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Excellent Executive Coaching: Growing Your Business and Enhancing Your Craft.
EEC 410: The Living Organization - Coaching Leaders to Unlock Human Potential, with Norman Wolfe
00:26:55
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- [00:05]
A
We all want to better adapt to the modern organization, but what are the shifts from the mechanistic era of companies to the modern, more adaptive shifts of the modern organization? Let's ask Norman Wolf, who has studied this topic. Welcome to the excellent executive coaching podcast. I'm your host, Dr. Katrina Birous and today our guest is Norman Wolf. Norman, welcome.
- [00:44]
B
Thank you. It's lovely to be here. Thank you for having me, Katrina.
- [00:48]
A
Well, we're delighted to have you, Norman. You've written groundbreaking book called the Living Organization. So I'm also very excited about having you on the podcast. And the Living Organization emphasizes treating organizations as dynamic living entities. So how maybe explain to us how this differs from the traditional paradigm.
- [01:15]
B
Thank you. So the traditional paradigm, the way I characterize it, it's like a machine, but it's if to expand that a little bit more. Organizations were conceived as entities that take input and convert it to output. And inside that box, that conversion box, if you will, the goal is to make that conversion from inputs to outputs as efficiently as we possibly can. As organizations evolved or developed as what we call the modern day corporation, the role of the leader was to design that box, right? It's like, how are we going to take inputs and produce outputs? What should the outputs be, I. E. What the customer needs, what do we need to do that? What supplies do we need? And then inside the box is how do we manage this production line or this conversion process? And that comes down to what you might call defining the processes. What functions do we need, what roles do we need? And then within that paradigm, the people of the organization are really considered simply component parts. Right? I need three salespeople. I need, you know, 20 full time employees. I need, you know, of those 20, I need three salespeople and five engineers and four marketing people and three administrative people and a CFO. And they're just like parts to the machine. That's highly efficient. And if what you really want is pure efficiency, that's the best way to do it. The problem with that is in today's world, we need more than efficiency. We need resilience, we need adaptability, we need creativity, we need innovation, we need adaption to change. We need to be able to deal with uncertainty. These are characteristics that machines don't do very well. Machines create inputs and produce outputs very efficiently. On top of that, it falls to the leader to figure it all out, right? The leader or the leadership team, if you have really sets up the strategies or the, which is a way of saying the design of the machine and then the people have learned to be good components. I mean, that's what people want to pay for. So that's what we do. And we come into organizations as employees and we look to the leadership to tell us how to behave or what's necessary. That's the traditional paradigm. Very mechanistic, very logical, very rational, relatively easy to manage. If things are. If the environment is simple.
- [03:52]
A
Yes. And also if there's little change.
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B
Exactly.
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A
Environment, it's the assumption is things will be the same.
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B
That's right. And then in the days when this model was created, this paradigm was created, that was the environment. Right. We had fairly consistent. Well, let's just say the rate of change was about every decade or so. Right. People didn't really have a lot of education back then. So having them be guided into what they should do and how to do it made a lot of sense. Competition didn't come from, I mean, it was. The marketplace was, well, definable. Right. You didn't have an Amazon all of a sudden replacing a bookstores. Right. I mean, competition did not come from crazy places. But look at today's world. First of all, our employees are much more educated. Even if all you looked at was high school. The overall maturity of the workforce is much higher than it was back then. Environment changes rapidly, as you pointed out, and we can go on and on. The conditions are fundamentally different today. And if you look at the statistics, 70% of companies fail to execute their strategies and, and 70% of employees are disengaged. I concluded back in, well, almost two decades now that there was a fundamental flaw not in the knowledge or tools or methodologies leaders needed, but in the paradigm. The way we think about what we are doing, what our role is and how we frame the challenges. Okay, so that's the foundation, that's the old paradigm. Let me tell you what the new paradigm is. What if we thought of an organization not as a machine, but as an individual? Then the question becomes not how do I make the machine really efficient, but how do I make the individual very capable? Okay, so now you can begin to see how that frames my role as a leader and the challenges I face very differently. The goal is to have the organization be highly adaptive, collectively highly adaptive, highly resilient, highly creative. Right? And these are attributes we, I mean, think of it this way. Raising a child, what do I want for them? I want them to be creative, stand on their own, resilient, adaptive, to change, live in the world effectively. Right. Those are the same qualities we want in an organization.
- [06:23]
A
You know, that's a good comparison to have a child and to think of what we need to install like a culture.
- [06:31]
B
That's right.
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A
An organization.
