2
A Different Kind of Leadership
MORE THAN A quarter century ago, Professor Fred Luthans of the University of Nebraska published an intriguing study that found a significant difference between how “successful” managers (those who got promoted rapidly) and “effective” managers (those whose units performed well) spent their time.1 The managers who were promoted rapidly spent much more time networking and politicking, while their more effective colleagues spent their time building their units and developing their people. In short, Luthans found that organizations were promoting the wrong types of managers. And because the managers who got promoted the fastest were also the ones who ended up in top leadership positions, Luthans’s study was an implicit indictment of how most organizations chose their leaders.
Although his study was conducted a while ago, we believe his findings are just as valid today. These findings alone might explain why leaders who pay attention to their front-line people are so rare, but the picture is actually much worse. Even when organizations do promote the right managers, as these managers rise up the hierarchy, a host of situational forces come to bear on them that can easily undermine their respect for the people on the front lines, and hence cause them to disregard the value in their ideas.
In this chapter, we discuss the dysfunctional behaviors that people often exhibit as they gain power and the reasons that such behaviors arise. We then turn to how idea-driven organizations counteract this problem and keep their managers engaged with their front-line people and valuing their ideas.
WHY LEADERS ARE OFTEN BLIND TO FRONT-LINE IDEAS
Consider the constant reminders of their superiority that managers are bombarded with in the course of their daily work. They wear the suits, they have the private offices, they are the ones chosen for promotion, they are more highly educated and paid significantly more than their subordinates, and everyone defers to them. They are the ones in charge. With all of these signals continually reminding them that they are superior to their employees, it is easy for managers to come to believe that they actually are. And such a belief can lead them into some highly dysfunctional behaviors.
One way that managers’ feelings of superiority manifest themselves is in excessive pay disparities and inappropriate perks. More than a century ago, J. P. Morgan observed an interesting pattern in his client companies. Those having excessive pay differences between levels in their hierarchies did not perform as well. Consequently, he would not invest in a company if pay differences from level to level were more than 30 percent. Morgan had put his finger on something important. If differences between levels in a company become too great, its intangible fabric of trust, communication, and respect unravels, which introduces enormous hidden costs.2 From the point of view of ideas, the ability of managers to listen to those who work for them is greatly reduced, as is the willingness of their subordinates to offer ideas.
We encountered a good example of the detrimental impact of extreme differences between levels on the flow of ideas while helping a European port and logistics company with its idea system. We arrived at the port in a blinding wet snowstorm to find the parking lot full. But directly in front of the headquarters building there was a row of mostly open spaces. Furthermore, these spaces were covered by a blue awning, which extended conveniently all the way to the front entrance. We couldn’t believe our luck—the visitors’ parking was right up front and protected from the weather! We pulled into one of the open spots and began getting out of the car. A well-dressed receptionist bustled out from the lobby and confronted us: “I’m afraid you can’t park there. It’s for top managers only.” We got back in the car, circulated some more, and eventually squeezed into a spot at the back of the lot. We got soaked as we ran into the building.
The right to park under the blue awning turned out to be a jealously guarded top management perk. The company’s headquarters were on the Adriatic coast, near the Italian Alps. In winter, it snowed and rained a lot, and in summer the hot Mediterranean sun baked any car left out in the open. That awning spoke volumes. On a daily basis, it reinforced top managers’ perceptions that they were somehow more worthy than their employees—they should not have to get wet in the winter or climb into swelteringly hot cars in the summer—and it reminded employees of their second-class status.
We had been invited because the company was losing business to more nimble competitors, and top management had set up an idea system hoping to capture employee ideas to cut costs. Unfortunately, very few ideas were coming in and almost none were being implemented. The managing director and his team thought the problem lay somewhere in the mechanics of the idea system, but the real problem turned out to be the gap the management team had created between itself and the workers. The blue awning had been our first indication of this. No matter how much the leaders of this company tweaked their idea process, unless they changed their behavior, they were not going to get much help from their employees in making the company more competitive.
When the perks that arise from management feelings of superiority are out of public view, some of them can be ridiculous. In Riverside, California, one such perk revealed much about the attitude of the county executives toward their workers. County policy specified that all bathroom tissue purchased for county government bathrooms must be twoply. Yet the county supervisor had quietly upgraded the toilet paper used in the bathrooms of the county’s top executives to a more expensive and softer four-ply. A whistleblower “outed” this perk to the press just after the county announced that employees had to take a 10 percent pay cut in response to a budget crisis. After a storm of negative coverage of what the media dubbed “Bathroom Tissue Gate,” the embarrassed officials sheepishly reverted back to two-ply.3
From reserved parking places to separate bathrooms, the last things managers need are extravagant status symbols that tell them that they are better than the people who work for them. Once they believe that, they can easily believe that they know better, too.
