organizational structure

  • Fidelity’s Amazing, Disappearing Star Fund Manager?

    The era of the star fund manager is waning.

    Fidelity Investments may replace a star-oriented fund management system with a collaborative approach after a consultant's report. As is so often the case when organizations suddenly consider—and often embrace— a more collaborative structure and culture, exigent circumstances precipitated the potential move. I call this phenomenon The Bounty Effect, and I’ve written extensively about it in the book by the same name. The Bounty Effect occurs when an event or circumstance creates a fundamental shift, changes the game and accelerates collaboration.

    The Bounty Effect for Fidelity occurred because of two exigent circumstances:

    Last year Fidelity reportedly fired Gavin Baker, manager of Fidelity OTC Portfolio, for allegedly sexually harassing a junior female staff member though Baker denies the allegations. This happened against the backdrop of the #MeToo movement. The apparent firing prompted Fidelity to conduct a “cultural review” of its stock picking unit.

    The other exigent circumstance is the reported outflow of $40 billion from Fidelity’s actively-managed funds in 2017, according to Morningstar, as investors have increasingly embraced exchange-traded funds (ETFs) and passively managed index mutual funds meaning those linked to the performance of a particular index such as the S&P 500. Active fund management essentially means one star manager with a supporting cast of analysts attempts to beat a particular index. Fidelity built its reputation in the 1980s around successful active managers including Peter Lynch who managed the Fidelity Magellan Fund.

    The decline of the “star” fund manager mirrors trends in other industries and throughout workplaces. Before the rise of human resources as a valued discipline, swashbuckling managers made hiring and tactical decisions based on gut and sometimes whim. Executives often made strategy decisions in a vacuum.  As HR has become more data driven, the era of the swashbuckling manager has ebbed. Leaders make few decisions without input or at least without consulting HR, finance, IT, communications or some other function. Companies measure everything and everybody which, incidentally, can short circuit collaboration.

    Fidelity would likely argue that “star” managers never made decisions in a vacuum but rather consulted Fidelity’s extensive research team and worked with analysts assigned to each fund. Nevertheless the funds industry—including Fidelity—has historically embraced star culture. And so have such industries as sports, food and beverage, medicine, journalism, the film industry and so many others. The media still goes to bizarre lengths to reinforce star culture, because media decision makers believe that personalities sell newspapers and drive viewership and eyeballs translating into advertising dollars. I’ve even read stories on “star” butchers. And while I appreciate the skill involved in selecting and cutting meat, putting certain butchers on a pedestal feeds a misleading perception that the vast majority of butchers fail to measure up to the so-called stars.

    When we turn athletes, chefs, doctors, television hosts, movie producers and others into stars, these so-called “stars” start believing the rules that apply to everybody else never apply to them. This breeds bad behavior. Star culture has also diminished the contributions of people who work with “stars” which makes these people feel sidelined and less likely to provide valuable input. In short, star culture costs organizations dearly. In contrast, embracing a collaborative culture and structure creates value.

    If Fidelity abandons its “star” manager system, the question is whether the move is window dressing or real structural change. We may learn that one person never really “managed” Fidelity’s actively-managed funds and that fund management was always an inherently-collaborative process among colleagues despite Fidelity’s marketing so-called “star” managers.

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  • 7 Success Factors for Collaboration Hackathons

    The hackathon has gone mainstream.

    Once a method used primarily by coders, the hackathon has moved beyond the boundaries of software development. From government agencies and universities to start-ups and Fortune 500 companies, organizations are embracing collaboration hackathons or what we might call collabathons to spark innovation, develop products and services, and improve processes for everything from quality control to recognition and reward.

    Collaboration hackathons inspire team members to step away from their day-to-day roles and solve a big problem or brainstorm a new direction with a tangible take-away.  The structure of a successful collaboration hackathon mirrors that of a collaborative organization. We’re talking about an ad hoc team that forms for a specific purpose, collaborates, and then disbands. The 7 Success Factors for Collaboration Hackathons mirror the 7 steps in my book The Bounty Effect: 7 Steps to The Culture of Collaboration. These are:

    1) Plan

    2) People

    3) Principles

    4) Practices

    5) Processes

    6) Planet

    7) Payoff

    In the context of collaboration hackathons:

    Plan is a problem to be solved, product/service to be developed, process to be created or improved or key question to be answered

    People means broad participation in cross-functional collaboration hackathons regardless of level, role or region

    Principles are the collaboration hackathon’s value system, the guidelines in solving the problem

    Practices put principles into action through everything from a physical environment that fosters brainstorming to tools for capturing and refining ideas and putting them into action. Practices ensure that the hackathon is a collaborative group session (CGS) rather than a meeting.

