Now I know the line we have been using all along: that I am only being compensated to keep up with others in my position. Enough of this complicity in behavior we all know to be outrageous. Frankly, I don’t care if his is bigger than mine. My salary should not be some kind of external trophy. It is above all an internal signal, to tell our people what we really think about this place. Let’s stop pretending that CEOs form some kind of elite club. It is leadership we are talking about here, not status.
To be perfectly honest, I am so busy running this company that I hardly have the time to spend all this money I make, let alone to so with a conspicuousness that demonstrates how much it is. My family and I are well looked after, I assure you, even at the income level I propose. Let me concentrate on trying to manage this place as it should be managed.
I trust you have read this letter as an investment in our future. Because if our company has no future in these terms, then neither does our society.
Sincerely,
Chief Executive Officer
Source: Henry Mintzberg ‘There’s no compensation for hypocrisy’, Financial Times, October 29 1999.
Here’s an Idea: Let Everyone Have Ideas
by William C. Taylor
Like many top executives, James R. Lavoie and Joseph M. Marino keep a close eye on the stock market. But the two men, co-founders of Rite-Solutions, a software company that builds advanced – and highly classified – command-and-control systems for the Navy, don’t worry much about Nasdaq or the New York Stock Exchange.
Instead, they focus on an internal market where any employee can propose that the company acquire a new technology, enter a new business or make an efficiency improvement. These proposals become stocks, complete with ticker symbols, discussion lists and e-mail alerts. Employees buy or sell the stocks, and prices change to reflect the sentiments of the company’s engineers, computer scientists and project managers – as well as its marketers, accountants and even the receptionist.
‘We’re the founders, but we’re far from the smartest people here,’ Mr. Lavoie, the chief executive, said during an interview at Rite-Solutions’ headquarters outside Newport, R.I. ‘At most companies, especially technology companies, the most brilliant insights tend to come from people other than senior management. So we created a marketplace to harvest collective genius.’
That’s a refreshing dose of humility from a successful C.E.O. with decades of experience in his field. (Mr. Lavoie, 59, is a Vietnam War veteran and an accomplished engineer who has devoted his career to military-oriented technologies.)
Most companies operate under the assumption that big ideas come from a few big brains: the inspired founder, the eccentric inventor, the visionary boss. But there’s a fine line between individual genius and know-it-all arrogance. What happens when rivals become so numerous, when technologies move so quickly, that no corporate honcho can think of everything? Then it’s time to invent a less top-down approach to innovation, to make it everybody’s business to come up with great ideas.
That’s a key lesson behind the rise of open source technology, most notably Linux. A ragtag army of programmers organized into groups, wrote computer code, made the code available for anyone to revise and, by competing and cooperating in a global community, reshaped the market for software. The brilliance of Linux as a model of innovation is that it is powered by the grass-roots brilliance of the thousands of programmers who created it.
According to Tim O’Reilly, the founder and chief executive of O’Reilly Media, the computer book publisher, and an evangelist for open source technologies, creativity is no longer about which companies have the most visionary executives, but who has the most compelling ‘architecture of participation’. That is, which companies make it easy, interesting and rewarding for a wide range of contributors to offer ideas, solve problems and improve products?
At Rite-Solutions, the architecture of participation is both businesslike and playful. Fifty-five stocks are listed on the company’s internal market, which is called Mutual Fun. Each stock comes with a detailed description – called an expect-us, as opposed to a prospectus – and begins trading at a price of $10. Every employee gets $10,000 in ‘opinion money’ to allocate among the offerings, and employees signal their enthusiasm by investing in a stock and, better yet, volunteering to work on the project. Volunteers share in the proceeds, in the form of real money, if the stock becomes a product or delivers savings.
Mr. Marino, 57, president of Rite-Solutions, says the market, which began in January 2005, has already paid big dividends. One of the earliest stocks was a proposal to apply three-dimensional visualization technology, akin to video games, to help sailors and domestic-security personnel practice making decisions in emergency situations. Initially, Mr. Marino was unenthusiastic about the idea – ‘I’m not a joystick jockey’ – but support among employees was overwhelming. Today, that product line, called Rite-View, accounts for 30 percent of total sales.
‘Would this have happened if it were just up to the guys at the top?’ Mr. Marino asked. ‘Absolutely not. But we could not ignore the fact that so many people were rallying around the idea. This system removes the terrible burden of us always having to be right.’
Another virtue of the stock market, Mr. Lavoie added, is that it finds good ideas from unlikely sources. Among Rite-Solutions’ core technologies are pattern-recognition algorithms used in military applications, as well as for electronic gambling systems at casinos, a big market for the company. A member of the administrative staff, with no technical expertise, thought that this technology might also be used in educational settings, to create an entertaining way for students to learn history or math.
