July 2005
Vol. 3, No. 1
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From the Editor: I think I've mentioned before that themes sometimes emerge from the studies I find each month, even though I just report on whatever was published. This month the "theme by coincidence" is large-scale collaboration. Several of this month's reviews show that investing what it takes to build consensus with groups of stakeholders before implementing a decision more than pays off. I know from my master's thesis on persuasion that people who decide to do an action are a lot more motivated than those just ordered to do one. You may think that is obvious, but if so, why do so many managers insist on ordering instead of persuading? I think it's because humans are notoriously bad at considering the long-term consequences of our actions, so we tend to take the route that seems easiest at the moment.
But this weekend America celebrates the actions of people who took the long view. The men who signed our Declaration of Independence on July 4, 1776; those who fought the five-year Revolutionary War; and the women whose support made independence possible all knew the process would take a long time and require significant personal sacrifice. They were not expecting a return on investment measured in fiscal quarters, but in generations to come. All knew some of them would not live to see, much less enjoy the outcome of their planning and efforts. So it is possible for humans to see beyond the next month's or year's results, to envision the good their collective will can bring to themselves and their children, and carry on the measured but determined fight to realize the dream of a better day for all.
You don't have to be an American to appreciate the courage these people had in taking the long view. Perhaps we each could borrow some from their example the next time we are pushed to do the easy thing rather than the right one.
Cooperation between managers and employees on business decisions will almost always result in better decisions and easier implementation of those decisions. If your want to lower the costs of achieving that cooperation, contact me today.
Study: "Self-managed" teams still have some kind of manager, just as any individual employee does. To be most effective as leaders, those managers must help the team in certain ways and times, according to Frederick Morgeson, a management professor at Michigan State University.
Morgeson used interviews with 29 "external team leaders" to identify memorable events that had affected the teams reporting to them. Then he surveyed 265 members of those teams to find out how effective they thought the leaders were and how satisfied they were with the leaders' efforts. The teams were from a data-management unit at a large pharmaceutical firm; production and maintenance teams at a food-processing plant; and cross-functional maintenance teams at a large university.
Managers who prepared the team to handle events on their own were considered more effective by their teams, but only when those events were unusual. By "events," Morgeson means problems or disruptions to a team's routine that interfere with normal work and require extra effort. Supportive coaching, the kind in which the leader "rewards and reinforces" self-management, did not make teams more satisfied with the leader, but was related to higher effectiveness ratings. Teams disliked the kind of "active" coaching where the leader gets directly involved in the work and "sense-making" in which the leader tries to influence the teams' view of the corporate world. However, when disruptions occurred, leaders who helped shape the teams' view of the event were considered more effective.
Application: Several interesting themes emerge from this study that managers of any team, but especially empowered teams, should consider. Taking the time to prepare teams for the unusual—training and giving them practice time in problem-solving techniques and troubleshooting, for example—may be seen as helpful by team members when things go wrong. Helping teams help themselves, instead of jumping in to do the work yourself, appears to be more effective leadership both in good times and bad. (Although I think offering to take on some of the extra tasks is different from trying to direct the extra effort, and from my experience, is appreciated by teams.)
One simple management technique illustrates how to achieve this balance. The next time a team brings a problem to you, do not start talking. Instead ask this simple question: "What do you think you should do?" And if they don't have an answer, ask them what they need to know to come up with one. After providing that information, give the team time to go back and meet until they can provide a solution.
But, my friends, if you are a manager you cannot win. Even when the team admits your support and perspective on an event was helpful, it won't make them like you any better! But that's okay. The truth is, most people don't like having someone tell them what to do. So if as a manager you end up respected, that means you have helped people to like and succeed at their jobs, and you have done your job. If that isn't enough for you, it's time to rethink whether you are a manager for the right reasons.
Source: Morgeson, F. (05), "The External Leadership of Self-Managing Teams: Intervening in the Context of Novel and Disruptive Events," Journal of Applied Psychology 90(3):497.
