A new organizational language is emerging. It is needed to describe how to manage the shift from the world of stable mass markets and mass production, with electromechanical tools, to a customer-responsive world of continual innovation with information-communication technology. This shift is transforming industrial bureaucracies with their functional hierarchies into decentralized business units that make use of heterarchical, cross-functional teams.
I call the new paradigm "technoservice" to emphasize that employees become responsible not only for producing something, but more than that, for using technology to satisfy customers--internal as well as external.
One of the key expressions used in describing this change is "learning organization." Like empowerment, corporate culture and other topical concepts, organizational learning strikes many managers as fuzzy, perhaps even needless, jargon. Nevertheless, they will not be able to redirect information-age organizations without having a common language that goes beyond the traditional concepts of productivity, profit, span of control, and even quality.
For this reason, it is well worth the effort to define the new concepts more precisely. Once understood, they raise challenging issues, for these terms turn out to be peaks of conceptual icebergs.
Consider the learning organization. In the old paradigm, where markets and technology were relatively stable, innovation was carefully planned and implemented. Learning referred to training for front-line sales and production workers. The learning curve described the time necessary to achieve maximum productivity by those working at a particular process. Once the employee learned the drill, little further improvement in performance was expected.
Only a few elite companies kept a small staff of intellectuals who were given the task of scanning the environment for changes that might require corporate response. IBM had such a group of futurists in the 1970s, but frustrated by their lack of clout in the corporation, they moved over to the Hudson Institute. Volvo's planners headed by Bo Ekman were a rare exception. They brought ideas from Japan and the U.S. to the company and helped Volvo to react rapidly to the oil crisis of the 1970s by making a deal with Norway. More commonly, corporations resisted outside ideas as NIH (not-invented-here) and therefore suspect or not relevant to the company. Most executives implemented what they had learned at school, with fine-tuning from occasional consultants.
WHAT THE BEST FIRMS DO
Customer-focused innovation requires continual learning. While this has been espoused by R&D organizations in the past, it usually meant that members of the technical staff learned that which they considered relevant to their particular area of expertise. Furthermore, knowledge was hoarded by experts and there was little learning across functions and disciplines. Now, there are learning requirements at all levels for both individuals and teams.
The best companies are scanning at all levels. As Robert Galvin of Motorola once put it, these companies are not too proud to steal good practices from anyone. Bell Labs has even made a business of teaching process benchmarking, which is a more polite term for stealing good ideas. To meet customer expectations in terms of quality, cost and timeliness, customer surveys inform product innovation. And it is the customer who determines the variables to be measured.
In the past, good companies relied on employee surveys to measure motivation and morale, but little was done to improve the results. In the new paradigm, the best companies do not wait for yearly or bi-yearly surveys that may be old news by the time they are analyzed. They connect with intrinsic employee motivation by eliciting and quickly acting on ideas for improvement from the front-line. These ideas may refer not only to products and processes but to the quality of working life as well. In this and other ways, productive motivation is continually measured and employed to further continuous improvement. The surveys can be used to assess the performance of leaders in developing and employing human capital.
At the front-line of technoservice companies like AT&T, American Express and United Airlines, employees must learn to solve customer problems, using good judgment. This means both learning company strategy and understanding a highly segmented marketplace. Thus, technoservice organizations are continually learning from customers, employees and other companies. They are also learning from their own successes and failures by reviewing what went right or wrong and adjusting.
Total quality management (TQM) is based on the principles that systemic errors can be differentiated from random errors, and that teams of front-line employees can learn to discover root causes in order to prevent errors and provide data for management to improve processes. Process improvement is measured in terms of both results and the means of reaching them. Continual learning is formulated in terms of the Deming cycle of PDCA (plan, do, check, act) which can be applied by all employees at all levels of the organization. Everyone is responsible for setting goals, implementing them, evaluating the results and making appropriate changes or suggesting improvements before beginning the next cycle.
Such learning does not come easily. New observations and ideas usually threaten the experts. When I met with the GM Saturn design team in 1987, team members complained that expert engineers resisted the notion of listening to ideas from the workers who assembled the car. An expert would say, "I have designed bumpers (or tailpipes, etc.) for 20 years. No worker can tell me anything I don't know." In the early 1980s, before this practice became common in the auto industry, I suggested to a product engineering manager at Volvo that they would save time and improve quality by instituting a form of concurrent engineering bringing together designers, product and production engineers. "We tried that once 15 years ago," he said, "and it didn't work."
