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The headlines rolled across my feed like the credits on a blockbuster movie. Something big seemed to be happening but I wasn’t quite sure what to make of it. It seemed that Zappos—the popular business management poster child for happy employees and customers—just announced it was adopting some new-fangled “boss-less,” “hierarchy-less,” “structure-less” management system called Holacracy.
“Hola-what?” I said to myself as I started clicking links. Aimee Groth at Quartz wrote: “Zappos is going holacratic: no job titles, no managers, no hierarchy,” while the Washington Post headlined with, “Zappos Says Goodbye To Bosses,” and the Canadian Broadcast Company led with “Holacracy management style eliminates all bosses, titles.”
I’ve been around long enough to know that what the media was reporting would be far removed from the truth. I also had the inkling that the level of publicity that Zappos generates made it likely that Holacracy would become the next buzzword in management in 2014. Paul Herbert captured it well: “A new word crept into HR’s vernacular last week: holacracy. Better get used to seeing it.”
Each year I attend two personal/professional development workshops for my own education and growth. After trying to make sense of Holacracy through their website materials and recorded webinars, in the spirit of exploration I decided to dive deeper and make Holacracy one of my annual workshops. I signed up for their 1/2-day Taster Workshop followed by a 5-day Practitioner Certification Training in Las Vegas hosted by Holacracy founder Brian Robertson.
A few weeks later I hopped in my car to make the trek from my home in Santa Barbara across the desert to Vegas. The seminar turned out to be located just down the block from the Gold and Silver Pawn Shop of History Channel fame. As I drove by their shop at 1pm on a Friday, there was a line of people down the entire block. “Note to self,” I murmured while rubber necking the crowd, “this is what a reality TV can do for your small business.”
I parked and found my way to the seminar, located on the third floor of a secured building. I buzzed the intercom, walked up three flights of stairs, and entered the room where I’d spend the next week. I noted there were about 25+/- people gathered around circular conference tables and a standard lecture area at the front. I found a spot, put down my stuff and, with a mixture of curiosity and anticipation, made small talk with my fellow attendees, a surprising number of whom were French nationals, while waiting for the seminar to start.
Little did I know then what a struggle that entire week — and even several weeks after digesting my experience — would be for me. What did I struggle with? First, I found it really hard to try to unlearn what I’ve spent decades mastering and greet Holacracy with a Zen-like beginner’s mind. What could they teach me, really? Is the founder just using different terminology or is there a real difference in philosophy? And how do I maintain an anchor point in the real world and not get swept down a rabbit’s hole of theory?
The other struggle was that Holacracy is not an easy practice to learn. In fact, the nuances are such a challenge to master that a handful of the participants in my course were on their third or fourth attempt at the same training. At one-week long and $4K a pop, that’s quite an investment. As one of my fellow participants poignantly put it, “Holacracy is like a religion for dedicated monks to practice,” adding, “I wonder what the layman’s version will turn out to be?” I think this is an excellent question that time will reveal.
I’ve been home for several weeks now and I’ve had sufficient time to reflect on my total experience. In retrospect, there are several things I really admire about Holacracy. There are also key elements that, if I was an entrepreneur or CEO considering deploying Holacracy in my organization, I would supplement around the standard Holacracy script. While you don’t need Holacracy to create sustainable business transformation, I believe that these adaptations are necessary to get the most out of your investment and increase your probability of success should you choose to deploy it as a management framework.
What Is Holacracy, Exactly?
Before I explain what Holacracy is, let me first clear up some of the more blatant misconceptions in the media. Holacracy does indeed have de facto bosses or managers, albeit ones with circumscribed power. These roles are called “lead links” and they set the priorities and control resources in an organization. Holacracy also does have an explicitly defined hierarchical structure. It’s not one big kumbaya free-for-all. And when it comes to titles, well, Holacracy can either support or not support the use of titles. The key point here (with which I agree wholeheartedly) is that individual roles in an organization can and should shift over time and, as a result, job titles more often cause harm than good.
In my book Organizational Physics, I explain that all business and management theory — past, present, and future — can be reduced to some key driving principles. That is, while supposedly “new” theories and strategies come and go depending on the cultural zeitgeist, they’re all trying to provide solutions to the same core underlying problems. In some sense, these countless methods can be boiled down to a handful of approaches
If you’re already familiar with the principles of Organizational Physics, you can easily understand this explanation: Holacracy is an attempt to increase system integration and decrease system entropy by aligning Structure and Process (the bottom left and right sides of the Execution Diamond shown at the bottom of the map below) by applying a very high Stabilizing force (the S in PSIU):
If you’re not yet familiar with Organizational Physics, this definition probably won’t help you much, but the rest of this article will. And though of course I’m partial, I firmly believe that if you read my book Organizational Physics: The Science of Growing a Business, you’ll find it much easier to put the barrage of “new” trends in perspective.
In any case, in order to understand Holacracy it’s helpful to realize that you’re already living and working in a system that uses many of the core Holacratic principles. It’s the United States of America. Wait… what??? Yep, this cutting-edge management theory is actually built on some of the core principles of our government:
- The U.S. government has a constitution, and so does Holacracy. (In fact, one of the first tasks of a CEO when adopting Holacracy is to cede his or her authority to a Holacratic-based constitution).
- The U.S. government has a set of explicit laws or rules that attempt to govern individual and collective behavior, as well as a detailed process to change an existing “law” or create a new one, and so does Holacracy – very detailed.
- The U.S. government relies on a nested hierarchical structure of governing bodies (i.e., The Office of the President, Congress, the Supreme Court, the Military, States, Counties, Cities, City services, etc.) that act mostly autonomously within their own spheres. And so does Holacracy.
- We, the people, elect representatives to perform defined roles in our local, state, and federal governments. The members of a Holacracy-based organization also elect individuals to perform defined roles at different hierarchical levels or “circles” of the organization.
Holacracy’s approach to managing an organization is also very similar in ambition to the founding vision of the U.S government. The founding fathers tried to create a structure, processes, and checks and balances so that the government wouldn’t meddle in the affairs of law-abiding citizens but would instead allow people the autonomy to pursue their individual and collective interests.
For example, when you got up this morning, did you call President Obama and ask him for permission to buy groceries? Or did you call the mayor of your town and ask for the right to binge-watch House of Cards? Nope. You just did what was in your own interest, while staying within the system of rules and processes that have been adopted by your local, state, and federal government.
So Holacracy asks this question: If you don’t need a ruler to govern your financial and social life, then wouldn’t it be superior to design a business around a set of rules so there’s no need for rulers? What if an organization acted more like a modern city and less like a top-down feudal monarchy? As Holacracy founder Brian Robertson puts it, “Order doesn’t require rulers. And if you give one individual monarch-like authority, then it’s only a matter of time before they make a royal screw up.”
It may seem counterintuitive to compare the core operating principles of a supposed next-generation management theory to the operating principles of the U.S government. After all, doesn’t the U.S. government of recent decades seem to be more incompetent, and sometimes even nefarious, than innovative?
Look at it this way. We can all agree that the design of the U.S. government has the potential to create a competent and wise system of governance as well as a happy, well-educated, prosperous, and productive population of citizens. But a lot depends on its lifecycle stage (the U.S. is aging), its sense of shared vision and values (it’s fragmented), its resources (it’s broke), and most importantly the quality and caliber of the leaders who perform roles in the system over time (The U.S. now has an entire party of leaders like this guy). So we know that things can and do go wrong despite our best design intentions.
The same is true for Holacracy. It has the potential to be transformative but a lot depends on the organizational lifecycle stage of the business, the embodiment of shared vision and values, the organization’s resources and capabilities, and the quality and caliber of the people who inhabit the roles in the organization. In theory, Holacracy is a compelling and very thorough framework for managing structure and process in an organization. In practice, a lot can go wrong, just as with any framework.
To sum this all up, Holacracy is an attempt to bring a rigid but evolving set of rules, structure, and processes to how an organization is managed so that individuals have more clarity and autonomy to do their work (what Holacracy calls “energizing their roles”) in pursuit of the organizational purpose, without undue meddling from those above or below them in the organizational hierarchy.
How Does Holacracy Work?
To accomplish its purpose, Holacracy focuses on five key elements, what it calls the Holacracy Operating System:
- The Holacracy Constitution
- Organizational Structure
- Governance Meeting Process
- Operations Meeting Process
- Glass Frog Software
Holacracy works by first having the CEO cede all legal authority to a new organizational Constitution. Holacracy provides a blueprint for the Constitution that the organization can modify for its particular needs and situation. This is where I warn you that you should not try to understand Holacracy by reading the Constitution. That would be like trying to learn a very complicated board game by reading the rule book. Instead, Holacracy encourages you to attend their trainings to learn how to “play the game” and then refer to the rule book when you have questions.
The organizational structure in Holacracy is constantly evolving. It’s created and reinforced through a series of special meetings called the Governance Process. The key organizing element of a Holacracy structure is a circle that is made up of one or more organizational roles. The highest-level circle is the General Company Circle (GCC), which consists of all of the main roles or functions being performed in the company. For instance, an initial GCC might consist of roles from Sales, Operations, Finance, Accounting, Engineering, Marketing, and Product Management, as well as the former CEO role. From the GCC, sub-circles are created for each role. For example, Sales is part of the GCC but also has its own Sales Circle.
Governance is where the organizational structure is created and evolved. Here the intent is to distribute authority and create organizational clarity about which roles are accountable for what. Holacracy doesn’t dictate what the structure should look like. It only stipulates how a role should be defined in the structure and how the members of a circle can adapt or change the roles within that circle to better serve the organization’s purpose. Most of the practitioner training is spent learning to navigate the nuances of the Governance meeting process. It starts out easy enough but the more you scratch the surface, the deeper it goes. If Holacracy was a board game, this is the stage when the players would get out the rule book (in this case the Constitution) and start interpreting and debating the rules. (This reminds me of Bismarck’s comment, “If you like laws and sausages, you should never watch either one being made”).
Operations is how the day-to-day work of an organization is managed. In Holacracy, the focus of Operations meetings is to synchronize information flow and quickly triage what it calls “tensions.” A tension is a perceived gap between what is and what could be. Any member of the circle can bring a tension to the table and have it addressed. What’s peculiar to the Holacracy approach is that the circle doesn’t try to find the best way solve an issue, nor does it attempt to do so holistically by gathering data on all the issues related to that tension. It simply tries to resolve that one particular tension, in isolation, for that one role in the circle. This is done through a series of rigid steps that the circle must follow before it can reach a decision. In other words, it follows a process focusing on micro-level issue after micro-level issue, until, theoretically, all issues are resolved…ad infinitum.
Glass Frog is like a corporate wiki designed specifically for Holacracy. Glass Frog contains the organization’s constitution, a description of all roles, and the output of all governance and operations meetings. A Holacracy purist would argue that Glass Frog is not part of its core operating system and that a company could deploy Holacracy without it. I disagree. There is an overwhelming level of detail within Holacracy. There’s no way to track and manage it without a good system in place to do so, especially in a distributed environment.
Now that you’ve gotten the basics, the main question you should be asking is, “So what?” Or, “What is the real problem that Holacracy is trying to solve?” It’s the question I’m most commonly asked about Holacracy, and probably the best one of all. So let’s address it.
What is the Real Problem Holacracy is Trying to Solve?
In Holacracy webinars and trainings, the first thing participants learn is what’s wrong with the traditional, top-down org chart. Brian Robertson will put up this image below and ask the class, “What are some of the challenges created by the traditional, top-down organizational hierarchy?”
The class or group will offer up answers like, “painful meetings,” “difficulty to change,” “overwhelm,” “unclear objectives,” “misalignment,” “lack of engagement,” “rigidity,” “politics,” “analysis paralysis,” “bureaucracy,” “fear,” “communication issues,” and so on. All common issues that people are faced with in poorly-run organizations.
Once the top-down hierarchy is defined as the core problem of most organizations today, the Holacracy trainer will propose that rather than “bugs,” these failings are actually “features” of top-down organizational design. That is, no matter how much restructuring, leadership training, agile development methodologies, or other tactics we deploy, they are ultimately doomed to fail because of the inherent problems of the surrounding structure.
Holacracy claims to design out these “features” by changing the concept of organizational structure from one that is autocratic and top-down to one that is decentralized, organic, and bottom-up. Ultimately, the vision of Holacracy is to allow the emergent, creative properties of the individuals playing roles within an organization to self-organize and flourish, much like human cells are organized into organs, which in turn are organized into bodies and minds, which in turn go forth into the world to express their purpose as humans.
If all this sounds very theoretical and far-fetched to you, especially in the midst of the chaos and battle of growing your own business, I understand. Still, several aspects of the Holacratic approach are impressive…
What I Admire About Holacracy
There are several things that I admire about Holacracy. There is a clear sense of “we’re changing the world” that emanates from Holacracy insiders. Brian Robertson is a very smart, charismatic, and articulate founder, even though he discounts his own role in the formation, evolution, and operation of Holacracy and attributes these to Holacracy itself. (On this last point, I strongly disagree. All founders are mission-critical to the success and growth of their organizations into and through Scale It mode).
When I boil it all down, here are three of my favorite things about Holacracy:
A Relentless Focus on Roles vs. People
Holacracy does an outstanding job of distinguishing and reinforcing the difference between roles and people, which is a core principle of any good structure. In fact, Holacracy does NOT manage people. It governs roles. Every role has a clearly defined purpose and accountabilities that are maintained and defined in its GlassFrog software.
Naturally, one person could play any number of different roles in the organization. Companies that deploy Holacracy are constantly checking and updating GlassFrog to see what a role’s purpose is and what it is accountable for. If there seems to be a breakdown in how a circle is being run, that circle can call a Governance meeting and change or add a new role, thus changing the structure of the organization on the fly.
Separation of Working In vs. On the Business
Holacracy does a phenomenal job of distinguishing between tactical/triage issues that are handled in Operations meetings and structural/role issues that are handled in separate Governance meetings. This is also a core principle of any good management process. It’s crucial to strike a balance between the demands of today and the needs of tomorrow, and a sound process will enforce a regular rhythm of long-range development and short-range execution. Holacracy accomplishes this by not allowing a circle to discuss Operational issues in Governance meetings and vice versa. The result is that there’s a clear and regular focus between working in the business and working on the business. Awesome.
An Operating System vs. Apps
Holacracy envisions itself like the Apple iOS platform. Apple builds and maintains the iOS platform while millions of independent developers build individual apps that run on that platform. Holacracy clearly distinguishes itself as the core operating system for Structure and Process ONLY. It does not try to tackle “app development” in the areas of strategy, people or cultural development, hiring, finance management, marketing, budgeting, sales tactics, etc. Instead, it encourages others to develop apps that are designed to run on the Holacratic platform.
Note that this separation of “OS” and “Apps” has caused some confusion in the marketplace. For instance, a guru like Steve Denning will look for a relentless focus on delighting customers within the OS and he won’t like it unless it has that, or until he understands the purpose of Holacracy is to be applicable to any organizational purpose.
On the other hand, I’ll look for a relentless focus on lifecycle management in the OS, believing that the operating system must manage differently at different lifecycle stages. To me, that’s not an App; it’s part of the OS. A culture guru like Robbe Richman, who was also at my training, will look for alignment of vision and values and organizational buy-in in the OS itself and not consider that an App either, etc. So there will be differences of opinion on where the OS should start and end. However, I appreciate the discipline Holacracy has embraced by clearly sticking to what it defines as the OS: structure and process.
Should You Deploy Holacracy?
