Jon R. Katzenbach is a Senior Partner with Booz & Company where he launched and now leads the Katzenbach Center at Booz. He is a recognized expert in leadership, organizational performance, teaming, culture, and employee motivation. His published works include Why Pride Matters More Than Money, Peak Performance, Teams at the Top, Real Change Leaders, The Myth of the Top Management Team, and Firing Up the Front Line. He also co-authored (with Douglas Smith) The Discipline of Teams and the bestseller The Wisdom of Teams. He and Zia Khan are the co-authors of a new book, Leading Outside the Lines, in which they discuss how leading enterprises can accelerate behavior change and performance by mobilizing the informal elements of their organization to complement the formal.

Zia Khan is the Vice President for Strategy and Evaluation at the Rockefeller Foundation. He is responsible for shaping the Foundation’s strategy and integrating it into the Foundation’s initiatives, Bellagio program, and organization. He also leads the Foundation’s long-term research program, exploratory initiatives, innovation capabilities, and monitoring and evaluation processes. Zia brings to the Foundation many years of consulting experience in strategy and organizational performance. He is a frequent writer and speaker on strategy, innovation, and organization. Zia holds a B.S. from Cornell and a Ph.D. from Stanford. Khan currently lives in Brooklyn, New York, which is rich territory for weekend bike rides. He’s an avid reader. While Zia aspires to spend more time in the outdoors, he thoroughly enjoys New York’s cafes, cinemas, and sidewalks.

Morris: Before focusing on Leading Outside the Lines, a few general questions. First, a great deal has happened (and not happened) in the business world during the past 3-5 years. In your opinion, what is the single most important development and what is its significance?

Katzenbach: Clearly, the financial recession and its recovery challenges is the single most important development that I see.

Khan: Another interesting and ongoing phenomenon is the emergence of new business models from developing economies that will add significant competitive pressure to incumbent players.  This increases the pressure to be constantly driving costs down while ramping up innovation.

Morris: Michael Porter once observed, “The essence of strategy is choosing what not to do. ” What do you think?

Katzenbach: While it is a very insightful question, I am not sure that I would characterize it as “the essence.”  Equally if not more important is recognizing that even the best-contrived strategies are relatively short-lived.  Therefore, those who can revisit, reconstruct, modify or abandon their strategies quickly are likely to be more successful than those who simply define the dos and don’ts.

Khan: As Jon points out, the critical element in that observation is how long should the choice last.  What’s the right balance between staying the course and adapting quickly? That’s where the simultaneous need is for locking down formal processes while encouraging informal exploration becomes critical.

Morris: In 1963, Peter Drucker expressed a similar thought: “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.” Nonetheless, C-level executives continue to make that mistake. Why?

Katzenbach: The age-old concept of cognitive dissonance reduction advanced by Leon Festinger in 1957 helps explain the mistake you cite. Once a “difficult decision is made” there is a strong, human tendency to defend it and “make it work” rather than reverse, revise or even question it. For example, the most avid readers of new car ads are those who have just purchased the car — and that tendency is stronger if that purchase decision was difficult to make.  Extending that to strategic decisions, executives are more inclined to stick with a decision (rather than abandon it) by relentlessly pursuing its execution with great efficiency.

Khan: There is also a strong tendency among C-level executives to measure progress. A complementary quote comes from Einstein: “Not everything that can be counted counts, and not everything that counts can be counted.”  The trick is that once programs and metrics become established, the focus is on making progress on pre-defined activities without questioning whether the goal remains relevant.

Morris: Based on your own experience and what you have observed, what are the best strategies for overcoming resistance to change, especially barriers that are the result of what Jim O’Toole so aptly characterizes as “the ideology of comfort and the tyranny of comfort.”

Khan: Comfort with the status quo becomes deeply engrained in terms of formal processes, metrics, and structures, but also in terms of informal values, sources of pride, and evaluation criteria for problem-solving.  The informal can both help and hinder change.  My suggestion for overcoming resistance to change is to identify what parts of the change already align with the informal organization, and mobilize them to help make the change more widespread.  For example, if there’s a company-wide effort to focus on customer service, and some sales associates in retail stores are passionate about this while others aren’t, you’ve found yourself some allies.

Katzenbach: Perhaps the single best strategy for overcoming resistance to change is to get informal, peer-to-peer interactions at different levels in critical populations to support the change.  As Zia indicates, the status quo is supported by lots of elements that are formally imbedded.  However, it is often the informal elements that companies overlook when they are trying to change the status quo. Many companies focus on formal efforts to change – these help establish a common outlook but they do not motivate the change itself. Informal efforts are what help motivate employees to change.

Morris: Given what I view as a distribution of workers within many organizations, scattered all over the place and many of them (in effect) free agents, to what extent is it more difficult for teams to be effective in terms of communication, cooperation, and especially, collaboration?

Katzenbach: Certainly it is difficult — perhaps impossible, if you don’t mobilize the informal elements of the organization to re-enforce formal teaming and collaborative efforts.  You can’t expect to do it entirely through formal programs, teaming, and “rules of engagement.”  I think that companies will increasingly have to “go beyond best practice” in areas of cross-cultural collaboration because the more diverse the culture is, the less likely standard approaches will produce the kind of teaming and collaboration that leads to global performance results.

