Gary Hamel - Humanocracy New Edition Part 1

In this episode of The Gary Hamel Series, we explore the principles laid out in 'Humanocracy,' a manifesto that argues for liberating human capabilities from the stranglehold of bureaucracy. We delve into practical strategies for creating more dynamic, innovation-driven organizations. Special guest, Gary Hamel, discusses the economic and social implications of bureaucratic systems and presents alternative management models exemplified by companies like Morningstar and Nucor. We also reflect on personal anecdotes and shared experiences that highlight the soul-crushing effects of traditional bureaucratic structures. Thank you to our sponsor, Kyndryl, for supporting this series focused on harnessing technology for smarter decisions and faster innovation.

 

00:00 Introduction and Sponsor Message

00:58 Overview of Humanocracy

02:08 Gary Hamel's Return and Dedications

02:51 Audience Feedback and Testimonials

05:18 The Problem with Bureaucracy

09:46 Personal Anecdotes and Case Studies

17:37 Economic Implications of Bureaucracy

19:27 The Need for a New Management Model

38:26 Post-Bureaucratic Pioneers

39:28 The Shift in Mindset

39:45 Nucor's People-Centric Approach

41:01 The Bureaucratic Worldview

41:54 The Growth of Bureaucracy

44:04 The Persistence of Bureaucracy

45:44 The Role of Managers

55:29 Morningstar's Self-Management Model

01:01:58 The Importance of Principles

01:07:09 Concluding Thoughts and Future Topics

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Episode Transcript

(00:23):
Before we start into the finaleof the Gary Hamel series, I
want to thank our sponsor ndl.
Kyndryl Runs and Reimagines technologysystems that drive advantage for
the world's leading businesses.
With a unique blend of AI poweredconsulting, built on unmatched
managed service capability.
Kyndryl helps leaders to harness thepower of technology for smarter decisions.

(00:46):
Faster innovation and alasting competitive edge.
They even got me a sign over my shoulder.
There you can find out more aboutKyndryl at K-Y-N-D-R-Y-L Kyndryl.
Today's book is a manifesto and a manual.
It argues persuasively that it's time tofree the human spirit from the shackles

(01:06):
of bureaucracy, and that doing so willproduce profound benefits for individuals,
organizations, economies, and societies.
It also gives managementrenegades practical strategies for
advancing the cause of Humanocracywithin their own organizations.
If you're ready to build an organizationthat's fit for human beings and fit for

(01:27):
the future, this is the book for you.
It's a new edition ofthis book, Humanocracy.
A lot of people have been waiting for it.
It's why we had a bit of a gap inour series on our guest, because he's
launched a brand new edition of this book.
He's currently recording theaudio book version of that.
It's a fantastic book.

(01:48):
Just look at the writings on Amazon.
Massive amount of ratings,500 5-star ratings.
The last I saw, and it has beenexpanded with new examples, new
case studies, and updated dataabout the problem of bureaucracy and
the opportunities for humanocracy.
It is a great pleasure to welcome backfor our final book in the series, the

(02:13):
Author of Humanocracy, Gary Hamel.
Welcome back.
Hi, Aidan, a great pleasureto, , be talking to you again.
It's great to have you back, Gary, andI thought for completeness, I've called
out the dedications that you have on thebook, and this one is to Kelly Duhamel.
So let's give her a bitof a shout out as well.

(02:35):
Thank, thank, thank you for,for, for that very, very much.
It's a very personal story.
I'll leave it at that.
But, , thank, thank you for that, Aidan.
And, thanks for, for persevering throughall of this accumulated body of work.
It's an absolute privilege, man.
I thought I'd just share with yousome of the amazing callouts people

(02:56):
have had, particularly on LinkedIn.
I just picked LinkedIn and I can saytheir name because they've actually
shared this content in LinkedIn.
I don't know all these people.
I've got to know some of thembut to a lady called Kathy
Comfort who shared on LinkedIn.
I've just added up.
I've spent over 14 hours listeningto Gary Hamel on the Innovation Show

(03:17):
Podcast and discuss his books and wehaven't even got to humanocracy yet.
She says, time well spent.
Each one is packed with good stuff.
One recent nugget that stuck in my head isthe idea that habits can supersede values.
Are your habits in line with your values?
That's what you called out,and that's what she echoed.

(03:37):
And then a gent that has listened fromday one, but also that has gone and worked
for one of the companies that you founded.
Strategos a gent called Craig Horton.
And he said, I'm just listening toleading the Revolution, part three,
be Your Own Seer Halfway through andhave already made eight pages of notes.

(03:58):
So shout out to you, Craig.
And finally, Patrick Lawlor.
So Patrick is from the IrishLeague of Credit Unions here in
Ireland, and he wrote a post.
It was his first time writinga post, Gary, and he quoted you
on the show, and that articlehe wrote went absolutely viral.
He said, as I was listening to Competingfor the Future, part two with the

(04:19):
author and strategy expert, Gary Hamel.
Gary said, walk towards the painwhen the future looks difficult,
walk towards the unfamiliar.
And then he said, in the context of thecredit union sector, history has shown
that dominant players who fail to evolveoften pay a steep price, and I just wanted
to share those few of many messages.

(04:41):
I have received a lot privately,backstage, but they were all front stage.
So tip of the hat to you.
Gary Bravo, sir. Bravo.
thank you Aidan for the, wonderfulplatform you've, provided.
And as you so well know, peopleacquire information, learn in
so many different ways today.
And, , books are only one way, butit's always more fun just to have a

(05:05):
conversation and talk about things,I guess, for most people than to
dig through, pages of a large book.
So, it's been super fun and boy, wehave a lot more to talk about too.
Huge amount to talk about.
So let's, talk about thestate of the problem.
So if you don't know what bureaucracymeans, you certainly know what it

(05:25):
feels like it is, particularly ifyou work in a large organization.
Gary has updated since the.
First edition of , Humanocracy tothe latest edition, and a lot of
the problems haven't gone away.
Gary, in those few years, alot of 'em have exasperated.
, they haven't gone away.
We'll come back to this.
I think there's a growing recognition.

(05:45):
I'm actually fairly impressed bythe number of CEOs who are now
raising their hand , and saying,yeah, we have a problem here.
I think it remains to be seen, whetherthey're doing the right things and and
going deep enough, and, for me, writingthis book , and more broadly my work , has

(06:05):
grown out of my first person experience.
I probably, I'm not gonna say livedexperience, but isn't that an overworked
phrase, but my, just my experiencewith people who are deeply frustrated.
Through my career, Aidan , I'vehad the chance to work with so
many amazing people, like reallysmart, clever, committed people.
And yet, when you see these people inorganizational settings, you kind of say

(06:29):
like, why does it seem like everybody'swalking ar around and lead boots, right?
That, that no one is very eagerto make a decision that, every
meeting requires , a pre-meeting.
That if you wanna do anything,literally, almost anything, you gotta get
sign-offs from HR and, legal and so on.
that that often a small screwup is regarded as a bigger

(06:49):
risk than creeping irrelevance.
That hard truths have to be packagedin bubble wrap before you can share
them up or down the chain of command.
That I think often the illusionof consensus is preferable to hard
conversation, that while companieskind of celebrate , diversity is good

(07:10):
only so long as it doesn't produce,genuine dissent, that what people will
call a transformation program leaves98% of the status quo untouched.
Alignment is celebrated even wheneverybody's walking off a cliff.
that, we call people leaderswhen everybody knows they don't

(07:31):
have many willing followers.
That we have all these corporaterituals like performance management,
which everybody knows is basicallytheater has very little impact.
That we willingly, knowinglymistake activity for impact.
All of these things are realitiespeople live with every day.

