STRATEGIES

TRAP THE COMPLICATEDNESS

n 1955, businesses typically committed to between four and seven performance imperatives. Today they commit to between 25 and 40. The Boston Consulting Group Complexity Index shows that business complexity has gone up six-fold in the last 60 years. Contemporarily, organizational complexity (meaning the number of structures, processes, committees and systems) has seen a 35-fold increase.

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Though they attempt to respond to increasingly complex performance targets, new organizational labyrinths make it harder to improve productivity and promote innovation, causing demotivation and poor involvement in collaborators. However, it is not necessary to apply “hard” solutions to manage complexity, such as adding new processes, new systems, new structures and KPIs according to traditional methods of business organization. Nor do you need “soft” solutions such as team building, networking events and activities aimed at improving interpersonal relationships. Both of these approaches seek to achieve control, while in reality they make organizations more complicated* and unable to manage the complexity at hand. What is needed is a reduction of direct control, an increase in flexibility and autonomy and the reduction of systems. In short, leveraging the intelligence of people.

TO UNDERSTAND HOW TO MANAGE COMPLEXITY WITHOUT GETTING COMPLICATED, WE ANALYZED THE WORK OF YVES MORIEUX, DIRECTOR OF THE BOSTON CONSULTING GROUP’S INSTITUTE FOR ORGANIZATION. AND WE DISCOVERED THE SIX RULES THAT HELP REDUCE BUREAUCRACY WHILE INCREASING COOPERATION AND ENGAGEMENT.

This issue of EVOLVE is dedicated to deciphering one of our most important current topics, how to reduce excess bureaucracy in business, and so we are taking a look at the thoughts and work of a number of international experts on business models and organization. In the next pages we will talk about the work of Yves Morieux, director of the Boston Consulting Group’s Institute for Organization and Michele Zanini, co-author with Gary Hamel of the book “Humanocracy”.

Morieux’s book “Smart Simplicity”, written in four hands with Peter Tollman, is above all aimed at managers. Based on solid theoretical foundations and the work carried out with over 500 companies in all kinds of industries in more than 40 countries by the BCG, Morieux offers managers six simple rules on how to manage complexity without getting complicated.

“There are two main factors that cause an increase in complexity” says the author. “The first is the great number of choices available to us, due to the lessening of commercial barriers and technological advancement. A customer with many alternatives is unwilling to compromise and will be more difficult to please. The second factor is the increase in the number of stakeholders (along with customers, shareholders and employees, there is the addition of political, legal, control and supervisory authorities) which puts companies in the difficult position of trying to meet the needs of one group, often to the detriment of another.” To meet the challenges of complexity, in recent years technicians, directors, CEOs and managers have tried applying the “best” management thinking and following the “best practices”, intervening with measures aimed at the development of human capital. Everything done according to the manual, everyone fully committed, in an effort to reach a goal that almost never produced the desired result.

In many cases applying the classic managerial models developed over the past hundred years, instead of improving the management of the growing complexity, has only made the situation worse. Both the hard approach adding levels, structures and scorecards like KPIs and the soft approach focusing attention on behavior and emotional stimuli and placing responsibility on the psychological state of individuals have generated complicatedness, which is the human response to complexity, both in life and in business. But complicatedness leads to productivity stagnation and demotivation, which then feed off of each other.

The work of the Morieux group started in response to this apparent stalemate, which integrated the economic and social sciences with the strategic and organizational challenges of companies and managers. The “Smart Simplicity” method was born, elaborated from the experience attained from field research and theoretical inquiry, combined with the skills developed through the relationships with customers in the United States, Europe and Asia. Along with the six simple rules to manage complexity, the authors reiterate the importance of autonomy and cooperation as key elements able to instill people with new power to reach goals effectively, in turn improving productivity, promoting innovation and making the most of every opportunity to create competitive advantage. One of the most significant and interesting steps of this method is “The shadow of the future”, meaning the importance to people of what happens tomorrow as a consequence of what they do today. Rule number 5 of the six rules is dedicated to this theme: it will become much easier for a manager to identify the point at which his current behavior will have consequences “down the line”.

As in previous issues of EVOLVE, we have extracted theoretical and strategic passages, this time from the work published by the director of the Boston Consulting Group Institute for Organization. These are the questions to think about to get out of the complicatedness trap and out from under the unnecessary bureaucratic procedure that prevents all companies from taking advantage of complexity to achieve competitive advantage.

SMART SIMPLICITY KEYSTONES 6

TAYLOR AND CONTROL STANDARDS

According to the theory of scientific management elaborated by Frederick Taylor nearly a century ago, there are two fundamental assumptions. The first is that structures, processes and systems will have a direct and predictable effect on results. The second is that the human factor is the weakest and least reliable point of the organization. According to Taylor, it is therefore necessary to control the behavior of employees with a myriad of rules that regulate their way of acting on the one hand, and provide financial incentives linked to performance indicators (KPI) to guide people to behave according to expectations on the other.

RELYING ON THE INTELLIGENCE OF PEOPLE

The human factor is actually the key resource for managing complexity. One of the consequences of complexity is that no one person has all the answers. This is why it is useful for individuals to use their autonomy to cooperate with each other. Companies must rely on the intelligence and ingenuity of employees, giving them greater independence and room to maneuver. This is the only way that team members will be able to exercise judgement, negotiate compromises and find creative solutions to new problems.

THE USE OF THE RULES IS IMPORTANT

Formal rules and procedures do not have a predetermined effect on individual behavior. Each person actively interprets the rules and uses them as a resource to reach their objectives. The rules are not what is important, but the use that people make of them.

