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How Do You Change An Organizational Culture?Changing an organization’s culture is one of the most difficult leadership challenges. That’s because an organization’s culture comprises an interlocking set of goals, roles, processes, values, communications practices, attitudes and assumptions.

The elements fit together as an mutually reinforcing system and combine to prevent any attempt to change it. That’s why single-fix changes, such as the introduction of teams, or Lean, or Agile, or Scrum, or knowledge management, or some new process, may appear to make progress for a while, but eventually the interlocking elements of the organizational culture take over and the change is inexorably drawn back into the existing organizational culture.

Changing a culture is a large-scale undertaking, and eventually all of the organizational tools for changing minds will need to be put in play. However the order in which they deployed has a critical impact on the likelihood of success.

In general, the most fruitful success strategy is to begin with leadership tools, including a vision or story of the future, cement the change in place with management tools, such as role definitions, measurement and control systems, and use the pure power tools of coercion and punishments as a last resort, when all else fails.

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Frequent mistakes in trying to change culture include:

Overuse of the power tools of coercion and underuse of leadership tools. Beginning with a vision or story, but failing to put in place the management tools that

will cement the behavioral changes in place.

Beginning with power tools even before a clear vision or story of the future is in place

These lessons are evident in successive efforts to change the organizational culture of the World Bank over a period of almost half a century.

The challenge of culture change at the World Bank

The World Bank represents a particularly difficult case of organizational culture change. Its formal goal—development—is ambiguous. The institution itself is a peculiar mix of a philanthropic foundation, a university and a bank. As an international organization, it is owned by the governments of the world, with a resident board of directors and their staffs who are ever present and ready to second-guess the management.

In a broad sense, the World Bank is a great success. It’s easy to forget that fifty years ago, India, China and Korea were seen as basket cases requiring Western charity in perpetuity: today, they are independent economic powers in their own right, as a result in part to the implementation of economic policies that the World Bank has been coaching them over many years.

But the remaining development problems in the poorest countries, particularly in Africa, remain intractable. And the new global issues such as the environment present new challenges for the World Bank to play a different role from the past.

Successive presidents have come and tried to change it, mostly with little success.

Robert McNamara: World Bank President 1968-1981

The most successful president by far in terms of changing the culture was Robert McNamara. After a career at the Ford Motor Company, of which McNamara became head in 1960, he was the U.S. secretary of defense from 1961 to 1968 and president of the World Bank from 1968 to 1981.

His most lasting accomplishment at the World Bank is, for better or worse, that he introduced hierarchical bureaucracy, with its attendant goals, roles, accountabilities, values and communications.

And we know how he did it. On his arrival at the World Bank in May 1968, McNamara quickly took charge. John Blaxall, a young economist at the time, recalls being summoned to McNamara’s office shortly after his arrival, being handed a stack of annual reports, and asked to assemble multiyear financial statements—something that hadn’t been done before. McNamara penciled in his left-handed scrawl on a white-lined pad the headings that he wanted. The columns

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across the top were the past five fiscal years, and the rows were the standard balance sheet and income statement items. How soon could he have it ready? Blaxall gave him a date and observed with concern that McNamara carefully wrote it down

Within six weeks, McNamara had a set of tables covering all major aspects of the Bank Group’s activities, with totals for each five-year period and detail for the past five years. Blaxall recalls McNamara poring over the sheets full of numbers, exclaiming with some animation: “This is really exciting, John!”

McNamara then asked the senior managers in the President’s Council of the bank to fill in the numbers for the next five years for the activities under his responsibility. The immediate reaction was that it couldn’t be done, to which McNamara replied that they should do it anyway—and have it ready within a month.

It is not surprising that the five-year lending plans submitted by the geographical units had little correspondence to the five-year plans prepared by the technical units. And the financial projections put forward by the disbursement department were unrelated to either.

It was at this point, in early summer 1968, that McNamara announced to the senior managers that in the future, the World Bank would have only one sheet of music from which everyone would play. Ensuring the necessary consistency would be a key role of the programming and budgeting department. The game plan was not a narrative but rather a set of standard tables—a bunch of numbers—through which McNamara managed the organization for the next thirteen years.

As a result, McNamara transformed the World Bank from a small, sleepy, financial boutique into a large, bustling, modern corporation, expanding lending more than tenfold in the course of his thirteen-year tenure. He dramatically increased the World Bank’s role in agriculture and education and opened up new lines of business in health, population, nutrition, and urban development. He articulated a new role for the World Bank in alleviating global poverty, passionately calling attention to the plight of the poorest 40 percent of the world’s population who had been essentially untouched by development lending. But his most lasting accomplishment is that he introduced hierarchical bureaucracy.

It’s interesting to note what McNamara didn’t do to bring about the culture change:

He didn’t change the managers or bring in his own staff. He basically worked with people who were already there. When he needed something he couldn’t get from the existing management, he drew on young people from within the organization like Blaxall.

He didn’t start by reorganizing: It was only four years after his arrival (in 1972) that McNamara finally got around to a reorganization, which was needed in any event because the organization had grown so much. By this time, his management systems and philosophy were firmly in place.

McNamara thus arrived with a clear vision for the organization: it was to be a lending organization that was lending a great deal more money. He had a clear idea of the management he wanted introduced: hierarchical bureaucracy. He introduced systems and processes that

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focused everyone’s attention on his vision of the World Bank as a rapidly growing lending organization and the type of management required. Those systems are still largely in place today and still guide management action.

