Empowered Individuals and Empowering Institutions - Gary Hamel WSJ

In my last post I talked about the widening fault lines that run between individuals and institutions. Crack open the head of the average manager, and you’ll find a way of thinking that puts the institution in front of, or on top of, the individual. Represented graphically, the thinking looks like this . . .

Model I: INSTITUTION –> INDIVIDUAL –> PROFITS

The company hires employees to produce goods and services that yield profits for shareholders. In this model, the individual is to the institution what human beings were to the Matrix—raw material; factors of production hired to serve the institution’s goals. In real life, human beings aren’t plugged into machines, but they’re often plugged into roles that don’t suit them and jobs that don’t fulfill them. Usually, it is the individual who must conform to the institution rather than the other way around. If you doubt this, ask yourself what would you wear to work every day if there really were no constraints? What computer would you use on the job if you could pick any one you wanted? And what task or project would you tackle if you were free to choose?

We can, though, imagine a different model, one where the interests of the individual take precedent . . .

Model II: INDIVIDUAL –> ORGANIZATION –> IMPACT

Note here the substitution of the word “organization” for “institution.” The latter word implies a lot of structure and a hierarchical distribution of authority. The word organization is more ambiguous. It can encompass something cellular, like Alcoholics Anonymous, or something networked, like an open source project. Here, the folks “in charge” are servant leaders who regard their constituents as volunteers, even if they’re paid. There is an explicit understanding that the organization is centered around the needs of those who support it and is run for their benefit. In this model, the organization is the instrument, not the individual.

These two models form the endpoints of a continuum—but few organizations (or institutions) inhabit the extremes. Yet if we were able to identify a midpoint, we’d find that most large enterprises reside on the “institution first, employee second” side of the spectrum. I think we need to flip this—for two reasons:
First, misaligned interests undermine competitiveness. A cynical and worried public will want to hogtie big companies in a snarl of rules and regulations, and as this happens, those institutions will become flexible and responsive. Moreover, low-trust, low-engagement institutions will fail to fully exploit the talents of their members, and in consequence will be less innovative and resilient. This combination of heavy-handed regulation and underleveraged talent will result in institutions that are less competitive than they might be.

And second, we deserve better. No one should have to work in an organization that feels more like a centrally planned economy than a vibrant, open community. Nor should anyone in a democracy feel that they are more subject than citizen.

Building human-centered organizations doesn’t imply a return to the paternalistic, corporate welfare practices of the 19th century. Most of us don’t want to be nannied. We understand we live in an uncertain world where no one can guarantee our financial security. We also understand that individual interests vary, and that no single organization can reconcile all our competing demands. Nevertheless, we expect our institutions to be our servants and not the reverse. This implies organizations that are built around some simple but important principles:

– Decentralize wherever possible.
– Break big units into small units.
– Ensure transparency in decision-making.
– Make leaders more accountable to the led.
– Align rewards with contribution, rather than with power and position.
– Substitute peer review for top-down review.
– Steadily enlarge the scope of self-determination.

But, you ask, can an institution-centric enterprise turn itself inside out? Can leaders change their mental models? Can they be induced to surrender their prerogatives? Can command-and-control types reinvent themselves as mobilize-and-mentor types? And can all this happen without undermining operational effectiveness? I think the answer is a tentative “yes,” and in my next posting, I’ll share a promising anecdote from a 500-year old institution.