Health Conditions

Is the COVID crisis busting business bureaucracy?

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.

Good morning.

Is the COVID crisis busting business bureaucracy? That’s the question I asked business guru Gary Hamel, who has a new book coming out next week entitled Humanocracywhich is his alternative to bureaucracy. I’ve been hearing stories from executives about how work from home has flattened hierarchies, democratized information, impaired micromanagement, focused on outcomes over inputs, and encouraged digitization and innovation.  In the process, has it also weakened corporate inertia andto use Hamel’s subtitle–moved us closer to Creating Organizations as Amazing as the People Inside Them?

Not so fast, says Hamel. “In any crisis, power moves to the periphery,” he says. “By definition, a crisis pushes power out. No hierarchical organization can handle the information processing demands and the decision-making requirements that a crisis presents.” But will the changes last? “We’ve gone through other crises, and typically bureaucracy reasserts itself rather quickly.”

Bureaucracy has been the bane of business leaders for decades. The conversation with Hamel reminded me of this piece I wrote for The Wall Street Journal in 2010, entitled “The End of Management”adapted from my book, The Wall Street Journal Essential Guide to Management. Twentieth century management was all about creating systems that made people part of a bigger machine. Twenty-first century leadership needs to set them free from the machine and empower them to innovate. The challenge, to use ex-IBM CEO Lou Gerstner’s metaphor, is to make the elephant dance.

Yet Hamel contends progress has been, well, nonexistent. Despite talk of a gig economy, the percentage of the U.S. labor force working for companies with more than 5,000 employees has swollen to a record 34{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}, from 29{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00} in 1987. And “the number of administrators, managers and supervisors…has more than doubled” over that period, while all other jobs increased by less than 50{ce8ce7cc98bffdc4302011057a79600ea02c464c5536f1477c12acdb8bd79c00}. “Bureaucracy has been growing, not shrinking.”

I asked Hamel whether the acceleration of digitization across industries that has occurred during the pandemic would help beat back bureaucracy. His response was, in essence, that while digitization may provide new tools for combatting bureaucracy, it doesn’t do the job by itself. Most such efforts simply graft “new practices and new processes on the old bureaucratic root stock.”

So what’s the antidote? In the book, Hamel and coauthor Michele Zanini call for a return to first principles—new ones that focus on empowering people. It’s worth the read.

More news below.

Alan Murray

[email protected]

Comments Off on Is the COVID crisis busting business bureaucracy?