Every year hundreds of business books are written but, if we’re being honest with ourselves, many are a reshuffling of old ideas and outdated tropes. It is a rare business book that charts fresh thinking and provides both deep insight and practical advice. That’s why “Humanocracy” was one of a very (very) short list of books I read in 2021 that made me sit up but, more importantly, caused me to reflect and ponder long after I’d tagged and highlighted passages from start to finish. The perception that business and business leaders must do better with the people in their care, and their impact on our society, is not new but the reflections, and the alternate solutions, offered by Michele Zanini and his longtime collaborator and co-author Gary Hamel are. Over the course of several calls, Michele shared his deep concerns about the reinforcing systems business operates under today but he also shared a bright-eyed optimism that business leaders are slowly and inexorably beginning to change. And that the stifling blanket of Bureaucracy might finally be replaced by the extraordinary potential of Humanocracy.
HB: Michele a real pleasure to be chatting with you. As you can see my copy of “Humanocracy” is well-thumbed and heavily marked up. Before we jump into the themes and topics you and Gary Hamel discuss in the book, can you tell readers a little about you and your background?
MZ: <Laughs> Thanks for the kind words and, obviously, I’m glad you enjoyed it.
So, I'm originally from Italy, but I came to the US in the mid-nineties for grad school and my initial passion was public policy, international policy in particular, and that led me to the Rand Corporation, which is a public policy think tank based in California. One of the projects I got involved was the evolution of terrorist groups and how the information revolution was enabling these groups to operate it in a much more dispersed networked way. In short, how the old military style kind of design was giving way to these looser networks and that was presenting a radically different threat to countries like the US. That exposure got me thinking about the importance of organizational models as a way to create advantage and the role that technology could play in enabling fundamentally new ways of organizing resources and generating ideas. That was an important and formative experience for me.
After Rand, I moved to the Boston office of McKinsey working at the intersection of strategy and organization. My McKinsey career was a little bit untraditional because I always gravitated, whenever I could, to doing research and writing. So, I did quite a bit of client work, but I was always thinking about new ideas and, and, and kind of marinating those.
It was through a little project of that kind that I ended up finding Gary Hamel, who I knew and had admired for a long time. Gary and I share the same premise that basically management needed to be reinvented for a new age. We've been active together now for more than a decade trying to change the world by changing management. We’re fortunate to work with companies who are trying to, operate in fundamentally new ways. So, that's a little bit of my trajectory over the last couple decades.
HB: Let’s jump straight into it. “Humanocracy” outlines some brilliant thinking but the organizations and leaders you reference (Southwest, Haier, Nucor) still number a miniscule percentage of the organizations in business today. This despite years of research showing there is a better, more successful, way to run and operate a company. Why are we still so stuck in these old wasteful bureaucratic ways?
MZ: An excellent question Hilton and one that has been at the core of my work for many years. It is important to say that, despite those appalling numbers, I remain an optimist at heart. An optimist but also a realist. The knowledge and comprehension of running better organizations has, as you point out, been seeds that have been around for years and should’ve germinated and flourished by now. The question is not about the seeds but why is the soil we plant them in seemingly so infertile?
There are numerous interconnected reasons. From the complex systems that businesses are, and those are becoming even more complex, to the classic refrains around the difficulty of change to the fact that many of our existing frameworks are predicated on organizational designs – and embedded beliefs – of scale at the bottom and a decreasing number of people as you go up some org chart or pyramid. That pyramid design remains an accepted fact along with the perception that the world has dumb and smart people. The dumb are at the bottom, the smart are at the top giving direction, writing brilliant strategy and are the single source of all great ideas inside an organization. That Taylorism attitude is blatantly false. Now consider the impetus or motivation to change if you’re at the top of those pyramids and all the systems around you have been built, from compensation to rewards to recognition, to support even embed the status quo? That’s like talking to LeBron and asking him to give up all the rewards of his brilliant basketball career and take up baseball in the hope of achieving a similar outcome. That’s a tough sell.
What’s almost as bad is taking a sliver from another organization that you admire and cutting and pasting it into your firm thinking you’ll replicate their same great success. How they hire, how they train, how they compensate. That never works. The body rejects the transplant because it’s seen as alien, a threat.
Change is absolutely doable, and the examples in the book show that, but I think some part of change stems from a conviction, even a moral outrage at all the wasted potential and possibility inside every organization.
Harnessing that wasted human potential is why we wrote Humanocracy.
The optimist in me looks around and I do see small, encouraging signs of change. Whether you call it the Great Resignation or something else, there is a growing recognition that the self-serving systems are not the answer. And there’s certainly a lot of grand proclamations and rhetoric I’m seeing right now. However, those signs of change are far from universal, and I fear some leaders will miss yet another opportunity to adapt to a better way. A way we know, and has been proven, to be better.
