Harness the Collective Intelligence of your Staff

This is an article that I wrote following a presentation I made to the US Pharmaceutical Association on 'Building Credible Sales Projections'. I was inspired to write the article after discussions with a senior executive who felt very strongly that leadership meant making sure your staff knew who was boss and did what they were told. It's as relevant today as it was a few years ago....

I would like to preface this by pointing out - as I do in my web-site www.ExecutiveCoach.guru - that the percentage of employees reporting high levels of discretionary effort sits at just 18% globally, 19.2% in Canada and just slightly higher at 24.4% in the USA. Just think of the untapped potential in our midst. I hope you take away something of value from this article for your organization...

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Change, new challenges, and ideas have been my constant companions while sharing in the joys of working with a group of professional people who bring a wide variety of ideas and experience to their work”. This article is based on a talk I gave to a group of multi-national sales and marketing leaders at an international business conference held in Philadelphia, convened to explore experiences in integrating the efforts of marketing and sales.

The important assets of most firms are no longer plant and equipment, but the intangible, not easily quantifiable intellectual achievements of their star players. This is frequently reflected in market valuation, as observed by Economics Nobel laureate James Tobin.

In successful, modern “knowledge” based companies, Tobin detected an increasing ratio between the replacement value of physical assets and stock market value, something called ‘Tobin’s Q’ (see box - Measuring the Value of Talent).

Change is all around us, and always has been. However, change is quickening as the latest technology develops ever faster. No one can be confident that they ‘own’ a market niche - there is constantly someone out there looking for ways to beat you. In the race to remain competitive, we cannot afford merely to fill job slots with warm bodies. The challenge today more than ever, is to harness the intelligence and innovative problem solving skills of every single employee. This potential value cannot be demanded, it can only be volunteered.

Management has to create an environment where creativity and initiative flow freely.

Not so long ago in selling, the key to success was believed to lie in building a disciplined, conforming sales force that followed proven procedures. Times have changed, and few sales managers can be found today who do not insist that they encourage their representatives’ creativity.

Managers in successful companies today are quick to tell their subordinates that they are ‘empowered’ to stretch the guidelines, use their imaginations, take risks. We are fond of encouraging them with words such as ‘enterprising’ and ‘entrepreneurial’.

Loosening the reins can have exciting (and profitable) results - for you, your team and your company.

But how many of us ‘walk what we talk’? Much of our ‘walk’ tends to take the easy and comfortable path of yesterday. Thomas Kuhn (The Structure of Scientific Revolutions) through his famous ‘paradigm shift’ example showed that we even tend to dismiss new information, if it does not fit into our established view of how we think/perceive things ‘should’ work. Maintaining an environment where people will try new ideas that might benefit the company demands constant vigilance and self-questioning.

Yes, change is difficult to adapt to and it doesn’t get any easier as we get older. Here is an example, within my own experience, which brought home to me the fact that good intentions are not enough:

Our company produces insulin. We promote it to physicians who prescribe it for patients with diabetes, who have been taught to self-administer their insulin daily through subcutaneous injection.

When our company brought out an innovative new insulin delivery device, the NovoPen®, which enables patients to administer their insulin much more conveniently and accurately, with less discomfort on injection, we followed the traditional path of promoting it to doctors.

This exciting new product is geared to improving the freedom of patients with diabetes functioning at home or in the working world. The ‘pen’ was not seen as a hospital product - hospital staff, were not in need of devices that make it easier to administer injections.

One representative was not so accepting of this ‘clear’ product positioning. He suggested that if the pen was introduced to hospitals, this would increase our business overall.

Management reaction was to dismiss the idea. They objected to the risk of wasted effort and cost in introducing a product to a market for which it was not intended.

But this representative quietly went his own way. He identified the advantages of the ‘pen’ for hospitals, made sales and documented his success. This came to the attention of management, not through a chorus of objections from hospitals and physicians, but when a significant increase was detected, not only in the hospital business of this representative’s territory, but also a roll-out into retail pharmacy sales surrounding these hospitals. Hospitals, it turns out, are a cost-effective environment for the NovoPen®, and the positive spin-offs make the additional cost of distribution there justifiable.