Tom Clausen: 1981-1986: Strategic planning

Tom Clausen came from being head of the Bank of America, in which role he was named as the “best manager in America”. After his stint at the World Bank, he returned to the Bank of America, where he was once again voted “best manager in America”.

However at the World Bank, he found it difficult to make his mark. He spent much of his time trying to figure out how the organization functioned. He could see that the organization lent a great deal of money, but the goal of lending—development—remained fuzzy.

Clausen’s response was to launch a major strategic planning exercise, of which the end result, like most such corporate exercises, was essentially to continue with “more of the same”.

Clausen relied principally on management tools, and lacked any clear vision of where he wanted the organization to go. As a result, it kept going in the same direction.

Barber Conable: 1986-1991: Reorganization

Barber Conable’s background as a Republican congressman from New York led him to approach his new job as a political challenge. The organization that he inherited had become slow, bureaucratic and unresponsive to its stakeholders. Conable’s response was a massive reorganization, combined with mild downsizing. The hope was that the reorganized organization would emerge lighter, nimbler and more client-focused. The reality was that the old culture quickly reemerged, despite the new managers and the new structures. The culture easily survived.

Here the reliance of power tools resulted in short term disruption but no long term change.

Lew Preston (1991-1995) came from being head of JP Morgan. As a banker, he accepted the World Bank as a bank, and in the four years that he served as president, he made no significant effort to change it.

James Wolfensohn: 1995-2005: New structure, new managers

James Wolfensohn came from a career of investment banking. Unlike his predecessors, he had spent a number of years thinking about the World Bank and in fact trying to become its president. He was a candidate when McNamara retired in 1981, but he was told he was ineligible as an Australian citizen. He adopted U.S. nationality and succeeded in becoming president in 1995.

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Upon his appointment, it was reported in the press that he intended to remove the entire cadre of senior managers. He denied the report at the time, but over the next couple of years, he did exactly that.

He also launched a massive reorganization that preoccupied managers and staff for several years, though as in earlier reorganizations, the culture re-emerged largely unscathed from the experience, despite the changes in personnel and structures.

More importantly, he also took steps to clarify the goal of the organization. In 1996, he espoused knowledge management as a strategic goal of the organization, calling it “the Knowledge Bank”. (I served as director of knowledge management from 1996-2000.)

In 1998, he succeeded in introducing a World Bank mission statement—the first in its entire life.

To fight poverty with passion and professionalism for lasting results. To help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors.

The goal was for the first time clearly focused on fighting poverty. However as all of the management systems and processes remained focused on getting out the lending program, the mission statement has still had little operational impact.

Thus Wolfensohn’s ten-year term was marked by a lot of energy and effort to introduce change. The organization became more decentralized, with a younger and less experienced staff, but not fundamentally different. It was a still a bank lending money for development, in accordance with the systems that McNamara had put in place almost forty years before.

Wolfensohn did have a vision for the organization as an organization dedicated to relieving poverty, but failed to put in place the management systems that would support and reinforce that vision.

Paul Wolfowitz: 2005-2007: New blood from outside

As a leading neoconservative, and Deputy Secretary of Defense, Paul Wolfowitz was a major architect of President Bush’s Iraq policy and its most hawkish advocate. His appointment as president of the World Bank was controversial.

Wolfowitz arrived with a change agenda to move the organization towards a more conservative stance. He tried to do this by bringing on board some of his neoconservative lieutenants as managers. By and large, the organization, which has no tradition like the US government of bringing in new managers from outside, responded like an immune system reacting to invading pathogens.

In effort to identify and put an end to corruption, Wolfowitz brought on two US nationals formerly with the Bush administration, whom he appointed as close advisors to flush out fraud. Their work proved divisive.

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Another appointee ran into problems when he tried change policies on family planning and climate change towards a conservative line.

After serving a tumultuous two years, Wolfowitz resigned, following revelation of a promotion that he had arranged for his companion. Obviously, a personal scandal brings any change effort to a screeching halt.

Robert Zoellick: 2007-to date

After the tumult of the brief Wolfowitz era, Zoellick’s calm tenure with no bold moves was a relief to many. His recent discovery of the World Bank’s role in providing data to the world shows how long it can take an incoming president to understand, let alone manage, this intricate organization. As he enters the final year of his five-year term, there is no indication from President Obama as to whether he wants the former Bush hand to stay on. Zoellick has made no statement about his own plans.

Meeting the challenge for the future

As of mid-2011, the World Bank remains a slow-moving traditional hierarchical bureaucracy, with an inward-looking perspective. The mission statement of 1998 dedicating the organization to the relief of poverty is largely unsupported by the management roles, systems and structures which still drive the organization to focus mainly on lending for individual development projects. While filled with talented staff, the organization as a whole is underperforming. It lacks the agility to cope with the diverse challenges that the world now faces.

Overall, the World Bank is desperately in need of a radical change in management. If no change occurs, it will become less and less relevant.

Lessons for the next president

If the next president is to achieve the needed change, he or she should learn from the success of Robert McNamara and the failures of his successors, as well as other successful change efforts in large organizations, such as Alan Mullaly at Ford [F] or even Steve Jobs at Apple [AAPL]:

Do come with a clear vision of where you want the organization to go and promulgate that vision rapidly and forcefully with leadership storytelling.

Do identify the core stakeholders of the new vision and drive the organization to be continuously and systematically responsive to those stakeholders.

