Rich Fernandez
Hello, everybody, and welcome to the Return on Intelligence podcast. I'm your host, Rich Fernandez. I'm the CEO of SIY Global. We're an emotional intelligence training company, and I am so thrilled today to welcome Gary Hamel, one of the world's foremost thought leaders in the arena of leadership, management. I would say the future of work. we're in for a treat.
Rich Fernandez
Gary has an amazing new book out and tons of really interesting ideas about, how we're structured and how we do our work in today's world. but before we dive in, well, first of all, welcome, Gary.
Gary Hamel
Thanks a ton. I'm glad to be here, Rich.
Rich Fernandez
Yeah. And before we get started, I'm just going to introduce you, if you don't mind, a little further to our audience, if they're not already familiar. Gary is one of the world's most influential. And I kind of classic business thinkers. he has worked with companies all around the world and, has been faculty at the London Business School for more than 30 years.
Rich Fernandez
Gary has written, 20 articles for Harvard Business Review and is the most reprinted author in the review's history. as well as writing for, The Wall Street Journal. Fortune. there's so much thought leadership and Gary share, so I encourage you to go check it out. And especially I'm interested in his landmark book. he has numerous books, numerous bestsellers.
Rich Fernandez
But, the latest one is Humanocracy, where he really makes what I love. You describe Gary as an impassioned plea for reinventing management. and laying out a practical blueprint for building organizations fit for the future. So welcome, Gary. this is going to be a fun conversation.
Gary Hamel
I hope so, I think it will be.
Rich Fernandez
Yeah. Where are you joining us from today?
Gary Hamel
I'm in Silicon Valley. I've been here, for about 30 years. And, so it's a great vantage point to watch the future unfold, and then I can move back and forth to London, where I have a faculty position at the London Business School.
Rich Fernandez
Very cool. yeah, I'm up in San Francisco myself, and I've worked in Silicon Valley, for a well over a decade. eBay and Google. All right. I mean, executive education. so, you know, I'm curious, Gary, before we get into the substance of your work, I'm curious about the trajectory of your career. So how did you get off started?
Rich Fernandez
You know, as a thought leader and leadership expert, tell us a little bit about your journey that got you to where you are today, if you don't mind.
Gary Hamel
Sure. I'll try to keep I'll try to do the, very condensed version. But, you know, as a young PhD student, I was at the University of Michigan, and this is longer ago than I'd like to admit. But that was the time when I think for the first time you had foreign competition, really challenging American industry, and in particular, you had the Japanese car company, really taking a lot of share from Ford, GM and so on.
Gary Hamel
And I watched that unfold, at that time. And I could see that the consequences of executive myopia or denial were very real and very personal. This was not an abstraction, which is kind of easy to get into that mode of thinking when you're an academic. But I could see neighbors and people around me lose their jobs, lose their homes.
Gary Hamel
You could see Detroit get hollowed out. And so that really, made a bridge between kind of the conceptual side of these problems and the very human side of, of leadership and management. And so I never kind of forgot that these decisions have enormous, personal consequences. And leaders have an incredible responsibility in that regard. kind of more intellectually.
Gary Hamel
When I joined the London Business School, my first job was teaching strategy. And at that time, Harvard's Michael Porter was kind of, you know, the major strategy guru really done a lot of work, really trying to explain something very important, which was why does why are some firms consistently more profitable than others? What is it about their strategy that allows them to just reap higher returns over long periods of time?
Gary Hamel
And that was a really, really critical question. but there were two others that I became equally interested in as kind of a young academic. One of them was, well, where did new strategies come from? Right. It's one thing to say, well, here's a very profitable and very powerful strategy, but how did that emerge in the first place?
Gary Hamel
So I spent several years talking to then the world's most iconic entrepreneurs. People like Bill gates, Michael Dell, Richard Branson and so on really try to understand what are the perceptual habits or the thing that allows you to see opportunities that other people can't see. We all live in the same world with more or less the same information.
Gary Hamel
So why does some people see these and others don't? And so, you know, I think I developed a very deep sense of where, you know, it comes from. And in my career I trained hundreds of thousands of people to think like like, you know, but that was one one interesting problem for me. The other equally interesting problem was, well, great, you may have a successful strategy, but what do you do as it loses its vitality?
Gary Hamel
What do you do when a strategy reaches its sell by date? And obviously what we saw was many organizations that this continues to this day had a very hard time. Revelatory, right? you know, they would cling to the status quo long after the quo were lost, the status, right, in a way of speaking. And so, you know, I could see that in large organizations, there's a lot of inertia, a lot of a lot of things that made it difficult to change proactively, which is why, you know, young companies so often invent the future, even though they don't have the resources or the capabilities of the incumbents.
Gary Hamel
So those are really been, you know, the two questions that I wrestled with probably most of my career now and looking at both of those rich, you know, why, why, why do larger organizations struggle with innovation? We know, for example, that, 79% of leaders, they generation is a top three capability that's, you know, pretty, pretty clear. And yet 94% will say we're not very good at it.
