Good riddance to those old ways of working

Gary Hamel hates red tape. Students on his Executive Education courses at London Business School have often heard the management guru argue passionately that organisations should ditch bureaucracy to boost productivity and nurture creativity. In Hamel’s opinion, far too few do.

Then, this year, coronavirus hit. The world was turned upside down and leaders were forced to cast aside established rules, processes and practices to allow employees to keep operations running through the pandemic.

Hamel says: “One Italian healthcare leader was quoted saying the virus moves faster than bureaucracy. But everything moves faster than bureaucracy! People were quick to move. I've talked to many CEOs and leaders in recent weeks about how Covid-19 is affecting them. What they say without exception is they’ve been impressed by the speed at which their teams, in the absence of clear direction, have tried new things, linked up in learning networks to share what’s working and generally taken quite extraordinary measures to keep serving customers and keep one another safe.”

The end of ‘business as usual’

Professor Hamel – “the world’s leading expert on business strategy”, according to Fortune magazine, thinks it is too soon to predict longterm effects of the coronavirus on how we work and organisations are managed. Hamel suspects many people will resist returning to business – and bureaucracy – as usual, once the virus has passed.

The benefits for businesses and individuals of throwing off bureaucratic shackles is a topic he explores at length in his latest book, Humanocracy: Creating Organizations as Amazing as the People Inside Them.

“In a small crisis, power moves to the centre, but in a big crisis, it moves to the periphery,” he says. “At the outset of the pandemic, a lot of individuals on the fringes of organisations realised the centre was overwhelmed or paralysed, so they dusted off their ingenuity and started improvising locally. I have a sense few of those individuals will return meekly to their previous, bureaucracy-shaped roles.”

While Hamel is based in the US, he has had a long relationship with LBS, first teaching on the school’s MBA programme in 1983. Today a visiting professor at the school teaching management strategy and entrepreneurship, Hamel takes clear aim at bureaucracy and its inefficiencies in Humanocracy. Co-written with Michele Zanini, with whom Hamel runs the Management Lab, a business innovation thinktank, the book argues that leaders perversely cling to outdated bureaucratic management models while freely admitting their failings.

Why? In part, for want of an alternative, but also from fear of trying something new, as well as a naked desire to maintain power. Along the way, they waste vast creativity in their ranks.

“Of course, a lot of leaders acknowledge bureaucracy has its downsides, but they think there’s no other way of achieving that control or the consistency of coordination required for large-scale human accomplishment,” Hamel says. “They say: ‘Gary, what's the alternative?’ The book argues there are alternatives and gives strong examples, such as Nucor, the world’s most innovative steel company. But many leaders haven’t taken the time to really understand. They wonder how to uninstall what’s already there without creating chaos. But perhaps the most difficult challenge is that people in power are often reluctant to give it up.”

Many business leaders have privately admitted to Hamel they knew their management models were not fit for purpose even before the pandemic put them under such unprecedented strain.

“It's important to recognise that Covid is only one of the challenges we're facing today,” Hamel explains. “We have climate change, racial injustice, massive economic migration, cyber threats, jobs being displaced by automation. All of these are stretching the old organisational model to the max. There was already an awareness bureaucratic structures and practices had outlived their usefulness. It’s possible the coronavirus could work in a ratchet-like way to advance this need for change.”

The arguments for change

For Hamel, the economic and human arguments for change were already clear and urgent. He adds: “Across the OECD, productivity growth has stalled or has been declining for the better part of 20 years. Rekindling productivity growth is the challenge of our lifetimes because, without that, living standards stall. With wages under pressure, we see the forces of populism gain strength. At the heart of this are people who feel the system no longer works for them – if it ever did. People are frustrated.

“The core argument of our book is it doesn't have to be this way. Every human being is looking for dignity, opportunity and equity. The data shows overwhelmingly that the majority of employees aren’t finding that at work. Gallup data suggests only 17% of employees around the world are engaged in their jobs. The same research shows that 89% are okay with the actual work they're doing. The work isn’t the problem, it's the way they're managed.”

Hamel cites research that reveals the frustration many workers feel. “Only one out of five employees believes his or her ideas matter at work,” he says. “Just one in 10 has the freedom to experiment with new ways of working. They're treated as semi-programmable robots, often on zero-hours contracts. Low-skilled jobs need not be dead-end jobs. There can be opportunities for development. People can have that creativity within them harnessed, encouraged, nurtured.

