. It is the practice of lifelong curiosity and learning: “knowing what to do when you don’t know what to do” as Piaget put it.
How did we become inured to the inhumanity of our organizations?
How is it OK that a scant 15% of employees around the world are emotionally engaged in their work?
How is it OK that 70% of jobs in the US require little or no originality — this according to the US Bureau of Labor Statistics?
How is it OK that only 12% of employees in Europe say they’re always consulted before objectives are set for their work?
How it OK that 50% of employees say they’ve had to change jobs to escape an incompetent or autocratic boss?
How is it OK that in a Harvard Business Review survey, designed by the Management Lab, 79% of respondents from large companies said new ideas were greeted with skepticism or hostility?
How is it OK that in the same survey 76% of respondents said that political behaviors highly influence who gets ahead?
How it OK that the average first level employee in a large organization is buried under 8 or more layers of management?
None of this is OK, not by a long shot, but we shouldn’t be surprised. Our organizations were designed to be inhuman. As Max Weber noted more than a century ago, “Bureaucracy develops the more perfectly, the more it is “dehumanized.”
By that measure, our organizations should be pretty damned perfect by now, but they’re not.
They are inertial. That’s not the the fault of change-phobic employees, but of top-down decision structures that create long lags between sense and respond.
They are incremental. That’s hardly surprising since bureaucracy has little room for the curiosity, intuition, playfulness and daring that animates human creativity.
And they lack lack nobility. Seldom in our organizations do we talk of love, beauty, truth, courage, freedom and justice. Bureaucracies are emotional dead zones.
As a result, our organizations are less adaptable, less creative and less inspiring than we are.
No wonder CEOs denounce bureaucracy.
Doug McMillon, CEO of Wal-Mart, labels bureaucracy a “villain.” Charles Munger, vice-chairman of Berkshire Hathaway, says the tentacles of bureaucracy should be treated “like the cancers they so much resemble.” And when told by consultants that bureaucracy is the inevitable product of complexity, Jamie Dimon, chairman of JP Morgan Chase, justly replied, “hogwash.”
Yet despite its enemies, bureaucracy is in rude health. Since 1983, the size of the bureaucratic class — the number of mangers and administrators in the workforce — has more than doubled, while employment in other categories has grown by only 40%.
Drucker thought bureaucracy would contract as the knowledge economy grew. Writing in 1988, he predicted that by 2008 the typical large business would have fewer than half the management levels of its counterpart at the time, and only a third as many managers. That didn’t happen.
Today, some believe that networks will soon displace bureaucracy. While groupware — Huddle, Slack, Jive, Microsoft Team, etc. — makes it easier for teams to work asynchronously, there’s no evidence decision-making is becoming less centralized. Instead, we’re seeing the rise of digital Taylorism — what two academics have called “timecards on steroids.” Performance analytics facilitate unprecedented levels of oversight — catnip for control-obsessed managers.
There’s hope, though. Bureaucrcy is not inevitable. You can see this at Haier, Morning Star, WL Gore, Nucor Steel, Bertzog, Svenska Handelsbanken, Valve, the Linux Foundation, and other positive deviants.
So if we’re stuck, and we are, it’s not because we lack role models. We have enough exemplars to know it’s possible to buy the blessings of bureaucracy duty free. You can achieve control, coordination and consistency without consuming 30% of human labor in bureaucratic paper shuffling.
And yet . . .
60 years after Douglas McGregor wrote The Human Side of Enterprise, the promise of human-centric organization seems as illusive as ever. A generation after Peter Ducker’s optimistic prediction, our organizations are still riddled with bureausclerosis.
Why? Because — and we need to take responsibility here — we’ve been insufficiently honest about the cost of bureaucracy, insufficiently brave in confronting those who defend it, and insufficiently creative in crafting alternatives.
So let’s start by being forthright about what bureaucracy costs.
Based on our research, we estimate that if we reduced the bureaucratic burden on OECD economies by half, we’d add $9 trillion to economic output. These are the direct benefits that would come from doubling the average span of control and cutting bureaucratic busywork by half. The indirect benefits would be even greater.
Friction conformity, timidity, insularity, rigidity, apathy, politicking — these are far more costly than bloat and busywork. They squander human capability on an epic scale. Yet few organizations have a way of measuring the side effects of bureaucracy. And that’s a problem, because things that don’t get measured don’t get addressed.
That’s why we created the BMI — the “Bureaucratic Mass Index” — an instrument that dimensionalizes bureaucratic drag. It’s the sort of tool that should appeal to activist investors, who by now should realize that changing a few board seats does little to dislodge bureaucracy. Instead, investors should require every company to report its BMI, and present a solid plan for reducing bureaucratic drag.
Having calibrated the cost, we need to take on the apologists. Few executives admit to being fans of bureaucracy, but fewer still seem committed to killing it. Apparently, managers are fans of all things lean save management itself.
We shouldn’t be surprised.
Bureaucracy is a massive, role-playing game in which millions of human beings compete for status and wealth. If you’re an advanced player, you know how to deflect blame, defend turf, manage up, hoard resources, trade favors, negotiate targets and avoid scrutiny. Those who excel at the game — the administrative aristocracy — are typically unenthusiastic about changing it.
