Organizational Insecurity

May 2, 2010

I was intrigued by a recent NYT interview with Omar Hamoui, founder and chief executive of the mobile advertising network AdMob.  Hamoui argued that organizational insecurity led to deep resistance to discussing problems:

When people are insecure, they just tend to hide and bury [problems]. The bad news eventually comes out, but it comes out all at once, and in sort of catastrophic form. I’m just much more in favor of conveying all the bad news in real time.

He continues:

If everybody at the company can feel that they’re not putting their jobs in peril by relaying those kinds of things, then you really do get a pretty accurate picture.

This manifests in a distinct culture at AdMob:

…we spend a great amount of time talking about everything that’s wrong. Not because we’re trying to be negative. You can only talk for so long about what’s going well and have it be useful. You can be a lot more productive if you spend time on the things that aren’t going well.

But this is atypical in most organizations, and so when others join the conversation, they need to be trained:

When we would have visitors come to our board meetings, I would have to spend time prepping them ahead of time, basically telling them: “Don’t worry. The company’s not falling apart. Everything’s going fine. This is just how we are.”

I often discuss the need to surface problems (here’s an earlier post on the subject), and whenever I do people get nervous about creating a culture of “whiners.”  They worry that if people are encouraged to bring up problems, particularly if they’re not on the hook for the solutions, then discussions will be reduced to toxic complaining about the other guy.  Hamoui has found just the opposite:

… nobody at AdMob is shy to point out a problem or an issue with a product or service, even if it’s a product or service that they didn’t build or they don’t own or doesn’t fall within their domain. People aren’t shy about bringing up these issues and being fairly demanding that we solve them. I think that that’s led to us being very proactive.

Every company has problems. Surfacing those problems and addressing them quickly is the sign of a healthy, secure organization.  It’s also the sign of an effective leader.  As Hamoui demonstrates, spinning reality and covering up the truth may be the more costly and dangerous path.


Toyota in Trouble (the quick and dirty version)

February 25, 2010

What happened at Toyota? Mr. Toyoda himself summed it up nicely, as the NYT recently reported.  In a nutshell, Toyota thrived when it focused on improvement. When that focus shifted to growth the company ran into serious trouble:

In his prepared testimony, released on Tuesday, Mr. Toyoda said he took personal responsibility for the situation. In the past, he said, the company’s priorities were safety and quality, and sales came last.

But as Toyota grew to become the world’s biggest carmaker, “these priorities became confused, and we were not able to stop, think and make improvements as much as possible,” Mr. Toyoda said.

Toyota earned its place as the most celebrated operations story of the past few decades because of its relentless commitment to surfacing problems.  The entire organization was focused on the same worthy goals of improving its cars and improving the way its cars were built.  This improvement philosophy reached beyond the factory floor and included strengthening relationships with suppliers and partners.  Toyota managers famously helped suppliers, for example, to lower their own costs by using principles of the Toyota Production System (TPS).  Growth followed naturally.

And then the company’s goal became selling more cars than anyone else, and the metric it glorified was sales growth.  This may seem like a small shift — from growth as an outcome of improvement to growth as a central goal — but the moral of the Toyota story is that this pivot can be devastating.  Improvement is a powerful, worthy mission for an organization’s stakeholders.  Growth can be (and usually is) associated with compromises, with winning the game at any cost.  Toyota paid a cultural price for this shift.  For example, instead of helping its suppliers reduce costs through operational improvement, Toyota began to mandate lower prices and left its suppliers to figure out the rest.  These choices created an environment where cutting corners both inside and outside the organization became likely.

I want the spotlight to linger on this story for a long time.  There are important lessons here beyond the fall of a once-mighty competitor.  The most important one may be that a company’s purpose matters, in ways that go beyond hard-to-measure outcomes like employee satisfaction and  customer loyalty.  Purpose infiltrates an entire organization, all the way down to the manufacturing of a faulty accelerator. My deep hope is that Toyota shows us both the cost of getting it wrong and the path back to getting it right.  Frankly, I’m optimistic.  The tradeoffs are now seared into the souls of every single manager at Toyota.  The company has a powerful incentive to return to its roots as a role model for improvement with growth as a manifestation.


Leadership at Home

December 12, 2009

Elizabeth Weil – who is now working on a “memoir about marriage improvement” called No Cheating, No Dying – wrote a riveting piece for the New York Times Magazine about trying to improve her own relatively functional marriage.  The project occurred to her when she realized how little conscious effort she was putting into the relationship, in contrast to almost all other areas of her life (work, kids, redoing the bathroom).

