Radicalism vs risk in the battle against corporate bureaucracy

The admin-encrusted, top-heavy superstructure of modern business makes a plump and enticing target. Gary Hamel, the motor-mouthed management thinker, has been shooting at it for years. But he is no mere iconoclast. He has also tried to resolve the central dilemma of organisations — how to balance necessary structure with creative chaos — through initiatives such as his Management Lab, which comes up with collaborative solutions to management problems.

“The typical medium-­ or large-­scale organisation infantilises employees, enforces dull conformity, and discourages entrepreneurship; it wedges people into narrow roles, stymies personal growth, and treats human beings as mere resources,” he and Management Lab co-founder Michele Zanini write in Humanocracy, published this year. Even sceptics will agree wholeheartedly with Laurence Peter, co-author of The Peter Principle: “Bureaucracy defends the status quo long past the time the quo has lost its status.”

When Hamel and Zanini tackled the bureaucracy problem in a 2016 paper, they tried to measure the “bureaucratic drag” on the US economy and called the reward for eliminating it “the $3tn prize”. Extrapolating these calculations to the rest of the world, they now estimate clearing out global bureaucratic waste would add a suspiciously neat $10tn to overall output — a sum needed more than ever as economies struggle with the consequences of the pandemic.

The heroes of their narrative are organisations already familiar to followers of progressive management thinking: Buurtzorg is a Dutch provider of home health services which is organised into self-managing teams; Morning Star is a Californian tomato processor without managers which arranges work around contracts between colleagues. Inevitably, Southwest Airlines, whose cheerful staff have the freedom to think and act like owners, is allowed a fly-past.

The battle against bureaucracy becomes more interesting when it is taken to large, and seemingly traditional, businesses. Hamel has long suggested big is beautiful only when large companies succeed in decentralising and breaking themselves into many smaller units whose team members have the power to take decisions.

For instance, Vinci, a French construction and concession company with 221,000 employees, has split itself into 3,000 specialised business units. Haier, a Chinese white goods manufacturer, has gone even further, replacing a traditional top-down management model with an ambitious and sometimes perplexing system of 4,000 “microenterprises” with the freedom to innovate and compete against each other for staff and capital.

Workers with more responsibility are happier and more engaged

Then there is Michelin. I wrote about the French multinational’s “responsabilisation” project — which delegates decision-making power to front-line workers — in 2017, when it was about to roll it out across the group. By the beginning of this year, according to Hamel and Zanini, the project was “on course to deliver a half-billion dollars’ worth of manufacturing improvements”.

The teachable lesson here is that even large, complex companies can take steps towards becoming meritocratic communities of self-directed small teams. And the pay-off is not just financial: workers with more responsibility are happier and more engaged. Not only is this radical shift possible, but Hamel and Zanini provide the tools to start it. They have devised a questionnaire to help executives measure the BMI — bureaucracy mass index — of their own organisations.

This gospel will find willing disciples among weary managers and workers at soulless megacorps, suffering “a Monday through Friday kind of dying”, in the words of Studs Terkel, the great chronicler of day-to-day work.

But even those committed to the race for the $10tn prize must acknowledge bureaucracy has its uses. It starts as a framework to maintain efficiency and can hold back the tide of disorder that threatens to overwhelm poorly run businesses. The question, then, even for ambitious start-ups, is how much structure to impose. Too much and the entrepreneurial spirit withers. “The fuel that feeds the growth of bureaucracy is the quest for personal power,” Hamel and Zanini write, correctly. Without any framework or process, though, a freewheeling culture can go rotten as an organisation grows.

What impact might the current crisis have on the management revolution that Hamel has been cheering all his career? It could be a catalyst for greater change, as companies are forced to manage more remote workers in different ways. But the disorder ahead could also encourage some corporate chiefs to shore up their fortress of centralised administrative power.

It would be a pity if the slow-to-ebb virus and the advancing recession were to deter would-be humanocrats from pursuing radical transformation. But it would be understandable. After all, management experimentation involves taking risks. The central challenge, as Hamel and Zanini point out in their book, is that “if you’re a manager of any sort, you can’t empower others without surrendering some of your own positional authority”.