💭

Humanocracy

by Gary Hamel & Michele Zanini

💭

A fantastic look into organizations that decentralize, treat their teams like humans, develop innovative processes, and eliminate bureaucracy. A challenging mindset for modern businesses, but a directional trend increasing. I thoroughly enjoyed Humanocracy and believe this mindset alone will be critical for the success of future firms. The case examples provided of the success and joy achieved through decentralizing teams and giving them the tools and space to succeed were encouraging—a worthy read to any business leaders who oversee teams or products. - Nicholas Beaird

Favorite Quotes from Humanocracy

Bureaucracy is not a cosmological constant.

In Gallup’s research, 70 percent of the variation in engagement scores was explained by differences in the attitudes and behaviors of the employee’s boss. For example, employees who felt they could approach their boss with any type of question were more engaged than those who couldn’t.

Stratification is the enemy of speed.

As our friend Vineet Nayar, the retired CEO of India-based IT giant HCL Technologies, once said to us: “The idea of the CEO as the captain of the ship is bankrupt.” It’s time to call off the search for superhuman leaders. What we need aren’t extraordinary leaders, but organizations that mobilize and monetize the everyday genius of “ordinary” employees.

How is it that in their personal lives, employees can be trusted to buy houses and cars, but at work can’t requisition a $300 office chair without a manager’s approval? If we thought about it for a minute, we’d realize this is stupid. Autonomy correlates with initiative and innovation. Shrink an individual’s freedom and you shrink their enthusiasm and creativity.

Bureaucracy is like pornography: it’s hard to find anyone who’ll defend it, but there’s a lot of it about.

Formal power is the currency of bureaucracy; it is the prize for which the game is played.

If we are not daily struck by the inhumanity of bureaucracy, it’s because our outrage has been dulled by time and familiarity. Yet what Thomas Paine said of monarchy in 1776 is equally true of bureaucracy today: “A long habit of not thinking a thing wrong gives it a superficial appearance of being right.”

In comparison, bureaucracies are closed systems. They make a sharp distinction between insiders and outsiders, put a premium on secrecy, and are generally reluctant to tap external partners for mission-critical tasks.

You can’t solve a truly novel problem, like building organizations that are fully human, with fossilized principles.

To be more innovative, adaptable, and inspiring, our organizations need new DNA. They need to be rebuilt on human-centric principles. Tweaks to existing systems and processes—a smidgen of mindfulness training, a dollop of agile teams, a spritz of digital transformation, or a fresh coat of analytics—will never produce nonlinear improvements in organizational effectiveness. For that to happen, we have to go back to first principles.

Entrepreneurship is equally essential to human flourishing. Phelps is right when he argues that we’re most alive when we have “the experience of mental stimulation, the challenge of new problems to solve, … and the excitement of venturing into the unknown.”3

Decades of consolidation, along with the winner-take-all dynamics of digital technology, have left us with an economy that is dominated by powerful, politically connected oligopolies

The results, notes Chris Hughes, cofounder of Facebook, is “a decline in entrepreneurship, stalled productivity growth, and higher prices and fewer choices for consumers.”6 More robust antitrust enforcement is undoubtedly part of the answer, but we must also work to infuse every company with the spirit of entrepreneurship.

It’s patently stupid to starve employees of autonomy and upside, yet this is the norm. What gives? The most plausible explanation is that senior leaders believe frontline staff have little to contribute

So how might you increase the sense of ownership in your own organization? Here are a few suggestions: Start by redistributing a chunk of your own authority. Step back from critical decisions and let your team decide. (We’ll say more about this in chapter 15.) If your company doesn’t have a profit-sharing plan, lobby for one and make sure it’s available to every employee. In a good year, profit sharing should raise average compensation by 10 percent or more. Wherever possible, disaggregate big units into small ones. In general, keep operating units to fewer than fifty people. Give every unit a full-fledged P&L. Minimize corporate overhead allocations and avoid building targets around detailed KPIs. Expand the decision-making prerogatives of frontline operating teams. Give them responsibility for decisions around unit strategy, operations, and people. Roll back legacy policies that have truncated the freedom of frontline units. Give businesses the right to negotiate the price of centrally provided services and opt out if they don’t think they’re getting a good deal. Once every unit has a genuine P&L, significantly increase the proportion of individual or team compensation that’s at risk. Ensure that above-average performance brings[…]

It’s more gratifying to believe that a sea of nodding heads betokens assent than to entertain the hypothesis that one’s subordinates are merely buying career insurance

While it’s true that the senior leaders are ultimately accountable for strategy, it doesn’t follow that they’re the best ones to create it. There’s only so much wisdom and experience within the executive team—and it’s often not enough. Yet senior leaders are often reluctant to crowdsource strategy. After all, how can they justify their generous pay packets if they’re not the ones plotting the future and making the “big calls”?

There’s another cognitive quirk that leads to misjudgments—the halo or horns effect. As human beings, we’re prone to judge others hastily, often on the basis of first impressions. These initial opinions are resistant to change, even in the face of new data. Researcher David Schoorman found that the biggest factor impacting an employee’s performance review was whether or not he or she had been hired by the person doing the evaluation.9 Thanks to the halo bias, a favored deputy may underperform for months or years before getting the boot.

whatever else you need to do to enhance the overall operation.”

During her tenure as Southwest’s COO, Barrett told employees “[Y]ou are empowered to make decisions on behalf of the customer and to ignore and waive policy and procedure as long as by doing so you are not being illegal, immoral or unethical.”25

Though the airline business is highly cyclical, Southwest has never used downsizing to shore up profits. As Kelleher often reminded his colleagues, “Nothing kills your culture like layoffs.”

