Many business-leaders continue to struggle with a bloated bureaucracy that cuts their profits, that causes rework and delays, and that drains the morale of the troops. They envy the innovative, networking enterprises that always beat them to the finish line.
“Bureaucracy” is a somewhat derogatory term that is used for <the non-value adding activities> that are necessary to support <the value-adding activities>. Support activities are necessary but costly. They are a necessary evil, but they should not cause more evil than absolutely necessary.
Let me take the example of the gasoline-powered engine of vehicles. Engineers have constantly improved it for the last 100 years. And yet, according to the California Energy Commission, the support activities of this type of engines still looses a staggering 62% of the energy of the fuel consumed !
The business-leaders have been struggling with bureaucracy for the past 100 years. Of course, the cost of bureaucracy is not easy to evaluate because it engenders hidden costs such as the loss of customers due to the general apathy of the organization, and all the infuriating delays. To put things into perspective let me mention that research by Collinson & Jay shows that “unjustifiable complexity cost companies on average 10% of their profits. (1)
So, bureaucracy is indeed an important issue, but dealing with it is not easy because bureaucracy is not a stand-alone, it is a part of the management-system. Actually, it is not a cause but a result of the design of the management-system. Doctors do not cut down the fiver, which is a symptom of pathology; they treat the pathology. Thusly, bureaucracy is a symptom of the dysfunctions of the management-system, which must be addressed in its systemic context, i.e. in the context of the management-system. Management-systems are complex, and tackling complexity is not easy. (2) Furthermore, times change, the management-systems change, and, as we will see, eventually management-systems reduce the problem of bureaucracy, and other issues take the limelight.
The support activities can be analyzed, they can be streamlined, and the waste can be reduced, and thusly the management-system can be improved. But, it is still the same old system. To do much better, and to achieve a quantum leap in proficiency and productivity, the leadership may have to innovate the management of the enterprise. Anyhow, the convergence and mergers of technologies, the galloping globalization, and the aftermath of a cascade of financial crises have caused tectonic changes in the business environment, which challenge the leadership to review and to reform the management.
Let us take a moment to look back and to understand the origins of bureaucracy, the current state of the management, and then sketch <the future of management> as implemented by innovative networking enterprises. I will outline – albeit briefly - the models and methods that I propose in order to establish and to run an innovative networking enterprise. (3)
The Industrial Revolution
At the downing of the 20th century, the boss had to direct and to discipline a bunch of unskilled workers. Fredrick Taylor, Max Weber, and Henri Fayol brought counsel with their “scientific management” – better known as “taylorism” - which is based on the following 3 pillars. (4)
- The boss takes charge of planning and of controlling. He instructs the unskilled workers on what to do, and on what to correct. A deep crevice separated the boss from the workers because the unskilled and unmotivated workers cannot be trusted and empowered, they must be commanded and controlled.
- The workflow is analyzed, and the roles, the responsibilities, and the resources are assigned to the leaders of groups of people, which show up on the organization chart as offices or “bureaux”. The bureaux are run by bureau-bosses.
- Everything that gets done must be controlled. Controls breed controls; controls must be documented on paper; and paper breeds more paper.
As the business grows, the big boss needs to appoint bureau-bosses who produce their own rules in order to run their bureau. The bureau-bosses eventually bring in assistants to deal with the increased workload, but also to add to their own power and prestige. So, we have a constant crescendo of procedures, of people, of paper, of delays, and more bureaucracy. Eventually, bureaucracy becomes a bloated bureaucracy.
In order to get a better grasp of the issues, let us revert to the aforementioned 3 pillars of taylorism.
<> Separating the planners from the doers estranges the doers who do not understand the strategies that are poured top/down. It deprives the planners from insights on what really happens at the action-points. Moreover, it deprives the enterprise of the necessary responsiveness since the doers are neither empowered nor motivated to take initiatives. Thusly, decisions get delegated upstairs as far as they can go. So, the senior management gets clogged-up with micro-management, and the decision-making gets delayed and impaired. Kaplan & Norton estimated that nine out of then organizations fail to execute their strategies.
<> Separating the levels and the functions in different bureaux is designed to foster specialization and efficiencies. As organizations grow, and the business environment becomes increasingly complex, the organization-charts become increasingly intricate. The bureau-bosses are responsible to make the linkage to the other bureaux, to coordinate, to share the resources.
