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.

Will Amazon Kill the Zappos Magic?

January 22, 2010

In a recent NYT interview Tony Hsieh (pronounced “shay”), CEO of Zappos, described his management priorities in this order:  culture first, service second.  This may come as a surprise to anyone who has first-hand experience with the Zappos service model, which consistently produces excellence at virtually every customer touch point.  I myself was surprised.  I’ve heard many executives talk about the need to align culture with service, but I’ve rarely heard someone describe culture as their organization’s primary purpose.

When pushed to explain what got him there, Hsieh reflected poignantly on a prior company he built and sold (for a great deal of money) that had a culture he and others hated.  He vowed never to let it happen again:

When it was starting out, when it was just 5 or 10 of us, it was like your typical dot-com. We were all really excited, working around the clock, sleeping under our desks, had no idea what day of the week it was. But we didn’t know any better and didn’t pay attention to company culture.

By the time we got to 100 people, even though we hired people with the right skill sets and experiences, I just dreaded getting out of bed in the morning…when I joined Zappos about a year later, I wanted to make sure that I didn’t make the same mistake…in terms of the company culture going downhill. So for us, at Zappos, we really view culture as our No. 1 priority. We decided that if we get the culture right, most of the stuff, like building a brand around delivering the very best customer service, will just take care of itself.

How do you “get the culture right?”  In Hsieh’s case, he and his team decided to live and die by a series of core values:

…we formalized the definition of our culture into 10 core values. We wanted to come up with committable core values, meaning that we would actually be willing to hire and fire people based on those values, regardless of their individual job performance. Given that criteria, it’s actually pretty tough to come up with core values.

I was particularly moved by his take on his own role in designing and protecting the Zappos culture, which involved a central responsibility to create an environment where other people will thrive:

Maybe an analogy is, if you think of the employees and culture as plants growing, I’m not trying to be the biggest plant for them to aspire to. I’m more trying to architect the greenhouse where they can all flourish and grow.

So what happens to the greenhouse once Amazon buys it? I wrestled with this question when I wrote about Zappos culture in a post last year, as I was getting ready to go on a case visit.  We wrote the case just as the Amazon purchase was going through (for just under a billion dollars).

Amazon has clearly indicated its respect for Zappos culture and its desire to leave the company alone to continue to deliver wold-class service.  My hope is that Amazon can resist the temptation that has tripped up so many other acquirers, the temptation to provide a bit too much help the moment the acquired misses its numbers, a tweak here, a tweak there, to improve its performance.  That kind of help can be a lethal blow to the true drivers of a company’s value.  In the case of Zappos, I’m not convinced its culture could survive this well-intentioned support.

Culture Change at GM: Declaring it Doesn’t Make it So

October 9, 2009

The NYT reported that the board of GM wanted the culture of the organization to change:

In the interim, Mr. Henderson stressed that G.M.’s new board was pushing management to speed up decisions on new products and install a culture devoted to pleasing customers.

I’m not optimistic. The first red flag is the title of the article, G.M. Is Adapting to a New Culture, Chief Says.  In my experience, culture doesn’t change upon decree from the top.  Culture exists because of years of reinforcing norms and behaviors.  It exists because smart people constantly pick up on how status is gained and which behaviors are valued in practice (not in the introduction to the annual report). Changing culture requires unraveling and replacing that normative system in a comprehensive way.  The analogy that always comes to mind is clearing a patch of land to be farmed. You can’t just cut down the trees and declare victory. You have to get your hands dirty beneath the surface, digging up roots and turning over the soil.

In other words, you have to address the underlying conditions that allowed certain behaviors to thrive in the organization. Where to begin?  I suggest starting with my favorite question, now familiar to our readers:  why would reasonable, well-intentioned people do what they’re doing?  Once you can answer this question with an open heart, once you can identify the organizational drivers of the actions and choices you want to change, then you can begin to influence them.

Maybe the article got it wrong, but if it’s even close to correct, the 90 days allocated to this activity at GM will be wildly insufficient.

Non-Verbal Leadership

September 22, 2009

In a recent article in the NYTimes, Linda Hudson described her first day on her job after being promoted to president at General Dynamics:

… I went out and bought my new fancy suits to wear to work and so on. And I’m at work on my very first day, and a lady at Nordstrom’s had showed me how to tie a scarf in a very unusual kind of way for my new suit. And I go to work and wear my suit, and I have my first day at work. And then I come back to work the next day, and I run into no fewer than a dozen women in the organization who have on scarves tied exactly like mine.

Hudson’s scarf is a great metaphor for the power of non-verbal leadership. Language matters in leadership, of course, but non-verbal leadership — the signals that leaders throw off in their actions and body language — can speak as loud, if not louder than those carefully-chosen words.  This phenomenon can be an enormous opportunity, as long as you understand and harness it.  Ms. Hudson got it immediately:

And that’s when I realized that life was never going to be the way it had been before, that people were watching everything I did. And it wasn’t just going to be about how I dressed. It was about my behavior, the example I set, the tone I set, the way I carried myself, how confident I was — all those kinds of things. It really was now about me and the context of setting the tone for the organization.

I try to focus my students on the non-verbal influence they have on their peers in the classroom, influence that they will eventually have on organizations. This is counter-intuitive in the beginning.  Students often think they’re only being evaluated on the two minutes they may contribute to a conversation in any given class, but I try to explain that the other 78 minutes matter just as much.  Our goal is to get as much out of the discussion as we can as a group, which means everyone needs to work hard when they’re not speaking, too.  It turns out that the body language of one student can have an incredible effect — positive or negative — on other students.