Khan: I think “collaboration” is a broad word.  It’s helpful to specify what performance improvement you need from collaboration, and then identify the appropriate balance of formal processes and informal values to help.  For example, that balance looks different if the collaboration you’re looking for is more innovation and integration between business units than it does if you’re looking for more efficient handoffs between partners in a complex supply chain.

Morris: Opinions are divided about 360º feedback. Some prefer that it be transparent, others prefer that evaluations remain anonymous, and still others what to have nothing to do with it. What do you think of 360º feedback?

Katzenbach: Honest feedback is an invaluable source of insight and information.  If transparency will constrain it, it is probably best to do it anonymously.

Khan: I’d agree – the goal should be to get the feedback however you can.  If there’s resistance to doing it transparently, it’d be interesting to use that resistance as an opportunity to learn more about the fears and concerns people have about providing it.  It’s often deeper than just about feedback.

Morris: During exit interviews of highly-valued workers who have decided to accept a position elsewhere, one of the most common complaints is that they do not feel that they and their efforts are appreciated. What can organizations do in response to such complaints?

Khan: Often the exit interview is too late – it is best to deal with individuals prior to problems coming to light in such a dramatic way.  One option is to have a “stay” interview during which the highly-valued workers are asked what it is that would keep them at the organization.

Katzenbach: Another and often very effective way to ensuring such dramatic cases are minimized is to focus more attention on the role of the workplace supervisors’ daily efforts to provide positive, credible recognition during “the journey as well as the destination.”  People will stay longer in organizations where there is strong mutual respect for their immediate supervisor — even if the money rewards are less than average.

Morris: Another common complaint has to do with performance measurement. Specifically, that the criteria are unclear and/or applied unfairly or inconsistently. What can an organization do about that?

Katzenbach: Perhaps the obvious answer would be to clarify the criteria and how they are applied.  However, I believe the better answer lies in strengthening the motivational capability of the first-line supervisor/manager.  It should be his or her task to find ways to make each person “feel good about the work itself” – and that includes, but is not limited to, fairness.

Khan: I also think there is an opportunity to design the criteria themselves so they act as a source of motivation.  There are a lot of process guidelines around designing criteria so they fit easily within HR systems and are easy to evaluate, but not enough thought given to how to use criteria the establishes emotional connections.  For example, consulting firms use “utilization” among the criteria for how billable a consultant is.  Wouldn’t it be more interesting to reframe it as “hours spent with clients”?  The total hours, while analytically less clean, are much more meaningful to each consultant than a percentage.

 

Morris: Now please shift your attention to Leading Outside the Lines. For those who have not as yet read it, given the thousands of books about leadership already in print, why another?

Katzenbach: Most leadership books do not emphasize the essential differences between the formal/informal, and the value of integrating the two (getting the best of both) and striving to maintain a dynamic balance.  That is the central premise and theme of our book.  We believe our book also provides practical actions that individuals at almost any level can learn to apply – and the real examples illustrate different ways to capture the best of both.

Khan: There has been a lot of excitement about social networks, emotional intelligence, etc.  We believe in their potential, but worry that people may be throwing out the baby with the bathwater in being too dismissive about the formal parts of the organization.  Much as The Wisdom of Teams brought a real discipline to thinking about the then emerging notion of teams, so too do we hope Leading Outside the Lines will bring a discipline to mobilizing the informal organization in conjunction with the formal.

Morris: For those who have not as yet read the book, what is “the logic of the formal organization”?

Khan: It is about how the formal organization can be designed through the standard approaches and techniques taught in business schools and management training programs

Katzenbach: The formal’s logic itself lies in its rational and analytic underpinnings.  It provides scale, consistency and control.

Morris: What is “the magic of the informal organization”?

Katzenbach: The magic of the informal lies in its spontaneity, fluidity, flexibility and cross-organizational emotional power

Khan: In essence, it’s the unexplainable part of organizational performance that people have previously assigned to the vague category of “leadership.”  But, like a magician’s trick, it can be understood.  Our book attempts to de-mystify the magic of the informal so that more people can learn to use it to help drive performance results

Morris: Where or what is “outside the lines” of a formal organization?

Katzenbach: It is that which takes place above, beyond and around the lines, boxes, and programs.

Khan: For example, while a product manager might lie in a formal product management group reporting to a vice-president, she will likely tap into the marketing group occasionally for help and insight.  Those interactions that aren’t formally part of regularly scheduled team meetings, processes, and reporting relationships are part of what’s outside the lines.

Morris: Where or what is “outside the lines” of an informal organization?

Khan: That is a very good question.  It would be business challenges that require consistency, repeatability, efficiency, and other characteristics that gain more from the formal organization. For example, you wouldn’t want to pay people with an informal payroll process.

Katzenbach: Perhaps an even better question would focus on what the informal organization is less well suited to address.  As Zia suggests, there are many challenges that are best served by the formal, and relying too heavily on the informal for those kinds of challenges can inhibit performance and frustrate employees as well as customers.