- [06:33]
B
That's right. So that's what I set out to do. And, you know, I began with this hypothesis, and then I began to look for support that might say this is a reasonable way to look at it. And the basic principle, I said, is a collective of people that come together for a common purpose, give birth to a living being. That is the essence of the collective. Right. That, in fact, the collective actually does in fact, operate like an individual, like a person. That was my hypothesis. And I did some research. I did some research in. In the fields of group dynamics, which comes out of sociology, and I did some research in psychology. I did some research. And empirically, and the way I explain it is I just asked leaders to think of their, you know, sales department and their finance department. I say, describe the departments to me, and they will describe, you know, typically, sales are outgoing, expressive, they talk a lot. They're very outgoing Sale the finance department, they're much more rigid, they're much more color with inside the lines. And. And if you think about it, those are attributes we typically assign to people. So empirically, from sociology, there's support for this notion also. I began to realize that, you know, if you look at a department and you describe the character of the department, you take people in and out of that department, it doesn't really change the character a lot. I mean, you have to. You have to really go out of your way to change the overall character of the department. You have to make it a conscious effort. So the department isn't just an average of the individuals within it. The department itself has its own Persona, its own personality, its own belief systems. It's.
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A
And it's culture.
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B
It's culture, yeah. So I began to feel real supportive, if you will, in this hypothesis that I created. And then I began to develop a whole framework. I began to ask questions. Well, how does an individual create outcomes? And I created six principles around that. And.
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A
But I'm going to ask you a question, Norman. Okay. So the salespeople have one type of culture and. And what drives them, and the finance is another. Then you have the logistics. Still another. So how do you combine them into one living organization? Which was easy to do it with the mechanistic approach, but now how do you integrate?
- [09:14]
B
That's a great question. So when you think of collectives of people, it could be a team, it could be a department, it could be a company as a whole. Just, you know, we won't go into multinationals. Like, it's more complex if you think of each of those entities as a single individual. Just like the individuals within the sales department begin to adapt the normative behaviors of the collective, collectives within the larger collective, I. E. Departments within the company adapt the normative, or what we call the context that you might call it the culture of the organization as a whole. For example, part of my career was with HP. I spent 15 years with HP. I left as the executive in charge of the administrative organization for the sales region. So Fairly large organization, 17 branches and so forth. One of the things I observed at HP was HP had a certain HP way about it. In fact, it was called the HP way back then. And whether the subunits of HP all very different. The western sales region that I was part of, very different than the eastern sales region, you can feel the differences. But we were both part of hp and you can feel that. And so this notion of organizations as living entities also extends to. Organizations are living entities of living entities. Right? And so it becomes scalable, if you will. It becomes the principles you apply to a individual to make them effective. Apply to a collective of individuals, a group, a team. Apply to a collective of collectives. A department that's made up of teams applies to a company that's made up of departments. And again, it changes the way we think of it. Because now, as a leader, I don't have a hundred people working for me. I just have my five people, I. E. My departments. And I can think of managing the collective much more simply.
- [11:25]
A
Okay, so there. I need more explanation from five people. Okay, so there's different entities in different departments. So the leader leads his particular area. What's the connection with the overall entity?
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B
Let's see how I can explain that. When an individual becomes part of the collective, this comes out of group dynamics. They naturally, because of the innate need for belonging, the individual begin to adopt, take on the normative values and behaviors of the group they're within. So if I think of a department, let's say my sales department and my engineering department, my finance department, these are three entities. So if I, as the CEO, establish the normative behaviors of the organization, each department will begin to adopt those normative behaviors. So the western sales region of HP had a very different personality than the eastern sales region, but we all lived within the collective called eula. Packet.
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A
Okay, can you give us a concrete example?
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B
Yeah. So I'm working with a client now who's taking their organization through a major transition Strategic transition. The sales department is. They won't call the sales department. So it's an agricultural commodity business and they have what they call the merchandisers. The merchandisers are the ones that buy grain and sell it. And the profit comes from the arbitrage between what you buy and what you sell. Right. It's a futures contract.
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A
Right. Okay.
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B
They also have a organizations you can think of as branch offices. They call them country terminal operations. And these are operations out by, close to the farmer that deliver the grain to the company and the company ships it back to their export terminal for delivery to the customer.
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A
Okay.
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B
The profit traditionally has been based on the effectiveness of the merchandisers doing the arbitrage and the terminal operations have been in support of the merchandisers. So, you know, you can think of hierarchy within an organization. Merchandisers are the revenue generating, profit generating part of it in the operations. Bring in the grain, they fulfill the contract, so to speak.