How Power Can Undermine Idea Leadership
Excessive perks and salary differentials are relatively easy to eliminate if an organization’s leaders have the will to do so. Unfortunately, power has more destructive effects on people than causing them to overpay themselves or pamper themselves with soft bathroom tissue, and many of these effects are much less apparent.
A considerable amount of research has been done on how power affects people. A classic, and very revealing, study was done in the early 1970s by Stanford psychology professor Philip Zimbardo. He conducted what became an infamous experiment, now known as the Stanford Prison Experiment.4 Together with his research team, Zimbardo built a mock prison in the basement of the psychology building. He recruited a pool of intelligent, healthy, and normal male students and randomly divided them into two groups: guards and prisoners. Great care was taken to re-create the power relationship between the guards and prisoners that is found in real prisons. On the day the experiment began, the prisoners-to-be were arrested as they went about their daily business by Palo Alto police officers. The prisoners were put in barred cells and placed “under the complete subjugation” of the guards. The experiment was continuously observed and both audio- and videotaped. Although it was scheduled to last two weeks, it quickly spun out of control and was aborted after only six days. The guards had become so abusive that the prisoners were in danger of mental and physical breakdown. Some of the video footage is shocking, and several of the “prisoners” suffered significant psychological problems for years afterward. Zimbardo would comment almost forty years later on the eerie similarities between the abuses during his prison experiment and the abuses in 2003 and 2004 at the Abu Ghraib prison in Iraq while U.S. forces were running the facility.5 Ultimately, the experiment resulted in significant new understanding of how a situation’s context can override people’s natural dispositions and radically alter their behavior. It also led to major changes around the world in the rules governing human subject experimentation.
The provocative nature of Zimbardo’s findings spurred considerable academic research on the effects of power on a person’s behavior. One particularly enlightening follow-up study, for example, was done by Adam Galinsky, Deborah Gruenfeld, and Joe Magee (Gruenfeld was a colleague of Zimbardo’s at Stanford).6 As they noted:
The experience of holding power in a particular situation generates a constellation of characteristics and propensities that manifest themselves in affect, cognition, and behavior.
It is easy to see how some of these “characteristics and propensities” have a direct negative effect on a person’s receptiveness to ideas from subordinates. For example:
Power reduces the complexity of a person’s thinking and his ability to consider alternatives.
Power leads to objectification—that is, to seeing others as a means to an end as opposed to seeing them as real people.
People with power listen less carefully and have difficulty taking into account what others already know.
People with power do not regulate their behavior as much. They become egocentric and preoccupied with their own self-interest, which eclipses their awareness of the interests of others.
People with power are less accurate in their estimates of the interests and positions of others, and less open to the perspectives of others.
In our own work, we often see power bringing out these tendencies and watch them undermine the trust and respect needed for an organization to operate effectively. Recently, we were hired by the new CEO of a large pharmaceutical company to design and lead an upper management development program aimed at improving the company’s ability to innovate and improve. We began by spending a day interviewing managers and workers to build an understanding of the issues the program would need to address. A picture of a dysfunctional and demoralized organization quickly emerged, one ruled by fear. At the end of the day, we spent an hour and a half with the CEO in order to better understand his goals for the upcoming program. The CEO was very clear—he was not impressed with his managers and wanted them shaken up.
“I have set the goal of 30 percent sales growth for each of the next three years,” he said, “and I need them to be able to keep up.”
“How did you come up with that goal?”
“Actually, I just pulled it out of a hat,” the CEO replied, with a smirk. Further probing revealed that he had given little thought to this stretch goal or whether it was even achievable. Was there enough market demand? What changes in the company’s physical plant would be needed to produce the increased volume? Would the resources be available to expand capacity and to fund the increased sales volume? What increases in staff would be needed, and where? He had not considered any of these basic questions.
That night, the CEO invited us and the managers who would be participating in the program out to dinner. At one point, the conversation turned to a recent environmental incident at one of the company’s plants. A large amount of hot liquid petroleum jelly had been accidentally released into the municipal wastewater treatment system, which had become clogged as the liquid cooled and gelled. As a result, two of the senior managers at the table had been summoned to a hearing the following morning and were worried that the company would lose its permit to use the municipal system. The CEO was completely unconcerned—in fact, he joked about the spill and made several derogatory remarks about the local environmental regulations. And then he boasted, “The first thing I did when I moved here [to an East Coast state with strict environmental rules] was to slip my garbage guy a couple of hundred bucks. Now I don’t have to worry about recycling or hazardous waste—he’ll take anything I put out.” His leadership team was visibly stunned.