THREE OUT OF FOUR ARE NOT INTERESTED

According to some Gallup polls, only 28% of the United States workforce feels actively involved in their work, while the rest is actively disinterested or simply uninterested. In Europe, the percentage of active involvement does not exceed 23% (Switzerland and Austria), and similar results are obtained from surveys carried out in Japan and Australia.

ENERGY SPENT IN VAIN

In the top 20% of complicated organizations, managers spend more than 40% of their time writing reports and between 30 and 60% of their total work hours in coordination meetings. It takes more time to manage the work than to actually accomplish it with your team. As a result, working hours increase, without adding any value.

COMPLEXITY BRINGS ADVANTAGES

While complexity poses enormous challenges, it also offers companies great opportunities. The companies that are successful in the current economic context, are increasingly, those that know how to take advantage of complexity and make the most of it to create a competitive advantage. The problem is not “complexity”, but “complicatedness”, the proliferation of unwieldly organizational systems, including structures, procedures, rules and roles.

THE FRUSTRATION OF “DOING AND REDOING”

In many companies, teams waste between 40 and 80% of their time doing unnecessary activities. They have to do, undo and redo: in the end, perceiving the futility of their efforts, individuals feel blocked, dissatisfied and unmotivated.

COOPERATE OR PROTECT YOURSELF?

The use of technology combined with typical methods of management produces something that “seems” to improve productivity, in that it reduces the amount of waiting or downtime. This means that more actual minutes of physical work are done for each hour of an employee’s presence in the workplace. If, however, there is no cooperation, the value produced in those extra minutes of work decreases, due to the proliferation of activities that do not add value (edits, modifications, report writing, inspections, etc...). Is copying ten recipients on an email (or inviting ten people to a conference call) true cooperation, or rather a way of protecting yourself?

AUTONOMY & COOPERATION

The key to managing complexity is a combination of “autonomy” and “cooperation” (cooperate means operate together, or, share the work), understood as” taking into consideration the needs of others in achieving a common result.” Autonomy strengthens the flexibility and agility of the individual; cooperation creates a series of synergies so that everyone’s contribution is multiplied to the benefit of the group’s effectiveness.

THE SHADOW OF THE FUTURE

In order to extend the shadow of the future increase the importance of what happens tomorrow as a consequence of what has been done today we need people to put themselves, even if only temporarily, in another’s place. Putting someone in the shoes of another they don’t work with directly (and that they may never meet) exposes them to the problems that their current behaviors may cause colleagues in the future.

8 THE IMPORTANCE OF BEING DOERS by Yves Morieux

lready back in 1994 in the book “The Age of Diminishing Expectations”, the Nobel Prize in Economics laureate Paul Krugman wrote: “Productivity is not everything, but, in the long run, it is more or less everything.” On the basis of this assumption, I have spent the last few years of my professional life trying to solve two great enigmas: why has the productivity of all the companies I have worked with been so unsatisfactory? And, why do we put so little effort into our work, performing with such unhappiness and lack of motivation?

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I initially thought it might be a circular problem. When people are less motivated, they become less productive. And vice versa, when they are less productive and receive more pressure, they become less motivated. However, as we analyzed this, we realized that there was a common cause for both problems that concern the two basic pillars of management: the concrete pillar, such as structures, processes and systems, and the intangible pillar, namely interpersonal relationships, character traits and personality. When a company reorganizes, restructures, redesigns or plans a cultural transformation, it acts on these two pillars. Business books are all based on one or the other, or on the combination of the two. The real problem is that these pillars are now obsolete and no longer suitable to best manage “new” business complexity. A complexity that is not a problem in and of itself, as long as you are able to create value by managing both it and the numerous company stakeholders. The problem arises when managers generate “complicatedness”, which puts people in situations that are impossible to manage and where they find themselves forced to use their skills solely to juggle critical issues rather than to generate value. All attempts to improve performance by managing complexity while avoiding complicatedness will frequently come up against a wall of business theories, accumulated over many decades, that have transformed management into an abstract concept, disconnecting it from its true mission. Some abstractions tend to become infiltrated into the following aspects of organization: hierarchical relationships, performance indicators and leadership styles. These abstractions, however attractive they may be on an intellectual level, are misleading on a practical one. Intellectual organization is one thing, but effective organization that uses the intelligence of its collaborators is another. To create this type of organization, it is necessary to have a strong management in place and, to make sure it flourishes, that management must re-attain direct knowledge of the operation, abandoning the abstractions and emblems that look like real work (structures,

Yves Morieux

Yves Morieux, director of the Boston Consulting Group’s Institute for Organization, is senior partner and managing director at the Washington branch of the Boston Consulting Group. He is the author of the book “Smart Simplicity”, co-written by Peter Tollman.

procedures and KPIs), but which instead push real work to the side. Let’s not resign ourselves to this fate, since we do not have to live in a world of abstractions. There is no need to waste time puzzling over how to tick all the boxes and outline organization charts. We can occupy our time with real work content, not just its packaging, by continuing to ask ourselves the same simple questions: what role do we expect this manager to play? What added value should the manager provide? What do we need this manager to do that his team wouldn’t spontaneously do on their own? What power bases will the manager have?

