Interview by: Alistair Craven
Harvard MBA Lowell Bryan is Director (Senior Partner) of McKinsey & Company. Over the past 30 years, he has spoken and written extensively on strategy, organization, and financial services.
Bryan has been a frequent contributor to the Wall Street Journal editorial page, has had articles published in numerous periodicals, including the Harvard Business Review and the McKinsey Quarterly, and has authored or co-authored several books.
Claudia Joyce is a Principal of McKinsey & Company and a core member of the Strategy and Organization practices.
Her work has been published on McKinsey's Knowledge Web and in the McKinsey Quarterly.
Their new book Mobilizing Minds aims to deliver a new, forward thinking management strategy for creating wealth and uncovering complexity in today’s high-growth economy. The authors take a bold stand: companies need to put the same energy and focus into designing their organizations as they have devoted to the design of new products, processes, or entry into new markets.
The ideas in the book are based on years of analysis of the world’s highest performing firms and concentrate on a new organizational model with which to generate tens of thousands of dollars of profit per employee by improving how firms mobilize talent, improve worker satisfaction and leverage intangible assets.
Hello and welcome. What is the message behind your concept of “mobilizing minds?”
Lowell L. Bryan & Claudia I. Joyce:
The core message of Mobilizing Minds is that corporate leaders can consciously design and build organizations that better nurture talent and knowledge, leading to substantial increases in returns.
Most companies were designed for the industrial age of the past century, when capital was the scarce resource, interaction costs where high and hierarchical authority and vertically integrated structures were the keys to efficient operation. Today superior performance flows from the ability to fit these structures into the present century’s very different sources of wealth creation. By remaking the organization to mobilize the mind power of the workforce and tap into its underutilized talents, knowledge, relationships and skills, companies can both help their people to undertake more rewarding, productive work and create sources of significant new wealth at relatively low risk.
You point out that today’s technology, while an enabler, can also add massive and unnecessary complexity to a company. Why is this so?
Lowell L. Bryan & Claudia I. Joyce:
For a while in the 1990s, we thought that digital technology would enable us to overcome our communication challenges – technology would provide new ways that organizations of increasing scale and scope could be managed. It was believed that technology would efficiently and effectively facilitate the constant connection of professionals and managers. It is true that today’s technology has led to a substantial fall in interaction costs, and as such has enabled professionals and managers at well managed companies to interact more cost effectively with one another. While digital technology has enabled this interaction (e.g., widespread use of e-mail to simultaneously communicate with multiple parties), the decrease in interaction costs has lead to an explosion of communications volume.
The problem is that this explosion in volume has resulted in a lot of extraneous communication that has wound up wasting energy and creating busy-work. A recent McKinsey survey of global executives underscored this point, highlighting that indeed more time is spent time in interactions (64 per cent felt the volume of e-mails, voicemails and meetings had significantly increased over the last five years), the volume of communications had become unmanageable (25 per cent of respondents) and ineffective (40 per cent). Therefore, in our view, it is less that today’s technology adds complexity as it is that technology reinforces, rather than resolves, the inherent complexity of today’s companies.
You talk about organization design as a centerpiece of corporate strategy. Can you elaborate on this?
Lowell L. Bryan & Claudia I. Joyce:
We believe the time has come for corporate leaders to view organizational design as a strategic imperative and high-return, low-risk opportunity for investment. The classic definition of “strategy” is a plan for actions to be taken with which to gain competitive advantage. Using this definition, we believe corporate leaders need to invest more energy than they have invested in the past in taking actions needed to create the strategic organizational capabilities that will enable their companies to thrive. We are convinced that in the digital age, if you want to create wealth, there is almost no better use of the CEO’s time and energy than making the organization work better. So if corporate strategy is about preparing the corporation to gain competitive advantage, designing a more effective organization is certainly central to this endeavour.
You espouse an organizational structure along the lines of a military model with a more direct chain of command. What are the benefits of this approach?
Lowell L. Bryan & Claudia I. Joyce:
We believe that nearly all organizations are replete with opportunities to streamline and simplify the use of hierarchical authority to remove unproductive complexities – while simultaneously increasing that authority’s effectiveness.