Do define the role of managers as enablers of self-organizing teams and draw on the full capabilities of the talented staff.

Do quickly develop and put in place new systems and processes that support and reinforce this vision of the future, drawing on the practices of dynamic linking.

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Do introduce and consistently reinforce the values of radical transparency and continuous improvement.

Do communicate horizontally in conversations and stories, not through top-down commands.

Don’t start by reorganizing. First clarify the vision and put in place the management roles and systems that will reinforce the vision.

Don’t parachute in a new team of top managers. Work with the existing managers and draw on people who share your vision.

A while back, a colleague asked me why leadership storytelling is important. I came up with the following list:

- Storytelling is a key leadership technique because it’s quick, powerful, free, natural, refreshing, energizing, collaborative, persuasive, holistic, entertaining, moving, memorable and authentic. Stories help us make sense of organizations.

- Storytelling is more than an essential set of tools to get things done: it’s a way for leaders – wherever they may sit – to embody the change they seek. Rather than merely advocating and counter-advocating propositional arguments, which lead to more arguments, leaders establish credibility and authenticity through telling the stories that they are living. When they believe deeply in them, their stories resonate, generating creativity, interaction and transformation.

- Storytelling is often the best way for leaders to communicate with people they are leading. Why? It is inherently well adapted to handling the most intractable leadership challenges of today – sparking change, communicating who you are, enhancing the brand, transmitting values, creating high-performance teams, sharing knowledge, taming the grapevine, leading people in to the future.

- Storytelling translates dry and abstract numbers into compelling pictures of a leader’s goals. Although good business cases are developed through the use of numbers, they are typically approved on the basis of a story—that is, a narrative that links a set of events in some kind of causal sequence.

- Storytelling is a crucial tool for management and leadership, because often, nothing else works. Charts leave listeners bemused. Prose remains unread. Dialogue is just too laborious and slow. Time after time, when faced with the task of persuading a group of managers or front-line staff in a large organization to get enthusiastic about a major change, storytelling is the only thing that works.

- Storytelling can inspire people to act in unfamiliar, and often unwelcome, ways. Mind-numbing cascades of numbers or daze-inducing PowerPoint slides won’t achieve this goal. Even logical arguments for making the needed changes usually won’t do the trick. But effective storytelling often does.

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- Storytelling works better than the “Just tell ‘em” approach in most leadership situations. Management fads may come and go, but storytelling is a phenomenon that is fundamental to all nations, societies and cultures, and has been so since time immemorial.

- Narrative is the instrument of continuing creativity, a power that inexorably propels us forward into the future, the unknown, building new worlds and structures.

- Storytelling is part of the creative struggle to generate a new future, as opposed to conventional management approaches that search for virtual certainties anchored in the illusive security of yesterday.

- Narrative can help transform even gargantuan organizations through the unanticipated power of the imagination. It has the capacity to change tangible, hard realities through no more than airy nothings, mere gauzy thoughts.

- Narrative champions freedom, interaction, and organic growth. It operates beyond the scope of simple, linear logic. It is as interested in the unknown as in the known.

- Narrative is a key tool for leadership, because it helps us deal with organizations as living organisms that need to be tended, nurtured and encouraged to grow. It thrives on inspiration rather than administration, fostering change rather than stasis.

- Storytelling liberates innovation, by generating the energy needed to change.

- Narrative helps us make sense of a world that is rapidly mutating, as compared to conventional management, which is more suited to a activities that are stable, linear and predictable.

- Narrative is interested in the next generation of change, not just an extrapolation of the present. It copes with swirling, new, emergent phenomena and phase changes that by definition escape the predictable frame of yesterday’s conceptions.

- Narrative helps us cope with a future that is evolving unpredictably. Conventional management techniques miss the fact that we cannot measure tomorrow when we don’t know what it will involve.

- Narrative is the natural instrument of change, because it draws on the active, living participation of individuals. It dwells in the experience of the people who act, think, talk, discuss, chat, joke, complain, dream, agonize and exult together, and collectively make up the organization. By contrast, conventional management focuses on lifeless elements – mission statements, formal

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strategies, programs, procedures, processes, systems, budgets, assets – the dead artifacts of the organization.

- Narrative is a tool that gives privileged access to the living part of an organization, and so can be used to elicit decisions to create organizational artifacts and generate support for them.

- Narrative is a tool for the instigators of change, who aim at continuing transformation and the creation of a fruitful tomorrow. Those whose goal is merely that of control will find that storytelling is not a very useful or important tool. For them, the important thing is accommodation to the preoccupations of a well-behaved yesterday.

- Storytelling is more than just a tool. It is beyond any implement–almost a requirement of being alive. Insofar as it has anything to offer, it generates fresh depth and breadth of perception. It enables us to surmount a humdrum world where everything makes sense and is logical, and get to that realm where deeper meaning is revealed.

- When we hear a story that touches us profoundly, our lives are suffused with meaning. As listeners, we have transmitted to us that which matters. Once we make this connection, once a sense of wonder has come upon us, it does not last long, and we inevitably fall back into our daze of everyday living, but with the difference that a radical shift in understanding may have taken place.

- A story is something that comes from outside. But the meaning is something that emerges from within. When a story reaches our hearts with deep meaning, it takes hold of us. Once it does so, we can let it go, and yet it remains with us. We do not weary of this experience.

- Once we have had one story, we are already hungry for another. We want more, in case it too can transmit the magic of connectedness between the self and the universe.