If you are going through a divorce, have a child struggling with addiction, have recently lost a parent, are facing surgery, or find yourself in the midst of some other life crisis, you need people to talk to—people who care. If there’s no such person at work, if you’re obligated to spend a succession of eight- or ten-hour days alone with your anxieties and fears, then you, your colleagues, and your organization will be the worse for it. Remember the Gallup finding that only two out of ten employees say they have a best friend at work? Based on its research, Gallup estimates that if this number was tripled, to six out of ten, the average company would increase its profitability by 12 percent.37 Again, when you think about it, this just makes sense. You can hardly expect employees to be engaged in their work if they’re not engaged with each other.

Likewise, there’s still a need for directional stability—for goals that extend beyond the next planning period. It takes time to grow a new business or build a new competence. More than a decade ago, Apple committed itself to becoming a world-class chip designer. By developing proprietary computer chips, the company hoped to further differentiate its expanding product portfolio. Over the past dozen years, Apple has made a string of acquisitions aimed at bulking up its expertise in low-power chips. It has also poached dozens of top-flight designers and given them the resources they need to excel. This effort has paid big dividends. A recent Apple processor, the A12X Bionic, used in the iPad Pro, boasts more processing power than most laptops. Today, proprietary chips feature in all of Apple’s hardware products and are critical to delivering customer benefits like facial sign-in and extended battery life. If Apple’s chip design business were a stand-alone company, it would rank number four globally.16

The odds of conceiving a game-changing strategy go up when the strategy conversation encompasses a large and heterogeneous group of participants. You need new voices to discover new options.

Looking back on the unprecedented effort, King remarked: “It really fostered a culture of curiosity and moved us more toward thinking and challenging. You can get compliance top-down, but you can’t get commitment top-down.”22

It’s crazy that in most organizations, a CEO has an easier time getting a multimillion-dollar project through the board than a frontline operator has in getting a few thousand bucks to run an experiment.

Everyone must be able to experiment, learn, and iterate. Position, obedience, and tradition should hold no power. For innovation to flourish, measurement must rule.”5

Conservatism without progressivism idolizes the past. Progressivism without conservatism vandalizes the past. Speaking of right and left, Ralph Waldo Emerson aptly said, “Each is a good half but an impossible whole.”2

Wallander would later write, “All companies suffer from powerful forces that pull in a centralizing direction. It is like water that easily and irresistibly trickles in unless you take special care to keep it out.”10 Though difficult to quantify, Wallander pressed his colleagues to be honest about the costs of overcentralization. “It is easy,” he argued, “to construct attractive-looking mathematical arguments showing the advantages of large-scale operations, but it is more difficult to illustrate the disadvantages. They are symbolized by words like rigidity, slowness, bureaucracy, lack of transparency and so on. Vague, yet just as real in their effects.”

As Black Swan author Nassim Taleb and professor Gregory Treverton have observed: “Although centralization reduces deviations from the norm, making things appear to run more smoothly, it magnifies the consequences of those deviations that do occur. It concentrates turmoil in fewer but more severe episodes, which are disproportionately more harmful than cumulative small variations.

He also read Michel Crozier’s classic, The Bureaucratic Phenomenon, which vividly accounts the dysfunctions of large organizations, including the limits of what Crozier called “changing by decree.

Ballarin understood that real change happens through persuasion and persistence, not via mandates and metrics.

As Harvard professor Marshall Ganz notes, the goal of people who change the world is “not winning the game, but changing the rules.”

Bureaucracies value results above all else. If you exceed your targets, no one’s likely to ask what shortcuts you took. Over time, the bias for outcomes over ethics desensitizes an organization to the moral consequences of its actions.

There’s an adage, variously attributed to Winston Churchill, Marshall McLuhan, and Father John Culkin, that “We shape our tools and thereafter our tools shape us.” This is true of every human invention—from cuneiform tablets to smartphones, from the wheel to self-driving vehicles, and from algebra to machine learning. A century and a half ago, human beings hammered out the basic structures of industrial-scale bureaucracy, and ever since, bureaucracy has been hammering the humanity out of us. But we’re not helpless. We can push back when we feel our souls are being beaten into shapes that make us less than fully human. That’s the first step on the journey to humanocracy.

Mary Parker Follett, the early twentieth-century management guru, argued that “leadership is not defined by the exercise of power but by the capacity to increase the sense of power among those led.”

A good first step is to ask those who work for you, “What am I doing that feels like interference, or adds no value?” Fearing repercussions, they may at first be hesitant to give direct feedback. If so, be patient. It may take several tries before they trust you enough to unload. Next, ask, “What am I doing that you could do better?” If they’re unclear about what it is you do, have team members shadow you for a few days, like Olivier Duplain in Michelin’s Le Puy factory (see chapter 14).

If you’re a team leader, middle manager, or even a VP, it’s easy to believe that someone else should take the lead in busting bureaucracy. But what if they don’t? The good news is that anyone can be a management renegade, and every team can be a laboratory

On the other hand, we argued, they had thousands of employees who were eager to help them crack the code, and if asked, would swarm the problem. As they say in open source software development, “Given enough eye balls, all bugs are shallow.”

The absurdity of the bureaucratic leadership model is apparent to anyone who grew up on the social web, where leadership is about attracting followers rather than ascending a ladder. If you’re a digital native, you view positional power as inherently authoritarian and are deeply suspicious of anyone who seeks “power over.” To you, leadership isn’t about assuming command and giving orders, it’s about activating a community and pitching in. For you, being an activist isn’t a set of tactics, it’s your everyday posture; it’s how you make a difference, whatever the task at hand. Credibility, courage, contrarian thinking, compassion, connection—that’s how you roll. You understand that the fastest way to erode your real leadership capital is to bludgeon others with your positional authority.