The approach we advocate involves redesigning a company’s hierarchical order, thereby improving management’s ability to use hierarchical authority to power a company’s performance. The effort centres on defining a “backbone” or central management structure; and developing general line management or clear decision authority and accountability for operating performance. By a “backbone line structure” we mean a chain of command that puts authority to make tactical decisions close to the front lines. By “frontline manager”, we mean someone with the authority to set aspirations, define tasks and roles, assign people and hold them accountable, mobilize resources, and make decisions for frontline workers.
We have used military analogies to illustrate both aspects of the model. In terms of a backbone line structure, in the military, there is no ambiguity about who a soldier’s commanding officer is, we believe the corporations should move more toward this model, than the traditional multiple bosses matrix approach. We also believe that the frontline manager should have more authority and accountability to make decisions at the front line, as do front-line military officers.
Many organizations will identify with the “silo mentality” you refer to in the book. You encourage leaders to eliminate silos, but can this really be achieved in practice? Isn’t it fair to say that an element of competition between departments or functions will always exist?
Lowell L. Bryan & Claudia I. Joyce:
Your question raises the need to make an important clarification. We are not encouraging leaders to eliminate silos, rather to develop ways to systematically cross silo walls so that departments, functions or business units can find ways to collaborate with one another. We believe that individual businesses should be under pressure to perform, and peer based competition helps drive performance. However, this should not come at the expense of collaboration between the units.
“To let employees unlock knowledge, some companies have relied exclusively on big investments in document management systems, shared servers and other technology solutions. While technology is certainly an important component of knowledge management, the solution must also focus on the supply side.”
We believe that by incorporating a number of “one company” governance approaches outlined in the book, such as parallel structure, partnership at the top, formal networks, talent markets and knowledge markets, companies can effectively drive collaboration across silos, limiting the destructive aspects of silo mentality.
You state that today’s companies need to be re-designed to remove unproductive complexity. Can you give us some indication of exactly how big a job this is for a typical corporation as studied in your research?
Lowell L. Bryan & Claudia I. Joyce:
Designing and successfully completing major organizational change initiatives is difficult and requires enormous commitment, focus and patience from top leadership. Major organizational change is usually a multi-year journey.
We recommend beginning with a “master plan” that integrates the elements of the organizational design into a holistic mental model. The model describes, at a high-level, how your organization should operate at a point in the future (i.e., three to five years from now). Think of yourself as an urban planner, one who must deal with the city as it exists. Undertaking an enterprise-wide organizational diagnostic is usually the first step and involves understanding how all the elements of the organization work – what works well and what works poorly. At the end of the diagnostic, you should be able to sketch out a direction design of the target organization and a game plan (rough timing and sequencing) for putting it in place. Once the directional design is approved, the target organization design is designed at an increasing level of detail, including standardization of roles, detailed new backbone line structure, installation of new management processes (e.g., performance management).
In the book you refer to the chequered success rate of knowledge management initiatives. What would you cite as the most common mistakes made in this area?
Lowell L. Bryan & Claudia I. Joyce:
The most common mistake is to drive knowledge management as a technology initiative. Most companies have pursued one (or more) of three unsuccessful paths:
1. Build it and they will come
To let employees unlock knowledge, some companies have relied exclusively on big investments in document management systems, shared servers and other technology solutions. While technology is certainly an important component of knowledge management, the solution must also focus on the supply side (are the documents on the system the right quality? How can we encourage knowledge submission?), the demand side (will people turn to the system?) and the market enablers (e.g., knowledge brokers, facilitators). The typical result: a great system, with poor quality content and a small user population.
2. Tell them what they need to know
Some companies, particularly those with large corporate staffs, have tried to push knowledge to users, often via internal websites. Such efforts can be worthwhile, as, for example, when the idea is to distribute top-down messages such as information or new product features. Still, the limitations of any central planning approach apply. Do the people writing the documents know what knowledge seers really want to know, or are they just guessing? Are the real experts on the topics actually those who are producing the content? The typical result: most of the knowledge pushed out this way is not very valuable to most frontline employees.
3. Let a thousand websites bloom
A third approach is to let various organizational units or informal networks solve their knowledge problems by themselves. What large company doesn’t have pockets of a few hundred people who are part of an informal network with a common interest? In these informal networks those who create knowledge and those who seek it usually know each other and exchange ideas easily. Usually some senior person in the group cares enough about the knowledge exchange to invest in the supporting technology and/or administrative staff to build or maintain a portal. While this approach does lead to success in pockets, the obvious flaw is that that proliferation of approaches and technological tools, with few common protocols or standards, typically remains useful only to a small group of workers. As a result, this approach will provide just a fraction of the potential benefit of exchanging knowledge on a company-wide scale.