Article: "Are democracy and success compatible in a business organization?" This is the question Professor of Strategic Management Francisco Javier Forcadell of Rey Juan Carlos University in Spain sets out to answer in his detailed description of Mondragón Corporación Cooperativa (MCC), based in the Basque region. "MCC is one of the few contemporary business organizations that can be viewed as a democracy, and it represents a unique experience in the use of democratic and participatory methods in management, the key to its success," he writes.
MCC comprises 100 independent cooperatives and 150 businesses employing 70,000 people in 65 countries. It has developed a culture aimed at "overcoming the capital-labor confrontation, making people joint owners of the firm and therefore sharing in…decision-making as well as in the profits," Forcadell says. The firm's mission statement and values, while mentioning competitiveness and customer satisfaction, are focused inward, emphasizing the treatment of the employee-owners. It is run by a hierarchy of governing bodies elected by the workers to which managers at each level answer, instead of the other way around. For example, at the top is a Cooperative Congress comprising 650 delegates from all of the member cooperatives. An elected Permanent Commission implements the Congress's decisions and oversees a General Council of the CEO and other executives. At the local cooperative level, every worker has an equal vote in the cooperative's General Assembly. The assembly elects the various committees that select the managers and oversee the operation of the business.
Strategic planning is drafted by the General Council and filtered downward to the local level, at which each local cooperative creates its own plan on how it will implement the general strategy. Upper organizational levels cannot rewrite a cooperative's plan. "In fact," Forcadell writes, "the only capacity to impose from above is provided by leadership…'since the power they possess is ceded by virtue of a pact.'"
Forcadell describes one local cooperative, Irizar, in detail. Irizar creates luxury coaches (limousines) using a "very flexible organization, with no hierarchy and an almost flat organizational chart, built around a group of working teams." Forcadell says, "Each team has a nominated leader with a great degree of autonomy and acts as a mini, semi-independent firm." Both power and pay are evenly distributed: one out of five workers has lead a team at some point, and the difference in pay between in the top and bottom workers in the company is only 3:1 (in the U.S., 40:1 or worse is fairly common). "Teams have freedom to organize their activities as they see fit…" Forcadell reports, and the "only restrictions are forced by the need to synchronize processes with other teams."
Getting back to his original question, the model appears to work:
Irizar began changing to its current form in 1991. It was almost bankrupt, and most worker-shareholders had lost "their own personal financial wealth after assuming Irizar's debt," Forcadell says. Now:
Application: Like most case studies, this one does not prove that organizational democracy was the best way to achieve MCC's financial goals or that it would work in any company. What it does prove is that democracy can work in business as well as it is purported to in democratic governments. One of the last bastions of tyranny in the United States is the business world, where too many managers regularly choose their own desires over what is best for both the employees and the bottom line of the company in the long run.
Forcadell recognizes that democracy to the degree found in MCC will be difficult, if not impossible, to implement in many companies and cultures—in fact, MCC itself has settled for joining with limited-liability companies instead of cooperatives as it expands to new countries. But he argues that it is possible to make any organization more democratic, using the following guidelines (the initial italicized words in each bullet point are direct quotations):
Most of you don't have the power to institute democracy in a big way in your firm. But as a manager or team member you can look for ways to improve it at your level. If the financial successes of MCC don't convince you to take another look at democracy, I ask you to think more deeply. If you consider some form of democracy to be the right thing to do in government, is resisting it in the workplace consistent with your own values? I mention this philosophical consideration because of the source of this article: the Journal of Business Ethics.
Source: Forcadell, F. (05), "Democracy, Cooperation and Business Success: The Case of Mondragón Corporación Cooperativa," Journal of Business Ethics 56:255.
Article: Investing in better relationships with "work councils" of employees pays off, according to an article in HR Magazine last month. As my European readers know, work councils are employee consultation groups that European companies meeting certain conditions are required by law to establish. As the article points out, these are not unions. "Work councils…serve as a forum for information-sharing and consultation on a variety of issues," the article says. (For more information, see the review on "Employee Forums" in the May issue of TeamResearch News.) Though many American managers are wary of formal worker groups of any type, some European companies are enjoying the benefits of going beyond the legal requirements, according to this article.
For example, the Dutch bank Rabobank needed to begin requiring employee contributions to keep its pension program solvent. The article says, "Seeking employee's understanding and support, management sat down with members of the bank's local works councils to outline financial issues that Rabobank faced." The councils saw there was no choice and agreed, which in turn led to "quick approval of its proposal from the union as well."