- Through narrative, we can let go the urge to control, and the fear that goes with it, learning that the world has the capacity to organize itself, recognizing that managing includes catalyzing this capacity, as well as sparking, creating, energizing, unifying, generating emergent truths, celebrating the complexity, the fuzziness and the messiness of living.

To learn more about leadership storytelling, read the second edition of my book, The Leader’s Guide to Storytelling: Mastering the Art & Discipline of Business Narrative, which was published in March 2011.

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The Reinvention of Management: Part 2: How do you delight the client?

In an earlier post entitled The Death—and Reinvention—of Management: Part 1, I noted that current management practices represent a set of economic, social and political problems of the first order, which cannot be resolved by a single fix, such as getting more employee buy-in[1], or instilling a sense of urgency,[2] or introducing new technology platforms.[3]

Instead, a whole host of business leaders and writers, including Umair Haque, John Hagel, John Seely Brown, Lang Davison, Rod Collins and Ranjay Gulati, are exploring a fundamental rethinking of the basic tenets of management. Among the most important changes being proposed are five basic shifts in management practice:

1. The firm’s goal (a shift from inside-out to outside-in).

2. Role of managers (a shift from controller to enabler).

3. Mode of coordination (from command and control to dynamic linking).

4. Values practiced (a shift from value to values).

5. Communications (a shift from command to conversation).

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In this continuing series of posts, I will explore in more detail the models, capabilities and processes needed to accomplish these five shifts.

I begin with the first shift, i.e. the shift in the firm’s goal from one of delivering goods and services so as to generate value to shareholders to single-minded focus on delighting the client i.e. a shift from inside-out to outside-in. Subsequent posts will explore implementation of the other four shifts.

Shift #1: New goal: Delighting customers

In the 20th Century, firms got by on profits. In today’s more competitive world, profits can vanish overnight with the entry of a new product or service into the marketplace. Making profits is obviously required for survival, but if profits are all a firm has, it faces a precarious future. The true bottom line of any business—and the key to an enduring future—is whether customers are delighted. Delighting customers means continuously providing new value for customers sooner, so that they are willing to buy the firm’s goods and services not just today but also tomorrow. It’s goes beyond mere transactions; it’s about forging relationships. For this to happen, it’s not enough that customers are passively satisfied. That’s just the price of admission to the marketplace. Today, customers must be delighted.

How do you delight customers?

1. Commit: Delighting clients is not a task just for the CEO or the marketing department. Everybody and everything in the organization must be committed to providing more value to clients sooner. All work teams and units must have a clear line of sight as to what they are accomplishing in terms of delighting clients. All systems and processes in the organization must be focused on enhancing client delight.

2. Target. Identify your core market of primary clients: if you can delight this group, you will have a resilient client base. Trying to satisfy everyone practically guarantees average products and services that will not delight anyone.

3. Focus. Aim for the simplest possible thing that will delight buyers. Don't load products down with features that most people won't use and that make the product hard to operate. For instance, my DVD controller made by Sony has 54 buttons, most of which no one in our house knows how to use: it delights no one. By contrast, my iPod by Apple has just four buttons and delights everyone.

4. Read their minds. Meet buyers' unrecognized needs. "The world wasn't asking Apple to make cool-looking MP3 players or arrange an easy, cheap way to download music online. People didn't know they wanted iPods or easy music download services until Apple invented them." says Chip Conley, author of Peak (Jossey-Bass, 2009) Apple did some mind reading with respect to what their customers (or potential customers) would love, but didn't know could be available. And Apple keeps surprising us. For example: the iPad.

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5. Innovate in stages: Launch the product or service with the key features that primary clients want, and then add selectively through upgrades. Apple’s iPhone initially lacked many features of existing Smartphones, but it delighted its core group of customers—young users who wanted a cool mobile phone; the other features were added later.

6. Evaluate: Don’t just add features. Following every customer suggestion can lead to a client-driven death spiral. As more and more customer requests are met and features are added, the product can become unlovable or even unusable. Make sure that each upgrade really does delight.

7. Customize: Harley-Davidson isn’t merely building reliable motorcycles. It aims to fulfill the dreams of its customers through the motorcycle experience. If that means going beyond the signature full-throated roar of their Harley and enabling the Harley owners to embellish their vehicles with grassroots folk art, the company will help them do it.

8. Partner with customers: Companies can enhance delight by partnering with buyers. For example, Quadrant Homes, a division of Weyerhaeuser doesn’t build homes and then try to sell them, Quadrant sells homes before building them and involves buyers in each step of the design. The customer can choose from multiple footprints and floor plans. The result is high demand in a weak market and strong word-of-mouth advertising.

9. Empower: To please customers, make sure frontline workers have the power to make decisions on the spot. Issues are resolved faster. Everyone in the organization must be inspired to thinking all day and every day: what can I do give more value to the customer sooner?

10. Measure: You can’t manage anything unless you can measure it and customer delight is no exception. Fortunately, Fred Reichheld has shown how, with the Net Promoter Score discussed in The Ultimate Question (HBSP, 2006). In most situations, asking a single question—how likely is it that you would recommend this product or service to a colleague or friend?—gives an accurate reading on whether the customer is being delighted.

The shifts are interdependent

Individually, none of the five shifts is new. However what has been learned in recent years is that when one of these shifts is pursued on its own, without the others, it tends to be unsustainable because it runs into conflicts with the attitudes and practices of traditional management.