When it comes to making a decision whether to deploy Holacracy in your organization, the real question you should be asking is this: “Where is my business in its lifecycle development and what is the management operating system I need for its next stage of evolution?” The solution you choose will depend a lot on your personal philosophies as well as the cost to integrate, maintain, and evolve the new system.
I indicated earlier that Holacracy is not an easy solution to deploy. There were parts of the training I really enjoyed but much of it I found exhausting, unnatural, and frustrating to practice. I am not alone. I’m told by Holacracy insiders that the norm is for a new circle to experience serious levels frustration, condemnation, and aggravation when deploying Holacracy. Then, almost by magic, around the three-month mark something shifts: Holacracy begins to feels natural to circle members and starts to work as designed.
Personally, I like systems that feel natural and intuitive, so I spent much of the training trying to think through how to adopt the “good” parts of Holacracy and design out the “bad” parts. My conclusion? A half deployment will backfire. Each element of Holacracy feeds into and supports the rest. It needs to be a full commitment from the Constitution on down. It’s all entwined and you can’t make up a “light” version and expect the organization to respond differently than it already is. So if you’re going to deploy it, prepare for months of push-back, resistance, and aggravation before you find the breakthroughs you’re seeking.
Upon reflection, I think this difficulty in deploying Holacracy may be one of its strengths. Its full commitment “forces” the organization, from the CEO on down, to adopt and practice decentralized management and self-organization. That is, while you could likely get equivalent organizational benefits by running a Management By Objectives (MBO) system or Objectives and Key Results (OKRs) or the latest flavor of MBO, what you wouldn’t get from these systems is the constant reinforcement of the new social structures that Holacracy is designed to create.
Naturally, you’ll want to test out Holacracy in the senior level GCC circle before going company-wide. If you get this far, stick with it. I’m confident that, with a full commitment, Holacracy can help your organization rise to the next level, just as any good approach would when backed by a full commitment. The adaptions that I’m suggesting below still work within a full Holacracy deployment – meaning, that you are still deploying the complete Holacracy implementation for process and structure, without sacrificing some important principles in leadership, long-range planning, and organizational design. I believe that these adaptations will allow you to get the most out of a Holacracy implementation.
Adaptation #1: Don’t Abdicate the Master Structural Design
My experience growing businesses and coaching dozens of other successful growth businesses is that structure is about 85% of the game. That is, get your structural design right and you can create massive organizational transformation. Get it wrong and you don’t have a chance.
Holacracy allows for an organizational structure to be designed from the bottom up. Not only does this “organic” approach take a long time and is prone to egregious errors; it also allows for chaos where you need order and order where you need chaos.
For example, every city planner and architect knows that there are principles to good structural design. If you were to allow individuals to design whatever style of home or building they wanted, wherever they wanted it, it wouldn’t take long until you had fracking wells next to schools and a shanty towns next to city hall. There’s a great example of a leader, the Mayor of Oklahoma City Mick Cornett, who understands this and took charge of a poor city experience with haphazard future direction and redesigned it for prosperity, health, and success. Well-designed organizational structures, just like well-designed cities, are a boon to everyone who inhabits them.
I think that Holacracy adopted its bottom-up approach to structure because it confuses what are really problems with poor strategy, misaligned vision and values, ass-backwards decision-making processes, and poor leadership with problems with structure.
If you go back to the Holacracy critique of the top-down hierarchical “structure” (in which they really mean to say “org chart”), you’ll see that very few items actually relate to structure and none of them to structure alone: painful meetings (accountabilities and process), difficulty to change (accountabilities and process), overwhelm (process and strategy), unclear objectives (process and strategy), misalignment (strategy, vision and values, structure and process), lack of engagement (process and people), rigidity (strategy, structure, and process), politics (process and people), analysis paralysis (process), bureaucracy (process), fear (strategy, process, people), and communication issues (process).
A sound management system will address all of the issues raised by Holacracy and leverage, rather than discard, the principles of sound organizational design. Think about it. The purpose behind a top-down organizational design is not to command and control or to dictate, as its harshest critics would claim. It’s to clarify accountabilities, thus decentralizing authority, and allocate resources. It’s about getting the right style of people in the right roles with the right metrics and providing them the autonomy to flourish. It’s also about allowing new business units to innovate because of — not in spite of — a sound overall design.
So even if you do choose to implement Holacracy, I’d make damn sure that you have the right initial structure in place and that, as the leader, you keep an eye on it to make sure it’s not going katty-whampus and headed off a cliff. You need a structure that supports the strategy and current lifecycle stage, and clearly identifies the metrics, key performance indicators, and style of leader most suitable for each role. This is in addition to the purpose and accountabilities of each role that Holacracy will definitely help you to define.
One way to conceptualize this is for you, the entrepreneur or CEO (GCC Lead Link in Holacracy terms) to maintain control of the overall strategy as well as the master structure to support the execution of that strategy. You could accomplish this as an accountability within the GCC or even create a separate Strategy and Structure circle with those specific accountabilities. This approach would allow for self-organizing circles but within the master design. It’s kind of like being a master planner for a community garden. You lay out the plots (the functions) in the optimal way to take advantage of the terrain and climate and invite the community members to plant whatever they want, while still being accountable to produce results. JUST DON’T LET GO OF THE MASTER DESIGN OR YOU’LL SOON HAVE A PLOT OF CRAP INSTEAD OF A VIBRANT ECOSYSTEM.
If you’d like to understand the basics of designing a structure from the Organizational Physics perspective, read The 5 Classic Mistakes in Organizational Structure: Or, How to Design Your Organization the Right Way.
Adaptation #2: Don’t Confuse the Tensions for the Cause
Holacracy Governance and Operations meetings have a relentless focus on solving tensions held by any role in the circle. So if you were the VP of Sales and had a tension with how Marketing was allocating its resource dollars to lead generation, you could bring that tension to the circle and have it processed.
In order to process the tension, the Holacracy trained facilitator would guide the circle through a series of prescribed steps to resolve the issue in such a way that your tension is satisfied (hopefully) but without harming the autonomy of any other role in the circle. How rigid are these steps? Very. There’s no discussion allowed of issues that might be related. There is only a focus on processing one tension at a time for the role that brought it to the circle. There is a set of rules about who speaks when and what is allowed or not allowed as a valid objection to any proposal. It’s a lot like practicing law in a courtroom.
Processing tensions is important. There’s always a gap between what is and what could be. However, the way the decision-making process is structured in Holacracy actually reverses what’s required for rapid execution. As I describe in Organizational Physics, organizational mass (resistance to change) is a real thing. In order to execute fast, you need a process that slows down enough up front (in the decision-making phase) to gather a diversity of opinions and sufficient data so that you make a good decision with full commitment. Then you can go fast on implementation. Holacracy reverses this model. It focuses on rapid decision making at the cost of rapid implementation. Exactly the opposite of what, in my opinion, a well-run decision making process should do.
To clarify, I’m not condoning pushing off making decisions. I’m also not condoning a poor decision-making process that allows for a free-for-all. The structure and process of meetings is critical to good management. But the right structure and process will support making sound, well-thought decisions that afterward get implemented quickly rather than rushed, half-baked decisions that fail on implementation. (If you’d like to learn more about the basics of a good-decision making process, read The Most Important Process in Your Business: Or, How to Make Good Decisions and Implement Them Fast.
In many later-stage, bureaucratic-heavy institutions like large businesses, governments, schools, and non-profits, I think that Holacracy could be a productive change. In these settings, there’s already a bias towards not making a decision, following the political winds, and covering your ass in the face of a stolid bureaucracy.
In short, these settings already have a high-Stabilizing force at work within them. Holacracy will match the Stabilizing force within these institutions well and, if executed correctly, it will shift the culture towards decision making, accountability, and action — any action. Because the risk of making a bad decision is low in these settings, versus the risk of not making a decision at all, it could be a helpful management practice to adopt.
However, in most expansion-stage companies (the area where I specialize), there’s actually a bias in the other direction. Here, companies usually confuse making rapid decisions with making rapid progress. Rather than speeding through to a one-off decision, they need to cultivate the muscle to find the underlying cause of every challenge. In short, they need to slow down in order to go fast. So be mindful of this if you adopt Holacracy. You’ll need to supplement it with long-range strategic development practices so that once or twice a year you pattern up all the tensions, identify their underlying causation, and put in place efforts to solve them at the root level.
Adaptation #3: You Can Renounce Your Authority But Don’t Cede Your Leadership
If you’re going to truly adopt Holacracy then you, as the CEO, will be asked to sign over your authority to a Holacratic-based Constitution, much as the President of the United States takes an oath to defend the U.S. Constitution.
Is this ceremony? Yes. Is it necessary? If you’re going to make a full commitment, then yes. But even if you do choose to sign over authority, make sure that you’re not also forgoing your own authentic leadership.
Let me put it this way. According to Holacracy, if the CEO just cedes authority to the Constitution up front, then the Holacractic system will take over and the organization will transform. It’s not a requirement for an organization to have great leadership, it’s only a requirement that they adopt Holacracy. Then, by virtue of its “exquisite design,” the organization will begin to transform.
This principle reminds me of Communism, which reads well in theory but utterly fails in implementation. The fact is that bad leaders make bad systems. A poor leader will attempt to execute on the wrong strategy, will allow misaligned vision and values, will disregard the principles of structure and process, or will place the wrong style of people in the right roles. If this is the case, then that business is going to fail anyway and Holacracy, or any other management system, is not going to prevent disaster.
On the other hand, a great leader builds sustainable systems. He or she will take what they’ve got and make any system work well, Holacratic or not. If you look at the most successful businesses in history, the ones that assume almost transcendent, iconic status — IBM, Apple, Ford, Disney, Walmart, Standard Oil, HP, Intel, Coca-Cola, Microsoft, Google, Amazon, Virgin, etc. — you’ll see that while each founder had his own unique approach and management methodology, each also designed their business to be symbiotic with his or her own innate genius.
These visionary founding leaders did what only they could do in the early stages of their business growth and beyond. They consciously designed their businesses around their own innate ability to innovate and made conscious design choices to offset their weaknesses. They influenced the most important things without getting bogged down in the details. They delegated, but with visibility and control. They surrounded themselves with complementary teams and structures. They ensured that good decisions got made and implemented quickly time and again, not by micro-managing details but through systems thinking. These same principles hold true for you.
Can you use Holacracy to create this kind of sustainable business growth over time? Absolutely. Do you need Holacracy to do so? Absolutely not. If you look again to the Organizational Physics map, you’ll see that there are many methods to manage your business, and they all come back to the basics. Set the right innovation strategy. Define the vision and defend the right values. Craft and realign the structure to support the evolving strategy. Use this structure to clearly distribute authority and accountability. Follow a sound decision-making process. Design for self-organizing teams with the freedom and autonomy to execute and backed with clear metrics. Get the right people in the right roles. Work on the long range and execute on the short range. Know the forces at play. You know — do the basics right.
Time will tell the fate of Holacracy in the changing winds of the marketplace. However that goes, I want to give kudos to the entire Holacracy team for their commitment to a big vision and for pushing the envelope. They’ve clearly chosen to do what they feel is right versus what is easy or expedient. As anthropologist Margaret Mead said, “Never doubt that a small group of thoughtful, committed people can change the world; indeed, it’s the only thing that ever has.” I look forward to learning more as Holacracy continues to develop.
The NFL is the most popular professional sports league in the United States. In fact, it’s bigger than the next three largest professional sports leagues combined. But when it comes to the field of talent management, what makes the NFL such an interesting case study for businesses of all types and sizes is not its popularity but its parity.
Each season, all 32 NFL teams begin with the same basic chance to be competitive. All teams have a roughly equal amount of money to spend and the same numbers of players to a roster, and the worst teams from last season get higher draft picks and an easier schedule this season. If a team gets “harmed” during free agency, the league will assign it compensatory draft picks to help it stay even.
Parity in the NFL has worked. On any given Sunday, one team can beat another. However, a few teams — despite parity — have been able to win consistently over time. In fact, over the past 13 NFL seasons from 1999 to 2012, just 6 teams out of 32 have achieved a 60% or better winning percentage: the Patriots, Colts, Steelers, Packers, Ravens, and Eagles, with only one team achieving a 70% winning percentage: the Patriots.
Clearly, if everything else is held nearly equal, then these winning teams have cultivated an edge in how they go about managing their business and developing their front office and on-field staff. Is there something you can learn from these consistent winners? And if there is something you can take away, can you actually apply it in growing your own business — a business that probably has just a fraction of the money and assessment resources that an NFL team can throw at the hiring problem? And can you teach it to your own team?
These are smart questions to ask. Even if you don’t follow the NFL or understand the rules of the game, anyone can appreciate the dedication it takes to thrive over time in a highly competitive setting. True, the NFL has its problems and its detractors. It’s violent beyond belief. It’s hypocritical when it comes to player safety. Its locker rooms and rosters are filled with some great men and some giant a@*!#$. That said, the NFL absolutely provides some critical insights for how to think about and approach the hiring process for every business, not just a professional sports team.
While you may not have considered the similarities between your business and an NFL team before, there are many. First, you too are faced with intense competition for great talent. Second, you can’t just throw money at the problem. You have finite time, energy, and resources to make great hires and avoid bad ones. Third, when an athlete is drafted and signed to a professional contract, they’re effectively being hired to do a job just as you hire an employee or independent contractor to do a job. So while your “draft picks” don’t get interviewed on ESPN, the fundamentals of getting the right talent at the right price are the same. Fourth, and most important, you’re not just looking to hire individual talent; you’re looking to build a winning team.
How Should You Solve the Hiring Puzzle?
Just as the NFL pours millions of dollars into how it assesses and hires potential draft picks, businesses of all types and sizes do the same when it comes to hiring. In fact, according to a recent IDC report, businesses actually spend over $85B each year trying to make the hiring process more efficient and effective. They invest in recruiting services, comparative profiling, psychometric tests, research, training, and other ways to try to get an edge in hiring and make it a little less painful.
Despite these massive investments, hiring is still a messy, expensive, convoluted process. For instance, in a recent Career Builder Survey of over 6,000 hiring managers from the world’s ten largest economies, more than half report making a bad hire that caused significant harm to revenues, productivity, client relations, or morale costing more than $50,000 per bad hire.
If you’ve been in the business world for more than a year, then you don’t need these stats to tell you how painful it is to make a bad hire and how challenging it is to get the hiring process right. If you can solve the hiring puzzle, then you can transform your business. If you can’t, and you make a string of bad hires, then you’re soon going to be out of business.
So what can you learn from the NFL winningest teams that hasn’t yet been captured by one of these tools, services, or recruiting firms? Why do businesses pour so many resources into it and still come up short? And can the hiring process ever be truly improved or will it always be an expensive crapshoot?
If you were to ask today’s HR experts on how to improve the hiring process, they’ll tell you that answer lies in having more technology and more data. For instance, there’s a fast-growing startup where I live in Santa Barbara, California, that helps companies scan a candidate’s Facebook page so they can know what that person is really like at home and avoid hiring some whacko. It’s all perfectly legal and EEOC compliant.
There’s yet another company nearby that will do a personality profile on your top performers and then compare them to new job applicants. Supposedly, this approach will weed out the riff raff to help find candidates who mirror the thought patterns and behavior of your existing “A Players.” It’s too bad that this company’s clients haven’t yet understood that high performers actually work best in teams when they are surrounded by complementary, not similar styles of colleagues.
Or perhaps you’ll hear that poor hiring is actually a supply side problem that occurs from a lack of adequately trained candidates coming out of colleges, universities, and trade schools. The solution therefore lies in how we prepare young people to enter the workforce and older people to transition their skills. If you believe this, then I know a few politicians who’d love to speak with you. Bring your checkbook.