The bureau-bosses want to closely control what happens in their fiefdoms, and they fear that contacts with other organizational nodes escape their control. The communications in the silos of the traditional organization only go one way, namely top/down. Suggestions that come up bottom/up or outside/in may get nixed by the bureau-boss. As a result, innovators are discouraged, and the whole organization is tied up in knots. The transit of the workflow through different bureaux is a laborious process as every bureau-boss has a different agendas, different approaches, and different resources and methods. The poor connectivity among the different bureaux that the workflow has to go through is a source of major dysfunctions.
In practice, the bureau-bosses tend to keep to themselves the merits and the allocated means, they will engage in internal fights, blame others, and they attentively avoid taking any risk that might endanger their position. Peter M. Senge described the attitude of the bureaucrat as “I am my position”.
Back at the time of the Industrial Revolution, the cost and the dysfunctions of bureaucracy could be afforded. At the time, competition was less strong and less sophisticated, and the management had to be efficient in doing more of the same. Now, to be proficient in a constantly shifting and innovating business environment, management must be mobile, multi-tasking, and mutable. It must be innovative and open-minded. So, bureaucracy, the praise of yore, has become the plague of today. However, that plague is difficult to eradicate.
Business-leaders that try to rationalize and to reframe their organization face the recalcitrant resistance from the rank and file because bureaucracy has grown long roots in the corporate culture and in the systems of the management. Nicolo’ Machiavelli wrote in 1511 in “Il Principe” “There is nothing more difficult to manage than the creation of a new system. For the initiator has the enmity of all who would profit from the preservation of the old institution, and lukewarm defenders in those who would gain by the new one”.
Of course, the CEO can redesign the organization chart, but he/she cannot easily erase old habits, and a well-entrenched mind-set. So, facing a tough test and time-pressures, some CEOs prefer to fixate more immediate problems, and to defer the issue or to delegate it to their successors.
The Digital Age
“No power on Earth can stop an idea when its time has come” Victor Hugo
World War II, boosted the investments in R+D. In 1947, we have to the invention of the transistor, which led to the impressive development of electronics, and of other technologies.
The Digital Age engenders considerable business expansion. The information technologies progress rapidly, and the telecommunication technologies eventually become digital. The new technologies and the new management-methods are readily available. Thusly, per se they do not beget a competitive edge, but merely a handicap for those who do not apply them effectively. And so, as the old saying goes, “a fool with a tool is still a fool”.
Let us understand what the technologies and new management methods do, and who uses them.
The operations management is action and short-term oriented. It is constantly confronted with the jolts of fickle customers, fierce competitors, and unreliable suppliers. Spectacular progresses are made in manufacturing and in logistics. Particularly in highly competitive sectors, like the automobile, the operations management rapidly adopts new technologies and new management-theories. The models and methods proposed for business-process reengineering enable the operations management to streamline the operations, and to cut down substantially on the nuisance of a bloated bureaucracy. (5)
Conversely, the senior management does not change its practices very much. It focuses on the big issues with an arsenal of theories and techniques. As long as the business grows, the executive is rarely pressed to change its business-model and/or its management-system.
For example, Total Quality Management provides models and methods to manage the processes in the operations as well as those that concern the strategies. However, for the most part, Western executives seldom use them. (6) Thusly, the practice of management has progressed faster at the level of the operations management than at the level of the senior management.
Albeit briefly, let us look at how the leadership manages the following 5 <S> that form the core of the management-system. (7)
The strategy fundamentals set the guidelines to develop and to deploy the business–policy and the strategies. As they did at the times of the Industrial Revolution, the business-leaders continue to retain a monopoly on setting and on deploying the business-strategy with the ensuing dysfunctions, which are well documented in the business-literature.
The style of the leadership remains authoritarian. The bureau-bosses, fearing to loose control of their fiefdom, pursue aggressive risk avoidance, and do not trust. So, here again, not much progress.
The structures of the organization continue to evolve, mostly with the proliferation of organizational divides that feed a bloated bureaucracy.
The systems of management need to respond with more controls to the growth of the organizations and to the internationalization of their operations. However, the controls and the system of performance evaluations continue to fixate the tangible assets. The intangible assets such as the brand capital, the customer capital, and the talent capital beget at best lip service, and they are not adequately reviewed and rewarded.
