It Does Not Fit
It Does Not Fit
Charles Lindblom | Bayer and Co-Determination | Factoids | Elsewhere and Elsewhen
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Quote of the Moment
It has been a curious feature of democratic thought that it has not faced up to the private corporation as a peculiar organization in an ostensible democracy. Enormously large, rich in resources, the big corporations, we have seen, command more resources than do most government units. They can also, over a broad range, insist that government meet their demands, even if these demands run counter to those of citizens expressed through their polyarchal [rule by the many] controls. Moreover, they do not disqualify themselves from playing the partisan role of a citizen — for the corporation is legally a person. And they exercise unusual veto powers. They are on all these counts disproportionately powerful, we have seen. The large private corporation fits oddly into democratic theory and vision. Indeed, it does not fit.
| Charles Lindblom, Politics and Markets: The World’s Political-Economic Systems
Lindblom’s most well-known work, Politics and Markets, was published in 1977 but seems strikingly contemporary. Indeed, a modern thinker like Elizabeth Anderson and her concept of businesses as ‘private governments’ is a direct successor to Lindblom’s work.
Bayer and Co-Determination
Bayer, the healthcare and agricultural products company and maker of Alka-Seltzer, Claritin, and other well-known consumer products — has had a difficult few years. The company acquired Monsanto, the agrochemical and agricultural biotechnology company and maker of toxic weed-killer Roundup, in 2018, for the astonishing price of $63 billion, and Bayer is now valued at only $28 billion, having lost 50% of its share price in the past year. The company will soon have to contend with billions of payouts for lawsuits related to Roundup.
Chip Cutter writes about the new CEO, Bill Anderson, who has undertaken a massive reorganization and reconsideration of Bayer, where he is attempting to trim the company’s international payroll by over $2 billion, by cutting out a lot of middle management.
Cutter, a regular commentator on business trends and news, stays pretty close to the PR side of this story, reporting on the fairly radical changes the CEO is rolling out across the U.S. operation. And, at face value, it’s a compelling story, since Anderson seems intent on a radical rethinking of Bayer’s operations:
The plan’s grand novelty is Anderson’s worker deployment scheme: Employees from various departments will be recruited to teams that decide on projects and work together for 90 days. Then, workers regroup in different configurations for their next undertaking.
The 57-year-old chief executive estimates that Bayer in coming years will operate 5,000 to 6,000 self-directed teams, a transformation that could blow up like other corporate experiments—or become a business landmark. At this point, Anderson said, “We don’t have to be that good to beat the current system.”
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Anderson mapped out his plan last June on a napkin at a cafe in San Diego with a McKinsey consultant who is now a full-time collaborator. The CEO named his idea “dynamic shared ownership.” It has since spawned its own glossary. Leaders are “visionaries,” “architects,” “catalysts” and “coaches,” positions focused on longer-term strategy and guidance-giving.
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He said he developed his plan after becoming disillusioned over the years by the many approvals and endless rounds of meetings required to get anything done at large companies.
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Figuring out exactly how Anderson’s dynamic shared ownership will operate is Michael Lurie’s job. His title is “chief catalyst.” Lurie was a McKinsey partner when he sat with Anderson at the San Diego cafe last year and helped hatch the plan using hand-drawn circles and squares.
Ok, I was intrigued enough to do some research. Lurie, a partner at McKinsey, wrote a very serious paper, published in 2023: 5 key shifts to redefine leadership for sustainable growth by Aaron De Smet, Arne Gast, Johanne Lavoie, and him:
For decades, organizations were designed and managed for an industrial environment. They were geared toward preserving stability, scale, and predictability with a focus on maximizing earnings for shareholders, and they paid little attention to the broader—often unintended—impact of their actions. Not anymore. Many organizations have recently decided that this approach is ill-suited to today’s complex challenges, and especially ill-suited to the host of societal demands companies must now consider.