The fact is that technology and training can play a part in improving the hiring process. But most NFL teams have near-equal technical capabilities and near-equal training regimes. Sure, every few seasons one team might develop an innovative technical or training edge, but that edge is quickly wiped out when other teams copy it. (The NFL is notorious as a copy-cat league. If something seems to be working, teams will quickly adopt it for their own use).
And if you were to ask the common fan why some teams perform consistently better than the rest, they’d tell you it’s because those teams have a great coach and a great quarterback. “Why have the Patriots won 70%? Easy. They have Belichick and Brady. ‘Nough said.”
Is that true? There’s some truth to it. Would the 2013 Broncos be who they are without Peyton Manning? Nope. Special players like Manning are hard to find and if you get one, you can build a dynasty around them while they last.
But it’s just as true that stars are developed, not born. We’re all shaped by the systems we inhabit and the NFL is rife with stars who were once rejects on their former teams but were fortunate enough to sign on with another team where their style, values, and talents were a better match – and that’s how they became stars (see Wes Welker or James Harrison).
It’s also true that great players get hurt (just like when a top performer at your company quits unexpectedly or no longer performs like they used to) and when this happens, the teams that don’t consistently win at a high level tend to implode. Those that do win consistently, however, tend to keep on winning, even without those former stars. New players enter the scene but the victories keep piling up.
Finally, two objections I often hear from executives when I tell them that the NFL can teach them about hiring is this: “That’s not applicable to us,” one struggling startup founder told me recently. “The NFL can try out players before hiring them. I wish we could do that. If we could try out staff members before hiring them, we’d do a better job too.” I’ve also heard, “The NFL has tons of standardized data to work with and a common hiring pool to compare players through the draft. If we had that level of standardized data, we’d be world-class at hiring too.”
It’s irksome to me that I hear these objections because executives like these just aren’t getting it. Yes, the NFL can try players out and then decide to keep them or cut them. So what? Your business can do the same. In fact, you should always try to structure your new hire arrangements so that you can date before getting married. It’s called a trial period and it’s easy to do and perfectly appropriate.
And yes, the NFL has lots of standardized data to work with. Team management knows the height, weight, 40-yard dash time, Wonderlic score (an “intelligence” test), and playing history of every prospective and future player.
While most of corporate America and Silicon Valley startups are driving hard to get more and more standardized and relevant information through big data, social gaming, and assessments on potential recruits, again, so what? The consistently winning teams use the same data set and have the same opportunities in the draft (or to recruit outside the draft using free agency) as every other team. Yet they consistently outperform their peers. How?
What the Best NFL Teams Do Differently
Clearly, there’s something beyond technology, data, training, individual talent, and luck that the winningest NFL teams do differently than the rest over time. So what is it?
The answer is both simple and profound: Consistently great teams don’t scout and hire for talent. They scout and hire for talent that is a supreme fit for their system. They always think about building a team with a strong collective identity at a fair price instead of just collecting individual talent at any price.
In addition, great teams tend to develop through the draft rather than relying heavily on expensive free agents. They also have a system for recognizing when to unload an existing player to another team and they manage their payroll (their biggest expense) in such a way so that the organization is healthy in the short and long run.
You too need to hire and develop top-notch managers and players. You too are under intense pressure and competition. And unlike the Yankees or Manchester United, you can’t just throw money at the problem. You’ve got to play “moneyball” instead and find the right mix of skills for your system and at a good value to market rates. You need to build a team, not a collection of mercenaries.
Put another way, the hiring process can be improved in your business by modeling what the NFL’s best teams do – but this doesn’t come from new technology, more training, or getting lucky. It starts with rethinking how you think about the hiring process itself. Unless you and your team have the right paradigm to think about hiring in the first place, then no matter what tools, resources, and processes you deploy, your hiring process is still going to be flawed. Until you think differently, you can’t act differently.
Today, you may know Bill Belichick as the head coach and de facto GM of the New England Patriots and one of the most successful coaches of all time. But 25 years ago, he got his first head coaching start with the lowly Cleveland Browns.
According to the book War Room: The Legacy of Bill Belichick and the Art of Building the Perfect Team, when Belichick took the helm at Cleveland, he was already crystal clear on the type of team he wanted to build — a big, strong, fast team that was capable of playing in any weather, in loud and hostile Rust Belt stadiums, and was smart enough to adjust their schemes each week to take away the biggest strengths of their opponents.
But during his first days on the job he quickly noticed that the Browns’ pro and college scouts, coaches, and administrative staff were not thinking about the hiring process in a smart and unified way. Because they weren’t thinking about it in the right way, they weren’t going about it in the right way, and they certainly wouldn’t be able to create a sustained competitive edge until they changed their thinking:
“[The Browns staff] were not speaking the same language when it came to personnel. There was one grading scale for evaluating the pros and an entirely different one for analyzing collegians. Even worse, in his opinion, there was no organizational identity. After all the scouting, who were the Browns trying to be?
It seemed to him that there wasn’t a good systematic answer to the question, so that became one of his missions: Build one player-evaluation system, for pro and college players alike, that always provided an instant snapshot of who a player was and whether he was capable of helping the Cleveland Browns. When the system was perfected, the coach imagined, everyone in the organization would be able to glance at a couple of numbers and letters on a scouting report and know exactly what type of player was being discussed.”
Belichick was never able to complete such a system for the Browns. A few years after taking the job in Cleveland, the team was moved to Baltimore and Belichick was fired. But the vision was set and years later, when Belichick became the head coach of the New England Patriots, he was able to put such a talent evaluation system in place and, with a few notable exceptions (no Aaron Hernandez jokes here, please), the results have been outstanding.
What Belichick recognized when he started with the Cleveland Browns is that hiring and development of both front office and on-field staff was critical to the organization’s success, but the organization lacked the framework to transform it into a competitive edge to wield against the competition.
It took Belichick years to refine his talent evaluation system. Once he got it going and cascaded it throughout the Patriot scouting teams and front office, however, it transformed a haphazard process into one that is much more accurate, scalable, and powerful.
I’m not saying the Patriots and other top performing teams have been perfect in their drafting and team development (they haven’t) but that the way they think about hiring and the approach they use gives them a slight edge over the other teams. And in a highly competitive setting, a slight edge makes a significant difference.
To drive this point home, I’d like you to reflect for a moment about how exactly you think about the hiring process in your business today. Are you searching for a particular personality? A salary range? Past experience? Education or credentials? A personal referral? Commitment to a vision? Job skills? Upside potential? Cultural fit? Avoiding a future liability? All of the above? And if you are clear on the above, how do you go about determining it? What tradeoffs are you willing to accept and why? Finally, how do you — and your team — actually know it when you see it in a way that everyone can agree on?
Chances are that you don’t have a unified answer to these questions nor a systematic way to find answers. And if you should happen to have an answer personally, does the rest of your company’s hiring team know the answer too? Probably not. In order to create a unified and systematic approach to hiring, one that guides you and your team to find the right candidates and avoid the wrong ones, you need a framework to follow.
The New Hire Draft Board: The Ultimate Talent Management Framework
Every season the NFL has a draft for new players. There’s a lot of organizational focus and media attention on the draft. It gets NFL fans in a tizzy of excitement too. “Who will our team draft this year?” “Will they botch it up again?” “Is there hope for the Browns finally?”
Before and during the draft, each team creates its own version of a draft board. The draft board helps team management to think about where they believe the relative value of a prospective player is compared to the “market demand” and the team’s needs.
If you’ve ever heard an NFL GM tell the media, “we worked our draft board perfectly this year,” what he’s really saying is that he believes the team got the players it wanted for the price they wanted to pay.
Even though your organization doesn’t hire employees all at once during a certain time of year like the draft or recruit employees in a hierarchy of rounds, but rather by pressing organizational need, you still need your own version of a “draft board” that allows you to think clearly and accurately about who to hire and why (and who not to hire and why) and where the value of a particular candidate lies.
If you had such a system, then you could place any prospective new hire on the draft board and see if they’re a fit or not, what the trade offs are for each candidate, and how candidates compare to existing staff and even glean insights into how to best recruit, manage, and develop them. In a word, the draft board brings clarity.
The right draft board will not only apply to prospective new hires but also to existing staff. That is, if you were to place an existing staff member on the draft board, it would tell you if they need a raise, if they’re suitable for a new position or are ready to be promoted into a leadership position, or if it’s time to let them go and find someone new.
Below is just such a draft board. It’s based on the team leadership framework created by legendary San Francisco 49ers football coach and GM Bill Walsh who was the architect of the 49ers football dynasty in the 1980s. There’s a richness of detail here, but for now just scan it quickly to get a sense for what a blank new hire draft board looks like:
Like most great things in life, this draft board is both simple and powerful. It groups all of an organization’s current staff and/or potential job candidates into one of four quadrants:
- The Team Leaders in quadrant 1 demonstrate high skills and fit for this position or role, they have shared vision and values, and they demand fair compensation (defined as at or below market rates for your industry and corporate lifecycle stage) for this position. That is, they could get more money elsewhere but they choose to take less because they intrinsically value being part of the team and opportunity in a role that is well suited to their strengths and interests.
- Team Leaders define “the way” of your organization much like Peyton Manning or Tom Brady are team leaders who define the way of their respective teams. “Hey rookie, see how Peyton Manning studies film every morning at 6am? That’s the kind of player we want around here. Prepare like he does and you’ll do just fine.”
Think of your Team Leaders as stars, starters, or captains. You want to reward and retain them for as long as possible. Give them ownership opportunities, career paths, autonomy, and support them as role models for the rest of the company.
- The Team Players in quadrant 2 don’t have the same technical skills, fit, or experience as a Team Leader but they share the same desired vision and values and don’t cost an arm and a leg relative to market price.
Team Players are valuable to your success and you definitely want them around. It’s very hard to find people who share the same vision and values and embody “the way” of your organization. If they have the raw talent, it’s much easier to develop their technical capabilities over time to become Team Leaders or if not, to remain as valuable role players. It may also be that, as they develop their capabilities and acumen, a role in the organization opens up that is a very strong fit for their style.
Think of your Team Players as your role players or bench. You need to coach them to develop their technical proficiency and groom them into the right role while still celebrating them as key contributors to the team’s success.
- The Specialists in quadrant 3 have high technical skills and are a strong style fit for the job, but they don’t share the same vision and values and/or may be very expensive compared to market rates.
Specialists are viewed as highly capable experts that don’t fit into the desired organizational culture. While specialists can get the job done, great organizations rely on them sparingly and never place them in core leadership positions because the specialist doesn’t share the desired vision and values. Much like having a primadonna wide receiver like “Ocho Cinco” in an NFL locker room can shift the focus from the collective “we” of the team to the “me” of the individual ego, a specialist in a leadership position who doesn’t embody the desired vision and values can quickly turn a once winning organizational culture into one that is toxic and self-defeating.
Think of Specialists like mercenaries or free agents who get paid well to perform a specific function well. If you do choose to use them to fill in some talent gaps, keep them on the periphery of the organizational core and pay them cash on the barrelhead for a job well done.
The biggest mistake you can make when hiring a specialist is to delude yourself into thinking that you can mold them into a Team Leader with the proper incentives and motivation. Don’t do it! They are who they are, and no amount of incentives is going to change that fact unless they themselves want to change.
Even with a strong individual commitment to change, personal character development can take a long time and can easily be tripped up. Therefore, if you do hire a Specialist, avoid putting them in a leadership position but allow them to express their high level of skills and acumen outside of the organizational leadership core.
- The Waivers in quadrant 4 do not have the skills and fit and do not buy into the desired vision and values. Or, they simply demand way too much compensation beyond market rates for a company of your size and industry.
Waivers are who you’re trying to avoid hiring in the first place. The easiest time to make a waiver is before they even get hired! So if in the interviewing process you notice the signals of a quadrant 4, it’s straightforward: DO NOT HIRE.
The next hardest waiver to make is an employee who sneaked through the hiring process and turned out to be a poor fit that now sucks everyone’s time and energy. They don’t perform at a high level and they don’t embody the desired cultural traits. So why do you have them around? Now that you’ve recognized the mistake, fix it. Fire ‘em or trade ‘em to the competition. Fast.
By far, the hardest waivers to make are those former Team Leaders and Team Players who just no longer have the high level of technical skills or fit within the evolving organization, or who are just demanding too much compensation relative to market rates for a company of your size and industry.
While it’s hard to say goodbye to these once valued team members, it’s even harder to be burdened with excessive overhead and a diminishing skill set. (Just ask the Raiders who have been mired in trying to work themselves out of expensive and underperforming contracts for the past five years).
That’s the four main quadrants of the draft board: #1 Team Leaders, #2 Team Players, #3 Specialists, and #4 Waivers. You should notice immediately that this framework provides a strong foundation for how to think about who’s on your team now and who you want on your team in the future. It tells you that:
- You need a strong core of #1 Team Leaders who are extremely talented at what they do, are a great fit for your system, share the desired vision and values, and will work at a fair price relative to market rates.
- You need a deep bench of #2 Team Players who aren’t yet as talented as the starters (or there’s not the same level of job fit) but buy into the desired organizational culture at also do so at fair market price.
- For the most part, you want to avoid using #3 Specialists who, if placed in a leadership position, can quickly turn the organizational culture toxic or tip the payroll balance by demanding exorbitant fees to be part of the core team.
- You must avoid hiring and retaining #4 Waivers who don’t have the skills, aren’t a fit, don’t buy into the vision and values, or make it too expensive in time, energy, and/or money to keep them around.
As you can see, the draft board framework provides a very strong foundation for how to think about the type of players you want on your team. It’s pretty straightforward to master the basic concept and it’s simple for everyone involved in the hiring process to understand.
The PSIU Code: A Common Language for Hiring Success
The draft board framework also sets the stage to create a powerful common language within your company. A common language, or code, promotes rapid communication and instant understanding. Having such a code is incredibly important to not only the hiring process but also to overall communication and organizational performance.
The winningest teams in the NFL understand this. Each one uses their own proprietary written code or shorthand to define players’ skills and fit within their system. The Patriots, for instance, use an intricate upper- and lower-case letter and numbered grading system that compares a potential draft pick or free agent against existing players on the Patriot’s roster.
Patriot scouts are required to rank a player using this internal code to describe not only physical characteristics, but also how those players play the game and fit within the Patriots’ system. (Is this player aggressive? Smart? Instinctual? Observant? Tough? Passionate? Studious? etc.).
Using a code to identify and communicate the kind of player the team needs for any particular position is brilliant. Because once you know the language, this allows a near-instantaneous understanding of an existing player or potential draft picks. It also forces the entire organization to get on the same page when it comes to knowing what an ideal player represents – e.g., What does a starting Patriot linebacker look like and how should they go about their job? The code tells it.
Your business needs a similar code – and the draft board framework provides it. The code needs to be able to answer this question: “What are the desired characteristics for this role and is there a match with this employee or job candidate?” The code must be simple, fast to use, and easily understandable by everyone involved in the hiring process.
Here is an example of the start of an active draft board with a simple code. This draft board is for a new Head of Operations role for an expansion-stage healthcare technology company. It includes the new shorthand code that you will soon master.
Learning a new language takes a bit of practice but already you should have an initial grasp of the type of candidate this company wants just by glancing at the draft board target. What can we tell?
The company is seeking a #1 Team Leader who demonstrates high job skills and high style fit for the role, who shares the desired vision and values, and who demands fair compensation compared to market. In addition, we can tell that the right candidate is a Producer/Stabilizer style (PSiu) in their approach — meaning that he or she will thrive when working to accomplish the daily/weekly work and to bring order or efficiency out of chaos.