    Processes let hackers rapidly prototype and test ideas.

    Planet puts communities in the center of the hackathons and inspires hackers to address how their ideas impact the communities in which the organization does business. The Planet step may consider everything from carbon footprint to privacy.

    Payoff is the work product of the hackathon which must create value

    These 7 steps prevent collaboration hackathons or collabathons from degenerating into meandering “bull sessions” at one extreme or turning into formal meetings at the opposite extreme. With The Bounty Effect’s 7 Steps, collaboration hackathons or collabathons succeed in solving big problems, answering key questions, developing products and services, improving processes, refining ideas and putting concepts into action.

    Collabathons can help shift the structure of the entire organization from competitive, command-and-control to collaborative. The possibilities are endless.

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  • Fixing Wells Fargo

    Wells Fargo CEO John Stumpf will testify before the Senate Banking Committee next Tuesday about the company’s sales practices. This word comes less than a week after Wells Fargo agreed to pay $185 million in fines from the Consumer Financial Protection Bureau, the Comptroller of the Currency and the City Attorney of Los Angeles. So what went wrong?

    Well, I’ve seen similar disasters in other companies when the structure—and, yes, the culture—of  the organization encourages competing with colleagues and cutting corners rather than collaborating with colleagues, customers and partners. The key building blocks of the organizational structure are principles, practices and processes. We get clues about Wells Fargo’s principles from its written “vision and values” which include:

    “Our ethics are the sum of all the decisions each of us makes every day. If you want to find out how strong a company’s ethics are, don’t listen to what its people say. Watch what they do.”

    So what exactly did Wells Fargo people do to cost the company $185 million plus untold damage to its brand and reputation?

    According to the Consumer Financial Protection Bureau, Wells Fargo opened over 1.5 million unauthorized deposit accounts and may have funded these accounts by transferring funds from existing customer accounts without consent or through “simulated” funding. This practice generated about two million dollars in fees from 85,000 accounts. The CFPB consent order also states that Wells Fargo submitted credit card applications, ordered debit cards and enrolled consumers in online banking without customer consent. Clearly, this behavior represents at best a disconnect between principles and processes particularly the reward system process.

    Wells Fargo truck
    © John Doe / Wikimedia Commons / CC BY-SA 4.0

    Wells Fargo’s “vision and values” cover everything from ethics to doing what’s right for customers. But written “vision and values” and mission statements don’t tell the whole story for many companies. Often, the real principles that govern an organization are unwritten. These principles manifest in break rooms, cafeterias, meetings, “off-site” sessions and sometimes during dreaded performance reviews. At best, Wells Fargo’s unwritten principles echo its written values and the problem is a disconnect between principles and processes that culminated in widespread abuses.

    At worst, the company’s unwritten principles are something like “win at all costs” and “loyalty above all” which by some accounts were the unwritten principles of Lehman Brothers.  Lehman, once the fourth largest investment bank in the United States, no longer exists. Neither does Enron which embraced the principle of following orders without questioning them. The wrong unwritten principles or a disconnect between the right principles and processes can start small with, say, approving mortgages for people who don’t qualify and culminate in a near collapse of the financial system.

    Many organizations espouse collaborative principles while short circuiting collaboration and value creation through reward systems that reinforce internally-competitive, command-and-control behavior which can easily morph into cutting corners and illegally fudging numbers. Along the way, trust dies among team members and ultimately among customers, partners, regulators and others. This happens in industries ranging from financial services and healthcare to manufacturing and technology. And it doesn’t help that increasingly team members across multiple industries prefer to interact with devices and computer systems rather than with their customers.

