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Is Management an Outmoded Idea?

Renowned scholar, Peter Drucker, said that the greatest 20th century innovation was management. Indeed, with industry ushering in new demands that required planning, decision, organization and market-based action, management as a practice has flourished. In the new century, however, some have claimed management to be an outdated idea, being unable to lead change or adapt to a new reality where knowledge workers must navigate in more technological and fast-moving workplaces.

A recent exhibit of this belief is Zappos, the online shoe and merchandise retailer. Several news outlets have reported that Zappos is eschewing the typical hierarchical reporting structure for a new approach called “holacracy.” While some small firms have reportedly used this approach to replace bosses and create “circles,” Zappos is the largest firm yet (1500 employees) to adopt this latest management fad. Zappos' John Bunch states, “As we scaled, we noticed that the bureaucracy we were all used to was getting in the way of adaptability” (McGregor). Bunch’s implicit conclusion: a management command structure with people reporting to others was the primary culprit in hindering adaptability.

Let’s take a closer look at holacracy, and how it is intended to work — and how much it really is at odds with classical management.

The first key element of holacracy, according to its creator, Brian Robertson, is that instead of organizing people, it organizes around the work. In other words, holacracy first eliminates hierarchical reporting structure because it gets in the way of organization. Robertson depicts a typical firm as a hierarchical mess with the structure littered by a myriad of circles where the work gets done — often involving people from different parts of the structure. So a big part of holacracy involves replacing the boxes with circles (albeit bigger ones). Though rare, this is not a new practice, as companies like W.L. Gore have done away with titles and formal reporting structures for years. The key is that even in systems like holacracy, effective management requires both organization and structure.

Organization is a process where two or more people work together toward some common end. This is not a new phenomenon; it's how most work gets done (some work can be done by individual specialists working alone). Effective organization requires communication between — and commitment from — the contributors. Organization can be informal, of short duration, and often involves people across functions. Most importantly, effective managers are able to foster cooperation by organizing people around clear common ends that focus their efforts effectively. Holacracy’s circles are about fostering organization, but cooperation requires that common ends are established and that the work contexts are maintained.

Structure, on the other hand, allows enterprises to break up the larger endeavor into smaller, more manageable pieces. Structure enables people to concentrate on smaller parts more effectively. Bureaucracy is inevitable partly due to structure, because people can become so focused on their part of the whole that larger goals are compromised or entirely lost (which is why companies do and should restructure periodically). But the essential part of structure is not merely the hierarchical reporting represented by those boxes. More important, it is how work is assigned and accountability created — how expectations for results are established and monitored. The tool of managerial policy is how structure is manifested in companies, including companies that adopt holacracy. Managerial policy is how accountabilities are assigned, authority is delegated and resources allocated. This brings clarity to the work.

According to Robertson, for holacracy to work well, people must be imbued with authority to make “autocratic” decisions. “It is easy to misunderstand [holacracy] as being about building a consensual process," he says. "It actually is not, as most of the decisions made in a company using holacracy are autocratic because when you fill a role it comes with accountabilities and the autocratic authority to make a decision itself. If you want to get input from others you can.” Good managers use structure to effectively assign accountability and delegate authority, even when they eliminate titles. They make both organization and structure their friends. Zappos notes that “there is still structure, and employees’ work is still watched” (McGregor). Translation: there is still management.

It is likely that this latest anti-management fad will not last long — in part because of the complexity of the governance systems it substitutes for titles, boxes and bosses. Hierarchical reporting is a convention of employment that facilitates things like hiring and promotion; it is not the essence of managerial structure. Importantly, the success of Zappos — or any other company using holacracy — will be its ability to utilize the proven management tools of structure and organization to drive results.

That is, success requires managers who can organize people around common ends, who can define and assign work so that decisions are made by people with access to the information, and who make time for planning. No buzzword, trend or fad will ever liberate managers from doing that challenging work, whether they use conventional titles or not.

Sources: McGregor, Jena. “Zappos says goodbye to bosses.” The Washington Post, January 3, 2014. http://m.washingtonpost.com/blogs/on-leadership/wp/2014/01/03/zappos-gets-rid-of-all-managers/?sf21372949=1

Roberson, Brian. “Introducing holacracy: Social technology for purposeful organization." Webinar, 2012. http://www.youtube.com/watch?v=R9Pb7aBWrvg.

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