A century ago, administrative competence was rare, but a rapidly growing, and poorly educated workforce needed wrangling and it was natural that bureaucratic hierarchies gave precedence to administrative expertise. Today, managerial competence is mostly a commodity — and the parts of it that aren’t probably can’t be taught.
Though no longer at the epicenter of value creation (and, in truth, as likely to destroy value as create it), the administrative elite isn’t eager to surrender its power.
Yet it’s impossible to dismantle bureaucracy without redistributing authority.
That’s not an easy message to deliver to an executive cohort. Who wants to tell a room full of senior managers that the post-bureaucratic future will be a post-managerial future, where power is no longer calibrated by headcount, budget and decision-rights? Who wants to admit that our forty-year effort to rebrand managers as “leaders” has mostly been a charade?
This is where we need some courage.
When a corporate chief like A.G. Lafley, who served two terms as head of Procter and Gamble, says, “The CEO can see opportunities others can’t . . . and make the tough calls others are unable to make,” who’s going to say “rubbish?” Or when the former managing partner of one of the world’s premier consulting companies declares that it’s up to a handful of top executives to “shape the destiny of the business … while others have their heads buried in operations… ,” who’s going to say, “you have it backwards; it’s the people out on the edge who are best positioned to see the future coming?”
Formal hierarchy demands too much of too few, but unfortunately, many CEOs feel they’re up to the task — and to admit otherwise would cast doubt on the defensibility of a 300-to-1 salary differential with those on the front lines.
I’m sorry for being blunt, but I’m in good company, here.
Roughly ten years ago, when I first met Vineet Nayar, then head of HCL Technologies, he said, “The concept of the CEO, the ‘captain of the ship,’ is bankrupt.”
In my first conversation with Zhang Ruimin, Chairman of Haier, the global appliance maker, he said, “Our goal is to let everyone become their own CEO.”
Years ago, Ken Iverson, Nucor’s pioneering CEO, said this about hierarchy: “Inequality still runs rampant in most business corporations. I’m referring now to hierarchical inequality, which legitimizes and institutionalizes the principle of ‘we’ vs. ‘they,’ just as racial inequality was once legitimized and institutionalized.”
Unless we’re willing to be similarly honest and forthright, we’re part of the problem, not the solution.
So before challenging others, we need to challenge ourselves. In what ways are we still paying homage to the bureaucratic confederacy? “Where is our thinking still mired in management orthodoxy?”
To get a glimpse of the belief structures that prop up the bureaucratic edifice, let’s examine one of its pillars — the professional HR establishment. Perhaps you’ve heard the phrase, “human resource management.” This formulation is unobjectionable except for two words: “resource” and “management.” What’s toxic here is the notion that people are mere resources, rather than multi-faceted human beings, and the assumption that they’re incapable of doing the right thing without being managed from above.
In the bureaucratic worldview, human beings are instruments. This antiquated framing fails to recognize that the most valuable human capabilities in the creative economy — initiative, imagination and passion — cannot be commanded or managed. They are gifts, and on most days, they get left at home. To change this, we need to turn the bureaucratic mindset inside out. It’s the institution that’s the instrument, not the individual. As Haier’s Zhang often says, “people are an end, not a means.”
Each of us needs to be alert to when we’re operating out of the bureaucratic worldview. This happens, for example, when we use the term “leadership team” to mean those at the top of the pyramid. (Having subordinates doesn’t make you a leader.) It happens when we assume that change “cascades” from the top, or that control and freedom are trade-offs.
Beyond new metrics and new mindsets, there’s a third requirement for uninstalling bureaucracy — migration paths.
Most of the post-bureaucratic vanguard were born that way. Even when they weren’t, it’s nearly impossible, years or decades later, to recreate the step-wise process through which they built their highly distinctive management models. To take an analogy, while 23 and Me can map your genome, it can’t map the billion-year evolutionary journey that produced the particular organism that is you.
The management models of the vanguard are highly resistant to decomposition. They cannot be reduced to set of recipes or routines. This creates problems for anyone who wants to replicate a model like Haier’s web of 4,000 internal “micro-enterprises.” There’s no way to cut and paste. Creating a post-bureaucratic organization is a quest, not an optimization problem. For the most part, it can’t be engineered, it must emerge — as life itself emerged.
Many in business are inherently skeptical of an initiative where you can’t see the end from the beginning. (These people wouldn’t have sailed with Columbus.) But while the destination is uncertain, we have a compass; we know which way to sail.
We know that post-bureaucratic companies are an artful integration of three organizational forms:
- Socially-dense markets — networks of internal contracts that achieve the allocational efficiency of arms-length markets without falling prey to Coasian transaction costs.
- Naturally-dynamic hierarchies — pyramids of peer-attested expertise that are built bottom-up, where power is fluid and contingent on value-added.
- Performance-oriented communities — clusters of individuals who self-organize around shared passions and problems.
What’s hard, in a brownfield organization, is to find a way from here to there.
How do you adapt macro-level principles to the micro-realities of an organization’s culture, values and capabilities?
