Some companies adopt a command-and-control approach to management, while others are more collaborative. Both have their advocates among management and employees alike. And both can point to examples of success. But in a fast-changing corporate world, which approach is more conducive to productivity? Which approach engenders a positive workplace culture?  And which approach is more likely to deliver results over the long term? 

MANAGEMENT

 

MANAGEMENT

Vive la devolution

Vive la devolution

Some companies adopt a command-and-control approach to management, while others are more collaborative. Both have their advocates among management and employees alike. And both can point to examples of success. But in a fast-changing corporate world, which approach is more conducive to productivity? Which approach engenders a positive workplace culture?  And which approach is more likely to deliver results over the long term? 

Bjarte Bogsnes is no ordinary oil executive. Since 2005, he has led a radical management overhaul of Norwegian oil group Equinor, previously known as Statoil. Decision-making has been devolved and many of the top-down systems typical of major companies have been abolished. 

“A lot of what we call management is about making it more difficult for people to do their jobs,” he says.

A senior adviser to Equinor, Bogsnes describes himself as part of a movement to overthrow traditional command-and-control management – a mission he considers essential to make companies fit for the 21st Century.

Freedom of choice

But some industries seem intrinsically more suited to collaboration, while others may need to adopt a command-and-control approach simply to function effectively. Julian Birkinshaw, professor of strategy and entrepreneurship at London Business School, agrees that this has been the traditional view.

He says: “At one end of the spectrum are things like computer gaming, where real lives are not at stake. It is there we see some of the best examples of hugely devolved companies. But industries where lives are at stake have been more centralised and controlling, whether it’s nuclear power or airlines.”

Many companies conform to this profile. Seattle-based computer gaming business Valve is a global success, with sales last year of an estimated $4 billion. The group famously has “no bosses” – staff are free to work on whatever project they choose, with whatever team, and every desk is on wheels, allowing people to move about and collaborate as they wish.

Decentralisation is not anarchy

Frequent flyers might be alarmed if aircraft manufacturers were run in the same way. But while many collaborative systems or flat hierarchies are to be found in the tech sector, such models can also be found in very traditional businesses.

Take Swedish bank Handelsbanken, which launched a management revolution in the early 1970s. The group abandoned centralised budgets, set up quasi-autonomous regional banks and devolved the vast majority of decision-making to branches. It also abolished individual bonuses in favour of a pooled employee scheme, with payouts determined by the group’s performance rather than individual targets.

Bernie Charles, officer at the UK arm of Handelsbanken, cites higher customer satisfaction, higher employee satisfaction and better financial returns as evidence that the revolution has worked. “Decentralisation is not anarchy,” he declares.

Stay agile

Each Handelsbanken branch is measured only on its cost-income ratio. Managers are free to take on whichever clients they choose and can even determine the prices charged. Outsiders might assume this means higher risks, but Handelsbanken weathered the financial crisis far better than mainstream banks and the latest credit ratings by Moody’s give Handelsbanken UK a higher score than any other leading UK bank.

Across industry, there are countless versions of innovative or devolved management. The “Agile” company is one of the best-known models, but others include “Beyond Budgeting” and the New Age-sounding “Holacracy”, favoured by Twitter co-founder Jack Dorsey.

With Holacracy, fixed job descriptions are replaced by roles that define the tasks to be achieved rather than pigeon-holing individuals and restricting their contribution. There are no top-down reorganisations. Instead, there are rapid “reiterations” of practice developed and implemented by the teams and individuals involved.

Questioning tradition

Entire books have been devoted to this practice, not least Holacracy: The New Management System for a Rapidly Changing World by Brian Robertson, who developed the model. Critics argue that Holacracy itself is bogged down in models. In Birkinshaw’s words, Robertson has “over-engineered” it.

Robertson is far from alone in using literature to expound on management practices. In Implementing Beyond Budgeting, for instance, Bogsnes suggests that the traditional management practice of top-down budgeting should be brutally discarded.

