Management: The Least Effective Business Model

by Jay Deragon on 08/01/2012

The business models of the 21st Century are going to require re-education of management, engaged thinkers, a new set of disciplines and revolutionary organizational structures for any business to survive.  The old business models simply do not scale and are not designed to adapt to the disruptive changes of the 21st Century.

In the midst of revolutionary change leaders have  told employees, shareholders and themselves that things will get better soon. Improvement doesn’t come from wishful thinking. Today improvement comes from radical changes starting with how we think about the effectiveness or ineffectiveness of management.

Re-examine The Value of Management

Gary Hamel writes: Think of the countless hours that team leaders, department heads, and vice presidents devote to supervising the work of others. Most managers are hardworking; the problem doesn’t lie with them. The inefficiency stems from a top-heavy management model that is both cumbersome and costly.

A hierarchy of managers exacts a hefty tax on any organization. This levy comes in several forms. First, managers add overhead, and as an organization grows, the costs of management rise in both absolute and relative terms. A small organization may have one manager and 10 employees; one with 100,000 employees and the same 1:10 span of control will have 11,111 managers. That’s because an additional 1,111 managers will be needed to manage the managers. Any way you cut it, management is expensive.

Second, the typical management hierarchy increases the risk of large, calamitous decisions. As decisions get bigger, the ranks of those able to challenge the decision maker get smaller. Hubris, myopia, and naïveté can lead to bad judgment at any level, but the danger is greatest when the decision maker’s power is, for all purposes, uncontestable. 

Third, a multitiered management structure means more approval layers and slower responses. In their eagerness to exercise authority, managers often impede, rather than expedite, decision making. Bias is another sort of tax. In a hierarchy the power to kill or modify a new idea is often vested in a single person, whose parochial interests may skew decisions.

Finally, there’s the cost of tyranny. The problem isn’t the occasional control freak; it’s the hierarchical structure that systematically disempowers lower-level employees. For example, as a consumer you have the freedom to spend $20,000 or more on a new car, but as an employee you probably don’t have the authority to requisition a $500 office chair.

Historically management has coordinated the activities or people and processes with the aim of achieving efficiency and effectiveness. Today coordination without a supervisory superstructure is being accomplished because of technology which enables people to freely engage without having to be managed.

To manage without management requires the re-education of leaders , engaged thinkers, high levels of trust, a new set of disciplines and revolutionary organizational structures for any business to survive during revolutionary times.


Stanley Rao August 6, 2012 at 6:15 am

nice description

Pete Dencker August 1, 2012 at 11:03 am

Great description of our current Federal Government!

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