Gary Hamel
So why is innovation so hard? And and in a way, why is change so hard. Right. Why does it often happen, you know, years late, kind of belatedly, convulsively, often takes a change of leadership to get a company on a new course. So I started to think about these as kind of institutional disabilities. Right. I written a paper called The Core Competence of the Corporation.
Gary Hamel
But what I was seeing was the core incompetence of the corporate.
Rich Fernandez
That there's a lot to go around as well.
Gary Hamel
And, and even the most successful companies, you know, can struggle with this. Yeah. And so you start so, so when you see those, you know, that that institutional inertia or, or the incrementalism and you see that over and over again, company, upper company, industry, industry, geography and so on, you start to realize there's something very deep here. So that's sent me back into history saying, all right, we clearly didn't build our organizations to be good at innovation.
Gary Hamel
I've got to change. So what did we build them to do? And if you go back and you look at the roots of, you know, what I might call managerial bureaucracy back in the in the late 19th century, we built them to be very good at ad efficiency. Right? We we basically build organizations that maximize compliance, the maximize control for the sake of efficiency.
Gary Hamel
And by the way, that was an extraordinary accomplishment, right, to bring out of these obstreperous, freethinking people together, to slop them into jobs, to say, this is exactly what you have to do. We'll tell you when you're done, we'll tell you if it's good enough, and we learn how to do that. But, you know, and yeah.
Rich Fernandez
Useful for the industrial revolution.
Gary Hamel
Yeah. When I say it, when I search something at Google, I expect it to come back in a millisecond and be absolutely reliable. You know, those those are hugely important institutional capabilities. The only dilemma is that they are no longer really distinctive capabilities being incrementally more efficient or having incrementally more control or more focused or more alignment or discipline.
Gary Hamel
All of it's important, but it doesn't produce much in the way of differential.
Rich Fernandez
It seems to disable innovation as well, because it seems antithetical to kind of creatives out of the box thinking, you know, creative problem solving. because if you're just going after control and compliance, you kind of have it by the books. you know, I talk to a lot of educators in places like Singapore, for example, that say, education is too formulaic.
Rich Fernandez
Kids are learning how to get the the right answer, but not seek new answers or creative answers. I don't know, what do you think about that?
Gary Hamel
Yeah. No, I think that's true. it is a problem. It kind of goes all the way down into our educational system and so on as as you're saying. But but what do you end up with? our organizations, I mean, and again, the control is a good thing, you know, when I, when I look at the latest, you know, chips in an Apple device that are produced by TSMC, Taiwan Semiconductor at at three nanometers.
Gary Hamel
Right. You need a lot of control to do something at three nanometers. Right. but having that, we've we've way over indexed on that. And I think a lot of leaders have come to see their job as, as, you know, the guardians of, of control, as making sure there's never a surprise. Nobody ever goes off the rail.
Gary Hamel
Nobody can ever come back and challenge me and say like, well, why did you allow that to happen? And so you end up with the absurdity of an organization where a front line employee who can buy a car or a house cannot buy an office chair for 500 bucks without getting somebody's permission, right? I mean, like, how the heck did we end up there?
Gary Hamel
and so like, like so many good ideas, when something becomes an ideology, when it slips the bounds of common sense, then you have a lot, a lot of problems. And so, so, so what I've been kind of try to work on is to rebalance that. And at kind of the core of it, you have this fundamental trade off between freedom and control.
Gary Hamel
And so you need both. It's not one or the other. It's not a little bit of one, or you need both, but at exactly the right proportion on exactly the right issue at the right time. So if you can overindex on control, people are not free to experiment. They're not free to try new things. You're always behind the the curve.
Gary Hamel
You lose the most, you lose the best and most creative people. But yet, many leaders are very wary of trying to give up control because they look at those things as mutually exclusive. Right? Freedom goes up. So I often say you need to dramatically large the autonomy of people on the front lines. which, by the way, if you want to get return on intelligence, you have to do that, right.
Gary Hamel
You don't get return on intelligence, that people are robots. So you say you have to dramatically increase the autonomy people in front of eyes. Well, I could just watch them, like, start to get nervous. Is that okay? Yeah. But what about meeting, you know, customer needs. What about making our budget? What about, you know, compliance with regulatory. Like they just have that sense that of freedom goes up, control goes down.
Gary Hamel
I don't think that's necessarily true. A lot of what I've been working on is, you know, how do you how do you break that seemingly, kind of either or choice and turn it into an and.
Rich Fernandez
I love that. Maybe that then leads into this conversation you can have about your latest book, which is fascinating. so if you're not familiar with it, if you're listening here, it's called Humanocracy a revolutionary manifesto and practical manual for freeing the human spirit at work. So, Gary, how do we get there? How do we get, from I use the word rebalancing.
Rich Fernandez
Right. How do we get to this rebalancing of freedom and control with something like humanocracy? And what does that have to do with the human spirit?
