From Bureaucracy To Humanocracy, With Michele Zanini
We are in a fast-paced and technology-driven society. Yet, many organizations continue to have antiquated management systems that are often bureaucratic and hierarchical. Michele Zanini has made it his life's work to overcome this, moving the conversation from bureaucracy to humanocracy. In this episode, he joins J.R. Lowry to take us deep into his book, Humanocracy, which he co-authored with London Business School professor Gary Hamel. Michele is also the co-founder of Management Lab, or MLab, which works with leading-edge firms and progressive practitioners to help them create tomorrow's new practices today. He shares with us how they stumbled into this alternative way of management that reverses the top-down power structure and puts people forward. With case studies on companies that have made the transition, Michele shows the benefits of humanocracy to the overall organization—from innovation to initiative and more!
Check out the full series of "Career Sessions, Career Lessons" podcasts here or visit pathwise.io/podcast/. A full written transcript of this episode is also available at https://pathwise.io/podcasts/from-bureaucracy-to-humanocracy-with-michele-zanini.
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From Bureaucracy To Humanocracy, With Michele Zanini
Co-Author Of Wall Street Journal Best Seller Humanocracy
My guest is Michele Zanini. Michele, along with Gary Hamel of the London Business School, is the Cofounder of MLab, which works with leading-edge firms and progressive practitioners to help them create tomorrow's new practices today. Michele and Hamel are also co-authors of the Wall Street Journal bestselling book, Humanocracy, which discusses the many ways in which top-down power structures and rule-choked management systems are crushing creativity and stifling initiative. Michele started his career as a graduate fellow at the RAND Corporation. He then spent a number of years at McKinsey, which is where we met, before co-founding MLab in 2009.
He's written a number of articles for the Harvard Business Review, the Financial Times, McKinsey Quarterly, Fast Company, and Fortune among others. He also publishes a video series with Fast Company called the "New Human Movement", which features leading thinkers and doers who are reimagining work, management, and capitalism. Michele is a graduate of Harvard's Kennedy School of Government, and he earned a PhD in Public Policy Analysis from Pardee RAND Graduate School. He lives and works in the Boston area.
Michele, welcome. It's good to have you on the show.
Thanks so much for having me.
I’m excited about this because I know you're doing some interesting things in the space of organizations and how they can adapt to the more modern world. Talk to us about MLab and the nature of the work that you're doing.
MLab is a little outfit that Gary Hamel, who teaches at the London Business School, and I started in 2009. The idea is to create an accelerator for new management practices. It's built on the premise that management is a social technology. It's the tools and methods we use to accomplish things together that we can't do alone. Our ability to be productive as a species depends on our advancement in management technology. We hardly ever think about management that way. It sets a perimeter of what we can get done together. It's something that you can innovate upon. Most people take things like budgeting or return-on-investment calculations or strategic planning as some sort of a given that has always been there.
They were invented by people trying to solve problems 100 years ago. Our point of view is that we are now on a flat part of the S-curve of management innovation. We can maybe get into that a little bit later if you want. We need to get on a new S-curve if we want to create more capable institutions. We're devoting our professional lives to this cause of how we get organizations to be fundamentally more capable by changing the way they're managed. We do research in the field and talk to companies that are making interesting advancements in this area. We write about it in articles, books and the like. We work with companies to essentially act as laboratories for managing innovation. That's a little bit of what we do.
How did you guys meet? How did you come to the idea of starting this back in 2009?
At the time, I was at McKinsey & Company. I had been there for about 5 or 6 years. In my prior life, I was a public policy researcher at the RAND Corporation, which is a place where people do research for a living. Obviously, McKinsey isn't a think tank, although out of all the consulting firms, it's one in that people with an interest in developing ideas have space to do that. I've always found opportunities to do that, aligning with partners, directors, and senior partners that were ideas-driven. One of these partners, Lenny Mendoza, suggested that I meet Gary. McKinsey had this incipient partnership with Gary around this topic.