PSIU stands for the Producing, Stabilizing, Innovating, and Unifying forces (think “PS. I love U” to remember them) and is a form of management shorthand that tells you what kind of style, strengths, and approach you require from any given position. As I explain in my book Organizational Physics: The Science of Growing a Business, these four forces show up in individual management styles as a result of how we learn to drive and respond to change and to focus on the parts or the whole of the system we’re in.
“OK,” I can almost hear you saying. Seems simple enough. But how do I determine where each candidate is on the draft board?” Well, that’s the purpose of your recruitment and interviewing process! That is, a good recruitment and interview process will quickly and cost-effectively identify where a candidate is on the draft board. A poor recruitment and interview process won’t provide that level of insight or it will take too long and cost too much to find the answers.
Before you start diving into how you’ll build a new recruiting and interviewing process to support the draft board framework, I’d like you to pause and reflect for a moment. Remember earlier when I asked you how exactly you think about the hiring process in your business today?
”Are you searching for a particular personality? A salary range? Past experience? Education or credentials? A personal referral? Commitment to a vision? Job skills? Upside potential? Cultural fit? Avoiding a future liability? All of the above? And if you are clear on the above, how do you go about determining it? What tradeoffs are you willing to accept and why? Finally, how do you — and your team — actually know it when you see it in a way that everyone can agree on?”
Well, guess what? Now that you are starting to get an initial feel for the draft board framework, can you see that you’re already well on your way to answering those questions now and forever? No matter how you slice it, from now on when you think about the hiring process, you’ll know what to think about:
Are you in search of a “#1 Team Leader” and will you only accept a “#1 Team Leader” because this is a critical leadership position and you must have captain who walks the talk and demonstrates a high level of skill and fit?
Or will you accept a “#3 Specialist” for this position because it is outside the company core and you just need a high level of technical skill and role fit to get the job done?
Perhaps you are in the market for a “#2 Team Player” but you’ll expand the scope to a “#1 Team Leader” if you stumble across the right candidate? Or is this purely a “#2 Team Player” hire because that’s all that’s really required for this role?
And what is the style of candidate who will naturally thrive in this role based on the job requirements and the complementary skills and gaps in the team? Do you need a high Producer/Innovator who thrives at winning and coming up with creative solutions to complex problems? Or would it be a Stabilizer/Unifier style who brings order out of chaos while keeping the team and clients on the same page? Or a different style altogether?
There are still a lot of details to answer and those answers will come soon enough. But what’s really important (and valuable) is having a framework to ask the right questions in the first place! And that’s exactly what the draft board framework gives you: A new way to think about hiring, along with the right questions to ask.
Now that you have a snapshot of the draft board framework, the next step is to understand how to put it into action. Once you know the how, then you can tackle the when to hire and who to hire. But right now, don’t rush past small victories. Take a moment to savor them. You now have a seriously powerful framework for how to think about the hiring process.
If you’re a person who likes to hear about momentous progress happening in the world, then you’re going to like the story that about I’m to share. However, if you’re an entrepreneur who appreciates ingenious solutions to complicated problems, then you’re going to absolutely love it.
It’s the story of one of the most innovative business models I’ve seen in some time. It’s also a story of confluence – an almost magical combination of technology, market timing, and business strategy that leads to greater social good.
The centerpiece of the story is M-KOPA, a fast-growing startup based in Nairobi, Kenya. M-KOPA has a compelling vision: to bring solar panel lighting and electricity to the African continent. M-KOPA doesn’t build solar panels. It provides consumer financing for them. And even though it went into service just a year and a half ago, it already has over 35,000 customers and is growing rapidly.
You probably know already that much of sub-Saharan Africa still uses kerosene-based lighting. Kerosene is not only antiquated, it’s also dangerous and unhealthy. If Kenya alone switched from kerosene to solar electricity, it would not only provide superior lighting and energy, according to Luminanet.org, it would also save the average Kenyan household $105 USD per year, eliminate 2.3 million tons of carbon dioxide from the atmosphere (equivalent to about 500,000 mid-sized cars), and save millions of children and families from exposure to toxic fumes (62% of all child poisonings in Kenya come from kerosene).
But wait a minute… haven’t you heard this story before? Haven’t you heard the big dreams and opportunities that Africa presents for both energy and economic transformation? And haven’t most of those dreams been shattered like a wooden boat thrown against the rocks of Cape Hope?
I know. I get it. I can almost hear you saying, “Wait a minute, what makes M-KOPA different from the dozens of other companies that have traveled this route before? Why are they growing so quickly? Are they some kind of pyramid scheme? And how can they provide financing to consumers who don’t have a credit score, a credit card, or collateral to take out a loan? Sounds like a fine African fairy tale.”
This is where confluence comes in. In 2007, Kenya adopted a mobile phone payments system called M-Pesa. M-Pesa has grown astoundingly quickly since the moment it was launched and, according to Wikipedia, by 2011 it had more than 17 million subscribers. Today, M-PESA is effectively at or near universal market penetration. Put another way, while we in the US suffer from shitty cell reception (“Can you hear me now?”) and legacy bank transfer systems, almost everyone in Kenya has a mobile phone with constant reception and the ability to do instant cash transfers!
On the back of this universal payment network M-KOPA, was conceived: a company designed from the ground up to do mobile phone payment transfers for solar financing. Without M-Pesa, M-KOPA could never exist. So one of the things that’s different this time around in Africa is timing. And as my granddad used to say, timing is everything.
“But wait a minute,” you’re probably thinking, “just because someone can pay for financing via mobile phone doesn’t mean they actually will pay. How does M-KOPA check for credit scores? Deal with non-payments and defaults? Collateralize their loans? What, do they have a fleet of bicycle-based repo men? Doesn’t sound very efficient to me…” The answer is No, No, and No. And this is what makes the M-KOPA business model so ingenious and scalable.
Here’s how it works: M-KOPA charges an up-front deposit of about $30 USD. This fee is high enough so that consumers value their investment but low enough that most Kenyan households can save up for a few months to afford it.
M-KOPA then finances the balance of the panels to their customers at a very affordable fee of $.50 (USD) per day. The program is designed to pay off the panels in one year, after which the customer owns the system outright.
That’s pretty basic. Now here’s the secret sauce: M-KOPA installs a secured SIM card on the solar panels themselves. In the event that a consumer doesn’t pay the 50-cent per day fee, then voila’, those solar panels get shut off through the mobile network! Once a customer shores up their balance, the panels are turned back on via the mobile network. No need for credit scores, credit checks, a fleet of repo men, or bank references (which don’t exist).
Isn’t that brilliant? M-KOPA’s loan repayment rates are astoundingly high. Once consumers shift from kerosene to solar electricity and lighting, they definitely don’t want to go back. Not only is it a sustainable business model, it’s the kind of approach that will allow Africa to quickly adopt clean, green, energy and all the benefits that entails.
As Chad Larson, co-founder and finance director of M-KOPA and an Oxford graduate put it to me, “Our loan repayment rates at M-KOPA are on par with those of loans to the highest credit score borrowers in the West. But what is more meaningful is that there’s huge demand for this kind of power in Africa, and it’s now possible for us to meet that need in a sustainable way.”
I love this story. I admire the combination of clean energy and social good combined with a sustainable business model. I tip my hat to the team at M-KOPA and wish everyone involved a brighter future.
If you’re interested in the new emergence of Africa, here are some interesting TED Talks I’ve seen recently that describe Africa at a tipping point towards a more prosperous future:
At the time, I had just shut down my first startup, had burned through all my savings, and was in desperate need of a job.
A friend of mine told me about the firm one night over beers: “Hey Lex, I know that you just shut down your startup. Sorry it didn’t work out, man. But hey, if you need a job to pay the bills, they’re hiring where I work. It’s not the best job in the world but the money can be good if you work hard at it.”
The notion of hard work and good money sounded like a pretty good opportunity. I needed something I could throw myself into until I found my footing again. So I called the company the next day, told them I was referred by one of their existing reps, and set an appointment for an interview.
To prepare for the interview, I practiced my spiel about why I’d be a good fit for their organization, polished up my resume, put on a suit, and went in with a mix of hope, anxiety, and chutzpah.
I arrived at their offices and approached the receptionist’s desk. The receptionist, middle-aged and blurry-eyed, looked me up and down skeptically and, with a hint of exasperation at having to deal with me, said, “May I help you?”
“Ah yes, I’m here for an interview for a sales position. My name is Lex Sisney.”
She glanced down at her calendar and shook here head: “There’s no interview today. You first need to take the written test.” She reached into her file drawer and handed me a 50-question fill-in-the-oval-and-make-damn-sure-you-stay-in-the-circle-scantron-test. “If you pass the written test, then you’ll be invited back in for an actual interview.”
I thought to myself, “Really? Why didn’t they tell me this on the phone? I’ve got to take some psycho-babble test before even speaking with somebody? And is this the kind of place I want to work for? WTF. Oh well, I guess I do need the money so I better just play along.”
So out loud I said, “OK, let’s take the test.”
“See the clock over there on the wall?” she said. “You have 30 minutes to complete the test. Have a seat under the clock and the time will begin. Do you have a #2 pencil?”
“Ahh, no, I’ll need a pencil please, do you have one?” She rolled her eyes and reluctantly handed one over like it was her last meal. I took the pencil, turned on my heel and walked back to my assigned seat under the clock.
The test asked me questions about what I’d do in hypothetical situations like the following:
“You see a co-worker take a company coffee mug from the storage closet and put it in his briefcase. You should:
A) report the theft to HR.
B) ask him what he’s doing.
C) take a mug for yourself.
D) tell him to put the mug back.”
I snickered under my breath but played along anyway. I finished quickly and turned it in with 15 minutes to spare.
The receptionist scanned it over with a raised eyebrow to make sure I stayed within the circles and didn’t miss any questions. “OK,” she said, “someone will call you if there’s a possible fit,” and I left. (Note: psychometric tests like this one have transitioned from #2 pencil to the web but they can still be just as asinine.)
About a week later the company called me in for the actual interview. And I was told that this time, I’d actually get the chance to speak with the hiring manager.
I arrived early and re-greeted the receptionist. She seemed in a somewhat better mood this time: “Have a seat Mr. Sisney and Mr. Johson will see you when he’s ready.”
After waiting for 20 minutes past the scheduled time (is this a doctor’s office?), a new voice spoke from the receptionist area. “Mr. Sisney? I’m Lidia, Mr. Johnson’s assistant. He’s ready to see you now.”
Lidia led me back through the cubicles and telemarketers to a large windowed office. There at a small, round conference table sat “the Man.” As I was ushered into the office, he didn’t actually look up or greet me but sat leafing through some papers, extended a limp-fish handshake, pointed to a chair across the table and sternly said, “Have a seat.”
After what seemed like five minutes of just sitting there waiting, he finally looked up from his reading, made eye contact, and with pursed lips told me, “I’m concerned about your ability to conform.”
“Excuse me?” I asked trying to mentally process what he just said. He placed one of the pages he was reading on the table and with two fingers slowly twisted it towards me so I could read it.
“You see this chart? This fourth column is conformance. Your scores in these other three areas are very high but you have the lowest conformance score of anyone I’ve ever seen.”
I said, “Hey, that’s pretty cool. Can I have a copy of that?”
“No,” he frowned. “But tell me why should I believe that you can conform to our way of doing things here?”
I tried to dance and weave and sell him on the idea that non-conformity really meant “creativity” but I didn’t think he really bought it. The interview lasted about 10 minutes total and I left thinking it was all a big waste of time.
Surprisingly, they called me a few weeks later and offered me the job.
“No, thanks,” I said. “It seems like you’re looking for drones for your empire. That’s not really me.”
Conformity vs Community
Just think about this interview I had. It’s clear that this company was suffering from high turnover in the sales team so they tried to fix the problem by weeding out risky candidates (like me) using a psychometric profile test early in the hiring process.
In effect they were saying, “Turnover is costing us a lot of money. We must control for it by only hiring reps who can conform to our process.”
Did it work for them? No! They still had high turnover in their sales team; those they did attract were of the lowest common denominator; and their entire recruiting process became a bureaucratic numbers game.
It’s no coincidence that this company went public a few years after my interview and went bankrupt a few years after that. Why? The market no longer demanded their products and they couldn’t adapt because they had conformed to the past.
Wise leaders build their businesses on a different principle. Rather than allowing for conformity, they design for community.
- Conformity gives the illusion of control but, in the end, its focus on “monocultures” makes the system brittle, stagnant, and tired.
- Community takes more time and courage to build but its focus on diversity ultimately makes things alive, vibrant, and adaptive over time.
The tricky thing to manage when designing for community is that community requires some conformity!
How to Design Your Culture for Community, Not Conformity
Imagine a community where no one speaks the same language or shares the same ideals, where there’s not a clear structure or decision-making process, and where the systems don’t interoperate (all of these things require some level of conformity). What do you get? Anarchy. Inefficiency. Exhaustion. Failure.
So how do you balance that? Or, how and where do you require some conformity but keep its relentless advance in check so that individual diversity can flourish, adapt, and up-level the entire system over time?
The answer is that every situation is unique but the underlying patterns remain the same. The secret to spotting those patterns and managing them more astutely is to understand the four forces of Organizational Physics: Producing, Stabilizing, Innovating, Unifying (PSIU). If you’re new to the concept of the four forces and how they show up in every system, read Part II in my book Organizational Physics – The Science of Growing a Business.
Take a look at the PSIU matrix below because it reveals the secret to balancing community vs. conformity:
On the left side are the Stabilizing and Unifying forces. The Stabilizing force creates Conformity. It makes things efficient, repeatable, and scalable. The Unifying force allows for Community. It makes things harmonious, congruent, and working well together as a complete whole.
On the right side are the Producing and Innovating forces. The Producing force is about getting things done and producing results for clients. The Innovating force is about adapting to changing conditions.
In order to be successful over time, the left side (Stabilizing and Unifying) of your organization must always be harnessed to support the right side (Producing and Innovating). I say “harnessed” because, like horses run amok, if left to their own devices, the Stabilizing and Unifying forces will creep, control, and condemn the rest of the system to failure.
For instance, if the Stabilizing force is out of whack, there will be too much bureaucracy, rules, standards, and efficiency in the system. The organization shows up like a shit factory. It produces the wrong thing very efficiently.
But the Unifying force can get out of whack too. If it is out of balance, the culture becomes all-consumed by politics, infighting, and the “drama in here” versus the “needs out there.” In this case, the organization shows up like a bad soap opera or a community at war with itself.
To repeat: the secret to designing a business that leverages diversity to become strong and vibrant over time is this: the left side must support the right side! If the Stabilizing and Unifying forces are NOT supporting the Producing and Innovating forces, then they are cancerous and must be ripped out/changed/healed/improved. That’s your job as a manager.
Why must the left side always be in support of the right side of the matrix? Because the purpose of the business is to produce results for its clients, now and over time. If you’re focused on meeting the changing needs of the external market, then everything else is open for reinvention.
- Is a process slowing us down in our ability to meet customer needs? Replace it.
- Is our culture too focused on what’s going on in here? Get out of the office and go meet with customers.
- Are we too staid in how we’ve always done things and the market is changing rapidly? Better get busy on blowing things up.
- Is our recruiting process bringing in the right candidates to meet client needs now and over time? No? Better go change that process.
So as a leader, how do you know what to do and when to create community and not fall prey to simple-minded conformance? You need to create a framework for success. Equipping you with such a framework is outside of the scope of this article because it would require a book
But a short answer is this:
- You need to define and defend the Vision and Values of the community. And yes, Vision and Values must be defended, just like the Constitution of the United States must be defended. If you don’t defend it, you’ll soon lose it.
