Power Of Re framing Organization Discussion Paper.

CHAPTER 1 INTRODUCTION THE POWER OF REFRAMING By the second decade of the twenty-first century, the German carmaker Volkswagen and the U.S. bank Wells Fargo were among the world’s largest, most successful, and most admired firms. Then both trashed their own brand by following the same script. It’s a drama in three acts:

1. Act I: Set daunting standards for employees to improve performance. 2. Act II: Look the other way when employees cheat because they think it’s the only

way to meet the targets.

3. Act III: When the cheating leads to a media firestorm and public outrage, blame the workers and paint top managers as blameless.Power Of Re framing Organization Discussion Paper.

In Wells Fargo’s case, the bank fired more than 5,000 lower-level employees but offered an exit bonus of $125 million to the executive who oversaw them (Sorkin, 2016). Volkswagen CEO Martin Winterkorn was known as an eagle-eyed micromanager but pleaded ignorance when his company admitted in 2015 that it had been cheating for years on emissions tests of its “clean” diesels. He was quickly replaced by Matthias Müller, who claimed that he didn’t know anything about VW’s cheating either. Müller also explained why VW wasn’t exactly guilty: “It was a technical problem. We had not the interpretation of the American law…We didn’t lie. We didn’t understand the question first” (Smith and Parloff, 2016). Apparently VW was smart enough to design clever software to fudge emissions tests but not smart enough to know that cheating might be illegal. The smokescreen worked for years—VW sold a lot of diesels to consumers who wanted just what Volkswagen claimed to offer, a car at the sweet spot of low emissions, high performance, and great fuel economy. The cheating apparently began around 2008, seven years before it became public, when Volkswagen engineers realized they could not make good on the company’s public, clean-diesel promises (Ewing, 2015). Power Of Re framing Organization Discussion Paper.Bob Lutz, an industry insider, described VW’s management system as “a reign of terror and a culture where performance was driven by fear and intimidation” (Lutz, 2015). VW engineers faced a tough choice. Should they tell the truth and lose their jobs now or cheat and maybe lose their jobs later? The engineers chose option B. The story did not end happily. In January, 2017, VW pleaded guilty to cheating on emissions tests and agreed to pay a fine of $4.3 billion. In the same week, six VW executives were indicted for conspiring to defraud the United States.1 In Spring of 2017, VW’s legal troubles appeared to be winding down in the United States, at a total cost of more than $20 billion, but were still ramping up in Germany, where authorities had launched criminal investigations (Ewing, 2017).

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The story at Wells Fargo was similar. For years, it had successfully billed itself as the friendly, community bank. It ran warm and fuzzy ads around themes of working together and caring about people. The ads did not mention that in 2010 a federal judge ruled that the bank had cheated customers by deliberately manipulating customer transactions to increase overdraft fees (Randall, 2010), nor that in August, 2016, the bank agreed to pay a

$4.1 million penalty for cheating student borrowers. But no amount of advertising would have helped in September, 2016, when the news broke that employees in Wells Fargo branches, under pressure from their bosses to sell more “solutions,” had opened some two million accounts that customers didn’t want and usually didn’t know about, at least not until they received an unexpected credit card in the mail or got hit with fees on an account they didn’t know they had. None of it should have been news to Wells Fargo’s leadership. Back in 2005, employees began to call the firm’s human resources department and ethics hotline to report that some of their coworkers were cheating (Cowley, 2016). The bank sometimes solved that problem by firing the whistleblowers. Take the case of a branch manager in Arizona. While covering for a colleague at another branch, he found that employees were opening accounts for fake businesses. He called HR, which told him to call the ethics hotline. Ethics asked him for specific data to support the allegations. He pulled data from the system and reported it. A month later, he was fired for improperly looking up account information. In 2013, the Los Angeles Times ran a story about phony accounts in some local branches. Wells Fargo’s solution was not to lower the flame under the pot but to try and screw down the lid even tighter. They kept up the intense push for cross-selling but sent employees to ethics seminars where they were instructed not to open accounts customers didn’t want. CEO John Stumpf achieved plausible deniability by proclaiming that he didn’t want “want anyone ever offering a product to someone when they don’t know what the benefit is, or the customer doesn’t understand it, or doesn’t want it, or doesn’t need it” (Sorkin, 2016, p. B1). But despite his public assurances, the incentives up and down the line still rewarded sales rather than ethical squeamishness. Many employees felt they were in a bind: they’d been told not to cheat, but that was the best way to keep their jobs (Corkery and Cowley, 2016). Like the VW engineers, many decided to cheat now and hope that later never came.

Maybe leaders at Volkswagen and Wells Fargo knew about the cheating and hoped it would never come to light. Maybe they were just out of touch. Either way, they were clueless— failing to see that their companies were headed for costly public-relations nightmares. But they are far from alone. Cluelessness is a pervasive affliction for leaders, even the best and brightest. Often it leads to personal and institutional disaster. But, sometimes there are second chances. Consider Steve Jobs. He had to fail before he could succeed. Fail he did. He was fired from Apple Computer, the company he founded, and then spent 11 years “in the wilderness” (Schlender, 2004). During this time of reflection he discovered capacities as a leader—and human being—that set the stage for his triumphant second act at Apple. He failed initially for the same reason that countless managers stumble: like the executives at VW and Wells Fargo, Jobs was operating on a limited understanding of leadership and organizations. He was always a brilliant and charismatic product visionary. That enabled him to take Apple from startup to major computer vendor, but didn’t equip him to lead Apple to its next phase. Being fired was painful, but Jobs later concluded that it was the best thing that ever happened to him. “It freed me to enter one of the most creative periods of my life. I’m pretty sure none of this would have happened if I hadn’t been fired from Apple. It was awful-tasting medicine, but I guess the patient needed it.”

During his period of self-reflection, Jobs kept busy. He focused on Pixar, a computer graphics company he bought for $10 million, and on NeXT, a new computer company that he founded. One succeeded and the other didn’t, but he learned from both. Pixar became so successful it made Jobs a billionaire. NeXT never made money, but it developed technology that proved vital when Jobs was recalled from the wilderness to save Apple from a death spiral. His experiences at NeXT and Pixar provided two vital lessons. One was the importance of aligning an organization with its strategy and mission. He understood more clearly that he needed a great company to build great products. Lesson two was about people. Jobs had always understood the importance of talent, but now he had a better appreciation for the importance of relationships and teamwork. Jobs’s basic character did not change during his wilderness years. The Steve Jobs who returned to Apple in 1997 was much like the human paradox fired 12 years earlier— demanding and charismatic, charming and infuriating, erratic and focused, opinionated and curious. The difference was in how he interpreted what was going on around him and how he led. To his long-time gifts as a magician and warrior, he had added newfound capacities as an organizational architect and team builder. Shortly after his return, he radically simplified Apple’s product line, built a loyal and talented leadership team, and turned his old company into a hit-making machine as reliable as Pixar. The iMac, iPod, iPhone, and iPad made Jobs the world’s most admired chief executive, and Apple passed ExxonMobil to become the world’s most valuable company. His success in building an organization and a leadership team was validated as Apple’s business results continued to impress after his death in October 2011. Like many other executives, Steve Jobs seemed to have it all until he lost it—but most never get it back. Martin Winterkorn had seemed to be on track to make Volkswagen the world’s biggest car company, and Wells Fargo CEO John Stumpf was one of America’s most admired bankers. But both became so cocooned in imperfect worldviews that they misread their circumstances and couldn’t see other options. That’s what it means to be clueless. You don’t know what’s going on, but you think you do, and you don’t see better choices. So you do more of what you know, even though it’s not working. You hope in vain that steady on course will get you where you want to go. How do leaders become clueless? That is what we explore next. Then we introduce reframing—the conceptual core of the book and our basic prescription for sizing things up. Power Of Re framing Organization Discussion Paper.Reframing requires an ability to think about situations from more than one angle, which lets you develop alternative diagnoses and strategies. We introduce four distinct frames—structural, human resource, political, and symbolic—each logical and powerful in capturing a detailed snapshot. Together, they help to paint a more comprehensive picture of what’s going on and what to do.

Virtues and Drawbacks of Organized Activity There was little need for professional managers when individuals mostly managed their own affairs, drawing goods and services from family farms and small local businesses. Since the dawn of the industrial revolution some 200 years ago, explosive technological

and social changes have produced a world that is far more interconnected, frantic, and complicated. Humans struggle to avoid drowning in complexity that continually threatens to pull them in over their heads (Kegan, 1998). Forms of management and organization effective a few years ago are now obsolete. Sérieyx (1993) calls it the organizational big bang: “The information revolution, the globalization of economies, the proliferation of events that undermine all our certainties, the collapse of the grand ideologies, the arrival of the CNN society which transforms us into an immense, planetary village—all these shocks have overturned the rules of the game and suddenly turned yesterday’s organizations into antiques” (pp. 14–15). Benner and Tushman (2015) argue that the twenty-first century is making managers’ challenges ever more vexing: The paradoxical challenges facing organizations have become more numerous and strategic (Besharov & Smith, 2014; Smith & Lewis, 2011). Beyond the innovation challenges of exploration and exploitation, organizations are now challenged to be local and global (e.g., Marquis & Battilana, 2009), doing well and doing good (e.g., Battilana & Lee, 2014; Margolis & Walsh, 2003), social and commercial (e.g., Battilana & Dorado, 2010), artistic or scientific and profitable (e.g., Glynn, 2000), high commitment and high performance (e.g., Beer & Eisenstadt, 2009), and profitable and sustainable (e.g., Eccles, Ioannou, & Serafeim, 2014; Henderson, Gulati, & Tushman, 2015; Jay, 2013). These contradictions are more prevalent, persistent, and consequential. Further, these contradictions can be sustained and managed, but not resolved (Smith, 2014).

The demands on managers’ wisdom, imagination and agility have never been greater, and the impact of organizations on people’s well-being and happiness has never been more consequential. The proliferation of complex organizations has made most human activities more formalized than they once were. We grow up in families and then start our own. We work for business, government, or nonprofits. We learn in schools and universities. We worship in churches, mosques, and synagogues. We play sports in teams, franchises, and leagues. We join clubs and associations. Many of us will grow old and die in hospitals or nursing homes. We build these enterprises because of what they can do for us. They offer goods, entertainment, social services, health care, and almost everything else that we use or consume.

All too often, however, we experience a darker side of these enterprises. Organizations can frustrate and exploit people. Power Of Re framing Organization Discussion Paper.Too often, products are flawed, families are dysfunctional, students fail to learn, patients get worse, and policies backfire. Work often has so little meaning that jobs offer nothing beyond a paycheck. If we believe mission statements and public pronouncements, almost every organization these days aims to nurture its employees and delight its customers. But many miss the mark. Schools are blamed for “mis- educating,” universities are said to close more minds than they open, and government is criticized for corruption, red tape, and rigidity.

The private sector has its own problems. Manufacturers recall faulty cars or inflammable cellphones. Producers of food and pharmaceuticals make people sick with tainted products. Software companies deliver bugs and “vaporware.” Industrial accidents dump chemicals, oil, toxic gas, and radioactive materials into the air and water. Too often, corporate greed,

incompetence, and insensitivity create havoc for communities and individuals. The bottom line: We seem hard-pressed to manage organizations so that their virtues exceed their vices. The big question: Why?

Management’s Track Record Year after year, the best and brightest managers maneuver or meander their way to the apex of enterprises great and small. Then they do really dumb things. How do bright people turn out so dim? One theory is that they’re too smart for their own good. Feinberg and Tarrant (1995) label it the “self-destructive intelligence syndrome.” They argue that smart people act stupid because of personality flaws—things like pride, arrogance, and an unconscious desire to fail. It’s true that psychological flaws have been apparent in brilliant, self-destructive individuals such as Adolf Hitler, Richard Nixon, and Bill Clinton. But on the whole, the best and brightest have no more psychological problems than everyone else. The primary source of cluelessness is not personality or IQ but a failure to make sense of complex situations. Power Of Re framing Organization Discussion Paper.If we misread a situation, we’ll do the wrong thing. But if we don’t know we’re seeing things inaccurately, we won’t understand why we’re not getting the results we want. So we insist we’re right even when we’re off track. Vaughan (1995), in trying to unravel the causes of the 1986 disaster that destroyed the Challenger space shuttle and its crew, underscored how hard it is for people to surrender their entrenched conceptions of reality: They puzzle over contradictory evidence, but usually succeed in pushing it aside—until they come across a piece of evidence too fascinating to ignore, too clear to misperceive, too painful to deny, which makes vivid still other signals they do not want to see, forcing them to alter and surrender the world-view they have so meticulously constructed (p. 235). So when we don’t know what to do, we do more of what we know. We construct our own psychic prisons and then lock ourselves in and throw away the key. This helps explain a number of unsettling reports from the managerial front lines:

• Hogan, Curphy, and Hogan (1994) estimate that the skills of one half to three quarters of American managers are inadequate for the demands of their jobs. Gallup (2015) puts the number even higher, estimating that more than 80 percent of American managers lack the talent they need. But most probably don’t realize it: Kruger and Dunning (1999) found that the less competent people are, the more they overestimate their performance, partly because they don’t know good performance when they see it.

• About half of the high-profile senior executives that companies hire fail within two years, according to a 2006 study (Burns and Kiley, 2007).

• The annual value of corporate mergers has grown more than a hundredfold since 1980, yet evidence suggests that 70 to 90 percent “are unsuccessful in producing any business benefit as regards shareholder value” (KPMG, 2000; Christensen, Alton, Rising, and Waldeck, 2011). Mergers typically benefit shareholders of the acquired firm but hurt almost everyone else—customers, employees, and, ironically, the buyers who initiated the deal (King et al., 2004). Stockholders in the acquiring firm typically suffer a 10 percent loss on their investment (Agrawal, Jaffe, and Mandelker, 1992), while consumers feel that they’re paying more and getting less.

Despite this dismal record, the vast majority of the managers who engineered mergers insisted they were successful (KPMG, 2000; Graffin, Haleblian, and Kiley, 2016).

• Year after year, management miscues cause once highly successful companies to skid into bankruptcy. In just the first quarter of 2015, for example, 26 companies went under, including six with claimed assets of more than $1 billion. (Among the biggest were the casino giant, Caesars Entertainment, and the venerable electronics retailer, RadioShack.)

Small wonder that so many organizational veterans nod in assent to Scott Adams’s admittedly unscientific “Dilbert principle”: “the most ineffective workers are systematically moved to the place where they can do the least damage—management” (1996, p. 14).

Strategies for Improving Organizations We have certainly made a noble effort to improve organizations despite our limited ability to understand them. Legions of managers report to work each day with hope for a better future in mind. Authors and consultants spin out a torrent of new answers and promising solutions. Policymakers develop laws and regulations to guide or shove organizations on the right path. The most universal improvement strategy is upgrading management talent. Modern mythology promises that organizations will work splendidly if well managed. Power Of Re framing Organization Discussion Paper.Managers are supposed to see the big picture and look out for their organization’s overall well-being. They have not always been equal to the task, even when armed with the full array of modern tools and techniques. They go forth with this rational arsenal to try to tame our wild and primitive workplaces. Yet in the end, irrational forces too often prevail. When managers find problems too hard to solve, they hire consultants. The number and variety of advice givers keeps growing. Most have a specialty: strategy, technology, quality, finance, marketing, mergers, human resource management, executive search, outplacement, coaching, organization development, and many more. For every managerial challenge, there is a consultant willing to offer assistance—at a price. For all their sage advice and remarkable fees, consultants often make little dent in persistent problems plaguing organizations, though they may blame the clients for failing to implement their profound insights. McKinsey & Co., “the high priest of high-level consulting” (Byrne, 2002a, p. 66), worked so closely with Enron that its managing partner (Rajat Gupta, who eventually went to jail for insider trading) sent his chief lawyer to Houston after Enron’s collapse to see if his firm might be in legal trouble.2 The lawyer reported that McKinsey was safe, and a relieved Gupta insisted bravely, “We stand by all the work we did. Beyond that, we can only empathize with the trouble they are going through. It’s a sad thing to see” (p. 68). When managers and consultants fail, government recurrently responds with legislation, policies, and regulations. Constituents badger elected officials to “do something” about a variety of ills: pollution, dangerous products, hazardous working conditions, discrimination, and low performing schools, to name a few. Governing bodies respond by making “policy.” But policymakers don’t always understand the problem well enough to get

the solution right, and a sizable body of research records a continuing saga of perverse ways in which the implementation process undermines even good solutions (Bardach, 1977; Elmore, 1978; Freudenberg and Gramling, 1994; Gottfried and Conchas, 2016; Peters, 1999; Pressman and Wildavsky, 1973). Policymakers, for example, have been trying for decades to reform U.S. public schools. Billions of taxpayer dollars have been spent. The result? About as successful as America’s switch to the metric system. In the 1950s Congress passed legislation mandating adoption of metric standards and measures. More than six decades later, if you know what a hectare is or can visualize the size of a 300-gram package of crackers, you’re ahead of most Americans. Legislators did not factor into their solution what it would take to get their decision implemented against longstanding custom and tradition. In short, the difficulties surrounding improvement strategies are well documented. Exemplary intentions produce more costs than benefits. Problems outlast solutions. Still, there are reasons for optimism. Organizations have changed about as much in recent decades as in the preceding century. Power Of Re framing Organization Discussion Paper.To survive, they had to. Revolutionary changes in technology, the rise of the global economy, and shortened product life cycles have spawned a flurry of efforts to design faster, more flexible organizational forms. New organizational models flourish in companies such as Pret à Manger (the socially conscious U.K. sandwich shops), Google (the global search giant), Airbnb (a new concept of lodging) and Novo- Nordisk (a Danish pharmaceutical company that includes environmental and social metrics in its bottom line). The dispersed collection of enthusiasts and volunteers who provide content for Wikipedia and the far-flung network of software engineers who have developed the Linux operating system provide dramatic examples of possibilities in the digital world. But despite such successes, failures are still too common. The nagging question: How can leaders and managers improve the odds for themselves as well for their organizations?

Framing Goran Carstedt, the talented executive who led the turnaround of Volvo’s French division in the 1980s, got to the heart of a challenge managers face every day: “The world simply can’t be made sense of, facts can’t be organized, unless you have a mental model to begin with. That theory does not have to be the right one, because you can alter it along the way as information comes in. But you can’t begin to learn without some concept that gives you expectations or hypotheses” (Hampden-Turner, 1992, p. 167). Such mental models have many labels—maps, mind-sets, schema, paradigms, heuristics, and cognitive lenses, to name a few.3 Following the work of Goffman, Dewey, and others, we have chosen the label frames, a term that has received increasing attention in organizational research as scholars give greater attention to how managers make sense of a complicated and turbulent world (see, e.g., Foss and Webber, 2016; Gray, Purdy, and Ansari, 2015; Cornelissen and Werner, 2014; Hahn et al., 2014; Maitlis and Christianson, 2014). In describing frames, we deliberately mix metaphors, referring to them as windows, maps, tools, lenses, orientations, prisms, and perspectives, because all these images capture part of the idea we want to convey.

A frame is a mental model—a set of ideas and assumptions—that you carry in your head to help you understand and negotiate a particular “territory.” A good frame makes it easier to

know what you are up against and, ultimately, what you can do about it. Frames are vital because organizations don’t come with computerized navigation systems to guide you turn-by-turn to your destination. Instead, managers need to develop and carry accurate maps in their heads. Such maps make it possible to register and assemble key bits of perceptual data into a coherent pattern—an image of what’s happening. When it works fluidly, the process takes the form of “rapid cognition,” the process that Gladwell (2005) examines in his best seller Blink. He describes it as a gift that makes it possible to read “deeply into the narrowest slivers of experience. In basketball, the player who can take in and comprehend all that is happening in the moment is said to have ‘court sense’” (p. 44). The military stresses situational awareness to describe the same capacity.Power Of Re framing Organization Discussion Paper.

Dane and Pratt (2007) describe four key characteristics of this intuitive “blink” process: • It is nonconscious—you can do it without thinking about it and without knowing

how you did it. • It is very fast—the process often occurs almost instantly.

• It is holistic—you see a coherent, meaningful pattern.

• It results in “affective judgments”—thought and feeling work together so you feel confident that you know what is going on and what needs to be done.

The essence of this process is matching situational cues with a well-learned mental framework—a “deeply held, nonconscious category or pattern” (Dane and Pratt, 2007, p. 37). This is the key skill that Simon and Chase (1973) found in chess masters—they could instantly recognize more than 50,000 configurations of a chessboard. This ability enables grand masters to play 25 lesser opponents simultaneously, beating all of them while spending only seconds on each move. The same process of rapid cognition is at work in the diagnostic categories physicians rely on to evaluate patients’ symptoms. The Hippocratic Oath to “do no harm” requires physicians to be confident that they know what they’re up against before prescribing a remedy. Their skilled judgment draws on a repertoire of categories and clues, honed by training and experience. But sometimes they get it wrong. One source of error is anchoring: doctors, like leaders, sometimes lock on to the first answer that seems right, even if a few messy facts don’t quite fit. “Your mind plays tricks on you because you see only the landmarks you expect to see and neglect those that should tell you that in fact you’re still at sea” (Groopman, 2007, p. 65).

That problem tripped up leaders at Volkswagen, Wells Fargo, and countless other organizations. Organizations are at least as complex as the human body, and the diagnostic categories less well defined. That means that the quality of your judgments depends on the information you have at hand, your mental maps, and how well you have learned to use them. Good maps align with the terrain and provide enough detail to keep you on course. If you’re trying to find your way around Beijing, a map of Chicago won’t help. In the same way, different circumstances require different approaches.

Even with the right map, getting around will be slow and awkward if you have to stop and study at every intersection. The ultimate goal is fluid expertise, the sort of know-how that lets you think on the fly and navigate organizations as easily as you drive home on a familiar route. You can make decisions quickly and automatically because you know at a glance where you are and what you need to do next.

There is no shortcut to developing this kind of expertise. It takes effort, time, practice, and feedback. Some of the effort has to go into learning frames and the ideas behind them. Equally important is putting the ideas to use. Experience, one often hears, is the best teacher, but that is true only if one learns from it. McCall, Lombardo, and Morrison (1988, p. 122) found that a key quality among successful executives was they were great learners, displaying an “extraordinary tenacity in extracting something worthwhile from their experience and in seeking experiences rich in opportunities for growth.”Power Of Re framing Organization Discussion Paper.

Reframing Frames define the questions we ask and solutions we consider (Berger 2014). John Dewey defined freedom as the power to choose among known alternatives. When managers’ options are limited they make mistakes but too often fail to understand the source. Take a simple example: “What is the sum of 5 plus 5?” The only right answer is “10.” Ask a different way, “What two numbers add up to ten? Now the number of solutions is infinite (once you include fractions and negative numbers). The two questions differ in how they are framed. Albert Einstein once observed: “If I had a problem to solve and my whole life depended on the solution, I would spend the first fifty-five minutes determining the question to ask, for

CHAPTER 2 SIMPLE IDEAS, COMPLEX ORGANIZATIONS Precisely one of the most gratifying results of intellectual evolution is the continuous opening up of new and greater prospects.