Just about every sales manager can recount examples like this. Even the histories of companies with a high reputation for innovation such as 3M and Hewlett-Packard are littered with success stories by innovators who persevered despite management’s directives, not because of them.

When employees do offer suggestions and perhaps ask for advice, it is not uncommon to hear ‘we tried that one before’, ‘its contrary to company policy’. Those wanting to be innovative, typically have to follow through their hunches almost clandestinely. The few who haven’t given up the battle know they have to fight every inch of the way. These mavericks are a rare and valuable breed indeed.

Here are a few key points that stand out for me in unleashing the hidden value of your staff.

Why empower them?

We have first to accept the undesirable truth (to management) that management is not the font of all wisdom. As change quickens, it is less likely that managers, removed from the front lines of the business, will be aware of the latest conditions. Sales representatives, for example, are often better placed to sense the need for a change in tactics - even though management may pride themselves in making regular forays into the field.

Don’t you want your people to act as though they are intrapreneurs or entrepreneurs within the organisation? Forget the company; if this was their business, if they’d invested their life savings in their territory how would they operate? Would they look for new business opportunities? Would they conjure up new ideas to delight their customers? Would they set out to beat the competition, work long hours, try new strategies? You bet they would!

The very first step is to decide that you sincerely want your staff to act on their own initiative. Do your employees have it in them? Believe me, they have! Your employees can provide you with all kinds of experience and accomplishments. Some of the people I have worked with in Sales and Marketing for example, have had experience as Director of a hospital nursing department; Director of a local federal political campaign office; creator of a call reporting computer program; or they have effectively managed a household with children while holding down a full time job. Many employees today are highly intelligent, educated people.

Give them the tools

Knowledge is power. Employees can be creative if they have all the information they need. They should also know the parameters within which they are free to act - and when they will need permission. Give all staff business information, news of industry developments, the background to a new product or marketing strategy and corporate goals and objectives. I have seen management spend days thrashing out a new strategy, then, after presenting it to their staff in a one or two hour presentation, wonder why the employees don’t quite understand the new concept or appreciate the rationale behind it.

Management must give employees all they need. People who are given the same information that management have can appraise and evaluate it critically in the light of their own “hands on” knowledge and reach sound conclusions of their own.

‘Walk what you talk’

Standing idly by while staff act out ‘ill conceived’ decisions is about as hard as anything we are called upon to do. Yet this is what its all about!

The gap between perception and reality explains why top management is always urging subordinates to strike out in new and ambitious directions, when notoriously, employees will not. Maybe employees play it safe because that is the way to be safe in their company or department. Nobody likes to look foolish or to have ‘their’ project or idea torn to pieces or crammed in the garbage can. If you are persistently disappointed at your staff’s lack of initiative, try looking under your own hat first.

Employees, who feel that management is constantly looking over their shoulders, will not so much try to improve the business, as jump the way they think management wants them to jump. Trying to second guess your boss does not come within any definition of empowerment.

On the other hand, managers whose only need is to be kept informed are liberated to move their vision further out on the planning horizon. And confident employees learn by working through their decisions, while also feeling a strong sense of accomplishment and pride in presenting the final result. The growth and satisfaction benefits are strong for all concerned.

If you really want people to take the initiative, let them - and be prepared to live with the consequences, even if you don’t always like them.

‘Walking what you talk’ means to demonstrate consistently that you mean what you say. This includes every small, seemingly unimportant issue. Remember, if there are two people who think the same way, you only need one of them.

Give people the freedom to fail

Much tougher than standing up Monday morning and announcing that henceforth your employees are ‘empowered’ to make decisions, is creating an environment where they feel they have the power to go out and learn, make mistakes, find improvements; an environment where they will actually choose to make decisions and run with them. Not all brainwaves are winners, but if we don’t allow people to try, we will stifle future initiatives and progress.