I was particularly moved by two passages.  The first spoke to the link between private relationships and public impact:

In psychiatry, the term “good-enough mother” describes the parent who loves her child well enough for him to grow into an emotionally healthy adult. The goal is mental health, defined as the fortitude and flexibility to live one’s own life — not happiness. This is a crucial distinction. Similarly the “good-enough marriage” is characterized by its capacity to allow spouses to keep growing, to afford them the strength and bravery required to face the world.

And when the goal is leadership, “good-enough” may not be enough. One pattern we’ve observed in our own work is that people who have strong, energizing private relationships, whether with friends or family or partners, have an easier time leading in the public sphere.  They have the emotional energy to stand up and take the inevitable hits and falls.  A counter-intuitive lesson for aspiring leaders is to strengthen their connections to their favorite people, who may not have anything to do with their vision for change.

The second paragraph that got me touched on the fundamental contract between any two people, in any organization, including a family unit.  As a note of caution, I’m giving away the ending here:

Over the months Dan and I applied ourselves to our marriage, we struggled, we bridled, we jockeyed for position. Dan grew enraged at me; I pulled away from him. I learned things about myself and my relationship with Dan I had worked hard not to know. But as I watched Dan sleep — his beef-heart recipe earmarked, his power lift planned — I felt more committed than ever. I also felt our project could begin in earnest: we could demand of ourselves, and each other, the courage and patience to grow.

The courage and patience to grow. One definition of leadership may be to pull those things out of ourselves and each other.


The Cure for Service Complacency

September 1, 2009

The NYT described how the post office is responding to reduced demand as customers increasingly turn to alternatives for exchanging letters.  The action is late, arguably decades late, and not at all uncommon.  When organizations face limited competition (in the case of the post office, it was literally no competition), they often suffer from what I like to call service complacency.  Service complacency is the malaise that infects a culture when good service feels like a choice rather than a business necessity.

While this conclusion may seem reasonable on its surface — you have nowhere else to go, dear customer, so delighting you needn’t be my goal today — it denies an important truth.  Even if your competition is not visible today, your increasingly dissatisfied customers are a beacon for them.  And the new entrants that you can’t yet see often don’t show up in the form of direct competitors, but rather as enablers of the workarounds your customers have already resorted to using.  This is a much more serious threat since the rules of engagement aren’t immediately obvious.

In the case of the post office, customer dissatisfaction had been brewing for decades, but regulation literally gave customers no alternative.  This mix of high retention but low satisfaction was the perfect breeding ground for service complacency.  The post office’s most demanding customers started to get creative, which is often a red flag.   They started using fax machines, then e-mail, then e-mail with attachments.  When FedEx finally entered to deliver original documents quickly and reliably, the dynamics of the entire industry had already changed.  At this point, FedEx was not the post office’s biggest problem.

On the one hand, you could say this is just the march of technological innovation, and the post office could do nothing about it.  I think there’s more to the story than that.  Customers are typically slow to embrace innovation when existing solutions meet their needs.  But when an existing solution disappoints and disrespects them, which was the service experience that many post offices were delivering, then adoption of alternatives can happen at lightening speed.

How should the incumbent respond?  The are two enormous hurdles standing in its way.  First, it has to learn how to treat customers as if they have a choice.  And, second, it has to create an operational culture where controlling costs is a matter of survival.  Neither of these steps will be easy for the post office.  Competition has not forced the post office to care deeply about cost or service, and it’s hard to develop these muscles simply because Congress decides it’s time to start using them.

Today, the post office relies heavily on sending junk mail and packages that we order online.  This will not be enough to sustain it.  Unless the organization recognizes the intensity and range of its competitive threats, a fear that should show up in every single line item and every single customer interaction, then I’m not optimistic it will overcome its service complacency.


How to Give Feedback that Changes Lives

August 26, 2009

I loved a quote I read recently in the NYT by Maigread Eichten, president and chief executive of FRS, a maker of energy drinks:

One of the most memorable things one of my bosses at Pepsi told me was that if you really care about somebody, you give them constructive feedback. And if you don’t care about somebody, you only say positive things.

In my experience, a deep sign of respect is to help someone overcome the obstacles to their effectiveness.  These obstacles usually show up in the form of small, but persistent personality tics.  I find it heartbreaking when these things go unaddressed because of some kind of social norm.  We need our colleagues at their best.  Helping them to sweep away the pebbles on their path to impact, pebbles that are often visible to everyone but them, is a gift we can give, an obligation we have.

Much has been written about how to give feedback.  The advice that has stuck in the popular imagination is to be careful about sequencing the hard messages.  Sandwich the bad between the good.  I’m largely indifferent to these kinds of tactics, and I’m predisposed to be more direct than most.  I’ve found that it’s the intent that really matters.  If you show up to the conversation truly committed to helping someone become more effective, then the structure and content will take care of itself.  You won’t be inclined to make the most common mistake, which is to focus on managing your own discomfort with the interaction.

