Gary Hamel - The Future of Management Part 1

In this insightful episode, Gary Hamel discusses the foundational ideas behind his book, 'The Future of Management.' Delving into the historical context and evolution of management principles, Hamel explores how long-standing conventions, established by early 20th-century theorists like Frederick Winslow Taylor and Max Weber, continue to shape modern companies.

He underscores the need for a radical rethink in organizational management to address contemporary challenges such as innovation, strategic renewal, and employee engagement.

Drawing parallels from history, Hamel illustrates how groundbreaking management innovations in companies like Whole Foods, WL Gore, and Nucor have driven exceptional performance. He emphasizes the importance of creating human-centric workplaces that inspire and motivate employees, advocating for a shift away from bureaucratic, control-driven models towards environments rooted in purpose, community, and mutual respect. Join us for part one of this engaging conversation with one of management’s leading thinkers.

 

00:00 Introduction to the Future of Management

02:01 The Origins of Modern Management

04:17 The Evolution of Management Innovation

08:49 Military Analogies in Management

12:34 The Layers of Innovation

22:20 Historical Management Innovations

29:56 The Industrial Revolution and Management

36:48 The Overlooked Innovation: Management

37:20 Taylor's Influence on Productivity

38:00 Ford's System and Its Limitations

39:04 Bureaucracy: A Double-Edged Sword

41:32 Adapting to the Knowledge Economy

43:16 The Role of Computational Power and Connectivity

45:50 The Need for Organizational Innovation

53:34 Case Studies: Whole Foods and Gore

01:01:54 Building Human-Centric Organizations

01:05:03 Concluding Thoughts on Leadership and Innovation

Episode Transcript

(00:00):
Today's episode, and the next daysis the Future of Management and the

(00:04):
author of that book and all the others.
Gary Hamel, welcome back.
Nice to be back Aidan.
Great to have you back.
I'm gonna tee us up with anintro this time from the preface.
I thought of this book, Iabsolutely love the preface.
I shared it with loads of people.
It goes as follows.
On Christmas Eve 1968, the Apolloeight command module became the first

(00:26):
human made object to orbit the moonduring its journey back to earth.
A ground controller's son asked hisdad, who's flying the spacecraft.
When the question was relayedup to the home bound crew
astronaut, bill Anders replied.
I think Sir Isaac Newton , isdoing most of the driving now.
Like that curious lad, Gary tellsus , he'd like to pose a question,

(00:51):
who's managing your company?
You might be tempted to answer theCEO or the executive team or all
of us in the middle management.
And you may be right, but thatwouldn't be the whole truth.
To a large extent, your company isbeing managed right now by a small
Cory of long departed theorists andpractitioners who invented the rules and

(01:13):
conventions of modern management backin the early years of the 20th century.
They are the poltergeists , who inhabitthe musty machinery of management.
It is their edicts echoing across decadesthat invisibly shape the way your company
allocates resources, sets budgets,distributes power, rewards people.

(01:34):
Makes decisions.
So pervasive is the influenceof these patriarchs that the
technology of management variesonly slightly from firm to firm.
How about that for an intro and thatwill echo true to so many people.
Listen to the show.
Gary, I thought that would tee you up totell us why this book, what was it about?

(01:57):
What was going through your head whenyou felt it was time to write it?
Yeah, well, that was, Ithink published in 2007.
So here we are almost 20 years.
On, and I guess, Aiden, the kind ofevolution of this book from the one
I'd written, the most recent beforethat was leading the Revolution,
which we talked about extensively.

(02:18):
, folks who've been with us mightremember that in the last chapter
of leading the Revolution, I wasreally talking about how do you make
innovation a distributed capability?
Everybody's job every day.
And that means, , changing theaward systems, the metrics, how
you train people, and so on.
And , the more I thought about howdo you build new capabilities like
innovation or others we may talkabout in the future, like resilience.

(02:41):
It's clear that to change reallydeep things in an organization.
You have to change the way they're run.
And, we talk so much about businessmodels, but it became more and
more apparent to me that whatreally needed to change in many
cases was the management model.
And, very few people think about that.
And as I said, there in that prefacemost of the fundamental choices about

(03:05):
how you run large scale organizationswere made decades ago some centuries ago.
And were just playing thatforward, accepting that legacy
without really questioning it.
So, it was interesting as you know,I had read a lot about innovation.
It been my passion for a longtime all the way back to when
I was a young faculty member.
And it started to occur to me like, whywasn't anybody talking about innovation

(03:29):
and management for heaven's sakes?
I literally there was like thatphrase management innovation.
I don't think it was even, certainlyyou could find somewhere who used
it somewhere, but it certainlywasn't an lexicon anywhere.
I went like, isn't that odd?
So part of the research in gettinggoing for that book is I went back
and I read a lot of the history ofmanagement and there, there are a

(03:51):
few universities, there are courseson the history of management and , I'm
embarrassed now, I can't remember.
One of the core authors there.
I'll go, I'll find itfor our next episode.
But I went back like, wheredid all of this come from?
And you see that , it was innovationafter innovation, after innovations,
people were trying to solve practicalproblems and slowly kind of layer by
layer, piece by piece, process by process.

(04:11):
We build out this kind of,elaborate model that we have today
in most of our organizations.
And so that was like the firstquestion, like, where did this come from?
What problem were all of thoseearly management thinkers,
innovators, trying to solve?
And and I went back through history.
The second question that I spent a lotof time thinking about with some of

(04:32):
my colleagues at the London BusinessSchool, principally Julian Birkinshaw,
was like, well how important is this?
Did, , did this make, , did any firmsever reap any competitive advantage out
of kind of their new management thinking?
the answer turned out to be yes, andactually one of the most influential
pieces I wrote, and again, or I readrather, I'll have to go back and get

(04:55):
the exact data, but it was a bookon revolutions , in military affairs.
And, in warfare and because Julian andI had gone back and we'll come back and
talk about this in more detail, we'd goneback about like over the last hundred or
so years in industrial history, trackingthese big innovations in management.
Who made them, what impact did they have?

(05:16):
How long did it take for them to diffuse?
But then we was like, no, no, we needto go back much deeper than that.
So we went back literally I thinkthis book covered about 800 years
mostly European military history.
But you found the same thingover and over again, that this
was really super important.
And again, I'll come back and givesome examples, but I think that was the.

(05:37):
Beginning of this book of saying, Hey, ifyou really wanna build new capabilities,
if you really wanna build an organizationthat in any sense is fundamentally more
effective, rather than incrementallymore effective, you have to look deep
inside of that management model whichmost of us like don't even think about.
One of the things you talked aboutwas reinventing the business concept.

(05:59):
You called it back then.
Then you talked about the mental model,and then you got to this, you're like
going, well, actually the managementmodel needs to absolutely change and
we'll totally come to that when we getto the work You've done the revolutionary
work you've done with hire in thisbook, you talk about WL Gore, you talk
about Google, and you talk about WholeFoods markets, all companies that
have continued to do remarkably well.

(06:22):
But, I wanted to go back to thathistory a little bit and the work of
Taylor, for example, Frederick WinslowTaylor, that really is solidified and
we still work to his edicts today, but.
I loved in chapter one, the end ofmanagement, you talked about this
concept of a fitness landscape, workby the Santa Fe Institute alumnus

(06:43):
Stuart Kaufman, and he used this notionof a fitness landscape to describe
the limits of evolutionary progress.
And you used it then as an allegoryfor, well, that's what happens with
organizations is that the structure ofthem and the hierarchy of them limits the
species as it tries to adapt and change.

(07:06):
I'd love you to describethis a little bit.
Give us an overview of what this was'cause it's a beautiful metaphor.
Well, if you think of a mountain range ofpeaks of varying height you know, I have
a home in, in the Rockies and here in, inthe United States and you know, you have
peaks that are 8,000, 10,000, 14,000 feet.