He said, “Why don't you go work with him? Help him out a quarter or two. You won't get any stupider as a result and then we'll see what happens." A quarter or two became four quarters, five quarters, and six quarters, and then eventually, I switched and became a full-time co-founder with Gary on this. It was through the McKinsey connection that I was able to strike up this partnership with Gary.
It's great that Lenny gave you that freedom.
I was very lucky to work with and know him. Not to get too "inside baseball", but it's because of people like him and people like Lowell Bryan at McKinsey, who was also an influential director and wrote tons of books, that I was able to stay at McKinsey. They allowed me to straddle the world of ideas and practice, which isn't usually typical in a consulting firm.
Apart from the two of you, what's the rest of MLab look like? Are there more people? Is there an office or are you all virtual?
We're all virtual. We have a small team including designers, web developers, content editors and the like. When we work with companies, one of the things we do is involve large groups of people in problem-solving. Let's say that a company wants to become more innovative. In a McKinsey or other typical consulting firm, they deploy a small team that drives the problem-solving and solutions, and then proposes the answers. What we do is we involve ideally everyone in the company, if not large merely swaths of the population, in diagnosing what the barriers to innovation are, being clear about what the roadblocks are, where we failed and why, and so on.
Through the process stage of problem-solving, you pose different questions or tee up different principles. For instance, in the case of innovation, one of the principles of an innovative company is being open to new ideas and new perspectives. The question you might pose to large groups of people around this topic is how we might become more open in how we do our strategy, how we allocate our resources, and how we review our talent.One of the principles of an innovative company is being really open to new ideas and perspectives. Click To Tweet
The community then comes up with lots of ideas on how they might do that, and how they might change those management processes. These then eventually get experimented upon. To enable this large scale, "crowd solving" process, you need a platform. More than consultants, we have developers who help us create a platform in which we embed content that then allows large groups of people to reinvent the core management operating system in a collaborative way.
In your work and your writing, you make the point that most organizations are getting this wrong. They've got antiquated management systems. What's driving that?
In the book, we talk about bureaucracy as being the standard operating model in most large companies. Bureaucracy sounds like horsepower or something that applies to a government, but not to a company. If you look at how bureaucracy as an organizational model was specified, there's a hierarchy of positions. Big leaders appoint little leaders. Roles are formalized and quite clearly delineated. The way you get ahead is by getting promoted. Things work according to a fixed calendar. All those things mostly still apply to most companies. If you could resurrect a CEO from the 1960s or 1970s, they'd be amazed at some things that have changed like the fact that information is easily obtainable, and supply chains are global and efficient and so on.
Many of the levers, like the way budgeting happens, the way investments take place, the way plans get enacted, the way you get ahead, and the numbers of layers, are still the same. Our premise is that model gives you some real benefits. You've got to recognize those. It gives you control, consistency, and some form of coordination and conformance. It minimizes variation. It allows you to be predictable and to have discipline. That's good. It also creates a ton of costs. You're too slow to respond to things that are changing in the environment.
You're driven towards incrementalism and turning the crank and not necessarily making huge improvements or creating innovation or new capabilities. It's also a dispiriting environment where people's ability to have agency, to have autonomy and be entrepreneurial, is highly constrained and circumscribed. There are real costs. The costs are becoming bigger and bigger. In the 1920s and 1930s, the name of the game was being big and being efficient. Things weren't changing that much.
A lot of your workforce was illiterate. It was scale that brought you success, not so much being constantly innovative and dynamic. That has changed. As we're talking now, we're still reeling from the pandemic, and we're in the midst of a geopolitical crisis. There's so much that is uncertain in the macroeconomy. The world is moving fast. People now are knowledge workers, as we call them. They are skilled. All this stuff has changed, but our organizations have not.
