Category: Management and Organization

“I hate to be managed. When someone tells me what to do, the hair on my neck bristles!”

This voice on my phone was not a frustrated millennial, blaming some boss who “doesn’t get it.” It was 53-year old Dominic Barton, Managing Director of McKinsey & Company since 2009, talking about organizational change at his firm.

I was interviewing the Canadian-born son of a religious missionary about the success he’s had in moving the global consulting firm towards more flexible and innovative ways of working with clients. With so many emerging community-style organizations in today’s socially-connected knowledge economy (platform models, ecosystems, networked volunteer movements, etc.), I was hoping to learn some relevant new ideas from his experience in the community of McKinsey partners.

McKinsey And Its Community Culture

Approaching its 90th anniversary, McKinsey is thriving today. Its over 1600 partners serve clients in 62 countries, across all regions, sectors and business disciplines. Under Barton’s leadership services and specialized expertise the firm offers has expanded considerably, well beyond what the firm has historically provided. McKinsey’s impact, top talent attraction, and financial results are now (quoting him) “better than ever before.”

McKinsey governs itself as a private partnership, with a distinctive and strong culture binding its members. If you join, you sign up for a tandem mission (impact for clients and developing excellent people), and a democratically elite set of values: integrity, transparency, making people successful, fact-based analysis, and “the obligation to dissent”— to get the best answers, and “do the right thing for clients and colleagues.”

The firm blends collaborative teamwork and competitive meritocracy, with members continuously assessed, up-or-out, for both performance and cultural fit. Partners share profits based on collective contribution. The McKinsey community has been compared, only half-jokingly, to the Jesuit Order.

The Two Sides Of Community Culture

At their best, community-style organizations like McKinsey can excite the aspirations of ambitious professionals. Like-minded relationships, common purpose, and shared ways of working drive higher performance and retain talent.

But organizational communities can have a darker side. Collective zeal and shared purpose may slip into self-satisfied groupthink. The organization can become resistant to new ways of thinking, because “that’s not the kind of community we are.”

Early in his first term as Managing Director, Dominic Barton feared this dark side was closing in on McKinsey.

Calling Out The Partnership

“We had become too internally focused, inflexible, and not keeping up with what our clients needed. We also were missing out on innovative organizations we should have been working with. Our own strategy reviews had argued the same, but implementation of our recommendations was barely one percent.”

In 2012 Barton addressed head-on the need for significant change at an all-partners’ conference in Berlin. Before the self-governing body politic, he seized the bully pulpit and challenged his colleagues to adapt more aggressively to what he and others saw as a dramatically new operating environment. He called on partners to spend more time working with clients; to be more mindful of emerging competitors; to deepen and extend a fuller range of McKinsey expertise in their service, also integrating more across McKinsey’s own internal boundaries; and to be more creative in arrangements for smaller companies and “non-traditional” opportunities.

“It was our effort to kick-start some really needed innovation. We’ve been working on it ever since.”

A Multi-Year Campaign

His remarks scratched the itch of many partners for some generational revolution. But the danger of continued inertia remained high. Dominic began what became a multi-year campaign to renew and transform the community. To do so, he had to figure out how to take charge without taking charge.

Through some trial and error, support from colleagues, and his own tough determination, Barton learned how to do that. He successfully sponsored, nudged, and mobilized progress against “the Berlin imperatives,” breaking taboos about “what we do and don’t do as McKinsey.”

New services were developed to create more hands-on and technologically-driven offerings in implementation support, operations, restructuring, digital, and data analytics. New kinds of talent and experienced hires were brought in to staff those. Experiments were launched and institutionalized around radically different team approaches and contracting arrangements with smaller and “non-traditional” clients. Personnel processes were modified to develop new people and ways of working. Nearly 30% of McKinsey’s current work today now comes from areas that did not exist in the firm even three years ago.

As McKinsey became more “modern,” it became more successful. The growth continues today.

Getting Help

Barton confesses how difficult the transformation has been. “In the early days the firm was really divided. We’d debate the changes at meetings and then the straw vote was always 51-49.  Also, I made so many mistakes along the way—but luckily had good help, from other partners and former Managing Directors like Ian Davis, Fred Gluck and Ron Daniel. Many, many people deserve credit for the good that’s come.”

I acknowledged the shared leadership but pressed Dominic about what he actually did as Managing Director to change the community.

Three themes and “lessons learned” emerged.