When the five shifts are undertaken simultaneously, the result is sustainable change that is radically more productive for the organization, more congenial to innovation, and more satisfying both for those doing the work and those for whom the work is done.

[1] Kotter, Buy-In: Saving Your Good Idea from Getting Shot Down (Boston MA: Harvard Business Press, 2010).

[2] Kotter, J. A Sense of Urgency (Boston MA: Harvard Business Press, 2010)

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[3] McAfee, A. Enterprise 2.0, New Collaborative Tools for Your Organization's Toughest Challenges (Boston MA: Harvard Business Press, 2009). The emergence of social media has accelerated horizontal communications both between employees and between customers, underlined the lack of agility of traditional management and helped expose inauthentic organizational behavior. However, the introduction of social media by itself will not resolve the complex set of problems that traditional management currently faces. By itself, technology will reinforce existing behaviors, unless the goals, roles, values and practices also change.

The Reinvention of Management: Part 3: From controller to enabler

In an earlier post entitled The Death—and Reinvention—of Management: Part 1, I noted that current management practices represent a set of economic, social and political problems of the first order, which cannot be resolved by a single fix.

Instead, a whole host of business leaders and writers, including Umair Haque, John Hagel, John Seely Brown, Lang Davison, Rod Collins and Ranjay Gulati, are exploring a fundamental rethinking of the basic tenets of management. Among the most important changes being proposed are five basic shifts in management practice:

1. The firm’s goal (a shift from inside-out to outside-in).

2. Role of managers (a shift from controller to enabler).

3. Mode of coordination (from command and control to dynamic linking).

4. Values practiced (a shift from value to values).

5. Communications (a shift from command to conversation).

In this continuing series of posts, I explore in more detail the specific practices needed to accomplish these five shifts.

In yesterday’s post, I explored the first shift in terms of the organization’s goal.

I continue here with the second shift—the shift in the role of the manager from controller to enabler.

Principle #2: New role for managers: From controller to enabler

Focusing on continuously adding new value for clients requires a change in the way work is carried out, because a traditional bureaucracy is not suited to innovation. It was designed to produce consistent performance from largely non-skilled workers. To reach the new level of

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performance, the organization has to empower those doing the work in self-organizing teams that are responsible for deciding how the work is to be done. The result is a dramatic shift in the role of the manager from controller to enabler.

How do organizations accomplish this shift? The principal shifts in managerial practices include:

1. Organize work in self-organizing teams: The default model of doing work shifts from individuals reporting to bosses, to organizing work in networks of self-organizing teams who regard their clients as “the boss”, not the manager. The teams are responsible for deciding how much work to attempt in any cycle, and how to do the work.

2. Keep teams small: A key factor in Apple’s success is keeping teams small. According to Google’s chief executive, Eric E. Schmidt, the biggest strategic issue now facing Google is that its teams are too big.[1]

3. Transmit passion for the goal: People only give their very best if they believe that it is worthwhile. A generic form of a compelling purpose is delighting clients. The manager’s role is to create meaning at work (the purpose of the whole organization as a whole is to delight clients) and meaning in work (the purpose of each team in each iteration is to delight its clients). The manager must articulate the goal with clarity, consistency and passion. Unlike the managers described by Abraham Zaleznik in his classic HBR article who communicate by abstract “signals”,[2] managers bring their own personal passion for delighting clients to the workplace.

4. Hire right: Hire people who can share the passion. In hiring, managers must find people who are capable of loving what they are hired to do. These are people who take pride in their work, inspire their fellow workers to greatness, and become the driving force behind the business. There is no way to find and keep such people unless the managers themselves feel the same passion.[3]

5. Transfer Power: Creating self-organizing teams that unleash the talents and creativity of their members requies that management transfer power to the team to decide how to go about the work for the duration of the work cycle. The risk involved in transferring power to the team is manageable as a result of the protections offered by dynamic linking: by working in short cycles, nothing can go too far wrong. In this way, performance is given priority over predictability—the opposite of the bureaucratic practices of traditional management.

6. Hold the team accountable: The transfer in power is conditional on the team actually delivering on delighting clients in each cycle. The transfer of power is thus an offer, for which the team must accept the responsibility to deliver. Then in due course the team is accountable for delivery. It involves creating a setting where a team has an appropriate role in deciding how much work can be done and in removing impediments so that the team gets on a steadily improving trajectory. After standing back and letting the team get on with the job, the team is held accountable for the results as determined by the client.

7. Be patient: Teams go through a process of storming and forming as they develop norms of behavior. In this initial period, management must be willing to persist and not give up at the first

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hiccup. They must help identify and remove impediments. In effect, management must adopt teams as the basic mental model of the way the work is done. Managers must be patient as the team learns.

8. Recognize performance: Recognizing teams that are succeeding in delighting clients is key to sustaining high performance. Recognition is not by itself sufficient, but it is necessary. Good management requires both informal feedback and formal feedback mechanisms that systematically pay tribute to performance that contributes to the overriding goal of delighting clients.

9. Remunerate fairly: Managers must make sure that remuneration is perceived as fair. High-performance teams are driven principally by intrinsic rewards. People will give their best only if they feel the desire to do something because it matters. Research shows that financial rewards–extrinsic motivation–work well only for tasks with a simple set of rules and a clear destination to move toward. Financial rewards, by their very nature, narrow our focus and create tunnel vision. Nevertheless, remuneration has to be part of the picture. The essence of work is that one gets paid for it. Pay thus needs to meet a certain threshold of fairness—fairness in relation to other workers on the team, other teams, other firms, what the managers are making, and what the organization is capturing.