- You must put in place a sound structure of accountability and have key metrics in place to track performance.
- You must enforce a sound team-based decision making process that allows for diversity of perspectives in the decision and ensures rapid implementation post-decision.
- You must create space for others who buy into the desired vision and values to have a place in the organization where they can express their individual genius in service to something larger than themselves (i.e., the clients).
Once you have these elements in place, that’s enough “conformance” to create a vibrant community. Your task as a manager is to now help keep the community focused on what’s happening out there in the world: being in service and producing results for clients and adapting to changing conditions over time. That’s sacred. Everything else in the community is open for reinvention.
Have you ever wanted something only to rue the day you actually got it?
Recently, I had a simple but profound lesson that really taught me the value of “be careful what you wish for.” I’m really lucky to live in a beautiful place. Take a look. Here’s the view from our deck:
It’s an awesome view right? Well, when my family and I first moved here, I certainly noticed that it was a beautiful view. Almost immediately, though, my internal monkey mind started telling a story that that the view from across the valley must be even grander.
“Wow,” I thought, “the view from here is pretty spectacular but the view from that beautiful house across the valley must really be great!” I even felt inferior in some sense, as if we had ended up on the “wrong” side of the valley. The truly good stuff was clearly over there.
Well, I’m an idiot. One day my wife and I took a hike across the way. When we got to the other side and looked back, what do you think we saw? A really mediocre view compared to our side of the valley. The mountain ranges and textures that made our own view so spectacular were missing on the other side. Duh!
I realized in that moment that I had spent much of my life assuming things were always better on the other side. From afar, they looked more beautiful or interesting or desirable “over there.” I often focused blindly on simply getting “there” even if “here” was actually better.
I know I’m not alone in this error. Many highly driven people make the mistake of focusing on getting something new, even if it doesn’t make any sense to do so.
For instance, I have a friend who built up a successful company over the past decade. He worked hard, lived a nice lifestyle, and seemed to authentically enjoy the industry, clients, and his employees. Basically, he had a really good thing going and he knew it.
But my friend’s vision had always been to sell his company. The story he told himself was that if he’d work hard to build up his business, then one day he could find a strategic acquirer, sell it, and do something new. He didn’t give too much thought to what he would do after the sale. He was exclusively focused on making the exit happen. He told himself that he’d figure out what to do once he had the time, money, and freedom to really think about it.
You can probably guess what happened. He actually did sell the company, but it turned out to be a disaster. He signed a three-year workout clause with the acquiring company. They made promises to keep the existing staff and give his business complete autonomy within their portfolio. That lasted for about 60 days before the new owner decided to change strategic directions. They made a call to shut down his business (now theirs), fire the staff, and sell off the assets.
Today, my friend has a little bit of money in the bank but he’s miserable. He’s cut off from the work he enjoyed, the team he built and thrived with, and the clients he used to serve. More than that, he’s really, really pissed off at how things went down. He feels cheated by the acquirer and blames himself for wrecking a really good thing.
I can contrast this story with another friend of mine who’s also successful entrepreneur. This friend had made his fortune in the commodities business and moved to Santa Barbara to “retire” at 40. He quickly got bored and decided that he wanted to get into the restaurant business. A dream that he always wanted to pursue.
But this friend did something really, really smart. He found a restaurant for sale that seemed like it might be a great purchase. But he didn’t go to the owner and make an offer. Instead, he dressed down and went to the owner and got a job as a busboy! I asked my friend why, being independently wealthy and with a world of options at his fingertips, he would waste his time being a busboy?
My friend responded, “Because I want to try on the restaurant business before I commit to it.” He worked at the restaurant for about a month. He learned the ins and outs of that business by doing the work, getting a firsthand account of the operation, and befriending the owner to get more inside information.
Ultimately, he decided that the restaurant business wasn’t his game. The margins were too thin and the hours too long. But isn’t that perfect? He only risked his ego and some time to suss out what his new reality would be like after the potential decision was made. The value he got of NOT buying a restaurant is priceless. Otherwise, he would have gotten stuck owning an asset he didn’t really want to own. His kind of methodical thinking and willingness to “try on” the future before making a commitment is certainly one of the reasons this friend is so successful.
I’ve tried to take this lesson to heart by slowing down my own decision-making process long enough to really investigate (or even intuit) what life would be like after I make a certain decision. In essence, I try to walk across the valley and see what life over there is really like before wishing I had it any different. How about you? Are you wishing you had it different when what you’ve got right now is perfect? How can you tell if you’re too focused on just getting it done versus making the right decision?
This article is for leaders who are seeking an edge in how to think about creating a winning culture and outcomes in their organization.
We’re in the dog days of summer and if you’re looking for a good book – well, I found Phil Jackson’s 11 Rings: The Soul of Success to be a fun, insightful, and breezy read.
As you know already, Phil is a living basketball and coaching legend. Here’s a snapshot of his career from Wikipedia:
- Head coach of the Chicago Bulls from 1989 until 1998, during which Chicago won six NBA titles.
- His next team, the Los Angeles Lakers, won five NBA titles from 2000 until 2010.
- He also won two championships as a player and holds the NBA record for the most combined championships (13) as a player and a head coach.
- He also has the highest winning percentage of any NBA coach (.704).
When someone has won at every level like Phil, he probably has something valuable to teach. Here are the top 4 things that I took away from his book that are applicable to how you think about growing your business…
#1 Have a SystemPhil is famous for being a disciple and a champion of the Triangle Offense (Phil learned the triangle from Tex Winter, who was a long-time assistant to Phil and who, in turn, learned the system from Hall of Fame coach Sam Barry).
The goal of the Triangle is to create a base structure on the floor (guess what? it looks like a triangle!) so that good spacing between the players is maintained and allows them to make adjustments on the fly, based on what the defense is doing. When the triangle offense is working well, it’s simultaneously hard to stop and a beautiful thing to watch:
Your business needs a system and philosophy you believe in too. There are many systems you can choose from but any good management architecture will at a minimum have these characteristics:
- It creates a common lens so the team sees the same thing on the floor. That makes sense, right? If the team isn’t seeing the same thing, they can’t act in concert. Like the proverbial five blind men and the elephant, if marketing sees one thing, sales another, and engineering something else entirely, then you’re going to drop a lot of passes.
- It creates a common language so that players instantly understand one another. When one player says, “Run X175B,” what in the heck does that mean? Similarly, if the CEO says, “We need to hire a VP of Sales,” what in the heck does that mean? Is it a VP of Sales type who can build a sales system and manage a team? Is it a VP of Sales type who can open new markets? Trust me, the title may be the same but the style of player is radically different. You need a language in your business that promotes instant understanding of what’s happening and what’s needed.
- It creates a common sequence so that the team knows what to do in a given situation. In the Triangle offense, if the defense takes a certain position, the offense knows what sequence of steps to take next. It becomes a fluid dance built on strong fundamentals. In your business, the sequence needs to be clear based on where you are, what is the right next set of priorities to solve, and in what sequence they need to be handled.
- It creates the right balance between the competing needs for flexibility and control. One of the coaching gems I got from the book is this: “Give players the freedom to find their destiny within the team structure” (293). I love this passage because it’s exactly what I strive for in my coaching practice. Design the system to scale and then allow tremendous autonomy for individuals to find their groove within that structure.
When you’re implementing your system, be prepared for some resistance. Much of 11 Rings is about how a leader can instill buy-in into a system, even when dealing with monstrous egos (like Michael Jordan and Kobe Bryant), that ultimately allows the players to flourish as a team.
#2 Lead to the Next Stage of Development. Then Lead Again.
In addition to the Triangle Offense, one of Phil’s major coaching frameworks is from a book called Tribal Leadership by Dave Logan, John King, and Hailee Fischer-Wright.
The book is about how tribes develop (or devolve) in a predictable ways. Just as you wouldn’t treat a three-year-old like a thirty-year-old, a good tribal leader will adjust his or her style based on the developmental stage of the tribe.
The book calls out 5 stages of tribe development. A good coach will recognize the stage and help the tribe develop into the next stage. The 5 stages are:
Stage 1: Shared by most street gangs and characterized by despair, hostility, and the collective belief that “life sucks.”
Stage 2: Filled primarily with apathetic people who perceive themselves as victims and who are passively antagonistic, with the mind-set that “my life sucks.” Think The Office or the Dilbert comic strip.
Stage 3: Focused primarily on individual achievement and driven by the motto “I’m great (and you’re not).” According to the authors, people in organizations at this stage “have to win, and for them winning is personal. They’ll outwork and outthink their competitors on an individual basis. The mood that results is a collection of ‘lone warriors.’”
Stage 4: Dedicated to tribal pride and the overriding conviction that “we’re great (and they’re not).” This kind of team requires a strong adversary, and the bigger the foe, the more powerful the tribe.
Stage 5: A rare stage characterized by a sense of innocent wonder and the strong belief that “life is great.” (See Chicago Bulls).
The key takeaway is that you’re always managing different people, teams, and business units differently, based on where they are in their stage of development. You lead each one to the next lifecycle stage. Then you change your leadership style and lead again to the next sequential stage.
This would be an impossible task unless you also had a universal framework, like Tribal Leadership or Organizational Physics, that reveals the underlying patterns at work at each stage of development. If you have such a framework, then what was once complex is now much simpler and even a lot of fun.
#3 Time Your Rhythm to the Stage of the Season
A favorite insight I took away from 11 Rings is that early in the season Phil would coach really hard in practice but be mostly laissez-faire during the games. His goal was to get the team to rely on and trust their teammates on the floor rather than looking to the sidelines for help. They had to learn to work their way out of their own problems on the court. The goal was to sacrifice some possible early season wins in order to build greater resiliency and self-reliance for the championship season down the road. Good advice for every leader.
In business we have it much tougher. We’re under constant pressure to go-go-go. One quarter blends into the next and one year into the next. It’s easy to lose sight of the stage of the season, confuse activity for effectiveness, and waste our time and energy on the wrong things at the wrong stage. Over time, this leads to burnout and disengagement.
A great practice for every business leader is to think and structure the business calendar like a sports season. When do you get off site to reflect and renew and plan for the long range? When and how do you roll out a quarterly game plan? When do you assess the structure key hires? When do you celebrate success and when do you learn from failure? When and where do you take more control and when do you allow for more autonomy?
The key point is that there is a rhythm and pace to business just like there is a rhythm to nature. It can’t be go-go-go all the time. You must consciously design the right rhythm into your business practices or you’ll end up winning the preseason but failing to win a championship.
#4 Be Yourself
In addition to the Triangle Offense, Phil is also known for taking a holistic approach to coaching that is influenced by Eastern philosophy, earning him the nickname “Zen Master.” In the book, Phil talks about how it was challenging early in his career to feel like he could really be himself with other players and coaches. Would they accept a tofu-eating, meditating, philosophizing hippie? But once he embraced his uniqueness fully out in the world, he developed a powerful coaching style that was impossible for other coaches to emulate.
The same is true for you. In my coaching practice, one of the first tasks I always undertake is to identify your Genius Zone. What is it that you are uniquely gifted to do that adds to your energy and joy? How can those genius-like qualities come forward more in your life and work? Once we’re clear on your genius, then we design everything in the business — the strategy, structure, team, and management rhythm — to support your being in that zone as much as possible. Then a funny thing happens. When you do what you’re a genius at — and if things are designed correctly — then the company scales too.
It’s not so crazy. Just look at Phil Jackson. His genius is understanding the subtle nuances of behavior and teaching others how to be relaxed and unified as a team in high-pressure situations. The Triangle Offense supported his genius. So did the assistant coaches who were strong in areas where he was weaker. Phil looked for and coached players to buy into his system while simultaneously expressing their own individual genius on and off the court. When it all comes together, it’s quite a ride.
If you’re in search of a system that allows you to manage your business more like a champion and scale in a sustainable way, then this summer I highly recommend you also read my book Organizational Physics: The Science of Growing a Business. It brings together all four of these aspects – #1 Have a System. #2. Lead to the Next Lifecycle Stage. Then Lead Again. #3. Time Your Rhythm to the Stage of the Season. #4 Be Yourself — into a singular meta-level framework that tells you exactly what to do next and makes the complex simple.
“Men more frequently require to be reminded than informed.”
― Samuel Johnson
If you don’t know about Yammer yet, you should. Simply, it’s an “enterprise social network” for businesses. Microsoft purchased it in 2012 for $1.2B in cash. The goal of Yammer (and similar tools like Salesforce’s Work.com) is to help employees collaborate, stay connected, and improve company-wide communication.
Yammer’s approach is to leverage the same type of social media experience that employees are using in their personal lives — like Facebook and Twitter — to be more productive in their jobs. According to Yammer, companies who use the service reduce email use by 40%.
I think this trend of “enterprise socialization” is here to stay. As with a lot of trends, though, there’s the hype and then there’s the reality. I’ve had the chance to sit in on a few companies’ Yammer channels over the past year and here’s what I discovered:
- The ratio of noise to signal seems (unscientifically) worse than the classic 80/20 rule. That is, for every really useful piece of actionable information, there’s a hell of a lot more useless noise/fluff/chatter filling up the airwaves. Some might argue that that’s the real benefit of these tools — they sort of capture an organization’s collective stream of consciousness. I would argue that it’s more indicative of people not being focused on or caring about what’s most important.
- Employees seem to really like and use the tools. There’s value in that for sure. The risk is that, just as email killed the face-to-face meeting and enterprise socialization is killing email, you end up with a lot of data but little cohesiveness and actionable insight. Often, the fastest route to creating a breakthrough is to communicate less frequently but have a regular (weekly or bi-weekly) process where team leaders can meet face to face to really dive into and solve the issues at hand.
- These tools don’t cut down on information fatigue. It can take just as long to get through a Yammer channel as it does to wade through your email inbox. So my sense is that the medium may have shifted but the feeling of information overload for most employees probably hasn’t. I overheard a woman in Accounts Receivable say, “I’ve got to start participating in Yammer or people will think I’m not working.” As Homer Simpson would say, “D’OH!”
There’s a simple practice you can implement immediately in your company that harnesses the best of what social enterprise has to offer and helps mitigate the bad. Here’s how it works:
At the start of each day, no later than, say, 9 a.m., have everyone log on to a set Yammer channel and state what their #1 priority is for the day, as well as any obstacles they need help in overcoming.
“Sam – My #1 priority is fixing the XYZ bug. Need help in getting the client to call me back.”
“Jane – My #1 priority is getting ABC Co. to sign the contract. No blockers. Let’s rumble.”
“Luke – My #1 priority is to make 3 outbound sales calls and follow up on the Rodriguez contract. If anyone has a sales lead, please send it my way.”
The benefit of this approach is that it begins to focus the organizational culture on achieving the most important things each day. It can have the additional advantage of improving visibility, teamwork, and accountability.
As a leader, you can scan the channel and get a sense of whether your staff is focused on the right things and better understand the pattern of obstacles presenting themselves, as well as who may be sandbagging, playing hero, or needing some coaching.
It’s a very simple process that takes little overhead to manage for the staff or for management. If done correctly, it begins to focus the conversations towards accomplishing short-term, daily wins. Those daily wins build up over time and pretty soon the train is roaring down the tracks.
Of course, this presupposes that your organization already has a strong and healthy foundation on which it can deploy a social enterprise tool. One with an aligned culture, structure, processes, strategy, and team. If not, then using Yammer, or any other social enterprise tool, is like trying to cover up body odor with cheap perfume. No matter how much you use, you’re still going to stink.
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This article is for leaders who seek an edge in navigating a personal or organizational crisis.
You’re either on top of events or events are on top of you.
