When Yonatan Bursztyn founded the backpack brand Totto in 1987 in Bogota, Colombia, there was seemingly only one way to organize the company: in the hierarchical, top-down structure of almost every other business at that time, with a clear chain of command and authority up to the CEO.
Three decades on, Totto has grown into a 3,000-employee company with 600 stores, making it one of Latin America’s top-selling backpack brands. But a new generation is questioning that traditional management structure, starting with the owner’s son, Benny Bursztyn ’19.
“The old thinking was how companies protect their market share,” says the younger Bursztyn, age 29. “With the internet and increased competition from startups, big companies need to adapt to be more nimble and innovative. As the saying goes, ‘innovate or die.’”
With Senior Lecturer Todd Jick, Bursztyn has been studying new management ideas that might help his family’s retail business be more innovative as well as better attract the millennial generation of workers and consumers. In his course Advanced Organizational Change, Jick is challenging students like Bursztyn to evaluate new management philosophies that aim to break away from bureaucracy, hierarchy, centralized information flow, and profit-only goals in favor of holacracy (decentralized management), “smart” transparency of information, and higher purpose missions.
“Organizations can’t stay the way they are in terms of their management practices,” says Jick. “When you spend time in and around organizations, as I have for 40 years, you discover too many people dissatisfied and frustrated with the hierarchies and controls that impede people’s ability to voice views, and box people into roles that limit their abilities. They complain to me that they don’t see the big picture, don’t feel that they’re making an active contribution, and don’t get feedback on any regular basis. It is evident that the organization models are oriented more to efficiency and consistency than to really leveraging the human potential.”
“We have to find a better way,” adds Jick, who was recently awarded the 2019 Singhvi Prize for Teaching Excellence.
What is causing this paradigm shift in management organization? According to Jick, the roots of discontent lie in the internet revolution, which democratized information, and the widespread adoption of smartphones and social media, which created expectations for instant feedback. He explored these ideas in his award-winning 2017 paper “Taking Stock of 30 Years of Change Management: Is It Time for a Reboot?” written with Kinthi D. Sturtevant of IBM Global Business Services and published as a chapter in Research in Organizational Change and Development.
“Hierarchies are flattening and ‘horizontal cascades’ of messaging are becoming more common and internal social media are helping to democratize the organization and drive more transparent dialogue,” Jick and Sturtevant wrote in the paper.
The shift is also driven by the coming of age of millennials, defined as those born from 1981 to 1996, a group that overturned the definition of work as it entered the labor market, says Jick. Millennials don’t just want paychecks; they want praise. Millennials don’t want bosses or performance evaluations; they want mentors and development plans. Millennials care less about job stability, predictability, or longevity than autonomy, flexibility, and sociability.
“Millennials expect not only financial compensation at work, but also value-driven satisfaction based on making a difference or working for an inspirational company,” says Lotte Van Uum ’19, who recently took the course Advanced Organizational Change. “Millennials don’t live to work but work to live, expecting a better work-life balance than previous generations.”
These millennial desires are often beyond the reach of the traditional model of management, which is shaped like a pyramid with a chief executive at the top. The opposite is considered “2.0 management,” a term made popular by a 2009 article in Harvard Business Review by Gary Hamel of London Business School, who argued that “tomorrow’s business imperatives lie outside the performance envelope of today’s bureaucracy-infused management practices.”
According to Van Uum, who is 29, cultural norms are also influencing the transition. She says her Dutch background made her more receptive to 2.0 ideas, as the Netherlands’ low gender gap and high internet saturation has already flattened power hierarchies and increased worker mobility. The traditional Dutch bank ING, for example, became a posterchild for 2.0 management when it adopted an “agile” model inspired by companies such as Google, Netflix, and Spotify.