Gary Hamel
Yeah, super, super good questions. Great. let me again, let me let me start with a little bit of context. So that desire for control, predictability, alignment and so on, which are all virtues, has left us with organizations that fit a particular type. And I think the easiest way to describe them is as, as bureaucracies. And by the way, there was a long time that was not a bad word, right?
Gary Hamel
Again, you know, the discipline, the focus that was that was a good thing. And so most of us have grown up in and around organizations that fit that template. And and you see these characteristics again, irrespective of industry, whatever power trickles down, you have multiple tiers of administrative authority. Big leaders appoint little leaders. you have powerful staff groups who ensure compliance, ranks of managers who assign tasks and assess performance, people who compete for the scarce resource of promotion.
Gary Hamel
Not so much to add value, but to get promoted. And you know, most organizations, that's that's what they look like. unfortunately, I would argue those things, most of those characteristics are antithetical to creating an organization that can outrun change, that is instinctively innovative and creative, and that inspires people to do their very best. You simply can't get there from here.
Gary Hamel
Now, the interesting thing is, over the last couple of decades, we've all gotten quite familiar with radical business innovation, right? You can see, you know, Google was a big advance over whatever, you know, yellow pages of the card library or whatever it was. Right. And I will be in advance over whatever came before. Or you look at, you know, Netflix versus a traditional broadcaster, what we have not seen so much and so many people don't even believe it's possible.
Gary Hamel
Is that kind of radical innovation and how we lead, manage and organize. So, you know, most of our innovation I've looked at this rich, you know, you look back and many of your listeners have been involved in this in different ways. If you look back over the last 30, 40, 50 years of kind of innovation in our organizations, you see things like, quality of work life, high performing teams, mindfulness training, diversity, equity, inclusion, agile teams, and so on.
Gary Hamel
Having said that, and all of those have their own merit and their own logic. None of them has made really very much difference in making our companies more capable. And I would argue the reason is we keep looking for the latest practice, the latest, you know, new process system, you know, AI, analytics, whatever it may be, or using AI to improve our hiring.
Gary Hamel
So we take these latest tools and technologies, but we graft them onto the old bureaucratic model, the bureaucratic rootstock. And then we wonder why those new things don't flourish. So you look at something like agile teams, which many companies have tried or experimented with in some ways. And often you come back three or 4 or 5 years later and the language is still there.
Gary Hamel
Some of the words. But the spirit of this long dead rise has been re kind of, what do I want to say? Re-bureaucratize. So, so the starting point was. Well, yeah.
Rich Fernandez
Yeah. Re-bureaucratize.
Gary Hamel
Right recolonize by bureaucracy.
Rich Fernandez
I've seen that happen.
Gary Hamel
The starting point is to start to say are there radical alternatives. Right. Can can we bring the same innovation to the way we manage as we have to other aspects of our business? and so the good news is there are examples of that. Now, even if there weren't, we'd have to try to, to, to change this. But the good news is you don't have to do this entirely from scratch.
Gary Hamel
So a lot of what I talked about in my book is, is basically some very large, very complex organizations that have gone bureaucracy free. I really mean bureaucracy free. birds. Org, which is the largest home health, company operator in the Netherlands. It has 16,000 nurses on staff. they're organized into teams of 12 nurses on a team.
Gary Hamel
They run that like a business. They have full responsibility for finding office space, hiring colleagues, doing continuous education, and so on. every one of those teams has a few very simple performance, goals that they that they need to meet. there's nothing in the way of hierarchy. They run 16,000 nurses with two managers, the founder, the managing director and an assistant.
Gary Hamel
and yet all of those teams are tied together laterally. every team can see how every other team is doing in real time. There's no place for mediocrity to hide that they have a proprietary, system. Because by the way, none of the tools right now that are being made by the IT vendors allow you to solve these kinds of problems.
Gary Hamel
That's why we had to develop our own platform. But they have a proprietary platform that allows nurses to share and capture the intelligence of 16,000 nurses. They run a business with no top down mandates at all in health care, no protocols. This is the way you, you know, take it out, take care of it. Alzheimer's patient. This is the way you change.
Gary Hamel
Addressing this is the way you do the blood draw. None of that. But everyone wants to get better. You have all of the wisdom that you can see and interrogate. Well, what's the best way to do this? And so the whole system is leveling up and improving at a rate that would be impossible if you were waiting for somebody from the top to tell you what to do.
Gary Hamel
So this has become maybe the most benchmarked healthcare organization in the world. They beat their peers on every aspect of quality and efficiency. so you and I could give a litany of examples like that in literally every industry look at that is like, okay, that's interesting. Right? like that has the challenge some of your assumptions about, you know, how you lead an organize.
Gary Hamel
So there are there are these kind of examples, out there and we could talk about why they haven't been more widely embraced, why is this kind of so slow?
