The Web is a meritocracy that spans all cultures,” says Gary Hamel, one of the world’s foremost business thinkers. “Because of this, the world’s most successful companies will look very different in the next 10 to 15 years.”

He claims the last 150 years have seen the introduction of two great social technologies – both of which have dramatically changed the way we go about our daily lives.

The first, introduced in the early 20th century, is management. In this concept, traditional hierarchical structures were merged with new social rules in order to bring people together, to work for a greater purpose.

“We invented a whole new set of social technologies and called it ‘management’. This included setting direction, allocating resources, assigning tasks, optimising workflows, evaluating performance, distributing rewards and much, much more,” says Hamel.

“Most people don’t think of management as an invention or a technology, but it is,” he says. “It has done more for human prosperity than any other scientific technology one can think of, be it the steam engine, electricity, the telephone or modern medicine.”

The other great social technology is the Internet. According to Hamel, the Internet can revolutionise the way companies think and operate. “The ideology of conventional management – something I call ‘Management 1.0’ – is about control. It’s about driving variety out and enforcing conformity,” he explains.

In contrast, the Web is based on a completely different ethos and has a completely different philosophical underpinning. Hamel believes the Internet is based around the freedom to communicate, compare, experiment and criticise. He argues that it exhibits characteristics that are becoming increasingly important to organisations of all types. Today’s companies, believes Hamel, aspire to be adaptable, innovative and engaging – core traits of the Internet.

“The Web is amazingly adaptable – it’s constantly changing shape. It has capacity for innovation, whether that is product innovation or business model innovation, and it’s highly engaging,” he enthuses.  

Natural hierarchy

Hamel describes the Internet as housing a ‘natural hierarchy’. Unlike traditional hierarchical models, online actors operating in the Internet’s natural hierarchy acquire influence and reputation solely through the quality of their output.

“If you asked just about every human being in the world to draw a picture of the organisation for which they work, virtually everyone would draw the same organisational pyramid. But, on the Web, nobody gives you that authority – you earn it by saying smart things or by getting involved in innovative projects,” says Hamel. “The minute you stop adding value, your power starts to ebb away.”

Hamel claims a major flaw found within large-scale organisations is that power generally moves from the top downwards. “People spend a lot of their time managing up rather than collaborating across. They spend a lot of time competing for promotion rather than looking for new ways to add value,” says Hamel.

Unfortunately, Hamel says very few companies are adopting natural hierarchy.

One that bucks this trend is WL Gore, a technology and manufacturing conglomerate best known for its Gore-Tex fabric. Although it has over 10,000 employees worldwide, the company has no formal hierarchy or job titles and a team of leaders supervises employees. In general, says Hamel, WL Gore’s leaders are elected by their peers and are compensated no more than their fellow workers.

“It’s a company where you don’t give orders. You have to make your argument, with decision cycles being longer than normal. But, the commitment, buy-in and quality of product is much better,” notes Hamel.

It appears to be working. WL Gore’s profits stand at around US$3 billion per year and that the company has not posted a loss in over 55 years. “They must be doing something right,” he adds.  

Cultural differences

While Hamel acknowledges cultural barriers may stand in the way of adopting this new approach to management – something he dubs ‘Management 2.0’ − he believes traditional societies are more ready for such change than most Westerners think.

“I have seen this new way of working in places you might not expect.

Take HCL Technologies, which is an Indian company. Indian culture tends to be very hierarchical, and yet the company has set out to reverse the pyramid. Their leader, Vineer Nayar, brought in this radically new culture where every employee evaluates whether their leaders are performing well or not. Such an initiative is a great leveller and encourages buy-in from all staff,” says Hamel.

Hamel’s vision of the business world being run by meritocracy rather than hierarchy is not without its critics, many of whom view his ideologies as simply unrealistic and impractical. However, core to his beliefs is the fact that today’s younger generation is inextricably tied to the values and openness of the Internet, irrespective of where they reside. 

“This generation goes to work with a completely different set of expectations. They believe every idea should have a chance based on its own merit; they are inherently suspicious of experience, and they believe one should only have authority if one has rightfully earned it. Today’s management therefore cannot build their organisations based on top-down hierarchical structures,” he asserts. Hamel points out that this new way of organisational thinking is unlikely to change for decades – if not centuries – to come.

“Some cultures are better poised for change than others. But, unless organisations start to build a culture that is extremely flat, meritocratic and completely transparent, they will not only fail to attract the best talent, they may not be around for too much longer,” he concludes.  

This article was first published in HQ Asia (Print) Issue 06 (2013)