Over the course of the management training program, it became clear that the leadership team members did not trust or respect the CEO. They felt that he was out for himself and unwilling to address the company’s real problems. But because several successful new products had been brought on line just as he joined the company, sales were strong and forecasts were rosy. As long as the CEO made sure the board heard only what he wanted them to, his job would be secure. He was a classic example of a “successful” manager in the Luthans sense, and he personified all the negative behaviors and cognitive limitations that power can bring out in a person.
FIGHTING BACK
In 2013, after a series of embarrassing public scandals involving top commanders, U.S. Army General Martin Dempsey, chairman of the Joint Chiefs of Staff, instituted a new “360-degree” evaluation system for senior officers—that is, an evaluation system in which input about their characters and competence would be sought from their direct subordinates and peers. According to the New York Times:7
General Dempsey said that evaluations of top officers needed to go beyond the traditional assessment of professional performance by superior officers alone … to assess both competence and character in a richer way. … The central role in national life played by the military since the attacks of Sept. 11, 2001—a time in which some general officers attained the stature, and entourages, of rock stars—put them in the spotlight. “Frankly, we’ve developed some bad habits,” General Dempsey said. … “It’s those bad habits we are seeking to overcome.”
The new evaluation regime was part of a broader overhaul of the way senior military leaders were to be selected and developed. Dempsey was attempting to stop his senior leaders from succumbing to the bad habits that come with power.
Fighting the forces that drive these bad habits takes place on two fronts. The first involves hiring and promoting the right managers, and the second involves keeping existing managers grounded so they continue to value their subordinates and treat them with respect.
Hiring and Promoting the Right People
Jay Reardon, president of Hickory Chair, the company whose dramatic turnaround was described in the last chapter, was very clear about what he looked for when hiring or promoting managers:
First, I look for people who are humble. Humility is not a weakness—it is a strength. I am careful to do the background work to make certain a candidate will be truly humble. How does he talk about his coworkers? How do they talk about him? Is he in the background supporting others and celebrating their accomplishments, or is he standing out front demanding all the attention?
During interviews, Reardon listens carefully to how candidates discuss their work and other people. “If they talk primarily about business and the numbers, and all the great things they have accomplished, I eliminate them from serious consideration. But if they focus more on their people’s contributions and accomplishments, then I look at them more seriously. I look for more ‘we’s and ‘us’s, and fewer ‘I’s and ‘me’s, in the way they talk.”
We asked Jesus Echevarria, chief communications officer at Inditex, what characteristics his company looked for in its managers. “First of all, humility,” he said. “A manager has to have the humility to listen to and respect other people’s ideas if he expects to rise up in Inditex.” (Afterward, we realized that Echevarria never did offer a second characteristic.) Inditex, best known for its Zara brand of “fast-fashion” stores, is headquartered in A Coruna, Spain, and is the world’s largest clothing company with more than six thousand stores in seventy countries. Zara’s business model is built around closely listening to customers and rapidly acting on the resulting information. It relies on its sales associates to observe what fashion-conscious customers are wearing and to listen to what they are requesting. Twice a week, headquarters calls each store to get its associates’ observations and ideas. (We will discuss Zara’s idea processes more fully in Chapter 3.) Echevarria emphasized that humble managers are necessary for a business model that is based on careful listening.
Amancio Ortega, founder and majority stockholder of Inditex, realized the importance of humility in managers at a very early age. He grew up poor and was forced to drop out of school at age twelve to work as a delivery boy for a women’s clothing store. He was bothered by the fact that the store wasn’t offering the types of clothing that its customers were asking for. He brought many improvement ideas to the store manager, but the manager never listened to him. Out of frustration, and while still in his teens, Ortega set up his own small clothing manufacturing company. By building a company that could listen extremely carefully to its customers and then respond very rapidly, Ortega would go on to become one of the richest men in the world.
To maintain its culture of humility, almost all of Inditex’s hiring is done for entry-level positions, and most managers are promoted from within the company. The exceptions occur when specific professional skills are needed that are not available internally, and in these cases the company is very careful to fit the new recruits into its culture.
In the late 1990s, for example, when Inditex was preparing for both rapid global expansion and an initial public offering, it was forced to hire a number of high-powered managers from the outside. One of them was Jesus Vega de la Falla, the new director of HR. He had an MBA from IESE (ranked among the top business schools in the world) and had extensive management experience at both Hewlett-Packard and Banco Santander (a large global bank headquartered in Madrid). When he arrived on his first day at Inditex, he was met by the company’s CEO, who informed him that they, together with the person Vega was replacing, would be leaving immediately on an extended road trip. Over the next ten days, the three men visited dozens of the company’s stores all over Spain. Finally, they pulled up in front of a Zara store in Madrid. The CEO turned to Vega and said, “This is where you will be working.”
Caught by surprise, Vega responded, “But I have never managed a retail store before!”
“That’s OK,” the CEO replied. “You won’t be managing the store. You will be a sales associate.”
