First Friday Book Synopsis

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Jeffrey Stamps and Jessica Lipnack on why BP crashed and killed the Gulf

Here is an excerpt from article written by Jeffrey Stamps and Jessica Lipnack  for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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“I’m not stonewalling. I simply was not involved in the decision making process.” “That was a decision I was not party to.” “I can’t possibly know the basis on which that decision was taken.” Did BP’s CEO Tony Hayward, speaking at a congressional hearing, create the very conditions that left the most responsible person in the company out of the loop?

Jeffrey Stamps

Every day we learn more about the causes of the catastrophe in the Gulf of Mexico. Many are technical but could much of this disaster actually have been the result of a massive organizational failure not of people but of design? If so, its lessons would apply to all large organizations, regardless of industry or sector.

When Hayward took over in October 2007 as BP’s new CEO, he announced a bold (though familiar) reorganization plan. He aimed “to improve performance by simplifying how the company is structured” — specifically, to create a “flatter” organization. He vowed to reduce BP’s eleven levels to seven, taking out four layers of supposedly unnecessary management complexity.

In reality, BP’s reorganization was likely suicidal. It dramatically reduced the company’s capacity to make good decisions. What it did greatly improve was the company’s capacity to communicate these increasingly bad decisions.

The two of us saw this coming because we had conducted an in-depth case study from 2004 to 2006 of a large-scale organization eerily similar to BP’s gulf operation — Royal Dutch Shell’s 5,000-employee, $50 billion North Sea operation.

At the behest of that Shell unit’s management, we mapped its whole org chart as a network. Enormous variations in structure appeared throughout the organization. Some parts were shallow, others deep, depending on what they were doing. 
In any large organization, leaders make decisions, and then communicate them. Hierarchies need to accommodate both: a capacity for high-complexity decisions communicated along the shortest possible paths.

The problem is these needs are in tension — if not in outright conflict. The requirement to communicate better leads to flattening — reducing the number of levels and thereby enlarging the size of teams. And the necessity to make better decisions leads to deepening — increasing the number of levels and making the teams smaller.

The risk an organization faces by eliminating levels — especially when it’s done in a one-size-fits-all way as per BP — is that it will severely damage its capacity to manage complexity. And reality is complex. When it comes to decision-making, any universal imperative that forces sub-organizations to flatten and pushes teams to expand in size regardless of local circumstances is foolish.

This wasn’t obvious at the time. BP raked in record profits over the past two years — although it also developed quite a record for

Jessica Lipnack

safety violations. But the oversimplification of management structure — which played out on rigs as well as in cubicles — was a disaster waiting to happen. The evidence is in eyewitness reports of management conflicts in the frenzied few hours before the blowout. More proof is in the inept efforts to stanch the flow, the clueless non-mobilization of cleanup resources based on inaccurate information, the convoluted claims process, the lack of sufficient equipment to capture the spewing oil, and finally the finger-pointing and the don’t-blame-me CEO.

Did BP redesign itself to create catastrophe rather than prevent it? As investigations continue, we all are learning a great deal about the energy industry, offshore oilrigs, sub-oceanic fields, the responsibilities of various parties, and the extent of government attention and oversight.

Let’s hope we also learn something about how organizations should be reorganized for the times — especially those whose work impacts the rest of us in such profound ways.

The standard response — “flatter is better” — is both a crude oversimplification and a fond illusion. Face it: organizations are complex. In order to function well, we must not homogenize their zones of communication and their decision making capabilities. These zones emerge from the network of teams — large and small — that make myriad local design choices. Organizations must learn to incorporate more complexity, not squeeze it out — for their own sake, and for ours.

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Jeffrey Stamps and Jessica Lipnack, co-founders of NetAge, are management consultants and co-authors of many books, including The Age of the Network, The TeamNet Factor, and Virtual Teams. They are also co-authors of the article, “Can Absence Make a Team Grow Stronger?”, HBR, May, 2004.

Click here here here to check out mini-executive summaries of this article and of five others, Trust Makes the Team Go ‘Round, Managing a Global Team: Greg James at Sun Microsystems, Inc. (A), Note on Team Process, and Using Social Network Analysis to Improve Communities of Practice.

Sunday, June 27, 2010 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , , | Leave a comment

A Couple of Milestones About our Blog

We’ve hit some milestones on our blog this week.

This weekend, Bob Morris posted our 1500th blog post.  Our “blogging team” experiment began last April (April, 2009), when we got serious about regularly producing content on this blog.  We are not one of the “big” blogs.  But we have seen our page views grow from 72 per day last April to just over 700 per day this month.  (This month is a little inflated – I wrote a post about Coach John Wooden last October that received a lot of readers after his death).  But even without the Coach Wooden article, we have grown every month, and we now know without a doubt that we have a growing community of fellow learners reading our blog.

Where does the urge to blog come from?  I do not know.  But on our blog team of five (though Cheryl & Sara sort of count as “one”), two of us are addicted.  Bob Morris posts so many posts a week that I have trouble reading them all.  (I try to!)  And I have averaged more than one a day for quite some time.  (Still no match for Bob).