“You can teach every single employee to think like an innovator. At present, the average organisation wastes human capacity. That waste never shows up on the P&L as there’s nothing to measure the discretionary energy that wasn’t forthcoming because you were treating people like lunkheads or simple commodities.”

Today, the spry 65-year-old with the signature grey moustache lives in the foothills of the Santa Cruz mountains in Northern California overlooking much of Silicon Valley, but he was based in London – “the most interesting city in the world,” Professor Hamel says – for ten years when he was a full-time member of the LBS faculty. In 1990, he published the idea of ‘core competencies’, developed with the late Professor CK Prahalad, an idea that successful organisations focused on what made them unique and important and prioritised what they did strategically well. As well as publishing several bestselling management books, including Leading the Revolution and What Matters Now, Hamel also founded the Management Innovation Exchange in 2008, an online platform that allows contributors to submit and debate new ways of running businesses. But what is about LBS that keeps the world-renowned business thinker – in great demand globally as a business consultant and speaker – returning to teach in London each year?

He says: “When I was based in London teaching on the MBA programme, it was the most fun I’ve ever had. One of the things I appreciated most about LBS is that it’s a relatively young school, which made it scrappy and entrepreneurial. It was always focused on making a real difference and that gave the faculty a freedom to experiment.

“Why do I come back? Firstly, the school attracts an incredibly impressive, international array of learners. Every time I turn up, I’m going to push my thinking because there are brilliant, committed people who are eager to learn and make a difference. The same is true for faculty. They’re at the leading edge, working on new things and they’re going to argue and challenge me.”

A major motivation for Hamel teaching at LBS for the better part of 40 years is a simple sense of gratitude. “They took a risk on a young faculty member and gave me a platform and an opportunity to learn and to grow. I think institutions are one of the few things, other than children, that we can invest in that are likely to outlive us. I’m deeply grateful to have that association.”

Education is evolving

Hamel mentions his daughter who has a masters degree in journalism from Berkeley, but who works as a data scientist in biotech. He thinks some of her career experiences may presage how people are hired in years to come and have some bearing on the relevance and shape of education in the future.

He says: “My daughter is an advanced AI engineer and the companies she’s worked for in Silicon Valley don’t care what school she went to. They simply put her through a battery of tests. You could be self-trained for all they care, but if you know how to program, if you can solve wicked hard problems, they want you. Obviously, hers is a technical field, but I do think over time employers are going to ask less about what your degree is than what capabilities you’ve built. Companies will look for people who pass certain tests, who demonstrate certain competencies, but they’ll care less about where your degree came from.”

The management expert believes this shift in approach by employers could affect how students choose business courses and how education is structured.

“I think curricula will be disaggregated and people will take whichever courses they think are important to getting ahead and what they think employers are looking for,” Hamel predicts. “This may mean you earn your qualifications from a variety of institutions, not just one. We’ve seen this time and again – the moment content is free to be distributed digitally, the whole industry structure changes. It happened in media and in publishing. It’s happening in banking with the growth of online payments. Something like that’s going to play out over the next few years in education.”

Hamel believes the forced move to teaching online during the pandemic has accelerated an existing trend and may soon become the norm. He says: “The number of students who earn a degree online is soon going to radically dwarf the number who are showing up in a physical programme. Will there always be a place for in-person programmes at elite business schools? Of course. There’s something different about being face-to-face with a community of fellow learners going through a shared experience, building those social connections. That has immense value, so, for those who can afford that experience, they’ll probably still say that’s what they want. I think there’s a small number of incumbents who will continue to do that very well, but they’re going to become less significant unless they’re ahead of this curve.”

When he is not teaching, writing or travelling for work, Hamel indulges his love of skiing and scuba diving. During the pandemic, he has spent much time reading, including Mind and Cosmos by philosopher Thomas Nagel and The Splendid and the Vile by Erik Larson, an account of British resilience and stamina in the darkest days of World War II.

This was something his own father, Professor Paul Hamel, now 101, witnessed at first hand when he was in London during the Blitz and the younger Hamel believes it has important lessons for us now. He concludes: “It’s a good reminder that while the current crisis is deeply unsettling, our forebears have endured worse and emerged with their spirits intact.”

 

Professor Hamel teaches on the Executive Education programme Humanocracy: How to Hack Management.