Are there too many bosses, and is that ruining our economy?
The size of the 'middle layers' of organizations – the managers and administrators – has ballooned in recent decades. Is there a better way?
Though automation is taking over many human jobs, and the Great Recession forced many companies to prune their staff, the size of the middle layers of organizations – the managers and administrators – has ballooned in recent decades.
The number of these jobs, which oversee, review and approve, has doubled in the US since 1983, while the number of other positions grew only by 40 percent, according to US Bureau of Labor Statistics data analyzed by Gary Hamel and Michele Zanini in a piece this week for Harvard Business Review.
This is slowing economic productivity and crippling companies, the authors say. The two anti-bureaucracy activists estimate that the morass of rules, procedures and paperwork administered by growing layers of managers is costing the American economy $3 trillion per year, or 17 percent of the gross domestic product, of wasted time and talent.
It’s time to change the way we organize people to tap the worker creativity and motivation that's now suffocating under a wrap of red tape and authoritarian "bosses," say Prof. Hamel, a visiting professor at the London Business School, and Mr. Zanini, the managing director of a business innovation think tank called Management Lab in Woodside, Calif., which Hamel co-founded and directs.
“Bureaucracy is probably humankind’s most brilliant invention,” Hamel tells The Christian Monitor. It took managers who dictated strict rules, he points out, to oversee humans who served as cogs in the manufacturing plants of the Industrial Revolution.
“But now, that 150-year-old technology needs to be reinvented. I think we’re on the verge of a revolution that in hindsight will be as profound as the Industrial Revolution” says Hamel.
In 'The $3 Trillion Prize for Busting Bureaucracy,' Hamil and Zanini call for reversing the “creative apartheid,” where some are decision-makers and others are doers, and paint a utopian picture of future workplaces with no bosses. In a “post-bureaucratic” company, as they call it, employees are organized into self-managing teams based on their talents and passion. They pick their own leaders and evaluate each other’s performance. Pay is based on the value workers bring to their teams.
“There’s an extraordinary depth of human capability that’s not being tapped,” says Hamel. “Human capabilities that are most important can’t be managed in a traditional way.”
There is data to support that point. Gallup has found that globally, across all industries, a mere 13 percent of people are engaged in their work. North American workers are more enthusiastic about their jobs, though at 29 percent of people feeling engaged, the picture is still dismal.
This finding, says Gallup, “is important when considering why the global recovery remains sluggish, while social unrest abounds in many countries.”
There are companies that are succeeding under a leaner managerial model. Hamel and Zanini point to several examples, including publicly traded Nucor Corporation, a steel producer in Charlotte, N.C. that organizes its 23,000 employees into self-managing and autonomous teams that bring in a combined $20 billion in revenue. Its layer of bosses – of which there are 100 – is one-tenth the size of those of its competitors.
“Nucor’s revenue per employee is nearly twice that of similarly sized US Steel and nearly three times that of ArcelorMittal, the world’s largest steel producer,” write the authors in their bureaucracy-busting manifesto.
The bloated alternative to Nucor is the University of California system of 10 campuses, which has been widely criticized for spending more money on administration than on education. The organization doubled its number of bosses between 2000 and 2015, while enrollment grew only by 38 percent over the same period. At the Berkeley campus, management consulting firm Bain & Co. found 11 layers of bosses between the chancellor and front-line employees, as the Los Angeles Times reported in 2015.
The bureaucracy, Bain found, slowed decision-making, generated excessive costs, and ruined employee morale.
There is hope, say Hamel and Zanini, in the a new generation of business leaders who grew up in the age of a democratization of information on the internet.
But, as the authors point out, even Silicon Valley startups that are part of the burgeoning "gig" and "sharing" economies, which boast new ways of doing business, aren’t immune to bureaucracy. In fact, even when the best-intentioned, boss-less startups reach 150 to 200 employees, or $1 billion in sales, bureaucracy inevitably starts to creep in. Zanini attributes this to the pressure these companies face of conforming to expectations from customers, new hires, partners and so on.
“Part of the trick is that you need to change the organization, societal institutions, educational systems, and incentives,” Zanini tells the Monitor. “It’s a major social change.”