For 40 years after the Wright Brothers used a small internal combustion engine to demonstrate human flight, aviation engineers concentrated on improving that technology. But, as demand grew for faster military planes and faster and larger commercial airliners, designers encountered fundamental limitations with the speed and power reciprocating engines could produce. Around that same time maverick engineers thinking outside the box in Germany and England invented and patented turbojet engines, which overcame these limitations and satisfied the design challenges. The resulting shift to jet engines in the 1950s ignited waves of aircraft innovation and turbojet improvement which continue half a century later.
Similar to aviation business leaders and experts steadily improved the hierarchical control management model through mid-20th Century with concepts like standardized job descriptions, protocols for planning and scheduling, cost accounting, incentive-based compensation, multi-divisional structures, etc.. However, limitations with that model also began to surface as researchers demonstrated that “self-direction” improved work team productivity and safety, and Peter Drucker’s first book described how “self-control” produced “stronger motivation: a desire to do the best rather than just enough to get by.”[1]
[1] “The Practice of Management” by Peter F. Drucker, Harper & Row Publishers, 1954; Page 130
Manager frustrations with hierarchical control grew over ensuing decades as changing conditions required more and more employees to use their full range of human capabilities on the job. “Knowledge workers” presented an early challenge where managing engineers, accountants, scientists, and lawyers differed fundamentally from supervising the uneducated workers in Industrial Revolution factories where hierarchical control was initially applied. In the rapidly expanding service industries growing numbers of front line employees faced customer issues that could not wait for management decisions. Increasing complexity and accelerating change exposed employees in all industries to problems and opportunities, the details of which could not be communicated for timely hierarchical decision making. And Generation Y expectations to be treated as self-responsible adults added to the growing discontent with hierarchical control practices. Although consultants and business schools offered a plethora of “solutions” and management fads came and went like the seasons, dissatisfaction with hierarchical control continues today—as reflected in the MIX moonshots.
Looking back with the benefit of 20/20 hindsight, around mid-Century a few maverick business leaders began to experiment with what we suggest would become management’s turbojet—a freedom-based alternative for hierarchical control that overcame these limitations and produced extraordinary business results. Similar to aviation these mavericks operated outside the box with a fundamentally different mindset about human nature and work. They saw employees as valuable sources of ideas, who under proper conditions would seek responsibility, work hard, and self control their actions. MIT professor Douglas McGregor labeled this view “Theory “Y” and explained how it differed from the “Theory X” beliefs underlying hierarchical control—such as work is not enjoyable and people tend to avoid responsibility. Although “Theory “Y” did not describe all employees, these leaders demonstrated that cultures built with this mindset set high expectations for everyone, encouraged everybody to think and act like owners in part by sharing the financial and intrinsic rewards of success with all, and most importantly capitalized on freedom’s profoundly positive impacts on employee behavior and growth. The resulting enjoyable working conditions inspired employees to do their best and made innovation everybody’s job, every day.
Operating by trial and error and unaware of each other, mavericks David Packard, Ken Iverson, Herb Kelleher, Max De Pree, and Sam Walton[1] shared with employees a vision for success and strived to align their interests and harmonize their needs with those of the business. They expected managers to help and coach individuals—instead of controlling them. Employees were encouraged to take risks and to learn from mistakes and failures. Unencumbered by belief that hierarchical control was essential, these mavericks shifted much responsibility for organizational control to employees and the results were extraordinary. Employees behaving like creative entrepreneurs helped HP, Nucor Steel, Southwest Airlines, Herman Miller, and Wal-Mart to out-perform the S&P 500 for three decades each by factors of 7, 9, 10, 3, and 35 respectively—powerful evidence that these mavericks truly stumbled upon the management turbojet!
Unlike aviation, however, others could not take advantage of their breakthroughs because these mavericks operated intuitively without incentive to patent their innovations. Additionally until our post-retirement research nobody identified the mindset shift from “hierarchical control” to “vision-led freedom” that was foundational to their successes, or how this shift enabled these organizations to displace slow, cumbersome “controlled order” with dynamic “self-organized spontaneous order.” Therefore lacking an alternative for hierarchical control mainstream management innovation slowed to a snail’s pace. In the terminology of Thomas Kuhn consultants, experts, and business schools bogged down wrestling with a long list of hierarchical control anomalies which only a paradigm shift to “vision-led freedom” could resolve—a characterization we suggest also applies to most MIX dialogue so far.