In the book, we lay out all those costs and examples of organizations that stumble because of this. I'm sorry to have given this long preamble, but it's to set the stage, because then the question is, if a lot of organizations are stuck and they're paying this high management tax, why is this model so pervasive? It's a big question.
We're still not done trying to answer it but we lay out a few different things. First of all, there's still a sense that there are no alternatives. It's like what Churchill said about democracy. It's the worst mode of governance aside from all the others. People might say bureaucracy has all these debilitating effects, but as opposed to what? There's the familiarity with alternative models of managing the large-scale enterprise in different ways. In the book, we talk about a lot of different alternatives.
We have the example of Haier, which is the largest appliance maker in the world. They're based in China. They have operations all over the world. In the US, they own GE Appliances. They operate in China. The mainland China operations have about 60,000 people and two layers of management. People are organized into 4,000 micro-enterprises, little entrepreneurial units that contract with each other. They are able to be quite independent and so on. At the same time, they are also integrated so that the whole is more than the sum of the parts.
Another company we mention in the book is Burrtzorg, which is a health services organization in the Netherlands where they have 16,000 nurses organized into about 1,000 teams. These teams are totally autonomous. There's no layer above these teams. The leadership is two people at the top of the organization. Despite the fact that they're flat and disaggregated, they have the best patient scores and the best outcomes. They have great staff satisfaction.
One of the things you need to do is open your eyes to alternatives, and understand there is a different way you could manage. Those alternatives are still not very well known. People don't necessarily have the confidence that there's an alternative. That's one thing. We don't believe or don't have enough awareness that there are alternatives. Second, the bureaucratic organizational model is highly integrated. You can't just change one thing piecemeal and hope that change can stick. You've got to change a lot of things.Organizations need to open their eyes to alternatives and understand there is a different way you could manage. Click To Tweet
That’s typically one of the failure modes when companies want to do something like, “I see Spotify. They're an agile company. I want to be agile. I'm going to do what Spotify does.” One of the things that they do is call people "scrum masters" or "coaches." They don't call them managers. They have these tribes. You import some of what these companies do, but you don't necessarily change other aspects of the model. For instance, you might even train your leaders. You want leaders to be compassionate or empathetic or enabling in some way. You train them to be different, but then they come back and the system is still operating in the old way. Within six months, they either quit or snap back.
It's complicated. You can't just say, "I'm going to wish for a new organization in the next six months." It's something that takes a long time. The path is not certain. There is no cut-and-paste. There's no cookie-cutter answer. The companies that we mention in the book are all different from each other. What's more similar are the principles underlying their model as opposed to the practices that they use. To embody those principles can be quite different. That's the second thing.
You're not aware of alternatives, and the second thing is it’s complicated. There are two more factors. We haven't quantified the cost of bureaucracy. It seems like it's a nuisance or it's something that's regrettable, but we don't have a way to quantify efficiency. The loss of effectiveness, innovation, and flexibility, we don't have any good metrics for that. We go to the fight against bureaucracy with one hand tied behind our backs because we can't necessarily prove it the way that accounting can prove that by consolidating and centralizing, you can get more efficiency. We don't have the right metrics to think about the costs.
The last thing, and maybe it's even the most important one, is there’s almost a political issue here because the people that are at the helm of these organizations got there through the bureaucratic maze. Now you're telling them, “You need to give up power. You need to have others take the lead. You don't have to have all the answers even though you're paid a lot of money. The presumption is that you do, but let's be honest, you don't. You can be a smart guy or gal, but you're just one person.” It's like telling LeBron James who plays basketball for the Lakers, “LeBron, you're great at basketball, but we want you to play volleyball.” A lot of people might say, “I'll stick to basketball. Thank you very much." The last factor, I would say, it's almost like an ideological reason. We believe that control is almost the most important thing that an organization needs to deliver.