(07:52):
And in some sense, if you work in almostany sort of an organization to some
degree you have Stockholm Syndrome, right?
I mean, you've kind of just givenin and said like, I can't fight back
and I'm just gonna like whatever.
But no, nobody should have tolive in an organization where
those kinds of things are true.
So for me, that's where this all starts.

(08:14):
Not as like some strategic issue or some,or it's just like, it's like, like life is
too short to work at organizations where,any or often all of those things are true.
And one of the things you say, andthis will speak to the very soul of
so many of these listeners of thisshow, is that in a bureaucracy to be
a maverick is a high risk occupation.

(08:36):
Worst of all bureaucracies are soulcrushing, deprived of any real influence.
Employees disconnect emotionallyfrom their work initiative,
creativity and daring requisitesfor success in the creative economy.
Get left at home.
And I witnessed that Gary, I worked inan organization and I didn't last long,
it was eight months there, but I feltstuff that I'd previously been able to

(08:58):
do in a more entrepreneurial environment.
It was like now I was wearing a fatsuit and I could barely touch my toes.
And like you said, there was10 meetings to the ratio of
one meeting in the other place.
In fact, on the other placeyou didn't even do meetings.
You just took action.
And that's where actually the showwas born from, was actually I got
given out to, for starting the show.

(09:20):
They were like, we weresupposed to meet about this.
I wanna come back on that point,Aidan, that's a really great analogy.
Like walking around in a fat suit.
I wanna come back because like, one ofthe questions is why is this persistent?
And maybe we've touched on this, butmaybe I can go a little deeper this time.
Why is this persisted despiteall of our frustration?

(09:40):
I don't know if I shared this anecdoteand if I did you'll just cut this out.
But, let's take a risk for a moment.
I'm gonna talk for a moment aboutgynecology and about my wife.
So you could like, whatcould go wrong with that?
But , my wife is a gynecologist,an obstetrician has
delivered about 5,000 babies.
And this is just like a personalexperience that, one tiny experience

(10:03):
that brings all of this home.
You know, she, with about four or fiveother partners, women, doctors, they built
this amazing practice over many years.
Had highly satisfied patients.
They loved them, and, so great practice.
And they'd made a goodliving out of it and so on.
And so, like a lot of physicianpractices in North America, they
were, they, this got acquired a fewyears back by a giant hospital group.

(10:28):
And a few months into it, maybe a yearinto it they get a note from the finance
person of this, a finance person, thisbig hospital group saying, we noticed
your practice is like losing moneyand , we needed to talk about this.
And of course, the physicianswho built the practice like.
Like, how could that be?
Like, we're as productiveas we've ever been.

(10:49):
Our billings are strong.
Like we haven't added any morestaff, like, what's going on here?
So , they get a meeting set upand the CFO comes in and says
lemme take you through the data.
So they puts up one, like a one pager,p and l summary and sure enough it's
like a half million dollar loss.
They're going, what the heck?
And so immediately what he said tothem is, you guys gotta cut some costs.
And so what we'd argue is, instead ofhaving nurses, so many nurses, see if

(11:12):
you can get like a lower level provider,maybe medical assistants or somebody
else and see if you can reduce somestaff there and get some lower point.
And the physician golike, no, wait a minute.
These nurses are incredibly skilled.
They're often the ones whoare answering the phone calls
in the middle of the night.
They save us a huge amount of time.
May lets us be more productive.
And the goes say, we have a rulethat, you don't, you only want so

(11:33):
many nurses for so many physiciansand you seem to be overstaffed.
So, these five ladies say like,can we go a little deeper here?
'cause this is not making any sense to us.
So they spend the next hour or so,like going deep through this, , p and l
and finally discover a one line chargecalled corporate services for $500,000.
And they go like, what the hell is that?

(11:54):
And the guy says, without, without anyembarrassment or blushing, he says,
well, everybody has to like, you know,support their share of corporate overhead.
And they go like, thatoverhead adds zero value to us.
Like, why are you taxing usfor a bunch of VPs sitting that
like, don't do anything for us.
So you can imagine it's a fairly kindof contentious meeting, but I just, that

(12:17):
just happens every day in all kinds oforganizations where we layer on these
costs with very uncertain benefits.
And we'll talk about why thathappens and why it grows.
But boy, how demotivating for a groupof people who've built something are
highly successful and then suddenlyyou find you're being taxed for a bunch
of suits that aren't adding any value.
So just a little case study.

(12:38):
Soul crushing is the exact wordthat you use in the book there.
There was one piece I just wanted to pullout, and it's just because it connects
to something that you had planted theseed of earlier on in the whole series.
You said at the time of writing of this,the world contains 433 unicorns, venture
backed companies that boast a marketvalue of over a billion dollars or more.

(13:00):
While these companies get a lot of press,they are a relatively small part of the
respective economies in which they sit.
In early 2020, US backed unicorns hada combined value of over $650 billion.
That seems like a big number,but at the time amounted to just
slightly more than 2% of the combinedmarket value of the s and p 500.

(13:24):
And this is the key point.
While entrepreneurial enclaves likeSilicon Valley are important, we need to
find ways to turn up the entrepreneurialflame in every organization.
I think that if there's anything elseand a drive from sharing this work
is to save those bigger companiesthat have often become bureaucracies
because we actually need them.

(13:45):
We need them for society,we need them for jobs.
I dunno if you saw last week the whatthe Wall Street Journal published, a
swathe of companies that are lettinggo of lots of people to prefer
smaller teams and teams that aremore broad skilled, that can use ai.
yeah, so let's a couple of things there.
So the first thing is there has been,and rightly so, I. A great hope that

(14:12):
startups will revitalize our economies.
They'll hold the big, companies toaccount , create new jobs, create new
wealth, and that's certainly happened,but nowhere near fast enough or broadly
enough to make up for the lack of,dynamism in a lot of these, even medium
size and larger, lemme say, longer lived.

(14:32):
It's less about size maybe than howlong they've been around, but in
some of these longer lived companies.
And, I think the data, wecan update that a little bit.
I think at the moment, unicorns are aboutfour and a half percent of the value,
and that includes like big unicorns, likeSpaceX, about four and a half percent
of the s and p 500 I think in Europe.

(14:53):
If you take eu, Switzerland, andGreat Britain the unicorns there
are worth about one and halfpercent of the European s and p 350.
So
those are just, are not big numbers.
And of course, some of these companieswe hope will grow up and one day
be, extraordinarily, impactful.
Having said that, if you look atin, in the US stock market, like the

(15:14):
Magnificent seven, the Amazon, Nvidia,apple, and so on of this world, but
that have largely driven the performanceof the US stock market, right?
Way overweighted in terms of theirimpact on the US stock market.
The average age of those companiesis 33 years, These are not, young
companies and like, where's thatnext, where's the next Mag seven?

(15:35):
Well, maybe it'll come, but we've beenwaiting for quite some time and some time.
We might have mentioned this before.
Let's come back to this 'cause I'll giveyou the exact data, but there's a lot of
evidence that large companies are becomingmore entrenched and we'll talk about this
specifically and that it's getting harderfor newcomers to penetrate those defenses.