How do you mitigate operational risk? How do you uninstall bureaucracy and still keep the trains running?
And, most critically, how do you overcome the resistance of those eager to protect their power and prerogatives?
Many leaders face what we call the Gorbachev problem — they’re advocates for perestroika and glasnost, yet are stymied by the very bureaucracy they seek to dismantle. At every turn they’re thwarted not by the peasants but by the nomenklatura. No single leader, however enlightened, can convince a couple of hundred VPs to redefine their self interest, give away a chunk of their authority, and start acting like mentors instead ofoverlords. There simply aren’t enough carrots and sticks to hand, nor enough hours in the day. In a battle between a progressive CEO and an entrenched bureaucracy, the bureaucracy is going to win every time — ask Pope Francis.
I’m sorry if this sounds pessimistic, but let’s face facts. We’ve been throwing ourselves at the monolith of bureaucracy for decades. Group dynamics, socio-technical systems, QWL (Quality of Work Life), T-Groups, systems thinking, industrial democracy, self-management, organizational learning, high performance work teams. Did any of these make a lasting difference? Maybe. But when measured against the enormity of the challenge, they fell woefully short. Why? Because, as Art Kleiner put it in The Age of Heretics, “the power structure fought back.”
Any approach to busting bureaucracy that fails to deal with this reality will sputter. (We’re thinking of you, “agile teams”). What we need is an approach to reinventing management that is far more courageous, spirited and collaborative than anything we’ve tried thus far.
We need something that routes around the old power structure, builds a coalition of the willing, exploits the power of combinatorial thinking, is deeply principled yet grounded in reality; and simultaneously revolutionary and evolutionary.
Is this possible? I think so.
What if we crowdsourced the work of busting bureaucracy? What if we encouraged everyone to think about how they could replace bureaucracy with more flexible, resilient and human ways of working — starting with their own teams? What if we used the tools of open innovation to ask people for new ideas on how to set goals, craft strategy, allocate resources, recognize contributions, make decisions, and hold one another accountable — all in hyper-flat, non-hierarchical ways? What if our organizations were running dozens of management experiments each year, and it was peers, rather than executives, who decided which ones to scale up?
A few years ago, I and few colleagues set out to do exactly this.
In one early test, we invited 3,000 people from a global apparel maker to an online hackathon. Each week, over a two-month span, we used an online platform to unveil a principle from the management vanguard — tenets like openness, meritocracy, ownership, entrepreneurship, and experimentation. We then asked the community, “What would you do to make this principle come alive in your organization?” On “openness,” suggestions included sharing salary information, involving super-users in product development, holding elections for team leaders, and inviting the whole company to participate in an open strategy process.
In all, team members generated more than 900 management hacks, which received 10,000 peer evaluations. The twenty highest rated hacks were turned into experiments.
What’s novel here isn’t the notion of online innovation, or low-cost experimentation, but the idea of harnessing collaborative tools to reinvent management. What’s new is creating an all-hands process where change is socially constructed, and rolls up, not out.
Michelin took a similar approach in 2016 when it launched 38 responsibilisation experiments across its plants, each led by a volunteer. The goal: move power from supervisors to first level employees. This sort of distributed, user-led change is hard to marginalize or abort.
While the task of dislodging bureaucracy can appear herculean, there’s reason to be hopeful.
Three hundred years ago, monarchical power was taken for granted. Many, such as Thomas Hobbes, believed democratic alternatives would open the door to chaos. Yet today, few us would be happy living in a society where power was an accident of birth.
Two hundred years ago, slavery seemed an immutable social reality. Some unfortunate souls were destined to be property. Today we regard slavery as repugnant.
A hundred years ago patriarchy was unchallenged. Women were at the mercy of men — politically, economically, socially and reproductively. Today, we see this as a great injustice and are committed to gender equality.
Aristocracy, slavery, patriarchy — these institutions were inhuman at their core. Each was an iron cage — and not always metaphorically. Like bureaucracy, they seemed unassailable.
The point is, deeply embedded social systems can be changed. Yet when you look back, you realize these cankers didn’t yield to utilitarian arguments. Eradicating slavery wasn’t a way to raise output. Self-government wasn’t a strategy for encouraging enterprise. Emancipating women wasn’t a tactic for enlarging the workforce. In each case, the hard wedge that cracked the prevailing social consensus wasn’t a pragmatic argument but an ethical one; not “ this doesn’t work,” but “this is wrong.”
As the great political theorist Thomas Paine once put it, “A long habit of not thinking a thing wrong gives it a superficial appearance of being right” — but that doesn’t make it impervious to moral courage. Fact is, no other proposition in human history has achieved more than the assertion that every human being deserves the opportunity to develop and benefit from their unique capabilities, and that human erected impediments to that pursuit are unjust.
Institutions change when we change; when we trade resignation for indignation. We must admit what we have long known: our organizations are at odds with our values — not just in how they foul the environment, misuse our personal data, or corrupt the political process, but in how they treat the human beings whose lives they consume.
When this conviction becomes fixed in our hearts and we surrender our interests in protecting the status quo, we’ll have the chance at long last to create organizations that are as amazing as the people who inhabit them.