The more that organizations are able to take advantage from the power of digital technology, extend themselves globally and operate in virtual teams, the more one particular aspect will need to be clarified,

The greater the complexity of a business, the more it is necessary to rely on the judgment of individuals.

something that has become increasingly ambiguous over time: that of real work that is done by real people. Staying connected to relevant work is both challenging and essential. One way of seeing the reality of things is by understanding the context in which the work is performed, exactly what is filtered out or confused by both the hard approach, those theories of alleged advantages and disadvantages of structures, processes and systems, and the soft approach, being those stories about personalities and feelings that ultimately work against people.

Management’s return to the reality of work is not merely an intellectual or philosophical endeavor. It is a concrete effort to understand how the different actors carry out their work and help them make the most of their judgement and energy. This kind of management is not a form of micro-management in search of the kind of control that hard and soft approaches give the illusion of attaining. These attempts to control individuals are all the more harmful as business complexity increases, and only serve to increase complicatedness. Instead, the greater the complexity of a business, the more it is necessary to rely on the judgment of individuals. The six rules of Smart Simplicity demonstrate that this trust can be much more than an act of faith: it is a carefully thought out path where your intelligence and your energy will make the difference.

10 THE SIX RULES COMPLEXITY TO MANAGE

s a rule, organizations take one of two approaches. They adopt either the “hard” approach (structures, processes, systems and financial incentives) or the “soft” approach (team building, people initiatives, off-site retreats, focus on leadership style and emotional incentives (all activities regarding interpersonal relationships). Or sometimes both. Both of these approaches seek to achieve control. In doing so, they make organizations complicated-slower, more bureaucratic, bogged down in process, and, more importantly, unable to manage the complexity

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of the environments in which they operate. What is needed is less direct control resulting from both the hard and soft approaches, fewer systems and more autonomy. By making better use of the opinions and power of individuals, an organization will be agile and better at responding to complexity. The six simple rules should be considered as guidelines to put into practice. They provide the base from which to approach a series of organizational challenges such as productivity, innovation, growth and cultural change.

RULE 1 Understand what your people do

Know the contexts that shape behaviors - what’s really happening in your organization. Learn how your people cooperate, find resources and solve problems - or fail to do so. To analyze context, you must understand goals, resources and constraints. Keep in mind that behaviors are rational solutions in a particular context.

• People always have reasons for the things they do • Every behavior is a solution to a problem

Key questions to ask your people in order to understand their contexts:

• What are the most interesting and frustrating aspects of your job? Why? • What are the key problems you have to deal with? • How do you solve them? • How do you know if your solutions work? • Who do you have to interact with to do your job?

RULE 2 Reinforce integrators

An integrator is an individual or working group who fosters cooperation for the benefit of the company. Unlike coordinators, integrators do not intervene after the fact to review the compatibility of individual contributions, but are directly involved in cooperation while the action is taking place.

Being both a resource and a constraint, integrators generally cause both positive and negative feelings: never indifference.

After understanding the context, (rule 1), find out how cooperation happens, and who makes it happen. Identify the integrators, the people and units who bring others together and drive processes. Eliminate layers and rules and give the integrators the power, authority and the incentives to make the entire task succeed.

RULE 3 Increase the total quantity of power

Power isn’t a zero-sum game. Increasing the total quantity of power available in the organization allows managers to think and act on more performance requirements.

This supports strategy and leadership and helps organizations respond to the demands of complexity. Creating power can be a small matter - like giving store managers control over staffing - and it doesn’t necessarily look “strategic”. But it can have a real impact on performance.

• Increase the total quantity of power whenever you intend to change your organizations structure, processes and system. See if creating new power bases could satisfy more requirements in dealing with complexity. • When creating new features, be sure to give them the power they need to perform their role. And that this power is not obtained at the expense of the power needed by others.

RULE 5 Extend the shadow of the future

Increase the importance of what happens tomorrow as a consequence of what one does today. In fact, actions have consequences: and experiencing the consequences increases performance. How to extend the shadow of the future: • Tighten the feedback loop so people feel consequences more frequently. • Have your people interact more frequently with others whose work is affected by their actions. • Make sure people’s involvement in the work continues to the end point of the activity, the point at which the consequences of their actions show up in collective results. • Tie futures together so that success requires contributing to the success of others. • Make people walk in the shoes they make for others, so they are exposed to the problems their current behaviors could create.

RULE 4 Increase reciprocity

Make cooperation happen. Work is becoming more interdependent, and that means that people need to rely more on each other and cooperate directly instead of relying on dedicated interfaces, coordination structures or procedures. Those things make life complicated, while ‘reciprocity”, which ensures that people have a mutual interest in cooperation (and that their success depends on each other), makes people cooperate more autonomously and, therefore, makes organizational life simpler. To create a working context where there is a greater probability of people behaving according to defined objectives, it is necessary to:

• Eliminate internal monopolies (functions, individuals and administrations) that become bureaucratic as they tend to underline the importance of the rules and create their own. • Remove some resources. If you take away the extra TVs in a household, people will have to cooperate to decide what to watch on the one remaining TV. • Create adequate networks of interaction. This pushes individuals to contribute their own specialized role to several aspects of performance: innovation, practicality, productivity of the purchasing staff and satisfaction of customer needs.

RULE 6 Reward those who cooperate

People think cooperation is risky. Make it riskier not to cooperate. Blame and risk aversion are at the heart of organizational culture. But smart organizations accept that problems happen for many reasons, and the only way to solve them is to reduce the payoff for those who don’t contribute to a solution. Performance evaluation and reward systems are the key but instead of using them to punish failure, use them instead to punish failure to help, or to ask for help. Refuse escalation of the decision-making process: it can have harmful consequences. Instead of arbitrating, gather everyone who should have cooperated in a room where they must stay until they have reached a satisfactory decision. If there are cases when the process is long and you have to intervene, then:

• Make sure that the people who caused the escalation are held responsible for the situation. • Make this a learning experience by asking everyone: “What will you do differently next time so that there is no need for an arbiter?”.

