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steve-denning's picture

Busting Bureaucracy with Radical Management

To transform organizations so that they are fit for human beings--more inspiring and engaging and yet just as disciplined and even more productive--we need to understand why promising ideas for improving management developed in the 20th Century--such as teams, empowerment, delayering or innovation--failed to become a permanent part of the standard management repertoire.

The default mental model of management

These improvements didn't stick because of the mental model around management should be conducted that is still remarkably pervasive in the Fortune 500. It comprises five interlocking principles.

The most important principle is that the goal of a firm is to make money for the shareholders. Second, the role of the managers is that of a controller of individuals, generally using a blend of carrots and sticks. Third, coordination of work is achieved through bureaucracy: rules, plans, reports and meetings. Fourth, the overriding value in the organization is efficiency, namely, saving money to enhance profits, often through economies of scale. Fifth, communications are top-down, telling subordinates what to do and often how to do it.

These five interlocking principles constitute an organizational culture. Single-fix improvements have difficulty enduring in this culture because they are usually incompatible with it. Improving one dimension of the culture is undermined by countervailing pressure from the other four dimensions. To achieve sustained change, we must move beyond single fixes and think in terms of systemic change.

A changed business context has caused declines in firm performance

Transforming management must also reflect the epochal change in the business environment. As Roger Martin has noted, we have moved from an age of shareholder capitalism to an age of customer capitalism. The balance of power in the marketplace has shifted from seller to buyer. Fifty years ago, big firms were in charge. Today, given the choice offered by global competition and customers' access to reliable information, along with their ability to communicate with each other, the customer is now in charge.

A new mental model of management: radical management

To deal with these issues, a new mental model of management is emerging. Its principles were developed in the software realm--beginning in the mid-1990s as "Agile and "Scrum." "Radical management" reimagines the five interlocking principles of traditional management for a new age:

  • The firm's goal shifts from making money for shareholders to delighting the customer. Delighting the customer is an operational business objective, not a vague slogan. The goal is not just the responsibility of marketing: it requires that everyone in the organization focus on providing additional value to customers and delivering it sooner. By adopting this new "bottom line", the voice of the customer is injected into every decision. Every individual must contribute.
  • The role of managers shifts from a controller of individuals to an enabler of self-organizing teams. Managers provide the team with a clear line of sight to the customer and are accountable for removing impediments. This shift recognizes that the engine of productivity in a knowledge economy--innovation and creativity--resides in the energy and ideas of the people doing the work, collaborating across boundaries, drawing on new technology and different perspectives.
  • Coordination of work shifts from bureaucracy to dynamic linking, in which work is done in short cycles with direct feedback on finished work from customers at the end of each cycle. Dynamic linking creates a space for the team to contribute its full talents and creativity aimed at delighting customers, while also achieving disciplined execution. The specific procedures of dynamic linking have been validated in thousands of firms in the software sector over the last decade and are now robust.
  • The values practiced embody a shift from a preoccupation with economic value to the embrace of a wider set of values that grow and sustain the firm, particularly radical transparency, continuous improvement and environmental sustainability. In hierarchical bureaucracies, crucial problems can lie hidden, unresolved for decades. In radical management, specific practices are put in place to ensure that performance impediments are systematically surfaced and addressed.
  • Communications shift from top-down commands to horizontal, adult-to-adult conversations. In traditional management, communications have tended to be vertical, thereby killing creativity. To elicit the talents and imagination of the workforce, managers need to communicate predominantly in the language of social norms: human being to human being, using stories, metaphors and open-ended questions. Leadership storytelling has an important role to play.

A new bottom line for the firm

The most important of the five shifts is the first: a shift in the bottom line of the firm from making money to delighting the customer. As Ranjay Gulati notes in Reorganize For Resilience, (HBSP, 2010), succeeding in a world where the customer is in charge requires a shift from an inside-out perspective ("We make it and you take it") to an outside-in perspective ("We seek to understand your problems and will delight you by solving them"). The shift requires more than merely emphasizing customer service: it means orienting everyone and everything in the firm to understanding customers and providing more value to customer sooner.

