Why Companies Are Creating Their Own Coworking Spaces

Nestled in the Silicon Sentier district of Paris, the Villa Bonne Nouvelle (“House of Good News”), or VBN, initially appears to be another new coworking space. But what sets it apart is that only half of its 60 occupants are freelancers. The remainder work for Orange (née French Telecom), which launched VBN in 2014 to teach its programmers and engineers how to work with and learn from people outside of the company. The experiment succeeded: Teams temporarily stationed there worked better and faster than colleagues elsewhere, and they reported greater satisfaction and engagement (along with bouts of depression upon returning to the office). Even the HR executives managing the space were surprised by their bonhomie. More villas are now in the works.

Orange describes its approach as “corpoworking,” a cousin to coworking. It’s not alone in trying to jump on the trend of shared workspaces, of which there are now around 19,000 worldwide. Dozens of companies, ranging from telcos (SprintAT&T), to tech giants (SAP, IBM), to automakers and insurance companies (MINI, State Farm) have launched similar experiments. The real revolution in coworking may have less to do with freelancers or startups than with employees of large companies working beyond the boundaries of their organizations.

A case in point is WeWork, the provider of coworking spaces, which has grown its enterprise customer base in the last year by 370%. As of June 2018, corporate occupiers make up roughly one-quarter of WeWork’s members and revenues. It’s also creating stand-alone locations for individual clients such as IBM, UBS, and Facebook. It’s typically assumed these companies are seeking a jolt of hipness. But our research and reporting show this isn’t the case. We’ve separately toured and interviewed principals in more than a dozen corporate coworking spaces in the U.S., South America, and Europe over the last three years. We’ve found that these companies and their employees are searching for the same qualities freelancers and entrepreneurs report from their experiences in shared workspaces — learning skills faster, making more connections, and feeling inspired and in control.

In addition to coworking spaces for individuals and those that partner with employers, we’ve identified two types of corporate coworking. One is what we call open houses, in which companies offer workspace as a public amenity, typically for brand-building. In Brooklyn, for example, MINI, where one of us works, runs A/D/O, a combination coworking space, café, concept store, and fabrication lab. Its mission isn’t to sell cars, but to attract and learn from local designers. The other type we call campsites — internal, invitation-only spaces where teams from one company co-locate with peers from another. Campsites are temporary, affording coworkers stationed there opportunities to learn, ignore org charts, and collaborate across corporate boundaries. Orange’s VBN is one example; another belongs to a large telco in Silicon Valley, where its teams huddle alongside those from customers to prototype products and services. Projects that would have taken months of calls are finished in weeks, demonstrating the importance of co-location in innovation. Some companies are aggressively testing both. SAP’s HanaHaus in downtown Palo Alto is an open house that charges walk-ins $3 per hour, or roughly the cost of their Blue Bottle coffee. (Notable visitors include Mark Zuckerberg.) A few miles away, at its Silicon Valley campus, is AppHaus, one of five such campsites worldwide, where SAP engineers work with local customers and startups to explore consumer software.

But what are the goals of these corporate coworking spaces? Who uses them? And what do they look like? Here’s what we’ve learned.

The purpose of these spaces can vary widely, but they typically fall into one or more of three groups: transformation, innovation, and future-proofing. In the case of transformation, the space is designed to be a Trojan horse, sneaking new ways of working into an otherwise staid organization. This is explicitly the goal at Orange’s VBN, which Ava Virgitti, an employee experience lead for Orange, describes as an “HR lab” to test and learn how teams behave in the presence of leaner and meaner startups.

Innovation is the goal at other campsites, where diverse stakeholders are assembled with specific tasks and equipped with special facilities and methodologies (say, design thinking) to achieve them. Future-proofing is more open-ended; these spaces are designed to generate new contacts or ideas, which seems to be the thinking behind HanaHaus.

For these reasons, users are typically quite diverse in rank, role, and affiliation, and are present for only a few months before rotating out or back into the company. This is a critical feature of campsites in particular — a revolving door means a constant stream of fresh insights and expertise. Orange’s VBN uses nine-month “seasons” to reset the space; others switch participants as necessary.

The role of community managers in fostering this culture can’t be overstated. Traditionally nonexistent in corporate America, they typically help select, vet, onboard, and connect new users with existing ones while organizing the space, arbitrating conflicts, and hosting events. User satisfaction surveys consistently rank them as the favorite aspect of corporate coworking.The other important aspect in creating these spaces is their physical design. Like the culture, which the design complements and enhances, the layout and amenities of these spaces are a far cry from cubicles. Nothing is stationary — whiteboards, movable walls, and flexible furniture are common. Amenities and kitchens are strategically positioned to “engineer serendipity” and conversations across organizations. And writing on the walls or floors is encouraged, as making a mess is considered a precursor to innovation.

Now, do these spaces work in promoting innovation? This seems to be the case, although, as with coworking in general, their effectiveness is difficult to measure and only quantifiable indirectly, through user satisfaction surveys and interviews. A few companies we spoke with also offered examples. Orange’s VBN reported a 92% user approval rating of the space, and pointed to the long waitlist for future seasons. At Grid70, one tenant reported a 30%–40% reduction in product development time after a redesign of their workspace. According to researchers at the University of Michigan, the most common reasons people seek coworking spaces are interaction with people (84%), random discoveries and opportunities (82%), and knowledge sharing (77%). Corporate coworkers seek the same.

As one might imagine, demonstrating the ROI of this is difficult — most don’t even try. Some eschew metrics altogether, gambling they will learn as they go when it comes to measuring what’s important. Many prefer the soft metrics, such as satisfaction and engagement mentioned above, and still others defer measurement into the future, minimizing expenses while awaiting a business case to emerge.

For this reason (and others), strong executive sponsors are crucial for corporate coworking. HanaHaus was instigated as the personal urging of SAP cofounder Hasso Plattner; Grid70 was conceived by a cluster of local CEOs. Orange’s VBN has the firm backing of senior HR executives, and so on. With the metrics so hazy, the decision as to whether these spaces are worth it is being made on a case-by-case basis.

Just as coworking was seen as a fringe phenomenon less than a decade ago, its corporate variant risks being perceived as a vanity project. But in light of the trends animating creative work today — increasingly flexible arrangements, cross-firm collaboration, and employees’ thirst for agency and authentic connections — these spaces hint at a future far beyond WeWork.

We’ve identified a few principles to keep in mind if your company is interested in exploring corporate coworking.

Be clear about your goals at the outset. Is it a Trojan horse for corporate culture, a cross-firm skunkworks, or a public branding exercise and serendipity engine? This decision will drive every facet of the project going forward, including participants, design, sponsorship, and ROI.

Community managers are the key to success. Hire carefully at the outset, involve them at every step of the design and recruitment process, and give them broad latitude in shaping the culture and programming of the space. Your project will likely fail without a strong community manager, and learning how their role could scale elsewhere in the organization is an incredible opportunity.

Don’t overthink the design. Focus less on foosball or Ping-Pong tables, and more on good overall layout principles. Co-locate teams in adjoining spaces for easy conversations; centralize amenities such as kitchens to increase serendipitous encounters (yes, even the unplanned can be planned for!). Empower users to make the space their own, and cut through red tape during construction — no one wants to spend nine months in just another project team room.


Originally posted at: https://hbr.org

Teams and Team Building

Many companies, when they decide to invest in team building, decide to do offsite events like bowling nights or ropes courses. Sometimes these events get really elaborate. One sales and marketing executive I know told me how he was flown to London with 20 of his colleagues, put up in a pricey hotel, and then trained to do the haka, a traditional war dance, by a group of Maori tribe members from New Zealand. This exercise was supposed to build relationships and bolster team spirit, and, by extension, improve collaboration. Instead, it fostered embarrassment and cynicism. Months later, the failing division was sold off.

Mars was not immune to the conventional wisdom. Before making the commitment to study collaboration intensively, we also did things like this. Once, we spent thousands of dollars to hire an orchestra to spend an hour with a group of senior leaders at an offsite retreat and help them work together in harmony. It was a nice metaphor and an interesting experience. It did nothing, though, to change how that group of leaders worked together.

Events like these may get people to feel closer for a little while; shared emotions can bond people. Those bonds, though, do not hold up under the day-to-day pressures of an organization focused on delivering results.

In 2011 senior HR leaders at Mars decided that we would study our global workforce and try to crack the code of how to maximize team effectiveness. The resulting research, which I led, revealed that most of what we — and others — thought about team building was wrong. Most important, we learned that quality collaboration does not begin with relationships and trust; it starts with a focus on individual motivation.

Our research drew on data from 125 teams. It included questionnaires and interviews with hundreds of team members. We asked, among other things, how clear people were about the teams’ priorities, what their own and others’ objectives were, and what they felt most confident about and most worried about. If there was one dominant theme from the interviews, it is summarized in this remarkable sentiment: “I really like and value my teammates. And I know we should collaborate more. We just don’t.”

The questionnaires revealed that team members felt the most clarity about their individual objectives, and felt a strong sense of ownership for the work they were accountable for. To further investigate, we turned to another source and analyzed several years of data from Mars’s 360-degree leadership surveys. The two top strengths identified in those surveys were “action orientation” and “results focus.” The picture was getting clearer: Mars was full of people who loved to get busy on tasks and responsibilities that had their names next to them. It was work they could do exceedingly well, producing results without collaborating. On top of that, they were being affirmed for those results by their bosses and the performance rating system.

It occurred to us that their failure to collaborate was, ironically, a function of their excelling at the jobs they were hired to do and of management reinforcing that excellence. Collaboration, on the other hand, was an idealized but vague goal with no concrete terms or rules. What’s more, collaboration was perceived as messy. It diluted accountability and offered few tangible rewards.

Based on that insight, we developed a framework to make collaboration clear, specific, and compelling — to make collaboration something to be achieved. At the core of this framework are two questions to pose to any team. The first: Why is their collaboration essential to achieving their business results? And second: What work, which specific tasks, would require collaboration to deliver those results?

We had a chance to test our framework in early 2012 with the Mars Petcare China leadership team. Over two days we posed our questions and hashed out specifics. We spent the entire first day wrestling with the answers to our two questions. Initial reactions were bemusement and frustration: What did I mean by “essential to business results”? We restated the question as: Why is your working together, as a team, more valuable than just the sum of your individual efforts? That got the conversation going, and we spent three hours discussing and debating what we called their “team purpose.” They finally agreed that their purpose would center on people development and deployment of their new strategy throughout the business.

The second question, the one about which specific pieces of work required collaboration, was more contentious. One leader in particular felt that he needed to be left alone, that none of the work he was responsible for should include any of his peers. The debate became heated, but eventually his peers won him over. Eventually we were able to sort our list of projects into those that could be handled by individuals and those that really would be improved by collaboration.

Our second day focused on accountability. They agreed to build their collaborative commitments into their individual performance objectives. Then they cocreated a list of the behaviors they expected of each other in support of those commitments and agreed on how they would hold themselves accountable for them. (At one point we compared and discussed their Myers-Briggs types. That discussion about relationships lasted 15 minutes before they urged me to take them back to discussions about how they were going to work together. I thought that was remarkably telling.) We ended by creating a plan for how they would sustain the progress we had made during our two days together.

I spoke with the general manager of Mars Petcare China a few times over the next year. During our final conversation I learned that their growth had rocketed up 33% — a stunning achievement. Their primary dog food brand alone was up 60%. It was the first time in eight years that they had met their financial commitments to the larger corporation. How much did our work together contribute to those outcomes? “Massively,” the general manager told me. Their team purpose had focused their collaboration on the things that mattered most to the results they planned for. The sense of accountability for their work together, based on the agreements they forged, made their working relationships far more productive than they had been.

