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.


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.


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.


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.

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