12 HUMANOCRACY TO GET OUT FROM UNDER BUREAUCRACY

here are researchers and experts who, for years, have studied the organization of work in the digital age and the consequent impact that this great transformation is having on the professional life of individuals. One of the most qualified people to speak on an international level about these topics is Michele Zanini, management consultant analyst, co-founder with Gary Hamel of the Management Lab, an organization that develops technology and tools to support organizational change.

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In addition to having his works published in the Harvard Business Review, the Financial Times, Fortune and the Wall Street Journal, Zanini and Hamel have written a new book together (which will come out in June 2020) entitled “Humanocracy”. In this essay they argue that new organizations must no longer be based on bureaucracy but must serve as a vehicle for human beings to improve their lives and the lives of those with whom they interact.

In this long interview, for which Michele Zanini offered his great availability to the editorial staff of EVOLVE, we are able to give a sneak preview of many of the themes to be found on the pages of “Humanocracy”. We will talk about what the future trend in organizations will be, the steps that managers must take to change the culture of their company, why, generally speaking, employees have lost enthusiasm and why bureaucracy is such a difficult phenomenon to eradicate.

A reading that– together with the other articles in this issue of EVOLVE – forms an effectively comprehensive picture of what we find inside of companies, and on the type of work that managers of the third millennium will have to do, without being overwhelmed, to govern the digital revolution.

INTERVIEW WITH MICHELE ZANINI, MANAGEMENT CONSULTANT ANALYST, CO-FOUNDER WITH GARY HAMEL OF THE MANAGEMENT LAB. «BUREAUCRACY IS A HUGE MULTI-PLAYER GAME. IT IS THE FIELD UPON WHICH MILLIONS OF HUMAN BEINGS COMPETE TO ACQUIRE STATUS AND WEALTH».

Michele Zanini

Michele Zanini is the co-author, with Gary Hamel, of HUMANOCRACY: Creating Organizations as Amazing as the People Inside Them (Harvard Business Review Press). Zanini is a co-founder of the Management Lab, where he helps large organizations become more adaptable, innovative and engaging places to work. Zanini is an alumnus of McKinsey & Company and the RAND Corporation, and holds degrees from the John F. Kennedy School of Government at Harvard University and the Pardee RAND Graduate School.

Professor Zanini, you wrote that excess bureaucracy costs the United States economy over $3 trillion in economic output per year. While for the 32 OECD countries, the cost of excess red tape rises to nearly $ 9 trillion. I ask: When was bureaucracy invented and with what objective? How did we get to this point?

There was a time when bureaucracy was a new idea — and a blessing. Its stratified power structures, specialized roles and routinized tasks enabled unprecedented levels of control and, thereby, efficiency. Absent bureaucracy, scientific inventions like the automobile would have remained mere curiosities. But like all technologies, bureaucracy is a product of its time. In the century and a half since its invention, much has changed. Today’s employees are skilled, not illiterate; communication is instantaneous rather than tortuous; and the pace of change is exponential rather than glacial. Nevertheless, the foundations of management are still cemented in bureaucracy. Most organizations still concentrate power in the hands of a few highly paid executives, alignment and conformance are, as ever, prized above all else, and employees are still treated like semiprogrammable robots. Held hostage by this bureaucratic legacy, most organizations are poorly adapted for the knowledge economy, and even less so for the creative economy. They are unnecessarily elitist, overly politicized, change-phobic, and above all, disempowering.

Might there, then, be any alternative organizational models to replace the bureaucratic one?

Yes there are. Around the world, a growing band of postbureaucratic pioneers are proving it’s possible to capture the benefits of bureaucracy — control, consistency, and coordination — while avoiding the penalties — inflexibility, mediocrity, and apathy. When compared to their conventionally managed peers, the vanguard — many of which we feature in our new book like Haier, Intuit, Nucor, Svenska Handelsbanken, and WL Gore — are more proactive, inventive, and profitable. These companies were built, or in some cases rebuilt, with a common purpose — to maximize human contribution. These organizations share a common set of practices, such as:

• Small, autonomous teams that are empowered to make key operational decisions, including hiring, staffing, pricing, and equipment purchases. • Compensation models that tightly link pay and profitability and encourage employees to think like business owners.

• Support services that are provided to operating units at cost (or are optional).

• A strong sense of competition and collaboration between operating units.

• A general aversion to formal titles and job descriptions in preference for dynamic, “natural hierarchies” based on demonstrated competence.

• Significant and on-going investment in the financial, commercial and technical skills of front line employees.

• A high degree of transparency around financial and operational information.

• Deeply shared norms and a strong sense of mutual responsibility for unit and enterprise success.

• Multiple channels for lateral communication and a reliance on ad hoc teams to address coordination issues.

• Radically simplified planning and budgeting processes which don’t rely on topdown targets or operate on a fixed calendar.

Despite their high performance relative to industry peers, post-bureaucratic organizations are still a small minority.

Why, in spite of the combined forces of profit-obsessed shareholders, value-conscious customers, low-cost competitors and taxpayers, has bureaucracy been so difficult to eradicate?

First, bureaucracy is familiar. It is the managerial operating system of virtually every medium and large-scale organization on the planet. Because bureaucracy is everywhere, and everywhere the same, it is easy to regard it as the evolutionary apex of human organization.