(15:55):
So, yeah, you cannot build a dynamiceconomy in Ireland, great Britain,
Germany, United States, anywherearound the world, unless, you know,
most of your institutions are trulydynamic, including the biggest
ones, particularly the biggest ones.
So that's an absolute fact.
Now, the thing about kind of thecurrent, preference for, , de

(16:16):
layering and downsizing, thisobviously goes in cycles, right?
We go all the way.
You just go all the way back and everytime you know, you have a recession
or times get tough, companies do that.
The problem, Aidan, is it's oftenlike mowing the grass like they do it.
yet without some like deeper, morefundamental change, like the grass

(16:38):
just grows back and then, a decade ortwo later you have the same problem.
I got kind of curious, thiscurrent enthusiasm for de layering.
I put that term into Google Ngram,which kind of gives you a measure
of how popular some of thesewords are in books and so on.
So I put an organizational de layering
there was a huge, uptick in thatback in, the early two thousands

(17:03):
after the.com boom and so on.
And then a bit with the financialboom, and then like the thing
just completely disappears again,like nobody's talking about it.
So we're gonna go throughthat, you know, thing again.
Will we have deeper, morefundamental changes this time?
I think the jury is still out and we'regonna talk about how do you ensure
you really do have deep and permanentchange, but experience suggests that

(17:28):
we'll kind of take some costs out.
We'll flatten it a bit, butwe really won't change the
organization in a fundamental way.
And that's what I'mgonna argue we have to do
.With Gary's permission, I have a few graphs that I'd love Gary to talk us
through, and I'll just give you a littlebit of , , an excerpt to tee this one up.
Bureaucracy's tumor like growth.
I love, I love this writinghas coincided with a notable

(17:51):
slowdown in productivity growth.
Over the past decade, US non-farmproductivity grew by just 1.7% a year,
and a meager 1.9% annually since 1970, andthis compares poorly with the 2.8% rate
of growth achieved between 1909 and 1969.

(18:14):
Most of the world's major economieshave experienced similar declines,
and that's what Gary's gonna speak to.
Hopefully those people,you're watching us on YouTube.
If you're not Gary, we'll justgive people a bit of empathy to
describe what we're looking at here.
In a time where we'reactually getting rid of jobs.
I, I felt that was really importantand we, we'll talk about companies

(18:35):
like particularly New New NuCorp andthe broad skill basis that they hire
for actually learnability because theyknow people are gonna have to change
roles throughout the company as well.
We'll, we'll I'm justplanting that seed now.
But really interestingly, Gary, I was,I was, I listened to the audio book of
Humancracy as well as read it and I waslistening 'cause I was traveling a lot

(18:57):
recently and I also varied between that.
I listened to some old Andy Grove.
Lectures that are online.
But I also listened to the late DonellaMeadows who, who was the systems thinking
lady, and she was talk, she talks aboutnature and you just brought it to mind.
Speaking about it there.
She talked about they never, in systemsthinkers, they never blame people.

(19:20):
They blame the systemsin which they're couched.
So she said, like, the systems we livein at the moment are, are very broken.
And I thought it was a perfect seguebecause you suggest a new management
model, which is essentially a systembecause one of the beliefs of, of
humanocracy versus bureaucracy is theactual system of how a company is run is

(19:41):
broken for the times that we're in today.
So I'm showing on the screen herethe management model that Gary
recommends for humanocracy Maybeyou'll talk us through this one, Gary.
again, the context here is I thinkthere are three equally valid
and critical reasons for sayingwe need to fundamentally rethink

(20:02):
how our organizations are run.
There's a social reason that, it'sjust iniquitous to waste as much
human capacity as we're doing.
I think there's a competitive reason.
You see a set of companies particularlycoming outta China, Xiaomi, Haier, BYD,
Huawei and so on, who basically aren'tstarting with the old bureaucratic model.

(20:25):
They're starting with the idea thathowever big an organization is, it has
to maintain this entrepreneurial energy.
And they're succeeding, I think,in many ways in doing that.
So there's definitely acompetitive challenge here.
You can't have , a resilient societywithout resilient organizations.
And there's an economicchallenge, which this speaks to.
So it's really kind of amazing.
Aidan, if you look again overthe last 23 years, what we see

(20:48):
is declining productivity growthdramatically across the entire G seven.
So that data you see in the US is exactlythe same line for all , major economies.
And the implications of that , as anyeconomist or, or central bank or whoever
will tell you, are very very profound.
Because if you have slowing productivitygrowth that means you are not creating

(21:13):
the excess wealth in a society thatallows you to fund education, healthcare,
environment, defense, and all theseother things that, that we need to fund.
Most, governments, in developed countriesare now in some kind of a fiscal crisis.
With one or two exceptions.
State borrowing is at an all timehigh . You governments are faced with

(21:34):
these impossible choices about, do wefund defense or do we fund healthcare?
And so on.
And unless you're creating, constantlyproductivity is growing, you just
end up with a, with a set of verypolitically difficult trade-offs
and obviously standards of livingdo not go up in that environment.
Overall the wealthy can stilldo very, very well and they

(21:55):
have done very, very well.
Let's come back to that.
But over overall, slowing productivitygrowth means you're probably gonna also
have more wage disparity with all thepolitical implications that brings.
And what's kind of ironic, I would argueis that that productivity slowdown Aidan
come at the same time we're investingrecords amount in information technology.

(22:20):
And so we're spending closenow in current dollars.
We're spending a little bit lessthan $4 trillion a year globally
on information technology.
And that has kind of doubled overthe last 20 years in real terms.
So you go like, how the heck is it?
Investment is going like this andproductivity is going the other way.

(22:41):
And this is a super complicated issue.
A lot of people have opinions on this.
I, I certainly would not arguethat technology isn't helping
productivity, but to the extent thatit is, and I think that extent is
often overrated to the extent that itis, there are other things that are
absorbing those gains thatare offsetting those gains.

(23:04):
Without getting into a long discussionabout where I AI may go, if you think
about, okay, what do we see over the last,like I'm old enough now to remember this.
You look over the last, 50 some yearsand like wave after wave of kind of
technology change and from semiconductorsto mainframe computers to personal
computers to the smartphone, to GPS,to DA data analytics, to big data

(23:26):
to cloud computing 5G and whatever.
And that's all great, but of thosetechnologies collectively and we still
have declining productivity growth.
So you'd have to believe that AI isgoing to do something that 50 years of
other technologies, very consequentialtechnologies like e-commerce

(23:48):
have somehow not managed to do.
and I think that's a fairly, , aiwe're all gonna use it.
It's gonna be transformative in manyways, but I'm a little skeptical that by
itself is gonna make much of a differenceto productivity growth, and I. lot of the
people who've looked at this deeply NobelPrize winning economists have come to
the same conclusion that it's unlikely.

(24:09):
So, that's a problem.
And we'll dig into this, but my senseAidan, probably the only way we're
gonna turn that, like slow productivitydecline, we're gonna turn that around,
is we have to get fundamentally better atusing human ingenuity human initiative.

(24:31):
And we can no longer justafford, to squander it the way
we white might once have done.
In the same way that, 20, 30 yearsago, nobody was caring about how
much carbon we pumped into theatmosphere, what we were doing to our
rivers and our lakes and the ocean.
And then you say, okay, crap,this is unsustainable, right?
Like, we gotta turn this thing around.
Well, I think we're in a similar position.
We've grown accustomed to thisenormous waste of human capacity.

(24:58):
but okay, no, we can't just becontent with that any longer.
Because our future prosperity depends,and as, as well as our leadership
in a lot of critical next generationindustries depends on creating
more dynamic organizations thatbetter use the people within them.
So that little slide there,that is the economic, for me.

(25:22):
That's why economically what we're talkingabout here is so fundamentally important.
in a time where we'reactually getting rid of jobs.
I felt that was reallyimportant and we'll talk about
companies like particularly new.
NuCorp and the broad skill basis that theyhire for actually learnability because
they know people are gonna have to changeroles throughout the company as well.

