1: How Great Companies Get Stuck
The author opens by referring to the "war for talent" and the recent survey (2012 PWC CEO survey) that indicates that having the right talent in place is critical for growth and profitability, and is the number-one concern for chief executives. For lack of the necessary human resources, CEOs indicated that they ...
- Cancelled or delayed a strategic initiative
- Were unable to pursue a market opportunity
- Were unable to innovate effectively
- Were unable to achieve growth and profitability goals
- Were unable to maintain quality standards
In reaction to this, companies spent more on talent acquisition than in previous years - but this cannot be the solution. There is only so much "top talent" out there and most highly talented individuals are cherished and guarded by their companies.
But more to the point, a person who achieves stunning results does so in the context of a given company. There are many instances in which a high achiever in one company failed to produce similar results in another firm that hired him away. His talent was smothered by the culture of his new employer.
With that in mind, a better and more effective method for acquiring talent is to grow you own. Leverage the talent of the people that you have, grow their capabilities, and most importantly create a culture in which they can apply their talent.
Many of the "problems" leaders seek to repair - shrining market share, inefficiency, lower revenue or profit, etc. - are merely symptoms of a culture problem within their organization. And unfortunately, the leaders' most common reaction is to put their company further into a panic state by demanding improvement in these metrics without addressing the real underlying problem of the company's culture. Again, this leads to a flurry of panicked activity rather than intelligent decisions.
It's a common pattern for a company to discover a method for being successful, and to refine and perfect that methodology - but over time, environmental changes render that methodology ineffective, and doing the same things does not produce the same results. When that happens, many firms stick doggedly to their outdated methods, insisting that the people need to conform to them, to apply more effort to working harder at the things that are no longer working.
The author calls these "inflection points" and at each such point, the company must adapt - its upward trend will level off or turn to the negative. A company that fails to adapt can struggle forward, applying more effort and getting less in the way of results. In a non-competitive environment, companies could be "walking dead" for years or decades. In the modern competitive environment, they have no such luxury - customers will not tolerate their inefficiency and effectiveness when there are many other firms competing for their business.
A culture that keeps employees in their animal state creates an environment of fear, in which people cling all the more to the familiar methods of the past, regressing to behaviors that used to bring success, but do not do so anymore. In order to overcome challenges, a culture must place employees in a smart state, so that they will be more forward-thinking and seek solutions to problems that arise by taking bold and decisive action, rather than cowering under the security blanket of familiar routines.
Back to inflection points, the author suggests that they often correspond to milestones in the revenue of the company: 10, 25, 50, 100, 250, and 500 million. This is fairly broad, but in her experience these milestones represent the point at which a firm must make a significant change in its methods in order to remain effective. At these inflection points, people generally need to develop new skills, adopt new behaviors, and change their approach to work.
In particular, these are points at which the CEO will need to step back further and delegate more authority to employees at lower levels of the organization to take on more responsibility and to have the authority to fulfill their new responsibilities.
At the lowest levels of progress, when a one-man company becomes a twenty-person company, or when that twenty-person company grows to a hundred, it becomes clear when the owner must engage more hands in the tasks of leadership. The change is just as dramatic when a company that once made 25 million in revenue doubles in size, but because the firm is already so large, it's seldom recognized.
(EN: This makes me wonder a bit ...why did the author choose the amount of revenue, rather than the number of employees, as her milestone? My sense is that the two are not in lock-step, as employers attempt to make more revenue with fewer people rather than scale their workforce - and many are likely attempting to do too much with too few hands. The author does not state this, but I suspect it figures into her rationale.)
When an entire organization has experienced an inflection, the only effective solution is to treat the system - not the individual symptoms. The problem is that organizational systems are created and supported by large numbers of people - to them, the existing system is the reason the firm has been successful in the past, and there is the assumption that the system will help the organization remain successful in the future - hence the inclination to cling to and defend the familiar patterns of behavior that have worked until now.
This means that to effect a change, everyone must be involved, from senior leadership to the front lines, in adapting the culture so that the company can be successful in future, while departing from the vestiges of the past.
As the size of a firm increases, the core competencies to ensure its effectiveness change - and the opportunities that it is capable of exploiting also change. It may require a complete change in the business model to overcome an inflection point.
In most instances, the problem within a firm is the people - and this can be difficult to address because people are "emotional, complex, and unpredictable." It's much easier to deal with issues related to money and the business model, but unless the people support these changes, they will not be effectively implemented.
This is where cultural awareness is important, and changing the culture of an organization is important.
Smart Tribe Accelerators
In the Industrial Revolution, Scientific Management emerged to help organizations cope with the industrial workplace and the way workers were managed within it. This theory of management was essential to success at adapting to the changing nature of business and competition. In the present day, some of these principles and practices remain applicable - but many are quite obsolete.
People are ultimately unmanageable and attempts to manipulate and control them will ultimately fail. This is particularly true in the individualist culture of the United States, in which workers do not feel part of a collective at all and are primarily pursuing their own self-interests. Leaders are little different, demanding that people serve their personal agenda with little interest in how it will benefit anyone but themselves.
Old-school management operates on threat or fear: if the employee fails to obey commands, he will ultimately be fired - removing his ability to support himself and his family. So ultimately, "leaders" motivated employees by threatening the welfare of their families if they failed to follow orders. This is nothing short of blackmail. Fear is a great motivator to take action - but it is not a motivator to think.
In the thirty-plus years of professional consulting that the author repeatedly mentions, she has regularly encountered highly effective leaders, and many share the same set of characteristics which she terms "accelerators."
- Focus - The leader is aware and cares
- Clarity - Expectations are detailed and explicit
- Accountability - Responsibilities are clearly defined
- Influence - The leader exerts influence openly rather than covertly
- Sustainable - Results are achievable, and can be perpetuated
These five practices appeal to peoples' higher motives: their desire to achieve and improve. By using them, managers do not have to resort to fear-based practice that access the instinct to merely be defensive, which tends to miss our desired outcome anyway. Instead, it inspires people with vision - which not only motivates people to take action, but to feel like they have a stake in the outcome and take personal ownership.
(EN: Another benefit that the author doesn't presently mention is that the desire to achieve can be sustained and increased - once one goal or level has been achieved, another can replace it - whereas the desire to protect cannot be sustained or increased: you can threaten employees more often, but you cannot threaten them into accomplishing more than they did the last time you threatened them.)
Ideally, an effort will be undertaken by an entire organization - a company-wide effort. However, culture also exists within smaller parts of the organization: divisions, offices, and business units have their own internal culture - which means that the author's theories are not merely for the top managers of an organization, but can be applied on any level.