The Power of a Peer Group: How come something so proven is not more pervasive, and what are we willing to do about it?
None of us is as smart as all of us - a safe, confidential and trusting peer group can be a powerful process for innovation, helping with opportunities, problems, challenges and issues of all shapes, sizes and descriptions. I mean a peer group of non-organizational peers, free of any conflicts of interest, hidden agendas and any other dynamics which diminish its powerful potential. How come a human capital investment so proven is not more pervasive, especially inside larger businesses and public corporations, and what are we willing to do about it?
- The power of a peer group is proven as a high ROI human capital investment.
- I spend about half of my time facilitating such groups as a Chair with Vistage International, with peer CEOs and executives from non-competing companies and organizations. I never cease to be amazed at the creative problem solving, issue resolution and innovation which routinely arises from these groups (and, not least of all, management innovation) because of the high functionality of the trust, transparency and dialog. I will share the story of Vistage, now in its 54th year with 15,000 members in 15 countries.
- I spend the other half of my time facilitating CEOs, executives and their teams - I never cease to be amazed at the dysfunctionalities of trust, transparency and dialog, especially in larger businesses and public corporations, which I have to help them overcome.
- Paradoxically, in these organizations that most need it, the power of peer groups is largely absent, as far as I can tell. I will share the story of one of my long time Vistage member CEOs who was just acquired by a multi-billion dollar public corporation which is now questioning her membership of "that groupy thing". That's the latest example of the paradox I encounter frequently - how come those private/small businesses/CEOs who can least afford the human capital investment are so committed to the process/ROI (she is already a 6 year member and, other things being equal, talks of being a lifelong member) and those larger businesses/public corporations who can most afford the human capital investment are least committed to the process/ROI? And what are we willing to do about it?
- We will explore the power of a peer group as a "circle of trust", providing feedback and guidance for the rejoining of soul and role, intellectually and emotionally, tapping into the core source of true leadership.
- How many of our submissions here at the MIX (whether they be Stories, Hacks, Barriers or Blogs) relate to the same core source? The core source of leadership, passion and productivity, and tapping into the potential for natural alignment and attunement, and revving up interest, engagement and contribution. A significant contributory answer is right in front of us (the power of peer groups), if only we can figure out the management innovation required to help it be a more pervasive human capital investment in larger businesses and corporations.
So, I am wondering how a peer group process can be leveraged as a human capital investment by larger businesses/public corporations for the same kinds of ROI benefits that small business members experience. I am starting this "Story" posting to progressively share stories from my own experiences and to invite others to do likewise, to gain greater insight into how peer group processes are being used inside of, outside of and between businesses and organizations, large and small, public and private, as an integral part of their management innovation process and human capital investment..
The rules of the road have changed. Our agility as businesses, organizations and teams is being tested like never before (as outlined in my hack, "In the Driving Seat of Organizational Agility: translating strategy and execution into traction in turbulent times"). Our resilience, sustainability and innovation are being tested to the limits, with accelerating pace all the time, and any shortfalls in adaptability tend to get exposed, very fully and very finally, with few second chances - Darwinian like, whether large companies or small companies, public or private, for-profit or not-for-profit. Managers, executives and CEOs who are trying to develop their strengths (knowledge, skills and talents) to fully fill their role "In the Driving Seat" need all the help they can get. The power of a peer group can make a pivotal difference.
Consider the success story of Vistage International (formerly TEC: The Executive Committee) which was founded in 1957 by a CEO named Robert Nourse in Milwaukee. He started meeting with fellow CEOs in the local area to test a new management innovation - by sharing knowledge, experience and insights could they help each other get better results with their businesses and have better lives? The answer was a resounding yes - more than 50 years later, Vistage now has 15,000 members in 15 countries, with accelerating growth over the last 5-10 years. Members represent 1.8 million employees and $300 billion in annual revenues. On average, members out-perform their non-member competitors (in a 2010 analysis, Vistage CEO member companies in the U.S. grew on average at 5.8% compounded annual growth rate (CAGR), while Dunn & Bradstreet companies declined on average by -9.2% over the last 5 years) and grow at twice the percentage rate after joining. Our focus is small-to-medium sized companies in the range of 20-100 employees and $5-50 million annual revenue range (our average members company is about $26 million and 165 employees). This sector is a a critical component of our economy - in the US, small to medium sized companies have generated 64% of net new jobs over the last 15 years and account for 50% of the non-farm GDP (source: The Milken Institute). [See the videos below to experience more of our typical members, the process and the benefits - please excuse the promotional aspects of these videos]
The context of these peer groups is:
- Non-organizational peers - peers who are not from the same company or organization.
