When the Model T Ford was introduced in 1908, consumers were thrilled. They didn’t care that it didn’t have a roof or windshield wipers. It was better than a horse and buggy, and reinvented personal transportation. The Model T turned a page from an era of scarcity into an era of mass consumption. When Henry Ford launched the first Ford plant in Highland Park, Michigan, it quickly became the benchmark for mass production methods around the world. Ford and his engineers knew that to meet demand, their focus on productivity and efficiency had to be relentless. They invented machines and devised methods of assembling parts and cars as efficiently as possible. With a complete car leaving the line every 10 seconds of every working day, Model T production reached record levels. To this day, it serves as a core example of efficiency in mass production.
Fast-forward 107 years later, we find ourselves in the middle of a completely different era. In the age of abundance, consumers, overwhelmed by choice, are shifting their preferences from products to experiences. They crave value over gloss, and are exposed to unlimited selection and instant availability. If Henry Ford were alive today and tried selling cars using the famous line that he’s used to sell the Model T; “Any color you want, as long as it’s black.”, how many of us would be rushing to buy his product?
Despite the shift that’s occurring in the market, we are seeing many organizations struggle to change ahead of customers’ expectations. There are a handful success stories that are being told time-and-time again in every recent business book, however, for the most part, organizations, big and small are struggling to change. Why is that? What’s the one big thing that holds us back? The answer to that may be rooted back in Henry Ford’s early days and one word: Efficiency.
The notion of organizational efficiency stems from the principles of Frederick Winslow Taylor, and has been refined by the likes of Henry Ford and Alfred P. Sloan, Jr at Ford and GM at the turn of the century. This system is largely based on standards, procedures, and output statistics, often used to run an organization. The approach to leadership is authoritative in nature and uses a top-down approach, which sees most privilege and power vested in senior management. If this sounds familiar, it is because most organizations are still working within this century-old framework!
Yes, most companies are still built and structured to launch and deliver products and services to as many people as possible while reducing risk. While in the past, organizations could gain market share by inventing and producing differentiated products, the competitive and global nature of business has made it almost impossible to create a sustained advantage through differentiation. Therefore, we default to efficiency as a way to reduce costs and compete on price.
The way we achieve efficiency is much like Henry Ford did a century ago. It is through standardization and reducing variance. We operationalize standardization through organizing in respective silos with defined responsibilities and accountabilities for a narrow set of tasks. Organizational charts and job profiles lock-in roles and define authority. We implement rigid processes and practices, built for consistency and scale.
In a way typical in an industrial economy where knowledge or expertise equals power, the hierarchy of management typically divides the thinkers (or experts) who have ideas, and the doers who must “follow the manual” and execute them in a very distinct and prescriptive way. We expect Senior management has the answers to most of our problems as the structure we’ve set relies on them to have not only a detailed vision, but to also inspire us to execute. In other words, we pay some people not to think, just follow the process and execute.
Name any core business activity and it has a process with a complement of operating manuals attached to it. Those manuals are needed to explain, in great lengths of detail, how jobs should be done at the front lines. In essence, we strip all decision-making power from the very employees who serve our clients and expect them to follow the script and hit their KPI, even if it means not doing right by the customer (here’s an example of that).
Do managers fair out better in a mode of efficiency? Middle managers and front-line managers jobs exist, on paper, to primarily develop staff and enable them to bring the corporate strategy to life with customers. We assume these managers are empowered to make decisions and come up with creative ways to improve the business. However, when top management thinkers and co-authors of Blue Ocean Strategy W. Chan Kim and Renée Mauborgne went out to conduct research for an initiative they called Blue Ocean Leadership, they found that most managers were rule enforcers who played it safe and spent much of their time playing politics.
Instead of coaching and developing their employees to delight customers and execute the organization’s strategy at the “tip of the spear”, front-line managers admitted to spending the majority of their time escalating customer queries to senior managers, producing data for reports, and completing forms and templates.
How about those middle managers? The study found they spend the majority of their time tasking front-line managers by requesting reports and data, enforcing compliance and reviewing decisions from above.
In essence, we’ve created an entire supply chain of bouncing decisions around, passing the buck on accountability and massive amounts of senseless reporting that takes place — all in the name of ‘efficiency’. How is that even remotely efficient and how does it benefit the customer? It seems that our quest for efficiency is yielding quite the opposite result. The rigidity we brought upon ourselves often makes it feel like we are fitting a square peg into a round hole. Anything new feels out of place; and that’s where corporate cultures kill ideas in the name of compliance, or “the way things are done around here”.
For the majority of us, the relentless focus on efficiency translates into paying us not to think. This causes a profound impact on our engagement at work. According to Gallup, over 70 percent of U.S. workers say they are fully disengaged from their workplace. Managers, who we count on to motivate and inspire employees, are in no better shape either. 51% of them are not engaged and 14% are actively disengaged. With employees showing up for just a paycheck and not being vested in their organizations, is there any wonder we are increasingly seeing organizations that are failing to execute, releasing mediocre products and quickly losing ground?
As we operate in an era of uncertainty or what Harold Jarche calls “Perpetual Beta”, where disruptors emerge and can grow their businesses and customers to significant scale in a matter of months, agility can make the difference between thriving or not surviving. Your scale, size or brand will only take you so far, but the only way to effectively compete with the shifting tide of consumer demand is with agility, speed and shared purpose, not annual plans, not another SWOT analysis, not more reports, business cases and PowerPoint decks.
Many senior leaders grew up in an era that values efficiency. It is the de-facto system that many senior leaders know too well. It is the one they default to, especially when they get hit turbulent times. Nearly every CEO today agrees that their business is facing complexity at levels that they’ve never seen before. They concur that their company needs to be responsive, nimble, and agile, but the changes that agility requires are really hard. Moving boxes around on an org chart or bringing in some new talent cannot solve it. It involves a cultural shift that for leaders means unlearning over a century of inherited instincts.
In an age of abundance, organizations need to learn how to get the most out of their people, not relegate them to the lowest common denominator. One leader who is truly pushing the envelope is Zappos CEO, Tony Hsieh. Hsieh knows full well that literally anyone can put up an ecommerce website. Anyone can sign distribution deals with suppliers for fashion and shoes. His entire business can be replicated in weeks, if it wasn’t for his people and culture that make purchasing from Zappos one of the most unique and desirable experiences online. Hsieh knows he’s building a company in an industry that’s hyper-competitive and he’s making his bets on a new way of organizing his company as a holacracy.
Holacracy is a radically different management system that changes how an organization is structured, how decisions are made, and how power is distributed. It is almost at the polar opposite spectrum of a traditional command-and-control organization. Yet Hsieh and a few other leaders are betting their entire companies on a new way to organize — a way that’s all about empowerment and gaining the most potential out of employees.
While the skeptics are out on holacracy and other new ways to organize, manage and empower, the status-quo and relentless focus on efficiency may have been great for Henry Ford and others, but it isn’t getting us to a place where we can get ahead, both as companies and employees. To be very clear, this isn’t an argument of ditching efficiency in favor of chaos. It is about find a better way to work and a better way to manage for both scale and agility. A way that doesn’t beat the thinking out of employees who hold some of the solutions to our biggest problems.
We don’t need a new system or permission to break the cycle. It happens when leaders reflect and decide that it’s time for a change. No more running in a hamster wheel. It’s time to remove barriers for our teams. It’s time to openly share information and collaborate. It’s time to build purpose and trust. It is time to unlock untold willpower, bold ideas, and brand-defining originality.
This story was originally posted in my blog