(07:26):
and each of those peaks isobviously built on a foundation.
It sits, you know, on a plot of earth.
And if you take an analogy and well,and lemme say if you climb a. 3000
meter peak, and you get to the top,that's as high as you could go.
There's once you're on the summit andyou may look around and you're like, wow,
well, interestingly that peak is higher.
I'd like to climb that, but you, youcan't go any higher from where you are.

(07:49):
think it's similar.
We have a management model built on aset of principles on a, on a foundation,
which will talk about and do course.
And so, you know, and, and, and obviouslymany organizations are on the top of
the, basically the same hill becauseour organizations are very much alike,
built on very similar principles.
You get to the top of thereand you go like, there's really

(08:10):
no place we can go from here.
Yeah, maybe we can pile a fewstones or build a tower, but
like we're this is where we are.
And one of the thoughts in fitness andthe idea of fitness landscape is that
you have to go down before you go up.
So , you don't just jump from the top ofone peak to a still higher peak, and so
you have to go back down, deconstruct,rethink, and start over again.

(08:33):
Now we'll see that in practice, thatdoesn't mean you have to tear down an
organization, but at least mentallythere's that idea that, hey, you have to
give up a lot of how you think about thisand start over again if you want to find a
fundamentally higher peak of performance.
I think it'd be interesting to yourreaders just to give a little bit of
history here because, what kind ofsolidified this in my mind I was saying we

(08:56):
were, we were looking at military history,and I wanna give a couple of examples
there because the question some of thesekind of military historians have asked is.
Why was it that at different pointsin times you had armies and navies,
this is history before there wasan air force, but how did you have
armies and navies that had longadvantages sometimes over generations?

(09:18):
You know, how was it that the Britishcould run all of the Indian subcontinent
with, you know, a few thousand militarypersonnel, sublets tenants and so on?
you know, you, you might think, well,it was probably about weapons, right?
Whoever invented, you know, the,the English had the long bow, the
French had the lightweight cannon.
Was it the Spanish?
Who invented the kindof three massed caravel?

(09:39):
I can't remember, but, you know,and, and us with smart missiles
or you know, now we have drones.
Like that's really where advantagecomes from, is, is, is the technology.
And it turns out when you go backthrough history, that was never the case.
That, that even hundreds of years ago, I.Those technologies diffused quite quickly.
You'd capture the enemy's equipmentyou'd reverse engineered, or better yet

(09:59):
you'd capture the people who built them.
And, you know, as, as we as theUnited States took a lot of the
German rocket scientists afterthe second World War bottom to the
United States, and that became thecore of NASA's first rocket programs.
So technology by itself really doesn'tproduce very long lasting advantage.
So, you know, another hypothesis well,like, it might be a brilliant general, and

(10:20):
certainly there are times when you knowthat was true, but that doesn't explain
anything that lasted over, , many decades.
Or maybe it was tactics, but whatyou discover when you dig deep,
it was almost always innovation.
In management at anorganization in some way.
So the Dutch were thefirst to master drill.
So before an army was just a throng,it was a mob that went out and there

(10:44):
was very, you couldn't move a lot ofsoldiers together quickly to reposition.
And the Dutch really invented the ideaof kind of military disciplined and
mobility and perfected, moving largegroups of people in a very or orderly way.
The English invented to a largeextent the regimental structure.
So your loyalty wasn't to some fardistant king, but, you had this espirit

(11:05):
de corp and a huge commitment to yourregimen, and you go across England and
you'll find these regimental museums withtheir kind of rich history and so on.
And that, that, that created acohesion and a passion of, of,
of brothers in arms fighting.
You look at Napoleon, who reallywas the first to invent an army that
was fighting not for the monarch.

(11:27):
But fighting, fighting as citizens,you know, as Citizens' Army
fighting for the Gloire de France.
And with a ferocity and a passionthat was actually quite new.
The Austrian Army invents the idea of thegeneral staff where you have functional
experts that are advising the generalsand bringing all the information together.
And then the Prussian army was reallythe first in Europe, to select officers,

(11:51):
not on the basis of aristocraticbirth, but on leadership skills.
They had exams and they tested people.
And because leadershipis not really hereditary.
So that was quite interesting, at leastto me, looking back and going, okay,
this kind of validates the fact that.
The way you create long-term advantageis innovating in management in ways that

(12:13):
really dramatically extend human capacityor allow human beings to collectively
do things they had never done before.
And we'll see that as wego forward into management.
But that gave me a lot of confidence.
And this is a proposition that you goback, , hundreds of years and you find
the same things at Military historianshad found the same things we were
finding about industrial organizations.

(12:34):
One other thing maybe to just spend amoment on Aiden, is maybe just a little
bit of definitional, something I like toput the idea of management innovation in
a bit of a context, because you can thinkof almost like an innovation stack where
you have different sorts of innovation.
I think, , one of the most familiarkind of maybe , at the bottom layer
would just be operational innovation.

(12:55):
You just, continuous improvement, youget better , and sometimes you can have
breakthrough innovation there, I think.
Walmart, fundamentally rethoughtlarge scale logistics and
built the IT systems to do it.
And that was quite a longlasting advantage for them.
But we're all quitefamiliar with that now.
You see things in the UK likeOcado, where, you have robots
moving through a warehouse.

(13:16):
I think Amazon now has about one robotfor every two team members at Amazon.
So the operationalinnovation is very important.
A level up from there, you have theproduct innovation and all the, whatever
latest gadget, whatever, music player newfinancial derivative investment product
a camera, computer, a mobile phone.
But we're quite familiar with that.

(13:37):
advantages don't tend to last very long.
They tend to be, rep. I thinkit was within two years of Apple
coming out with the iPhone.
Samsung came with something thatlooked functionally, very similar.
a level up from that, you haveinnovation business models, which
we've, talked about a lot, let'ssay in Airbnb or something like that.
And then a level up from that,you have innovation in ecosystems.

(13:59):
So if you look at, WeChat and China,which is , these super apps that have
become gateways to everything, andhave hundreds of supporting apps or
you look at Apple , with the appstore with thousands, tens of
thousands of virtual contributors.
So that's more and more important.
But really at the pinnacle, you findthis innovation in management, I think

(14:19):
we can say with some confidence onaverage, not always, but on average
produces the most enduring advantages.
Well, what's interesting, , if youthink about that Pyramid Aidan you
think about operational product,business models, ecosystems management.
And , where leaders andpeople put their attention.
Most of our attentionis down at the bottom.
We're working on operationalthings, on product extension.
Seldom really on new businessmodels and almost no attention

(14:42):
to innovation and management.
That's like, well that's weirdthat, , we're spending most of our
energy on innovation in areas that areleast likely to produce fundamental
breakthroughs and long-term advantage.
So I think if you wanna build acapacity for innovation, you gotta
think about all of those layers andtake them all equally seriously.
I loved the, the work you didon the military and, and drawing

(15:05):
those analogies between military,the stuff you had studied.
I had loads of quotesthere and ya beat me to it.
One of the ones I'll just sharewith our audience is history's most
consistently victorious armies andnavies have been those that were able
to break with the past and imaginenew ways of motivating staffing,
training, and deploying warriors.

(15:26):
Like you said there, for example,fighting for somebody that you could
actually see, somebody that you couldpress the flesh with was much more
different than a monarch in the distance.
And yet so many people never meetthe CEOs of their organizations
don't have a mission to fight for.
This idea of a moral forcewithin the organization or

(15:47):
the army is absolutely core.
And one of the things yousaid was even knowledge.
So if you think about organizationalknowledge, this was military
knowledge that would be passedfrom generation to generation
instead of just being disbanded.
And I thought there about how manytimes you bring an innovation team
together, or perhaps they cometogether in a innovation outpost.