(25:42):
I'm just planting that seed now.
But really interestingly, Gary, Ilistened to the audio book of Humancracy
as well as read it and I was listening'cause I was traveling a lot recently
and I also varied between that.
I listened to some old AndyGrove lectures that are online.
But I also listened to the lateDonella Meadows who was the systems

(26:05):
thinking lady, and she talks aboutnature and you just brought it to mind.
Speaking about it there.
In systems thinkers,they never blame people.
They blame the systemsin which they're couched.
So she said, the systems we live inat the moment are, are very broken.
And I thought it was a perfect seguebecause you suggest a new management
model, which is essentially a systembecause one of the beliefs of humanocracy

(26:30):
versus bureaucracy is the actual systemof how a company is run is broken
for the times that we're in today.
So I'm showing on the screenhere the management model that
Gary recommends for humanocracy.
Maybe you'll talk usthrough this one, Gary.
Most people today are very familiar withthe idea of a business model, right?
What's the value proposition?

(26:50):
What's the product?
What channels are you going to go through?
You know, what's your pricing strategy?
All those elements that, thatcomprise a business model.
But maybe we talk a little bit lessabout the management model, which is
just all the system structures andprocesses we use to run our organization.
And, you know, I've tried tobreak that down here into kind
of the typical major elements.

(27:12):
You know, we have some kindof an innovation system.
We certainly have a lot offinancial management, people,
management, our planning, ourperformance management, so on.
And then underneath that is kind ofarchitecture of the structures we
use and how we divided up the tasks,how we define them, you know, the
internal networks and so on, and,and the information technology.
So the argument, I think we're gonnahave here the discussion, Aidan, is we

(27:34):
have to be able to completely reimagineevery element of this and that, you
know, all all of these things in, ina kind of traditional organization,
a bureaucratic organization, all ofthese systems hang together, right?
This is an integrated piece and theyall, they all share information and
a lot of processes cut across here.
And most importantly, they're all based,and we'll come back to this, but they're

(27:55):
all based on the same set of kind ofbureaucratic principles of routinization,
formalization, standardization,specialization, stratification, and so on.
And if you see organizationsstruggling in similar ways then,
, there's something that's ratherdeep and fundamental to that.

(28:16):
And I think it's this,it's the management model.
Now this is a genericrepresentation of that.
When you dig into all these structuresand systems, what you find is, they're
all built on that old bureaucratic model.
That assumption that powertrickles down, that big leaders
appoint little leaders that, that,people cannot manage themselves.
That more control is alwaysbetter than less control.

(28:37):
That control is best to come fromoversight and rules and policies.
That what people reallycare about is promotion.
And that's the game we're gonna play,is we're all gonna compete together.
I mean, all those assumptions are deeplyburied, into this, management model.
And, to your point there,where you started , about
thinking of this as a system,

(28:59):
we're, we'll talk at some point aboutBill Anderson, who led this amazing
transformation within within, Roche,pharmaceuticals second biggest pharma
company in the world, and is now in themidst of doing something similar, maybe
even bolder at Bayer in, in, in Germany.
And of the things he said, and Idon't have the quote in front of
me, but I'll give you a pretty closeapproximation, when they started, he

(29:22):
said, we had tried a lot of thingsover many years and people were still
telling me we couldn't get things done.
And so he said, we could have done somenext round of kind of process updates
and transformational this and that.
And he said it would've been totallydemoralizing 'cause we've been
doing that for a long, long time.
And it wasn't changinganything fundamental.

(29:44):
And then he said this, I had to admit thatsomething was wrong with the whole system.
Now that is a really profound thingto say because it's saying no way we
can build a fundamentally more capableorganization with point solutions.

(30:04):
Because what leaders, what CEOsoften want is just tell me that
one thing we need to change.
I'll, give that as an assignmentto some Vice President EVP.
They'll go talk to the consultantsand come back in six months and
tell me like, this is fixed.
Right?
And what Bill was saying is,no, everything has to change.

(30:25):
Somebody at Roche also put it another way.
They said, we're gonna have totear everything back to the studs.
In other words, just the basic framingof this thing, everything else comes out.
And now sounds like, that's impossible,or that would be hugely disruptive, or,
that could go terribly wrong and youcould bring an organization to its knees.
So we can come back and a bit laterwe'll talk about like, how do you

(30:45):
do that without blowing things upand taking big operational risks.
But if you don't start by saying theold model is broken like everywhere
and we have to search for somethingthe other, if you don't start there,
you'll end up with small incrementalfixes that will change nothing.
And that's my concern, with the currentkind of de layering and downsizing.

(31:07):
Okay.
I've seen that movie afew times in my career.
So we'll see where that leads, butI think that's why, you really do
have to take a system perspective.
And the dilemma is the moment yousay, let's think about the system,
you're talking about something that'svery complex and very interrelated

(31:27):
and it was built over a long time.
And I think just the idea oftrying to change the system is
immensely daunting to many leaders.
and has very little reward, Gary as well.
I think in the short term and thatthing about the short term that the
lifespan of leaders has got less.
One of the things I picked up isthat leaders are a little bit older.

(31:49):
I think three years older thanthey used to be, but their
lifespans as leaders is less.
So this whole idea of why would Ibother taking on such a big challenge?
Because it's often not rewarded fromstakeholder, shareholders, board members.
Yeah, I mean,
I guess you can kind of blameit on the shareholders or so on,

(32:12):
but, you know, most of the, mostof the, the, the stakeholders,
they're not content withwhere the system is either.
And I think as we'll see, you canmake these changes without, these are
not, these are hard changes to make.
They're not necessarily expensivechanges to make, nor, are

(32:33):
they going to blow things up?
So if you assume that.
Deep change and this is an assumptionbased on kind of the way we change and
the change model we've used in the past.
But if you start with an assumption thatevery deep change is gonna be highly
disruptive to the organization andand take way longer than what we were
promised and whatever, then you go like,my God, like it, it was hard enough when

(32:55):
we just changed the IT system and, wewent through private cloud or something.
My god, you're saying we're gonna change.
So you also, and again, somethingwe'll talk about, you have to find
a very different way of changingbecause Yeah, if, like, who's gonna
do something that's this hard?
If what, even when we change smallthings, you know, we basically end
up you know, in cardiac arrest.

(33:16):
But, and I will also say in theorganizations where I've tracked this
and looked at these long change processesand, and, and, and help to lead them on
occasion, the gains come very quickly.
Right.
There's, there's so much potentialityin, in an organization when you kind
of take off the lid on the pressurecooker, it's not that like, oh my

(33:39):
gosh, you know, we're gonna have towait a year before we get a payoff.
You know, like, no, no, you,you, like, you, you give people
a little bit more freedom.
Uh, you teach 'em to, to think alittle bit more like business people.
You get some bureaucracy outta theway you, things will start to get
better, like super, super fast.
So again, this is not like, Hey,we're gonna spend 10 years investing

(33:59):
in some technology and hope it works.
This is like, no, let's just geta few things outta the way the
payoff comes almost immediate.
But if you want it to be aDNA level change and persist
and for that bureaucraticcrap never to grow back, yeah.
Then it's gonna take perseverance.
I wanted to just as well explain theexamples are so clear and they're so

(34:20):
well laid out, Nucor, you know, Nucor,empower everybody to be entrepreneurial.
Haier for me was well actuallyempower 'em to be entrepreneurs
and they were system changes.
There were re reward changes,they were accountability changes.
They were upskilling people.
Investing in that upskilling, flatteningthe organization, listening to the edges.