At Mars, we learned that to get people to work together, we had to let them figure out how that would actually improve results.

We officially deployed our fully developed and tested framework later in 2012, embedding it in a single management development program. Within two years, the Mars High Performance Collaboration Framework had gone viral throughout the company.

Strong relationships and trust do matter to collaboration, but they are not the starting point. They are the outcomes of dedicated people striving together. Connecting collaboration to the motives of success-minded team members is what unlocks productive teamwork.


Posted from: http://www.hbr.org

What Transformational Leaders Do

Companies that claim to be “transforming” seem to be everywhere. But when you look more deeply into whether those organizations are truly redefining what they are and what they do, stories of successful change efforts are exceptionally rare. In a study of S&P 500 and Global 500 firms, our team found that those leading the most successful transformations, creating new offerings and business models to push into new growth markets, share common characteristics and strategies. Before describing those, let’s look at how we identified the exceptional firms that rose to the top of our ranking, a group we call the Transformation 10.

Whereas most business lists analyze companies by traditional metrics such as revenue or by subjective assessments such as “innovativeness,” our ranking evaluates the ability of leaders to strategically reposition the firm. Some companies that made the list were obvious choices; for example, the biggest online retailer now gets most of its profit from cloud services (Amazon). But others were surprising, given their states before embarking on transformation. The list includes a health care company that was once near bankruptcy (DaVita), a software firm whose stock price stagnated for a decade (Microsoft), a travel website that faced overwhelming competition (Priceline), a food giant that seemed to lose its focus (Danone), and a steel company that faced new pressure from lower-cost rivals (ThyssenKrupp).

The team began by identifying 57 companies that have made substantial progress toward transformation. We then narrowed the list to 18 finalists using three sets of metrics:

New growth. How successful has the company been at creating new products, services, and business models? This was gauged by assessing the percent of revenue outside the core that can be attributed to new growth.

Core repositioning. How effectively has the company adapted its legacy business to change and disruption, giving it new life?

Financial performance. How have the firm’s growth, profits, and stock performance compared to a relevant benchmark (NASDAQ for a tech company, for example, or DAX Index for a German firm) during the transformation period?

We recruited a panel of expert judges (see the list below), who evaluated the companies through the lens of their own expertise and gauged which transformations were most durable and had the highest impact in their industries. (For more on our methods, see the sidebars below.) With these criteria in mind, our final list is as follows:

Our analysis revealed characteristics shared by the winning firm’s leaders as well as common strategies they employed.

Transformational CEOs Tend to be “Insider Outsiders”

The list is topped by companies headed by visionary founders with no prior experience in their industries; Jeff Bezos came from the world of finance, and Reed Hastings from software. As it turned out, having no predetermined way of doing things turned out to be an asset when it came to reinventing retailing and television, and these leaders kept that outsider’s perspective even through waves of growth.

We see an interesting pattern across the professionally managed companies, those whose CEOs were hired by the board. These CEOs are what we call “insider outsiders.” Make no mistake, they have substantial relevant experience. They had 14 years of tenure on average before getting the top job. That knowledge helped them understand how to make change happen inside an organization. Yet these executives also had an outsider role where they worked on an emerging growth business or consciously explored external opportunities, giving them critical distance from the core. After becoming CEO, that insider-outsider perspective helped them explore new paths to growth without being constrained by yesterday’s success formula.

Satya Nadella, for instance, joined Microsoft in 1992 and worked his way up to running its cloud computing effort, building that business unit into a viable new growth platform before becoming CEO, in 2014. He got the top job because of that, and then as CEO he accelerated cloud-business development to make it the company’s primary strategy.

The same was true of Adobe’s Shantanu Narayen. He joined the creativity applications vendor in 1997, and got the CEO job a decade later largely because he was able to articulate a vision for pursuing digital marketing services as the new growth path.

At Priceline, Glenn Fogel joined in 2000 and became head of strategy. Long before becoming CEO, in 2016, he was searching for new growth in the hypercompetitive travel reservations market, coming across a pair of small European startups with a business model opposite to Priceline’s in two key ways: Instead of taking an up-front 25% commission on a hotel reservation, the startups charged only 15% after check-out. Instead of focusing on major hotel brands, they pursued the long tail, engaging with more than 1 million inns, B&Bs, and apartment buildings in 200 countries. The result was the Booking.com platform. What started with a $200 million investment a decade ago now accounts for most of Priceline’s new growth as well as its rise past $80 billion in market valuation.

And at Danone, Emmanuel Faber, an insider for 17 years, won the CEO job, in 2014, because he was one of the architects of the firm’s 2020 vision to transform from a food and beverage conglomerate into a family health and medical nutrition company that emphasized sustainable agriculture. That vision prompted Danone to divest product lines such as biscuits and beer while broadening its core dairy franchise. For new growth, in 2007 Faber helped form a new business unit called Nutricia, anchored off a $17 billion acquisition, to pursue baby foods, protein bars, and health shakes. Today this unit accounts for 29% of revenue.

They Strategically Pursue Two Separate Journeys

Many firms that have tried to transform have failed. A common reason why is that leaders approach the change as one monolithic process, during which the old company becomes a new one. That doesn’t work for a host of practical reasons. An organization that grew up producing newspapers, for instance, not only lacks key skills to build a digital content company but also might actively resist embracing the new in order to protect the business it knows and loves.

Success requires repositioning the core business while actively investing in the new growth business.

Apple serves as the classic model of such “dual transformation.” With the iMac and iBook, Steve Jobs reinvigorated the core Macintosh franchise by injecting a new sense of design and rethinking what computers would be used for in the age of the internet. On a separate track, he launched the device and content ecosystem, starting with iPod and iTunes, that would become the company’s new growth engine.

It’s a strategy that has also worked for others on the list. While Amazon has expanded its core retailing platform into new categories, such as food and streaming content, in parallel it has built the world’s largest cloud computing enterprise. Amazon Web Services CEO Andy Jassy has been with the effort since it began as an internal challenge to scale IT infrastructure. Established as a separate division in 2006, AWS ultimately addressed a long-standing analyst complaint about Amazon — that its core was only barely profitable. Today AWS accounts for just 10% of Amazon’s $150 billion in revenue, but generates close to $1 billion in quarterly operating profit.

German steel maker ThyssenKrupp, facing pricing pressure from Asian competitors, likewise embraced a dual transformation strategy. In 2011 the board selected as the new CEO one of its own members, Heinrich Hiesinger, a Siemens executive with experience supplying technology to many industries. From day one, Hiesinger began executing a plan for repositioning the declining core of steel manufacturing by divesting less profitable product lines, focusing on higher-margin custom manufacturing, and even opening 3D printing centers to fashion components such as parts for wind turbines. For new growth areas that now make up 47% of sales, it moved into industrial solutions and digital services, creating systems such as internet-connected elevators.

They Use Culture Change to Drive Engagement

Microsoft is a case in point. In the four years since Satya Nadella came on as CEO, he has been credited with transforming Microsoft’s cautious, insular culture. In the old world, large teams would work for years on the next major version of a franchise program like Windows and Word, leading to a risk-averse environment. In the new world of “infrastructure on demand,” dozens of new features and improvements would need to be introduced per month — and no one would fully know ahead of time what they might be. This required a culture of risk taking and exploration.

In this way, Nadella was unlike his predecessors, in that he built his reputation as a hands-on engineer, not as a visionary like Bill Gates or a Type-A salesman like Steve Ballmer. Instead, Nadella was known for listening, learning, and analyzing. His idea of how to engage and motivate employees wasn’t by making a speech but rather by leading a company-wide hackathon, and empowering employees to work on projects they were passionate about. This new level of employee engagement has helped drive Microsoft’s expansion into cloud services and artificial intelligence, areas that now account for 32% of revenue.

He chose the name DaVita, Italian for “giving life,” and settled on a list of core values that included service excellence, teamwork, accountability, and fun. As any manager knows, a generic-sounding list of values won’t move the culture needle unless leadership brings it to life. To that end, Thiry and senior managers performed skits in costumes — for instance dressing as the Three Musketeers and leading call-and-response chants of “All for one, one for all.” To honor employee heroism, he became the emcee of awards banquets that had all the music, stagecraft, and emotional speeches of the Oscars, and he celebrated “village victories” around milestones like achieving a five-star quality rating for dialysis delivery from the Centers for Medicare and Medicaid Services.

The success in turning around DaVita’s core business caught the attention of Warren Buffett, whose Berkshire Hathaway became DaVita’s largest shareholder. But it was DaVita’s move into new growth areas that earned it a spot on our list. Starting with an acquisition of 50 physician offices, DaVita worked to build an “integrated delivery network” that contracts for the full spectrum of care, using the value-based care model of being paid to keep patients healthy rather than accepting fee-for-service — resulting in new growth that now represents 30% of revenue.

They Communicate Powerful Narratives About the Future

To change the culture and move into new growth areas, the CEO needs to become “the storyteller in chief,” says Aetna’s Mark Bertolini. That means telling different aspects of the same transformation narrative to all the constituencies and stakeholders in the company.

“The CEO’s responsibility is to create a stark reality of what the future holds,” says Bertolini, “and then to build the plans for the organization to meet those realities.”

In Aetna’s case, this meant building a narrative of how the move away from fee-for-service reimbursement to the new business model of value-based care would change the nature of health insurance, and one day possibly render it obsolete. Instead of simply reinforcing the story about strengthening Aetna’s current businesss, Bertolini developed a narrative about building new skills to help consumers make better health choices — and about building a new organization that can make money doing so.

Telling that kind of story about the future is not a one-time event. “It’s easy to underestimate the amount of communication that is needed,” he adds. “You have to be tireless about it, consistent and persistent, and keep battering the core messages home week after week. Your leaders have to as well, and they have to tailor the message so it has the appropriate level of fidelity relevant to each part of the organization. A person working in a call center might need a different set of messages than a line manager does to understand how he docks into the big picture.”

They Develop a Road Map Before Disruption Takes Hold

Because dual transformations typically take years, we used a 10-year time frame in our analysis. Indeed, transformations often can’t be completed during the average tenure of a CEO. These long time horizons mean that there’s no time to waste in getting started. Many of the most notable disrupted companies — from Blockbuster, to Borders, to Blackberry, to Kodak — ran into their deepest troubles a decade or more aftersome of the first warning signs appeared. None of their leaders developed effective transformation plans in time to halt the decline.

At the other end of the spectrum is Reed Hastings of Netflix. Even as the original DVD-by-mail business grew quickly to dominate the industry, Hastings believed that a new wave of disruption could be rolling in. “My greatest fear at Netflix,” he says, “has been that we wouldn’t make the leap from success in DVDs to success in streaming.”

That’s why he laid the groundwork for a transformation as far back as 2007, when he started negotiating deals with Hollywood to test online streaming of movies and TV shows. Famously, Hastings moved too quickly to spin off the core and focus only on streaming, when Netflix announced plans in 2011 to create a stand-alone mail-based DVD company called Qwikster. This prompted a backlash from angry customers — and triggered a humbling apology from Hastings.

But the mistake he made was preferable to waiting too long. He reformulated his plan, this time to extend the life of the core DVD business while aggressively rolling out the new streaming service in parallel. It proved to be such a winning strategy that it funded a big move into original content. Now, with membership of 100 million homes in 190 countries, Netflix is the leader of a reconfigured movie and television landscape that it helped shape.

As all these cases show, transformation is not just about changing an enterprise’s cost structure or turning analog processes into digital ones. Rather, it’s about pursuing a multiphase strategy to reposition today’s business while finding new ways to grow. That’s why we believe the companies that made the Transformation 10 list deserve to be seen as models to help other leaders create the future.