- No conflict of interest - no customer-supplier relationships.
- No hidden agenda - as a result, there are no hidden agendas, except a desire to help each other as much as we possibly can.
- No other dynamic which diminishes the potential power of the group - no personality conflicts for instance, or anything else getting in the way - emergent problems get talked about and, if they can't be resolved for some reason, members may be referred out of the group to find a better fit in another group.
- Total confidentiality - nothing, but nothing leaves the confidentiality bubble of the group, not getting shared with spouses or anybody.
- Diversity - of business type, size, age, scope and scale; of member gender, ethnicity and generation - the more diversity the better - when we member comes to their group meeting we want them to be breathing different air.
- Commitment to the process - attending a monthly all-day group meeting (which is split into two halves - a best practice speaker and an executive session) and a monthly one-to-one session with the Chair
- It is a place where we engage in:
- "Care-frontation" - we confront each other directly because we care.
- Questioning answers - we question answers, assumptions and beliefs which are driving behaviors and habits.
- Blind-spots, hot-spots and soft-spots - we shine a light into members' blind-spots, we help members cool down their emotional hot-spots and harden their soft-spots (and soften their hard-spots/sharp-edges).
- Processing issues - the core purpose of the group is processing issues which the members bring - tapping into the power of the peer group context we are describing. In particular, we are at our most powerful when we are processing what I call "wheel$pin issues" - these are those most perplexing and challenging issues members face, on which they have been spinning their wheels for some time. Despite numerous different attempts they are struggling to get into traction. That wheel$pin can be costing them a fortune, as outlined in my hack, "In the Driving Seat of Organizational Agility: translating strategy and execution into traction in turbulent times", in business and/or in life. We process issues all across the map of business, professional development, personal growth and quality of life, helping members be "In the Driving Seat" of their whole life, work and non-work. The reality is, of course, that they are inevitably interlinked, interwoven and often, very tangled.
Consistent with the membership statistics outlined above, the majority of our CEO members come from privately-held/owner-managed businesses, although we do have a significant number of hired-in CEOs and General Managers, including in the corporate and public company environment. We also have programs for senior executives, most of whom of course are hired in.
Here's the interesting thing which suggests to me there is a management innovation waiting to happen here -when members sell to or join larger businesses/public corporations, their membership thereafter tends to be short lived, because their new employer soon takes a red pen to that line item in their budget.
This leaves me pondering the following questions:
1. What is different about the context inside larger corporations and public companies, which causes them to interpret the value-for-money/time value proposition differently and to perceive the ROI of the human capital investment differently?
2. Where do peer groups fit in the bigger system of mentoring, coaching, peer-reviews/360s, training and development in larger corporations and public companies, to help them be the agile, learning organizations they need to be these days?.
3. How can the power of peer groups be leveraged by larger corporations and public companioes to achieve the high functionality of trust, transparency and dialog which is at the core of organizational agility?
Clearly, a peer group process is much easier to achieve outside of a business by means of a membership organization such as Vistage (or one of its competitors). My interest is in exploring ways in which the same can be achieved inside of and between organizations, for similar management innovation benefits which we have been exploring.
One other example I know of is the "20 Groups" program run by the NADA (National Automobile Dealers Association). I have been on the board of a Toyota dealership for many years and the General Manager (who is also a long time Vistage member) attends his "20 Group" for two days, three times a year. A "20 Group" is made up of twenty peer general managers from Toyota dealerships all across the nation, geographically dispersed so that there are no competitive conflicts of interest. They share data, best-practices and process issues to help each other. Founded in 1917, NADA represents more than 17,000 new car and truck dealers, both domestic and import, with more than 37,500 separate franchises and more than 91 percent of U.S. new-vehicle dealers as members, employing about 1 million people in the United States. [See the NADA 20 Group video below - please excuse the promotional aspect of this video].
In his 2004 book, "A Hiiden Wholeness - the journey to an undivided life", Parker Palmer said, “We cannot embrace the challenge all alone, at least, not for long: we need trustworthy relationships, tenacious communities of support, if we are to sustain the journey to an undivided life". By "the journey to an undivided life" he means the rejoining of soul and role, saying, "We are born with a seed of selfhood that contains the spiritual DNA of our uniqueness – an encoded birthright knowledge of who we are, why we are here, and how we are related to others. We abandon that knowledge as the years go by but it never abandons us. As we become more obsessed with succeeding, or at least surviving, in the world, we lose touch with our souls and disappear into our roles. It is not easy work, rejoining soul and role – reaching in toward our own wholeness, reaching out toward the world’s needs and trying to live our lives at the intersection of the two”.