Second, this consensus is reinforced by what might be called the bureaucratic “ecosystem.” Every organization is embedded in a web of institutional relationships, most of which are predicated on the belief that bureaucracy is essential.

Third, bureaucracy is a massive, multi-player game. It’s the field upon which millions of human beings compete for status and wealth. As in all games, some skills are more germane than others. While expertise and execution count for much in most bureaucracies, other skills are often equally, if not more valuable: deflecting blame, defending turf, managing up, hoarding resources, trading favors, negotiating targets and avoiding scrutiny. To the extent these behaviors correlate poorly with value creation, they add to the management tax. Nevertheless, those who’ve excelled at the game of bureaucracy are typically unenthusiastic about changing it. Someone who’s invested thirty years in acquiring the power and privileges of an executive vicepresident is unlikely to look favorably on a proposal to downgrade formal titles and abolish the connection between rank and compensation. Bureaucracy persists because it’s well-defended by those who’ve done well by it.

Finally, bureaucracy is hard to root out because it works — sort of. All those bureaucratic structures and systems serve a purpose, if only poorly. To simply excise them would create chaos. Imagine, for example, what would happen if an organization decimated the ranks of middle management without equipping frontline employees with the skills, incentives and information they need to become self-managing. Moreover, there’s no well-trodden path for building a post-bureaucratic organization. The challenge is not unlike that faced by the first surgeons who attempted to transplant human organs: the stakes were high and the protocols were few.

Bureaucracy is accepted, embedded, defended and useful. Any strategy for busting bureaucracy must confront these realities. While the hurdles are daunting, there’s reason to be hopeful. Deeply institutionalized systems can be changed. The proof? Most of us are citizens, not subjects — our leaders are elected, not crowned. And despite centuries of patriarchy, we are committed to gender equality.

What is the difference between the speed of change in organizations and that of human beings?

We live in a world that’s all punctuation and no equilibrium. Change moves forward at breakneck speed. Lightning-fast communication allows us to combine knowledge and resources in ways never before possible. Everywhere one looks, network-powered collaboration means human beings can unite to solve problems in ways never before possible. The paper which announced the discovery of the Higgs Boson, for example, had more than 5,000 co-authors.

Lightning-fast communication allows us to combine knowledge and resources in ways never before possible. Everywhere one looks, network-powered collaboration means human beings can unite to solve problems in ways never before possible.

The shockwaves of this explosion in computation and bandwidth are reverberating all around us: Social media, the sharing economy, geolocation, e-commerce, synthetic biology, blockchain, and cyberespionage. In this maelstrom, the most important question for any organization is this: Are we changing as fast as the world around us? For most organizations, the answer is “no.” On average, they’re exceedingly good at what they do and quite hopeless at changing what they do. If you doubt that, try to think of a single case in which an industry stalwart has outpaced the upstarts.

CEOs are inclined to blame this lack of adaptability on human nature. “People,” they solemnly intone, “are against change.” Like so many trite managerialisms, this is not true. Think about your family, friends and colleagues. Over the last three years, probably everyone you know has made an important change in his or her life, like moving to a new city, started a new job, enrolled in a new course, taken up a new hobby, formed a new relationship, or taken a holiday in a new destination. Humans have an insatiable appetite for the new. All those changes that are roiling our world, they’re our doing. We are the agents of upheaval.

So why does the myth of fearful, change-resistant employees persist? Because the change CEOs talk about isn’t the sort of change you would choose for yourself; it isn’t change with an upside, change that opens new vistas, change that energizes. The typical corporate change program is defensive, dreary and disempowering. It’s about catching up, not breaking new ground. It often involves involuntary reassignments and layoffs. It doesn’t roll up, it “rolls out”. Not surprisingly, this isn’t the sort of change that gets eagerly embraced, but that doesn’t make people change phobic.

In your general experience, what is the percentage of employees who work with commitment and motivation and what is the percentage of those who move through the maze of bureaucratic rules without enthusiasm?

A 2018 Gallup study found that barely a third of US employees were fully engaged in their work — where engagement is defined as being “involved in, enthusiastic about and committed to work.” The majority of employees, 53 percent, were “not engaged,” while 13 percent — the maliciously compliant — were “actively disengaged.” Globally, the situation is even worse, with 15 percent engaged, 67 percent disengaged, and 18 percent actively disengaged.

A more recent Gallup survey indicates that barely a third of US employees strongly agreed with the statement: “I have the opportunity to do what I do best every day.” Less than a quarter said they were expected to be innovative in their job and only one in five felt their opinions mattered at work.

Here’s why these depressing statistics matter. Picture for a moment a hierarchy of human capabilities at work, a bit like Maslow’s hierarchy of needs. At the bottom is obedience. Every organization has certain rules and regulations that must be followed — the equivalent of stopping at red lights. Employees need to be law abiding. Next up is diligence. Employees need to work hard and take responsibility for results. The third level is expertise. Team members need to be well trained and possess the necessary skills to do their job. As essential as these capabilities are, obedience, diligence and expertise don’t create a lot of value. They are commodities that can, for the most part, be acquired in the world’s low cost labor markets. If this is all your organization gets out of its people, it’s going to struggle.

