Sea Change Calls For a New Social Contract

The previous blog entry, Sea Change Demands New Paradigms and Tools, briefly described the rationale for a new way of building, leading and managing organizations. This one will discuss a change that is at right at the foundation of a newly-emerging viewpoint on what is required to build high-performing, innovative, self-renewing enterprises.

Here’s a provocative statement: Here at the Center, we believe that most companies already have most of the resources they need to build innovative, entrepreneurial, self-renewing enterprises, right under their nose! However, in the large majority of companies, those resources are totally unavailable for use; in fact, they are kept under heavy lock and key!

What resources? The deep desire within most human beings to create, to make a real difference, to make a real contribution, to realize their full potential, and to engage in something that’s meaningful and larger than themselves. That profound desire, that unrealized potential is vast, largely untapped, and inexhaustible – IF the conditions are right. And, they are not. I would estimate that 80% - 90% of available internal vitality, energy, passion and creativity are completely untapped. They are under heavy lock and key.

The Old Social Contract:

What’s that heavy lock and key? The fundamental social contract that we’re currently laboring – slogging – under. First let’s look backward a little bit.

In the heyday of the “great bureaucracies” (my father’s generation), the basic social contract was this: if you (employees) behave like good corporate citizens, then we (the company) will take care of you for life. Not bad, you have to admit. But, being taken care of for life came at a price. Being a good corporate citizen meant: work hard, keep your nose clean, and most importantly, don’t make waves. “Not making waves” meant: don’t speak up, don’t speak out, don’t stand out, and don’t rock the boat. Let’s look a little deeper.

First, a good employee was compliant: good employees behaved exactly as the company expected them to behave. Second, a good employee conformed – he or she was expected to become “one of us”, and to suppress aspects of his or her personal, unique, individual identity that differed from the corporate culture. The system was this: nails that stick up get pounded down. Those that persist in sticking up get thrown out.

Third, a good employee was powerless. The price of remaining a member of the system was this: individual, adult, intrinsic power was traded for positional/social power. If you were a good employee, you might get rewarded with an organizational role where you could tell others what to do (positional power). However, you were still not allowed to act independently, or to take any action individually that might affect the system, or “rock the boat.” The system retained total control. Exercises of individual power threatened that system, and were dealt with quickly.

It was a Parent-Child, “Cog in the Machine” system. The Company was the benevolent caretaking (but also disciplining and controlling) Parent and employees were good, well-behaved (compliant, conforming, powerless) children. The belief system was that senior leaders were supposed to know everything, retain all the power, make all the decisions (and get most of the goodies). The rest of the workforce was there to execute – to follow directives from senior management. In other words, serve as childlike, unquestioning cogs in the machine.

This model works quite well when repetitive execution is the primary strategy for market dominance over long periods of time, because it’s the basic design DNA for “organization-as-production-line.” This model assumes basic stability – that tomorrow will be pretty much like today, that change will be slow, and more importantly, that leadership will initiate it. However, when innovation is the primary strategy for market dominance, it’s a crippling – even mortal – liability.

Today’s Social Contract:

This social contract – the basic fabric that held our society together – began to be ripped apart during the 1980’s when wave after wave of downsizings, rightsizings, and mergers and acquisitions started to became the norm. Since then, the basic social contract has devolved into this: You (the employee) must work harder than ever (50-60-70-80 hours/week), and still don’t make waves, but… we (the company) can’t take care of you anymore. Good luck – you’re on your own. Generally, employees are still required to give up their intrinsic, adult power, and to suppress their own independent voice and identity. The contract is still based largely on the parent-child model, but… it’s time to speak plainly: the parents have become near slave-drivers who have little or no commitment or loyalty to their children.

The old social contract worked because it was reciprocal. Employees, while they did have to give up their individual, adult-level power and identity, were in fact taken care of by the system. Today’s social contract really isn’t a contract at all, because it isn’t reciprocal: it’s almost all one-way. The company demands nearly everything and gives you a salary in return. It’s way out of balance.

Should it really be surprising that a recent poll reported that 74% of American workers are disengaged clock-watchers who want to change companies within the year? A staggering three-quarters of American employees couldn’t care less about their company, and want to get the heck out as quickly as possible!

Is this a solid foundation for sustainable innovation, corporate entrepreneurship, or corporate renewal? At the Center, we don’t think so. We think there is a better way. Does that mean going back to the old contract? Absolutely NOT.

The Path Forward: A New Social Contract

The hard truth that we, as business leaders, must address in a direct and honest way, is that if we want to build innovative, self-renewing, entrepreneurial companies, AND we still want to retain total power and control, it’ll be just like the farmer in the old joke said: “you can’t get there from here.” If we want to unlock those untapped resources and build enterprises that are filled with entrepreneurial vitality, energy, passion, creativity, engagement, commitment and contribution – we must create a fundamentally new social contract. There’s simply no way around it.

