Taylor is still alive
It is a story of two Dutch guys, who fed up with the “normal” corporate way of doing things. The bureaucrats still run the greater number of our modern-day workplaces. Most of our current organisational models find their roots in the industrial revolution and are based mainly on the ideas of Taylor. Their relentless pursuit of efficiency forced many organisations to squeeze out the highest productivity with the lowest possible expenditure of energy, time and money. Due to their efforts, traditional organisations successfully introduced strong hierarchies, rigid rules and made work increasingly specialised. That’s why we are now used to shaping our organisations like pyramids – with inflexible departments separated by layers of management. The authors decided to resign and take a road trip and visit all the organisational mavericks. As with most people, it all started with Ricardo Semler.
The book is full of fascinating statistics
- Worldwide, only 15% of employees feel engaged with the work they do.
- Gallup estimates that globally, $7 trillion – more than half of China’s GDP – is wasted in lost productivity thanks to disengagement.
- Research at the University of Leiden concludes that 25% of employees doubt the usefulness of their work.
- A British study shows that 37% of workers feel that their job does not make a useful contribution to society.
- A recent paper in The Journal of Business Ethics backed-up by five studies showed that employee motivation is 17 to 33% higher when profit is not the primary concern.
- Companies with a focus on a higher purpose perform up to 10 times better than the competition.
- According to the study that Hamel and his colleague Michele Zanini carried out, the effects of bureaucracy cost society, in the US alone, some $3 trillion every year.
- Traditional structures worry 92% of organisation heads.
- Research from the University of Nebraska shows that up to 55 million meetings take place in the US every day, and the average employee spends six hours of the week in one of them.
- Organisations “waste $213 billion (equivalent to California’s fiscal spending plans for 2019) on bad meetings
- A reported 65% of employees hate their boss so much that they would rather change their position and work with another manager than receive a pay rise.
- The cost of bad management (in the United States alone) is estimated at $310 billion per annum.
- Ford Motor Company once estimated that planning and budgeting processes cost around $1.2 billion each year.
- A survey by McKinsey found that 72% of senior executives felt that bad decisions were made as frequently as good ones or were “the prevailing norm.”
- A recent study that canvassed 70,000 employees found that 64% of respondents felt they were underpaid – even though they were all rewarded according to industry standards.
- Research in Hollands shows that only 33% of employees use their main talents in their day-to-day work and. Only 35% of employees perform tasks that match their interests.
They start with Patagonia
They are fans of Patagonia too. The CEO wrote “My People Go Surfing: The Education of a Reluctant Businessman”. How we spend our days is how we spend our lives. The work we do says a lot about the way we lead our lives. Imagine this: you’re 80 years old and surrounded by your grandkids. They ask you about the things you are most proud of. Read “Legacy“.
Make a difference
Why do we agree to work for a boss whose only goal is to get richer, and for shareholders who don’t look beyond the next quarter? These narrow-minded aspirations do not sit well with modern thinking and result in unhappy employees. The question, ‘What difference do I make in the world?’ is essential. Being aware of your contribution is hugely motivating. The paradox is that many organisations do nothing when it comes to creating a higher purpose.
At Patagonia, everything is about that higher purpose. It is embodied in their expressions and attitudes. It is a free-thinking collection of rambling, intelligent, unusual, interesting people, not drones. They really believe in what they make – and use the products in their free-time passions.
More than profit
Profit for a company is like oxygen for a human: necessary to stay alive, but not the reason for living. Values should be entrenched in all activities: recruitment, selection, rewards, on-boarding, decision making, leave of absence, holidays, etc.
Hollands Kroon determined to become the smartest municipality in the Netherlands in response to an ever-changing world. “People ask for speed, efficiency, and customisation,” It considered six core values: trust, grit, enthusiasm, contact, respect, and innovation, and implemented them, with input from all employees. They ended up ditching 70% of the rules, and people have to sit a value test. Similar to Spotify, which abides by the motto: “Hire for culture, train for skills”.
- Have a bold purpose
- Get the message to everyone
- Measure impact, track progress, share your results
- Put your money where your mouth is
His study shows that larger businesses are tending to become more conservative and still feature eight or more levels of management. He saw that many companies in America and Europe organised themselves in hierarchical pyramids. Japanese companies were experimenting with principles such as Lean and Total Quality Management. He applied that.
