Don't Fix Management; Replace It

09/05/2014 10:18 am ET Updated Nov 05, 2014

When you were in college did your professor ever tell you where to read the homework assignment or what time to write the term paper? No, of course not. There were classes, sometimes, and there was an exam, but other than that, you were treated as a responsible adult able to make your own choices about where, when, and how to study.

Some of us took advantage of that freedom and blew off some of our classes or even entire courses. But most of us learned how to make the choices that gave us both a good time and a good education.

Then what happens when most people walk into a corporation? They're told, "Be in that seat at 8:30 and you can leave at 5:30, and in the meantime, be creative."

I believe that way of managing well-educated, creative knowledge workers accounts for the low level of employee engagement, the high level of employee turnover, and the increasing popularity of self-employment in the United States.

According to the Gallup organization, only about 30 percent of employees today are positively engaged. And the low or negative engagement of the other 70 percent is costing U.S. companies more than half a trillion dollars a year in lost productivity.

See "The State of the American Workplace," May 2013 for the details.

An engaged employee is someone who is actively excited about the work he or she is doing and committed to helping the organization succeed; engaged employees are positive about the organization they work in, and they feel close to their co-workers.

Engagement is related to job satisfaction and motivation, but it is a more intense state of mind. People who are engaged with their work and their employer typically work harder, are more productive, and feel more accomplished than those who are neutral or actively disengaged.

Two additional statistics from the Gallup report are central to my belief that management is broken; 89 percent of employers think their employees leave their job because of inadequate pay; but only 12 percent of employees actually do leave for money. They are leaving for other reasons. And 75 percent of people who voluntarily leave don't quit their job, they quit their boss.

Most employees are unhappy at work, and it's time to face up to that reality. It's our collective responsibility to do something about it.

Low employee engagement is a serious problem that is costing the American economy billions of dollars in lost productivity, employee turnover, and medical costs. But problems create opportunities.

Consider an article by management guru Gary Hamel that appeared in the Harvard Business Review in December 2011. It was called simply "First, Let's Fire all the Managers."

Hamel's solution to the low engagement challenge comes from his study of The Morning Star Company, the largest, most profitable, and fastest-growing tomato ingredient processing company in the United States. Morning Star has 600 full-time employees, 2,400 seasonal workers, and no managers. No managers!

Here's the way Morning Star works: all its employees are based in teams or "circles." Each circle builds internal consensus about what commitments it should make to support the company's production goals. During that process the circle identifies what it needs from other circles to meet its own goals. And then the circles negotiate with each other to establish common goals, and make mutual commitments that will meet the company's overall requirements.

One remarkable aspect of this management system is that no one at Morning Star can single-handedly fire anyone. And any employee of the company, including those 2,400 seasonal workers, who sees the need for a new piece of capital equipment can order it. There's no set capital budget, and no limits on what any individual in the company can order; and remember, Morning Star is the fastest growing, most profitable, and largest tomato growing and processing company in the United States.

We all need to pay attention to examples like Morning Star. The science fiction writer William Gibson once said, "The future is already here; it just isn't equally distributed." In my humble opinion Morning Star is a real signal about what the future of work will look like.

And Morning Star is not alone. A surprising number of other highly successful organizations have adopted very nontraditional organizational practices.

Here are just a few more examples:

Eighteen years ago, Southeastern Mills, a fourth-generation highly successful food company headquartered in Rome, Georgia, threw out its thick policy manual. The company now operates on the assumption that everyone who works there is an adult and does not need lots of "rules" to govern their behavior. Furthermore, everyone is salaried with paid time off for any reasonable and necessary absence (the same as management). As adults, they are largely self-managing, and the few team leaders (supervisors) they have understand that their job is to support the team.

Menlo Innovations is a software company based in Ann Arbor, Michigan. Richard Sheridan, Menlo Innovation's CEO, recently wrote a book called Joy, Inc. He believes work should be fun. What a radical idea!

Zappos , the online shoe retailer, recently announced it is dropping all management titles. Zappos is adopting a practice called Holacracy©, an approach that shifts responsibility for achievement from management to the workforce.

In a Holacracy© everyone, including the CEO, is beholden to a constitution that lays out principles and "rules" for making decisions, resolving conflicts, and dividing up responsibilities. The constitution governs the company, not the C-Suite. Holacracy© provides a structure for shared leadership with accountability built-in to the circles and roles that are based on task-relevant skills and knowledge; it operates much more like a democracy than a bureaucracy.

These examples, and others, have convinced me that it is incredibly important to begin thinking very differently about the way we manage people and organizations.

The industrial model of organization that we all know and grew up with (and most of us are still living in) was based on "Command and Control." During the industrial revolution managers were totally turned on and excited about the newly-invented steam engine, which was a very precise and efficient instrument that did the same thing over and over and over again.

The parts of those machines had to fit together exactly and operate reliably; and we designed bureaucratic organizations to do the same thing. The underlying assumption was that the best way to get work done was to divide it up into small, controllable tasks, separate those tasks, and train the workers to be specialists -- to be very good at doing one thing over and over. The job of the manager then was to coordinate all of those separate tasks, and to make sure people did what they were told to do.

That model may have been very appropriate for the industrial economy, and it is still important for some businesses. We do not want the head of a nuclear power plant or an automobile assembly line saying, "Just keep the plant running 24x7, and figure out for yourself how to do it." There are certainly many jobs and activities where standards and precision and minimizing errors are still very important goals.

But command and control is the wrong way to manage creative talent or produce innovative outcomes. We need a new kind of 21st-century leadership for what we (and others) are calling the age of networked intelligence.

It is becoming very clear that the management practices that worked so well in an era of mass production are totally inappropriate for this new era of mass creativity and collaboration.

You've heard the expression, "If it ain't broke, don't fix it." Well, when it is broke the important question is, "Should we fix it, or should we replace it?" We need to find leaders willing to replace the way they manage people, projects, and organizations.

Executive coach and author Marshall Goldsmith said it well: "What got you here won't get you there." It's well past time to rethink, redefine, and re-build the way we design and lead organizations.

James P. Ware, PhD, works with change leaders to design and implement compelling work experiences that foster high performance and employee engagement. He is a former Harvard Business School professor who has spent his entire career teaching clients how to invent their own futures. Jim is the founder and Executive Director of The Future of Work...unlimited, Global Research Director for Occupiers Journal Limited, and a Partner with the FutureWork Forum.

He is also a co-founder of the new Great Work Cultures movement. Jim is a co-author of four books on the digital economy; he currently serves as the elected president of the Corporate Real Estate Council of the International Facilities Management Association. He is also president-elect of the National Speakers Association Northern California chapter and a member of the World Future Society and the Association for Strategic Planning.

He holds PhD, M.A., and B.Sc. degrees from Cornell University and an MBA (With Distinction) from Harvard Business School. He lives and works in the San Francisco Bay Area. You can reach Jim at jim@thefutureofwork.net.