The CEO introduced Vega to the store manager. After a brief welcome, the manager turned to Vega and said, “Let me introduce you to your new boss.”
The new boss turned out to be a twenty-year old girl with bright dyed-red hair and a large number of body piercings.
Vega turned to the CEO and asked, “How long will I be working here?”
The CEO shrugged, “I have no idea.”
“Does Ortega know about this?” Vega asked.
“It was his idea.”
Recounting this story to us years later, Vega said “My stint as a sales associate was the most effective development experience I have ever had. It made me humble. It was also the beginning of a life experience with Zara that completely changed the way I thought about how to run a business.”
While humility is a prerequisite for managing in an idea-driven manner, other characteristics are necessary as well. These include being improvement oriented and execution minded, and having the ability to work well collaboratively. When Pete Wilson, CEO of Pyromation, an Indiana thermocouple manufacturer with 120 employees (averaging 45 implemented ideas per person per year or so), began transforming his company, he brought in a consultant with a PhD in organizational behavior to help his top managers make the transition to the idea-driven leadership style he was looking for. Early on, two of his top managers didn’t like the changes being made and left. Wilson hired an executive search firm to help create an in-depth profile of the type of people he wanted on his leadership team. This profile was used to develop a detailed questionnaire to guide the process of evaluating prospects and, once hired, to structure their ongoing development.
The characteristics of idea-driven leaders are similar to those of the “Level 5” leaders that Jim Collins found in his best-selling Good to Great study.8 Level 5 leaders, the ones who successfully led their companies’ transition to greatness, were humble people who put their organizations first and were determined to improve them. While Collins found such people to be rare in top leadership positions, Jay Reardon of Hickory Chair insisted that they are plentiful, but the place to look for them is three or four tiers down in the organization’s hierarchy—exactly where the Luthans study predicts managers more concerned with being effective than being promoted will be predominantly found.
The problem is that the people in the best positions to identify such leaders are usually their subordinates. Subordinates know the true characters of their bosses and whether they are truly improvement oriented and responsive to ideas. This is why a 360-degree review process, like the one initiated by General Dempsey, holds the promise of providing much better evaluations of managers than can be done by their superiors alone. However, while the 360-degree review is an attractive concept, a note of caution is needed. The process is difficult to get right and rarely delivers fully on its promise. Unless the right conditions are set by the leaders, and subordinates have a great deal of trust in the confidentiality of the process, they will not provide honest feedback. It is dangerous and foolish for subordinates to point out their bosses’ weaknesses in an unsecure process, particularly as their comments will be documented and remain in the organization’s files for a long time.
Changing Management Mindsets and Behaviors
When Wilf Blackburn took over as CEO of Ayudhya Allianz, the Thai subsidiary of Munich-based insurance giant Allianz, the company was run in a heavily top-down manner and was a minor player in the Thai market. His first actions were to set up an idea system, educate his managers and employees in what would be expected of them, and begin identifying and eliminating the barriers that impeded the flow of ideas.
Blackburn abolished the company’s dress code, knocked down walls—literally—and eliminated high-walled cubicles to open up the offices and improve interdepartmental communication. He relocated managers nearer to their subordinates, scheduled quarterly idea fairs around the company to showcase ideas, and instituted a spectacular off-site annual idea celebration and recognition event for everyone in the company. He also had his managers select the themes for the quarterly idea campaigns so the resulting ideas would help them with their unit’s goals, and he incorporated each manager’s idea management performance into his formal performance reviews.
Within three years Ayudhya Allianz won a Stevie award for being one of the most innovative companies in Asia, and Blackburn himself was named Best Executive in Asia (subcontinent, Australia and New Zealand) in the International Business Awards. The company was also named the most innovative of the 120 “operating enterprises” in the global Allianz family. And by the end of Blackburn’s fourth year, Ayudhya Allianz had moved from twenty-fourth in revenue among Thai insurance companies to second, and it was first in terms of new policies underwritten (i.e., growth rate).
Blackburn was already an experienced change agent when he assumed control of Ayudhya Allianz. The effectiveness of his actions is perhaps best explained by viewing them from the perspective of change theory. In their landmark study of hundreds of different approaches to changing a person’s behavior, Kenneth Benne and Robert Chin separated them into three categories: the rational-empirical (using data and logic), the normative–re-educative (educating people to look at things differently), and the power-coercive (forcing conformance).9 Collectively, Blackburn’s actions covered all three categories. His rational-empirical tactics were to show managers the benefits of ideas through idea fairs and engaging them in choosing idea campaign themes. His normative–re-educative tactics, all designed to get his managers to change their perspectives and ways of thinking, were manifested in the new training programs he created and in his tearing down walls, locating managers close to their charges, and promoting ideas through lavish celebrations. And, of course, holding his managers accountable for their idea management performance was a power-coercive approach.
