Every now and again, usually at fairly long intervals, a new wonder-company is born. The wonder lies less in super-growth or astounding profitability (though these may exist) than in the revolutionary way in which the business is managed. Its founders brazenly challenge the norms of authority, hierarchy, manners, even ownership. Those norms are condemned, both explicitly and implicitly, as outmoded, restrictive and (the ultimate crime) ineffective.
The eccentricity of Wondercorp is alone enough to propel it to fame - and maybe fortune. Thus did a British company called St. Luke's spread its gospel, and its image, even unto the doors of the Harvard Business Review. St. Luke's was cited in its pages as 'the most frightening company on earth'. The normal disciplines had been relaxed in the paramount interest of being dynamically creative. The staff were therefore all 'co-workers', who all owned the same amount of shares in the firm and who could check, via open employee files, how their earnings compared with other people's.
OPEN-PLAN EVERYTHING
The culture was open-plan in every other respect. Nobody even had a desk, let alone an office; people could take time off at will; decisions were taken by a democratically elected council of 'Questors'. The familiar driving forces of 'fear, greed and ego' were to be ruled out by these cultural weapons, and change was to be the new stability. The philosophy would be one of continual radicalism - if something worked, you still should do it differently next time, according to St. Luke's leading leader: or rather, non-leader.
That word goes to the heart of the matter. All human activities are means to an end. Both means and ends must be selected and supervised. Some arrangement must be made to ensure that the selection and the supervision are undertaken by competent people in competent ways. That arrangement inevitably leads to hierarchy - not the hierarchy of rank and seniority, but that of expertise and expert leadership.
The larger the organisation, and the more it depends on complex processes (like manufacturing), the more it requires (and the more often it becomes enslaved to) the formal disciplines of leadership and the rules and regulations of corporate bureaucracy. As the years go by, so authority and hierarchy only strengthen and stiffen. That's why Wondercorps like St. Luke's are always small, usually start-ups (the company only began in 1995), and engaged in non-traditional, flaky businesses - like advertising, where St. Luke's made a big hit. Its founders understood that ad-men and women are paid to produce ideas.
In the standard firm, creativity is an add-on. In the ad agency, it's the whole business of the business. Then, the nature of the people who go into a business determines the culture to a great extent. Both 'creatives' and account handlers differ in background, personality and life-style from the typical employee, and ad companies are therefore bound to be different, too.
Much the same was true of Silicon Valley - and still is true of the much reduced Valley that has survived the e-meltdown. But the survivors make a crucial point. Their continuing power is no accident. Rather, it stems from a fusion of creative freedom, often enhanced by a free and easy corporate lifestyle, with firm industrial discipline, which may be marked by systems that are more rigorous than most traditional firms dare to employ.
APPRAISALS AS MINI-TRIALS
Intel provides a telling example. Under the tough and demanding Andrew S. Grove, it drove employees to higher and higher levels of motivation and performance. He urged his managers to clarify in advance what they expected from a subordinate. That enabled them to judge whether performance was up to expectations. Appraisals became mini-trials: the interview 'is the subordinate's day in court'. If the verdict went against the latter, he or she 'could get fired' - and often would be.
Bizarrely, but quite typically, Grove instigated a much-hated system called 'the late list'. He got irritated by early morning meetings that didn't begin on time and insisted on security staff getting signatures from anybody who arrived after eight o'clock. For 17 years, despite widespread dislike and much evasion, Grove persisted with this Draconian discipline.
Yet this was the same company where open argument and confrontation, often vigorous in the extreme, were an operating principle. And it was the same company in which relatively lowly engineers, acting on their own initiative, generated a magical innovation - the all-conquering microprocessor. This device made the digital revolution possible and saved Intel from disaster as its memory business went down before unbeatable Japanese competition.
A typical company might perhaps have let an engineer, designing logic chips for a Japanese calculator firm, to propose and work on a design which crammed all the circuitry on a single chip that could be programmed, just like a computer. Much less constructively, that typical firm might also (which happened to the man concerned, Ted Hoff) have taken him off the project for other work. But only an unusual company like Intel would have kept Hoff's project going in the same informal manner.
It cheerfully allowed two other engineers, one newly arrived, to carry on the good (and, as it turned out, vital) work. When top management eventually got into the act, its intervention proved decisive. The chairman personally regained exclusive rights from the customer: and, later on, top management brushed aside a lukewarm marketing department to bet Intel's whole future on the microprocessor marvel.
In other words, everybody concerned played their separate parts, which interlocked to produce a spectacular result - one of the great business breakthroughs of all time. The conclusion is obvious. People need freedom to give of their best, especially in areas, like creativity, where individual initiative may well make the essential difference. Organisations, though, need structures, systems and rules to establish common purposes and direct human effort to realising those objectives.