    Why would the third largest U.S. bank by assets—and a favorite stock of Warren Buffett—risk its reputation by cutting corners? The most likely answer: to keep the squeeze on team members through a reward system that the bank believed would deliver ever better quarterly returns.

    When I hear analysts and others suggest that a company has a secret sauce shrouded in mystery that delivers outlier returns, alarm bells reverberate in my brain. This is also true of financial advisors touting a particular investment. In 2009, Warren Buffett suggested in a Fortune interview that there was something special about how Wells Fargo does business. “The key to the future of Wells Fargo is continuing to get the money in at very low costs, selling all kinds of services to their customer and having spreads like nobody else has.” This sounds sort of like a secret sauce—and there go the alarm bells. Sometimes there’s a reason why a company is an outlier. Mostly, what Buffett was referring to is the Wells Fargo practice of cross selling which is simply selling more products to existing customers. It turns out that cross selling involved phantom sales. Wells has told some team members to stop cross-selling amid the crisis.

    So how can Wells Fargo be fixed?  The company has fired more than 5000 employees, because of the illegal practices. But is the real problem these team members or the company’s principles, practices and processes?  Wells Fargo CFO John Shrewsberry apparently feels it’s the former. Shrewsberry reportedly told the Barclays Global Financial Conference in New York on Tuesday that the team members who committed the illegal acts were “at the lower end of the performance scale” and they were trying to hold onto their jobs.

    Wells Fargo senior leaders are missing the point. The real villain is the reward system they created or approved that drives the behavior of team members at bank branches. This system apparently rewarded employees for opening accounts regardless of whether customers funded these accounts with new money. What value does this create? None. In fact, it likely costs more to open and ultimately close an unauthorized account than to do nothing. It makes little sense to blame bank branch employees for trying to retain their jobs when senior leaders have likely created principles, practices and processes that prevented more than 5000 people from acting ethically, selling products and creating value.

    As its CEO prepares to testify before the Senate Banking Committee, Wells Fargo announced today the company is eliminating sales goals for retail bankers. Fixing the reward system without systemic repair may help for a while, but a lasting solution requires a more comprehensive approach. I’ve learned that trying to change an ingrained culture fails without changing the organizational structure.

    The unfolding crisis provides an opportunity for Wells Fargo and many other companies in multiple industries with similar issues to replace an obsolete organizational structure while revamping the flawed reward system. This involves focusing like a laser beam on the key building blocks of a value-creating collaborative company: principles, practices and processes. Only then can the culture evolve.

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  • Socrates and New York Mayor Bill de Blasio’s City Hall

    The in-box culture is dead, but that may be news to the mayor and officials in New York City.

    New York’s City Hall apparently never got the message about deserialization. What I mean by deserialization is curbing the in-box or pass-along approach to work and interaction that is critical for collaboration and value creation. But New York Mayor Bill de Blasio has sure received plenty of memos…decision memos, that is.

     

    New York City Hall
    New York City’s City Hall reportedly embraces the pass-along approach to work and interaction

    Before Mayor de Blasio makes many decisions, his staff prepares memos. And before these decision memos reach the Mayor, they reportedly require the signatures of at least eight officials including the first deputy mayor, the law department, the Mayor’s counsel, the budget director, the press secretary, the head of intergovernmental affairs and the deputy mayor with direct responsibility, according to a recent story by J. David Goodman in the New York Times. This is the antiquated pass-along approach.

    The Wall Street Journal reports that a memo on flight rules for helicopters took at least nine rounds of revisions. Nine rounds! This is pass-along times nine. And we wonder why citizens complain that government is mired in bureaucracy. The Times story quotes the Mayor’s chief of staff Tom Snyder as saying the Mayor’s decision-making process is “extremely granular, engaged, semi-Socratic.”

    Actually, Mayor de Blasio’s approach is anything but Socratic. Socrates believed that the way to the truth was through questioning and dialogue. Socrates rejected writing, because writing meant—quite literally in ancient Athens—that ideas were set in stone or wax and that the process of developing those ideas was dead.  Socrates also rejected scripted speeches, because these are essentially the recitation of written words. For organizations making decisions, one form of the truth is accurate information—which is dynamic rather than set in stone. As the situation changes, sometimes hour-to-hour, what can be considered accurate information also shifts.

