MIX Co-founder and Professor at London Business School
The Wall Street Journal recently ranked Gary Hamel as the world’s most influential business thinker, and Fortune magazine has called him “the world’s leading expert on business strategy.”
Hamel’s landmark books, which have been translated into more than 20 languages, include Competing for the Future, Leading the Revolution and The Future of Management (selected by Amazon.com as the best business book of the year). His latest book, What Matters Now, was published in 2012.
Over the past twenty years, Hamel has authored 17 articles for the Harvard Business Review and is the most reprinted author in the Review’s history. He has also written for the Wall Street Journal, Fortune, The Financial Times and many other leading publications around the world. He writes an occasional blog for the Wall Street Journal.
Since 1983, Hamel has been on the faculty of the London Business School, where he is currently Visiting Professor of Strategic and International Management.
As a consultant and management educator, Hamel has worked for companies as diverse as General Electric, Time Warner, Nestle, Shell, Best Buy, Procter & Gamble, 3M, IBM, and Microsoft. His pioneering concepts such as “strategic intent,” “core competence,” “industry revolution,” and “management innovation” have changed the practice of management in companies around the world.
Hamel speaks frequently at the world’s most prestigious management conferences, and is a regular contributor to CNBC, CNN, and other major media outlets. He has also advised government leaders on matters of innovation policy, entrepreneurship and industrial competitiveness.
Currently, Hamel is leading a pioneering effort to reinvent management by harnessing the power of open innovation. The Management Innovation Exchange (MIX) is an online community where the world’s most progressive business leaders share their ideas on how to build organizations that are fit for the future and fit for human beings. The MIX is supported by a network of strategic partners, which includes McKinsey & Company, the Harvard Business Review and others.
Hamel is a Fellow of the World Economic Forum and the Strategic Management Society. He lives in Northern California.
In our previous post we argued that an excess of bureaucracy costs the U.S. economy more than $3 trillion in lost economic output, but defeating bureaucracy won’t be easy. Bureaucracy is familiar, entrenched and well-defended. The challenge for would-be bureaucracy fighters isn’t unlike that faced by campaigners who, in years past, set out to change deeply rooted social institutions such autocracy, racism and patriarchy.
Long-standing realities change only when the beliefs that underlie them change. As Thomas Paine put in Common Sense, a tract that proved pivotal to the American and French revolutions, “A long habit of not thinking a thing wrong gives it a superficial appearance of being right… .” Thus the first battle to be won is against indifference. In this regard, no argument has proved more irresistible than the one which asserts that every human being should be free to exercise and profit from their natural gifts, and that human-crafted impediments to that pursuit are unjust.
What’s the least efficient activity in your organization? What sort of work delivers the least value per dollar? We think it’s management and administration. The fault isn’t with any particular leader, but with the top-heavy, bureaucracy-infused management structures that predominate in most organizations. We believe that an excess of bureaucracy costs the U.S. economy more than $3 trillion in lost economic output, or about 17% of GDP. Here’s the data.
According to the U.S. Bureau of Labor Statistics, in 2014 there were 23.8 million managers, supervisors and administrators in the American workforce. (This figure does not include individuals in IT-related functions). That works out to one bureaucrat for every 4.7 employees. Overall, bureaucrats comprised 17.6% of the U.S. workforce and received nearly 30% of total compensation. (See Figure 1.)
Figure 1. Employment and compensation share of U.S. managers, supervisors and administrators.
The question is, how many of these 23.8 million overseers do we actually need? We can get an answer by looking at the management practices of a small but growing number of post-bureaucratic organizations. Their experience suggests it’s possible to run large, complex businesses with less than half the bureaucratic load found in...
Writing for Harvard Business Review in 1988, the renowned Peter Drucker predicted that in twenty years the average organization would have slashed the number of management layers by half and shrunk its managerial ranks by two-thirds. Yet despite the recent emergence of the “gig economy” and the “sharing economy,” there’s no evidence that bureaucracy is on the ropes—quite the opposite, in fact.
In 1993, 47% of U.S. private sector employees worked in organizations with more than 500 individuals on the payroll. Twenty years later, that number had grown to 51.6%. Large organizations, those with more than 5,000 employees, increased their employment share the most—from 29.4% to 33.4%.
Meanwhile, the percentage of Americans who are self-employed dropped to an all-time low. Today, of the roughly 120 million Americans working in the private sector, 62 million work in organizations that are big enough to have the trappings of bureaucracy. To this number we must add the 22 million souls who work in public sector organizations, where bureaucracy seems as inescapable and unremarkable as coffee-stained carpeting.
Within these organizations, the “bureaucratic class” has been growing, not shrinking. Between 1983 and 2014, the number of managers, supervisors and support staff employed...
Innovation starts with the heart—with a passion for improving the lives of those around you. When the iPad was introduced, Jony Ive, Apple’s head of design, talked about his passion for creating things that seemed “magical”—that were so far beyond what any customer might have imagined, they seemed like wizardry. You don’t achieve this by paying attention to customers, by putting them first, or even delighting them. You do it by setting out to amaze them—and it all begins with an attitude.
You have to be achingly eager to do whatever can be done, within the limits of physics and economics, to raise the quantum of human happiness in the world.
“Yes,” you say, “but in business, we have to be pragmatic. We have to focus on things that can actually be accomplished.” Fair enough, but often, we are blindly pragmatic. We are so conservative, so utilitarian, so process-focused, so data-driven, so obsessed with meager efficiencies, that we can scarcely dream of doing something “insanely great”—to borrow one of Steve Jobs’ favorite phrases.
Large organizations of all types suffer from an assortment of congenital disabilities that no amount of incremental therapy can cure. First, they are inertial. They are frequently caught out by the future and seldom change in the absence of a crisis. Deep change, when it happens, is belated and convulsive, and typically requires an overhaul of the leadership team. Absent the bloodshed, the dynamics of change in the world’s largest companies aren’t much different from what one sees in a poorly-governed, authoritarian regime—and for the same reason: there are few, if any, mechanisms that facilitate proactive bottom-up renewal.
Second, large organizations are incremental . Despite their resource advantages, incumbents are seldom the authors of game-changing innovation. It’s not that veteran CEOs discount the value of innovation; rather, they’ve inherited organizational structures and processes that are inherently toxic to break-out thinking and relentless experimentation. Strangely, most CEOs seem resigned to this fact, since few, if any, have tackled the challenge of innovation with the sort of zeal and persistence they’ve devoted to the pursuit operational efficiency. Their preferred strategy seems to be to acquire young companies that haven’t yet lost their own innovation mojo (but upon acquisition most likely will)....