In a refreshingly provocative article in this month’s Harvard Business Review, celebrated business writer Gary Hamel describes the condition of management in most large organizations (costly and inefficient) and how one company did away with all their managers and still manage to run a $700 million company with revenues and profits that leave competitors in the dust.
Hamel says “management is the least efficient activity in your organization.” He says direct management costs in most organizations account for about one-third of the payroll and that “management is expensive.”
He also says that “the typical management hierarchy increases the risk of large, calamitous decisions. As decisions get bigger, the ranks of those able to challenge he decision gets smaller . . . Give someone monarchlike authority, and sooner or later there will be a royal screwup.” He continues, saying “a multitiered management structure means more approval layers and slower responses. In their eagerness to exercise authority, managers often impede, rather than expedite, decision making.”
Finally, he says there is “the cost of tyranny. . . as a consumer you have the freedom to spend $20,000 or more on a new car, but as an employee you probably don’t have the authority to requisition a $500 office chair. Narrow an individual’s scope of authority, and you shrink the incentive to dream, imagine, and contribute.”
But management isn’t all bad. Hamel notes that the use of market incentives work well when needs are simple and easy to define, but they are not effective when interactions are complex. In fact, “That’s why we need corporations and managers. Managers do what markets cannot; they amalgamate thousands of disparate contributions into a single product or service.”
But then Hamel raises a question: “Wouldn’t it be great if we could achieve high levels of coordination without a supervisory superstructure? . . . If only we could manage without managers.” So he went out and found that just such a company exists.
Have you ever seen the Morning Star brand of tomatoes in the store? The company, founded in 1970, is the world’s largest tomato processor and is headquartered in California. It is a place where:
- No one has a boss.
- Employees negotiate responsibilities with their peers.
- Everyone can spend the company’s money.
- Each individual is responsible for acquiring the tools needed to do his or her work.
- There are no titles or promotions.
- Compensation decisions are peer-based.
In his article, Hamel describes each of these elements in detail, but he also offers some advice on how to begin moving a traditional bureaucracy toward the “self-management” model. He cautions “self-management doesn’t mean no management and that radical decentralization isn’t anarchy.” But here’s his advice:
- Ask everyone on your team to write a personal mission statement, focusing on benefits delivered to others rather than activities performed.
- Find small ways to expand the scope of autonomy for each employee (starting with the annoying controls, such as sign-in sheets).
- Equip every team with its own “profit and loss” statement and provide that information widely across the organization. Hamel says “The road to self-management is paved with information. . . employees must be able to calculate the impact of their decisions.”
- Erase the distinctions between those who manage and those who are managed.”
Hamel’s observations and advice are similar to those championed by former Vice President Al Gore’s reinventing government effort. While that effort may not have reached every corner of the government, it did shine a light on ways “self-management” could be adapted in a public organization.
Did any of you have the experience of working in one of the Reinvention Labs? Do any of these principles raised by Hamel remind you of any of those efforts? Can you eat leaderless tomatoes?
Graphic credit: Morning Star
I subscribe to the HBR Ideacast podcast so I heard the interview with the author. It’s a great piece and could work in many organizations that have a culture of entrepreneurship. However, I’m not sanguine that this could ever work in federal, state or municipal government. The temperament of entrenched bureaucracies would never permit this to occur.
The only possible way it could work, would be to create or charter a public sector unit from the start to operate under this model. If you could recruit the right people it would have a chance to succeed. Yet there are still rules and such (like following the FAR) that would have to be reconciled with this new organizational construct.
Hi Neil – I agree, but there are some elements of Hamel’s approach that any manager in government can apply and these steps can dramatically change the work environment. For example, asking employees to prepare their own mission statement and what benefits they provide their co-workers and citizens, and then have staff meetings where each staff member shares their mission statement and then have a conversation about the benefits could be a power way of changing conversations in the workplace — and increasing their discretion to get their jobs done — within the context of their mission statement — would be another step toward changing the way work gets done. Hamel offers some powerful points that I think are applicable in the public sector, even if government can’t take the full leap like Gore and Morning Star have . . .
Hamel brings a refreshing point of view for gov. Agree his model cannot work in government today but given that such dramatic reform is needed, that is exactly why we should try it. Vineet Nayar writes from the perspective of a CEO and basically say the same thing. It is all about solving problems for the **customer** not just blindly following archaic and overly complicated processes that only get in the way.