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This chapter was written by Gifford Pinchot
for The Drucker Foundation. You will find it in the book:
"The Leader of the Future" published by Jossey-Bass 1996.
The very highest leader is barely known by men.
Then comes the leader they know and love.
Then the leader they fear.
Then the leader they despise
The leader who does not trust enough will not be trusted.
When actions are performed without unnecessary speech
The people say, "We did it ourselves."
...................................................................Lao Tsu
Leaders move people from selfish concerns to serving the common good. This requires
vision and the ability to move people toward it. Leaders can refocus people's energy
with direct interventions or do so indirectly by adjusting the system so people naturally
gravitate toward what needs to be done.
The most direct methods of leadership include commands, decisions about resources
and promotions, and personally guiding individuals and teams. As organizations becomes
larger and more complex, direct interventions by senior leaders can carry less of
the load. Less direct leadership focuses on communicating inspiring vision and values,
on listening and caring for the followers, on leading by personal example. The most
indirect and potentially invisible forms of leadership focus on creating conditions
of freedom that, like the "invisible hand" of Adam Smith, automatically
guide people toward serving the common good.
When indirect leadership is at its best, the people say, "We did it ourselves."
The more indirect the method of leadership, the more room there is for other leaders
within the organization.
Three Approaches to Empowering Many Leaders
Different models of the organization lead to different approaches to empowering people
and bringing forth many leaders. Let us consider three systems of increasing opportunities
for leadership -- delegation within a traditional hierarchy, creating a community
with common purpose and shared values, and establishing a free market system.
Delegation within a traditional hierarchy
In a hierarchy, delegation is the primary tool for creating opportunity for more
leaders. The subordinate leaders accept the scope of their command and use leadership
to accomplish the tasks given them. If delegation is the norm, each leader can create
leaders below them.
Given the rules of bureaucracy, subordinate leaders have limited scope for big picture
or cross functional thinking. As a result, the people at the top have too much to
do while everyone else is "waiting for orders." Delegation is a good first
step in creating space for leadership to emerge, but does not fully meet the needs
of information age
organizations.
Creating Community
Many great corporate leaders such as Max DePree of Herman Miller, and Ben Cohen of
Ben and Jerry's, see their organizations as communities. They create space for more
leaders with inspiring goals and trust that employees guided by community spirit
will generally use their freedom to do good rather than harm.
Under Frances Hesselbein, the Girl Scouts searched for and found a succinct mission:
"To help each girl reach her own highest potential." Seeing the need to
include minorities in this goal, the leaders set targets of tripling minority participation.
But how could they impose this on the many local volunteer leaders over whom they
had no control? They succeeded by creating a community in which local leaders chose
to strive for these worthwhile goals.
If people feel part of the corporate community, if they feel safe and cared for,
if they are passionate about the mission and values and believe that others are living
by them, they will generally give good service to the whole. If they are dedicated
community members, it will be safer to trust them to create their own leadership
roles across the
organizational boundaries. As community members, they will worry less about defending
their turf, trusting that if they take care of it, the organization will take care
of them.
Effective leaders today use the tools of community building to create an environment
in which many leaders can emerge. They contribute inspiring descriptions of shared
vision to align everone's energies. They care for and protect their employees. They
listen and do their best to accept the contributions and divergent ideas of employees
as honest attempts to help. They give thanks for the gifts of ideas, courage and
self appointed leadership that employees bring to the community. They discourage
backbiting and politics. They do their best to treat each member of the organization
as a spiritual equal worthy of respect. They share information so everyone can see
how the whole organization works and how it is doing. They publicly celebrate the
community's successes. In tragedy they mourn the community's losses. I have watched
Jack Ward Thomas, chief of the US Forest Service cry in public over the loss of fire
fighters.
Community is a phenomenon that occurs most easily when free people with some sense
of equal worth join together voluntarily for a common enterprise. Great leaders create
the sense of freedom, voluntariness and common worth, but do so most easily in smaller
organizations with lots of face to face contact. As organizations become larger,
more complex, and more geographically distributed, it becomes harder to create enough
common vision and enough community spirit to guide the actions without increasing
reliance on the chain of command. When people are separated by distance, vast differences
in power and wealth, and conflict over resources and promotions, political struggle
often replaces community.