1. Engage the Community With Its Own Values–To Change Itself

Most McKinsey partners, like Dominic Barton, bristle to be told what to do. But if you engage them as fellow problem-solvers—and especially with values that everyone shares—bristling disappears. Brought into the process, the community rises to change itself.

Dominic sketched a few practices that explained more:

Relentlessly invoke mission: “Time and again when we got stuck about deciding whether to add a new service or change a process, I went back to our mission. Asking how it would increase our impact, and talent aspirations always clarified the choices.”

Assert a point of view that dares the community to do better. “The Berlin speech worked because I laid out some bold and provocative assertions, as if I were presenting to a client. Our firm likes to learn from hypothesis-driven problem-solving. Leadership flows from a point of view, and pushing for excellence– it starts people working together to find the best answer.”

Build ownership through co-creative conversation. “Nobody here wants to read a memo from me. You have to go belly-to-belly, work on solutions with people in person.”

“We built momentum after Berlin in a series of ‘Performance and Health Conversations’—groups of partners in open, problem-solving dialogues about why and how we had to do better with our services, and what it would take. Later a large group of partners worked together on updating our overall firm description, ‘McKinsey Today.’ By design, the narrative of who we are as a firm has been cooperatively shaped.”

Promote new practices and innovation, but let the internal market adopt the best ideas: “Rhetoric about change is useless. Better to showcase something that’s working in India, say, and see if it can also take root in Copenhagen. I travel all the time, simply sharing what’s being done elsewhere and learning from the different local practices. And coaching and helping leaders who are trying to make change in their practices or regions.”

“We also launched several experimental practices and engagement approaches. Some have petered out, but others took off. If something new adds value, partners are happy to adopt it from their peers.”

Build change into the self-governance of the community. “Our most critical processes are about self-governance: who will be a partner, and how partners participate in the firm’s decision-making. We are constantly working on that; it’s how we shape the direction of who we want to be, as we evolve.”

“We have a major task force now wrestling with how to restructure governance to accommodate the new talent and modes of working, while still honoring our values. As we grow bigger and more diverse, we have to embrace the good complexity and minimize the bad.”

2. Be Both Part Of And Apart From The Community.

The second theme of Dominic’s change leadership is to adopt a “dual mindset”—think like an equal but also like a first-among-equals.

A community leader promoting change faces a fundamental dilemma: how to maintain the credibility of “being a member”, but also sometimes rise higher—taking appropriate leadership that can rally others when needed.

Barton explained his own dual identity of the last several years—as working partner and Managing Director. Here again, some lessons applicable to any leader:

Personalize the Opportunities and Risks: “I wake up frequently just thinking: ‘What God-given right do we have to be successful? What do we need to do to keep winning?’ As a partner I don’t want us to fail, and as a leader even less so. I constantly try to bring the same attitude I have about my own professional ambition to the overall firm.”

Remain a practicing member of the community: “I can’t do the same consulting load as before. But I’ve made a point of staying involved with clients, helping out teams with new proposals, and attending practice meetings as a substantive contributor. You need the credibility of being a practitioner to influence practitioners. I have to ‘be the change’ I want others to be too.”

Influence others by helping them: “I find that working with someone on actual problems puts me in a better position to help them think differently. People are more open to new ideas if it you’re working together side by side. Much of my job is simply building social capital across the firm.”

3. Go Big When You’re Feeling Most Small

Dominic also identified a third theme, as we closed our conversation: having the courage to challenge the community early on, to take action you see as needed—even though you’re  insecure as a new leader. The window of opportunity will close more quickly than you realize.

“In the early years I felt really nervous. I was untested and I’m sure there were lots of partners thinking, ‘What’s so special about this guy?’ And yet the beginning is when you have the greatest opportunity to change a direction. In Berlin I pushed to be as forthright and strong as before I was named Managing Director.”

“Looking back, I wish I had been even bolder. There’s a cycle of leadership in a limited term. The more competent you become, the less time you have to exercise the authority you’ve earned.”

Barton finished with some self-aware humility. “When I think about all the change we’ve made during my time, and the disruptions and taboos broken, if I were another partner here, I might actually be thinking ‘I hate Dominic Barton.’”

But of course his partners don’t hate him at all. They’ve elected him three times as their leader, and have worked with him and each other to remake the firm– as he challenged them to do in 2012. He retires as Managing Director in 2018, doubtlessly leaving this particular community better off than he first found it.