—Nikola Tesla1 September 11, 2001 brought a crisp and sunny late-summer morning to America’s east coast. Perfect weather offered prospects of on-time departures and smooth flights for airline passengers in the Boston-Washington corridor. That promise was shattered for four flights bound for California when terrorists commandeered the aircraft. Two of the hijacked aircraft attacked and destroyed the Twin Towers of New York’s World Trade Center. Another slammed into the Pentagon. The fourth was deterred from its mission by the heroic efforts of passengers. It crashed in a vacant field, killing all aboard. Like Pearl Harbor in December 1941, 9/11 was a day that will live in infamy, a tragedy that changed forever America’s sense of itself and the world. Why did no one foresee such a catastrophe? In fact, some had. As far back as 1993, security experts had envisioned an attempt to destroy the World Trade Center using airplanes as weapons. Such fears were reinforced when a suicidal pilot crashed a small private plane onto the White House lawn in 1994. But the mind-set of principals in

the national security network was riveted on prior hijackings, which had almost always ended in negotiations. The idea of a suicide mission, using commercial aircraft as missiles, was never incorporated into homeland defense procedures. In the end, 19 highly motivated young men armed only with box cutters were able to outwit thousands of America’s best minds and dozens of organizations that make up the country’s homeland defense system. Part of their success came from fanatical determination, meticulous planning, and painstaking preparation. We also find a dramatic version of an old story: human error leading to tragedy. But even the human- error explanation is too simple. In organizational life, there are almost always systemic causes upstream of human failures, and the events of 9/11 are no exception. The United States had a web of procedures and agencies aimed at detecting and monitoring potential terrorists. Had those systems worked flawlessly, the terrorists would not have made it onto commercial flights. But the procedures failed, as did those designed to respond to aviation crises. Similar failures have marked many other well- publicized disasters: nuclear accidents at Chernobyl and Three Mile Island, the botched response to Hurricane Katrina on the Gulf Coast in 2005, and the deliberate downing of a German jet in 2015 by a pilot who was known to suffer from severe depression. In business, the fall of giants like Enron and WorldCom, the collapse of the global financial system, the Great Recession of 2008–2009, and Volkswagen’s emissions cheating scandal of 2015 are among many examples of the same pattern. Each illustrates a chain of misjudgment, error, miscommunication, and misguided action that our best efforts fail to avert. Events like 9/11 and Katrina make headlines, but similar errors and failures happen every day. They rarely make front-page news, but they are familiar to most people who work in organizations. In the remainder of this chapter, we discuss how organizational complexity intersects with fallacies of human thinking to obscure what’s really going on and lead us astray. We describe some of the peculiarities of organizations that make them so difficult to figure out and manage. Finally, we explore how our deeply held and well-guarded mental models cause us to fail—and how to avoid that trap.

Common Fallacies in Explaining Organizational Problems Albert Einstein once said that a thing should be made as simple as possible, but no simpler. When we ask students and managers to analyze cases like 9/11, they often make things simpler than they really are. They do this by relying on one of three misleading and oversimplified explanations. The first and most common is blaming people. This approach casts every failure as a product of individual blunders. Problems result from egotism, bad attitudes, abrasive personalities, neurotic tendencies, stupidity, or incompetence. It’s an easy way to explain anything that goes wrong. After scandals like the ones that hit Volkswagen and Wells Fargo Bank in 2016, the hunt is on for someone to blame, and top executives became the prime target of reporters, investigators, and talk-show comedians. As children, we learned it was important to assign blame for every broken toy, stained carpet, or wounded sibling. Pinpointing the culprit is comforting. Assigning blame resolves ambiguity, explains mystery, and makes clear what to do next: punish the guilty. Corporate

scandals often have their share of culpable individuals, who may lose their jobs or even go to jail. But there is usually a larger story about the organizational and social context that sets the stage for individual malfeasance. Targeting individuals while ignoring larger system failures oversimplifies the problem and does little to prevent its recurrence.

Greatest Hits from Organization Studies Hit Number 8: James G. March and Herbert A. Simon, Organizations (New York: Wiley, 1958) March and Simon’s pioneering 1958 book Organizations sought to define an emerging field by offering a structure and language for studying organizations. It was part of the body of work that helped Simon earn the 1978 Nobel Prize for economics. Power Of Re framing Organization Discussion Paper.March and Simon offered a cognitive, social-psychological view of organizational behavior, with an emphasis on thinking, information processing, and decision making. The book begins with a model of behavior that presents humans as continually seeking to satisfy motives based on their aspirations. Aspirations at any given time are a function of both individuals’ history and their environment. When aspirations are unsatisfied, people search until they find better, more satisfying options. Organizations influence individuals primarily by managing the information and options, or “decision premises,” that they consider. March and Simon followed Simon’s earlier work (1947) in critiquing the economic view of “rational man,” who maximizes utility by considering all available options and choosing the best. Instead, they argue that both individuals and organizations have limited information and limited capacity to process what they have. They never know all the options. Instead, they gradually alter their aspirations as they search for alternatives. Home buyers often start with a dream house in mind, but gradually adapt to the realities of what’s available and what they can afford. Instead of looking for the best option—”maximizing”— individuals and organizations instead “satisfice,” choosing the first option that seems good enough.

Organizational decision making is additionally complicated because the environment is complex. Resources (time, attention, money, and so on) are scarce, and conflict among individuals and groups is constant. Organizational design happens through piecemeal bargaining that holds no guarantee of optimal rationality. Organizations simplify the environment to reduce the demands on limited information-processing and decision- making capacities. They simplify by developing “programs”—standardized routines for performing repetitive tasks. Once a program is in place, the incentive is to stay with it as long as the results are marginally satisfactory. Otherwise, the organization is forced to expend time and energy to innovate. Routine tends to drive out innovation because individuals find it easier and less taxing to stick to programmed tasks (which are automatic, well-practiced, and more certain of success). Thus, a student facing a term- paper deadline may find it easier to “fritter”—make tea, straighten the desk, text friends, and browse the Web—than to struggle to write a good opening paragraph. Managers may sacrifice quality to avoid changing a familiar routine. March and Simon’s book falls primarily within the structural and human resource views. But their discussions of scarce resources, power, conflict, and bargaining recognize the

reality of organizational politics. Although they do not use the term framing, March and Simon affirm its logic as an essential component of choice. Decision making, they argue, is always based on a simplified model of the world. Organizations develop unique vocabulary and classification schemes, which determine what people are likely to see and respond to. Things that don’t fit an organization’s mind-set are likely to be ignored or reframed into terms the organization can understand. When it is hard to identify a guilty individual, a second popular option is blaming the bureaucracy. Things go haywire because organizations are stifled by rules and red tape or by the opposite, chaos resulting from a lack of clear goals, roles, and rules. One explanation or the other usually applies. When things aren’t working, then the system needs either more or fewer rules and procedures, and tighter or looser job descriptions. By this reasoning, tighter financial controls could have prevented the subprime mortgage meltdown of 2008. The tragedy of 9/11 could have been thwarted if agencies had had better protocols for such a terrorist attack. But piling on rules and regulations is a direct route to bureaucratic rigidity. Rules can inhibit freedom and flexibility, stifle initiative, and generate reams of red tape. The Commission probing the causes of 9/11 concluded: “Imagination is not a gift associated with bureaucracy.” When things become too tight, the solution is to “free up” the system so red tape and rigid rules don’t stifle creativity and bog things down. An enduring storyline in popular films is the free spirit who triumphs in the end over silly rules and mindless bureaucrats (examples include the cult classics Office Space and The Big Lebowski). But many organizations vacillate endlessly between being too loose and too tight. A third fallacy attributes problems to thirsting for power. Enron collapsed, you can say, because key executives were more interested in getting rich and expanding their turf than in advancing the company’s best interests. This view sees organizations as jungles teeming with predators and prey. Victory goes to the more adroit, or the more treacherous. You need to play the game better than your opponents—and watch your back. Each of these three perspectives contains a kernel of truth but oversimplifies a knottier reality. Blaming people points to the perennial importance of individual responsibility. People who are rigid, lazy, bumbling, or greedy do contribute to some of the problems we see in organizations. But condemning individuals often distracts us from seeing system weaknesses and offers few workable options. If, for example, the problem is someone’s abrasive or pathological personality, what do we do? Even psychiatrists find it hard to alter character disorders, and firing everyone with a less-than-ideal personality is rarely a viable option. Training can go only so far in ensuring semi-flawless individual performance. The blame-the-bureaucracy perspective starts from a reasonable premise: Organizations exist to achieve specific goals. They usually work better when strategies, goals, and policies are clear (but not excessive), jobs are well defined (but not constricting), control systems are in place (but not oppressive), and employees behave prudently (but not callously). If organizations always operated that way, they would presumably work a lot better than most do. In practice, this perspective is better at explaining how organizations should work than why they often don’t. Managers who cling to logic and procedures become discouraged and frustrated when confronted by intractable irrational forces. Year after year, we witness the introduction of new control systems, hear of new ways to reorganize, and are dazzled by emerging management strategies, methods, and gurus. Yet old problems

persist, seemingly immune to every rational cure we devise. As March and Simon point out, rationality has limits. The thirst-for-power view highlights enduring, below-the-surface features of organizations. Dog-eat-dog logic offers a plausible analysis of almost anything that goes wrong. People both seek and despise power but find it a convenient way to explain problems and get their way. Within hours of the 9/11 terror attacks, a senior FBI official called Richard Clarke, America’s counterterrorism czar, to tell him that many of the terrorists were known members of Al Qaeda.Power Of Re framing Organization Discussion Paper.

“How the fuck did they get on board then?” Clarke exploded.

“Hey, don’t shoot the messenger. CIA forgot to tell us about them.” In the context of its chronic battles with the CIA, the FBI was happy to throw the CIA under the bus: “We could have stopped the terrorists if CIA had done their job.” The tendency to blame what goes wrong on people, the bureaucracy, or the thirst for power is part of our mental wiring. But there’s much more to understanding a complex situation than assigning blame. Certain universal peculiarities of organizations make them especially difficult to understand or decipher.

Peculiarities of Organizations Human organizations can be exciting and challenging places. That’s how they are often depicted in management texts, corporate annual reports, and fanciful managerial thinking. But they can also be deceptive, confusing, and demoralizing. It is a big mistake to assume that organizations are either snake pits or rose gardens (Schwartz, 1986). Managers need to recognize characteristics of life at work that create opportunities for the wise as well as hidden traps for the unwary. A case from the public sector provides a typical example:

When Bosses Rush In Helen Demarco arrived in her office to discover a clipping from the local paper. The headline read, “Osborne Announces Plan.” Paul Osborne had arrived two months earlier as Amtran’s new chief executive. His mandate was to “revitalize, cut costs, and improve efficiency.” After 20 years, Demarco had achieved a senior management position at the agency. She had little contact with Osborne, but her boss reported to him. Demarco and her colleagues had been waiting to learn what the new chief had in mind. She was startled as she read the newspaper account. Osborne’s plan made technical assumptions directly related to her area of expertise. “He might be a change agent,” she thought, “but he doesn’t know much about our technology.” She immediately saw the new plan’s fatal flaws. “If he tries to implement this, it’ll be the worst management mistake since the Edsel.”

Two days later, Demarco and her colleagues received a memo instructing them to form a committee to work on the revitalization plan. When the group convened, everyone agreed it was crazy.

“What do we do?” someone asked.

“Why don’t we just tell him it won’t work?” said one hopeful soul.

“He’s already gone public! You want to tell him his baby is ugly?” “Not me. Besides, he already thinks a lot of us are deadwood. If we tell him it’s no good, he’ll just think we’re defensive.” “Well, we can’t go ahead with it. It’ll never work and we’d be throwing away money.”

“That’s true,” said Demarco thoughtfully. “But what if we tell him we’re conducting a study of how to implement the plan?” Her suggestion was approved overwhelmingly. The group informed Osborne that they were moving ahead on the “implementation study” and expected excellent results. They got a substantial budget to support their “research.” They did not say that the real purpose was to buy time and find a way to minimize the damage without alienating the boss. Over time, the group assembled a lengthy technical report, filled with graphs, tables, and impenetrable jargon. The report offered two options. Option A, Osborne’s original plan, was presented as technically feasible but well beyond anything Amtran could afford. Option B, billed as a “modest downscaling” of the original plan, was projected as a more cost-effective alternative.

When Osborne pressed the group on the huge cost disparity between the two proposals, he received a barrage of complicated cost-benefit projections and inscrutable technical terms. Hidden in a fog was the reality that even Option B offered few benefits at a very high cost. Osborne argued and pressed for more information. But given the apparent facts, he agreed to proceed with Option B. The “Osborne plan” was announced with fanfare and widely heralded as another instance of Paul Osborne’s talent for revitalizing ailing organizations. Osborne had moved on to work his management magic on another organization by the time the plan came online, and his successor had to defend the underwhelming results. Helen Demarco came away with deep feelings of frustration and failure. The Osborne plan, in her view, was a wasteful mistake, and she had knowingly participated in a charade. But, she rationalized to herself, she had no other choice. Osborne was adamant. It would have been career suicide to try to stop him.

You might have noticed that Helen Demarco’s case is more than a little similar to the scandals at Volkswagen in 2015 and Wells Fargo in 2016. At the Geneva International Motor Show in 2012, VW CEO Martin Winterkorn proclaimed that by 2015 the company would cut its vehicles’ carbon dioxide emissions by 30 percent from 2006 levels. It was an ambitious goal that would have beat the targets set by European regulators to combat global warming.

But just like Paul Osborne, Winterkorn had set the bar too high. The engineers saw no way to meet the boss’s goals, but no one wanted to tell him it couldn’t be done. So, they cheated instead. There was a precedent because VW’s cheating on diesel emissions had started back in 2008, and observers reported that “an ingrained fear of delivering bad news to superiors” (Ewing, 2015, p. B3) was a feature of VW’s culture.

Like Helen Demarco and her colleagues, the VW engineers had other options but couldn’t see them. Paul Osborne and Martin Winterkorn both thought they were providing bold

leadership to vault their organizations forward. They were tripped up in part by human fallibility but also by how hard it can be to know what’s really going on in any organization. Managerial wisdom and artistry require a well-honed understanding of four key characteristics of organizations. First, organizations are complex. The behavior of the people who populate them is notoriously hard to predict. Large organizations in particular include a bewildering array of people, departments, technologies, strategies. and goals. Moreover, organizations are open systems dealing with a changing, challenging, and erratic environment. Things can get even messier across multiple organizations. The 9/11 disaster resulted from a chain of events that involved several separate systems. Almost anything can affect everything else in collective activity, generating causal knots that are hard to untangle. After an exhaustive investigation, our picture of 9/11 is woven from sundry evidence, conflicting testimony, and conjecture. Second, organizations are surprising. What you expect is often not what you get. Power Of Re framing Organization Discussion Paper.Paul Osborne saw his plan as a bold leap forward; Helen and her group considered it an expensive albatross. In their view, Osborne was going to make matters worse by trying to improve them. He might have achieved better results by spending more time with his family and letting his organization take care of itself. Martin Winterkorn was stunned when the hidden cheating blew up in his face, costing him his job and hitting VW with devastating financial and reputational damage.

The solution to yesterday’s problems often creates tomorrow’s obstacles. A friend of ours headed a retail chain. In the firm’s early years, he had a problem with two sisters who worked in the same store. To prevent this from recurring, he established a nepotism policy prohibiting members of the same family from working for the company. Years later, two key employees met at work, fell in love, and began to live together. The president was startled when they asked if they could get married without being fired. Taking action in a cooperative venture is like shooting a wobbly cue ball into a scattered array of self-directed billiard balls. Balls bounce in so many directions that it is impossible to know how things will eventually sort out.

Third, organizations are deceptive. They camouflage mistakes and surprises. After 9/11, America’s homeland defense organizations tried to conceal their confusion and lack of preparedness for fear of revealing strategic weaknesses. Volkswagen engineers developed software whose only purpose was to cheat on emissions tests, hoping that no one would ever see through their deception. Helen Demarco and her colleagues disguised obfuscation as technical analysis. It is tempting to blame deceit on individual weakness. Yet Helen Demarco disliked fraud and regretted cheating—she simply believed it was her best option. Sophisticated managers know that what happened to Paul Osborne happens all the time. When a quality initiative fails or a promising product tanks, subordinates often clam up or cover up. They fear that the boss will not listen or will kill the messenger. Internal naysayers at Volkswagen and Wells Fargo Bank were silenced until outsiders “blew the whistle.” A friend in a senior position in a large government agency put it simply: “Communications in organizations are rarely candid, open, or timely.”

Fourth, organizations are ambiguous. Complexity, unpredictability, and deception generate rampant ambiguity, a dense fog that shrouds what happens from day to day. It is hard to get the facts and even harder to know what they mean or what to do about them. Helen Demarco never knew how Paul Osborne really felt, how receptive he was to other points of view, or how open he was to compromise. She and her peers piled on more mystery by conspiring to keep him in the dark. Ambiguity has many sources. Sometimes available information is incomplete or vague. Different people may interpret the same information in a variety of ways, depending on mind-sets and organizational doctrines. At other times, ambiguity is intentionally manufactured as a smoke screen to conceal problems or avoid conflict. Much of the time, events and processes are so intricate, scattered, and uncoordinated that no one can fully understand—let alone control—the reality. Exhibit 2.1 lists some of the most important sources of organizational uncertainty. Exhibit 2.1. Sources of Ambiguity.

• We are not sure what the problem is.

• We are not sure what is really happening.

• We are not sure what we want. • We do not have the resources we need.

• We are not sure who is supposed to do what. • We are not sure how to get what we want.

• We are not sure how to determine if we have succeeded. Source: Adapted from McCaskey (1982).Power Of Re framing Organization Discussion Paper.

Organizational Learning How can lessons be extracted from surroundings that are complex, surprising, deceptive, and ambiguous? It isn’t easy. Decades ago, scholars debated whether the idea of organizational learning made sense: Could organizations actually learn, or was learning inherently individual? That debate lapsed as experience verified instances in which individuals learned and organizations didn’t, or vice versa. Complex firms such as Apple, Zappos, and Southwest Airlines have “learned” capabilities far beyond individual knowledge. Lessons are enshrined in acknowledged protocols and shared cultural codes and traditions. At the same time, individuals often learn even when systems cannot.

Several perspectives on organizational learning are exemplified in the work of Peter Senge (1990), Barry Oshry (1995), and Chris Argyris and Donald Schön (1978, 1996). Senge sees a core-learning dilemma: “We learn best from our experience, but we never directly experience the consequences of many of our decisions” (p. 23). Learning is relatively easy when the link between cause and effect is clear. But complex systems often sever that connection: causes remote from effects, solutions detached from problems, and feedback absent, delayed, or misleading (Cyert and March, 1963; Senge, 1990). Wells Fargo’s aggressive push for cross-selling led to cheating from coast to coast, but that was mostly invisible at headquarters, which kept its eyes on the financial results—until the scandal blew up.

Senge emphasizes the value of “system maps” that clarify how a system works. Consider the system created by Robert Nardelli at Home Depot. Nardelli had expected to win the three-way competition to succeed management legend Jack Welch as CEO of General Electric. He was stunned when he learned he didn’t get the job. But within a week, he was hired as Home Depot’s new CEO. He was a big change from the company’s free-spirited founders, who had built the wildly successful retailer on the foundation of an uninhibited, entrepreneurial “orange” culture. Managers ran their stores using “tribal knowledge,” and customers counted on friendly, knowledgeable staff for helpful advice.

Nardelli revamped Home Depot with a heavy dose of command-and-control, discipline, and metrics. Almost all the top executives and many of the frontline managers were replaced, often by ex-military hires. At first, it seemed to work—profits improved, and management experts hailed Nardelli’s success. He was even designated Best Manager of 2004 on the cover of Business Week (Business Week, 2005). But employee morale and customer service went steadily downhill. The founders had successfully promoted a “make love to the customers” ethic, but Nardelli’s toe-the-line stance pummeled Home Depot to last place in its industry for consumer satisfaction. A website, Home Depot Sucks.com, gave customers a place to vent their rage. As criticism grew, Nardelli tried to keep naysayers at bay, but his efforts failed to placate customers, shareholders, or his board. Nardelli abruptly left Home Depot at the beginning of 2007. The story is one of many examples of tactics that look good until long-term costs become apparent. A corresponding systems model might look like Exhibit 2.2. The strategy might be cutting training to improve short-term profitability, drinking martinis to relieve stress, offering rebates to entice customers, or borrowing from a loan shark to cover gambling debts. In each case, the results look good at first, and the costs only emerge much later.

Exhibit 2.2. Systems Model with Delay. Oshry (1995) agrees that system blindness is widespread but highlights causes rooted in troubled relationships between groups that have little grasp of what’s going on outside their own neighborhood. Top managers feel overwhelmed by complexity, responsibility, and overwork. They are chronically dissatisfied with subordinates’ lack of initiative and creativity. Middle managers, meanwhile, feel trapped between contradictory signals and pressures. The top tells them to take risks but then punishes mistakes. Their subordinates expect them to intervene with the boss and improve working conditions. Top and bottom tug in opposite directions, causing those in the middle to feel pulled apart, confused, and weak. At the bottom, workers feel helpless, unacknowledged, and demoralized. “They give us bad jobs, lousy pay, and lots of orders but never tell us what’s really going on. Then they wonder why we don’t love our work.” Unless you can step back and see how system dynamics create these patterns, you muddle along blindly, unaware of better options.

Both Oshry and Senge argue that our failure to read system dynamics traps us in cycles of blaming and self-defense. Problems are always someone else’s fault. Unlike Senge, who sees gaps between cause and effect as primary barriers to learning, Argyris and Schön

emphasize managers’ fears and defenses. As a result, “the actions we take to promote productive organizational learning actually inhibit deeper learning” (1996, p. 281). According to Argyris and Schön, our behavior obstructs learning because we avoid undiscussable issues and tiptoe around organizational taboos. That often seems to work because we avoid conflict and discomfort in the moment, but we create a double bind. We can’t solve problems without dealing with issues we have tried to hide but discussing them would expose our cover up. Facing that double bind, Volkswagen engineers hid their

CHAPTER 3 GETTING ORGANIZED Organizing is what you do before you do something, so that when you do it, it is not all mixed up.