Rich Fernandez
Why, why, why our, our, you know, the governance boards, however, you know, makes these decisions. Why are they adopting this more? Why aren't leaders organizations adopting this approach more if you get the same or better outputs, right? Why isn't this just. It's a new model for how we are ways of working.
Gary Hamel
I think there's several things there. Which one is just, you know, new ideas of whatever sort typically have a very long kind of, diffusion period, gestation period. I wrote here's here's a bit of history in 1998, which is before probably a bunch of your listeners were born. In 1998, I wrote the first cover story for fortune magazine on the internet.
Gary Hamel
And at the end of that, and we talked about, you know, long tail and peer to peer and everything pretty much like this come over the last 20 years, you know, we had a pretty good handle on that. And, and not myself a lot. Many people were writing about this. So so I ended that article by saying the internet is not a new marketing channel.
Gary Hamel
It's not a new advertising medium. It's the foundation for a new industrial order. And that turned out to be the case. What's interesting is I wrote that in 1998. I recently looked I was looking at Google Ngram, right, which tracks the number of mentions for for words and books. The notion of digital transformation does not gain any significant currency until 2011.
Gary Hamel
Gary Hamel
Right. Most leaders have grown up in and around organizations that fit that, that old template. So simply hard for them to imagine what it really is like asking somebody at Marriott to imagine Airbnb, right? Like now they should have been able to do it. If you have the right tools or I think you can do it, but very hard to do.
Gary Hamel
So we're just we're, we're, we're, we're prisoners of of the familiar. The other piece though that I think is probably more real and more problematic, is that if you have a system that works, maybe better for the few than the many, for those at the top of the pyramid, those not at the bottom, at if you've spent your whole career learning how to play the bureaucratic game, learning how to negotiate targets, hard resources, manage up, deflect, blame, whatever.
Gary Hamel
And then suddenly someone says, hey, we're going to change this game, like, entirely, right? We're going to go we're going to take out half or more of the levels. Well, when I was working as the chief, transformation officer to HAIER the Chinese appliance maker owns GE appliance of the United States, one of the most radically managed companies in the world today, and sees themselves as a platform for entrepreneurship.
Gary Hamel
That's all they do is create a place where entrepreneurs can thrive. So we took out 11, I saved more, I could we reassigned because most of them state 11,000 middle managers. Right? Most organizations, they can't even think that way. But if you're a leader and you're saying, I've learned how to to play, you know, bureaucracy is a massive multiplayer game played for the stakes of positional power, right?
Gary Hamel
And it's a set of promotion tournaments, and you have winners and losers, right? So if you've gotten really good at that game, as somebody says, by the way, we're going to change it. So for example, at Roche, the big drug company, which has been through kind of an amazing transformation, what the most interesting examples in the world, there's top six senior leaders gave up their titles and they let themselves be absorbed in a much larger I think they call it a network enablement team, a much larger team of peers.
Gary Hamel
They gave up a huge amount of positional power. Well, you know, if you go back and you look at, slavery, patriarchy, aristocracy, people in power are not always eager to cover it up. Right. So you read almost a personal epiphany that says, by the way, as a leader, I can be way more effective if I get out of this command and control mode and into an encourage and enable mode.
Gary Hamel
But that is asking a lot of people.
Rich Fernandez
It is. And is it delivering, because I think some of this is structural as well in terms of the larger ecosystem. And we're swimming. Right. So like, is it delivering Wall Street's expectations on a quarterly basis. So if you take away that management structure, are we able still to meet the expectations, the growth expectations of the street.
Rich Fernandez
And that feels like a narrative pressure that, begs for kind of command and control, right. Like, let's make sure all our ducks in a row so that we can squeeze out the most profit, but is that wrongheaded thinking? Gary?
Gary Hamel
Hey. Yeah, it's it's historically, you know, explainable because if you go back to when, you know, Madison was a new idea, you know, it's very interesting to think, you know, today we think about managers. That's almost like now a passé thing. We can come back to that. But if you go back to the late 90s, the early 20th century, being a manager was as rare and valuable a skill as being a data scientist or a geneticist today.
Gary Hamel
Right? This is a very rare skill. People who knew how to wrangle people together, set targets, measure them, keep them focused, and so on. And so, you know, Wharton Business School gets established sometime in the 1890s. Harvard Business School, I think it was 1905, Stanford Business School, 1920 or something. So business schools got traded to to to, to, to, to basically, train this new category of employee.
Gary Hamel
And their job was control. Right. And as you know, if you think about it, if you take the word manage as a verb to manage, and you look in any thesaurus, in any language, the number one synergism two manages to control that's there's an all of us virtually. Right. So we got exactly what we what we what we wanted.
Gary Hamel
Right. So yeah. But but but so there's a reason and so the point is there are multiple ways of getting control. There's a bureaucratic way of getting control, which is not a lot of oversight, not much freedom, not much self-directed time, not much self-directed money. Right. a lot of rules, a lot of protocols, by golly you get control, but you sacrifice adaptability and speed and innovation and inspiration, all those other things.