The experts the magazine interviewed acknowledged that time and money is needed to work with the councils—Tricia Tarant, global employee relations manager for Shell International Ltd., says she spends 60% of her time on work council issues. Major proposals can be held up four to six weeks to give councils time to think them over. But the experts believe the councils "ultimately can help speed decision-making, open lines of communication and help companies refine business strategies."
The power, responsibilities, and organization of work councils (also known as "employee relations groups,") vary from country to country. In addition, by European Union law some companies must have "European Work Councils" (EWCs) to address "transnational" issues. Each of Rabobank's 300 local banks, and the firm's headquarters, has its own council that meets eight times a year, and there also is a firm-wide council representing all employees. The head of the bank's industrial relations department (equivalent to "labor relations" in the U.S.), Jan de Wit, is indirectly quoted as saying the councils "have never tried to block any bank decisions and…sometimes lead to better decisions." But for councils to work, managers "'must be open about the policy and path for the coming years,'" he adds.
Employees appear to want the councils. EWCs are only required when employees petition for them, and that happened in two-thirds of the companies meeting the legal criteria. Some of the other third have other forms of work councils.
Tarant said the Shell councils developed a high level of business understanding, which makes them "'masters of asking the single deadly question' [of managers]: '"Are you sure you know what you're doing?"'" This forces managers to think through proposed actions more carefully, and how to go about them. For example, when a change in strategy meant layoffs would be required, Shell management "told the EWC why the company couldn't communicate to the staff for several months about what was going to happen." The EWC persuaded managers to at least tell employees that much, and according to Tarant, "'You could see people stop and think, "Yes, they have a point there."'"
Several people interviewed for the article urged managers of international firms to embrace councils rather than just meet the legal requirements. Josee Lamers of the Netherlands, who helps U.S. companies in Europe set up EWCs, suggests that employers ask the councils how to address absenteeism or improve productivity. Work councils are "'adaptable to change,' Lamers says. 'That's the highest profit you can get.'"
Application: The most obvious application is for those of you in or preparing to do business in Europe, and it boils down to a modern maxim: "If you're going to do something, do it right." Even if your company is not legally required to set up a local or European work council, employees there are going to expect that level of collaboration. That means companies with good track records in working with councils will be more competitive in the labor market as time goes on. So you might as well set councils up, and as long as you are investing the time and money to do so, there's no business justification for not getting the most out of them that you can. Hire a consultant who has set up successful councils and follow his or her advice.
For the rest of you, especially in the U.S., two themes emerge for me. First, these success stories, though not carrying the weight of scientific studies, nonetheless add to the evidence that companies who involve employees in decision-making before the decision is made avoid a lot of the "employee" problems managers complain about most. I put "employee" in quotation marks because the ability to avoid those problems means managers who choose not to avoid them are the real problem, not the employees. The second theme is, globalization of the labor market means the U.S. is not immune to the issue I mention in the paragraph above, in which prospective employees you may want to hire will come to expect the higher levels of communication work councils provide. I'm currently on contract with a large software firm in which at least half of the workers on the project were born in other countries, including India, Scotland, Russia, and Canada.
You can be ahead of the curve, behind it, or riding the wave. Guess which position gives you an advantage over your competitors?
Source: Ladika, S. (05), "Working Together," HR Magazine June:87.
Article: In the U.S. manufacturing sector, empowered teams are now fact, not fad. Thus says the 2004 Census of Manufacturers produced jointly by IndustryWeek magazine and the Manufacturing Performance Institute. The magazine reports that four out of five respondents now have teaming programs, up by 7% in just the past year. Furthermore, 65% of those firms says teaming is "somewhat" or "highly" effective, an increase of 8% over the previous year. Despite these trends, the percentage of production workers on teams has dropped from 88% in 2000 to 70%. But the sources interviewed by the magazine don't think this means teaming is going away. If anything, teaming "'is becoming embedded in the organizations and in parts of other initiatives or day-to-day operations,'" according to Kevin Gromley, global leader of Deloitte Consulting's Manufacturing Industry Consulting Practice. Gromley sees three trends occurring in the use of teams:
Steelcase International, a furniture manufacturer based in France, provides a good example of these trends. Thirty years ago its teams were confined by international borders: "U.S. teams for the U.S., France teams for France, etc." Today its teams "have evolved into cross-functional, cross-geography, virtual teams," the article says.
