How Great Leaders Think

by Lee G Bolman

  Whenever a new team forms or an old team underperforms, examine the team’s task and structure. If you try to play baseball with a structure better adapted to basketball, members will waste time in unnecessary meetings and become frustrated as they trip over one another. Conversely, if the team uses a baseball structure to play basketball, lack of teamwork will doom its efforts, and the whole will be much less than the sum of the parts.

  Leadership becomes even more critical in self-managing teams, which many see as the structure of the future. Such teams plan, assign tasks and roles, schedule, make decisions, and solve problems on their own. The model is becoming more and more common as experience and research both suggest that self-directed teams often produce better results and higher morale than groups operating under more traditional top-down control.9 But Lord of the Flies reminds us that there is an important difference between “self-managing” and “leaderless.” Self-managing teams usually need help getting started, and work best when they have a clear sense of what game they’re playing and how success is defined. More and more well-known firms—such as Microsoft, Boeing, Google, W. L. Gore, Southwest Airlines, Harley-Davidson, and Whole Foods—capitalize on the benefits of self-directed teams. A workable structure helps ensure that these positive paybacks will be realized, and structurally attuned leaders are needed to make sure a team is aligned to compete in its game.

  CONCLUSION

  A designated leader is no guarantee that a team will be well led. An effective team requires leadership that aligns the group’s structure with the group’s tasks and circumstances. If the official leader doesn’t bring the structural awareness or leadership skills that the team calls for, someone else must step in to ensure that the team stays on track and gets where it needs to go. Structural leaders help groups get clear about why they’re there, who is in charge, who is supposed to do what, and how team members can work with one another to achieve the group’s purpose. When authority is challenged, they find ways to share leadership so that team members can work together instead of letting conflict undermine team performance.

  NOTES

  1. One of the best accounts of this widely covered story is Franklin, J. 33 Men. New York: Putnam, 2011.

  2. Ibid., p. 96.

  3. Keidel, R. W. “Baseball, Football and Basketball: Models for Business.” Organizational Dynamics, 1984 (Winter), p. 8.

  4. Quoted in Keidel, “Baseball,” pp. 14–15.

  5. Ibid., p. 9.

  6. Ibid., p. 15.

  7. Ibid., p. 4.

  8. Lubans, J. “More Than a Game.” Working draft, Mar. 20, 2001. http://www.lubans.org/morethanagame.html.

  9. Cohen, S. G., and Ledford, G. E., Jr. “The Effectiveness of Self-Managing Teams: A Quasi-Experiment.” Human Relations, 1994, 47, 13–43; Emery, C. R., and Fredendall, L. D. “The Effect of Teams on Firm Profitability and Customer Satisfaction.” Journal of Service Research, 2002, 4, 217–229.

  Part 3

  Human Resource Leadership

  Great human resource leaders see people as the key to success. They apply a consistent set of people-friendly principles:

  They communicate a strong belief in people.

  They develop a philosophy and practices to put their belief in action.

  They’re visible and accessible.

  They empower others.

  Chapter 4

  Leading People

  NPR host Adam Davidson and his wife went furniture shopping in 2008 at the Ikea hyperstore in Brooklyn, New York. They hated it. It was an enormous, confusing labyrinth, and they couldn’t get any help finding their way around. Angry and frustrated, they vowed never to return. Five years later, the couple relented and gave Ikea a second chance. They were startled at the difference: help was readily available from pleasant, knowledgeable staff. What happened? Ikea had reframed by adopting a new approach to managing people.

  Much of the business world views frontline workers as a necessary evil, a cost to be minimized by keeping head count and wages as low as possible. But retailers such as Costco, Trader Joe’s, Wegman’s, and Mercadona in Spain have found that they get much better results by investing in people. “Costco pays its workers about $21 an hour; Wal-Mart is just about $13. Yet Costco’s stock performance has thoroughly walloped Wal-Mart’s for a decade.”1

  Structural thinking and leadership are powerful and vital, but by themselves they are rarely enough. Legions of managers have built a career or a business using structural thinking, only to crash into the limits of a single frame. Their career stalls, or their business goes downhill. They work even harder and do even more of what worked in the past, but they no longer get the results they seek. They wonder what’s gone wrong and why success is eluding them. Learning to understand people as well as structure would expand their leadership options and improve the odds of success.