To win in the creative economy, more is required. Organizations need people with initiative — self-starters who are proactive in tackling new problems and opportunities; people who don’t wait to be asked and aren’t bound by their job description. Another level up is creativity — an ability to reframe problems and generate unconventional solutions. Finally, at the top, is daring — a willingness

to take risks for something you believe in. It takes a great passion to unlock these “higher order” abilities. Unlike obedience or diligence, initiative, creativity and devotion can’t be commanded. They are gifts. Each day, every employee gets to decide: Do I bring these gifts to work today? For most the answer is “no.” A company can’t build an innovation advantage without an inspiration advantage. In the end, everything hinges on willing and enthusiastic engagement

What are the first steps that must be taken to change the culture of a company where the only choice for managers is bureaucracy? Are managers the agent of change?

Most of us quietly bear the burden of bureaucracy. We’ve bought into the fiction that the management structures and systems that confound and constrain us can be amended only by those at the top of the pyramid, or by their appointees in HR, planning, finance, and legal. The problem is, waiting for bureaucrats to dismantle bureaucracy is like waiting for politicians to put country ahead of party, of for teenagers to clean their rooms. It may happen, but it’s not the way to bet. If the goal is build an organization that’s as capable as the people inside it,

Instead of a management model that seeks to maximize control for the sake of organizational efficiency, we need one that seeks to maximize contribution for the sake of impact. We need to replace bureaucracy with humanocracy.

change must come from individuals who create and catalyze change from where they sit. Managers can play an important role, but they also face the biggest challenge. If you’re a manager of any sort, you can’t empower others without surrendering some of your own positional authority. You have to trade in the old currency of power — perks, decision rights, and sanctions — for new coinage — wisdom, generosity, and mentorship.

A good first step is to ask those who work for you, “What am I doing that feels like interference, or adds no value?” Fearing repercussions, they may at first be hesitant to give direct feedback. If so, be patient. It may take several tries before they trust you enough to unload. Next, ask, “What am I doing that you could do better?” If they’re unclear about what it is you do, have team members shadow you for a few days.

There are many ways you can begin syndicating the work of managing to one’s team. Here are a few that we’ve seen be applied effectively:

• Ask your team to define its shared mission. Give them time to brainstorm answers to questions like, “What’s our value proposition? “How should we measure the success of our team?” and “What are the most important things we could do to increase our impact?”

• Support team members throughout the year in acquiring new skills. This could mean giving people time to take online classes, setting up job rotations, or working to become a better mentor.

• Give team members the time and opportunity to liaise with other units and with functions such as quality, HR, finance, and IT. Delegate the responsibility for managing cross-unit coordination.

• Invite team members to craft their ideal job descriptions. Set aside time to review and iterate these as a team.

• Have the team organize and host weekly or monthly conversations about unit performance. Let team members create the agenda, assemble the relevant information, identify areas for improvement, and develop action plans.

• Facilitate peer-to-peer feedback. Hold a session in which every team member is given constructive feedback by their colleagues.

• Help frontline team members better understand the strategic measures and screens that business unit or corporate leaders use to judge orgainizational effectiveness.

Despite digitalization, what is the future trend in organizations? Will bureaucracy increase or decrease?

Since 1983, the number of managers, supervisors, and administrators in the US workforce has more than doubled, while employment in all other occupations is up by only 44 percent. Data from other developed economies like the UK suggests a similar trend globally. This wasn’t supposed to happen. The renowned Peter Drucker, writing in 1988, predicted that within 20 years the average organization would have slashed the number of management layers by half and shrunk its managerial ranks by two-thirds. He expected that advances in communications technology would allow workers to coordinate with each other and manage themselves, thereby reducing the need for layers of supervisors. He unfortunately was wrong.

More recently some have hoped that the spread of collaboration tools like Slack, Yammer and Chatter would fatally undermine bureaucracy. Yet while messaging and project apps make it easier for employees to synch up, there’s little evidence these technologies are reducing management layers, rolling back bureaucratic mandates, slashing compliance costs or expanding the decision-making rights of those on the front lines. While collaborative tools could be used to crowdsource strategy development, capital allocation, leadership selection and change management, this has seldom happened. Thus far, collaborative tools have been used mostly to facilitate project work. They are to teams what Microsoft Office was to individuals 30 years ago.

Rather than replace top-down structures, technology is likely to reinforce them. Digital technology allows jobs to be sliced into ever smaller segments and outsourced to the lowest bidder, further dumbing down work. Real-time analytics makes it possible to assess job performance minute by minute, allowing unprecedented levels of oversight. Social media tools threaten to replace the performance review with a 24/7 campaign to garner “likes” from your peers. Unique skills that once might have differentiated an employee can now be codified and absorbed into an algorithm which, in a cruel twist, can start to issue its own orders. Given the relentless growth of the managerial class, and their pursuit of control, where would you expect this to lead? The spread of digital technology gives us more reasons, not fewer, to fear the relentless spread of bureaucracy, and more reasons to fight it.

The central theme in your next book to be released with Gary Hamel is called “Humanocracy”. What does this term mean and can you summarize what we will read in your book?

The core message of our book is that we need to put human beings, not structures, processes, or methods, at the center of our organizations. Instead of a management model that seeks to maximize control for the sake of organizational efficiency, we need one that seeks to maximize contribution for the sake of impact. We need to replace bureaucracy with humanocracy.

We spend much of this book exploring the differences between these two models, but the essential distinction is this. In a bureaucracy, human beings are instruments, employed by an organization to create products and services. In a humanocracy, the organization is the instrument — it’s the vehicle human beings use to better their lives and the lives of those they serve. The question at the core of bureaucracy is, “How do we get human beings to better serve the organization?” The question at the heart of humanocracy is, “What sort of organization elicits and merits the best that human beings?

