Why I am done with Gary Hamel, (and my clients value that)

Note: this story has also been published on LinkedIn, where Gary Hamel’s co-author Michele Zanini has responded and clarified key aspects of Humanocracy in the comments. I recommend reading those comments to know better the intended message of the book.

In 2003 the USA, with the help of a modest coalition, invaded Iraq and started an armed conflict. It cost $2 trillion in the most conservative estimation, lasted a decade with a known aftermath of thousands of deaths, the rise of the Islamic State as the successor of al-Qaeda, millions of displaced civilians and a humanitarian crisis, infamous images of human rights violations at the Abu Ghraib prison, etc. It was a war that the Secretary-General Kofi Annan of the United Nations described as “illegal.”

The reader of these lines surely remembers that the main argument was that the regime of Saddam Hussein was developing weapons of mass destruction that presented a threat to the world. Those weapons, as the bureaucratic UN inspections stated previously, never existed.

The awful truth about the anti-bureaucratic rhetoric achievements

Some years ago, I attended a keynote talk by Paul du Gay at an academic conference held in his home business school in Copenhagen. He analyzed the conclusions of the official investigations and other independent research into the decision to go to war in Iraq conducted in the UK (such as The Hutton and Butler Inquiries) and the USA. As du Gay writes, “Under the Blair administration, the traditional bureaucratic practices of careful and precise note-taking and writing of minutes had fallen into abeyance were both striking and worrying”. In that sense, Butler wrote that “the informality and circumscribed character of the Government’s procedures” seriously risked “reducing the scope for informed collective political judgment”. Things were not very different on the other side of the Atlantic: in a DCI Tenet leaked to the press after September 11th you can read, emphasis mine, that the administration needs to “end business as usual, to cut through red tape, and give people the authority to do things they might not ordinarily be allowed to do… If there is some bureaucratic hurdle, leap it”.

Professor du Guy also showed examples of how harmful the anti-bureaucracy rhetoric has been in the private sector. He dug into equally infamous corporate collapses, like the Valukas report into Lehman Brothers and the UK Parliamentary Committee on Banking Standards report into HBOS. But we do not want to go into arguing how irresponsible trashing of bureaucracy can be (you can read the ethical defense that duGay carefully developed in “In Praise of Bureaucracy: Weber — Organization — Ethics”) because this is not my only focus in this article.

Of course, removing bureaucracy to make leadership less accountable is not on the agenda of Humanocracy, the anti-bureaucratic manifesto for a freer human race. So how good or bad does the aftermath of anti-bureaucracy efforts look?

After all these years reading Hamel, one could be perplexed that there has not been in the last decade a wave of a massive transition to non-bureaucratic corporations. Hamel has provided convincing theory illustrated with numerous examples, and yet, the same names show up over and over, with a few meritorious and dazzling (yet scarce) new examples. The fact is that, as all the historians of the anti-bureaucracy thinking show, it started a long time ago, and yet bureaucracy only has grown more and more over time. In other words, Bush and Blair removed bureaucracy from their administrations very selectively or just moved it to the private sector. In the USA, where health is mostly in private and market-oriented hands, the administrative costs accounted for 34.2% of all health care expenditures in 2017, twice the percentage spent in Canada. In short, it is safe to state that, no matter what management gurus say, Capitalism relies on and develops thanks to bureaucracy, not despite it.

But let us talk about Haier, Hamel’s new antibureaucratic champion. After reading Hamel’s book some aspects did not sum up so I did three things. Firstly, I looked up in the library of EADA Business School (where I teach Competitive Intelligence and Open Innovation) and found and read the book “Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform”. Secondly, I searched for a first-hand account of Haier’s model on Youtube. Thirdly, I looked for Haier’s employees’ opinions at Glassdoor. And I learned two things: 1) Haier is quite bureaucratic, and 2) its model is not anti-bureaucracy-centered but for-value-centered.

Haier is actually quite bureaucratic (and still awesome)

When I read Hamel’s functions of Humanocracy I laughed so hard that coffee almost came out my nose:

Hamel soon clarifies that it looks pretty much the same as the old model, BUT the accent is not the WHAT but the HOW. Fair enough! So let us take a look at the “hows” that Hamel does not explain in his book, but Lago, Umberto, et al. do in theirs.

For instance: who decides what microenterprises are created in the Haier ecosystem. The so-called Haier entrepreneur? The ecosystem itself? Not really (emphasis mine):

“ZZJYTs are born in auctions, where aspiring ZZJYT leaders submit prospective business plans for a target market after carefully studying the potential of this market and formulating sales goals, a plan of attack, and a budget for the resources needed. These plans are reviewed by a committee of internal managers from the departments of finance, strategy, and human resources, as well as line managers from other business units and occasionally outside experts. The committee reviews the proposals on the basis of their objectives regarding timing, strategy, processes, and incentive system, as well as how the business plan agrees with Haier’s overall strategy.”

What about the performance evaluation of Haier’s thousands of microenterprises?

“Detailed three-year, yearly, quarterly, monthly, weekly, and daily execution plans

Short-term adjustments based on external market changes Tools such as weekly clear and daily clear to report the planned and accomplished tasks Results for the previous week, plan for the next week, and the next six weeks “

Can the so-called entrepreneurs spend the ad budget freely? Not exactly (emphasis mine):

“Marketing costs are primarily associated with advertising. These costs are normally audited by the financial department in order to avoid costs that are not competitive.”