Originally posted at: http://harvardbusinessreview.org

Matrix Management: Not a Structure, a Frame of Mind

Top-level managers in many of today’s leading corporations are losing control of their companies. The problem is not that they have misjudged the demands created by an increasingly complex environment and an accelerating rate of environmental change, nor even that they have failed to develop strategies appropriate to the new challenges. The problem is that their companies are organizationally incapable of carrying out the sophisticated strategies they have developed. Over the past 20 years, strategic thinking has far outdistanced organizational capabilities.

All through the 1980s, companies everywhere were redefining their strategies and reconfiguring their operations in response to such developments as the globalization of markets, the intensification of competition, the acceleration of product life cycles, and the growing complexity of relationships with suppliers, customers, employees, governments, even competitors. But as companies struggled with these changing environmental realities, many fell into one of two traps—one strategic, one structural.

The strategic trap was to implement simple, static solutions to complex and dynamic problems. The bait was often a consultant’s siren song promising to simplify or at least minimize complexity and discontinuity. Despite the new demands of overlapping industry boundaries and greatly altered value-added chains, managers were promised success if they would “stick to their knitting.” In a swiftly changing international political economy, they were urged to rein in dispersed overseas operations and focus on the triad markets, and in an increasingly intricate and sophisticated competitive environment, they were encouraged to choose between alternative generic strategies—low cost or differentiation.

Yet the strategic reality for most companies was that both their business and their environment really were more complex, while the proposed solutions were often simple, even simplistic. The traditional telephone company that stuck to its knitting was trampled by competitors who redefined their strategies in response to new technologies linking telecommunications, computers, and office equipment into a single integrated system. The packaged-goods company that concentrated on the triad markets quickly discovered that Europe, Japan, and the United States were the epicenters of global competitive activity, with higher risks and slimmer profits than more protected and less competitive markets such as Australia, Turkey, and Brazil. The consumer electronics company that adopted an either-or generic strategy found itself facing competitors able to develop cost and differentiation capabilities at the same time.

In recent years, as more and more managers recognized oversimplification as a strategic trap, they began to accept the need to manage complexity rather than seek to minimize it. This realization, however, led many into an equally threatening organizational trap when they concluded that the best response to increasingly complex strategic requirements was increasingly complex organizational structures.

The obvious organizational solution to strategies that required multiple, simultaneous management capabilities was the matrix structure that became so fashionable in the late 1970s and the early 1980s. Its parallel reporting relation-ships acknowledged the diverse, conflicting needs of functional, product, and geographic management groups and provided a formal mechanism for resolving them. Its multiple information channels allowed the organization to capture and analyze external complexity. And its overlapping responsibilities were designed to combat parochialism and build flexibility into the company’s response to change.

In practice, however, the matrix proved all but unmanageable—especially in an international context. Dual reporting led to conflict and confusion; the proliferation of channels created informational logjams as a proliferation of committees and reports bogged down the organization; and overlapping responsibilities produced turf battles and a loss of accountability. Separated by barriers of distance, language, time, and culture, managers found it virtually impossible to clarify the confusion and resolve the conflicts.

In hindsight, the strategic and structural traps seem simple enough to avoid, so one has to wonder why so many experienced general managers have fallen into them. Much of the answer lies in the way we have traditionally thought about the general manager’s role. For decades, we have seen the general manager as chief strategic guru and principal organizational architect. But as the competitive climate grows less stable and less predictable, it is harder for one person alone to succeed in that great visionary role. Similarly, as formal, hierarchical structure gives way to networks of personal relationships that work through informal, horizontal communication channels, the image of top management in an isolated corner office moving boxes and lines on an organization chart becomes increasingly anachronistic.

Paradoxically, as strategies and organizations become more complex and sophisticated, top-level general managers are beginning to replace their historical concentration on the grand issues of strategy and structure with a focus on the details of managing people and processes. The critical strategic requirement is not to devise the most ingenious and well-coordinated plan but to build the most viable and flexible strategic process; the key organizational task is not to design the most elegant structure but to capture individual capabilities and motivate the entire organization to respond cooperatively to a complicated and dynamic environment.

Building an Organization

Although business thinkers have written a great deal about strategic innovation, they have paid far less attention to the accompanying organizational challenges. Yet many companies remain caught in the structural-complexity trap that paralyzes their ability to respond quickly or flexibly to the new strategic imperatives.

For those companies that adopted matrix structures, the problem was not in the way they defined the goal. They correctly recognized the need for a multi-dimensional organization to respond to growing external complexity. The problem was that they defined their organizational objectives in purely structural terms. Yet the term formal structure describes only the organization’s basic anatomy. Companies must also concern themselves with organizational physiology—the systems and relationships that allow the lifeblood of information to flow through the organization. They also need to develop a healthy organizational psychology—the shared norms, values, and beliefs that shape the way individual managers think and act.

The companies that fell into the organizational trap assumed that changing their formal structure (anatomy) would force changes in interpersonal relationships and decision processes (physiology), which in turn would reshape the individual attitudes and actions of managers (psychology).

But as many companies have discovered, reconfiguring the formal structure is a blunt and sometimes brutal instrument of change. A new structure creates new and presumably more useful managerial ties, but these can take months and often years to evolve into effective knowledge-generating and decision-making relationships. And because the new job requirements will frustrate, alienate, or simply overwhelm so many managers, changes in individual attitudes and behavior will likely take even longer.

As companies struggle to create organizational capabilities that reflect rather than diminish environmental complexity, good managers gradually stop searching for the ideal structural template to impose on the company from the top down. Instead, they focus on the challenge of building up an appropriate set of employee attitudes and skills and linking them together with carefully developed processes and relationships. In other words, they begin to focus on building the organization rather than simply on installing a new structure.

Indeed, the companies that are most successful at developing multi-dimensional organizations begin at the far end of the anatomy-physiology-psychology sequence. Their first objective is to alter the organizational psychology—the broad corporate beliefs and norms that shape managers’ perceptions and actions. Then, by enriching and clarifying communication and decision processes, companies reinforce these psychological changes with improvements in organizational physiology. Only later do they consolidate and confirm their progress by realigning organizational anatomy through changes in the formal structure.

No company we know of has discovered a quick or easy way to change its organizational psychology to reshape the understanding, identification, and commitment of its employees. But we found three principal characteristics common to those that managed the task most effectively:

1. They developed and communicated a clear and consistent corporate vision.

2. They effectively managed human resource tools to broaden individual perspectives and to develop identification with corporate goals.

3. They integrated individual thinking and activities into the broad corporate agenda by a process we call co-option.

Building a Shared Vision

Perhaps the main reason managers in large, complex companies cling to parochial attitudes is that their frame of reference is bounded by their specific responsibilities. The surest way to break down such insularity is to develop and communicate a clear sense of corporate purpose that extends into every corner of the company and gives context and meaning to each manager’s particular roles and responsibilities. We are not talking about a slogan, however catchy and pointed. We are talking about a company vision, which must be crafted and articulated with clarity, continuity, and consistency. We are talking about clarity of expression that makes company objectives understandable and meaningful; continuity of purpose that underscores their enduring importance; and consistency of application across business units and geographical boundaries that ensures uniformity throughout the organization.


There are three keys to clarity in a corporate vision: simplicity, relevance, and reinforcement. NEC’s integration of computers and communications—C&C—is probably the best single example of how simplicity can make a vision more powerful. Top management has applied the C&C concept so effectively that it describes the company’s business focus, defines its distinctive source of competitive advantage over large companies like IBM and AT&T, and summarizes its strategic and organizational imperatives.

The second key, relevance, means linking broad objectives to concrete agendas. When Wisse Dekker became CEO at Philips, his principal strategic concern was the problem of competing with Japan. He stated this challenge in martial terms—the U.S. had abandoned the battlefield; Philips was now Europe’s last defense against insurgent Japanese electronics companies. By focusing the company’s attention not only on Philips’s corporate survival but also on the protection of national and regional interests, Dekker heightened the sense of urgency and commitment in a way that legitimized cost-cutting efforts, drove an extensive rationalization of plant operations, and inspired a new level of sales achievements.

The third key to clarity is top management’s continual reinforcement, elaboration, and interpretation of the core vision to keep it from becoming obsolete or abstract. Founder Konosuke Matsushita developed a grand, 250- year vision for his company, but he also managed to give it immediate relevance. He summed up its overall message in the “Seven Spirits of Matsushita,” to which he referred constantly in his policy statements. Each January he wove the company’s one-year operational objectives into his overarching concept to produce an annual theme that he then captured in a slogan. For all the loftiness of his concept of corporate purpose, he gave his managers immediate, concrete guidance in implementing Matsushita’s goals.


Despite shifts in leadership and continual adjustments in short-term business priorities, companies must remain committed to the same core set of strategic objectives and organizational values. Without such continuity, unifying vision might as well be expressed in terms of quarterly goals.

It was General Electric’s lack of this kind of continuity that led to the erosion of its once formidable position in electrical appliances in many countries. Over a period of 20 years and under successive CEOs, the company’s international consumer-product strategy never stayed the same for long. From building locally responsive and self-sufficient “mini-GEs” in each market, the company turned to a policy of developing low-cost offshore sources, which eventually evolved into a de facto strategy of international outsourcing. Finally, following its acquisition of RCA, GE’s consumer electronics strategy made another about-face and focused on building centralized scale to defend domestic share. Meanwhile, the product strategy within this shifting business emphasis was itself unstable. The Brazilian subsidiary, for example, built its TV business in the 1960s until it was told to stop; in the early 1970s, it emphasized large appliances until it was denied funding, then it focused on housewares until the parent company sold off that business. In two decades, GE utterly dissipated its dominant franchise in Brazil’s electrical products market.

Unilever, by contrast, made an enduring commitment to its Brazilian subsidiary, despite volatile swings in Brazil’s business climate. Company chairman Floris Maljers emphasized the importance of looking past the latest political crisis or economic downturn to the long-term business potential. “In those parts of the world,” he remarked, “you take your management cues from the way they dance. The samba method of management is two steps forward then one step back.” Unilever built—two steps forward and one step back—a profitable $300 million business in a rapidly growing economy with 130 million consumers, while its wallflower competitors never ventured out onto the floor.


The third task for top management in communicating strategic purpose is to ensure that everyone in the company shares the same vision. The cost of inconsistency can be horrendous. It always produces confusion and, in extreme cases, can lead to total chaos, with different units of the organization pursuing agendas that are mutually debilitating.

Philips is a good example of a company that, for a time, lost its consistency of corporate purpose. As a legacy of its wartime decision to give some overseas units legal autonomy, management had long experienced difficulty persuading North American Philips (NAP) to play a supportive role in the parent company’s global strategies. The problem came to a head with the introduction of Philips’s technologically first-rate videocassette recording system, the V2000. Despite considerable pressure from world headquarters in the Netherlands, NAP refused to launch the system, arguing that Sony’s Beta system and Matsushita’s VHS format were too well established and had cost, feature, and system-support advantages Philips couldn’t match. Relying on its legal independence and managerial autonomy, NAP management decided instead to source products from its Japanese competitors and market them under its Magnavox brand name. As a result, Philips was unable to build the efficiency and credibility it needed to challenge Japanese dominance of the VCR business.

Most inconsistencies involve differences between what managers of different operating units see as the company’s key objectives. Sometimes, however, different corporate leaders transmit different views of overall priorities and purpose. When this stems from poor communication, it can be fixed. When it’s a result of fundamental disagreement, the problem is serious indeed, as illustrated by ITT’s problems in developing its strategically vital System 12 switching equipment. Continuing differences between the head of the European organization and the company’s chief technology officer over the location and philosophy of the development effort led to confusion and conflict throughout the company. The result was disastrous. ITT had difficulty transferring vital technology across its own unit boundaries and so was irreparably late introduc-ing this key product to a rapidly changing global market. These problems eventually led the company to sell off its core telecommunications business to a competitor.