He claims that “the budgetary mindset” sets too much store on fixed targets and asset allocations, and instead advocates a more dynamic approach, with teams accessing finance in response to real events and new ideas as they arise. Decisions can be devolved, with fewer actions requiring approval from above.

“I’ve been in this movement from the very beginning and interest is now exploding,” he says.  “I don’t care what you call it – Beyond Budgeting, business agility, Holacracy, whatever. The point is that we have to change traditional management to create companies that are more adaptive and agile.”

Divide or rule?

At Equinor, key performance indicators are determined at team or project level. The group’s watchwords are autonomy and transparency. And, like Handelsbanken, Equinor is an undoubted financial success. 

So is the command-and-control model washed up? Perhaps not. London Business School’s Birkinshaw points to obvious counter-examples.

 “Looking at companies such as Apple, Oracle, Facebook and News International, we see businesses where an extremely powerful individual absolutely decided the terms and they were highly successful. So business dictators can make a difference,” he says. “If you devolve the decision-making process, you can’t always make the difficult decisions in the appropriate time. You can make the case that collaboration sounds wonderful, but it is not a good way to make decisions.”

Valve famously has ‘no bosses’ – staff are free to work on whatever project they choose, with whatever team, and every desk is on wheels, allowing people to move about and collaborate as they wish”​

The four questions

Birkinshaw makes a further point about “business agility”, which is often bracketed with devolved decision-making and collaborative management styles. True, a devolved company may be more “agile” at ground level, but when big strategic decisions are involved, agility may come from the top.

“There are different routes to agility, from the bottom up or from the top down. They can both give you agility. So if we take that word’s literal meaning, then putting your faith in a powerful leader can be just as agile as a bottom-up approach,” says Birkinshaw.

One leader who has pursued a devolved management style from the start is Tom Georg Olsen, co-founder of international software consultancy Miles. Olsen admits he is at the top of a hierarchy, but his title is “enterprise servant leader”. 

Olsen identifies “the four Ts”: employees have as much control as possible over the Task they perform, the Time they use to perform it, the Team they work with and the Tools they use.

Trust them

“The idea is that you have to make decisions at the level of competence for that decision. Do I need to change my computer? Do I need to go to that conference? The point is that each person knows best what they need to do their job.” The result, he says, is greater efficiency, happier staff, lower costs and better service to clients. Traditional bosses might ask how this can possibly work. Olsen suggests that trust and transparency are an essential part of the process. First, the company assumes most people want to do their job well and, second, all decisions are open for everyone to see. 

“If someone chooses an extremely expensive PC, far beyond their needs, colleagues will question that decision long before management,” he explains. In organisations such as this, one point is clear: employees have greater responsibility, so effective recruitment is particularly important. 

Handelsbanken’s Charles explains: “We have quite distinctive HR policies. We invest a lot of time in the process and for a branch manager that can take up to six months. We really want them to understand the culture. We need to test not just their technical competence, but also their values.”

Naturally, this management style raises eyebrows in some quarters. Bogsnes refers to two types of sceptics. “The first are people who have never worked anywhere similar and they are confused. But I am never concerned about that group. They just need time to see it in practice and after some time they just get it,” he says.

Group think

“The other group, which is far smaller, are not confused at all – they understand exactly what it is about, and they are dead against it. This group can never change. But time is on our side. It’s partly a generational thing and these people retire or move on.”

Bogsnes is a true believer, but most observers accept that no single model of management fits all companies. Some strategic decisions are not suitable for company-wide consultation. And while collaboration may open up innovation among teams or individuals, many companies have thrived on the vision and innovation of a single dominant leader.

But in many fields, top-down management and autocratic leadership may not be the best way forward. They may stifle innovation, encourage inertia and set in stone budgets and strategies that are quickly overtaken by events.

Working out the best answer in any business will depend on countless factors. But perhaps business leaders should consider the following questions: Are you the best person to make every decision? Do you think you can and should define every target and control every project? Do you need to define precisely what each individual in your company does? 