Along the lines of wikipedia, you suggest that a well-run “companypedia” can be an effective way to disseminate formerly siloed knowledge throughout a large and complex organization. Why is this so? Do you have any examples of this idea in action?
Lowell L. Bryan & Claudia I. Joyce:
We believe that a companypedia could provide an innovative way for employees to collaborate and share knowledge across the corporation, without regard to bureaucracy and reporting lines. The companypedia allows the creation of a dynamic work product with multiple contributors, that isn’t out of date as soon as it is posted, but reflects the latest and best thinking of the collaborators. Also, posting on the companypedia would likely be far less time-consuming than posting an entry on a traditional knowledge management site. We recognize that the use of companypedias is new, and as such the risks (e.g., security, content quality/accuracy) have not been fully addressed.
BusinessWeek’s recent article cited several examples of companypedias in action. (12 March 2007 “No Rest for the Wiki: The online tools for building collective info banks are making deeper inroads in corporations and rewriting the rules of collaboration” by Rachael King). These companypedias focused on managing projects, tracking news, setting meeting agendas, posting corporate policies and creating strategy documents at a number of large and complex organizations such as Intel, IBM, Sony, Xerox, Disney and Microsoft. For example, the article described IBM’s WikiCentral, which was the forum used by 50 experts from around the corporation to author an “intellectual-property manifesto”.
Interestingly, you suggest that individual employees should be evaluated not only on their personal achievements, but also on their contributions to the success of others. How could this “contribution” be measured?
Lowell L. Bryan & Claudia I. Joyce:
The short answer is it takes some work to incorporate measures of collaboration into the evaluation process. In reality, we expect there to be multiple sources for developing a “collaboration score.” First, traditional 360-degree feedback or anonymous upward feedback forums can provide solid, quantitative input. While not perfect, they are directionally accurate, particularly in highlighting those with distinctively good and those with distinctively bad relative performance.
Secondly, a self assessment can be an important input. Not only does the form itself reinforce what talents and behaviours constitute superior performance, it establishes standards for the role. It requires the individual to think hard about what he or she has done well and what he or she could have done better. Finally, we believe that personnel committees can play important role in gathering independent input (i.e., confidential interviews with a cross-section of co-workers and superiors) and interpreting all sources of input. Personnel committees, which are common in many professional services companies, should be created for every significantly sized population of talent in the enterprise. We understand that establishing this sort of an approach is incredibly time consuming, but we believe it is critical to institutionalize performance evaluations and effectively incorporate collaborative metrics in the evaluation processes.
According to your final chapter, most people “hate” change. Obviously, much of your book promotes changing structures and systems within organizations. What do you think are some of the biggest mistakes companies and their leaders make in communicating and implementing change?
Lowell L. Bryan & Claudia I. Joyce:
Yes, much of our book does promote rethinking the structures and systems within organizations. In our experience, there are three mistakes that we have seen repeated across many situations. First, in the diagnosis phase, we find that very few leaders really understand how their organizations work at the front line, and are not willing to release their preconceived notions. Yes, they certainly have some familiarity with hierarchical roles, but usually they have very little real knowledge about how key processes work, how people acquire knowledge, how people are evaluated, and so on. Without a thorough understanding of an organization’s challenges, the solutions will likely not address the root causes of complexity.
“Personnel committees, which are common in many professional services companies, should be created for every significantly sized population of talent in the enterprise…we believe it is critical to institutionalize performance evaluations and effectively incorporate collaborative metrics in the evaluation processes.”
Second, in the design phase, we find that most companies complete the design at too high of a level. When the design is left at the high level (e.g., joint responsibility for hiring), it is likely that consensus can be achieved, while the underlying questions remain unresolved until implementation, at which point disagreements will be blamed on the design and slow implementation. Finally, communication and consistent role-modelling from the top of the house needs to reinforce why the organization needs to change, what changes are expected, what the penalties are for not changing. Leadership needs to celebrate success stories, needs to explain midcourse corrections, reinforce the logic of change, explain the process and manage expectations.
While all this may seem obvious, managers often fail to spend the time and energy to win the hearts and minds of their people in this way.
June 2007.
You can order Mobilizing Minds from www.amazon.com or www.amazon.co.uk