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.