As a simple example, imagine the quality of participation when Student A speaks and Student B is leaning forward and listening carefully.  Not only is Student A much more likely to deliver on the high expectations of Student B in that moment, not only is she much more likely to step up and share something brilliant with her audience of believers, but she’s also more likely to stay focused on the collective learning of the group.  Student B’s eagerness to learn from Student A shuts down the possibility of narrow, self-promotional exchanges that can sometimes creep into the dynamics between students and teachers.  Student A can no longer just talk to me, the evaluator.  She must respond to Student B’s non-verbal invitation to help him improve.  Now consider the quality when Student B is barely listening, or appears bored or dismissive.  Why should Student A bother to do anything but think about herself?

In my experience, the classroom is a microcosm for organizational dynamics. It’s a laboratory for learning how our  choices influence others in the structure of a group.  As I’m reminded every day when I step into that laboratory, our non-verbal choices are a powerful tool for creating the conditions for others to thrive.  The next time you are in a conversation, take note of how the body language of listeners affects the speaker.  If you accept the premise that our job is to bring the best out of the speaker, then we need to learn how to lead non-verbally.  The first step is understanding that we’re accountable for it.

Hidden Risks of Crisis Leadership

September 14, 2009

The NYT’s Adam Bryant delivered an interesting interview with Lloyd Blankfein, CEO of Goldman Sachs.  Blankfein offers some suggestions for leading in a crisis, which can be summarized as keep talking, to everyone, both to better inform your choices and to communicate changing conditions and strategies.  Blankfein walked the halls constantly during the height of the financial crisis and left a daily voicemail for the entire organization.

Blankfein also speaks to the need to “be good” to your people without lowering standards, a theme I explored in an earlier post.  In his words:

…being good to them doesn’t mean you pay them more or you’re more liberal, or you let them get away with things. Most people, what they want is to be better.

Getting this right is a central part of good leadership, but it’s harder to do in a crisis.  There is often intense pressure to care too little about your people — to become distracted by anxiety and external events — or to care too much and lower your expectations of their performance.  The first reaction is more common, but the second is more insidious.

Anxiety is a deeply selfish emotion. We don’t think of it that way because it’s often threats to other people that trigger the sensation, but anxiety’s unique rush of hormones and chemicals is biologically designed to promote our own survival.  The response is self-distracting, by design.  It’s almost impossible to focus on the experience of other people in these moments, to perform the very act that makes leadership possible, and so we end up hardening ourselves to the people who need us most.  Anxiety is an indulgence that destroys our capacity to lead.

In contrast, a crisis tempts some of us to become overly sympathetic and lower our standards.  When people you care about are going through a tough time, it can feel reasonable to compromise and let them off the hook a bit.  But there are two significant costs to that choice.  First, it denies your team the opportunity to learn.  People, like muscles, need to push themselves beyond their comfort zone to grow.  They need to bump up against their perceived limits in order to break through them, and protecting them from reality disrupts that growth process.  Second, lowering standards signals your hidden belief that maybe they’re not up for it after all.  It reveals a lack of confidence in your people when the stakes really matter.  They will internalize the message.  Their performance will rise only to the level of your diminished expectations, and everyone will conclude that you were right.  It is hard for organizations to recover from those dynamics.

A provocative way to think about it is that a crisis tempts us all to become anxious mothers or protective fathers.  Leadership requires that we reject both of these unproductive stereotypes.

Explore vs. Exploit

August 18, 2009

Alison Gopnik, a Berkeley psychology professor, described how babies learn in a recent NYT op-ed she provocatively titled, “Your Baby is Smarter Than You Think.”  The article shot to the top of the paper’s “most popular” list, partly for its challenge to the widespread investment in trying to get babies to behave like Type A adults — goal-oriented, focused, socially motivated to achieve.

I was struck by her observation that babies are most engaged when they’re exploring new things, while adults prefer exploiting known skill sets:

Very young children imagine and explore a vast array of possibilities. As they grow older and absorb more evidence, certain possibilities become much more likely and more useful. They then make decisions based on this selective information and become increasingly reluctant to give those ideas up and try something new. Computer scientists talk about the difference between exploring and exploiting — a system will learn more if it explores many possibilities, but it will be more effective if it simply acts on the most likely one. Babies explore; adults exploit.

This distinction matters in organizations, too.  Despite our best managerial intentions, most organizations are primarily designed to do one or the other well.  In our business, we call it “organized to execute” or “organized to learn.”  The concept is the brain child of Frances’s HBS colleague, Amy Edmondson.  A firm’s strategy, operations and culture generally line up to either explore or exploit opportunities, rarely both.

But success often requires pivoting from one to the other (and sometimes back again) over the life span of a company.  This is a clear pattern in start-ups, which usually require a high experimental capacity in the beginning, but then have to shift to head-down execution once the business model falls into place.  The transition can be painful, as explorers often have to cede control to exploiters before they’re emotionally ready. And the young firm’s culture, built to dwell in possibility and manage significant risk, can often be one step behind. Similarly, market leaders faced with a disruptive competitor often have to learn how to learn again.  This pivot can be even more wrenching.

Great organizations learn to do both before their survival is on the line, but it often means separating the explorers from the exploiters.  Just as babies and adults rarely play well together, world-class exploiters and outstanding explorers are different animals that need different environments to thrive.  Practically, this often means walling them off from each other, as many firms do with separate R&D shops.

The biggest risk here is that these departments are not separate enough.  Each function needs its own rules and inputs to perform well — think of it as the kids’ table at Thanksgiving dinner — and companies often resist these separations. The exploiters at the top don’t like the messiness of multiple systems, and the idea feels vaguely unfair to someone.  If staying power is your goal, however, the lessons are clear.  A few ruffled feathers and some added complexity are worth it.