Six Simple Rules

by Yves Morieux

  Why Increasing the Total Quantity of Power Is So Important

  When power is used to mobilize collective action that furthers the goals of an organization, it is a fabulous thing. This is what happened at InterLodge, as we saw in chapter 2. When the hotel receptionists were given more power (in the form of a voice in the performance evaluation of maintenance and housekeeping staff), they had much greater capacity to play the integrator role. The end result was more—and more effective—cooperation in the achievement of the organization’s goals.

  What happened at InterLodge is what people in the business world often call “empowerment.” It involved a redistribution of power from the back-office functions to the receptionists. In the past, promotion within the back-office functions of maintenance and housekeeping was determined exclusively by the managers of those functions. By giving the receptionists a say in back-office performance evaluations and promotion decisions, InterLodge management shifted some of that power to the receptionists.

  As effective as such reallocations of power can be, however, it is increasingly important in situations of business complexity for organizations to create many new sources of power. Coping with complexity requires higher levels of both autonomy and cooperation. But when people cooperate, they are no longer self-sufficient; they become dependent on others. Therefore, the influence you have (or do not have) over others will play a central role in your decision not only to cooperate but also how much to cooperate. The more influence you have over the behavior of others, the more you can take the risk of becoming dependent on what they do. In other words, power determines the capacity to enter into the kind of cooperative interactions and reciprocity of action that are essential for addressing business complexity.

  For this reason, power in the organization often needs to be something more than a zero-sum game. If power is only redistributed, then as performance requirements multiply, there will always be someone without the power to step into the cooperation game. The day InterLodge needed to offer innovative new services (Internet connectivity) to its customers, the organization had to create new power bases for its maintenance staff.

  You need to create a positive-sum game. You need to increase the total quantity of power in the organization so that the power given to some does not come at the expense of the power of others. The new power can benefit managers in their integrator role and also team members so they can further cooperate with others. That way, you can channel the intelligence of more people against more fronts in a coherent yet flexible way, for both greater effectiveness and adaptiveness.

  The Manager’s Role in Increasing Power: Creating New Stakes

  Given that power is so important to success in the modern business organization, a key role of the manager is to find ways to create new sources of power and to multiply the power bases inside the organization. He or she can do so by adding at least one new stake that matters to someone and that the achievement of which depends on others in the organization. A stake is something that matters to people, that makes a difference to them. A stake can be either positive or negative, something that a particular individual or group either wants to have or wants to avoid. Those who have an influence over this stake will benefit from having power over those for whom the stake matters. When a stake is new, it is a new power base that benefits some without being taken away from others.

  Of course, not all stakes will create the kind of power that will mobilize action in the direction the organization needs and wants. A stake that is meaningful to an individual or group but has no relation to the performance requirements of the organization is obviously not an appropriate or effective stake. Rather, managers need to come up with stakes that matter to the relevant actors and also relate positively to the company’s performance requirements.

  To illustrate these concepts, let us consider the example of GrandeMart, a large retailer, and how we used a simple intervention to create new power and thus improve performance.

  GrandeMart: Managers Need to Add Value but Have Lost Power

  Over a decade, the retailer had lost ground on two fronts: to discounters that successfully undercut GrandeMart on price and to specialty stores that offered better selection and higher quality in specific categories of goods. The company’s market share was being eaten away, and it was losing sales and foot traffic every year.

  GrandeMart decided that, in order to regain market share, it had to find ways to adapt its stores to the greater diversity of local consumption patterns and preferences. The change in GrandeMart’s customer profiles had been particularly dramatic. In one major city, for example, GrandeMart stores in three different city locations now served very different customers. Ten years earlier, the customers in all three localities had fit roughly the same profile. As part of this plan to diversify the company’s stores and localize the offering, the senior management team directed each store to hold a monthly sale or promotion featuring products that would be of particular appeal to local customers. Each month, every store would reconfigure its layout, refresh its displays, and hold events that related to the theme of that particular month.

  To do all this required a good deal of diligence and responsiveness on the part of the store employees. They also had to cooperate across departments (such as grocery, personal care, home goods, and others) within the store. The store managers had to mobilize the efforts of their teams, getting them all to work in sync.