This is one of the best descriptions I have ever come across which nails my experience of the core of what Vistage is about. Parker Palmer goes on to say, "That journey has solitary passages, to be sure, and yet it is simply too arduous to take without the assistance of others. And because we have such a vast capacity for self-delusion, we will inevitably get lost en route without correctives from outside ourselves. That kind of community - one that knows how to welcome the soul and help us hear its voice – I call a “circle of trust”, with a singular intent: to make it safe for the soul to show up and offer us its guidance. A “circle of trust” is defined by the nature of the space it creates between us ... rooted in two basic beliefs:
- We all have an inner teacher whose guidance is more reliable that anything we can get from a doctrine, ideology, collective belief system, institution, or leader.
- We all need other people to invite, amplify, and help us discern the inner teacher’s voice for at least three reasons:
- The journey toward inner truth is too taxing to be made solo: lacking support, the solitary traveler soon becomes weary or fearful and is likely to quit the road.
- The path is too deeply hidden to be traveled without company: finding our way involves clues that are subtle and sometimes misleading, requiring the kind of discernment that can happen only in dialogue.
- The destination is too daunting to be achieved alone: we need community to find the courage to venture into the alien lands to which the inner teacher may call us."
He goes on to say, "In a circle of trust we practice the paradox of “being alone together”. We have much to learn from within, but it is easy to get lost in the labyrinth of the inner life. We have much to learn from others, but it is easy to get lost in the confusion of the crowd. So we need solitude and community simultaneously: what we learn in one mode can check and balance what we learn in the other. Together they make us whole, like breathing in and out. Spaces designed to welcome the soul and support the inner journey are rare. But the principles and practices that shape such spaces are neither new nor untested."
These are the reasons why members join Vistage and stay for many years and, in many cases, for their life long journey. They seek a place where they can "be alone together", simultaneously of solitude and community, in a space that welcomes their soul and our inner teacher's voice. It's about the journey to an undivided life of rejoining role and soul, as an intellectual and emotional journey of our hidden wholeness emerging, which is the true source of leadership. It's about a "circle of trust" which will provide them the feedback they need to invite, amplify and discern their inner teacher's voice. Watch the videos at the end of this submission (please excuse the promotional aspects of these videos) and you will hear members voicing things like the following:
- "It has changed the way we look at our business"
- "You don't go expecting to get an absolute answer - what you go and look for is that support to think through a problem"
- "The honesty of this group is unparalleled"
- "The fact that we can be honest with one another and tell our stories and know that there is no judgment there"
- "I can't do it alone"
- "Its quite eye opening and extremely valuable - I would not be where we are today without Vistage"
- "I can't imagine somebody that was running a business not wanting the privilege to get involved with Vistage - I just can't imagine it"
- "Any human being, if you look in the mirror and are honest with yourself, you realize you are just a work in process - in Vistage, more than anything that I have ever been involved with, helps me realize that everyday"
- "I did not have the business experience I needed to run my company"
- "Many, many years ago I realized that there's a lot of things that I just don't do well, so the things that I don't do well, I need to surround myself with people that do them well and can think a little differently than I think"
- "When we come into our Vistage meetings we shut the door, we hang our ego at the door and we become vulnerable, and we put the real issues on the table"
- "We don't come to conquer the mountain, but to conquer ourselves"
Contrast that with the kinds of environments we often experience, not least of all in larger businesses and public corporations, in which our hidden wholeness of soul and role isn't invited to emerge and stays hidden. Parker Palmer puts it this way, "If we want to create spaces that are safe for the soul, we need to understand why the soul so rarely shows up in everyday life. It is our powerful ego drive to pull everything into ourselves and let nothing live for itself. We have a disbelief in the reality and power of the inner teacher. Convinced that people lack inner guidance and wishing to “help” them, we feel obliged to tell others what we think they need to know and how we think they ought to live. Countless disasters originate here – between parents and children, teachers and students, supervisors and employees – originate, that is, in presumptuous advice-giving that leaves the other feeling diminished and disrespected. In our utilitarian culture it is hard to hold fast to the notion that a circle of trust is not about solving a visible problem: it is about honoring an invisible thing called the soul. A circle of trust has no agenda except to help people listen to their own souls and discern their own truth. Its singular purpose is to support the inner journey of each person in the group, to make each soul feel safe enough to show up and speak its truth, to help each person listen to his or her inner teacher. A circle of trust consists of relationships that are neither invasive nor evasive". It's an ego thing! Indeed, too much ego drive is the number one reason why we will decline to invite a prospective member to join Vistage. We all have ego drive, so instead, we look and listen for the maturity, humility and vulnerability which it takes to have our ego drive well under control and to hang what remains of it at the door.
