Most sizable organizations have a management hierarchy that includes several if not dozens of managers, below the executive team or owners. As organizations have found ways to recover from the global recession and remain competitive, the costs of a significant management structure becomes questionable. Some would argue that middle management is no longer necessary and should be abolished.
The hierarchy of managers exacts a hefty tax on any organization, says management guru Gary Hamel, in The Harvard Business Review, “the costs of management rise in both absolute and relative terms…management is expensive.” Hamel goes on to contend “the typical management structure increases the risks of large calamitous decisions…the danger is greatest when the decision-makers power is, for all purposes, uncontestable.” This often is because the most powerful managers are the ones furthest from the front line realities. The third reason Hamel explains is that a multilevel management structure means more approval layers and slower responses, and that impedes decision-making. Finally, Hamel argues, hierarchical structures systematically disempower lower-level employees.
Hamel’s perspective is echoed by Lynda Gratton, writing in The Harvard Business Review. She argues that technology itself can do much of what middle managers do, as also do skilled teams of workers. There is a generational difference too, among employees she says, “Gen Y employees see no value in reporting to someone who simply keeps track of what they do.” Whereas, Gen Yers do value mentoring and coaching from a master, something general managers don’t do or are not trained to do.
Steve Denning, author of A Leader’s Guide To Radical Management, writing in Forbes, points out that “something has gone terribly wrong with the private sector—the supposed engine of economic growth…when the best firms have rates of return on assets or invested capital of on average just over one per cent, we have a management catastrophe on our hands.”
Denning argues that the economy and world of business today, with the advent of globalization, the Internet, and social media has changed everything, and the result on management-driven hierarchical bureaucracies is devastating. “Now the power in the marketplace has shifted from seller to buyer,” Denning contends, “And in this new ecosystem, big lumbering bureaucracies of the 20th century are not agile enough to compete.” And yet, management consultants, business schools and governments still don’t get it, Denning says, although a new generation of managers have realized a paradigm shift.
What is the paradigm shift? “It’s really a change in an ecosystem,” from a hierarchical bureaucracy that is internally focused on production outputs to an ecosystem that is agile, flexible and externally focused on clients, Denning argues. It’s also a change “from a world in which workers and customers are manipulated as things to a world in which workers and customers are interacted with as human beings.” It’s a shift from a boss/manager centric world to a customer-centered world. Management guru Gary Hamel says, “Management is out of date, like the combustion engine, a technology that has stopped evolving.”
Thomas Hout, writing in the Harvard Business Review, argues that if management is so good at predicting outcomes through analytical and scientific methods why have so few public companies performed well? “Companies that are managed the traditional way—by executives developing analytically-driven strategy and shaping the organization to meet the needs of the business as they see them—are obsolete. Management as we have known it, is too cumbersome.” Hout cites the work of Howard Sherman and Ron Schultz at the Santa Fe Center for Emergent Studies, who contend that business today moves in a nonlinear fashion, with no continuity in the flow of events, and no way to predict which products or services will succeed. Sherman and Schultz argue, in their book, Open Boundaries, business structures should be self-organized to be successful, which means managers allow employees to organize as needed, based on customer needs. This conclusion places the role of the manager in a very different light.
Mitch MCrimmon, writing in the Ivey Business School Journal, argues “in many organizations, employees know more about their work than their managers. This reality should force organizations that still cling to the old top-down style of managing to recognize that many employees today are very capable of managing themselves.” He contends management should be seen as a process, one in which everyone can engage, rather than a role. McCrimmon contends a critical area of focus in today’s organization, employee engagement “cannot become a reality until we move beyond our industrial-age definition of a manager.”
Some futurists, such as Don Tapscott and Anthony Williams, authors of Wikinomics, go as far as to say that corporate hierarchies will disappear as individuals are empowered to work together in creating a new era of mass collaboration--in a new Renaissance.
A number of significant organizations are significantly downsizing or removing middle management structures. For example, the digital-security giant Symantec has completed a restructuring process that saw middle management reduced by as much as 40%. The world’s biggest appliance making company, Haier, in China, has reorganized the company’s workforce into 2,000 self-managed teams that are responsible for not only production but for profit and loss and paid on performance. Online retailer Zappos, a company obsessed with customer service has moved to eliminate traditional managers, do away with the typical corporate hierarchy and job titles, an approach that has been termed “holacracy.” This move gives employees more of a voice in the way the company is run.
It may be an ideal time to re-examine the purpose and structure of management for organizations, one that better suits the times and needs of modern organizations and their customers and employees.