Less frequently, Karl Krayer, and Cheryl & Sara, weigh in with posts.  Cheryl and Sara point us to human connection issues, and especially women in business/women in culture posts.  We of course are delighted whenever they share their wisdom with us.  (Read about the members of our blogging team here).

Bob provides connections with authors, stories about authors, a lifetime of overflow about books and movies and…  He writes reviews, posts author interviews, and an array of other types of articles.  He has taught, coached, consulted, written, reviewed (he has written over 2000 reviews for Amazon.com).  To read Bob Morris is to get a business book/business author education — and so much more.  Many of the authors have written him with appreciation for his reviews and interviews on this site.  There may be some person somewhere who reads more business books than Bob — but I would bet there aren’t many!

I present a minimum of two new book briefings/synopses a month, one a business book, the other a social justice/poverty book.  Many of my posts come from these books.  But, that is only one prompt for my blog posts.  I’m simply a preacher at heart.  Though I left full-time ministry years ago, I still think like a preacher.  Kind of a “what are the implications of this incident, this story, this book for life” approach.  And, I really don’t quite know how to explain this – but whenever I grasp a message, I can’t wait to share it.  Blogging has given me that outlet.  I have, to put it simply, taken to blogging.  I like it.

But, of course, without you the reader, we would have little reason to keep at it.  We wish more would leave comments (though that too has grown in frequency).  Enough of you send e-mails or leave comments to let us know that you find something useful here, that it keeps us going.  Thank you.

Anyway, this is just my personal update, prompted by that little number I saw this morning – that we have now posted 1503 articles on our blog.  In just over a year.  Thanks for reading.

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Here are a couple of easy ways to keep up with our blog posts:

Sign up for a regular e-mail alert which tells you of our new posts.  It takes a couple of steps, but they are easy steps.  You can get an alert after every post, but most people set it for the “daily alert,” which lists each new post from the last 24 hours.  You can then click directly to posts that most interest you.  The email reads: “Daily digest for _______,” from “First Friday Book Synopsis no-reply@wordpress.com.”

You will find the sign-up spot. marked “Email Subscription,” on the right side or our page, just below the 15MinuteBusinessBooks.com logo.

Or, follow me on twitter here.  In addition to other tweets, I post links to most our blog spots (not all – if I am out speaking/teaching, I may miss some, or be late on some).

Sunday, June 27, 2010 Posted by | Randy's blog entries | | 1 Comment

Book Review: The Starfish and the Spider

The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations
Ori Brafman and Rod A. Beckstrom
Portfolio/Penguin Group (2008)

Ori Brafman and Rod Beckstrom’s explain that the title of their book refers to metaphors. The starfish represents the decentralized network, one that has no central command because it is a neural network, “basically a network of cells…get this: for the starfish to move, one of the arms must convince the other arms that it’s a good idea to do so…Starfish have an incredible quality to them: If you cut an arm off, most of these animals grow a new arm. And with some varieties, …the animal can replicate itself from a single piece of an arm.” What about the spider? With its eight legs coming out of a centralized body, tiny head, and eight eyes, it represents a centralized network. “If you chop off the head, it dies. Maybe it could survive without a leg or two, and could possibly even stand to lose a couple of eyes, but it certainly could couldn’t survive without its head.”

Throughout their lively narrative, Brafman and Beckstrom rigorously examine primarily centralized organizations (e.g. Aztecs and the Spanish army) and primarily decentralized organizations (e.g. the Spanish conquistadores and Apaches) noting the most significant differences that help to explain why – when in conflict — the former are vulnerable to the latter. In fact, when attacked, a decentralized organization tends to become even more open and decentralized, can easily be mistaken for a centralized organization, has intelligence distributed throughout the entire system, its open systems can easily mutate, it can “easily sneak up on you [while] growing incredibly quickly.”

Readers will welcome the research-driven approach that Brafman and Beckstrom in this volume, especially the fact that after identifying the “what” (i.e. the central issues to be addressed), they focus almost all of their attention on “why” and “how” leaderless organizations are unstoppable. They offer dozens of real-world examples of organizations that have – or compete with those that have – “a hidden force” and “the harder you fight this force, the stronger it gets. The more chaotic it seems, the more resilient it is. The more you [or anyone else] tries to control it, the more unpredictable it becomes.” How can this be true? How can the absence of structure, leadership, and formal organization, once considered a weakness, become a major asset? It is for starfish organizations; however, for spider organizations, as already indicated, it is a liability. They die.

An Englishman, Thomas Clarkson, was relentless in promoting the abolition of slavery. He was inherently hyperactive and operated well in nonhierarchical environments. He formed a circle and was the only member who worked on the issue full-time. “For the next sixty years, Clarkson dedicated his life to the movement.” Nonetheless, he was soon forgotten. “Credit for the abolition of slavery [in 1833, years before its abolition in America] was attributed to William Wilberforce, a politician who was the movement’s ally and spokesman in Parliament.” As the example of Clarkson clearly demonstrates, the various leaders of a decentralized movement never bother to secure recognition for themselves. Most people credit the success of a movement to the wrong person, in this instance a politician rather than an evangelist, because they do not understand the power of a starfish organization.