Once a firm adopts this different bottom line, it discovers that the traditional way of managing--hierarchical bureaucracy--doesn't work. It doesn't delight anyone. It was never intended to. It was aimed at producing average outputs consistently. To achieve the new goal, the firm has to implement the other four organizational shifts: the new role for managers, new modes of coordination, new values and new ways of communicating.

Individually, none of the shifts is new. What is new is doing all five shifts together as systemic change. When only one or two of the five shifts is pursued, the change is usually undermined by conflicts with the interlocking principles of traditional management.

The gains in performance are extraordinary

The financial impact of doing all the shifts together is extraordinary. Paradoxically, when the firm focuses on delighting the customer, it makes more money than if it focused directly on making money. Compare the ten-year share price of well-known firms implementing most of the principles like Apple, Amazon, and Salesforce, with increases of ten times or more, with that of traditional stalwarts like GE, Cisco, Wal-Mart, which struggle even to maintain their share price constant.

By adopting a people-centered goal, a people-centered role for managers, a people-centered mechanism for coordinating work, people-centered values and people-centered communications, the firm is able to operate at a new level: making more money for its shareholders by delighting the people for whom the work is done while providing deep job satisfaction for those doing the work.

Editor's note: Do you have any ideas for busting bureaucracy and reinventing management? Share your progressive practices and disruptive ideas in the Beyond Bureaucracy Challenge. We're looking for STORIES and HACKS around making organizations more inspiring and engaging; developing an outside-in orientation; and managing without managers.

Stephen Denning is is the author six business books, including most recently The Leader's Guide to Radical Management: Reinventing The Workplace For the 21st Century (Jossey-Bass, 2010). You can learn more about his work on the web: www.stevedenning.com.

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alexia-marthoon's picture

Liked the thoughtflow. You might also waana try agile and scrum methodologies in project management. After attending an agile scrum certification course (Scrum Master Certification) now am convinced it can help a lot.

max-brunelli's picture
Congratulations, great article!Really celar and interesting.
Best regards,
 
Massimiliano Brunelli
madan-nagaldinne's picture

I love the way you have tried to simplify your thoughts - Having worked in one of the radical organizations for 4 years, I can tell you that the single biggest advantage these companies have is 'Speed' - they call it bias for action, move fast etc, but the effect is same - stunning ability to bring to market products and services at a pace that competitors cannot match - Speed has a positive self fulfilling prophecy - faster products mean lesser bureaucracy, more innovation, happier teams because they are smaller in size, less monotony, rapid feedback and rapid growth of individuals and teams  ( vertically {promotions} and horizontally {experiences, passion and strengths} ) and thus a 'unique' culture is born. The commonality of this uniqueness (Apple, Amazon, etc) is set of operating principles that they call culture which actually is management innovation in action  which is centered around how work gets done ( Fredrick Taylor for the 22nd  century:)

If you are going to be writing more on this topic, would love to see you touch upon how organizational structure can help reinvent management. Your current article is more about changing behaviors of management, would love to get your thoughts on the science of structure.  Apple, Amazon, Google etc are all structured differently but pretty much achieve similar results - So unlocking the key to how organizations are structured and how  work gets done is important to understand. That said, loved this op-ed piece !

 

steve-denning's picture
Dear Madan,

Thanks for your comment. The question of structure is an interesting one. As you point out, Apple and
Amazon have very different structures, yet end up with similar results. The same could be said about
Salesforce.

My tentative conclusion is that once you get into this mode and the culture truly changes, then structure
becomes less important. Hierarchy is still there, but the bureaucracy tends to dissolve.

Steve

grant-lichtman's picture
While your central premise is that companies will make more money by following this new paradigm, I find it parallels my/our current thinking in the area of independent school (and I know higher ed as well) education.  Our schools and universities are paralyzed by an inertia of outdated management structures as you describe, at a time when we need to be understanding our business in terms of value proposition, not traditional bottom lines.
 
