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Despite their headlong pursuit of tomorrow’s innovations, too many organizations still cling to yesterday’s hierarchies. They conflate “supervisor” with “boss”—the person over and above a team of subordinates.

But organizations that truly want to transform themselves and the world around them are flipping that hierarchy upside-down: meet the anti-manager.

A new wave of start-ups and incumbents alike are turning away from top-down, centralized structures toward confederacies of tiny, autonomous “micro-enterprises.” Gone is the red tape. Flash teams—virtual organizations assembled on the fly to accomplish a specific task—are replacing middle management.

In their place, managers are becoming organizers who “support and serve” rather than “command and control”—less like bosses, more like coaches. And employees are becoming stakeholders in the larger good of the company.

“We want to encourage employees to become entrepreneurs because people are not a means to an end but an end in themselves,” Zhang Ruimin, the CEO of Haier, the Chinese appliance-manufacturer, told the Harvard Business Review. “Our goal is to let everyone become their own CEO—to help everyone realize their potential.”

In this new model of decentralized management, power resides in the regional departments at a company’s front lines. The decision-makers are the ones closest to the customers and most knowledgeable of local markets. Managers can change direction without having to wait for word from on high, allowing for quick reactions that could mean the difference between success and failure.

Toyota, for example, shifted away from a highly centralized “spoke-and-wheel” management structure in 2010, following a string of product recalls. When once the company’s headquarters in Japan made every major decision, the regional and business unit managers now have the authority to quickly address emerging safety issues on the fly. The car maker now has eight geographic divisions and four product teams all serving autonomously, but cooperatively, under the umbrella of the parent company.

“What we lacked was the customer perspective so that voices around the world will reach our management in a timely manner,” Akio Toyoda, the CEO of Toyota told Congress in the wake of a series of sudden acceleration accidents.

Meanwhile, at Pariveda Solutions, a technology consultancy in Dallas, what CEO Bruce Ballengee calls “self-governance” has been elevated to an ideal. The company has become a practitioner of Holacracy, an approach to management that eschews hierarchies in favor of roles and responsibilities. “High morale is due to our transparency, open communication and supporting our people positively and holistically as individuals,” he says.

Letting Go

A decentralized system can be empowering. Employees gain motivation when they believe they have a say in the direction of the organization. They make better use of their talents and experience when given the latitude to succeed—or make mistakes—on their own. Employees working to their full potential are more likely to generate innovative ideas, and they’ll probably be happier at work as well. In both cases, it’s not only employees who benefit: research links more satisfied workers to more satisfied customers.  

William Weldon, the former chairman of Johnson & Johnson, said mistakes were easier to handle once his company moved to a decentralized form of management. The company has more than 200 autonomously directed divisions worldwide. When the company was controlled from the top, one bad decision could spell disaster for the entire organization. Mistakes are easier to fix, he said, when the outcomes were contained. “You’ve got wonderful people running businesses,” he said in an interview with the Wharton School of Business. “You have to have confidence in them, but you let them run it—and you don’t have to worry about making that one big mistake.”

Just as Toyota entrusted authority in its regional divisions in the United States and elsewhere, Johnson and Johnson allows its subsidiary in Japan to make its own decisions. “They understand the consumer, they understand the people they are dealing with, and they understand the government and the needs in the marketplace,” Weldon said. “They can relate to the needs of the customer, whoever that customer may be.”

The shift to a wider, more unwieldy, power structure requires a leap of faith, Weldon said, along with systems that help institute the values, principals, and standards universal to the organization. Centralized sources of truth to which teams can return anchor them as they venture out to take the risks that lead to innovation. “What you do lose is control,” Weldon said. “But, with our credo and the value system that we work under, we feel very confident about our leadership and our management—and you have to have trust and confidence in them.”

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