Developing a Supportive Organizational Environment in a Decentralized Way

The following is an edited extract from  Organizing for the New Normal.

Creating an organizational environment that supports and promotes the behaviors of agility does not necessarily have to be done in a centralized way and does not have to be undertaken by top management alone.

Individual managers and team leaders scattered all over the organization can achieve major changes in their local organizational environments through a few small and targeted actions.

Done within prescribed parameters as set by top management, these decentralized actions could start a thousand little fires that can grow into an inferno that transforms the organizational environment of the whole company.

To appreciate this point, consider the story of David Kennedy. You probably never heard of him, but he is considered a pioneer and a radical thinker, who is revolutionizing the way we deal with drugs in the inner cities.

Kennedy is really an unlikely candidate for this—he does not have a degree in criminology, nor did he ever study crime prevention. Instead, he studied philosophy at Swarthmore. Yet, he is credited as the only person to come up with a consistently viable and cost-effective strategy for helping inner cities deal with the problem of drugs.

What is his big idea? Simple—you cannot solve this problem without getting the local community to help. And to get the local community to help, you have to earn their trust.

To achieve this, you have to demonstrate to them through actions (and over time) that you really want to help them and that you have their interests at heart. Thus, rather than go after young drug dealers with the intention of arresting them, how about helping them to get out of drugs?

In a 2004 experiment in High Point, North Carolina, Kennedy got the police to round up young drug dealers and showed them videos of them dealing drugs. The police told them that they had prepared cases against them and were all set for indictment. But instead of proceeding with indictment, they let these young dope dealers go back home. They then worked with their families to help them get training and new jobs.

The message, which spread quickly through the neighborhood, was that the cops were not out for arrests. Instead, they really wanted to help by giving kids a second chance—but they would get aggressive if they didn’t take that chance. Over time, the police won the local community’s trust and cooperation. The kids themselves began pointing out the big drug dealers in the area and this led to their arrest.

According to Newsweek: “After four years, police in High Point had wiped the drug dealers off the corner. They compared the numbers to the prior four years and found a 57% drop in violent crime in the targeted area.”

Kennedy’s tactics are now being adopted by police departments all over the US. Although the strategy is not without its critics—who see this as being “soft” on criminals—police departments across the nation are reporting impressive results from his “good-cop” approach.

This story highlights a key point I want to make in this chapter: Small changes can have a big impact.

What Kennedy did is not radical or revolutionary. It does not require major investments or huge amounts of resources. It is something that can be done quickly and by few people, even an individual. Yet look at the enormous impact it had!

This is the principle made popular by Thaler and Sunstein’s book Nudge and it is the principle that I will use in this chapter to build the case that we can create an organizational environment that supports and promotes the behaviors of agility in a decentralized way.

The Butterfly Principle

Small and seemingly trivial changes in the immediate environment or in the way we behave can have a big influence on what people do or how they behave.

This is not a new principle. In 1961, a meteorologist at MIT named Edward Lorenz constructed a mathematical model containing a set of 12 differential equations to predict weather patterns. One day, he wanted to re-examine a sequence of data coming from his model and to save time he manually entered data in the model from the printout of the previous run.

To his amazement, the results from the second run were dramatically different from the results of the previous run. Upon further examination, he realized that he had entered the data to three decimal points whereas the previous run had used the same data but to six decimal points. This tiny difference in initial conditions had produced completely different results.

These observations ultimately led him to formulate what we now call “the butterfly effect” - a term derived from an academic paper Lorenz presented in 1972, entitled: “Predictability: Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas?”

The butterfly effect has been used to explain numerous major changes in society. For example, in his wonderful book The Tipping Point, Malcolm Gladwell describes how William Bratton - first as head of the New York Transit Authority’s police force in 1990–1994 and then as head of the New York Police Department in 1994–1996 - managed to dramatically reduce crime in New York City by implementing a few (seemingly) minor changes, such as cracking down on fare beating on the subway and going after people who committed quality-of-life crimes such as public drunkenness and public urination.