Whatever the mix of tactics you choose to work on your managers’ mindsets and behaviors, your efforts will have a much better chance of success if you use a synergistic balance of Benne and Chin’s three dimensions of creating change. In the rest of this chapter, we describe some effective tactics in each area.
The Rational Approach: Building the Case for Ideas. One of the most common questions we are asked by people who are interested in starting an idea system in their organizations is how to convince (possibly reluctant) senior managers that it is worth doing. If senior managers have never been exposed to a high-performing idea system, they may find it difficult to imagine what one can do for their organization. Consequently, an effective first step is to expose senior managers to a sizeable quantity of good ideas from their own employees.
At Big Y World Class Market, one of the largest independently owned supermarket chains in New England, CEO Donald D’Amour came up with a very effective tactic to do just this for his leadership team. During the pilot stage of his idea system, he held monthly leadership meetings for the sole purpose of reviewing all the ideas submitted in the three pilot stores and assessing how they had been handled. Over the six-month pilot, the senior leaders looked at hundreds of implemented ideas. Even though most of them were small, it was clear that their cumulative impact was huge (a small sample of these ideas is given in Chapter 7). This process convinced the leadership team that an idea system would be an enormous help in meeting their company’s goals. It forced them to engage with the new idea process and confront the changes they would need to make in management systems or policies that interfered with the flow of ideas. It also gave them a fresh appreciation of what was taking place on the front lines in their stores.
For example, one of the first ideas was from a woman in the deli department. It had to do with the numbered tickets that customers pulled from a dispenser to get their place in line for service. The problem was that when she finished serving one customer, before turning to the next, she had to walk twenty feet down to the end of the counter to hit the button to advance the overhead sign to the next customer’s number. She pointed out that this meant that her first action as the next customer stepped forward was to turn her back and walk away, starting that person’s service experience off on a negative note. Her idea was to put three buttons spaced along the deli counter so employees could conveniently press one while beginning to serve the next customer. D’Amour used this idea frequently in his meetings with directors across the company to show them how a very simple idea—one that was most readily seen by someone directly serving the customers—made the employees’ jobs easier and more productive while improving customer service.
D’Amour was a champion of the idea system from the outset. He took on himself the task of winning over the other members of his leadership team. Although rare, such championing from the top certainly makes all the change involved a lot easier. More often the initial championing comes from midlevel managers with much less power. But they can still find ways to put large numbers of employee ideas in front of their senior leaders.
We recently watched a middle manager at a large European insurance company use this tactic with his superiors. The company had been using an electronic suggestion box that was averaging 0.2 ideas per person per year with an 8 percent implementation rate. Although the CEO dutifully attended the annual awards banquets and said all the right things, he was hardly a champion of employee ideas. Worse, at least half the company’s leadership team was openly hostile to investing any effort whatsoever in eliciting employee ideas.
It was obvious that the idea system needed to be scrapped and a new one created. After some persuasion, the CEO gave this middle manager permission to develop and pilot a new process. Within two months, some of the six pilot areas were averaging more than one implemented idea per person per month—750 times more than before. The middle manager selected a sample of 30 ideas, listed them on a single “idea sheet” (much like Table 1.1), and met with the CEO and COO.
As he walked them through the ideas, their excitement mounted. Most of the ideas were small but were obvious improvements and easy to implement. Taken collectively, they clearly had a significant impact on performance. The two men could now envision the significant benefits of a company-wide idea system. At the CEO’s request, over the next few days, the middle manager met with all members of the leadership team individually, showing them the idea sheet and letting them see its implications. Soon afterward, the CEO began championing employee ideas regularly in his talks around the company.
Reeducating Managers. Although some leaders can be convinced of the value of front-line ideas when exposed to a large number of them, such exposure alone is rarely enough for a person to overcome years of entrenched bad habits and to change his or her management style. A deeper intervention is needed, the nature and extent of which will vary depending on where the manager sits in the organization’s hierarchy and exactly how much that person’s behavior and attitude need to change.
For lower-tier managers, who are closer to the front lines, installing new idea processes combined with a day or two of thoughtfully designed training, followed by a short-term regime of coaching, is usually sufficient. But sometimes a little more help is needed. For example, during the pilot-testing of its new idea system, a U.K. financial services company was experiencing a huge variance in performance between the different pilot areas. While several supervisors were doing quite well, the majority were struggling. After looking into the reasons behind this variance, it appeared that the two dominant factors were (1) the supervisor’s attitude toward front-line ideas and (2) the supervisor’s skills in idea management, particularly in idea meeting facilitation, coaching team members, and problem solving. To address these areas, an in-house certification program for idea management was designed for supervisors. To become certified, candidates had to attend two day-long training seminars, work through two books on idea management, and pass two online examinations on these books. A minimum of three of their idea meetings (this process is explained in Chapter 5) had to be observed by trained idea coaches, who provided structured feedback and had to “sign off” on each candidate’s ability to lead effective idea meetings. Certification was awarded only after the supervisor’s team had implemented at least one hundred ideas.
