Select Page

Since 1983, employment in the US has increased by some 40%, but the number of management staff has more than doubled. There are simply far too many managers and organizational layers today – completely contrary to Peter Drucker’s predictions in 1988 that within 20 years organizations would operate with much leaner structures and just a third the number of managers.

This was highlighted in a fascinating McKinsey interview with Gary Hamel and Michele Zanini, authors of Humanocracy.

What came out in their research for the book was how bureaucracy has become entrenched – especially in large organizations. But don’t be complacent if your organization is smaller, as bureaucracy starts off small and then grows, and grows!

The problem with it is the behaviours it encourages: resource hoarding, office political battles, shifting blame, moving targets, and so on – all of which take up huge amounts of time and energy, while contributing nothing of value to the organization’s goals. It also, of course, increases resource use massively as departments fight for greater shares of budgets, often through increasing employment needlessly. Power and influence, after all, are related to the authority levels of larger departments.

In fact, Harvard Business Review estimated that excess bureaucracy costs the US economy over $3 trillion a year in lost economic output. The waste is truly staggering.

It’s why smaller, more entrepreneurial businesses have a distinct advantage over the larger bureaucratic ones. And it’s why businesses of all sizes need to actively resist bureaucratic structures forming, if they’re not there already, and roll back those that are – fast!

The roll-back is tricky, potentially, of course – it generally means a change of leadership mindset, or even a change of leadership if the mindset won’t change. Leaders need to trust their teams to make decisions, devolving authority to the lowest possible level.

Top-down management is not the way forward. Rather, true leadership is the key: enabling individuals to reach their greatest potential, developing their skills while inspiring and motivating them with the vision of the business, giving them the power to be passionate and engaged.

As Hamel says, organizations today need to be resilient, passionate and creative, but they mostly are none of these things, being inertial, incremental and inhuman. Hence the need for Humanocracy.

Humanocracy is about encouraging a spirit of openness and taking ownership, encouraging experimentation, mastering paradox, embedding meritocracy and a sense of community in the organization and, through these principles, achieving leadership in markets, both current and new.

The authors argue convincingly for creating organizations that are inspired and ingenious as the human beings within them – for human beings consistently show these qualities when not supressed – organizations that are entrepreneurial, nimble and bold.

And this should not be complicated. Boards and business leaders can, and should, start encouraging the breaking down of bureaucratic structures quickly (the cost savings alone justify this). Be careful, though, not to just impose this as a top-down model (this runs contrary to the principles, after all) but through teaching, by drawing on the successful experience of other organizations that have profitably challenged such structures and models, allow those on the front line to start doing so – rolling this up, rather than down.

As Hamel and Zanini point out, we’re no longer in the early industrial era, where factories and mass production were new and labour forces being adapted from agrarian, rural economies to those based around towns and cities. While centralised, close management might have been necessary in those days, it is counter-productive today.

We live in a fast-changing world where organizations cannot afford the delays inherent in multi-tiered management structures when making even the smallest decisions. Speed of response is key to retaining customers and/or entering new markets. “Lean” thinking is the watchword in everything – continuous improvement cycles, removing waste, increasing speed.

Organizations that implement the Humanocracy principles will be more profitable today, experience faster growth and greater value than their competitors that don’t.

 

#BusinessFitness #Board #Business #CEO #Change #Excellence #Growth #Leadership #Management #People #Profitability #Resilience #Strategy #Teams #Trust

 

P.S. If you want to see how well, or badly, your organization fares, this assessment tool by Hamel and Zanini will show your Bureaucratic Mass Index.

 Some other short posts that you might find relevant include: