MANAGEMENT SPECIAL ...................... Gary Hamel - "Modern Management is Bureaucracy"

Gary Hamel - "Modern Management is Bureaucracy"





Hierarchies will disappear within a decade in progressive companies

Management guru Gary Hamel was in India to talk about how the country can grow 5X times to be a $10 trillion economy.

Part of the answer lies in leapfrogging old management practices, a focus beyond manufacturing to build a digital economy. The easy part is there are ample opportunities to exploit and accelerate growth.The tough bit to build globally relevant organisations in an era where benchmarks of what's global are being constantly reset.In an exclusive interaction with Corporate Dossier, the 61 year-old co-creator of the theory of core competencies discussed why modern management is flawed & how organisations can reinvent themselves for a new age of business . 

Edited excerpts:

What are your impressions about India and the kind of growth that you see in businesses here?

You cannot take growth for granted. The problem here is how do you grow the economy? How do you become a $10 trillion economy is a multi-dimensional problem. A decade or two ago, if you talked to business leaders, most of the conversation was about what the government needed to do. That is still a significant issue ­ monetary policy, trade policy and investment in education, infrastructure and so on. It always tended to be the government's problem.

What I see now is a very healthy turning point. Now leaders are more inclined to say, `okay, we understand there are things to solve but we can no longer use those as an excuse' because you have enough companies like HCL, Sun Pharma that are globally competitive. The question for the rest of the Indian industry is: are we going to be global benchmarks or not? That's a change. The bar is going up very fast in terms of what it means to be a world class enterprise.

The challenges include accelerating change, crumbling barriers to entry you see across every industry, rising expectations of consumers and employees. My purpose here in India is to help enterprises recognize those challenges and start to tackle them creatively and with a bit of luck, to leapfrog the old management practices that are fast becoming competitive liabilities.

The government is focused on `make in India'. Is that priority misplaced?

It's going to be very, very hard to bring the next 100 million jobs in manufacturing alone. You have to have a multi-sectoral approach. I don't want to say it is right or wrong, I would just say manufacturing alone is unlikely to be enough.

What future do you see for the technology services companies which have grown on the back of core competencies, which led to the whole outsourcing wave?

Today, any company has to build an evolutionary advantage. It is no longer enough to have a competitive advantage because those advantages will disappear over time. If you look at every industry around the world over the last decade, it's been the newcomers and not the old guard that created growth. That cycle continues to repeat. We call it creative destruction. You're either on a creative path or you're on the destruction path and you can go from one to the other. As we have seen from Nokia, sometimes it can happen in 24 months. Most organisations were not built to change. In large organisations change usually happens once there is a crisis and it usually requires a change in leadership. Get rid of the old guy and bring in a new guy. This is how it happened at Ford and Nissan. That is a very expensive way to change. The question is, can you build organisations that change before they lose their competitive advantage and in time have an evolutionary advantage? Very few exist today. It's a challenge around the world ­ how do we build organisations that can change as fast as change itself.

In your 2007 book, Future of Management, you talked of how practices from the industrial era continue even today. Do you see that changing now?

I see things changing in vanguard compa nies. There is a division inside General Electric that assembles jet engines. They run a plant with 400 technical employees and one plant supervisor. That's 1:400 span of control. How many managers think you can run a business with 1:400 span of control when you're doing some thing that complex? Or a company like Red Hat Software. It's a leader in the open software space, which uses crowd sourcing and is not depend ent on a few super smart leaders to spot the next trend. You see these little glimmers out there.

What we call modern manage ment is basically bureaucracy.

Power trickles from the top or resources are allocated centrally.

Employees are treated like semi programmable robots; people compete, put more energy into competing for promotions than competing to add value. We all grew up in organisations that feel like that. When we talk about companies like Sun Pharma or Google, it is not to celebrate those organisations but to encourage others to be equally innovative on how they manage, plan, allocate resources, hire.

In a recent blog, you wrote about bureaucracy and you mentioned how at companies like Apple less bureaucracy is leading to some kind of change...

Even in Silicon Valley if young companies succeed and scale, they are overcome by bureaucracy.

There's a $4 billion cloud computing company that needs 600 vice presidents to deliver revenue. How is that possible?
As the company grows, you get more management layers, decision cycles get longer, staff groups become more powerful, roles proliferate, legal has to sign off on every thing. And pretty soon the organisation is strangled by its own complexity. It's a global problem and it's a problem we have to tackle. Germany invented it, Britain exported it and India perfected it. That's how I think about bureaucracy.

Do you expect the next level of innovation to come from India?

