Social Business Needs Social Management

Social business has the potential to change the way we work, but for the most part it has not. The social enterprise is not yet here, though many talk about it, and confuse it with using social tools. For that, we can blame management.

As many people, from W. Edwards Deming to Gary Hamel have observed, management is what really differentiates organizations. It was better management that allowed Japanese automobile manufacturers to dominate the North American market, using the same raw materials and work force. Most management practices have changed little since the beginning of the millennium. We still have many vestiges of early 20th century industrial management — hierarchies; work standardization; job specialization; planning; and control. Extrinsic rewards are then dispersed by management based on these principles.

The first elephant in the social room is compensation. As Gary Hamel describes:

… compensation has to be a correlate of value created wherever you are, rather than how well you fought that political battle, what you did a year or two or three years ago that made you an EVP or whatever.” —Leaders Everywhere: A Conversation with Gary Hamel

If compensation was really linked to value, then salaries, job models, and other ways of calculating worth would have to be jettisoned. As it stands, in almost all organizations, those higher up the hierarchy get paid more, whether they add more value or not. It is a foregone conclusion that a supervisor has more skills and knowledge than a subordinate. This has also resulted in the requirement for more formal education as one goes up the corporate ladder, whether it’s needed or not.

The other elephant in the room is democracy. For management to work in the network era, it needs to embrace democracy, but we are so accustomed to existing structures that many executives would say it is impossible to run a business as a democracy. But hierarchy is a prosthesis for trust, according to Warren Bennis, and trust is what enables networked people to share knowledge and innovate faster. A key benefit of social tools is to share knowledge quicker. Trust is essential for social business but management can easily kill trust. Democracy is the counterweight to hierarchical command and control.

org chartAs more people work in distributed networks they are beginning to realize how little they actually benefit from standard management practices. In an economy based on trusted knowledge networks of individuals, the organization should revert to merely a supporting role.

A hierarchy is nothing more than a centralized branching network. It is inadequate for the complex challenges facing all organizations today. Decentralized networks, based on intrinsic motivation, are a much better vehicle for rewarding work than hierarchies can ever be. Any organization driven by external direction, with social tools or not, cannot innovate as fast as self-motivated and hyper-connected workers can. Democracy in the workplace therefore makes for more resilient companies.

A stated commitment to democratic principles is often lacking in descriptions of social business practices. But without compensation for value in an open network, social initiatives likely will be seen in hindsight as just another management buzz-word. “Lipstick on a pig,” I believe is the term.

So what’s next in social business? A serious look at its foundations is needed. While social business may have changed the way some of us work, it has not changed the way most organizations are managed. As networked, distributed work becomes the norm, trust will only emerge in workplaces that are open, transparent and diverse.

In these trusted environments, leadership will be seen for what it is — an emergent property of a network in balance and not some special property available to only the select few. Leadership should be drawn from an aggressively intelligent and engaged workforce, learning with each other. Social business requires social management that marinates in and understands the work culture. This cannot be done while trying to control it.

Social business will become reality when management lets go of command and control, makes work transparent so that value is visible to all, and treats workers as adults, engaged in democratic work practices. We are a long way from that until management is reconnected to the work being done. People naturally like to be helpful and get recognition for their work. Leadership in a social enterprise is based on this assumption.

Connected leaders need to foster deeper connections with the entire enterprise, often through meaningful conversations. This is an ongoing process, not a “town hall” meeting from time to time. They have to listen to and analyze what is happening in order to help set the work context according to changing conditions, and then work on building consensus. Given the constantly changing conditions in hyper-connected work environments, a much higher tolerance for ambiguity is becoming a critical leadership trait.

This article was originally published in CMS Wire

2 Responses to “Social Business Needs Social Management”

  1. Jay Deragon

    Bravo Harold for being spot on as usual.

    There is a generation of instilled management thinking that hangs on to beliefs that power is about control and worth is reflect by how much one controls. It is a struggle to let go and embrace when entire careers have been built on these beliefs yet even when given overwhelming evidence that it is the wrong belief they hang on like an addict hooked on a strong drug.

    And to those organization that do hang on everything will eventually be lost.

    Check out the results of Gallops extensive research on employee engagement for an enlightenment of lost Human Capital due to poor management practices.

  2. Sharon Boller

    Extremely interesting thoughts, which generates lots of thoughts of my own. and reminds me of Skinner’s novel on Utopia. My husband and I own a 20-person company and we’ve worked hard to avoid the standard hierarchy and instead create a structure that uses interdependent teams (though it’s funny how people set up their own hierarchies even in teams!) I personally hate the concept of a hierarchy that seems to deem some folks as more important than others in an organization.

    But I’ve come to realize that some hierarchy is required. Otherwise, people get uncomfortable as they crave clarity on roles and responsibilities.

    As you say, the “do-ers” in any organization are indeed the ones generating the profit for the company. So what’s up with hierarchies and paying people lots more the further they get away from “doing?”

    Hierarchy comes into play when it comes to risk, strategy, and decision-making. While do-ers may generate profit (if senior leaders are pricing appropriately), how much risk are they willing to assume on behalf of the organization? Can they make the toughest decisions (Perhaps a decision to pursue or not pursue work, not knowing if a “no” decision might lead to financial hardship later on.) Can they formulate strategies for future growth? (What sells today may not sell tomorrow.) If the answer is “no,’ then that may answer the question of value and who becomes most valuable within an organization. If no one is willing to assume risk or make difficult decisions, then being profitable today is of little value because it’s unlikely the business will exist in the future.

    I’ve often wondered how many people crafting leadership strategies and organizational strategies have actually started, grown, and run a full-fledged business. Even those who spend years studying organizations and leaders are looking in from the outside. I’m a big believer in the adage, “Walk a mile in my shoes.” Only then can someone truly answer the question about value and the issue of hierarchies. Which is more valuable? Generating today’s revenue or making the decisions and crafting the strategies that enable tomorrow’s? Is that value of these two things equal or is it of greater value to have the person who can think ahead?

    I think a zero hierarchy is a recipe for disaster (not that your blog post is advocating for zero hierarchy). Ultimately, people like to know that someone – or a small team of someones – exists at the top of a metaphorical food chain who will make the hardest decisions, assume the risks, and set direction that teams then execute. People place a high value on that, which is why the senior members of an organization make more. What’s of little value in my mind is multiple layers of hierarchy that make it difficult for decisions to get made or for people to get what they need to do their jobs.

    The more interesting question to me is, “How MUCH more is it worth to be a direction-setter as opposed to a do-er?” I’m a big advocate of the 10x rule – no single person’s salary in an organization should be more than 10x greater than anyone else’s in the organization. (Within our organization, I can tell you it is far less than that!). No one, in my mind, adds enough value to an organization to make them worth $1M plus while someone else on the front lines of doing makes $35K or thereabouts. People in senior roles have no profits today without the do-ers. Do-ers have little future without senior leaders willing to make the hardest decisions, take risks, and set strategy. It’s a symbiotic relationship.


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