10. Do no harm: Managers are responsible for ensuring that the work is done in a way to protects the environment, that enables the organization to act as a responsible citizen in the communities in which it operates. The organization refrains from pretending that good acts in one area (environmental responsibility absolve it from asocial practices in other areas e.g. employee practices.

Reinventing Management: Part 4: Coordination: From bureaucracy to dynamic linking

In an earlier post entitled The Reinvention of Management: Part 1, I noted that current management practices represent a set of economic, social and political problems of the first order, which cannot be resolved by a single fix.

Instead, a whole host of business leaders and writers, including Umair Haque, John Hagel, John Seely Brown, Lang Davison, Rod Collins and Ranjay Gulati, are exploring a fundamental rethinking of the basic tenets of management. Among the most important changes being proposed are five basic shifts in management practice:

1. The firm’s goal (a shift from inside-out to outside-in).

2. Role of managers (a shift from controller to enabler).

3. Mode of coordination (from hierarchical bureaucracy to dynamic linking).

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4. Values practiced (a shift from value to values).

5. Communications (a shift from command to conversation).

In this continuing series of posts, I explore in more detail the specific practices needed to accomplish these five shifts.

In previous posts, I have described the practices needed to achieve the shift in the firm’s goal to delighting the client and the shift in the manager’s role from controller to enabler.

In this post, I describe the practices involved in the shift in coordinating work: from hierarchical bureaucracy to dynamic linking.

Shift #3: Coordination: from bureaucracy to dynamic linking

Even the best intentions to delight clients or empower staff will be systematically subverted if the work is coordinated through hierarchical bureaucracy. Meshing the efforts of autonomous teams and a client focus while also achieving disciplined execution requires a set of measures that might be called “dynamic linking,” The method began in automotive design in Japan[1] and has been developed most fully in software development with methods known as “Agile” or “Scrum,”[2]

“Dynamic linking” means that (a) the work is done in short cycles; (b) the management sets priorities in terms of the goals of work in the cycle, based on what is known about what might delight the client; (c) decisions about how the work is to be carried out to achieve those goals are largely the responsibility of those doing the work; (d) progress is measured (to the extent possible) by direct client feedback at the end of each cycle.[3]

1. Organize work in short cycles: As the authors of The Power of Pull point out, one proceeds “by setting things up in short, consecutive waves of effort, iterations that foster deep, trust-based

relationships among the participants… Knowledge begins to flow and team begins to learn, innovate and perform better and faster.… Rather than trying to specify the activities in the

processes in great detail…specify what they want to come out of the process, providing more space for individual participants to experiment, improvise and innovate.”[4]

2. The team reports to the client, not the manager: The shift in the organization’s goal from producing goods and services to delighting clients means that the team effectively reports to the client, rather than the manager. The manager’s role is to give the team a clear line of sight to the client. Work is presented to the client or customer proxy at the end of the process of iterations, so

that the team doing the work can experience the reaction. Progress is measured not by whether the boss is satisfied but rather whether value is delivered to clients. Instead of reliance on

progress reports, progress is measured by only in terms of finished work—work that actually delivers value to clients at the end of a work cycle.

3. The team estimates how much time work will take: Unlike traditional management, where managers decide how much work will be done, the team is given responsibility for estimating

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how much time any individual piece of work or story will take. As described in Mike Cohn’s book, Succeeding with Agile, methods involving the use of story points and planning poker can

be used to measure even complex knowledge work that is inherently dynamic and unpredictable.[5]

4. The team decides how much work it can do in an iteration: In knowledge work, the people doing the work are best placed to know what the work entails and what is involved in delivering value to clients at the end of the iteration. In order for work to get done efficiently, people must have the time to do the work that they have committed to complete. To avoid phantom work jams, new work being undertaken must be limited to match capacity. The team itself is given responsibility for determining how much work can be accomplished in an iteration.

5. The team decides how to do the work in the iteration: Unlike traditional management,where managers decide how the work is to be done, management steps aside and draws on the talents, ingenuity, and insights of the cross-functional team to find the best way to attack the task. Managers refrain from interrupting the work during the course of an iteration.

6. The team measures its own performance: The team measures its own velocity and tracks the progress of its own performance. Iterations help establish the cadence of work. Every week, or fortnight, or month, something gets done. After a time, people begin to count on it. They can make plans based on a track record of delivery. The amount of work that can be accomplished in an iteration becomes apparent.

7. Define work goals before each cycle starts: Unlike traditional management, where work begins without clarity as to what completion will entail, radical management entails getting crystal clear on what work is to be attempted in each iteration and then getting out of the way to let the team get on with it.

8. Define work goals through user stories: Unlike traditional management where the goal is defined in terms of the abstract requirements such as the production of goods or services, the goal of work aimed at delighting clients is a client experience. This is normally captured in the form of user stories.[6] As Mike Cohn explains in User Stories Explained, the user story has a standard form: “As a <type of user>, I want <some goal> so that <some reason>. Putting the story in the first person is important, because it draws the team into imagining the client’s situation. The user story is as the beginning, not the end, of a conversation: The written version of the user story is less important than the conversations surrounding the story. It enables the people doing the work to get inside the mind of clients and focus on what might delight them.

