Going Bottom-Up

I’m often invited to speak about the importance of networking and collaboration.  After I’m done, one of the most common questions from I get from the audience is “If your company is not innovative and not collaborative, how can you make the switch?  Can you give us an example of a company that’s successfully made the change?”  I have my favorites, companies I talk about in my book GROUP GENIUS, including IBM and Semco, but I’m always looking for new examples.

So I was delighted to read about the transformation accomplished by ICU Medical, Inc., a manufacturer of medical devices based in San Clemente, California.*  The company was founded by an internist, Dr. George Lopez, in 1984.  Ten years later, the company had almost 100 employees but was still being run largely by Dr. Lopez in a top-down manner.  Lopez tells a story about watching his son play hockey; the other team had one incredibly talented player, but his son’s team was a better team.  Even though none of their players could match the other team’s star, the team collectively was able to defeat him.

Dr. Lopez went back to the office and announced a new leadership style: delegate power to the employees.  He took the radical step I’ve seen at innovative companies like Gore and Semco: he decided to allow the employees to create their own teams.  He decided to allow the company to be managed bottom-up, rather than top-down.  When Ricardo Semler did the same thing at Semco, many of his top executives quit; top people quite at ICU Medical, too.  But Lopez’s strategy worked; the company’s stock has gone up sixfold in the last ten years, and revenue growth last year was 28%.  These self-forming and self-managing teams came up with better ideas than any one manager could have.  To take one example, one of the plant workers thought that the forklifted delivery of parts from the warehouse to a molding site was overly inefficient.  He got some colleagues interested, and they formed a team to re-examine the manufacturing process for the Clave, a top-selling product.  Six months later, they introduced a new process that is saving the company a half-million dollars each year. In the new company culture, teams often are allowed to implement their ideas even if top executives are opposed.  Dr. Lopez, as the CEO, has always retained the right to veto a decision, but years later, he still hasn’t done so.

Through trial and error, ICU Medical has learned several of the lessons that you can find in my book GROUP GENIUS.  Teams need some structure to be effective–a set of core values and rules of engagement, and they always elect a leader.  One group created a 25-page manual with advice about team operations.  Team members are rewarded collectively based on the value their work contributes to the bottom line.

So yes, it is possible for a company to make the difficult transition from top-down to bottom-up. You can do it through trial and error; but far better to save yourself the trouble by learning about the research on groups, collaboration, and innovative organizational design.

* Erin White, “How a Company Made Everyone a Team Player,” Wall Street Journal, Monday August 13, 2007, pages B1, B7.

Are you in a “real team”?

Lots of people work in groups that are not really teams. If you work alone in a cubicle, and meet your fellow team members only in the Monday status meeting, you’re not in a real team. Organizational researchers reserve the term “team” for groups that have high interdependence–each task that you do, sometimes on an hourly basis, is dependent on what the other team members are doing at that same time. Some team tasks need high interdependence, while others don’t. In a recent post at Huffingtonpost.com, I gave a sports example: a basketball team is highly interdependent; a baseball team is low. In an interdependent team, you can’t get anything done without working closely with the other team members. Years of organizational research show that as your team becomes more interdependent, you need more and better communication, and higher cohesion. In my book GROUP GENIUS, I show that real teams need what I call group flow–a state of peak performance that comes from close work, shared commitment to the goals, and pride in the team.

I’ve just read a fascinating academic study* of interdependence in top management teams (TMT)–basically, this is the group of senior executives that has their offices in the executive suite at headquarters and that report directly to the CEO. Professors Murray Barrick, Bret Bradley, and Amy Colbert studied 94 credit unions, with TMT size ranging from 4 to 14 members. They interviewed 517 of the 601 TMT members at these credit unions. To assess TMT effectiveness, they measured the team’s own ratings of their effectiveness, and then they waited one year and measured each firm’s performance using data from the National Credit Union Administration.

Using some fairly sophisticated statistics, they demonstrated that when teams are more interdependent, coherence and communication more strongly predict the team’s performance and the firm’s performance over the following year. But what’s interesting is that there were two different kinds of teams. For teams that were highly interdependent, high coherence and good communication predicted both team performance and firm performance. But for teams that were not interdependent, low coherence and less communication was related to better performance. The top performing teams and firms were those with interdependent teams and high cohesion and communication; but the non-interdependent teams with low cohesion and communication only performed slightly worse.

The key message is that you need a match: between the degree of interdependence on the one hand, and coherence and communication on the other. The least successful teams were those for which these two features were mismatched.

I would add one tip from my own studies of innovation: significant innovations always emerge from interdependent teams, and rarely come from teams low in interdependence. That’s why innovations tend to come from teams that are high in group flow, high in cohesion and with constant communication. Credit unions aren’t generally associated with high innovation; I’d like to see this study repeated, but in an industry that is associated with constant innovation.

*Barrick, M. R., Bradley, B. H., Colbert, A. E. (2007). The moderating role of top management team interdependence: Implications for real teams and working groups. Academy of Management Journal, 50(3), 544-557.

The Starfish and the Spider

I have just finished reading a marvelous book, The Starfish and the Spider by Ori Brafman and Rod A. Beckstrom.   (Full disclosure: Ori Brafman endorsed my new book Group Genius.)  SS (I’ll call it by the title’s initials) is, at root, a book about complex social networks, and the principles and stories in it will be immediately recognizable to scholars who study social networks, complex dynamical systems, and social emergence. But what’s brilliant about this book is that it’s so accessible; not a single academic citation, not even in the notes. Instead, their point is made with fascinating stories, and they make concrete recommendations that managers will easily be able to apply to their own organizations.