If the answer to all those questions is yes, then devolved management will not be for you. In almost every other case, it may be worth a try 

Back to articles

Bogsnes claims that ‘the budgetary mindset’ sets too much store on fixed targets and asset allocations, and instead advocates a more dynamic approach, with teams accessing finance in response to real events and new ideas as they arise”​

Bjarte Bogsnes is no ordinary oil executive. Since 2005, he has led a radical management overhaul of Norwegian oil group Equinor, previously known as Statoil. Decision-making has been devolved and many of the top-down systems typical of major companies have been abolished. 

“A lot of what we call management is about making it more difficult for people to do their jobs,” he says.

A senior adviser to Equinor, Bogsnes describes himself as part of a movement to overthrow traditional command-and-control management – a mission he considers essential to make companies fit for the 21st Century.

Freedom of choice

But some industries seem intrinsically more suited to collaboration, while others may need to adopt a command-and-control approach simply to function effectively. Julian Birkinshaw, professor of strategy and entrepreneurship at London Business School, agrees that this has been the traditional view.

He says: “At one end of the spectrum are things like computer gaming, where real lives are not at stake. It is there we see some of the best examples of hugely devolved companies. But industries where lives are at stake have been more centralised and controlling, whether it’s nuclear power or airlines.”

Many companies conform to this profile. Seattle-based computer gaming business Valve is a global success, with sales last year of an estimated $4 billion. The group famously has “no bosses” – staff are free to work on whatever project they choose, with whatever team, and every desk is on wheels, allowing people to move about and collaborate as they wish.

Decentralisation is not anarchy

Frequent flyers might be alarmed if aircraft manufacturers were run in the same way. But while many collaborative systems or flat hierarchies are to be found in the tech sector, such models can also be found in very traditional businesses.

Take Swedish bank Handelsbanken, which launched a management revolution in the early 1970s. The group abandoned centralised budgets, set up quasi-autonomous regional banks and devolved the vast majority of decision-making to branches. It also abolished individual bonuses in favour of a pooled employee scheme, with payouts determined by the group’s performance rather than individual targets.

Bernie Charles, officer at the UK arm of Handelsbanken, cites higher customer satisfaction, higher employee satisfaction and better financial returns as evidence that the revolution has worked. “Decentralisation is not anarchy,” he declares.

Stay agile

Each Handelsbanken branch is measured only on its cost-income ratio. Managers are free to take on whichever clients they choose and can even determine the prices charged. Outsiders might assume this means higher risks, but Handelsbanken weathered the financial crisis far better than mainstream banks and the latest credit ratings by Moody’s give Handelsbanken UK a higher score than any other leading UK bank.

Across industry, there are countless versions of innovative or devolved management. The “Agile” company is one of the best-known models, but others include “Beyond Budgeting” and the New Age-sounding “Holacracy”, favoured by Twitter co-founder Jack Dorsey.

With Holacracy, fixed job descriptions are replaced by roles that define the tasks to be achieved rather than pigeon-holing individuals and restricting their contribution. There are no top-down reorganisations. Instead, there are rapid “reiterations” of practice developed and implemented by the teams and individuals involved.

Bogsnes claims that ‘the budgetary mindset’ sets too much store on fixed targets and asset allocations, and instead advocates a more dynamic approach, with teams accessing finance in response to real events and new ideas as they arise”​​

Questioning tradition

Entire books have been devoted to this practice, not least Holacracy: The New Management System for a Rapidly Changing World by Brian Robertson, who developed the model. Critics argue that Holacracy itself is bogged down in models. In Birkinshaw’s words, Robertson has “over-engineered” it.

Robertson is far from alone in using literature to expound on management practices. In Implementing Beyond Budgeting, for instance, Bogsnes suggests that the traditional management practice of top-down budgeting should be brutally discarded.

He claims that “the budgetary mindset” sets too much store on fixed targets and asset allocations, and instead advocates a more dynamic approach, with teams accessing finance in response to real events and new ideas as they arise. Decisions can be devolved, with fewer actions requiring approval from above.

