Traditional Management Structure Is Obsolete, Red Hat CEO Says

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    The top-down management structure that’s prevalent in corporate America today is an anachronistic holdover from a bygone era, when mass manufacturing was what drove the economy and created powerful enterprises. Today’s companies demand a far more open, inclusive, participative structure—not unlike the structure of the open source software community.

    An outspoken champion of that message is Jim Whitehurst, president and CEO of Raleigh-based Red Hat Software, the high-profile, $10 billion provider of open source software to the enterprise community. In his new book, “The Open Organization: Igniting Passion and Performance,” Whitehurst argues that “Red Hat is the only company that can say that it emerged out of a pure bottom-up culture—namely, the open source ethos—and learned how to execute it at scale.”

    I recently had the opportunity to interview Whitehurst, and I asked him to explain the connection between open source software and the open organization. He described it this way:

    Open source software is basically written by people who voluntarily contribute time and effort to build it. Red Hat exclusively sells open source software, but importantly, the company came after open source—we grew out of the open source movement. Well before my time, way back in the ‘90s when the company started, it looked to adopt the same principle around open source. Think about groups of people around the world who have not met each other, who voluntarily decided to write a piece of software with millions of lines of code and incredible complexity. Given that there was no formal hierarchy or leader, they had to figure out how to self-organize to do this stuff. So a whole set of norms developed around how these people in a participative community were going to act to coordinate behavior, and come out with a product that now runs stock exchanges and nuclear submarines. Red Hat supplied a lot of those principles, so it really starts off with the basics of, assume people have to opt in. If people are working for you because it’s the only job they can get, that’s probably not the people you really want to have working for you. So creating meaning and a reason to be there, beyond a paycheck, is obviously important. And then I’ve opened up very inclusive decision-making. In open source software, we talk about, “release early, release often,” which is saying, do very, very small, iterative changes. It’s OK if you make a mistake, because the changes are all so small, you can roll back easily. In management we call it “failing fast.” We allow our associates a lot of latitude to try things, but they never have enough latitude that they can blow $20 million before you realize they’ve made a mistake. So all those little things that we’ve put into our culture—in the way we run the company, it’s more than just culture, it’s process, as well—are all mirrored off of open source.

    I found it interesting that in the book’s foreword, Gary Hamel, a visiting professor at London Business School, says that “in organizations that are fit for the future, leaders will be chosen by the led.” I asked Whitehurst if he agrees with that. He said he does, but not in the sense that people will vote on their leaders:

    If you think about it more broadly, the best people will go to work for people that they want to work for. The companies that have the best people will win, and the others will lose. So in that context, yes, people will choose their leaders, because the leaders who survive are the ones who have great people working for them, and they’re the ones who can attract the great people. Red Hat is not even close to a democracy. But I do think we work to build a place where we have some great leaders, and where a lot of people want to work.

    Whitehurst went on to say that “it’s time for a fundamental rethink” about traditional management hierarchies:

    I think what’s important is, it’s not that Red Hat has randomly come up with a better way to manage—most importantly, vs. what happened 150 years ago, when management was developed in the late 1800s for mass manufacturing, when you had uneducated workers doing rote tasks in industries that moved really, really slowly, with very limited ability to communicate, and we developed these traditional hierarchies. The world we live in now is moving very, very fast. Almost all of the rote tasks have been automated, so you actually are hiring knowledge workers who have to apply initiative and creativity. And you have ubiquitous, instantaneous, high-bandwidth information. So obviously, the methodology we use to coordinate behavior should be really different, given educated people doing different tasks, in a different environment, with different technology. What we’re basically saying is, we need to rethink management in a world where all of that has changed. It’s not that all the sudden, we’re smarter than other people. It’s just that people have gotten stuck in a rut of doing what we’ve always done, and not realized that the world has changed so much, it’s time for a fundamental rethink.

    I asked Whitehurst what’s not in the book that, in hindsight, he’d like to have gotten in there. He said he wishes he had spent more time addressing how to create an open organization:

    I think the thing I’d like to have gotten more into is, I get asked a lot by people who say, “Great, I see how it’s working at a company where it’s working. But if I’m in a very traditional company today, how do I really get started?” The way we wrote the book is to talk about the logical components—the importance of purpose and passion; or the importance of engagement; or meritocracy vs. democracy, areas like that. We didn’t do a “how to” book, which is, if you’re starting off in a traditional organization, what are the first three things you do, and what’s next, and what’s next? I’ve been out with executives talking about it—that has ended up taking up a fair amount of time. I have opinions on that, and I wish I’d talked more about that in the book—about where and how to open up, and how to start with leaders, because if it’s not leader-led, it’s not going to happen. It’s the importance of going not halfway, but all the way. I’d rather take one of the pillars and go all the way than take all of the pillars and go 20 percent of the way. There’s a lot of that that’s not fully in the book, which I wish I’d spent a little more time addressing.

    I also spoke with Whitehurst about his own experience at Red Hat, including the fact that despite the company’s untraditional management structure, it has a very traditional compensation structure, in the sense that the top executives are paid in the millions of dollars, while employees in the trenches are making a small fraction of that. I’ll cover that part of the interview with Whitehurst in a forthcoming post.

    A contributing writer on IT management and career topics with IT Business Edge since 2009, Don Tennant began his technology journalism career in 1990 in Hong Kong, where he served as editor of the Hong Kong edition of Computerworld. After returning to the U.S. in 2000, he became Editor in Chief of the U.S. edition of Computerworld, and later assumed the editorial directorship of Computerworld and InfoWorld. Don was presented with the 2007 Timothy White Award for Editorial Integrity by American Business Media, and he is a recipient of the Jesse H. Neal National Business Journalism Award for editorial excellence in news coverage. Follow him on Twitter @dontennant.

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