This article is part of a series that discusses the management book Humanocracy. The core of Humanocracy is made up of seven principles that are intended to provide orientation when you have to design organizations or act within them. This article deals with the first principle: the principle of ownership.
Published in the series:
The core idea
According to Hamel & Zanini, it is important for organizations that their members feel totally related to their customers, take responsibility, are committed to the organization and its goals, are willing to take risks, and question conventional thinking. This attitude, they say, is particularly strong in start-ups because their members feel like owners – and often are.
As a result, organizations should not treat their members as employees, but as entrepreneurs: “Every organization can become a confederation of owners and thereby catalyze the pride, passion, proficiency, and performance that are hallmarks of humanocracy” (124). According to Hamel & Zanini, this can be achieved by dispensing with detailed KPIs and instead giving small organizational units their own P&L responsibility and involving all employees across all hierarchical levels in the profits earned.
Our considerations
First of all, it is plausible to want to increase employees’ motivation to perform through profit sharing. In many cases, this could work. At the same time, however, it must also be recognized that the motivation and willingness to perform only develop effectively in conditions in which performance can actually be achieved. All too often, however, organizational structures are not well aligned to everyday work requirements. If a person’s willingness to perform is hampered by organizational structures, it is above all frustration that will increase along with the willingness to perform.
It is true that organizational structures can be changed. But this becomes a difficult undertaking if very small organizational units have their own P&L responsibility. What is an improvement for some may only make work more difficult for others. Therein lies the core problem of a radical P&L orientation: the individual focus on maximizing one’s own P&Ls does not automatically lead to profit maximization for the organization as a whole. Instead, existing “local rationalities”1 are geared towards a quantifiable value – with the result that negotiations between organizational units become more acrimonious. Ownership is thus not only a catalyst for pride and passion, but also for organizational ego-centrism.
How it could work
The goal of focusing more strongly than before on autonomy and thus increasing commitment and engagement can be maintained. In order to achieve this goal, however, it will be important to build well-functioning organizational structures. This may well include giving individual – perhaps even very small – organizational units P&L responsibility, but the side effects should also be considered and blind spots identified. The question should then be which units can make a valuable contribution to the organization if they are relieved of P&L issues. But to this end, it is important to recognize that, for example, the preservation of expertise within the organization has a value of its own which tends to be more indirect and long-term and may well be overlooked by a quarterly observation of what P&L contributions have been made.
We are looking forward to the discussion!
The next article in this series:
Literature
[1] Cyert, Richard M. / March, James G. (1963): A Behavioral Theory of the Firm. New Jersey: Prentice-Hall. Seite 165.