- Pat Riley
A good warrior must always assess his present position, evaluate his losses and assets, and move forward.
- Tim O’Shea
When you’re in a crisis, there are three things you can do to get out of it. These three things will not only create distance from the current crisis; they’ll make you stronger and more resilient, as well as help you avoid a similar crisis in the future.
These three steps aren’t easy. They take great courage. But they work for just about any type of crisis: financial hardship, poor health or disease, a deteriorating relationship, or a business failure.
Follow these three steps whenever you’re feeling stuck, afraid, or trapped by circumstances and you’ll break through to greater freedom, perspective, and new opportunities – usually much faster than you could have imagined. The three steps are:
- Stick to your strengths and core values
- Do what you’ve been resisting doing
- Trust and follow one expert or method until the crisis has passed
HG Wells said, “The crisis of today is the joke of tomorrow.” Putting these three elements into practice will transform your crisis of today into something you can laugh at in the near future.
Stick to Your Strengths and Core Values
If you’re in a crisis, chances are that you stopped playing to your strengths or stopped living by the real values in your heart some time ago. Is this true for you? If so, then this crisis is your wake-up call.
Now is the time to get back into your strengths and double-down on your core values. Say “no” to everything that’s not in your wheel house. Say “yes” to everything that is. Play to your strengths. Stick to your core values. They’re non-negotiable.
The risk here is that, in the fear and uncertainty of the crisis, rather than doubling down on what you do singularly well and sticking to your core values, you freak out and do something drastic or foolish that isn’t in alignment at all.
If you do, an ordinary crisis can quickly turn into a catastrophe. For example, about a decade ago, Martha Stewart was at the top of her fame and power. Her strengths were media and communications and the core values she expressed were beauty, elegance, and fine entertainment. Then Martha got off track. She got caught up in an insider trading scandal. Then she lied about it, got busted for it, and was sent to prison – only to watch her empire crumble.
While we all get off track from our core mission and make mistakes, when we get a wake up call (like from the Feds), it’s like a smack across the face to get back to basics and return to our strengths and core values. If we don’t, if we panic and go in the opposite direction, this usually leads to calamity.
So don’t panic. Calm down. Take a look at the facts. Identify your core values and don’t compromise them. Identify your true strengths and begin to play from there. When you do, even the scariest situation will begin to resolve itself into clarity of purpose.
Key Question to Ask Yourself: What are your strengths and core values?
Do What You’ve Been Resisting Doing
I have an unprovable theory that we create crisis in our life because we’ve been resisting doing what we know we’re supposed to be doing in our heart. “Fate leads him who follows it and drags him who resists,” said Plutarch.
There’s something liberating about a really good crisis. It forces you to cut away those things that are no longer serving you and probably haven’t been serving you for a while. What should you cut out? It could be anything — an old mindset, a self-limiting behavior, a toxic relationship, an underperforming business unit, a job you hate. You name it.
When you cut out the old, you give space for the new to emerge. This takes real courage. For instance, at 45 years old, Mary Jones was diagnosed with terminal cancer and she was given only a few months to live by her doctors. A true crisis.
Mary’s life dream was to work with orphans in Southeast Asia but she had never found the time or money to take a sabbatical from her job as a corporate controller. Having a prognosis of just a few months to live sent Mary into action. She quit her job, sold her house, and dedicated her remaining days to helping kids while her health allowed her.
Basically, Mary cut out everything except what was truly important to her — what she knew in her heart she should have been doing all along. You won’t be surprised to learn that Mary’s cancer “miraculously” went into remission and ten years later, she has a clean bill of health. Why? In my opinion, the crisis showed up because Mary’s career choices were fighting against her true desires. The crisis went away when she owned up to what she was resisting doing and took action to actually do it.
To be clear, I’m not saying you need to leave your CEO job and go work with orphans. I’m saying that, when in crisis, you need to take action on whatever it is that you’ve been resisting so that the new thing can emerge.
Key Question to Ask Yourself: What have you been resisting doing?
Trust and Follow One Expert or Method Until the Crisis Has Passed
There’s a time to explore options, teachers, and methods. A crisis is not the time. If you need help in navigating a particular crisis, then choose and commit to only one expert or method that you trust. Cut out any other sources of advice or guidance until you’re re-integrated on the other side of the crisis and you have the energy and capability to explore new options once again.
In a recent Ted Talk, Baba Shiv explains that having too many options, or too much conflicting advice, actually makes it less likely that you’ll achieve success.
Here’s an example. About a decade ago, I had a coaching client and he was making great initial progress. He seemed on the verge of creating a breakthrough in his life and business.
Then unbeknownst to me, he started seeing an energy healer/psychic to help him with a health condition. This “psychic” said something to him that made him question our entire approach and method together.
While we did talk it through afterward, all the momentum we had built up in this early critical phase was gone and we never got it back. We soon ended our coaching collaboration. The sad thing is that he was never able to recover and, although we remained friends, he’s still stuck in that same issue today.
I recognize that blindly trusting the wrong method or guru can also be a recipe for disaster. But the solution during a crisis isn’t to dabble. The solution is to go “all in” with the method you believe in and stick it out for a reasonable time frame. If a reasonable time has passed, and if you’re still not getting the results you’re seeking, then change to a new expert or approach. But don’t trade horses mid-race.
Key Question to Ask Yourself: Who is the one person you trust to help you across to the other side?
In his book, The Winner Within, Pat Riley writes: “Renewal always begins with destruction. The key is guiding the pain of destruction in the direction of renewal. Otherwise, the pain is useless and self-defeating.” I couldn’t agree more.
A crisis is a form of destruction of the old to make way for the new. You channel the pain of the crisis by playing to your strengths, sticking to your core values, owning up to what you’ve been resisting doing, and trusting in a worthy mentor or guide to help you get across the hard parts. If you do those things, then a crisis becomes truly liberating.
What do you think? How have you successfully navigated a crisis before?
Last week, I was invited to speak to a group of college students at the Next Generation Summit at UCSB. I knew that most of them were probably under extreme pressure from their parents, peers, and society to go forth and “get a fricking job,” so I thought it would be fun (and helpful) to tell them the exact opposite: “Don’t get a job. Get in your Genius Zone!”
My core message is that everyone is a genius at something. If you don’t know what that is, and if you want a life with greater success, meaning, and happiness, then your mission is to go forth and find that “thing.” Once you’ve found it, then you must sacrifice to design everything in your life around it.
When someone hears this message for the first time, the typical reaction is, “OK, but what am I a genius at?” I answer this question in the talk with a simple formula: Talents + Purpose = Genius and then I give several examples of college students living this formula right now who are showing up as geniuses within their niche and making a positive impact on the world.
I, too, benefitted from giving this talk. My personal key takeaway is that there are committed and talented people in every generation. While the media often portrays “Millenials” as a spoiled, over-parented, unaware, and texting- and Ritalin-addicted bunch, I found this group to be incredibly insightful, passionate, engaged, and sincerely committed – not just to having a job, but to making a real difference. It was inspiring and reaffirming that humans are indeed very cool beings.
How about you? What do you think of the talk?
Adam Grant, author of Give and Take: A Revolutionary Approach to Success (a must read book!), recently published a great LinkedIn article called “What’s the Common Ingredient for Team Success in Surgery, Banking, Software, Airlines, and Basketball?” I want to share it with you, along with my comments, because it’s a great illustration that success has more to do with the surrounding environment (i.e., vision and values, structure, process, and team) than with individual talent.
To get important work done, most leaders organize people into teams. They believe that when people collaborate toward a common goal, great things can happen. Yet in reality, the whole is often much less than the sum of the parts.
Many teams fail because they lack the requisite experience. If you want to perform a successful cardiac surgery, you need to bring in surgeons who have mastered the techniques. If your aim is to make good stock recommendations to investors, it would be wise to hire analysts with a long track record of star performance. If your goal is to produce high-quality software, land an airplane safely, or win basketball games, you’d be smart to rely on people who have done it before. As Jim Collins put it, we need to get the right people on the bus. But what if work experience is overrated?
How many times have you interviewed in the past year looking for “past experience” as one of the primary drivers of job fit? This is a fallacy, which I’ve written about before in “What Warren Buffet Can Teach You About Hiring”, that needs to end. Yesterday. And here’s where this gets interesting:
In a brilliant study, researchers Robert Huckman and Gary Pisano tracked more than 200 cardiac surgeons at 43 hospitals. After analyzing more than 38,000 procedures, it turned out that the surgeons didn’t get better with practice. Their patient mortality rates were no better after 100 surgeries than after the first few.
A closer look at the data revealed a fascinating pattern. The surgeons did get better as they gained more experience at a particular hospital. Each procedure performed at one hospital decreased patient mortality rates by an average of 1%. But the benefits of experience didn’t carry over to other hospitals.
The technologies weren’t any different from one hospital to another; the people were. When the surgeons left their teams behind, it was as if they were starting over from scratch without any of the benefits of practice. Practice wasn’t an individual act; it was a team process. As the surgeons worked with a core team of nurses and anesthesiologists at one hospital, they developed effective routines that leveraged the unique talents of each member.
There’s a growing movement within the professional recruiting market to assess the skills and attributes of the top-performing “stars” in a company and seek to find new candidates just like them. Like Communism, this approach sounds great on paper but fails in reality. Why? Because great teams are born out of complements, not similars. Success occurs within complementary teams, in a unified setting, and with efficient processes, clear metrics, a sound structure, and great support. This is a delicate mix. If you keep hiring “all stars” on paper, you run the great risk of destroying the equilibrium. Just look at the 2013 Lakers. A bunch of future Hall of Famers who don’t mesh well as a team.
In teams, it appears that shared experience matters more than individual experience. The best groups aren’t necessarily the ones with the most stars, but rather the teams that have collaborated in the past. In a study of more than 1,000 security analysts led by Boris Groysberg, when star analysts moved to a new firm, it took them an average of at least five years to recover their star status—unless they moved with their teams. The star analysts who moved alone had 5% odds of receiving the highest ranking from investors, whereas those who transferred with their teams enjoyed a 10% chance of earning the top spot.
Huckman and his colleagues found similar patterns in a study of more than 100 software development projects. The highest quality and on-time delivery rates were achieved not by the teams whose members had the most individual experience, but by the teams whose members had the most shared experience working together. Another study of product development teams showed that it typically took two to four years for members to gain sufficient experience working together to achieve their potential.
Shared experience in teams is so important that Richard Hackman, one of the world’s foremost experts on teams, went so far as to include it in the very definition of team effectiveness. In Leading Teams, he argues that, in addition to assessing the quality and quantity of output, we should expand our measures of team effectiveness to include viability—whether the team retains its capability to work together in the future.
The benefits of shared experience are visible outside knowledge work. Hackman referenced a NASA study showing that fatigued crews with experience flying together made significantly fewer errors than rested crews who had never flown together. He also pointed to an NTSB analysis of airline accidents revealing that 44% occurred on a crew’s first flight together and 73% on a crew’s first day. And an investigation of all NBA basketball games played from 1980 to 1994 showed that as teams gained more experience, they won more games. This was true even after accounting for player talent and age.
If you think about it, teamwork is blending individuals’ talents and strengths into a force that is greater than the sum of its parts. There’s real chemistry and alchemy here. It takes time and seasoning for a good team to become great. Time is necessary for team members to get to know one another and anticipate each other’s thinking and moves. But I think the real value comes when the team “grows up together.” Once the team has developed a sense of a shared journey, sacrifice, and group learning from successfully moving through trials together, then its true potential can be unlocked.
There are alternative explanations for some of these findings. Many airline crews only do one flight or day together, meaning that there are more chances for accidents to occur on first flights and first days. Basketball executives and coaches work harder to keep successful teams together—and players are more motivated to stay with winning teams. Consistent with this idea, when NBA teams win more games in year 1, they’re more likely to stay together in year 2. But the opposite also holds: NBA teams with more shared experience in year 1 win more games in year 2.
Interestingly, in the NBA and R&D, the gains from shared experience declined over time. The value of the first few years together was much greater than additional years accumulated. As teams stayed together longer, they had less to learn and faced a greater risk of becoming too rigid and predictable in their routines. At that point, rotating a member—or a coach—might be a critical step. But most teams never made it there. The vast majority of teams weren’t together long enough to benefit from shared experience.
Today, too many teams are temporary: people collaborate on a single project and never work together again. Teams need the opportunity to learn about each other’s capabilities and develop productive routines. So once we get the right people on the bus, let’s make sure they spend some time driving together.
From the perspective of Organizational Physics, there’s something absolutely critical to highlight here: the importance of lifecycle theory. Great leaders understand an organization’s lifecycle stage and treat it accordingly. If you let your team stay together too long, it’s going to get tired and stale. It will lose its humph and innovative power. Conversely, if you break the team up too soon, it will never have a chance to learn from its mistakes and form into something great. The key here is to recognize what lifecycle stage each team is at, as well as the stage of the surrounding business unit in which the team operates. You don’t treat a 30-year-old like a 3-year-old and vice versa.
If you’d like to learn some signals to watch for when a team should be broken up or kept together, or if you have any other questions or comments, please include them in the comments area below.
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Ars Technica published a great article this week “The rise and fall of AMD: How an underdog stuck it to Intel.”
The article follows the rise and fall of AMD over the years in its attempt to wrest a market leadership position from Intel (a war it was never able to win) and gives many anecdotes about the leadership style of the company founder and CEO Jerry Sanders. I want to share this article because it’s a good read and because it captures the essence of how a company behaves when a Big Innovator is at the helm.
As you might know if you’re familiar with my work, the Innovator style is one of four management styles that we all possess to some degree. You can read more about these styles (Producer, Stabilizer, Innovator, and Unifier) in Part II of my book Organizational Physics: The Science of Growing a Business.
Our best Innovator qualities are our ability to anticipate change and to be imaginative, charismatic, and inventive. Without the Innovator force, we would have no ability to adapt to changes in our environment and we would quickly become irrelevant or extinct.
When the Innovator force is really high, we call it a “Big Innovator” or “Big I.” The Big I shows up in some predictable and telling ways, and this description of Sanders is a perfect example:
On June 10, 2000, Advanced Micro Devices (AMD) wanted to party—and party big. The company’s CEO, Jerry Sanders, arranged to rent out the entire San Jose Arena (now called the HP Pavilion) and then paid big bucks to bring in Faith Hill and Tim McGraw, the husband-and-wife country music superstars.
Employees “could bring anybody, your wife, your kids, your friends—it was big doings. There were celebrations, gifts and awards,” recalled Fran Barton, who served as AMD’s chief financial officer from 1998 to 2001. The boss even got in on the fun. “[Sanders] was on a high wire, he did a unicycle ride. It was totally Hollywood. He could really put on a show when he wanted to put on a show.”
And why not celebrate in style? AMD’s successful Athlon chips—Ars named the Athlon its “CPU of the Year” in 1999—had finally put the screws to archrival Intel, and in 2000 the company earned nearly $1 billion in profits.
By 2005, years of solid chip design and technological execution had the company walking with a swagger, as seen in marketing stunts which challenged Intel’s then-current server processors to a “dual-core duel.” Nowhere was this attitude more apparent than AMD’s 2005 lawsuit against Intel for anti-competitive business practices.
When a Big Innovator feels momentum, there is no greater joy to them than rallying people to their cause and celebrating the realization of their vision. They’ll put on a great show, go over the top, and try to get everyone else to feel inspired and “believe” in them and their vision.
But don’t confuse the Big Innovator’s charisma and charm on stage with his or her everyday style. Unlike Big Unifiers, Big Innovators have no real need to connect with others other than to sell their vision and create a legion of followers. They may seem charming, gregarious, or compassionate on stage, but it’s really about selling the vision, not bonding for bonding’s sake.
