A new Ideology of Management – part II

The leap towards a new set of normative beliefs and values, a new Ideology of Management, that is in stark contrast to existing management practices requires much faith and conviction to initiate and sustain. Who has taken this leap? Under which circumstances? What is the fine print of the transformation?

Who has taken the leap towards Digital Management?

A lot of companies already have:

  • Nearly all well-known Digital champions such as Amazon, Google, Facebook, Uber, Airbnb, LinkedIn, Zappos, Netflix, Snap, Etsy, GitHub
  • Classic companies transforming into Digital ones: Wegmans (Grocery), Buurtzorg (Health Care Services), FAVI (Automotive Supplier), Morning Star (Food Processing), Patagonia (Apparel)
  • Classic companies transforming pockets of their Organizations into Digital Organizations: Otto.de (B2C), Disney (e.g. Pixar)

In addition to that, I worked with or talked to Organizations who started their digital transformations with their IT units. IT units appear to be a natural place to start, as the pain caused by the tedious way IT services are provided today appears to be the very bottleneck of all attempts to digitize companies.

But there are companies taking the Digital Management Approach further, some to all departments, including Manufacturing, HR, Sales and even Accounting. Here is a list of the most aggressive form of Digital Management, called “Holacracy”.  I watch this movement since 2015 and it is really gaining traction in organizations and the minds of progressive leaders.

There are many forms of Digital Mangement out there, but all organizations show the uniting feature of a move away from hierarchy and to more autonomous, trusted teams.

“If everyone had to think outside the box, maybe it was the box that needed fixing”

– Malcolm Gladwell, What the Dog Saw 

Where is a good place to start the transformation towards Digital Management?

Digital Management is a term used by me and is defined in my last posts. Other people label this new way to manage and organize “Team of Teams” (Stanley McChrystal) or “Holacracy” or “the Amazon way” or the “Google Model”. Whatever the name, the main characteristics shared are all the same.

While the principles can really be applied to any organization, benefits and needs seem to be greatest in knowledge-driven organizations or those parts of organizations which are knowledge driven.

IT units fall into that knowledge-driven category. It is really an ideal candidate to start this new organizational model, given

  • the need to change often tedious IT Operations is existing in always all companies
  • that any “digital transformation” initiative places an oversized sign pointing towards IT and reading “RESTRUCTURE ME”.
  • that modern software architecture and processes like DevOps or Continous Delivery are urgently required in order for companies to keep pace with the changes in the marketplace

The fine print: Q&A

The major outlines of the Digital Management approach can be found in the last post A New Ideology for Management in the Digital Age. Here is the fine print:

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Digital Management is not a Pony Farm

This Blog, ManagementDigital has a business take on things. There are obviously bigger implications for people and society as a whole if people experience work not a “wrench in a machine” but as a creative person.

I choose to leave this humanistic perspective to others, like the Holacracy crowd, which strikes me as a big esoteric. I think that a “Heal the world” perspective will fail to convince the profit-seeking executives of this world.

Plus there is simply not enough evidence for less autocratic organizations to turn the workplace to a more human place. There are at least as many companies with an aggressive, meritocratic culture based on strength than socially responsible companies, The most aggressive ones are probably Uber, followed by Tesla and Amazon. Hugely successful, nonhierarchical companies with explicit Digital management structures – but with abrasive, in Uber’s case even abusive company cultures.

After all, a companies organization of work is something other than a companies culture.

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Hope you liked this post!

Additional Resources on Digital Management

All sources for this Blog

A german speaking podcast for this blog is available.

 

Digital Transformation is a more encompassing term for all initiatives to revamp a company in order to succeed in the Digital Age. It encompasses Business Strategy, Business Models, Product Design, Customer Focus, Data Intelligence, Market Positioning and new (Digital) Management Models.

 

 

 

 

A New Ideology for Management in the Digital Age

We may like it or not, but everyone who works has a personal Ideology, a comprehensive set of normative beliefs and ideas.  This ideology has been learned in school, in university and from working in companies. It is deeply engrained in every individual. It is very hard to change.

Ideologies are hard to break. Take the ideology of communism, which despite good intentions, did not work out, but kept being embedded in person’s mind for at least a decade. Take the Ideology of Share Holder Value, which in its most extreme dominance in the 1990’s led to disastrous mergers based on short-term, financial decisions. Both of these ideologies are deemed obsolete by now, even so, a lot of ideas embedded in them remain valid.

Or look at a dominant Ideology held by some of the established Silicon Valley giants today, which have re-interpreted monopolies (Amazon, Facebook, Google, etc.) to be good, as they provide more money that can be reinvested into innovation. An ideology described by Peter Thiel, an outspoken early supporter of Donald Trump, in his influential book “From Zero to One.”