Gary Hamel
So let me let me give an example of kind of how you have the both and of, you know, as I was saying, a freedom of and control how you how you get in that upper kind of right hand corner. and this is, this was an experiment that we, we did with, with a large drug company. and, we had, we had a group of kind of upper level managers who were very frustrated about the company's travel policies.
Gary Hamel
And, and apparently this is true in many organizations that at the time, it was new to me because I I've never had those constraints. But you had somebody like a corporate travel department telling you which airlines you could fly on, which hotels you could stay, and how much you could spend every day. Like, and this guy said, hey, I run a $100 million business and I have to see whether they'll pay for my coffee.
Gary Hamel
Like, it's like, insane, right? The level of infant, you know, fetishization. Yeah, I guess that's the word. So they did a little experiment. They said, hey, we're a drug company. We know how to do AB testing. we're going to take a control group. They have to observe our policy. We're going to take a treatment group. And for the next 30 days, you travel any way you like.
Gary Hamel
If you want to go first class on Emirates, no problem. Spend whatever you like. Like there's no policy. We have to have receipts for tax, but that's it. Oh, by the way, we're going to take all of your expenses and put them online where everybody sees. So the hypothesis is that transparency may be a better mechanism of control than a lot of rules.
Gary Hamel
And a bunch of auditors. Well guess what. In the experiment in the train, a group travel costs go down, engagement goes up from that one. Change a lot now. But here's here's the interesting thing. Most of us, we just don't believe there's another way of getting control. Right. Well, I was this is this is where this first really struck me when I was a young professor, the first term I was teaching at the London Business School.
Gary Hamel
I had a also newly hired colleague who was teaching the another section of the same course. After week three, the students in the other course went to the dean and said, this guy's not doing a good job like this. Is this guy not a good teacher? And the guy was fired that week. That was the end of the story.
Gary Hamel
So, you know, I understood I do not report to the dean, or the department chair. I report to my students. And at the end of the year, they're going to give me the grade, right, that everybody can see. It's transparent, my ratings and so on. And as a, as a, as an academic, I report to my peers when I write something.
Gary Hamel
Right. Blind review and so I realized there's a lot of ways of getting a lot of control. But where it is not that bureaucratic narrow. Right. Let me tell you how to do it. Kind of control. Right. I think we have become comfortable that creating more autonomy goes hand in hand with creating more accountability. You know, one of the dilemmas, I would argue, rich in a bureaucracy.
Gary Hamel
And by the way, we've been very curious and thinking very hard about why bureaucracy is growing in our economy. So if you look, since, since, 1983, the number of bureaucratic jobs administrators, managers, support staff has grown three times as fast as all other job categories. So our I mean, is becoming more and by the way, you cannot explain this just with, with growing external regulation.
Gary Hamel
It's mostly, something that happens inside. Let me give you an example. You look at a company like Facebook and, meta now. So ten years ago, Mark Zuckerberg was saying, hey, we are Lily, you said this. We are not going to suffer from kind of big company disease because really, we believe really in moving fast and being entrepreneurial.
Gary Hamel
Well, what young, inexperienced, naive Mark could not realize is you don't fight bureaucracy by talking about being fast and breaking things. Bureaucracy will break you, right? So you start to get bigger. You hire a lot of people. A lot of them came from more traditional organizations. They tell you the only way to keep the wagon, the wheels on the wagon.
Gary Hamel
So you look, for example, in parts of, of, of, of meta right now you'll find 10 or 11 layers. By the way, I will tell you it is impossible. It is mathematically, you know, impossible to build a resilient, creative organization with 8 or 9 layers. It has never been done. It will never be done. So like end of last year, Mark says, again, direct quote I don't think you want an organization or you have managers managing managers, managing managers, managing managers, managing managers, managing the people doing the work.
Gary Hamel
It's like, no kidding. Like the yeah, yeah, now you now you got it right. And so so it's simply we don't we can't think of another way better control. Now let me give you another way. So in almost all and this will bring us back to return on intelligence in almost all the organizations that we profile. And you asked about the street, the organizations that have made this shift, on average, have 50% higher productivity than their peers.
Gary Hamel
They dramatically outperform on share price on everything else. You know, I mean, most most of the world's largest organizations right now are super badly stuck. For example, the majority, the majority of the S&P 500 over the last ten years has not grown as fast as the GDP or go like, how the heck you can't even go as far as the economy.
Gary Hamel
You can't. You're you're so bureaucracy bound right now. So so if you look at these companies that have made this switch, there's one thing you find at the very core in every single case, very different industries, some different practices. But one thing you found, they have found ways of turning on the problem solving capabilities and the entrepreneurship of every single employee.
Gary Hamel
So at at at at at at higher, we broke this very large 50, 60,000 person organization into 4000 micro enterprises with the average of 15 to 20 employees. So there's one that does three to our refrigerators. We broke all the staff groups into micro-enterprises. We took out an 800 person, corporate HR group and completely disband that and created micro enterprises that had to sell their services to the rest of, of of of the micro enterprises.