She started a stock called Win/Play/Learn, which attracted a rush of investment from engineers eager to turn her idea into a product. Their enthusiasm led to meetings with Hasbro, up the road in Pawtucket, and Rite-Solutions won a contract to help it build its VuGo multimedia system, introduced last Christmas.
Mr. Lavoie called this innovation an example of the ‘quiet genius’ that goes untapped inside most organizations. ‘We would have never connected those dots,’ he said. ‘But one employee floated an idea, lots of employees got passionate about it and that led to a new line of business.’
The next frontier is to tap the quiet genius that exists outside organizations – to attract innovations from people who are prepared to work with a company, even if they don’t work for it. An intriguing case in point is InnoCentive, a virtual research and development lab through which major corporations invite scientists and engineers worldwide to contribute ideas and solve problems they haven’t been able to crack themselves.
InnoCentive, based in Andover, Mass., is literally a marketplace of ideas. It has signed up more than 30 blue-chip companies, including Procter & Gamble, Boeing and DuPont, whose research labs are groaning under the weight of unsolved problems and unfinished projects. It has also signed up more than 90,000 biologists, chemists and other professionals from more than 175 countries. These ‘solvers’ compete to meet thorny technical challenges posted by ‘seeker’ companies. Each challenge has a detailed scientific description, a deadline and an award, which can run as high as $100,000.
‘We are talking about the democratization of science,’ said Alpheus Bingham, who spent 28 years as a scientist and senior research executive at Eli Lilly & Company before becoming the president and chief executive of InnoCentive. ‘What happens when you open your company to thousands and thousands of minds, each of them with a totally different set of life experiences?’
InnoCentive, founded as an independent start-up by Lilly in 2001, has an impressive record. It can point to a long list of valuable scientific ideas that have arrived, with surprising speed, from faraway places. In addition to the United States, the top countries for solvers are China, India and Russia.
Last month, InnoCentive attracted a $9 million infusion of venture capital to accelerate its growth. ‘There is a “collective mind” out there,’ D
r. Bingham said. ‘The question for companies is, what fraction of it can you access?’
That remains an unanswered question at many companies, whose leaders continue to rely on their own brainpower as the key source of ideas. But there’s evidence that more and more top executives are recognizing the limits of their individual genius.
Back at Rite-Solutions, for example, one of the most valuable stocks on Mutual Fun is the stock market itself. So many executives from other companies have asked to study the system that a team championed the idea of licensing it as a product – another unexpected opportunity.
‘There’s nothing wrong with experience,’ said Mr. Marino, the company’s president. ‘The problem is when experience gets in the way of innovation. As founders, the one thing we know is that we don’t know all the answers.’
Source: ‘Here’s an idea: let everyone have ideas’ by William C. Taylor, New York Times, © 26 March 2006. The New York Times. All rights reserved. Used by permission and protected by the copyright laws of the United States. The printing, copying and redistribution, or transmission of the material without express written permission is prohibited.
Managing quietly
by Henry Mintzberg
A prominent business magazine hires a journalist to write about the chief executive of a major corporation. The man has been at the helm for several years and is considered highly effective. The journalist submits an excellent piece, capturing the very spirit of the man’s managerial style. The magazine rejects it – not exciting enough, no hype. Yet the company has just broken profit records for its industry.
Not far away, another major corporation is undergoing dramatic transformation. Change is everywhere, the place is teeming with consultants, people are being released in huge numbers. The chief executive has been all over the business press. Suddenly he is fired: the board considers the turnaround a failure.
Go back five, ten, twenty or more years and read the business press – about John Scully at Apple, James Robinson at American Express, Robert McNamara at the Defense Department. Heroes of American management all … for a time. Then consider this proposition: maybe really good management is boring. Maybe the press is the problem, alongside the so-called gurus, since they are the ones who personalize success and deify the leaders (before they defile them). After all, corporations are large and complicated; it takes a lot of effort to find out what has really been going on. It is much easier to assume that the great one did it all. Makes for better stories.
If you want to test this proposition, try Switzerland. It is a well-run country. No arounds. Ask the next Swiss you meet the name of the head of state. Don’t be surprised she does not know: the seven people who run the country sit around a table, rotating position on an annual basis …
The problem is the present
… Today, today, always today. This is the voice of the obsessively analytic mind, shouting into today’s wind.
But if you want the imagination to see the future, then you’d better have the wisdom to appreciate the past. An obsession with the present – with what’s ‘hot’ and what’s ‘in’ – may be dazzling, but all that does is blind everyone to the reality. Show me a chief executive who ignores yesterday, who favors the new outsider over the experienced insider, the quick fix over steady progress, and I’ll show you a chief executive who is destroying an organization.
To ‘turn around’ is to end up facing the same way. Maybe that is the problem: all this turning around. Might not the white knight of management be the black hole of organizations? What good is the great leader if everything collapses when he or she leaves? Perhaps good companies don’t need to be turned around at all because they are not constantly being thrust into crises by leaders who have to make their marks today. Maybe these companies are simply managed quietly.