—A. A. Milne Watching an eight-oar racing crew skim along the Charles River is like watching a highly choreographed ballet group perform Swan Lake. To a coxswain’s cadence, eight oars at exactly 90 degrees enter the water in unison. A collective pull “in swing” propels the shell smoothly forward as eight oars leave the water at a precise perpendicular angle. If any oarsman muffs just one of these strokes or “catches a crab,” the shell is thrown off kilter. Close coordination welds eight rowers into a harmonious crew. It looks straightforward to an outside observer, an effortless ballet in motion. But structurally it is more complicated. All members of a crew are expected to row smoothly and quickly. But expectations for individuals vary depending on the seat they occupy. Bow seats one, two, and three have the greatest potential to disrupt the boat’s direction, so they must be able to pull a perfect oar one stroke after another. Rowers in seats four, five, and six are the boat’s biggest and strongest. They are often referred to as the “engine,” providing the boat’s raw power. Seat seven’s rower provides a conduit between the engine room and the “stroke oar” in seat eight. The “stroke oar” sits directly facing the coxswain and rows at the requested rate of speed and power, setting the pace and intensity for the other rowers. The coxswain is responsible for steering the shell, but also serves as captain. Coxswains vocally determine both the rate and degree of power of the oar strokes. They know their rowers physically and psychologically and how to inspire their best efforts. They also know opponents’ strengths and weaknesses. Before a race, the coxswain develops a strategy but must be ready to alter it as a situation demands. A good coxswain is “a quarterback, a cheerleader, and a coach all in one. He or she is a

deep thinker, canny like a fox, inspirational, and in many cases the toughest person in the boat” (Brown, 2014, p. 232). The individual efforts are also integrated by shared agreement that the team effort transcends the individual. All rowers have to optimize their strokes for the benefit of the boat. Coordination and cooperation among individuals of different statures and strengths assures the unified and beautiful symphony that a crew in motion becomes. In crew racing competition, structure is vital to top performance. Structure is equally critical in larger organizations. Jeff Bezos, one of the world’s most admired CEOs, is passionate about structure and process at the company he founded, Internet giant Amazon. He makes the company’s strategy crystal clear. Embracing the familiar credo that the “customer is always right,” Bezos is riveted on figuring out what the customer wants and delivering it with speed and precision. His “culture of metrics” coddles Amazon’s 250 million shoppers, not its quarter million employees. Amazon tracks its performance against some 500 measurable goals; almost 80 percent relate directly to customer service. Even the smallest delay in loading a Web page is carefully scrutinized, because Amazon has found that “…a .01 second delay in page rendering can translate into a 1 percent drop in customer activity” (Anders, 2012). Supervisors measure and monitor employees’ performance, observing behavior closely to see where steps or movements can be streamlined to improve efficiency. Amazon is a classic example of a highly developed organizational structure—clear strategy, focus on the mission, well-defined roles, and top-down coordination. Power Of Re framing Organization Discussion Paper.Some employees grumble about the working conditions and the fast pace, but many others find the tempo exhilarating. Bezos makes it clear: The customer is number one. Period. Amazon began as an online bookstore, but now it sells almost anything that can be shipped or downloaded. The company lost money for many years after its founding in 1995. But in recent years, it has been consistently profitable, and its 2015 annual report noted that it had achieved $100 billion in sales faster than any company in history (Amazon, 2015). The benefits of getting structure right are obvious under normal conditions and even more so when organizational architecture meets unexpected crises. Recall the horror of 9/11 and the breakdown in coordination between New York City’s fire and police departments as they confronted the aftermath of terrorist strikes on the World Trade Center. That day saw countless inspiring examples of individual heroism and personal sacrifice. At the risk of their own lives, emergency personnel rescued thousands of people. Many died in the effort. But extraordinary individual efforts were hindered or thwarted by breakdowns in communication, command, and control. Police helicopters near the north tower radioed that it was near collapse more than twenty minutes before it fell. Police officers got the warning, and most escaped. But there was no link between fire and police radios, and the commanders in the two departments could not communicate because their command posts were three blocks apart. It might not have helped even if they had talked, because the fire department’s radios were notoriously unreliable in high-rise buildings. The breakdown of communication and coordination magnified the death toll—including 121 firefighters who died when the north tower collapsed. The absence of a workable

structure undermined the heroic efforts of highly dedicated, skilled professionals who gave their all in an unprecedented catastrophe (Dwyer, Flynn, and Fessenden, 2002). The contrast between Amazon’s operations and the rescue efforts at the World Trade Center highlights a core premise of the structural lens. The right combination of goals, roles, relationships, and coordination is essential to organizational performance. This is true of all organizations: families, clubs, hospitals, military units, businesses, schools, churches, and public agencies. The right structure combats the risk that individuals, however talented, will become confused, ineffective, apathetic, or hostile. The purpose of this chapter and the next two is to identify the basic ideas and inner workings of a perspective that is fundamental to collective human endeavors. We begin our examination of the structural frame by highlighting its core assumptions, origins, and basic forms. Power Of Re framing Organization Discussion Paper.The possibilities for designing an organization’s social architecture are almost limitless, but any option must address two key questions: How do we allocate responsibilities across different units and roles? And, once we’ve done that, how do we integrate diverse efforts in pursuit of common goals? In this chapter, we explain these basic issues, describe the major options, and discuss imperatives to consider when designing a structure to fit the challenges of a unique situation.

Structural Assumptions The central beliefs of the structural frame reflect confidence in rationality and faith that a suitable array of roles and responsibilities will minimize distracting personal static and maximize people’s performance on the job. Where the human resource approach (to be discussed in Chapters 6 through 8) emphasizes dealing with issues by changing people (through coaching, training, rotation, promotion, or dismissal), the structural perspective argues for putting people in the right roles and relationships. Properly designed, these formal arrangements support and accommodate both collective goals and individual differences.

Six assumptions undergird the structural frame: 1. Organizations exist to achieve established goals and objectives and devise strategies

to reach those goals.

2. Organizations increase efficiency and enhance performance through specialization and appropriate division of labor.

3. Suitable forms of coordination and control ensure that diverse efforts of individuals and units mesh.

4. Organizations work best when rationality prevails over personal agendas and extraneous pressures.

5. Effective structure fits an organization’s current circumstances (including its strategy, technology, workforce, and environment).

6. When performance suffers from structural flaws, the remedy is problem solving and restructuring.

Origins of the Structural Perspective The structural view has two principal intellectual roots. The first is the work of industrial analysts bent on designing organizations for maximum efficiency. The most prominent of these, Frederick W. Taylor (1911), was the father of time-and-motion studies; he founded an approach that he labeled “scientific management.” Taylor broke tasks into minute parts and retrained workers to get the most from each motion and moment spent at work. Other theorists who contributed to the scientific management approach (Fayol, [1919] 1949; Urwick, 1937; Gulick and Urwick, 1937) developed principles focused on specialization, span of control, authority, and delegation of responsibility. A second pioneer of structural ideas was the German economist and sociologist Max Weber, who wrote around the beginning of the twentieth century. At the time, formal organization was a relatively new phenomenon. Patriarchy rather than rationality was still the primary organizing principle. A father figure—who ruled with almost unlimited authority and power—dominated patriarchal organizations. He could reward, punish, promote, or fire on personal whim. Seeing an evolution of new structural models in late- nineteenth-century Europe, Weber described “monocratic bureaucracy” as an ideal form that maximized efficiency and norms of rationality. His model outlined several major features that were relatively novel at the time, although they are commonplace now:

• A fixed division of labor

• A hierarchy of offices

• A set of rules governing performance • A separation of personal from official property and rights

• The use of technical qualifications (not family ties or friendship) for selecting personnel

• Employment as primary occupation and long-term career (Weber, 1947)

After World War II, Blau and Scott (1962), Perrow (1986), Thompson (1967), Lawrence and Lorsch (1967), Hall (1963), and others rediscovered Weber’s ideas. Their work inspired a substantial body of theory and research amplifying the bureaucratic model. They examined relationships among the elements of structure, looked closely at why organizations develop one structure over another, and analyzed the effects of structure on morale, productivity, and effectiveness.

Greatest Hits from Organization Studies Hit Number 5: James D. Thompson, Organizations in Action: Social Science Bases of Administrative Theory (New York: McGraw-Hill, 1967) “Organizations act, but what determines how and when they will act?” (p. 1). That guiding question opens Thompson’s compact, tightly reasoned book. He answers that “organizations do some of the basic things they do because they must—or else! Because they are expected to produce results, their actions are expected to be reasonable, or

rational” (p. 1). As Thompson sees them, organizations operate under “norms of rationality,” but uncertainty makes rationality hard to achieve. “Uncertainties pose major challenges to rationality, and we will argue that technologies and environments are basic sources of uncertainty for organizations. How these facts of organizational life lead organizations to design and structure themselves needs to be explored” (p. 1).

Thompson looked for a way to meld two distinct ways of thinking about organizations. One was to see them as closed, rational systems (as in Taylor’s scientific management and Weber’s theory of bureaucracy). The second viewed them as open, natural systems in which “survival of the system is taken to be the goal, and the parts and their relationships are presumably determined through evolutionary processes” (p. 6). Thompson tried to build on a “newer tradition” emerging from the work of March and Simon (1958, number 8 of our greatest hits in organization studies) and Cyert and March (1963, number 3). This tradition viewed organizations as “problem facing and problem solving” in a context of limited information and capacities. With these premises, Thompson developed a series of propositions about how organizations design and manage themselves as they seek rationality in an uncertain world. The two primary sources of uncertainty, in his view, are technology and the environment. He distinguished three kinds of technology—pooled, sequential, and reciprocal—each making different demands on communication and coordination. Because demands and intrusions from the environment threaten efficiency, organizations try to increase their ability to anticipate and control the environment and attempt to insulate their technical core from environmental fluctuations. Still another source of uncertainty is the “variable human.” The more uncertainty an organization faces, the more discretion individuals need to cope with it, but there is the risk that discretion will run amok. “Paradoxically, the administrative process must reduce uncertainty but at the same time search for flexibility” (Thompson, pp. 157–158).Power Of Re framing Organization Discussion Paper.

Strategy Strategy comes from a Greek word that originally referred to the art of military leaders. It was imported into the business context in the twentieth century as a way to talk about an organization’s overall approach to goals and methods. Strategy has been defined in many ways. Mintzberg (1987), for example, offers five of them, all beginning with the letter P:

1. Plan: a conscious and intentional course of action. 2. Perspective: an organization’s way of framing where it wants to go and how it

intends to get there. 3. Pattern: a consistent pattern of decisions. 4. Position: the way an organization positions itself in relationship to its environment. 5. Ploy: a plan or decision whose purpose is to provoke a reaction from competitors.

Some of Mintzberg’s Ps focus on thinking while others are more about action. All are elements of a coherent strategy. Roberts (2004) argues that the job of the general manager is to define a strategy that includes objectives, a statement of scope, a specification of the organization’s competitive advantage, and the logic for how the organization will succeed.

Structural logic dictates that an organization’s success requires alignment of strategy, structure, and environment. But, as Chandler noted in 1962, “structure follows strategy.” A good strategy needs to be specific enough to provide direction but elastic enough to adapt to changing circumstances. Eastman Kodak provides a classic case in point. Kodak developed a strategy that made it a dominant player in the film industry for many decades, but stayed with its approach too long and finally ended in bankruptcy. In 1880, George Eastman developed a formula for gelatin-based dry plates, the basis for the then nascent field of photography. For the next 125 years the company’s strategy sought to capitalize on this technology by introducing products such as the Kodak Brownie camera, Kodachrome, the Kodak Instamatic camera, and gold standard motion picture film—as well as producing thousands of patents in related fields.Power Of Re framing Organization Discussion Paper. Pursuing this strategy the company’s performance soared. At its zenith, Kodak employed over 145,000 people and earned billions of dollars in sales (Brachmann, 2014). It was one of America’s best-known and most-admired companies. Threats to Kodak’s film-based strategy surfaced as early as 1950 with the introduction of instant photography and the Polaroid camera. In the 1980s, Fujifilm, an upstart Japanese competitor, was able to mass produce film and sell it at a cheaper price to discount retailers like Walmart. Kodak couldn’t compete and lost a large share of the film market (Brachmann, 2014). The death knell for Kodak came in the midseventies with the invention of the digital camera. Ironically, it was invented in one of the company’s labs by one of its own engineers. Upper management’s reaction: “It’s cute but don’t tell anyone about it” (Chunka, 2012). Kodak’s protection of its film-based strategy and inability to see that digital would capture the market led to its decline and eventual bankruptcy filing in January, 2012. What kept Kodak from adapting to a changing world? The strategy led to an organizational structure that channeled the activities and thinking of top management in one primary direction: film! In that context, any effort to promote digital cameras required swimming upstream against a strong current. A similar thing happened at Xerox. Xerox researchers had developed the concepts for the graphical user interface and mouse, but the company’s structure and business model were built around photocopying, not computers. Steve Jobs at Apple and Bill Gates at Microsoft immediately saw the market potential that Xerox executives missed. Kodak and Xerox, like many other companies, were never able to capitalize on their own inventions because they fell outside the corporate strategy. Christensen (1997) calls it “the innovator’s dilemma,” and notes that one reason firms get stuck in the past is that standard cost-benefit analysis usually tells them that they will get a better return by investing in the tried and true instead of something new and unproven. As at Kodak and Xerox, the game is usually lost before the numbers tell a different story.

Structural Forms and Functions Structure provides the architecture for pursuing an organization’s strategic goals. It is a blueprint for expectations and exchanges among internal players (executives, managers, employees) and external constituencies (such as customers, competitors,

regulators, and clients). Like an animal’s skeleton or a building’s framework, structure both enhances and constrains what an organization can do. The alternative design possibilities are virtually infinite, limited only by human preferences and capacities, technological limits, and constraints in the surroundings.Power Of Re framing Organization Discussion Paper.

We often assume that people prefer structures with more choices and latitude (Leavitt, 1978), but this is not always the case. A study by Moeller (1968), for example, explored the effects of structure on teacher morale in two school systems. One was loosely structured and encouraged wide participation in decision making. Centralized authority and a clear chain of command characterized the other. Moeller was surprised to find the opposite of what he expected: Faculty morale was higher in the district with a tighter structure. Teachers seemed to prefer clarity of expectations, roles, and lines of authority. United Parcel Service, “Big Brown,” provides a contemporary example of the benefits of structural certainty and clarity. In the company’s early days, UPS delivery employees were “scampering messenger boys” (Niemann, 2007). Since then, computer technology has curtailed employee discretion, and every step from pickup to delivery is highly programmed. Detailed instructions specify placement of packages on delivery trucks. Drivers follow computer-generated routes (which minimize mileage and left turns to save time and gas). Newly scheduled pickups automatically download into the nearest driver’s route plan. UPS calculates in advance the numbers of steps to your door. If a driver sees you while walking briskly to your door, you’ll receive a friendly greeting. Look carefully and you’ll probably notice the automated van lock the driver carries. Given such a tight leash, you might expect demoralized employees. But, the technology makes the job easier and enables drivers to be more productive. As one driver remarked to us with a smile, “We’re happy robots.” Do these examples prove that a tighter structure is better? Sometimes the opposite is true. Adler and Borys (1996) argue that the type of structure is as important as the amount or rigidity. There are good rules and bad ones. Formal structure enhances morale if it helps us get our work done. It has a negative impact if it gets in our way, buries us in red tape, or makes it too easy for management to control us. Equating structure to rigid bureaucracy confuses “two very different kinds of machines, those designed to de-skill work and those designed to leverage users’ skills” (p. 69). Structure, then, need not be machinelike or inflexible. Structures in stable environments are often hierarchical and rules oriented. But recent years have witnessed remarkable inventiveness in designing structures emphasizing flexibility, participation, and quality. A prime example is BMW, the luxury automaker whose success formula relies on a combination of stellar quality and rapid innovation. “Just about everyone working for the Bavarian automaker—from the factory floor to the design studios to the marketing department—is encouraged to speak out. Ideas bubble up freely and there is never a penalty for proposing a new way of doing things, no matter how outlandish. The company has become an industry benchmark for high-performance premium cars, customized production, and savvy brand management” (Edmondson, 2006, p. 72. Copyright © 2006 McGraw-Hill Companies, Inc.).

Dramatic changes in technology and the business environment have rendered old structures obsolete at an unprecedented rate, spawning a new interest in organizational design (Nadler, Gerstein, and Shaw, 1992; Bryan and Joyce, 2007; Roberts, 2004). Pressures of globalization, competition, technology, customer expectations, and workforce dynamics have prompted organizations worldwide to rethink and redesign structural prototypes. A swarm of items compete for managers’ attention—money, markets, people, and technological competencies, to name a few. But a significant amount of time and attention must be devoted to social architecture—designing structures that allow people to do their best: CEOs often opt for the ad hoc structural change, the big acquisition, or a focus on where and how to compete. They would be better off focusing on organizational design. Our research convinces us that in the digital age, there is no better use of a CEO’s time and energy than making organizations work better. Power Of Re framing Organization Discussion Paper.Most companies were designed for the industrial age of the past century, when capital was the scarce resource, interaction costs were high and hierarchical authority and vertically integrated structures were the keys to efficient operation. Today superior performance flows from the ability to fit these structures into the present century’s very different sources of wealth creation (Bryan and Joyce, 2007, p. 1).

Basic Structural Tensions Two issues are central to structural design: how to allocate work (differentiation) and how to coordinate diverse efforts after parceling out responsibilities (integration). Even in a group as small and intimate as a family, it is important to settle issues concerning who does what, when the “what” gets done, and how individual efforts mesh to ensure harmony. Every family will find an arrangement of roles and synchronization that works—or suffer the fallout.

Division of labor—or allocating tasks—is the keystone of structure. Every living system creates specialized roles to get important work done. Consider an ant colony: “Small workers…spend most of their time in the nest feeding the larval broods; intermediate-sized workers constitute most of the population, going out on raids as well as doing other jobs. The largest workers…have a huge head and large powerful jaws. These individuals are…soldiers; they carry no food but constantly run along the flanks of the raiding and emigration columns” (Topoff, 1972, p. 72).

Like ants, humans long ago discovered the virtues of specialization. A job (or position) channels behavior by prescribing what someone is to do—or not do—to accomplish a task. Prescriptions take the form of job descriptions, procedures, routines, protocols, or rules (Mintzberg, 1979). On one hand, these formal constraints can be burdensome, leading to apathy, absenteeism, and resistance (Argyris, 1957, 1964). On the other, they help to ensure predictability, uniformity, and reliability. If manufacturing standards, aircraft maintenance, hotel housekeeping, or prison sentences were left solely to individual discretion, problems of quality and equity would abound.

Once an organization spells out positions or roles, managers face a second set of key decisions: how to group people into working units. They have several basic options (Mintzberg, 1979):

• Function: Groups based on knowledge or skill, as in the case of a university’s academic departments or the classic industrial units of research, engineering, manufacturing, marketing, and finance.

• Time: Units defined by when they do their work, as by shift (day, swing, or graveyard shift).

• Product: Groups organized by what they produce, such as detergent versus bar soap, wide-body versus narrow-body aircraft.Power Of Re framing Organization Discussion Paper.

• Customer: Groups established around customers or clients, as in hospital wards created around patient type (pediatrics, intensive care, or maternity), computer sales departments organized by customer (corporate, government, education, individual), or schools targeting students in particular age groups.

• Place: Groupings around geography, such as regional or international offices in corporations and government agencies or neighborhood schools in different parts of a city.

• Process: Grouping by a complete flow of work, as with “the order fulfillment process. This process flows from initiation by a customer order, through the functions, to delivery to the customer” (Galbraith, 2001, p. 34).

Creating roles and units yields the benefits of specialization but creates challenges of coordination and control—how to ensure that diverse efforts mesh. Units tend to focus on their separate priorities and strike out on their own, as New York’s police and fire departments did on 9/11. The result is suboptimization—individual units may perform splendidly in terms of their own goals, but the whole may add up to much less than the sum of the parts. This problem plagued Tom Ridge, who was named by President George W. Bush as the director of homeland security in the aftermath of the 9/11 terrorist attacks. His job was to resolve coordination failures among the government’s many different units that dealt with security. But he was more salesman and preacher than boss, and he lacked the authority to compel compliance. Ridge’s slow progress led President Bush to create a cabinet-level Department of Homeland Security. The goal was to cluster independent security agencies under one central authority. As often happens, the new structure created its own problems. Folding the Federal Emergency Management Agency into the mix reduced FEMA’s autonomy and shifted its priorities toward security and away from its core mission of disaster relief. The same agency that had responded nimbly to hurricanes and earthquakes in the 1990s was slow and ponderous in the aftermath of Hurricane Katrina and lacked authority and budget to move without a formal okay from the new Secretary of Homeland Security (Cooper and Block, 2006).

Successful organizations employ a variety of methods to coordinate individual and group efforts and to link local initiatives with system-wide goals. They do this in two primary ways: vertically, through the formal chain of command, and laterally, through meetings,

committees, coordinating roles, or network structures. We next look at each of these strategies in detail.

Vertical Coordination With vertical coordination, higher levels coordinate and control the work of subordinates through authority, rules and policies, and planning and control systems.

Authority The most basic and ubiquitous way to harmonize the efforts of individuals, units, or divisions is to designate a boss with formal authority. Authorities—executives, managers, and supervisors—are charged with keeping action aligned with strategy and objectives. They do this by making decisions, resolving conflicts, solving problems, evaluating performance and output, and distributing rewards and sanctions. A chain of command is a hierarchy of managerial and supervisory strata, each with legitimate power to shape and direct the behavior of those at lower levels.

CHAPTER 4 STRUCTURE AND RESTRUCTURING When society requires to be rebuilt, there is no use in attempting to rebuild it on the old plan.

—John Stuart Mill In 2004, a crisis over journalistic standards ensnared the British Broadcasting Corporation (BBC) in a flurry of parliamentary hearings, resignations, and public recrimination. The controversy so tarnished the respected institution’s reputation that top officials took steps to ensure that it would never happen again. They initiated a number of structural changes: a journalism board to monitor editorial policy, guidelines on journalistic procedures, forms to flag trouble spots that managers were required to complete, and a 300-page volume of editorial guidelines. The cumulative effect of the changes was a multilayered bureaucracy that limited managerial discretion and fostered a hierarchy of approve-disapprove boxes. These were to be passed up the chain of command as an alternative to probing questions at lower levels in the organization. Some cures make the patient worse, and this newly restructured system resulted in two crises more damaging than the one in 2004. In October 2012, the BBC came under

heavy fire when it became known that it had broadcast a glowing tribute to a well-known former BBC TV host, Jimmy Savile, but killed an investigative report detailing evidence that Savile had been a serial child molester. The following month, the BBC aired a report wrongly accusing a member of Margaret Thatcher’s government of being a pedophile. Postmortem investigations attributed both errors directly to BBC’s restructured, highly bureaucratized system. In another case, when Larry Summers, an economist and former treasury secretary, became president of Harvard University in 2001, he soon concluded that the venerable university needed a structural overhaul, and he subsequently issued a series of presidential directives. He attacked the undergraduate grading system, in which half of the students received As and 90 percent graduated with honors. He stiffened standards for awarding tenure, encouraged more foreign study, and directed faculty (especially senior professors) to spend more time with students. He stepped across curricular boundaries to call for an emphasis on educational reform and more interdisciplinary courses. He proposed a center for medicine and science to encourage more applied research. Finally, he announced a bold move to build an additional campus across the Charles River to house new growth and development. Power Of Re framing Organization Discussion Paper.Summers’s initiatives aimed to tighten Harvard’s famously decentralized structure and to imbue the president’s office with more clout. Restructuring worked about as well for Summers as it had for the BBC—he was forced out after serving the shortest term for a Harvard president in more than a century. Reorganizing or restructuring is a powerful but high-risk approach to improvement. Major initiatives to redesign structure and processes often prove neither durable nor beneficial. Designing a structure, putting all the parts in place, and satisfying every interested party is difficult and hazardous. Although restructuring is a manager’s strategy of choice to improve performance, a Boston Group Study estimates 50 percent of the efforts fail (BSG, 2012). Other estimates put the misfire rate even higher (HBR, 2000). But it is also true that, over the past 100 years, management innovations such as decentralization, capital budgeting techniques, and self-governing teams have done more than any other kind of innovation to allow companies to cross new performance thresholds (Hamel, 2006). American automakers scratched their heads for 20 years trying to figure out what made Toyota so successful. They tried all kinds of process innovations but finally reached the conclusion that Toyota had simply given their employees more authority to make decisions and solve problems (Hamel, 2006). An organization’s structure at any moment represents its resolution of an enduring set of basic tensions or dilemmas, which we discuss in opening this chapter. Then, drawing on the work of Henry Mintzberg and Sally Helgesen, we describe two views of the alternatives organizations may consider in aligning structure with mission and environment. We conclude with case examples illustrating both opportunities and challenges that managers encounter when attempting to create more workable and successful structural designs.