Matrix model second
He then saw the rise of the matrix model. Employees were divided into teams, reporting to superiors and project leaders. This form of multi-headed control turned out to be precisely what was needed.’’ During this second transformation, Haier was reborn in the matrix mould. Along with this came initiatives to stimulate innovation. Employees who came up with the most effective proposals to improve matters or solve a pernicious problem were rewarded — and had the honour of having their innovations named after them.
In the 2000s, Zhang saw that multinationals were experimenting with satellite organisations. Zhang threw the traditional structure out the window. He divided the company into 2,000 Zi Zhu Jing Ying Ti’s (ZZJYTs). As a result, 12,000 middle-management positions were made redundant, and 2,000 ZZJYT became 4,000 micro-enterprises. These are self-organising units, moving away from hierarchical pyramids towards team networks.
The principle is simple. The person who comes up with an idea is appointed leader. He or she would then gather a team, and all other employees could join the ZZJYT if they thought they would be able to add value. Most are around 15-strong, some are smaller, others have as many as 200. The employees — or entrepreneurs, as they are referred to — are solely responsible for the provision of products and services. They must keep their company afloat and ensure optimal customer care. The success of the new enterprises is around 50%. That doesn’t sound impressive, consider that a mere 8% of start-ups survive, let alone succeed.
Network of teams
After their journey to China, they found companies that have discovered the same structure and benefitted from it. Employees are divided into small, autonomous teams, sometimes independent companies. They focus on a specific market, region, product, or customer. They are granted autonomy, the right to be entrepreneurs and pioneers. The structure they encounter most often at progressive organisations is the network of teams, with a collective responsibility.
The authors use Handelsbanken as another example. The CEO went in search of a new model. He wanted a model that displayed trust in the qualities and talents of employees. The transformation that the CEO initiated was aimed at decentralisation. He did this by refusing to unilaterally take any major decisions after he had announced the decentralisation. It was forbidden for head office departments to communicate with local branches via memo. Groups were disbanded, as were centralised budgeting processes. Local branches no longer had to abide by the budgets of other departments. The creation of long-term visions, strategic plans and marketing campaigns now fell within their authority. The role of head office had changed to one of support rather than control. Now Handelsbanken has 800 offices and 12,000 employees; each branch has genuine autonomy.
Centralise versus networked
Traditional companies, after reaching a total of 30 to 50 employees (sometimes before), organisations feel the need to centralise. Managers are appointed, functional departments created, formal rules and procedures set up, and weekly alignment meetings planned. Progressives tackle this differently. Before they reach critical mass – 10 to 15 employees – they divide into two autonomous teams within the same network. As soon as one reaches the critical point, it splits again. Growth is organic. The idea is simple, but implementation won’t always be easy.
The teams are often multidisciplinary to reflect the tasks expected. That often brings not only benefits to the client but also increases the engagement and motivation of employees. The teams need to be supported by an efficient information flow and a well developed IT systems.
The steps to change the organisation
- Map ow many layers of management does your business have, and how many of those should go?
- Apply the inverted pyramid
- Set up autonomous teams in the pyramid
- Flatten the organisation with autonomous teams
- Set up a network of team
They start this chapter with anarchy. The visited the Zingerman Community of Businesses. The CEO Weinzweig is heavily influenced by interest in anarchy. Weizberg: “Everybody is creative and intelligent by nature, and capable of great things. We must lead by supporting others, not by commanding. Wonderful things happened over these past 30 years simply because a great number of intelligent, hard-working people gave us the chance to lead them. No leader will ever be truly productive without the people to make their vision a reality. Leaders without committed followers are doomed to fail.’’
Hierarchy itself is not the problem. Artificial hierarchy is. When authority isn’t based on competence or quality of leadership. In a hierarchy, every employee tends to rise to his level of incompetence. Many organisations we have visited make short work of the Peter Principle by creating multiple promotion tracks. If you’re a great IT programmer, you don’t necessarily need a management position as recognition.
They visited UKTV. Everything in the UKTV office is there to get rid of the command-and-control structures. They took all managers out of their rooms. At UKTV, an important part of the process is the sharing of adversity and mistakes.