    Using memos or email to make decisions compromises collaboration and disrupts value creation. This approach is a hallmark of command-and-control organizational structure and culture. By the time each department head or official has signed off on the course of action and passed the baton to the next official, the “truth” or facts have often changed. Socrates would roll over. Yet dialogue and questioning without a structure can also pose problems particularly for complex organizations such as New York City government and large, distributed enterprises. So what’s the alternative?

    My most recent book, The Bounty Effect: 7 Steps to The Culture of Collaboration, shows how to change the structure of organizations so that they can evolve from command and control to collaborative. And a fundamental element is creating an Open-Access Enterprise which enables the organization for spontaneous dialogue. In the Open-Access Enterprise, everybody has access to everybody else—and that access is immediate.

    Using unified communications, we can see who is available and connect instantly. We can bring key stakeholders into collaborative group sessions (CGS) so we can hash out issues in real time, make decisions and create a work product without getting mired in the pass-along approach of memos and meetings. A CGS can occur virtually using unified communications and related tools or the session can happen physically with all participants in the same room.

    Mayor De Blasio’s apparent goal of getting broad input into decisions makes sense. Embracing the Socratic method has merit. But the structure and processes of the Mayor’s office appear flawed and are short circuiting the goal. This is typical of many organizations that embrace collaboration as a concept but sabotage collaboration with a command-and-control structure that encourages bureaucracy and reinforces hidden agendas and internal competition. The solution is to adopt a collaborative organizational structure that leaves memos and traditional meetings in the dust. The in-box culture is dead.

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  • Collaboration Washing

    It takes more than appearing collaborative to achieve The Culture of Collaboration.

    As collaboration has become a trend, companies and people talk collaboration without being collaborative. Just as greenwashing involves deceptively promoting the perception that an organization’s products and policies are environmentally-friendly, something similar is happening with collaboration. It's called collaboration washing: promoting collaboration as a corporate or product trait without any real collaboration happening.

    When the first edition of my book The Culture of Collaboration® appeared in early 2007, consciousness for organizational collaboration was just beginning. One prominent Silicon Valley company had pre-ordered thousands of copies of the book. A new chief marketing officer disliked the word collaboration, and so the books remained in the company’s warehouse until the following year when more people, organizations and media outlets began embracing collaboration. Then the technology company distributed the books to customers globally.

    Now collaboration is a buzz word. Marketers link myriad products to collaboration, and human resources people embrace the word as a corporate culture label. And guess what? The meaning of collaboration is getting diluted. In The Culture of Collaboration® book, I define collaboration as “working together to create value while sharing virtual or physical space.”

    Many people regard social media use as a mark of a collaborative company. As I’ve demonstrated to many audiences, it’s quite possible to use social media and create zero value. It’s also possible to use any collaboration technology without creating value and, therefore, without collaborating. Some consider a youthful workforce as an indicator of a collaborative culture. But I’ve observed, interviewed and worked with numerous engineers in their fifties and sixties who have designed everything from game-changing software to airplanes. Without significant collaboration, these products would have been dead on arrival. And it’s easy to find internally-competitive, command-and-control behavior among people in their twenties working in technology and other leading-edge sectors.

    Real collaboration requires adopting a collaborative organizational structure as I outline in my most recent book, The Bounty Effect: 7 Steps to The Culture of Collaboration®. This goes well beyond buzz words and window dressing. The Bounty Effect is the second book in The Culture of Collaboration® series. The first book, The Culture of Collaboration®, is about raising the consciousness for a new way of working. The Bounty Effect focuses on how to achieve collaboration in organizations

    Open-plan workspaces are a current popular marker of a collaborative company. Collaborative workplace design is much more than window dressing. It’s a key practice in adopting a collaborative structure, but it’s only one element. Citigroup is the latest Fortune 500 company to jump on the open-plan workspace bandwagon. Citi reportedly is adopting a “non-territorial” or “free-address” deskless approach similar to the one GlaxoSmithKline uses in its Philadelphia Navy Yard building. In The Bounty Effect, I explain GlaxoSmithKline's approach to collaborative workspaces and culture.