Structural Dilemmas

Finding an apt system of authority, roles, and relationships is an ongoing, universal struggle. Managers rarely face well-defined problems with clear-cut solutions. Instead, they confront enduring structural dilemmas, tough trade-offs without easy answers.

Differentiation versus Integration The tension between assigning work and synchronizing sundry efforts creates a classic dilemma, as seen in Chapter 3. The more complex a role structure (lots of people doing many different things), the harder it is to sustain a focused, tightly coupled enterprise. Recall the challenge facing Larry Summers as he tried to bring a higher level of coordination to a highly decentralized university. As complexity grows, organizations need more sophisticated—and more costly—coordination strategies. Lateral strategies need to supplement top-down rules, policies, and commands.

Gap versus Overlap If key responsibilities are not clearly assigned, important tasks fall through the cracks. Conversely, roles and activities can overlap, creating conflict, wasted effort, and unintended redundancy. A patient in a prestigious teaching hospital, for example, called her husband and pleaded with him to rescue her. She couldn’t sleep at night because hospital staff, especially nurses’ aides and interns, kept waking her, often to repeat a procedure or administer a medication that someone else had done a short time before. Conversely, when she wanted something, pressing her nurses’ call button rarely produced any response. The new cabinet-level Department of Homeland Security, created in the wake of the 9/11 terrorist attacks, was intended to reduce gaps and overlaps among the many agencies responsible for responding to domestic threats. Activities incorporated into the new department included immigration, border protection, emergency management, and intelligence analysis. Yet the two most prominent antiterrorism agencies, the FBI and the CIA—with their long history of mutual gaps, overlaps, and bureaucratic squabbling— remained separate and outside the new agency (Firestone, 2002).Power Of Re framing Organization Discussion Paper.

Underuse versus Overload If employees have too little work, they become bored and get in other people’s way. Members of the clerical staff in a physician’s office were able to complete most of their tasks during the morning. After lunch, they filled their time talking to family and friends. As a result, the office’s telephone lines were constantly busy, making it difficult for patients to ask questions and schedule appointments. Meanwhile, clients and routine paperwork swamped the nurses, who were often brusque and curt because they were so busy. Patients complained about impersonal care. Reassigning many of the nurses’ clerical duties to office staff created a better structural balance.

Lack of Clarity versus Lack of Creativity If employees are unclear about what they are supposed to do, they often tailor their roles to fit personal preferences instead of shaping them to meet system-wide goals. This frequently leads to trouble. Most McDonald’s customers are not seeking novelty and surprise in their burgers and fries. But when responsibilities are over-defined, people

conform to prescribed roles and protocols in “bureaupathic” ways. They rigidly follow job descriptions, regardless of how much the service or product suffers. “You lost my bag!” an angry passenger shouted, confronting an airline manager.

The manager responded, “How was the flight?” “I asked about my bag,” said the passenger.

“That’s not my job,” the manager replied. “Check with baggage claim.”

The passenger did not leave as a satisfied customer.

Excessive Autonomy versus Excessive Interdependence If the efforts of individuals or groups are too autonomous, people often feel isolated. Schoolteachers may feel lonely and unsupported because they work in self-contained classrooms and rarely see other adults. Yet efforts to create closer teamwork have repeatedly run aground because of teachers’ difficulties in working together. In contrast, if too tightly connected, people in roles and units are distracted and spend too much time on unnecessary coordination. IBM lost an early lead in the personal computer business in part because new initiatives required so many approvals—from levels and divisions alike—that new products were overdesigned and late to market. The same problem hindered Hewlett- Packard’s ability to innovate in the late 1990s.Power Of Re framing Organization Discussion Paper.

Too Loose versus Too Tight One critical structural challenge is how to hold an organization together without holding it back. If structure is too loose, people go astray, with little sense of what others are doing. But rigid structures stifle flexibility and encourage people to waste time trying to beat the system. We can see some of the perils of a loose structure in the former accounting firm Andersen Worldwide, indicted in 2002 for its role in the Enron scandal. Efforts to shred documents and alter memos at Andersen’s Houston office went well beyond questionable accounting procedures. At its Chicago headquarters, Andersen had an internal audit team, the Professional Standards Group, charged with reviewing the work of regional offices. Unlike other large accounting firms, Andersen let frontline partners closest to the clients overrule the internal audit team. This fostered local discretion that was a selling point to customers but came back to haunt the firm. As a result of the lax controls, “the rainmakers were given the power to overrule the accounting nerds” (McNamee and Borrus, 2002, p. 33).

The opposite problem is common in managed health care. Insurance companies give clerks far from the patient’s bedside the authority to approve or deny treatment or to review medical decisions, often frustrating physicians and patients. Doctors lament spending time talking to insurance representatives that would be better spent seeing patients. Insurance providers sometimes deny treatments that physicians see as urgent. In one case, a hospital- based psychologist diagnosed an adolescent as likely to commit sexual assault. The insurer questioned the diagnosis and denied hospitalization. The next day, the teenager raped a five-year-old girl.

Goal-less versus Goal-bound

In some situations, few people know what the goals are; in others, people cling closely to goals long after they have become irrelevant or outmoded. In the 1960s, for example, the Salk vaccine virtually eradicated polio. This medical breakthrough also brought to an end the existing goal of the March of Dimes organization, which for years had championed finding a cure for the crippling disease. The organization rebounded by shifting its strategy to focus on preventing birth defects.

Irresponsible versus Unresponsive If people abdicate their responsibilities, performance suffers. However, adhering too rigidly to policies or procedures can be equally harmful. In public agencies, “street-level bureaucrats” (Lipsky, 1980) who deal with the public are often asked, “Could you do me this favor?” or “Couldn’t you bend the rules a little bit in this case?” Turning down every request, no matter how reasonable, alienates the public and perpetuates images of bureaucratic rigidity and red tape. But agency workers who are too accommodating create problems of inconsistency and favoritism.

Structural Configurations Structural design rarely starts from scratch. Managers search for options among the array of possibilities drawn from their accumulated wisdom and the experiences of others. Templates and frameworks can offer options to stimulate thinking. Henry Mintzberg and Sally Helgesen offer two abstract conceptions of structural possibilities. Greatest Hits from Organization Studies Hit Number 7: Michael C. Jensen and William H. Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure,” Journal of Financial Economics 1976, 3, 305–360 This classic article, seventh on our list of works most often cited by scholars, focuses on two central questions:

• What are the implications of the “agency problem”—that is, the conflicts of interest between principals and their agents?

• Given those conflicts, why do corporations even exist?

An agency relationship is a structural arrangement created whenever one party engages another to perform a task. Jensen and Meckling’s particular focus is the relationship between a corporation’s owners (shareholders) and their agents, the managers. Principals and agents both seek to maximize utility, but their interests often diverge. If you are a sole proprietor, a dollar of the firm’s money is a dollar of yours as well. But if you are an employee with no ownership interest, you’re spending someone else’s money when you pad your expense account or schedule a business meeting at an expensive resort. One rationale for linking executive compensation to the price of the company’s stock is that it may reduce the agency problem, but the impact is often marginal at best. A notorious example is Tyco’s chief executive, Dennis Kozlowski, who reportedly spent more than $30 million of company money to buy, furnish, and decorate his palatial apartment in New York City (Sorkin, 2002). Nonexecutive shareholders hate this kind of thing, but it is difficult for

them to stay abreast of everything management does, and they can’t do it without incurring “monitoring costs”—time and money spent on things like supervision and auditing. One implication the authors draw is that the primary value of stock analysts is the sentinel function they perform. Analysts’ ability to pick stocks is notoriously poor, but their oversight puts more heat on managers to serve shareholder interests. The article also concludes that, despite the agency conflicts, the corporate form still makes economic sense for the parties involved—managers cost more than owners wish, but they still earn their keep.

The authors see the agency problem as a pervasive feature of cooperative activity. The relationship between a team and individual members, or between a boss and a subordinate, is like that between principal and agent. If members of a team share rewards equally, for example, there is an incentive for “free riders” to let someone else do most of the work. Principals face a perennial problem of keeping agents in line and on task.Power Of Re framing Organization Discussion Paper.

Mintzberg’s Fives As the two-dimensional lines and boxes of a traditional organization chart have become increasingly archaic, students of organizational design have developed a variety of new structural images. One influential example is Mintzberg’s five-sector “logo,” depicted in Exhibit 4.1. Mintzberg’s model clusters various functions into groupings and shows their relative size and influence in response to different strategies and external challenges. His schema provides a rough atlas of the structural terrain that can help managers get their bearings. It assists in sizing up the lay of the land before assembling a structure that conforms to the prevailing circumstances. One of the distinctive features of Mintzberg’s image is expanding the typical two-dimensional view of structure into a more comprehensive portrayal. In doing this, he is able to capture more of the complexity and issues in formal dealings.

Exhibit 4.1. Mintzberg’s Model. Source: Mintzberg (1979, p. 20). Copyright ©1979. Reprinted by permission of Prentice Hall, Upper Saddle River, NJ. At the base of Mintzberg’s image is the operating core, consisting of workers who produce or provide products or services to customers or clients: teachers in schools, assembly-line workers in factories, physicians and nurses in hospitals, and flight crews in airlines. Directly above the operating core is the administrative component: managers who supervise, coordinate, control, and provide resources for the operators. School principals, factory supervisors, and echelons of middle management fulfill this role. At the top of Mintzberg’s figure, senior managers in the strategic apex track developments in the environment, determine the strategy, and shape the grand design. In school systems, the strategic apex includes superintendents and school boards. In corporations, the apex houses the board of directors and senior executives. Two more components sit alongside the administrative component. The technostructure houses specialists, technicians, and analysts who standardize, measure, and inspect outputs and procedures. Accounting and quality control departments in industry, audit departments in government agencies, and flight standards departments in airlines perform such functions.

The support staff performs tasks that support or facilitate the work of others throughout the organization. In schools, for example, the support staff includes nurses, secretaries, custodians, food service workers, and bus drivers. These people often wield influence far greater than their station might suggest.

From this basic blueprint, Mintzberg (1979) derived five structural configurations: simple structure, machine bureaucracy, professional bureaucracy, divisionalized, and adhocracy. Each creates a unique set of management challenges. Simple Structure New businesses typically begin as simple structures with only two levels: the strategic apex and an operating level. Coordination is accomplished primarily through direct supervision and oversight, as in a small mom-and-pop operation. Mom or pop constantly monitors what is going on and exercises complete authority over daily operations. William Hewlett and David Packard began their business in a garage, as did Apple Computer’s Steve Jobs and Steve Wozniak. Simple structure has the virtues of flexibility and adaptability. One or two people control the operation and can turn on a dime when needed. But virtues can become vices. Authorities can block as well as initiate change, and they can punish capriciously as well as reward handsomely. A boss too close to day-to-day operations is easily distracted by immediate problems, neglecting long-range strategic issues. A notable exception was Panasonic founder Konosuke Matsushita, who promulgated his 250-year plan for the future of the business when his young company still had less than 200 employees. Machine Bureaucracy McDonald’s is a classic machine bureaucracy. Members of the strategic apex make the big decisions. Managers and standardized procedures govern day-to-day operations. Like other machine bureaucracies, McDonald’s has large support staffs and a sizable techno- structure that sets standards for the cooking time of French fries or the assembly of a Big Mac or Quarter Pounder.

For routine tasks, such as making hamburgers and manufacturing automotive parts, a machine-like operation is both efficient and effective. A key challenge is how to motivate and satisfy workers in the operating core. People quickly tire of repetitive work and standardized procedures. Yet offering too much creativity and personal challenge in, say, a McDonald’s outlet could undermine consistency and uniformity—two keys to the company’s success. Like other machine bureaucracies, McDonald’s deals constantly with tension between local managers and headquarters. Local concerns and tastes weigh heavily on decisions of middle managers. Top executives, aided by analysts armed with reams of data, rely more on generic and abstract information. Their decisions are influenced by corporation-wide concerns. As a result, a solution from the top may not always match the needs of individual units. Faced with declining sales and market share, McDonald’s introduced a new food preparation system in 1998 under the marketing banner “Made for you.” CEO Jack Greenberg was convinced the new cook-to-order system would produce the fresher, tastier burgers needed to get the company back on the fast track. However, franchisees soon complained that the new system led to long lines and frustrated customers. Unfazed by the

criticism, Greenberg invited a couple of skeptical financial analysts to flip burgers at a McDonald’s outlet in New Jersey so they could see firsthand that the concerns were unfounded. The experiment backfired. The analysts agreed with local managers that the system was too slow and decided to pass on the stock (Stires, 2002). The board replaced Greenberg at the end of 2002. Professional Bureaucracy Harvard University affords a glimpse into the inner workings of a professional bureaucracy. As in other organizations that employ large numbers of highly educated professionals to perform core activities, Harvard’s operating core is large relative to other structural parts, although the technostructure has grown in recent years to accommodate mandated programs such as racial equity or gender sensitivity. At the operating sphere, each individual school, for example, has its own local approach to teaching evaluations; there is no university-wide profile developed by analysts. Few managerial levels exist between the strategic apex and the professors, creating a flat and decentralized profile. Control relies heavily on professional training and indoctrination. Insulated from formal interference, professors have almost unlimited academic freedom to apply their expertise as they choose. Freeing highly trained experts to do what they do best produces many benefits but leads to challenges of coordination and quality control. Tenured professors, for example, are largely immune from formal sanctions. As a result, universities have to find other ways to deal with incompetence and irresponsibility. Faced with a professor whose teaching performance was moving from erratic to bizarre, a Harvard dean did the one thing he felt he could do—he relieved the professor of teaching responsibilities while continuing to pay his full salary. The dean was not very disappointed when the professor quit in anger (Rosovsky, 1990). A professional bureaucracy responds slowly to external change. Waves of reform typically produce little impact because professionals often view any change in their surroundings as an annoying distraction. The result is a paradox: Individual professionals may strive to be at the forefront of their specialty, whereas the institution as a whole changes at a glacial pace. Professional bureaucracies regularly stumble when they try to exercise greater control over the operating core; requiring Harvard professors to follow standard teaching methods might do more harm than good.Power Of Re framing Organization Discussion Paper.

Harvard president Larry Summers tripped over this challenge in a famous case when he suggested that superstar African American studies professor Cornel West redirect his scholarly efforts. Summers gave his advice to West in private, but West’s pique made the front page of the New York Times (Belluck and Steinberg, 2002). Summers’s profuse public apologies failed to deter the offended professor from decamping to Princeton, where he stayed for 14 years before returning to Harvard in 2016. In professional bureaucracies, professionals often win struggles between the strategic apex and the operating core. Hospital administrators learn this lesson quickly, and often painfully, in their dealings with physicians. Divisionalized Form In a divisionalized organization (see Exhibit 4.2), the bulk of the work is done in quasiautonomous units, such as freestanding campuses in a multi-campus university, areas

of expertise in a large multispecialty hospital, or independent business units in a Fortune 500 firm (Mintzberg, 1979). Johnson and Johnson, for example, is among the largest companies in the world (#39 on the Fortune 500 in 2016). It has 250 operating companies lodged in virtually every country. Its medical device division is the world’s largest. Its pharmaceutical division is even bigger. Its consumer products division produces a wide assortment of well-known brands, such as Neutrogena, Tylenol, Band-Aids, and Rogaine. It also makes contact lenses and tuberculosis medicines.

Exhibit 4.2. Divisionalized Form. Source: Mintzberg (1979, p. 393). Copyright © 1979. Reprinted by permission of Pearson Education, Inc., New York, New York. Although J&J’s divisions often have little in common, the company’s executives argue that there is a level of shared synergy and stability that have paid off over time. Despite setbacks in the Tylenol crisis of 1982 and a series of product recalls in 2010 and 2012, J&J had raised its dividend for 53 consecutive years and was one of only two U.S. companies with an AAA credit rating.

One of the oldest businesses in the United States, Berwind Corporation began in coal- mining in 1886. It now houses divisions in business sectors as diverse as manufacturing, financial services, real estate, and land management. Each division serves a distinct market and supports its own functional units. Division presidents are accountable to the corporate office in Philadelphia for specific results: profits, sales growth, and return on investment. Power Of Re framing Organization Discussion Paper.As long as they deliver, divisions have relatively free rein. Philadelphia manages the strategic portfolio and allocates resources based on its assessment of market opportunities. Divisionalized structure offers economies of scale, resources, and responsiveness while controlling economic risks, but it creates other tensions. One is a cat-and-mouse game between headquarters and divisions. Headquarters wants oversight, while divisional managers try to evade corporate control: Our top management likes to make all the major decisions. They think they do, but I’ve seen one case where a division beat them. I received…a request from the division for a chimney. I couldn’t see what anyone would do with a chimney…

CHAPTER 5 ORGANIZING GROUPS AND TEAMS Alone we can do so little; together we can do so much.

—Helen Keller On May 2, 2011, Stealth Hawk helicopters carried two units of SEAL Team Six Red Squadron for Operation Neptune Spear—the assault on Osama bin Laden’s lair in Abbottabad, Pakistan. The outcome of their mission “to interdict a high value target in a nonpermissive environment” has taken its place in history, though there are conflicting accounts of the actual combat. The fog of war invites many interpretations. Red Squadron’s success owed much to awesome weaponry and the unsurpassed courage and pluck of its highly trained operators. But many after-the-fact commentators agree that the real secret of its success is the astonishing teamwork built into a SEAL’s experience from the beginning. Teamwork is an integral part of Basic Underwater Demolition (BUD/S) training, the toughest school in the military. Classes begin with 200 recruits, but few make it to the end of the program. Sometimes no one from a class graduates. Applicants endure extreme, if not inhuman, physical and mental challenges. Teams of eight are assigned 200-pound inflatable rubber boats that they must carry with them at all times. During chow time or bathroom breaks, a team member must guard the boat. The team gets punished for any individual infractions. When anyone drops out, other members of the team have to fill in. Sometimes a crew of two or three is responsible for the heavy vessel. Survivors of the initial BUD/S ordeal move on to SEAL Teams. Those who seek a place on legendary Team Six apply for the Green Team. Past training intensifies during the year of Green Team rigor. In addition to tougher physical challenges, candidates for SEAL Team Six train in intense, close-quarters combat in a simulated terrorist “kill house,” using live ammunition. An inch or two between men under combat conditions may mean the difference between life and death. Candidates sometimes wound or kill teammates during this phase of training. During Green Team exercises, members of the three Team Six squadrons—Gold, Blue, and Red—choose new men for their units. The squadrons exist in a relatively simple structure. The Admiral who heads Joint Secret Operations Command (JSOC) reports directly to the Secretary of Defense, who in turn answers to the President. Those relations follow strict protocol. The Team Six commander reports to the head of JSOC and has authority over the leaders who command the three squadrons; “The heart of each Squadron are the teams, each led by a senior enlisted SEAL and made up of half a dozen operators apiece…Assault squadrons are accompanied by intelligence analysts and support personnel” (Owen and

Maurer, 2012, p. 37). Teams consist of snipers, shooters, explosive experts, and other operators required for a specific mission. In the case of Operation Neptune Spear these included a translator, a CIA agent, and a dog named Cairo. The chain of command from the JSOC Admiral to the operators is clear but very informal: casual civilian dress, first names, very little protocol. But in battle, Team Six operational units are highly regimented: “Every assaulter knew both his place in the chain of command and what to do if communications were lost to operations center” (Pfarrer, 2011, p. 181). The mission’s detailed plan relied on highly sophisticated intelligence. When the two helicopters landed in bin Laden’s compound, every operator knew his role and relation to others. Lateral coordination was precise, achieved mainly through terse “SEAL Talk” and nonverbal hand signals. When one helicopter crashed, the teams quickly modified their plans and team structure. Power Of Re framing Organization Discussion Paper.From BUD/S training on, a focus on teamwork returned a huge dividend for the operatives of Red Squadron, Team Six, and the nation. When the team assembled for recognition at the White House, President Barack Obama asked, “Which of you fired the final round?” In unison, the members of Red Squadron responded, “We all did!” Teams that work well regularly make an enormous difference in the business world as well. Consider “six teams that changed the world” (Fortune, 2006). There was the remarkable group that Thomas Edison pulled together, including an English machinist, a Swiss clockmaker, a German glass blower, and a Princeton-trained mathematician. They worked in concert with Edison’s inventive genius to produce an astonishing array of novel products, including the phonograph and the lightbulb. Or how about Lockheed’s legendary Skunk Works, a team that built a series of breakthrough aircraft: the F-104 Starfighter, the U-2, and SR-71 spy planes? The name came from the team’s initial quarters—a circus tent with bad odors. It was World War II, and space was tight. Designers were quartered away from the main offices and worked side by side with metal workers to help assure that breakthrough designs were practical. Cumbersome bureaucratic procedures were streamlined by team leader Kelly Johnson’s “14 rules and practices.” In addition to Skunk Works’ own innovations, the concept of its team structure has spawned thousands of corporate imitators. Then, of course, there’s the well-known team of four driven malcontents, later expanded to dozens, who believed you could build a personal computer easy enough to use and inexpensive enough to be affordable. Their ultimate goal was to unleash personal creativity. Steve Jobs of Apple headed up the super-stealth project, housed in a two- story building near a gas station. Competition with other projects and with Apple’s leadership was fierce, but, despite the quarreling, the Macintosh was born in 1983, marking a turning point in the history of personal computing. MasterCard was struggling in 1997. Six major advertising campaigns had failed to close the gap with Visa. In desperation the company hired McCann Erickson, who assigned a creative team of three to the case. The trio’s breakthrough came with the tagline “some things money can’t buy.” The first ad was set at a baseball game featuring everyday transactions with the setup, “priceless.” The ad and its successors helped MasterCard turn the tables on Visa.

Ford faced a difficult challenge in the 1980s. The Japanese were making serious inroads in the American automobile market. Taurus, Ford’s best-selling car, needed a major redesign, but executives knew too well of past problems with the design process. Every function had a different view. Designers initially presented a new concept. Engineering very often maintained the design was not feasible, finance typically argued it was too costly, and manufacturing was sure to argue that it couldn’t be built. Competing voices typically slowed down or shut down the smooth transition from concept to finished product. This time, Ford decided too much was at stake and put 700 people, representatives from each group, in the same place, under a tough manager, to work it out. The concept was Team Taurus. The result was Motor Trend’s Car of the Year in 1986. In all these cases, teams of diverse individuals, typically working at a distance from the existing hierarchy, sparked major breakthroughs. Well-organized small teams have the ability to produce results that often elude the grasp of large organizations. Around the globe, much of the work in organizations gets done in groups or teams. When these units work well, they elevate the performance of ordinary individuals to extraordinary heights. When teams malfunction, as too often happens, they erode the potential contributions of even the most talented members. What determines how well groups perform? As the examples illustrate, the performance of a small group depends heavily on structural design and clarity. A key ingredient of a top-notch team is an appropriate blueprint of roles and relationships aligned with common goals or missions. In this chapter, we explore the structural features of small groups and teams to show how restructuring can improve group performance. We begin by describing various design options for teams, accenting the relationship between design and task. Next, using sports as an analogy, we discuss patterns of team configuration, coordination, and interdependence suited to different situations. Then we describe the characteristics of high-performing teams. Finally, we discuss the pros and cons of self-managing teams—a hot topic in recent years.