(34:43):
And they aren't like, as yousay, they're not massive changes.
They're just changes in the way you dothings and your change as you as a leader
to be able to empower those things.
And I thought it was important, Gary, aswell be before we go into any examples
or build on this to, to explain thedifference between Humanocracy 'cause.
I don't know if anybody who hasn'tread this book knows this, that

(35:05):
it's not just a catchy title.
It's actually an operating system forhow you need to be versus a bureaucracy.
So there's a diagram againin the book where Gary shows
the difference between both.
But I'd love you to share this,Gary and talk audience through it.
yeah, let, yeah.
So, but I also want to come back.
So remind me 'cause what, what,what, what, there's a couple

(35:27):
things we touched on earlier Ishould probably amplify, but, but
you know, one, one of the thingsI argue in the book is that you
reach a point in any field of humanendeavor where you can't solve the
new problems with the old principles.
So the one class, thereare many classic examples.

(35:48):
Well, I'll maybe give a couple quick ones.
So if, if you are John Locke in theearly 17th century and you start to
think about individual sovereignty,of the state, the Monarch, but of the
individual, nobody probably really everhad that thought before in human history.
And it wasn't only John Locke,but there are other people that,
that kind of emerged as thisidea out of the enlightenment.

(36:10):
And then you go, okay, like, wow.
So what does that mean interms of self-government?
So that new worldviewpoints you to a new problem.
Like how do, how canpeople govern themselves?
And then you end up withthe idea of democracy.
So I think we're at a pointwhere what we really need is not

(36:31):
better practices and processes.
We need better thinking andbetter starting principles and
a better starting worldview.
And I'd like to come back and we'll talkabout this in a slightly more structured
way, but let me say that the worldview,and we'll talk to this you have here, the
diagram for most of us, the kind of ourworldview are, paradigmatic assumptions.

(36:54):
Why do people go to work?
Why do organizations exist?
You know, what's thepurpose of capitalism?
Right?
Those beliefs are so deeply embeddedin, in the zeitgeist, right?
That we never questioned 'em.
We inherited them, we neverquestioned them, right?
one of the deepest beliefs of all,and that old bureaucratic model is
that individuals are instruments.

(37:18):
So the institution, a business school,a bank, whatever, they hire people to,
produce some kind of output, probably,services, products, and profit.
And in that view thehuman being is a tool.
just, and that's why we callthem human resources, right?

(37:38):
Terrible word or phrase human capital.
And so, you know, if you've everbeen in a relationship where you
are seen as an instrument, right?
Like sometimes people havecalled me a tool, but I think
they meant something else.
I'm not sure what that was, but whatever.
Uh, but if you are seen as an instrument,like that's a bad relationship, right?

(37:59):
You're just, you're just ameans for somebody else to
get what they want, right?
And you are incidental to their needs andyou just are in service to their needs.
But that thinking, you know, that,that, that view of, of, of human
beings at work is deeply, deeplyembedded in that bureaucratic model.
You know, you, you, you hear leadersabout my people like, what the hell?

(38:20):
Like, how are they your people?
Right?
We do not have like slavery.
So.
So almost all of the organizations, whatI would call kind of the post bureaucratic
pioneers who showing us a differentway, they start with that second model.
And, but we'll come back to how, like,how does that work out in all kinds
of systems, structures, processes.

(38:40):
they start with a belief thatit is the institution that's the
instrument, not the human being.
So I joined the London BusinessSchool, like I don't think the
London Business School hired me.
You know, I had more than one choice,saw them as a wonderful platform
with colleagues and students and, andhelping me make an impact in the world.
And, you know, and, and I think that'show most young people view work today.

(39:08):
and, and to the extent view work as anecessary evil and, you know, something
like, okay, fine, I gotta do it because I,well then, then they're in an organization
that's still managing that old model.
Uh, if they see it as, wow, thisis an amazing place to work where
I can solve really interestingproblems and make an impact in
the world, and yes, earn a living.

(39:28):
So I think, you know, this lookslike a very subtle switch, right?
Like, what's the instrument here?
What's the tool?
But this, that shift in mindsets isat the core of everything that you
see in these vanguard organizations.
We'll, we'll talk aboutNucor, but it's interesting.

(39:49):
When I was talking to one of theirpast CEOs, he said, you know,
they operate in a lot of fairlyimpoverished rural areas across America.
You know, they use the local workforce.
These are not people who've beento you know, Ivy League schools
and have all kinds of credentials,but they get extraordinary results.

(40:09):
And he said, we never think we're inthe business of, of building steel.
We're in the business of building people.
And if you build people,you build communities.
And if you build a great community,you can build a great company . And
you go like, wow, that's like how manycompanies would start with that, right?
And so I, I just think so often Aidan,we haven't like asked backwards, right?

(40:33):
So it's like we start from thatoutput and then work back, okay, yeah,
we need some people and whatever.
And yeah, that will just never,you know, you'll never have a truly
great institution over the long termwithout, with that point of view.
So, so there are other kind of muchmore practical differences between
that bureaucratic, but this, that'sperhaps the most foundational.

(40:55):
And when you start there withthat kind of worldview, it points
you in different directions.
So the bureaucratic worldview, theproblem to solve was how do we maximize
compliance for the sake of efficiency?
Which is, by the way, a veryinteresting problem to solve if most
of your employees are illiterate.
And you're trying to scale up somethingin your Ford or your whatever,

(41:16):
and you need people to show up intime and do what they're told and,
you know, not drink on the job.
And you know, okay, yeah.
Like we gotta figure outhow to get compliance.
But I would argue today the problemis not how do you maximize compliance
for the sake of efficiency, buthow do you maximize contribution
for the sake of impact ? Efficiencyis table stakes, right?
So and we know a lot, we know a lotabout what drives human achievement

(41:41):
we are using almost none of whatwe know inside of our organization.
So, but let me lemme just come backvery briefly to one other thing.
You know, you had that, youhad the diagram up on up
on, declining productivity.
Well, what's also happened over thatlast 30, 40 years is the growth of
the administrative and managerial.
Class.

(42:02):
in the United States, and I mighthave shared this data at some
point Aidan, but we, we definitelyneed to come back to this.
you look since 1983, and I can giveyou data for the uk, Germany, in
different countries, but since 1983
the number of administrativeand managerial jobs in the US
workforce has grown by 150%.

(42:24):
And all other job categories,as you see here, all of the job
categories have grown by about 50%.
And go, okay, so, and, and by the way,if you look at this from a micro basis,
my colleague Michele has been doing thisjust about every large organization,
revenue per vice president is going downbecause we're adding vice presidents

(42:49):
faster than we're, growing the company.
And so, and, and by the way, issuper, super typical what happens
in almost every organization.
Is you reach an inflection point fairlyearly on where bureaucracy starts growing
faster than the organization itself.
So more rules, more procedures, moreadministrators, more managers and so on.

(43:14):
And that never reverses untilone day there's a crisis and
something dramatic changes.
So what, what what you see in this, youknow, by the way, if I, if I showed you
the data right now for uk civil service,you see exactly the same data number
of administrators up by about 150%.
Number of managers is kind of doubled.

(43:34):
And all other employment in the UK civilservice is, flat over the last 20 years.
And so we're just addingmore and more bureaucracy.
And so I, you know, causality isa little difficult to prove here,
but I'm at least suspicious Aidan.
if you look at the growth of bureaucracygoing one way and productivity growth

(43:54):
going the other way, maybe there'ssomething we gotta look at here.
And yeah.
So you, you do come back, I think,to quite an interesting question.
Like, you know, why, why, whyhas bureaucracy continued?
Like why does this thingseem untamable, right?
Because obviously it, it doesn'tgrow absent human intentions, right?