The shared critical competencies develop considerably, but the previous <S> limit the extent to which they are shared.
The Internet Age
“The future of management has already arrived” Prof. G. Hamel
The Internet Age combines 3 powerful levers to bring about change, namely the information technologies, the telecommunication and the mobility technologies, and the social technologies. These technologies converge and merge, and ddrive an unprecedented acceleration of progress.
The myriad of interchanges on the Internet Age has a deep impact on people’s attitudes and aptitudes, and thusly they can pave the road to <the future of management>. (8) Moreover, a sequence of global economic crises has a lasting impact on people’s thinking. In particular, it throws into relief the importance of systemic interdependencies.
And we also have a new generation of men, a new mind-set, new means, and new management-methods such as Lean Six Sigma, which is designed to cut costs and thusly also bureaucracy. (9) Thusly, the Internet Age is setting the stage for a collaborative mode of management that draws in the knowledge and the imagination of a wide-range of talents on the side of the offer as well as of the demand. And so, we can now focus on the progress of the management-system, and let that progress take care of bureaucracy.
“The Internet has emancipated ordinary people” W. A. Sussland
The Internet provides readily available, easy to use information that broadens the perspectives and that raises the horizons in people’s interchanges. The unskilled labor of yore has given way to the knowledge workers, and the knowledge workers - that are powered by broader knowledge and ambitions - become valuable collective content-creators. Moreover, a close sequence of financial crises has spread the awareness of the interactivity of the major factors of our environment.
So, the Internet Age has changed the attitudes and the aptitudes of people both on the side of the offer as well as of the demand. People have emancipated and now they want to participate, they want their opinion to be heard, they want to count and to be counted. People are getting used to working in groups, to network.
The information technologies
Integrated management-systems create transparency across the different business-units, and across the different functions. Software facilitates the analysis and the decision-making as well as the simulation of models that can be used for rethinking the business-model, for business-process reengineering, or for prototyping.
Cloud computing, Big Data, and data mining provide a mass of data to a mass of people. They help to solve problems and to foster ideation, but they can create new problems if they snow under everybody and everything.
Managers need to know when too much data is too much, and when an excessive distribution of data is just being used by some people just to show-up, but creates useless debates that waste everybody’s time. Knowledge is power, and that power can be abused by the knowledge-holders.
As I have mentioned earlier, a fool with a tool is still a fool. The information technologies are readily available to all, actively promoted by the vendors. Consequently, per se they do not constitute a competitive edge. I think that original software, and better services will probably carry the show.
The telecommunication technologies
The telecom technologies interact with the information technologies to facilitate mobility, networking, and social interchanges. People can be on-line with their office while being on trip or while vacationing. Time can be better allocated, and the decentralization of locations can be advantageously used.
The new attitudes and aptitudes
The spreading of the new attitudes and aptitudes all over our globe, has helped people to better understand others but also themselves.
I would say that the interactions on the Internet Age enable the implementation of the “johary windows”, a model developed by psychologists Joseph Luft & Harry Ingram in order to help people better understand their relationship with self and others. Hereafter, the description of the 4 “johary windows”, which I have downloaded from Wikipedia.
- What is known by the person about him/herself and is also known by others - open area, open self, free area, free self, or 'the arena'
- What is unknown by the person about him/herself but which others know - blind area, blind self, or 'blindspot'
- What the person knows about him/herself that others do not know - hidden area, hidden self, avoided area, avoided self or 'facade'
- What is unknown by the person about him/herself and is also unknown by others - unknown area or unknown self.
Understanding self and others is the bedrock of trust, and trust is the basis of cooperation, and cooperation is driveshaft of the collaborative content creation that drives a dynamic innovative organization.
The business-leaders can take advantage of the new attitudes and aptitudes facilitated by the Internet Age in order to abate some of the unnecessary barriers of bureaucracy by empowering teams, by setting-up and by leading the networks, and by delegating the controls. They can also provide transparency over who does, what, how, with whom, with what results. For example, the efficiency of the networks can be monitored. To that effect, the industrial psychologists have their methods. Senior consultants can observe team-sessions, and focus on who is asking what type of questions, on who provides what type of answers, and who comes up with a consensual conclusion. However, many companies still do not monitor and measure the effectiveness of their networks.