How many of our submissions here at the MIX (whether they be Stories, Hacks or Barriers) speak of helping our soul to show up, as team leaders and as team members, and the journey to the hidden wholeness of an undivided life, as teams, organizations and businesses, and as managers, executives and CEOs. Indeed, how many of the Moonshots speak of this. Here we have a management innovation of peer groups which is so proven. Yet, why is it not more pervasive in larger businesses and public corporations in particular? As Parker Palmer says, "The principles and practices that shape such spaces are neither new and untested" and I invite you to share such spaces you know of inside of, outside of and between businesses and organizations, large and small, public and private.
Consider the story of my member.
She joined one of my Vistage groups for senior executives 6 years ago back in February 2005, investing one day and about $500 per month in attending her peer group, supported by her owner and CEO. Through a combination of expert resource speakers, issue processing, various exercises and strategic planning (in the context of accountability and confidentiality described earlier), she got and gave a great deal of value, learning a growing in business and in life.
A few years later, her owner promoted her to be President. recognizing in her the capability to lead the business in the next phase of its evolution, growth and eventual sale/acquisition. Coincident with her promotion, we moved her over into my Vistage peer group for CEOs, Presidents and General Managers, for which the investment more than doubled to $1100 per month. In particular, she really started to master the challenge of organizational agility (as mentioned earlier, see my Hack "In the Driving Seat of Organizational Agility: translating strategy and execution into traction in turbulent times").
With her leadership, along with the owner and COO, they weathered the storm well and emerged fitter, stronger and better placed to move from a mode of surviving back into a mode of thriving. At the worst of times, when it would have been so easy for her (or her owner) to red pen the Vistage membership line item from her budget, the ROI remained a must-have. Indeed, members will typically voice things like, "Vistage will be the last thing I cut", as indeed to mine during that phase, including her.
Emerging stronger and getting back to thriving, they were identified by a large (multi-billion dollar revenue) public corporation as a potential acquisition. A price was agreed, a handshake deal was done, a Letter of Intent was signed and the acquisition was transacted at a strike price balancing value-for-money for the acquirer and money-for-value for the owner. She is now the head of a sub-division of a large, multi-billion dollar public corporation with huge synergy opportunities for profitability and growth. Paradoxically, now her Vistage membership is more at risk of that red pen than ever before.
Here's my back of an envelope math:
- Over the 6 years of her accumulated membership so far, her membership dues total approximately $50K.
- Suppose that the value-for-money and money-for-value equations received by the acquirer and the owner were enhanced by just 1% through her accumulated efforts, credibility and continuity as the leader (the acquirer would not have pursued the company if she and others were not staying as the owner is moving on). Sticking with rough order of magnitude numbers, so as not to divulge any specifics, my estimate is that equates to a 10X ROI on her membership dues.
- Suppose that she continued her membership for another investment of $50K (4 years), all she would need to do to breakeven on her membership would be to enhance the market capitalization contribution from her subdivision and the synergies it can catalyze by 0.1%.
0.1% = 1X; 1% = 10X; 10% = 100X etc. That's a human capital investment bet which I would take! Why do so many larger businesses and public corporations fold on that bet? And what are we willing to do about it?
There are clearly challenges and barriers keeping something so proven from being more pervasive in larger businesses and public corporations, and I attempt to capture my sense of some of those here. I invite others to add their sense of the challenges and barriers to allow us to build management innovation solutions.
- Challenge: Apples and Oranges - mis-interpretation and/or mis-categorization of what a peer group is. This is something I run into all the time as so few managers, executives and CEOs have real experience of real peer groups. They confuse it with things they are more familiar with such as consulting, training, or coaching. I educate them that a peer group has elements of those in it but is distinctly different in nature (as I have outlined in this Story). Next they will usually talk about other things they have in the mix: mentoring; various assessments and profiling tools (of personality type and leadership style etc); peer reviews and 360 degree assessments; whatever else they are proud of as making a difference in their business (balanced scorecard; virtual collaboration communities of all kinds; suggestions schemes; innovation centers etc etc etc). Again, I explain that a peer group has elements of these but is decidedly different. Finally they will typically say that they hold regular group facilitation sessions of their team. Again, I explain that a peer group has elements of that but is decidedly different. Now that we have worked through their well meant attempts at an apples with apples comparison, I explain that a peer group is an orange. In the basket of fruit of human capital initiatives in their business, they probably don't have the orange of peer groups.