Case in point, fifteen years ago Haier was this insignificant appliance manufacturer headquartered in Quingdao, a city halfway between Beijing and Shanghai. Today it is a model of success. The world’s largest appliance manufacturer, and recognized pioneer in the Internet of Things, built on an entrepreneurial ecosystem of self-forming and self-regulating internal teams that set their own projects, initiate their own contracts and partnerships with other internal teams and have a degree of autonomy unheard of in 99% of companies. Did they get it right the first time? No, but they were willing to learn, experiment, try new things. Knowing that the things they try today may or may not work. That curiosity, that experimentation, that ambition is almost entirely absent from the bureaucratic orientation and systems of most organizations and the way most leaders operate.
Two other significant contributing factors are, in my mind, the broken state of business education and the fact that we have no meaningful measure for the enormous waste of human potential across the globe daily. On business education, a topic we could have an entire half-day conversation about, we’re still cranking out armies of biz-school graduates schooled in the broken mechanics of bureaucracy. How can we expect different outcomes?
On the measurement front, one of the reasons Gary and I created the BMI or Bureaucratic Mass Index was a tongue-in-check way for leaders to dimensionalize the sheer bloat of bureaucracy on their firms.
Imagine for a moment if there was a global ranking and rating system on the level of bureaucracy – and waste – in business.
A ranking for, and of, business leaders – and business investors.
How quickly might we see change then?
HB: Perfect segue into the set of Principles – or, as you call them in the book, “Powers” – that offer business leaders a different framework or approach. Is there a “Power” that you believe is the most transformative or is the most logical place for a leader who wants to change to start?
MZ: You’re talking about the power of markets, entrepreneurship, paradox, community, meritocracy, and openness we detail in “Humanocracy”? Those came from our research into the organizations we researched for the book. It was almost a set of beliefs, an ethos, that they exhibited and that underpinned how they chose to operate or make decisions. Business as practiced today has always had certain constructs, like formalization, stratification, specialization, standardization. Sadly, those reinforced bureaucracy. These principles offered an alternative way, but we were very deliberate about not creating an exhaustive list. We debated principles like diversity, serendipity, autonomy but ultimately felt these seven covered more than 90% of scenarios we saw.
Is there one particularly transformative Principle?
Not really but, in my opinion, the ownership one is an excellent bedrock to build from.
That doesn’t mean making everyone a shareholder, but it means giving everyone an ability to impact and influence their contribution.
You know, giving people a bit of a financial upside in what they're doing, but also giving them a sense that they could have a stake in the business, and they can control it. So, one way, that is done is by creating small teams that are really autonomous. You see that across basically every single company that we feature, whether it's Haier with micro enterprises, Nucor with self-managing teams and self-managing plants, every organization has that notion of a team that is incredibly empowered and has real skin in the game. So that in a way is maybe the most universal.
But the others have real galvanizing power too. Haier’s model leverages markets as well, in the way that bids and contracts are created and won. But there’s a tremendous amount of social capital operating in those markets, the teams have a rapport, they know and trust each other, which is part of the community principle. And so that's why we talk about not just about markets, but socially dense marketplaces. There is a social lubricant that underlies contracting and similarly, like Southwest or Nucor, they're a performance driven community. Those are community where people feel like they're accepted for who they are, they're supported and so on, but there's also some performance pressure too. And an intolerance for mediocrity. You can be amused or delighted by the quirky nature of Southwest’s personnel when you fly with them, and you might sense a deep camaraderie and community across the organization but make no mistake no other airline turns around their aircraft quicker at an airport, and gets them back in the sky, than SWA.
The seven aren’t intended as a “check the box” effort but it’s what aggregates to a set of principles that really drive every aspect of your management model. You know, the way you allocate resources, the way decisions are made, the way strategy gets set, the way people are recruited, hired, and evaluated and so on. So, you know, you have to fuse these together in a way that multiplies the power of each.
HB: That mix of Principles, or Powers, makes tremendous sense. What advice for those who want to reorient around those.
MZ: Firstly, an important reminder. There is no single Silver Bullet, back to complex systems, but there can be a lead Principle that works better for your organization and for your context. The other part that Gary and I didn’t fully appreciate until we were crafting our opinion was that each of these Principles have a light and a dark side.
For example, markets can be great at allocating resources and harnessing collective intelligence, but they can atomize relationships and make everything transactional. Light and dark. Community can give people a sense of belonging and connection but, the dark side, is that they can become cliques or be satisfied with mediocrity versus meritocracy. That light and dark dichotomy is an important component that leaders cannot afford to lose sight of.
HB: I’m a passionate advocate for organizational culture, a word that hasn’t explicitly come up in this chat. When I hear words like beliefs, principles and when you mentioned moral outrage earlier, I automatically think culture. How does organizational culture play into your thinking and what does culture mean to you?
MZ: For me culture is something I typically see as the worldviews, shared values and then, the rituals and norms that define an organization, and maybe sets it apart from others. But in a way to me, culture is an outcome or something that emerges out of very specific choices you make about how you run and design the organization. So, for me at least, talking about culture and the notion of creating a different culture is not super helpful.
Sadly, much of the culture conversations I see are stuck in what I would say are basic requirements of human dignity, little more. Having diverse and inclusive programs. Paying people a living wage. Giving them an opportunity to contribute meaningfully. Those are important topics for sure but they’re hygiene factors. The culture conversation needs to go deeper.