(44:16):
There's not some malevolent forceout there that is like doing this,
we're doing this to ourselves,
The thing, Gary, I, I just, I, I don'tget, and maybe it's because I've tasted
what it's like not to do that type ofwork, is that , the people who get into
those jobs, I mean, it's meaningless.
It's, it, it, it, I don't, I.There's no, as you talk about

(44:39):
that, there's no noble quest.
There's no driving vision for that work.
You know, I know, I know.
You need, you need administration, youneed some administration bureaucracy.
But when that becomes protectionismof those roles for no other goals
other than to have the roles, it mustbe demoralizing to be in the role.

(45:00):
'cause you're living in stressand you're living in in misery.
You know, unless you don'tknow what you don't know.
Yeah, I, I think that's true, Aidan.
Now it's amazing.
As human beings we're, we'reable to get acclimated to all
kinds of very substandard.
People will stay in a badrelationship for years and years

(45:21):
and years because of the inertia.
But I think you're right.
You know, I've often said that I'venever met a 12-year-old who says
they want to grow up to be a manager.
So, you know, when I'm talking tomanagers, I gotta tell 'em like,
somewhere you guys took a wrong turn.
Like, I dunno what happened to you,but I. Like this, this was never

(45:41):
your vision of your best life.
So it's important to understandlike how we, how, how we got there.
And, and let me provide justa little bit of context there.
Like, one of the reason we gotthere is, you know, if you go back
a hundred and some years when, youknow, we were starting to build large
scale organizations, administrativeskills were very, very rare.

(46:03):
So being a be, you know, understandinghow to be a manager, like how to do a
budget and how to put together a, a planand how to motivate people and how to
keep track of their work and how to dotasks design, you know, all the stuff
that Peter Drucker wrote about his,his whole career, you know, that was
super, super rare all those years ago.
All those, all those decades ago,it was like being a geneticist or
a data scientist, AI expert today.

(46:26):
so at that time, that was like apretty cool, exotic thing to be.
And, uh, you know, and was reallystretching that's like, not true anymore.
So, so why is it that, that.
This thing continues to expand, like,like an invasive species with no
natural predators, local predators.
So I think there's several reasons IJIjust ask our listeners to kind of reflect

(46:49):
on this for a moment and say like,like, does Gary have this right or not?
And if I don't like, or if you seesomething else going on, like, you know,
maybe put it in the comments here, butone, in most organizations, at some point,
the only way you can move farther in yourcareer is to join the managerial ranks.
So, because, you know, at the top ofan organization, it's all managers.

(47:10):
Now they can be managers of marketingand, and finance, whatever, but it's
no longer just technical expertise.
Now I am somebody who most of my time isspent managing other people who may or
may not need managing, but that's my job.
So inevitably you push people into thoseroles whether they want to be in that
role or not, and many of them don't.
Or they took one for the team.

(47:32):
Somebody left and said, okay, yeah,crap, we have to have a manager.
I'll go do that job.
And those are also the jobs that arethe best paid . if you wanna move up
in an organization at some point, theonly choice is to make that shift into
an administrative or managerial role.
So that's one reason this keeps andbecause they tend to be higher paid.

(47:52):
If you want to reward people, youcreate more of those jobs, which
is one of those reasons, we'recreating managerial jobs far fast.
Another because we're, we're not payingthe people on the front lines anymore.
So if you're exceptional and youwant somebody to recognize them,
you move 'em into these one.
So that's number one.
I think number two,once you kind of havethat bureaucratic mindset, your solution

(48:13):
to every new problem is more bureaucracy.
So like, we're in a world where there areproblems, , proliferating all the time and
you see a new problem, what does it mean?
We need another CXO, we need morereporting, we need new rules,
we need new policies and so on.
So as the world becomes morecomplex, , we don't say, Hey, is there
a better way to deal with complexity?
We just keep adding more bureaucracybecause that's what we do.

(48:35):
I think thirdly, and this is reallyrather pernicious, but again,
let people tell, tell, tell us,tell me whether I got this right.
I think bureaucracies offer alot of jobs that are a safe haven
from genuine accountability.
So there are a lot of jobs inbureaucracies where you are not really
accountable to truly the outside world.

(48:58):
There are all kinds of things betweenyou and the customer, the stakeholders,
the shareholders, and so on.
So you've negotiated a set of KPIsor other targets internally with
other people that are often, proxiesfor real value added, like, let.
And, and, and pardon me if I usethis example before Aidan, but you
know, one of the things I I put upon excellence is a little question.

(49:20):
I said, would you rather have ajob as chief Revenue Officer or
head of sales in your organization?
Let's say it's well paid halfa million dollars a year, or as
head of training development alsohalf a million dollars a year.
And most people want the trainingand development job because it's
hard to measure value added.
So, you know, bureaucracies cultivatemediocrity because so many roles

(49:46):
they really are not directlyaccountable and nobody can fire you.
I think you know, another reason is thosewho've done well in a bureaucratic model,
those who've learned how to play thegame , who've learned how to manage up
and negotiate targets and so on and on.
Like why do they wanna change it?
I mean, if you're a great footballeryou know, you probably don't

(50:08):
wanna play rugby or badminton.
So even though you may find a lot ofleaders saying, yeah, bureaucracy kind
of sucks, we need like, really arelike, are, are you really willing?
If, if that's what you've learnedhow to do and that is what got
you ahead, you really want tokind of fundamentally undo that
.Which kind of leads to the fifth and last thing.
You know, bureaucracy is just a wayof allocating power at one level.

(50:32):
And, you know, people have powerare reluctant to give it up.
And we, and will give youreasons why they need more of it.
And, and, and the number onereason is we have to make sure
everybody's doing it the same way.
Right.
We need, we need to haveonly one way of doing it.
One system.
Well, and like, and I'm gonna run it.
So I think, you know, that's it.
We force people into managerial roles.

(50:53):
We look at every new problem and tryto solve it through bureaucratic means.
Bureaucracy gives peoplekind of protection from their
own mediocrity in a way.
The people who've donewell by it wanna keep it.
And you know, if you have a lotof power, you're near the top.
Like, you're not gonna give it away.

(51:13):
And I think maybe there's other things,but I think those are the primary reasons.
This whole thing has been, been so sticky.
You know,
I mean, the, the, the, the questionI'd maybe like people to reflect
on is like, how does bureaucracyshow up in your organization?
How, how do you experience thatevery day in ways that slow you down?

(51:36):
kind of undermine your commitment,undermine your enthusiasm, make
collaboration difficult, rewardthe wrong behaviors, because I, you
know, we, we really wanna, we'regonna talk about how to solve this.
for sure.
I don't wanna leave peoplehanging on this, but,
you know, as we talked about today,Aidan, the starting point is you

(51:56):
gotta say the system is broken.
You gotta admit that.
You know, one of the questions I, I ask,
CEOs, I say, can you imagine anorganization that is as different
from the bureaucratic model as chat?
GPT is different from Google search,or as Netflix is different from the
B, BC. And so, you know, openingyour minds to at least the idea that

(52:23):
there may be a radical alternative.
Being willing to say, yeah, we haveto change the whole damn system.
Sorry to say, for me, those are thecritical starting points on this journey.
And so we'll get to the practicalityand whatever, but if you're not
there yet, if you can't say ifthe system is broken, there's no.

(52:45):
Plaster, no bandage, no we'rejust not gonna solve it that way.
You know, you can't solveobesity through amputation.
And number two, and you knowwhat, maybe there's something
fundamentally better out there.
Once you open your mind to those twothings, genuine progress is possible.
Until that point, you're stuck.

