Who's Really On Board?

I had an epiphany last week, and it went like this: After giving a speech on competitive strategy to the board of directors and senior executive team of a large corporation, I was chatting with a few front-line employees who were arranging the logistics of getting me back to the airport. Several of them had heard my speech and had a few unequivocal comments about it. The thrust of their message was: Oren, you need to come back here over and over again because those guys (the board and executive team) talk a good game but aren’t going to do any of the things you advised. In fact, what they do regularly is exactly what you warned against doing in your speech. Then they proceeded to tell me why, in effect, they were hungering for leadership that was bold and imaginative, and what the potentials of the corporation would be if that leadership was in evidence. I remember thinking: Wait a minute, I’ve heard this before. Often. And then the epiphany: When considering innovative action and radical change, top management often asks me “How do we get everybody on board?”, meaning how do we convince and enlist all employees to go a new route? That’s an important question, and I’ve addressed it often in my work. But the fact is that I’ve often heard the same kind of question asked from “lower-level” people about the people upstairs: In effect, how do we get “them” (top management, or our bosses) on board? The more I thought about it, I realized I’ve heard the question of getting people on board asked as often from the bottom as from the top. So why is our professional attention always on how to pull those at the bottom? Perhaps we need to redirect our attention a bit. I’ve frequently told my executive clients to stop worrying so much about getting “everybody” on board. “Everybody” won’t get on board, but in every organization there are many creative, proactive individuals in all levels and functions who are straining at the bit, or at least would be very responsive, for new opportunities to make a difference and take accountability for progress. By developing and liberating those people, and rewarding them properly, the pressure is on the career skeptics to change or leave. With my new epiphany, I now realize that for years I’ve underestimated the number, and power, of the mid-level and front-line folks who really are eager for change. They’re there, and they’re ready to rumble, but what they want to see is management that walks the talk. They want leaders who lead innovative change with collaborative, transparent action, not just periodic words, memos, and directives. They want leaders who themselves are visibly engaged with the "two steps forward-one step backwards" process of executing change. They want optimistic leaders who regularly inspire people to march with them toward unchartered territory. Yeah, the traditional question about getting lower levels on board is still legit. But from now on, when I hear that question from senior people, I’m going to gently throw it right back to them: Are you sure that you’re on board? And if so, are you sure you’re showing it?

Hire or Fire the Crazies?

You know that “Hero or Villain?” blog I wrote on September 10 (see http://www.harari.com/blog/index.php?/archives/2007/05.html)? I’ve gotten incredulous responses from readers. They find it hard to believe that a company (Kaiser Permanente in this case) would fire a firebrand front line employee who took it upon himself to demonstrate that a multimillion dollar IT investment might actually be a corporate albatross. I am disarmed by their innocent reactions. Reality flash: It happens too often that those talented, innovative and impatient individuals who challenge the ineptness of the status quo are reprimanded and punished, which leads them to polish up their resumes and head for greener pastures, leaving the conforming drones behind to take orders—leaving the “C” suite executives wondering why things are falling apart. Just to muck up the waters even further, consider another little case—this time the polar opposite of what happened at Kaiser. I want to credit Fast Company magazine for this vignette about a little company called Slim Devices, which makes state-of-the-art audio devices that let individuals transfer digital music from their computer hard drives to speakers in their homes. One of the cool things that Slim Devices does is to encourage customers to suggest product ideas, changes, and technological tweaks on interactive online forums. Many of the customers are real techno-geeks, and one of them posted a piece of software that would enhance Slim’s functionality with Real Networks’ online music service. Unfortunately, his contribution was illegal, since it was based on cracking Real’s code which protects data transmission over the Web. Here is how Fast Company described the next delicious scene: “The author of the Real plug-in lived just a few blocks from Blackketter (Slim’s Chief Technology Officer) in San Francisco. Blackketter went over to his house and said, ‘That’s a really good hack, man’, but told him it wasn’t legal. Only mildly daunted, the hacker put the plug-in on his own Web site rather than Slim’s. Then, sure enough, an email came from Real Networks asking him to take down the posting—and in classic Silicon Valley fashion, to visit Real the following week for a job interview (my emphasis). Slim managed to hire him first (my emphasis again), then eventually worked out a legal relationship with Real and incorporated the plug-in into its players.”So there it is. Kaiser fires the crazy who made value-adding waves. Real Networks and Slim Devices race to hire the crazy who made value-adding waves. Which approach do you think is better in today’s nutty marketplace? Which approach does your organization take? As Slim vice president Patrick Cosson notes: “You can’t be heavy handed and kill the creativity. But you have to manage the chaos and resolve disputes.” Sounds good to me. Vive le crazies!

