The key challenge in this hack is “how to make organizations genuinely fit for human beings”. Therefore, the fundamental questions are ‘What do human beings really seek?’ and ‘Why do we believe that the current organizations are not fit for human beings?’.
Close observation reveals that human beings inherently seek freedom. Right from birth, they hate controls. One can validate this in almost all families, where teenagers revolt against their own parents for the sake of independence, even though the home environment is filled with love and affection. Freedom is the most basic attribute of human beings, which is expressed through various demonstrations across the globe. Therefore, in order for organisations to genuinely fit for people, they must provide 'real freedom'.
However, these days, corporates provide little freedom for employees and certainly no love and affection. Yet we expect them to be happy, productive and most importantly, loyal to the company. Moreover, many companies don't hesitate to cut employee benefits for the sake of 'shareholder value creation', placing capital suppliers ahead of its own employees. Employees freedom as well as their interests have 'gone with the wind'. How inhuman the companies have become? The corporates seem to be built on the principles that clash with the core values of human beings.
The Nature can provide solutions to such complex problems. In fact, the human body organisation can be a good guide as it is built on freedom, no bureaucracy yet is exceptionally efficient. It has no management hierarchy, can combat external threats, has strong sense of purpose, which is proved for millions of years. In essence, it is proposed that the corporates should be set up along the lines of human body organisation, which is refered as 'Body Corporate'.
During the industrial age, the concept of Corporate has taken shape, promoted by entrepreneurs with capital to invest. The capital was scarce those days and hence the entire focus was on protecting the interests of people who supplied the capital. A certain section of well educated and experienced staff were recruited to manage the interests of owners. They work as agents of owners and decide every aspect of staff employment, which inadvertently led to the creation of layers within the company such as:
- The suppliers of capital – The owners
- The agents of the owners – The managers
- Rest of the staff - The workers or Employees
As companies grew and spread across the globe, more and more managers were needed, who were organized into hierarchical structures. The rules and regulations multiplied, consequently the bureaucracy increased many folds, taking away the much loved freedom of employees. As a result, gradually, it created an environment that is fundamentally in conflict with the core values of the human beings. The underlying outcomes are:
- It killed the employee freedom and turned the fiercely independent employee into a submissive character
- The free flow of information within the company is severely restricted due to excessive bureaucracy
- It created a class structure in the organisation, where the managers are seen as the protectors of company while rest of the staff as mere workers
- The corporates started focusing on creating shareholder value, at times, at the cost of employees' jobs.
The world has moved on with the evolution of internet and mobile devices, where information is freely available in abundance. The popularity of the internet and social networks is yet another testimony of the love of people for freedom. The next generation, who are growing up with the digital devices, are in love with this abundant information and expect instant results. The corporates with the current levels of bureaucracy will not be able to meet the needs of future generation.
Therefore, we need to rethink the current organizations and perform radical surgery to make them genuinely fit for human needs.
The future organisations should be set up along the lines of human body, which operates based on three key principles:
- Freedom - Free flow of thoughts that govern the functioning of the body
- No Management Hierarchy - All Cells and Organs are of equal status
- Superfast Information - The information flow is superfast and unrestricted
The human body has perfected these principles over a long period as the biological evolution of the human body occurred over millions of years. It is hard for human beings to replicate the human body organisation in full, but if we are able to replicate at least the key principles, it could solve many problems of the contemporary corporate.
The other equally fascinating aspects of human body are:
- It works for itself. It doesn't work for someone external to the body
- The cells, which are fundamental building blocks are designed in a complimentary and mutually supporting structure
- The work done by each cell and organ is well defined and not subject to interpretation
- Two coordinating bodies exist – Heart for the distribution of the most critical resource (ie, blood and oxygen), while the mind distributes the other critical resource (ie, information)
- Extraordinary evidence of co-existence and interdependency. The malfunction of one organ in a remote part of the body can affect the performance of the rest of the body
- Multiple sub-systems (eg, cardiovascular, respiratory, immune) exist in a perfectly synchronized manner
- The body produces its own critical resources (ie, blood and thoughts)
- The process of converting food into required energy is extremely efficient and predictable
- The logistical network for sending the ‘blood and nutrition’ to various parts of the body is flawless
- The energy levels and thoughts produced in the body are self-regulated
There are significant parallels between the human body and corporates. Can we not mimic such a system of organization to run the modern Corporate?
