, Entrepreneur, influencer, management exorcist, change curator, thought innovator, speaker, author, globally working advisor on leadership transformation. Former Beyond Budgeting Round Table director. Founder of the BetaCodex Network.
Industrial age ends: Knowledge economy advances: high ”Supplies have the power“, ”Customers have the power“, Evolution of mass markets: strong competition, individualized demand: Taylorism as the superior model decentralized and adaptive model is superior! Now, all these factors are equally important! Here, only efficiency Competitive mattered, really! Characteristics success factors (CSF)Dynamics 1. Discontinuous change - Fast response and 2. Short life cycles - Innovationcomplexity 3. Constant pressure on prices Operational excellence - Characteristics 4. Less loyal customers - Customer intimacy • Incremental change • Long life cycles 5. Choosy employees - Great place to work 6. Transparency, - Effective • Stable prices societal pressure governance • Loyal customers High financial - Sustained superior • Choosy employers expectations value creation/fin.perf. • „Managed“ results low 1890 1980 1990 2000 2010 2020 Most organizations still use a management model that was designed 2030 for efficiency, while the problem today is complexity. 4
“command and control“ • Too centralized • Too inward-looking • Too little customer-oriented • Too bureaucratic • Too much focused on control • Too functionally divided • Too slow and time- consuming • Too de-motivating • … 7
Do you BELIEVE in Theory Y?Firmly?Good. Because we are sure then you would never, everpractice (or support, or tolerate) HR processes and toolsthat treat people like children, or animals, or worse. Right?Such as performance appraisals, individual target setting,incentive compensation, meritocracy, or control of work-hours…
Sciences: Practice:Thought leaders Stafford Beer Industry leaders Margareth Wheatley(selected) Niklas Luhmann (selected) W. Edwards Deming Kevin Kelly Ross Ashby Joseph Bragdon … Douglas McGregor Chris Argyris Complexity Jeffrey Pfeffer Reinhard Sprenger theories Industry Stephen Covey Howard Gardner Social Viktor Frankl … sciences and Retail HR Peter Drucker Tom Peters Leadership & Services Charles Handy change John Kotter Peter Senge Thomas Davenport Strategy & Governments Peter Block Performance & NGOs … management Henry Mintzberg Gary Hamel Jeremy Hope Michael Hammer Thomas Johnson Charles Horngren … 25
Industry Retail ServicesGovernments. & NGOs 26
The BetaCodex: The 12 new laws of Leadership§1 Freedom to act Connectedness not Dependency§2 Responsibility Cells not Departments§3 Governance Leadership not Management§4 Performance climate Result culture not Duty fulfillment§5 Success Fit not Maximization§6 Transparency Intelligence flow not Power accumulation§7 Orientation Relative Targets not Top-down prescription§8 Recognition Sharing not Incentives§9 Mental presence Preparedness not Planning§10 Decision-making Consequence not Bureaucracy§11 Resource usage Purpose-driven not Status-oriented§12 Coordination Market dynamics not Commands 27
Traditional model (supports efficiency) New model (supports complexity) Centralized Decentralized hierarchy, network, “command “sense and control” and respond“ The old model is not aligned with today’s Critical success factors and it does not support ‘Theory Y’. > We need a new Relative strategy model to cope with performance complexity contracts > We must change the whole model! Fixed performance contracts Dynamic coordination Fixed processes Dynamic processes control 29
The BetaCodex: Thinking and workingon the model, not in the model.
• Consistently successful, for more than 40 years • “Most innovative company in the U.S.“ (Fast Company) • For the 8th year in a row among the 100 best employers in the U.S. (“Fortune“ – best medium-sized employer). Best employer in England for the third consecutive year. Among the best companies to work for in the EU and Germany. • All employees participate in the firm´s success and become “virtual“ shareholders. • No job titles. Little hierarchy. No job descriptions - instead: “job sculpting“. • Highly empowered teams. “Temporary leadership“• “Since 1958, Gore has avoided traditional hierarchy. Instead, we have practiced a team-based environment that stimulates personal initiative, innovation and communcation between all our Associates.”• “The fundamental belief in the people in our organzation and in their ability continues to be the key to our success.“ 35
1 very simple principle:Always disconnect compensation from targets.Always. 54
Pay-for-performance is an outgrowth of behaviorism, which isfocused on individual organisms, not systems - and, true to its name,looks only at behaviors, not at reasons and motives and the people whohave them.I tell Fortune 500 executives (or at least those foolish enough to ask me)that the best formula for compensation is this: Pay people well, pay themfairly, and then do everything possible to help them forget about money.How should we reward our staff? Not at all! They are not our pets.Pay them well, respect and trust them, free them from disturbance,provide them with all available information and support to performon the highest possible level. Alfie Kohn, Sociologist1. Pay people well2. Pay people fairly3. And then do everything possible to take money off peoples minds!All pay-for-performance plans violate that last precept!
1 very simple principle:Never use bonuses and incentives.Apply profit sharing and/or shareholding conceptsfor community. 56
1 very simple principle:Pay the person. Not the position.Always.
Companies. Don´tNeed. Planning.Eine Konsequenz aus dem Kodex.
A small elite governing the powerless masses. An economic system held together by tight planning, and control. Mistrust in entrepreneurial initiative. Those were key features of the soviet union. Now guess where this kind of governance remains in place today: It is the worlds corporations and small to large- size firms. It is just that we call the practice “management”.Apertura 62
More about devolved leadership• Devolution, like delegation, is a form of decentralization. While delegation occurs when a superior decides to pass a power, responsibility or task to a subordinate, devolution occurs when a board (or equivalent) decides as a policy to empower a lower level in an organization.• Devolution is therefore more permanent than delegation. It involves structural changes that impart a greater degree of autonomy (Greek: self governance). Devolved Leadership means decentralizing decision making authority to teams at as low a level in the organization as possible. The aim is to enable everyone to think and act like a leader.• It is likely to require changes in organization, and for people to acquire new capabilities. It will usually involve decentralizing activities in order to provide teams with greater autonomy, but it does not mean that all activities must be decentralized.• Under Devolved Leadership, activities may be centralized or decentralized. As a rule decentralization of activities is preferred because it leads to better customer service and reduces organizational complexity, but it does not preclude centralizing activities if doing so will make significant cost savings or enable more specialist expertise to be retained, and these benefits outweigh those of greater autonomy.• However, what has to change under Devolved Leadership is the relationship between units. Power must be given to the customer, whether external or internal. Suppliers must respond to the needs of their customers, not be driven through a functional hierarchy.• The result is that the organization becomes flatter. It can then act as a network of autonomous units, each unit adjusting continuously to the needs of its customers (internal and external), thereby enabling the whole organization to become more adaptive.
The notion ofdividing an organizationinto functions,and then departments,is fundamentally flawed.But what is the alternative?
Make it real!www.betacodex.orgA selection of associates: Silke Hermann Niels Pflaeging Valérya Carvalho silke.hermann@ firstname.lastname@example.org email@example.com insights-group.de nielspflaeging.com Betaleadership.com Wiesbaden–New York São Paulo-New York-Wiesbaden São Paulo Walter Larralde Sergio Mascheretti wlarralde@ s.mascheretti@ on-strategy.com.mx itmconsulenza.it Mexico City Bergamo/Milan