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CHAPTER 1
HUMANIZE STRATEGY
Employees' emotional, passionate, and intellectual insights form the heart of a company, driving innovation, differentiation, and resolution. But human complexity also introduces a unique set of challenges to strategy. To harness the power of our human capital, we must embrace the positive human elements while mitigating ego, misguided emotions, prejudice, and groupthink.
In this chapter, I discuss how to overcome the negative side effects of a humanized strategy to
* transform toxic environments to foster intentional company culture,
* create an objective strategy,
* eliminate rigid bureaucracy,
* resolve power struggles,
* eradicate detrimental budgeting practices, and
* focus on what matters.
BUILD AN INTENTIONAL CULTURE
The internet provides customers with a platform to share their grievances, and it also bolsters the employee voice. Fed-up employees frequently express their frustration with their work environments and unveil workplace ordeals via social media, inviting the public and reporters into their enigmatic company cultures. Neither brand status nor size can shield businesses from negative cultural depictions or litigation.
A story about the $10 billion ridesharing app, Uber, bubbled to the top of 2017 headlines when Susan Fowler, an engineer, published a blog denouncing her former employer. The post candidly detailed Fowler's experiences coping with sexual harassment in an aggressive workplace. She described the sexual advances of a "high performer" who was given a "stern talking to" after she reported his lewd conduct. The company "[didn't] feel comfortable punishing him for what was probably just an innocent mistake on his part." Fowler explained how after interacting with female coworkers, she discovered that hers was not the manager's first reported sexual harassment incident.
Fowler also described the "'game-of-thrones political war" boiling in the company. She depicted the competitive culture where people were shuffled around like pawns, organizational priorities were undefined, and little progress on company-related goals was made. Fowler's blog captured the attention of the New York Times, which disseminated Fowler's sentiments and the newspaper's own findings to a broader audience in the exposé "Inside Uber's Aggressive, Unrestrained Workplace Culture." The piece depicted the app's freewheeling, Hobbesian environment, portraying employees' lewd conduct, drug use, and unbridled abuse of power. Uber's culture centers around meritocracy, emphasizing how "the best and brightest will rise to the top based on their efforts, even if it means stepping on toes to get there."
In the article, a few current employees anonymously revealed some shocking cultural concerns. One employee divulged that his manager threatened to beat his head in with a baseball bat. Three female employees reported being groped by a manager at a global staff meeting in 2015. Since Fowler opened the floodgates, Uber has dealt with multiple lawsuits from former employees asserting sexual assault and verbal abuse from higher-ups. Susan's revelations not only exposed Uber to litigation and evoked widespread backlash against the company's culture but also revealed how women are often treated in male-dominant Silicon Valley.
Unfortunately, poor workplace culture extends beyond Northern California tech firms. For instance, in 2015, Amazon received extensive press for promoting a "bruising workplace" where "workers are encouraged to tear apart one another's ideas in meetings, toil long and late ... and [are] held to standards that the company boasts are 'unreasonably high.'" As global competition increases, companies shift the burden of enhanced performance and increased production onto employees.
Negative culture doesn't just stem from aggressive behavior and exceedingly high expectations. Every year, the company 24/7 Wall St. aggregates thousands of employee reviews and publishes the report "The Worst Companies to Work For." A variety of companies make the cut for an assortment of reasons. Craft store Jo-Ann Fabrics, Dillard's department store, Dish Network, and Kraft Heinz Company topped 2017's list. In a recent interview, Glassdoor spokesman and list contributor Scott Dobroski explained that the leading indicators of employee satisfaction include "culture and values, career opportunities, and trust in senior leadership." Employees who gave low ratings frequently cited how their employers lacked these core values. One telling comment from an employee at a company that received the second-lowest rating of any US company said, "Corporate leaders don't truly respect or care about their employees. They only care about making money off them."
Cultural warning signs are prevalent, and most of the time, company leadership is aware. Leaders have skimmed employee reviews, witnessed extreme turnover, and even read about their company's cultural slip-ups on social media or in publications. Though many acknowledge that something needs to change, harmful cultures often remain intact. Despite the additional feedback and information that clues leadership in to how not to run a company, employee satisfaction remains dismal, and turnover relentlessly climbs.