Gary Hamel
So if I'm a little that little micro enterprise, you know, making designing three door refrigerators and I need some help in hiring, I go to an Air Micro enterprise. We write a contract for them to help me hire people at an every hour. Or if I need R&D help, I write a contract with an R&D micro enterprise.
Gary Hamel
And every one of those contracts, there's a performance clause where I get a bonus only if that product succeeds with the ultimate customer. So every single employee has their every employee has their compensation at risk, a part of it. Depending on how we do with customers, there are no internal monopolies. You know, I talk to people in training and development and and HR and so on, and they talk to me about their their internal customers.
Gary Hamel
I got interested can those customers fire you? Oh no, I said, all right. Let us let us be honest and call them hostages. Right. Those are not customers. Customer I'm sorry. These are hostages, right? I know what the wonder the satisfaction of these are. It's like you measure it in low, low, low double digits. Right. in most organizations.
Gary Hamel
So. So, so what do you find? Are these companies, they disaggregated the company into much smaller units. Every one of those units has a real PNL. You are accountable. Not for some kind of boss KPIs and synthetic targets. You are responsible for a real PNL for delivering. You have to make the trade offs to deliver on that PNL.
Gary Hamel
You have a significant share of your compensated at risk, depending on what you do with customers and the financial results that you produce. You just don't find those things. On most large bureaucracies.
Rich Fernandez
I mean, it it occurs to me that one, yes, you're aligning the incentive structures, which is brilliant. Right? But then this other step it occurs to me it would require is trusting and empowering those teams to do the work. And I think trust is at a premium. I think there's not a lot of trust to go around, like, really, you're going to, you said disaggregated company into 4000 semi-autonomous units, each with their own PNL.
Rich Fernandez
You're going to have to, really trust that that those 4000 groups have their capabilities that can deliver against that.
Gary Hamel
If you've got to trust people, you they need to be capable. So what do you also find in all of these organizations? They spend an enormous amount of time investing in the business and, and, and competence and managerial competence of people on the front lines. So, Ingersoll ran a very, you know, all kind of mature manufacturing company, bought by KKR, few years back.
Gary Hamel
and in a quite a bold move for a private equity company, KKR gave those employees. Ultimately, I think it was $250 million of stock with with very short vesting. No, they just gave part of the company away. So they really wanted people to feel like owners more importantly, though, they trained every single employee to think like a business person to understand cash flow cycle.
Gary Hamel
ROI, ROA. Then in the second round, they train them all to think strategically right about emerging technologies, about AI, about everything that's going on around them, about the changing needs of their customers because they wanted people on the front lines who had both the, the, the financial literacy and the strategic imagination to help them run the business. Now, if you look at most companies, you know, if you look at the training budget, 90% of it goes to the top 10% of employees.
Gary Hamel
I think that's ridiculous. I think we should take almost the entire at budget, and we should focus that on front line employees. Right. And because because let me say this in another way. The pace at which any organization gets better in any dimension is arithmetically a function of the number of good ideas that get generated and tested and then implemented right is wide eyed development testing pace of improvement are like lockstep together.
Gary Hamel
So and I would also argue that in any business, there is literally virtually an infinite number of interesting problems to solve. A lot of the time we don't recognize them, but they're they're there all kinds of frustrated customers and whatever. So a lot of, you know, the heart of my arguing about human accuracy is saying, how do you unleash that problem solving capability in ordinary people?
Gary Hamel
Well, so trust is important, as you say, but trust is really about giving them the skills. Trust is also about holding them accountable. So for example, at hire, if a team misses its performance goals, if one of those micro-enterprises misses its goals for three months in a row, it triggers an automatic leadership reelection. The team will choose a new leader, and every year, formally, there's a leadership contest.
Gary Hamel
So every one of these small teams, right, they have financially, they're they have they're at risk in that unit. So their, their, their pay is at risk from how their unit does. in most large companies, a tiny share of employees have direct performance related pay. Right. But here everybody has so you are not going to choose the leader.
Gary Hamel
That's the nice person or the easy person. You're going to choose a leader who helps you succeed. And so that's accountability right? So I have financial accountability. I have accountability to the people who just chose me as their leader. I have the competence, to to to make wise decisions. I have access to 100% of the organizations financial information.
Gary Hamel
So I have the information I need to make wise decisions. So, you know, that is what you need to unleash that problem solving capacity. And there's a lot of interesting research on this rich, most recently, a big study that was done in Europe. and what they found was the thing that most determines whether people use that problem solving capability at work is not, personal competence.
Gary Hamel
It's not their role. The number one thing is, have they been given the opportunity? And when you look at the data from Gallup, it is damning data. Only 1 in 5 employees believes their ideas matter at work. Only 1 or 2 say they could influence decisions. Only one and 11 have any capacity to experiment. So we have we have literally closed down, locked up, thrown away, 90% of the intellectual capacity in our organization.
