As we stand on the threshold of the knowledge age, the most powerful sources of growth, employment, and wealth creation are found in innovation-driven industries? computer software, biotechnology, and the like-where innovation, flexibility, responsiveness, and the creative redefinition of markets and opportunities are the new sources of competitive advantage. As he strategic emphasis shifts from the efficient management of mass markets and tangible assets to innovation and the effective utilization of knowledge and human capital resources, organizations and their leaders must also change.
More capable leadership at the top?smarter managers ?is not necessarily the answer. Rather, to compete in the information age, firms must increasingly rely on the knowledge, skills, experience, and judgment of all their people. The entire organization, collectively, must create and assimilate new knowledge, encourage innovation, and learn to compete in new ways in an overcharging competitive environment.
The demands of this changing environment present a complex set of challenges-and require a shift in focus and emphasis–for organizational leaders. The traditional tools and techniques of management are designed, in large measure, to ensure organizational stability, operational efficiency, and predictable performance. Formal planning processes, centralized decision making, hierarchical organization structures, standardized procedures, and numbers-oriented control systems are still the rule in most organizations.
As important as these structures and processes are to organizational efficiency, hey tend to limit flexibility and create impediments to innovation, creativity, and change. To meet the challenge, organizational leaders must “loosen up” the organization–stimulating innovation, creativity and responsiveness, and learn to manage continuous adaptation to change?without losing strategic focus or spinning out of control.
To position their organizations to compete and win in the competitive environment of the 21st century, organizational leaders must place less reliance on traditional structures and controls, and focus their efforts on five key priorities: Using strategic vision to motivate and inspire Empowering employees at all levels Accumulating and sharing internal knowledge Gathering and integrating external information Challenging the status quo and enabling creativity. A single individual, or is shared only with a select few at the top, its value is diminished.
The power of strategic vision lies in h o w it is used. An effective strategic vision is clear, compelling, and communicated in a w a y that motivates and inspires a broadly shared sense of organizational direction and purpose. Such a vision is essential to developing an organization that can learn and adapt to a complex, interconnected, and rapidly changing environment. In the words of William O’Brien, CEO of Hanover Insurance: “Before there can be meaningful participation, people must share certain values and pictures about where we are trying to go.
We discovered that people have a real need to feel that they’re part of an ennobling mission. ” Similarly, Xerox PARA guru John Solely Brown asserts: “The job of leadership today is not just to make money: It’s to make meaning. ” Percy Brainier, CEO of the Shadowiness holding company that includes Seaborne Bovver, nurtures pride and creativity with a vision hat focuses on the organization’s broader role in society: It is important that people in an organization have something to be proud of. It is important that our people can feel pride in something beyond the numbers.
For example, if you look at our company now, we have been pioneering investments in Eastern Europe, spearheading East-West integration. Many of our people are proud of participating in that process. The same can be said about our work in the environmental field. I would like to create and develop an image of us as helping to improve the world environment. For example, transferring sustainable genealogy to China or India, where they have a tremendous need to clean up their coal-fired power plants.
Our employees can look at work like that and see that we contribute something beyond mere shareholder value. Internally, we can pride ourselves on certain environmental improvements WINTER 2000 19 U S I N G STRATEGIC VISION TO MOTIVATE A N D INSPIRE Every organization has a strategic vision, explicit or implicit. Effectively employed, a strategic vision provides many benefits: a clear future direction; a framework for the organization’s mission and goals; and enhanced employee communication, participation, and commitment.
But if an organization’s vision exists only in the imagination of without being too bombastic or boastful about them. This is particularly relevant for attracting young people to the company. They are by and large not happy just to work for a big company with high profits; they also like to see a purpose that goes beyond numbers. It is important that a company can be perceived as changing the world in a positive way. As Brainier suggests, an effective strategic vision is multifaceted, addressing the needs and concerns of all the organization’s stakeholders, not just its employees.
The formulation f a strategic vision requires an indents understanding and knowledge of the organization, its competitive environment, the needs and priorities of its stakeholders (customers, suppliers, employees, and shareholders), and other salient environmental trends and forces. This understanding must be shaped and molded into a clear and compelling vision of what the organization is, what it could become, and how it will get there.
