Turning the lone star into a real team player
FT.com site; Aug 07, 2002
By Morten Hansen
Electronic tools and other initiatives designed to enhance the sharing of information are useless unless the company acknowledges a fundamental need: fostering a culture of collaboration between units and employees, says Morten Hansen.
The field of knowledge management arose in the early 1990s as an attempt by companies to harness the wealth of their underused knowledge and intellectual capital. Nearly a decade later, it has not delivered on that promise.
Knowledge management has become narrowly focused on databases and other electronic means such as online communities and webcasts. While these may have some use, they are not far-reaching; in part because they do not alter employees' attitudes to sharing and using knowledge. To do so, knowledge management needs to tackle something more fundamental - the design of a collaborative organisation.
BP provides a good example. Over the past decade the petroleum group's managers have transformed the company from a collection of individual fiefdoms and independent business units into a collaborative business, thereby cutting costs, improving efficiency and lifting revenues.
Managers changed the resource allocation process so that a group of peers - business unit heads who run similar businesses - became responsible for the capital expenditure allocation of that group, effectively forcing the peers to work together to maximise the allocations for the group and not each individual. They also developed "peer assist" and "peer challenge" processes, whereby managers and engineers in a business unit receive help from other units. Engineers in a typical business unit now spend about 5 per cent of their time on peer assists in other units.
Promotion and reward systems were also changed. Managers receive a "360-degree" review and those who do not collaborate effectively across the organisation are not given more senior manager positions. In addition, 30-50 per cent of bonuses for senior managers depend on the performance of the company. BP also developed several electronic knowledge management systems and used video technology to aid the peer assists.
These changes went far beyond electronic tools, altering the organisation and management principles of the company. The transformation led to collaborative behaviour in the organisation - a lateral way of managing across units that complements the traditional hierarchy.
Collaboration brings real economic benefits: cost savings through the transfer of best practice; improved decision-making through the use of advice from across the organisation; increased revenues through shared expertise and products shared among subsidiaries; more innovation; and a greater capacity for concerted action among far-flung business units.
While most managers acknowledge the value of a "collaborative culture", few know how to build one. In fact, it is not that mystical - a few simple techniques can help create the right types of behaviour. (To assess how your company is stacking up, take a survey at www.people.hbs.edu/mhansen. )
However, because each organisation is different, executives first need to understand why people in the organisation are not collaborating and sharing as much as they should.
There are four obstacles involving employees' motivations and abilities that must be overcome.
First, unwillingness to seek advice and learn from others. Employees may not want to seek advice across the organisation, either because they believe they cannot learn anything or because there is a prevailing norm that people ought to fix their problems themselves. No electronic knowledge management system can fix this problem; simply making documents and links to experts available does not help if employees do not want input from others.
For example, some years ago executives at Hewlett-Packard's European operations created a performance system that compared times taken to process computer orders across factories in various countries. Some managers in the under-performing factories were at first unwilling to use this information to learn from others and only did so when senior managers intervened.
BP uses peer pressure to make sure people seek advice and learn from others. Senior managers keep a close eye on the extent to which a business unit manager asks for assistance from peers and will intervene if they seek too little. A peer challenge is an even more direct form: peers, not superiors, will go directly to a business unit, challenge it and help it improve in areas in which it is under-performing.
Another method is to recruit employees who have a natural inclination to ask for help. A chain of restaurants in the US does this deliberately. At interview, it asks: "What obstacles have you faced in a previous job that prevented you from doing a good job and how did you overcome these obstacles?" The desirable answer should include asking for help and communicating the problem to others, not trying to be a hero and fix it alone.
Second, there is inability to find expertise. There is often someone who knows the answer to a problem but it may be nearly impossible to connect the person who has the expertise with the one who needs it. Clearly, databases and electronic search engines serve a useful role here but more in the capacity of being "electronic yellow pages" than as self-sufficient electronic repositories. In most management consulting companies, for example, consultants upload sanitised documents containing their finished work into databases, which are then accessed by other consultants who review prior work and contact the consultants who did it.
