The United States, in good times and bad, remains the world’s largest and most essential market. It continues to be viewed as the global leader in innovation. But it has become apparent in its recent political and cultural discourse that the US is torn – it is also the world’s leader in wealth inequality, and in the gap between the standards of living for its corporate executive elite and the rest of its workforce.
In such a context – with the largest corporations driven by traditional command and control executives who have in the last 30 years been able to extract record-level productivity from employees while keeping the wages of their workforces essentially flat – it might be argued that the US is the last place in the industrialized world to look for innovation in participatory leadership.
Is that the case? Breakwater put the question to one of America’s leading futurists and influential in the study of work: Stowe Boyd, Managing Director at Gigaom Research, a New York-based think tank. Boyd suggests the US is indeed undergoing a transition in its political and corporate culture, one that is likely to require revolutionary change. He agrees that hidebound American companies driven by a singular focus on shareholder returns will resist change – but argues that the passing of the leadership baton from an aging cohort to the Millennials now coming of age in American business will make more inclusive leadership inevitable.
The examples of US companies adopting more democratic organizational structures have included a small elite of highly-digitalized companies. But what is the incentive for the biggest companies, whose executives are doing rather well under the old model, to change?
There are two schools of thought about this – one a more industrial mindset and the other more philosophical.
The philosophical approach usually focused on the future of work – ideas having to do with a more democratic workplace, driving higher degrees of employee engagement, higher degrees of personal autonomy, individuals wanted more meaning and purpose in their work. You’ll hear arguments that increased diversity leads to better decision-making. There are hundreds of themes that tend to cross-reference each other.
On the other side, the industrial approach is less about making the company more humane, and more about organizing the company around the new Digital Reality of marketplaces and competition, and the connection to an increasingly digital consumer. That’s the Digital Transformation Wave, if you will.
These two approaches actually share a lot of themes – they’re really two ends of one dimension. But the industrial side is more focused on a more technologically oriented marketplace, reaching out to customers who are always online. From this perspective, companies that don’t want to be disrupted out of business need to accommodate a whole long list of new ways to do what they do – rethinking marketing or product development, acquiring a more agile mindset. These companies are really driven by an existential dread of being driven out of business. And the approaches used to get employees in line with the changes needed tend to be more hard-edged.
So even from the industrial perspective, the company has to be concerned with how it gets people onboard, how much autonomy can be pushed to the front line, how much transparency you can achieve, how to maintain alignment with a top-level strategic vision without mechanistically telling employees to do their jobs and shut up.
The old command and control model is generally seen as going away, to be replaced by more self-motivated, higher-performing business models. But the degree to which this is actually changing the way work is managed in corporations is wildly variable. One of the issues is that we don’t have a lot of models of success for democratically run organizations in the US.
The examples you hear about are Zappos and Patagonia.
Yeah, but Zappos is looking like a disaster. It’s not a poster child for Holocracy. Neither is Medium, which is doing better, but it’s a smaller company and has a much more uniform culture. Even they have defined their own practices and haven’t adopted a model like Holocracy whole cloth. Patagonia and Gore-Tex have been around for many years, and they have the reputation for being more democratic than most organizations, but there’s a question as to how open and egalitarian they really are.
Thomas Piketty and others have observed that in large US corporations, the senior executives have become an aristocracy…
Oh yes. I’ve written about this recently – our businesses are largely oligarchic. The elite have control, and much of what they spend their time doing is indoctrinating people, so that people know what they’re supposed to be doing, applying principles that the elite have decided are the ones that the business should be based on. Their legitimacy as leaders is derived from the promise of their being productive, that the business will be better off because of their leadership.
It really isn’t based on the consensus of the people who work for them. Quite the opposite – the business is run by sliderule accounting and if it will save the company a lot of money to downsize a plant in Toledo, Ohio, that was built with public subsidies, and export the jobs to Mexico, that’s what they’ll do. And the Board of Directors nods approval, because the purpose of the business is to provide value to the shareholders, and everything else is secondary.
There are significant differences in the culture and practices of business in various parts of the world. In a place like Denmark, you don’t see the extreme stratification we have in the US, where CEOs make 350 times the average salaries of their employees. In many countries, there are aspects of the political culture that make it feasible to impose controls or tax incentives for reducing the disparities between the management strata in companies, and ensure that people who work for a living don’t have to live in poverty. In the US, those issues have sadly slipped off the agenda in the last 30 years.
So isn’t this a unique set of conditions that work against the development of more democratic business models in the US?
Well, the best examples are new companies being founded here by people who believe business should function differently. Can it work in the largest companies that have command and control ingrained in their cultures? It is likely to require a succession of revolutionary changes, starting with tax policies that reduce the incentives for companies to offer their senior executives these astronomical compensation packages and recover the wealth that’s accumulating among those elite executives and their investors. That’s a cultural revolution that would have to happen.
The degree of populism in the US now, among average American of all political stripes, reflects the profound dissatisfaction with the level of inequity in this society. This is no longer a radical fringe – this discontent is mainstream. And if you zoom into what this means inside any given business, I think we’re going to see significant changes that are strongly influenced by these macro forces that are roiling the society in which these companies operate.
That’s going to manifest itself in many different ways – not just adoption of Holocracy or its various knock-offs, but a large variety of experiments in how companies can organize themselves in order to involve people in decisions, and share the pain and the successes as the business culture goes through this transition. But it has to be demonstrated that if you operate in a different way, the company can be more successful, people will be willing to maintain their productivity, people can spend more time doing productive things and less time struggling against internal friction, and so on.
But the advantages also have to be clear to investors, who then have to demand these changes. It can’t be just a thought exercise, where it’s assumed that these changes will lead to better financial results. It has to be borne out empirically, in the results of actual companies making these changes and seeing better outcomes.
The changes will happen in the US, and if history is any guide, the changes will be quick. A good model is the introduction of email and the re-engineering of processes that that brought about. A significant driver will be technological, a new wave of thinking about business, relying on technologies to accomplish part of the transition. But I suspect we’ll also see the elimination of the old-style, hugely stratified business models, with 15 levels of hierarchy, in favor of flatter organizations or genuinely networked organizations with significantly greater degrees of autonomy.
You’re writing a book on this transition. Are you talking about changes you expect to see in the next five years, or 10 years, or is it 50 years?
Oh, I’m sure there are going to be significant changes in the next five years. Change is already happening in the US – it’s just not happening in a uniform way. But the half-life of businesses is dropping all the time. Instead of lasting 50 years, companies typically last only 15 years, or less. That means more businesses are being started all the time, and they start from new principles. That increases the likelihood of new ideas at least finding the opportunity to be tested.
And they will be started by Millennials – the largest generation ever. They’re different, and they’re becoming the dominant element in the workforce. In the next five years, they’re going to go from being middle managers to being senior executives. It’s unlikely that these people will hold onto business models that made sense to the Baby Boomers.