We get the fact that it's good to be responsive and innovative and creative, but control is what organizations were programmed to do. Unless you change some of this worldview, control is important. I love control, but it's a subtle trade-off. Sometimes there are better ways to get control. There's a sense that we want to be in control as individuals, but we also like to have others in control. We think that predictability is the name of the game. Unless we change that, it's going to be hard for anything else to change. As you can see, this is a pretty wicked challenge because there's not one thing that you just change, and then the system flips to a new mode.Unless we let go of control, it will be hard for anything else to change. Click To Tweet
Talk about the appliance company in more detail. It's a Chinese firm. They own GE Appliances. Long history there. They’re not a new company. They've been around forever and ever. They operate in a supply chain where they're buying parts from suppliers. They're delivering appliances through wholesale and retail distribution channels. How do they go from the old world to the new world in the "micro teams" structure that you talked about? How do they go from the old world to the new world in terms of the way that they look out to the rest of the world and their supply chain? I'm curious how they went through that transition because it's complicated.
For them, it's a journey. Right now, they have a model that looks like science fiction to most CEOs, but they started as a pretty unremarkable municipally-owned refrigerator company in this town called Qingdao, which is halfway between Shanghai and Beijing on the coast in the Shandong Province. The CEO who is now retired, Zhang Ruimin, took over in the ‘80s. The current model is a product of an evolution that spanned over fifteen years. He got to the point where in the ‘90s he said, “We want to compete internationally. There are certain things we need to do around quality and others that are important for us to do. Let's get that going.”
They then realized that to get to the next stage and be a global leader, they needed to create a much more entrepreneurial culture in the organization. We heard this for the first time in 2010, when I was working with Gary in Woodside, California. Gary had written a book called The Future of Management. Zhang Ruimin had read it. He came to talk to us because he had some thoughts and wanted to learn a little bit more about what Gary was seeking at the time. He said to us, “I want to create a company where everybody feels like they're their own CEO,” which is a pretty remarkable thing. I had never heard that from a CEO before.
The idea was that everybody has an opportunity to be an entrepreneur. I'll tell you maybe a little bit about how they work now and a little bit about how they got there. They've disaggregated the company into micro-enterprises. Some of these are responsible for bringing a product to market like a three-door refrigerator. They're the people putting all the pieces together, but then they are collaborating with other micro-enterprises that are more functional in nature. You have sales and marketing teams in various regions of China. You have design and micro-enterprises that put the design together, get the components right, and so on. You have manufacturing micro-enterprises, services micro-enterprises, distribution, HR, IT and so on.
When you want to put together a new product, you enter into contracts with all these different micro-enterprises. You put a bid out saying, “We want to create this part or this kind of product.” There are multiple micro-enterprises, for instance, around design, and you get different bids. There's an internal market. You pick the one that you feel has the best proposal for you. Once you enter into that agreement, then the agreement determines not only what the provider of that service does for you but also how the benefits and the success get shared.
Even if you are a support function or you're in the back-end, you have skin in the game because you're only going to get paid a bonus if that product does well in the marketplace. Even if you're in R&D or a factory, you have that market signal. Typically, in most companies, once you've put together the product, it's a weight off your shoulders. It’s someone else's problem to sell it. In their case, everybody is motivated to do the right thing.
The other thing that is interesting is that there are multiple providers. There's no internal monopoly. It's not just manufacturing and design. If you're not internally competitive, you go out of business. I always hear clients, especially in HR and IT and so on, talk about their internal customers. Unless you have the ability to fire your provider, they're not your customer. At Haier, you can do that. You can fire internal providers. If you don't like anybody inside, you can go outside. That's the system, and then they have all sorts of ways for incubating micro-enterprises for new ideas inside and outside of the core and getting VC money. They are tapping into this open innovation ecosystem where if they can't develop something on their own internally, they go out to bid the problem to an outside network of solvers, and they get expertise that way.If you're not internally competitive, you go out of business. Click To Tweet
They have this crazy system that works. It has its limits. It hasn't always worked well. One of the lessons from the Haier model is they've tried this in many ways. They keep innovating and they keep trying new things. They hit dead ends. They hit the snags and they learn from that, and they improve it. For instance, their internal contracting initially was administratively intensive and a source of friction. They found ways to make that less so. There's a whole contracting app, which is neat, where they have some benchmarks around services and ways for the contracting to be much simpler.