It’s clear that companies can’t “take care” of their employees for life anymore. That’s all gone. But, if we want innovative, self-renewing, entrepreneurial companies,, we (leaders and managers) must also let go of the parental, dominating, command-and-control model of leadership and management.

The bottom line is that if we want employees to be deeply engaged, highly committed, highly creative, and making a powerful contribution, we must treat them as independent, unique, individual adults. We must allow them to have adult-level power, and we must allow them to “be themselves”.

The new social contract must be based on adult-to-adult, mutual partnering. Let’s be clear: in this new contract, the enterprise still has power, but that power cannot be absolute; it must have limits. In the new social contract, each and every member of the enterprise is treated like a responsible, mature, independent adult, who has power and some degree of real “say” in the direction and operation of the enterprise, and in their role in it. We must let go of the illusion of power and control that comes with the parental role in the parent-child contract.

There are two sides to this. On one hand, this implies that each and every person is responsible, and accountable for their behavior. They are responsible – and accountable – to their boss, their employees, and their peers. The other side of that coin is that each and every member is allowed to be – and express themselves –as a unique, independent adult. Everyone is allowed to speak their mind freely, without fear of reprisal or marginalization. Everyone is allowed to “chart their own course” (within reason, of course), meaning that each person can pursue his or her own career path and goals, as long as they are in basic alignment with the overall shared purpose and goals of the enterprise. Further, everyone participates - in a very real and substantial way, in the ongoing "workings" of the enterprise; i.e. everyone has a stake in the outcome, and everyone has a degree of real power (within the boundaries of the shared purpose and overall goals of the organization).


A Community of Individuals:

The enterprise must be working toward something paradoxical and qualitatively new: maximum social variety coupled with maximum social integration. We need to build social systems that encourage and support maximum diversity and maximum individuality simultaneously with maximum community and a sense of belonging. The vision here is what we call “Individuals-in-Community,” or possibly “Diversity Deluxe.”

Here’s why: The “three C’s” – compliance, conformity and control – are tools for gaining internal alignment with collective purpose and task, but at a monstrous cost: suppression of internal variety and differences. That’s a huge problem, because internal differences are the very fountainhead of enterprise-level creativity, learning, and growth. Where the 3 C’s hold sway, innovation and entrepreneurship will wither like a tender shoot of grass in Death Valley at high noon in August.

What we’re seeking is a high degree of internal coherence and alignment that is not based on the external, social pressures of control, conformity and compliance. What we’re seeking is authentic, individual-level commitment to the shared purpose. This requires that the enterprise build a unique, individual relationship with each employee. In other words, we have to throw out the old “one-size-fits-all” approach to management, and begin to treat each member of the organization as a separate, unique adult, and as a precious resource for contribution and creativity.

My belief, and experience, is that when a real sense of community exists, but a community where the individual is genuinely valued and treated as such, the entrepreneurial flame is ignited – together with a powerful upsurge of vitality, energy, passion, creativity, drive, initiative. Everything you need.

The next blog entry will begin a discussion of what is required to implement this new social contract.

Sea Change Demands New Paradigms and Tools

The previous blog entry, Creative Renewal and Legacy Management Tools, briefly discussed the legacy leadership and management concepts and practices that dominated during the 20th century and that had a very big hand in why America dominated the world economy for much of it. The previous entry also briefly discussed why those same tools have become a major impediment in the 21st century.

There is a document available on Schering-Ploughs web site, which is a transcription of a conversation that S-P’s new CEO Fred Hassan had with a writer/reporter. In that document, at one point Mr. Hassan says that “CEOs who understand the human factor, who see the big picture of building sustainable value, do better in the long term than those who just try to appease the Street every quarter.” Indeed. But why?

New principles and practices are needed to meet the challenges of a complete sea-change in the fundamental rules of business in the 21st century. During most of the 20th century, the primary drivers of business success were execution and production. Not to say that innovation wasn’t important; it was important. But if you set up a scale and put “execution and production” on one end of the scale, and “creativity and innovation” on the other end, the scale would tip heavily toward execution and production.

In the 21st century, the balance has changed. Priorities have reversed. The heavier side of the scale has become creativity and innovation. Again, not to say that superior execution and production aren’t important; they are still critical. But execution and production no longer provide competitive advantage; in a hyper-competitive, dynamic global economy, they have been reduced in status to “table-stakes.” You have to have them to play the game; but they are simply not good enough to win the game.

In the new millennium, winning the game requires that creativity and innovation are THE core capability. Creativity and innovation have become the core strategic drivers, the primary differentiators, the foundations of sustainable organic growth. And sustainable creativity and innovation requires fundamentally new practices that tap into, unleash and align blocked and pent-up workforce capabilities, energy, passion and commitment.

The old tools focused on holding all of that down in the quest for continuity, predictability, conformity and control. The old tools are all about compliance to a (relatively) fixed strategy and to a (relatively) fixed corporate ideology, values and behavioral norms. The old tools focused on preserving the institution. In the 21st century, businesses that run themselves under the old 20th century institutional model will go the way of the dinosaurs.

