Gary Hamel on dismantling bureaucracy to empower the workforce
Photography: World Business Forum
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Gary Hamel on dismantling bureaucracy to empower the workforce

James Lawrence — July 2019

Provocative keynote speaker, business school professor and author Gary Hamel has set his sights on business bureaucracy, arguing that it thwarts the potential of modern workforces. In an exclusive interview, he highlights the key role of technology in eradicating ‘bureausclerosis’ and humanizing management practices.   

London Business School professor of strategy and entrepreneurship Gary Hamel has a new mission: to inspire an overdue modernization of traditional business practices. The highly influential — and sometimes controversial — management thinker has launched a campaign directed squarely at the stultifying impact of bureaucracy and its direct consequence, an overbearing command-and-control management approach. In his view, traditional approaches continue to suck the agility, creativity and innovative impulses out of today’s workforces.

Often considered a radical on re-inventing leadership, Hamel sees clear evidence everywhere that companies will have to address their bureaucratic structures or, within a generation, face being out-thought, outmoded — and out of business.

The perspective from such a leading business thinker will certainly resonate in many C-suites. Hamel is considered one of world’s leading business thinkers. His best-sellers have included The Future of Management and What Matters Now, and his new title, Humanocracy, due in January 2020, spells out why it is now imperative that businesses everywhere abolish bureaucracy and “re-invent management”?

He draws on a killer stat: according to a global workforce survey by Gallup, only 13% of employees feel “engaged” at work. That leaves 32% “actively disengaged and a further 51% “not engaged.” In other words, in any typical organization, only a fraction of the workforce applies its best capabilities.

“Gary

“Our organizations are failing us. They’re sluggish, change-phobic, and emotionally arid,” he writes in the introduction to Humanocracy. “Human beings, by contrast, are adaptable, creative, and full of passion. This gap between individual and organizational capability is the unfortunate by-product of bureaucracy — the top-down, rule-choked management structure that undergirds virtually every organization on the planet. Worse, despite all the hype around flat organizations and agile processes, bureaucracy is growing, not shrinking.”

The situation, argues Hamel, is not sustainable. What’s more, the opportunity cost is huge: “Bureaucracy costs the global economy more than $9 trillion in lost economic output each year, yet we live in a world of limitless problems and close to limitless intellectual capability,” he says when interview by I-CIO at the World Business Forum 2019 in London. “But in most organizations we have really not incentivized or even allowed people to use their problem-solving skills at work. How is this OK?”

The way forward, he argues, is to move decision-making away from the center and towards the edges of the enterprise. “My dream is that every single employee sitting in the front line should have a choice: for example, ‘Do I make five sales calls today or do I put my feet on the desk and think about a new product?’ Every such employee has [been equipped with] the required information: they know where the business sits; how it is doing; what the pressure points are. They are capable of making those smart decisions in real time.”

So, just as business models have been re-invented over the past few decades, thanks to the advent of the internet and digital technology, organizational models need to follow by developing new decentralized structures — thereby enhancing the free flow of ideas and creativity form the edges while eliminating the drag on time due to excessive bureaucracy.

“What has struck me,” he says, “is just how challenging the problem is of getting bureaucracy out of the way. If you think about it as an operating system — a technology — it is the most ubiquitous technology in the world. Bureaucracy is literally at the heart of every single organization I see.”
Humanizing the management model

Digital technology, Hamel believes, has a big role to play in creating the flatter, more agile organizations of the future. His advice to technology-focused CXOs is simple: “Think about how you use the technologies that your firm has, or can get access to, to improve the capacity of people at the front line to make smart decisions. How do you empower decision-making by them in real time?”

Just as technology has been used to advance efficiency over the years, it can now be used to help organizations surface their “humanity” — the human creativity, intuition and cognitive abilities that machines are still a long way from being able to replicate. “Over the last 20 years at least, companies around the world have been deploying technology to optimize their operating models,” he says. “This is where all the investment has gone — into supply chain systems, CRM systems, ERP systems, and so on. More recently,” he continues, “they’ve spent a lot of energy asking, ‘How do we digitize our business models? How do we do omnichannel? How do we use geo-location? How do we make our inventory searchable on the web?’ And here and there, you see extraordinary breakthroughs.