Equally impressive examples of the butterfly effect have been provided by social psychologists through a number of experiments. For example, it has been shown that asking people to donate blood by having a friendly peer complying with the request can increase the success rate from 25% to 67%. More importantly, none of the subjects in the no-model experiment followed up the request by giving blood whereas 33% of the subjects in the model experiment showed up.

Within the world of business, we also have several examples where small and apparently insignificant changes can have major impact on how people behave.

For example, in the famous Hawthorne experiments of 1927–1932 undertaken at the Hawthorne plant of the Western Electric Company in Chicago, the productivity of assembly line employees increased by up to 30–40% with a change in a number of conditions, such as the frequency and duration of rest periods and meal breaks. Productivity increased whether these conditions were increased or decreased!

In another study, workers in a pajama factory were asked to take on board a seemingly small change in the way the pajamas were sewn or boxed. One group of workers was simply informed of the change. In another group, a selected team of workers was asked to meet with management and then inform the rest of the employees about the change and help with the implementation. In yet another group, all the employees became “special operators” and were asked to help implement the change.

The difference in productivity gains was dramatic. The first group experienced a sharp drop in productivity and a loss of morale (17% quit their job). In the second group, there was no morale loss (nobody quit their job) and the initial drop in productivity was regained within two weeks. In the third group, morale remained high and a slight drop in productivity (for one day) was soon followed by a steady increase to a level 15% higher than the pre-experiment level.

Decentralized change through small actions

How can we apply this principle inside our organization? In the previous chapter, we proposed that we need to put in place the organizational environment that supports and promotes the behaviors of agility. The question that immediately arises is how to create such an organizational environment.

One way - and the method most organizations adopt - is top-down, through a major culture change program.

Is this the only way to do it?

The butterfly principle suggests that there is an alternative and possibly better way: Individual managers and team leaders could take it upon themselves to introduce small changes in their own local environments.

The right kind of changes, done properly, can produce big changes in each of these local environments. If all these local changes are undertaken within an overarching framework and within strategic parameters developed by top management, then the sum of many local changes could add up to one big change in the organizational environment of the whole organization.

The key point here is that individual team leaders and managers should take action only within clear parameters and guidelines set by top management, otherwise chaos might ensue. As long as individual actions fall within these parameters, the collection of these actions could add up to a big change.

Many little fires could grow into an inferno that transforms the environment of the whole organization.

Academic research has identified a number of examples of “small fires” that individual leaders could light up at the local level with the aim of changing the environment in which their people operate.

By far the most influential of such small changes that can be adopted is small and symbolic changes in our day-to-day behaviors.

We all know that employees pay close attention to how their leaders behave and what they say. Based on what they see or hear, they form their beliefs, which tend to be reinforced and strengthened over time. The collection of these beliefs is nothing more than the culture of the organization.

What this implies is simple: If culture is created through the day-to-day actions of leaders, then the way to change culture is by changing those behaviors. In doing this, leaders have an ace up their sleeves. We know that whatever leaders do or say can be magnified a hundred times by people around them.

This has a serious implication: Leaders should pick one or two behaviors that they want to change in their organization and adopt those behaviors themselves. The trick is to do so in a visible and symbolic way. As if by magic, employees will soon get the message and begin to behave that way themselves.

A good example that highlights this point is the story of Nandu Nandkishore, the market head at Nestlé Philippines in 2005, who succeeded in transforming the culture of the local organization within a year. Because he wanted to encourage more collaboration among his people, the first change he introduced when he took over was a total redesign of the executive floor where he sat with his secretaries.

Out went the private entrance for the market head, the security guards to his office, his private bathroom, and the offices of the secretaries that surrounded his office, preventing anybody from reaching him without their permission. In their place he created a more open floor where his (smaller) office was easily accessible by anybody and where cross-functional teams sat together.

On every floor in the building, the walls were converted into glass and reduced in height from 9 feet to 3 feet to allow easier communication and interaction among people. Nandkishore also started regular townhall meetings as well as weekly market visits, and he made it his routine to walk the floor several times a day, talking and interacting with employees.

It wasn’t long before the whole organization got the message: collaboration and open communication is the new game in town.