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The View from the Top & Bottom: Why Command-and-Control Companies Fail

Posted on July 17, 2015

The world watched in amazement when, in December of 1991, the Soviet Union collapsed into 15 separate countries. Long bedeviled by inefficient processes and a bloated bureaucracy, the great social experiment's failure marked the triumph of capitalism and the free market over socialism and central planning.

But take a look at many American companies today, over 20 years later, and one can see the Soviet command-and-control management style is alive and well. One study in 2011 found 43% of employees surveyed described their company's culture as "command-and-control, top-down management" which relied on coercion to get the work done.

Does your company fit the Soviet model? Command-and-control organizations typically feature:

- Leaders who are expected to know what is best for the company. This group of select insiders determine where the company is going and devise the plan for how to get there.

- Great emphasis is placed on controlling behavior within the organization. Variance from the predetermined plan is not encouraged or tolerated and feedback is not welcome.

- Employees are not expected to contribute positively and must be forced into cooperating.

In some cases, the command-and-control model performs adequately - assembly lines would quickly break down if individual workers determined what hours they chose to work. That's the reason Henry Ford put Winslow's scientific management principles in place at his factories.

But, as the Soviet Union proved, there are limits to this growth. Command-and-control systems are rigid and cannot be easily maneuvered to meet fast changing markets - as evidenced by the rise of the black market and breadlines in the late Soviet era.

This report from Booz Allen argues there are four reasons it is even more important for the modern company to move away from the command-and-control model:

1. Organizations have become larger, more complex, and fast-moving.

It’s a fact the average Fortune 500 firm is almost three times larger in real revenue than it was 1980 and the time required to create a new car model has fallen from 60 months to 19 months.

In this dynamic environment, it is not possible for any one person, no matter how talented, to have all the answers. Executives cannot do it all themselves, they need input from the boots on the ground who are closest to the market.

2. The world has moved from an era of physical capital to an era ruled by intellectual capital.

The physical factories of yesterday lended themselves well to centralized control, producing massive amounts of units from prescribed, regimented processes. Large bureaucracies sprang up in these industrial plants to manage and control these workers.

Intellectual capital, on the other hand, is best created by distributed networks of individual contributors. While still using an assembly line, Toyota recognized the value of employee ideas and suggestions (ie. intellectual capital) early and has since supplanted command-and-control GM as the world’s number one automaker.

3. A revolution in complexity theory has demonstrated large organizations, given the right culture and support systems, can be run without a central command.

These self-adapting systems are faster and more flexible to changing market conditions than the command-and-control organization.

4. Increasing the value of company stock has shifted from cost reduction to fostering top-line growth.

Cost reductions work well in a command-and-control environment - executives can take away budgets or shut down a factory with the stroke of a pen. This method of improving stock prices flourished in the U.S. between 1985 to 1995.

But value creation has since shifted to creating new revenue streams - Apple computer is now the world's largest company and Bethlehem Steel is no longer. Innovation is the new value driver and it cannot be commanded from the top, it comes from below.

Because of these four factors, Booz Allen argues that organizations need to behave more like living organisms - capable of quickly adapting to changing environments and identifying opportunities for growth while still retaining group cohesion.

A key component to this new mindset is valuing employee suggestions and using them to create new value. To do otherwise is to run the risk of becoming a Soviet-era dinosaur.

If your organization is looking for ways to de-centralize its leadership mentality and are ready for a change, give the Vocoli team a call at 888.919.5300.

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