9. Systematically remove impediments: In the daily stand-up meetings of a self-organizing team, each member systematically answers three questions: What did I do yesterday? What am I going to do today? What impediments are getting in the way of what we need to accomplish? Often the impediments facing any team will exist not only in the team itself, but also in the context surrounding the team, particularly management actions or the organization’s policies and practices. The willingness of management to encourage the identification of such impediments and take action to remove them is one of the make-or-break aspects of dynamic linking.

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10. Conduct retrospective reviews: Digesting what has been learned in the iteration and how the next iteration can be improved is crucial to the continuous improvement needed to delight clients. At the end of each iteration, the team reviews what has been learned, including impediments that have been identified in the course of the iteration, and decides what improvements are to be explored in the coming iteration.

Reinventing Management: Part 5: From value to values

The paradox of reinvented management: Make more money by focusing less on money

In an earlier post entitled The Reinvention of Management: Part 1, I noted that current management practices represent a set of economic, social and political problems of the first order, which cannot be resolved by a single fix.

Instead, a whole host of business leaders and writers, including Umair Haque, John Hagel, John Seely Brown, Lang Davison, Rod Collins, Ranjay Gulati and Carol Sanford are exploring a fundamental rethinking of the basic tenets of management. Among the most important changes being proposed are five basic shifts in management practice:

1. The firm’s goal (a shift from inside-out to outside-in).

2. Role of managers (a shift from controller to enabler).

3. Mode of coordination (from hierarchical bureaucracy to dynamic linking).

4. Values practiced (a shift from value to values).

5. Communications (a shift from command to conversation).

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In this continuing series of posts, I explore in more detail the specific practices needed to accomplish these five shifts.

In previous posts, I have described the practices needed to achieve the shift in the firm’s goal to delighting the client, the shift in the manager’s role from controller to enabler and the shift from bureaucracy to dynamic linking.

In this post, I describe the practices involved in the shift in the values practice: from a single-minded focus on economic value to shareholders to a broader set of values to dynamic linking.

Shift #4: From economic value to values

When the firm’s goal shifts from making money for shareholders to providing a continuous stream of additional value to customers, there is a necessary shift from a single-minded preoccupation with economic value—efficiency, economies of scale and cost-cutting—to a broader focus on the values that will grow the business by generating innovation and customer delight.

A number of books, including The New Capitalist Manifesto, The Power of Pull, Reorganize for Resilience, Open Leadership and The Responsible Business , point to the need for adherence to values that are aligned with delighting the client, motivating autonomous teams and continuous innovation. Trust, honesty, diversity, and caring for the environment are obviously important and have also been present in traditional management. However two values differentiate the reinvented organization from traditional management and lay the basis for continuous innovation: radical transparency and a commitment to continuous improvement.

Radical transparency

In a bureaucracy, problems can fester for years, or even decades, before anything is done about them. Such unresponsiveness is incompatible with the goal of delighting clients. Radical transparency both within the team and between the team and management, and among the management, is a necessary basis for continuous innovation. Management by enablement and dynamic linking provide some of the practices needed to establish radical transparency, including daily standup meetings, the systematic identification and removal of impediments, delegation to the team of how much work to undertake, and providing a clear line of sight for everyone in the organization to the client. In addition, the following practices are important:

1. Display real-time information: As in the automaker Ford under CEO Alan Mulally and the Danish software developer Systematic under CEO Michael Holm, senior management meets in a room where real-time information is visible to everyone. Similarly at the working level, notice boards in the workspace display what is being worked on, what has been completed, and what remains to be done in the iteration. When information is continuously visible, people can see at a glance where things stand. Public display serves an information radiator.

2. Set priorities at the beginning of each work cycle: Unlike traditional management where work often begins without clear priorities, management needs to provide a unified set of priorities by the start of

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every work cycle. Management normally refrains from making any changes in priorities until the next iteration. The team knows what is expected of it and is free to decide how much can be accomplished and how it should be accomplished. As a result, work is always focused on items of highest priority to the client.

3. Embrace two-sided accountability: If subordinates have failed, managers accept that they have also failed. As management theorist Samuel Culbert says in Beyond Bullsh*t , “The consequence of a failed performance should be personal development, new perspective, improved judgment, skill enhancement, and general all-around learning. If the cohort is one’s boss, so much the better. In a straight-talk relationship, both have the opportunity to learn. Subordinates learn what they need to do differently to achieve desired results, and bosses learn what type of support and guidance the subordinate needed but did not receive.”[1]

Continuous self-improvement

4. Embrace continuous improvement: Unlike traditional management that is based on processes and procedures aimed at producing standardized products, a fundamental assumption of the reinvented organization is that improvement is endless. No matter how well work is proceeding, it can always be enhanced. Hence there is no such thing as “best practice”: every process can be improved. Moreover as Toyota has shown, there is no such thing as “unskilled labor”: there is only work to which intelligence has yet to be applied.[2]

5. Give recognition for identifying impediments: Unlike a bureaucracy where people are punished for pointing out impediments, or a learning organization where people are rewarded for finding solutions, the reinvented organization rewards the identification of impediments, even when no solution is in sight, as Jeffrey Liker and Michael Hoseus explain in Toyota Culture: The Heart and Soul of the Toyota Way [3]

6. Align the team’s interests with the organization: If a team is concerned that any savings it generates will result in staff layoffs, then the team is unlikely to make progress towards identifying inefficiencies, eliminating tasks, or streamlining unnecessary processes. The experience in lean manufacturing is that it is central to have a policy in which savings are deployed for better products, better service, and better price rather than layoffs.