We wrote the book to be both a manifesto and a manual. It argues, persuasively we hope, that it’s time to free the human spirit from the shackles of bureaucracy — and that doing so will produce profound benefits for individuals, organizations, economies, and societies. It also gives management renegades practical strategies for advancing the cause of humanocracy within their own organizations. The ultimate prize: an organization that’s fit for the future and fit for human beings.

18 AWP AND THE SHADOW OF THE FUTURE

he international scenario in which main EPC contractors operate is undergoing a period of great transformation, mostly due to the change of pace resulting from the “digital revolution” and the productivity recovery that the construction sector, unlike other industries, has not yet carried out. The growing complexity of plants, higher costs and increasingly challenging contractual needs are forcing companies all over the world to adapt to new market conditions and raise the level of competitiveness through targeted digital strategies.

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The impact of digital innovation on processes is not only changing business models, but also the management culture implemented by project managers. To give an example, for decades in the EPC world (Engineering, Procurement and Construction), those who were building a plant on site used the classic sequence that provided for the delivery of necessary materials, the respective procedures and the operating instructions accompanied by the drawings produced by the engineer. The engineer at headquarters designed the project in a logical and linear order. This would often lead to a misalignment between the materials and drawings that were needed at the construction site and what was made available by headquarters. However, today the digitalization of critical activities has made it possible to invert the project sequence of EPC processes and redefine priorities with a construction-oriented approach called Construction-Driven Execution (from which procurement and engineering work is

WITH THE INTRODUCTION OF THE AWP (ADVANCED WORK PACKAGING) METHODOLOGY, MAIRE TECNIMONT IS INNOVATIVELY RETRACING AND INTEGRATING PROCESSES TO CREATE EFFICIENCY, REDUCE COSTS AND GENERATE A COMPETITIVE ADVANTAGE BY LIGHTENING BUREAUCRACY AND INCREASING INTERDISCIPLINARY COLLABORATION.

derived backwards) sought after for decades but only made possible today by new information technologies that were unavailable before now.

“The paradigm of managing the typical design sequences has changed” explains Max Panaro, Group Organization, ICT and System Quality Vice President of Maire Tecnimont. “Today our engineers no longer need to refer to the classic progression, but can design in reverse starting first from the construction phase, and then taking the procurement and supply process into account. It is a virtuous path that begins by exchanging the starting point with the arrival point, in which construction needs dictate the pace of the previous phases”.

Alignment traps

When faced with business complexity, not everyone demonstrates the same degree of reactivity. We are often presented with “classic” bureaucratic responses, which bind the company and its people to a sequence of linear procedures. For those who have clung to the so-called “traps of strategic alignment” (to use the words of Yves Morieux, an expert in business organization, whom we spoke about in the articles from page 4 on), succeeding in changing the management

of a project, and consequently innovating the way of achieving market objectives, is far from easy.

At Maire Tecnimont, this way of reasoning – specifically the idea of increasing efficacy, safety and productivity – has evolved from the increasingly incisive use of the AWP (Advanced Work Packaging) model. It is an approach – one that is becoming more and more internationally diffused – that starts from the Construction phase and then goes up the entire life cycle of the project, allowing the model to be integrated into the overall planning, clearly defining priorities. “To respond to the speed of our business and meet regulatory and planning needs, – Michele Mariella, Head of Information and Communication Technology explains – we have successfully introduced AWP, an application model that regulates current management processes and provides a planning tool for evaluating plant construction. This allows the three EPC disciplines to develop on the same plane. By using the AWP system, we have been able to take advantage of an opportunity that digital technology has made available to us. We have applied a new model that governs processes differently.”

Advanced Work Packaging thus bridges the gap between the final project design and the needs that arise during the execution phase of the works for those who are building the plant. By increasing the visibility of project details, alternative design models are opened up that include resource planning and constructive information. “We no longer plan the three disciplines E, P and C sequentially, but rather at the same time. I see a strong connection between this way of planning and Yves Morieux’s message:

Today, innovation allows everyone to use process data transparently. Along with an improvement in production, we help train our resources and expand the information model that was previously either immediately unavailable or particularly complex to assemble.

the “shadow of the future” of an EPC project starts directly with what makes work on site efficient”, Panaro says. “Let’s not forget that one of Maire Tecnimont Group’s three pillars of Innovation is called ‘EPC Innovation’. Better systems design is advantageous for both the contractor and the customer, since the application of these methodologies optimizes organization in the field by increasing the efficiency of work teams to the full advantage of the construction program and overall productivity”, Panaro concludes.

With the development of an EPC innovation program, Maire Tecnimont remains highly competitive in the market: thanks to this process intelligence, able to generate savings, custumers can clearly see our crucial role in the chain. Luigi Anselmi, Head of Construction Methods & Innovation at Tecnimont explains: “Today, innovation allows everyone to use process data transparently. Along with an improvement in production, we help train our resources and expand the information model that was previously either immediately unavailable or particularly complex to assemble. In the pre-digital era, anyone who needed information regarding the purchase of a component or the location of a dispatched object could wait up to two weeks before receiving an answer that gave few assurances for the following steps in the process. Today, with one click, it is available in real time and, above all, it is substantiated information, having switched from a push planning model to a pull planning model, which is connected to the backward path concept mentioned by Panaro”.