  Therein lay the problem. Although they held positions of authority, the store managers at GrandeMart did not have much power, not much influence on issues that mattered to their employees. Over the years, as the market had changed, the company, like many others, had centralized its key functions in order to benefit from economies of scale. As a result, the store managers could no longer make much of a difference for their employees. All the major issues that matter in the day-to-day life of employees in the stores—about their product assortment, product availability, and prices, and about human resource management policies and systems—were decided at the center. The managers had become little more than “nice nannies,” as one employee put it. Remember the managers we described in chapter 1 who complained about all their administrative tasks and yet spent most of their time working on them? These were the store managers at GrandeMart. As a result, they avoided launching the monthly promotional campaigns; they were adjusting their goals and aspirations to the poor resources granted by the very limited power they had to mobilize the teams.

  GrandeMart couldn’t give back to the store managers the influence on assortment, procurement, prices, policies, and systems they had lost over the years. The competitive requirements for consistency and economies of scale had not disappeared. How could a new source of power be created in the stores to allow them to effectively mobilize their teams in the localization initiative, without compromising on the other requirements?

  Creating a New Base of Power

  The challenge was finding some stake that had three characteristics:

  It mattered to the company as a whole, because it affected how it would meet its performance requirements.

  It mattered to the store departments, because it pertained to an uncertainty that affected what they had to do in particular situations.

  It was controlled by store managers. It was important that the store managers had the possibility to make a difference on the stake, which would increase their power such that they could mobilize store employees to meet the new demands of localization.

  The stake we identified related to an important performance requirement: improving customer satisfaction, notably when it came to the amount of time customers had to wait in the checkout line. The waiting time at checkout was a key determinant of a customer’s in-store experience. It had a significant impact on customer loyalty and the frequency of visits to the store. The longer the lines, the less often customers came to the store. Some customers, seeing how long the lines were, would head back to their cars and leave. In a major communication campa
ign, GrandeMart announced that in order to better serve its customers, the lines at the checkout stations would never get too long. The company even marked on the floor of some stores just exactly what “too long” meant.

  To keep this new commitment, senior management decided that whenever the lines at the checkout stations got too long, new stations would open immediately. To open more checkout stations, however, would require that employees from other departments would be assigned to operate the stations. This new practice gave us the opening we needed. Here was a stake that clearly mattered to organizational performance but also mattered a great deal to employees across the entire store.

  How store employees felt about suddenly being directed to help at checkout depended on their immediate work situation. When it forced them to interrupt a task they were engaged in or to confront annoyed and irritated customers, fed up from waiting in lines, the employees experienced it as a major disruption of their day. In those situations, however, when having to help at checkout freed them from a task they did not particularly enjoy, they appreciated it as a welcome diversion. We all have tasks we prefer to others, and it also depends on circumstances.

  Our idea was to have the store managers decide which employees would be called away from their departments to fill in at the overflow checkout stations. We didn’t develop any elaborate criteria or rules for deciding whom they should choose. We left it up to their judgment. Our goal was to give them a new source of power that would provide them with leverage in the larger task of mobilizing the departments for the monthly localization campaign.

  At first glance, letting the store managers decide who had to work at the extra checkout stations at moments of high customer demand might seem like a trivial change. It certainly didn’t require any major structural changes or the usual hard or soft initiatives. Yet, when you think about it, this simple change had enormous leverage. Store managers now could make a difference that mattered to their employees, and that mattered for performance. Adding value and having power are the two sides of the same coin in effective organizations. When it comes to designing organizations, it is helpful to consider the power perspective. Store employees now had something to gain from listening to the priorities set by the store manager—being assigned to the checkout counter only when they wanted to be. Of course, it was not an explicit negotiation—“If you do a good job working with others on the special events, I’ll take it into account when I have to assign people to checkout”—but it was clear enough to give store managers a new card in the game.

  Employee behavior began to shift. They started to listen to the store managers and take their needs and priorities into account. They engaged more with the store managers in developing ideas for customizing store offerings and monthly special events. They were more willing to cooperate with people in other departments on these events.

  The increased cooperation in the stores also had some powerful second-order effects. The first concerned the special monthly promotions. In the past, they had been a constraint for store managers, so much so that the managers actually avoided launching them. But now that they could better mobilize their people, these events became a resource and they put their full energy behind them. The events provided even more opportunities to make a difference, yet more cards in the game.

  By increasing the total quantity of power, GrandeMart was able to maintain its necessary consistency and economies of scale at the center, while also providing store managers with the power needed to implement customized improvements in local store operations. As a result of these endeavors, sales increased by multiple percentage points in the stores that applied the new approach, with an equivalent increase in foot traffic, reversing the previous decline in both measures.

  But there was another second-order benefit: better cooperation between central functions and store managers. The functional managers at GrandeMart’s corporate center regularly designed performance improvement initiatives that they would roll out across the stores. In the past, interactions between functions and stores had been limited to defining the road map and milestones to implement the performance initiatives. Now that the managers’ context had changed, they could also make a greater difference for the functional managers by mobilizing their teams in support of a new improvement initiative.