Change Out of Necessity
Amid this backdrop, Jick revamped his highly sought-after course, Advanced Organizational Change, so he could introduce students to new management ideas such as holacracy, a form of hierarchical-free management that Tony Hsieh famously implemented at the online retailer Zappos. Inside Jick’s office on the seventh floor of Uris Hall, his obsession with this subject is revealed in his stacks of books, from The Kingdom of Happiness: Inside Tony Hsieh’s Zapponian Utopia to Principles by hedge fund manager Ray Dalio of Bridgewater, who advocates for radical transparency.
Traditional firms are also adopting some of these 2.0 ideas. Accenture, GE, Morgan Stanley, and Goldman Sachs have all revolutionized their performance management systems, moving away from the annual employee review and toward ongoing, organic feedback that is less evaluative and more developmental.
For these more established companies, a major driver of the management revolution is the desire to acquire and retain talent from the millennial generation, says Elizabeth Passannante ’19, who was a recent teaching assistant for Advanced Organizational Change. “The change is happening out of necessity,” she says.
Not many businesses appear ready to jump fully into the 2.0 world, however, and some companies have backtracked from it. As a case in point, IBM and Yahoo both reversed liberal work-from-home policies, essentially retreating to management 1.0 in what appeared to be attempts to improve worker productivity by boosting face-to-face communication.
At the same time, few MBAs are ready to fully embrace management 2.0. Over the three years that Jick has taught the course, he has found students becoming more receptive to the idea of 2.0 management, though many still prefer the traditional path toward paying off school loans, winning promotion, and climbing the ladder.
“It was interesting to note that many [students] were not totally enamored with the 2.0 model and its lack of definition and determinism,” according to the senior executive at a major multinational manufacturing company who recently attended Jick’s course. “The perspective from many of them was from pragmatism in acknowledging that they have student debt that needs to be retired and they have career aspirations to climb within whatever company they eventually find themselves. Management 1.0 offers a much easier career roadmap to follow and well established norms for which they will need to adapt or overcome.”
Kate McKenna ’19 is a case in point. After graduation, the 32-year-old says she is going to work for a large bank more aligned with the 1.0 style of hierarchy, large-scale coordination, and streamlined processes that have been optimized for efficiency and consistency. “However,” she adds, “I’m excited to explore pockets of the company where some of these innovative ways of working are being explored.”
Choose Your Adventure
On the final exam for Advanced Organizational Change, Jick asks, What is the role of managers in a 2.0 world?
“The answer is, it’s a different role,” he explains. “Instead of being supervisors and controllers and protectors, they’re resource gatherers. They’re facilitators of collaboration. Their value-add is to support and enable others to succeed by providing useful feedback, reconciling competing interests, and allowing employees to focus their time on using their heads, hands, and heart to get their jobs done. Instead of being traditional administrators or control-oriented managers, they’re really meant to be new age managers, whose role is still important, but very different.”
Jick says he is encouraged that his students will help challenge the sacred cows of 1.0 management and build more innovative organizations for the future. He ends his course by telling them, “This is your laboratory, it’s the world you can shape. Choose your companies that you’re going to work in. Some of them are old style, 1.0. Some of them are 1.5, at the beginning the journey. Some of them are more progressive. Suit yourself as to where you want to start, but head toward 2.0.”
For Bursztyn of Totto, he says he’ll start slow with implementing 2.0 ideas at the Bogota-based bag retailer. When he graduates in May, he plans to join Totto’s product development and merchandising department, which he wants to make more millennial-minded and nimble in responding to customer demands by experimenting with team-based and project-based management models. He is looking to a company like Patagonia as a model: Customers buy a Patagonia backpack not just to carry stuff, but also because the bag signals a commitment to environmental sustainability. Employees work at Patagonia for not just a paycheck, but because the culture encourages personal development and adventure.
“I’m more of an example of trying to go from 1 to 1.5,” says Bursztyn. “I’m trying to bridge that gap.”
About the researcher
Professor Jick is a leading expert in Leadership and Organizational Change. He has had a long career of both academic and consulting work in...Read more.