Note how effectively this certification program addressed both factors that had been identified. First, the skills gap was addressed by training—training that was put to use immediately, then backed up with observation and coaching. The online examinations made sure that the managers had read the books and understood the material. And then there was the test of supervisors’ idea management skills through their teams’ actual performance—that is, the requirement for one hundred implemented ideas. This requirement also helped to address the second issue: the supervisor’s attitude. By the time a supervisor’s team implements one hundred ideas, the supervisor should have come to appreciate the value of front-line ideas, become comfortable working with them, developed the right habits to encourage and stimulate them, and created a successful team that uses the idea process effectively in its daily work. In short, the supervisor should have become a true believer.
Ironically, most of the skills a supervisor needs to effectively manage ideas are skills that any supervisor should have anyway: listening, coaching, communicating, facilitating meetings, and leading improvement activities. Unfortunately, in organizations where supervisors’ jobs are to give orders and assure compliance with them, they can slide by without many of these skills. But in idea-driven organizations, any shortcoming in these skills will quickly become obvious, as it will be reflected in their team’s idea performance.
It is much more challenging to transform the thinking of recalcitrant higher-level managers and executives who don’t see the value in front-line ideas. They are generally successful people who have built careers around the very habits and thinking that now hold them and their organizations back, on top of which they are suffering from the debilitating effects of having power. Consequently, they are often less open to new leadership concepts, and a deeper intervention is necessary. One of the more effective methods, in our experience, is a guided reading course for the company’s top leadership.10
A few years ago, a prestigious national laboratory was struggling and risked possible closure. As part of a plan to cut costs and increase performance, its director brought us in to help set up an idea system. During our assessment, a number of issues were identified that were also primary contributors to the laboratory’s overall poor performance. Many of these issues ultimately stemmed from the lab’s promotion practices. For decades, its scientists had been selected for promotion into management positions based on their scientific prowess rather than their management skills. A further complication was that the leadership team members had a very low opinion of management as a profession, and they saw management training as silly and shallow. But they were open to a guided reading course, based on serious management books, which would give them the opportunity to explore new thinking and discuss how it might help to address some of the lab’s substantive issues.
The first book, Good to Great, was selected partially because we felt the leadership team members (all scientists and engineers) would respect author Jim Collins’s data-driven approach to discovering the elements needed to transform a good organization into a great one.
One of these elements, for example, is the importance of “confronting the brutal facts.” An early homework question was “What are the most important brutal facts this leadership team is not confronting?” When the replies came back, they collectively identified that the lab’s hiring and promotion processes focused on the wrong skills, and no one at any level was being held accountable for his or her performance.
Another of the book’s main points was the importance of defining a simple and clear focus for the organization—the so-called hedgehog concept—and then to ruthlessly stop doing anything that was not within this focus. After considerable debate, the leadership team realized that the laboratory was not even close to having such a focus. Over the decades, it had grown haphazardly as disparate opportunities arose, and resources were now being dissipated across a host of unrelated programs and institutes.
In total, the leadership team studied seven books over a six-month period. By the end, the change in mindset of its members was profound, and they became a much more effective team. Among other things, they completely overhauled the HR process, developed a hedgehog concept that helped them prioritize projects, and set up an idea system.
When properly designed and used in the right context, reading courses can be highly effective. They can be customized to address the exact changes that are sought, and the pedagogy respects the complexity of leadership, the sophistication and judgment of the participants, and the need for them to discuss and debate how the concepts apply to their organizations. The readings and robust dialogue also create the common understanding and vocabulary that is a prerequisite for better teamwork.
However, reading courses are not risk-free for the participants. With the quality of each executive’s thinking on display to colleagues and superiors, inflexibility and poor thinking are quickly exposed. The discussions also bring out areas of fundamental disagreement between managers. A skilled moderator can be important to minimize excessive conflict and draw out the key lessons.
Keeping managers in touch with the front lines. Even when managers believe that their people have good ideas and can be counted on to make good decisions about them, with all the power-related situational forces working to distance them from the front lines, their conviction will need ongoing reinforcement. This is one of the reasons that leaders of idea-driven organizations develop mechanisms to keep their busy managers engaged with front-line people and their ideas:
John Boardman, the CEO who led Dubal (an aluminum producer in Dubai with three thousand employees) to become one of the most idea-driven companies in the Middle East, developed a recognition process designed to regularly expose his managers to large numbers of excellent front-line ideas. Annually, first-, second- and third-place awards were given for the best ideas in more than a dozen categories. Each department was expected to nominate one idea in each applicable category. The clever part of Boardman’s scheme was the composition of the judging teams. Every upper manager, including Boardman himself, served on at least one team. To evaluate the ideas, the teams had to visit each department to hear presentations from the people whose ideas had been nominated and to see the results of these ideas firsthand.