The most powerful visions are clear about the direction and objectives and proactive in approach, but deliberately vague about the means–leaving room for flexibility in developing viable strategic options and solving complex problems. At times, creating a vision involves what the CEO of Yoga’s, Gee’s Japanese partner in the Medical Systems business, calls “bullet train” thinking. That is, if you want to increase the speed by 10 miles per hour, you look for incremental advances.
However, if you want to double the speed, you’ve got to think “out of the box”–widen the track, change the overall suspension system, and so on. In today’s challenging times, leaders typically don’t just need to keep the same train with a few minor tweaks, but rather come up with more revolutionary visions. Consider, for example, how Enron’s CEO, Kenneth Lay, completely changed his firm’s (and its industry’s) mental model of the natural gas pipeline industry: In 1986, after Enron was formed by the merger of two natural gas pipeline giants, Lay determined that it was time 20 Gregory G.
Des$ holds the Carol Martin Gaston Endowed Chair in Leadership and Strategic Management at the University of Kentucky. He presently serves on the editorial boards of the Academy of Management Review, StrategicManagementJouma/, and the Journo/ of Business Research. His research on strategic decision making, competitive advantage, and organization- environment relations has been published in many of the leading academic and practitioner journals. In 1994, Professor Deeds taught at the University of Porto (Portugal) on a Fulbright lectureship. He has also taught in the M. B. A. Aerogram at the Norwegian School of Management and has conducted executive education programs on strategic management and leveraging human capital in the United States, Norway, Portugal, and Australia. Dry. Deeds received his bachelor of industrial engineering from the Georgia Institute of Technology and his Ph. D. In business administration from the University of Washington. o change the entire way his firm did business. According to Lay: “l was trained as an economist, love free markets, and was convinced that government regulation was causing most of the problems in the industry. By pushing for deregulation, Lay felt that Enron could use all of those natural gas lines as a network to buy gas where it was cheap and sell it where it was needed. (Regulation required a gas pipeline to run single-minded from a specific field to a particular utility company, with few shifts or diversions. ) Although other gas utilities pressed for continued regulation, Enron hired aggressive, well-paid readers and almost single-handedly began creating spot markets in gas. Enron found that its new approach and structure could reduce the cost of gas for some utilities by 30 percent to 50 percent. We changed the concept of how the natural gas industry was r u n – – n e w products, new services, new kinds of contracts, new ways of pricing,” says Lay. Texas Senator Phil Gram’s take on Kenneth Lay: “He has the ability to step back from an issue and see the big picture, something that I don’t see in a lot of people in business. ” Guided by Lay’s innovative vision, Enron has turned in an impressive financial performance. Sales soared 52 percent to $20. 2 billion in 1997. The average annual total return to investors over the past decade has been 19. 7 percent.
Visionary thinking is not, of course, the exclusive province of the firm’s top executive. Nor s h o u I d it be. Broad participation in the formulation of a strategic vision offers multiple perspectives and e n c o u r a g e s commitment. Back in 1994, d u r i n g the early stages of Sears’ dramatic transformation, the firm’s top 120 executives were g ro u p e d into task forces focused o n such key strategic elements as customers, e m p I ay sees,and financial perform- Joseph C. Picked is a member of the adjunct faculty in organizational behavior/ business policy at the Edwin L.
Cox School of Business at Southern Methodist University. Hess also president of Joseph C. Picked & Associates, a consulting firm providing strategy, operations and financial management, and turnaround management consulting services to mid-sized and emerging growth firms. Over a business and consulting career spanning nearly 30 years, Dry. Picked has held executive positions in Fortune 500 corporations and has served as CEO, COO, or SCOFF of several high-tech entrepreneurial companies. Dry. Picked holds an A. B. In economics from Dartmouth College, an M.
B. A. In finance and accounting from the Amos Tuck School of Business Administration at Dartmouth, and a Ph. D. In business administration from the University of Texas at Arlington. He has published numerous articles in trade and professional journals, conducted seminars throughout North America, and is the author (with Gregory G. Deeds) of Mission Critical: The Seven Strategic Traps That Derail Even the Smartest Companies (1997) and Beyond Productivity: How Leading Companies Achieve Superior Performance by Leveraging Their Human Capital (1999).
