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What is leadership, if not strategy and culture; setting the direction to which the organization must move, and instilling behaviors that will provide the best chance of making the journey? Successful leaders pay attention to the world around them, and then navigate whatever challenges appear; this is strategy. They assemble the talent needed, and then mold a community around it; this is culture.
Outside-in or Inside-out?
Done well, strategy is built outside-in. Culture, all too often, however, is inevitably inside-out. Whenever we reorganize, bring in a new IT system, when we change our measurement systems, or the values we espouse, we are making managerial choices that are designed to affect the way we behave. And, as a result, shape our culture. All of these managerial choices are typically made deep inside the firm; away from customers, partners, rivals, and often, most of the team, as well. This becomes culture by decree; inside-out, with only grudging acknowledgement of outside issues.
Disconnect by default
No wonder, we never get it right. Strategy and Culture, which should be joined at the hip, are, more often than not separated at birth. When we strive for “alignment”, insisting that each unit behave in the same internal way, we exacerbate the separation between ourselves and our customers, or users. This is even more the case when an organization is an active participant in one or more ecosystems, and when that participation takes the form of many different independent partnerships.
The past can no longer inform the future
In the past, in a world where S-curves were longer, industry boundaries impermeable, and customer experience expectations more accommodating, we could get away with such disconnects. This is no longer possible. Increasingly, we are witnessing bold experimentation among respected organizations, trying to get closer to their customers and unleashing latent entrepreneurial energies that exist within their workforce. Almost always, this results in some form of radical unorganizing2, greater managerial autonomy and distributed leadership.
Paul Michelman, then editor-in-chief of Sloan Management Review, anticipated this3, and worried what it meant for strategic alignment: in “an era of entrepreneurship, distributed leadership, and the continual reorganization of people and resources, …. there is reason to question culture’s role. Our relationships to institutions will become increasingly defined by the activity in which we are engaged at any given time. We will come to view ourselves as “affiliates” more than “employees”.” To which he added: “In this world, we will no longer prize alignment; we will prize realignment. Such an environment benefits from clear and universal rules of engagement. It does not benefit from habits that are distinctive to one group of people — which is the essence of organizational culture.”
From employees to free-agents
In fact, the defunctionalizing of many organizations, in an effort to get closer to their customers, was the first step in realizing Michelman’s concerns; and was followed, quickly, by the advent of the gig economy. Both of these events have turned many once-employees into true entrepreneurs, and shredded much of whatever was left of organizational loyalty in the process.
Beliefs not behaviors
In the case of Haier, perhaps the most extreme example of unorganizing, many different microenterprise cultures have arisen, but surprisingly with little apparent feeling of culture loss, or loyalty. Despite all of the reorganizing into many small, autonomous, microenterprises, there is still very much a Haier culture, but it is a culture based on shared beliefs, rather than shared behaviors. Recently, at Haier’s General Electric Appliances, one long-time GEA executive, suggested that the biggest lesson for him was the repetitive nature of what he now saw throughout the organization: you look at the group level, and there is the pursuit of great customer experience, and entrepreneurship; then you look at the microenterprises, and you see exactly the same thing; and, then, you look at the individuals within the microenterprises and you see, once again, the same thing. He used the term “fractals4” to describe the replication of GEA’s core beliefs at each level; that is where the alignment is, around guiding principles, not common behaviors
Common principles drive common beliefs
Danah Zohar, in her new book, Zero Distance5, which uses quantum physics to explain Haier’s organizational logic, also points to the importance of guiding principles: “a sense of purpose permeates every person, activity, service and product in a company…. It is the “sea” upon which all boats sail, with their compasses pointing to true North.” James F. Moore, whose work led to the idea of business ecosystems, has observed that “Haier looks at its employees, customers and suppliers and gazes on unlimited capabilities, and boundaryless possibilities.”6 Just think of what cultural choices can be made with guiding beliefs such as these.
A reliance on common guiding principles to instill common beliefs requires a high degree of trust within the entire workforce. Beliefs are based on trust. Contrast that with organizations where behaviors created by systems and controls, as these are based on discipline and mistrust.
Look carefully at the organizations who are held up as models of greater autonomy and ecosystem engagement. Organizations such as: Haier, Morningstar, Buurtzorg, Fujitsu Europe, Bosch PowerTools, General Electric Appliances, and VkusVill. They are all experimenting with smaller, more autonomous units, and a widespread distribution of leadership responsibility. Then, look closer. In the background, it is guiding principles that ensure that these organizations are not out of control. Despite their immense variety in products and customers, there is a common thread of beliefs regarding customers, employees and partners, and an expanded expectation in what each is capable of, which allow these organizations to run at different speeds, in different directions, without being in disarray.
Rethinking purpose and values
Guiding principles are a powerful attractive force that holds communities together as their members pursue wildly different objectives. Their adoption argues, persuasively, that much of what we regard as core to organizational cultural alignment, similar behaviors and similiar systems, moving all parts of an organization in the same direction, and at the same speed, is no longer a useful aspiration.
Instead, we should be rethinking purpose and values, as a fundamental statement of beliefs. This is particularly important in preparation for larger ecosystemic transformations in the future; restoring the human imperative as the prime organizational asset for navigating uncertainties; not so much as mimicked behaviors, but as shared beliefs, rather than shared systems or shared processes.
Footnotes :
[1] This title was generously suggested by Nick Hixson
[2] “Unorganizing” is a term coined by Sogeti, a Capgemini firm: hpps://www.sogeti.com/explore/newsroom/the-unorganization-new-research-on disruption-from-sogetilabs/
[3] Paul Michelman, “The End of Corporate Culture As We Know It,” Sloan Management Review, Summer 2017.
[4] Common behaviors taking place within the greater Copenhagen Esports ecosystem were also noticed at the “individual, team, SBU, firm and global levels,” and described by Anouk Lavoie as “fractal-like.” Anouk Lavoie and Bill Fischer, “How Copenhagen launched an Esports ecosystem,” IMD Case IMD-7-2102, 2019.
[5] Danah Zohar, Zero Distance: Management in the Quantum Age, forthcoming, London: Palgrave MacMilian.
[6] James F.Moore, comments made at Haier’s OpenTalk 2020 forum, October 2020.
About the Author:
Bill Fischer is Professor of Innovation Management, at IMD business school. He coauthored the book “Reinventing Giants” which describes Haier’s évolution as an innovative organization and he and Simone Cicero have been working with Haier developing the story of Haier’s emergence as an ecosystem participant. He was inducted into the Thinkers50 Hall of Fame in 2019.
This article is one in the “shape the debate” series relating to the 13th Global Peter Drucker Forum, under the theme “The Human Imperative” on November 10 + 17 (digital) and 18 + 19 (in person), 2021.
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Great Post from Bill Fisher with huge implications for post pandemic leadership, talent attraction and the future of work. Organizations and leaders that focus on common behaviors only want to see their employees beck in the office as soon as possible so they can manage and control them again. Organizations and leaders that focus on common beliefs never had that problem during the last few month because they trusted their employees no matter what kind of office they worked from. For which organization you would like to work for in the future? And how successful will you be at retaining talent in your organization if you don’t change the way you think about culture and strategy?