  These ideas are not new. In the early nineteenth century, a Scotsman, Robert Owen, made a fortune in the textile business by providing better wages and working conditions. He took children off the factory floor and put them in school. He was criticized as a wild radical who would harm the people he hoped to help. A century later, when Henry Ford announced in 1914 that he was going to shorten the workday to eight hours and double the wages of his blue-collar workers from $2.50 to $5.00 per day, he came under heavy criticism from the business community. The Wall Street Journal opined that he was “committing economic blunders, if not crimes.”2 The Journal got it wrong. Ford’s profits doubled over the next two years as productivity soared and employee turnover plunged. Ford later said that the $5 per day was the best cost-cutting move he ever made.3

  Fast-forward another century to Jim Sinegal, cofounder and longtime CEO of retail giant Costco. He put in place many of the structural elements that fueled Costco’s growth, but insisted that treating people well was at the heart of the company’s success. Wall Street analysts sometimes complained that he cheated shareholders by charging customers too little and paying employees too much. An unfazed Sinegal replied wryly, “You have to take the shit with the sugar.”4 He could afford to stick to his beliefs—his company was more successful and profitable than competitors who hewed more closely to the analysts’ advice.

  Organizations need people for their energy, effort, and talent. Individuals need organizations for the many rewards they offer. But the needs of the individual and the organization don’t always line up very well. When the fit between people and organizations is poor, one or both suffer. Individuals may feel underpaid, unappreciated, or disrespected. Organizations sputter because individuals give less than their best or work against organizational purposes. Douglas McGregor argued some fifty years ago that the central task of leadership is to ensure alignment between people and organizations so that individuals find satisfying, meaningful work, and organizations get the talent and energy they need to succeed.5

  In this chapter, we contrast traditional treat-’em-like-dirt strategies with more enlightened approaches for managing people. We’ll dig into a story of a company in Brazil that dramatically demonstrates the benefits of creative and progressive strategies for managing people. Then we’ll transition to a well-known American clothing retailer, Men’s Wearhouse, to see how an enlightened approach to people management can build a remarkably successful business in a tough environment.

  TREAT ‘EM LIKE DIRT

  For most of management history, standard practice has been to treat employees like pawns to be moved where needed and sacrificed when necessary. As one former plant manager put it, “The way you treat people would be awful. You know, the people, they’re nothin’, they’re just a number. You move ’em in and out. If they don’t do the job, you fire ’em. If they get hurt, or complain about safety, you put a ‘bulls-eye’ on them. They’re not gonna have a job in the near future.”6

  That attitude explains why so much of the public thinks of bosses as selfish, heartless tyrants. In an era of high unemployment and economic distress, elites in every sector are suspec
t, and the idea of sacrificing people for profits persists as a popular view of the workplace. One of America’s favorite cartoon strips is Dilbert, whose white-collar, cubicle-bound hero wanders mindlessly through an office landscape of bureaucratic inertia, corporate doublespeak, and callous, incompetent bosses. The popularity of such images tells us that organizations often manage people badly. They turn employees into sullen, undermotivated loafers or rebels who couldn’t care less about the quantity or the quality of what they produce. The human resource frame offers a much more positive and productive way to think about people.

  SEMCO: INVESTING IN PEOPLE

  A father-son tale from Brazil tells of a young chief executive who shifted from structural to human resource beliefs, saving his health and his company’s future in the process. The father, Curt Semler, was born in Austria in 1912 and trained as an engineer before he moved to Brazil in the 1950s. There he built Semco, a successful manufacturing business. The elder Semler ran his company like a good Austrian engineer—with a strong emphasis on efficiency, command, and control. By 1982, he faced a painful dilemma. Sales had plummeted, and the business was struggling amid a downturn in the Brazilian economy.

  Semler’s dream was to leave his business to his only son, Ricardo. So he brought Ricardo into the company and put him in an adjacent office. Ricardo was smart, educated, and hard working and, to his father’s relief, had given up his dream of becoming a rock guitarist. But Ricardo was still young and rebellious, and he chafed under his father’s tight leash. The two of them fought constantly, and Ricardo finally said he’d had enough—he was going to quit Semco and go off on his own.

  So what do you do if you’re the elder Semler? Do you wish your son well as he storms out the door? Or do the one thing that might convince him to stay: turn your business over to a twenty-four-year-old with little management experience who will probably take the business in some wild new directions? Faced with those painful options, Curt Semler reluctantly turned over control of the business to Ricardo, telling him: “Better make your mistakes while I’m still alive.” What followed was one of the more surprising and dramatic stories in business history.

  Young, inexperienced, and fearless, Ricardo grabbed the reins with gusto. Working feverishly, he fired most of his father’s top managers, diversified into new businesses, and pulled the company out of a cash crunch. His first moves were structural. He installed elaborate information and control systems and brought in tough executives to enforce them. It worked—to a point. The business results improved, but at a personal cost: Ricardo was killing himself. His many health issues included fainting spells, gastritis, skin rashes, and a chronic sore throat. When a doctor told him that he was physically fine but his stress levels were off the charts, Ricardo decided he had to change his lifestyle.

  Until then, Ricardo had retained and reinforced much of the top-down, bureaucratic approach developed on his father’s watch. Now he looked for ways to work less and delegate more. He read books, consulted peers, and experimented with assorted management fads of the time. Nothing seemed to help, but he kept looking. The company seemed to be well organized and disciplined, but he wasn’t getting the performance he wanted, and Semco did not feel like a happy place. He decided to go for broke, launching his company on a high-risk journey into the unknown. Along this new path, Ricardo and his company rediscovered and adapted many of the principles for leading people used by progressive leaders and organizations around the globe (summarized in Exhibit 4.1). Much of what he tried was not new, but few companies had gone as far—or as fast.