Q and A
They organise Q and A sessions. It started with a post-box decorated with a prominent white question mark. Anyone with a question, or anyone wanting to share matters of a sensitive nature, was asked to write it down and put it in the box. Every month the CEO opens the box and reads aloud whatever it says on the note. Then the leadership team and the CEO try to answer honestly.
The leadership lessons
- Don’t make attendance Q and A compulsory.
- Beware of HIPPOS
- Destroy the ivory tower
- Allow evaluation of the managers
- Get to the stage where leaders are chosen. Read “The captain class“
Growth and chaos often go hand in hand. We need to let go of the naïve belief that the world in which we work can be predicted. Far from solving the problem of complexity, most organisation worsened it with bureaucracy. Organisations have become more complicated instead of more agile.
They are not talking about the trending “agile methodologies” that companies currently strive for or claim to have as a goal. While the foundations of the “agile” movement are sound and valuable, the way many companies practice it is simply wrong. Many labour under the impression that if you do daily stand-ups, use a truckload of Post-its and appoint a scrum master, you’ve created an entirely new way of looking at the workplace.
Forget command and control
The focus should be on creating a flexible, adaptive, and engaging workplace. First get rid of the hierarchical pyramid, with all its prediction and command-and-control mechanisms. Remove all privileges. Then create an almost flat organisation that consisted of multidisciplinary, self-managed teams.
Transparency and training
It’s crucial to have full transparency, including financial information, for all involved. Make salary levels transparent, as well as team commitments and results. While much of the world is about finance, not many people truly understand it. This is why you should first teach everyone the basics in finance.
Spotify ticks all the boxes of a modern start-up.
- They have basic units of self-steering teams of six to 12 developers. These are referred to as squads and resemble mini-corporations.
- Every squad has access to coaches who can help develop and improve work methods.
- They place more value on innovation than predictability. Prediction can never be innovative. The focus is on trial and error.
- Making mistakes is acceptable as long as something is learned along the way. Some squads have a special Fail Wall to encourage learning from errors.
- When a person or team wants to experiment with something new – and there is enough internal support – they’re free to give it a try. If they decide to go for it, they usually commit for at least one year.
The key to success is to experiment often, fail quickly, and keep improving. These pioneers know that the most valuable experiments are the result of intense interaction between employees, customers and other stakeholders. They are not the result of a mystical view of the future by a group of over-paid consultants or astrologers.
The steps to innovation
- Ruthlessly experiment
- Kill the budget cycle
- Create a safe-to-try environment
- Crowdsource experiments
- Allow everyone some rebel time
Why is our faith in others so low that we don’t trust our colleagues to take the smallest of decisions? Is writing policy manuals really the best use of company time, when they are unlikely to be read? Do we have to impose strict rules on the masses because of the sins of the few? Many think so. Fear and distrust have a clear playing field. People cling to control systems, even when it has been repeatedly proven that they do not work.
Jungle of protocols
The jungle of protocols and control mechanisms, the barrage of rules. It wasn’t unusual to spend half our time writing reports for managers so they could feel a sense of control. Another example from our past lives: after an employee had been on a business trip, they had to fill out declarations to get their expenses reimbursed. The many pages would have been a challenge for even the most dedicated pencil-pusher.
Streaming movie service Netflix has just one policy when it comes to corporate travel: “Act in Netflix’s best interest.” Treat company money as if it were your own and make all costs transparent. There is faith that you are responsible enough to make the right decision. The benefit? More autonomy, fewer rules, and no departments needed to do the checking. Nordstrom is the same.
We see mental and physical health complaints, discontent, and poor motivation – and how enormous the gap between knowing and doing. Research consistently shows the benefits of autonomy, freedom, and trust – yet nothing changes. Read “Capacity”
Pioneering trust practices
- Design your own workplace
- Result based working
- Remove control mechanisms
- Apply peer reviews
- Self-set salaries
Distributed authority and decision-making processes are trending. However, the freedom to make decisions is accompanied by responsibility. Progressives tend to be decentralised. They understand that centralised decision-making processes cause the organisation to be slow-footed.