In its place, a new form of organization and management has been slowly emerging. We believe this new approach is at a tipping point where more and more companies will join the pioneers who are already riding this wave. Organizations such as Allianz, Haier, Microsoft, and Nucor are transforming their industries with a new organizational approach that seeks to be open, fluid, and adaptable; unleashes the collective energy, passion, and capabilities of its people; reimagines strategy; and focuses on delivering greater value to all stakeholders. This new model focuses on a powerful aspiration: creating sustainable, inclusive growth. The companies leading the way are developing new architectures featuring collaborative networks of self-managing teams that operate in rapid cycles and focus on creating value for their stakeholders. Their cultures support a more open, collaborative, and emergent way of working. And the shift to this new kind of model changes the way businesspeople must lead.
The paper is a very detailed characterization of, or a handbook for, the transition from a conventional to — in my terms — an emergent organization.
Transforming an organization into a thriving entity that is able to deliver sustainable, inclusive growth requires a comprehensive approach to leadership transformation, beginning with the senior network of leadership teams. More specifically, this typically requires the involvement of the top-three levels of the organization: the enterprise leadership team, the leadership teams of the major business and functional units, and the leadership teams of primary units within each of the major units, as well as cross-unit governance groups. In large organizations, this may comprise the 500 to 1,000 most senior leaders in the company.
Notably, one of Anderson’s first actions was to cut about half of Bayer’s US senior executives, a fact not found in Cutter’s piece, but probably consonant with the need to steer this transition.
And, of course, it’s likely that Lurie was more than just a sounding board for Anderson, he is likely more like the source for a lot of what makes up ‘dynamic shared ownership’, or DSO. If interested, you might watch this webinar at YouTube. (For details on DSO see 26:44 How DSO is rolling out at Bayer – Michael Lurie, and there’s also a section with Gary Hamel speaking about this, as well.)
Instead of digging into the particulars of DSO, which I may return to at a later date, I’d like to point out that at no time did the employees of Bayer’s U.S. operations have a say in this reorganization, as far as I can discern.
However, I noted that Bayer is undertaking this shift to DSO internationally, including in its German operations, where the headquarters are.
I quickly found a press release detailing the roll-out in Germany:
Leverkusen, January 17, 2024 – The Bayer Group is introducing a new operating model called “Dynamic Shared Ownership” (DSO) worldwide, which will reduce hierarchies, eliminate bureaucracy, streamline structures and accelerate decision-making processes. The aim of the new operating model is to make the company much more agile and significantly improve its operational performance. In a joint declaration, the Board of Management of Bayer AG and the employee representatives on the Supervisory Board have agreed on principles for the future of the company. This also includes regulations for the significant staff reductions expected in the course of the restructuring at the Group companies in Germany.
“Bayer is currently in a difficult situation for various reasons. In order to make rapid, sustainable improvements to our operational performance and our room to maneuver, far-reaching measures are necessary. We want to get Bayer back on the road to success quickly,” explains Heike Prinz, member of the Board of Management and Labor Director of Bayer AG.” Company management and employee representatives must pull together and agree on the steps expressed in the Joint Declaration to overcome this challenging situation and secure the future of the company. Only through decisive, collective action will we be able to remove all internal obstacles and put Bayer back on track for future profitable growth.”
Note that the German operations involve co-determination — where worker representatives sit in an advisory role at the Board of Directors, and which are extensively consulted on major actions.
Instead of the immediate layoffs — by June 2024 — in the U.S. headquarters of at least 90 middle managers and the redeployment of an unknown number of others back into individual contributor roles, German workforce reductions were slowed by contracts and negotiation [emphasis mine]:
“As an employee representative body, we are vigorously campaigning for the continued existence of the Group with all three divisions. We see the new operating model as a great opportunity to significantly improve our economic situation. However, in the company's strained economic situation, the programs and measures already underway are not sufficient, which is why, with a heavy heart, we have agreed to further cuts,” says Heike Hausfeld, Chairwoman of the Central Works Council of Bayer AG. “In the negotiations with the employer, however, we have succeeded in making the forthcoming job cuts as socially responsible as feasible within the existing possibilities. We were also able to ensure that the general job security is extended by a further year until the end of 2026” emphasizes Hausfeld.
