Endless Knots

Leading ourselves via "the lattice"

June Holley, whose insights and methods for establishing and growing networks are in a class of their own, points today to Phanish Puranam's post on the INSEAD blog, "What Bossless Firms Can Teach Us."

Puranam's round-up of companies that have eschewed traditional hierarchy and bureaucracy for more intelligent self-management points to some popular and successful examples: Valve, the Seattle software company where employees vote with their seats for projects they want to work on (no votes, no project); the California tomato processor, Morning Star, that, as Puranam writes "bases its organisation on a sort of mission statement that is negotiated peer-to-peer rather than imposed by a boss, laying out each employee’s tasks and organisational affiliations;" and, the grandparent of them all, W.L. Gore and Associates, which I mentioned here.

 

We (Jeff Stamps and I) stumbled upon W.L. Gore when we were doing research for The TeamNet Factor, our 1993 book. Given all the hoopla about self-governance and jettisoning old authoritarian structures, I'm offering this excerpt which details how Gore has done it all these years. It's simple, sensible, and worth a try, C-Suiters. Good sense can prevail when the agreements, policies, and governance are in place throughout an organization, top-to-bottom. Gore's approach reflects both good organizational design, mutual respect, and a mature approach to how people come to work.

Take a look and see if this makes sense to you, noting Bill Gore's realistic caveats, typically overlooked in the idealistic vision of "leaderless" organizations espoused by people who haven't carefully considered what it takes to make people-working-together work.

From The TeamNet Factor, Chapter 4:

Meet the Lattice: The Free Form Organization That Makes Gore-Tex

Gore-Tex is" a miracle weave in the fabric of the world’s outdoor life." It evaporates sweat while protecting its wearer from the drench of rain. Gore-Tex is a visible, distinctive partner with producers of ski gloves, tents, and clothing of all descriptions. Like Dolby sound, Gore-Tex is known for the special contribution it makes to a wide range of products.

If ever there were a company whose product mirrored its culture, it is W L. Gore & Associates. This lattice textile is made by a lattice organization, a company designed for horizontal interactions where employees are known as “associates.”

In 1982, Inc. magazine runs a cover story on the Newark, Delaware, company best known for its popular product Gore-Tex. Headlined “The Un-manager: Without Ranks and Titles,” the story describes Bill Gore’s “not your average” almost-billion- dollar company. By 1991, the company is among the “400 largest private U.S. Companies.”2

The name “W. L. Gore & Associates” captures the essence of this remarkable enterprise. The design of the company is that of a network. Its core glue is the philosophy of its husband-and-wife founders, Wilbert (“Bill”), who died in 1986, and Genevieve, who remains involved in the company. Business Week features their son Robert in 1990 in an article titled “No Bosses. And Even Leaders Can’t Give Orders.”

The 1982 Inc. story so excites us that we call its author, Lucien Rhodes, who in turn forwards us a poorly typed document with a few handwritten notes on it that Bill Gore has sent him. “The Lattice Organization—A Philosophy of Enterprise” describes the Gore “bureaucracy”:

People group around projects undertaken on the basis of commitment.

The firm’s 5,600 associates (not employees)—now in 46 plants in six countries— have sponsors (not bosses), who serve as their mentors and advocates.

Gore’s projects are boundary crossing teams. “The mathematician, engineer, accountant, machinist, chemist and so on provide a combination of capabilities of a much broader scope than the mere sum of their number. This synergism . . . impels us to join together for mutual benefit.”

STUMP SPEECH TO THE TRIBES

Bill Gore’s paper, written in 1976, was the basis for many talks that he gave over the years to the company’s associates.4 (Which brings us back to the name: everyone who works at W. L. Gore & Associates is an associate.)