Perhaps to a greater extent than do “champions,” those whom Brafman and Beckstrom characterize as “catalysts” have a much greater importance to decentralized organizations. Why? Because, after initiating a circle and then fading away into the background, moving on, the catalyst transfers ownership and responsibility to each circle’s members. Think of catalysts as being those who concentrate on establishing an organizational infrastructure (especially in terms of its ideology) and do so inconspicuously. Their satisfaction has nothing to do with attracting attention and gaining power or praise; rather, with helping strengthen and advance a cause in which they passionately believe. In this context, I am reminded of the insights that Jeanne Liedtka, Robert Rosen, and Robert Wiltbank share in The Catalyst: How You Can Become an Extraordinary Growth Leader, Mother Teresa, the Missionaries of Charity In Chapter 6, they explain how to lead pragmatically and idealistically at the same time when leading a growth initiative: First, identify the starting point and destination, then recruit an A team because it takes the best people who “are fully committed to a shared vision [and who will] consistently perform at the top of their game.”

Moreover, as Brafman and Beckstrom correctly emphasize in the final chapter, it is critically important for everyone involved to be at the top of their game when a decentralized organization’s “sweet spot” has been identified. That is, “the point along the centralized-decentralized continuum that yields the best competitive advantage. In a way, finding the sweet spot is like Goldilocks eating the various bowls of porridge: this one is too hot, this one is too cold, but this one is just right.”

There are others, however, who ask Brafman and Beckstrom how they can be a better starfish in what seems to be a spiderlike organization. That is an excellent question. “We pointed them to the model of Mother Teresa, who created the Missionaries of Charity, a starfishlike organization that has spread out to 133 countries, while still working within the confines of an ancient, hierarchical organization.” My guess is that, during the decades to come, the number of organizations that are primarily starfishlike will increase and the number of organizations that are primarily spiderlike will decrease. But none will be either a starfish or spider because there will always be a need for both order/structure and “chaos”/freedom.

Sunday, June 27, 2010 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , , , | Leave a comment

Are the leaders in your organization teaching the next generation of leaders?

Michael Watkins

Here is an excerpt from article written by Michael Watkins for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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Once a year, I chair a future enterprise leader development program at a Fortune 500 firm. It includes elements on strategy, innovation, leadership, decision-making, corporate diplomacy, and executive presence. The most powerful element is a one-week module on enterprise perspective, the core of which is presentations by virtually all of company’s senior executive team. It’s all about leaders teaching leaders.

The program highlights the critical role that senior leaders play, in the best companies, in teaching the next generation. It’s become an acid test for me of company greatness: if your senior leadership isn’t investing a significant amount of their own time in educating high-potentials, that doesn’t bode well for your business.

The single most impressive aspect of the presentations I listened to was the common core of values and priorities shared by the team. While they run far-flung parts of the business, there was tremendous coherence in what they said about what’s really important. The driving theme was that great performance is a direct consequence of having great people and a great culture. This was certainly the case during the recession, when the company moved nimbly and effectively. Needed restructuring was done, but in the most humane way possible. And while pay cuts were necessary, the top team took the biggest reductions on a percentage basis. This attention to preserving the culture left the company well positioned to accelerate out the other side.

Beyond the impressive commonality of purpose and values, the executives individually articulated aspects of their shared leadership philosophy that deserve to be highlighted. Here are some excerpts:

“There may be many opinions, but only one set of facts.” This reflects the reality that fact-based management (and continuous improvement) is core to how the company does business. If you get mired down in divergent opinions, seek the truth.

“You have two ears and just one mouth for a reason.” Executives in this business are serious about listening and assessing before they act. Even at the most senior levels, executives are very careful not to become deaf to beliefs that run counter to their own, and are genuinely committed to life-long learning.

“I don’t let people delegate upward.” The executive who said this was careful to note that his people could of course come to him for advice, but he never let them offload problems that were within their capabilities to solve.

“I manage between the white lines.” By this, the executive meant that he gave his people the scope to do things their way, so long the results were not likely to drive the business off the road. It reflects an understanding of the need to balance judicious risk management with empowerment and innovation.

“What’s the worst thing that could happen if the worst thing happened?” Finally, this quote reflects the attention that the team gives to anticipating potential “surprises” and developing contingency plans. While real surprises happen, this business is unlikely to get sideswiped by a surprise. I plan to pick up some of these themes and develop them in more detail in future posts.

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To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

Michael Watkins is Chairman of Genesis Advisers. He is the author of many books, including The First 90 Days and Your Next Move.

Sunday, June 27, 2010 Posted by | Bob's blog entries | , , , , , , , , | Leave a comment

   

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