But formulating and communicating a vision—no matter how clear, enduring, and consistent—cannot succeed unless individual employees under-stand and accept the company’s stated goals and objectives. Problems at this level are more often related to receptivity than to communication. The develop-ment of individual understanding and acceptance is a challenge for a company’s human resource practices.

Developing Human Resources

While top managers universally recognize their responsibility for developing and allocating a company’s scarce assets and resources, their focus on finance and technology often overshadows the task of developing the scarcest resource of all—capable managers. But if there is one key to regaining control of companies that operate in fast-changing environments, it is the ability of top management to turn the perceptions, capabilities, and relationships of individual managers into the building blocks of the organization.

One pervasive problem in companies whose leaders lack this ability—or fail to exercise it—is getting managers to see how their specific responsibilities relate to the broad corporate vision. Growing external complexity and strategic sophistication have accelerated the growth of a cadre of specialists who are physically and organizationally isolated from each other, and the task of dealing with their consequent parochialism should not be delegated to the clerical staff that administers salary structures and benefit programs. Top managers inside and outside the human resource function must be leaders in the recruitment, development, and assignment of the company’s vital human talent.

Recruitment and Selection

The first step in successfully managing complexity is to tap the full range of available talent. It is a serious mistake to permit historical imbalances in the nationality or functional background of the management group to constrain hiring or subsequent promotion. In today’s global marketplace, domestically oriented recruiting limits a company’s ability to capitalize on its worldwide pool of management skill and biases its decision-making processes.

After decades of routinely appointing managers from its domestic operations to key positions in overseas subsidiaries, Procter & Gamble realized that the practice not only worked against sensitivity to local cultures—a lesson driven home by several marketing failures in Japan—but also greatly under-utilized its pool of high-potential non-American managers. (Fortunately, our studies turned up few companies as shortsighted as one that made overseas assignments on the basis of poor performance, because foreign markets were assumed to be “not as tough as the domestic environment.”)

Not only must companies enlarge the pool of people available for key positions, they must also develop new criteria for choosing those most likely to succeed. Because past success is no longer a sufficient qualification for increasingly subtle, sensitive, and unpredictable senior-level tasks, top management must become involved in a more discriminating selection process. At Matsushita, top management selects candidates for international assignments on the basis of a comprehensive set of personal characteristics, expressed for simplicity in the acronym SMILE: specialty (the needed skill, capability, or knowledge); management ability (particularly motivational ability); international flexibility (willingness to learn and ability to adapt); language facility; and endeavor (vitality, perseverance in the face of difficulty). These attributes are remarkably similar to those targeted by NEC and Philips, where top executives also are involved in the senior-level selection process.

Training and Development

Once the appropriate top-level candidates have been identified, the next challenge is to develop their potential. The most successful development efforts have three aims that take them well beyond the skill-building objectives of classic training programs: to inculcate a common vision and shared values; to broaden management perspectives and capabilities; and to develop contacts and shape management relationships.

To build common vision and values, white-collar employees at Matsushita spend a good part of their first six months in what the company calls “cultural and spiritual training.” They study the company credo, the “Seven Spirits of Matsushita,” and the philosophy of Konosuke Matsushita. Then they learn how to translate these internalized lessons into daily behavior and even operational decisions. Culture-building exercises as intensive as Matsushita’s are sometimes dismissed as innate Japanese practices that would not work in other societies, but in fact, Philips has a similar entry-level training practice (called “organization cohesion training”), as does Unilever (called, straight-forwardly, “indoctrination”).

The second objective—broadening management perspectives—is essentially a matter of teaching people how to manage complexity instead of merely to make room for it. To reverse a long and unwieldy tradition of running its operations with two- and three-headed management teams of separate technical, commercial, and sometimes administrative specialists, Philips asked its training and development group to de-specialize top management trainees. By supplementing its traditional menu of specialist courses and functional programs with more intensive general management training, Philips was able to begin replacing the ubiquitous teams with single business heads who also appreciated and respected specialist points of view.

The final aim—developing contacts and relationships—is much more than an incidental byproduct of good management development, as the comments of a senior personnel manager at Unilever suggest: “By bringing managers from different countries and businesses together at Four Acres [Unilever’s international management-training college], we build contacts and create bonds that we could never achieve by other means. The company spends as much on training as it does on R&D not only because of the direct effect it has on upgrading skills and knowledge but also because it plays a central role in indoctrinating managers into a Unilever club where personal relationships and informal contacts are much more powerful than the formal systems and structures.”

Career-Path Management

Although recruitment and training are critically important, the most effective companies recognize that the best way to develop new perspectives and thwart parochialism in their managers is through personal experience. By moving selected managers across functions, businesses, and geographic units, a company encourages cross-fertilization of ideas as well as the flexibility and breadth of experience that enable managers to grapple with complexity and come out on top.

Unilever has long been committed to the development of its human resources as a means of attaining durable competitive advantage. As early as the 1930s, the company was recruiting and developing local employees to replace the parent-company managers who had been running most of its overseas subsidiaries. In a practice that came to be known as “-ization,” the company committed itself to the Indianization of its Indian company, the Australization of its Australian company, and so on.

Although delighted with the new talent that began working its way up through the organization, management soon realized that by reducing the transfer of parent-company managers abroad, it had diluted the powerful glue that bound diverse organizational groups together and linked dispersed operations. The answer lay in formalizing a second phase of the -ization process. While continuing with Indianization, for example, Unilever added programs aimed at the “Unileverization” of its Indian managers.

In addition to bringing 300 to 400 managers to Four Acres each year, Unilever typically has 100 to 150 of its most promising overseas managers on short- and long-term job assignments at corporate headquarters. This policy not only brings fresh, close-to-the-market perspectives into corporate decision making but also gives the visiting managers a strong sense of Unilever’s strategic vision and organizational values. In the words of one of the expatriates in the corporate offices, “The experience initiates you into the Unilever Club and the clear norms, values, and behaviors that distinguish our people—so much so that we really believe we can spot another Unilever manager anywhere in the world.”

Furthermore, the company carefully transfers most of these high-potential individuals through a variety of different functional, product, and geographic positions, often rotating every two or three years. Most important, top management tracks about 1,000 of these people—some 5% of Unilever’s total management group—who, as they move through the company, forge an informal network of contacts and relationships that is central to Unilever’s decision-making and information-exchange processes.

Widening the perspectives and relationships of key managers as Unilever has done is a good way of developing identification with the broader corporate mission. But a broad sense of identity is not enough. To maintain control of its global strategies, Unilever must secure a strong and lasting individual commitment to corporate visions and objectives. In effect, it must co-opt individual energies and ambitions into the service of corporate goals.

Co-Opting Management Efforts

As organizational complexity grows, managers and management groups tend to become so specialized and isolated and to focus so intently on their own immediate operating responsibilities that they are apt to respond parochially to intrusions on their organizational turf, even when the overall corporate interest is at stake. A classic example, described earlier, was the decision by North American Philips’s consumer electronics group to reject the parent company’s VCR system.

At about the same time, Philips, like many other companies, began experimenting with ways to convert managers’ intellectual understanding of the corporate vision—in Philips’s case, an almost evangelical determination to defend Western electronics against the Japanese—into a binding personal commitment. Philips concluded that it could co-opt individuals and organizational groups into the broader vision by inviting them to contribute to the corporate agenda and then giving them direct responsibility for implementation.

In the face of intensifying Japanese competition, Philips knew it had to improve coordination in its consumer electronics among its fiercely independent national organizations. In strengthening the central product divisions, however, Philips did not want to deplete the enterprise or commitment of its capable national management teams.

The company met these conflicting needs with two cross-border initiatives. First, it created a top-level World Policy Council for its video business that included key managers from strategic markets—Germany, France, the United Kingdom, the United States, and Japan. Philips knew that its national companies’ long history of independence made local managers reluctant to take orders from Dutch headquarters in Eindhoven—often for good reason, because much of the company’s best market knowledge and technological expertise resided in its offshore units. Through the council, Philips co-opted their support for company decisions about product policy and manufacturing location.

Second, in a more powerful move, Philips allocated global responsibilities to units that previously had been purely national in focus. Eindhoven gave NAP the leading role in the development of Philips’s projection television and asked it to coordinate development and manufacture of all Philips television sets for North America and Asia. The change in the attitude of NAP managers was dramatic.

A senior manager in NAP’s consumer electronics business summed up the feelings of U.S. managers: “At last, we are moving out of the dependency relationship with Eindhoven that was so frustrating to us.” Co-option had transformed the defensive, territorial attitude of NAP managers into a more collaborative mind-set. They were making important contributions to global corporate strategy instead of looking for ways to subvert it.

In 1987, with much of its TV set production established in Mexico, the president of NAP’s consumer electronics group told the press, “It is the commonality of design that makes it possible for us to move production globally. We have splendid cooperation with Philips in Eindhoven.” It was a statement no NAP manager would have made a few years earlier, and it perfectly captured how effectively Philips had co-opted previously isolated, even adversarial, managers into the corporate agenda.

The Matrix in the Manager’s Mind

Since the end of World War II, corporate strategy has survived several generations of painful transformation and has grown appropriately agile and athletic. Unfortunately, organizational development has not kept pace, and managerial attitudes lag even farther behind. As a result, corporations now commonly design strategies that seem impossible to implement, for the simple reason that no one can effectively implement third-generation strategies through second-generation organizations run by first-generation managers.

Today the most successful companies are those where top executives recognize the need to manage the new environmental and competitive demands by focusing less on the quest for an ideal structure and more on developing the abilities, behavior, and performance of individual managers. Change succeeds only when those assigned to the new transnational and interdependent tasks understand the overall goals and are dedicated to achieving them.

One senior executive put it this way: “The challenge is not so much to build a matrix structure as it is to create a matrix in the minds of our managers.” The inbuilt conflict in a matrix structure pulls managers in several directions at once. Developing a matrix of flexible perspectives and relationships within each manager’s mind, however, achieves an entirely different result. It lets individuals make the judgments and negotiate the trade-offs that drive the organization toward a shared strategic objective.


Originally posted: https://hbr.org/matrix

3 Transitions Even the Best Leaders Struggle With

We love to read about the dynamics of success. We study it, celebrate it, and try to emulate how successful leaders rise to the top. I’m no different: I’ve spent my career helping executives succeed, either through coaching and development or assessments of their strengths and opportunity areas to identify the development work they need to do to take their careers to the next level. But even as I’m drawn to success stories, I have found that the greatest lessons come from examining failure.  For instance, my last research effort looked into how elite executives make a successful transition to the C-suite. As I worked through the interviews, I found that executives whose careers had been derailed shared many commonalities. Specifically, I found that C-suite executives are vulnerable to career failure when they are in the midst of one of three common transition scenarios.

1.The leap into leadership. The transition to the top team is demanding, with 50% to 60% of executives failing within the first 18 months of being promoted or hired. For instance, Gil Amelio was Apple’s CEO for less than a year in 1997, and General Motors’ chief human resources officer decamped in 2018 after just eight months in the job.  For some, this high-profile leadership transition is more than they bargain for. They are unprepared for the frantic pace or they lack the requisite big-picture perspective. (Sixty-one percent of executives can’t meet the strategic challenges they face in senior leadership.) This is an especially common risk for leapfrog leaders — executives one or two steps down in the organization who skip levels when they are elevated a top spot. But even the most seasoned executives have little transparency into looming team dysfunction or insurmountable challenges until they are actually in the role.