Gary Hamel
And so, you know, and we can no longer afford to do that right across across most of all of countries, we have declining productivity growth despite huge increase in technology, R&D and so on. Productivity is going down. That's another interesting topic, right? Productivity is going down.
Rich Fernandez
Secret part, right where the human spirit is stifled. And we're not actually tools. Is that is that so.
Gary Hamel
So what happens is we have all these new tools, but we use them in very incremental kind of way. Right. So we have productivity tools that make it easier for you to schedule a team meeting or to share a document. But what we really could be using is all these new tools to equip with information and skills thousands, hundreds of thousands of employees to exercise their initiative in their imagination.
Gary Hamel
But we don't do that because that takes you outside of the bureaucratic frame, no longer can you talk about unskilled, you know, jobs. I mean, I don't think any job is inherently low skilled. I mean, you know, we we treat the people as if they don't have brains often, but not the, the job itself. Right. So I think, yeah, I think the secret to kind of reversing that long productivity slide is turning on this long dormant, human capacity, which is the whole focus of of our book.
Rich Fernandez
That's beautiful. Beautifully said. So, maybe the last thing I'll ask you about is how do you think AI is going to play into all of this? because from my perspective, it's, added it's to it'll free us up actually even more. Right. Like a lot of the operational things. And if it's a copilot and a really smart copilot now, I don't want to overindex on it as well, because there's lots of bills that are associated with it, and it can take jobs potentially, and it can replace a lot of the created things that we do and innovative things we do.
Rich Fernandez
Or does it or is it an additive thing? And I will confess, I'm in this in a state of inquiry. I don't have a definitive answer, even in my own head. But I'd be curious what you think. Relative to this kind of the same place.
Gary Hamel
Rich, I don't know, and I don't think anybody really knows. I have to say, I think the estimates by, by, Goldman Sachs and others about the job losses are hugely over, hugely exaggerated now, I think, yeah. So, so if you look at so I always I like to, I start by looking at analogies.
Gary Hamel
So you look back over the last 40 years of technology development from the mainframe, to the PC to all the productivity, software that we had, to, the cloud, to mobile, to e-commerce, and so on. And you go like, okay, all of that together has had some impact, but it it hasn't it hasn't given us productivity growth.
Gary Hamel
That's a very interesting question. So is I going to be fundamentally different than the last 40 years of technology. Is it going to be somehow different than have a different. So the smartest people I know thinking about this, a professor at MIT estimates that, I will lift, productivity growth by about, two thirds of 1%.
Gary Hamel
Very similar. And what do you think about this? I think think about an example. So when we first started getting word processors and then we had, you know, PCs and word or whatever you use, we rightly kind of predicted that all of those secretarial jobs or many of them would go away. Right? I don't know any company that has a typing pool anymore.
Gary Hamel
Right. But here's my question. Has the number of total keystrokes an organization has gone up or down over the last 40 years per capita? You know, it's called like there, right? We said, oh, look at, look at look at how, email is going to make communication more efficient. Yes it did. It also allowed an enormous amount of spam.
Gary Hamel
So like what do you make. So we're going to have unbelievable amount of knowledge spam when you make the cost of something close to zero, you get an explosion of it. And, and and and what we did with a lot of this personal technology, we shifted a lot of clerical work on to executives who are now sitting there, opening their opening a document, finding the right thing to write, like my assistant used to do, that way faster with a physical file drawer than I can do today.
Gary Hamel
And I'm, you know, pretty adept at these things. So I think, first of all, there's there's often the productivity gains are little illusory. secondly, it often gets used in ways that offsets a lot of those productivity gains because it just gets, you know, makes our lives more, you know, I mean, take, take, take chat bots, right? I will tell you, chat bots are way if you look at total human hours spent interacting with with with trying to get a problem solved with a vendor, with a, with a whatever are way less efficient than a human being.
Gary Hamel
They are more efficient for for for the company. Because now I have $0.30 a transaction rather than $3 a transaction, but because the amount of time I'm sitting there frustrated, going through and in the end still have the automated. So so I, I'm rather skeptical that AI is going to have. And there's a last reason I'm skeptical. We have seen greater concentration in almost every industry.
Gary Hamel
There are fewer and fewer companies that control more and more of every industry and large. And by the way, there's less disruption now than there was 20 years ago. Less disruption when we looked at. And I'll explain this, hopefully not very complicated, but we looked at, at the the largest 100 companies in the US economy. And for each, each year, we said how many of these 100 largest companies were in the top hundred for the previous ten years.
Gary Hamel
So in 2024 we take the top under. How many were there all the way back to 2004. Then we go back to 2023. How many of them were there? There are more companies right now that have been in that list for 100 for ten years than they've ever been. Disruption is not true. As as a as a general thing.
