Gary Hamel On The Pandemic And Wringing Bureaucracy Out Of Organizations

November 9, 2020

By Adam Chapman, EyeForPharma on Mar 21, 2019
Gary Hamel

Complexity is the defining business and leadership challenge of our time. But it has never felt more urgent than this moment, with the coronavirus upending life and business as we know it. For the past few months, we’ve been talking to leaders about what it takes to lead through the most complex and confounding problems related to the pandemic. Today, we talk with Gary Hamel, faculty-member of the London Business School, cofounder of the Management Lab, and co-author of HUMANOCRACY: Creating Organizations As Amazing As The People Inside Them. Hailed by the Wall Street Journal as the world's most influential business thinker, Professor Hamel’s landmark books have been translated into more than twenty-five languages.

David Komlos and David Benjamin: How do you define humanocracy, and what makes it different from bureaucracy?  

Gary Hamel: The fundamental difference between humanocracy and bureaucracy is that the latter has the goal of maximizing compliance, while the goal of humanocracy is to maximize contribution. In a bureaucracy, human beings are seen as resources that the institution hires as instruments to create products and services and ultimately profits. Humanocracy, by contrast, says individuals are agents that join organizations so they can do together what they could not do alone. It assumes that the ultimate goal is to have impact as a human being, and to earn a living as well. When you build an organization from the vantage points of a humanocracy, it is different in almost every respect from one that’s built on the old bureaucratic model.

Komlos and Benjamin: How did heavily bureaucratic organizations fare during the first few days and weeks of the pandemic?

Hamel: The most important question today for any organization is “are we changing as fast as the world around us?” And the answer for many organizations is “no.” We saw that, again, as we looked at large organizations responding to the Covid-19 crisis. Bureaucracies are replication machines. They're designed to do the same things over and over again with perfect replicability. While there's value in that, bureaucracies struggle when they're confronted with situations that are novel and/or moving quickly, like the coronavirus. It was a new kind of disease, and it was something that could spread very rapidly through the population.

As large bureaucracies were confronted with this new phenomenon, many struggled to adapt their procedures and their processes to the new reality because the first impetus of bureaucratic organizations is to defend the status quo. That’s why in a crisis like Covid-19, power tends to move out to the periphery as it becomes clear to individuals that the center doesn't know what's going on, that they are too slow, and that they are still fighting the last war. As a result, in healthcare bureaucracies for example, we’ve seen nurses, physicians, hospital CEOs and others all coming together, getting on the phone, sharing data, revising their protocols, and not waiting for somebody else to tell them what to do.

Komlos and Benjamin: Do you think the lessons of the last few months offer hope for sustained change, even in the most bureaucratic organizations?

Hamel: I’m skeptical about sustained change because without distributing power, there is no way to build a more responsive, more daring, more creative organization, and people with power are often reluctant to give it up. Having spent most of their career working their way up the org chart, learning how to accumulate and use power, fighting off rivals, defending their turf, managing up and deflecting blame, it can be very intimidating for senior leaders to think about radically changing the game. Highly successful alternatives to the status quo have existed for decades, and we’ve been writing books and case studies about them for years - yet most organizations are still stuck.

What makes me hopeful, though, is that the CEOs I meet today are under enormous pressure from the environment, shareholders and other stakeholders, and they understand that the real problem is the bureaucratic management model. I think the pressure of the environment will ultimately break us out of that model and force us to build organizations that have this capacity for proactive change.

Komlos and Benjamin: Have you had a chance to check-in on some of the companies you use as examples of humanocracy in the book—Nucor, Haier, Handelsbanken, and Vinci for example — to see how they’ve fared during the pandemic?

Hamel: I can't give you a systematic data-driven answer, but what I can tell you is that I have been in touch with most of the CEOs that we profiled, and they have told me that they are dramatically outperforming their peers. They responded quicker and more creatively than others, and their people did not wait for permission. In a humanocracy, employees worry about growth, swarm new challenges and think like problem-solvers, and they ask customers ‘what else can we make for you?’ Nobody sits around waiting for somebody to tell them what to do. So I think they have a natural advantage in turbulent environments.

Komlos and Benjamin: What fundamentally has to change to build humanocracies?

Hamel: In traditional, multi-layered bureaucracies, the power for setting strategy and direction is concentrated at the top. A very small number of individuals have the right to hold the organization's future hostage to their own personal willingness to unlearn and relearn. They act as a choke point on what ideas are considered credible and get funded. And because of the many layers of hierarchy, it takes a long time for new problems and new opportunities to become sufficiently large, urgent and inescapable to capture their scarce attention. Typically, by the time a problem gets to them, it’s too late.

Thus, it is very hard for employees to get even a small amount of time and a small bit of funding to experiment with a new idea. From research, we know that only one out of ten employees believe they have the freedom to experiment with new solutions, approaches, and products.

Over the last several decades, we’ve seen a lot of companies that have been fiddling in the margins - bringing in new practices and processes, doing some mindfulness training, building agile teams, setting up an internal idea market - without challenging the deepest beliefs about how to build and run organizations. To get to the future, leaders need to take a hard look at two fundamental things:

  1. Organizational architecture. The old bureaucratic model is built on a top-down pyramid that has its roots in military structures, dating back as far in human history as we can go. That model may have made sense 100 years ago when the average employee was illiterate and needed managers to tell them what to do, and when the easiest and cheapest way to move information was to have employees report up through a chain of command. But today, workers aren’t illiterate, of course, and everyone can see the full picture because we can share information quickly and easily.
  2. The ideology of management. The very reason managers existed as a class of employees was to exert control and to assure that employees did as they were told. We still need control in our organizations, but that ideology has slipped the boundaries of common sense and it has become a goal unto itself that is untethered from any business realities. That’s why you have the absurdity of an employee in a large company, unable to requisition a $300 office chair without getting somebody’s permission.

To have any hope of intercepting the future, we have to do something quite radical and take a more intentional, more systematic approach to wringing bureaucracy out of our organizations. We have to give up the conceit that you can set strategy at the top, and instead free employees up to do bottom-up experimentation. We can’t put employees into narrow job roles and take away most of their discretion, at the very moment in time when the entire organization needs to become a laboratory, with hundreds or thousands of employees alert to what is happening on the fringes of the organization, constantly experimenting and trying new things.

Original article posted on Forbes on Nov 9, 2020

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