The future corporate refered as 'Body Corporate' must mimic the human body to reduce bureaucracy and align closer to the human needs. The following building blocks should be considered while designing a Body Corporate:
Organisation: Just like human body, the corporate should work for itself (ie, its staff and clients) not for the external parties such as shareholders. Although shareholders are very important stakeholders of a corporate, the purpose of the organisation should not be totally skewed towards the shareholders. In line with the growing importance for talent, the future corporate should be built, owned and led by the people who supply talent (as opposed to capital suppliers). If talent suppliers are the owners of the corporate, the need for managers can be reduced. The talented people when inspired by an idea, come together to form a company and implement the ideas. Just like a human mind generates thoughts that govern the functioning of Organs, the Body Corporate functioning is fuelled by the new thoughts generated and shared by the talented people.
Structure: The future organisation can be structured into Organs and Cells. The Organ - A group of talented staff performing a defined function (eg, product development), will consist of Cells, who are individual employees. The Organs are structured and linked to other Organs horizontally in a hexagonal form (see attached picture) rather than in a vertical hierarchy. The Cells and Organs are loosely coupled in a hexagonal form to ensure no single point of failure in the network.
Ownership: The Cells are owners of the company. The ownership is based on the ‘Talent Investment’ they make rather than ‘Capital Investment’. The better talented people have higher share of ownership. The talent is assessed and regulated collectively at the Organ level.
The Cells may also make some capital investment to support the business operations. Should there be a short-fall in the capital, it is addressed through debt raised from banks.
Down the line, this concept can be extended to setting up a ‘Talent Exchange’ as opposed to the current Stock Exchange.
Information: Just like human body, the information in the Body Corporate should NOT be controlled. The proposed horizontal structure will ensure the uninterrupted information flow. All corporate information should be freely available on the company portal. The self interest of the employees (since they are the owners) will ensure that the company information is not leaked to the competitors.
Governance: The Governance is done collectively at the Organ level. For example, an Organ would collectively reject the under-performance of a Cell and also determine the value of talent brought by a new Cell. The concept of the Talent Index can be introduced to measure, track and monitor the changes in talent.
The Body Corporate could be a good template for a group of entrepreneurs looking to form a non-bureaucratic organization. Whereas, the current large organizations can use this model to transform from the existing bureaucracy into an open organization.
The key question is "will it work in practice?". The Body Corporate will work in practice as:
- The workers are co-owners of the company and will work for themselves. The interest of employees is perfectly synchronised with the organisational interests
- It will eliminate managers, cut down the organisational hierarchy and the consequent bureaucracy
- Talent becomes pre-eminent in the company, which promotes innovation
- Freedom will be in abundance, therefore, a high sense of belongingness prevails
In practice, the Body Corporate will be suitable to the 'Next Generation Employees and Customers' as it provides significant freedom. When it comes to the key decisions relating to the future direction of Body Corporate, the representatives from each Organ will vote. This fair representation will ensure a sound democratic functioning of the organisation.
The research done by the Towers Watson Group validates that the employees involvement will significantly improve the revenue and reduce the Cost of Goods Sold (COGS). Hence, the freedom and democratic functioning characteristics of the Body Corporate will contribute to financial value creation.
The recommended steps for transforming into a Body Corporate are:
STEP 1 - Identify the talent needed for the growth of the corporate
STEP 2 - Develop a Talent Index and agree on monitising the talent
STEP 3 – Define the role of each Organ and the Cell clearly – No misinterpretation
STEP 4 - Gradually change the ownership structure from financial stock holding to talent stockholding
STEP 5 – Build a neural network of IT that seamlessly distributes information to the Cells in real time
STEP 6 – Establish a Governance Structure to monitor the transition
As an interim step, one could experiment this in a single business unit or in a single geography. Upon successful experimentation, it can be rolled out across the organisation
Further considerations should be given to aspects such as regulation, talent markets for raising funds, Body Corporate doctor for regular organisation health checks.
In Summary, this hack attempts to highlight a solution that is offered by the Nature in the form of human body organisation. Such a simple, yet revolutionary thought is needed to beat the well entrenched bureaucracy in the contemporary corporate.