(53:06):
I love that.
I ju I just wanted, some ozempic.
You took my arms, man, you took my arms.
Or better yet, get on thedamn treadmill and exercise.
You know, I, I used the term many yearsago back in competing for the future.
I called it corporate anorexia.
Yeah.
Yeah.
And, um, yeah, I mean, you, you, you,you don't starve your way to health,

(53:31):
but a diet sometimes is useful.
Yeah.
Gary, I thought, I thought we'd leavewith, , a moment of hope and beautiful
case study, and I'm sure a lot ofpeople use this company's products,
but never, never know what they do, orcertainly not the name of the company.
Well, just, I'll just be as a,as a contrast, Gary mentions as

(53:52):
well at the end of part one to theformer CEO of SAP, Jim Hagemann.
uh, I think that's how you say his namediscovered at the end of his tenure
with SAP that the company was using.
Get a load of this 5,000, at least KPIs,key performance indicators, covering
every single job across the company.

(54:14):
And he was horrified.
He said, we were trying to run thecompany by remote control and we had
all this amazing talent, but had askedthem to put their brains on ice and.
We are told to do this KPIsthat are important and all that.
We need some type of measure tosee if we're making progress, but
it can absolutely be paralizingand an an absolute difference.

(54:37):
A a total other side of the coin is adecentralized model, and that's the one
of Morningstar and Chris Roofer, who's theCEO founder and president of that company.
I'd love you to tell us about this asa moment of hope and what's possible.
Yeah, it is, it's like super amazingand super hopeful and yeah, that, that

(54:57):
5,000 KPIs, it, I, I don't want to castdispersion, but it does affect a certain
kind of arrogance that like, we're smartenough to deconstruct success into all
these major subsidiary majors and so on.
And if everybody just does and hitstheir numbers, like it's gonna add up.
And of course the dilemma withthat is, , you end up with an
organization where people feelthey only need to meet that target.

(55:19):
And they don't need to do more.
So you've actually capped theorganization's performance.
And number two, if the worldchanges, they're still gonna
try to meet that target, right?
Even if, so Morningstar is very different.
You know, it, it's, it's thecompany that probably started me
now, 15, 17, 18 years ago before Iworked with hire or anything else.
It started me down this quest.
Somebody told me about theworld's largest tomato processor.

(55:40):
This is not a glamoroushigh tech industry.
It's maybe about 150 miles from whereI'm sitting talking to you today.
It's out in the central.
Valley of California, one ofthe most verdant, agricultural,
regions of the world.
And, unlike basically every otherVanguard I will talk about, it was
started with somebody with an MBA,came out of a traditional business
school, but didn't like what he learned.

(56:01):
And Chris Roofer, by the way, he'snot the CEO, he's the president,
the founder of the owner.
But he said like, why, how, why,who, like, why am I the ceo?
I have, we, we need a president.
Legally you have to have a, you know,legal, but like, I'm not the ceo.
But anyway, so he built a modelbased on self-management and
like this was way before like.
Almost anybody was talking about this.

(56:22):
I'm guessing this started maybe inthe eighties at, at, at the latest.
And so they have an organization.
I can't tell you right nowhow many employees they have.
It's several hundred,four or 500 employees.
They the largest, committedprocess in the world.
So if you've had, , you know, spaghettisauce or, salsa or ketchup or whatever,
and they export all over the world.

(56:44):
And, and they are unbelievably productive.
They've bought out a lot oftheir other competitors and they,
they're just the best in the world.
And so.
When I went to kind of, and I learneda little bit when I went there,
it was like the craziest thing.
First of all, they have nomanagers at all, like, like zero.
Everybody, they're organizinginto teams, but, and, and people

(57:04):
write contracts with their peers.
So let's say I'm responsible forunloading and sorting tomatoes as they
come off the trucks out of the fields.
So I'll write a contract that, iswith the truckers of how quickly I'm
gonna get the stuff off of their truck'cause they want to get going again.
My contract will also have,responsibilities to downstream

(57:25):
because I need to have these thingssorted and make sure we don't have
a lot of bad product going through.
So I have a network of accountabilityto my peers, and that is
all recorded in some detail.
These contracts will run to several pages.
They have thousands ofthese across the company.
Everyone can be seen by everybody.
So there's no mystery what I'm supposedto be doing and how my peers are gonna,

(57:46):
are, are gonna hold me accountable.
And, the compensation systemis quite, quite interesting.
They, and again, this may have evolvedsince I was there, so I'm, I'm giving
you what I learned at the time.
I'm not trying to tell you this is howthey're doing it now, but at that time,
they had local compensation committees,councils, a couple of dozen of them.
And, you know, at the end of the year,everybody has a chance to come say,

(58:08):
here's how I did against my contract.
And their peers can say like, Garyexceeded, like, here, here, here, here.
Or I didn't.
And then they try to make surethat that correlates with wages.
And as with Nucor and some of theseother companies, they don't have the
best, kind of base wages, but based onproductivity and contribution, these
people are very, are within that industry.

(58:30):
Quite, quite well Paid, paidabove, above the average.
It is also interesting, like how theynow, how they deal with underperformance.
So if somebody thinks that I'mnot living up to my contract,
they call it a clue agreement.
Colleague letter of understanding.
So CLOU, clue agreement.
Hundreds of them.
So if somebody says, Gary, you'renot living up to your agreement, and

(58:52):
they come and kind of remonstratewith me about that and take me on.
Yeah, we probably will come.
Yeah.
I fell down a little bit.
I'm sorry.
Lemme see if I, but if we disagree.
Then we both can ask somebody else tocome in and kind of adjudicate and listen
to us and see like what needs to happenif we still can't agree and there's
serious concerns about my performance.
Then they bring together like ajury of six of your peers who look

(59:15):
at all the evidence, and in somecases, those peers will fire you.
And you know, if you've been firedby six of your colleagues, you're
pretty thoroughly fired, right?
I mean.
You like, that's, you can't say, yeah, Ihad a personality conflict with my boss.
Like, no, you just,you are doing your job.
So you start to think about, okay, thisis a process capital intensive industry,

(59:39):
highly integrated, you know, downthrough the whole production process.
And they're running itwithout any managers at all.
And, every employee hasthe company's checkbook.
So if I figure I need an upgrade tothe Boyd or cooking these tomatoes
and it's gonna cost me a half.
Million dollars.
There's literally nobody in purchasing,nobody in engineering to go ask.

(59:59):
I have to like, sit down, figure that out,go find the vendors and, and get it done.
And again, knowing that if I getthis decision wrong, it affects
everybody's bonus, I'm gonna goask a few people and make sure,
like I've talked to my colleagues.
Because again, if I make something,if I do something stupid, there's
a, there's a lot of accountability.

(01:00:19):
There's just no managers.
I also, you know, in talking to Chris,the founder, I said, Chris, how do
people get ahead at Morningstar?
'cause there's no ladder decline.
He said, Gary, what a silly question.
He said, how do you getahead on the PGA tour?
You get better.
He says, so everybody here knowswho are the most important.

(01:00:40):
You know, this is notlike a flat organization.
If you ask people, who are the10 people who are most important
to our leadership, our success.
You're gonna get the same namespopping up again and again.
And everybody wants to ensure thosepeople are well-paid and they stay here.
But you don't get ahead by,you know, satisfying your boss.
You get ahead by like doing great work.