They also have created this joint accountability for market outcomes so that you're not just arm’s length contracting with an internal provider. You're all in it together because, in the end, you're all going to get paid on whether the product does well or not. They have this thing right now, but they started in a humble way. What they started with was, "Can we get sales and marketing teams to be a little bit more autonomous? Can they set their own targets?" They started with areas of the business where maybe there was less integration. Maybe where the voice of the customer market feedback was strongest, the most immediate, and they tried to see whether they could get more autonomy there.
They gained confidence. They gave them a little P&L, even though they didn't control all those back-end functions. How can we make it so that every single person feels like they have their own little startup? They built from that. They've evolved it through trial and error and experimentation. One of the frustrating things about hiring someone who studies them is that not only do I not speak Chinese, so everything needs to be translated but also, every time I go there, they're doing something different. Whatever I wrote six months ago is no longer operational.
They're driven by this aspiration. Everybody is a CEO. Everybody needs to report to the customer, not a manager. It’s a bold aspiration, and then gradual and constant experimentation of ways to get there by changing structure and process. In a nutshell, that’s how they do it. They are revolutionary goals with evolutionary ways to get there. It’s a deliberate effort on innovating the management model of the company, not just the products.
It's fascinating, particularly with a manufacturing company where you've got high capital costs and all those other things. You talked earlier about us being in a flat part of the S-curve. Here we are sitting in October of 2022. We've got geopolitical turmoil, and financial markets are off. We've got this raging debate about the future of work and return to the office. You would think in the scheme of things that this would be a time when organizations would be hungry for ideas that might break the norm of how things have worked. Are you seeing that in the last several months as we've emerged from the pandemic?
I'm seeing some positive signs and maybe signs that are not so positive. On the positive side, the crisis has inevitably led to some decentralization and more dynamism because companies had no choice. In a crisis, power shifts to the periphery because the center is overloaded. They can't process all the changes. People could take initiative. We've seen amazing evidence of that in the private sector, in the public sector, as well in the healthcare system. Teams of doctors and nurses are figuring out how best to treat patients. That's all amazing. Also, the other thing that has happened is that maybe there's more of an awareness, given the fact that some people got comfortable working in their pajamas at home, and others had to go to work and risk getting infected. Maybe there's a greater appreciation for the fact that some work is not very good and we've made it worse. It has been crapified.
There's something we need to do to improve frontline work. If it’s not good for them, it's also not good for the company. I also feel like there's more awareness around the quality of workplace life in general. Maybe the pandemic has raised awareness. There was this headline in a McKinsey article saying, “Back to basics. CHRO is finally focusing or coming back to focusing on people,” which is like, “Okay, but where were they focusing before? Isn't that what they're supposed to be doing?”
Back to this notion of compliance and control and so on, maybe there are other priorities. Maybe we're more focused on people and the people dimension of work. On the other hand, we've seen this movie before. I like history. I find management and business to be not as steeped in history as they should be. We talk a little bit about this in the book. You can back to what people were writing about the future work in the 1950s and 1960s, and you can find things that would be completely cutting edge now. The role of leadership, the fact the organization needs to be flat, the fact that their need is more horizontal and autonomous teams. You could find people talking about agile without saying agile in the 1970s.
It's good that we're rediscovering it now, but then my worry is what do we do to make this stick, and to make sure that this time is different? I'm not sure we have all the ingredients in place. We'll see. People talked about the pandemic as being a great reset, whether you agree with that or not. To me, if you were in leisure and hospitality, like if you were in Carnival Cruises or Marriott, you were in difficult times. If you were a financial services company, an IT company, or even larger retailers, you didn't do so badly.