Amid a changing landscape and labor gap, cultural adaptation is more critical now than ever. People are the source of your competitive advantage. Employees, not companies, execute tasks, implement strategy, and create value for customers. In my first book, Delivering Value, I discussed how employees' diverse skill sets are the primary resources in an organization. Without people, commerce is baseless. Without the right people, company success is bridled. Employees — not companies — have the power. And they're no longer succumbing to virulent work environments. Change is overdue.
COMPETITIVE ADVANTAGE
I often explain to clients that people cannot be your competitive advantage. This is true because people are not a rare resource — many companies have great people — and people are not durable. They don't stay at your company forever, and they are free to move from company to company.
People are, however, the source of your competitive advantage. They execute your strategy and drive your company toward your desired outcomes.
Few leaders succeed at transforming their company cultures, because changing behaviors and ideals that have been ingrained over years — sometimes decades — is difficult. This is due primarily to two reasons:
1. Companies are under pressure to perform. Most executives don't envision a toxic dog-eat-dog workplace culture when they form a business. Many leaders initially prioritize the health and wellness of their people. They offer generous vacation policies and encourage employees to sleep, exercise, and spend time with friends and family. However, companies are in business first and foremost to deliver results. When inevitable road bumps occur, hindering a company's ability to fulfill its duty to shareholders, panic sets in, and over time, employee-first culture is gradually replaced with a rank or yank mentality. Employee needs are overlooked or deprioritized in times of crisis. Those who can't compete aren't allowed to play the game. A negative culture evolves as trials cause leaders to tense up and emphasize performance above culture (forgetting that the two are interdependent).
2. Negative culture is hard to reverse. Organizations are filled with incumbent players who have constituted and endorsed certain work environments. Oftentimes, a cultural turnaround requires key leadership to transition out of their roles so the company can elevate individuals with fresh perspectives through the chain of command.
While it can be painful to reverse a negative culture, the efficacy of your strategy depends on it. Management guru Peter Drucker famously asserted, "Culture eats strategy for breakfast." While this book is about creating a successful strategy, I cannot emphasize enough the importance of your people and company culture. (See Figure 1.1.) A strategy without people can't exist. If the employees leading your strategy are uninformed, opposed, or apathetic, your company will not succeed. While financial well-being, operational effectiveness, and customer satisfaction are critical pieces of your business, you can't have a business without employees. You must endorse a socially oriented, intentional culture that engages and fulfills the people who are dedicated to making your organizational vision a reality.
To transform your culture, you must first acknowledge your starting point. A simple way to achieve this is by engaging your employees:
1. Ask employees to describe the organizational culture in three words.
2. Request that they anonymously rate your culture on a scale of 1 (ineffective, toxic) to 5 (highly enjoyable, productive).
3. Analyze the results. Are they what you expected? Following these insights, be transparent about the descriptions (not necessarily about low ratings — you don't want to contribute to negative feelings about the culture) and ask employees to list up to five things they would do if they were in charge of the company. Garnering employee input will provide you with some strong suggestions and open a dialogue around continuous cultural improvement.
Next, you must focus on your company's values and understand how to project them to the rest of the organization through your actions. Culture is defined by how employees interact and behave, and leadership sets the precedent. Employees will mimic their superiors' conduct. If they see a leadership team that puts growth and profits before ethics, they will do the same. Your actions demonstrate the culture you want your employees to build. Therefore, your conduct must be deliberate.
Finally, company culture is built around whom you hire, fire, and promote. Many leaders grapple with this challenge. We are taught that performance always aligns with organizational advancement. However, I have witnessed strong employees — who possess unique skill sets and capabilities — willing to oppose the strategy and poison the culture. I have also observed lower performers who embody the desired culture and project the team-oriented behavioral traits necessary to foster the desired environment. As I highlight in chapter 5, it's fairly easy to train people on skills. Forcing someone to care or attempting to change someone's personality, however, is a futile undertaking.
Ensure that your workforce is established with your ideal culture in mind. By recruiting candidates and valuing employees who exhibit strong behavior and dismissing those who don't, you send a message to the rest of your team and fortify a culture based on shared values and principles.
Former CEO of IBM Louis Gerstner stated, "Culture isn't just one aspect of the game; it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value." Fostering an intentional culture will set the tone for employees' behavior and communication with each other and with customers. Culture is a key tenant of strategy and a driving force within your company. Ensure that your work environment reflects your values and guiding purpose. Promoting a purposeful culture enables you to engage the best employees, attract your ideal customers, and advocate for your desired reputation.