All ideologies rest on individual ideas and beliefs that are self- supporting. Therefore, they are hard to change. And so is the current ideology of work and management.

But the world has changed. With the Digital Revolution in full swing, the social innovation of Management needs to change too. As defined in the last post Big Tax Cut! Flatten the Management Hierarchy:

Management in the Digital Age = Freedom * Discipline * Autonomy * Accountability

  • Freedom to pursue personal fulfillment
  • Discipline to care for the rules
  • Autonomy to say and do as you want without fear
  • Accountability for success and failures

So what on earth is the new “Digital Manager” compared to the Classic Manager supposed to be doing day by day? Here is my answer in four categories.

1.Sic Semper Tyrannis!

Since Cesar and Brutus, Autocrats are regularly killed. Although the murderer is not always the Gardener  – this time,  the murderer really is the Gardener.

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To maximize the creativity of an organization, the autocrats need to make way for a Digital Manager who interprets his job as an Explorer, a Coach, and a Gardener. The Digital Manager

  • is bestowing a lot of authority, and freedom to the team
  • refrains from controlling inputs and focuses on refining outputs
  • does no longer define the supposedly one best way to do things but lets teams experiment, in the conviction that inefficiencies incurred in the short run will be more than paid for by efficiency created by learning and personal development in the future

2. Put yourself on the sidelines

A football coach is on the sideline to analyze the game and make decisions. She has set up her team before the game, and she will improve the team by walking the team members through the learnings afterward. And so should a manager in the Digital Age.

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The leadership span is increased by the factor of 5 from an average of 10 to 50. Why this? This increase is caused by the primary target of the Digital Management Model, i.e. to release the creativity of an organization and of individuals to the utmost.

Creativity and Freedom are so interrelated in human nature that a manager hovering near a subordinate will quickly be driving out all initiative.

Once in a while, there are emotionally intelligent managers who may be able to avoid this drowning of individual initiative for a time, but it wouldn’t be wise to rely on good luck.

Better to rely on a system of management which restricts the access of managers to employees so they can tune the mission and entice expected behaviors through the management tools described below, instead of ordering people to do things.

And a leadership span of 50 does just that. First, there is simply not enough time to micro manage. Second, employees must find their way into the system themselves. Coached by the new “Digital Managers,” but still they are to a large part the master of their own destiny, thereby causing the exact behavior and dynamics that Digitalization calls for.

3. Be a Close Observer of Results

The day to day tasks of managers shifts from “do as I say” to “do as you please.” If the mission is clear and social norms are embedded inside the organization, this will not lead to chaos, but to creativity.

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The strategy is no longer something that is defined in a periodic exercise somewhere up in the hierarchy and then analytically broken down into its component parts in the hierarchy.  Instead, strategy becomes a permanent process that is initiated top-down as well as bottom-up. Interestingly, research in the field of Innovation Management has been pointing towards this bottom-up/top-down way as the optimal path to innovation for a long time. Numerous tools have been devised, such as Knowledge Management or Workflows for the appraisal for improvements handed in by employees.  But none of these innovation management tools got very far:  Hierarchy, Middle management and the whole way that classical organizations fail to give workers much context to their work at all conspired against any significant results.

One very distressing fact for traditional managers is that hiring decisions are no longer done by them. Why not? Because the results of managers selecting candidates are simply inferior to rule, test- and panel-based selection procedures. See Hiring like a Pro: Lessons from Google.

Targets are still set, but on a much higher level, based on a mission and not daily priorities. See Priorities are left to the team to figure out. See Force 4: New Work organization.

Teams are not defined and organized by managers. An additional set-up might be recommended, but once this is done, team members are free to associate and dissociate themselves from teams. Team sizes are not given but fluctuate. This approach has the danger that unwanted, tedious jobs will be vacant  – until the need for them grows overwhelmingly high or they are automated or organized away.

Tactical and operational decisions are left to the teams. What a manager controls are the overall mission, and she is the guardian of the team rules. A Digital Manager needs to realize that she is no longer the best expert in the room.  In the absence of an Autocrat, decisions inside team need to be made by consensus, absolute or qualified majority. A Digital Manager needs to define the rules, circumstances, and procedures by which decisions are made and followed through.

Control is delegated to the teams. As Control is a huge chunk of what traditional management is about, this “socialization of control” causes a big management tax cut, see Big Tax Cut! Flatten the Management Hierarchy.

Personnel Development becomes an essential activity. The Digital Manager is no longer the superior that needs to be impressed, served and cozied up to. Instead, he becomes an ally in the personal development and advancement of an employee. A huge benefit to the organization and the individual.

4. Use new tools – burn the outdated ones

As the purpose and tasks of Mangement changes in the digital age, tools need to change, too. After all, archeologists describe cultures by the traits of the tools they have used (the plow, the spindle, etc.).