Maybe you were tested in some ways, but in other ways, your business model wasn't tested. You had this massive stimulus and permissive monetary environment. You could buy a bunch of companies and make a lot of CapEx investments and so on. I wonder whether the crisis that I fear is upon us will be the biggest test. Let's see, at the end of that wave of disruption and dislocation, what sticks. Are the work-from-home people or the fully remote people going to be the ones that are laid off first? Are people that are working in Boise, Idaho going to be replaced by people that work in Bangalore?
You can even see that when it comes to things like engagement scores, or even questions about whether my company cares for my well-being. There was a surge during the pandemic up until 2021, but things are now back to where they were pre-pandemic. I don't want to be totally negative here. There's an opportunity for us to make real inroads, but we need to find ways to make some of these structural changes that I mentioned before around hierarchy, control, and how it's distributed, measuring the cost of bureaucracy, and so on if you want to retain that motivation and not go back to the old bad ways of doing things.
To some extent, the pandemic created a crisis. To your point earlier, there was a massive focus on people's mental health and well-being while they were working in isolation. Companies earned a lot of credit for the way that they handled that situation. We've come out of that. There were a lot of companies that did not survive it because they didn't have the wherewithal to get through that period. If you did, other than the fact that you're having a debate about how many days a week people need to be in the office, the day-to-day work is still pretty much the same. Maybe we've blown an opportunity to have a big rethink of work.
At the same time, I feel like everybody expects that there's some big change coming because we talk about the future of work. We talk about how hybrid has changed things. At the same time, it doesn't feel like people have figured out what it is yet. There's probably more of an openness to thinking about new things than there may have been before the pandemic. Nobody, at a macro level, isolated companies aside, seems to have figured out what it is yet. We're a little bit stuck trying to determine what the future looks like.
Harvard Business Review celebrated its 100th birthday in 2022. They put out a book with some of the most interesting articles, but they also have it online. They polled a bunch of mostly academics around what the next 100 years would look like. Have you ever seen these pictures of the early versions of buses? There was a car with coaches that used to have horses. They're stacked together and there was a car pulling them forward. That was the future of transportation. It's somewhat similar. We're in this frame where all we can see is an organization that is 10% different from what we have now.
The impression I've had was we're not breaking the mold here. We're still in the same managerial paradigm. My partner, Gary Hamel, has often talked about managerial ADD, Ambition Deficit Disorder. Maybe we're all a little bit culpable of that. I don't know if you remember during your days in consulting, J.R., but one of the questions a client would often ask you is, “Who else has done that? How do we stack up against the others?”
Think about the people at NASA who put out the rover that spent all that time on Mars. Who do they benchmark? No one. They asked themselves, “Is this worthwhile doing?” I wish corporate leaders were a little bit bolder and more courageous in trying new things. You don't have to demolish the old before you build the new. You can evolve your way there like the Haier story I mentioned before. Having a little bit more ambition, it's almost like that Peter Thiel tweet that says we dreamed of flying cars and we got 140 characters. We dreamed of dynamic organizations, and all we got was three days a week or something. Modality shift I'm sure is good, but we can do more.Corporate leaders need to be a little bit bolder and more courageous in trying new things. Click To Tweet
Few of us are CEOs, though, in control of a company's destiny. If you're a mid-level manager or an individual contributor, how do you spark this movement?
If you wait for the CEO to get it, you might have to wait a long time. There are opportunities to start something lower in the organization. If you are someone who's a department head or functional head, has some budget, or has some managerial supervisor responsibility, there's stuff you can do within your perimeter. You'll have to adhere to policies and processes that are consistent across the company.