(16:12):
They do a job, they work on aproject, you have consultants there,
and they all leave, they disband,and that knowledge is then lost.
That capability, that muscleis lost to the organization.
Yeah, I, no, I, I think that's true.
The, the other interesting thing, asyou think about military in innovation,
and it has a lot of parallels one of thequestions that some of these historians

(16:36):
have looked at is , there's some kindsof innovation, as I said, in weapons
technology that propagates very quickly.
So he says, well, that, like,that kills more people faster.
Let's try that.
There's other things like some of , thesemore organizational innovations that
historically took a long time to change.
One, one of the really interestingexamples in one of these books they looked

(16:57):
at how how battle formations changedafter the, in introduction of the musket.
When it was, , longbows, pikes, and so on.
You tend to have a lot of ranks,a very deep, a deep formation.
So narrow.
But then, because you have pikemanon, on the flanks protecting your
flanks, and then the archers, ofcourse, they shoot at an angle, right?

(17:19):
The arrows go up and down.
So you're shooting over the heads ofthe people in front of you and you
reign deadly arrows down on your enemy.
The musket doesn't work that way.
Right.
You don't fire on that kind ofa arc and you really don't wanna
have too many people in front ofyou when you're firing the musket.
So you would've thought that , assoon as the musket comes into battle,
those formations quickly change.

(17:40):
'cause what you want is alonger formation, but with
maybe only three or four ranks.
And people duck as they're reloadingand people stay on the shoot.
Well, back and looking at,they estimated it took about a
hundred years for that to change.
And the question is like, why did ittake so long to figure this thing out?
It looks fairly obvious.
And the answer is it like threegenerations of generals had to die.

(18:05):
Because as you were saying a minuteago, that's how they've been trained.
That's like, this is how we, , thisis what a military unit looks like.
And so you start to, and there's,I think there's a super, super
important insight in here, whichwe may come back to as well, that.
Traditionally organizational innovation,badly, badly lags technology innovation.

(18:27):
And I see that I, I won'tgive too many examples.
Now we can come back in another episode.
But you see right now, even like rightnow with AI is we use these technologies
mostly in ways that kind of buttress thestatus quo, that pave the cow path, right?
In incremental ways.
Because you never see a differentway of using the technology until you

(18:49):
go back to the fundamental startingpoint and think much more deeply.
And what occasionally happens, it happenedin the US Army after the second World War,
it happened again during some of thesebattles with Al-Qaeda and ISIS is at some
point, you go back to doctrine, right?
You stop thinking about tactics,information, technology, and you say,

(19:09):
okay, what's our fundamental doctrine?
And so, , one of the huge changes.
Over the last half a century more wasarmies found themselves much more often
fighting asymmetric warfare, right?
You were not fighting another army.
You were fighting gorillas orterrorists or something that were
deeply embedded in civilian populations.

(19:30):
So that kind of asymmetric warfareneeded a very different way of
thinking, and in the end neededfundamentally different organizations.
Because, , you can't beat adiffused information enabled network
of terrorists with a centralizedcommand structure using traditional
weaponry, like never gonna work.
And so the faster,, or themore frequently, or at least

(19:53):
seriously, you think about, okay,what's the underlying doctrine?
What is our org?
What was our organization built to do?
What are the fundamental assumptionswe have about people at work?
And so on.
You know, then you have some chance.
Finding a new and better way.
But if you can't go back tothat level, then you're stuck
with very incremental approaches.
But a lot of what I've tried to do inmy work is to close that gap between

(20:18):
, technology making it possible to bringpeople together to do new things and
yet, we're stuck with these very old,hierarchical organizational models.
But but yeah, there's a lot to learn frommilitary history that you go like, yeah,
it's not exactly the same, but there'sa lot of analogies and lessons to learn.
That's so fascinating, man.
The idea of the technology changes,which is the weapons, but you

(20:43):
hold onto the old structures.
It reminded me of your friend andcolleague, Zhang Rumin, and he
said that after the arrival of theinternet, we realized that under this
triangular hierarchical structure,people had a difficult time adapting.
So we reorganized ourselves as anentrepreneurial platform and it speaks

(21:03):
to exactly that same thing, but alsothis idea, you and I have both agreed
on that this work, all your work all,all this research that you've done on
these shelves behind me and all thatwe've talked about, it's pervasive.
As you said, this is stillwithin organizations.
It's very, very hard and hopefullywe don't have people, we don't

(21:25):
need people to die out, but maybewe need the mindsets to die out.
Yeah, and I think that's, the wholequestion like . Do you really have to wait
and just be patient until it is so damnobvious that the old thing isn't working.
And that's what happened tothe US and Vietnam, right?
, the world's leading superpowergets humiliated so you, you really
wanna do this without having to , gothrough that kind of an experience.

(21:49):
So can we actually recognize this asan important sphere for innovation?
Can we think deeply about, well, whatare the principles that underlie this?
And why this kind of sort versusanother sort, can we actually put
our minds to thinking about whatmight be a different way of doing it?
It's quite interesting.
again, we just takeeverything for granted.
But, but virtually every systemprocess that you find in a large

(22:12):
organization was invented, right?
This isn't , this isn't like comedown on tablets and still like
human beings who invented this., Ithink of, I'll give a few examples.
You go back in the very early 20thcentury Thomas Edison, co-founder of
General Electric was asked this reallyamazing question, which is, can we
bring management discipline to science?
So people have been doing science forever,, all the way back to Copernicus and so on.

(22:35):
And yet it was it was verydisorganized, when you got a
breakthrough, like, who knew?
And so by bringing some disciplineto this, Edison was able to say,
we are now going to get a minorbreakthrough every six months.
Sorry.
How do, yeah.
And a major breakthrough every year.
I can't remember exactly the timing,but like, we're gonna put this
thing, put discipline behind it.
And within a couple of decades, GEhad half of the world's industrial

(22:59):
patents, which is like unbelievable.
And of course , they lived off ofthat heritage for decades , and
ultimately squandered it in some ways.
But that was like, that was a new idea.
How do you bring discipline to size?
You go forward , a few decades , andGeneral Motors was this big sprawling
empire that had been built throughacquisitions, had a lot of different
brands, , and the chairman of thetime, Pierre DuPont was saying

(23:21):
like, how do I manage something socomplex, so many different brands?
It's just like this vast empire.
And he turned to a young staffer,Alfred Sloan, after whom the Sloan
School that MIT is now named.
And he said like, how do I, how dowe manage something this big, this
complex in some kind of systematic way?
And Sloan invents the Divisionalizedorganization saying, okay, we're gonna

(23:42):
have centralized finance and strategy,but decentralized manufacturing
and marketing to some degree.
And we're even gonna let thesebrands compete head to head.
Which is like, well that's a crazy idea.
And of course, that, that kindof basic architecture became the
architecture for almost everymulti-business company in the world.
Every company of any size hasGeneral Motors, DNA in it.

(24:04):
And unfortunately for GMA for gm,it was the last time they were
really a management innovator.
You go forward a couple of decades andyou see Toyota after the second World War.
Japan is in ruins.
Toyota's a relatively small company.
They have ambitions to be a globalcar leader, which you go like, how the
hell do you think you could do that?

(24:25):
But they realized they hadfewer people, fewer resources.
So the only way we can compete is ifwe get more ideas out of those people.
And so they were one of the firstcompanies in the world to train
every single, you know, employee,blue collar, whatever, in, in
problem solving, statisticalprocess control, Pareto analysis.
You give these people theright to stop a billion doctor,

(24:45):
billion dollar production line.
And, you know, and again, we'vetalked to other episodes, it took
a long time for their competitorsto figure out what they were doing.
But that was a management innovation.
Or you, you know, you go forwardand you look at for example,
open software development.
You know, most, most of the softwareplatforms we now use Hadoop and uh,
and Linux and so on, have been builton you know, out of open innovation.

