Challenges of American and European Companies

(Alain Gauthier’s Interview in NSI)

Western companies seem to go trough a restructuration every two or three years. Are there common characteristics among say, American and French companies?

Most Western companies are still organized in a hierarchical, vertical way, although a number of them have gradually delegated some decision making closer to the customer and the employees. In the face of economic downturn, market changes and increasing international competition, both large American and European companies tend to react by recentralizing and restructuring, i.e. weeding out less profitable activities and reducing overhead costs. The number of lay-offs are more spectacular in the U.S. than in France because workers are less protected by American laws, but the trend is the same. The emphasis has been put on productivity and return on material assets, considering people mainly as costs. And it is doubtful that much learning has accrued in the process: the next restructuring effort looks pretty much like the previous one and will likely produce the same type of outcome: further need for restructuration!

What are the limits of this organizational “mindset”? If it is inherited from the easy growth years, how can it be still valid  in the 90’s that are characterized by much uncertainty?

The mindset that underlies many restructuring efforts is directly linked to a mechanistic view of organization which culminated with Fayol and Taylor, but it is still very much alive today among top and middle managers. In spite of the progress made in continuous quality improvement and participative management, the organization is still considered as a machine producing value for its shareholders. Customers and employees are really only means to this end, even if they receive more attention from management today. In spite of all the rhetoric about people development, only very few organizations truly attempt to reconcile the long-term interests of the company  and of the individual employee.

The human factor has progressively imposed itself as the key factor for success in the management literature. How did it happen?

It is mainly attributable to a number of gradual shifts in the economy: from mass production to mass customization, from production to service, from a majority of blue- or white-collar workers to growing numbers of “gold-collar” or knowledge workers. Creative, self-realizing people working collaboratively can indeed  make a huge difference in a firm’s success. Management literature tends to focus on the emerging trends and the leading edge organizations; but what the authors describe is far from the way most people are actually treated in most organizations, especially the large ones.

In your collaboration with Peter Senge for “The Fifth Discipline” how did you arrive at your fairly radical views on management, the organization and their relationship with their environment?

One of the starting points was the observation that many of the “excellent” companies of the early 80’s were not doing so well ten years later: they were obviously not learning as much as they needed to. And a study by Royal Dutch Shell showed that the average life of large corporations was less than 40 years, i.e. half of the human life. We then started looking at the characteristics that emerging learning organizations seem to have in common. And that lead to the conceptualization of the five disciplines, in the course of some action-research work with a few of these medium to large organizations.

Practicing the five disciplines leads to becoming a learning organization. But don’t all organizations learn in a way? They certainly accumulate knowledge, often beyond the individual brain’s capacity to absorb it.

Individual or organizational learning requires indeed new knowledge, but it does not stop there. Some unlearning is also needed, such as letting go of habitual thinking or mental models that are no more adequate to the new realities. And the real test of effective learning is breakthrough ideas, new behaviors and new actions. The cycle of learning therefore includes building a new frame, theory or plan, experimenting or acting on it, reflecting on the results and reframing or replanning if the results do not match expectations.

It involves challenging prevailing world views and modifying  standard operating procedures, at an individual, team and organizational level.

Let us review the five disciplines, starting with the fifth: systems thinking. What is it about?

Systems thinking focuses our attention on the inter-relationships of the parts within the whole, and on the trade-offs between short-term and long-term. It is the opposite of mechanistic or reductionistic thinking which focuses on the parts through separation and analysis. Systems thinking looks at organizations as purposeful living systems that relate both to the larger systems which they serve or are a part of – customers, communities, environment ­– and to their component systems – employees, work units, etc. Systems thinking also offers a visual language which enables us to go beyond linear thinking by mapping circular cause- and-effect relationships in loops. Finally, it underlines the importance of assuming responsibility for our current reality: we had a large part in creating it, sometimes inadvertently; therefore, we also have the capacity to change it by becoming more conscious on the unintended consequences of our actions!

Identifying systems, building causal loop diagrams, all this takes time. And we don’t have time!

This is indeed one of the key challenges of managers, particularly in times of crisis or rapid change. But it is this very “business”, this propensity to act fast that tend to result in poor decisions and cause  rework and waste. Team reflection from a systems viewpoint before

deciding and when reviewing results is an investment of time that has assured payback in the medium term. It is, however, counter-cultural, particularly in organizations with a strong bias for action.

Let us turn now to personal mastery. What is it?

Working toward greater personal mastery could be translated as  gaining clarity on one’s values and vision, as well as identifying and overcoming self-imposed limitations, in order to realize more of one’s potential at work and in one’s life in general. It involves bringing more of oneself to work everyday and achieving results with an economy of means.

Does this discipline really belong in an organizational learning framework, or should it just be practiced on evenings or week-ends, in personal development activities?