We lay this out in the book. We have a set of things you can start to think about. One of the things you should think about is, “How do I share my power? What are the things that I am doing right now that I can syndicate and involve others on, whether it's individuals or an entire team? What can I do to involve them when it comes to planning? Maybe I don't need to sit in on interdepartmental meetings or whatever. Can I send someone in my place with decision-making authority or with a real voice that represents me, instead of me being the one that goes there?”
There are lots of things you can do to share your power and multiply the leadership capacity of your team. That's one thing. The other thing you can do, whether you're a manager or not, is to try to work and create a little bit of a horizontal coalition around a topic you might be passionate about. One of the things that has happened over the last several years is sustainability and even DEI and topics like that have become important for companies.
Often, those efforts were started not by appointing a sustainability officer. That often comes later, but it's people inside the company who were agitating for change. You're creating a group of people that feels the same way, having a community, setting the agenda, and making themselves heard. Just like you do with sustainability, you can do it for other aspects of work. In the book, we have an example of this happening in the National Health Service in England, which has its own limitations and problems, and it’s a big bureaucracy. There is a story of Helen Bevan about how she created a campaign called Change Today in which people would pledge one thing that they would do to improve their patients' experience within the NHS.
It's something they did without any permission. It was a simple website they put together. They put it out there and they expected a few thousand people to respond with their pledges. The first time they did it, they got over 180,000 people. A pharmacist was saying, “I'm going to taste the pediatric medicines before we give them to children, and make sure they taste good.” “We're going to have a new way of welcoming patients when they come into the hospital." Each person created their own pledge. It created a big wave. It was interesting. They did this for several years on an ever-increasing scale.
Eventually, the head of the NHS in England got on board and said, “This is a great initiative.” Had they asked that person before starting it, “Can we do this?” they would have been shut down. Eventually, they got on board. Maybe that's not quite the right approach for you, but it shows you that you can mobilize people and work horizontally and commit to that. It's better to do that than to just moan and complain about things not being great.
To some degree, irrespective of role, all of us have some control over the destiny of the company. You operate within a sphere, whether it's your own role or your team's role or a broader part of the organization. You used the word "agency" earlier. You [no matter what your role] do have some agency in all of this. If you don't, that's a bigger issue with the nature of the company you're in.
Your interest may be quite small, but can you aggregate the power units across in a way that makes it difficult for the higher-ups to ignore? Can you create that activism? Now more than ever with social media and online technology, you can create these coalitions across the globe if you're a global company. I do think that activism and being an entrepreneur is still a high-risk occupation in most companies, but there's strength in numbers.
What's ahead for you in the next year or two, and for MLab and the work that you're doing?
I'm passionate about this challenge of upgrading the management capabilities of our institutions because I feel that it is a limiting factor to our ability to solve problems as a species. I still work with individual companies. I still write about their experiences right now. A pharma company will have an article coming out on how they are transforming and empowering people and getting into the joys of all that. It's not easy. The more we can share stories of transformation, the better. One of the criticisms, which is to some extent valid for some of the examples we have in the book, but not all of them, is that they were born with those genes or they had the philosophy of like, “What happens if my company isn't like that?”
It’s showing that there is a path and laying that out. That's one priority for me. Part of it is case studies and understanding what companies do. Hopefully, from there, we can extract some broader lessons. That's one thing. The other one is a broader view that tries to create a bit more of an awareness that this is a societal problem. The over-bureaucratization of our economy and institutions is the problem.
It's not just a CEO's problem. It's not even a problem in the corporate sector. It's a problem in our health systems, our scientific research institutions, and our government. The solutions may be different depending on the context, but there needs to be shared awareness. This is a worthwhile problem to solve, and we need to commit to it collectively because you solve this one company at a time. I'm trying to agitate for that. I write and interview people. Hopefully, that will become a bigger part of what I do over the next couple of years.