It’s not your typical corporate speech. With his ponderous, sometimes mystical tone, Gore sounds more like a 19th-century transcendentalist than the late-2Oth- century entrepreneur that he is. He begins with the “Nature of Man,” the starting point, usually unstated, of every corporate culture. One part of our heritage, he says, comes from hunters and predators with the urge to attack, destroy, loot, vanquish, and overcome competitors. Fortunately, humans evolved new social capabilities that carried the species far beyond this endowment. ‘A further great evolutionary invention is the cooperation of groups made possible by friendship and love.... The tribal group ... combines aggressive capability welded together by emotional interactions.” To Gore, the essence of human nature is co-opetition.

Besides being capable of friendship and love, he says, people are also dreamers. He asks what would happen if people doubled their brain capacity. “If the norm in our society is the utilization of say 10% of our inherent human capabilities, what would be the result if we were able to restructure . . . this to double to 20%?”

People participate in groups because together they can accomplish more than alone, he says. Gore believes accomplishment peaks with about 150 people in the same group. After that, results decline, and it’s time to form another group, a principle that the company puts into practice. Gore breaks plants apart when they exceed 150 to 200 people. This is, roughly, a tribal size, the upper-limit size of groups that people lived in after the invention of language but before the development of agriculture and cities.

When groups pass out of the realm in which everyone knows everyone else, Gore believes “we" quickly translates into “they.” This tiny language signal announces the beginning of turf wars, the identification of enemies, and win-lose maneuvers that eventually bring down even great companies.

THE LATTICE BEHIND THE FACADE

There’s another downside to groups of more than 150 to 200, Gore says. “Beyond some such level, it becomes necessary to impose rules, regulations, procedures and the like that dictate how the cooperation shall be done. Special teams evolve within the lattice structure usually led by someone particularly competent in the discipline or activity of the team. One individual may participate on several such teams and have a leadership role in them. These multi-participant people serve an important liaison function and are often involved ina number of different teams,” Gore says.

To avoid bureaucracy and to reach for that doubling of human capabilities, the company uses the lattice, which has these characteristics:

• No fixed or assigned authority;
• Sponsors, not bosses;
• Natural leadership defined by followership;
• Person-to-person communication;
• Objectives set by those who must make them happen; and
• Tasks and functions organized through commitments.

Leadership “evolves” at the company, according to Daniel D. Johnson, who eventually followed in his former co-worker’s footsteps, leaving Du Pont to join Gore. “You look behind you, and you’ve got people following you.”

In Gore’s view, “Every [successful] organization has a lattice organization that underlies the facade of authoritarian hierarchy. It is through these lattice organizations that things get done. Most of us delight in ‘going around’ the formal procedures and doing things the straightforward and easy way. The legendary subversion of official military procedures by the ‘non-coins’ is an example of this. All astute military leaders utilize this sub rosa lattice.”

For all his unusual ideas, Gore is not a romantic. He doesn’t propose replacing every aspect of hierarchy with lattices because of what he calls obvious difficulties:

• “Stability and long-term constancy require a firm hand at the helm;
• “Decisions must be made. Complete consensus is never achieved;
• “There seems to be some upper limit for which the lattice is effective; and
• “It’s unrealistic for people to set their own salaries."

VOW TO AVOID BUREAUCRACY

“The rest of Corporate America is only beginning to think about how to motivate employees now that there’s a shrinking hierarchy to slot people into,” Joseph Weber says in the 1990 Business Week article. “But Gore, a quirky, family-held plastics company, has never had much of one: It has been experimenting with an almost free-form management structure for 32 years.... Gore isn’t some little countercultural outfit, mind you. By turning a flexible form of DuPont’s Teflon into Gore-Tex, used in fabrics and assorted medical, electronic, and industrial products, the company has grown into a nearly $700 million a year outfit, whose return on assets and equity puts it in the top 5%, whose sales quintupled in 8 years.”