(25:10):
And I think, you know, the latest releaseof Linux has about 25 million lines of
code in it, about 15,000 contributors.
Like where did that idea come fromthat you could build like one of
the most sophisticated, complexthings on the planet with almost
no management structures, atleast no formal management at all.
And, you know, it was interesting when,when this whole open source started

(25:33):
to take off, there was a young Indianengineer at at Microsoft watching this.
And he wrote what, what becamequite an, a famous internal memo.
And he said, for the first timein our history as a company, we
are not competing against anotherproduct or even another company.
We're competing againsta different philosophy.
do you, you know, build large scalesoftware And so every one of these

(25:56):
companies, Microsoft, they all now have,they mimic that same kind of approach.
So you just see this, you know, you goback and, and look at all this innovation
and what, what, and, and by the way,there, it's, it's quite interesting.
Aiden, if you look at many of thecompanies that came to dominate the
industrial economy, companies like Shell,

(26:20):
Unilever, Procter and Gamble, IBM,general Electric, these were all serial
management innovators, IBM, , there,there was a time when I think a lot
of corporate CEOs understood thisand took this super, super seriously.
, GE invents industrial r and d,they invent management training.

(26:41):
They invent management by objectives.
They were one of the first to reallydevelop systems for talent development.
Built the first corporate university.
We're one of the first companiesto do true strategic planning.
Also the strategic business unit.
I mean, just, they took thislike super, super seriously.

(27:02):
And at some point, and we'll talk aboutit, a lot of these CEOs like said, now
I'm gonna go do deals, or we'll justdo cost cutting, or, , something else.
But they, they lost sightof how important this is.
And so I think that's why, if youthink of innovation as a te management,
as a technology, think we're, andyou think of technology as a S-curve.

(27:23):
know, starts not muchinnovation really hard.
And then some people start to innovate.
You build on other innovations.
A pace of innovation starts to go fast.
But then at some point you reachthe limits of that paradigm and the
innovations become more incremental.
I think we are way out on the flatpart of that s-curve right now.
I can't think of for sure.
I can't, I can think of almost, no,almost no fundamental management

(27:44):
innovation in my lifetime.
all of it comes before I, I wasborn and that's, a long time ago.
So, you know, it's a littlebit like the combustion engine.
Like that's like fine, , nowwe're doing turbocharging and,
esoteric things and , combinationswith hybrid batteries and so on.
But at some point a new paradigm.
So I think we can come back to kinda whywe lost, , sight of how important this is.

(28:10):
But I think we did, and I thinkthat's why we're you know, stuck now.
I love that you mentioned the idea ofthat nobody came down and went, this
is the best way to do it possible.
And if we think back to the fitnesslandscape and the fact that's the
S-curve, the top of the mountainis the top of the S curve, we
need to come back and reassessbecause the landscape has changed.

(28:32):
And I thought we'd remind people.
One of the great companies Garytalks about was WL Gore and how
Bill Gore actually looked at and he.
Trying to find this newoperating model for management.
Couldn't find it.
So he made it up.
And that's actually the pointthat you have to make it up
for your unique configuration.
But I thought we'd revisit thestart of the S-curve we're on, and

(28:54):
the people responsible for that.
And again, not criticizingthem, it's not their fault.
They invented this.
This was Frederick Winslow,Taylor and Taylorism.
This all idea of taylorism,but also Max Weber.
The renowned German sociologistand a contemporary of Taylor
who viewed bureaucracy as thepinnacle of social organization.

(29:17):
He said, experience tends universallyto show that , the purity bureaucratic
type of administrative organization isfrom a purely technical point of view,
capable of attaining the highest degree ofefficiency, and is in this sense formally
the most rational known means of carryingout imperative control over human beings.

(29:37):
So this was all about control, wherepeople weren't very disciplined
when they were coming to work.
They did what they want.
They weren't measured, , they took aslong as they took to get the job done.
And it was this change andthis drive towards efficiency
that we're still stuck with.
I'd love you to give us alittle taste of the history.
you know, and that's why the, I, the,the real history of, of management

(30:00):
obviously goes back as far back in humanhistory as we can go, but probably what
we would think about as kind of modernmanagement, it's not so modern anymore,
I guess, really is the late 19th century.
It's, it's, it's happens before.
Before the 20th century, butit's, you know, it's the early
railroads they had to run on time.
You know, you had the systems to do that.

(30:20):
It was, you know, some of theearly factories in the Midlands
and England turning out fabricand, and, and garments and so on.
And so as we've started tobring people to work, right?
Never, never really before hadwe had hundreds or thousands of
people at work in, in the sameenterprise doing related things.
So that was an immense challenge,like how the heck do coordinate

(30:42):
hundreds, thousands of peopleand, and choreograph all of that.
We just like never done that before.
And of course, this was a time whensimply the ability to do, do the same
thing with predictability was like,like nobody had ever done that before.
If you had a blacksmith or youhad a Cooper or you had a. You
know, a tailor, every piece wasdifferent and every individual was

(31:05):
you know, doing their own thing.
So, you know, this goes back to Adam Smithand the pin factory and the fact that
when you had specialized labor, you know,rather than somebody making the entire pin
themselves, you, you watch productivitygo up, you know, many, many, many fold.
you know, it was a series ofinnovations, but all of them
were focused on those challenges.

(31:26):
How do you, how do youmake this more predictable?
How do you get more specialization?
How do you have more control?
Because to do anything in a repeatedway requires control, and it requires
compliance to the work standards,to the budget, to the timescale.
So you need people who are,you know, are going to comply.

(31:48):
So at the heart of this was a mass.
socialization effort because we weretaking people who had been you know,
farmers, craftspeople homemakers, whatevertheir occupations were, and suddenly
you're in a factory you gotta work.
You gotta do it exactly the sameway every time at, and you have to

(32:09):
show up at work at the right time.
And this is pretty newfor human beings, right?
I mean, we could, we can be conscientiousand work hard, but working in that kind
of disciplined order taking rule drivenenvironment that was like human beings had
really never, ever before had done that.
So, you're gonna have to remind me'cause I, I wanna come back with a

(32:30):
little bibliography for people whowanna go deep into this, but there
was, there's an interesting book calledManufacturing the Employee, I might
have mentioned that before, that kind oftalks about all this, how this happened.
And initially a lot of people thoughtthis was a really bad idea and.
And still do.
And they had a, a, a derogatory termfor these employees called wage slaves.

(32:52):
So you and now are slave to your boss.
And you know, you'd lost almostall your agency and you were just,
you know, a a, a flesh and bloodcog in what really was a machine.
And that's why , uh, Weber at the sametime, you know, he could say, and, and he
said, there's nothing else that superiorto bureaucracy is a way of doing things in

(33:13):
a, in a highly replicable, efficient way.
He would also call it an iron cage.
And and he said, and I'll giveyou, this is almost a direct quote.
He says, bureaucracy is perfectedto the extent it is dehumanized.
So to the extent you can take thehuman element out, the intuition,
the curiosity, the obstreperousnessthe laziness maybe, but to the extent

(33:36):
you take all of those things out.
And of course what happened is,yeah, we took out some of those maybe
less desirable human things, but wealso took out almost everything that
made us human, other than the factthat we could just show up , and do
the same thing over and over again.
So, you know, if you really wannathink about our organizations,
they're really a mashup at the court.
They're a mashup of two ideas.

(33:59):
They're a mashup of military commandstructures, which go all the way
back, , through history to the Romans,and much farther back than that.
and of the principles of industrialengineering, as you said Taylorism
and galrith and all the otherpeople who are working in that mode.
So that's, , that's what we haveand on those kind of, those two
core ideas and immensely effective.

(34:21):
The fact that, and it's interestingwhen people talk about, , like what
happened in the industrial revolution?
Why did suddenly , economicprosperity start to go up?
Why suddenly did we have all of theseamazing products and services and so on?
And life started to get better?
And people tend to pointto the technology advances.
You know, we got the steam engine,we got electricity , and so on.

