Playing To Win
Strategy at Human Scale
Achieving Intimate Monumentality
In this series’ first two installments, Strategy & Scale and The Downside of Scaling Strategies, I have argued that the strategy imperatives of the past half-century have driven massive scaling and that its handling by a combination of standardization, compartmentalization, and subordination has led to employees feeling small and disengaged. In this final Playing to Win/Practitioner Insights (PTW/PI) piece of the series, I lay out how companies can think differently about standardizing, compartmentalizing, and subordinating in Strategy at Human Scale: Achieving Intimate Monumentality. All previous PTW/PI can be found here.
Simulating Smallness
The modern company can’t simply ignore its bigness or wish it away. It will be big, so the big modern company needs to simulate smallness.
The key to simulating smallness is to leverage community. As I pointed out in my 2005 article, The Power of Happiness, happiness is driven by the extent to which a person a) feels a valued member of a community; b) that the person values; and c) is a community valued by people outside it. For example, a brand manager will be happy at work to the extent that she is valued by the entire brand team, plus she thinks the brand team is meritorious, plus others outside the brand team express admiration for it. If the third isn’t present, she will feel that she is toiling nobly but in the dark. If the second isn’t present, she won’t feel much inspiration from being valued by a team that she doesn’t think much of. And if the first isn’t present, she will be profoundly sad at work — and will be one of Gallup’s disengaged employees.
Effective managers leverage community to help each colleague feel that individualized sense of belonging. They ensure that everyone reporting to them feels a valued part of a community and that they know their role as part of the community — so that they can do it well, feel valued, and be happy.
Reimagining Standardization
The core benefit from standardization is simplification. But those standards should be designed with the intent to drive feelings of individualization.
However, in the modern large company, it can’t be left entirely to chance in the hands of a wide range of managers, some who will do a good job and many who won’t. It needs to have a standardized system for promoting communities. The ‘community’ of the whole company is just too big for workers to feel a meaningful part. It is vastly beyond the 150 people that Robin Dunbar identified as the number beyond which communities start to lose their ability to cause members to feel deep connection.
Companies need to standardize a system for ensuring that every employee feels part of a community, that they know their role/job in that community and can do it well so that they feel valued and understand the community well enough to value it. And the company has a system for making sure that each community is valued outside that small community, whether that occurs inside the company or outside of it.
Haier provides an example of how to accomplish this at scale. Haier is a $50 billion global company with 100,000 employees. But that huge number of employees is broken down into 4,000 Ecosystem Micro Communities (EMCs) that are self-managed, but under a well-defined and standardized structural relationship with Haier overall. That is, Haier standardizes aspects that help ensure that it consistently creates vibrant, human-scale communities. Within this standardization structure, each EMC determines who to hire, and how to organize and compensation them — all things that enable its members to feel part of a human-scale community, even if it is housed inside a monumental company.
Reimagining Compartmentalization
Modern companies are too big and sprawling to simply eliminate boundaries. But they can rethink those boundaries from a human perspective. The question is: if we need to have a boundary for purposes of managing the complexity of the company, how can we help humans feel less like one disjointed piece of system across which they do not have full visibility?
This will differ across companies, but in general, functional boundaries tend to break the whole product/service into piece-parts — e.g., this is the human resources or marketing piece of the whole — and make it difficult for the person in the functional compartment to identify with or even understand the whole. Furthermore, in the modern international or fully global company, creating geographic boundaries helps make the territories within the boundaries smaller, but if the company is genuinely global then it makes it difficult for workers to see how their region fits into the global picture.
I believe that boundaries based on products/services have more promise because everybody in a global product compartment can more easily see their part in delivering the product/service to the customer. The ‘end-to-end’ movement is an example of this and P&G’s reorganization in 2019 provides an illustration.
In the period leading up to September 1998, P&G drew its principal boundaries around four self-contained geographic compartments (NA, LA, Europe, and Asia/Pacific) with full profit & loss responsibility. But that compartmentalization was working less and less well as it grew its international business. In response, it reorganized into seven Global Business Units (GBU) and eight regional Market Development Organizations (MDO), which it put in place in 1999. The GBUs had profit responsibility globally while the MDOs had responsibility for hitting volume and margin targets in their region. The logic, which did not lack merit, was that this would enable the seven product categories to gain global scale — e.g., the diaper R&D program would be globally coordinated rather than split into four sub-scale regional programs — and the in-country selling efforts of the MDOs to exploit economies of scope across the seven GBU product domains.