As irony would have it, of course, Gore started his own company because “as a DuPont chemist, he couldn’t get his innovation—Teflon coating for electrical wires—marketed by the big company. When he left, he vowed to avoid stifling bureaucracies, so he tossed out the traditional chain of command for a ‘lattice’ system. In it, any staffer may take an idea or complaint to any other: A machine operator can talk directly with plant leaders.”

In his lattice organization paper, Gore gives DuPont credit for inspiring his “ahead of the time” ideas. “The concept of the lattice originated from my consideration of the operation of ‘Task Forces’ created during the 1950s to carry out research and development within the Du Pont Company. The original ideas have been refined and extended over the past 18 years. The record supports the belief that a lattice organization releases and promotes the creativity of human beings.”

Task forces at DuPont and lattices at Gore are just two expressions of the worldwide, simultaneous, uncoordinated “experiment” with boundary crossing teamnets in the past few decades. 

 

 

Stop(ped) the presses at 140 papers and counting

Ian Lamont, editor of The Standard, alerts us to this great/concerning/comprehensive "Best blog on the business of news(papers): Reflections of a Newsosaur. If you're not reading it, start now." I've done a few tear-stained posts here, including referencing Paper Cuts which the Newsosaur mentions as its blogger, Erica Smith, is keeping a map of where newspapers are disappearing. As per the title, 140 in 2009 gone, kaput.

For any of us who got our start getting high on newsprint and printers' ink (legal but so addictive that at 16 I preferred reporting from 3-11 at The Pottstown Mercury to going to the drive-in to meet boys), the transformation from packed newsroom and the ca-thunk of presses churning out papers to sitting alone and googling for sources--while charming in its own right and oh-so-efficient--is nevertheless unnerving and filled with loss.

More on corporate strategy - #NACD

I mentioned the “Board’s Role in Corporate Strategy” session below at the NACD Corporate Governance Conference. Here are a few more tidbits from the absolutely packed session, so popular that three rounds of additional chairs had to be brought in and people still were left standing in the back. 

Norm Augustine: Committees are very good at critiquing and dissecting but poor at putting things together. It befalls the management team to put together the strategic plan. The CEO sits down with management and comes up with the plan, then sits down with the board. I believe in the chair and CEO being held by the same person but, for this purpose, it may not be a good thing. 

Beverly Behan: In my work, I’ve made a number of international site visits. Could you talk about that when you were at P&G?  

Norm: I was on their board for 18 yrs. P&G does some unusual things: I spent a half-day sitting with an earphone in the Complaint Department listening to complaints. It was revealed to the customers that a board member was listening in. This gives you a real perspective from the person who counts: the customer. Sometimes we went to the annual offsite a day early. Then we paired up and visited someone’s home and asked if they were willing to talk about household matters. We wouldn’t tell them what company we were from. I’ve sat in fancy homes and homes with dirt floors. You get real insight into consumers. After about 20 minutes, people became very candid. I learned more during those visits than from all the management briefings. Here’s an example. We were in a very poor country. If you buy Tide in a big box, you save money. But if you have to walk a mile to get groceries, then it’s too heavy to carry and people buy it in little packages, which costs more. 

Peter Boneparth: At Jones [where he served as CEO], from a supply channel standpoint, it’s hard to understand what goes on in the far east but until you’ve seen it. It gives you a different perspective on corporate responsibility. At Kohl’s [where he’s a board member], the board is required to make five site visits per year. At Jet Blue [also a board member there], there is a maverick culture, which goes all the way to the board level. One benefit is free travel but we have to file trip reports and are expected to engage with people all up and down the chain on morale and talk to customers on flights. This is very important to developing corporate strategy. Industry expertise is at a premium in the boardroom.   Norm: I used to walk through stores on my own. I saw a woman taking non-Tide detergent off the shelf and asked her why she was not buying Tide. She said it was too expensive. It was $1 more per box. I bet her $2 that she wouldn’t buy it so she bought it. 