AWP Ready Projects

“Maire Tecnimont – Luigi Anselmi explains – is achieving excellent results in the process integration of medium and large projects by offering our customers a complete and competitive adoption of AWP. We started to test the AWP system in 2018. We then started to implement it in Azerbaijan, as part of the modernization and reconstruction works of the Heydar Aliyev refinery in Baku. From there the group of ‘champions’ was born within the Construction Innovation department which led to the adoption of AWP on various plants, including that of Baytown (Texas), where Maire Tecnimont is building units for the ExxonMobil petrochemical complex. Our mantra is now that of the three I’s: Innovate, Inform, Inspire. Today all Maire Tecnimont EPC projects are AWP Ready”. Related to the cover motto (“Step up and make things happen!”), what at first seemed like a silent revolution is now a real change in project culture. Max Panaro concludes: “We are working to break the “silo” approach, starting first with processes, and thanks to the new systems, relieve those processes of the kind of bureaucracy that slows activity down. This is the real ‘digital transformation’, an example of how innovation is able to bring about a series of changes in companies, not only technological, but cultural, organizational, creative and managerial ones as well”.

When Morieux talks about extending “the shadow of the future”, he means just that. One of the rules for making sense of complexity is to tie one another’s future together. Managers and collaborators must feel part of a single vision-shadow, where the behavior of one has consequences on another’s work. Morieux insists on the need to put ourselves in someone else’s shoes and seek solutions to problems, not only in compliance with strict established procedures, but according to new contexts and mutual needs. In applying what he calls the “rules of simplicity”, companies will not necessarily have to abandon the classic organizational levers (definition of roles and objectives, processes, career paths etc.): his advice is to use them instead with a view towards simplification and cooperation between people of different levels. This is the only way we will be able to manage complexity without falling into the complicatedness trap.

DIGITAL IS A PRAGMATIC SOLUTION

«The word digitalization is often misused and thrown around wi thout meaning. As an entrepreneur, I think the success of this revolution will be the result of an approach I would define as “widespread entrepreneurship”, through which we must all reinvent ourselves and innovate our way of working. Everyone must take responsibi lity for making decisions in the face of uncertainty». Therefore, at the end of 2019, the Chairman and Founder of the Group, Fabrizio Di Amato, introduced the “BEYOND DIGITAL” event, a strategic passage of great importance for the multinational company Maire Tecnimont which operates in a traditional sector characterized by the process rigidity typical of the EPC (Engineering, Procurement and Construction) world.

In an issue of EVOLVE like this one – where the streamlining of bureaucratic processes and organizational models of the third millennium is the common denominator of the various articles pu blished – we will provide you with a clear idea of our Group’s vision of digitalization by going over some short passages from BEYOND DIGITAL. It will help us to understand how this transformation has already profoundly changed many industrial sectors (such as ener gy, engineering and construction), by channeling investments for innovation and improving business performance.

«Digital gives us an important competitive edge in our industrial network – Pierroberto Folgiero, CEO and Managing Director of the Group explained – High profile resources and excellence in the technology sector make digitalization the only way to compete at higher levels. At Maire Tecnimont, where engineering is our busi ness, we have the pragmatic approach of contractors who are used to taking the measure of complexity in the field: because of this, we have been undergoing an intense optimization of all of our internal processes for quite some time now, in addition to establi shing a wider range of digital services for our customers».

Like other industry leaders, Maire Tecnimont has chosen to be a pioneer in the digitalization of both engineering procurement and construction as well as the creation of a coordinated supply chain. Our main objective is to promote flexible platforms capable of inte grating the best digital solutions for customers, while creating an open ecosystem that keeps all the interested parties involved. «We are a company of great minds and great technical skills» said Pre sident Di Amato. «Our growth comes from the combining) of processes that, from a technological stand point, must be increasingly evolved over time. Therefore, we must involve all of the stakehol ders in our supply chain in a vast portfolio of initiatives to make sure we seize the opportunities that are to come from digitalization and the energy transition».

Hybridizing is better than Dreaming

Thanks to a variety of factors, the application of digital solutions to a petrochemical plant can generate, in practice, an estimated recovery of efficiency betwe en 4 and 7% of operating margin. «Today, artificial intelligence and the enormous availability of data – Folgiero explained – make it possible to create a sy stem’s “digital twin”, allowing you to optimize energy consumption and the various phases of the chemical process in real time. In this new operating model, Mai re Tecnimont has its digitalization interpreted not by “dreamers”, but by “doers”. This is why the contractor of the future is a sort of “orchestrator” on the value chain, a competent and independent technologist, able to “hybridize” different worlds. It makes me think of the process engineer who works in synergy with the data scientist, and of the big corporation that must de velop technologies alongside start-ups. In fact, it is the union between the DNA of engineering tradition and that of quality people».

On the occasion of the BEYOND DIGITAL event, Fran co Ghiringhelli (Human Resources, ICT and Process Excellence SVP of the Group), explained that digital transformation «must be an opportunity for professio nal growth for the approximately six thousand companies that collaborate with us along the supply chain. We have been asking them to get involved, with gre ater entrepreneurial proactivity, using the enormous and increasingly accessible technological opportuni ties available. It will also be an opportunity for us to include resources with profiles that are not typical of our sector, but that help us to interpret the transforma tion taking place».

People and the culture that surrounds them are the keystone of change that will help us leave a rigid bureaucratic approach unsuited to complexity behind. To increase the level of engagement, Maire Tecnimont asked its employees for their active participation as “Digital Catalysts” or accelerators of digital change. Citing Yves Morieux’s Smart Simplicity once again, one of the basic rules is precisely that of transforming managers into integrators: they will be the ones who stimulate the productive cooperation that will bring value to the whole organization.