Tasks and Linkages in Small Groups Groups choose among a range of options to develop a structure that maximizes individuals’ contributions while minimizing the chronic problems that plague small groups. The nature of the work or task provides a key to shaping group structure. Tasks vary in complexity, clarity, predictability, and volatility (Hærem, Pentland, and Miller, 2015). The task- structure relationship in small groups is parallel to that in larger organizations.Power Of Re framing Organization Discussion Paper.

Contextual Variables As we saw in Chapter 4, simple tasks align with basic structures—clearly defined roles, elementary forms of interdependence, and coordination by plan or command. Projects that are more complex or volatile generally require more complicated structural forms: flexible roles, reciprocal give-and-take, and synchronization through lateral dealings and communal feedback. If a situation becomes exceptionally ambiguous and fast paced, particularly when time is a factor, groups may be unable to make decisions quickly enough without centralized authority and tight scripts. Planning a SEAL Team Six mission or

transplanting a kidney is not the same as painting a house or setting up a family outing. Performance and morale suffer, and troubles multiply when groups lack an appropriate structure. Getting structure right requires careful consideration of pertinent contextual variables, some of which are vague or tough to assess:

• What is our mission? • What actions are required?

• Who should do what?

• Who is in charge? • How should we make decisions?

• How do we coordinate efforts? • What do individual members care about most: time, quality, participation?

• What are the special skills and talents of each group member?

• How does this group relate to others? • How will we determine success?

Some Fundamental Team Configurations A high percentage of employees’ and managers’ time is spent in meetings and working groups of three to twelve people. To illustrate design options, we examine several fundamental structural configurations from studies of five-member teams. These basic patterns are too simple to apply to larger, more complex systems, but they help to illustrate how different structural forms respond to a variety of challenges.

The first is a one-boss arrangement; one person has authority over others (see Exhibit 5.1). Information and decisions flow from the top. Group members offer information to and communicate primarily with the official leader rather than with one another. This array is efficient and fast and works best in relatively simple and straightforward situations when it is easy for the boss to stay on top of things. Circumstances that are more complicated or volatile can overload the boss, producing delays or bad decisions, unless the person in charge has an unusual level of skill, expertise, and energy. Subordinates quickly become frustrated with directives that are late or out of touch.

Exhibit 5.1. One Boss. A second alternative creates a management level below the boss (see Exhibit 5.2). Two individuals have authority over specific areas of the group’s work. Information and decisions flow through them. This arrangement works when a task is divisible; it reduces the boss’s span of control, freeing up time to concentrate on mission, strategy, or relationships with higher-ups. But adding a new layer limits access from the lower levels to the boss. Communication becomes slower and more cumbersome, and may eventually erode morale and performance.

Exhibit 5.2. Dual Authority. Another option is a simple hierarchy with a middle manager who reports to the boss and, in turn, supervises and communicates with others (see Exhibit 5.3). A similar arrangement at the White House frees the President to focus on mission and external relations while leaving operational details to the chief of staff. Although this type of hierarchy further limits access to the top, it can be more efficient than a dual-manager arrangement. At the same time, friction between operational and top-level managers is commonplace, and number two may be tempted to usurp number one’s position.

Exhibit 5.3. Simple Hierarchy. A fourth option is a circle network, where information and decisions flow sequentially from one group member to another (see Exhibit 5.4). Each can add to or modify whatever comes around. This design relies solely on lateral coordination and simplifies communication. Each person has to deal directly with only two others; transactions are therefore easier to manage. However, one weak link in the chain can undermine the entire enterprise. The circle can bog down with complex tasks that require more reciprocity.

Exhibit 5.4. Circle Network. A final possibility sets up what small group researchers call the all-channel, or star, network (see Exhibit 5.5). This design, familiar to Team Six operators, is similar to Helgesen’s web of inclusion. It creates multiple connections so that everyone can talk to anyone else. Information flows freely; decisions sometimes require touching multiple bases. Morale in an all-channel network is usually high. The arrangement works well if a task is amorphous or complicated, requiring substantial mutual adjustment, particularly if each member brings distinct knowledge or skill. But this structure can be time consuming, and decision making may slow to a crawl, making it cumbersome and inefficient for simpler undertakings or for groups that have difficulty coming to agreement. It works best when team members bring well-developed communication skills, enjoy participation, tolerate ambiguity, embrace diversity, are able to manage conflict, and agree on how the team will make decisions.

Exhibit 5.5. All-Channel Network.

Teamwork and Interdependence Even in the relatively simple case of five-person groups, the formal network is critical to team functioning. In the give-and-take of larger organizations, things get more complicated. We can get a fresh perspective and sharpen our thinking about structure in groups by looking beyond typical work organizations. Making the familiar strange often helps the strange become familiar. Team sports, among the world’s most popular pastimes, offer a helpful analog to clarify how teamwork varies depending on the nature of the game. Every competition calls for its own unique patterns of interaction. Because of this, distinctive structures are required for different sports. Social architecture is thus remarkably different for baseball, football, and basketball.

Baseball

Baseball player Pete Rose once noted, “Baseball is a team game, but nine men who meet their individual goals make a nice team” (Keidel, 1984, p. 8). In baseball, as in cricket and other bat-and-ball games, a loosely integrated confederacy makes a team. Individual efforts are mostly autonomous, seldom involving more than two or three players at a time. Significant distances, particularly on defense, separate players. Loose connections reduce the need for synchronization among the various positions. The pitcher and catcher need to coordinate, as do infielders dealing with a ground ball or outfielders playing a high fly. But batters are alone at the plate, and fielders are often on their own to make a play.

Managers’ decisions are mostly tactical, normally involving individual substitutions or actions. Managers come and go without seriously disrupting the team’s play. Players can transfer from one team to another with relative ease. John Updike summed it up well: “Of all the team sports, baseball, with its graceful intermittence of action, its immense and tranquil field sparsely salted with poised men in white, its dispassionate mathematics, seemed to be best suited to accommodate, and be ornamented by, a loner. It is an essentially lonely game” (Keidel, 1984, pp. 14–15).

Football American football and other chess-like sports such as rugby and curling create a structural configuration very different from baseball. These games proceed through a series of moves, or plays. Between plays, teams plan strategy for the next move. Unlike baseball players, football players perform in close proximity. Linemen and offensive backs hear, see, and often touch one another. Each play involves every player on the field. A prearranged plan links efforts sequentially. The actions of linemen pave the way for the movement of backs; a defensive team’s field position becomes the starting point for the offense, and vice versa. In the transition from offense to defense, specialty platoons play a pivotal role. Efforts of individual players are tightly synchronized. Power Of Re framing Organization Discussion Paper.George Allen, former coach of the Washington Redskins, put it this way: “A football team is a lot like a machine. It’s made up of parts. If one part doesn’t work, one player pulling against you and not doing his job, the whole machine fails” (Keidel, 1984, p. 9). Tight connections among parts require a football team to be well integrated, mainly through planning and top-down control. The primary units are the offensive, defensive, and specialty platoons, each with its own coordinator. Under the direction of the head coach, the team uses scouting reports and other surveillance to develop a strategy or game plan in advance. During the game, the head coach typically makes strategic decisions. Assistants or designated players on either offense or defense make tactical decisions (Keidel, 1984).

A football team’s tight-knit character makes it tougher to swap players from one team to another. Irv Cross, of the Philadelphia Eagles, once remarked, “An Eagles player could never make an easy transition to the Dallas Cowboys; the system and philosophies are just too different” (Keidel, 1984, p. 15). Unlike baseball, football requires intricate strategy and tightly meshed execution.

Basketball In basketball and similar games, like soccer (football everywhere but North America), hockey, and lacrosse, players perform in even closer proximity to one another than football

players do. In quick, rapidly moving transitions, offense becomes defense—with the same players. Efforts of individuals are reciprocal; each player depends on the performance of others. Each may be involved with any of the others. Anyone can handle the ball or attempt to score. Basketball is much like improvisational jazz. Teams require a high level of spontaneous, mutual adjustment. Everyone is on the move, often in an emerging pattern rather than a predetermined course. A successful basketball season depends heavily on a flowing relationship among team members who read and anticipate one another’s moves. Players who play together a long time develop a sense of what their teammates will do. A team of newcomers has trouble adjusting to individual predispositions or quirks. Unlike football, basketball has no platoons. It is wholly a harmonized group effort. Coaches, who sit or roam the sidelines, serve as integrators. Their periodic interventions reinforce team cohesion, helping players coordinate laterally on the move. Unlike baseball teams, basketball teams cannot function as a collection of individual stars. During the 2016 basketball season, the rather dismal performance of the Los Angeles Lakers was attributed to it being a loose array of individual stars rather than a well-knit unified team. Conversely, the San Antonio Spurs became one of the most consistently successful teams in professional basketball by emphasizing teamwork. According to LeBron James, that’s how the Spurs beat his team in the 2014 NBA championships: “It’s all for the team and it’s never about the individual. That’s the brand of basketball, and that’s how team basketball should be played” (Ginsburg, 2014).

Duke University’s women’s basketball success in 2000 documented the importance of group interdependence and cohesion. The team won because players could anticipate the actions of others. The individual “I” deferred to the collective “we.” Passing to a teammate was valued as highly as making the shot. Basketball is “fast, physically close, and crowded, 20 arms and legs in motion, up, down, across, in the air. The better the team, the more precise the passing into lanes that appear blocked with bodies” (Lubans, 2001, p. 1).

CHAPTER 6 PEOPLE AND ORGANIZATIONS Who first invented work and tied the free and holy-day rejoicing spirit down to the ever- haunting importunity of business and, oh, most sad, to this dry drudgery of the desk’s dead wood?

—Charles Lamb

Is it all dry drugery? Schwartz and Porath (2014) say that’s the reality for white collar workers, who aren’t eager to go to work, don’t feel they get much appreciation while they’re there, have trouble getting everything done, and doubt that their work makes much of a contribution. They arrive home deflated and haunted by round-the-clock demands. Schwartz and Porath could have been writing about Amazon where “workers are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are ‘unreasonably high’ … [Amazon] is conducting a little-known experiment in how far it can push white-collar workers, redrawing the boundaries of what is acceptable” (Kantor and Streitfeld, 2015). Amazon is tough on the white-collar employees at its Seattle headquarters, and even tougher on the blue-collar workers who move its goods. Amazon came under fire in 2011 when workers in an eastern Pennsylvania warehouse toiled in more than 100-degree heat with ambulances waiting outside, taking away laborers as they fell. After an investigation by the local newspaper, the company installed air-conditioning (Kantor and Streitfeld, 2015). Power Of Re framing Organization Discussion Paper.Amazon is not alone. Apple’s design and technological savvy have captured the affection and loyalty of consumers around the globe, but the company has earned lower marks for treatment of the offshore workers who make its products. In 2012, the huge success of products like the iPad and iPhone was great news for Apple but not so good for the Chinese employees who made them. Long hours, low pay, and intense pressure to ramp up production triggered strikes and a worker riot that shut one plant down for a day. Apple’s products were cutting edge, but its people management evoked centuries- old images of sacrificing people for profits and reinforced popular stereotypes of bosses as heartless and insensitive (Amar, 2004; Duhigg and Barboza, 2012). But not all companies view employees as merely a means to the greater end of profits, as a contrasting case illustrates: Early one March afternoon, three electricians who worked for Nucor Corporation got bad news. In Hickman, Arkansas, the company’s steel mill was dead in the water because its electric grid had failed. All three employees dropped what they were doing to head for Arkansas. One drove from Indiana, arriving at 9 PM that night. The other two flew from North Carolina to Memphis, then drove 2 more hours, arriving after midnight. All three camped out at the plant and worked 20-hour shifts with local staff to get the grid back up. The electricians volunteered—they didn’t need a boss to tell them that Nucor had to get the mill back on line. Their herculean effort was a big help to the company but brought them no immediate financial reward, even though their initiative helped Hickman post a quarterly record for tons of steel shipped (Byrnes and Arndt, 2006). At Nucor, this story is not particularly unusual: In an industry as Rust Belt as they come, Nucor has nurtured one of the most dynamic and engaged workforces around. Its nonunion employees don’t see themselves as worker bees

waiting for instructions from above. Nucor’s flattened hierarchy and emphasis on pushing power to the front line have given its employees the mindset of owner-operators. It’s a profitable formula: Nucor’s 387% return to shareholders over the past five years soundly bests almost all other companies in the Standard & Poor’s 500-stock index (Byrnes and Arndt, 2006, p. 58). What’s in it for the workers? Their base pay is nothing special—it’s below the industry average. But when Nucor has a good year, as it often does, they get big bonuses, based on their own output and the company’s success. That’s one reason electricians would grab a plane to help jump-start a plant in Arkansas. It’s also why a new plant manager at Nucor can expect supportive calls from experienced colleagues who want to help out. At Nucor, work is more than a job. It’s about pride. Employees enjoy seeing their names listed on the covers of corporate publications, including the annual report. They’re proud that their company, which turns scrap metal into steel, is the world’s largest recycler. And they’re exhilarated when they can draw on their intelligence and creativity to demonstrate that American workers can still compete. Companies like Nucor are too rare. In the context of strikes and boycotts across China protesting “inhumane” management practices at Walmart in late 2016, a company spokesperson offered the usual boilerplate, “Our employees are our most valuable asset” (Hernández, 2016). Most companies claim to value their people, but fewer live up to those words. In practice, employees are often treated as pawns to be moved where needed and sacrificed when necessary. In this chapter, we focus on the human side of organizations. We start by summarizing the assumptions underlying the human resource view. Next, we examine how people’s needs are either satisfied or frustrated at work. Then we look at today’s changing employment contract and its impact on both people and organizations.

Human Resource Assumptions Amazon and Nucor represent different stances in a perennial debate about the relationship between people and organizations. One side sees individuals as objects or tools, important not so much in themselves as in what they can do for the organization. The opposing camp holds that the needs of individuals and organizations can be aligned, engaging people’s talent and energy while profiting the enterprise. This debate has intensified with globalization and the growth in size and power of modern institutions. Can people find freedom and dignity in a world dominated by economic fluctuations and a push for cost reduction and short-term results? Answers are not easy. They require a sensitive understanding of people and their symbiotic relationship with organizations. The human resource frame evolved from early work of pioneers like Mary Parker Follett (1918) and Elton Mayo (1933, 1945), who questioned a deeply held managerial assumption that employees had no right beyond a paycheck, and their duty was to work hard and follow orders. Pioneers of the human resource frame criticized this view on two grounds: It was unjust, and it was bad psychology. They argued that people’s skills, attitudes, energy, and commitment are vital resources that can make or break an enterprise. The human resource frame is built on core assumptions that highlight this linkage:

• Organizations exist to serve human needs rather than the converse. • People and organizations need each other. Organizations need ideas, energy, and

talent; people need careers, salaries, and opportunities. • When the fit between individual and system is poor, one or both suffer. Individuals

are exploited or exploit the organization—or both become victims.

• A good fit benefits both. Individuals find meaningful and satisfying work, and organizations get the talent and energy they need to succeed. Power Of Re framing Organization Discussion Paper.

Organizations ask, “How do we find and retain people with the skills and attitudes to do the work?” Workers want to know, “How well will this place work for me?” These two questions are closely related, because “fit” is a function of at least three things: how well an organization responds to individual desires for useful work; how well jobs let employees express their skills and sense of self; and how well work fulfills individual financial and lifestyle needs (Cable and DeRue, 2002).

Human Needs The concept of need is controversial—at least in some academic circles. Some theorists argue that the idea is too vague and ethereal. Others say that people’s needs are so variable and influenced by their surroundings that the concept offers little help in explaining behavior (Salancik and Pfeffer, 1977). Goal-setting theory (Locke and Latham, 2002, 2004) suggests that managers do better to emphasize specific performance goals than to worry about employees’ psychic needs. Economists like Jensen and Meckling (1994) argue that people’s willingness to trade off one thing for another (time for money or sleep for entertainment) disproves the idea of need. Despite this academic skepticism, needs are a central element in everyday psychology. Parents worry about the needs of their children, politicians promise to meet the needs of constituents, and managers make an effort to understand the needs of workers. That’s how Wegmans, a grocery chain that perennially ranks high on Fortune magazine’s list of best places to work (number two in 2017), states its philosophy: “We set our goal to be the very best at serving the needs of our customers. Every action we take should be made with this in mind. We also believe that we can achieve our goal only if we fulfill the needs of our own people” (Wegmans, 2016). Common sense tells us that needs are important because we all have them. But identifying what needs we have—long term or at any given time—is more elusive. A horticultural analogy may help clarify. A gardener knows that every plant has specific requirements. The right combination of temperature, moisture, soil, and sunlight allows a plant to grow and flourish. Plants do their best to get what they need. They orient leaves sunward to get more light and sink roots deeper in search of water. A plant’s capabilities generally increase with maturity. Highly vulnerable seedlings become more self-sufficient as they grow (better able to fend off insects and competition from other plants). These capabilities decline as a plant nears the end of its life cycle.

Human needs are similar. Conditions or elements in the environment allow people to survive and grow. Basic needs for oxygen, water, and food are clear; the idea of universal psychic needs is more controversial. A genetic, or “nature,” perspective posits that certain

psychological needs are essential to being human (Lawrence and Nohria, 2001; Maslow, 1954; McClelland, 1985; Pink, 2009; White, 1960). A “nurture” view, in contrast, suggests that people are so shaped by environment, socialization, and culture that it is fruitless to talk about common psychic needs. In extreme forms, both nature and nurture arguments are misleading. You don’t need an advanced degree in psychology to recognize that people are capable of enormous amounts of learning and adaptation. Just about any parent with more than one child knows that many psychological characteristics, such as temperament, are present at birth.

Most scholars see human behavior as resulting from the interplay between heredity and environment. Genes initially determine potential and predispositions. Research has identified connections between genetic patterns and behavioral tendencies such as antisocial behavior. But learning profoundly modifies innate directives, and research in behavioral genetics regularly concludes that genes and environment interact in complex ways to determine how people act (Baker, 2004). The nature-nurture seesaw suggests a more useful way to think about human needs. A need can be defined as a genetic predisposition to prefer some experiences over others. Needs energize and guide behavior and vary in potency at different times. We enjoy the company of others, for example, yet we sometimes want to be alone. Because genetic instructions cannot anticipate all situations, both the form and the expression of each person’s inborn needs are significantly tailored by experiences after birth. Power Of Re framing Organization Discussion Paper.

Work and Motivation: A Brief Tour Why do people do one thing rather than another? Why, for example, do they work hard, or not hard, or not at all? Despite decades of research, answers remain contested and elusive, but we can briefly summarize some of the major ideas in an ongoing dialogue. An old formula (Maier, 1967) tells us that Performance = Ability × Motivation. If you have both talent and desire, you’ll do well. Theories of motivation seek to explain the desire part of that formula. One of the oldest views, still popular among many managers and economists, is that the primary thing people care about is money: they do what they believe will get them more of it. Playing a hit man in the 2012 film Killing Them Softly, Brad Pitt summarizes this view with the observation, “America isn’t a country. It’s a business. Now give me my money.” Money is a powerful incentive, and focusing on financial rewards simplifies the motivation problem—just offer people money for doing what you want. But the classic highwayman’s demand—“Your money or your life!”—reminds us that money isn’t the only thing people care about and is not always the most important thing. Managers and organizations that focus only on money will miss other opportunities to motivate. But what else is important beyond money? A number of theorists have developed models of workplace motivation, and some of the better-known examples are summarized in Exhibit 6.1. Each model develops its own list of the things that people want, and no item appears on every list. But there is broad agreement that people want things that go beyond money, such as doing good work, getting better at what they do, bonding with other people, and finding meaning and purpose. There is also alignment with a distinction that was central to Herzberg’s (1966) “two-factor” theory. Herzberg argued that extrinsic factors, like working conditions and company

policies, can make people unhappy but don’t really motivate them to be more productive. He insisted that the things that motivate are intrinsic to the work itself—things like achievement, responsibility, and recognition for work well done. All these theories converge on the view that motivating people requires understanding and responding to the range of needs they bring to the workplace. Exhibit 6.1. Models of Motivation at Work. Author(s) Needs/Motives at Work Maslow (1943, 1954)

Hierarchy of needs (physiological, safety, love/belonging, esteem, self-actualization)

Herzberg, Mausner, and Snyderman (1959); Herzberg (1966)

Two-factor theory: Motivators/satisfiers: achievement, recognition, work itself, responsibility, advancement, pay Hygiene factors/dissatisfiers: company policies, supervision, interpersonal relationships, working conditions, pay

McClelland (1961) Three needs: achievement, power, affiliation Hackman and Oldham (1980)

Three critical psychological states: meaningfulness of work, responsibility for outcomes, knowledge of results

Lawrence and Nohria (2002)

Four drives: D1 (acquire objects and experiences that improve our status relative to others); D2 (bond with others in mutually beneficial, long-term relationships); D3 (learn about and make sense of ourselves and the world around us); D4 (defend ourselves, our loved ones, our beliefs, and our resources)

Pink (2009) Three drives: autonomy (people want to have control over their work); mastery (people want to get better at what they do); purpose (people want to be part of something bigger than themselves)

Maslow’s Hierarchy of Needs One of the oldest and most influential of the models in Exhibit 6.1 was developed by the existential psychologist Abraham Maslow (1954). He started with the notion that people are motivated by a variety of wants, some more fundamental than others. The desire for food dominates the lives of the chronically hungry, but people move on to other things when they have enough to eat. Maslow grouped human needs into five basic categories, arrayed in a hierarchy from lowest to highest (Exhibit 6.2).

Exhibit 6.2. Maslow’s Hierarchy of Needs. Source: Conley, 2007. Copyright © 1979. Reprinted by permission of Pearson Education, Inc., New York, New York. In Maslow’s view, basic needs for physical well-being and safety are “prepotent”; they have to be satisfied first. Once lower needs are fulfilled, individuals move up to social needs (for belongingness, love, and inclusion) and ego needs (for esteem, respect, and recognition). At the top of the hierarchy is self-actualization—developing to one’s fullest and actualizing one’s ultimate potential. The order is not ironclad. Parents may sacrifice themselves for their children, and martyrs sometimes give their lives for a cause. Maslow believed that such reversals occur when lower needs are so well satisfied early in life that they recede into the background later on. Attempts to validate Maslow’s theory have produced mixed results, partly because the theory is hard to test (Alderfer, 1972; Latham and Pinder, 2005; Lawler and Shuttle, 1973; Schneider and Alderfer, 1973; Wahba and Bridwell, 1976). Some research suggests that the theory is valid across cultures (Ajila, 1997; Rao and Kulkarni, 1998), but the many theories of motivation developed since Maslow attest that the jury is still out on whether people have the needs Maslow posited or that the satisfaction of one need leads to activation of another. Despite the modest evidence, Maslow’s view has been widely accepted and enormously influential in managerial practice. Take, for example, the advice that the Manager’s Guide at Federal Express offers employees: “Modern behavioral scientists such as Abraham Maslow…have shown that virtually every person has a hierarchy of emotional needs, from basic safety, shelter, and sustenance to the desire for respect, satisfaction, and a sense of

accomplishment. Slowly these values have appeared as the centerpiece of progressive company policies, always with remarkable results” (Waterman, 1994, p. 92). Chip Conley, founder of a California hotel chain, put it simply: “I came to realize my climb to the top wasn’t going to be on a traditional corporate ladder; instead it was going to be on Maslow’s Hierarchy of Needs pyramid” (Conley, 2007). Academic skepticism didn’t prevent him, FedEx, Joie de Vivre hotels, or Airbnb from building a highly successful management philosophy based on Maslow’s theory, because the ideas carry a powerful message. If you manage solely by carrot and stick, you’ll get only a part of the energy and talent that people have to offer.

