Ask a group of your colleagues to describe the distinguishing characteristics of your company, and few are likely to mention adaptability and inventiveness. Yet if you ask them to make a list of the crafts at differentiate human beings from other species, resilience and creativity will be near the top of the list. We see evidence of these qualities every day - in ourselves and in those around us. All of us know folks who've switched careers in search of new challenges or a more balanced life. We know people who've changed their consumption habits for the sake of the planet. We have friends and relatives who've undergone a spiritual transformation, or risen to the demands of parenthood, or overcome tragedy. Every day we meet people who write blogs, experiment with new recipes, mix up dance tunes, or customize their cars. As human beings, we are amazingly adaptable and creative, yet most of us work for companies that are not. In other words, we work for organizations that aren't very human.

There seems to be something in modern organizations that deplete the natural resilience and creativity of human beings, something that literally leaches these qualities out of employees during daylight hours. The culprit? Management principles and processes that foster discipline, punctuality, economy, rationality, and order, yet place little value on artistry, nonconformity, originality, audacity, and élan. To put it simply, most companies are only fractionally human because they make room for only a fraction of the qualities and capabilities that make us human. Billions of people show up for work every day, but way too many of them are sleepwalking.  read more »

Initiative, creativity, and passion are gifts. They are benefactions that employees choose, day by day and moment by moment, to give or withhold. They cannot be commanded. If you're a CEO, you won't get these gifts by exhorting people to work harder, or by ordering them to love their customers and kill their competitors. You'll only elicit these capabilities when you start asking yourself and your colleagues: What kind of purpose would merit the best of everyone who works here? What lofty cause would inspire folks to give generously of their talents?

A moral imperative can't be manufactured by speech writers or ginned up by consultants. It can't be cobbled together in a two-day offsite. Rather, it must grow out of some genuine sense of mission, possibility, or outrage. A moral imperative is not something one invents to wring more out of people. To be regarded as authentic, it must be an end, not a means... Beauty. Truth. Love. Service. Wisdom. Justice. Freedom. Compassion. These are the moral imperatives that have aroused human beings to extraordinary accomplishment down through the ages.  read more »

Hierarchies are very good at aggregating effort, at coordinating the activities of many people with widely varying roles. But they're not very good at mobilizing effort, at inspiring people to go above and beyond. When it comes to mobilizing human capability, communities outperform bureaucracies. This is true for several reasons. In a bureaucracy, the basis for exchange is contractual - you get paid for doing what is assigned to you. In a community, exchange is voluntary - you give your labor in return for the chance to make a difference, or exercise your talents. In a bureaucracy you are a factor of production. In a community you are a partner in a cause. In a bureaucracy, "loyalty" is a product of economic dependency. In a community, dedication and commitment are based on one's affiliation with the group's aims and goals. When it comes to supervision and control, bureaucracies rely on multiple layers of management and a web of policies and rules. Communities, by contrast, depend on norms, values, and the gentle prodding of one's peers. Individual contributions tend to be circumscribed in a bureaucracy -marketing people work on marketing plans, finance people run the numbers. In a community, capability and disposition are more important than credentials and job descriptions in determining who does what. And where the rewards offered by a bureaucracy are mostly financial, in a community they're mostly emotional. When compared with bureaucracies, communities tend to be undermanaged. That, more than anything else, is why they are amplifiers of human capability.  read more »

Although there are no ranks or titles at Gore, some associates have earned the simple appellation "leader." At Gore, senior leaders do not appoint junior leaders. Rather, associates become leaders when their peers judge them to be such. A leader garners influence by demonstrating a capacity to get things done and excelling as a team builder. At Gore, those who make a disproportionate contribution to team success, and do it more than once, attract followers. 'We vote with our feet," says Rich Buckingham, a manufacturing leader in Gore's technical fabrics group. "If you call a meeting, and people show up, you're a leader." Individuals who've been repeatedly asked to serve as tribal chiefs are free to put the word "leader" on their business card. About 10% percent of Gore's associates carry such a designation. 

Despite the unprecedented freedom granted to associates, Gore isn`t a company for slackers. Once a year, every associate receives a comprehensive peer review. Typically, data is collected from at least 20 colleagues. This information is shared with a compensation committee comprising individuals from the employee's work area. Each associate is then ranked against every other member of the business unit in terms of overall contribution. This rank ordering determines relative compensation. While the list isn't published, people are told in which quartile they rank. Seniority yields no dividends in Gore's compensation system. For example, an experienced business leader might be paid less than a PhD scientist. The formula is unblinking: the more you contribute the more highly regarded and rewarded you will be. Consequently, most associates feel pressured to take on more rather than less. Critically, though, this pressure doesn't come from a whip-cracking boss, but from one's own teammates.  read more »

Over the past 50 years, the New York Stock Exchange has outperformed most of the companies on the New York Stock Exchange. Why? Because markets are better at allocating resources than hierarchies. Hierarchies are very good at applying resources, laying out plans, sequencing activities, and meeting deadlines but they're lousy at allocating resources or, more specifically, at reallocating resources from old strategies to new strategies.