Originally published on Forbes.com

Venture investor Marc Andreessen famously wrote “software is now eating the world”— encoded intelligence dominates business. A new book (Platform Revolution) wants to update the slogan. Author Sangeet Choudary (and co-authors, Geoffrey Parker and Marshall Van Alstyne) think the new omnivore is really “the platform:” the digitized, open and participative business models creating commercially connected ecosystems of producers and consumers. The networks and markets forming around—and orchestrated by– Google, Airbnb, Uber, and other virtual exchange enterprises are the maws into which traditional companies are now disappearing.

Understanding The Juggernaut

The tantalizing leap of this book is its focus on a broader pattern of technology-enabled value. The revolution the authors sketch goes beyond algorithms (Google), “on demand” resources (Uber), or “sharing economy” databases (Airbnb). It’s all of the above and more.  Clever software is the core of every platform business, but the book argues that the real juggernaut isn’t the code; it’s the explosively scalable network processes that are disrupting traditional buy-make-sell competition.

Platforms beat old-fashioned “pipe businesses” (as the book calls them) by building new growth markets and innovating communities beyond the boundaries of their central hubs. While taxi companies and Marriott struggle to market assets they own, Uber and Airbnb are expanding into unbounded universes, joining ever more producers and customers. Google’s platform links an infinite supply of people looking for answers to a near infinite supply of advertisers eager to sell into those needs. Platforms win, not just by facilitating such new interactions, but also by aggregating and analyzing the data of it all — so everybody out there gets better at demanding and providing services to one another. It’s a tsunami of monetized organizational learning and adaptation, facilitated across networks of networks.

Probing The Nature Of The Revolution

Platform Revolution does plenty pitchfork-waving, but also offers sober advice for how to get with the transformation. It’s a well-illustrated learning tour of the economics and social dynamics of winning (and occasionally failed) platform businesses.

I spoke recently with Sangeet Choudary about the book, and the wider research that’s earned him a place as a Top50 Thinker. Six insights from our conversation:

Looking Back

1. We’ve seen platforms before—but now, “this time is different.”  “Platform” is not a brand-new idea. Consider, for example, the 1957 “corporate strategy vision” of Walt Disney, diagramming how his creative studio would produce characters and stories to fuel (and be fueled by) a web of businesses in television, music, theme parks, publishing and merchandise.

The authors acknowledge such antecedents but argue we’re now in a whole new game.

Sangeet explained: “Global network infrastructure now allows for much larger scale aggregation, no longer dependent on physical exchange. Markets and other forms of virtual value creation are more dynamic and open than before, and increasingly self-governing—not controlled by contracts or central enforcement. Value itself is more democratized—consumers can be producers and vice versa: you can become an Airbnb provider, but also use the service for yourself when you travel. Finally, the explosion of data, and its use by platform businesses to keep learning is perhaps most significant. Uber, for example, is not just matching rides to travelers, but increasingly predicting and even structuring demand by algorithms that rebalance supply of available cars. Business models are bigger, more virtual, more dynamic, and more intelligent than ‘platforms’ of the past.”

2. Platform value derives from creating scalable, complementary kinds of connections: markets, ecosystems, and communities. Much platform discussion treats markets and ecosystems as interchangeable ideas; and inevitably “community” is another invited guest at the conceptual table. I came away from Platform Revolution wondering if we  don’t need more semantic precision. I posed the question to Sangeet.

“Good question and yes, our book could have been a bit clearer about the relationships among these terms. Platforms create an exchange of value enabled by technology, and the market is comprised of participants making the exchange. The ecosystem is something larger. The overall value of a platform usually requires other players too, e.g., developers who build tools to operationalize the exchange. For Twitter, the platform market is comprised of tweet creators, tweet readers, and advertisers. Its ecosystem would also include developers working on, say, the search function for the platform.”

But What About “Community”?

“Value exchange based on markets depends on incentives, and we think about it in economic terms. But there are two additional elements to the model. Platforms also have codes and cultures; these ultimately shape what becomes a community. Codes are rules of conduct that mediators enforce for operating in the market. Culture is more emergent. It grows out of values and practice as the market and ecosystem mature. It’s more difficult to control; and also (as seen with Reddit and Twitter), the culture of the community can sometimes turn against the platform itself.”

So if culture and community are important, but difficult to control, what’s a good platformer supposed to do?