One veteran executive I know accepted a job reporting to the CEO only to find that her functional area had been mismanaged and was in serious financial disarray. She started to turn around its performance in year one, but her reporting structure was altered mid-stream, and she found herself accountable to the CFO. The new situation left her feeling “micromanaged,” and she moved on two years later.  The single best thing a new executive can do to avoid a brief tenure is to actively pursue feedback. Most undergo rigorous executive assessments prior to receiving an offer, but soon they are too occupied with the demands of the job to be introspective. Many benefit from in-depth 360-degree reviews at six to eight months and then again at 18 months. One division president I interviewed learned in her 360s that board members were skeptical of her abilities. To her credit, she did the difficult work of getting to know the board members better and put together a plan to actively win them over.  Overall, knowing the areas others think you need to grow allows you to get the support you need — executive coaching, finding a peer-mentor, or adjusting your team to round out your development areas. It also helps you assess whether you are fitting onto the culture or if you need to strengthen key relationships internally and externally.

2. The organizational transition. I would argue that nearly every organization today is either considering or enacting a transformation of some type. Even in this “change is the new normal” reality, high stakes transformations are highly risky for executives who fail to reinvent the organization or themselves fast enough.  Mergers, for instance, create instant overlap in executive roles, and redundant leaders can be swept out in waves. Just as often, leaders fail to read the tea leaves before a surprise executive succession and are left vulnerable when their allies exit. But by far the biggest derailer for executives during this transition is misinterpreting the need for change or getting on the wrong side of it. For example, Durk Jager stepped down as CEO of Proctor & Gamble in 2000, just a year and a half into the job, after roiling P&G’s conservative culture by taking on “too much change too fast.” More often, leaders are too slow to act or unwilling to get on board as a change effort gets underway. In 2009, for instance, GM removed its CEO, Fritz Henderson, because he was not enough of a change agent.  To survive organizational and industry shifts, leaders need to get ahead of change. They need to think about where they fit into the new order and find a way to have an impact. They also must overcommunicate with the CEO or board to make it clear where they stand on the need for change and how they will lead its implementation.

3.The pinnacle paradox. The last tricky transition that derails executives is the career pinnacle. C-suite leaders are at the apex of their careers. They have competed for years and achieved what they have been striving for: a spot on the top team. As a result, many experience a type of paradox: They are working harder than ever to succeed, but they don’t know what’s next in their career. In time, this uncertainty, combined with job stress, can lead to burnout. Executives I have coached sometimes hit the ceiling and feel “stuck” at the top. Whether they experience burnout or move on for another reason, the average tenure of C-suite leaders has been declining in recent years. According to one study, the median tenure for CEOs at large-cap companies is five years. The tenure for CMOs is even less: 42 months, according to Spencer Stuart.

Executives can take steps to either extend their tenure or prepare for what’s next in their career. As part of that, they need to rethink their relationship with sponsors. At this stage in their career lifecycle they may not need sponsors to create new opportunities for them, but they do need advocates, supportive peers, and career role models. C-suite executives can move on to lead in other organizations or they may eventually retire and do board work. Others may find like-minded partners and investors to launch their own venture. I’ve worked with younger executives, as well, who accept global assignments or move down in the organization to gain new experience — they move down with a plan to move up again later in a different functional role. Regardless of their future plan, C-suite executives who surround themselves with support and have a clear vision of their future, are more likely continue to succeed.

The capacity for reinvention is the single-most-important career attribute for executives today. Successful reinvention may look different for each of us, but if we do not attempt it, we are sure to fail.


Originally posted at  http://hbr.org/transition

“Thanks, but no thanks!”


Friends and family thank me during Memorial Day weekend (I served six years in the Navy.)  I have started responding “Thanks, but no thanks!”  The response probably seems a little strange, but on Memorial Day we honor those who died serving in the Armed Forces, on Veterans Day we honor those have served in the past, and on Armed Forces Day we honor those who are currently serving.




Here is an example of a service member who died in combat while serving others:

William H. Pitsenbarger wouldn’t receive the Medal of Honor until 2000, about 34 years after his death. Pitsenbarger joined the Air Force in 1962 and qualified for Pararescue. Eventually flying over 300 rescue missions in Vietnam, Pitsenbarger risked his life almost every day to save fellow service members.On April 11, 1966, Pitsenbarger was part of an operation involving two Huskies to rescue roughly half a dozen soldiers near Cam My. Pitsenbarger was lowered onto the ground and secured the wounded. Six soldiers were loaded and flown to an aid station, and the crews returned to evacuate the rest of the men. Pitsenbarger had remained with 20 who were left over, and when the returning helicopters took damage under small arms fire, Pitsenbarger waived them off.

For about 90 minutes, Pitsenbarger tended to the wounded with splints made out of vines and stretchers made out of saplings. He policed ammunition and dispersed it to the active survivors, then joined them with a rifle to fend off Viet Cong.  Later that night, Pitsenbarger was taken out by an enemy sniper. His body was found with a rifle and medkit still clutched in hands. Nine more soldiers made it back to safety that day.


“Courage is almost a contradiction in terms.  It means a strong desire to live taking the form of a readiness to die.” — G.K. Chesterton

Crayola and Minitab

The Color of Quality: How Crayola Uses Data to Deliver the Perfect Crayon

Here’s a brand-new box of 64 crayons. Pick your favorite shade, then color for as long as you like—and don’t be gentle! Now, look at the crayon. It’s still in one piece, and it even retains a decent tip. But that’s no surprise: it’s a Crayola crayon.

Crayola has been making crayons at its facilities in eastern Pennsylvania for more than 100 years, during which they have become the undisputed leaders in providing crayons and other colorful items children use to express their creativity. Everyone knows the name, but few recognize Crayola’s dedication to ensuring that the 2.2 billion crayons they make every year meet the highest standards.

Crayola relies on a data-driven culture of continuous improvement to enhance the quality of their crayons—not to mention their markers, paints, modeling clay, and other products—and they trust Minitab Statistical Software to analyze that data. “We start with the assumption that everything we do, we can do better,” explains Gary Wapinski, vice president of manufacturing. “And that’s why Minitab is key—it helps us understand the statistical analysis and lets the data reveal where we need to go.”

Crayola’s data-driven approach to solving problems really took off in 2007. That’s the year Pete Ruggiero, executive vice president of global operations, encountered an issue while visiting one of the company’s overseas locations. “I went into a shop and opened a box of our crayons, and some of the labels were coming off,” he recalls. “When I got back, I said ‘We’ve got to get this fixed,’ but there was a dispute about the source of the problem. We wound up doing an elementary Six Sigma project to resolve it.”

Data analysis showed that the adhesive didn’t consistently set properly when the labels were dry. Misting crayons as they went through the labeling machines solved the problem, and that project’s success prompted Crayola to expand the use of statistical methods. In 2008, the company’s initial wave of Six Sigma projects saved more than $1.5 million. Since then, 7 waves of Six Sigma green belts and 3 waves of black belts have completed projects, and all of them have analyzed their data with Minitab.

Hands-on Commitment—from the Top

Rich Titus, a Lean Six Sigma consultant and adjunct faculty member at Lehigh University, trains Crayola’s green and black belts and helps them keep projects on track. He credits Crayola’s leadership with providing the support necessary to initiate and sustain a successful continuous improvement program. “Executives are actively involved in selecting and approving projects, and we gather with project leaders to review their progress every few weeks,” Titus notes. “And even though those review sessions can last up to three hours, the executives aren’t replying to e-mails or stepping out to take phone calls—they’re engaged and asking questions about every project.”

Knowing their leaders take it seriously helps teams appreciate the importance of this data-driven methodology, says James Collins, manager of continuous improvement and Six Sigma at Crayola. “Project leaders need to be able to support their recommendations with data. Having an idea to make something better is great—but when you can prove it with charts and graphs and statistics, then you’ve got the foundation to make a change.”

Crayola’s rigorous, data-driven improvement projects help the company maintain and enhance the quality of their crayons—and they trust Minitab Statistical Software to analyze that data.

But Crayola’s leaders don’t just review improvement projects—they do their own. Wapinski’s most recent project saved a quarter of a million dollars. When the project began, highly experienced workers were assigned to oversee small teams of less experienced employees who placed arts and crafts components into kits. “I used Minitab to compare lines led by veteran employees with lines led by the less experienced workers themselves,” he says, “and found no differences in safety, efficiency, or quality. Paying skilled employees to lead these teams gave no benefits because the kit-assembly process is so limited. So we were able to move these skilled employees to areas where their experience has a real impact.”

Not surprisingly, many projects at Crayola contribute to the goal of making the perfect crayon. Company engineers used Minitab’s Measurement System Analysis (MSA) and Design of Experiments (DOE) tools to study the breaking strength of crayons—efforts that ultimately led to new standards and even the creation of a new crayon break-testing machine.

“We’ve made crayons for more than 100 years, but we didn’t have a reliable, consistent crayon strength measurement until now,” says Bonnie Hall, vice president for global quality and continuous improvement. “Every time we tested a formula change, we needed to break tens of thousands of crayons to know if we’d made a difference or not. Now it’s much faster and easier to evaluate how strong our crayons are.”

Root Causes and Real Solutions

Gary Wapinski witnessed many poor examples of data analysis before he joined Crayola. “I saw people spend more time trying to figure out how to come up with data that supported their thesis rather than letting the data reveal where they needed to go,” he says.

“Many people do not want to do the hard work of getting to the root cause of a problem. If a piece of equipment shuts down every three minutes, they’d rather just believe that we can buy a new machine to solve the problem. But if the root cause has to do with our processes, materials, or training our people, then a new machine won’t fix anything. I want to make real improvements, not fake ones, so combining disciplined problem solving with a powerful tool like Minitab is something I naturally gravitate toward.”

Analyzing data with Minitab helped Crayola engineers visualize how color and position within a mold affected the strength of their crayons’ tips.

Using Minitab sometimes turns conventional wisdom on its head—like the time a process was improved by reducing the line speed and cutting the crew from 10 people to 5. “Some people were convinced those changes would mean less output, but the capacity study in Minitab showed that we got the same output at a lower speed with half the labor,” says Wapinski. “Running the machine faster just introduced more downtime and scrap. What’s more, the people working the line were much happier, because they weren’t fighting to keep up with the machine at those higher speeds.”

Although their work may change, no one at Crayola has lost a job as a result of a quality project. “When we started this, employees wondered what we were doing, and whether their jobs would be going away,” Ruggiero says. “Now everyone understands that we’re investing in continuous improvement to increase our competitiveness and preserve jobs.”

Sustaining Improvements

Crayola wants these improvements to be sustainable, and project savings are rolled into the budget. “You can’t just make a PowerPoint and cite the dollars you’ve saved,” says Ruggiero. “We recalculate the standard cost of that process based on those savings, and then we deliver on those savings.”

The use of data also affects Crayola’s suppliers. For instance, the company partnered with a supplier to reduce the amount of defects in corrugated shipping cartons. “We really need perfect cartons,” says Hall. “If they have any warp at all, they don’t run through the automatic case packers.”

That project slashed $56,000 worth of defects to nothing in a single year—and when defects began to reappear, another benefit of paying close attention to the data became evident. “Routine analysis gave us a clear warning as soon as quality started failing, and we worked with the supplier to solve the problem much more quickly as a result.”

Crayola’s quality teams frequently turn to the Assistant menu in Minitab Statistical Software, which guides users through their analyses and provides clear, easy-to-understand results and graphs

A Culture of Data Awareness

Those involved in Crayola’s quality initiative know it’s a long-term effort. “You don’t flip a switch and suddenly you’re a great company,” says Wapinski. But data analysis using Minitab already is a part of everyday operations. Pareto charts, boxplots, hypothesis tests, control charts, and capability analyses are common sights.

“Minitab is a daily tool for managing and exploring our data,” says Hall. “And because we’re using Minitab, it’s much easier to communicate about business problems. There’s an expectation that you have a good understanding of your data, and that gets us to the root of the problem more quickly.”

