Cultivating entrepreneurial hotbeds within organizations

It’s hard for many of us to imagine a business functioning well in the absence of a multi-level organizational structure. Many lament silos, yet organizations continue to try to operate with them intact. Can you imagine a product making it to market without rigorous project management tools and systems? Without managerial oversight? Without senior leaders driving deliverables? Arthur Yeung, Senior Advisor at Tencent Holdings, spoke eloquently during the 2019 Global Peter Drucker Forum about how eliminating management has radically improved speed to market AND quality of their video games, which include blockbusters such as Call of Duty. Yes, I did write “eliminating management.”

The pictures below are taken from Mr. Yeung’s talk during the Global Peter Drucker Forum in November 2019. He outlines why Tencent eliminated their management structure. Tencent’s leadership identified that approvals in the existing structure slowed progress, that coordination suffered (what some of us know as the silo effect”). Given increasing competition for both products and talent, Tencent realized they could no longer afford their organizational structure and processes.

So, Tencent made a radical move eliminated the management structure in its gaming division. They moved from a top-down heirarchy, to a market-oriented ecosystem. Teams in Tencent’s gaming division self-form whenever a new product is thought up (or ideated). Senior leaders identify a desired launch date and the broad parameters of the game. All other parameters, the “How” of getting the game to market, including the details of who does what, are self-managed by the team who has self-identified. The picture below shows how they re-organized their work around a platform, with the self-forming teams in the outer circles, creating a “market-oriented ecosystem.”

There are many questions about how this approach works in reality, and Mr. Yeung answered many of them during his presentation. Results? Games are getting out faster and with better quality, by far, than under the old organizational structure. Tencent has had more blockbusters than ever before. Performance management? Since teams are self-formed and self-manage. Employees self-identify to work on products. This means they are interested (read: motivated) and have the skills to work with the particular platform. Product quality? Teams fail fast so they learn fast. They don’t need approvals to try new programming, developing or marketing approaches. Bonuses are based on team performance. Training? Employees learn from others and by doing. What about the transition? Mr. Yeung indicated that the biggest pushback came from the people in the middle, those supervisors, managers, and directors who found their roles no longer defined by authority.

Mr. Yeung was not the only person at the Drucker conference to discuss how the elimination of layers of management has improved performance. I’m sure the elimination of management is not perfect in the day-to-day. Boards and Leadership teams need to consider it seriously, though. Organizations have been slow to change despite changes in customer needs, employee expectations, and supplier’s realities – entire ecosystems have changed yet many companies remain wed to their hierarchy. Boards and Leaders who are willing to have serious discussions about doing things in a radically different way organizationally open up many strategic options for their organizations.

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