Theory X and Theory Y Douglas McGregor (1960) built on Maslow’s theory by adding another important idea: that managers’ assumptions about people tend to become self-fulfilling prophecies. McGregor argued that most managers harbor “Theory X” assumptions that subordinates are passive and lazy, have little ambition, prefer to be led, and resist change. Most conventional management practices, in his view, had been built on either “hard” or “soft” versions of Theory X. The hard version emphasizes coercion, tight controls, threats, and punishments. Over time, it generates low productivity, antagonism, militant unions, and subtle sabotage—conditions that were turning up in workplaces across the United States at the time. Soft versions of Theory X try to avoid conflict and keep everyone happy. The usual result is superficial harmony with undercurrents of apathy, indifference, and smoldering resentment. Power Of Re framing Organization Discussion Paper.

McGregor’s key point was that a hard or soft Theory X approach is self-fulfilling: If you treat people as if they’re lazy and need to be directed, they live down to your expectations. Managers who say they know from experience that Theory X is the only way to get anything done are missing a key insight: The fact that people respond to you in a certain way may say more about you than about them. McGregor advocated a different way to think about people that he called Theory Y. Maslow’s hierarchy of needs was the foundation: The man whose needs for safety, association, independence, or status are thwarted is sick as surely as the man who has rickets. And his sickness will have behavioral consequences. We will be mistaken if we attribute his resultant passivity, hostility, and refusal to accept responsibility to his inherent human nature. These forms of behavior are symptoms of illness—of deprivation of his social and egoistic needs (McGregor, 1960, pp. 35–36). Theory Y’s key proposition is that “the essential task of management is to arrange conditions so that people can achieve their own goals best by directing efforts toward organizational rewards” (McGregor, 1960, p. 61). If individuals find no satisfaction in their work, management has little choice but to rely on Theory X and external control. Conversely, the more managers align organizational requirements with employee self- interest, the more they can rely on Theory Y’s principle of self-direction.

Personality and Organization Like his contemporary McGregor, Chris Argyris (1957, 1964) saw a basic conflict between human personality and prevailing management practice. Argyris argued that people have

basic “self-actualization trends”—akin to the efforts of a plant to reach its biological potential. From infancy into adulthood, people advance from dependence to independence, from a narrow to a broader range of skills and interests. They move from a short time perspective (interests quickly developed and forgotten, with little ability to anticipate the future) to a much longer-term horizon. The child’s impulsivity and limited self-knowledge are replaced by a more mature level of self-awareness and self-control. Like McGregor, Argyris believed that organizations often treated workers like children rather than adults—a view eloquently expressed in Charlie Chaplin’s 1936 film Modern Times. In a classic scene, Chaplin’s character works furiously on an assembly line, trying to tighten bolts on every piece that slides past. Skill requirements are minimal, and he has no control over the pace of his work. An efficiency expert uses Chaplin as the guinea pig for a new machine designed to feed him lunch while he continues to tighten bolts. It goes haywire and begins to assault Chaplin with food—pouring soup on his lap and shoving bolts into his mouth. The film’s message is clear: Industrial organizations abuse workers and treat them like infants.

Argyris and McGregor saw person-structure conflict built into traditional principles of organizational design and management. The structural concept of task specialization defines jobs as narrowly as possible to improve efficiency. But the rational logic often backfires. Consider the experience of autoworker Ben Hamper. His observations mirror a story many other U.S. workers could tell: I was seven years old the first time I ever set foot inside an automobile factory. The occasion was Family Night at the old Fisher Body plant in Flint where my father worked the second shift. If nothing else, this annual peepshow lent a whole world of credence to our father’s daily grumble. The assembly line did indeed stink. The noise was very close to intolerable. The heat was one complete bastard. After a hundred wrong turns and dead ends, we found my old man down on the trim line. His job was to install windshields using this goofy apparatus with large suction cups that resembled an octopus being crucified. A car would nuzzle up to the old man’s work area and he would be waiting for it, a cigarette dangling from his lip, his arms wrapped around the windshield contraption as if it might suddenly rebel and bolt off for the ocean. Car, windshield. Car, windshield. Car, windshield. No wonder my father preferred playin’ hopscotch with barmaids (Hamper, 1992, pp. 1–2). Following in his father’s and grandfather’s footsteps, Ben Hamper became an autoworker—the pay was good, and he didn’t know anything else. He soon discovered a familiar pattern. His career began decades after Argyris and McGregor questioned the fallacies of traditional management, but little had changed. Hamper held down a variety of jobs, each as mindless as the next: “The one thing that was impossible to escape was the monotony. Every minute, every hour, every truck, and every movement was a plodding replica of the one that had gone before” (1992, p. 41).

The specialization Ben Hamper experienced in the auto plant calls for a clear chain of command to coordinate discrete jobs. Bosses direct and control subordinates, thus encouraging passivity and dependence. The conflict worsens at lower levels of the hierarchy—narrower, more mechanized jobs, more directives, and tighter controls. As

people mature, conflict intensifies. Leann Bies was 44 with a bachelor’s degree in business when she started work as a licensed electrician at a Ford truck plant in 2003, and “for two years they treated me as if I were dumber than a box of rocks. You get an attitude if you are treated that way” (Uchitelle, 2007, p. 10). Argyris argued that employees try to stay sane by looking for ways to escape these frustrations. He identified six options:

1. They withdraw—through chronic absenteeism or simply by quitting. Ben Hamper chronicled many examples of absenteeism and quitting, including a friend who lasted only a couple of months:

My pal Roy was beginning to unravel in a real rush. His enthusiasm about all the money we were makin’ had dissipated and he was having major difficulty coping with the drudgery of factory labor. His job, like mine, wasn’t difficult. It was just plain monotonous…

The day before he quit, he approached me with a box-cutter knife sticking out of his glove and requested that I give him a slice across the back of the hand. He felt sure this ploy would land him a few days off. Since slicing Roy didn’t seem like a solid career move, I refused. Roy went down the line to the other workers where he received a couple of charitable offers to cut his throat, but no dice on the hand. He wound up sulking back to his job. After that night, I never saw Roy again (1992, pp. 40, 43).

CHAPTER 7 IMPROVING HUMAN RESOURCE MANAGEMENT Far and away the best prize that life offers is the chance to work hard at work worth doing.

—Theodore Roosevelt Google, with more than 500 applicants for every job opening in recent years, is harder to get into than Harvard. In 2017 it was once again number one on Fortune’s list of the best places to work (Fortune, 2017). Its king-of-the-Internet image helps, but the search giant knows it takes more to hire and retain the brainy, high-energy geeks who keep the place going and growing. As one Googler put it, “The company culture truly makes workers feel they’re valued and respected as a human being, not as a cog in a machine. The perks are

phenomenal. From three prepared organic meals a day to unlimited snacks, artisan coffee and tea to free personal-fitness classes, health clinics, on-site oil changes, haircuts, spa truck, bike-repair truck, nap pods, free on-site laundry rooms, and subsidized wash and fold. The list is endless” (Fortune, 2016). Few go as far as Google, but a growing number of enlightened companies are finding their own ways to attract and develop human capital. They see talent and motivation as business essentials. That idea has taken a couple of centuries to gain traction, and many companies still don’t get it. They adhere to the old view that anything you give to employees siphons money from the bottom line—like having your pocket picked or your bank account drained.

A pioneer of a more progressive approach was a Welshman, Robert Owen, who ran into fierce opposition. Born in 1771, Owen became a wildly successful entrepreneur before the age of 30 by exploiting the day’s hot technology—textile mills. Owen was heavily attacked because he was the only capitalist of his time who believed it was bad for business to work eight-year-olds in 13-hour factory shifts. At his New Lanark (Scotland) knitting mill, bought in 1799, Owen took a new approach:

Owen provided clean, decent housing for his workers and their families in a community free of contagious disease, crime, and gin shops. He took young children out of the factory and enrolled them in a school he founded. There he provided preschool, day care, and a brand of progressive education that stresses learning as a pleasurable experience (along with the first adult night school). The entire business world was shocked when he prohibited corporal punishment in his factory and dumbfounded when he retrained his supervisors in humane disciplinary practices. While offering his workers an extremely high standard of living compared to other workers of the era, Owen was making a fortune at New Lanark. This conundrum drew twenty thousand visitors between 1815 and 1820 (O’Toole, 1995, pp. 201, 206).

Owen tried to convince fellow capitalists that investing in people could produce a greater return than investments in machinery. But the business world dismissed him as a wild radical whose ideas would harm the people he wanted to help (O’Toole, 1995).

Owen was at least 100 years ahead of his time. A century later, when Henry Ford announced in 1914 that he was going to shorten the workday to 8 hours and double the wages of his blue-collar workers from $2.50 to $5.00 per day, he also came under heavy fire from the business community. The Wall Street Journal opined that he was “committing economic blunders, if not crimes” (Harnish et al., 2012). The Journal got it wrong. Ford’s profits doubled over the next two years as productivity soared and employee turnover plunged. Ford later said the five dollars per day was the best cost-cutting move he ever made. Only in the late twentieth century did more business leaders begin to believe that investing in people is a way to make money. In recent years, periodic waves of restructuring and downsizing have raised age-old questions about the relationship between the individual and the organization. A number of persuasive reports suggest Owen was right: An excellent route to long-term success is investing in employees and responding to their needs (Applebaum et al., 2000; Barrick et al., 2015; Collins and Porras, 1994; Deal and Jenkins, 1994; Farkas and De Backer, 1996; Becker and Huselid, 1998; Lawler, 1996;

Levering and Moskowitz, 1993; Pfeffer, 1994, 1998, 2007; Schwartz and Porath, 2014; Waterman, 1994).

Changes in the business environment have made human resource management more critical than ever. “A skilled and motivated work force providing the speed and flexibility required by new market imperatives has increased the importance of human resource management issues at a time when traditional sources of competitive advantage (quality, technology, economies of scale, etc.) have become easier to imitate” (Becker and Huselid, 1998, p. 54). Yet many organizations still don’t believe it, and others only flirt with the idea:

Something very strange is occurring in organizational management. Over the past decade or so, numerous rigorous studies conducted both within specific industries and in samples across industries have demonstrated the enormous economic returns obtained through the execution of what are variously labeled as high involvement, high performance, or high commitment management practices…Power Of Re framing Organization Discussion Paper. But even as positive results pile up, trends in actual management practice are often moving exactly opposite to what the evidence advocates (Pfeffer, 1998, p. xv). Why would managers resist better ways of managing people? One reason is that Theory X managers fear losing control or indulging workers. A second is that investing in people requires time and persistence to yield a payoff. Faced with relentless pressure for immediate results, executives often conclude that slashing costs, changing strategy, or reorganizing is more likely to produce a quick hit. A third factor is the dominance of a “financial” perspective that sees the organization as simply a portfolio of financial assets (Pfeffer, 1998). In this view, human resources are subjective, soft, and suspect in comparison to hard financial numbers.

Getting it Right Despite such barriers, many organizations get it right. They understand the need to develop an approach to people that flows from the organization’s strategy and human capital needs (Barrick et al., 2015; Becker and Huselid, 1998). Their practices are not perfect but good enough. The organization benefits from a talented, motivated, loyal, and free-spirited workforce. Employees in turn are more productive, innovative, and willing to go out of their way to get the job done. They are less likely to make costly blunders or to jump ship when someone offers them a better deal. That’s a potent edge—in sports, business, or elsewhere. Every organization with productive people management has its own distinct approach, but most include variations on strategies summarized in Exhibit 7.1 and examined in depth in the remainder of the chapter. Exhibit 7.1. Basic Human Resource Strategies. Human Resource Principle Specific Practices Build and implement an HR strategy.

Develop and share a clear philosophy for managing people. Build systems and practices to implement the philosophy.

Hire the right people. Know what you want. Be selective.

Human Resource Principle Specific Practices Keep them. Reward well.

Protect jobs. Promote from within. Share the wealth.

Invest in them. Invest in learning. Create development opportunities.

Empower them. Provide information and support. Encourage autonomy and participation. Redesign work. Foster self-managing teams. Promote egalitarianism.

Promote diversity. Be explicit and consistent about the organization’s diversity philosophy. Hold managers accountable.

Develop and Implement an HR Philosophy “Systematic and interrelated human resource management practices” provide a sustainable competitive advantage. The key is a philosophy or credo that makes explicit an organization’s core beliefs about managing people (Becker and Huselid, 1998, p. 55). The credo then has to be translated into specific management practices. Most organizations lack a philosophy, or they ignore the one they claim to have. A philosophy provides direction; practices make it real.

Wegmans, a supermarket chain in the northeastern United States that consistently gets top marks for both customer satisfaction and employee well-being, has been on Fortune’s list of the 100 Best Companies to Work every year since 1998. It offers a succinct statement of “What We Believe:” At Wegmans, we believe that good people, working toward a common goal, can accomplish anything they set out to do. In this spirit, we set our goal to be the very best at serving the needs of our customers. Every action we take should be made with this in mind.

We also believe that we can achieve our goal only if we fulfill the needs of our own people (Wegmans, 2016).

Hire the Right People Strong companies know the kinds of people they want and hire those who fit the mold. Southwest Airlines became the most successful carrier in the U.S. airline industry by hiring people with positive attitudes and well-honed interpersonal skills, including a sense of humor (Farkas and De Backer, 1996; Labich, 1994; Levering and Moskowitz, 1993). In one case, interviewers asked a group of pilots applying for jobs at Southwest to change into Bermuda shorts for the interviews. Two declined. They weren’t hired (Freiberg and Freiberg, 1998).

Even though Hertz had a 40-year head start, Enterprise overtook them in the 1990s to become the biggest firm in the car rental business. Enterprise wooed its midmarket clientele by deliberately hiring “from the half of the class that makes the top half possible”—college graduates more successful in sports and socializing than the classroom. Recruiting for people skills more than “book smarts” helped Enterprise build exceptional levels of customer service (Pfeffer, 1998, p. 71). In contrast, Microsoft’s formidably bright CEO, Bill Gates, insisted on “intelligence or smartness over anything else, even, in many cases, experience” (Stross, 1996, p. 162). Google wants smarts, too, but believes teamwork is equally important—one reason that its hiring is team-based (Schmidt and Varian, 2005). The principle seems to apply globally, as illustrated by a study of successful midsized companies in Germany (Simon, 1996). Turnover was rare in these firms except among new hires: “Many new employees leave, or are terminated, shortly after joining the work force, both sides having learned that a worker does not fit into the firm’s culture and cannot stand its pace” (p. 199). Zappos tries to accelerate the process by offering new hires a cash bonus to quit after they complete the company’s orientation program. Few take the money and run, but Zappos wants to keep only people who love the company’s idiosyncratic culture.

Keep Employees To get people they want, companies like Google, Southwest Airlines, and Wegmans offer attractive pay and benefits. To keep them, they protect jobs, promote from within, and give people a piece of the action. They recognize the high cost of turnover—which for some jobs and industries can run well over 100 percent a year. Beyond the cost of hiring and training replacements, turnover hurts performance because newcomers’ lack of experience, skills, and local knowledge increases errors and reduces efficiency (Kacmar et al., 2006). This is true even at the CEO level. CEOs who move from one organization to another perform less well on average than those who are hired from inside (Elson and Ferrere, 2012). Reward Well In a cavernous, no-frills retail warehouse setting, where bulk sales determine stockholder profits, knowledgeable, dependable service usually isn’t part of the low-cost package. Don’t try to tell that to Costco Wholesale Corp., where employee longevity and high morale are as commonplace as overloaded shopping carts. “We like to turn over our inventory faster than our people,” says Jim Sinegal, Costco founder and CEO until he retired in 2012. Costco, a membership warehouse store headquartered in Washington State, by 2016 had become the world’s second largest retailer (after Walmart) with more than 700 stores across the United States and beyond. Costco has a counterintuitive success formula: Pay employees more and charge customers less than its biggest competitor, Sam’s Club (a Walmart subsidiary). A great way to lose money? Costco has been the industry’s most profitable firm in recent years. How? In Sinegal’s view, the answer is easy: “If you pay the best wages, you get the highest productivity. By our industry standards, we think we’ve got the best people and the best productivity when we do that.” Costco paid its employees about 70 percent more than Sam’s Club but generated twice as much profit per worker (Cascio, 2006). Compared with competitors, Costco achieved higher sales volumes, faster inventory turnover, lower

shrinkage, and higher customer satisfaction (RetailSails 2012; American Customer Satisfaction Index, 2016). Costco illustrates a general principle: Pay should reflect value added. Paying people more than they contribute is a losing proposition. But the reverse is also true: It makes sense to pay top dollar for exemplary contributions of skilled, motivated, and involved employees (Lawler, 1996). Power Of Re framing Organization Discussion Paper.

“This is the lesson Costco teaches,” says retailing guru Doug Stephens. “You don’t have to be Nordstrom selling $1,200 suits in order to pay people a living wage. That is what Walmart has lost sight of. A lot of people working at Walmart go home and live below the poverty line. You expect that person to come in and develop a rapport with customers who may be spending more than that person is making in a week? You expect them to be civil and happy about that?” (Stone, 2013). To get and keep good people, selective organizations also offer attractive benefits. Firms with “high-commitment” human resource practices are more likely to offer work and family benefits, such as daycare and flexible hours (Osterman, 1995). Take software powerhouse SAS: Just about every benefit known to corporate America—on-site child care, swimming pools, medical clinics, fitness centers, car detailings, nail salons, shoe repairs—are on offer at this software company based in Research Triangle Park, North Carolina. Said one employee: “I get massages, pick up prescriptions, get my hair done, take photography classes, get physical therapy. The list is endless.” But the employee quickly added: “It’s not just about the ‘what.’ It’s about the place itself. The campus is beautiful and quite tranquil. I can take a walk during lunch and find myself far away. I know it sounds corny, but I enjoy just driving into campus in the morning” (Fortune: SAS Institute, 2016).

Why spend that much? In an industry where turnover rates hover around 20 percent, SAS maintains a level below 4 percent, which results in about $50 million a year in HR-related savings, according to a Harvard Business School study. “The well-being of our company is linked to the well-being of our employees,” says SAS CEO Jim Goodnight (Stein, 2000, p. 133).

Protect Jobs Job security might seem anachronistic today, a relic of more leisurely, paternalistic times. In a turbulent, highly competitive world, is long-term commitment to employees possible? Yes, but it’s not easy. Companies (and even countries) historically offering long-term security have abandoned their commitment in the face of severe economic pressures. During the first year of the recession of 2008–2009, American businesses laid off close to 2.5 million workers (Bureau of Labor Statistics, 2012). In China, a government report counted more than 25 million layoffs from 1998 to 2001, many of them unskilled older workers (“China Says ‘No’ …,” 2002; Lingle, 2002; Smith, 2002). Many state-owned enterprises foundered when economic reforms forced them to sink or swim in a competitive market.

Yet many firms continue to honor job security as a cornerstone of their human resource philosophy. Publix, an employee-owned, Fortune 500 supermarket chain in the southeastern United States, has never had a layoff since its founding in 1930. Similarly,

Lincoln Electric, the world’s largest manufacturer of arc welding equipment, has honored since 1914 a policy that no employee with more than three years of service will be laid off. This commitment was tested when the company experienced a 40-percent year-to-year drop in demand for its products. To avoid layoffs, production workers became salespeople. They canvassed businesses rarely reached by the company’s regular distribution channels. “Not only did these people sell arc welding equipment in new places to new users, but since much of the profit of this equipment comes from the sale of replacement parts, Lincoln subsequently enjoyed greater market penetration and greater sales as a consequence” (Pfeffer, 1994, p. 47). Japan’s Mazda, facing similar circumstances, had a parallel experience: “At the end of the year, when awards were presented to the best salespeople, the company discovered that the top 10 were all former factory workers. They could explain the product effectively, and when business picked up, the fact that factory workers had experience talking to customers yielded useful ideas about product characteristics” (Pfeffer, 1994, p. 47). Promote from Within Costco promotes more than 80 percent of its managers from inside the company, and 90 percent of managers at FedEx started in a nonmanagerial job. Promoting from within offers several advantages (Pfeffer, 1998):

• It encourages both management and employees to invest time and resources in upgrading skills.

• It is a powerful performance incentive. • It fosters trust and loyalty.

• It capitalizes on knowledge and skills of veteran employees.

• It avoids errors by newcomers unfamiliar with the company’s history and proven ways.

• It increases the likelihood that employees will think for the longer term and avoid impetuous, shortsighted decisions. Highly successful corporations rarely hire a chief executive from the outside; less effective companies do so regularly (Collins and Porras, 1994).

Share the Wealth Employees often feel little responsibility for an organization’s performance because they expect gains in efficiency and profitability to benefit only executives and shareholders. People-oriented organizations have devised a variety of ways to align employee rewards more directly with business success. These include gain-sharing, profit-sharing, and employee stock ownership plans (ESOPs). Scanlon plans, first introduced in the 1930s, give workers an incentive to reduce costs and improve efficiency by offering them a share of gains. Profit-sharing plans at companies like Nucor give employees a bonus tied to overall profitability or to the performance of their local unit. Both gain-sharing and profit-sharing plans usually have a positive impact on performance and profitability, although some have worked better than others. Success depends on how

well these plans are integrated into a coherent human resource philosophy. Kanter (1989a) suggests that gain-sharing plans have spread slowly because they require broader changes in managing people: cross-unit teams, suggestion systems, and more open communication of financial information (Kanter, 1989a). Similar barriers have slowed the progress of ESOPs:

To be effective, ownership has to be combined with ground-floor efforts to involve employees in decisions through schemes such as work teams and quality-improvement groups. Many companies have been doing this, of course, including plenty without ESOPs. But employee-owners often begin to expect rights that other groups of shareholders have: a voice in broad corporate decisions, board seats, and voting rights. And that’s where the trouble can start, since few executives are comfortable with this level of power-sharing (Bernstein, 1996, p. 101). Nevertheless, there have been many successful ESOPs. Thousands of firms participate (Rosen, Case, and Staubus, 2005), and most of the plans have been successful (Blasi, Kruse, and Bernstein, 2003; Blair, Kruse, and Blasi, 2000; Kruse, Blasi, and Park, 2010). Employee ownership tends to be a durable arrangement and to make the company more stable—less likely to fail, be sold, or to lay off employees (Blair, Kruse, and Blasi, 2000). When first introduced, employee ownership tends to produce productivity gains that persist over time (Kruse, 1993). A plan’s success depends on effective implementation of three elements of the “equity model” (Rosen et al., 2005, p. 19):

• Employees must have a significant ownership share in the company.

• The organization needs to build an “ownership culture” (p. 34). • It is important that “employees both learn and drive the business disciplines that

help their company do well” (p. 38). All those characteristics can be found at Publix, America’s largest employee-owned business. Publix has become a fixture on Fortune’s list of most admired companies and its list of best places to work, while achieving the highest customer satisfaction ratings in its industry (American Customer Satisfaction Index, 2016).