“Of course, that’s important, but the next challenge is: ‘How do you humanize the management model? And that is also going to require us to use technology.” Or, to be more precise, when competitive edge flows from tailoring software solutions for unique business processes, it will require technology plus original human thinking. “For most organizations that don't put technology ‘front-and-center,’ what’s really going to matter is: do you use it more creatively than the next company?” he says.

He points to the rise of collaboration tools. “There are different ways of using the likes of Jive or Slack,” he explains. “For the most part, they’re used to simply improve team productivity  through the likes of shared calendars and docs.”

But Hamel believes that that is just scratching the surface of their capabilities. “How many organizations have used that real-time technology to have conversations with thousands of people, to have company-wide votes, and said something like, ‘Let’s open up our entire strategy process to the organization and have a real-time company-wide conversation about what we do next’? How many companies have said: ‘What we really want to do is let all employees vet top management’s views on investment decisions’?”

This leads him to a powerful conclusion: “You can use such technologies to let teams collaborate a little bit better. Or you can use those technologies to turn the hierarchy upside down.”

“Hamel's
Humanocracy: Coming January 2020
Hamel also has a stern warning about the negative consequences of failing to put technology to the right use — and the dangers of adding to the bureaucratic burden rather than reducing it. “If you believe as a manager and a leader that your job is to control, and that the worst thing that can happen is for you to be surprised, and you believe you need to know what’s going on everywhere, then technology can be a dangerous temptation,” he says. “You start to believe that by bringing all this data to the center it will tell you what to do.”

He draws on the example of the CEO of a large organization he recently worked with. “The CEO said, ‘Gary, I can now run the whole company from my Gulfstream jet, because I have access to all of this data.’ And I said, ‘Yes, you have the data but you don’t have context.’ And without the context, the data itself isn’t worth very much. It doesn’t allow you to make very smart decisions.”

Hamel therefore thinks leaders have a straightforward choice: “We could primarily use such technologies as a way of aggregating power and information at the top of the company, allowing even more oversight and more penetrating views into what individuals are doing moment by moment. Or we could use it to empower people on the front line with better data and better tools, so they’re making better decisions right there.

“Technology should  produce an irreversible shift in power from managers to employees. However, that has yet to happen. We’re definitely moving that way, but we’re not yet at a tipping point.”
Superior decision-making at the edges

The empowerment of individuals at work is not just a simple matter of managers letting go, however. Hamel fully understands that this is potentially a recipe for chaos, unless the workforce is armed with the right skills and information,  coupled with genuine accountability for their decisions.

“There are several things necessary to make empowerment successful,” he explains, giving the example of Morning Star, a California-based tomato-processing business. “They have only blue-collar employees, no managers at all, no hierarchy in a company of about 700 people. Everyone has [access to] the company check book. If you need a piece of equipment that'll cost $100,000, you can go and buy it.

“What makes that work is that they have trained every single employee how to do RoI calculations, internal rate of return, net present value and so on, so they can model their decisions. Every employee can see the balance sheet of their business unit. And colleagues all know that the reason they get paid so well is that they have greater asset efficiency than any of their competitors,. So if you start screwing with that, your colleagues will fire you.”

He summarizes: “So you can have all this discretion but (a) you need a financial stake in your company, (b) the company needs to invest in your skills and (c) if you get it wrong, your colleagues are going to come and have a word with you — or more.”

And the upside of such an approach? Superior decision-making at the edges of the business, he says. “Think about it. When people who make local decisions can look their customer in the eye or can see what’s going on with their competitor, the amount of information that can be incorporated in their decisions is far greater than if you have a single decision made at the top. What we want is a lot of local decisions that are information-rich, rather than a few big decisions that based on a bit of data aggregation that. are information-poor.”

Is he feeling positive about the future of the enterprise, despite most organizations having such a long way still to go to tackle “bureausclerosis”? “Yes, I’m pretty optimistic,” he smiles. “We have a new generation coming to work that is the first in human history whose primary social reference point is not a formal hierarchy. You have every CEO living in fear of being ‘Uber-ized’ and they understand that the old change model no longer works — i.e. you can’t just ‘do change’ every three or four years. And then you have all of these technology innovations becoming available.

“So we’ve got new expectations, new problems, new tools — it’s a pretty good combination for doing something differently. You can see the shadow of the future in many organizations now. It’s inevitable that today’s notion of bureaucracy will appear ludicrous to the next generation. And every company has a choice of whether to lead or follow that change.”

 

• Gary Hamel was a keynote speaker at World Business Forum London 2019

First published July 2019
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