As Deloitte's Gromley is quoted as saying, teaming will "'never go away. It will constantly evolve and… (will) distinguish the winners from the losers on the global competitive dynamic.'"
Application: At a meeting of the Seattle Society of Human Resource Management in 2003, I was stunned to have an HR professional, upon hearing what I do, ask whether empowered teaming had not been "debunked" (or some such word). I offer this article as proof to use against such that kind of misconception within your company. If your manager or teammates think "teambuilding" is a dirty word, it's probably because of poor implementations they have suffered through. Most often, management does not invest the time and money needed to do real team development, settling instead for occasional teambuilding interventions that simply do not work. Also, the article points out that teamwork is not right for every company, citing one winner of the magazine's 2003 Best Plants award that only had 5% of its workforce in empowered teams.
This newsletter has always promoted that perspective, but the evidence from this article and all the research reported in TeamResearch News is that empowered teaming will work in most companies if put into place properly (using my SuddenTeams® Program, for example). The next time you get resistance from someone as you try to empower your team, the results of this highly respected survey will give you more ammunition.
Source: Purdum, T. (05), "Teaming, Take 2," IndustryWeek May:41.
Article: A recent article in Business Week says some tech firms are multiplying the power of collaboration by the thousands. An investment firm, Marketocracy, Inc., borrows the best successes of 70,000 virtual traders to pick stocks for its mutual fund. Larger firms like Eli Lilly and Amazon.com are using the Web to tap customer input to improve their products. LEGO used the Web to identify 250 fans of its trains. Then it brought them in to provide feedback on a new train and redesigned it as a result. The company sold 10,000 units in the first 10 days—with no marketing other than their superfans' word of mouth, the article says.
Proctor & Gamble has tapped into a network of 80,000 self-described "solvers," who produced solutions to a third of the requests P&G submitted at a modest cost of $5,000 apiece. But not all of the success stories listed in the article require huge numbers of people. Hewlett-Packard "set up a market with 15 finance people not normally involved in (financial forecast) planning," the article says. "They bought and sold virtual stock that represented a range of forecasts… Their collective best yielded a 50% improvement in operating-profit predictability over conventional forecasts by individual managers."
Some economists think this could be the start of an economic revolution in which masses of consumers guide corporate strategy directly. "This departs radically from everything we've seen since the Industrial Revolution," the article quotes Yochai Benkler of Yale University as saying.
"Crowds can go mad, of course, but by and large, it turns out, they're smarter at solving many problems than even the brightest individuals," the article says. There have been cases where "mob mentality" harmed instead of helped. "Groups that discourage independent thought potentially could put a damper on out-of-the-box ideas from brilliant individuals" (the "groupthink" discussed in earlier issues of TeamResearch News). But the ease of connecting means companies will have to harness the power of collaboration lest it turn against them. Those that have done so are reaping rich rewards.
Application: I reviewed this article here for two reasons. First, it brought into focus a cultural phenomenon I hadn't been very aware of, so I wanted to make sure you aren't caught unawares by it. Second, it is another good illustration of the power of admitting as a manager that you don't know everything. Most appropriate to the teamwork angle is the group of 15 people HP put together, forecasting novices who as a group bested experienced managers.
If you are a manager, think about this: Before your first management position, didn't you used to talk with your colleagues about what management should be doing to improve things? Weren't many of those ideas good ones?
What makes you think your employees aren't doing the same thing?
Source: Hof, R. (05), "The Power of Us," Business Week 7/20:75.
TeamResearch News summarizes the latest information from studies or articles on business teams, along with guidance on how to apply that research in your workplace. It is published the first full weekend of each month as a free service from TeamTrainersTM Consulting (www.suddenteams.com). Learn how to subscribe below and see the newsletter Web page for details about the newsletter, cautions about studies, and our privacy policy.
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