Being able to analyze and act on data has transformed the way Crayola does business, and it benefits the entire operation. “It’s allowed us to concentrate resources where we can get the most bang for our buck,” Ruggiero says. “We’ve moved our culture from ‘When you have a problem, bury it,’ to ’We have a problem and we need to make it visible so we can solve it.’”




From Minitab Case Studies http://www.minitab.com/en-us/Case-Studies/Crayola/


ron palinkas ron palinkas grit grit https://www.entrepreneur.com/slideshow/300288There are a ton of qualities that can help you succeed, and the more carefully a quality has been studied, the more you know it’s worth your time and energy.
Angela Lee Duckworth was teaching seventh grade when she noticed that the material wasn’t too advanced for any of her students. They all had the ability to grasp the material if they put in the time and effort. Her highest performing students weren’t those who had the most natural talent; they were the students who had that extra something that motivated them to work harder than everyone else.  Angela grew fascinated by this “extra something” in her students and, since she had a fair amount of it herself, she quit her teaching job so that she could study the concept while obtaining a graduate degree in psychology at UPenn.  Her study, which is ongoing, has already yielded some interesting findings. She’s analyzed a bevy of people to whom success is important: students, military personnel, salespeople, and spelling bee contestants, to name a few. Over time, she has come to the conclusion that the majority of successful people all share one critical thing—grit.
Grit is that “extra something” that separates the most successful people from the rest. It’s the passion, perseverance, and stamina that we must channel in order to stick with our dreams until they become a reality.  Developing grit is all about habitually doing the things that no one else is willing to do. There are quite a few signs that you have grit, and if you aren’t doing the following on a regular basis, you should be.  You have to make mistakes, look like an idiot, and try again, without even flinching. In a recent study at the College of William and Mary, they interviewed over 800 entrepreneurs and found that the most successful among them tend to have two critical things in common: They’re terrible at imagining failure and they tend not to care what other people think of them. In other words, the most successful entrepreneurs put no time or energy into stressing about their failures as they see failure as a small and necessary step in the process of reaching their goals.
You have to fight when you already feel defeated. A reporter once asked Muhammad Ali how many sit-ups he does every day. He responded, “I don’t count my sit-ups, I only start counting when it starts hurting, when I feel pain, cause that’s when it really matters.” The same applies to success in the workplace. You always have two choices when things begin to get tough: you can either overcome an obstacle and grow in the process or let it beat you. Humans are creatures of habit. If you quit when things get tough, it gets that much easier to quit the next time. On the other hand, if you force yourself to push through it, the grit begins to grow in you.
You have to make the calls you’re afraid to make. Sometimes we have to do things we don’t want to do because we know they’re for the best in the long-run: fire someone, cold call a stranger, pull an all-nighter to get the company server back up, or scrap a project and start over. It’s easy to let the looming challenge paralyze you, but the most successful people know that in these moments, the best thing they can do is to get started right away. Every moment spent dreading the task subtracts time and energy from actually getting it done. People that learn to habitually make the tough calls stand out like flamingos in a flock of seagulls.
You have to keep your emotions in check. Negative emotions will challenge your grit every step of the way. While it’s impossible not to feel your emotions, it’s completely under your power to manage them effectively and to keep yourself in a position of control. When you let your emotions overtake your ability to think clearly, it’s easy to lose your resolve. A bad mood can make you lash out or stray from your chosen direction just as easily as a good mood can make you overconfident and impulsive.
You have to trust your gut. There’s a fine line between trusting your gut and being impulsive. Trusting your gut is a matter of looking at decisions from every possible angle, and when the facts don’t present a clear alternative, you believe in your ability to choose; you go with what looks and feels right.
You have to give more than you get in return. There’s a famous Stanford experiment where an administrator leaves a child in a room with a marshmallow for 15 minutes, telling the child that she’s welcome to eat the marshmallow, but if she can wait until the experimenter gets back without eating it, she will get a second marshmallow. The children that were able to wait until the experimenter returned experienced better outcomes in life, including higher SAT scores, greater career success, and even lower body mass indexes. The point being that delay of gratification and patience are essential to success. People with grit know that real results only materialize when you put in the time and forego instant gratification.
You have to lead when no one else follows. It’s easy to set a direction and believe in yourself when you have support, but the true test of grit is how well you maintain your resolve when nobody else believes in what you’re doing. People with grit believe in themselves no matter what and they stay the course until they win people over to their way of thinking.
You have to meet deadlines that are unreasonable and deliver results that exceed expectations. Successful people find a way to say yes and still honor their existing commitments. They know the best way to stand out from everyone else is to outwork them. For this reason, they have a tendency to over deliver, even when they over promise.
You have to focus on the details even when it makes your mind numb. Nothing tests your grit like mind-numbing details, especially when you’re tired. The more people with grit are challenged, the more they dig in and welcome that challenge, and numbers and details are no exception to this.
You have to be kind to people who have been rude to you. When people treat you poorly, it’s tempting to stoop to their level and return the favor. People with grit don’t allow others to walk all over them, but that doesn’t mean they’re rude to them, either. Instead, they treat rude and cruel people with the same kindness they extend to anyone else, because they won’t allow another person’s negativity to bring them down.
You have to be accountable for your actions, no matter what. People are far more likely to remember how you dealt with a problem than they are how you created it in the first place. By holding yourself accountable, even when making excuses is an option, you show that you care about results more than your image or ego.
Bringing It All Together
Grit is as rare as it is important. The good news is any of us can get grittier with a little extra focus and effort.
Dr. Travis Bradberry is the award-winning co-author of the #1 bestselling book, Emotional Intelligence 2.0, and the cofounder of TalentSmart, the world’s leading provider of emotional intelligence tests and training, serving more than 75% of Fortune 500 companies. His bestselling books have been translated into 25 languages and are available in more than 150 countries. Dr. Bradberry has written for, or been covered by, Newsweek, TIME, BusinessWeek, Fortune, Forbes, Fast Company, Inc., USA Today, The Wall Street Journal, The Washington Post, and The Harvard Business Review.

How to Handle Difficult People

Difficult people defy logic. Some are blissfully unaware of the negative impact that they have on those around them, and others seem to derive satisfaction from creating chaos and pushing other people’s buttons. Either way, they create unnecessary complexity, strife, and worst of all stress.

Studies have long shown that stress can have a lasting, negative impact on the brain. Exposure to even a few days of stress compromises the effectiveness of neurons in the hippocampus—an important brain area responsible for reasoning and memory. Weeks of stress cause reversible damage to neuronal dendrites (the small “arms” that brain cells use to communicate with each other), and months of stress can permanently destroy neurons. Stress is a formidable threat to your success—when stress gets out of control, your brain and your performance suffer.

Most sources of stress at work are easy to identify. If your non-profit is working to land a grant that your organization needs to function, you’re bound to feel stress and likely know how to manage it. It’s the unexpected sources of stress that take you by surprise and harm you the most.

Recent research from the Department of Biological and Clinical Psychology at Friedrich Schiller University in Germany found that exposure to stimuli that cause strong negative emotions—the same kind of exposure you get when dealing with difficult people—caused subjects’ brains to have a massive stress response. Whether it’s negativity, cruelty, the victim syndrome, or just plain craziness, difficult people drive your brain into a stressed-out state that should be avoided at all costs.

The ability to manage your emotions and remain calm under pressure has a direct link to your performance. TalentSmart has conducted research with more than a million people, and we’ve found that 90% of top performers are skilled at managing their emotions in times of stress in order to remain calm and in control. One of their greatest gifts is the ability to neutralize difficult people. Top performers have well-honed coping strategies that they employ to keep difficult people at bay.

While I’ve run across numerous effective strategies that smart people employ when dealing with difficult people, what follows are some of the best. To deal with difficult people effectively, you need an approach that enables you, across the board, to control what you can and eliminate what you can’t. The important thing to remember is that you are in control of far more than you realize.

They set limits. Complainers and negative people are bad news because they wallow in their problems and fail to focus on solutions. They want people to join their pity party so that they can feel better about themselves. People often feel pressure to listen to complainers because they don’t want to be seen as callous or rude, but there’s a fine line between lending a sympathetic ear and getting sucked into their negative emotional spiral.

You can avoid this only by setting limits and distancing yourself when necessary. Think of it this way: if the complainer were smoking, would you sit there all afternoon inhaling the second-hand smoke? You’d distance yourself, and you should do the same with complainers. A great way to set limits is to ask complainers how they intend to fix the problem. They will either quiet down or redirect the conversation in a productive direction.

They rise above. Difficult people drive you crazy because their behavior is so irrational. Make no mistake about it; their behavior truly goes against reason. So why do you allow yourself to respond to them emotionally and get sucked into the mix? The more irrational and off-base someone is, the easier it should be for you to remove yourself from their traps. Quit trying to beat them at their own game. Distance yourself from them emotionally and approach your interactions like they’re a science project (or you’re their shrink, if you prefer the analogy). You don’t need to respond to the emotional chaos—only the facts.

They stay aware of their emotions. Maintaining an emotional distance requires awareness. You can’t stop someone from pushing your buttons if you don’t recognize when it’s happening. Sometimes you’ll find yourself in situations where you’ll need to regroup and choose the best way forward. This is fine and you shouldn’t be afraid to buy yourself some time to do so.

Think of it this way—if a mentally unstable person approaches you on the street and tells you he’s John F. Kennedy, you’re unlikely to set him straight. When you find yourself with a coworker who is engaged in similarly derailed thinking, sometimes it’s best to just smile and nod. If you’re going to have to straighten them out, it’s better to give yourself some time to plan the best way to go about it.

They establish boundaries. This is the area where most people tend to sell themselves short. They feel like because they work or live with someone, they have no way to control the chaos. This couldn’t be further from the truth. Once you’ve found your way to Rise Above a person, you’ll begin to find their behavior more predictable and easier to understand. This will equip you to think rationally about when and where you have to put up with them and when you don’t. For example, even if you work with someone closely on a project team, that doesn’t mean that you need to have the same level of one-on-one interaction with them that you have with other team members.

You can establish a boundary, but you’ll have to do so consciously and proactively. If you let things happen naturally, you are bound to find yourself constantly embroiled in difficult conversations. If you set boundaries and decide when and where you’ll engage a difficult person, you can control much of the chaos. The only trick is to stick to your guns and keep boundaries in place when the person tries to encroach upon them, which they will.

They don’t die in the fight. Smart people know how important it is to live to fight another day, especially when your foe is a toxic individual. In conflict, unchecked emotion makes you dig your heels in and fight the kind of battle that can leave you severely damaged. When you read and respond to your emotions, you’re able to choose your battles wisely and only stand your ground when the time is right.

They don’t focus on problems—only solutions. Where you focus your attention determines your emotional state. When you fixate on the problems you’re facing, you create and prolong negative emotions and stress. When you focus on actions to better yourself and your circumstances, you create a sense of personal efficacy that produces positive emotions and reduces stress.

When it comes to toxic people, fixating on how crazy and difficult they are giving them power over you. Quit thinking about how troubling your difficult person is, and focus instead on how you’re going to go about handling them. This makes you more effective by putting you in control, and it will reduce the amount of stress you experience when interacting with them.

They don’t forget. Emotionally intelligent people are quick to forgive, but that doesn’t mean that they forget. Forgiveness requires letting go of what’s happened so that you can move on. It doesn’t mean you’ll give a wrongdoer another chance. Smart people are unwilling to be bogged down unnecessarily by others’ mistakes, so they let them go quickly and are assertive in protecting themselves from future harm.