Another way to help people find expertise is to create transparent benchmarking systems. At Ispat International, one of the largest steel companies in the world, there is a system that performs costing at plant level and compares the various plants around the world. Managers can compare different factors in operating units around the world, use this information to spot deviations from best practice and then contact the best-performing plant in certain areas.
However, technology has its limits. Expert directories become out of date and do not fully capture what each person knows. More importantly, they do not allow for creative combinations of ideas and individuals. Companies therefore need to cultivate people who know where experts and ideas reside. These "connectors" tend to be long-timers who have worked in many different areas in the company and hence have an extensive personal network. They see opportunities for new value creation based on the combination of talent, ideas and expertise in different units.
Then there is unwillingness to help. Is knowledge hoarded in your company? Employees may be willing to seek advice but others are sometimes reluctant to share it. The growing emphasis on performance management has fuelled this problem: people no longer have the time to help others, or they do not care, because they are only asked to deliver on their own targets. While performance is important, executives also need to develop incentives to help others and cultivate a shared identity among employees. This is a notorious problem in many investment banks, where bankers chase their own opportunities without properly assisting others.
When John Mack took over at Morgan Stanley, he set out to create a more collaborative culture by changing the promotion criteria. Bankers needed to demonstrate both individual performance and contributions to others to become a managing director, the level at which bankers reap the most rewards - lone stars would no longer be promoted. Supported by a 360-degree review procedure, individuals started to co-operate on a much greater scale than before.
Lastly, there is the inability to work together. A "chemistry" problem can sometimes prevent people working well together, even if they want to and are part of a project team. It is a very different problem from the other three obstacles and requires different responses, including training sessions on teamwork, coaching people as they try to work together and the development of strong relations between people from different units.
For example, a study of time-to-market performance of new product development projects in a high-technology company found that project engineers who worked with engineers from other divisions took 20-30 per cent longer to complete their projects when they had not established a personal relationship. Engineers found it hard to articulate, understand and absorb complex technologies that were transferred between divisions when they had not learned to work together beforehand.
Managers must respond to each of these obstacles in different ways. For example, developing an electronic knowledge management system will not help if the underlying problem is that employees hoard knowledge and will not seek help; it will only make people cynical about collaboration. Likewise, making promotion contingent on the extent to which people seek advice from others will not help if there is no way of identifying experts. All four obstacles need to be overcome for effective collaboration to occur. Solving one problem, but not the others, will not help.
If the problem is a lack of willingness to seek advice and share it, there are several effective responses. Leaders should urge the importance of collaboration and its value should be incorporated into the company's value statement. Performance reviews, compensation and career advancement opportunities have been mentioned, alongside recruitment criteria that discourage "lone stars". If the problem is an inability to find expertise, then the company should cultivate informal networks of experts to be used by those searching for particular expertise. Electronic yellow pages should be set up to identify the company's various experts and benchmark systems established to allow staff to identify the company's best practices.
If the problem is an inability to work together, managers should develop regular, structured interactions, such as the peer groups at BP, between relevant sets of employees. Those who need to work across the organisation should be given coaching and training where necessary.
One pitfall of collaboration is that it can easily be overdone. Before you know it, people participate in meetings without getting anything done, leading to ineffective collaboration that undermines overall performance. Levers to create a collaborative organisation must therefore be counterbalanced by clear performance management of each individual and business unit, including a specification of who is responsible for what.
Companies that achieve this balance break one of the most ingrained compromises in corporations - that between decentralisation and centralisation. Decentralising responsibility by giving each manager a clear performance mandate leads to better local decisions. At the same time, companies also reap economic gains from working together across decentralised business units. This in turn creates managers who transcend parochial interests and can see the whole while delivering their part. This is the promise of the collaborative organisation.
Morten Hansen is an associate professor of business administration at Harvard Business School.
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