WINTER 2 0 21 menace. Working together, they arrived at a vision for the business: a “compelling place to shop, work, and invest. ” This vision was implemented in the design of a comprehensive performance measurement system based on key indicators: one for compelling place to work, two for compelling place to shop; and three for compelling place to invest. Simply an academic exercise? Hardly! A consulting firm was hired to develop a quantitative model that permits management to make inferences about cause and effect with a rather high level of predictability.
According to Anthony Rice, chief administrative officer: Now we know that if store increases its employee satisfaction score by five measuring units this quarter, the following quarter its customer-satisfaction scores will go up by two units. And if a store increases its customer satisfaction by two units this quarter, its revenue growth the following quarter will beat our stores’ national average by 0. 5 percent. It’s not guesswork or theory anymore.
We have built an empirical model that says unless you have a trained, literate, motivated, competent workforce, and give them decision-making authority, you don’t get satisfied customers no matter how good the merchandise is. Inspiring the organization and its stakeholders with a clear vision and compelling sense of purpose is a necessary but not a sufficient condition for the development of an organization that can learn, adapt, and respond effectively to a rapidly changing competitive environment. Empowerment, providing motivated employees with the responsibility and authority to implement the vision, is equally important. Hose in powerful positions are exalted and those who fail to achieve top rank are diminished. Such an attitude is implicit in phrases like ‘Lead, follow, or get out of the way” or, even less appealing, “Unless you’re the lead horse, the view ever changes. ” The fact is, of course, that few will ever reach the top positions in an organization, but in a competitive environment increasingly dependent on knowledge and information, the strongest organizations will be those that effectively use the talents of all the players on the team. The great leader is a great servant” asserts Ken Mellower, CEO of Tort Company and author of Making the Grass Greener on Your Side. In his view, the key role of top management is the creation of an environment in which employees can achieve their potential as they help move the organization toward its goals. Many leading organizations eave come to realize that the results available in an environment based on trust and cultural control are superior to those formerly achieved under a system of rules, regulations, and hierarchy.
Instead of viewing themselves as resource controllers and power brokers, leaders must truly envision themselves as flexible resources willing to assume numerous (perhaps unaccustomed) roles—coaches, information providers, teachers, decision makers, facilitators, supporters, or listeners–depending on their employees’ needs. The key to empowerment is effective leadership. According to Mellower: “l came to understand that you best dead by serving the needs of your people. You don’t do their jobs for them; you enable them to learn and progress on the job. ” Consider Chris Turner’s perspective.
She’s an executive called the “Learning Person” for Xerox Business Services (CBS)–a $1 billion organization growing at 40 percent a year. Largely through her efforts, CBS has created an environment that not only produces business results but also supports personal growth: My job is to disturb the system. I give people new ways to think. It’s more a matter of offering people different perspectives and influencing their thinking than trying to drive them. It sounds EMPOWERING EMPLOYEES AT ALL LEVELS Organizations often fall prey to the “herdsman-drones syndrome,” wherein the value of 22 ORGANIZATIONAL DYNAMICS strangely indirect.
Why not adopt a more top-down approach? It turns out you can’t “empower” anyone. This is not the freeing of the slaves. Chris Turner makes the insightful point about empowerment requiring more than the sprinkling of fairy dust. At first glance, it may appear that this overstates or trivialize the case, but it is critical that organizations look at e m p o w e r m e n t as involving more than just “giving more power” to people throughout he organization. Empowerment also requires that organizations redistribute information, knowledge (i. E. , skills to act on the information), and rewards.
For example, a company may give frontline employees the power to act as “customer advocates,” doing whatever is necessary to please the customers. To function effectively in this role, however, employees will also require appropriate training and knowledge?information about customer expectations, timely feedback, and data on firm performance. In order to make the best decisions in each customer interaction, employees must clearly understand the goals, objectives, ND priorities of the organization and be knowledgeable about its internal procedures and processes—how key value-creating activities are related to each other.
Finally, rewards should be allocated on the basis of how effectively employees use this information, knowledge, and power to improve the quality of customer service, as reflected in customer loyalty and overall firm performance. If the widespread sharing and distribution of information and knowledge are key to empowerment, the organization’s internal processes and practices for accumulating and sharing internal knowledge and information also represent a eye link in the chain.
Effective leadership requires that these internal processes and practices be consistent with and supportive of the broader goals of the organization. Processes and devote considerable resources to gathering, organizing, and analyzing information about their inner workings and overall performance. But all too often, the end products of this effort are available only to a limited group of managers–individuals who frequently have insufficient time to read understand, and meaningfully interpret TTL volumes of information available.