They squash negative self-talk. Sometimes you absorb the negativity of other people. There’s nothing wrong with feeling bad about how someone is treating you, but your self-talk (the thoughts you have about your feelings) can either intensify the negativity or help you move past it. Negative self-talk is unrealistic, unnecessary, and self-defeating. It sends you into a downward emotional spiral that is difficult to pull out of. You should avoid negative self-talk at all costs.

They get some sleep. I’ve beaten this one to death over the years and can’t say enough about the importance of sleep to increasing your emotional intelligence and managing your stress levels. When you sleep, your brain literally recharges, so that you wake up alert and clear-headed. Your self-control, attention, and memory are all reduced when you don’t get enough—or the right kind—of sleep. Sleep deprivation raises stress hormone levels on its own, even without a stressor present. A good night’s sleep makes you more positive, creative, and proactive in your approach to toxic people, giving you the perspective you need to deal effectively with them.

They use their support system. It’s tempting, yet entirely ineffective, to attempt tackling everything by yourself. To deal with toxic people, you need to recognize the weaknesses in your approach to them. This means tapping into your support system to gain perspective on a challenging person. Everyone has someone at work and/or outside work who is on their team, rooting for them, and ready to help them get the best from a difficult situation. Identify these individuals in your life and make an effort to seek their insight and assistance when you need it. Something as simple as explaining the situation can lead to a new perspective. Most of the time, other people can see a solution that you can’t because they are not as emotionally invested in the situation.

Bringing It All Together

Before you get this system to work brilliantly, you’re going to have to pass some tests. Most of the time, you will find yourself tested by touchy interactions with problem people. Thankfully, the plasticity of the brain allows it to mold and change as you practice new behaviors, even when you fail. Implementing these healthy, stress-relieving techniques for dealing with difficult people will train your brain to handle stress more effectively and decrease the likelihood of ill effects.

Please share your thoughts in the comments section below, as I learn just as much from you as you do from me.



Dr. Travis Bradberry is the award-winning co-author of the #1 bestselling book, Emotional Intelligence 2.0, and the cofounder of TalentSmart, the world’s leading provider of emotional intelligence testsemotional intelligence training, and emotional intelligence certification, serving more than 75% of Fortune 500 companies. His bestselling books have been translated into 25 languages and are available in more than 150 countries. Dr. Bradberry has written for, or been covered by, Newsweek, BusinessWeek, Fortune, Forbes, Fast Company, Inc., USA Today, The Wall Street Journal, The Washington Post, and The Harvard Business Review

Want Collaboration?: Accept—and Actively Manage—Conflict



The challenge is a long-standing one for senior managers: How do you get people in your organization to work together across internal boundaries? But the question has taken on urgency in today’s global and fast-changing business environment. To service multinational accounts, you increasingly need seamless collaboration across geographic boundaries. To improve customer satisfaction, you increasingly need collaboration among functions ranging from R&D to distribution. To offer solutions tailored to customers’ needs, you increasingly need collaboration between product and service groups.  Meanwhile, as competitive pressures continually force companies to find ways to do more with less, few managers have the luxury of relying on their own dedicated staffs to accomplish their objectives. Instead, most must work with and through people across the organization, many of whom have different priorities, incentives, and ways of doing things.

Getting collaboration right promises tremendous benefits: a unified face to customers, faster internal decision making, reduced costs through shared resources, and the development of more innovative products. But despite the billions of dollars spent on initiatives to improve collaboration, few companies are happy with the results. Time and again we have seen management teams employ the same few strategies to boost internal cooperation. They restructure their organizations and re-engineer their business processes. They create cross-unit incentives. They offer teamwork training. While such initiatives yield the occasional success story, most of them have an only limited impact in dismantling organizational silos and fostering collaboration—and many are total failures. (See the sidebar “The Three Myths of Collaboration.”)

So what’s the problem? Most companies respond to the challenge of improving collaboration in entirely the wrong way. They focus on the symptoms (“Sales and delivery do not work together as closely as they should”) rather than on the root cause of failures in cooperation: conflict. The fact is, you can’t improve collaboration until you’ve addressed the issue of conflict.  This can come as a surprise to even the most experienced executives, who generally don’t fully appreciate the inevitability of conflict in complex organizations. And even if they do recognize this, many mistakenly assume that efforts to increase collaboration will significantly reduce that conflict, when in fact some of these efforts—for example, restructuring initiatives—actually produce more of it.

Executives underestimate not only the inevitability of conflict but also—and this is key—its importance to the organization. The disagreements sparked by differences in perspective, competencies, access to information, and strategic focus within a company actually generate much of the value that can come from collaboration across organizational boundaries. Clashes between parties are the crucibles in which creative solutions are developed and wise trade-offs among competing objectives are made. So instead of trying simply to reduce disagreements, senior executives need to embrace conflict and, just as important, institutionalize mechanisms for managing it.  Clashes between parties are the crucibles in which creative solutions are developed and wise trade-offs among competing objectives are made.

Even though most people lack an innate understanding of how to deal with conflict effectively, there are a number of straightforward ways that executives can help their people—and their organizations—constructively manage it. These can be divided into two main areas: strategies for managing disagreements at the point of conflict and strategies for managing conflict upon escalation up the management chain. These methods can help a company move through the conflict that is a necessary precursor to truly effective collaboration and, more important, extract the value that often lies latent in intra-organizational differences. When companies are able to do both, conflict is transformed from a major liability into a significant asset.

Strategies for Managing Disagreements at the Point of Conflict

Conflict management works best when the parties involved in a disagreement are equipped to manage it themselves. The aim is to get people to resolve issues on their own through a process that improves—or at least does not damage—their relationships. The following strategies help produce decisions that are better informed and more likely to be implemented.

Devise and implement a common method for resolving conflict.

Consider for a moment the hypothetical Matrix Corporation, a composite of many organizations we’ve worked with those challenges will likely be familiar to managers. Over the past few years, salespeople from nearly a dozen of Matrix’s product and service groups have been called on to design and sell integrated solutions to their customers. For any given sale, five or more lead salespeople and their teams have to agree on issues of resource allocation, solution design, pricing, and sales strategy. Not surprisingly, the teams are finding this difficult. Who should contribute the most resources to a particular customer’s offering? Who should reduce the scope of their participation or discount their pricing to meet a customer’s budget? Who should defer when disagreements arise about account strategy? Who should manage key relationships within the customer account? Indeed, given these thorny questions, Matrix is finding that a single large sale typically generates far more conflict inside the company than it does with the customer. The resulting wasted time and damaged relationships among sales teams are making it increasingly difficult to close sales.

Most companies face similar sorts of problems. And, like Matrix, they leave employees to find their own ways of resolving them. But without a structured method for dealing with these issues, people get bogged down not only in what the right result should be but also in how to arrive at it. Often, they will avoid or work around conflict, thereby forgoing important opportunities to collaborate. And when people do decide to confront their differences, they usually default to the approach they know best: debating about who’s right and who’s wrong or haggling over small concessions. Among the negative consequences of such approaches are suboptimal, “split-the-difference” resolutions—if not outright deadlock.

Establishing a companywide process for resolving disagreements can alter this familiar scenario. At the very least, a well-defined, well-designed conflict resolution method will reduce transaction costs, such as wasted time and the accumulation of ill will, that often come with the struggle to work through differences. At best, it will yield the innovative outcomes that are likely to emerge from discussions that draw on a multitude of objectives and perspectives. There is an array of conflict resolution methods a company can use. But to be effective, they should offer a clear, step-by-step process for parties to follow. They should also be made an integral part of existing business activities—account planning, sourcing, R&D budgeting, and the like. If conflict resolution is set up as a separate, exception-based process—a kind of organizational appeals court—it will likely wither away once initial managerial enthusiasm wanes.

Provide people with criteria for making trade-offs.

At our hypothetical Matrix Corporation, senior managers overseeing cross-unit sales teams often admonish those teams to “do what’s right for the customer.” Unfortunately, this exhortation isn’t much help when conflict arises. Given Matrix’s ability to offer numerous combinations of products and services, company managers—each with different training and experience and access to different information, not to mention different unit priorities—have, not surprisingly, different opinions about how best to meet customers’ needs. Similar clashes in perspective result when exasperated senior managers tell squabbling team members to set aside their differences and “put Matrix’s interests first.” That’s because it isn’t always clear what’s best for the company given the complex interplay among Matrix’s objectives for revenue, profitability, market share, and long-term growth.

Even when companies equip people with a common method for resolving conflict, employees often will still need to make zero-sum trade-offs between competing priorities. That task is made much easier and less contentious when top management can clearly articulate the criteria for making such choices. Obviously, it’s not easy to reduce a company’s strategy to clearly defined trade-offs, but it’s worth trying. For example, salespeople who know that five points of market share are more important than a ten point increase on a customer satisfaction scale are much better equipped to make strategic concessions when the needs and priorities of different parts of the business conflict. And even when the criteria do not lead to a straightforward answer, the guidelines can at least foster productive conversations by providing an objective focus. Establishing such criteria also sends a clear signal from management that it views conflict as an inevitable result of managing a complex business.

At Blue Cross and Blue Shield of Florida, the strategic decision to rely more and more on alliances with other organizations has significantly increased the potential for disagreement in an organization long accustomed to developing capabilities in-house. Decisions about whether to build new capabilities, buy them outright, or gain access to them through alliances are natural flashpoints for conflict among internal groups. The health insurer might have tried to minimize such conflict through a structural solution, giving a particular group the authority to make decisions concerning whether, for instance, to develop a new claims-processing system in-house, to do so jointly with an alliance partner, or to license or acquire an existing system from a third party. Instead, the company established a set of criteria designed to help various groups within the organization—for example, the enterprise alliance group, IT, and marketing—to collectively make such decisions.

The criteria are embodied in a spreadsheet-type tool that guides people in assessing the trade-offs involved—say, between speed in getting a new process up and running versus ensuring its seamless integration with existing ones—when deciding whether to build, buy, or ally. People no longer debate back and forth across a table, advocating their preferred outcomes. Instead, they sit around the table and together apply a common set of trade-off criteria to the decision at hand. The resulting insights into the pros and cons of each approach enable more effective execution, no matter which path is chosen.

Managers at Matrix spend much of their time playing the organizational equivalent of hot potato. Even people who are new to the company learn within weeks that the best thing to do with cross-unit conflict is to toss it up the management chain. Immediate supervisors take a quick pass at resolving the dispute but, being busy themselves, usually pass it up to their supervisors. Those supervisors do the same, and before long the problem lands in the lap of a senior-level manager, who then spends much of his time resolving disagreements. Clearly, this isn’t ideal. Because the senior managers are a number of steps removed from the source of the controversy, they rarely have a good understanding of the situation. Furthermore, the more time they spend resolving internal clashes, the less time they spend engaged in the business, and the more isolated they are from the very information they need to resolve the disputes dumped in their laps. Meanwhile, Matrix employees get so little opportunity to learn about how to deal with conflict that it becomes not only expedient but almost necessary for them to quickly bump conflict up the management chain.

While Matrix’s story may sound extreme, we can hardly count the number of companies we’ve seen that operate this way. And even in the best of situations—for example, where a companywide conflict-management process is in place and where trade-off criteria are well understood—there is still a natural tendency for people to let their bosses sort out disputes. Senior managers contribute to this tendency by quickly resolving the problems presented to them. While this may be the fastest and easiest way to fix the problems, it encourages people to punt issues upstairs at the first sign of difficulty. Instead, managers should treat escalations as opportunities to help employees become better at resolving a conflict.

At KLA-Tencor, a major manufacturer of semiconductor production equipment, a materials executive in each division oversees a number of buyers who procure the materials and component parts for machines that the division makes. When negotiating a companywide contract with a supplier, a buyer often must work with the company commodity manager, as well as with buyers from other divisions who deal with the same supplier. There is often conflict, for example, over the delivery terms for components supplied to two or more divisions under the contract. In such cases, the commodity manager and the division materials executive will push the division buyer to consider the needs of the other divisions, alternatives that might best address the collective needs of the different divisions, and the standards to be applied in assessing the trade-offs between alternatives. The aim is to help the buyer see solutions that haven’t yet been considered and to resolve the conflict with the buyer in the other division.