We could go on and on with more examples (feel free to ask me for more in the comments, or add your favorite ones). Lisa Gill, in a perfect mix of intellectual humble and exquisite British humor, expressed in this episode of Leadermorphosis how overwhelmed you can feel when reading the specifics of the heavily regulated Haier ecosystem.

The fact is that there is not a single example of how to perform those functions at a certain scale without bureaucratic procedures. Haier introduces market dynamics with surgical precision to orient the company towards product innovation and time-to-market reduction. This is what the model is about.

Rendanhey is not anti-bureaucracy-centered but for-innovative-value-centered

As a result of my Ph.D., I ended up being an expert in the interpretation of symbolic language in organizations. So when I heard Haier’s CEO Zhang Ruimin in some interviews talking about his management model, I quickly saw that he talks in a different symbolic regime than his Western exegetes. It would be nice to have the time to confront the different symbolic structures, but I think that a picture will be enough.

No, Zhang Ruimin does not want to kill dragons. He wants them to carry the company, as his vision of Haier is to become “a group of dragons flying in the sky without a leader.”

Regarding the abstract ideas and concepts, if you listen to Mr. Ruimin you will find that he does not spend much time trashing about bureaucracy but talking about value creation for the user/customer, and entrepreneurship. The model is called Rendanheyi, whereby ren(人) means “staff”, dan(单) means “user needs”, and heyi(合一) means integration. In short, what MY old guru Shoji Shiba calls “market-in” as opposed to “product-out”. The genius of Zhang Ruimin has been to change the scale in which this process happens, through a strategy that some researchers describe as “microdivisionalization”. And as it is said in the podcast mentioned above, he has innovated not only in how value is created but also distributed.

When analyzed through these lenses, bureaucracy is less important, as long as it does not interfere in the “heyi” part of the equation. Haier, ultimately owned by one of the most bureaucratic states of the world, would put the whole Chinese pantheon (famously depicted as the “celestial bureaucracy”, check the Wikipedia entry if you do not believe me) at the service of the thousands of microenterprises if that would serve better the connection between front-line employees and users’ needs, and the reduction of time-to-market of Haier’s solutions to those needs.

What it is all this anti-bureaucratic rhetoric about

In a recent post, Alex Ballarí reminded us that the closing sentence of the Agile manifesto is largely ignored:

Humanocracy’s strong antagonism is not agile thinking. Not to mention the reading from the perspective of non-violent communication that Jaume Jornet does also in another popular future-of-management bestseller:

My biggest disappointment with Humanocracy was not the fact that I would not find any idea substantially new; I kind of expected that. My problem is that the authors devote a chapter to the “Power of Paradox” that seems to be ignored in the rest of the book!

We live in a world that is experiencing polarization at many levels. I think that polarizing against bureaucrats helps to sell books, because it does not affect a particular minority. So it works nicely nowadays as the ancestral mechanism of the scapegoat. Is scapegoating in organizations (get rid of the bureaucrats!) a good strategy for cultural change? Not in my book. Among other things, because you need a whole Pantheon to rule your organization, bureaucrats included. Lisa Gill warns on different occasions during the mentioned podcast about the risk of killing diversity with the pro-entrepreneurship and anti-bureaucracy way of thinking, and I totally second that.

Because the intelligent and smart critique of bureaucracy is always targeted. Look at the example of David Graeber, one of the authors that have influenced me the most (I am still emotionally devastated by his unexpected death). In his book entitled “The Utopia of Rules: On Technology, Stupidity, and the Secret Joys of Bureaucracy” he wrote (again, emphasis mine):

“But this essay is not just — or not even primarily — about bureaucracy. It is primarily about violence. What I would like to argue is that situations created by violence — particularly structural violence, by which I mean forms of pervasive social inequality that are ultimately backed up by the threat of physical harm — invariably tend to create the kinds of willful blindness we normally associate with bureaucratic procedures. To put it crudely: it is not so much that bureaucratic procedures are inherently stupid, or even that they tend to produce behavior that they themselves define as stupid — though they do do that — but rather, that they are invariably ways of managing social situations that are already stupid because they are founded on structural violence. This approach, I think, has the potential to tell us a great deal about both how bureaucracy has come to pervade every aspect of our lives, and why we don’t notice it.”

The good thing is that Hamels’s fans do not pay my bills. My clients do. And they have explicitly told me several times that they want me around as an adviser because despite my dream of a different society is not less ambitious than the one of Hamel or Graeber (closer to the later than the former), I am a pragmatic person, attentive to the paradoxical reality we live in, and that grounds my thinking in updated research (with critical perspective) and philosophical wisdom they do have not time to read and reflect, but they can selectively dig in after listening to my reasonings.

And yet I recommend buying Humanocracy

Wait! There is actually a twist here? I don’t know. The thing is that when buying the book you get access to a web crash-course on Humanocracy that can save you the time of reading the book if you just want the main points, but more importantly, it has interviews with VERY interesting people that work in the companies the book talks about. And I think that those interviews are GOLD because the interviewees are well selected, but also because Hamel and Zanini always make the questions I would like to ask them. That intellectual coincidence — for me the right questions are the key — makes me reconcile a little bit with the authors despite their dubious choice of how to market their ideas.