DESIGN AN OBJECTIVE STRATEGY
Have you ever been stuck in a meeting where one person dominates the conversation? Strategy workshops often unveil an organizational chasm born of extreme personality discrepancies. In many cases, a client engages me after their internal strategic process converts to an unproductive argument where a few anchors sway the opinion and muffle the rest of the group. Regardless of the conversation's outcome, hearing one or two opinions is never conducive to a successful strategy. Biases break down the strategic process. To design a focused, effective strategy, you must start with a clean slate and develop an impartial view of the problem or opportunity at hand.
I was working with a mid-size company headed by an intimidating CEO. He stood well over six feet tall and commanded the room with his booming voice and blunt conversational style. His company was experiencing turmoil; the market had shifted, and cross-industry automation was slowly eating away at his revenue. The company needed an immediate turnaround strategy.
He called me in for an emergency strategy overhaul and invited four of his colleagues to join. We were tasked with evaluating an expansion strategy for the business, a necessary but risky endeavor. As we analyzed the options, it became apparent that the CEO's reigning opinion was the only information that mattered. While he was an intelligent, experienced professional, he determined (almost singlehandedly) to open a division in an overcrowded, unfamiliar market. He was biased because his brother lived in California and consistently alluded to an economic boom that was generating opportunity for businesses like his own. While this information wasn't untrue, it wasn't the whole story. His explanation excluded key pieces of data, including California's increased cost of conducting business and its overly saturated market.
This strategy session exhibited three common types of damaging biases:
1. Anchoring: The tendency to allow the first idea offered to steer the entire decision-making process. The CEO was the first (and one of the only people) to give his opinion at the beginning of the session.
2. Champion bias: Evaluating an idea based on the person proposing it rather than by an objective assessment of the idea itself. Because the CEO was a knowledgeable, experienced executive, the team took his word as the truth.
3. Herding: People's inclination to side with the majority without taking their own judgments into consideration. It was easy to consent to the CEO's idea. After all, even if his proposition failed, there would be no repercussions for other employees. Sometimes challenging a leader's opinion can seem too big a risk.
The group trusted their CEO. They assented to his ideas without completing any formal analysis or playing devil's advocate. The team had likely been absorbed into a dangerous pattern of groupthink long ago and therefore decided this was a good strategy because everyone else appeared to think so. Due to the volatile combination of biases, the organization's strategy temporarily wandered down the wrong path, costing the company significant time and money.
TYPES OF BIASES
In addition to anchoring, champion, herding, and optimism biases, other common biases damage strategic decision-making.
Confirmation bias: The tendency to seek and reference information that confirms one's preexisting theories or beliefs.
Correspondence bias: The propensity to inaccurately credit success to observed factors. This bias assumes that by replicating the actions of others, similar results may be achieved. I often see this when companies attempt to "copy" competitor strategies. A company may see its competitor excelling in a certain area and follow the competitor's lead, failing to understand the complex network of activities that enables success for the competitor.
Loss aversion: The impulse to place too much emphasis on avoiding downsides at the peril of not pursuing risks worth taking.
Survivorship bias: The tendency to focus on people or things that made it past some selection process and neglecting those that did not.
Bias can take on many forms. One that commonly misleads strategy is optimism bias, such as when a team member proclaims, "We're going to grow by 30 percent next year!" Usually, aggressive growth forecasts such as this don't align with anticipated market growth. This level of growth would require the company to either steal significant business away from competitors by offering a uniquely differentiated product or service or necessitate the company inventing a new piece of the market. Typically, the team will remain steadfast in their bold growth trajectory. They view their strategy and the market through rose-colored glasses because, at the end of the day, it's easier and more enjoyable to maintain a bright outlook.
Optimism bias clouds most people's judgment. Nearly 80 percent of people display an optimism bias, measured as the difference between a person's expectations and the outcome that follows. A recent study asked participants to predict the likelihood of the occurrence of different life events such as receiving a gift, burning dinner, and getting stuck in traffic. Once a month passed, the participants reported back about which events had occurred. The findings demonstrated that people's outlooks tended toward optimism. Regardless of gender, race, or nationality, participants predicted positive events would occur more often than negative or neutral events. Most of us believe that we will live longer, earn more money, and be less likely to suffer from cancer than what reality tells us. In fact, the likelihood of positive, negative, and neutral events occurring is equivalent.
(Continues…)
Excerpted from "Outsizing"
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Copyright © 2019 Coltivar Group.
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