'If every unit could give people a little more autonomy, that would make a big difference,' says Canadian academic
Pharmaceutical company Bayer recently announced that it plans to drastically cut bureaucracy and move to a decentralized system that will see its nearly 100,000 employees largely managing themselves.
Bill Anderson, Bayer CEO since 2023, calls the plan “dynamic shared ownership”, and hopes the shake-up will revitalize the 160-year-old company, which has seen its stock decline more than 50 percent in the last year.
"People love the company; they love the sort of culture and the science and the commitment to patients, but they basically said, 'Increasingly, we can't get anything done,'" Anderson said in an interview with Business Insider.
"It's just too hard to get ideas approved, or you have to consult with so many people to make anything happen."
Can decentralized management work in large organizations?
Bayer’s move to decentralization is based on the “holacracy” theory of management, which was brought to the mainstream by online shoe company Zappos, later purchased by Amazon. The model features self-management at its centre, and is seen as a way to encourage innovation and empowerment of employees through collaboration.
But will it work for a large company like Bayer? Perhaps, says Rafael Gomez, professor of employment at the University of Toronto. But implementing such a measure at scale will present almost insurmountable challenges.
“For this case, which is a well-established, very old, mature company, large, bureaucratic, it has pre-existing norms and culture, it has workers who were hired under one rule, and presumably those hiring decisions were kind of a two-way street,” he says.
“People who apply to Bayer, or who work for companies that they've acquired, which are also big and bureaucratic, didn't accidentally end up there.”
Employees self-select into the systems that work for them, Gomez says, and in instances like Bayer, where there have been decades of this selection, there are going to be uncomfortable disruptions as a result of drastic systemic changes.
“Part of the reason these systems work, it's not because the systems are working, it's because they've self-selected and separated out the people who don't like to work in the wholly autonomous ‘I'm responsible for my outcomes’ world,” he says.
“It might work, but in the short run, it's going to cause huge disruptions. So if you're prepared for the huge disruption, and you have this end goal of recreating a company that's less bureaucratic, it’s going to be more autonomous – it will attract people eventually.”
Is cutting middle management a solution to bureaucracy?
A big part of Bayer’s strategy includes cutting a large proportion of middle managers, and allowing employees to choose the projects they want to be involved in. The company said in a March press release that the move will save about $2.17 billion in organizational costs.
"We hire highly educated, trained people, and then we put them in these environments with rules and procedures and eight layers of hierarchy," Anderson said. "Then we wonder why big companies are so lame most of the time."
Decentralization is possible in larger organisations, Gomez says, and it doesn’t have to be a complete adoption, either. HR managers who want to implement self-management in their workforce, to see if it might be a fit for a more widescale application or to spark innovation, can do so by allowing smaller teams space to make their own decisions.
“If every unit could give people a little more autonomy, that would make a big difference,” he says. “A little more scope to do something, a little more ability to go directly above, two or three layers of management – I think that would make a difference.”
Recognizing middle managers as a “pinch point”, Gomez says that the principles of holacracy can be applied in any environment or size of company. Empowering employees to communicate laterally with other teams and levels of management eases barriers to innovation and productivity.
“You could even collaborate across the globe with a team — we learned that during the COVID lockdowns,” he says. “The technology has made it easier to collaborate this way.”
How HR creates decentralized management
Implementing decentralization strategies is no small task for HR, Gomez says, as such a fundamental shift requires creating new compensation structures, new performance management metrics, and plenty of clear communication.
Additionally, dealing with constructive dismissal and other claims will likely be a reality as the employee base adjusts. And it will mean a lot of work for HR, he says.
“My thinking from the economic side is you do nothing, you just implement the policy — be prepared for people not liking it, and therefore quitting. And you now have at least a signal of what this is going to take if this is a true commitment of people who do want to work in those kinds of structures, they don't want to work in bureaucratic structures.
“So they'll start applying to Bayer, the new Bayer, and they'll eventually have the kind of worker that matches the kind of organization.”