It is a rare expert who is willing to learn from anyone but another certified subject matter expert. I was once introduced to a meeting of Bell Labs executives as an expert on leadership, with the clear implication that anything I said on any other subject should be discounted. Perhaps, in the old paradigm, leadership could be separated from all other business issues, but not in the technoservice world where management by objectives (MBO) should be replaced with leadership by learning (LBL) and by teaching (LBT).
Organizations that want to learn cannot expect that the experts, at whatever level, will transform themselves, gain humility and become respectful to non-experts, be they employees or customers. Instead, as I have emphasized previously in this column, they must establish systems for continuous improvement. These include measurement of front-line ideas proposed and implemented, charting customer satisfaction, and rewarding those supervisors with high scores so that everyone wins. The idea of self-directed democratic teams is appealing, especially to Americans and Scandinavians, but these will survive only with rules and systems to define roles and measure and reward learning, particularly at the levels of the front-line and middle management.
NEW PARADIGM FOR THE BOSS
It is at the senior management level that personal development becomes essential or the firm. In the old paradigm, executives could be administrators. In the new paradigm, they must be entrepreneurial leaders who determine strategy and direct change. They must design an ideal future for the organization on the basis of what they learn from customers, competitors, partners, employees, academics, and consultants.
In the old paradigm, the good boss was like the one-minute manager who delegated responsibility and checked the MBOs of subordinates. In the new paradigm, the leader does not delegate responsibility but invites subordinates to interpret the ideal future in terms of their roles and to determine how to close the gaps between the present situation and the ideal. Management becomes a continual dialogue based on learning how best to reach the ideal future, or on the basis of experience, to modify the vision.
Both present situation and ideal future must be conceived as a system. This is also hard for many managers to learn. When I interviewed hi-tech managers for The Gamesman (Simon and Schuster, 1976), I found that only about 10 percent had "system minds" and characteristically looked for the interrelationship of parts to a whole picture. Most managers focus on manageable parts and are not driven to integrate them.
Russell A. Ackoff has forcefully taught that the modern corporation is a purposeful social system. He writes: "A system is a set of elements that cannot be separated into independent parts. Analysis of a system, which begins by disassembling it, can reveal only its structure and how it works but not its essential properties or why it works. To obtain such knowledge and understanding one must use synthetic thinking that is, inquiry into the functions that the system performs both for the larger system of which it is a part and for its parts." (Creating the corporate Future, Wiley, 1981).
Recently, I spoke with a technoservice executive who stated that for his group, the key to a winning strategy was fielding frontline employees who solve customer problems. He complained that the major difficulty in achieving this was that the first-line supervisors still saw their job as controlling rather than helping the frontline reps fix problems. You have been a vice president for 10 years," I said. "Why haven't you changed the behavior of the first-line supervisors?" He answered: "I used to think it was a matter of teaching a new style. Now I see you have to deal with all the Ss. You can't do it by just changing style or teaching new skills. You also have to fix your strategy and structure and look at what you are measuring and rewarding."
By Ss, he was referring to the 7S model of viewing organization as a system. This was first proposed by McKinsey consultants in the early 1980s. The model directs managers to align not only strategy, structure and systems (the hard Ss), but also the soft Ss of skills, style and shared values. The seventh S for the McKinsey group is staffs, referring to the kinds of people needed to make the system function. I prefer using the concept of social character to emphasize the need to align real employee values (which may include maintaining one's marketability, or doing challenging technical work, or being recognized for achievement) with the shared corporate values, such as excellence, ethics, teamwork, and continuous improvement, essential for organizational success. In the post-modern corporation and most particularly global companies, this alignment must allow for cultural diversity.
MITRE Corporation managers have drawn the 7Ss in such a way as to show their interrelationship and the overlap between social character and shared values (see diagram below). (Diagram omitted)
While continual learning is essential for top management, I know of no formula for developing master strategists. For example, there is no learning process that could have guaranteed that IBM would change its strategy in time to avoid losing its commanding position in computers. Someone at the top foreseeing that customers would demand distributed processing would have had to take considerable risks before the market forced action. (For example, John Cocke invented RISC at IBM ten years before Sun Microsystems employed this technology to produce powerful workstations that could compete with mainframes. If IBM had taken the lead with workstations, they would have been undermining. what was then a successful strategy.)
HOW EXECUTIVES LEARN
What do we know about how senior executives learn?