Bonus and profit-sharing plans spread rapidly in the boom years of the 1990s. The benefits often went mostly to top managers, but many successful firms shared benefits more widely. Skeptics noted a significant downside risk to profit-sharing plans: They work when there are rewards but breed disappointment and anger if the company experiences a financial downturn. A famous example is United Airlines, whose employees took a 15-percent pay cut in return for 55-percent ownership of the company in 1994. Initially, it was a huge success. Employees were enthusiastic when the stock soared to almost $100 a share. But, like most airlines, United experienced a financial crunch after 9/11. Employees were crushed when bankruptcy left their shares worthless and their pensions underfunded. Power Of Re framing Organization Discussion Paper.

Invest in Employees Undertrained workers harm organizations in many ways: shoddy quality, poor service, higher costs, and costly mistakes. A high proportion of petrochemical industry accidents involve contract employees (Pfeffer, 1994), and in postinvasion Iraq some of America’s

more damaging mistakes were the work of private security contractors, who often had less training and discipline than their military counterparts. Many organizations are reluctant to invest in developing human capital. The costs of training are immediate and easy to measure; the benefits are long term and less certain. Training temporary or contract workers carries added disincentives. Yet many companies report a sizable return on their training investment. An internal study at Motorola, for instance, found a gain of $29 for every dollar invested in sales training (Waterman, 1994), and an analysis of the effects of training programs over the period 1960 to 2000 found consistently positive effects, “comparable to or larger than other organizational interventions designed to improve performance” (Pfeffer, 2007, p. 30).

Empower Employees Progressive organizations give power to employees as well as invest in their development. Empowerment includes keeping employees informed, but it doesn’t stop there. It also involves encouraging autonomy and participation, redesigning work, fostering teams, promoting egalitarianism, and infusing work with meaning. Provide Information and Support A key factor in Enron’s dizzying collapse was that few people fully understood its financial picture. Eight months before the crash, Fortune reporter Bethany McLean asked CEO Jeffrey Skilling, “How, exactly, does Enron make money?” Her March 2001 article in Fortune pointed out that the company’s financial reports were almost impenetrable and the stock price could implode if the company missed its earnings forecasts. Over the last few decades, a philosophy sometimes called “open-book management” has begun to take root in progressive companies. The movement was inspired by the near- death experience of an obscure plant in Missouri, Springfield Remanufacturing (now SRC Holdings). SRC was created in 1983 when a group of managers and employees purchased it from International Harvester for about $100,000 in cash and $9 million in debt. It was one of history’s most highly leveraged buyouts (Pfeffer, 1998; Stack and Burlingham, 1994). Less debt had strangled many companies, and CEO Jack Stack figured the business could make it only with everyone’s best efforts. He developed the open-book philosophy as a way to survive. The system was built around three basic principles (Case, 1995):

• All employees at every level should see and learn to understand financial and performance measures.

• Employees are encouraged to think like owners, doing whatever they can to improve the numbers.

• Everyone gets a piece of the action—a stake in the company’s financial success.

Open-book management works for several reasons. First, it sends a clear signal that management trusts people. Second, it creates a powerful incentive for employees to contribute. They can see the big picture—how their work affects the bottom line and how the bottom line affects them. Finally, it furnishes information they need to do a better job. If efficiency is dropping, scrap is increasing, or a certain product has stopped selling, employees can pinpoint the problem and correct it.

Open-book strategies have been applied mostly in relatively small companies, but they’ve also worked for Whole Foods, the natural foods supermarket chain, and Hilcorp, the largest privately owned U.S. business in the oil and gas industry. Whole Foods “collects and distributes information to an extent that would be unimaginable almost anywhere else. Sensitive figures on store sales, team sales, profit margins, even salaries, are available to every person in every location” (Fishman, 1996a). Hilcorp attained notoriety in December, 2015, when CEO Jeffrey Hildebrand came through on his promise to give every employee $

CHAPTER 8 INTERPERSONAL AND GROUP DYNAMICS Coming together is a beginning. Keeping together is progress. Working together is success.

—Henry Ford Anne Barreta Anne Barreta was excited but scared when she became the first woman and the first Hispanic American ever promoted to district marketing manager at the Hillcrest Corporation. She knew she could do the job, but she expected to be under a microscope. Her boss, Steve Carter, was very supportive. Others were less enthusiastic—like the coworker who smiled as he patted her on the shoulder and said, “Congratulations! I just wish I was an affirmative action candidate.” Anne was responsible for one of two districts in the same city. Her counterpart in the other district, Harry Reynolds, was 25 years older and had been with Hillcrest 20 years longer. Some said that the term “good old boy” could have been invented to describe Harry. Usually genial, he had a temper that flared quickly when someone got in his way. Power Of Re framing Organization Discussion Paper.Anne tried to maintain a positive and professional relationship but often found Harry to be condescending and arrogant. Things came to a head one afternoon as Anne, Harry, and their immediate subordinates were discussing marketing plans. Anne and Harry were disagreeing politely. Mark, one of Anne’s subordinates, tried to support her views, but Harry kept cutting him off. Anne saw Mark’s frustration building, but she was still surprised when he angrily told Harry, “If you’d listen to anyone besides yourself and think a little before you open your mouth, we’d make a lot more progress.” With barely controlled fury, Harry declared that “this meeting is adjourned” and stormed out. A day later, Harry phoned to demand that Anne fire Mark. Anne tried to reason with him, but Harry was adamant. Worried about the fallout, Anne talked to Steve, their mutual boss.

He agreed that firing Mark was too drastic but suggested a reprimand. Anne agreed and informed Harry. He again became angry and shouted, “If you want to get along in this company, you’d better fire that guy!” Anne calmly replied that Mark reported to her. Harry’s final words were, “You’ll regret this!” Three months later, Steve called Anne to a private meeting. “I just learned,” he said, “that someone’s been spreading a rumor that I promoted you because you and I are having an affair.” Anne was stunned by a jumble of feelings—confusion, rage, surprise, shame. She groped for words, but none came.

“It’s crazy, I know,” Steve continued. “But the company hired a private detective to check it out. Of course, they didn’t find anything. So they’re dropping it. But some of the damage is already done. I can’t prove it, but I’m pretty sure who’s behind it.”

“Harry?” Anne asked. “Who else?” Managers spend most of their time relating to other people—in conversations and meetings, in groups and committees, over coffee or lunch, on the phone, or on the net (Kanter, 1989b; Kotter, 1982; Mintzberg, 1973; Watson, 2000). The quality of their relationships figures prominently in how satisfied and how effective they are at work. But people bring patterns of behavior to the workplace that have roots in early life. These patterns do not change quickly or easily on the job. Thompson (1967) and others have argued that the socializing effects of family and society shape people to mesh with the workplace. Schools, for example, teach students to be punctual, complete assignments on time, and follow rules. But schools are not always fully successful, and future employees are shaped initially by family—a decentralized cottage industry that seldom produces raw materials exactly to corporate specifications. People can become imperfect cogs in the bureaucratic machinery. They form relationships to fit individual styles and preferences, often ignoring what the organization requires. They may work but never only on their official assignments. They also express personal and social needs that often diverge from formal rules and requirements. A project falters, for example, because no one likes the manager’s style. A committee bogs down because of interpersonal tensions that everyone notices but no one mentions. A school principal spends most days dealing with a handful of abrasive and vocal teachers who generate far more than their share of discipline problems and parent complaints. Protracted warfare arises because of personal friction between two department heads. This chapter begins by looking at basic sources of effective (or ineffective) interpersonal relations at work. We examine why individuals are often blind to self-defeating personal actions. We describe theories of interpersonal competence and emotional intelligence, explaining how they influence office relationships. We explore different ways of understanding individual style preferences. Finally, we discuss key human-resource issues in the functioning of groups and teams: informal roles, norms, conflict, and leadership.

Greatest Hits from Organization Studies

Hit Number 6: M. S. Granovetter, “Economic Action and Social Structure: The Problem of Social Embeddedness.” American Journal of Sociology, 1985, 91(3), 481–510 The central question in Granovetter’s influential article is a very broad one: “How behavior and institutions are affected by social relations.” Much of his approach is captured in a quip from James Duesenberry that “economics is all about how people make choices; sociology is all about how they don’t have any choices to make” (1960, p. 233). Classical economic perspectives, Granovetter argues, assume that economic actors are atomized individuals whose decisions are little affected by their relationships with others. “In classical and neoclassical economics, therefore, the fact that actors may have social relations with one another has been treated, if at all, as a frictional drag that impedes competitive markets” (Granovetter, 1985, p. 484). Conversely, Granovetter maintains that sociological models are often “oversocialized” because they depict “processes in which actors acquire customs, habits, or norms that are followed mechanically and automatically, irrespective of their bearing on rational choice” (p. 485). The truth, in Granovetter’s view, lies between these two extremes: “Actors do not behave or decide as atoms outside a social context, nor do they adhere slavishly to a script written for them by the particular intersection of social categories that they happen to occupy. Their attempts at purposive action are instead embedded in concrete, ongoing systems of social relations” (p. 487). Granovetter’s argument may sound familiar, since it aligns with a central theme in our book: Actors make choices, but their choices are inevitably shaped by social context. To illustrate his argument, Granovetter critiques another influential perspective: Oliver Williamson’s analysis of why some decisions get made in organizational hierarchies and others are made in markets (Williamson, 1975, number 12 on our list of scholars’ hits). Williamson proposed that repetitive decisions involving high uncertainty were more likely to be made in hierarchies because organizations had advantages of information and control—people knew and had leverage over one another. Granovetter counters that Williamson underestimates the power of relationships in cross-firm transaction and overemphasizes the advantages of hierarchy. A central point in Granovetter’s argument is that relationships often trump structure: “The empirical evidence that I cite shows … that even with complex transactions, a high level of order can often be found in the market— that is, across firm boundaries—and a correspondingly high level of disorder within the firm. Whether these occur, instead of what Williamson expects, depends on the nature of personal relations and networks of relations between and within firms” (p. 502).

Interpersonal Dynamics In organizations, as elsewhere in life, many of the greatest highs and lows stem from relations with other people. Three recurrent questions about relationships regularly haunt managers:

• What is really happening in this relationship? • What motives are behind other peoples’ behavior? Power Of Re framing Organization Discussion Paper.

• What can I do about it?

All were key questions for Anne Barreta. What was happening between her and Harry Reynolds? Did he really start the rumor? If so, why? How should she deal with someone who seemed so difficult and devious? Should she talk to him? What options did she have? To some observers, what’s happening might seem obvious: Harry resents a young minority woman who has become his peer. He becomes even more bitter when she rejects his demand to fire Mark and then seeks revenge through a sneak attack. The case resembles many others in which men dominate or victimize women. What should Anne, or any woman in similar circumstances, do? Confront the larger issues? That might help in the long run, but a woman who initiates confrontation risks being branded a troublemaker (Collinson and Collinson, 1989). Should Anne try to sabotage Harry before he gets her? If she does, will she kindle a mêlée in which everyone loses? Human resource theorists maintain that constructive personal responses are possible even in highly politicized situations. Argyris (1962), for example, emphasizes the importance of “interpersonal competence” as a basic managerial skill. He shows that managers’ effectiveness is often impaired because they overcontrol, ignore feelings, and are blind to their impact on others.

Argyris and Schön’s Theories for Action Argyris and Schön (1974, 1996) carry the issue of interpersonal effectiveness a step further. They argue that individual behavior is controlled by personal theories for action— assumptions that inform and guide behavior. Argyris and Schön distinguish two kinds of theory. Espoused theories are accounts individuals provide whenever they try to describe, explain, or predict their behavior. Theories-in-use guide what people actually do. A theory- in-use is an implicit program or set of rules that specifies how to behave. Argyris and Schön discovered significant discrepancies between espoused theories and theories-in-use, which means that people aren’t doing what they think they are. Managers typically see themselves as more rational, open, concerned for others, and democratic than others see them. Such blindness is persistent because people learn little from their experience. A major block to learning is a self-protective model of interpersonal behavior that Argyris and Schön refer to as Model I (see Exhibit 8.1). Exhibit 8.1. Model I Theory-in-Use. Core Values (Governing Variables)

Action Strategies Consequences for Behavioral World

Consequences for Learning

Define and achieve your goals.

Design and manage the environment unilaterally.

You will be seen as defensive, inconsistent, fearful, selfish.

Self-sealing (so you won’t know about negative consequences of your actions).

Maximize winning, minimize losing.

Own and control whatever is relevant to your interests.

You create defensiveness in interpersonal relationships.

Single-loop learning (you don’t question your core values and assumptions).

Core Values (Governing Variables)

Action Strategies Consequences for Behavioral World

Consequences for Learning

Minimize generating or expressing negative feelings.

Unilaterally protect yourself (from criticism, discomfort, vulnerability, and so on).

You reinforce defensive norms (mistrust, risk avoidance, conformity, rivalry, and so on).

You test your assumptions and beliefs privately, not publicly.

Be rational. Unilaterally protect others from being upset or hurt (censor bad news, hold private meetings, and so on).

Key issues become undiscussable.

Unconscious collusion to protect yourself and others from learning.

Source: Adapted from Argyris and Schön (1996), p. 93.

Model I Lurking in Model I is the core assumption that an organization is a dangerous place where you have to look out for yourself or someone else may do you in. This assumption leads individuals to follow a predictable set of steps in their attempts to influence others. We can see the progression in the exchanges between Harry and Anne:

1. Assume that the problem is caused by the other side. Harry seems to think that Mark and Anne cause his problems; Mark is insulting, and Anne protects him. Anne, for her part, blames Harry for being biased, unreasonable, and devious. Both are employing a basic assumption at the core of Model I: “I’m okay, you’re not.” So long as problems are someone else’s fault, the other, not you, needs to change.

2. Develop a private, unilateral diagnosis and solution. Harry defines the problem and tells Anne how to solve it: fire Mark. When she declines, he apparently develops another, sneakier strategy: covertly undermine Anne.

3. Since the other person is the cause of the problem, get that person to change. Use one or more of three basic strategies: (1) facts, logic, and rational persuasion (tell others why you’re right); (2) indirect influence (ease in, ask leading questions, manipulate the other person); or (3) direct critique (tell the other person directly what they are doing wrong and how they should change). Harry starts out logically, moves quickly to direct critique, and, if Steve’s diagnosis is correct, finally resorts to subterfuge and sabotage.

4. If the other person resists or becomes defensive, that confirms that the other person is at fault. Anne’s refusal to fire Mark presumably verifies Harry’s perception of her as an ineffective troublemaker. Harry confirms Anne’s perception that he’s unreasonable by stubbornly insisting that firing is the only sufficient punishment for Mark.

5. Respond to resistance through some combination of intensifying pressure and protecting or rejecting the other person. When Anne resists, Harry intensifies the pressure. Anne tries to soothe him without firing Mark. Harry apparently concludes that Anne is impossible to deal with and that the best tactic is sabotage. He may

even believe his rumor is true because, in his mind, it’s the best explanation of why Anne got promoted.

6. If your efforts are less successful than hoped, it is the other person’s fault. You need feel no personal responsibility. Harry does not succeed in getting rid of Mark or Anne. He stains Anne’s reputation but damages his own in the process. Everyone is hurt. But Harry is unlikely to see the error of his ways. The incident may confirm to Harry’s colleagues that he is temperamental and devious. Such perceptions will probably block Harry’s promotion to a more senior position. But Harry may persist in believing that he is right and Anne is wrong, because no one wants to confront someone as defensive and cranky as Harry.

The result of Model I assumptions is minimal learning, strained relationships, and deterioration in decision making. Organizations that rely too much on this model are rarely happy places to work. Model II How else can a situation like Anne’s be handled? Argyris and Schön’s Model II offers basic guidelines:

1. Emphasize common goals and mutual influence. Even in a situation as difficult as Anne’s, developing shared goals is possible. Deep down, Anne and Harry both want to be successful. Neither benefits from mutual destruction. At times, each needs help and might learn and profit from the other. To emphasize common goals, Anne might ask Harry, “Do we really want an ongoing no-win battle? Wouldn’t we both be better off if we worked together to develop a better outcome?”

2. Communicate openly; publicly test assumptions and beliefs. Model II suggests that Anne talk directly to Harry and test her assumptions. She believes Harry deliberately started the rumor, but she is not certain. She suspects Harry will lie if she confronts him, another untested assumption. Anne might say, for example, “Harry, someone started a rumor about me and Steve. Do you know anything about how that story might have been started?” The question might seem dangerous or naive, but Model II suggests that Anne has little to lose and much to gain. Even if she does not get the truth, she lets Harry know she is aware of his game and is not afraid to call him on it.

3. Combine advocacy with inquiry. Advocacy includes statements that communicate what an individual actually thinks, knows, wants, or feels. Inquiry seeks to learn what others think, know, want, or feel. Exhibit 8.2 presents a simple model of the relationship between advocacy and inquiry.

Exhibit 8.2. Advocacy and Inquiry. Model II emphasizes integration of advocacy and inquiry. It asks managers to express openly what they think and feel and to actively seek understanding of others’ thoughts and feelings. Harry’s demand that Anne fire Mark combines highadvocacy with low inquiry. He tells her what he wants while showing no interest in her point of view. Such behavior tends to be seen as assertive at best, dominating or arrogant at worst. Anne’s response is low in both advocacy and inquiry. In her discomfort, she tries to get out of the meeting without making concessions. Harry might see her as unresponsive, apathetic, or weak.

Model II counsels Anne to combine advocacy and inquiry in an open dialogue. She can tell Harry what she thinks and feels while testing her assumptions and trying to learn from him. This is difficult to learn and practice. Openness carries risks, and it is hard to be effective when you are ambivalent, uncomfortable, or frightened. It gets easier as you become more confident that you can handle others’ honest responses. Anne’s ability to confront Harry depends a lot on her self-confidence and interpersonal skills. Power Of Re framing Organization Discussion Paper.Beliefs can be self-fulfilling. If you tell yourself that it’s too dangerous to be open and that you do not know how to deal with difficult people, you will probably be right. But tell yourself the opposite, and you may also be right. The Perils of Self-Protection When managers feel vulnerable, they revert to self-defense. They skirt issues or attack others and escalate games of camouflage and deception (Argyris and Schön, 1978). Feeling inadequate, they try to hide their inadequacy. To avoid detection, they pile subterfuge on top of camouflage. This generates even more uncertainty and ambiguity and makes it difficult or impossible to detect errors. As a result, an organization often persists in following a course everyone privately thinks is a path to disaster. No one wants to be the one to speak the truth. Who wants to be the messenger bearing bad news?

The result is often catastrophe, because critical information never reaches decision makers. You might think it difficult to ignore a major gap between what we’re doing and what we think we’re doing, but it’s not, because we get so much help from others. You can see this happening in the following conversation between Susan, a cubicle-dwelling supervisor in an insurance company, and one of her subordinates, Dale. Dale has been complaining that he’s underpaid and overqualified for his mail clerk job. As he regularly reminds everyone, he is a college graduate. Susan has summoned Dale to offer him a new position as an underwriting trainee. What Susan is thinking: What Susan and Dale say: I wonder if his education makes him feel that society owes him a living without any relationship to his abilities or productivity.

Susan: We’re creating a new trainee position and want to offer it to you. The job will carry a salary increase, but let me tell you something about the job first. Dale: Okay. But the salary increase has to be substantial so I can improve my standard of living. I can’t afford a car. I can’t even afford to go out on a date. Susan: You’ll start as a trainee working with an experienced underwriter. It’s important work, because selecting the right risks is critical to our results. You’ll deal directly with our agents. How you handle them affects their willingness to place their business with us.

How can he be so opinionated when he doesn’t know anything about underwriting? How’s he going to come across to the people he’ll have to work with? The job requires judgment and willingness to listen.

Dale: I’m highly educated. I can do anything I set my mind to. I could do the job of a supervisor right now. I don’t see how risk selection is that difficult. Susan: Dale, we believe you’re highly intelligent. You’ll find you can learn many new skills working with an experienced underwriter. I’m sure many of the things you know today came from talented professors and teachers. Remember, one of the key elements in this job is your willingness to work closely with other people and to listen to their opinions.

That’s the first positive response I’ve heard.

Dale: I’m looking for something that will move me ahead. I’d like to move into the new job as soon as possible. Susan: Our thought is to move you into this position immediately. We’ll outline a training schedule for you. On-the-job and classroom, with testing at the end of each week.

We owe him a chance, but I doubt he’ll succeed. He’s got some basic problems.

Dale: Testing is no problem. I think you’ll find I score extremely high in anything I do.

Dale is puzzled that no one seems to appreciate his talents. He has no clue that his actions continually backfire. He tries to impress Susan, but almost everything he says confirms his shortcomings and makes things worse. His constant self-promotion reinforces his public persona: opinionated, defensive, and a candidate for failure. But Dale doesn’t know this because Susan doesn’t tell him. At the moment that Susan is worrying that Dale will offend colleagues by not listening to them, she tells him, “We think you’re intelligent.” Susan has good reason to doubt Dale’s ability to listen: He doesn’t seem to hear her very well. If he can’t listen to his boss, what’s the chance he’ll hear anyone else? But Susan ends the meeting still planning to move Dale into a new position in which she expects that he’ll fail. She colludes in the likely disaster by skirting the topic of Dale’s self-defeating behavior. In protecting herself and Dale from a potentially uncomfortable encounter, Susan helps to ensure that no one learns anything. There’s nothing unusual about the encounter between Susan and Dale—similar things happen every day in workplaces around the world. The Dales of the world dig themselves into deep holes. The Susans help them to remain oblivious as they dig. Argyris calls it “skilled incompetence”—using well-practiced skills to produce the opposite of what you intend. Dale wants Susan to recognize his talents. Instead, he strengthens her belief that he’s arrogant and naive. Susan would like Dale to recognize his limitations but unintentionally reassures him that he’s fine as he is.

Salovey and Mayer’s Emotional Intelligence The capacity that Argyris (1962) labeled interpersonal competence harked back to Thorndike’s definition of social intelligence as “the ability to understand and manage men and women, boys and girls—to act wisely in human relations” (1920, p. 228). Salovey and Mayer (1990) updated Thorndike by coining the term emotional intelligence as a label for skills that include awareness of self and others and the ability to handle emotions and relationships. Salovey and Mayer discovered that individuals who scored relatively high in the ability to perceive accurately, understand, and appraise others’ emotions could respond more flexibly to changes in their social environments and were better able to build supportive social networks (Cherniss, 2000; Salovey et al., 1999). In the early 1990s, Daniel Goleman popularized Salovey and Mayer’s work in his best-selling book Emotional Intelligence. Interpersonal skills and emotional intelligence are vital, because personal relationships are a central element of daily life. Many improvement efforts fail not because managers’ intentions are incorrect or insincere but because they are unable to handle the social challenges of change. Take the case of a manufacturing organization that proudly announced its “Put Quality First” program. A young manager was assigned to chair a quality team where she worked. Excited about an opportunity to demonstrate leadership, she and her team began eagerly. But her plant manager dropped in and out of team meetings, staying long enough to dismiss any new ideas as impractical or unworkable. The team’s enthusiasm quickly faded. The plant manager hoped to demonstrate accessibility and “management by walking around.” No one had the courage to tell him he was killing the initiative. Management Best Sellers Daniel Goleman, Emotional Intelligence (New York: Bantam, 1995)

Daniel Goleman didn’t invent the idea of emotional intelligence but he made it famous. His best-selling Emotional Intelligence focused more on children and education than on work, but it was still a hit with the business community. It was followed by articles in the Harvard Business Review and a small industry producing books, exercises, and training programs aimed at helping people improve their emotional intelligence (EI). Goleman’s basic argument is that EI, rather than intellectual abilities (or intelligence quotient, IQ), accounts for most of the variance in effectiveness among managers, particularly at the senior level. In a sequel, Primal Leadership, Goleman, Boyatzis, and McKee (2002) define four dimensions of emotional intelligence. Two are internal (self-awareness and self- management), and two are external (social awareness and relationship management). Self- awareness includes awareness of one’s feelings and one’s impact on others. Self- management includes a number of positive psychological characteristics, among them emotional self-control, authenticity, adaptability, drive for achievement, initiative, and optimism. Social awareness includes empathy (attunement to the thoughts and feelings of others), organizational awareness (sensitivity to the importance of relationships and networks), and commitment to service. The fourth characteristic, relationship management, includes inspiration, influence, developing others, catalyzing change, managing conflict, and teamwork. Critics have two main complaints about Goleman’s work: They say there’s nothing new, just an updating of old ideas and common sense, and they maintain that Goleman is better at explaining why EI is important than at suggesting practical ideas for enhancing it. It is true that Goleman borrowed the EI label from Salovey and Mayer, and the idea of multiple forms of intelligence was developed earlier by Howard Gardner (1993) at Harvard and Robert J. Sternberg (1985) at Yale. The dimensions of EI in Primal Leadership (inspiration, teamwork, and so forth) could have been culled from the leadership literature of recent decades. But even if Goleman is offering old wine in new bottles, his work has found a large and receptive audience because of the way he has packaged and framed the issue. He has offered a way to think about the relative importance of intellectual and social skills, arguing that managers with high IQ but low EI are a danger to themselves and others. A growing body of research supports this proposition (Druskat, Sala and Mount, 2005).