Toyota has long been an idea-driven organization. One of its core management concepts is the importance of managers at all levels regularly “going to gemba” to stay in touch with what is going on there. Gemba is Japanese for the actual place where the real work is done (i.e., the front lines). At Toyota, managers and employees are taught that everything that really matters happens at gemba.
ThedaCare, an idea-driven health care system in Wisconsin, is widely recognized for the superior clinical results it delivers at costs significantly lower than the industry average. Every manager, even the CEO, must spend several hours each week at gemba as part of his “leader standard work,” learning about issues, listening to ideas, and coaching. A concept from lean, leader standard work generally refers to a checklist of regular tasks that leaders must do to support improvement activities.
The value of keeping managers engaged with the front lines is greater than simply making them supportive of front-line ideas. It also helps them make much more informed decisions on major issues. Consider the following example from ThedaCare.
ThedaCare holds its Thursday morning leadership team meetings at a different one of its hospitals or clinics each week. Immediately following each meeting, the senior leaders each take a gemba walk in a different part of the facility. After one meeting held at the ThedaCare Clark Hospital, CEO John Toussaint decided to take his walk through the intensive care unit (ICU). He approached a nurse and asked if he could shadow her for about half an hour as she went about her work. She was happy to oblige.
The nurse’s first stop was the room of an automobile accident victim. The patient was still unconscious, and three worried family members were huddling in a corner of the small room trying to stay out of the way as the nurse went about her work. Toussaint watched as the nurse had to go around the bed, twist and lean awkwardly over a shelf to adjust the patient’s oxygen, and then a little while later do it again to check the suction tubes that were keeping the patient’s airways clear. Both control and connection panels were attached to the wall in unwieldy positions. And while working with this awkward setup, she had to be careful to work around the IV pole, lines, and pumps.
Toussaint quickly realized that the ICU rooms were very poorly designed for modern medical care. They had been built many years before and were far too small to provide efficient care using modern technologies and methods. In addition, the movements the nurses needed to go through because of the space constraints and poor layout meant they could easily be injured. Furthermore, there was not enough room for family and visitors, who were important for the patients’ morale and comfort.
Ironically, at that morning’s leadership team meeting a $90 million renovation and construction project for the ThedaCare Hospitals had been discussed. Toussaint was about to take the proposal to the board of directors for approval. The project involved a major redesign of the facilities as part of a new “collaborative care” initiative. The pilot of this program had demonstrated significant improvements in the quality of health care delivered, and at a much lower cost. But the ICU, which was not directly related to the collaborative care delivery model, had been cut from the project. Immediately after leaving the ICU, Toussaint called ThedaCare’s president and asked her why the ICU was not included in the proposal. The answer was for budget reasons—it would add $4 million to the proposal. But after a short discussion, they both agreed to add the $4 million for a new ICU back into the proposal. There was little difference, after all, between borrowing $90 million and $94 million.
In the end, the new rooms were more than double the size of the old ones, and they were designed to support the clinical process redesign as well as integrate the latest technologies in ways that made the work of the staff much easier and more efficient. Special lifts attached to the ceilings reduced injuries when transferring patients in and out of bed. Cabinets were installed so that regularly needed supplies could be stored in the rooms and resupplied by dedicated support functions on daily rounds, and medications could be delivered directly to the rooms where they would be used rather than to the nursing station. The rooms also had extra-wide doors and enough space to wheel in special equipment so a number of common tests and procedures—such as ultrasounds, electrocardiograms, and endoscopy—could be conducted right in the rooms rather than requiring patients in critical condition to be moved to other parts of the hospital.
The new rooms resulted in a significant improvement in productivity and increases in both patient and family satisfaction. In addition, the hospital was no longer requiring its front-line people to work in ways that could easily cause them injury. All this started with Toussaint shadowing a nurse on his weekly visit to the front lines.
As Key Fujimura, director of Continuous Improvement and Quality at Crane & Co., the high-end paper maker, once said to us, “When you go down to the front lines to see for yourself, you can use all five senses to decide if ideas are any good.”
Unfortunately, many top-level managers make their decisions primarily on the financial numbers. As UCLA professor Theodore Porter wrote in his 1995 book Trust in Numbers, numbers are the language of distance. The problem with a myopic focus on numbers is that it shuts out the richness of the knowledge that comes from the front lines. “What is the financial return on that idea?” is often not the smartest question to ask. While cost-benefit analysis (CBA) is certainly useful, it deals with only part of the story—and often not the most important part.