THE VELVET HAND
This isn't the iron hand in the velvet glove - the hard discipline that's concealed by soft words. It's nearer to the opposite - the soft interior contained within the firm surround. The great director Preston Sturges, whose films always topped the box office charts, was so angered by the studio's restraints - such as the rule that six pages of the script be shot every day - that he quit and went independent. Freed of those irksome, but very sensible rules, Sturges never made another hit.
The Intel separation of powers comes into play. The great director's role was to achieve creative excellence. The studio bosses had to provide the framework within which that success could be best achieved. When St. Luke's was wowing its peers and clients like IKEA, BT and HSBC, it was because the revolutionary culture encouraged creative brilliance within a structure that was far more traditional than appeared. For a start, the co-workers might well be equals on paper: but the handful of founding fathers were inevitably more equal than everybody else.
Far from being a failure, that's an ineluctable necessity for any organisation. The WICH? factor - Who's In Charge Here? - arises at every level. In many large businesses (like BT, as it happens) it can be very hard to find where the decision-making power resides, for both insiders and outsiders. Note that this isn't an issue of ownership. Britain's best store chain is probably the John Lewis Partnership, co-owned by its staff for many decades. But the management is organised on normal principles which have achieved abnormal levels of effectiveness and quality.
A HAPPY COMPANYRadical ownership and philosophy can confer clear benefits, however. They attract external attention (as at St. Luke's), provide a Unique Selling Proposition, excite internal enthusiasm, and thus help to supply the best possible background for achievement - a happy company that is a good place in which to work.
Some time ago, Thinking Managers raised a central question. Can you have a successful business with unsuccessful human relations? The question, as I pointed out, is better posed in another, more positive way. The fact that some horrific work-places do achieve terrific performance is no recommendation for horror. Equal success can be achieved by a business that's fun to work in, humane, happy, employee-driven - whatever phrase you care to use. Denial of this certainty flouts all the work done by the behavioural psychologists. Research confirms the commonsense view that people perform best when they most enjoy their work.
At St Luke's the atmosphere deteriorated as the results worsened, partly because of advertising recession, but also because of the deteriorating atmosphere; that's a vicious circle. At base, the agency had forgotten the main reason for revolutionary ideas in the workplace: to produce revolutionary benefits for the customer. St. Luke's had come to believe its own publicity. As one founder told The Independent newspaper, 'Our brand ended up being put higher than the clients', and that's not the way it should be'. Wondercorps are only as good as the quality given to customers - among whom, as internal suppliers of top management services must know, the staff are by no means the least important.
With unhappy timing, Andy Law, the most prominent of the St. Luke's founders, published a book on its management principles and practices just as he was ousted by his co-workers. The collapse of his dreams doesn't mean that Experiment at Work isn't worth reading. Some of the jargon ('connectivity' and working 'teleologically', for example) is uninviting. But new and heterodox ideas are always stimulating, if nothing else - like Law's view, mentioned earlier in Thinking Managers, that if something works, you should do it differently next time. The trouble is that research by academics J. Stuart Bunderson and Kathleen M. Sutcliffe doesn't support his case for change for change's sake.
In the company studied, the authors compared two teams, one which 'embraced change and continuous learning' and another which, unlike Law, advocated 'if it ain't broke, don't fix it'. Over a year, the results in terms of targets met and bonuses earned were identical. Further, writing in the Harvard Business Review, the academics conclude that there's 'an optimal point' beyond which more emphasis on learning actually depresses performance. Their advice? 'If it ain't broke, tweak it' - but don't aggressively fix what isn't broken, and don't fundamentally rethink.
BUDGET BLUES
Here's one very promising fundamental rethink, though. The all but universal basis of organisational systems is the budget. The all but universal result is that managers everywhere suffer budget blues, both in doing and meeting the wretched things. Jeremy Hope and Robin Fraser, authors of Beyond Budgeting (Harvard), have a simple antidote. Scrap the budgets! No targets for spending and selling means no criticism (or worse) for shortfalls. Control isn't lost, however: rolling five to eight quarter forecasts of key variables (say, orders, sales, costs and capital spending) are more effective and less time-wasting than annual budgets.
As for motivation, key performance indicators (like profits, cash flow, cost ratios, customer satisfaction and quality) are the answers, measured against internal or external peer groups. In the Harvard Business Review, the authors claim that this approach leads people to outdo themselves, and that beyond-budget companies create more value, while saving oceans of time and mountains of money. Old-fashioned budget-related spending at Ford is said to total $1.2 billion annually, to no good effect - the auto company's recent results have still been horrible.
read all 70 gurus with one feed read all Read all media