“I’ve been in this movement from the very beginning and interest is now exploding,” he says.  “I don’t care what you call it – Beyond Budgeting, business agility, Holacracy, whatever. The point is that we have to change traditional management to create companies that are more adaptive and agile.”

Divide or rule?

At Equinor, key performance indicators are determined at team or project level. The group’s watchwords are autonomy and transparency. And, like Handelsbanken, Equinor is an undoubted financial success. 

So is the command-and-control model washed up? Perhaps not. London Business School’s Birkinshaw points to obvious counter-examples.

 “Looking at companies such as Apple, Oracle, Facebook and News International, we see businesses where an extremely powerful individual absolutely decided the terms and they were highly successful. So business dictators can make a difference,” he says. “If you devolve the decision-making process, you can’t always make the difficult decisions in the appropriate time. You can make the case that collaboration sounds wonderful, but it is not a good way to make decisions.”

The four questions

Birkinshaw makes a further point about “business agility”, which is often bracketed with devolved decision-making and collaborative management styles. True, a devolved company may be more “agile” at ground level, but when big strategic decisions are involved, agility may come from the top.

“There are different routes to agility, from the bottom up or from the top down. They can both give you agility. So if we take that word’s literal meaning, then putting your faith in a powerful leader can be just as agile as a bottom-up approach,” says Birkinshaw.

One leader who has pursued a devolved management style from the start is Tom Georg Olsen, co-founder of international software consultancy Miles. Olsen admits he is at the top of a hierarchy, but his title is “enterprise servant leader”. 

Olsen identifies “the four Ts”: employees have as much control as possible over the Task they perform, the Time they use to perform it, the Team they work with and the Tools they use.

Trust them

“The idea is that you have to make decisions at the level of competence for that decision. Do I need to change my computer? Do I need to go to that conference? The point is that each person knows best what they need to do their job.” The result, he says, is greater efficiency, happier staff, lower costs and better service to clients. Traditional bosses might ask how this can possibly work. Olsen suggests that trust and transparency are an essential part of the process. First, the company assumes most people want to do their job well and, second, all decisions are open for everyone to see. 

“If someone chooses an extremely expensive PC, far beyond their needs, colleagues will question that decision long before management,” he explains. In organisations such as this, one point is clear: employees have greater responsibility, so effective recruitment is particularly important. 

Handelsbanken’s Charles explains: “We have quite distinctive HR policies. We invest a lot of time in the process and for a branch manager that can take up to six months. We really want them to understand the culture. We need to test not just their technical competence, but also their values.”

Naturally, this management style raises eyebrows in some quarters. Bogsnes refers to two types of sceptics. “The first are people who have never worked anywhere similar and they are confused. But I am never concerned about that group. They just need time to see it in practice and after some time they just get it,” he says.

Group think

“The other group, which is far smaller, are not confused at all – they understand exactly what it is about, and they are dead against it. This group can never change. But time is on our side. It’s partly a generational thing and these people retire or move on.”

Bogsnes is a true believer, but most observers accept that no single model of management fits all companies. Some strategic decisions are not suitable for company-wide consultation. And while collaboration may open up innovation among teams or individuals, many companies have thrived on the vision and innovation of a single dominant leader.

But in many fields, top-down management and autocratic leadership may not be the best way forward. They may stifle innovation, encourage inertia and set in stone budgets and strategies that are quickly overtaken by events.

Working out the best answer in any business will depend on countless factors. But perhaps business leaders should consider the following questions: Are you the best person to make every decision? Do you think you can and should define every target and control every project? Do you need to define precisely what each individual in your company does? 

If the answer to all those questions is yes, then devolved management will not be for you. In almost every other case, it may be worth a try 

Back to articles

Valve famously has ‘no bosses’ – staff are free to work on whatever project they choose, with whatever team, and every desk is on wheels, allowing people to move about and collaborate as they wish”​​

Looking at companies such as Apple, Oracle, Facebook and News International, we see businesses where an extremely powerful individual absolutely decided the terms and they were highly successful. So business dictators can make a difference”​​

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Bridgepoint  |  The Point  |  November 2018  |  Issue 34