If you truly want to get a new set of values and behaviors that requires making informed choices about the way the organization works, runs, and is structured.
What’s needed is a real disciplined focus on the systemic structural stuff that will change the outcome of the culture you have today.
In simple terms, culture is either an outcome or becomes the symptom, but the root causes for success or failure lie somewhere else.
HB: Let’s pick up on that “symptoms versus root causes” idea. Or, as many management thinkers from Michael Porter to Roger Martin would say, choices you make. The influence of the street, the investor community, your Boards of Directors are often held up as a cause for many of the (poor) choices made by leaders. Do you agree with that premise?
MZ: Before I answer that, I want to go back to a foundational idea that Gary and I put into “Humanocracy” which is this notion that the organizations of the future will maximize on (human) contribution, not compliance. At the heart of this compliance orientation that all bureaucratic organizations have, is the idea of predictability, of removing deviations from the norm, which is why we’ve seen this inexorable erosion of job quality over the last 20-30 years.
We’ve attempted to commoditize, optimize jobs into these easily replicable tasks.
That attitude has entirely removed discretionary thinking, autonomy, creativity for so many workers and directly contributed to the prevailing narrative that there are low-skilled jobs – and low-skilled workers.
That’s complete BS.
As the organizations we highlight have shown, the very people written off as low-skilled by many organizations are often the source of the most innovative ideas, the best customer service, the freshest thinking.
How does this factor into the relationship with Boards, investors, or the street? I think it comes down to whether you believe that narrative of your employees as highly creative contributing humans or as low-skilled, easily replaced resources. The leadership at Southwest Airlines, all the way back to the founder Herb Kelleher, are definitely in the former camp and the investors who have backed them understand that too. The “contributing human” component is central to the Southwest Airlines vision, to the Southwest Airlines business model – and the Southwest Airlines success. As an investor, why would you want to mess with that?
More explicitly, when we spent time with US steel manufacturer Nucor, they told us that they’ve never engaged in a single period of layoffs in the history of the organization, even in the darkest days of their operations around 2008 when many were strongly advising them to. For Nucor management that would have broken a sacred code or part of the social contract that they had with their members. Something that, once you’d done it once, would be really simple to do again, and then again. Not surprisingly, when you talk to any Nucor employee about contribution, they talk in glowing terms about how that’s deeply embedded in the organization. One of my favourite lines came from a Nucor plant manager who said, “we don’t build steel here. We build people who build families and families who build communities. That’s what we build.” That wasn’t a line, that was a core belief across the entire company.
So, I think this investor “pressure” is a bug, not a feature, of the system. There are plenty of examples, from Bezos to Musk, where investors have bought into the vision and haven’t required outsized returns quarter after quarter. So, if that vision, or that narrative, is ground in you seeing your people as commodities then you can’t be surprised when your investors push you to optimize your return on those commodities. But if they’re seen as highly-creative, contributing assets, no sane investor is going to expect you to get rid of them.
HB: I loved that articulation and, you’re right, few people would seek to get rid of an asset that was contributing and seen as vital to the vision of the organization. Inevitable question but what advice are you giving your clients as you seek to push them toward this new “Humanocracy” vision?
MZ: Firstly, please stop solving every new challenge the way you’ve tried to solve problems before. Which is creating a new C-suite “Chief Something or other”, building out a department or unit beneath them and adding more bloat and bureaucracy to your system. Case in point, look around at the number of shiny new “Chief Diversity officers”, “Chief Sustainability Officers”, “Chief ESG Officers” and ask yourself when did more layers ever solve a business challenge? Innovation is seldom solved if you install an administration process and that’s typically what these new roles and departments are.
The other is something I touched on earlier which is a moral outrage at all the wasted capacity and contribution in business today. And, sadly, I think that wasted capacity and contribution has only increased during the pandemic.
While this may sound deeply philosophical, if you’re not outraged or angry in some deep way, I don’t believe you’ll have the courage and the stamina to try and change these embedded systems.
Ultimately, the most direct advice is to throw out the traditional engineering-style approach of designing and cascading solutions from the top. These solutions require a more socially oriented solution. One that invites input from across all points of the organization. That places an emphasis on the level of contribution, not on the seniority or title of the contributor as we’ve historically done. That also requires a degree of experimentation, and of curiosity, like the Haier example from earlier.
My personal favourite analogy for radical transformation is the caterpillar to the butterfly. That’s an enormous change in function, right? From something crawling to something that flies, but it never feels traumatic right? It's entirely natural and it's gradual. So, revolutionary goals require evolutionary steps, with experimentation and inclusiveness, not just a dictate from the top of the organization. That’s the mental model I share with our clients.
HB: Michele, always a pleasure chatting with you. Hard not to feel a little revolutionary fervour when you frame this challenge so brilliantly around wasted capacity and wasted contribution. Thank you, my friend. Until we speak again.
MZ: Appreciated the conversation, Hilton. Look after yourself.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Breaking News
Michele and Gary Hamel have recently started a new project, the New Human Movement.
Find out more here : humanocracy.com/movement.