Initially, this approach required more time from managers than if they had simply made the decisions themselves. But it has paid off in fewer disputes that senior managers need to resolve, speedier contract negotiation, and improved contract terms both for the company as a whole and for multiple divisions. For example, the buyers from three KLA-Tencor product divisions recently locked horns over a global contract with a key supplier. At issue was the trade-off between two variables: one, the supplier’s level of liability for materials it needs to purchase in order to fulfill orders and, two, the flexibility granted the KLA-Tencor divisions in modifying the size of the orders and their required lead times. Each division demanded a different balance between these two factors, and the buyers took the conflict to their managers, wondering if they should try to negotiate each of the different trade-offs into the contract or pick among them. After being coached to consider how each division’s business model shaped its preference—and using this understanding to jointly brainstorm alternatives—the buyers and commodity manager arrived at a creative solution that worked for everyone: They would request a clause in the contract that allowed them to increase and decrease flexibility in order volume and lead time, with corresponding changes in supplier liability, as required by changing market conditions.

Strategies for Managing Conflict upon Escalation

Equipped with common conflict resolution methods and trade-off criteria, and supported by systematic coaching, people are better able to resolve conflict on their own. But certain complex disputes will inevitably need to be decided by superiors. Consequently, managers must ensure that, upon escalation, conflict is resolved constructively and efficiently—and in ways that model desired behaviors.

Establish and enforce a requirement of joint escalation.

Let’s again consider the situation at Matrix. In a typical conflict, three salespeople from different divisions become involved in a dispute over pricing. Frustrated, one of them decides to hand the problem up to his boss, explaining the situation in a short voice-mail message. The message offers little more than a bare acknowledgment of the other salespeople’s’ viewpoints. The manager then determines, on the basis of what he knows about the situation, the solution to the problem. The salesperson, armed with his boss’s decision, returns to his counterparts and shares with them the verdict—which, given the process, is simply a stronger version of the solution the salesperson had put forward in the first place. But wait! The other two salespeople have also gone to their managers and carried back stronger versions of their solutions. At this point, each salesperson is locked into what is now “my manager’s view” of the right pricing scheme. The problem, already thorny, has become even more intractable.

A few years ago, after a merger that resulted in a much larger and more complex organization, senior managers at the Canadian telecommunications company Telus found themselves virtually paralyzed by a daily barrage of unilateral escalations. Just determining who was dealing with what and who should be talking to whom took up huge amounts of senior management’s time. So the company made joint escalation a central tenet of its new organization-wide protocols for conflict resolution—a requirement given teeth by managers’ refusal to respond to unilateral escalation. When a conflict occurred among managers in different departments concerning, say, the allocation of resources among the departments, the managers were required to jointly describe the problem, what had been done so far to resolve it, and its possible solutions. Then they had to send a joint write-up of the situation to each of their bosses and stand ready to appear together and answer questions when those bosses met to work on a solution. In many cases, the requirement of systematically documenting the conflict and efforts to resolve it—because it forced people to make such efforts—led to a problem being resolved on the spot, without having to be kicked upstairs. Within weeks, this process resulted in the resolution of hundreds of issues that had been stalled for months in the newly merged organization.

Ensure that managers resolve escalated conflicts directly with their counterparts.

Let’s return to the three salespeople at Matrix who took their dispute over pricing to their respective bosses and then met again, only to find themselves further from an agreement than before. So what did they do at that point? They sent the problem back to their bosses. These three bosses, each of whom thought he’d already resolved the issue, decided the easiest thing do would be to escalate it themselves. This would save them time and put the conflict before senior managers with the broad view seemingly needed to make a decision. Unfortunately, by doing this, the three bosses simply perpetuated the situation their salespeople had created, putting forward a biased viewpoint and leaving it to their own managers to come up with an answer. In the end, the decision was made unilaterally by the senior manager with the most organizational clout. This result bred resentment back down the management chain. A sense of “we’ll win next time” took hold, ensuring that future conflict would be even more difficult to resolve.

It’s not unusual to see managers react to escalations from their employees by simply passing conflicts up their own functional or divisional chains until they reach a senior executive involved with all the affected functions or divisions. Besides providing a poor example for others in the organization, this can be disastrous for a company that needs to move quickly. To avoid wasting time, a manager somewhere along the chain might try to resolve the problem swiftly and decisively by herself. But this, too, has its costs. In a complex organization, where many issues have significant implications for numerous parts of the business, unilateral responses to unilateral escalations are a recipe for inefficiency, bad decisions, and ill feelings.

The solution to these problems is a commitment by managers—a commitment codified in a formal policy—to deal with escalated conflict directly with their counterparts. Of course, doing this can feel cumbersome, especially when an issue is time-sensitive. But resolving the problem early on is ultimately more efficient than trying to sort it out later after a decision becomes known because it has negatively affected some part of the business.

In the 1990s, IBM’s sales and the delivery organization became increasingly complex as the company reintegrated previously independent divisions and reorganized itself to provide customers with full solutions of bundled products and services. Senior executives soon recognized that managers were not dealing with escalated conflicts and that relationships among them were strained because they failed to consult and coordinate around cross-unit issues. This led to the creation of a forum called the Market Growth Workshop (a name carefully chosen to send a message throughout the company that getting cross-unit conflict resolved was critical to meeting customer needs and, in turn, growing market share). These monthly conference calls brought together managers, salespeople, and frontline product specialists from across the company to discuss and resolve cross-unit conflicts that were hindering important sales—for example, the difficulty salespeople faced in getting needed technical resources from overstretched product groups.

The Market Growth Workshops weren’t successful right away. In the beginning, busy senior managers, reluctant to spend time on issues that often hadn’t been carefully thought through, began sending their subordinates to the meetings—which made it even more difficult to resolve the problems discussed. So the company developed a simple preparation template that forced people to document and analyze disputes before the conference calls. Senior managers, realizing the problems created by their absence, recommitted themselves to attending the meetings. Over time, as complex conflicts were resolved during these sessions and significant sales were closed, attendees began to see these meetings as an opportunity to be involved in the resolution of high-stakes, high-visibility issues.

Make the process for escalated conflict resolution transparent.

When a sales conflict is resolved by a Matrix senior manager, the word comes down the management chain in the form of an action item: Put together an offering with this particular mix of products and services at these prices. The only elaboration may be an admonishment to “get the sales team together, work up a proposal, and get back to the customer as quickly as possible.” The problem is solved, at least for the time being. But the salespeople—unless they have been able to divine themes from the patterns of decisions made over time—are left with little guidance on how to resolve similar issues in the future. They may justifiably wonder: How was the decision made? Based on what kinds of assumptions? With what kinds of trade-offs? How might the reasoning change if the situation were different?

In most companies, once managers have resolved a conflict, they announce the decision and move on. The resolution process and rationale behind the decision are left inside a managerial black box. While it’s rarely helpful for managers to share all the gory details of their deliberations around contentious issues, failing to take the time to explain how a decision was reached and the factors that went into it squanders a major opportunity. A frank discussion of the trade-offs involved in decisions would provide guidance to people trying to resolve conflicts in the future and would help nip in the bud the kind of speculation—who won and who lost, which managers or units have the most power—that breeds mistrust, sparks turf battles, and otherwise impedes cross-organizational collaboration. In general, clear communication about the resolution of the conflict can increase people’s willingness and ability to implement decisions.

During the past two years, IBM’s Market Growth Workshops have evolved into a more structured approach to managing escalated conflict, known as Cross-Team Workouts. Designed to make conflict resolution more transparent, the workouts are weekly meetings of people across the organization who work together on sales and delivery issues for specific accounts. The meetings provide a public forum for resolving conflicts over account strategy, solution configuration, pricing, and delivery. Those issues that cannot be resolved at the local level are escalated to regional workout sessions attended by managers from product groups, services, sales, and finance. Attendees then communicate and explain meeting resolutions to their reports. Issues that cannot be resolved at the regional level are escalated to an even higher-level workout meeting attended by cross-unit executives from a larger geographic region—like the Americas or Asia Pacific—and chaired by the general manager of the region presenting the issue. The most complex and strategic issues reach this global forum. The overlapping attendance at these sessions—in which the managers who chair one level of meeting attend sessions at the next level up, thereby observing the decision-making process at that stage—further enhances the transparency of the system among different levels of the company. IBM has further formalized the process for the direct resolution of conflicts between services and product sales on large accounts by designating a managing director in sales and a global relationship partner in IBM global services as the ultimate point of resolution for escalated conflicts. By explicitly making the resolution of complex conflicts part of the job descriptions for both managing director and global relationship partner—and by making that clear to others in the organization—IBM has reduced ambiguity, increased transparency, and increased the efficiency with which conflicts are resolved.

Tapping the Learning Latent in Conflict

The six strategies we have discussed constitute a framework for effectively managing organizational discord, one that integrates conflict resolution into day-to-day decision-making processes, thereby removing a critical barrier to cross-organizational collaboration. But the strategies also hint at something else: that conflict can be more than a necessary antecedent to collaboration.

Let’s return briefly to Matrix. More than three-quarters of all cross-unit sales at the company trigger disputes about pricing. Roughly half of the sales lead to clashes over account control. A substantial number of sales also produce disagreements over the design of customer solutions, with the conflict often rooted in divisions’ incompatible measurement systems and the concerns of some people about the quality of the solutions being assembled. But managers are so busy trying to resolve these almost daily disputes that they don’t see the patterns or sources of conflict. Interestingly, if they ever wanted to identify patterns like these, Matrix managers might find few signs of them. That’s because salespeople, who regularly hear their bosses complain about all the disagreements in the organization, have concluded that they’d better start shielding their superiors from discord.


The situation at Matrix is not unusual—most companies view conflict as an unnecessary nuisance—but that view is unfortunate. When a company begins to see conflict as a valuable resource that should be managed and exploited, it is likely to gain insight into problems that senior managers may not have known existed. Because internal friction is often caused by unaddressed strains within an organization or between an organization and its environment, setting up methods to track conflict and examine its causes can provide an interesting new perspective on a variety of issues. In the case of Matrix, taking the time to aggregate the experiences of individual salespeople involved in recurring disputes would likely lead to better approaches to setting prices, establishing incentives for salespeople, and monitoring the company’s quality control process.

At Johnson & Johnson, an organization that has a highly decentralized structure, conflict is recognized as a positive aspect of cross-company collaboration. For example, a small internal group charged with facilitating sourcing collaboration among J&J’s independent operating companies—particularly their outsourcing of clinical research services—actively works to extract lessons from conflicts. The group tracks and analyzes disagreements about issues such as what to outsource, whether and how to shift spending among suppliers, and what supplier capabilities to invest in. It hosts a council, comprising representatives from the various operating companies, that meets regularly to discuss these differences and explore their strategic implications. As a result, trends in clinical research outsourcing are spotted and information about them is disseminated throughout J&J more quickly. The operating companies benefit from insights about new offshoring opportunities, technologies, and ways of structuring collaboration with suppliers. And J&J, which can now piece together an accurate and global view of its suppliers, is better able to partner with them. Furthermore, the company realizes more value from its relationship with suppliers—yet another example of how the effective management of conflict can ultimately lead to fruitful collaboration.

J&J’s approach is unusual but not unique. The benefits it offers to provide further evidence that conflict—so often viewed as a liability to be avoided whenever possible—can be valuable to a company that knows how to manage it.


Posted at: http://hbr.org/2005