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One on one meetings, that allow managers to build and maintain personal rapport with an employee are no longer needed, as the employee is much more strongly embedded in his team and the community.   It is no longer practicable with a leadership span of 50 employees. And it is even counterproductive, as too much daily proximity destroys the autonomy of individuals.

Delegation remains relevant, but it is now done on a much grander, systematic scale. Instead of tasks, missions are given. They are granted to teams, not persons.

Feedback remains critical to all intents and purposes. The main rule of “good” feedback remains intact: Give Feedback immediately on observed behavior, not postponed and not based on hearsay.

Team Meetings are no longer organized or hosted by a manager. Instead, each team devises their own rules, whatever works best for them at a particular point in time. Team members take turns in preparing, heading and to follow-up on meetings.

There are still regular reports on financial matters, but they are augmented by KPI driven, quantitative measurements of results and deliverables as a more direct proxy for performance.

Job design is entirely taken out of the hand of a manager. The team’s dynamics take care that tasks are done, by whoever is competent, available and most highly motivated at a particular point in time. The whole term “job” as understood as a static job description is obsolete, as the ownership of tasks changes way too fast. Instead, the term “role” becomes much more meaningful, even so, there may be multiple roles that team members have at any point in time.

Personal work methods remain highly personal. What changes is transparency: Instead of keeping all your tasks, your daily schedule and priorities close to your body, invisible to all other members of the organizations, they should be shared on a whiteboard or shared in groupware. Trust is of the essence for a digital organization to perform well and Transparency fosters trust.

An often overlooked tool are simple checklists for personal use or shared with teams. These enable knowledge to be captured transparently, actions to be conducted thoroughly and learning to be done systematically. There is really not much different between the advantages of using checklists in a conventional or a digital organization, except for the greater emphasis on learning and transparency in a digital group. For more info checklists see Atul Gawande’s Book “The Checklist Manifesto.”

Budgets are still necessary, but business cases which are continually updated with the results of experiments are maintained on a team level. These are not the heavyweight business cases of controlling, finance or logistics departments, but light weight, KPI driven business cases as used in the Lean Movement.

Performance Evaluation can be done away with. It is replaced by more coaching. More feedback and mission based objective key results (OKR) agreements.

The closing of obsolete activities and tasks is something that a manager can leave to a great extend to the teams, as they have authority to prioritize freely within their mission.

Challenges

There are numerous challenges:

  • What is the career path to advancement, if there only 20% Management positions left?
  • Who will be paid how much?
  • What to do about dysfunctional teams?
  • What to do with unwanted jobs, i.e. jobs that no one wants to take on?
  •  What about time critical actions, emergencies when every minute counts – should a company continue to rely on group decisions?
  • What about synergies, are they no longer necessary?
  • etc.

I will try to give answers in the next post.

Examples of  Management Ideologies

A glimpse of some existing management ideologies can be found in the following posts:

Force 5: Culture (continued): Xaomi, Spotify, Amazon, and gov.uk

Good Managers – Good Teams: Lessons from Google

Tired of hierarchy? Try this

9 reasons why your organization might be left behind

Exponential Organizations – a way forward for traditional companies?

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If interested, try my German language MangementDigital podcast.

Big Tax Cut! Flatten the Management Hierarchy

What about shifting the costs to digitalize your company to someone else? Is there something to learn from an obnoxious Reality Show host? Let’s find out.

The need for a new Management Ideology

Digitalization will happen if organizations find a better way to release the creative potential of humans. A hierarchical management style is centered on control. But innovation is focused on freedom. So the hierarchical management style and hierarchical organization structures got to go.

They need to be replaced by a set of normative beliefs and ideas that focus on individual freedom. This new ideology of management is at odds with current views. Gary Hamel, an influential author on the subject of Management, provides a comparison between the current mainstream and the new ideology of management in his 2012 book “What Matters Now: How to win in a world of relentless change, ferocious competition, and unstoppable innovation.”

Conventional Managers manufacture control. Everything they do can be attributed to ensuring that work is done: Setting targets, organizing, deciding, checking, developing employees. Each of those factors is, to a large part, an attempt to control what is going on.

This is important in a factory of unskilled labor. But as workers are educated, and work is less structured and more complex, more local initiative and more ideas are needed,  and more innate sense of commitment and care is required, control needs to give way to freedom.

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But control has a value. Without control, would the company not fall into pure chaos? Would slackers have a field day? Would anything be done at all? Would there be any coordination of efforts?