A National Academy of Sciences study found that while CBA can accurately predict the effect of simple decisions, it is a poor technique for more complex ones, particularly for those with intangible and unpredictable elements.11 Even its inventor, the French engineer-economist Jean Dupuit, warned of the limitations of CBA in his classic 1844 paper.12 He cautioned that it would be easy for decision makers to take the numbers as gospel and not think past them. Because of these limitations, Dupuit stressed, CBA should be used to inform decisions, not to make them.
Applying Power: Accountability for Idea Performance. If an organization wants its managers to encourage and implement large numbers of front-line ideas, it needs to hold them accountable for doing so, just as it would for any other aspect of their performance. This can be done in a variety of ways, ranging from light social pressure to complete integration of idea performance into the organization’s performance appraisal processes.
One of the lighter forms of accountability is transparency. When managers’ idea performance is public and can be compared with their peers, and they know their bosses are watching, they will start paying more attention to ideas. A number of years ago, during a visit to a division of Air France, one of the authors noticed that one of a handful of graphs displayed in its lobby showed the number of implemented ideas in each of the division’s eight units for the previous quarter. There was considerable disparity in the height of the bars, and each bar had the unit manager’s name underneath it. The author asked the managing director what was done with this information. “Nothing,” he replied. “You have to understand that it is impossible to become a senior manager without being very sensitive to what your boss is thinking. Just the fact that I have posted this data means that the situation will be totally different next year.”
Transparency can also be used to hold managers accountable to their subordinates when it comes to following through on ideas. We found a good example of this at Scania, the Swedish truck maker, where ideas escalated from front-line idea boards are posted on higher-level boards for managers to work on. All the boards, up to and including the leadership team’s, are public so that everyone can easily see the progress of escalated ideas. This idea-by-idea transparency gives managers a powerful inducement to follow through on the ideas that come to them. Their employees are watching! (We will discuss the Scania system more in Chapter 5.)
Transparency alone, of course, does not create full accountability. For this, managers who do not do well at getting ideas from their people should face consequences, and managers who do well should be recognized and rewarded.
A number of years ago, the new CEO of Siemens VDO created strong accountability for ideas in a relatively simple way. Early on, he met with his idea system manager and told him that he wanted at least fifteen implemented ideas per person throughout his global organization of forty-four thousand people. The idea system manager came up with a simple Pareto-type chart that displayed the idea performance of each of the ninety-five business units (an illustrative version with fewer and fictional locations is shown in Figure 2.1). This chart became one of the CEO’s favorite tools when reviewing his business directors’ performance. When showing it to us, the idea system manager pointed to the laggards in the bottom right of the graph and commented, “When the CEO gets this chart, you do not want to be one of the executives out here.” Similar approaches are used in many idea-driven organizations. As we explain in Chapter 4, it is usually quite straightforward to integrate idea performance into an organization’s regular performance review process and to incorporate it into the criteria used for promotions, raises, and bonuses.
FIGURE 2.1 Idea performance by unit
The most draconian type of accountability we have ever seen was in the late 1980s at Sumitomo Electric in Japan. At the time, the company was averaging some fifteen ideas per person. The CEO’s policy was that any manager—from supervisor to vice president—who did not average at least five ideas per person in his area was ineligible for a raise or promotion for three years.
An idea-driven organization cannot be created or maintained without being led by the right kind of people. But the leaders themselves can only be as good as the structures and systems they set up to govern the way their organizations work. What we turn to next is how to modify these structures and systems so they enable the organization to be idea driven.
KEY POINTS
As managers rise up the hierarchy and gain power, a host of situational forces come to bear on them that reduce their openness to ideas from subordinates. For example, research shows the following:
Power reduces the complexity of a person’s thinking and his or her ability to consider alternatives.
People with power listen less carefully and have difficulty taking into account what others already know.
People with power are less accurate in their estimates of the interests and positions of others, and they are less open to others’ perspectives.
Fighting the negative effects of power takes place on two fronts: (1) how managers are selected, developed, and promoted and (2) keeping managers grounded in what is happening on the front lines.
Idea-driven organizations look for managers with humility when hiring and promoting, and they constantly cultivate it in their managers.
Most of the skills a supervisor needs to effectively manage ideas are skills that any supervisor should have anyway: listening, coaching, communicating, facilitating meetings, and leading improvement activities. But in idea-driven organizations, any shortcomings in these skills quickly become obvious.
Idea-driven organizations develop mechanisms to keep their busy managers engaged with front-line people and their ideas.
“What is the financial return of that idea?” is often not the smartest question to ask. While numbers are certainly important, they tell only part of the story—and often not the most important part. Cost-benefit analysis (CBA) should be used to inform decisions, not to make them.
Idea-driven organizations have mechanisms to hold managers accountable for encouraging and implementing large numbers of front-line ideas, just as they do for any other aspect of their performance.