“We’ve seen that different platforms have different degrees of dependence on community. When market exchange is more commoditized—like Uber or Lyft providing taxis to customers—strategy calls for managing economic incentives. But when a business is more individualized and varied, say apartments in Airbnb or craft sales in Etsy, strategy demands more attention to culture across the markets and ecosystem.”

Looking Ahead

3. Platform strategy is evolving towards a second phase of issues, as the concept matures. Sangeet noted how many traditional companies trying to migrate to platform growth often fail: “The first phase is making markets and exchange work. Companies stumble either by pursuing only incremental changes to their traditional business, or by not fully embracing a big enough ecosystem to create new value.”

OK, I said, but what about longer term?

“Brand will become more important, because ultimately differentiation will move beyond creating efficient market connections, towards overall end-to-end experience. For example, Airbnb has to compete long term on that, and not just matching people with nice apartments. That leads back to questions of culture. Over time, even for some businesses that are initially commoditized, community will start to matter more.”

I asked if, given the inevitable competition as platforms like Uber and Lyft go head to head, “winning the game” will become just a new version of Michael Porter’s classic framework of forces and competitive advantage.

“Yes and no,” Sangeet offered. “Some platform ecosystems will competitively differentiate themselves, e.g. Vimeo co-exists with YouTube by providing a different experience and tool set.  More directly competitive ecosystems will try to close off their rivals—but the fight will turn on controlling demand (actors making the value exchange) whereas traditionally, in the Porter model, it was about controlling supply. For example, in earlier times, your advantage as an oil company was controlling the sources of crude. Today, platform businesses have to try to gain an edge with people offering and buying services. Maintaining that advantage within an ecosystem is much more difficult. An ecosystem can turn against you—as happened with Samsung and Google/Android. That doesn’t happen with an oil field you own.”

The New Oil

4. Watch for competitive battles in the future about data ownership and value. Speaking of bubbling crude, the book reminds us that “data is the new oil.” Sangeet emphasized some further implications about this dimension of the platform revolution.

“Data will become more of a regulatory issue—because members of ecosystems are essentially subsidizing the collection of—and learning from—data as they participate in platform work. Uber drivers, for example, provide huge amounts of data as they drive around—looking for customers, paying for their own gas as they go. We’ll see more pressure for sharing the benefits of aggregated data.”

“There will also be continuing global political issues about data. Some platform companies may end up knowing more about citizens of a country than the country itself. That’s one of the reasons China is so adamant about maintaining firewalls around its businesses.”

Whither Leadership?

5. Platforms require a different kind of leadership—attuned to the cultures and governance of the ecosystems they are shaping. My only real critique of this otherwise compelling book was its sometimes bloodless analysis—not enough discussion of people and leaders. Sangeet acknowledged the gap—“remember, Brook, it was two economists and a computer scientist collaborating here”—but he rose to my challenge with a few helpful observations.

“Leaders in platform businesses have to learn not to think of people in their ecosystems like  numbers in a traditional market analysis. For many leaders that’s hard to do.  Future strategy will call for adapting to ecosystems  what best firms  now do internally—focus on emerging high performers for extra development, and manage others with more cultural incentives.”

“There’s also a leadership skill we see emerging in platform companies, about deciding ‘what’s inside, what’s outside’—judging what work should get done at the core of the business, and what belongs out in the ecosystem. It’s not about cost, but more the best way to create value and experience overall: who contributes what to that, where do they sit?”

“New questions will also arise as more tools and infrastructure allow ecosystems to become truly self-governing. Firms, as we know them today are, at least medium term, not going to disappear—but they are starting to shrink in size, as platform models become more important. The next phase of this revolution will raise a whole new set of leadership issues.”

Originally published on Forbes.com

In 2008 Jim Whitehurst abandoned the comfortable hierarchy of Delta Airlines for the freedom-loving culture of Red Hat. Before long, he grasped that the ethos of his new technology company mirrored the spirited communitarianism of the open source Linux movement on which Red Hat depended. CEO in name, but now facing a different game: Whitehurst saw his success would require (as I wrote last August) unlearning command and control.

The leader took the challenge to heart and since then has been pursuing a personal  transformation: fewer executive prerogatives and more “igniting and catalyzing” the raucous tribe of open source enthusiasts at Red Hat. Last spring he published his memoir-cum-exhortation for lessons learned, seven years in: The Open Organization. The book was a paean to a new kind of leadership, suited to our ever more competitive and connected age.