The Internet Age provides the operations management with an arsenal of new tools and techniques to breakdown the chains of bureaucracy, and to install lean and systems that efficiently support the value-adding activities. However, the senior management has to look to organizational health. To that effect, de Smet & Schaninger suggest that organizational health requires a shared vision, meaningful values and inspirational leaders, personal ownership and involvement, constant learning and innovation. (10) But, for the most part, senior management relies on conventional management-methods, and it has not innovated systemically their management-system, merely improved some parts of it.
The innovative Networking Enterprise
“No problem can be solved from the consciousness that created it”
As previously mentioned, Gary Hamel suggested: “the future of management has already arrived”. And indeed it has arrived, but then only for some. The problem is that the innovation of the management requires a different consciousness.
As we have seen in the previous section, by now, the operations management is used to introduce improvements and innovations in the supply-chain. Conversely, a majority of the CEOs has little experience in innovating the core of their management-system. (11) This is supported by executive surveys run by McKinsey just a couple years ago. Among their findings, let me just mention “Only about 20% of the surveyed executives said that neither innovation nor growth is part of their strategic planning process, which is confined to forecasting and to budgets”. (3)
The leadership that does not have experience with programs of change-management may hesitate considering that the batting average of such programs is reportedly very low. Moreover, such programs can take a lot of time, while, as reported by PwC’s consultancy, the average tenure of CEOs at large companies, is just over six years. So, some CEOs may prefer to defer the issue or to delegate it to their successor.
And yet, a number of factors should help the leadership review its management-system and, as appropriate, to consider a program of management innovation. Firstly, as shown by the executive surveys run by global consultants, management innovation underpins the efficiency of the operations management and of sustainable outperformances. Secondly, based on studies at Bain & Co., Chris Zook estimated that 2/3 of companies will have to redefine their core business over this decade.
Indeed, we are seeing with increased frequency companies to innovate their business-model. However, innovating the strategies of the business-model without innovating the management-system introduces strains that may cause more problems than profits.
The dynamic business-leaders may take a cue from the innovative management of successful start-ups. Of course, the ambitions of the CEO for his/her enterprise play a determinant role in the launch of a program of management innovation.
An old saying suggests: “where there is a will there is a way”. Let me turn that around, and say that if executives can be shown the way, it will boost their will to launch a change-management program. To this effect, “The Innovative Enterprise” focuses on showing the way to management innovation. (3)
The innovative enterprise differs from the traditional organization essentially in the approaches taken to the management of the 5 <S> whose synergies power the core of the management-system. Hereafter, I will sketch the principles and the practices that I advocate in my aforementioned book in order to establish and to run an innovative enterprise. To structure the discussion, I will use my aforementioned model of the 5 <S>, which sets the five pillars of the management-system. (7)
“Management innovation may require the innovation of the way people think,
of the way people behave, and of the way people act.”
The strategy fundamentals: the way people think
The strategy fundamentals provide the guidelines for the strategic management of the enterprise. They feature the statement of the corporate ambitions and visions, which should spur the life-forces of the organization to excel in the creation of value in the business.
The business-value is created/destroyed on the web of the 5 strategic resources, namely the Corporate Capital, the Talent Capital, the Market Capital, the Life and Time Cycles, and the Financial Capital. Each of these strategic resources breaks down in 5 resource-components so as to facilitate their understanding and their management. The Corporate Capital features the 5 <S>, and it drives the management of all the other 4 strategic resources.
Please note that, in my model, 4 out of the 5 strategic resources consist essentially of intangible resources. This duly takes into account the fact that the intangible assets - and in particular the fundamental success factors - are the essence of entrepreneurial innovativeness and dynamism. Also note that all the five strategic resources, and their resource-components are interactive. Thusly, changing one without regard for the others can lead to major dysfunctions.
I believe that the aforementioned core beliefs about the creation of business-value must be promoted and role-modeled by the conference of the business-leaders so as to ensure that they are shared, and that they galvanize the energies of the whole organization.
The strategy fundamentals put into gear the process of strategic and organizational deployment discussed in the section <the systems of the management>.