Gary Hamel
I mean, yes, there are instances for sure of disruption, but it's something that's radically transforming our economy. No. Right. There's only 4 or 5 companies in that top hundred that were created in the last 50 years, like Google and Apple and so on. Most were not. And so what's happened is these large companies have gotten much better at creating the illusion of resilience through share buybacks, through more debt to regulatory, you know, through through shaping, through lobbying, shaping the regulatory environment and so on, making acquisitions and killer acquisitions.
Gary Hamel
It's the only way Facebook has really innovated has been through acquisitions matters, innovated. Right. In a way. So so the dilemma is so you have this highly concentrated kind of often kind of stuck in the mud, backward looking organizations, and they're the ones that are going to be using these new tools. So how is going to be using them.
Gary Hamel
So to use an analogy, when you know, when the web web based things come out. So if I Marriott how do I think about using those. Oh this is really good. I can do dynamic pricing. That's cool. I can shift I can get people to make their own reservations. So we cut the travel agents out. That's cool.
Gary Hamel
I can take cost out of my loyalty program because I can run online. They never saw the opportunity for Airbnb. So large companies tend to use new technologies and very incremental ways, right. To kind of do more of the same and, and in defensive ways. So that's why I mean, if you look right now in the United States, if you take all the unicorns right now in the US economy, like these are venture funded companies with at least a billion, right, in kind of imputed market that all of the unicorns, the United States, including the largest, which are space-x collectively is worth 4% of the S&P 500.
Gary Hamel
Entrepreneurship does not solve the problem of stuck in the mud companies. Right. But there's just there's just not enough entrepreneurship. I think in Europe, that figure, if you take all the unicorns in Europe, it's like one and a half percentage of the largest European companies. So what we have to do is we have to wring bureaucracy. And by the way, all those little companies are going to go up into very big bureaucratic companies.
Gary Hamel
What happened to face, you know, as you know, last year, Sundar Pichai and I saying his name right at Google. Yeah, they did the big, like, simplicity, hackathon, which I can tell you, it's not going to do much because unless you're willing to start by saying we may have to take out two thirds of the layers, right?
Gary Hamel
For example, that just becomes a little bit of window dressing. You mow the lawn and you go crowd. All the grass has grown back last week out of that.
Rich Fernandez
Yeah, yeah. It's a human order problem as well, you know, and I think it's, it's a failure of imagination. and, maybe we'll end there, Gary, because I think we could probably. I feel like I could talk to you all day. And, you know.
Gary Hamel
Let me give your listeners the 11I want to leave with. One reason to be very helpful. Yeah. What do you find in all the companies that have made this journey? new car hire, bazaar and so on. None of them did it overnight. None of them did it by blowing up what was already there. They just started by experimenting, as always, and saying, is there another way to do this?
Gary Hamel
Usually with it just a fraction, a tiny part of the organization. And so I think the way we're going to make this, you know, we're going to deeper archetypes ourselves is not going to be to like, you know, it's not we need a new CEO. We need to like a huge reorg. No, no, no, no. It's when everybody at every level looks at their team as a little laboratory and says, how do I think about creating more ownership?
Gary Hamel
How do I create more transparency? How do I create more trust? How do I do that right here within my scope of permissions. So you look at that little example I use where, you know, they said, can we change travel policies? They didn't start by trying to change the whole organization. They did a little hack. And so what I would encourage and and a lot of the book is about how you build your own hack wherever you are.
Gary Hamel
Right. So everybody at every level, we all have a choice. We can whine and we complain or we can hack something, right? And talk about how you can do this in ways that don't put your career at risk. But but here's the wonderful news. Everybody is frustrated. CEOs are very frustrated. They know that this is a problem. So if you want to hack something and you so there's a better way, you are not going to get fired.
Gary Hamel
I yeah I've seen this again. We are going to thank you. It is likely that it scales up. It's going to be a better way. But but if you have an idea, don't start by trying to talk to the CTO. Carl. That's like a dead end. Get a bunch of your colleagues. Let them help you test the idea.
Gary Hamel
Find a place to do a little experiment, get some data, and then say, hey, we thought about doing this differently. So like, you know, hack don't bitch would be like my motto.
Rich Fernandez
Yes, I love that. And run experiments. that's a very, very, practical and I think doable approach to this, very large kind of problem. And disorder, as you'd like to say, that we have going on with bureaucracy. And so I want to just encourage everyone and remind everyone that your book is, is, Humanocracy.
Rich Fernandez
It's an incredible book. I really suggest if you want to dive deeper into some of these ideas that care is presenting Humanocracy. you wrote it with Michael Zanini, a revolutionary manifesto and Practical manual. Practical manual for freeing the human spirit at work. Gary, thank you so much for your time and your and sharing your brilliance today.
Rich Fernandez
it it's tremendous.
Gary Hamel
And I know you can find me on, on, on x at, at Prof. Hamel. you can find me on LinkedIn the same way I love interacting, hearing what people are doing, sharing their stories. So, you know, be on time.
Rich Fernandez
Fantastic. Thank you so much, Gary. Thanks everyone.
Gary Hamel
Cheers.