(34:42):
And I think that's partly true.
I think that's a much less importantstory because if, if you, if we hadn't
learned how to bring people together todo things at scale and, and replicate
and, and therefore reduce prices, all ofthese things would've been curiosities.
You know , when Ford opened, in1930, they opened the plant that's
gonna build the Model T. at the timeit's the biggest plant in the world.

(35:06):
It's 900 feet long has, you know, itsown railway line and coal comes in at one
end and cars come out of the other end.
Nobody in human history had builtsomething of that size and complexity.
Never.
The pyramids are a simple thing,maybe hard to get the stones
up, but conceptually you justpile rocks in a particular way.
This was a level , of organizationthat the world had never seen before

(35:31):
it allowed Ford, I think that themodel T at about a 15, 18 year
production run, it allowed them toreduce the cost of the model T by 69%.
From 800 and something to $250over that timeframe and made
mobility affordable to millions uponmillions of people around the world.
So just an unbelievable accomplishment.

(35:52):
And if you look between 18 70 19 sorry,1870 2015 16 when I last looked, if
you, if you look at the increase inproductivity, you know, the UK started
at a slightly higher level, but, butthey've had like 20 times productivity
growth over that time period.
Japan has had 60 times productivitygrowth, meaning that the amount of

(36:16):
value that one human being can producegrew, , between 20 and 60 times.
Like this is like, it'sjust mind boggling.
If you go back in that pre-industrialworld where you had about 2000 calories of
human effort every day that you could dosomething with, and that was all you could
do, and suddenly we had these ways of.

(36:37):
And by the way, energy is an importantpart of this, but you have these ways
of vastly amplifying, human capacity andin a way that creates the middle class.
So yeah, , without that invention , ofmanagerial bureaucracy we don't
have the modern world, right?
We don't, we don't haveprosperity on any scale at all.
And I think , that was a , farmore important invention any

(37:01):
particular scientific inventionthat happened in that era.
But we very seldom celebrate that , , Ioften ask people, , I ask my students
like, make a list of the top 10innovations of the last 150 years.
I've asked that question a hundred times.
Nobody has one said management, whichis like, it's an incredible blind spot,
but we don't think of it in that way.
I was reading about the historyof Taylor and how, for example.

(37:25):
Taylor helped win the war for the alliesbecause the factories were then able
to create armaments, et cetera, becausethey were so, but, but all the, all the
men it was back then were away at war,so they brought women and elderly people
who couldn't go to war into the factory.
So they had to try and spark them up someway to get more productivity outta them.

(37:46):
But it was the origin.
Also, I read in Michael Pollin's bookof coffee breaks or tea breaks, because
that gave even more productivity.
So you made me think it's this reallynice thing to have a coffee break, but
it gets more productivity out of it.
But I, I'm linking thisthen to, you mentioned Ford.
What I found so fascinatingwith the history of Ford was.

(38:07):
That because he had such a perfectsystem like Taylor's system, it
was so perfect and it was alldriven by this, you can have it in
any color as long as it's black.
The whole idea of the Model T,he stopped listening to people
at the edges who were going, ourcustomers want a car that's covered.
Our customers want carsthat are different colors.

(38:27):
They want style.
And he ignored that because itbroke the system and it also meant
he had to retool the factory.
And I'm bringing this back towhat you said about the in army.
You know, we have these newweapons, this new technology,
we need to change the formation.
You get stuck in the ru you mentionedthe, oxcart, the cattle ruts, and

(38:48):
you get stuck in a mental one as well.
And this seems to be the pervasive problemis that I have a system that works.
The landscape changes, the worldchanges, the new technology comes
in, and I'm stuck with that untilmaybe that management dies out.
We all have this tendency to hang on toour legacy beliefs particularly when,

(39:09):
you know, they've been effective for us.
But , I think it's even worsebecause, , bureaucracy is built
to be a replication machine.
That's what it's there for.
and so anything that, you know, anythingthat you change is disrupting that, right?
It's like , we spent allthis energy, all this effort,
decades figuring this thing out.
How do we get this?
Like, and then you go like, okay,now we gotta like, stop it and

(39:31):
change it and do something else.
You know, we'll, we'll, we'll talk aboutNucor, the steel company in, in another
episode, super innovative company.
But one of the things there, andI'll, I'll just give you a contrast.
You know, Henry Ford once saidis reputed to have said why is it
that every time I ask for a pairof hands, a brain comes attached?
He really, he justwanted meat wear, right?

(39:52):
He wanted these like semi programmablerobots that would serve the machines.
And so, you know, somebodywas gonna do their own thing.
Fricking that's like a problem for me.
if I look at Nucor and are we gonna talkabout Toyota as well in this sphere?
You know, Ken Iversson,who was really the, the.

(40:12):
The architect of Nucor'smanagement system.
He said, we started by building a company.
Our, our core idea was the genius lies inevery human being, not in the management.
And so our whole goal was to build acompany where people are inspired to
bring that thinking to work every day.
So in contrast, you know, at Nucor,employees in a plant will shut

(40:33):
down the plant because they wannaexperiment with something new.
We gotta just stop this 'cause we're gonnause a new method or a new tool, or we
wanna produce a different grade of steel.
And they have to make that decision.
Like, okay, we're gonna surrender a littlebit of efficiency, but we need to do that.
Because if you don't, you'renever gonna invent anything new.
And you know, but if you leavethat decision to somebody at the

(40:53):
top of the company, you go like,and the same thing at Toyota.
You know, the, the idea that youwould let frontline employees stop
a production line when they saw aquality problem and go like, okay,
we need to figure out how, like.
That was just anathema.
No, keep the damn factory running, right?
This is how you make money.
It's efficiency and it'sthroughput and so on.
So yeah, that's, so the dilemmawith bureaucracy is, you know,

(41:20):
anything, anything that you want todo that's new, different, whatever
is a threat to the core principles,the engine, the economics of that.
So, yeah, it's hardly surprising that.
Let's move to some of theantidote for this because.
People are nodding, going, yeah,you just describe my company.
But one of the big shifts was themove to knowledge work and we're

(41:44):
left with this physical work.
The way Ford had tooled up his factories,et cetera, was for two physical work.
And now we're in a knowledge economy,but the structures still are that way.
So the knowledge needs to getto the top of the organization.
And in chapter three, you outline thethree most formidable challenges that
confront companies in this new century.

(42:07):
One was dramatically acceleratingpace of strategic renewal in
organizations large and small.
The second was making innovationeveryone's job every day.
And the third was creating ahighly engaging work environment
that inspires employees to givethe very best of themselves.
They were huge shifts fromthat old physical manufacturing

(42:28):
world to a knowledge economy.
I.
Yeah, and I think they challenge, , backto my point about military doctrine,
they challenge the very doctrine, right?
This is not about, and again,, we'll come back to this, we'll
go deeper here, but it's not.
You can't build a fundamentally morecapable organization if you're starting
by, by tweaking process and so on.
Even things like agile teamsare not going to do it.

(42:50):
yeah, you look at these new realitiesand, , accelerating change has, again,
even in the industrial area, , the worldis changing very fast at that time.
So we've had this kind ofgeometric curve now for a long
time, for a century and a half.
So wherever you sit on that curve,it looks like it's accelerated.
'cause it is.
And to you, you go, oh my gosh.

(43:11):
But it's accelerated a pace in those lastfew decades that we've never had before.
And interesting.
It might be interesting to somethingyour readers, if you think about like,
why do you have exponential change?
What has really driven that?
I would argue there's two thingsthat have long histories behind them.
But one of them is increasingcomputational power.
So you go back to the first mechanicaladding machines and so on, Babbage

(43:32):
and so on, , banks, everything.
We just got way more productive.
And then you get the firstprimitive computers and now we get
quantum computers and we get ai.
And so the more you can compute, themore you can model a system, understand
it, changed the system and so on, andthat, that has grown exponentially.
Right?
I mean, literally, if you look at thatcurve, if you look at like an Nvidia

(43:54):
, GPU, it's just, it's unbelievable.
Or you look at a new, you lookat a new Tesla, and I won't even
remember, but it's like trillionsof calculations per second.
the other thing that changed washow densely connected we were.
So the, whenever you start connectingpeople together, you multiply the number
of combinations of which you can putresources, talent, and so on together.