The larger the role of the chain of command in the system, the more the equality
and freedom that are necessary to community are undone. This produces a nasty feedback
loop. As the power of community spirit is stretched thin, the chain of command becomes
more prominent, and sense of community declines further.
Liberating the Spirit of Enterprise
The more machines take over routine work and the higher the percentage of knowledge
workers, the more leaders are needed in the organization. The work left for humans
involves innovation, seeing things in new ways, responding to customers by changing
the way things are done. We are reaching a time when every employee will have take
turns leading. Each will find circumstances when they see what must be done and they
must influence others to make their vision of a better way a reality
To create room for everyone to lead when their special knowledge provides the key
to the right action we must move beyond traditional concepts of hierarchy. To become
lean and mean is not enough. In the times to come, leaders must find ways to replace
hierarchy with indirect methods of leadership that allow greater freedom, lead to
more accurate allocation of resources and provide a stronger force for focus on the
common good. Where do we find the models for this new form of leadership?
The organizations that first hit the wall of complexity and thus first had to invent
the institutions to distribute leadership and power were the largest organizations
we know of -- whole societies and whole nations. For this reason, the leaders of
corporations, non-profits, and even government agencies have much to learn from the
methods of leadership and control used by successful nations.
Centuries ago many nations reached the limits of direct leadership. Even with the
help of a brilliant set of ministers, the diversity of enterprises within a great
nation was simply too great for any king or dictator to run effectively. Every Western
European nation has long since given the free market a major role in its economy.
The nations in the Warsaw Block, who until recently persisted in running their nations?
economies with centrally controlled ministries, fell way behind in both wealth and
human happiness.
By freeing their nation's entrepreneurial spirit from the monopoly power of the party,
China's leaders have achieved double digit economic growth. After introducing freer
markets, South Korea, Chile, Singapore, Peru and Taiwan have all achieved astounding
economic growth. Can the same level of explosive growth in productivity and innovation
be available to leaders of corporations and non-profits who create institutions that
liberate the entrepreneurial energies of their people?.
In national economies, the free market seems to be an indispensable institution for
creating productivity and prosperity. According to Adam Smith, the free market acts
with an invisible hand to guide entrepreneurs pursuing their own selfish aims into
serving the needs of their customers and thus the common good. To the degree that
this is true, this automatic action of the market parallels the job of leaders and
thus makes their job easier. When national leaders establish an effective market
system, many entrepreneurial leaders arise to help them satisfy people's needs. The
job of effective national leadership goes from impossible to merely very difficult.
Market institutions provide feedback and control more accurate, detailed and locally
appropriate than any leader could hope to provide directly. By using institutions
that create a self organizing system, the leader indirectly motivates and inspires
followers to find the most efficient and effective ways in which they can serve the
larger
community or group.
Internal Markets
Early in the era of AIDS, The New York Blood Bank asked DuPont's Medical Products
Department for help in tracking the history of every pint of blood it distributed.
They needed a massive data base system to be developed in
ninety days.
Normally, The Medical Products Department supplied the blood bank with blood analyzers,
not computer software. But the blood bank was a good customer and desperate to prevent
needless HIV infections. So the Medical Products people sought help from their departmental
and corporate information technology staffs. Neither could deliver within the 90
day window.
According to the rules of bureaucracy, the Medical Products account executive had
done all he could for his customer. But he had heard of a very special small information
technology group within DuPont's huge fibers business.
The Fibers Department made fibers for textiles, carpets, and industrial uses like
tire cords. Within it , Information Engineering Associates (IEA) had recently been
formed to exploit CASE tools, a new technology for writing software faster. They
had previously solved a problem very similar to the New York Blood Bank's problem
of
tracking the history and quality of every pint of blood: they had built a database
to track the history and quality of every bobbin of KevlarÆ fiber as it moved
through the plant in Richmond.
According to the rules of bureaucracy, a staff group from one division is not supposed
to do major jobs for other divisions. But this was an emergency, so IEA got the job.
