Friday, November 19, 2010

Culture of Successful Organizations

Why do people cling to weak ideas even when they have such destructive effects? Because they often don’t recognize how ill-conceived the ideas really are. Below are ten of the most common, bad ideas I’ve seen at work.

1. Everyone should live by our values (except for a few prima donnas who bring in most of the revenue). There are two problems with this thinking. First, the assumption that people need to be challenged to live in accordance with their values is just wrong. The company values should be the values of the people you actually have, and so challenging people to live in accord with them is like challenging people to remain true to the color of their eyes. (It is true that people need to be reminded of their values, especially during times of extreme change.) Of course, in most companies, the values (which look like every list of values you’ve ever seen) were set on–high, and brought down from the mountain at the same time Moses brought the ten commandments. And so they aren’t “our” values; they are “your values.” Challenging someone to live by someone else’s values is both insulting and untenable.

The second problem here is that one set of people–you know the group, the ones that are rude, mean-tempered and get to do anything they want–get a free pass on being challenged. They are the ones who bring in the revenue, or are so high up, that like the monarchs of old, they get to do whatever they want and they are above criticism. They should meet a similar end to their monarch-ancestors: get their (career) heads chopped because we’re not series about values at all if anyone is exempt.

2. Great companies are built to last. I have enormous respect for Jim Collins and Jerry Porras, the authors of Built to Last. That said, our own studies didn’t find companies that were set on the “great” path and then were great forever. Instead, we found that greatness today predicts nothing about tomorrow.

Companies are composed of groups of people talking–in person, over email, in meetings, and in formal documents. This chatter isn’t something the company has, it’s what the company is. The discussion in a company can change in a very short period of time, and often does when tyrants take over, the market hands the firm a shellacking, or any mediocre ideas take hold.

A better analogy for companies is that of body builder. Ripped today? Eat donuts (the equivalent of embracing mediocre ideas for a few weeks) and you’ll be falling toward average. Out of shape today? Work out, eat right, and it will change. But no one checks off “worked out” and then is done with it–except for future candidates of the lap-band.

3. When times are tough, the company should temporarily suspend training and development. This one is tough. As an entrepreneur, I (and my partners) have floated company payroll on our credit cards when clients were slow to pay. We’ve had times of feasting and times of famine. I say this so the following won’t be dismissed as coming from an academic egghead who isn’t in the real world: you are judged by what you do during the hard times, not during the easy times. A company that’s flush with cash doesn’t prove its commitment to the employee by investing a little on training and development. But that same company does prove its commitment to shredding the culture and setting its principles on fire when it sacrifices these activities when times are tough.

During tough times, employees (and managers and executives) often don’t know what to do. This is exactly when training and development (done well, not the ultra-lame stuff that’s pre-packaged and devolves into simple and useless steps) can make the difference. Even more important, this is when company leaders are judged.

4. The main purpose of the company is to earn a profit, or conversely, the purpose of the company is to do good in the world. Zealots of all sorts are running companies these days. Some focus purely on financial performance, and some argue that a greater purpose must be served or the organization has no right to exist.

The problem with such single focused answers is that, well, they are single focused answers. A corporation has many of the same legal rights as a person. It can own property, it can hire employees, and it can enter into contracts. So let’s extend the metaphor further.

A person who says his sole purpose in life is to make a lot of money is a lot like the greed-is-good character, Gordon Gekko. And often the person that just wants to make the world a better place does so at the expense of ignoring his family, not working, and is wanted by the IRS.

The point is that we are citizens, and we have lots of responsibilities: To raise families, to keep up our health, to help our community, and to help run companies that make money. It’s the same for companies. (What if your family had a recycling manager take up permanent residence in your house?)

When we finally get this point through our heads, we won’t need groups like corporate social responsibility in companies, because companies will be socially responsible. As they also seek to make money, and make a positive contribution to the global community.

5. Management is the key to high performance. This one isn’t that hard to refute. Management is about systems, processes, checklists, and formulas. It produces, as John Kotter noted, predictability and order. If you want more predictability and order, then don’t let a leader around your company.

Leadership is about alignment, vision, setting direction (again, thanks to John Kotter here), and it produces change, often to a dramatic degree.

High performance requires reinventing what the company does (leadership, and change) and great management (steps, milestones, deliverables). Management alone produces wastelands of despair where people chase the numbers and try to make plan, and burn themselves and everyone else out. Management without leadership never produces high performance, at least not for long.

6. Just follow the recommendations of the latest management books. The problem here is that most management books provide simplistic solutions that are not up the complex challenges of running a company. What’s needed is thought, debate, and reflection, leading to a collective understanding of what to focus on, and then relentless execution. Replace the first part of that with what’s in the latest management book, and you might as well post your resume on now, to avoid the rush.

Photo courtesy Olando7, CC 2.0.7. Incentivize people to boost performance. “Do x and I’ll give you y” doesn’t make people do “x,” as least not for long. Adding more “y” only gives people a bigger badge of honor for not doing it. Some groups (like most salespeople) will respond to the “x” and then “y” formula, but that’s because the system plays to their values.

And that’s the point. Instead of approaching employees like hamsters who want more and more food, you have to get to know the people you work with as individuals, and discover what they value. Build jobs around their core commitments, and pay them so that its fair, and you’ll get good performance. Ask them to work against their values for lots of extra cash, and you’ll make them feel like prostitutes.

8. Streamline operations to make the company more competitive. Streamlining is great, and most companies can do much more of it than they are doing. But streamlining alone is not likely to make a company more competitive.

Greater competitive advantage requires knowing the market, the changing tastes of customers, the price points of products and services, and then finding a value proposition that’s good for customers and for the company. This is a tough process, and it gives some people a headache to try to figure out. So pop a Tylenol, get back to work, and find an offering your company can make that will make everyone happy. (And a little streamlining is a nice thing to do, sort of like a stocking-stuffer for investors.)

Photo courtesy Intersection Consulting, CC 2.0.9. Just create a new strategy, and employees will feel empowered to implement it. The fundamental problem here is that these two things–a plan for change and employee empowerment–are at odds with each other. Planned change relies on a command: Do this because I said so. Empowering employees means enabling workers to find their passion and act on it. So this whole notion of empowering employees to implement management’s strategy is just double talk. (Thanks to Chris Argyris for pointing out this disconnect.)

What’s the better idea? Anne Mulchahy got it right in the dark days of Xerox. Start by listening to what everyone wants–customers, employees, suppliers, and partners. Then put it all together so that when you announce the new strategy, people say “that’s right!” Of course they say it’s right–it’s their idea, packaged with other ideas and weighted against what makes sense for the business. Then you don’t have to ask people to be empowered, because empowerment is baked into the strategy. For people who say “that takes too long,” the response is: It takes less time than launching a strategy that has no chance of success. And for people who say “but people don’t understand the marketplace,” either you’ve done a rotten job of hiring, or maybe your view of the market is a tad limited.

10. Companies need to focus on doing what made them successful in the first place. This is the death wail of a company just before it stops breathing: We’re not succeeding, so we’re going to return to what made us successful a decade ago (or more), only we’re going to redouble our efforts to get it right this time. One of the more famous examples of this mediocre idea at work is when People Express executives believed what made the company great was training and passion, and so they trained and trained and trained–while the industry adopted a new pricing model that put them out of business.

What a company should never change is its core identity. Apple shows what happens when a company gets this right, and the years before Jobs’ returns shows how bad it can be when we get it wrong. Its operations, strategy, and everything else needs to not just change but radically reinvent itself every few years, or else the competition will put it out of business.

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