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'..You really have to be able to think about the post-bureaucratic world..'

Posted by ProjectC 
'..A lot of the coordination will come from that horizontal communication rather than from top-down control .. My hope is that a large organization of the sort you are mentioning would be doing hundreds of experiments a year. Because I think today you have to be able to imagine a radical alternative to the management status quo. You really have to be able to think about the post-bureaucratic world..'

'..All these organizations around the world are much more alike than they are dissimilar—they have more or less the same approach to strategic planning, to allocating resources, to budgeting, to promotion, to compensation .. Then the question becomes: what principles do you use to reinvent management? Very seldom as managers do we talk about our principles.

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So what I’ve started to do over the last few years is say: ‘Alright, what things in our world are very adaptable?’ If we need organizations that can change as fast as change itself, then where do you look to see this in action? What are the systems that seem to be very resilient and very adaptable? One is markets. So the New York Stock Exchange, over the last 50 years, has outperformed every company on the New York Stock Exchange. Markets are very good at doing something where hierarchies typically underperform .. The idea of markets and using market mechanisms to make decisions is only one of the principles that we need when we think about ‘Management 2.0’. If you look, for example, at the web, it is extraordinarily innovative and as a platform for innovation it is constantly evolving and adapting, spawning new business models and new forms of social organization..

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Now, back to your question: can we get scale and resilience and entrepreneurship at the same time? I think we’re still trying to invent that, but there are very promising examples. One of those examples is Haier. This is a company with 80,000 employees that recently divided itself into 2,000 business units because you cannot have a resilient business organization if the operating units are very large, monolithic things. Big things are not adaptable, we know that—dinosaurs are gone, bacteria are still here. So Haier divided itself into 2,000 business units, but then you have to ask: where does the coordination come from? Increasingly coordination will come from lateral communication and social networks where peers across the organization can discover for themselves where coordination needs to happen, where we need to be working together and then solve those problems. But it won’t come from a senior group that’s imposing those across the whole organization.

So at Haier they’re creating a lot of lynchpin roles where, for instance, for small operating units they really let individuals coordinate across all of these smaller business units. In the past it was impossible to achieve coordination without centralization, but now because we can move and share information laterally so easily, you can begin to see how we get coordination and the benefits of scale without having multiple layers of management, or as many layers of management.

One company that is very good at this is CEMEX, the Mexican cement company. They have national subsidiaries all over the world, local cement companies, but they also have a very robust social platform where there are more than 500 user-defined communities of peers coming together from around the world to work on shared problems .. A lot of the coordination will come from that horizontal communication rather than from top-down control.

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So I think those three things [are very important]: investing in getting closer to the future as a leader, making it safe for people to challenge you and making it easy for experiments to get started.

One of the most innovative companies right now on the planet is Amazon. And Jeff Bezos has said in his letter to shareholders in 2013, [their] goal is to be the biggest laboratory in the world. To do that you have to be able to experiment cheaply and fail quickly, but it also means that every idea cannot come first of all to get the approval of the CEO, because that would be a choke point, that would be a block on innovation.

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..The secret here, whether it’s evolving your business model or evolving your management model, is the same: experimentation.

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My hope is that a large organization of the sort you are mentioning would be doing hundreds of experiments a year. Because I think today you have to be able to imagine a radical alternative to the management status quo. You really have to be able to think about the post-bureaucratic world .. I think the old model of top-down change is essentially bankrupt.'

- Gary Hamel (Interview, December 15, 2014)


Context

(Praxeology) - '..Menger’s experience stressed subjective factors..'

'..have organizations that are more and more adaptable and far more humane..'

(Slow Economics) - '..advocates a more measured, thoughtful, conscientious, and pleasurable economy..'