  The store managers now controlled a key uncertainty for the central functions. Therefore it was genuinely in the interests of the central functions to even more deeply listen to the store managers and to take into account their suggestions so that, in return, the store managers would effectively mobilize their teams on the center’s initiatives. This new power vis-à-vis the functional managers created a situation in which the store managers could also take the risk to further cooperate with the central functions—for instance by being more transparent about their store’s improvement potential. Beyond coordinating timelines, functions and stores could engage in a richer joint exploration of performance improvement opportunities. Store managers engaged even more actively in the initiatives launched by the center, leading to further improvement in performance. Store managers and their teams had become more effective players in the organizational system, and the organization was now able to more fully leverage their intelligence and judgment.

  Power as a Positive-Sum Game

  As the GrandeMart story suggests, turning power into a positive-sum game is like increasing the number of cards in the deck. The more cards in the deck, the greater the variety of moves each player can make. In the workplace, the greater the quantity of power available, the more initiatives individuals or units can take with others, the more willing they will be to accept transparency about their performance, and the more likely they are to participate—without limiting the participation of others.

  By calling on organizations to increase the total quantity of power, we are not suggesting that every single organizational unit has to have exactly the same amount. It is not necessary (or possible) to even out power across all contexts and eventualities so that every entity is always equal in the amount of power it has over others. We are suggesting, however, that it is critical to avoid an overconcentration of power that causes others to withdraw from cooperation. When some players are dominated by others, they tend to isolate themselves. Below a certain threshold of cards in their hands, and whenever they have a choice, people are better off avoiding cooperation as they would bear most of the adjustment costs. Only those players who can act on a problem critical for others—who control a relevant uncertainty—will find room in the exchange relationship that underlies cooperation.

  When creating new bases of power for people who have heretofore been dominated players in the organization, it’s important to determine the critical mass of new power that will really make a difference. Sometimes, we hear executives say, “Our managers are given the power to evaluate performance fairly, thanks to our new evaluation system. But they don’t use their power. They give everybody high marks even when it’s obvious that performance is not as good as it should be.” We also frequently hear that managers are provided with new levers to manage their team, but “lack the courage” to put the levers to use. This type of judgment is typical of the pseudo-psychology of the soft approach. What it usually means is that people have some authority (over some decisions) but not real power. It’s a bit like the soldier facing ten enemies with only one bullet in his gun. In such a situation, the gun isn’t a resource; it’s a constraint.2 Using the gun exposes the soldier to more problems than it solves.

  When you create power, there has to be enough of it to be used. If the power falls short of this threshold, it is not a resource; it is a constraint. This is why managers do not use the power they are given, because it is not enough to make a difference. Suppose the manager uses the new evaluation system and gives a bad grade to a poor performer. That person responds, “I’m very disappointed. I feel demotivated. Maybe I could go on a training course to improve?” But suppose the manager does not have any training resources
. The result is that the manager will have to deny the request and may not be able to count on his team member’s engagement.

  The only way you will know whether people have a critical mass of power—enough to use it—is by applying the first simple rule: understand what your people actually do and why they do it. In the case of middle managers, ask yourself these questions:

  What levers are at their disposal—in terms of budgeting, staffing, target setting, evaluating performance, influencing those issues that matter to teams? What room for maneuver do they have in using these levers?

  What would happen to managers if they were to use these levers? Are these levers resources or constraints for them?

  Have you created the right context of goals, resources, and constraints in which using these levers in an effective way is an individually useful behavior (rational strategy) for these managers?

  Harnessing Power to Face Complexity

  Being able to increase the total quantity of power available in the organization allows managers to think about and act on more performance requirements. This has implications for strategy and leadership. It also has implications for organization design.

  Strategy and Leadership to Keep Pace with Complexity

  Performance requirements have become both numerous and contradictory. Every time a new requirement emerges, a new degree of freedom is created for players to gain or lose customers and thus market positions. This complexity creates new volatility. Indeed, each additional performance requirement creates a new opportunity for competitors to make a difference vis-à-vis each other. This is one of the main reasons why market leadership volatility—measured by the frequency of changes in market share positions among competitors—has multiplied by a factor of twenty-two since the 1950s.3 Because of this volatility, strategy is less a matter of positions—having strongholds in this or that domain—and more a matter of quickly adapting to opportunities as they arise. Competitive advantage is a matter of agility and adaptation, requiring the organization to nurture more options.