There is no set of institutions today, perhaps with the exception of certain religious orders, that are more stuck in vertical silos of traditional management, than schools and universities.  We have operated in modality for so long that it is proving exceedingly difficult to adapt to the paradigm you propose.  But some of us are working on it and I will have progress to report in the not too distant future. 
 
Thanks for this clear articulation of the issue; I will use it in a presentation I am giving in a couple of months (with proper credits, of course).
steve-denning's picture
Hi Grant,

I agree that radical management has obvious parallels in education. I have written quite a bit about this, beginning here:

http://www.forbes.com/sites/stevedenning/2011/09/01/the-single-best-idea...

Looking forward to seeing your presentation.

Steve

steve-davies's picture
Hi Steve
 
Your piece resonates strongly with the conversation we've been having at the Hackathon http://bit.ly/v67t4Y
 
Especially in relation to the issue of push versus pull culture. I think one of the reasons why, for example, managers in corporate functions often look at social media and collaborative technologies and see risk and the sky falling in is that these technologies threaten the default mental model and are a threat to traditional management.
 
More than that, however, these technologies are people centric weapons for change that enable people to shape culture and practice from the ground up. This is a practical and ideological threat to traditional management. Which leads me to the view that they should be deliberately used as weapons of change.
 
Like a say, a fantastic piece of work that really pulls things together.
 
Cheers
 
 
 
Steve
steve-denning's picture
Dear Steve,

I agree that social media and collaborative technologies can and should be used to
as "weapons of change". At the same time, one also has to allow for the fact that
technology changes initially reflect the existing culture, rather than changing it.

So in addition to taking advantage of social media and collaborative technology,
we also need to give explicit attention to changing the culture from one of push
and top-down and inside-out, to one of pull and outside in.

Steve

steve-denning's picture
Dear debmalya

Thanks for your comment. Radical management is not an academic idea. Its principles have emerged from the actual experience of what works--and what doesn't--in running organizations in today's world. You will find the 70+ practices of radical management described in detail in my book, The Leader's Guide To Radical Management (Jossey-Bass, 2010).

There are also summaries of most of these practices in the following links:

Radical Management: Part 1: Overview

http://stevedenning.typepad.com/steve_denning/2010/11/the-deathand-reinventionof-management-a-draft-synthesis.html

Radical Management: Part 2: Delighting the client

http://stevedenning.typepad.com/steve_denning/2011/01/the-reinvention-of-management-part-2-how-do-you-delight-the-client.html

Radical Management: Part 3: From controller to enabler

http://stevedenning.typepad.com/steve_denning/2011/01/the-reinvention-of-management-part-3-from-controller-to-enabler.html

Radical Management: Part 4: Coordination: From bureaucracy to dynamic linking

http://stevedenning.typepad.com/steve_denning/2011/01/reinventing-management-part-4-coordination-from-bureaucracy-to-dynamic-linking.html

Radical Management: Part 5: From value to values

http://stevedenning.typepad.com/steve_denning/2011/01/reinventing-management-part-5-from-value-to-values.html

Radical Management Part 6: From command to conversation

http://stevedenning.typepad.com/steve_denning/2011/01/reinventing-management-part-6-from-command-to-conversation.html

Radical Management Part 7: Implementing the transition

http://stevedenning.typepad.com/steve_denning/2011/01/reinventing-management-part-7-implementing-the-transition.html

Radical Management Part 8: Measuring radical management

http://blogs.forbes.com/stevedenning/2011/02/25/measuring-businesss-new-bottom-line-customer-delight/

There is also a large amount of practical ideas and implementation advice on my daily blog at:

http://blogs.forbes.com/stevedenning/

Hope this is helpful.

Steve Denning

debmalya-dutta's picture
Great article . Completely understand the concept underlying radical management . I think the theory/ thinking is appropriate in current business context. That said, I think the main challenge lies in the execution / implementation bit of the 5 principles. Can you please share / give a thought on how to implement / enforce the radical management principle at an enterprise level , taking it out of the purview of academicians to the line worker's territory.