At lower levels, individuals see only the isolated bits and pieces of information elated to their specific activities, and are largely in the dark about what is going on elsewhere or how their efforts relate to the overall performance of the organization. As a result, much of the potential value created in this nonproliferation’s process is wasted because the information is not made available to those who could most effectively use it.
Effective leaders have learned how to leverage their investment in internal information by (1) sharing information and ideas across the organization; (2) encouraging and cultivating informal sources of information; and (3) utilizing technology to facilitate both the adhering and sharing of information. Sharing Information and Ideas Jack Stack is president and CEO of Springfield Remunerating Corporation (in Springfield, Missouri) and author of The Great Game of Business (Doubleday/ Currency, 1992).
He is generally considered the pioneer of “open book” management–an innovative approach to gathering and disseminating internal information. Implementing this system involves three core activities. First, numbers are generated daily for each of the company’s employees, reflecting their work performance and production costs. Second, this information, aggregated once a week, is shared with all the company’s people–everyone from secretaries to top management. Third, extensive training–how to understand balance sheets, income statements, and cash flows?is provided to enable employees to use and interpret the numbers appropriately.
In explaining why ISRC embraces open-book management, Stack provides an insightful counter- percentiles 2 0 0 0 ACCUMULATING A N D SHARING INTERNAL KNOWLEDGE Most organizations have elaborate formal 23 dive to the old adage: “Information is power”: We are building a company in which everyone tells the truth every day–not because everyone is honest but cause everyone has access to the same information: operating metrics, financial data, valuation estimates.
The more people understand what’s really going on in their company, the more eager they are to help solve its problems. Information isn’t power. It’s a burden. Share information, and you share the burdens of leadership as well. Whole Foods Market, Inc. , the largest natural foods grocer in the United States with 43 stores in ten states, places a strong emphasis on t e a m w o r k throughout the organization. The company’s “gain sharing” program ties bonuses directly to team performance and team members vote n who gets hired.
What really makes the system work, however, is CEO John Mackey’s “no secrets” management philosophy: a dedication to sharing virtually all company information with all employees: The curious team member at any level of the company has access to nearly as much operating and financial data as anyone in the Austin, Texas headquarters. In Ron Megaton’s store, for example, a sheet posted next to the time clock lists the previous day’s sales broken down by team. Another sheet lists the sales numbers for the same day last year.
Once a week, Megaton’s store posts a fax that lists the sales of every tore in the New England region broken down by team, with comparisons to the same week last year, as well as year-to-date totals. Once a month, stores get detailed information on profitability. The report analyzes sales, product costs, wages and salaries, and operating profits for all 43 stores. The data is sensitive, but it is freely available to any employee who wants to see it. And store managers routinely review it 24 with their team leaders.
Since individual teams make decisions about labor spending, ordering, pricing–the factors that determine profitability–the reports are indispensable. An additional benefit of the information sharing at Whole Foods is the active process of internal benchmarking. Competition is intense. Teams compete against their own goals for sales, growth, and productivity; against different teams in their stores; and against similar teams at different stores and regions. On a periodic schedule, each Whole Foods store is toured by a group of as many as 40 visitors from another region.
The tour is a mix of social interaction, reviews, performance audits, and structured feedback sessions. Lateral learning–discovering what your colleagues are doing right and carrying hose practices into your organization–has become a driving force at Whole Foods. Mackey puts it bluntly: “If you don’t correspondence, you become a hick. ” Cultivating Informal Sources of Information In most organizations, the formal sources of internal information represent the by-products of an accounting system designed years earlier and, by its very nature, focused on what happened weeks or months ago.
Aggregated, summarized, standardized, and sanitized, this kind of information has its place but lacks the “freshness” and urgency of direct personal communications through informal channels. Most organizations have well-developed patterns of informal communications, but frequently those at the top are “out of the loop. ” To successfully tap into these informal networks, managers must (1) listen effectively; (2) be accessible—demonstrate the desire for information and feedback; and (3) provide opportunities for information exchange.
