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.”
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
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.
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
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.”