    Citi CEO Michael Corbat told the Wall Street Journal that he is particularly excited about a “town square” space on the ground floor that will increase serendipitous encounters among team members. This, in turn, he expects will enhance communication and exchange of ideas. Also, Citigroup anticipates that the open-plan workspace will flatten hierarchies.

    Essentially, Citigroup is taking a step towards adopting a more collaborative culture and structure. However, transforming a company into a global collaborative enterprise requires many more structural changes than the physical workplace environment. Many organizations such as police and fire departments, newsrooms and trading floors have operated with open-plan workspaces for years. Yet a lack of collaboration still compromises many of these organizations.

    Citigroup and the increasing numbers of organizations adopting open workspaces can create incredible value through collaboration if they go beyond the most obvious manifestation of a shifting culture—the physical workplace environment—to embrace principles, practices and processes of collaborative organizational structure. These include everything from replacing the traditional organization chart and the traditional meeting to changing the recognition and reward system and keeping measurement mania in check.

    Anything short of structural change is collaboration washing.

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  • Accenture Scraps Reviews, Rankings and Joins The Bounty Effect Bandwagon

    Nothing impedes collaboration more than outmoded recognition and reward systems. And replacing annual performance reviews and rankings advances collaborative culture, behavior and organizational structure.

    Many organizations promote themselves as collaborative while simultaneously reinforcing internal competition through annual performance reviews and rankings. This process squanders time and distracts the organization while pitting team members against one another. Performance reviews and rankings incent team members to hoard information and maintain hidden agendas rather than share ideas and work together towards common goals.

    Accenture is the latest major organization to eliminate rankings and performance reviews. “Massive revolution” is how Accenture CEO Pierre Nanterme characterized the organizational change as quoted in the July 21 edition of The Washington Post.

    In the Spring of 2013, Microsoft Co-Founder Bill Gates read an advanced copy of The Bounty Effect: 7 Steps to The Culture of Collaboration® which demonstrates why ranking team members falls short and how a Collaborative Reward System creates greater value than an internally-competitive system. Replacing performance reviews is the first of seven components of the Collaborative Reward Process (CRP) that I outline in the book.  In November, 2013, Microsoft eliminated rankings of team members. You can read more about Microsoft’s reward system shift in my January 20, 2014 post.

    Many legacy recognition and reward systems are based on the premise that individuals have different goals and must be motivated using “carrot-and-stick” approaches. But in a collaborative organization, people share the same goals so “carrot-and-stick” performance reviews and rankings are obsolete.

    So why do organizations persist in ranking and annually reviewing the performance of team members? The justification is weeding out non-performers and promoting “star” players, but the real reason is clinging to an outmoded command-and-control organizational structure. Remnants of this structure include not only performance reviews and rankings, but also organization charts, meetings and mission statements. These remnants inhibit organizations from maximizing value through collaboration.

    Undoubtedly, more organizations will follow Accenture, Microsoft and other major companies in replacing rankings and annual performance reviews—and in adopting a more collaborative organizational structure.

     

     

     

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  • General Motors and the “C” Word

    General Motors CEO Mary Barra is taking aim at the “C” word.

    “I hate the word culture,” Barra is quoted as saying in an article by Joseph B. White in the Mary BarraSeptember 30 edition of the Wall Street Journal. “Culture is really just how we all behave,” according to Barra. The comments are curious in that Barra testified before a Congressional subcommittee last June that she would

    GM CEO Mary Barra outlines new strategic plan  (Image copyright GM)

    not rest until GM’s “deep underlying cultural problems” are resolved. The subcommittee was investigating GM’s failure to recall thousands of cars with defective ignition switches for eleven years.

    It’s myopic to dismiss the word culture. Merriam-Webster Dictionary’s third definition of culture is “a way of thinking, behaving, or working that exists in a place or organization.” GM would benefit from focusing on these issues plus the broader context of the word culture. In his Tusculan Disputations, the ancient Roman orator Cicero introduced the concept of culture as cultivation of the soul as a farmer cultivates crops. Culture has come to represent beliefs and customs of societies. Cultural anthropologists study social structure and customs in populations ranging from villages to corporations.