(44:16):
So again, you look at how densely we'reconnected today, the amount of mobile
data that's moving around the world,what the internet did, and so on.
So literally both of those, Aidanin your lifetime because if, if, and
I've looked at these over many, manydecades, both computational power and
con con connectedness reach a seriousinfection point around the year 2000 and

(44:36):
have been going like this ever since.
like never before have human beingslived in a world where so much
is changing at the pace, right?
Or lemme say it differently.
We've never lived in a worldwhere the future is so little a
reflection of the past, right?
When, when, and, and it's particularlyinteresting, you know, if, if you're

(44:58):
a kid growing up, you know, if yougo back a couple of generations,
kids grew up more or less inthe same world as their parents.
It wasn't very, very different.
Right?
I mean, Lily, if you, if I go back to,let's say me and my great grandparents,
they had, they lived exactly the sameway that people came before them did.
Maybe you had a slightly betterplow or you had something.
Now each generation is growing up in aworld that's unfamiliar to their parents.

(45:23):
Right?
You know, when you were growing up,you would've never thought, and God
help if you have daughters or children,ho hopefully not think about it.
You would've never thought, we live ina world 16, 17 to 18 year olds are going
to plastic surgeons and saying, can youmake me look like my Instagram image?
Like, no, you would not havepredicted that, , as a possibility.
Or, or when young men are sufferingfrom erectile dysfunction because

(45:45):
they're spending so much time on porn.
Right.
That is not something that,that would've occurred to you.
So, , we live in a world of our ownmaking, but where, is, , one of the
most important questions today forany organization, are we changing
as fast as the world around us?
And the answer is often no.
So that's like, that's let'ssay a fundamentally new reality.

(46:06):
And, and our institutionswere never built for that.
And of course , if you wantto change faster, that change
is driven by innovation.
You have to have this capacity forreimagining and innovating and so on.
And, , we talked about this quite a bitlast time, but the number of companies
in the world that have said, I wantinnovation to be everybody's job, or this

(46:26):
has to be like truly a core competence,I can count on a couple of hands.
That's how powerful thelegacy of the past is.
and then of course you don't getinnovation unless you have people who
show up at work every day inspired.
We'll talk about all thesethings , , at greater length.
yeah, I think those are.
Those are new realities.

(46:48):
The fact that you have to re-earnyour success month by month, year
by year, not decade by decadeor century by century, right?
That, the line between, being a leaderand being irrelevant can now be measured.
At some point we'll talk about intel andhow do you go, literally in a generation
from being the greatest semiconductorin the world to be pulled apart, right?

(47:12):
So yeah, , these are someof the new challenges.
There are others, but, these are,this is the equivalent to suddenly
being, you know, having to fight anasymmetric war and having to go back
and rethink your doctrine becausea big formation with big weapons is
like very little help in this at all.
And that's where we are as, as businesses.
That thing about, you know, Intel, forexample, people working in Intel 20

(47:35):
years ago thought it was one of themost stable organizations in the world.
And that's the thing that I really,really want to emphasize by covering
these books and by going back andbringing people on the journey of your
to of work is because it's hard to readthe label when you're inside the jar.
That if you're working in the organizationand you're so focused on how you're

(47:58):
rewarded, what you're measured on,you miss the bigger picture, miss the
shifts that are happening around you.
So it's that thing that Ireally want to emphasize.
I thought , we'd jump into theagenda for management innovation.
So what do you do about this?
And you mentioned it there, Gary, thatthe first thing to do is think big.
And you mentioned here NobelPrize winning zoologist.

(48:21):
Peter Mear and how he said dull or pingproblems yield dull or ping answers.
So you need to really thinkbig in order to inspire people,
especially in a knowledge economy.
You.
Well, I think, yeah, I meanwe've, we've talked a little bit
about ambition before and how.

(48:43):
Setting, you know, setting a goal thatis stretch for you compels innovation.
Like I clearly can't get from hereto there with more of the same.
And so, you know, I think I, I madethis argument in another session
that, you know, there there are no, noorganizations, you know, outperform the
aspirations and the most organizationsare more aspiration constrained
than they are resource constrained.

(49:04):
But the same thing is, so that's true.
You know, if you're thinking aboutif you're thinking about strategy
and, and, and you know, if you'reElon Musk and you say, Hey, we need
to become an interplanetary species.
Well that's gonna drive someinnovation if you wanna do that.
Like, we can't do that the sameway we're, you know, right?
So talk about that maybe later.
But it's also true with management,I mean, if, if, where does the

(49:25):
incentive come to fundamentallyrethink how you lead, plan,
organize, allocate, and so on, and.
You know, you, you, you have to seethese challenges out there that are just
gonna demand much better organizations.
You know, if you, if you thinkof the number of things, Aidan,
and you know, it's a fairly,it is a fairly daunting list.
But if you think of the number ofthings right now, the challenges that

(49:47):
are facing, you know, humanity aroundthe world, whether that's, you know,
refugee crises, whether that's pandemicsrogue states state backed cyber crime
declining economic mobility, globalindebtedness de-globalization is going on.
Now huge amount of economic migrationyou know, threats to privacy.

(50:10):
Fundamental questions about what does itmean to be human in a world of you know,
genetic manipulation and AI and so on.
Like, there is an enormous.
You know, of challenges we haveto figure out as a species.
And, you know, my argument hasbeen that to, to, to meet these
challenges, we just need organizationsthat are fundamentally more capable

(50:33):
than the ones we have right now.
Right?
That are, that can change faster, that aremore innovative, that are more courageous.
And so I think, you know,
and we'll get into this more when wetalk about my latest book, but I think
if you're a leader today, you haveto believe that the challenges your

(50:57):
organization is gonna face is alreadyfacing and certainly will face those
challenges, lie outside the performanceenvelope of that old management model.
Like we've, we've just exhausted that.
You know, I, I go back, you know, when,when, when Weber talked about, well,
one of the, the great advantages of abureaucracy, he talked about discipline,
reliability, precision, and so on.

(51:19):
Hey, we've been working on thosethings for a hundred years.
Like we've been working to bea little bit more reliable, a
little bit more disciplined,a little bit more predictable.
And there's some industrieslike education and healthcare
we still have a lot more to do.
They have a, a unique challenge becausethey're in a, in a sense they are 19th
century industries still trying toget into the 20th while they also have

(51:39):
to get into the 21st simultaneously.
So they have their ownunique set of challenges.
But we've been, you know, we've beendown on those mines for a hundred
years at the coalface, like, andthose seams are pretty much empty.
And, you know, not many organizationsare gonna win because you're a little
bit more disciplined, a little bit more.
Those are like table stakes.

(51:59):
People just assume that you have those.
So to make this commitment as, as you weretalking about, you know, bill, bill Gore
you know, that was a very interesting, hehad, he had worked at DuPont, I believe,
and he had been part of several skunkworksteams at DuPont, an idea that got borrowed
from Lockheed and Aerospace, but where,you know, DuPont put together these small

(52:22):
teams focus on some big problem a lot ofcomradery kind of relief from a lot of
the corporate bullshit dedicated budget.
You could move fast and so on.
And he started asking us like, why doesn'tthe whole organization work like this?
Why don't we, why isn't it, why isn'tit a team of Skunkwork teams rather
than that's a little, you know, a littlepimple on, on Bureaucracy's ass somewhere.

(52:44):
So, you know, and that waslike a super ambitious thing to
say, and I think he was driven.
Not by any big existential crisis.
He was driven by how do we createa, a workplace where people can
do their very best work every day.
But I think unless you have some,you know, unless you recognize the
limits of the existing model andor have a real belief that, you

(53:06):
know, we, we just can do way better.
You probably don't have the courageto just challenge the status quo.
Because you mentioned Gore there.
I, I was gonna cover each ofthe, you have a chapter on.
Gore, you have a chapter on WholeFoods and have a chapter on Google.
But, but I, I think I'd direct peopletowards reading the book because I don't
want to labor too much on those examples.