(01:01:02):
So again, it was very interesting tosee a company that challenged one of the
most fundamental assumptions of all, andthat is, you need managers to manage.
And you know, when I wrote, whenI wrote the first article about
this, Aidan for Harvard BusinessReview, I had a battle with an

(01:01:25):
editor who's no longer there anymore.
Because what was reallyfired by his peers?
Well, I don't know what happenedor he went on to greener pastures.
I won't name names, but, theinteresting question to me was not
Well, how does self-management work?
Well, yeah, that's interesting.
The much more interestingquestion is, how the hell did
you ever end up with that model?
Right?
I mean, okay, fine.
And turns out, and I'm, you know,there are other ways to get there, but

(01:01:50):
Chris Roofer is kind of a libertarianand has just this like unshakeable
belief in the value of human freedom.
And what he said was, how do Ibuild an organization that maximizes
freedom with accountability?
And so in writing up the piece, I hada whole little section on, you know.
The deep values that he had about freedomand individual accountability and so on.

(01:02:14):
And the editor says, oh, like we,we can't put that in like this.
Like this is not a philosophical piece.
Like what does all this value crap have?
Like this is the.
And I lost that battle.
But, but, but, but that's the whole story.
The whole story is if you do notstart with a different set of
principles and a different view,view of human beings vis our earlier
conversation, you are never gonna endup with a management model like that.

(01:02:34):
Or you'll have some PAYE limitationor you'll put a few of those things
in and they'll soon disappear.
So, yeah.
So, you know, it's, it's like.
You go back a hundred and some years,like the first time somebody saw an
airplane flying, you only need tosee it once to go, okay, gravity may

(01:02:55):
always win, but not at every moment.
At every point.
Like sometimes you can get uphere and do this, and so all you
have to see is I don't have tosee 10 companies like Morningstar.
I see one and go like, oh.
And they have unbelievable, bythe way, they train everybody
in financial modeling.
So they're telling me our bluecollar employees are better
at doing NPV calculations andproject than your MBA students.

(01:03:17):
And that's, and then they were right,because if you don't train people,
how are you going to, you know, ifyou don't, if you don't, you, you, you
can't have autonomy without competence.
So, yeah.
So I saw that.
I went very interesting.
So just about, you know, and, and thisis, this is, let's maybe end here, but.

(01:03:40):
What I also realized, Aidan, isbasically everything we know, everything
we've learned, everything you readby every, almost every management
expert, business author, academic,everything we know, we learned inside of
organizations that fit the old template

(01:04:00):
and all the assumptions we make aboutwhat our organizations are capable
of or not capable of, or whatever.
It's, it's, it's a little bit if,if all economics came out of people
working in essentially planned economy. What would we really know about
economics, maybe not that much, right?
Or only a sliver.
And so when I hear, you know, I've hadgreat mentors, people like Jim March at

(01:04:21):
Stanford, others that I interact with,you know, and they all tell me, well,
you know, organizations can only likebe so good because like, this is just
the reality as if like, that realityis, is, is like a cosmological constant.
Rather than just a stickwe made for our own back.
So the moment you realize, okay,we got ourselves into this mess,

(01:04:42):
maybe we can get ourselves out,that's when you start to be hopeful.
And like you say, and we talked aboutbefore, is somebody just made this up
someday so you can make up something else.
And it just happens to be thatthese people were the founders
and they had more autonomy.
Same for Whole Foods we talked about.
Same for Will William Gore, bill Gore and,you know, his wife setting up the company.

(01:05:05):
So they just made up a differentmodel and, and because they owned
the company, they backed that model.
I just wanted say one.
But they start, but they startwith the same set of principles.
They start with that same.
You know, the same deep, , commitmentto maximizing freedom with the
goal of maximizing accomplishmentand contribution and trying to

(01:05:26):
get everything out of the way.
Anyway, we'll, we'll, we'll fleshthis all out, but, yeah, we don't
have to live with what we've got.
And one thing I wanna say is many,many people inside companies,
they blame their manager.
And one of the things you call outis, well, well, I, I dunno the exact
research, but it was a Gallup poll.
You mentioned that I think itwas 70% of people are disengaged

(01:05:47):
or something like that.
It's huge number Anyway, what,whatever it is, we know that.
But they would maybe think, oh, it'sbecause my, I can't speak to my boss.
You talk about this.
But then it's actually, thebosses are also disengaged.
50% plus of US managers are noddingat least, at least as disengaged
as the people working for them.
You know, it's oftentimes being amanager is basically you're being asked

(01:06:11):
to be a surrogate parent to adults.
And like, who wants that job?
Right?
It's, it's, it's bad enough tryingto tell a teenager what to do.
I can tell you, telling your adultchildren what they think they should do.
They're just gonna say F off, right?
Like, like no, my, my turn now.
And so, yeah.
And of course those middlemanagers are getting it.

(01:06:32):
They're getting the crap fromabove them and then they, yeah.
It's, it's, boy that's so, I have alot of empathy for middle managers.
But I wanna also help them find betterroles and higher value added roles.
We'll talk about how to do thatbecause, you know, just, just because
we have so much information now andwith AI and with educated employees

(01:06:53):
and so on, it's just like no argumentfor the number of managers we have.
Like, no, people tryto make that argument.
I hear people making that argument.
I don't believe it.
Like we just, no, we don't need them.
And I have the evidence to back it up.
Huge amount of evidence in this book.
New edition coming out soon.
Gary's actually recording the audiobook over the next couple of weeks
and we're gonna cover Nucorp andHaier next magnificent stories

(01:07:17):
we've been leading up to hire.
We.
It's been the, it's been thebiggest amount of setting up a
company, Gary, over those 14 hours.
, And not only Haier, I want totalk about Roche and maybe some
others because we, we really needconfidence that this is possible.
And, you know, and, and, and thatyou can go from here to there.

(01:07:38):
You know, you, you talk about acompany like, like Morningstar.
Well, and you can kinda like, well,they were born that way, right?
Like, that was in theirDNA from their finding.
Well, we're gonna talk about somecompanies that weren't born that
way, and in some sense they're,they're the more interesting cases.
Huge of great cases.
C to come.
And, , Gary, always a pleasure.
Where can people find youfor people to reach out?

(01:08:00):
I was laughing at Craig,who listened to the show.
It was kind of like that old RemingtonSteel ad. I like the company so much.
I bought it.
Craig was, I like Gary so much.
I joined his company.
Well definitely, you know, go towherever you buy books online and
the new edition is already, for sale.
I think it's out next month.
We'll start shipping next month again.

(01:08:21):
I think probably half of it isnew since the first edition.
So even if you bought it, you'regonna find a lot more to inspire you.
And if you wanna share it like.
You know, share the new thing.
And maybe next time we will, I canput up a QR code or something else for
people who want to go find, find it.
And then, yeah, you know, ask mequestions on LinkedIn or, or share

(01:08:42):
some of your own experience or, youknow, you can find me on X I'm just
at Prof, Hamel, and Gary hamel.com.
So yeah, be in touch and tell meif any this makes sense to you.
And I'll also link towhere to buy the book.
And I can attest, I got an early copyof the new book and unfortunately I had
pre-prepared and read the older copy.

(01:09:02):
So now I have both.
So I've, I've got what, I'vegot lots of new content as well.
Gary Hamel, it's always a pleasure.
Thank you for joining us.
Pleasure.
Pleasure, Aiden.
I hope you enjoyed another episode ofthe Gary Hamel series, and I wanna thank
our sponsor, Kyndryl for sponsoring theentire innovation show for the next year.
Kyndryl runs and reimagines the technologysystems that drive advantage for the

(01:09:26):
world's leading businesses with a uniqueblend of AI powered consulting, built
on unmatched managed service capability.
Kyndryl helps leaders harness.
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