    Culture is inextricably intertwined with collaboration in that how “we all behave” in Barra’s words determines whether we’re working together towards common goals or working at cross purposes. Ironically, in a July 28, 2014 post, The Culture of Collaboration® blog took General Motors to task for overemphasizing culture change without structural change. Culture change typically delivered as an edict often highlights the desired result without providing a way to get there. This common prescription from leaders, pundits and management gurus often fails, because the shift originates with executives without detail, discussion or broad buy-in. Meantime, the outmoded organizational structure stays the same. To achieve collaborative culture and the payoff that collaboration provides, it’s necessary to change the organizational structure. Then culture change can happen.

    On October 1, GM outlined its new strategic plan that focuses on technology and product advances, growth in China, establishing Cadillac as a separate business unit “headquartered” in New York City and delivering “core operating efficiencies.” Incidentally, the notion of headquarters is a relic of Industrial Age command and control. Nowhere does the plan mention structural change, which the automaker sorely needs. Changing GM’s structure requires overhauling everything from how team members share information across levels, roles and regions to how the company recognizes and rewards people as I detail in my book, The Bounty Effect: 7 Steps to The Culture of Collaboration®.

     

     

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  • Health Insurance Company Experiences The Bounty Effect

    When Presbyterian Health Plan denied Dave Bexfield of Albuquerque, New Mexico reimbursement for a multiple sclerosis treatment trial, Bexfield launched a campaign to recover the $200,000 he spent on the treatment. He contacted media, bombarded Presbyterian with calls and emails, and ultimately lined his garage walls with the insurer’s denial letters, according to an August 1, 2014 column by David Segal in the New York Times.

    The treatment was a stem cell transplant trial sponsored by the National Institutes of Health. The trial worked in that Bexfield no longer takes M.S. medication and the disease is in remission. But the stem cell transplant was apparently not a covered benefit when Bexfield received the treatment. Ironically, Presbyterian Health Plan added this treatment to the benefits for Bexfield’s plan a few months after he finished the trial. A Presbyterian spokesperson reportedly called the timing “unfortunate.”

    Unfortunate indeed for Presbyterian Health Plan in that Bexfield refused to back down. Presbyterian reportedly insisted that the only reason the company had added stem cell transplants for M.S. as a benefit was that the federal government had mandated it. So Bexfield submitted a Freedom of Information Act request and received documents indicating there was no federal mandate. This suggested that Presbyterian had decided on its own based on the treatment’s merits to begin covering stem cell transplants after Bexfield had completed the trial. After receiving many additional letters and media calls, Presbyterian changed course. Presbyterian Health Plan President Lisa Farrell Lujan agreed to reimburse Bexfield not only the $200,000, but also an additional $198,000 in interest at 18 percent, according to the Times.

    Boom. The Bounty Effect had arrived at Presbyterian Health Plan, and the company seized the opportunity to change. The Bounty Effect happens when exigent circumstances compel businesses, governments and organizations to change their structures from command-and-control to collaborative. The exigent circumstances were groundbreaking advances in stem cell research. Bexfield’s campaign and the resulting media attention drove The Bounty Effect home. In this situation, Presbyterian adopted a more collaborative approach. Often structural change starts small and grows. This episode may pave the way for more fundamental structural changes at the company.

    In my latest book, The Bounty Effect: 7 Steps to The Culture of Collaboration, one of the 7 steps is Processes. And a key process is employing Measurement Counter-Measures which curb the measurement mania that can complicate collaboration and compromise value. The point is that a maniacal focus on measurement can produce the opposite of the intended result. Clearly, Presbyterian’s measurement mania produced myopia in that claims representative had difficulty seeing beyond the numbers.

    The $200,000 for the stem cell transplant would cost the insurer in the short run, but the money produces a living, breathing example of an insurance customer who may potentially avoid further treatment for M.S. and save the insurer plenty. One measurement counter-measure is to perform a common sense reality check. If the numbers defy common sense, that’s our cue to pause and reconsider. Employing Measurement Counter-Measures is often the hardest collaborative process for financial professionals to adopt.

    Lujan, Presbyterian’s president, is the company’s former CFO and was previously an audit manager with Arthur Andersen. She told the Times that the individual decisions Presbyterian made in Bexfield’s case were correct but that consistent policies had to be balanced against fairness. “When I looked at the forest, I came to a different conclusion than those who had looked at each individual tree,” according to Lujan.