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A
Right.
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The new strategy is to shift that because when you're in that arbitrage mode, you're really living in a world of commodity business. Right. So it's really pricing focused.
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Yes, pricing, focus, trading, trading.
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And it's really tough business. They are shifting to more of a relationship based model. They recognize if they get the grain from the farmer, they have higher margins. So the goal is to start to build long term relationships with the farmer to take them out of the commodity business and put them into the solution, relationship business with the farmers.
- [14:44]
A
So commodity business is highly volatile. It goes up and down with the market while having a relationship with those that produce the grain. It's a more long term situation.
- [14:56]
B
Exactly right. So that's the strategic shift. Now how does the. So I was talking with the CEO and he was struggling with how do I get all these terminal operations and the merchants and change that thing? And I said, you're making it too complicated. You've got two people, you've got, and let's just give them names, you've got merchandise and let's call it merch. So you got merch and you got ct. Just two people. How would you like those two people to behave?
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A
I see, so you translate it to behavior. Okay.
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B
Right. How would you like those two people to behave and how can you communicate to them what your expectations are? What we're doing is where we recognize. One of the principles in the living organization framework is that outcomes is a function of behaviors, but behaviors is driven by context. So, okay, if the leader learns how to set the context for the collective, they are creating natural behaviors to produce the outcomes you want. So by asking the question, what is it? That's what is Mercury doing now? And what is the story or the narrative behind how they make decisions the way they do? That's the context. What is the context behind how CTE is behaving? Let's define the behaviors we want, and then let's create a new narrative around that to support those behaviors. And then we can build what we call scaffolding, support structures, incentive plans, performance goals, whatever. But it's driven by the reframing of the context that drives the behaviors of these two people. Now, once you change the behaviors of those two people, that is the collectives, you're changing everybody's behavior underneath it.
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A
I see.
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B
It's a methodology for instilling a culture, right? The HP way was a cultural norm, that it was a contextual way of thinking.
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A
So tell our listeners the HP way, because everyone knows Harrod Packard. So tell us a little bit the culture there.
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B
Well, the culture around HP was, oh, gosh, it's been so long. I used to know it by heart. But generally speaking, it was an environment where it was. You were given guidelines, operational guidelines, not specific. You were given objectives to run by, not specific data. There was a lot of freedom within HP to be creative, but there were also guidelines for them. And as long as you played within that guideline. So the HP way had to do with certain guidelines around financial, certain guidelines around innovation, certain guidelines around customer orientation. For instance, I remember1 was HP always stood for expanding. It was basically an innovation guideline. The goal was whatever your field of interest is, if it was computers, if it was medical devices, the goal was to always advance the field you were involved with through technology. You know, when somebody took over hp, they. They tried to capture that and they tagline HP invent. But creating taglines and vision statements and doesn't capture the energy. The HP Way is a. One of the things I believe coming out of HP is the realization that organizations are driven by a field of energy. HP way was a field of energy. Nobody told me what the HP way was sort of like. I stepped into this collective field and by osmosis, I kind of picked up what the HP way was all about. And you just behaved that way. That's what you did. This is the way we behaved around here over the years. What I've tried to do is break that down into how do you form that, how do you create that field of energy? And a lot of it has to do with the stories we tell and the narratives we hold and the behaviors we support or don't support. That's what I began to put into a package, if you will, to take all these principles and ideas and experiences and put them into where a leadership framework that other leaders can learn how to do consciously, not by accident.
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A
Yes. And many organizations struggle to align individual goals with broader organizational objectives. Can you comment on that?
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B
Yeah. This whole issue of alignment is really a critical one. And when you think of an organization as a machine, it's logical to think about alignment as a top down process of assigning people the goals and they should just naturally adopt them. If you're raising a child, telling a child what to do when they're young is pretty straightforward, relatively speaking. But as they get older, you've got to help them want to do what you want them to do. Right. They start to get a sense of agency. In today's world, you want people to have a sense of agency, but you want them to have a sense of agency centered around the goals of the organization. So we have to shift the focus. And this is one of the key skills leaders need to learn how to do. And there's a whole other conversation we have about the changing role of leadership, but the goal is we created what we call contribution agreements. I'll use that as a framework to explain what I'm saying. In the traditional set, like I said, leader decides what the objectives are, the leadership breaks that down into certain department goals, they hand it down and it cascades on down. It's a top down approach. We take a different approach. We say, look, here's what the company is set out to do. This is our vision, this is our purpose, this is what we want to accomplish. This is the new way we want to be. I'm going to invite you to tell me how can you contribute to it.
