Gary Hamel: If you want an adaptable or an innovative organization, people need more freedom. Freedom to break the rules, freedom to challenge conventional wisdom, free to go around channels, free to experiment and try to do new things, freedom to disagree. And normally, when you kind of suggest, at least in my experience, when you suggest to a manager that we need more freedom in the workplace, there's almost this instinctive fear. That if we give people more freedom, efficiency and discipline are going to, you know, just crumble.
So we've put a whole bunch of kind of constraints around people that make sure they can never screw up. But unfortunately, that particular-- how the supervision, the very tight rules, the narrow job description, lack of discretionary spending ability, lack of discretionary time even, these things are very successful in driving discipline, but they tend to kill the kind of innovation and creativity that are so important in the creative economy.
So is there another way? Well, let me give you a couple of examples. One of the most innovative companies in the world, indeed it has sometimes been called the most innovative company in the world, is WL Gore. You would know them for GORE-TEX®, the high performance fabric you find in all kinds of sporting goods, clothing and so on. But beyond that, they make about a thousand other products, from aortic grafts to fuel cells that go into membranes. Some of the world's best selling guitar strings, dental floss, an enormously creative company. Been around for 50 years, never made a loss in 50 years.
When you go inside of Gore, you discover they have a management model that's every bit as radical as their products, every bit as innovative as what they make. One of the things you discover at Gore is, there is no formal hierarchy. When you go there, people hand you their business cards, you'll see that on the business card, there's no EVP, SVP, Director, Project Manager, none of the typical hierarchical designations. When you walk around Gore, you're never going to hear words like, "supervisor, boss, direct reports, bottom up, top down." All the things that we use to describe hierarchy, those terms have no meaning at Gore. It's a lattice, not a hierarchy.
They also have a philosophy at Gore that every employee has the right to say "no" to any request. Think about that for a moment. Doesn't that sound to you like a recipe for anarchy? How would you run a disciplined organization, and by the way, Gore is pretty disciplined, they sell to Proctor & Gamble, they sell to Nike, to some very demanding customers. How do you run a disciplined organization if everyone can say no? Well, Gore gets discipline, but they get it in an unusual way. One of the mechanisms, and they have several, but one, at the end of every year, every employee goes through an evaluation process and 20 of your peers are going to weigh in on your performance that year.
There's no 360 degree review, 'cause there are no ups and downs, just a set of peers. And what they're going to ask is, how much value did Tom or Susan or Gary, how much value did they add this year? They take all those rankings, they use those to put you on a bell shaped curve and that will drive a lot of your compensation. It's a kind of brutal process, but it's also very effective. If you're any good at Gore, you're going to have a lot more requests to work on projects and help out teams than you have time for. You are going to have to say no. And sometimes you're just not interested in things and if you said yes, it wouldn't be something that fired up your passion.
Gary Hamel: The second thing that I think is fundamentally important here, is you have to have an organization where people feel like they're part of a community. Not part of a bureaucracy, not part of a hierarchy, not cogs in a machine, but they feel like a community. Think back in your own career or your own life, at the times when you were the most energized or having the most fun, making the biggest contribution. I'm willing to bet that at those points in your life, you felt like you were part of a community. It could have been a sports team in school, or maybe a school play that you were part of producing. It could have been a skunk works that you had in your company, where you got assigned to a cool new kind of a project. Maybe a church group that you're involved in, I don't know.
Twenty and more years ago, when John Mackey founded Whole Foods, a company that for sure is struggling through the current recession, but I think is going to come out of it and will continue to thrive. John Mackey said, "How do I build an entire company that feels like a community?" In fact, they don't have a mission statement; they have a statement of interdependence that says shareholders, employees, suppliers, management, nobody here can win at the expense of another constituency. We all go up or we go down together. That's the first principle of community. And how has that been operationalized in their management processes and practices? In a whole variety of ways.
First of all, the company very clearly is united around a mission. Whole Foods, Whole People, Whole Planet. How do you produce and bring to market foods that are healthier with fewer additives? It's a company in which first-line employees have enormous discretion. Small teams, do the merchandise selection, set prices, set the work hours, not the store manager, not somebody at regional headquarters. More autonomy right down there on the front lines than almost any retailer I know. The senior executives have set a limit on their compensation of 19 times the average pay in the company. As you know, in so many large organizations today, that ratio, CEO pay to first level pay, is 300 or 400 to one.
But they've done a whole variety of things to create that egalitarian sense, that sense of being in it together that is lacking in so many other organizations. People are only going to give you their very best if they feel they are truly part of a true community.
Gary Hamel: The third thing that I think is so important here, if you really want to unleash this capability, this is where the greatest potential for efficiency gain comes from, is unlocking the creativity, the passion that people have in organizations. And I think the other thing that's so critical there, is a deep sense of purpose. You know, let me get you to think for a moment. It's kind of a little assignment I might give you.
Go back and look at the CEO's recent speeches. Transcripts I'm sure are floating around your organization or whatever leader you have in your company, your business, look at the speeches, look at the letter that gets sent out to shareholders, the chairman's letter in the annual report, whatever it may be and do a little content analysis. Look at the language that gets used there and I think you're going to see a lot of words like "value, quality, excellence, superiority, advantage, focus, differentiation." Those are great words, but I can tell you, most of those words don't stir the human soul. Those are not the words that connote the great ideals that have driven extraordinary human accomplishment.
The words that denote those ideals are things like "joy and truth and honor and loyalty and wisdom and beauty and justice." You know, I was talking about Whole Foods, year ago, John Mackey once said it, in the company, "I want to build a company based on love instead of fear." Now that's a simple little statement, it's kind of hardly objectionable. But here's a personal challenge for you. Next time you're sitting in a meeting in your business, your organization, and there's a lull in the conversation, say, "Hey guys, I want to make a point here. What we really need in this organization is, we need more love." I double dog dare you to do that. 'Cause while we all can kind of empathize, sympathize with that as a thought, building an organization based on love instead of fear, not many of us would be willing to bring that actual language into our own organizations.
So freedom, community, purpose- if you instill those things in your organization, I can assure you that you will get an extraordinary amount of contribution out of your people. One that allows you to do far more with far less than you would have ever thought possible and that of course is the objective in tough times.
Recorded on August 15, 2009