CHAPTER 17 REFRAMING LEADERSHIP A leader is a dealer in hope.

—Napoléon Bonaparte The pitched battle between Hillary Clinton and Donald Trump for the U.S. presidency in 2016 sent shockwaves around the world and was unprecedented in many ways. Clinton was the first woman nominated to run for president by a major party, while Trump was the first major candidate who had no previous political or military experience. Few, if any, could remember an election where both candidates were so widely disliked, nor one where one of the candidates, Trump, spent so much time battling leaders of his own party. Historians will no doubt spend years trying to sort this out, but a look through

the four frames reveals important lessons for leadership. Structure, people, politics, and symbols all contributed to the outcome.

Structure Two key structural issues were the process for nominating candidates and the Electoral College system for choosing the winner. In U.S. presidential elections, a party’s nominee emerges over several months from a state-by-state process of caucuses and primary elections that select delegates to each party’s national convention. The two major parties had different rules. On the Republican side, it was winner-take-all in many states, and a candidate could garner all of a state’s delegates with less than half the votes. Power Of Re framing Organization Discussion Paper.Running in a multicandidate field, Trump racked up a majority of all Republican delegates with less than 40 percent of the total votes. The race ended early but produced an unconventional candidate opposed by many grassroots Republicans and much of the party’s leadership. Meanwhile, the Democratic race dragged on longer because the party awarded delegates on a proportional basis. Over the primary season, Clinton got a majority of the votes but had trouble pulling away from her major opponent, Bernie Sanders. Even when she won a state, she often got only a slightly larger share of the delegates. The Electoral College, a quaint eighteenth century compromise enshrined in the U.S. Constitution,1 gives each state a number of electors equivalent to its representation in Congress. Beginning in the 1990s, America became sharply divided between red (Republican) and blue (Democratic) states. In the 2016 election, most of the 50 states and the District of Columbia were sure to vote either red or blue, leaving only a few states that were real battlegrounds and three that were critical. Trump was almost sure to win if, but only if, he carried Florida, Ohio, and Pennsylvania.

Human Needs Turning to the human resource frame, we can ask about the concerns and attitudes that were motivating American voters. It was a year of surprises as both sides of the political spectrum saw major shifts in the electorate toward greater anger and dissatisfaction with the status quo. Many voters wanted wholesale change because they believed Washington was broken. On the Democratic side, almost everyone expected that Clinton, who had narrowly lost the nomination to Barack Obama eight years earlier, had an easy path to the nomination. But Bernie Sanders, a relatively obscure senator from Vermont, mounted a ferocious challenge from the left on a platform of economic justice, universal health care, and free college tuition. Liberals and young voters flocked to him. Caught off guard, Clinton struggled to adjust her positions to catch up with a leftward drift among Democratic primary voters. She ultimately prevailed but emerged weaker than expected amid concerns that many Sanders voters might never support her. Meanwhile, the surprises were even greater on the Republican side. When Donald Trump first announced that he was running for the nomination, almost everyone saw it as a publicity stunt that would quickly flame out. How could a brash real estate developer and television personality with no government experience and a crazy idea about building a wall along the U.S./Mexican border get anything more than a fringe vote? But Trump tapped into a huge reservoir of disenchantment among voters who felt that they were being left behind and that the America they knew was being undermined by globalization,

immigrants, bureaucrats, and condescending coastal elites. Trump gave voice to their feelings. His promise to deport immigrants, bring jobs back, and make America great again resonated powerfully, and he overwhelmed the large field of more traditional Republicans running against him.

The human resource frame also underscores the importance of the personal characteristics of the two candidates. Clinton and Trump had a few things in common. Long before the election, both were household names and both had very high unfavorable ratings. The two were also the oldest pair of candidates in U.S. history; Trump would be 70 on Election Day, and Clinton would be 69. But they had very different personas. Trump was hot where Clinton was cool, flamboyant where she was restrained, shoot-from-the-hip where she was disciplined, and outrageous where she was cautious. To almost every issue, Trump offered dramatic but vague promises, while Clinton delineated specific policies and plans. Voters who liked one rarely liked the other. Many disliked both and lamented that they were forced to choose the lesser of two evils. The candidates also had contrasting leadership styles. Trump was an entertainer, a business magnate, and perhaps the least-disciplined presidential candidate in American history. He was notorious for over-the-top 3 AM Twitter storms attacking his various enemies. He was a relentless warrior who mostly embodied the political and symbolic frames, both central to effective leadership. Clinton was a cool-headed policy wonk— strong on details but weaker on assembling them into a compelling vision. She was more attuned to the structural and human resource frames. Her picture of the future was clearer on the details but fuzzier in terms of the big picture. Voters knew that Trump promised to “Make America great again,” but were less clear about Clinton’s core message.

Changing Coalitions The political frame points to the importance of coalitions and scarce resources, and the 2016 election occurred in the context of a deeply polarized nation and a changing electorate. Beginning in the 1960s, the Republicans had evolved from the party of the industrial north to a coalition of economic conservatives (including much of the business elite) and white social conservatives (particularly in the south and the Plains states). The party appealed to the first group with support for low taxes, free markets, and free trade and kept the second group happy by opposing abortion, gay marriage, and government programs many whites saw as mostly benefitting persons of color. The Democratic coalition, meanwhile, underwent its own evolution in the late twentieth and early twenty-first centuries. Members of the white working class, particularly religious and social conservatives, drifted toward the Republicans, but a new Democratic coalition emerged that brought together groups heavily concentrated in and around major cities— the poor, minorities, and upscale progressives. The differences between Clinton and Trump backers in the 2016 campaign reflected the evolution in both parties. Democrats increased their share of college-educated voters, and Clinton won among women and people of color. But Trump won among whites, particularly white men without college degrees. Tellingly, 81 percent of Trump supporters, but only 19 percent of Clinton’s said that life for people like them was worse now than 50 years earlier (Smith, 2016).

Culture and Narrative The symbolic frame underscores the importance of culture and narrative in understanding the election. A critical cultural shift in the U.S. electorate was the gradual decline of non- Hispanic whites as a percentage of the population. People of color had become a majority in four states (California, Hawaii, New Mexico, and Texas) and were gaining in many others. This worked both for and against Trump: demographics were shifting toward the Democrats, but that shift triggered powerful levels of distress and anger among many whites. The specter of terrorism, beginning with 9/11 and continuing with the rise of ISIS, exacerbated voters’ suspicions toward immigrants in general and Muslims in particular. Trump supporters were not poorer than Clinton voters, but they had the lowest opinions of Muslims and were most likely to favor mass deportation of undocumented immigrants (Matthews, 2016).

What followed was one of the bitterest, most divisive presidential campaigns in U.S. history. Many Trump supporters saw Clinton as a corrupt, lying criminal who would confiscate their guns, open the door to terrorists, and destroy everything good in America if she became president. They cheered when Trump said that she would be in jail if he became president and nodded assent when he told them that “this election is our last chance to save our country.” Many Clinton supporters found the prospect of a Trump presidency genuinely terrifying. They saw him as a homegrown version of Adolf Hitler—an authoritarian, narcissistic, racist misogynist.

In the end, Clinton got some 2.8 million more votes, but Trump won the presidency. He took the battleground states he had to get (Florida, Ohio, and Pennsylvania) and picked up narrow victories in two blue states in the upper Midwest, Michigan, and Wisconsin.

Leadership Lessons from the 2016 Election In the tale of the 2016 election we can find many of the lessons for leadership that form the backbone of this chapter. Structure matters but is not always sufficient for leadership success. Clinton won on campaign infrastructure, but that was not enough to win the presidency. During the primaries, both candidates had to appeal to the partisan zealots who form the party’s base, but Trump defied the conventional wisdom that a candidate needs to move to the center in a general election to pick up independents and undecideds. He thrived on huge rallies where his passionate supporters devoured his message and showered him with approval. That passion turned out to be critical.

Symbolically, elections are always about shaping the narrative in order to control how voters perceive you and your opponent. Trump framed himself as the only leader strong enough to save America from terminal decline. In his story, the United States had become a weak, borderless nation that was failing on almost every front, and he knew how to “Make America great again.” That catchphrase crystallized his message and rallied his supporters. Clinton, better on policy specifics than grand narrative, struggled to communicate an equally focused and compelling message. Her catchphrases included “I’m with her,” “Stronger together,” “America is already great,” and “Love trumps hate.” They added up to a fuzzy rationale for her candidacy. In a change election, Trump offered a clearer message of making things better.

Both campaigns’ efforts to develop a positive image for their candidate were sometimes overshadowed by efforts to persuade the public that their opponents were terrible leaders and vile human beings. Trump consistently referred to Clinton as “crooked Hillary” and labeled her the worst candidate for president in American history. That narrative drew support from an FBI investigation into Clinton’s use of a personal e-mail server while she was Secretary of State and from an ongoing drip-drip of e-mails hacked from her campaign by Russian operatives and distributed through Wikileaks. Clinton supporters believed that her momentum was seriously damaged when FBI director James Comey announced days before the election that new e-mails had been discovered that “might be pertinent” to the investigation. A week later, Comey said that it had been a false alarm, but Democrats believed the new announcement served only to keep the e-mails in the news. Although the Democrats got no help from the FBI or Wikileaks, they benefited from a continuing flow of new material from investigative reporters and from Trump himself to support their framing of him as a liar, misogynist, racist, and tax cheat who lacked the judgment and self-control to be trusted in the White House. Gender was a central issue for the first time in a U.S. presidential election. It both helped and hindered Clinton. She was a powerful symbol to millions who hoped to see the first woman president. But leadership has historically been associated with maleness, and research (that we examine later in this chapter) shows that women who seek high office often face discrimination and higher expectations than men. Both men and women are often uncomfortable with women who are powerful or who seem to want power.

In the end, much of the public believed the worst about both candidates—polls suggested that Clinton was viewed unfavorably by 57 percent of the public and Trump by 62 percent. Even many Trump supporters feared that he lacked the maturity and steadiness required in a president. But they saw him as the candidate who could bring change to Washington. That was enough to make him president.

We begin this chapter with a historical tour of theory and research on leadership, examining quantitative and qualitative strands that have run in parallel to one another. This will lead us into an exploration of the idea of leadership—what it is, what it is not, and what it can and cannot accomplish. We look at the differences between leadership and power and between leadership and management. We examine the intersection of leadership with gender and culture. Finally, we explore how each of the four frames generates its own image of leadership.

Leadership in Organizations: A Brief History In nearly every culture, the earliest literature includes sagas of heroic figures who led their people to physical or spiritual victory over internal or external enemies. In Egypt and China, we find narratives about pharaohs and emperors and the rise and fall of dynasties that date back thousands of years. Ancient Chinese chronicles tell a cyclical story that begins when a dynamic leader leverages disorder and discontent and amasses sufficient force to found a new dynasty. For a time the new dynasty produces vigorous and far- sighted leaders who create a stable and prosperous state. But eventually corruption spreads, leadership falters, and the dynasty collapses in the face of a new challenger. Then

the cycle begins anew. This saga still has a powerful resonance in modern China because the Communist party leaders understand that their dynasty, like all that have come before, may someday lose the “mandate of heaven.” From ancient times to the late nineteenth century, the leadership literature consisted mostly of narratives about monarchs, generals, and political leaders. Then the rise of big business triggered an interest in the qualities of the giants who founded great enterprises, like Cornelius Vanderbilt, Andrew Carnegie, J. P. Morgan, and John D. Rockefeller. In the same era, social science began to separate from philosophy and emerge as a distinct academic field. Scholars like Harvard psychologist William James and the sociologists Herbert Spencer in England and Emile Durkheim in France began to lay the intellectual foundations for a science of society and human behavior based on systematic research. Out of this ferment emerged two distinct approaches to understanding leadership in organizations that have coexisted for more than a century, traveling more or less side by side, with only occasional nods to one another. One track, which we label quantitative- analytic, emphasizes testing hypotheses with quantitative data to develop leadership theory. The work is typically published as articles in scholarly journals (an overview of eras in the evolution of this strand appears in Exhibit 17.1). A second track, qualitative-holistic, relies on case studies and interviews with practitioners to develop ideas and theory about how leadership works in practice. Such work is often published in books aimed at an audience that includes both practitioners and scholars. We will survey quantitative and then qualitative work before trying to capture the current state of the field. Exhibit 17.1. A Short History of Quantitative-Analytic Leadership Research. Leadership Theory Examples Central Idea Current Status Trait theory: how are leaders different? Power Of Re framing Organization Discussion Paper.

Galton, 1869; Terman, 1904; Kirkpatrick and Locke, 1991; Zaccaro, 2007

Leaders possess distinctive personal characteristics (intelligence, self- confidence, integrity, extraversion, and so on).

Fell out of favor in the 1950s when reviewers found weak empirical support, but has returned to favor in recent decades.

Leadership style theory: how do leaders act?

Lewin, Lippitt, and White, 1939; Likert, 1961; Fleishman and Harris, 1962

Leadership depends on style (democratic vs. autocratic, task-oriented vs. people-oriented, etc.).

Mixed evidence stimulated move toward contingency theories, which often include leader style variables.

Contingency theory: how do circumstances affect leadership?

Fiedler, 1967; Lawrence and Lorsch, 1967; Evans, 1970; House, 1971, 1996

Effective leadership depends on the characteristics of followers and context: what works in one situation may not work in another.

No single contingency view has found consistent empirical support or wide acceptance, but most modern leadership research incorporates the idea that leadership

Leadership Theory Examples Central Idea Current Status depends on circumstances.

Leader-member exchange (LMX) theory: what happens in the leader-follower relationship?

Dansereau, Graen, and Haga, 1975; Graen and Uhl-Bien, 2008

Leadership is rooted in the quality of the relationships between leaders and individual followers.

Advocates of LMX theory have been actively conducting research since the 1970s; many LMX propositions have empirical support, but the approach is criticized for complexity and viewing leadership too narrowly.

Transformational leadership theory: how do leaders transform followers?

Burns, 1978; Bass, 1985; Conger and Kanungo, 1998

Transformational (or charismatic) leaders use inspiration, idealized influence, and the like to generate followers’ trust and willingness to go above and beyond.

Evidence suggests transformational leadership makes a difference, but more research is needed on when and how it works best.

Quantitative-Analytic Research Since the early twentieth century, quantitative research has moved through several eras, gradually evolving from simpler to more complex views of leadership. The initial research, flowing from the “great man” theory of leadership (Carlyle, 1841), focused on finding the distinctive traits that made leaders different from everyone else. Around 1950, multiple reviews (Stogdill, 1948; Gibb, 1947; Jenkins, 1947) concluded that there was little consistency in leadership traits across people and circumstances. That gave rise to two lines of research in the 1950s and subsequent decades: one on leadership style and another on situational contingencies. Style research focused particularly on the difference between task-oriented and people-oriented leaders. The results suggested that leaders who focused on people generated higher morale although not necessarily higher productivity, and that the most effective leaders were good at dealing with both tasks and people (Fleishman and Harris, 1962). Contingency theorists examined characteristics of situations that interacted with leader behavior. One influential line, for example, found that task-oriented leaders did best in situations that were either highly favorable or highly unfavorable for the leader, while people-oriented leaders did best in situations in the middle (Fiedler, 1964, 1967). Another contingency theory, Hersey and Blanchard’s situational leadership model (1969, 1977), had less research support (Hambleton and Gumpert, 1982; Graeff, 1983; Blank, Weitzel, and Green, 1990) but became more popular with practitioners because it is more intuitive and offers clearer practical guidance to practitioners. The model incorporates its own version of the distinction between task and people, using a two-by-two table to develop four different leadership styles (see Exhibit 17.2). Hersey and Blanchard argued

that each style was appropriate for a different level of subordinate “readiness,” which they defined in terms of how able and willing subordinates were to do the work. If subordinates are neither willing nor able, then the leader should tell them how to do the job. If they want to do the job but lack skill, then the leader should sell or coach to build capacity. When subordinates are able but unwilling or insecure, then the leader should use a participative style to build motivation. If they are both able and willing, the leader should delegate and get out of the way. Exhibit 17.2. Situational Leadership Model. High Relationship, Low Task: Participate Use when followers are “able” but “unwilling” or “insecure.”

High Relationship, High Task: Sell (or Coach) Use when followers are “unable” but “willing” or “motivated.”

Low Relationship, Low Task: Delegate Use when followers are “able” and “willing” or “motivated.”

Low Relationship, High Task: Tell Use when followers are “unable” and “unwilling” or “insecure.”

Hersey and Blanchard’s model continues to be popular for leadership training but has been criticized for lack of research support and for generating self-fulfilling prophesies. If, for example, managers give unwilling and unable subordinates high direction and low support, what would cause their motivation to improve? The manager of a computer design team told us ruefully, “I treated my group with a ‘telling’ management style and found that in fact they became both less able and less willing.” The 1970s spawned a new line of research: leader-member exchange theory (LMX). LMX research began with the insight that leaders create different relationships with different followers, and, in particular, they create in-groups and out-groups by interacting with some subordinates in a more personal way while focusing strictly on task with others (Dansereau, Graen, and Haga, 1975; Graen and Uhl-Bien, 2008). One practical implication from this research is that leaders can get better results by creating strong relationships with all, not just some, of their subordinates (Graen and Uhl-Bien, 2008, p. 225). A major new strand that emerged in the 1980s emphasized a distinction between transactional and transforming leadership (Burns, 1978). Transactional leadership involves practical, give-and-take exchanges, such as pay for performance. Transforming leaders, on the other hand, “champion and inspire followers…to rise above narrow interests and work together for transcending goals” (Burns, 2003, p. 26). Over the next two decades, research on transformational, or charismatic, leadership became a dominant research strand, producing a number of studies confirming that transformational leaders had a more powerful impact than those who relied only on transactional approaches (Shamir, House, and Arthur, 1993; Conger and Kanungo, 1998).

Qualitative-Holistic Leadership Studies The quantitative research tradition has both strengths and limits. Over more than a century, scholars have tested hypotheses, discarded ideas that don’t work, and gradually built theory that fits the data. But the work has often simplified the complexities of

leadership by treating only a few variables at a time and by treating leadership as equivalent to what happens between managers and their subordinates. Qualitative research on real-world practice has viewed leadership in more nuanced and holistic ways, often developing ideas decades before they make their way into quantitative studies. Mary Parker Follett (1896, 1918, 1941), for example, was well ahead of her time in exploring distributed leadership, charisma, and the importance of the human element. Many of the major themes in Follett’s work were extended by two of the most influential management thinkers of the early twentieth century: Elton Mayo and Chester Barnard. Mayo, often viewed as the founder of the “human relations” school of management, conducted the famous studies that gave rise to the “Hawthorn effect” and promoted the idea, viewed as radical at the time, that human and social factors mattered as much as technical and economic ones (Mayo, 1933). Chester Barnard, a telephone executive, was a practitioner rather than an academic, but he wrote one of the most influential management books of the midtwentieth century, The Functions of the Executive (Barnard, 1938). Barnard argued that the task of leadership is to balance technical and human factors to achieve cooperation among the many groups and individuals within an organization. Organizations rarely survive indefinitely, he noted, because it is so challenging to solve two central issues: achieving goals while satisfying the needs of those who do the work.

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The idea that leadership is about balancing or integrating concerns for task and people remained a central theme in qualitative work on leadership for the next several decades (examples include Argyris, 1962; Bennis, 1961; Likert, 1961; McGregor, 1960), but in later years researchers began to give greater attention to political and symbolic issues in the workplace (Dalton, 1959; Mintzberg, 1973; Kotter, 1985; Heifetz and Linsky, 2002). Interest in the symbolic dimension of leadership exploded in the 1980s when students of organization discovered something long known to anthropologists—organizations had cultures, and those cultures mattered (Deal and Kennedy, 1982; Peters and Waterman, 1982; Schein, 1992). Symbolic elements such as charisma, vision, and transformational leadership became dominant themes in discussions of leadership, although Collins and Porras (1994) and Collins (2001) led a kind of counterrevolution, arguing that charisma was overrated (Collins and Porras, 1994). Instead, they argued, leaders of successful companies were disciplined and determined but humble (attributing success to the team, not to themselves) and even self-effacing. Heifetz and Linsky (2002), focusing particularly on leadership in the public sector, took a similar position, arguing that the essence of leadership is not vision but mobilizing followers to work on solving hard problems.

Evolution of the Idea of Leadership Prior to the twentieth century, leadership was usually equated to high position, and the dominant theme in leadership studies was that leaders were born with special gifts that made them different from ordinary mortals. That view is dying, brought down by leadership research and by the complex challenges of leading in contemporary organizations. Our tour of more than 100 years of leadership history shows a gradual shift from a simpler view centered on the individual to a more complex view that takes account of individual, relationship, and context. Five propositions capture this evolution:

Leadership Is an Activity, Not a Position Leadership is distinct from authority and position, although authorities may be leaders. Weber (1947) and Barnard (1938) both linked authority to legitimacy. People consent and choose to obey authority only as long as they believe it is legitimate. Authority and leadership are both built on voluntary compliance. Leaders cannot lead without legitimacy, but many examples of authority fall outside the domain of leadership. As Gardner put it, “The meter maid has authority, but not necessarily leadership” (1989, p. 7).

Heifetz (1994) argues that authority often impedes leadership because in times of distress we expect those in authority to know and do more than they can and to solve our problems for us. This tempts leaders to overpromise and underdeliver, a recurring setup for failure and disappointment. After the 2016 election, many observers wondered how Donald Trump would be able to deliver on the many promises that he made during his election campaign. The management literature has often equated leadership to whatever managers do with their subordinates, but this defines leadership too narrowly. Leaders need skill in managing relationships with all significant stakeholders, including superiors, peers, and external constituents (Burns, 1978; Gardner, 1986; Kotter and Cohen, 2002; Heifetz and Linsky, 2002). Power Of Re framing Organization Discussion Paper.