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Danger of Hierarchy in a Fast-Moving World

People don't participate because they are going to get another 20 percent boost in salary. They participate because they want to work on something exciting and meaningful in a bigger way to the organization.
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My conversation with Dr. John Kotter, one of the foremost authorities on business leadership change in the world and Director of Research, Kotter International as well as Professor of Leadership, Harvard Business School.

John, you and I both know, based on extensive data and the work we do daily (boots on the ground) with C'suites and companies globally, that the fast moving pace of the world has no intention of slowing down. Based on your enormous domain expertise can you explain why organizational hierarchy is now a potential barrier to profitability and success?

"Put simply, it can't handle speed well. Information goes up and down levels slowly for all sorts of reasons and it can easily become distorted every time it passes from a subordinate to a boss and vice versa. Rules and procedures that inevitably accompany hierarchies almost never change fast even if they are now irrelevant, overly burdensome, and the like. Some of the most basic managerial processes which are the software which run on a hierarchy's hardware have a yearly cycle, which means, for example if a new opportunity comes along and there is no money in the budget -- well, come back to us in October (when the opportunity no longer exists in a fast moving world). And over time, it's so easy for hierarchies to keep adding levels and rules, to keep making the walls of silos thicker, which slows everything down even more."

You know how outspoken I am about developing a conscious brand of global leaders who understand the psychology of success and the value of building organizational structures that embrace all parts of the human spirit. Can you help my readers understand why companies create so many levels of bureaucracy? What do you feel are the strengths and weaknesses of hierarchy? And most important, how did that analysis lead you to the cutting edge new organizational system you call "dual operating systems," highlighted in your new book, Accelerate?

"Levels creep in for a number of reasons. You grow, so it seems only logical to add levels as you add people. You don't grow, but you think you need promotion opportunities to keep good people, so you sneak in more levels.

"The basic strength of hierarchies is that if they are designed well -- the departments/silos make sense in light of your business strategy and your competition, there aren't too many levels, the rules that accompany the hierarchy are smart and sensible -- hierarchies can be an incredibly efficient and reliable way to get work done. In fact nobody has found a more efficient and reliable way.

"The problem is that hierarchies change slowly to changing conditions, to new rapid-fire strategic challenges, to technological discontinuities. They're not agile, they can't jump to the left or to the right quickly. In today's world you have to be fast and agile, but you also have to be efficient and reliable.

"So the problem is that a well-designed hierarchy is still needed but it's insufficient. You need two systems, one that can handle speed with agility, and one that gets the work done today with quality and efficiency. And the two have to work together hand in glove. That's my dual system described in the Accelerate book."

We agree that innovation is the name of the success game today. If you can't innovate 24/7, you're dead. Blackberry is just one example. Additionally, innovation demands certain cultural conditions. It is a form of "oxygen," if you will, that can only be breathed into an organization by adhering to Maslow's Hierarchy of Needs; providing a safe environment, providing a sense of belonging/purpose and vision, and creating a culture of caring, autonomy and respect. It's what Stephen Covey referred to as a High Trust Culture.

Can you explain why Accelerator Networks, that are the proven drivers of innovation, don't have and can't be bound by traditional operating plans?

"Innovation means openness to constant discovery, constant learning, constant going in whatever direction now makes sense. There's no way you can put that in your yearly operating plan. You can't say, "I'm sure this is what we will learn in March and that will tell us to go left or to go right so I will put it in the plan and budget". It's a dynamic process, much like what you see with entrepreneurs, who only have yearly corporate-looking operating plans when they're forced to write them by funding groups (plans which the entrepreneurs tend to think are fantasies because there is no way to predict a year in advance and if you do and hold by your silly predictions you will kill learning and innovation)."

John, can you discuss why accountability metrics and compensation don't work in an accelerator model?

"These are all ideas that are essential to making hierarchies work. But in a strategic network, an innovative network, they are not necessary and they can get in the way. People don't participate because they are going to get another 20 percent boost in salary. They participate because they want to work on something exciting and meaningful in a bigger way to the organization.

"They develop relationships like you find in a small and young organization and hold each other accountable with no need for a heartless formal accountability system. They don't usually ignore metrics but they create ones themselves that make sense to them for the specific strategic initiatives that they're working on. Metrics are not imposed on them from above to control behavior -- not a great word (control) when you are trying to innovate and move fast."

Is there a company using a Dual Operating System presently? One that embraces your core concepts in Accelerate of organizationally driving "urgency" and "big opportunities" through what you refer to as a "volunteer army?"

"The organizations I know best using dual systems have been clients of Kotter International. It's a consulting firm that guides businesses to create these systems. And that's why I know it works. In terms of well-known organizations, I think Southwest did a better job of maintaining something close to what I talk about in my book Accelerate then anyone. Whether that's breaking down today just under the weight of size, I'm not sure.

"We will see more well known organizations moving in the direction of two systems simply out of necessity or because they have insightful leaders who see the world is changing so fast that something new is needed."

Can you also outline the qualitative differences between a "right sided network," which embodies the Accelerator model, and a "left sided system" that represents the older, more hierarchical structure?

"They certainly feel different. In a strategy/innovation network of the sort that works well in a dual operating system, people participate because they want to, not because they have been assigned. That makes a huge difference in how it feels.

"With information liberated from silos and levels, there's a whole different sort of conversation that can take place both in creating ideas and then implementing ideas. A person in a meeting in a conference room in his or her hierarchy job will create a look that is very different than the same person operating in the same conference room in his or her strategy-innovation-network job. And those two meetings will have very different levels of formality, spontaneousness, and energy."

If there were three core messages you'd like every CEO to hear, what are they?

"We all know, as our mutual friend Marshall Goldsmith says, what got you here won't get you there. In running a business today that means, in a very fundamental sense, how you do things. The methods we developed in the 20th century can't keep up with the pace of change in the world. Something very new is needed, not simply incremental adjustments to what we know. And if you don't have an open mind to look for and try something new you're both taking a huge risk and you're going to fail in capitalizing on the biggest opportunities around you.

"Capital markets and hierarchies will push you into spending 90 percent of your time managing the enterprise and 10 percent leading it. It may not feel that way to you, but I have studied it and I am confident of what I say. In a slower moving world, 90 percent/10 percent could work. With increased speed, it works less and less well.

"In a rapidly moving world, a real sense of urgency, among as many people as possible, around the big strategic opportunities, is a huge asset. And I know from my work that it can be created. You should find out how to create it and do just that before a competitor does."

Thank you John. Your answers are important for leaders to hear and I personally learned a great deal reading Accelerate. I am grateful for your courage to tension organizations and their leaders to embrace growth and change.
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