Refining The Secret Sauce

Whitehurst’s story found a ready audience among other leaders eager to transform their own businesses by “becoming more open.” This CEO’s clarion call, backed by the company’s  continuing strong financial performance, began to sound as if a new secret sauce was cooking at Red Hat. A few weeks ago I asked  if we could lift the lid off the pot, and have another look. Had Jim’s post-publication experience led to any new ideas? Improvements? Recantations?

To Whitehurst’s credit, he has always acknowledged his Red Hat leadership journey as a “work in progress.” As I listened to his reflections of the past year, I heard a leader fine-tuning the gentle schizophrenia of the network age: how to be in charge without being in charge? In search of the Open-ish Organization.

Six Insights

1. The greatest value of an open organization is fostering innovation and enabling change. The Red Hat CEO is more clear than ever that open organizations are a strategic response to business disruption. He cited a recent McKinsey study highlighting the large gap between today’s leaders’ perceived need for innovation and their companies’ abilities to transform themselves to deliver it. “This approach is not just about ‘holding hands’ or ‘creative class’ situations. Even traditional manufacturers are under pressure now to innovate. The opportunity to work open is less about collaboration per se than facing the need for change coming into your company. Hierarchies are not responsive enough for managing and adapting to change.”

2. The open leadership challenge is building culture that blends accountability and efficiency with creative and frontline freedom. Whitehurst was equally clear that hierarchy still has its place in the world: “Bureaucracies can get bloated, but they remain good for driving down accountability. The trick is building an organization that maintains the accountability while also encouraging freedom and debate.”

Whitehurst stressed that Red Hat’s open model is in fact a hybrid. “The book should have brought out the combination of accountability and freedom more clearly. Even when I was at Delta our rise from ‘worst to first’ was based on complementing front-line empowerment with top-down management of results. There are some things like safety which shouldn’t be debated after a certain point. At Red Hat we do have people in control. For example, we deliver mission-critical software security that requires high integrity and accountability. We might explore different approaches in our community for securing a system of a nuclear submarine or a major bank, but once we decide, we settle—and expect everyone to follow along.”

Jim began to sketch the bigger pattern. “Red Hat does have a CEO and a chain of command. We use open culture and networks to innovate and develop strategy, and a top-down hierarchy to deliver quarterly results. There’s ultimately a continuum that every company has to consider. Where they fall on a spectrum of efficiency versus agility and being able to change—that’ll determine how open they should be. But even the most staid companies will need some combination—because everyone has to innovate at some level today. And yet they also need to deliver quality products. The book should have been more articulate about finding the balance. The open leader has to manage the inevitable friction points between the two sides of this kind of culture.”

Management, Leadership, Or Both/And?

3. Open requires rethinking “management” vs. “leadership.” The Red Hat CEO implied finding such a balance means abandoning the historical split between “management” and “leadership.” He began with the analogy of the behavioral revolution in economics. “For years that discipline was based on simplifying assumptions that people were rational. All economists then built models around that. It was imperfect, but you could do the math. Today economists are embracing human emotion and revolutionizing their theories accordingly. There’s not yet a universal science because the math of behaviorism is too hard. But we’re understanding more and more that emotions are part of what drives markets.”

“In the last century the ‘science’ of management began with similar simplifying—but imperfect–assumptions: that people would be rational in the workplace. The idea evolved that leadership was different, primarily for motivation and inspiration—tapping into emotions, getting people to want to do things. By contrast, management was about rational coordination. So we started to have different disciplines dedicated to leadership and management.”

“I wanted to write the book because the Red Hat culture is about bringing both leadership and management to scale—and doing that means also bringing them together. Communities have to be inspired and motivated, but also coordinated for results. In an open organization you can’t separate leadership from management. I would emphasize this more if I wrote another book.”

Shaping A Hybrid Culture

4. Focus, tools and techniques can shape the hybrid culture. Jim Whitehurst acknowledged that “it can be fuzzy how accountability gets grooved in an open organization—so I spend a lot of time thinking, talking, and memorializing how to make our culture work. It can be hard to learn, for new people coming in.”

As I questioned further, he mentioned a few mechanisms Red Hat has been developing, to clarify ownership and expectations in a company that also celebrates dialogue and autonomy. “We just published an ‘open decision-making framework.’ As we get bigger, we wanted to document and promote best-in-class approaches to making decisions using open principles, without getting pulled into consensus thinking. Our decisions are inclusive, but not democracy.”