[1] Bill Gore of W.L. Gore, and J. Robert Beyster of SAIC were also mavericks not included in our research.
Fortunately in contrast to the immature turbojet technology which reignited aviation innovation, managers today have a role model for implementing “vision-led freedom” (in our draft of “Freedom-Based Management©”[1]), which produced seven remarkable success stories in six different industries. The foundational mindset shift does present a paradox. Individuals who like these mavericks and ourselves are intuitively comfortable with Theory Y need never explicitly consider this issue. On the other hand anyone uncomfortable with Theory Y, or who has not questioned why they rely on hierarchical control probably needs help. Our draft explains why hierarchical control is unnecessary, and describes specifically why freedom had such profound impacts on employee performance in the companies we studied. Additionally “Freedom, Inc.” by Brian Carney and Isaac Getz provides 13 more case studies of freedom-oriented successes around the globe. If these readings stimulate enthusiasm for eliminating hierarchical control and capitalizing on freedom’s powerful benefits, that should be sufficient to get started.
[1] http://cid-13d8911780bef9bf.skydrive.live.com/redir.aspx?resid=13D8911780BEF9BF!104
Under partner Paul Staley’s leadership PQ Corporation capitalized on freedom to out-perform the S&P 500 for 30 years by a factor of 5. Also as previously mentioned “vision-led freedom” helped HP, Nucor Steel, Southwest Airlines, Herman Miller, and Wal-Mart to out-perform the S&P 500 for three decades each by factors of 7, 9, 10, 3, and 35 respectively.
(1) The benefits of “vision-led freedom” derive from two fundamental sources. First are freedom’s profoundly positive impacts on human behavior and growth, which economists identified by comparing centrally controlled socialist societies with free-market democracies, and which are equally powerful inside organizations. Second is the impact of shifting from the slow, cumbersome “controlled order” of hierarchical control to dynamic “self-organized spontaneous order.” These two impacts interacting synergistically revolutionize organizational effectiveness and creativity. For example PQ Corporation transformed from a stodgy, commodity chemical manufacturer into “one big damned laboratory of continual change and product innovation” by the time Paul retired.
(2) History shows the impossibility of evolving hierarchical control into “vision-led freedom”—just as it was impossible to evolve the reciprocating engine into a turbojet. For decades managers have tried to inject into hierarchically controlled organizations concepts like “increased freedom,’ “reduced control,” “empowering employees,” “self-directed work teams,” etc. None of these efforts produced “vision-led freedom” and the vast majority failed because these concepts are antithetical to the core assumption of hierarchical control—i.e. that management control is essential to sustain order and prevent chaos. Management systems sensing these threats have spontaneously rejected initiatives to protect order and prevent chaos.
“Vision-led freedom” requires leadership enthusiasm for the extraordinary value of eliminating hierarchical control and enabling employees to function freely and spontaneously guided by the enterprise vision for success and organizational culture. That open-mindedness eliminates any dissonance with concepts like these and, when problems occur, encourages solutions that do not require hierarchical control.
(3) Several of our example companies have drifted away from their original freedom-orientation —primarily because successor CEO’s have not explicitly understood the critical cultural elements they inherited. Our role model should help to reduce this risk, as can business school research, which we expect to shift toward exploring “vision-led freedom.”
We are indebted to the leaders who showed the way by building the freedom-oriented cultures we studied and who shared their experiences. We also value the insights of Douglas McGregor and Peter Drucker, who came so close to discovering this paradigm shift 50 years ago. Paul's question--Does management have any fundamental reason to control employees?, provided the breakthrough that allowed us to build on their ideas and ultimately stumble upon "vision-led freedom."
http://cid-13d8911780bef9bf.skydrive.live.com/redir.aspx?resid=13D8911780BEF9BF!104
Rutgers School of Management and Labor Relations is offering a fellowship to explore freedom-based management at http://smlr.rutgers.edu/billnobles-fellows
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