They delivered the blood tracking database within the ninety day deadline and Medical
Products delivered a service that far exceeded a major customer's expectations. Breaking
the rules of bureaucracy saved lives!
IEA as a Third Choice for Information Technology
In the diagram above note that the user in Medical Products got better service because
they had more choices of internal vendors. As IEA's reputation spread throughout
DuPont, they found themselves creating a ground water database to track radiation
in the ground water in the test wells around DuPont's nuclear materials production
site at
Savannah River. When they succeeded again in 90 days, groups all over DuPont wanted
their services.
Soon IEA's success began to be a problem. The Fibers Department paid their salaries
while other departments used their services, and the management of Fibers began to
complain. A creative leader in the corporate finance department saw the chance for
indirect leadership, and created a system that made it easy for others to pay for
the
service they received. As he put it, "Corporate tradition won't let a staff
group like you be a profit center, so I have arranged for you to be a 'negative cost
center.'" IEA went from being a staff group supposedly serving only Fibers to
being an "intraprise" (an internal enterprise) with clients throughout
DuPont. As the result of one leader changing the rules, businesses all over DuPont
began getting better information technology service.
While other information technology groups in DuPont were downsizing, IEA grew to
120 employees. The new technology spread rapidly across the organizational boundaries.
Lives were saved and customers amazed. Serious safety problems were brought under
control. This was a result of leadership -- the direct intrapreneurial leadership
of the IEA team and the indirect leadership of the finance department who created
the conditions in which IEA could bring their talents to wherever they were most
valuable and be paid for doing so.
From monopoly staff services to free-market insourcing
A debate rages between proponents of the efficiency of centralized service and those
who believe that decentralization of functions will create greater responsiveness
to divisional needs. But these two solutions are merely alternative flavors of bureaucracy
and miss the larger point. Whether centralized or lodged in the divisions,
services still have a monopoly over the customers they serve.
Centralized Staff Service Decentralized Staff Service
Neither solution uses the discipline of choice; their proponents merely argue over
who should be in charge of the monopoly. Learning from the success of free enterprise
and pioneering examples like IEA, information age leaders will change the terms of
the debate from centralization vs. decentralization to monopoly vs. user choice.
Consider the Forest Service's technical service function. which was available from
two technical service centers, each with a monopoly in its own territory. Customers
in the 127 National Forests were complaining about the service. Senior leaders could
have intervened directly by defining acceptable service standards or changing the
leaders of the technical service centers. They could have broken up the centers and
put small service units in each region or even in each forest. Instead they used
a much simpler and more effective form of indirect leadership: they changed the rules
so users in the forests could choose between the two technical service centers.
Once users had choice, the centers got honest and compelling feedback. Without having
to be told what or how, they transformed themselves into cost-effective, customer-focused
technical service organizations. Simply giving
customers choice provided a stronger force for customer focus than decentralization
would have and at the same time preserved all existing economies of scale.
Choice Between Two Internal Providers
We call the system based on free choices between alternative internal suppliers the
free intraprise system (short for intra corporate free enterprise). An advanced free
intraprise organization has a structure much like that of a virtual organization.
Both have a small hierarchy responsible to the top leaders for accomplishing the
mission. The main businesses in both kinds of organization buy the bulk of the components and services
that create value for their customers from suppliers. The difference is this: in
a virtual organization those suppliers are outside firms, and in an free intraprise
organization many are internal "intraprises" (intra corporate enterprises),
controlled by the freenternal market but still part of the firm.
James Brian Quinn points out that what most everyone does at work is to provide a
service. Whether they provide market research, maintenance, engineering design or
clerical work, these are services that can be defined and bought and sold. James
Brian Quinn suggests this points to outsourcing them. The biggest advantage of outsourcing
is dealing with resources through a market with choice rather than the monopoly structures
of a chain of command. This same advantage can be obtained without firing many of
the employees and giving outside firms who also serve competitors key skills and
competencies.
In the organizations of the future, most employees will work in intraprises that
provide services to the core businesses. The core businesses will be run by a small
groups of line managers who buy much of the value that is added by their businesses
from internal intraprises.