    The old reimbursement decision was obsolete, because of scientific breakthroughs. Clinging to an antiquated coverage decision would expose the company to possible litigation, bad publicity, and a hit to its reputation. More fundamentally, the old decision—and the structure that produced that decision—failed the fairness test and the common sense reality check.

    The Bounty Effect prompted Lujan to take a key step—but changing the structure requires much more. If only the CEO can see the forest and use a fairness test, the organization flies blind and the business suffers. In adopting a collaborative structure, the challenge for Presbyterian and for many organizations is empowering people at all levels to consider the big picture, participate in decisions and take action. This requires, among other shifts, changing the recognition and reward system and enabling spontaneous interaction so that all Presbyterian Health System team members share a view of the forest and not just individual trees.

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  • Fixing General Motors and Curing Veterans Affairs

    General Motors chief executive Mary Barra has vowed to change the company’s culture and has testified
    GM Logo1before Congress that GM has taken steps to increase internal transparency and information sharing. This commitment follows a report exposing that GM discouraged raising or sharing safety concerns. The company commissioned the report, because GM failed to recall thousands of cars with defective ignition switches for eleven years.

    Similar calls for culture change have followed the Veterans Health Administration’s wait-for-care and numbers fudging scandal. President Obama has remarked that VA Image the VA needs a culture change so that “bad news gets surfaced quickly.” Not content to wait for culture change, House and Senate negotiators today announced a $17 billion plan that, among other provisions, provides money to lease clinics so that veterans can get treatment outside the VA’s system.

    Culture change emphasizes the result without a way to get there. It’s like telling a poor person to become rich. Culture change has become a common prescription from leaders, pundits and management gurus. The prescription often fails, because the shift originates with executives without detail, discussion or broad buy-in. Meantime, the organizational structure stays the same.

    The Bounty Effect has hit GM and the VA. As I describe in my new book, The Bounty Effect happens when exigent circumstances compel businesses, government and organizations to change their structures from command-and-control to collaborative. The solution for these organizations is to seize the opportunity The Bounty Effect provides and fundamentally change their structures so that people can spontaneously engage one another, share information and participate in decisions regardless of level, role or region. This will cost far less than $17 billion.

    Many organizations, including GM and the VA, still operate with a structure that has barely changed since the Industrial Age.  This obsolete structure based on command-and-control promotes hierarchy and internal competition plus rewards information hoarding, secrecy, and cutting corners. GM and the VA also share a need to go through channels. This inhibits the participation and information flow critical to Information Age organizations.

    Safety concerns apparently never reached GM’s chief executive, nor did problems with scheduling reporting systems apparently flow to former VA Secretary Eric Shinseki.  And both organizations apparently discouraged people from sharing concerns. VA supervisors often retaliated against workers who raised valid complaints, according to a White House report.

    GM chief executive Mary Barra has said that culture change must be leader-led. Barra has also promoted a program called “speak up for safety” plus three GM “core values.” These are “the customer is our compass, relationships matter, and individual excellence is crucial.” But a leader’s words have modest impact without structural change. Yes, GM has added safety investigators, increased safety data mining, and created a vice president of safety position. Nevertheless, none of these actions will reduce information hoarding and internal competition. None of these actions will change GM’s structure from command-and-control to collaborative. 

    When an organization rewards obsolete behavior, change dies on the vine despite a leader’s mandate. If hoarding and hiding information or failing to act on knowledge results in a raise or a promotion, people are unlikely to share information or take action. Pushing safety issues at GM was seemingly no path to promotion. VA managers reportedly kept patient names off the official waiting list, because bonuses depended on concealing information. Recognition and reward systems in obsolete organizational structures often reinforce bad behavior and the status quo regardless of culture change efforts. The same flawed practices and processes that encourage internal competition and information hoarding lead companies to compromise safety and fudge numbers.

    Changing the VA’s structure will enhance transparency and efficiency while saving money rather than costing the $17 billion Congress is authorizing. Changing GM’s structure will ensure that people across the organization share and act on critical information.  And changing the structure of GM and the VA will accomplish what many leaders and pundits are recommending: culture change.