Beverly: I just talked to someone going onto new GM board. At the first meeting  with the new board, they all went to the Design Center where they walked them through the whole car making process from a blank piece of paper through to production. That afternoon they went to the performance track to see the Volt and other new vehicles drove them on city streets members of the production team. 

Question from audience: Could you tell us what information is essential for board to have in regard to strategy.

Peter: Competitive information is critical but don’t inundate the board with information. Understanding the customer base is critical. And you need good information on people in the organization.

Norm: I’m an engineer [as per below] which means I’m one of those guys who created the button that says “start” to turn off your computer. 

Peter: I’m now sitting on two bds. What I see now is the need for appropriate deference to management’s capability. You have to know enough about the industry to feel confident in asking the right questions. As CEO, I wasn’t comfortable that board at reservoir of knowledge. 

Norm: That’s the greatest dilemma I faced as a director. Your basic source of knowledge comes from the CEO and top management. If they’re not candid with you, there can be real problems. Alternatively, I’ve been on boards where two of the directors had buddies in management a few levels down feeding them information. Having been in the Pentagon, I believe in the chain of command and that’s just wrong. That company got into trouble and those directors with buddies knew about  problems before the rest of the board. It can undermine the CEO if you have board members dipping into the system without the CEO knowing.

And then this little reminder, which feeds into an upcoming post: 

Norm: American companies are being bought at an alarming rate.

How long does it take? - #NACD

One topic that came up a number of times at the National Association of Corporate Directors Corporate Governance Conference was this: How long does it take to change a culture? “Culture” is on the minds of directors and executives, not to mention the press (excuse me, the media, as “press” doesn’t quite capture its production any longer). But back to our subject, changing a culture. Given the meltdown. Given the excesses on a certain street with a bronze bull in the middle of it. Given, given, given…much talk about this at the conference, as per:

On the first night, when Bill George gave his talk, he mentioned having asked IBM’s Sam Palmisano how long it was going to take to transform that company’s culture: Five to seven years, Palmisano reportedly said, which he thought at that time would be the length of his tenure (he's been there seven).

The next morning, CA's (formerly Computer Associates) board chair, Bill McCracken, and its EVP and Chief Administrative Officer, Jim Bryant, presented the complicated story of CA’s return from an accounting scandal so serious that it sent its former CEO to jail. As luck would have it, I happened to sit down next to Patrick Gnazzo, the company’s Chief Compliance Officer, who pointed me toward Martin Biegelman's Building a World-Class Compliance Program, which contains a detailed account of what had happened there.

One intervention that CA used to rebuild confidence and trust, while relatively obvious, proved extraordinarily helpful: executive coaching.  “It really helped us,” said McCracken. “We had to create the culture of the company in the boardroom. The executive coach sat down with each of us and asked what each of us wanted to do personally to change. One of my changes, after 45 yrs in the business, was that for 38 of those years, I was at the top of a hierarchical organization. Now no one reports to me and I‘ve had to learn new skills.”

While some on the board initially thought coaching was a bad idea, ultimately everyone came around as they realized how much their own internal growth would affect the organizational change required to come back from scandal. (McCracken quipped that when another board member discussed his own coaching plan with his wife, she said, “I could have told you that.”)

Northwestern Professor and author Bill White, who chaired this panel, then addressed the observation that sits as the title of this post: how long does it take to transform a culture? For CA, the process is taking quite a long time. “One of the things that comes out when you read the litigation report,” White said, “is how deep these issues went, how embedded the problems were in so many levels of the organization. Do you see how long it takes to go down all the levels?”

CA has roundtables at all levels every year , where the “#1 subject is cross-boundary, cross-functional teamwork,” Bryant said.

“We’re taking it down through the whole organization,” said McCracken. “And, we’re all saying the same thing.”