“Our new operating model is designed to make Bayer faster and more innovative. However, its introduction will come at the expense of many managerial employees,” explains Dr. Barbara Gansewendt, Chairwoman of the Bayer AG Group Executives’ Committee, which represents the interests of managerial employees. “This is an extremely bitter development for us, but there is no viable alternative under the current circumstances. However, we have ensured that employees whose jobs will be eliminated under the new system will receive not only an attractive severance payment at market conditions, but also the necessary support and time for personal orientation in order to find new employment as quickly as possible.”
So, in general, the layoffs won’t actually push German workers out of employment with the company until the end of 2026, along with ‘market conditions’ severance.
In a recent Work Futures issue, Falling Faster, I cited research that causally links layoffs with increased mortality. I am confident that the co-determination baked into Bayer’s employee agreements, along with the negotiations by the workers councils with Bayer management, will likely sidestep much — if not all — of the mortality risk incurred by these layoffs. While the U.S. middle managers are getting only a few months notice — because they have no workers’ council on their side — the equivalent workers in Germany have at least two years before receiving their final paycheck and severance.
I encountered this Bayer information only after writing Falling Faster, but it makes the case I laid out, perfectly. American workers should unionize in all sectors, and break the barrier between rank-and-file and managerial workers, too. The workers have to do it, because the owners and CEOs are not going to set it up, and government, which could be playing a major role, is absent or in many cases actively obstructing union activity, with ‘right-to-work’ laws, and more.
The union and workers’ council representing middle managers accomplished something for Bayer’s German middle management that is not even a footnote in the story about U.S. deployment of the same CSO reorganization.
Factoids
Research reveals that nearly 75% of respondents indicated their employer has not trained its managers to lead a distributed team, established team or meeting norms, or adopted best practices to support working across distances.
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Daniel Kahneman, a cognitive psychologist who won the Nobel in economic science in 2002, passed away this week. He never took an economics course.
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79% of Americans said they did not trust corporations to use AI responsibly, per a Gallup poll.
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One poll found that 72% of young American women who voted in House elections in 2022 backed the Democratic candidate; some 54% of young men did. In 2008 there was barely any gap.
Young men and women are diverging politically, over just the past 15 years.
Elsewhere and Elsewhen
Elsewhere
Strengths Forward
In Navigating a strengths-forward approach to management, at Optionality, Rachel Lowell Ellison describes the stresses on managers these days:
In 2022, the HR research firm Gartner found that managers' responsibilities doubled since the pandemic hit, with 35% overseeing more people and 49% dealing with increased complexity. Gartner’s survey of HR leaders found that despite investing in development, only 25% feel confident about managers' training. With increased responsibility and ineffective support, burnout follows. An Adecco Group 2023 survey found that 68% of the 16,000 managers they surveyed suffered burnout in the past year, a significant increase from 43% in 2022.
One approach to counter these strains:
One antidote may be taking a step back, recognizing the unique abilities you bring to the table, and leaning into them. It could be an innate ability to foster inclusion, a talent for adapting to industry shifts, a gift for communicating vision, a skill for assessing team readiness, or a sixth sense for cultivating collaboration. By relying on your innate strengths, you can find a solid footing amidst the chaos and start charting a course forward with greater confidence and clarity.
She offers guidance on how to make it work. A good read.
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Economic Nihilism
A new term has come into the economic and political discourse — Economic Nihilism — and I wrote about it at stoweboyd.io:
“Financial nihilism” – the idea that cost of living is strangling most Americans; that upward mobility opportunity is out of reach for increasingly more people; that the American Dream is mostly a thing of the past; and that median home prices divided by median income is at a completely untenable level.
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