The book’s unifying thread is the distinction between two kinds of organizational forms. A spider is a centralized organization, the hierarchical company of the 1950s. If you cut off a spider’s head, it dies. The starfish is a decentralized organization, what scholars would call self-organizing, self-managing, or emergent (although these terms don’t appear in the book). A starfish doesn’t have a head. If you cut off one leg, the starfish grows a new one; and the detached leg can actually grow itself another four legs. I knew that; but what I didn’t know was that a starfish has no central nervous system. As Brafman and Beckstrom report, neuroscientists have discovered that what happens when a starfish starts walking is that the urge to walk begins in one of the five legs, and then somehow the other four legs are convinced to join in (scientists don’t yet know how this happens).

This makes the starfish an apt metaphor for leaderless, self-managed organizations. Their examples include Al Qaeda, Wikipedia, the Apache’s resistance to the Spanish colonists, Alcoholics Anonymous, and how the abolitionist movement piggybacked on the Quaker community’s decentralized organization.  Of course, the Internet is frequently mentioned–not only as a starfish itself, but as a mechanism that makes the formation of starfish much more easy than it was in the past.  These are familiar stories, but SS does a wonderful job of identifying the common themes and translating them into practical advice.

There are a handful of recent books that emphasize leaderless, self-managing organizations, including Leadership Ensemble, written by the director of the Orpheus Chamber Orchestra of New York, a group that performs without a conductor.  Other recent books with similar themes include Swarm Creativity, Democratizing Innovation, and Smart World.  In my own book Group Genius, I refer to starfish organizations as “collaborative webs” and I argue that breakthrough innovations always emerge from these distributed networks, rather than in centralized bureaucracies.

The most wonderful aspect of SS is how incredibly easy it is to read; you can finish it on a short plane ride.  And you’ll remember the take-home message; I counted eight principles of decentralization, including “open systems can easily mutate” (p. 40) and “when attacked, a decentralized organization tends to become even more open and decentralized” (p. 21).  Their final chapters provide advice on both how to fight a starfish (this book has apparently been widely read in the U.S. military to provide tips on countering Al Qaeda) and how business organizations can transform themselves into hybrid organizations that mix the best features of centralization and decentralization (eBay is their example of a hybrid organization that is a centralized company, but one that decentralizes the customer experience, for example with its user rating system).  What they call the “sweet spot” is the perfect blend of centralization and decentralization, given your company’s competitive environment and customers.

I’m intrigued by this book because it contains stories I already know, and has unifying themes I’m deeply familiar with, and yet I still enjoyed reading it and felt like I learned something new.

You Need a Vacation

Like many of you, I just returned from a summer vacation, but one that was shorter than I would have liked: five days and four nights. But I’m lucky; many of my friends didn’t take any vacation this summer.  Research shows that Americans work more hours than anyone on the planet.  In 2004, the average American worked 1,824 hours. Compare that to the Dutch, who worked 1,357 hours apiece, or the Swedish, at 1,585 hours. Americans work more annual hours even than the Japanese (1,789). Each year, thirty percent of Americans fail to use even their measly ten vacation days. (see note 1)

This is a problem, because creativity researchers have found that the best new ideas come to people when they step away from work and do something completely different. In my book, GROUP GENIUS, I tell a story about how the CEO of Citibank, John Reed, in 1976 had a vision for a new kind of bank while vacationing on a beach in the Caribbean. If you work all year round and rollover your vacation days, you’re not realizing your full creative potential.

You can’t use this research to argue you should live on the beach!  The insights don’t come if you haven’t been working hard before leaving town.  Creativity researchers have found that the most creative people invest long hours in their chosen field. It’s not the sheer total number of hours, but the way that those hours are used. Top creators engage in deliberate practice: concentrating fully on what they’re doing at the moment, constantly working to become better. Even just three hours a day, over ten years, adds up to the 10,000 hours total that researchers have shown is the minimum required for top creative performance. (note 2)

But here’s a puzzle: if more vacation days made people more creative, then Europe would be leaping far ahead of the U.S. in innovation.  But just the opposite seems to be happening, so clearly, more vacation isn’t a panacea.  (Europe’s lack of innovation is due to other structural features of those economies, but that’s a story for another post.)  The U.S. would be a more innovative economy if Americans took longer vacations.  You’ll be more likely to have good new ideas if you do.  (Of course, only if you’ve been working hard with “deliberate practice” while you’re still on the job.) Every summer, take at least a two-week vacation–and leave the Blackberry and the laptop back at home.  And while you’re at work, try to take at least 15 minutes each afternoon to let your mind wander.  It’s worth it, because you could have that breakthrough idea that pays for itself later.

note 1. My figures are taken from a 2006 article by Gornick, Heron, and Eisenbrey: http://www.sharedprosperity.org/bp189.html

note 2. For details, read any of the papers by K. Anders Ericsson, such as: Ericsson, K. A., Krampe, R. T., & Tesch-Römer, C. (1993). The role of deliberate practice in the acquisition of expert performance. Psychological Review, 100(3), 273-305.