(53:30):
You need to read the book to getthe feel of those, and Gary does
a great job of covering them.
But I thought I'd mention justWhole Foods, because Whole Foods
as an organization was a totallydifferent model and we know how
successful that was acquired byAmazon, et cetera, IPO as well.
But it was the ambition and the purpose.
People worked for a purpose,and it was the difference

(53:53):
between working as a community.
That was the big thing thatyou talked about there.
Yes, and I, you know, I got toknow John Mackey, the co-founder
of Whole Foods quite well animmensely inspiring individual.
I have to say, I don't know how much,you know, I wrote this before the
acquisition by Amazon, so I don'tknow how much of the culture that

(54:15):
I write about there survived that.
You know, Amazon.
a very different culture and probablydoesn't look at frontline employees
in the same way that Whole Foods did.
But maybe just a coupleof little thoughts there.
Things I found very interesting, youknow, again, when you looked at their
model I'll, I'll just, I'll maybepoint out two or three things that
were, that I found very interesting.

(54:36):
One was that every little team, youknow, working in every little part
of, of a Whole Foods, you know, storesupermarket, was economically accountable
for their little department, whetherthat is fresh produce, whether that's,
you know, dairy, whether that's frozenfoods aisle, whether that's, you
know, diet supplements or whatever.

(54:56):
And so those, those little teams and theywere teams had bonuses that were tied
to the profitability of that department.
you had very what you would calllow level frontline people who
were economically vested in that.
that little business.
It wasn't micro businessthat they were running.
We'll see shades of that at higher.
And they all had thefinancial information.

(55:18):
They understood which products weremaking money, which weren't, they
had a lot of freedom to vary themerchandise mix, which typically
you do not have in a chain retailer.
You just like take what centralmerchandising you put it on the shelf
exactly where they tell you and howparty, because they're selling safe shelf
space to the big you know, big brandsand they demand, you give them so much.

(55:39):
But, but Whole Foods didn't do that.
So that was one very, I mean, youhave people who really feel like
this is my business which is super,super rare in these organizations.
Another interesting feature wasthat got hired by their peers.
So if you wanted to work for WholeFoods and you got through the first
round of interviews, they wouldput you with a team for a couple

(55:59):
of weeks and a probationary period.
But at the end of that period,it took a two thirds vote.
vote of that team to hire you.
You know, if, if you think about like,what, what should empowerment mean at
the, at the very minimum empowermentshould mean I have a little bit of a
voice in who's working next to me all day.
And so, so that, that, so every, like,I either hired you or you hired me.

(56:23):
A simple thing.
But, and of course, because you want yourdepartment to do well and because you
have financial incentives, you, you'relooking for people who are gonna really
pitch in and work hard and do a good job.
So that was like also very,very interesting thing.
We'll talk maybe in another episodeabout their compensation system,
which was like quite interesting.
But the other thing is they gavethe vast majority of of their

(56:46):
share options, stock options.
To lower level of employees.
So in most companies, about90% of 'em goes to the top
team at at, at Whole Foods.
It was just the other way around.
so super, super interesting model, butfar more interesting than that is when
I talked to John Mack and I said, solike, you know, did this stuff come from?

(57:09):
You know, how did you end up witha management model that's like
so weird and so different, but,but yet makes a lot of sense.
He said, I wanted to build a workplacebased on love instead of fear.
And I can tell you now, this is a coupleof decades ago, but that was the first
time ever, ever in my career I had hearda CEO or a founder use the word love in

(57:32):
relation to how their company worked.
You know, you might say, you know,I love a wonderful red wine or
something, or I love a sunset, but I'dnever heard anybody talk about that.
Herb Kelleher founded Southwest Airlines.
He used the same kind of languageand John was also one of the few cos

(57:52):
another one would be Richard Branson.
Another one would be the, the folksat Nucor, but one of the few cos
who said got it backwards, right?
We think that shareholders comefirst, they come last, not, not in
the sense that they're not important,but just as a logical thing.
If I create this great place to workfor employees, they're gonna do amazing
things and my customers will love them.

(58:13):
And if customers love the experienceof work shopping with us, then our
shareholders are going to do very well.
So customers first, you know,sorry, employees first, customers
second, because as a leader, I can'tdo much with, with my customers.
That's the, like the people who havethat role every day, that's their job.
My role is to create thisamazing place to work.
Where people are excited to be here.

(58:33):
They feel respected, they feel loved, theyfeel it feels like a community to them.
There's a lot of trust.
And if I create that, then they're gonnado amazing things for the customers.
And that means our shareholders do well.
Also.
So, yeah, and of course that it reallygot me thinking like, how can we, you

(58:53):
know, words like, like beauty truthlove, community, the things that are
most important to us as human beings.
How the hell, this language doesn'teven show up in our organizations.
Like, people can't even like, talkabout it without feeling like weird
or self-conscious and like, man,we, we've screwed this thing up.
We've completely dehumanized.

(59:14):
I mean, you know, favor was right.
We've dehumanized our organizationsto the point where the things who are
most important to us as human beingslike our cringe making, if we even
talk about them, like, we gotta digourselves out of that pit somehow.
I shared that excerpt with KimClark, who was the former dean
of Harvard Business School.
He wrote a book with his children, Erinand Jonathan called Leading Through.

(59:38):
And Erin, his daughter , she was aformer Deloitte md and she said that
when she was speaking at events andshe used this word love, she'd see like
half the audience throwing their eyesup to heaven today, like still today.
So that's pervasive , in organizationstoday, and people think you've lost
it if you start to use that realhuman language as well, which is

(59:59):
why I found it so interesting thatMackey was talking about it back then.
But, you were saying aboutMackie, he really created his
own model that worked for him.
I found that really interesting thatthese organizations that you, these case
studies you did like, , gore did the same.
He was like going, how doI create the same model?

(01:00:20):
How do I remove the facadethat everybody has inside an
organization about things work?
And he goes, I couldn't findit, so I just made up myself.
And I thought that was interestingabout the Gore aspect, that, and
also , he created it and he was 45 andI thought that was really interesting.
Him and his wife were both 45 andthey poured their own money into
this, so they had to make it work andthey had to find a model that worked.

(01:00:43):
And maybe we'll share a biton Gore and what you found
most fascinating about them.
Yeah.
Well, again, I think the origin storyis super interesting, as you say you
look at all of these companies andI, or, or virtually all of them that
have these these positive deviancethat have post bureaucratic, anti

(01:01:03):
bureaucratic management models.
know of only one of them that wasstarted by somebody who had an MBA.
And, and mostly he thought whathe'd learned was bullshit and
he had to turn it inside out.
And that was Chris roofer at Morningstar,the tomato processing company.
So, yeah, I mean, if you gothrough a typical MBA program or

(01:01:24):
if you've worked in now, he was.
The good thing about, about Bill Goreis he had worked on these Conco team.
He's like, Hey, you know, if he hadnever had that experience, I don't
think he could have created Gore.
And so yeah, you, as with all kinds ofinnovation, you, you gotta start, you
gotta think as an outsider and you gottalike be able to step back and like,

(01:01:44):
well, why the hell do we do it that way?
That seems a little bit crazy.
And and that's, you know, that'shard, hard to do particularly if
you spend a long time immersedin one, one kind of environment.
I think the other I want, I wanna say wecan come back to go, but I wanna say one
other thing about John Mack in this kindof idea of love and your point about,
you know, people rolling their eyes.
I think one of the things that makes itreally difficult to talk about that just

(01:02:10):
how cynical our organizations have become.
Because we may not talk aboutlove, but we talk about a lot
of other things that people know
is bullshit, right?
, we talk about integrity and people seeall kinds of shortcuts taking place, or
as we talked about last time, they willsee ways in which we are purposefully
profiting from customer ignorance.