However, this precipitated two decades of discord by which GBUs were frustrated by MDOs not focusing on and prioritizing their initiatives in their geographies, while the MDOs were frustrated by the GBUs not giving them the product features and branding campaigns that worked for their geography. At a personal level, everybody felt small, in their little compartment of the giant machine.
To attempt to shift boundaries to a more productive place, in 2019, P&G shifted to six ‘end-to-end’ product-based business units (e.g., beauty care) with full responsibility across the ten geographic markets that make up over 90% of P&G profit. That helped the people in those end-to-end organizations see more clearly how their work contributed to delivering the desired product experience to the desired customer. The rest of the markets, all considerably smaller, were the ‘enterprise markets’ in which the people in a given market had the primary job of developing their market and utilizing in that market in the best way possible, the products that the end-to-end businesses produced for the ten principal markets. While personnel in enterprise markets have little control over the products that they sell, they have control over how they choose to take whichever products they want to their own market.
In the end-to-end organizations, it is easier to create a community focused on delivering a defined set of products across ten geographic markets rather than dumping the products over the proverbial wall to one of eight previous MDOs. In the enterprise markets, the smaller market size and control over that market makes it easier to create a sense of community than it does being a small market attempting to coordinate the wishes of seven gigantic GBUs.
Time will tell the extent to which this approach to compartmentalization provides a greater sense of community or not, but the early returns are positive.
Reimagining Subordination
The modern company can’t put everyone in charge. Even Haier doesn’t do that. There will always need to be subordination. So, the question is how to create the necessary subordination in a way that doesn’t make employees feel a tiny part of a big machine. Subordinating employees to an abstract entity such as ‘the shareholder’ contributes to making people feel small. Shareholders are treated like the troll under the bridge. If you displease the troll, it will come out from underneath the bridge and gobble you up. Additionally, having a hierarchical structure that prioritizes coordination and control to produce satisfactory returns for the shareholders is a guaranteed method for making employees feel small and insignificant.
A superior approach is to subordinate to the customer: to make your task to serve the customer in a way that satisfies and delights them. The benefit of this approach is that it feels natural because every employee is a customer many times over and knows how it feels to be taken care of as a customer — or not. Customers are not abstract like shareholders. They have a face. You can go see them and observe how your offering does or does not make their lives better. In this form of subordination, every level of management above the front line is there to help the layer below it to achieve the goal of delighting the customer, as I have written about in Chapter 1 of A New Way to Think.
I have long believed the brand management system, pioneered at P&G by Neil McElroy in 1931, inadvertently led P&G to an ethos that has this feature. Brand Managers have been so centrally important and relatively close to the customer that the organization above the Brand Managers recognizes that their job is largely to enable and empower the Brand Managers. One other unexpected side effect of creating an organization built around numerous powerful Brand Managers, who act like mini-CEOs, is that P&G became the undisputed CEO factory in the past 90 years. A recent report suggests that P&G alumni represent a stunning 10% of S&P500 CEOs.
P&G has gone through many organizational iterations since 1931, but my observation is still that the subordination flow feels like the following: the goal of the Pantene brand organization is to delight Pantene customers; the goal of the Hair Care category organization is to help the Pantene organization delight customers; the goal of the Beauty Care sector is to help the Hair Care category help the Pantene brand delight customers; and the goal of P&G senior leadership is to help the Beauty Care sector help the Hair Care category help the Pantene brand delight customers.
In this way, while there is plenty of very organized subordination, it is done in a human-centered way by subordinating to the customer.
Practitioner Insights
Don’t ignore the importance of being bigger than anyone in your space. It is not unimportant, especially in the modern world of giants competing with one another. But as we have seen, companies can’t simply wish away the implications of bigness. They can’t customize everything; they must standardize some things to operate effectively. They can’t completely integrate everything; they must compartmentalize by breaking down the whole in some way. And they can’t have a flat organization, despite mythology about their existence; they must feature some level of subordination.
The key to switch from forms of standardization, compartmentalization, and subordination to which humans feel (and indeed are) forced to submit, to ones in which people feel like willing volunteers, as Peter Drucker admonished. Standardize around people-friendly platforms. Compartmentalize in ways that create engaging communities. And subordinate in a way that motivates rather than discourages.
The only way to get comfort and engagement from your people is to get your organization to human scale. That is intimate monumentality in business. It’s not easy in the least. The easiest thing to do is not scale. But in most industries in the modern economy, that means being squashed like a bug. The next hardest thing is to achieve monumentality but do so with soul destroying standardization, compartmentalization, and subordination. That will make the monumentality hard if not impossible to maintain. The very hardest thing is to standardize, compartmentalize, and subordinate at human scale. Achieving that intimate monumentality will make it a great company that stands the test of time.