Managing quietly
What has been the greatest advance ever in health care? Not the dramatic discoveries of penicillin or insulin, it has been argued, but simply cleaning up the water supply. Perhaps, then, it is time to clean up our organizations, as well as our thinking. In this spirit I offer a few thoughts about some of the quiet words of managing.
Inspiring: Quiet managers don’t empower their people – ‘empowerment’ is taken for granted. They inspire them. They create the conditions that foster openness and release energy. The queen bee, for example, does not make decisions; she just emits a chemical substance that holds the whole social system together. In human hives, that is called culture.
Quiet managers strengthen the cultural bonds between people, not by treating them as detachable ‘human resources’ (probably the most offensive term ever coined in management, at least until ‘human capital’ came along), but as respected members of a cohesive social system. When people are trusted, they do not have to be empowered.
The queen bee does not take credit for the worker bees’ doing their jobs effectively. She just does her job effectively, so that they can do theirs. There are no bonuses for the queen bee beyond what she needs.
Next time you hear a chief executive go on about teamwork, about how ‘we’ did it by all pulling together, ask who among the ‘we’ is getting what kind of bonus. When you hear that chief boasting about taking the long view, ask how those bonuses are calculated. If cooperation and foresight are so important, why have these few been cashing in on generous stock options? Do we take the money back when the price plummets? Isn’t it time to recognize this kind of executive compensation for what it is: a form of corruption, not only of our institutions, but of our societies as democratic systems?
Caring: Quiet managers care for their organizations; they do not try to slice away problems as surgeons do. They spend more time preventing problems than fixing them, because they know enough to know when and how to intervene. In a sense, this is more like homeopathic medicine: the prescription of small doses to stimulate the system to fix itself. Better still, it is like the best of nursing: gentle care that, in itself, becomes cure.
Infusing: ‘If you want to know what problems we have encountered over the years,’ someone from a major airline once told me, ‘just look at our headquarters units. Every time we have a problem, we create a new unit to deal with it.’ That is management by intrusion. Stick in someone or something to fix it. Ignore everyone and everything else: that is the past. What can the newly arrived chief know about the past, anyway? Besides, the stock analysts and magazine reporters don’t have the time to allow the new chief to find out.
Quiet managing is about infusion, change that seeps in slowly, steadily, profoundly. Rather than having change thrust upon them in dramatic, superficial episodes, everyone takes responsibility for making sure that serious changes take hold.
This does not mean changing everything all the time – which is just another way of saying anarchy. It means always changing some things while holding most others steady. Call this natural continuous improvement, if you like. The trick, of course, is to know what to change when. And to achieve that there is no substitute for a leadership with an intimate understanding of the organization working with a workforce that is respected and trusted. That way, when people leave, including the leaders, progress continues.
Initiating: Moses supplies our image of the strategy process: walking down the mountain carrying the word from on high to the waiting faithful. Redemption from the heavens. Of course, there are too many people to read the tablets, so the leaders have to shout these ‘formulations’ to all these ‘implementors’. All so very neat.
Except that life in the valleys below is rich and complicated. And that is what strategy has to be about – not the neat abstractions of the executive suite, but the messy patterns of daily life. So long as loud management stays up there disconnected, it can shout down all the strategies it likes: they will never work.
Quiet management is … about rolling up sleeves and finding out what is going on. And it is not parachuted down on the organization; it rises up from the base. But it never leaves that base. It f
unctions ‘on the floor’, where the knowledge for strategy making lies. Such management blends into the daily life of the corporation, so that all sorts of people with their feet planted firmly on the ground can pursue exciting initiatives. Then managers who are in touch with them can champion these initiatives and so stimulate the process by which strategies evolve.
Put differently, the manager is not the organization any more than [a painting of a pipe is a pipe] … A healthy organization does not have to leap from one hero to another; it is a collective social system that naturally survives changes in leadership. If you want to judge the leader, look at the organization ten years later.
Beyond quiet
Quiet management is about thoughtfulness rooted in experience. Words like wisdom, trust, dedication, and judgment apply. Leadership works because it is legitimate, meaning that it is an integral part of the organization and so has the respect of everyone there. Tomorrow is appreciated because yesterday is honored. That makes today a pleasure.
Indeed, the best managing of all may well be silent. That way people can say, ‘We did it ourselves.’ Because we did.
Source: Reprinted with deletions from Henry Mintzberg, ‘Managing quietly’, Leader to Leader, Spring 1999, 24–30.
Managing Without Managers
by Ricardo Semler
In Brazil, where paternalism and the family business fiefdom still flourish, I am president of a manufacturing company that treats its 800 employees like responsible adults. Most of them – including factory workers – set their own working hours. All have access to the company books. The vast majority vote on many important corporate decisions. Everyone gets paid by the month, regardless of job description, and more than 150 of our management people set their own salaries and bonuses …
Management- It's Not What You Think! Page 15