Now let’s read more about what happened with the business:
Doubters didn’t think the good times could last. “I rode through a few such cycles and can recall the zenith of decadent exuberance and breathtaking spectacle in 2000 when AMD’s then showman CEO, Jerry Sanders, clad in tight leather pants, shirt cracked open to the waist, descended to the stage of the HP Pavilion in a cherry-picker and announced that AMD’s stock would soar to over $100 per share and that another [chip fabrication plant] would be built in Austin,” recalled Bill Bushnell, a rank-and-file veteran software engineer at AMD, in an e-mail to Ars. “Neither occurred.”
AMD has been on a notable drop for nearly a decade now. To put it mildly, 2012 was a rough year: AMD lost over $1 billion, effectively wiping out its $471 million profit in 2010 and its $491 million profit in 2011—its two most profitable years in the last decade. Over the last 15 years, AMD has sustained a net loss of nearly $7 billion, and the company has been downgraded by credit rating agencies, burned by lower demand for PCs (and hence, for its products), and even called “un-investable” by one Wall Street analyst.
Last month, the company even sold (and then leased back) its corporate headquarters in Austin, Texas for $164 million as a way to make some quick cash. After years of technical stumbles, Intel now runs circles around AMD in desktop, laptop, and server CPUs, while newcomers like Qualcomm, Samsung, and Nvidia have used their low-power ARM chips to shut AMD out of the burgeoning smartphone and tablet markets. And critics charge that the company still has fundamental structural problems that go beyond technical missteps.
“There’s no control on spending—even now, one of the problems is if you take a look at the salary structure,” said Atiq Raza, the company’s former president, chief technical officer, and chief operating officer, in a conversation with Ars. “[AMD is] a sinking ship, fundamentally. I really am sorry for [current CEO Rory Read]. He’s a well-intentioned person but the ship has a huge hole in it. That $164 million is going to go in no time.”
Raza calls the company’s decline “one of the great fumbled opportunities of our time.” How did AMD go from the most successful period in its history to one of its bleakest—and does the company have a fighting chance going forward?
Big Innovators are big dreamers and hence can be powerful catalyzers to create and launch new opportunities by the sheer force of their will, intellect, and vision. But there’s a saying that big dreams need wings and landing gear, and that’s where Sander’s Big Innovator style ultimately cost the company big time. It’s the classic hero’s tragedy, full of genius and dangerous hubris:
When Jerry Sanders was 18, he was beaten in a street fight by people who left him unconscious in a trash can. “They fractured my skull, broke my nose—that’s why you’re photographing from the left,” Sanders told Daniel Marrow of Computerworld (PDF) in 2000. “So my nose is not more crooked than normal, ribs—I mean just a disaster. And they left me to die. They literally left me to die.”
But after three days in a coma, Sanders rallied.
“I once said ‘I can die, but I can’t fail’,” he told the San Francisco Chronicle for a profile. “What I meant was, I was always going to give it my all. I couldn’t fail, because failure wasn’t an option. I would die before I’d fail.”
Sanders went to work for Motorola and Fairchild Semiconductor, but he didn’t work long for others. He opened AMD for business on May 1, 1969—when he was just 33 years old. He quickly cemented a reputation for being defiant and flashy, and he kept a poster in his office which read, “Yea, though I walk through the valley of the shadow of death, I shall fear no evil—for I am the meanest son of a bitch in the valley.”
“He’s a mix between Don Quixote and Indiana Jones,” former CFO Barton said, “a swashbuckling idealist, not afraid to tilt at windmills and dream the impossible dream. His whole career, his impossible dream was to battle Intel. And he battled very hard for decades.”
Innovators make life interesting. The media loves to portray them as swashbuckling heroes who overcame great odds. See Steve Jobs, Larry Ellison, and Richard Branson. Get behind the press releases and fawning magazine articles and you’ll find that Big Innovators are often acerbic, defiant, and short-tempered. They change their minds frequently and often burn things and people down with as much fervor as they once built them up:
… Microsoft CEO Bill Gates showed an interest in NexGen and had a 45-minute meeting with Raza (soon to be AMD’s new COO) that stretched into a four-hour dinner. Gates suggested that Raza speak to Sanders since AMD owned a chip fab but needed a better product to build in it. Raza said he would like to talk with Sanders but said he didn’t know how to reach the AMD CEO, much less get him to pay attention.
“The first time I was introduced to Jerry Sanders, he didn’t even pause long enough to hear my name—he kept calling me Raja,” Raza told Ars. “He did that nonstop for 45 minutes telling me how AMD is going to crush me. I stayed there with a smile on my face, but how do I communicate with such a person? Bill said, ‘Jerry should not be underestimated—he has three qualities: he’s smart, he’s extremely egotistical, and he’s completely random.’”
Bill Gates totally nailed the definition of a Big Innovator. Tons of ideas. Very intelligent. Usually driven by fear/ego. Often Big Innovators are more interested in validating and defending their existing vision than in learning something new that might counter that vision. This is true until their vision isn’t executing as fast as they’d like. Then they look for a new one, which becomes the “vision of the day.”
Sanders’ management style was idiosyncratic, and it created both loyalty and friction. Patrick Moorhead, AMD’s vice president of marketing from 2000 to 2010, still remembers the day he interviewed for the AMD job with Sanders. “I parked my 1990 Toyota Camry next to his Bentley convertible,” Moorhead told Ars. “We talked about making a difference and shaking up the industry and quite frankly I just fell right into that. I absolutely loved that pitch.”
We were running quarter after quarter on the ragged edge and had been for decades. It was a real culture change of ups and downs. But Raza quickly grew unhappy with his boss’ approach to work. Since 1979, Sanders had kept his Beverly Hills office, commuting up to Silicon Valley each week and returning to Southern California Friday through Monday.
“If [Sanders] was constantly engaged, that would be acceptable,” Raza said. “He was not engaged. He would be upset if I called him too late in the evening or too early in the morning. I’m a 24/7 kind of guy.”
Here’s the thing: Big Innovators are outstanding at selling a vision and they need to work on their own schedule, whenever the mood strikes them. This is why two Big Innovators in a company usually clash… it’s a conflict of who holds the vision and who sets the direction.
The other big issue came in around finances:
As The New York Times reported in 1989, AMD’s corporate culture had also lost the thrifty habits it had at its founding. “Mr. Sanders’s increasingly lavish style also became contagious,” wrote the paper. “Salesmen who did not wear Rolex watches were likely to find their less-expensive time pieces thrown away by high-level executives who wanted the company to have a certain image. It was an atmosphere, former employees say, that encouraged loose spending throughout the company—a far cry from the early days at Advanced Micro, when Mr. Sanders once rejected a request for an electric pencil sharpener because it was too costly.”
Raza also became concerned about the spending, which he came to see as extension of Sanders’ personal lifestyle. Shortly after AMD bought NexGen, Raza visited Sanders at his expensive Los Angeles home.
“I said, ‘It’s a beautiful house,’” Raza said. “He said, ‘I got in a competition with Madonna. We had a fight and I outbid Madonna.’ I said, ‘OK…’ And he said, ‘I understand what you’re thinking. I spend more than I make. I always have spent more than I make.’” Raza said that the comment hit him like a punch in the gut. “And I said, ‘I hope you don’t do it at AMD,’ but he did,” he added. (Sanders did not respond to our request for comment.)
Notice that money is just a tool to support the vision — classic Big Innovator behavior.
Financial problems mounted. As AMD stretched out the life of the K6 line, former CFO Barton recalled how the company flitted from one near-disaster to another every few weeks.
“We would have Monday morning operating meetings and someone would say, ‘We have a glitch. The yields have dropped precipitously and we don’t have anything to sell next week,’” Barton said. “The financial ramifications of that are awful. We have nothing to sell! We’re doomed! Then everybody would get their assignments and somewhere in the next day or two there would be an e-mail or phone call saying, ‘We fixed it. And it’s even better, sales will be higher.’”
Each time this happened, Barton said, Sanders firmly delegated assignments to each department. On numerous occasions, Raza himself only got a few hours’ sleep to isolate the repeated problems and get things back on track. On the financial side, Barton and his team had to make a decision about disclosing each problem to investors or to the Securities and Exchange Commission (SEC).
“We were running quarter after quarter on the ragged edge and had been for decades,” he added. “It was a real culture change of ups and downs. “For the rest of my career nothing bothered me [as much] anymore.”
Because the Big Innovator hasn’t allowed or learned how to integrate planning, efficiences, and controls, there’s constant management-by-crisis. It can be exciting in short bursts but creates fatigue over the long term.
However, just weeks after the K7 debuted on June 23, 1999, Raza (the COO) left AMD amid rumors that he had a major falling-out with Sanders. Analysts were left scratching their heads.
“It’s certainly going to reduce confidence in the company’s ability to compete,” Linley Gwennap, chief analyst at Cahners MicroDesign Resources, told the Los Angeles Times in 1999. “Atiq was the one guy in upper management that really understood the technology behind the K6 and K7.”
As Raza tells the story today, his boss insisted on building a fab in Dresden, Germany, over Raza’s objections. (That fab, which still operates today as part of AMD spin-off GlobalFoundries, was completed in the spring of 2000.)
“The trouble in the entire economic model was that AMD did not have enough capital to be able to fund fabs the way they were funding fabs,” Raza said. “The point at which I had my final conflict was that [Sanders] started the process of building a new fab with borrowed money prematurely. We didn’t need a fab for at least another year. If we had done it a year later, we would have accumulated enough profits to afford the fab in Germany. He laid the foundation for a fundamentally inefficient capital structure that AMD never recovered from. I told him: don’t do it. I put the [purchase orders] on hold. He didn’t tell me and accelerated the entire process.”
Both Raza and Barton recalled, independently of one another, one of Sanders’ mantras: “Real men have fabs.” Raza called this comment “simultaneously a sexist remark and the most stupid thing you can say,” and he saw the fab decision as one of Sanders’ “significant acts of irresponsibility.” After he quit, Raza never spoke to Sanders again.
So that’s very much what you get when you have a Big Innovator at the helm of a company. It’s exciting. It’s erratic. There will be periods of great booms followed by periods of great busts. It’s all or nothing. It’s ultimately very frustrating for everyone involved because there’s a feeling of “what could have been.”
To be clear, all entrepreneurs have a high drive to Produce and Innovate. The great entrepreneurs — the Andrew Groves (who Sanders was never able to beat), the Jeff Bezos, the Jim Sinegals of the world — find ways to complement their strengths and create focused, sustainable enterprises that meet changing customers’ needs over time. That’s the key to greatness.
You can apply the lessons of this article in a number of ways:
1) Many VCs make the mistake of ousting the founder because he or she appears immature or uncontrollable. But unless the founder truly can’t evolve, this is a critical mistake. It’s no coincidence that the world’s greatest organizations have a founder who thrives in the CEO role and has to be taken out on a stretcher. It’s not because these were extra-special founders. It’s because these founders were able to harness their Innovating force to make it constructive and not destructive. Put another way, they were able to complement their strengths with co-founders, leaders, processes, and systems that allowed them to be Innovators and respond artfully to market dynamics without succumbing to being Big Innovators who can’t get out of their own way.
2) When you’re being “sold” by a Big Innovator, recognize that it’s going to be 99% enthusiasm, 1% reality, and absolutely no appreciation for the details involved. It’s no coincidence that AMD customer service was atrocious. Customers to a Big Innovator are not the lifeblood of the organization but are just a minor inconvenience, a pesky detail to be managed in order to realize the vision.
3) It takes a team to be successful. Big Innovators are so charismatic that they can seem to steal the limelight from everyone else. But if you look deeper into organizations that are truly market leaders, you’ll see that the charismatic founder who gets all the press and media accolades is complemented by a co-founder or partner who brings stability and unification to the system: i.e., Mr. Outside and Mr. Inside. As with any marriage, one without the other is a failure. Both together can succeed.
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I really appreciate the framework of the Lean Startup approach and I’m a big fan of the movement. One thing I notice that’s missing from it is a discussion on the lifecycle stages of the customers that the lean startup should be targeting/getting feedback from. Here’s what I mean:
The Product Lifecycle goes like this: Pilot it, Nail it, Scale it, Milk it, Kill it.
The Market Lifecycle of customer types goes like this: Innovators, Early Adopters, Early Majority, Late Majority/Laggards.
In order to navigate from the temporary organization of a startup, find the business model, and scale it, the disruptive entrepreneur should seek to align this sequence of steps together. I.e., Pilot it for Innovator Customers. Nail it for Early Adopters. Scale it for the Early Majority, and Milk it for the Late Majority/Laggards like this:
Put another way, you DON’T want to be Piloting a project for a Late Majority/Laggard clients or misaligning the other stages. Why not? Because those Late Majority/Laggard clients are old and stable. They are outstanding at telling the entrepreneur what the market needs now (or 5 years ago) but tend to be incapable of identifying where it’s going to be 5 years from now. To find that out, you have to go to the fringe — those Innovator and Early Adopter Clients that aren’t currently served by the status quo. That’s where the true disruption lies.
Late Majority/Laggard clients also have a vested interest in maintaing the status quo. So even if the entrepreneur has a visionary champion within that Late Majority/Laggard client, he or she is going to be blocked by the surrounding inertia within that large, stable organization. The Late Majority/Laggard client is also subjected to broad market forces and quarterly financial targets that may require it to shift directions. So even promises of “yes, build this for us at this price and we’ll roll it out to our distribution network” aren’t worth the email they were written on when market forces change.
A great example of this principle in action is Square, a great disruptive force in the mobile payments space. Notice that Square DID NOT go to Visa, Mastercard, and Paypal to find the initial product market fit. They went to taco truck vendors, independent artists, and others SOHO’s who were NOT served by the status quo. If CEO Jack Dorsey did go to Visa or Pay Pal to practice the Lean Startup methodology and find the product market fit, he would have gotten great product specs to support the current payments model — but not to disrupt it. I’ve written about this in detail here.
The Real Purpose of the Lean Startup Methodology
Those of you who have read my Part III of my book Organizational Physics — The Science of Growing a Business already know that what the Lean Startup or customer-driven development approaches are really trying to do is to help the entrepreneur and the start-up business unit go as far as possible from the start of quadrant 1 (Pilot it for Innovators) to the top of quadrant 2 (Nail it for Early Adopters) by interviewing, researching, and selling customers in advance before the product development process begins.
In other words, customer-driven development tries to limit the cost, risk, and time investment of making poor product or market decisions between the Pilot It and Nail It stages. They are looking for a good product/market fit before the development process begins. If they can discover what the thought leaders really value and what the early adopters’ true spending priorities are before development begins, this lowers the risk and increases the probability of meeting those needs. Development can become more focused and demand is established before any real money is spent on development.
Agile software development is a product development method that aligns very closely with a customer-driven philosophy. Agile, or iterative, development is a process of taking real-time data from actual use of the product and quickly iterating changes using short release cycles to develop a better product that meets the needs of target customers. Fundamentally, agile is a product development method that attempts to better manage changing requirements; avoid long release cycles; and produce live, working, tested software that has real business value. In an early-stage startup, using an agile approach can help a company quickly and cost-effectively navigate the Pilot It to Nail It stages by eliminating the guesswork, long product release cycles, and overhead involved in trying to do a big product design up front. In larger companies with existing products in scale mode, using agile is an attempt to better meet user requirements, based on data and customer feedback, and to turn that knowledge more quickly into new product features and extensions.