One of the best books on the subject is The Reflective Practitioner by Don Schon (Basic Books, 1983). He describes how experts--architects, engineers, psychiatrists form models in their minds of how the world works. New information is coded according to these models or theories. Those experts with inflexible models ignore information that does not fit and tend to overvalue that which does fit. New learning may require expanding one's model, changing a theory, or even shifting paradigms.
In the 1950s, I carried out a study under the guidance of Jerome S. Bruner at Harvard about how people make use of information. I found that most people make much better use of information that confirms their theories than they do negative information. The more anxious they are and the more pay-off there is for successful learning or punishment for mistakes, the harder it becomes to make use of negative information that would force someone to reformulate a theory. The least effective learners stick to theories long after they have the information to disprove them. This is what happened when AT&T insisted that its customers were better off with analog than digital systems. As a result, customers switched to other suppliers and AT&T had to play catch-up.
Senior executives need to stretch themselves to challenge their operating theories, especially those that served them well in the past. They need to listen to customers and subordinates, and study the actions of competitors. This requires a corporate culture like that of Motorola, which supports open dialogue and values sharp debate on strategic issues.
Too often top executives are surrounded by courtiers who flatter rather than challenge them. I recall a corporate vice president at the presentation of survey findings that reported widespread distrust of top management. He turned to his directors and stated, "This can't be true. I go around and talk with people all the time, and they never tell me this." The directors who knew that no one including themselves dared bring bad news to the vice president all agreed that there must be something wrong with the survey. The result: no learning, a waste of money, a lost opportunity for improvement, and confirmation that the frontline was right not to trust a top management that refused to listen.
The fear of being put down or considered stupid undermines many opportunities for learning. Often groups of managers will hear presentations or visit other companies, but fail to take the time to process what they have learned and what use, if any, they might make of it. The role of the leader, or someone designated by him or her, should be to facilitate such a discussion. A book or article like this might also be used as an opportunity for group learning.
It has become accepted among educators that there are different ways to learn, and that people differ in their preferred styles of learning. However, different types of lessons may require particular learning strategies. For example, a certain amount of rote learning, memorization, is required to learn multiplication tables or a foreign language. Scientific knowledge comes from doing experiments oneself; rote learning is not sufficient. So it is with leaders who want to learn what works for their organizations. There are two stages. One is learning systemic theories, and the second is testing the theories in practice and customizing them.
However, these lessons are not learned mechanically. Values and emotions play a role. The British psychologist Frederick C. Bartlett showed in his book Remembering (Cambridge, 1950) that people in different cultures code and retain information that is valued and forget that which is not. (For example, the Laps perceive, name and remember many different colors of reindeer skin.) Freud's discoveries about denial and repression are relevant to learning under stressful conditions. Fear narrows the intellect. We tend to repress knowledge that forces us to take dangerous actions. Courage, a term whose root in French is "knowledge of the heart," refers to the ability to conquer fear and act out of the experience of what one believes to be true and morally right. Too many top executives spend years rising to the top of the corporate pyramid and then feel trapped and powerless to change the system. Unless they find a way to liberate themselves, they will be unable either to learn or make use of their learning.
This requires getting out of the top executive world, at least for a while. Most executives move in a global cocoon of suburban enclaves, air conditioned cars, planes, and hotels. These protect and isolate the executive from the harsher world where most people live, including their frontline employees and customers.
THE LEARNING ORGANIZATION
Thus, the learning organization must include:
1. The principle that all work is a process that includes planning, doing, evaluating or checking, and acting or adapting according to what has been learned.
2. Processes and metrics to support continuous improvement toward an ideal future.
3. Strategists who listen and study in a culture that supports heterarchy rather than strict hierarchy.
Heterarchy means that leadership shifts according to the situation and the person who has the knowledge and skills. It requires open debate and respect for different types of knowledge and experience. It also means willingness to adapt and change theories, and to test new models. To create a cross-disciplinary team, experts have to be able to teach other experts so that they understand the different logics that are to be integrated.
4. Individuals at all levels who take responsibility for learning.
The shelf life of an EE is about five years. The brightest young engineers I meet in the U.S., Europe and Asia know this and want to join companies that offer continual learning. That can be more important to them than starting salary. There is no shelf life for leadership skills. In the world of advanced technology, everyone must be prepared to learn new rules and use new tools. As learning and good solutions depend increasingly on working in teams that cross traditional boundaries of expertise, everyone must learn more about the human side, since understanding others and reaching out to them becomes essential for teamwork.
Michael Maccoby directs the Project on Technology, Work and Character in Washington, D.C. His book, Why Work: Leading the New Generation (Simon & Schuster, 1988) has been published in 10 languages.…