The strategy fundamentals differentiate the innovative enterprise from the traditional organization. The former focuses the attention of the life-forces of the organization on the web of the 5 strategic resources rather than focusing on the financial results, and on the enablers and results rather than just on the results. Thusly, the strategy fundamentals of the innovative enterprise implement a systemic approach to resource-based management. (2) This approach differs from the approach that I used with Total Quality Management, which focused on the processes. (16)
The style of the leadership: the way people behave
There is a lot of literature on how the leadership manages the corporate culture, and some on how it is interiorized by the personnel. (14) In my opinion, the culture starts and ends with the style of the people, the style of their behaviors, and the style of their interactions with other people.
Psychologists point out that most people play a self-imposed role, and that role affects the style and the openness to change. The style can be forward looking or backwards looking. It can be arrogant - John Hagel III refers to it as the “masculine archetype” - or more flexible –John Hagel III calls it the “feminine archetype”. (15) The style affects the relationships with other.
The style differentiates the innovative enterprise from the traditional organization where often the “masculine archetype” still dominates. The style of the innovative enterprise implements the stimulating approach that builds on the collaborative mode of management in order to foster commitment, cooperation, and on the collective creativity.
There is also an important interaction between the style of the leadership and the systems of the management. The leadership must put the emphasis on the style, and arrange the systems accordingly. The other way around does not work well.
The style drives trust, and trust drives commitment, cooperation, and collective creativity.
The people must trust the leaders, their vision and their performance-evaluations or they will hesitate to commit. The people must trust their team-members for support or they will restrain their cooperation. The people must trust themselves in order to stick out their neck with crazy ideas and ambitious initiatives.
So trust is the lubricant of interpersonal relations; no trust, no culture.
The leadership must use effectively the network of business-leaders to effectively role-model the right style, to monitor and to facilitate mutual understanding, and to ensure that trust is a basis for “the way things are done ‘round here”. Of course, principles without practices are empty. So, the structures of the organization and the systems of the management must foster the implementation of the right style. Only then will the corporate culture drive the collaborative mode of management.
The structures of the organization: the way people behave
The process of strategic and organizational deployment of the innovative enterprise, which I mention in the following section, articulates the strategic projects. The projects are assigned to the business-unit directors who in turn empower their self-managed teams to do the job. The business-unit directors supervise the networks involved in their projects.
Supported by the strategy fundamentals and by the style of the leadership, the management project-by–project implements the collaborative mode of management.
Most business-projects will interact at one or several points with other business-projects. In the process of strategic and organizational deployment discussed in the following section, the self-managed teams have to manage the interactions with other groups. The transparency of project-management lets all project-managers see where they stand, and where the others are going.
And so, the business-unit directors and their self-managed teams form the backbone of the line-management. However, the chiefs of the shared services support the line-management with the expertise on the business-processes and on the various functions. And so, we the architecture of projects is complemented by the architecture of the functions.
The management project-by–project has the advantage of letting the people in charge take full ownership for the course of their project. The workflow of the project is not disrupted by changing ownership, and by changing models and methods. So, in order to get things done, the project-managers will abate the unnecessary barriers of bureaucracy.
The self-managed teams form the core of the line-management. They must be mobile, modular, and mutant as needed. They interface with professional as well as social networks inside the enterprise as well as outside the enterprise. According to an article in the Wall Street Journal, some psychologists consider that 8 is the ideal size of team, i.e. small enough to be able to manage itself and not too big to need the supervision of a manager.
The structures of the organization supplement the style of the leadership in the implementation of the stimulating approach that builds on the commitment, on the cooperation, and on the collective creativity of its people, which results in superior performances.
The systems of management: the way people act
“Principles without practices are empty, and practices without principles are blind”.
To innovate the way people act, the innovative enterprise proposes a systematic & swift approach that is based on a set of 3 principal management-practices, which integrate the <Model of the Two Rings> (3) as follows.
-1- Based on the Japanese “Hoshin Kanri”, I have developed the collaborative strategic planning, a vertical process that combines the development and the deployment of the business-policy and of the strategies. In my opinion, the collaborative mode of management becomes credible and actionable if it starts with the process of strategic and organizational deployment.
The process of strategic deployment works on the vertical vector, i.e. top/down => bottom/up => top/down. (3 & 6)
-2- The aforementioned process must be complemented by a horizontal process of organizational deployment. The organizational deployment works inside/out and outside/in. I propose a model that enables the teams at the various levels of the strategic deployment to form their networks, and to arrange with their partners the distribution of the roles, the responsibilities, and the resources.