Having built several successful high-tech products and run agile development teams, I can say that I am a big fan and believer in both approaches. They go hand in hand. Their real but unstated goal is to help a company navigate up the path to prosperity more quickly and cost-effectively. These approaches can help verify that your thinking is sound, that demand is there and you’ve uncovered a proven market opportunity. Additionally, having evidence that your entrepreneurial vision is baked in the cold, hard light of reality can make all the difference in raising the capital you need. These are sound methods and they fit perfectly well into the strategy lifecycle scheme.
The truth is that there are many other methods that can also help you quickly navigate the path to prosperity. Customer-driven can work. So can vision-driven. For example, I don’t believe Steve Jobs had ever done a day of interviewing customers in his entire life. Instead, he had that rare ability to envision something entirely new, intuitively understand the needs of his target customers even before they did, and bring his vision to the world in surprising and beautiful ways. No external customer-driven development of the iPad would have worked because customers would have had no frame of reference for it. Walt Disney was the same way. He had a powerful vision and followed his own instincts about what families really valued that wasn’t being provided by other amusement parks at the time. He created magical experiences that no one was expecting. The point is that there are many ways to develop a product but the fundamentals of strategy should always the same: You must go the long way around the path and create the product/market fit in the right sequence.
I hope this helps with your thinking as you contemplate how the Lean Startup meme will play out in your own organization.
I came across a phenomenal obituary written for Frosty Westering by Chuck Culpepper at Sports on Earth today.
Frosty was the football coach for the Division III Pacific Lutheran football team and he was remarkable. He coached for over 32 seasons without a losing record in any. He never mentioned playoffs or titles to his players but won four national championships and four runner-up finishes on two levels. He died on Friday at age 85 surrounded by a loving family.
Tears welled up in my eyes and my throat got caught when I read it. I want to share this story about Frosty for that reason alone. But I also want to share it because it’s a wonderful portrait of a strong Unifier leadership style in action.
The Unifier style is one of four management style dimensions that we all possess to one degree or another. You can read more about these styles: Producer, Stabilizer, Innovator, and Unifier in Part II of my book Organizational Physics: The Science of Growing a Business.
Our best Unifier qualities are our ability to create rapport, understand and motivate others, build cohesive teams, and create sound organizational cultures based on caring, empathy, and loyalty. Without the Unifier force, we would have no ability to respond to change efficiently because the organization couldn’t act as a whole.
Let’s see how the Unifier force shows up in coach Frosty’s leadership style so that you can learn to recognize it, develop it, and manage it in your own life and work:
His players implored him to belly-flop into a California hotel pool, and he complied – at age 75. He once took a running plunge into the mud during a soppy game in Oregon. He adored when players pulled pranks on him, insisted players use his first name – Frosty! – and corrected them if they used “Coach.”
He sometimes halted practice to have players spend five minutes gazing beyond the giant evergreens to Mount Rainier. He sometimes halted practice to have players go to other sporting fields and cheer on, say, the soccer team. He always halted two-a-day practices in August and instructed players to go help freshmen move into dormitories.
He believed deeply in singing. His players sang before games, after games. Sometimes they sang to the mock direction of the coach’s cane. Always they learned to sing without embarrassment, for it had become uncool to refrain from the refrains. For his 300th win in September 2003, an offensive lineman led the team in James Taylor’s “Steamroller.” During warmups for the NCAA Division III national championship game in December 1999, right there on the field in Virginia, his players sang “The Twelve Days of Christmas,” then proceeded to win 42-13.
Can you imagine warming up on the other side, then losing 42-13 to that?
During three of the best days of my career — those in his company, in Tacoma, Wash., in 2003 — he requested that I join his players for supper in their dining hall. Three of them drove me, in a pickup truck, back to my car. Along the way, they sang “Leaving on a Jet Plane.”
“Why singing?” I asked the coach.
“When you sing,” he said, “your consciousness is raised.”
The Unifier style loves to laugh, have a great time, create “story” moments, and keep the group structure flat and inclusive. I love the focus on singing as a form of culture reinforcement. It’s brilliant.
And lest you think this guy some Left Coast flake, let me hurl at you this biographical detail: former drill instructor, United States Marine Corps.
What this tells me is that Frosty was indoctrinated in a Producer/Stabilizer style in the Marine Corps. Most likely, he found this lacking in the development of full human potential and therefore embodied a leadership style that transcended that. I have no doubt that Frosty could turn on the Producer/Stabilizer hard-ass if he needed to but that he found an alternative way to coach a football team and develop young leaders.
An airline pilot wrote to the university president. He wrote because the Pacific Lutheran presence on his airplane had taken a routine day and whipped it up into memorable. He wrote because Westering insisted his players respect other people’s work. He wrote because that respect included rapt attention to the flight attendants, which in turn included a phenomenal sound that came when the players clicked their seat belts in unison.
He wrote because at the destination gate, the college football players had held back and lined up on two sides in a “go” tunnel so they could give high-fives to disembarking crew.
A janitor wrote to the university president. He wrote because when he came upon Pacific Lutheran’s visiting locker room one postgame in Portland, he found the chairs lined up in impeccable order. He wrote because he found the floors and lockers completely free of the normal detritus. He found the place just about spotless.
He wrote because, when he arrived in the room, he found a note on the whiteboard suggesting he go home and join his wife by the Christmas tree.
Wow. The focus on empathizing and respecting others is a true Unifier trait. I love how Frosty’s consistency in message and tone unlocked the creativity of the team in how that gets expressed. Can you imagine what a positively memorable experience the flight attendants and the janitor had? Amazing.
A man in a wheelchair came to the “Afterglow,” a Westering postgame concoction where a few hundred players, coaches and fans would gather in the bleachers. They might discuss the game. Players might thank the fans for support. Fans might thank the players for inspiration. Everyone would sing “Happy Birthday” to anyone with a birthday nigh. The “Afterglow” would happen after wins, but — oh yes — the “Afterglow” would happen also after losses, because in Westering’s mind, losing meant you had just completed the privilege of playing.
On a weekday after the “Afterglow,” Westering happened upon the man in the wheelchair and invited him to practice. Soon after that, he made the man an assistant coach, and so John Nelson, a quadriplegic Singaporean-American born with a debilitating condition and spinal-cord problems, came to head up the freshmen players. And they, in turn, had to take on responsibilities for his care: dressing him, helping him eat, helping him go to the bathroom. Do you suppose that taught them anything?
By 2003, Nelson had lost count of the times he had appeared as a groomsman in the weddings of former players, reckoning the number beyond 10. He told of a road trip stop at Disneyland when the players determined he should take a ride, so one player hugged him all the way through. During those three days I spent with the team in 2003 Nelson said to me, “There’s a reason for this, a reason for the guys coming out to this program, to see somebody who’s different. Hopefully, it inspires them. If someone in public needs help, I’m sure they will be comfortable with helping them.”
Doctors thought Nelson would have trouble making 30. By 2003, he had made 38. By his death in 2009, he had made 44. At his memorial service, Frosty placed a jersey on his wheelchair.
Notice the Unifier’s focus and pride on being part of the team vs. the focus on winning at all costs? Notice too that the Unifier extends the definition of “team” out to all the stakeholders?
Westering had such stern rules. His players had to help up opponents during games on the premise that the privilege of playing could not occur without opponents. Troublemakers didn’t have to run sprints; no, they were denied the “honor” of running. He knew fear could motivate but thought love could motivate for longer, so players badly in need of upbraiding – of putdowns – would receive what Frosty called “put-ups,” and he mandated six put-ups per day.
One put-up, “Attaway” – a configuration of “That a way” – became a staple. He had players use it prolifically, including toward hotel clerks, short-order cooks, fast-food clerks, custodial staffs, flight crews. They used it one day at practice after Frosty had some women’s volleyball players address the team about their recent and difficult victory over Puget Sound.
The reason Frosty’s Unifier style can be effective is that he backs it up with the Stabilizing force. Rules, norms, and expectations are set, clear, and reinforced. If Frosty didn’t have these elements in place, he’d be all talk, and without resulting in corresponding action in the team. Instead of being a highly successful football coach, he’d be out of a job.
In a football world chockablock with practices planned to the minute if not the second, Frosty’s practices carried a decided imprecision. His son and coaching successor Scott said that, to his knowledge, his father had never written a practice plan. One day he had me address the team, impromptu. Sometimes he’d serve popsicles, with root beer one flavor during my visit. Wet days might enable frolicsome sliding contests. Meetings never started on time, and Frosty’s penchant for hazy punctuality proved so entrenched that Donna, his wife and the mother of their five children, found an “ish” clock with the suffix “ish” beside each number and placed it on their kitchen wall.
Said Donna, one day on the phone, “In fact, it’s five after 2-ish right now.”
Classic Unifier again. No real plan. Go with the flow. Time is flexible. But keep it fun. Mix it up.
Players never wore full gear until game days, then would suit up on Saturdays, sing (of course), maybe even listen to some music professor Frosty had invited to play drums for them on an upside-down bowl and plastic pitcher. Then the whistle would blow, the kickoff would go up, and players would tell of this astonishing transformation into hard, hard hitting — replete with helping up the people they’d hit.
Then again, one day in September 2003 the quarterback came to the sideline on fourth-and-12 and said, “Let’s go for it,” whereupon Frosty said, “You’re kidding,” whereupon a small gaggle of players agreed with the quarterback, whereupon Frosty said, “Let’s do it, then,” whereupon Pacific Lutheran converted the first.
Football players by nature thrive on physical challenges and hard hits. That cultural trait is there. Frosty knew that and didn’t have to coach it much. Unifiers also don’t mind when others make decisions, as long as it doesn’t threaten the harmony of the group.
Seasons would begin with a three-day getaway in which players bonded, played games but not football, apologized for any insufficient effort the prior season and sang, sang, sang, the freshmen standing on chairs and singing their high school fight songs unless they could not remember them, in which case they got stuck with “Twinkle, Twinkle Little Star.” Seasons would end the way almost all seasons everywhere end, with a loss, but with a way almost no seasons end, with an “Afterglow.” Or they ended with a win and an “Afterglow.”
Notice that the harmony of the group and respect for the individual transcends all else. That’s a Unifier.
And when players’ careers ended, the graduates sprinkled over much of the Northwest, some in coaching. One helped run a car dealership where they took time to behold Mount Rainier and they declined an applicant after a job interview in which the applicant told of being a No. 1 salesman, because they thought he had missed the point of it all.
Their former coach always bought used cars, so he drove me to the dining hall in his 1993 blue Oldsmobile. When he left one day for a speaking engagement, he offered me the use of his small office, which surely meant he wasn’t cheating. And when I returned to New York, a dear friend who does not follow college football but who read my story said something simple, but said it with an inflection that made it ring in my head for good.
“He’s a great man,” my friend said. A great man died on Friday. A great man also lived from 1927 until Friday, and while he lived, oh boy, was he alive.
I couldn’t agree more. You can apply the lessons of this article in a number of ways.
1) Learn to spot and identify Unifier characteristics. Even if these characteristics aren’t really your style, you still want to have strong Unifiers on your teams. Unifiers help bring the group together, resolve conflicts, and lighten things up. Who are the Unifiers in your culture and how can you place them into positions where they thrive?
2) Winning is a byproduct of many things, not least of which is the feeling of transcendence that results from being a part of something larger than yourself. Coach Frosty really demonstrated this powerfully. How can you create the experience of transcendence in your own culture?
3) It’s not the destination but the journey. Don’t you love how Frosty frequently took time out from the daily grind to look at the beauty of the mountains, to visit other teams and cheer them on, and to bask in the Afterglow? How can you show enough confidence in your own team and progress to do the same?
I never met Frosty but I sure wish I had the chance to play for him. I’m confident that the lessons would have served me really well in my life and work.
Blessings to the Westering family during this transition.
I lost 35 pounds and several sizes in three months. I didn’t do it by dieting. I did it by changing the way I eat. There’s a difference.
What led me to this was thinking about my health in a whole new way. After trying to navigate large amounts of conflicting nutritional information and trying on new diets over the years (many of you can relate), I had an insight based on the Organizational Physics principles I teach every day.
I took the Universal Success Formula from Chapter 1 of my book Organizational Physics: The Science of Growing a Business and made a slight modification to the terms. The original formula looks like this:
If you’re new to the Universal Success Formula, all you need to know is that any system is acted upon by entropy and will eventually fail unless new energy is added to the system. Once you decrease entropy, the energy available for integration and success increases.
For example, imagine that you have a friend in the hospital. He can’t go out in the world and be successful (high integration) because most of his available energy has to go towards healing his illness (entropy). Once he recovers, entropy will be lower and he’ll have more energy to re-integrate into the world and thrive.
Applying the same concepts to health and diet, the Universal Success Formula can be worded like this:
Think of your health as a highly organized system — body and mind — which is acted upon by entropy over time and fails unless it continues to have new energy sources that you can assimilate. Entropy, in this case, can mean inflammation, congestion, and any other state of less-than-optimal functioning in the body. Vitality is synonymous with integration. It is a state of high energy in which you are thriving in relationship with your environment, continuing to obtain energy from it. When inflammation-related entropy is high, for example, it’s harder to convert new energy sources and vitality is naturally lower.
Put another way, at any given point in time, the body/mind has a finite amount of energy. It must get new energy or fuel from external sources. Food is fuel. Water is fuel. Thought is fuel. Relationships are fuel.
Good fuels are those that the body/mind can easily convert into new energy and that don’t increase entropy in the system. Bad fuels are those that the body and mind can’t convert easily, increasing entropy over time. Like a car with too much gunk in the fuel lines, your body just can’t drive as efficiently. The bottom line is that you want to utilize good fuel sources that don’t cause systemic harm (i.e., increase entropy) and are easy to convert into new energy.
Using this formula as a metaphor, I simply began to assess how foods impacted my energy level and which ones seemed to be contributing to inflammation in my body. When did my blood sugar shoot up or bottom out? When did allergies seem to strike? When did I feel more moody or unusually tired? In this process of trial and error, I also relied on expert opinions about which foods cause inflammation and which ones don’t, using these opinions as suggestions for exploring what works best for me.
I made a 30-day commitment to cut out inflammatory foods. For me, this meant eliminating all grains, sugar, and refined anything. Please note I’m not saying that’s what you should do. Health and diet are a very personal thing. There’s no one-size-fits-all. What I’m saying is that, if you want better health and fitness, you’ll want to eliminate any sources of high entropy from the system and increase your body’s access to good fuels. Period. You can start with expert opinions, but you’ll want to closely observe, first-hand, what works and doesn’t work for you.
In my own journey, after 30 days, I felt great. I had lost some weight and especially a lot of puffiness in my face and waist. I decided to keep going, continuing to pay attention to those things that cause inflammation and eliminating them. It’s now been 5 months and I’m still going strong. It no longer feels like a diet but a new way of living that has increased my vitality and become second nature to me.
I hope this perspective helps you tune in and amp up your own personal journey to health and wellness as well, wherever that path may lead you.
There is a growing body of evidence that points to chronic, low-grade inflammation as a kind of a “unified field” explanation of disease. That is, some researchers now believe that low-grade inflammation is associated with everything from Alzheimer’s and arthritis to diabetes and heart disease, and may even be the cause of most chronic diseases.
If you’re interested in supporting evidence that inflammation is the enemy of good health, you might take a look some sources that I found helpful:
- Why You Get Fat (3-minute video and I’m ashamed to admit I didn’t know this 30 years ago)
- Genetic Roulette (documentary on how GMOs cause increased inflammation).
- The No-Grain Diet (I read this book 4 or 5 years ago but didn’t have the wherewithal to follow it. Making the connection between entropy and inflammation finally helped me commit to change and it was surprisingly easy. Go figure.)