I often get asked about timing difficult feedback.  When should you do it?  When it is truly in the best interest of someone, when your input can make them better.  When should you not do it?  When it is more about you than it is about them.  How do you know the difference?  When you’re dreading it.  Feedback is your chance to change a life.  When you honor it for what it is, the task is trust-building and restorative.


Self-Service Innovation at USAA

August 13, 2009

The NYT recently described an innovative new iPhone “app” that allows customers to use their phones to deposit a check.  Take pictures of the front and back of the check with the phone’s camera, and then use its email function to send the pictures to USAA.  Now discard the check.  No trip to the bank necessary. 

The application is a great model for self-service innovation.  USAA customers get a solution they prefer to the existing alternatives.  Instead of going to an ATM, they can now deposit a check from anywhere.  Customers get the enhanced convenience of mobile banking without having to sacrifice functionality.  In fact, the mobile deposit service increased the functionality of the traditional online banking experience, essentially overcoming the classic tradeoff between functionality and convenience.

USAA didn’t just transport the same services to a new channel — it designed new services for a new channel.  Bank of America, in contrast, created an iPhone application that only performs a limited set of transactions, all of which can be performed through its online banking program.  This type of solution is far more common and creates far less value for customers, a concession to the tradeoff between convenience and service.  USAA reminds us that great service innovation occurs when we challenge our employees (and often customers) to overcome persistent assumptions.


Lean Thinking at Starbucks

August 5, 2009

The WSJ wrote an article about the recent adoption of “lean thinking” at Starbucks.  Lean thinking is a philosophy popularized by Toyota’s famous Toyota Production System (TPS) that emphasizes rooting out waste in its many forms.  At Toyota, waste might be excess inventory.  At Starbucks, waste might be baristas taking too many steps to travel from the coffee beans to the espresso maker.  After reading the article, I’m not optimistic about the process of Starbucks trimming down.

Scott Heydon has the title Vice President of Lean Thinking at Starbucks, and two of his quotes set off alarm bells for me.  The first suggests that the impetus for the change is to free up the time and space for employees to deliver a better service experience.  The quote:

Mr Heydon says reducing waste will free up time for baristas – or “partners,” as the company calls them — to interact with customers and improve the Starbucks experience.

But Heydon follows quickly with this quote:

If Starbucks can reduce the time each employee spends making a drink, the company could make more drinks with the same number of workers or have fewer workers.

At first glance, this may not sound like an impending disaster.  After all, who doesn’t want better service and lower costs?  The danger lies in the ambivalent framing of the initiative, which is often good enough for the C Suite, but doesn’t fly on the front lines.  If the objective is to enhance the service experience, then a set of activities will reinforce that goal, and the definition of success will be fairly straightforward.  Alternatively, if the objective is to reduce costs, then a different set of activities will be required.  Eventually, these activities will be at odds with each other, and employees will get caught in the tension.

This is a well-worn path that can easily lower performance and increase employee cynicism.  The typical sequence of events is as follows: A manager sets out to make changes with the stated intention of improving the service experience.  Compelling rationale is used, invoking the experience as a driver of premium pricing.  Then, under the banner of improved service, the same manager starts talking about the efficiency gains of the changes.  You’re a barista with more time on your hands? Serve more customers!  Say good-bye to your colleagues!

This is dangerous for two reasons.  First, if your employees believe your commitment to service and then watch you measure productivity gains, you sacrifice focus and trust.  Not only do you breed confusion, but as clarity emerges, employee cynicism is not far behind.  Second, when senior executives begin to prioritize labor productivity over service, they often start to erode the competitive distinction that led to the premium pricing.  It’s one thing to purposefully pivot away from a premium position.  It’s another to creep away from it without making a clear strategic choice.

To be clear, I have seen companies achieve great success through cost-cutting initiatives.  But they were internally branded as cost-cutting initiatives, as a competitive rallying cry for employees and sometimes even customers.  Similarly, I have seen spectacular success when companies commit to enhancing their service experiences — again, internally branded commitments with the requisite decisions and activities in alignment.  I have even seen success with initiatives designed to improve both cost and service.  These typically work when a company is performing poorly compared to its peers and can make improvements on both dimensions, or when a company is in an innovative phase and looking for breakthrough ways to do things.

The problem is the disingenuous internal framing.  By far the most common approach is to try to dress up cost-cutting initiatives as service improvements, which breeds disappointment among employees, customers and owners.  And a tell-tale sign of this charade is shifts in messaging, particularly for multiple audiences.  Starbucks contradicted itself within minutes for the WSJ, which doesn’t make me optimistic that they’ll be an exception to the rule that these initiatives tend to cause more harm than good.