The Dangers of Commodity Work

Several years ago Deborah Mayer taught elementary school in Indiana. Then she was fired. The reason was four words: “I honk for peace”. That’s the reply that she gave a student who asked her if she would ever take part in a peace march. The case is wending its way up the court system’s food chain, and legally, it revolves around the issue of free speech. As a citizen, the case would interest me, as I’m sure it would you. But from a business perspective, what strikes me as also worthy of discussion is the rationale given by a federal appeals court which denied Mayer’s claim that her speech was violated. The court stated that the teacher’s speech is “a commodity she sells to an employer in exchange for her salary.” Did I hear that right? This is another reason why courts and legislators should be carefully bridled before being unleashed on an unwitting economy. The best leaders (including school principals) understand that any organization in which employees simply do “commodity” work is an organization doomed to mediocrity and inevitable decline. Commodity work—defined by job descriptions, employment contracts, official company directives, and such—are the bare minimum standards in today’s hypercompetitive environment. They highlight the kinds of performance that in aggregate, allows companies to survive—for the time being. But to thrive, organizations need to have employees fully engaged in not just “doing” their work, but regularly critiquing it and changing it in order to continually create more value for the organization and its customers. And by achieving these higher hurdles, employees ought to be psychologically rewarded and financially compensated well beyond conventional wisdom commodity benchmarks.I tell my clients repeatedly: If you recruit and pay for commodity work at any level and any function, you’ll get commodity output, which is the kiss of death in today’s marketplace. Further, I advise them that if they see chunks of their organization buried in commodity work, then they must consider these alternatives:: 1. Lay out new (higher) performance expectations, create a new culture of empowerment and accountability, train the dickens out of people, help them overcome their fears of the new, and then get the heck out of the way. 2. Reward the creative contributors generously. Terminate the chronic nay-sayers..3. Hire and promote talented people—the kinds that want to be treated as “businesspeople”—the kinds that are eager to learn, are excited to set more ambitious goals, and who want to take initiative and responsibility. 4. Whenever you can’t do #1, #2, or #3, then go another route: eliminate, digitalize, divest, outsource or offshore the functions and activities (including total jobs) that cannot be de-commoditized. My point is that no healthy vibrant organization would accept the federal court’s perspective that an employee or manager sells commodity work for a (commodity) salary. But I’ve seen unhealthy organizations with leaders who can’t understand why their “industry-standard” wages and “clear job descriptions” don’t generate groundbreaking products, services or cost-cutting efforts. And I’ve seen tort lawyers sue companies who terminated an employee who would only do commodity work on the grounds that the employee was “adequately” performing the “job description” or “terms of the contract.” And by the way, notwithstanding how Deborah Mayer’s case turns out, this little discussion is so very applicable to our public school system. As I’ve written in my February 15 blog “Are Teachers Overpaid? What a Stupid Question!” (see http://www.harari.com/blog/), if we’re to compete in a knowledge economy, we desperately need to attract and retain teachers who don’t view their work as a commodity.

Hero or Villain?