In a recent survey of presidents, Coos, board members, and top executives in a variety of nonprofit organizations, respondents were asked what differentiated the successful candidates for promotion. The consensus: The executive was seen as a person who listens. According to Peter Meyer, the author of the study: The value of listening is clear: You cannot succeed in running a company if you do not hear what your people, customers, and suppliers are telling you. Poor listeners do not survive. Listening and understanding well are key to making good decisions. Effective leaders must beware of the errors of poor listening and misinterpretation.
Once an associate told movie producer Sam G o I d WY n that audiences would not respond to the script he wanted to produce–it was too caustic. Golden’s reply: “Too costly? To hell with the cost. If it’s a good picture, we’ll make it. ” Did he miss the point? John Chambers, president and CEO of Cisco Systems, the $6 billion networking giant, has an effective vehicle for discovering potential problems and getting candid feedback from employees. Every year during their birthday month, employees at Coco’s corporate headquarters in San Jose receive an email invitation to a “birthday breakfast” with Chambers.
Any question is fair game at these sessions, and the employees don’t hold back –asking tough questions about strategy and operations, and providing stark assessments of perceived management failings. Although not always pleasant, Chambers believes it is an indispensable hour of unmediated interaction, observing: “I’m not there for the cake. ” speed modem, and lots of performance enhancements. One purpose in giving everyone the same computer is to underscore the company’s aversion to hierarchy. A more important purpose is to support its all-important global network. At Peoples, a laptop isn’t just a personal-productivity device.
It’s the point of entry into a massive information infrastructure that spans continents and time zones. “You can take your laptop to any of our offices anywhere in the roll, plug it in, and the network recognizes you as if you were in your home office,” CIO Steve Karate says with obvious pride. CEO Dave Outfield is very explicit about the kind of company he’s building. He states: “The objective is to have all 4,500 people know what matters. If people don’t have total access to information, they have to guess what they should be doing. Both e-mail and Lotus Notes databases are powerful forces for open access at Peoples.
Over 400 databases store marketing presentations, intelligence on competitors, and status reports on projects. Claims Outfield: “Anyone can get to anyone else or to NY piece of information. ” Sharing internal information is important, but if the organization is out of touch with its external environment, the organization’s strategy will miss the mark and the information shared internally may be irrelevant. In the following section we will discuss how leading organizations learn from their environments–gathering, distributing, and integrating critical external information into their organizational knowledge base.
Using Technology to Leverage Efforts Technology can play a vital role in gathering and disseminating information across an organization. To illustrate, at Peoples, a firm with a powerful position in one of technology’s hottest sectors, enterprise resource planning (ERP) software, all new hires receive the same laptop: a top-of-the-line model with a CD-ROOM drive, a high GATHERING RAT IN G EXTERNAL INFO R MAT ION Organizational strategies and competitive responses are frequently based more on management’s collective assumptions, premises, and beliefs than on an empirical understanding of the environment.
Hammed and Parallax, in Competing for the Future, maintain that WINTER 2000 25 “every manager carries around in his or her head a set of biases, assumptions ND presuppositions about the structure of the relevant ‘industry,’ about how one makes money in the industry, about who the competition is and isn’t, about who the customers are and aren’t, about which technologies are viable and which aren’t, and so on. ” Peter Trucker calls this interrelated set of assumptions the “theory of the business. Strategies frequently go awry when management’s internal frame of reference is out of touch with the realities of the business situation, w h e n one or more of management’s assumptions, premises, or beliefs are incorrect, or w h e n internal inconsistencies among them render he overall “theory of the business” no longer valid. These assumptions must be periodically updated and validated on the basis of a realistic appraisal of current conditions. Recognizing the opportunities–and the threats–in the external environment is equally vital to a firm’s success.
The organization must become “externally aware” and sensitive to all that is going on around it. How effectively an organization gathers, interprets, and integrates relevant external information into its internal decision-making processes has a lot to do with its competitive performance. Focusing exclusively on the efficiency of internal operations may result in a firm’s becoming, in effect, the world’s most efficient producer of typewriters or leisure suits-hardly an enviable position! Arthur Martinez, chairman of Sears, Roebuck & Co. Puts it this way: “Today’s peacock is tomorrow’s feather duster. ” In the business world, many peacocks have, in essence, become feather dusters over the past several years (or at least had their plumage dulled! ). Consider Novel and Silicon Graphics in the high-tech sector? both have recently fallen upon hard times.