It's impossible to tell. Who expected that Skype would come out of Estonia? Who expected one of the number one enterprise collaborative software companies will be in Australia? One of the fastest growing insurance platform is out of China. Today it's impossible to tell because digital technology means capital and capability is available to anybody around the world who has an idea. Can it happen in India? Of course it can. Part of the goal of Inspire India is really to deliver two messages. One is, no society outperforms its institutions. Second, no institution will outperform its aspirations. If you don't start with a point of view that we can be global, that we can be disruptive innovator that we can become the benchmark for the new management models then it won't happen.

Some people like Peter Thiel (co-founder Paypal & hedge fund manager) believe that the next generation of innovation will come from advanced countries. While countries like India can create wealth by just moving people from villages to cities. Do you agree?

There are opportunities for a kind of ketchup innovation. Putting more people in automobiles, getting more people on smartphones. Smartphone technology is going to allow us to reinvent education and agriculture and banking in ways that bring many, many people into the economy that aren't in the economy today. But even that is not going to happen simply by imitating what has been done in the West. I would be surprised if there's anybody who has not learnt that lesson at this point. Which is that, yeah, the West may lead in certain technologies but innovating in ways that open up opportunity for people in the developing world, that's a different kind of innovation.

But even in the new age, we have seen copycat ideas. Flipkart, Makemytrip and many others are copycats of successful models in America.

Despite globalisation, there are important differences around the world in culture. If an idea is better adapted in a way that makes it more appropriate to India it doesn't always mean it's a copycat. There are many American companies who don't understand the rest of the world that well. They look at the world through a North American lens and that creates an opportunity for somebody who knows how to do something that's more appropriate to India or China or wherever it may be. One of the most interesting internet banking applications in the world was created by a company from Colombia, not a centre of the financial world. I've lived in Silicon Valley for the last 20 years and every meeting I go to, 10% of the people are from India. There is no shortage of talent, no shortage of energy. How do you create an environment where they want to do it here is the question.

What will the future organisation be like?

There are several things that will be true about the organisation of the future.

Number one, they will be organisations where every idea competes on its own merits. Where it doesn't matter where you sit in the organisation or even if you're outside of it but every idea is looked at on its merit not by who is this person?

Number two, strategy and resource allocation is going to happen in a much more open and transparent way. We will not expect strategy to come from a small number of people at the top. Number three, your people will compete more to create value than for promotions. The idea of a job and a role and a title is go ing to be irrelevant.

If you look at young companies like Spotify (a music streaming company), most of that old hierarchy is gone. On one team you may be a leader on another team you may be a follower but the idea of a fixed and permanent hierarchy will be gone within a decade in most progressive companies.

Many B-school graduates are moving away from large companies to start ups. What's driving that?

It's interesting that so many young people don't want to work for the Global 1000. They want to build because it has become so much easier. About ten years ago, you needed $5 million to start a company. Five years back, it was $500,000. Now, it is $50,000. You can build business like a Lego kit. The payment system is here. The customer relationship management (CRM) system is here and online hiring to find talent is here.

Who are some of the modern business leaders you admire?

In business media and in general we try to celebrate these few heroes. But almost always if you come back in three years, the organisations are not doing so well. The world is so complex and is moving so fast that change exceeds the cognizant limits of any small number of people. Ten years ago, Tesco was the most admired company in Britain and CEO Terry Leahy was God. Before that, Sainsbury's was the number one supermarket in the UK and everybody thought Sir John Sainsbury was the best business leader ever. So I think the question to ask is: how do you build extraordinary organisations with ordinary leaders?
Today it's about how you capture the collective genius rather than how do you find the individual genius. There are very few people in the world who have the political skills of Lee Kuan Yew (first prime minister of Singapore), the emotional intelligence of Desmond Tutu (Nobel Peace prize winner; South African activist) and the innovation instincts of Steve Jobs.

Do you think there's a lot democratisation now, a lot more social media scrutiny that you don't have Jack Welch or Sam Palmisano kind of heroes with the whole business world looking up to them?

That era has passed. I respect leaders who think of themselves as social architects. Today leaders are people less like Jack Welch type -here's what I did, I grabbed the organization, I transformed it and so on-and more like a Jimmy Wales, who built Wikipedia who say, how do I put together the social architecture where I can get the best of everyone and get their gifts to the fore. And I think in the past a lot of leaders looked at power as a zero sum game. Today, I think we have to see power no longer as zero sum game. And the real power of a leader is when you unlock the capability of the people around you.

By Shelley Singh  CDET 7MAR15