Nov 30 2007

Leading: Shaping the Way Your People Work Together

Published by admin under Innovation, Leadership

(21803) Ram Charan says:

Astute leaders manage the social aspects of their organizations to deliver results. They resolve problems and then synchronize everyone’s efforts so a common objective is achieved rather than letting everyone do their own thing. Leaders with know-how change their organization’s internal social system.

Managing Your Organization’s Social System

Another dimension of know-how is having the ability to make your organization’s social system deliver just what is needed when it is required. Getting people to work together towards a shared objective is a vital business skill. Sometimes, this is likened to herding cats–you can put loads of energy into it but at the end of the day everyone pretty much does whatever they like.

Managing your organization’s social system has two parts:

  • 1. Determine the key decisions that need to be made and get the right people making them
  • 2. Actively shape and mold the behaviors that are displayed in making those key business decisions

    Leading Your Organization Through Critical Tests

    A leader with know-how will develop a social system that is in sync with what the business ought to accomplish. If there is a problem, he or she will initiate corrective actions and wake sure specific steps to fix it.

    An active approach

    To actively manage and improve your organization’s social system, there are a few things you can do:

  • Map how decisions currently get made
  • Track how readily information flows around your organization
  • Diagnose your operating mechanisms and make sure each is geared to the right business result
  • Provide incentives for people to upgrade obsolete internal systems with better ones
  • Initiate and guide an internal dialogue where people evaluate the quality and substance of their decision making with a view towards suggesting improvementsEncouraging Productive BehaviorThe place where the rubber figuratively meets the road when it comes to managing a social system generally lies at the “critical intersections”–at all those places where information needs to be exchanged, conflicts need to be resolved, trade-offs need to be agreed upon and decisions must be made. It’s absolutely vital that your social system encourages productive behavior at these various critical intersections. It’s your job as a leader to design and implement a well-oiled social system with operating mechanisms that function well at those critical intersections. You also have to signal which behaviors are acceptable and which are not through ongoing dialogue.

    Resolving Hidden Conflicts

    Most companies’ existing social systems are a mishmash of different building blocks that are either poorly designed or that have evolved over a period of time. That’s why there are often a number of unresolved conflicts lurking just beneath the surface. This leads to inefficiency and wasted energy–for example, sitting through meetings that achieve nothing. Your job as a leader with know-how is to eliminate waste.

    Key questions

    There are four questions you should be asking all the time:

  • What is the purpose of our existing operating mechanisms and how good are the linkages between them?
  • Which of our operating mechanisms are worth keeping in place and which should be replaced by newer and better designed options?
  • Which operating mechanisms should be completely rebuilt?
  • Are there new operating mechanisms we should be developing and then integrating into our social system?

    Tweaking Your Social System

    The best social systems are designed around your own organization’s most important business activities. When you’re trying to achieve new or different business results, it stands to reason you’ll also need to tinker with your social system to achieve those results on an regular basis. Otherwise, people will probably go on doing what they have always done, which will mean your output will remain pretty much the same as it has always been. If you’re out to achieve something different, your social system will need either tweaking or a major overhaul.

    The Home Depot Story

    A good example of this was when Bob Nardelli was appointed CEO of Home Depot in 2000. The company had grown from a single store in 1978 to around eleven hundred stores generating $40 billion in revenue by 2000, so they were obviously doing many of things right.

    However, all kinds of problems that lurked beneath the surface had been generated by that growth. The company was emphasizing sales at the expense of every other metric, including profitability, cash flow and inventory management. Individual store managers were making their own purchasing decisions, failing to take full advantage of Home Depot’s scale. Nardelli came up with some new ways to keep the company growing. He also developed systems that would enable those changes to take root and flourish.

    Nardelli’s new system

  • A new internal planning process called SOAR–Strategic Operating and Resource Planning
  • A weekly two-hour planning meeting involving all of the senior management team
  • A new Store Manager Council where new initiatives were discussed and agreed uponAs a result of these and other new operating mechanisms, Home Depot’s revenue nearly doubled to $80 million by 2005, which in turn generated strong earnings-per-share growth for the company. Nardelli would later be caught up in controversy over his severance package with Home Depot, but nobody can doubt he had the know-how to change Home Depot’s social system.

    Know-How

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