Cultural Multipliers

“We’re also now trying to measure the ‘Red Hat multiplier effect’—specific ways our cultural values contribute to performance: collaboration, trust, etc. But we need to get crisper. We’re also beginning to measure why it is certain people make a positive difference to a team, even if they themselves aren’t the biggest star. It’s similar to what’s been discovered about Duke basketball player Shane Battier—whenever he’s on the court the team overall performs better–but he’s not the top scorer.”

5. For most organizations, moving to open will be a gradual transformation. Since his book’s publication, Whitehurst has been questioned about how to create the open organization culture in other enterprises. Emphasizing the transformational challenge for any company, he’s brainstormed with other leaders about possible accelerating strategies, e.g. “employee surveys or other bureaucratic jiu-jitsu that actually uses hierarchy for employee engagement. In the end, however, energy needs to come bottom up. And culture building is always a long process.”

He pivoted to another analogy. “The reason the U.S. legal system is so good is because it’s evolved through hundreds of years of case law. You can top-down mandate something like the Napoleonic Code—but it’s not going to be as durable or engaging as ours.”

Watching For Movement

6. The rising influence of technology in all businesses is now the likeliest driver of a broader “open organization” movement.

So is there an open organization movement actually building now? Whitehurst paused.

“Not really yet. I see a lot of companies doing this here and there,  in pockets. But we don’t have a long list of other examples so far. Remember, it’s hard to do this at scale. That’s what’s been distinctive about Red Hat. ”

But The Open Organization author finished with a few buoyant thoughts. “Remember, I had the benefit of being thrown like a frog into the boiling water when I came to Red Hat. I had to start quickly, though I soon saw the process itself would be long. But as technology becomes ever more central to companies, and the disruptions and pressure for change and innovation continue, I think open-style culture will become more mainstream, and spread to more businesses. It’s not restricted to technology, but will likely began in that part of large enterprises.”

“We’re already seeing that in some of our clients, and also competitors. The movement will expand,  most likely following the open source philosophy itself: ‘start small, iterate, and grow from there.’”

Frogs everywhere, please note.

Originally published on Forbes.com

The U.S. Department of Labor marks today’s holiday to honor “the contributions workers have made to the strength, prosperity, and well-being of our country.” It’s also a chance for us to look ahead—about the future challenges of workplaces and human capital. What are the labor-related issues that leaders will face in September 2025?

Of course, nobody knows. But it’s a reasonable guess that today’s debates, about the roles and meaning of human work in a networked, knowledge economy, will become even more significant in the next ten years. That’s because a blurring of boundaries—both physical and conceptual— is forcing a rethink for every leader about how people work together to create value.

Here are four issues that might help shape your own leadership thinking about labor and work in the future:

1. Where Does The Organization End—Or Begin?

When work is outsourced, contracted, or developed through open innovation competition, can you—should you—treat the people who are making the contribution as part of the organization? What does ever-more distributed labor and production mean for leaders “taking charge” and “taking care” of workers?

Regulators are raising their hands with a few new answers: some distributed production may not absolve a company of labor responsibility. The recent “joint employer” ruling of the National Labor Relations Board, reinforced the right of unionized workers of contractors (e.g. of a cleaning service) and franchises (e.g. of a local MacDonald’s) to bargain with the contracting or “parent” company. Similarly, several “Gig Economy” and “platform” companies (Uber, Lyft, et al) are now involved in litigation about whether their independent contributors should be treated (and compensated, with comparable benefits) as legal employees. Their right to unionize is also in the courts.

Whether you believe all this is an overdue rebalancing of power between workers and management, or yet another economic burden on capitalist entrepreneurialism, it’s one more indication that enterprises are becoming extended, more fluid, and networked. Blurring organizational boundaries are challenging traditional assumptions about management control and responsibility for workers—especially beyond the periphery of a company.

Expect the debate about where “the organization ends” to become only more ferocious. Global competition and the flexibility desired by workers will drive more experimentation about how extra-mural talent is recruited, motivated and deployed. Leaders will become more creative. Labor will too. Lawyers will be busier.

2. Does Automation Replace—Or Extend—Human Work?

Since the Industrial Revolution, debates have raged about whether machines should replace human work (lower costs, destroy jobs?) or enhance it (increased productivity, shifting from brawn to brains?).  With new network-based communication and sophisticated robotics, the answer increasingly seems to be “both/and”: more work is being automated and interconnected, but, with that, human contribution is also reaching higher levels of performance.