Virtual Organization Free Intraprise Organization
Notice that in the virtual organization above, the rectangular line organizations
buy from the enterprises represented by circles, all of which are outside the boundary
of the organization. In the free intraprise organization the rectangular line organizations
are buying from both intraprises inside (dark ovals) and outside firms (white ovals).
Free intraprise provides the core discipline for the horizontal networked organizational
form we are all seeking to build. It allows senior leaders to project strategic intent
through a small hierarchy without creating much bureaucracy. It allows them to indirectly
shape the direction of the intrapreneurial leaders whose teams are hired by line
managers reporting to them. Free intraprise creates opportunity for the large numbers
of intrapreneurial leaders in the many intraprises that make up the network supporting
those assigned to carry out the strategic intent.
If you had the task of trying to enliven a command economy like that of an old Communist
nation, you would get nowhere by telling local party leaders to take more risks or
by training the managers in the central ministries to be more empowering. To crack
that bureaucracy, the leaders of those nations had to allow entrepreneurs to compete
with the state owned monopolies. Similarly, to cure corporate bureaucracy, training
managers in empowerment is not sufficient. Intrapreneurial teams must be developed
to offer services that compete with the functional and staff monopolies. Free choice
between different providers will sort out what works to serve the mission and values
of the organization.
Leaders can use free market choice inside the organization to achieve many of the
benefits nations achieved when they liberated the entrepreneurial spirit of their
people by creating free market institutions. They can create a self organizing network
that spreads learning and capabilities across organizational divides without the
need for direct senior leadership intervention or even direct inspiration. They can
create a feedback system that sorts out what internal services are effective without
having to evaluate and decide themselves.
To establish a free intraprise system, leaders
will:
Allow choice between several internal suppliers of services and components.
Establish right of employees and teams to form an intraprises.
Protect intraprises against the efforts of former bureaucrats to reestablish their
monopolies by political means.
Establish accounting systems that support free
intraprise.
As organizations move towards indirect leadership, the key role of senior leadership
is to increase their people's choices in ways that still focus the organization on
its mission. Internal markets provide a way to be sure everyone's contributions to
that mission are cost effective without relying on the accuracy of appraisal from
above. For many leaders it is difficult to turn from direct intervention in the businesses
of the corporation to creating conditions which empower others to address those issues.
Indirect leadership takes a little getting used to. But what greater legacy than
the liberation of an organization to a higher level of productivity, innovation and
service.
Creating space for more leaders follows three stages, each characterized by a view
of the organization.
Phase I: Organization
as hierarchy.
The key tool:
Delegation
Phase II: Organization
as community:
The key tool:Vision
& Values
Phase III: Organization
as economy:
The key tool:Free
intraprise, regulations, taxes, subsidies, education and effective strategy and leadership
of core businesses.
The organizations of the future will be structured from many smaller interacting
enterprises, more like the market structure of a free nation than that of a totalitarian
system. Each of these enterprises will require leadership. The new organizations
will be pluralistic to the core, preferring conflict between competing points of
view and the struggle of competing suppliers to the illusory security of bureaucratic
command and internal monopolies of function. The power to make fundamental work decisions
-- such as what to do and whom to do it with -- will continue to be divested by the
hierarchy and gradually distributed to smaller, self-managing groups who make those
decisions together.
There is so much emphasis today on the leader's role in vision and values that the
leader's role in creating systems that support and guide liberty is often ignored.
Once we have gotten good at defining and communicating vision and values, liberation
of potential leaders is the next critical step in creating an organization with many
leaders.
As the complexity of any organization reaches beyond the grasp of direct leadership,
the leader's central role becomes contributing to the corporate culture and corporate
institutions that make freedom work-- that create a freer society within his or her
organization. This freer society will be based on values with which we are all quite
familiar, values such as respect for every person and their opinions, freedom of
choice, speech and assembly, fairness and justice. The role of senior leadership
will then be akin to the role of the best kind of government of a free nation. While
listening to their followers, they will be not so much players or even coaches as
designers of them game that brings out the best in others. When they have done their
job of indirect leadership well, the people say, "We did it ourselves."
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