Wholly new leadership and management principles and practices will be required to ensure that a business survives and grows. And those new principles and practices will be focused on ensuring that a business never becomes an institution, i.e. ensuring that it remains alive, vital, creative, innovative and self-renewing.

We’ll discuss these new leadership and management principles and practices over the next several blog entries: They include:

o The New Social Contract
o Leverage Diversity: Maximize Differentiation AND Integration
o All Hands on Deck: The Commitment-Driven Enterprise
o Partnering
o Building Commitment
o Inside-Out Alignment:
o Intrinsic Motivation
o Shared Purpose
o Three-Way Alignment
o Freedom + Accountability
o Dynamic Alignment = Dynamic Company
o Tapping the Current
o Open the Channel with New Communication Practices
o Keep Current to Keep the Current Flowing
o Tap the Underground River (Access the Right Brain)
o The Post-Institutional Enterprise

We'll address these topics in some depth over the next several weeks.

Dean Robb, Ph.D.

Creative Renewal and Legacy Management Tools

The last two blog entries focused on two key drivers in unlocking and channeling untapped workforce energy and passion into creation of new forms of value. The April 14 entry, More on Vision Statements, Alignment and Strategy talked about how a compelling vision is a primary tool in unlocking blocked workforce energy and passion. The April 25 entry, Innovation and Value Creation at Schering Plough discussed some of the key structural/technical changes introduced into Schering-Plough (SP), as part of their massive effort to channel that passion and energy into continuous creation of new, innovative forms of value – i.e. on Creative Renewal.

This week’s blog entry will focus more deeply on some of the human factors that are foundational to building organizational capability for sustainable Creative Renewal.

Creating sustainable capability for innovation and renewal is a “brave new world” for corporate America. The foundations, or “premises.” upon which most large companies have been built, stem from ways of thinking and operating that are well over 100 years old. They are rooted in the work of management and organizational theorists and practitioners whose work and thinking were embedded in, shaped by, and constrained by, the “zeitgeist” or “worldview” of the time (just before and after the turn of the century (19th to 20th)).

In a nutshell, the emphasis at that time was on creating organizations that could maintain continuity – i.e. the status quo – for long periods of time. The primary models were bureaucratic and institutional. The scientific thinking of the time, which drove these organizational models, was that the world is basically a gigantic machine, and that if we figure out the rules of that machine, we could make it do whatever we wanted it to do via the application of scientific thinking, engineering-based tools, and control-based leadership and management practices.

In that bureaucratic/institutional mindset, a parallel concept was that companies (organizations) were basically large, complex production lines. Within that worldview, a primary task of leaders and managers was to figure out how to design and operate the production lines – i.e. to keep their hands firmly on the important buttons and levers that controlled that machine. Furthermore, everybody else’s job was, in essence, a cog in that machine.

The underlying, but somewhat unstated, belief was that the world was stable – it didn’t change much, and if it did, it happened quite slowly, could be planned down to every last detail in advance (by leaders and managers), and implemented like a large engineering project. The mantra: a place for everything, and everything in its place.

Four primary leadership and management tools – hierarchical power structures, command-and-control, compliance and conformity – flow directly from these 100 year-old foundations. Their overarching goal was, and remains, predictability and stable production outputs. And to this day, those tools are smack dab at the core of how most companies operate.

The enormous problem facing business leaders today is that, while those fundamental leadership and management concepts and tools are superb if your business is based primarily or solely on continuous unchanging execution of a fixed strategy in an essentially unchanging environment, they are diametrically opposed to the goals of continuous, sustainable innovation and renewal!

If your primary business goal is to tap into collective energy, passion and creativity and channel it toward the task of continuous creation of new forms of added value, these old tools are actually counterproductive to the task! That’s a hard pill to swallow. It’s huge and it tastes quite bitter. But there it is. We need to face up to it and deal with it – directly and honestly.

(If you want to learn more about the whys and wherefores of all of this in substantially greater detail, read my article The End of "Scientific Management": Replace the Traditional 3Cs With Corporate Creativity). The nutshell version is that these old tools are based on the paradigm that the knowledge and skill needed to run a business exists solely in senior leadership and management, and everybody else’s job is to do what they’re told. It’s a military model. Another underlying assumption is that deviation and difference are the enemy of smooth, standardized, predictable and controllable production, and so they should be stamped out. This belief is captured neatly in an old Asian proverb: “the nail that sticks up will be pounded down.”

So: where do we go from here? What are the premises and practices upon which we can build organizations capable of continuous innovation, reinvention and creative renewal? We’re all in a learning mode here in this emerging brave new world, but at the Center for Corporate Renewal we believe we’ve unearthed at least a few of the key foundations. In the blog, I’d like to talk about them, and attempt to link them into the elements of the transformation happening at Schering-Plough. I will probably go beyond what Schering-Plough is doing at this point, but to the extent possible, I’ll try to link these key practices with the Schering-Plough story, as they conceive it.

More soon.

Dean Robb, Ph.D.