Idea champions should be given leeway to experiment and reach their own conclusions. You will always have the final say, especially if your staff are doing something that is both unproductive and costly. Yet by short-circuiting the experiment too early you may win the skirmish while losing the longer-term battle to unlock the resources in your team’s minds. Allowing your sub-ordinates to make a mistake - even a mistake that has been made previously - allows them to see for themselves that it is unproductive and could turn out costly. If they are not blamed for it misfiring, they will have the confidence to try again.

Don’t insist that people turn to you for approval unless it really is necessary

Rather than pour cold water on the idea, ask questions. How will you avoid stepping on ...’s toes? How will you deal with …? Even if it has already been tried and failed, don’t dismiss the idea out of hand. Maybe circumstances have changed. The next time around, perhaps it will work. Either way, you will both have learned something.

‘You know, Tom tried this last year. He fell flat on his face. But maybe you can make it work. How do you want to proceed?’.

If you must ward off an idea, then please be absolutely certain to sit down and talk with the person about it. Don’t just tell them it’s a bad idea and it won’t work. Sure, they will accept it because you’re the boss. But they won’t likely understand the reason why. Discuss the idea, the reasons behind it, your employee’s objectives. Who knows, you might find out that you were wrong to stop the idea in the first place.

If you can’t convince them that its not a good idea and you haven’t been proven wrong yourself, maybe you are both missing something and its time to ask another experienced colleague for an opinion, to allow you both to move on. Now, I am not suggesting that managers spend hours with every employee in this situation. But don’t just (although I am sure you would do it nicely) cram the ‘bad’ idea into the garbage can. By giving them a valid rationale, they will come to the right conclusion and feel good about making a sound decision.

When it comes to satisfying new and changing customer and organisational needs, we need more mavericks. Mavericks need managers or leaders like Akio Morita, Chairman of Sony Corporation, who said: ‘If you go through life convinced that your way is best, all the new ideas in the world will pass you by’. As in the history of how the Swiss watchmakers dismissed the new idea of Quartz watches.

Create an environment where your employees can truly feel powerful, and you will quickly discover that they know more and can contribute more to the success of your firm that you might have thought. Its not easy and it doesn’t happen overnight, but with persistence, the benefits will appear. Learn to accept the positive contribution that your ‘knowledge workers’ can make. Your company will benefit, you will benefit, your customers will benefit, and your employees will feel more challenged and rewarded by their job. You will have created a win/win/win situation for all.

‘Tobin’s Q’ - Measuring the Value of Talent

The ratio of stock market value to replacement value of the physical assets of listed companies is know as ‘Tobin’s Q’, named for Economics Nobel Laureate James Tobin of Yale University.

Tobin noted that whereas industrial age companies manufacturing or processing basic resources tend to trade at prices fairly close to their tangible asset value, newer companies which, while holding a certain value in trademarks or patents, rely on the ingenuity and inventiveness of their employees, often trade at values that are many times the value of their physical assets.

There is measurable value in the intangible tasks of gathering, analyzing and processing information. For instance, Michael Cowpland, President of software developer Corel Corporation of Ottawa, is quoted in the Financial Post magazine as observing that every employee in his company contributes $100,000 not merely to total sales, but to bottom line profits.

As can be seen from the examples below, the Tobin’s Q for ‘newer age’ companies is frequently remarkable:

Northern Nakoosa 1980 102% Forest Products

Microsoft 1992 800% Computer Software

Johnson & Johnson 1998 831% Pharmaceutical Manufacturers

Novo Nordisk 1999 855% Pharmaceutical Manufacturers

The world pays a huge premium for the well managed and applied ingenuity of ‘knowledge workers’. As Tom Peters pointed out in his book, Liberation Management, companies that successfully unlock the intellectual abilities of their employees can expect gratifying market recognition - a huge surge in their ‘Tobin’s Q’ ratio.

This requires employee engagement !

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