-3- As mentioned earlier, 4 out of the 5 strategic resources consist essentially of intangible resources. Thusly the organization needs to innovate also their performance reviews-evaluations-rewards so as to duly take into account the enablers and the results on the tangible as well as on the intangible assets. I propose an original system of reviews-evaluations-rewards that integrates the <Returns on Total Resources>.
The traditional organization assigns the controls to the hierarchy. The innovative enterprise features 3 levels of controls. The first level is bestowed to the self-managed teams; the second level to their networks; the third and final level to the business-unit directors and to the chiefs of the shared services. The empowerment includes the controls, and the ownership is not diluted by entrusitng all controls to the hierarchy. Thusly, the structures of the organization of the innovative enterprise do not need many layers of hierarchy.
The shared critical competencies: the way people act
“Companies can only perform if they perform together” the former Arthur Andersen
The critical competencies must be shared. The conference of the business-unit directors and of the chiefs of the shared services must ensure that the enterprise will have the resources needed to support the strategic ambitions, and that these capabilities are well shared and well utilized.
The value-adding activities need supporting activities. And so, the supporting activities are a necessary evil, and the leadership must ensure they do not cause more evil than necessary.
Times continue to change, and business has continued to grow, and it has become more complex. And yet, the aforementioned tenets of “taylorism” have resisted. As a result, we continue to see a rift between the planners and the doers in spite of the fact that, according to Kaplan & Norton, nine out of ten organizations fail of execute efficiently their strategies because the doers do not understand what the planners have in mind, and because the planners do not understand what the doers are doing. Bureaucracy and the damaging fragmentation of the organization are very difficult to uproot.
The Internet Age – with the convergence of various technologies – emancipates ordinary people, and it innovates their attitudes and their aptitudes. So, the unskilled workers of yore have become the knowledge workers of today.
The social technologies and the networking can further abate the deadweight of bureaucracy. However, the leadership can take advantage of the new situation to implement a program of management innovation that will enable the whole enterprise to deal more efficiently with the globalized business environment.
Gary Hamel suggests: “the future of management has already arrived”. Indeed it has arrived for some while many others are still looking to the way. In my “The Innovative Enterprise” I present a model and a roadmap that combines the systemic approach in order to innovate the way people think, a stimulating approach in order to innovate the way people behave, and a systematic approach to innovate the way people act. (3)
Borrowed from “The Innovative Enterprise”, hereafter my model of the innovative enterprise.
The Innovative Enterprise
Systemic & strategic
way people think
The strategic resources
Business value is create/ destroyed on the resources, and
on their components
Understanding the value creation on the 5 strategic resources
the way people behave
The collaborative management mode
Collective content creation by the teams
on their assigned project(s)
the way people act
The “Model of the
This model integrates the 3 principal management practices
The self-managed teams
The teams set their self-referentials
- S. Collinson & M. Jay “ From Complexity to Simplicity” Simplicity 2012
- G. Probst & A. M. Bassi “Tackling Complexity” Greenleaf Publishing 2014
- Willy A. Sussland “The Innovative Enterprise” second edition Create Space 2010
- F. W. Taylor “The Principles of Scientific Management” 1911
- G. H. Watson “Business Systems Engineering” John Wiley 1994
- S. S. Soin “Total Quality Essentials” McGraw-Hill 1999
- W. A. Sussland “At the core of the management-system” paper # 16 on my Web site www.willysussland.com
- G. Hamel “The Future of management” HBSP2007
- J. W. Martin “Lean Six Sigma for the Office” CRC 2009
- A. de Smet & W. Schaninger “Beyond Performances” McKinsey 04/14
- Willy A. Sussland “Management innovation starts by removing the strategic and organizational constraints” paper #10 on my Web site www.willysussland.com
- Willy A. Sussland “Collaborative strategic planning” paper # 14 on my Web site www.willysussland.com
- Willy A. Sussland “The Model of the Two Rings” paper 2012
- P. Scott-Morgan “The Unwritten Rules of the Organization” McGraw-Hill 1994
- John Hagel III “Deloitte Center for the Edge” paper published June 2011
- Willy a. Sussland “Le manager, la qualité et les normes ISO: de l’ISO 9000 vers la Qualité Totale” EPFL Press 1996