Kill bureaucracy and you'll unclog the arteries of business

Bureaucracy must die.

That’s the clarion call of Gary Hamel, professor, author, founder of The Management Lab and all round innovative business thinker. Few would argue for clemency.

The death threat was uttered at HR Tech World in Paris this week, where Hamel charged the HR audience to “to stop fiddling at the margins” and take up arms against bureaucracy, the biggest barrier to productivity in business:

That’s the challenge I’d like you to take on, because it’s strangling our economies, it is bad for human creativity.

Hamel laid out the facts: while bureaucracy does provide necessary control and consistency, it is clogging the arteries of business. Productivity is in the doldrums (despite the welter of technology available to help us), engagement levels are pitiful, and 14% of people in work spend all day every day attending to internal bureaucracy.

Eradicating that bureaucratic overhead would save the OECD $9 trillion and more than double productivity within a decade, says Hamel.

Beating bureaucracy

Bureaucracy, says Hamel, is like a massive multi-player game in which billions of human beings compete for wealth and status. While it does reward good people, it also rewards deflecting blame, protecting turf, trading favors, avoiding scrutiny.

But all is not lost, suggests Hamel:

History suggests that deeply entrenched institutional systems can be changed.

He points out that it wasn’t that long ago that we assumed having slaves was just a fact of life, that aristocracy was the only way to organize a civil society, that women were little more than chattels.

All that has changed, but it was a far from easy process. Beating bureaucracy is on a similar scale and will be just as hard to achieve because, he says:

It’s deeply embedded, deeply familiar, deeply disempowering.

The starting point, notes Hamel, is to start by people getting a little bit angry about the fact that millions of employees show up for work every day physically, but leave their curiosity and other talents that make us into unique human beings at home:

So we need a little less resignation and a little more indignation.

In fact, Hamel suggests there needs to be moral outrage at the status quo and wants to wake people from their moral slumber.

Acting like a startup

The place where creativity, innovation, autonomy flourish is in start-ups. As companies bulk up, they add a lot of bureaucratic fat around the once taut frame. They follow a familiar pattern of top-down power structure, where managers assess performance.

This is old news; the problem is how to change these entrenched views and Hamel shares a few case studies of what can be achieved.

Chinese electrical goods maker Haier, for example, shows how even the biggest companies can act like a startup.

The aim of Haier's chief executive was to create an organization where all employees were encouraged to become entrepreneurs. He divided the 60,000 workforce into 4,000 micro-enterprises with 15 to 20 employees apiece. It was a flat structure with basically just three layers.

Each micro organization had its own P&L and there was no individual target setting. Instead, each unit was compared to how fast the market was growing and the performance of outside competitors. Each was rewarded according to how they compared against these benchmarks.

If they wanted R&D or HR or any other service, they contracted out, either to another micro business within Haier or to an outside contractor.

When someone came up with a new idea for a business, the idea was reviewed by a group of external venture capital partners, and if they liked it, then the company matched their investment. Hamel says:

That gives you a sense of what’s possible. When you can run a large, global business with 60,000 people into a portfolio of entrepreneurial businesses there’s no reason why we can’t beat bureaucracy.

Grassroots initiatives

Another example from Hamel is the maker of Gore-Tex fabric, W L Gore & Associates, where employees choose their own leaders – and they can get rid of them too at the end of the year if they don’t like them. Each year, employees are given a list of 25 of their closest associates and asked to rate them 1 to 25 based on how much value they think they have created over the last year. It is this information which drives compensation.

These are big systematic changes across the organization, but Hamel points out that grassroots initiatives can also be incredibly powerful. At the NHS, for example, a group of HR and clinical staff launched the NHS Change Day in 2013. The idea was simple; they asked people to pledge to do something that could sustainably improve patient care in their job.

They hoped for 65,000 pledges to match the 65^th birthday of the NHS. Instead they had 189,000 pledges and it became the biggest change initiative within the NHS, says Hamel. And this was all set up without seeking permission of senior leadership, though leaders were quick to see the benefits once it was up and running. As the NHS example shows, it’s not just leaders who can make a difference; we all have collective responsibility in tackling bureaucracy, according to Hamel:

You can change your organizations when you stop thinking of yourself as an employee, a staffer and [instead] as someone who loves the organization, who wants to do better but who will not settle for the status quo.

And that means it’s time for HR to stand up and be counted, says Hamel:

So as HR we need to stand up and say we will no longer tolerate organizations that structurally and systematically empower the few at the expense of the many.

My take

Gary Hamel is an engaging speaker. He is preaching to the converted with his argument that bureaucracy is damaging productivity and that we all need to act like start-ups.

But rather than accept this as ‘just the way it is’, he offers some great examples of different ways of running companies, as well as convincing evidence of the damage bureaucracy is causing.