Bill George's "Seven Lessons for Leading in Crisis" - #NACD

The kick-off speaker at the National Association of Corporate Directors Corporate Governance Conference, Bill George, had some very practical advice for board members. A former CEO and board chair of Medtronic, George now teaches at Harvard Business School, serves on several high profile boards, and writes books. Four in the past five years, to be exact, all published by Jossey-Bass, an imprint of John Wiley & Sons, publishers of four of Jeff Stamps' and my books. Jossey-Bass has a reputation for publishing good leadership books, in particular, as well as some real classics in organizational theory.

Given the crisis in business, kicked off by the meltdown precipitated by Enron and the two hundred firms that fell with it, and sent into molten lava by the financial debacle of 2008, George's advice is timely:

His points, from his new book, Seven Lessons for Leading in Crisis:

1. Face reality: There's been a loss of trust among shareholders and the public AND it needs to be addressed candidly.

2. Don't be Atlas; get the world off your shoulders: CEOs can't do "this" (resolve crises) by themselves. They need to build coalitions and recruit help from boards and their organizations.

3. Dig deep for root causes. "Short-termism," George's "term," goes to the heart of this. Long-term thinking, including comprehensive succession planning, obviates some of the problems caused by only looking at the nearest hill. In thinking about succession, he favors internal candidates over external ones, who may not even know the industry of the company that they're being brought in to rescue.

4. Get ready for the long haul. No matter how bad things are, George says, they could get a lot worse so...we need to put structures in place that will survive even more adverse times, including executive compensation. George favors a common-sense approach: long-term rewards for long-term performance rather than unnecessary perks and short-term rewards that engender mistrust.

5. Never waste a good crisis. I really like this one. Bad times open up the possibility of great transformations.

6. You're in the spotlight so follow your "true north." Those last two words are the title of one of his books and a phrase in another. In short, stay true to your principles. Simple. Direct. Makes sense. And, he says, boards have to push transparency even if it makes the executive team uncomfortable.

7. Go on offense; focus on winning now. Here he cited one of my favorite corporate experiments in turning around a culture: IBM CEO Sam Palmisano's Values Jam, where more than 300,000 IBM employees were invited to participate in a several-day-long online conversation about IBM's values. When people are looking for great examples of corporate communication, they should look at what IBM has done with this "technology," very soft tech to be sure, very low tech in fact, mainly a facilitation technique for "massively parallel conversations," as IBM's Mike Wing has called them. I was delighted to hear George call this one out - as if it were commonly known. It should be.

Next up: NACD Corporate Governance Conference (#NACD, tweeters)

Pleased to say that I'm chairing a panel at the National Association of Corporate Directors' 2009 Corporate Governance Conference in Washington, DC, Oct 18-20.

Topic = Transparency & Technology: Directorship in a Digital Age. Cool, eh? When asked to chair this panel, I hesitated for less than a millisecond, especially when told who my panelists will be:

• Scott Greenburg, director of Sahale Snacks, Inc., and senior partner, K&L Gates LLP;
• Paul Levy, CEO of Beth Israel Deaconess Medical Center [and fearless blogger]; and,
• Thomas Gensemer, managing partner, Blue State Digital [aka the folks who did the websites for the Obama campaign]

According to the program description, we're going to "explain how social networking, virtual communications, and new ways of problem-solving could transform intra-board communications-and relationships with shareholders." Yes, we will!

I've had the chance to prep a bit with the panelists, leading me to believe that this will be a real eye-opener for corporate directors.

Given the digital-age divide (some of those attending began their careers giving dictation to secretaries), the collective experience of Scott, Paul, and Thomas, all of whom have earned their board stripes -- not to mention their Web 2.0 savvy -- promises a stellar moment in the development of corporate governance. I'm serious.

If we can bring corporate directors up-to-speed on new ways of working, we will likely see major improvements and breakthroughs in corporate transparency. Seeing "through" how our companies work is good for everyone and good for the economy.

And...blogfans: I'm going to live-blog and tweet from the conference. As per above, #NACD. Stay tuned.