(01:02:30):
I get pissed off at this, at thesize of, let's say my, my, my cable
television bill I call them and theygo and I say, Hey, I'm gonna defect.
I'm gonna go to like YouTubeTV or something else.
I'm gonna cut the cable.
And they go like, well, we cangive you a much better deal.
And they finally put me to thecustomer retention people, and I'm going
like, why the hell didn't I know that?

(01:02:51):
why do I, why didn't you, like, whydidn't you just adjust my bill rather
than let me go on at some legacyprice, which is really no longer
your best price, but you're so happy.
Like, so, we hear peopletalk out integrity.
We hear them talk about customerfocus , , or we hear them talk about,
, employees are our most important assetand we just know that's bullshit.

(01:03:11):
We know here's, , here's a little asidefor any leader in a company, if you're
using words like integrity, employeeengagement, customers first, anything
like that, I want you to stop sayingthat shit, unless you have a bunch of
examples of where you guys have actuallymade hard sacrifices for that goal.

(01:03:35):
If you haven't, if you know if you,if, it actually ranks practically
number five or six or 10, right?
And if everybody could point to thingsthat we're doing that are not consistent
with that value, just like, shut up.
Don't talk about that thing.
Like get, you know, sort it outand just, and, and, and make
the changes you need to make.
So that really is asimportant as you say it is.

(01:03:55):
But I think there's this justyawning rhetoric reality gap in so
many companies, which is why, wejust have this endemic of cynicism.
So I think that's a lot of why atthe moment, like people would be
very disinclined to even use thisword, because of course people
are gonna roll their eyes, right?
So that's just a littleassignment for anybody listening.

(01:04:15):
Look at these highfalutin value-ladenterms that you're using and then
ask, like, ask your employees,where are we not living up to that?
Do you have the guts to do that?
Ask employees where arewe not living up to that?
And then let's, fix that.
And then maybe you have thecapacity to talk about these things

(01:04:37):
without people rolling their eyes.
But I certainly understand why they do.
I'm gonna share because you saidthat a, a great thought experiment
you share in the book and this.
Maybe we'll leave our audience with thisand we'll touch back on Gore and we'll
touch back on Google and Whole Foods thenext day, and particularly the paradoxes
of trying to lead in a new way that youhave to accept these kind of trade-offs

(01:05:01):
the whole time in order to do that.
But there was a thoughtexperiment that you had.
You said, suppose you knew that in 12months time, a looming financial crisis
would force you to cut the salary ofevery employee in your company by a
third, assume further that your company isrunning very lean and that every associate
is making an indispensable contribution.
Now, if the goal is to minimize therisk of a mass exodus when the financial

(01:05:26):
crunch finally hits, what changes wouldyou make over the next few months to
keep your colleagues from jumping ship?
I absolutely love that, man, becauseI don't think anybody read that
before the Covid pandemic hit.
This is about the importance of amoral imperative in an organization.
How do you get people toget behind your company?

(01:05:49):
How do you get them to stay there, rather than just staying for the paycheck?
It is a, it's a big question andone that is gonna deserve more
time than we have right now.
But I would start with this.
'cause there's a lot of thingsthat are important in doing that.
Mostly not the things we typicallythink about the hygiene factors,
but you really do have to believethat your business thrives or dies

(01:06:16):
on the emotional connection peoplehave with you as an employer.
And that your primary responsibilityas a leader is to make that connection
stronger and to give people reallygreat reasons for hanging with
you when things are difficult.
And again, I do notthink you can fake this.

(01:06:40):
I had a conversation, I dunnoif it made it in, into any of my
books, but I had a conversationwith one of the CEOs at Nucor,
again, just an exceptional company.
And I said, how do you introduceyourself to new employees?
Like, what's, what, what, whensomebody meets you, right?
And blue collar employee or the CEO,and like, tell me like, how does
that, how he said in any, when Ihave interactions, I try to do this.

(01:07:05):
He said, the first time I talked toone of my employees, our employees,
the conversation's entirely about them.
It's not about business.
Tell me about your family.
Tell me about where else do you work?
How did you get here?
Why did you come here?
What's going on in your life?
What are, what ischallenging you right now?
What do you worry about at night when it'snot, when you're not thinking about work?
And he said like, I really wanna know whothey are as a human being and I want to

(01:07:26):
connect like heart to heart in that way.
and then he said, thesecond time I'll meet them.
The question is about work, but my onlyquestion is, what do you need from me?
Like, what is frustrating you?
What would help you do a better job?
How are we not supporting you?
Technology, training, leadership.
Tell me what I, what we need to bedoing to make your life better work.

(01:07:50):
And he said, only in the thirdconversation will I say anything about
who I am, what our bigger mission is,what we're trying to do, and so on.
And so I think I, I can give you, we'llgo deeper maybe later into kind of some
heart to heart stories, but I thinkpeople sense that , super clearly,
whether that's part of the culture or not.

(01:08:11):
And and whether they're actuallytruly treated as human beings or not.
And, you know, it's notall that complicated.
People want, they, they wannabelieve that, that they're working
on something that makes a difference.
I. They want to feel like they're part ofa community, that they have people around
them that care for them as human beings.
They want to believe that they havethe freedom to make a difference, that

(01:08:31):
they're, they're empowered and notdrones and to share in that success.
And they want the chance to grow andto, to advance their skills and so on.
And to the extent that everythingaround them is working to those ends,
like they'll do extraordinary things tothe extent it's not, they won't, but,
but, but you don't build that kind ofculture and you don't build those things

(01:08:53):
into the employment context unless youhave leaders who I think are just like
deeply, deeply human at their core.
And sadly, I do not think thatis what we, that that is not.
The ethic, the ethos, the feeling thatwe select for when we're promoting
people, often in organizations.

(01:09:15):
But yeah, and, and so if you look at thepeople, we'll talk about this I'm sure
at some point too, but if you look atthe people that had the courage to do
what, what Gore did, what John Mackeydid what, what Ken Iverson that group did
at at at Nucor and so on, none of themwent down that path because hey, we're
gonna be more profitable, we're gonnabe bigger, you know, more productive.

(01:09:37):
All of 'em said this is the rightthing to do for human beings.
And they had faith that we can getthe other things to work, right?
We can figure out how to make a profitablebusiness, we'll work in the business, but,
but if you don't get that thing right,whatever you built is gonna be fragile.
And it's just, you know, youthink it's like so obvious.
I, I saw this piece, this is now a fewyears ago, three or four years ago, in,

(01:09:57):
in in, in, in the US Business magazine.
Walmart was doing some, and, and pardonme if I get this wrong, 'cause I'm
remembering an article, Walmart hadstarted to do some experiments with,
with paying people more because Walmartwas having like 30% turnover every year.
And you know, they were very miserlywith healthcare and so on and so on.
They were experimenting what happens ifwe pay people more and they like crap.

(01:10:19):
Like, like they did a better job.
And I don't think it was because it'sjust the pay 'cause like, you feel just
a little bit of respect coming your way.
And it was like, and it was so the,the, the reaction's like, wow, who knew?
And you're going like, honestly, who knew?
So Anyway, that's we'llcome back to that theme.
That's why my next bookwas called Human Ocracy.

(01:10:39):
But all of these companies, that'sthe problem they were trying to solve.
How do you build a workenvironment that deserves the
very best that people can give?
Beautiful.
Nice way to finish it, man.
And I, I feel getting to knowyou more and getting to read the
books and see how they developed.

(01:11:00):
I see that what you're really doingis trying to unlock better leaders,
to create better organizations so thepeople working there have better lives.
So I certainly see that red threadfrom reading through your work.
It's always a pleasure.
Thank you for joining me for Part one ofthe Future of Management, , Gary Hamel.
Thank you for joining us.
A pleasure.