Empowering staff to make key decisions can improve profits
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Editor’s note:
Gary Hamel is a management expert and visiting professor at the London Business School. The article is an excerpt of his keynote speech at the Singapore Human Capital Summit 2013 on September 11.
Barron’s, the global business magazine, picked a list of the world’s top 30 CEOs in 2008. However, only five of those 30 CEOs made it on to a similar list four years later.
The same is true for the corporate leader table turn rate. There’s a 30 percent probability that a top quintile corporation will keep that ranking five years from now.
So the problem is: are we changing as fast as change itself?
A decade ago, Microsoft, Intel, HP and Dell were considered the four most influential computing high-tech companies in the world.
They could hire top engineers, smart people and amazing human capital. And yet, those four companies almost completely missed the single biggest trend in their industry — the shift to mobile. The world is expected to have 5 billion mobile broadband accounts by 2016, and these companies mostly missed it.
As business leaders are trying to future-proof their companies, how can we agree that the smartest companies in the world so often miss the future?
People often talked about change to meet the future challenges. Trying to future-proof an organization, business leaders frequently ask the question: how can we get better at managing changes? But the phrase “change management” itself implies that some people have the right to initiate the change and most people don’t.
It also has the implication that the change will be managed, top-down designed, programmed, restricted and implemented. In a word, it will be imposed rather than bottom up. When asked to draw a picture of their organizations, people in any corner of the world would probably work out a hierarchy structure. Yes, this is the most durable social structure for humankind.
Going back into history, when it came to industrial engineering, the management challenge 100 years ago was how to achieve efficiency and stability. “(Bureaucracy) is superior to any other form in precision, in stability, in the stringency of its discipline and in its reliability,” German sociologist and political economist Max Weber said almost a century ago.
But the problem is, this is a social graph. It’s not a map of a network, nor is it a diagram of an ecosystem, or a picture of community.
This is the episode skeleton of bureaucracy that empowers the few, but dis-empowers many. The mash-up military command hierarchy structure imposes a hefty tax on modern organizations.
A global study of 300 corporations asked employees “does your boss share power through an effective delegation?” The result suggested that only 20 percent of workers queried were truly engaged in their work globally.
In Asia, most of the organizations were found to be centralized.
A hierarchy system usually brings a kind of “soft tyranny.”
Many bosses are control freak, which shrinks people’s capacity and willingness to dream, to imagine, and to contribute.
So the question here isn’t how can we get better at managing change. The question should be: how can we build an evolutionary advantage?
In my new book “What Matters Now” published in 2012, I studied the case of Morning Star, a California-based company adopting a complete self-management model that needs no distinctive managers. Peers can negotiate their job responsibilities with each other, as well as compensation and firing.
Self-managing
“(All team members) will be self-managing professionals, initiating communications and the coordination of their activities with fellow colleagues, customers, suppliers and fellow industry participants, absent directives from the other, as stated in Morning Star’s “organizational vision.”
To everyone’s surprise, the 500-person company was found perfectly synchronized. Over more than 20 years, Morning Star edged up to become the world’s largest tomato processor by earning a double-digit revenue growth, while the industry average was only about 1 percent.
The self-management model complies with the operational structure of nature, in which those who prove themselves competent takes the lead. The same is true with web as well. In the cyber space, people are entitled to the freedom to communicate, create, dissent and choose. People on the web possess no positional power, but if you can do something extraordinary, you are the leader.
In other words, the enormous amount of influence comes from bottom-up, rather than top-down.
Coming back to the question that why the smartest people consistently give away the future?
One of reasons: we give a small number of individuals the ability to hold the company’s capacity to change to their own willingness to adapt to change.
They miss the future because the leadership team failed to appreciate the intellectual talent.
Over the last 10 to 15 years, companies around the world spent an enormous amount of energy, re-engineering their operating models — logistics, supply chain, ERP (enterprise resource planning), and CRM (customer relationship management). Some, mostly new commerce, revolutionized their business models. Now it’s time to find the same kind of change in people-management models.
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