Imagine this. You’re the CEO of a multi-billion dollar company that’s dispersed over several states. Your company has invested millions of dollars in a new IT system. One day you learn that a 22 year old employee somewhere in the bowels of your company has sent a lengthy e-mail to staffers throughout the organization documenting the inefficiencies and glitches of the new system, and suggesting that even the process by which the IT vendor was chosen might have less than stellar integrity. This is pretty much what happened to the giant health maintenance organization Kaiser Permanente. The kid in question is Justen Deal, and his e-mail highlighted, point by point, why the new system was generating problems not just with costs but with medical providers’ abilities to serve patients. And for good measure, the memo took CEO George Halvorson and other senior executives to task for jeopardizing Kaiser’s capacity to deliver high quality care because of their unquestioning allegiance to the IT system in question. If you were the CEO, what would you do? Would you fire Justin Deal? Well, that’s exactly what Kaiser did, and I suspect that most companies would have done the same. I say they’re stupid. I say Halvorson should have promoted Justen Deal. No, I’m not crazy. Consider: Here’s a kid who, on his own initiative, documented significant glitches and inefficiencies of a new IT system. On his own initiative, he did the due diligence (poring over budget and engineering reports, for example) that suggested a potential seven billion dollars of dollars of costs to Kaiser from system failures and poor output. On his own initiative (and courage), he wrote a report which he sent to his boss, Kaiser’s compliance officer, and the Kaiser board. Only when nothing happened (why am I not surprised?) did he go public within Kaiser, and not for self-aggrandizement, but because he was concerned, as the April 24 issue of Wall St. Journal reported, that “poor decisions…are positioning us for potentially catastrophic failure.” What sort of an employee do you want? A drone who takes orders well and plays it safe, or someone who takes it upon themselves to do what it takes to add value to the company, even when that means butting heads with sacred cow processes and with silverback gorilla managers? Ironically, Kaiser might have eventually paid a ton of money to an independent consulting firm to have come up with a similar document-- after the system was already clearly malfunctioning, of course. In fact, as the Journal pointed out, here’s what did happen: the frenetic attempt by Kaiser to kill the memo and paper over the mess with a public relations blitz failed, the fired Deal became a hero in the Web community, the “whistleblower” policy within Kaiser was dealt a big credibility blow, some of Deal’s technical concerns already seem to have achieved some objective traction, and the CIO of Kaiser abruptly quit. Now imagine a different scenario. Imagine if CEO Halvorson would have said: “You’re telling me that a 22 year old kid came up with all this? On his own time? I want to meet him. I want to listen to him. And if he makes sense, I want him to be part of an IT evaluation project, with full honors and a hefty increase in pay. I want everyone to know that this is the kind of person we’re interested in recruiting and retaining-- even if he’s not 100% right. And I want everyone to know that if we’re made errors, we’re going to fix them, even if it’s personally embarrassing. That’s how we build a culture of innovation and accountability.” Instead, the IT system and its entrenched defenders remain, and Kaiser has lost a curious and committed employee, the kind of employee who on his own initiative had edited Kaiser’s listing on Wikipedia because nobody else did—until, of course, higher-ups told him to cease and desist. (Again, why am I not surprised?)Do yourself a favor. Don’t spend gobs of money on motivational speakers and happy-talk training sessions which spew out pat phrases like “Empower your people!” and “Innovate and change!” until you’re clear that in your company, people like Justen Deal are more likely to be treated as heroes than villains.

Why Toyota Isn't Happy About Being #1

In the first three months of 2007, Toyota sold 2.38 million vehicles worldwide to GM’s 2.26 million, which means that Toyota is now the biggest car company on the planet. And yet, according to a few news releases, Toyota is not comfortable with being #1 and didn’t seek to be #1. “I don’t believe that”, said one of my clients, an executive who thinks about boosting sales every day. “I’m sure they’re thrilled with being the top dog.” Well, maybe. I worked with Toyota for years and interacted with the top American and Japanese executives of the firm, and with that experience I frankly do believe that their ambivalence with being #1 is real. Three reasons: 1. The first reason is political. Toyota is dependent on global sales, especially to the U.S., and it doesn’t want to provide protectionists with ammunition. It prefers to stay under the radar scope as a quiet underdog. 2. The second reason is complacency. It’s a lot easier to become complacent when you’re #1. Like most great companies, Toyota leaders know that complacency is much more debilitating than any products that GM or Ford can throw into the marketplace. Look at business history and you’ll see that one of the best predictors of corporate failure is corporate success, because that little intervening variable “complacency” creeps in and slowly smothers urgency, change and innovation. 3. The third reason is profitability. This one is at the heart of the differences between how GM and Toyota approach their businesses. GM’s mantra has always been: do whatever it takes to maintain market share and sales, regardless of the impact on bottom line. Toyota has always been about steady, prudent, profitable growth. That’s why GM’s incentives to buyers have been more than double that of Toyota. Put another way, American customers have agreed to pay an average of 12% more per Toyota car than a GM car. On the cost side, Toyota’s obsession (and that’s not too strong a term) with cost reduction means that Toyota’s productivity growth is double that of GM’s, and the company averages $2400 of profit more than GM does per car sold. So even as GM has maintained its lead in global sales (until Q1 in 2007, at least) and still leads in market share in the U.S. relative to Toyota (23.3% vs. 15.7%), GM lost $2 billion globally in fourth quarter 2006 (including a $799 million loss in the U.S.). In short, Toyota doesn’t want to catch GM’s “being biggest at all cost” disease, and that is why Toyota executives approach their new #1 status gingerly. By the way, in what appears a masterful public relations rationalization, GM is now making noises that size is no longer as important as profitability. Yeah, right. Bill Ford said the same things a few years ago about his company, but it seems like business as usual has prevailed there. Profitable growth is part of Toyota’s DNA, not yet in GM’s.