  Exhibit 4.1. Principles for Leading People

  Human Resource Principle Semco’s Approach

  Develop a philosophy and

  values Experiment and learn from experience

  Instill values of trust, transparency,

  and democracy

  Hire the right people Know what you want

  Be selective

  Keep them around Promote from within

  Protect jobs

  Share the wealth

  Invest in their future Provide learning opportunities

  Rotate jobs

  Sustain power to the people Open the books

  Foster egalitarianism

  Encourage self-managing teams and business units

  Redesign work

  Make decisions democratically

  Promote diversity Initiate Semco’s Woman project

  Developing a Philosophy and Values

  When Ricardo began his quest, he had no idea where he was going or how he would eventually get there. He embarked on a series of experiments and gradually homed in on three key values—trust, transparency, and democracy. These sound simple enough, but Semco took them to heart, with dramatic results.

  Trust was a central theme when Ricardo decided to eliminate some of the most “visible signs of corporate oppression.”7 His first step was simple: ending the standard practice of searching employees as they left the plant. Managers objected: frisking workers was the only way to prevent theft. The union complained: searches were the workers’ best defense against false accusations. Despite the opposition, Ricardo replaced searches with signs politely asking workers not to exit with anything that didn’t belong to them. To Ricardo, whether theft decreased or not really didn’t matter. He wanted employees to get the message, “We trust you.”

  Over time, Ricardo evolved an unorthodox philosophy of management:8

  The key to management is to get rid of all the managers.

  The key to getting work done on time is to stop wearing a watch.

  The best way to invest corporate profits is to give them to the employees.

  The purpose of work is not to make money. The purpose of work is to make the employees, whether working stiffs or top executives, feel good about life.

  Hiring the Right People

  In studying Semco managers who failed, Ricardo realized that they often were technically capable but lacking in leadership talent. In response, he developed a system in which subordinates rated their bosses on both technical ability and leadership. Those with low scores either improved or were fired. Ricardo applied the same approach to hiring new managers. People who would be working with a new manager made the hiring decision, using ratings of both technical qualifications and leadership. Job applicants went through multiple rounds of interviews, fully aware that their fate depended on the judgments of their prospective colleagues and subordinates. The process was grueling, but it helped ensure that new hires fit with Semco’s distinctive ways and enjoyed the support of their new colleagues.

  Keeping Them

  To attract the right people, progressive companies reward generously and share the business profits. To retain loyal and hardworking employees, they protect jobs and promote from within. Semco shared the wealth through an employee-driven profit-sharing system. The company put about a quarter of its profits into a profit-sharing pool, and workers hammered out a process for distribution. Each unit got a share based on its profits for the year, and everyone in the unit got the same amount.

  One of Semco’s compensation experiments was “name your price,” allowing people to set their own pay. The company gave people data about what they could make elsewhere and what Semco paid for similar jobs in the company. Many observers might wonder: Why wouldn’t people ask for more than they were worth? Because at Semco, colleagues would notice, and “gougers” would price themselves out of a job.

  Semco also kept retention rates high by promoting from within and protecting jobs. In some jobs and industries, turnover can run over 100 percent a year. This gets expensive because of the high cost of hiring and training replacements and because newcomers are prone to confusion and error. Semco rarely fires people, and annual turnover is less than 1 percent.9 The company posts open positions internally and gives first preference to current employees. The company searches outside only if no qualified insider applies. When it faces downturns, Semco has asked employees to look for creative alte
rnatives to layoffs. During one sustained economic slump, workers voted to close a plant, over the management’s objections. Executives wanted to avoid layoffs, but the workers had studied the numbers and concluded that Semco couldn’t afford to keep the plant open. When Semco did lay off workers, the company had a program to help them start businesses selling goods or services to Semco or other customers. White- and blue-collar workers formed more than two dozen companies providing everything from legal services to software to contract manufacturing.

  Investing in People

  Organizations are sometimes reluctant to invest in developing their human capital. The costs of training are immediate and easy to measure, whereas the benefits are more elusive and long term. Semco understands that undertrained workers cause harm by delivering shoddy quality, poor service, and costly mistakes.

  The company invests in employees in a variety of creative ways. One is a job rotation program in which about 20 to 25 percent of managers change jobs in any given year. Another program, called “Lost in Space,” allows young recruits to meander around the company for a year, working in any job or unit that interests them. At the end of the year, any unit can offer them a job. Another program, “Rush Hour MBA,” offered classes at 6 p.m. so that employees could take a class instead of battling the rush-hour crush. After class, they could enjoy a more relaxed drive home.