Irrespective of that, whether there's a financial cost of bureaucracy, to me, it's a tragedy of sorts that Gallup has been reporting for decades that only 30% of people are engaged in their work. That is a disheartening statistic. It has been that way for many years. To me, that's the opportunity. What you want is for people to feel a greater sense of engagement that gets them up in the morning and excited about what they're doing professionally, and not just doing it because it's a job and gives them an income in the work-to-live construct. That's the opportunity in the long run.
I'm digging into the scientific research in the NIH, National Institute of Health, which distributes $30 billion a year for scientific research, and how it has become much more conservative, risk-averse, and bureaucratic. Researchers are spending all this time writing proposals and updating people on milestones for speculative research. You wonder what the cost is of that money not being spent properly by brilliant people who are applying. What is the cost of Alzheimer's drugs or cancer treatments not reaching the market for ten years?
One other example, and this is in a completely different field, is the Department of Defense. The US is behind the curve on hypersonic missiles even though that technology was invented by the US and the early designs were American. One of the reasons for that is that the whole process of developing new systems becomes completely risk-averse. Prototyping is something that we don't do much of. We don't want to fail because if we fail, it's a mark on our careers and the success of our program.
There are wild stories about how in the '60s, they would run hundreds of tests on new missiles they were developing. Failure was expected, and they'd celebrate it. Now they're running 4 or 5 tests per year. There's this complete fear of the test going badly. There’s this reset we need to have around our priorities as institutions. You end up wanting to have more engaged people. The way you get more engaged people is by giving them the opportunity to be more entrepreneurial, to take calculated risks, and to be driven by a passion that they have. That then creates more innovation. More ideas bubble up. Not all of them work, but some of them will.
Eventually, an organization that has that innovation advantage becomes more resilient because it can respond more quickly. It's almost nested. Even though the book is called Humanocracy, and I’m sensitive and passionate about improving the lives of people at work, I come at it almost from a strategy perspective. The reason why we want people to be engaged is we want organizations to be higher performing. You have to look at both. Engagement sucks and we need to improve that, but the way we improve that is through creating a work environment where they can be entrepreneurial. That then creates greater capability and more productivity.
Which would be a win-win.
You would hope. You mentioned the word stuck. I would echo that 100%. We're stuck in this sub-optimal equilibrium. Hopefully, what's happening around us will disrupt things enough that we can land on a higher and better one.
It has been a good discussion. We didn't even get to your broader career background, which is a first for this show. We'll have to do a part two at some point in the future. Thanks. It was certainly thought-provoking. It's been great to catch up. I learned a lot more about the work you've been doing since you left McKinsey. I enjoyed that and appreciate your time.
Thank you. It was a pleasure.
Have a good day.
I'd like to thank Michele for joining me, and for discussing the groundbreaking and thought-provoking work he's doing on organizational dynamics. If you’re ready to take control of you’re career, visit PathWise.io. If you like more regular insights, you can become a PathWise member. Basic membership is free. You can also sign up on the website and the PathWise newsletter or PathWise on LinkedIn, Twitter or Facebook. Thanks. Have a great day.
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About Michele Zanini
Michele Zanini, along with London Business School professor Gary Hamel, is the co-founder of Management Lab, or MLab, which works with leading-edge firms and progressive practitioners to help them create tomorrow’s new practices today.
Michele and Gary are also co-authors of the Wall Street Journal best-selling book, Humanocracy, which discusses the many ways in which top-down power structures and rule-chocked management systems crush creativity and stifle initiative.
Michele started his career as a graduate fellow at the RAND Corporation. He then spent a number of years at McKinsey before co-founding MLab in 2010. He has written a number of articles for the Harvard Business Review, the Financial Times, the McKinsey Quarterly, Fast Company, and Fortune. He also publishes a video series with Fast Company called “The New Human Movement,” which features leading thinkers and doers who are reimagining work, management and capitalism.
Michele is a graduate of Harvard’s Kennedy School of Government, and he earned a PhD in Public Policy Analysis from Pardee RAND Graduate School. He lives and works in the Boston area.