Oh yes, by just stating to your organization “You are free to do what you want. Enjoy!” you ensure that the organization will go to hell in a hand basket. Control is needed. The thing is: It is a different, more refined type of control. Not the plumb hierarchical sort of control, but a social control by teammates following the same mission and playing by a set od shared social rules and values:

Management in the Digital Age =

Freedom * Discipline * Autonomy * Accountability

  • Freedom to pursue personal fulfillment
  • Discipline to care for the rules
  • Autonomy to say and do as you want without fear
  • Accountability for success and failures

One can imagine that this may be ideal for the bold risk taker, but what about the timid, honest worker type? The answer is freedom: You are free to be an adventurous or as shy as you want. As long as the composition of the team is sufficiently heterogenous, everyone can contribute in her own fashion. This is even beneficial, as diverse teams tend to perform better than homogenous ones.

So far so good for the organization and the team member. So let’s fire Managers!

Big Management Tax Cut – now!

And Mexico will pay for it!

What is a management tax? Imagine a typical organization employing one manager for every 10 employees. The manager is basically not doing any other work than controlling the work done by the ten workers. The management tax is 10% if measured in headcount, 30% of salary, supposing the manager gets three times the average pay of an employee.

Now that organization is growing. For every 10 additional teams, another manager is needed to coordinate the 10 first level managers. A company that employs 100.000 first tier employees will need 11.111 managers to manage those. The Management tax increases to 11% measured by headcount, and to >33% by personal costs, as higher level management gets exponentially larger paychecks.

33% is a very high tax just to control a company.

Now the social innovation of Management in the digital age is invented. With this invention, control is smartly delegated to the first level workforce. Managers are no longer needed in their old role as Autocrat, but in a new role as “Explorer, Gardener, and Coach.” And you need just a 1 Manager per 50 first level employees.

The Management tax decreases to 2049 Managers. That is a Management Tax of 2% in Headcount and a 6% one in personal costs.

mtax

That’s pure efficiency. Imagine saving 27% of total current personal costs just by employing the social invention.  Let’s call it “Digital Management” (as an appreciation for “Management in the Digital Age”).

And it gets even more exciting. Digital Management has not even been invented for efficiency, it has been designed to increase innovation. This enormous boost of efficiency is just a by-product.

Middle Management is like Mexico…

…it will pay for the social invention of Digital Management.  But while Mexico, much to the surprise of  President Trump, is proud and obstinate to the rogue demands of a – six-time bankrupt – reality TV host, Middle Management will have no choice but to adapt.

The ideology of Digital Management does not only enable individuals to release their creative potentials and lowers the management tax, but it also shrinks the middle management layer by 82% from 11110 to 2049.

The vast layer of middle management has been widely recognized in the academic literature as a being the primary source of resistance to any change. The Middle Management acts like the bureaucracies immune system, fighting any intrusion on the status quo.

By adopting Digital Management, change has just been made a lot easier! Yes, there will be fewer jobs in Management – but there will be more fulfilling jobs for everyone.

Reality Check

I have been surprised by the radical nature of this list supplied in the table above by Gary Hamel. Hamel has been born 1954 and has been known to me as a leading but mainstream author about management. In 1990 he core-authored “Core Competencies“,  a very influential set of ideas which got companies to re-focus their operations and is today an accepted part of mainstream management strategy know-how. He seemed to me as one of the “Business Process Reengineering” crowd of thinkers. A thinking model that was and to a large part is still dominating management, consulting and business schools.

Twenty-two years later, Gary Hamel has evolved his views further with this radical list, calling for a “new ideology of management.” A new social innovation that has been discovered by some companies, but is still unknown to the vast majority of businesses and managers.

These Companies, are the silicon valley type of Amazon, Google, Facebook, Uber, Tesla, Linkedin, Airbnb, etc. , but this innovation is not limited to Tech Companies. Traditional Companies like the grocer Wegman in the Northwest US or the Dutch Healthcare Provider Buurtzorg are practicing the ideology of “Digital Management,” too. With great results.

This Social Innovation in the realm of management will determine corporate competitiveness in the years to come – more than any other factor. But there is more than corporate progress in this.

It’s humankind, stupid!

In the year 1909 Max Weber, on whose works a lot of today’s thinking on the organization, management, and sociology rests wrote:

The great question is … how we can oppose the machinery (of hierarchies) to keep a portion of mankind free from this parceling-out of the soul.

Digital Management, as I like to call this new management ideology for lack of a better term, is a social invention that might be bigger than the invention of  “Scientific Management” in the 1880’s by Frederick Winslow Taylor. With Scientific Management, machines found a place in the human culture.

With Digital Management, humans find a place of self-fulfillment in the age of machines.

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In the next post, I will dive deeper into the tools of “Digital Management” by contrasting them to traditional management tools such as meetings or performance reviews.

If you like to read more about “Digital Management” use the filter on the right side of the home screen of the “ManagementDigital” Blog and click on the label “Management.” Or use these links:

Tired of hierarchy? Try this

9 reasons why your organization might be left behind

Good Managers – Good Teams: Lessons from Google

What Google Inc. has to teach about Management

German speaking? Please check the new podcast.