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DEMOCRATIC MANAGEMENT?

Posted by Tim Bryce on November 16, 2015

BRYCE ON MANAGEMENT

– Look carefully before you leap into “Holacracy.”

(Click for AUDIO VERSION)
To use this segment in a Radio broadcast or Podcast, send TIM a request.

The October 2015 issue of “The Atlantic” magazine featured an article asking the management question, “Are Bosses Necessary?” In it, they present a concept called “holacracy” which, in a nutshell, calls for the elimination of middle management and a more democratic form of government in business. In essence, a company consists of nothing but senior management and the workers organized into teams or “circles.” The term is based on the word “holarchy,” representing a connection between holons – where a holon is both a part and a whole. The term was coined in Arthur Koestler’s 1967 book, “The Ghost in the Machine.” (source: Wikipedia)

Similar approaches surface every ten years or so, all with little success, but this appears to be a more overt push for change.

To illustrate how “holacracy” works, the article referenced Zappos, the young Internet based shoe and clothing store headquartered in Las Vegas, Nevada, and a wholly owned subsidiary of Amazon.com. The company has over $1billion in revenues and employs +1,500 workers. According to the article, this past spring, CEO Tony Hsieh, embraced “holacracy” by eliminating middle management, job titles and organization charts, and devised a 10,000 word constitution for self-governance. Instead of management directing activity, employees join “circles” where they determine priorities and project assignments. In essence, “holacracy” empowers employees by creating a democratic society within a business. Allegedly, this approach is derived from “Agile” programming, a quick and dirty approach for building software.

Results are mixed thus far. According to the article, Zappos employees have met the new approach, “with everything from cautious embrace to outright revulsion.” Without middle management, there is little in terms of decisive leadership and teamwork. Instead, it is hoped leaders will emerge among the circles along with a spirit of cooperation. So far, the jury is still out.

I’m not sure the developers of “holacracy” truly understand the concept of democracy. A true democracy doesn’t work effectively in government and ultimately represents mob rule. This is why America is a Republic, with democratically elected representatives to serve the interests of the people. The management of the government is entrusted into these representatives. One has to wonder, if democracy doesn’t work in government, why would we kid ourselves into believing it will work in business? The point is, it doesn’t.

The “holacracy” approach is a knee-jerk reaction to overcoming Theory X “micromanagement,” a very dehumanizing form of management which, unfortunately, is still popular in corporate America today. Basically, it represents autocratic rule which tends to inhibit employee creativity and stifles worker responsibility. Unfortunately, instead of using other proven management techniques, the promoters of “holacracy” are essentially throwing the baby out with the bath water.

The obvious alternative to Theory X is Theory Y, whereby a company manages from the bottom-up as opposed to top-down. Under Theory Y, workers are treated like professionals, are delegated responsibility, and held accountable for their actions. A management hierarchy is still maintained to allocate resources and assignments, control the corporate culture and expedite problems, thereby providing a sense of direction and promoting teamwork. However, unlike Theory X, workers are empowered to execute assignments on their own, and report to management on progress and notify them of problems. This approach encourages worker participation and promotes a sense of project ownership.

Then there is Theory Z as developed by Dr. William Ouchi (UCLA) based on the study of Japanese businesses during the 1970’s. Ouchi observed higher productivity because Japanese society encourages mutual trust and cooperation between management and workers. Making a decision normally takes longer due to the need to achieve “consensus” from all parties involved. However, when a decision is reached, it is quickly implemented as all parties have agreed to it.

Interestingly, Theories Y and Z are not new, having been used since the 1930’s (Theory Y) and 1970’s (Theory Z). However, over the last twenty years there has been a movement to ignore worker’s feelings and institute stringent management control and bureaucratic regulations (“micromanagement”). In other words, companies have gone too far towards autocratic rule, with radical techniques such as “holacracy” emerging to take its place.

Personally, I believe Zappos is on a dangerous and reckless path. It is no small wonder the employees are nervous about it. It may also cause investors to think twice about gambling on the company. I, for one, will certainly not be investing in it, as I consider this a pseudo-scientific approach devised by naive people. Their intentions may be good, but their delivery will be catastrophic.

Related articles:

Theories X, Y, and Z – Nov 03, 2014
Managing from the Bottom-Up – Jul 16, 2012
Pseudo-Scientific Management – Aug 10, 2011

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

For Tim’s columns, see:   timbryce.com

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Copyright © 2015 by Tim Bryce. All rights reserved.

NEXT UP:  THE EFFECT OF SOCIAL NETWORKING – Two studies reinforce our suspicions.

LAST TIME:  FALLING INTO A RUT  – Getting out is a lot harder than getting in.

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5 Responses to “DEMOCRATIC MANAGEMENT?”

  1. Tim Bryce said

    An M.B. of Wilmington, North Carolina wrote…

    “Tim, good article however you left out the connections you and your dad had to theory Z management (back when there was a high rate of usage of the Pride Methodology in Japan as they were beating out the rest of the world in productivity). Theory X management was largely discredited and should not be rising due to its side effect of killing innovation. The Y concept allows for significant innovation however it lacks the key element of buy in at all levels. This suggests that theory Y plus vision based planning and communication to all levels may be the best concept creating an environment with both innovation capabilities and speed of implementation.”

    Like

  2. Wayne Brown said

    Ah yes, another fancy name cast upon something in order to sell it conceptually to corporate America. Charge them six figures, show up and teach a few seminars then all hold hands and sing Kumbaya. Then leave them to swim in their own idiocy. If nothing else, middle management is the designated link by which top management keeps tabs on what is going on and how much progress has been made. To rename functions and say that you are doing away with something is just not so. The leader cannot be in charge unless they know what is going on. That means someone in each crowd has to be responsible to lead the group and to report information up and down the line. So you don’t call him a manager but he is really functioning very much in that role. If there were total democracy offered and used, any given group could decide not to work today or tomorrow and it would have to be okay by management in that it was decided democratically in a democratic environment. This just does not work. I have seen “teams” and each team has a “leader” and the “leader” reports to the big guy—it still the same system they just changed out the lock-washers. I once saw a shift in my department in which nine different teams were formed in order to eliminate to line supervisor positions. Many of the same people had different functions in different teams just to cover both the actual work and the administration of it. It was nuthouse. If managers are properly chosen and management philosophy is of the correct style, then all the rest will follow. Thanks for the tour through LA LA Land, Tim!

    Liked by 1 person

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