7. The team measures its own velocity: The team establishes its velocity for each work cycle and learns how much work that adds value to clients it can accomplish during a given period. This enables the team to understand whether its trajectory is improving, stagnating, or deteriorating. Rather than the carrots and sticks of traditional management, radical management uses transparency to inspire the self-organizing team to progress toward high performance. The team is not competing with other teams or responding to managerial goads from above. Instead, the team itself can see how it is doing, can see impediments being removed, and can aspire to do better, [4]

8. Fix problems immediately: Given Toyota’s discovery that the cost of not fixing problems is enormous, priority must be given to detecting mistakes early and fixing them immediately—even stopping the

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whole production line to achieve this.[5] It is also crucial to get to the root causes of problems, rather than removing symptoms, as Mike Cohn explains in Succeeding with Agile .[6]

9. Share, rather than enforce, improved practices: Knowledge is spread laterally as an opportunity to improve, not as a top-down instruction to implement. Knowledge about practices is is treated as an invitation to explore their applicability and adapt ideas to the team’s own context. Sharing is fostered in horizontal communities of practice. Such communities nurture opportunities for people facing similar challenges to meet, in person or electronically, and share relevant experiences and learning.

10. Encourage openness to outside ideas: Radical transparency within the organization is important, but it’s not enough. The best organizations expose themselves to outside ideas. Crowd-sourcing is systematically practiced. Being willing to listen and consider the possibility that one’s strongest beliefs are wrong require an open state of mind, intellectual curiosity, and a kind of serious playfulness. Unlike the grim and humorless context of the traditional workplace, laughter is a pervasive feature of the new workplace.

Reinventing management Part 6: From command to conversation

Stop shouting & start listening!

In an earlier post entitled The Reinvention of Management: Part 1, I noted that current management practices represent a set of economic, social and political problems of the first order, which cannot be resolved by a single fix.

Instead, a whole host of business leaders and writers, including Umair Haque, John Hagel, John Seely Brown, Lang Davison, Rod Collins, Ranjay Gulati and Carol Sanford are exploring a fundamental rethinking of the basic tenets of management. Among the most important changes being proposed are five basic shifts in management practice:

1. The firm’s goal (a shift from inside-out to outside-in).

2. Role of managers (a shift from controller to enabler).

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3. Mode of coordination (from hierarchical bureaucracy to dynamic linking).

4. Values practiced (a shift from value to values).

5. Communications (a shift from command to conversation).

In this continuing series of posts, I explore in more detail the specific practices needed to accomplish these five shifts.

In previous posts, I have described the practices needed to achieve the shift in the firm’s goal to delighting the client, the shift in the manager’s role from controller to enabler, the shift from bureaucracy to dynamic linking and the shift from value to values.

In this post, I describe the practices involved in the shift in communications from command to conversation.

Shift #5: From command to conversation

None of the above shifts will be sustained if management communicates in the traditional mode of top-down commands that dispirit knowledge workers. Nor will customers be delighted if communications with organization consist of unresponsive one-way messages. Instead, communications need to proceed in the mode of social norms, with adult-to-adult conversation, listening attentively and responding openly, with authentic stories, metaphors and open-ended questions.

1. Use authentic storytelling to inspire a passion for delighting clients: For most organizations, the above four shifts entail a significant change agenda—often a fundamental shift in culture. This won’t happen, as Peter Guber explains in Tell to Win (2011), without compelling leadership storytelling—stories that show how other organizations have done it and, where possible, stories about how it is already happening within the organization.

2. Practice deep listening: Deep listening to stories both inside the organization with employees and outside the organization with customers provide the ingredients for lasting relationships. Within the organization, employees discover what’s wonderful in each other. Outside the organization, as customers discover that the firm consists of real people who communicate authentically, the foundation for a relationship can be laid.

3. Know the customer’s story: The shift from producing goods and services to networks of teams that delight clients sooner, more often, and more profoundly can only happen if teams doing the work know the customer’s story. This story becomes the raw material from which hypotheses as to what might delight the client can be derived.

4. Conduct authentic conversations with customers: Instead of viewing the customer as thing to be manipulated with one-way messages that “manufacture demand”, the firm organizes itself to conduct authentic conversations with customers whether through social media as explained by Charlene Li in

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Open Leadership or in call-in centers that actually seek to turn customer problems into customer delight, as at Zappos.

5. Deploy user stories as catalysts for conversation: User stories aren’t artifacts or instructions or commands. They are opportunities to conduct a conversation between the client and the people doing the work. The object of the conversation is to deepen understanding as to what might delight the client.

6. Deploy stories to enhance individual performance: Carrots and sticks don’t motivate knowledge workers. Instead, skilled leaders seek to discover what drives people into action and then connect that to the goals of the team. The sharing of stories can help to create needed understanding, mutual respect and trust.

7. Use stories to enhance team cohesion: Groups develop a sense of identity from three sequential stories: the story of who we were, the story of who we are now, and the story of who we are going to be. Having groups craft and perform this combination of stories communicates to both themselves and others what they have in common and why they might evolve into a high-performance group.

8. Use stories to inspire high-performance teams: The telling of stories about successful high-performance teams in other similar organizations can stimulate the narrative imaginations of the team members and show how that the experience can be emulated

http://www.forbes.com/sites/stevedenning/2011/07/23/how-do-you-change-an-organizational-culture/