Researchers are now studying how to further optimize the man/machine relationship, so-called  “augmentation strategies.” They are probing mechanical, economic and even social dimensions of how machines and people working together can achieve breakthrough productivity and innovation. As “tools become teammates”, and the human/machine boundary blurs, the old debates are transforming: now it’s how to ensure that both elements augment each other?

3. Do People Work To Live–Or Live To Work?

In an era of wide-spread unemployment and slow wage growth, getting a paycheck remains a major motivation for people work. But workforce research increasingly shows that’s not enough to spur the enthusiasm that high performance requires. Most organizations face a steep climb here: Gallup’s annual workplace survey reports that 90% of workers are either “not engaged” or “actively disengaged” from their jobs.

Today’s leaders are partly to blame.  Many still structure work as if nobody really wants to be in a job—employees are monitored, reviewed, and nudged along with rewards and punishments like trained circus animals. The passion of human endeavor is not seen as an appropriate part of office life.

But many other leaders are now thinking differently. Hastened by growing professionalism, mission focus, and broadening social consciousness in workplaces, leading organizations like Zappos, USAA, Whole Foods have been focusing on job satisfaction and sense of purpose as important sources of organizational motivation.  More generally, today’s younger generation of workers wants to blur work-life boundaries, and combine personal and professional goals. They want to work more freely, earning a wage but also fulfilling ambitions to contribute to the world.

The Gallup results are not necessarily at odds with these trends; the disengaged numbers may simply reflect that most of today’s work is still not designed to help people “bring their whole person” to deliver the best performance possible. But workplace innovation is underway. Experiments with cross-boundary strategic communities, social volunteer work and inter-organizational learning are now addressing many workers’ desires to grow and find more meaning in what they do. Expect more of this in coming years.   

4. Is Every Worker An Employee—Or A Leader?

Thirty years ago, corporate leadership development programs were reserved for higher pay-grade managers: people with senior titles ready to become a next level up leader in the organization. As organizations have become flatter, and work more knowledge-oriented, the pay-grade requirements for leadership development are also blurring. Leadership programs are now being offered at multiple levels of organizations; and the language and culture of leadership more generally has become democratized. “Leadership” is no longer about title—it’s about initiative, identity, judgment, and values—personal qualities and skills that anyone can develop to create value for the organization. Open-style and collaborative organizations in fact expect people to be growing constantly and taking responsibility whenever required: “Everyone a leader.”

As boundaries between organizations also blur, and enterprises invest in crowd-sourcing, networked communities, and more open approaches to finding talent and innovation, leadership itself will become more situational and distributed. Meritocracy, not position or structure, will define authority; and leaders will increasingly rotate, sharing  responsibility with others, depending on task.

***

In September 2025, chances are we’ll all still celebrate Labor Day. But the labor we’ll be celebrating then may not be something we recognize today. Embrace the change!

[Note: minor updates were made to this post on September 8th–primarily URL links added in various places of the text.]

Originally published on Forbes.com

Dad needs a coronary bypass operation—and you’re helping him choose between two local hospitals. You discover  both have about the same history of patient deaths per 100 procedures performed. You further learn that, at Hospital A, most recent bypass-related deaths were performed by a few apparently sub-par surgeons. You’re comforted they’ve been asked to leave the hospital.

Hospital B shows a different pattern of surgical outcomes. Patient deaths there were not concentrated among any group of  surgeons. Negative incidents were more widely distributed in the general rotation, with no discernible clustering of failure. Hospital B did not systematically dismiss “the few erring cardiologists,” but instead pursued a broader practice improvement program to enhance evidence-based protocols, training, and multi-disciplinary quality committees.

So Where Do You Send Dad For His Operation? 

First take, you might choose Hospital A: decisive leadership identified the physicians responsible and moved them out. And who knows about Hospital B?  Mistakes were more random there–how can you be sure that Dad won’t just be unlucky and be some doctor’s next operation mistake?

Oddly, Hospital B may be the better bet. Thus argues a new research study by Vinit Desai, an associate professor of management at the University of Colorado Denver (available in the current  Academy of Management Journal) .

Desai studied patient death rates and data for cardiac bypass surgery in some 115 California hospitals—and found that in most of the hospitals, the departure of physicians performing the failed operations did not significantly diminish the rate of future patient deaths. In contrast, hospitals that improved most in overall organizational performance (i.e. reduction of coronary patient deaths) were those where the failures were widely dispersed across all operating  surgeons.