Command and control
The iceberg is a fine analogy of the miserable state of the modern workplace. Most traditional organisations operate via a centralised decision-making process, with power mainly in the hands of the elite few. The higher up the pyramid you are, the more clout you have. Decisions flow through the layers in the hope that employees will carry out orders as precisely as possible. A century ago, centralising decision-making was a sound idea. It was the way to co-ordinate matters, to ensure that decision-makers were well informed and that the decisions dovetailed with strategy. It was sensible in an unchanging world. Education levels were lower, policies more pragmatic and linear. But those days are behind us.
The result of command and control
The result of centralised decision-making is frustration, an unwillingness to take responsibility, inertia, poor choices and endless “co-ordination”. Challenges known to top management are often widely misunderstood by front-line staff – the perfect ingredients for miscommunication, misunderstanding and misjudgement.
Two decision models
In traditional organisations, we see two decision-making methods. The first and most popular is the directive, top-down style. Leaders dominate by telling their teams how to implement instructions. At the other end of the spectrum is the consensus method. Causing the walking-through-treacle syndrome, and drowning in sluggish processes based on consensus.
Many progressives apply another approach: the advice process. That allows everyone to take a certain amount of authority and make decisions. “There is one qualification: before anyone makes a decision, they must seek appropriate advice. This has to be given by people who will be affected by the decision, and who have relevant experience. Different perspectives will be considered, but in the end, it is up to the decision-maker to say what is needed. The decision-maker ensures that all involved are informed about the advice received and the eventual decision. These steps show clearly that the process is not about reaching a consensus. Not everyone has to agree; not every source has to be taken into account. The decision-maker should get enough advice to make an informed decision.
Pioneering practices in decision making
- Map decision making
- When employees ask for permission or approval, simply ask “What do you propose?”.
- Push authority down
- Apply pre-approval
- Apply the advice process
A leader or manager approves something in advance before the employee has made a decision or found a solution. The approval is given on one condition: adhere to the predefined boundaries.
Secrecy can be the enemy. Employees are clueless about how things function and what strategy they are meant to follow. The only real communication from leaders amounts to corporate propaganda. All this results in information asymmetry. This imbalance creates all sorts of adverse effects. The dividends of secrecy are distrust, ignorance, gossip, and poor performance. Radical transparency is vital. Trust increases, involvement rises, and people make better decisions. Some progressives make all information public unless there is a very good reason not to. This open-by-default policy ensures that as many people as possible have access to relevant information. It is important to train people to understand the information they get.
Talent & Mastery
Employees should be encouraged to discover their own talents and use them. Mastery refers to their continuous development. Companies remove the individual from an environment in which they excel and give them a role that ignores their talents, skills, and passion. This hampers motivation and commitment. One of the embarrassing symptoms is the proliferation of ridiculous job names. Take a quick look at your LinkedIn timeline.
Nearsoft gives its staff the freedom to deploy their talents. In-house, there are no job descriptions. Their organisation is based on Ricardo Semler and pirates. Every decision on a pirate ship was made democratically? The pirate code was drawn-up by all crew members. Alex Clay and Kyra Maya Phillips wrote a book on the subject, entitled The Misfit EconomyShips flying the Jolly Roger valued democracy, equality, and shared ownership. Captains only held absolute decision-making powers during combat; in times of peace, everyone had a voice. Captains could be, and often were, replaced.
The boss is a shared goal
Every five years, long-term goals are defined by all Nearsoftians, as they call themselves. One of them, Kimberley Lantis, tells us that her “boss” is not a person but a shared goal. “Success is determined by the response to a unified vision,” When a decision is made, it will be communicated and implemented. Does this guarantee happy employees? “Not necessarily,” says Kimberley, “but that’s not our goal. There will always be people who are unhappy, but they can make a change and be heard. They are free to make suggestions.”
Some of the most progressive organisations have established an “internal marketplace”. In the nineties, Oticon in Denmark eliminated all departments, management positions, and job titles. Projects were the driving force. Based on their interests, people took on as many as they wanted. Every task became a project.
The book finished with three principles
- Don’t force a change, inspire it
- Continuously experiment
- Create a movement
The book is music to my ears. Particularly the project auction. It hits on many things in my work with Sunil Prashara of PMI. Another rebel. He is writing about the combination of organisational transformation, the citizen developer revolution and the project revolution. Happy to tell you more. E-mail firstname.lastname@example.org.