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A
Ah, okay. So it's shift from top down to down up. In simple terms, yeah.
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B
Yeah. But again, you can't just simply do that. You got to recognize when you're dealing with people, there's an element of maturity involved. Are they mature enough to understand the complexity by which they're making decisions? So a big part of the living organization framework is helping leaders learn how to develop the maturity of the organization as a whole, which impacts the maturity of the individuals within it. Again, a lot more to talk about around that topic alone, but yes.
- [21:23]
A
I'm just going to ask you another question to shift a little bit because what you say, a lot of leaders at the top feel lonely. What's your advice with that?
- [21:35]
B
I'll quote One of my CEOs that said this exact phrase yesterday. He said, oh, I get it. I'm shooting myself in the foot by my own leadership style. And what I mean by that, in a top down approach and the machine approach. Right. The goal is efficiency. The most efficient way to do it is to set the framework and have the people execute what you design. That puts the burden on the leader to always figure it out. And the people fundamentally sit around and say, tell me what to do. That's my job. You tell me, I execute. As the world gets more and more complex, the burden on leaders to figure it out gets harder and harder and harder and they got nobody to go to. Lonely at the top. It's not only lonely at the top. From the point of view of I really can't share everything with somebody because now the metaphor going back to families I use is in the traditional paradigm, what you're doing is you're creating employees that are highly dependent on you and there's nobody else you can talk to. That's like raising your children. You get things done very efficiently in your family, but at the age of 35, your children are still living in the basement of your house because they never grew up. Now imagine leaders who focus on what we've been talking about, say developing the maturity and the capability of the organization as a whole and the employees within it. Now you've got people you can have conversations with, just like I can have a conversation with my 35 year old daughter now as Right. As an adult. Not like when she was 12 years old. Right. Of course, that's the shift that enables it. So the living organization is actually designed to take the burden off leaders, to have them share it. And that's what the CEO I was talking with yesterday and I are doing. He came at it from the point of view of succession planning. And I said, you know, the key to succession planning is you need people that you feel comfortable. You can turn over the complex challenges of running this organization to somebody else. That's really an issue of maturity, isn't it?
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A
Yes. And then of course they're closer to the market and probably could have better decisions anyway.
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B
Absolutely. If you look at a company like Haier Corporation, they are the pioneers in the application of these principles. Even though they didn't call it the living organization, they turned everything upside down. They, they have what they call micro enterprises, which are really no longer top down anything. The people who are closest to the customer are deciding what we should do as a company. It's a Complete frizzle.
- [24:14]
A
I have my last question because they're coming at the end of our podcast. Tell us about your latest book.
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B
So I wrote the Living Organization really as a trilogy. Initially, the first book was the explanation of the fundamental theory, what we've talked about today, the shift in the paradigm. But then the second book is how does a leader have to be? What skills does the leader need to be able to lead this new way? Because you don't raise your children using the same principles you do running a company, thinking of it as a machine. Right? So there's some new skills you need. So the second book we call Leading the Living Organization and it's a parable. It's a story about a CEO who's challenged with the typical challenges every CEO faces. And she calls on the advice of a consultant. His name is Merlin, her name is Catherine. And we go through this dialogue, conversation and through the various challenges she faces in first of all, overcoming an initial challenge of COVID hits and you know, the pivot they have to make and how do you get a company to pivot? And two departments are struggling to collaborate. So Marilyn comes in and helps her. And then she recognizes that the future is going to change and she's going to have to change with it and she's going to have to develop her organization. So now we go into the longer conversation about the six skills that the leaders needs to lead the living organization and develop them, set the context, develop the people, build a sense of community, and create an organization that's in service to its constituents. So that's the second book. It should be out, according to the publishers, around the first or second quarter of next year.
- [26:00]
A
Oh, great. Congratulations. I know writing a book is a feat. So where can people get a hold of you?
- [26:06]
B
Quantum Leaders is my website, www.quantumleaders.com Norman Wolf on LinkedIn or you can send me an email at nwolf n w o l f eantumleaders.com thank you very.
- [26:20]
A
Much to share your experience and your wisdom.
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B
And thank you so much for having me.
- [26:26]
C
Thank you for listening to the Excellent Executive Coaching podcast. You can subscribe to all Future podcasts@excellent executive coaching.com join us each Wednesday to learn more about the latest trends in leadership techniques and bring your coaching to the next level. To learn more about Dr. Burris CEO mastermind, use the contact form@excellentexecutivecoaching.com.