Concentrated Failure, Clouded Judgment

Why would that be? It seems related to how hospital leadership tried to improve the patient survival rate. Desai’s research suggests that “concentrated failures prompt narrower attributions of responsibility which, whether accurate or not, ultimately lead to less thorough investigations and fewer of the system-wide changes that are typically required to address organizational performance problems.”

Stated simply, hospitals that most improved went beyond simply firing the sub-par performers. Instead of blame they reframed: analyzed and tackled the problem in broader, interconnected dimensions, focusing on structural solutions and coronary bypass procedures.  They made more efforts to understand and address systemic issues (e.g. operating room protocols, post-op care, inconsistent organizational practice, etc.) that, taken together, were more significant in causing performance to lag.

Desai hypothesized  that intensive focus on individual actors can actually obscure the deeper performance problems of any organization seeking to improve itself.

Fixing The Problem, Missing The Solution

Desai’s research rings true for anyone who’s ever been scapegoated. We all know how convenient—and often ineffectual—it is for the boss to simply blame “the poor performers.” Miss a number for Wall Street, bungle a new product rollout—the “bold leader” moves swiftly to find the guilty parties and then “solve the problem” by firing them. It’s the zero-sum game of hierarchical accountability, played the old fashioned way. Identify the cancer eating  performance, and cut it out.

But so often the real problem is not just a few malignant cells, but sub-surface, interrelated causes, or wider issues of culture—mindsets, behaviors, attitudes and processes. It’s harder for a leader to work on those, but that’s often what differentiates good from poor performance.

Now think about the networked world. The frequency and cost of  rush-to-judgment leadership action—blame instead of reframe—will  increase as traditional organizations become more interconnected and distributed. When products are co-created across crowds and networks of customers, when competitors thrive not on the basis of their own businesses but rather the strength and reinforcing strategies of broader ecosystems, when talent is being mobilized from beyond traditional boundaries and organizational units—what leader can easily and quickly identify “just a few guilty parties” when a problem arises?  What’s the right way to learn and improve from mistakes or shortfalls of performance, when results are the collective work and innovation of more and more hands?

Managing Performance In The Networked World

Welcome to the new world of networked and collaborative accountability. Tomorrow’s leaders cannot abandon focus on individual contributions, good or bad. But they also can’t just blame everyone when something goes wrong, nor celebrate “the entire crowd” when success is achieved. Leaders now have to  identify individual contributions and also understand the deeper and systemic attributes of performance—culture, processes, and habits of thought. And they have to be willing to invest the time and trouble to look across boundaries, beyond organizational units, and understand more informal communities of collaboration which produce today’s best products and services. Developing in tandem  individual practitioners but also the broader networks in which they operate is the new imperative. It’s yet another dimension of the “both/and” thinking that today’s network leaders must adopt.

Leadership Lessons

What broader lessons about managing performance might network leaders take—or extend– from Desai’s new research?

1. Make Performance Transparent. Desai’s inquiry began with the availability of rich and comparable data about coronary bypass outcomes across a large sample of hospitals (required by California law). But you don’t have to be writing a research paper to “make data matter.” Avoid the pitfalls of “judgment by the gut” by clarifying—and making clear for all to see—what success looks like for any product/service/process you are seeking to improve. Be consistent in using that data for evaluating and managing performance.
2. Build Performance Metrics Collaboratively. Measurement of excellence must not only be clear to all, it must also be agreed by all. In evaluating hospital performance and medical procedure success, patient survivability rates are relatively unambiguous. The best way to ensure metrics that are transparent  and owned by a community is to create them collaboratively—not imposing upon but rather engaging the members of the community who are delivering a product or service to define the desired outcomes.
3. Don’t Rush To Judge, Even If Problems Crop Up In One Place. Beware the misleading signals of “concentrated failure.” Even if one unit or a small group of contributors seems to be where performance goes bad, look for deeper, more systemic problems that could be critical factors—or even the most important source—of trouble. Engage the community to understand  those, as part of the problem-solving process.
4. Build A Culture Of Continuous Improvement, Governed By The Community.  Desai argues that “top-down punctuated remediation”—simply removing poor performers—is often less effective than making broader cultural changes to support the best practice and quality of  a service delivery. A culture of continuous improvement does not ignore individual accountability; it combines it with contextual and organizational factors, to strengthen “whole system” performance. Such a culture typically embraces open organizational values such as meritocracy, open dissent and debate, and learning from failure. In the best cases such values are co-developed with members of the performance community itself.

Originally published on Forbes.com