Personal mastery is what enables and sustains individual learning; and individual learning is indispensable to team and organizational learning. Why would an individual want to go through the discomfort of unlearning and learning if he or she were not internally motivated by a personal vision and not aware of what habitual behavior may get in the way? And how can I help build a truly shared vision without  reflecting personally on how it fits into my vision for my own life over the next few years? Learning organizations create the conditions for people to develop their personal mastery at work, while recognizing that it is the individual’s primary responsibility to practice that discipline.

The third discipline “surfacing and challenging mental models” is probably the one that leads to the most radical personal changes.

Yes, it usually leads to a shift in one’s perspective when it is practiced with an open mind. For example, a leader discovers that it is critical to help others clarify their own vision of what the    organization should be and do, not just to have a vision of one’s own and “sell it” to them. To become a “midwife” of others’ visions or a “gardener” of people represents a substantial shift for managers who have been trained in the tradition of command and control, where they are expected to have all the answers. And challenging collective mental models can be equally powerful for a team or a whole organization; it requires practicing the art of dialogue, i.e. taking the time to have in-depth conversations without trying to solve the problem immediately.

Could you give us an example where this has been particularly useful to a senior management team?

I facilitate a number of retreats for healthcare organizations in North America. And one of the most dramatic shifts that I have observed among hospital leadership teams is to acknowledge that their institution is not only in the acute care business but should also promote health through education and prevention. It induces a very different identity for the hospital and leads to establishing new and collaborative relationships with other community organizations such as employers and schools.

The fourth discipline seems to be better known and practiced: which company has not already endeavored to define its mission and its “project” as an organization? How is “building a shared vision” any different from these efforts?

Before I left France in 1985, I did facilitate as a consultant the elaboration of a mission and “projet d’entreprise” in several organizations. There are several key differences for me between these efforts and the work I do now: a shared vision starts with the expression of individual visions and values throughout the organization; its elaboration is a “messy” process that requires a number of iterations up, down and across the organization; a shared vision is usually dated (e.g. five years from now); the main gaps between vision and reality are evaluated explicitly in order to set strategic priorities for the next year or two on the way to realizing the vision; finally both vision and creative gaps are internalized by a large number of people in the organization so that they can act in collaborative and convergent ways, without cumbersome planning and control procedures. The vision is thus much more than a piece of paper – the vision statement; it is alive and well in the heart and mind of most people in the organization.

The last discipline – team learning – seems a  lot less evident at first. What is it about?

Most decisions in a company are either made, reviewed, criticized or implemented in teams. Both formal and informal teams are the foundation of the organization and team learning is a necessary condition for organizational learning. Individual learning also happens most likely in teams, when team members are willing to let go of defensive routines and show enough curiosity and humility to

inquire into what others see that they don’t see themselves. But it does not come naturally to most people because we have been trained to advocate and defend our positions; team learning requires a conscious effort to monitor how well the team is doing on that score, for instance through a ten-minute team evaluation at the end of each meeting. Another vehicle for team learning is the use of management practice fields like board games or computer simulations; each team member has an opportunity to sharpen their learning skills in a risk-free environment similar to a play rehearsal or football practice.

Which companies have you encountered that practice these five disciplines? Are their results better that those of their competitors?

There is no such thing as a learning organization model, since it is a moving target by definition: there is always more to learn and better ways to do it. However, a few organizations show at least some learning characteristics: Motorola, Shell, Federal Express and Hewlett Packard among large international corporations; Gortex, Hermann Miller, Harley Davidson, GSI and a number of other medium-size companies. And their long-term results tend to be significantly better than their competitors, including their ability to attract and retain talented and motivated individuals. They demonstrate their ability to build a sustainable competitive advantage: the capacity to learn better, deeper and faster, across the organization.

Where should a company start among the five disciplines ? Should it come from top management ?

Ideally it is best to start with a truly shared vision because it creates a field within which learning makes sense and is encouraged.

But all disciplines are inter-related and you can start really with anyone of them, in any order. The key is to build on the most receptive parts of the organization and to relate their application to the company’s strategic imperative. It is best if senior management is involved in the beginning: at best, to start practicing the disciplines themselves and thus give credibility to the efforts needed – behavior and actions speak louder than words; at the minimum, to champion and protect experiments within the organization; in both cases meaningful results need to be generated over time in order to attract the “fence sitters” to the critical mass formed initially by the “active minority”. The learning organization cannot happen by decree; but it certainly can use all the encouragement and example from up high that it can get, in order to overcome the deeply entrenched habitual behaviors and cynicism that prevail in many organizations.

About Alain

Alain Gauthier’s current focus as an author, consultant, facilitator, educator, and coach is on evolutionary co-leadership development and collective learning as prerequisites for cultivating deep and lasting change in and across organizations. A graduate from H.E.C. (Paris) and an M.B.A. from Stanford University, he has served over the past 45 years a large variety of client organizations in Europe, Japan and North America. He first worked as a senior associate of McKinsey & Company in Europe, then as a partner of a Paris-based consulting firm, and is currently Executive Director of Core Leadership Development and Founder of the Global Transforming Ensemble, in the San Francisco Bay Area.
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