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  • Pope Francis Promotes Collaborative Structure

    The least collaborative organization is changing its structure.

    Which organization? Well, here are some of its characteristics. This global enterprise pays a few people to make decisions while everybody else follows orders. The CEO’s direct reports act like a royal court and compete for face time. Senior leaders often live lavishly and consume conspicuously. Headquarters micromanages satellite offices. Bureaucracy and formality reduce efficiency.  Internal competition runs rampant. The command-and-control organizational structure quashes dissent.

    Sound familiar? This description fits many global corporations and government entities. This particular multinational spent $170 billion in the United States in 2010, according to The Economist. The organization is the Catholic Church and, more specifically, the Roman Curia, the church’s centralized administrative operation.

    Like many corporations, the Catholic Church suffers from an obsolete organizational structure that is compromising value. And like many corporations, reform-minded leaders have tried introducing a new approach. But entrenched interests and a centralized bureaucracy rife with intrigue, fiefdoms, and Machiavellian motivations has frequently derailed change.

    Enter Pope Francis setting the stage for change by wearing a simple white robe and black shoes rather than the regal vestments and ruby shoes of his predecessor. He has washed the feet of inmates and has Pope Francis smallopted to live in a guest quarters rather than the Vatican’s deluxe papal apartments in the Apostolic Palace. There are signs the Pope’s frugal tone is rippling across the Church. In March, the Pope accepted the resignation of Bishop Franz-Peter Tebartz-van Elst of Limburg, Germany who spent the equivalent of $43 million on a new house and office complex.  In April, the Atlanta Archdiocese announced that it would sell Archbishop Wilton Gregory’s $2.2 million mansion.

    Beyond Pope Francis’ rejection of the trappings of office, he is taking steps to adopt a more collaborative structure in the Roman Curia and in the global Catholic Church. The Pope has chosen a “working group” of eight cardinals from outside the Curia to collaborate with him on changing the structure.

    Cardinal Francesco Coccopalmerio heads the Vatican department that writes the church laws that will codify reforms. The Religion News Service quotes Cardinal Coccopalmerio as saying “The big change is the emphasis on collegiality, on collaboration.” Now Pope Francis, Cardinal Cocopalmerio and other new church leaders are focused on breaking down barriers among silos so that information flows around the organization rather than from top to bottom. Cardinal Cocopalmerio has proposed naming a “moderator of the Curia” to identify inefficiencies and cut through red tape.

    Pope Francis participates in meetings without dominating them and embraces broad input. Cardinal Donald Wuerl of Washington, D.C. recently attended one such meeting at the Vatican about appointing new bishops. Typically, popes never attend such meetings. Pope Francis reportedly stayed for three hours. “We’re all sitting around the table, and he comes in and pulls up a chair,” Cardinal Wuerl told Fox News.  At another similar meeting, a senior cardinal asked the Pope what he thought about the topic. “If I told you what I think, you would all agree,” Pope Francis responded according to Cardinal Wuerl. “I want to hear from you what you think.”

    Perhaps most significantly, according to Cardinal Wuerl, the Pope has repeatedly advocated a collaborative process through which “the Holy Spirit can be heard.”  And the Holy Spirit isn’t going to be heard if just one person speaks. “He wants all of us to be speaking with him so at the end of the day he can say this truly was the fruit of the work of the Spirit.”

    Hallelujah. Many corporations in multiple industries including United States government agencies can learn from the Pope’s example. It takes more than window dressing and a desire for change to create value through collaboration.  The only viable approach is changing the organizational structure which, in turn, shifts the culture. My research on collaboration indicates that changing the structure requires seven steps—plan, people, principles, practices, processes, planet and payoff. Pope Francis has demonstrated that making progress through these steps requires that a leader set the stage for change so that others feel comfortable participating.

    In essence, The Bounty Effect has hit the Catholic Church. The Bounty Effect happens when exigent circumstances compel companies, governments and organizations to change their structures from command-and-control to collaborative. For the Catholic Church, exigent circumstances range from sexual abuse scandals to corruption and cronyism at the Vatican. And it’s The Bounty Effect that led to the election of Pope Francis and the structural change now underway.

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