There is another, more general limitation to our shopworn management principles. While ostensibly they serve the goal of operational effectiveness, they minister to a need that is perhaps even dearer to top management's heart: predictability. One can fairly describe the development of modern management as an unending quest to regularize the irregular, starting with errant and disorderly employees. Regularity (achieved through standards, controls, plans, and procedures) makes management's job easier. It helps executives recognize and correct deviations when they occur. It allows business leaders to make predictions and then stick to them. It reduces the chance that middle managers will be caught out by their superiors. In other words, it helps the bureaucratic class maintain its self-comforting illusion of control. In the bible of modern management, "no surprises" is the first commandment.

Increasingly, though, we live in an irregular world, where irregular people use irregular means to produce irregular products that yield irregular profits. For example, while one can imagine a highly disciplined product development process yielding the "son-of-iPod," a line extension within Apple's family of iconic music players, it's unlikely that a rigid, mechanistic process would have ever hatched the iPod itself. In the 21st century, regularity doesn't produce superior performance... Of course, deviations from the norm can destroy value, as when, for example, they impair product quality. Nevertheless, an organization that worships regularity with a single-minded devotion is likely to have trouble distinguishing between value-destroying irregularities and value-creating irregularities. The risk is that management systems designed to promote alignment and consistently end up culling our variations of all sorts - the good and the bad. With exactitude and invariability fast losing their power to generate above-average returns, companies are going to have to learn to love the irregular.  read more »

Why, exactly, is the Internet so adaptable, innovative, and engaging? Because:

• Everyone has a voice.
• The tools of creativity are widely distributed.
• It's easy and cheap to experiment.
• Capability counts for more than credentials and titles.
• Commitment is voluntary.
• Power is granted from below.
• Authority is fluid and contingent upon value added.
• The only hierarchies are "natural" hierarchies.
• Communities are self-defining.
• Individuals are richly empowered with information.
• Just about everything is decentralized.
• Ideas compete on an equal  footing.
• It's easy for buyers and sellers to find each other.
• Resources are free to follow opportunities.
• Decisions are peer-based. 

This may not be a detailed spec for a 21st century management system, but I doubt that it is far off.  read more »

In the pursuit of efficiency companies have wrung a lot of slack out of their operations. That's a good thing. No one can argue with the goal of reducing inventory levels, reducing working capital, and slashing overhead. The problem, though, is that if you wring all the slack out of a company, you'll wring out all of the innovation as well. Innovation takes time to dream, time to reflect, time to learn, time to invent, time to experiment. And it takes uninterrupted time - time when you can put your feet up and stare off into space. As Pekka Himanen put it in his affectionate tribute to hackers, "the information economy's most important source of productivity is creativity, and it is not possible to create interesting things in a constant hurry or in a regulated way from nine to five."  read more »

While the folks in R&D and new product development are given time to innovate, most employees don't enjoy this luxury. Every day brings a barrage of emails, voice mails, and back-to-back meetings. In this world, where the need to be "responsive" fragments human attention into a thousand tiny shards, there is no "thinking time." And therein lies the problem. However creative your colleagues may be, if they don't have the right to occasionally abandon their posts and work on something that's not mission critical, most of their creativity will remain dormant.

Every business is successful until it's not. What's disconcerting, though is how often top management is surprised when "not" happens. This astonishment, this belated recognition of dramatically changed circumstances, virtually guarantees that the work of renewal will be significantly, if not dangerously, delayed. 

Denial follows a familiar pattern. Disquieting developments are a first dismissed as implausible or inconsequential, then rationalized as aberrant or irremediable, then grudgingly mitigated through defensive action, and then finally, though not always honestly, confronted. 

Twenty years ago we started sending our young people to Japan to study Toyota. They'd come back and tell us how good Toyota was and we simply didn't believe them. We figured they'd dropped a zero somewhere- no one could produce cars with so few defects per vehicle, or with so few labor hours. It was five years before we acknowledged that Toyota really was beating us in a bunch of critical   areas. Over the next five years, we  told ourselves that Toyota's advantages were all cultural. It was all about wa and nemawashi  - the uniquely Japanese spirit of cooperation and consultation that Toyota had cultivated with its employees. We were sure that American workers would never put up with these paternalistic practices. Then, of course, Toyota started building plants in the United States, and they got the same results here they got in Japan so our cultural excuse went out the window. For the next five years, we focused on Toyota's manufacturing processes. We studied their use of factory automation, their supplier relationships, just-in-time systems, everything. But despite all our benchmarking, we could never seem to meet the same results in our own factories. It's only in the last five years that we've finally admitted to ourselves that Toyota's success is based on a wholly different set of principles - about the capabilities of its employees and the responsibilities of its leaders.