- Solution: Figuring out how best to educate managers, executives and CEOs about what a peer group is, how it works, how it is different and how it can fit in with the bigger system of initiatives in a larger business and/or public corporation as part of becoming more agile as an organization. Figuring out how best to support human capital professionals in navigating this challenge.
- Challenge: Red Pen - separation of value experience and budgetary approval. One of the reasons for the success story of Vistage is that typically, for the majority of our members (who are CEOs of an privately held, owner-managed businesses), there is no separation between the experience of the value of a peer group process and the budgetary approval. Because these members have the visceral experience of the value, they say the kinds of things that I have quoted from the videos above and that, "Vistage will be the last thing I cut". Of course, most executives and general managers in larger businesses and public corporations have budgetary approval authority massively exceeding that of a Vistage membership but (as was the case with myself when I was in that kind of role in the corporate world) when it comes to an investment in themselves, they need some kind of sign off from upstairs. Or at the very least, when its budget review time, someone points at that line item and says something like, "what's that, it seems like an awful lot of money for a "groupy thing"". So, take the case of my member who just got acquired by the multi-billion dollar public corporation, who is now having to fight to stop her Vistage membership being red-penned. The the day after the acquisition completed, did Vistage suddenly get less valuable? Did the ROI potential of the human capital investment in a peer group experience suddenly diminish? Did the efficacy of the process and the experience base of the group suddenly become less relevant (keeping in mind, that many, many Vistage members, speakers and Chairs, like myself, have diverse experiences of larger business and public corporations - indeed, my member we have been referring to is ex Fortune 100 in a previous chapter of her career). I would suggest its the inverse - it just got even more valuable and even more relevant to the next phase of her role with an even higher ROI potential. Trouble is, someone upstairs with a red pen doesn't have a visceral experience of that.
- Solution: Figuring out how to give those upstairs a visceral experience of a peer group process (getting into their own groups would be the best way of course - typically, once a CEO Vistage member has been in a group for a while, they quickly put some of the senior executives into their own groups, to help bring more of the value of the process into their businesses) and a gut feel for the ROI. Figuring out how best to support human capital professional in positioning the value-for-money/ROI of the human capital investment.
- Challenge: Logistics, Impediments & Technology Enablers. Clearly, one of the biggest challenges is that the safe, trusting environment which invites the soul to show up (a "circle of trust") is largely predicated on groups being made up of non-organizational peers, which is more challenging to create inside of larger businesses and public corporations. We run into geographical, travel and other impediments, although various technology enablers can help overcome those these days.
- Solution: Figuring out a blended approach of face-to-face and virtual peer group experiences which overcome the logistical impediments without diminishing the "circle of trust" experience (and causing it to default back into being more like consulting, training, coaching and everything else in the basket of fruit which we talked about above, except the orange it was trying to be). Figuring out how best to support human capital professionals in designing a portfolio approach to implement different kinds of peer group experiences at different levels in their organizations.
At the end of the day, the practical reality is that there is only one benefit/metric at the very, very bottom-line which counts. That is cash-flow and, when the analysts do their net-present-value/discounted-cash-flow-analysis, how that feeds into market capitalization and stakeholder value creation (whether the business is a public or private corporation). I know, I know, I am as much a proponent of multiple bottom-lines (societal, environmental etc), ends and means etc as anyone else, but the only safe assumption in my experience is that the raw financial math has to been seen to work too (otherwise we are much more at risk from that red pen from the unenlightened).
I believe the financial payback benefit is proven by the Vistage example/data and, not least of all, through my own personal experience as a Chair with my members. The question is, how can human capital professionals create metrics to evidence that in their businesses, which is a similar challenge they face with their other initiatives, financially and non-financially, ends and means to those ends.
That's why I like to talk about "Wheel$pin" (as outlined in my Hack, "In the Driving Seat of Organizational Agility: translating strategy and execution into traction in turbulent times") which is costing us a $ fortune in avoidable costs and opportunity costs, sometimes with life and death consequences, for the future of our business or certain components/aspects of our business. A peer group process helps us diagnose and treat the sources of wheel-spin in our business (and our life), more transparently than anything else I have every encountered, with nothing off limits - strategy, structure, culture, leadership/communication, mental models, productivity, operations management, goal-setting, execution-excellence, path-finding, executive-intelligence, intuition and resilience, etc etc etc. In a "circle of trust", when non-organizational peers are shining a light into your blind-spots, with care-frontation, there is nowhere to hide. As a result, members feel more composed, confident and courageous, with more balance, less stress and better perspective, translating everything into more traction, not least of all with cash-flow, market capitalization and stakeholder value.