Morris: Presumably the leadership to which you refer is not limited to C-level executives. In fact, it includes people who are actively engaged at all levels and in all areas of the given enterprise. Is that a fair assessment?

Katzenbach: In a word, yes.  In fact most of the leadership efforts we refer to take place well below C-level executives — and are particularly important when directly focused on the employees who make, sell or design the product service offering

Khan: However, it’s probably those at the C-Level who need this book most.  They’ve likely advanced largely due to their skill with the formal organization, and their increased formal authority and power can lead them to overlook or underestimate what the informal offers.

Morris: How can leaders most effectively determine what the most appropriate balance of what is formal and informal in their organization?

Khan: They can think about important performance imperatives and see if they have both formal and informal mechanisms acting in concert. For example, continuing with the customer service example, do they have efficient systems to manage inventory combined with a motivated sales force that engages customers appropriately?  Are these mechanisms acting together or in conflict?

Katzenbach: It is also very important for senior leaders to tap into human sources of insight and information that are not within their normal purview.  Insights from “down the line” that don’t easily reach the top will tell you a great deal about formal/informal imbalances.

Morris: Here’s a follow-up question. How can the same leaders most effectively determine when and why to modify that balance? That is, have their organization become more or less formal and informal?

Katzenbach: A leader should think about modifying that balance whenever performance results consistently fall short of expectations.  They should also think about it whenever significant changes in the competitive situation call for a different set of strategic priorities.

Khan: Or if they see a performance challenge on the horizon and they realize that they’ll have to either lean more on the formal or the informal

Morris: Long ago, I became convinced that it isn’t possible to motivate another person but it is possible to inspire that person to become self-motivated? What do you think?

Khan: While I agree people can become self-motivated, I also believe you can motivate another person. It simply takes a fair bit of time to understand how anyone ticks, and in today’s drive to be efficient and multi-task, the time to establish that personal connection is overlooked.  Interestingly, lots of the leadership literature in the early part of the 20th century emphasizes this point.

Katzenbach: I’m afraid I also disagree with the assertion that you cannot motivate others. We consistently see “master motivators” at work that instinctively find ways to make people (of all kinds) feel good about the work they have to do every day.  And they do it by making emotional connections that are both personal and credible.

Morris: What do you mean by “values driven, not values displayed”?

Katzenbach: In a values driven situation, the leader’s intended values actually determine the behaviors of his or her people.  A values displayed organization states and promulgates a set of “good sounding” values, but the behaviors of most people do not reflect the values that are “displayed.”

Khan: In a nutshell, it’s a simple question of “walking the talk.”

Morris: What is involved when “setting fast zebras free”?

Khan: Fast zebras often exist in spirit, and they often operate within organizational constraints.  Setting them free involves giving them a little encouragement, a few resources, and some guidance to “seek forgiveness afterwards instead of permission before.”

Katzenbach: I think  “setting fast zebras free” also involves identifying them, encouraging them to extend their influence, and removing unnecessary constraints

Morris: Please explain Chapter 8’s title, “Melting the Frozen Tundra.”

Katzenbach: The “Frozen Tundra” refers to the “broad middle” of an organization – mid-level managers, many of whom do not have direct contact with customers or clear profit responsibility.

Khan: The idea of melting this part of the organization responds to the fact that middle management often develops its own entrenched ideology and ways of working that don’t quite align with the strategic intent of the senior leadership, nor the on-the-ground reality of the frontline.

Morris: In your opinion, what is the single most important business lesson to be learned from Bell Canada’s cultural transformation?

Katzenbach: To me it is that behavior change can spread “virally” across an entire organization much faster than it can be spread through hierarchy and program.

Khan: Also, the Bell story was about how to undertake such changes.  It was done with a spirit of experimenting, amplifying what worked, and jettisoning what didn’t.  There’s a big desire among leaders to have a predictable plan.  The challenge with culture change is that it’s inherently unpredictable.

Morris: Given your response(s) to the previous question, is are those lessons relevant to all other organizations, whatever their size and nature nay be?

Khan: Yes – most certainly.  The distinction we develop between “managing” and “mobilizing” applies fairly broadly.

Katzenbach: I believe it is.

Morris: One of the greatest challenges that business leaders face is to get a workforce actively and productively engaged in change initiatives, to “mobilize the troops,” the subject of Chapter 9. To what extent does the leadership required when mobilizing the formal organization differ from the leadership required when mobilizing the informal organization?

Katzenbach: We use the term “managing” for the formal, and “mobilizing” for the informal to emphasize the difference.  The informal cannot be directly managed because it lies outside of the management realm of structure, process and program.  It can be influenced, but if you try to “manage it” you lose its spontaneity, flexibility and emotional impact.

Khan: The leadership trait that’s most important for mobilizing is a bias for learning as opposed to a bias for having the answers.

Morris: Here’s a statement that caught my eye in Chapter 10, “What to Do,” on Page 177. “We often ask a simple question when helping clients with innovation: Are you killing enough ideas?” What does asking this question accomplish?

Khan: It points to importance of formal mechanisms that efficiently allocate resources to the best ideas at some point in the innovation approach.  Innovation is often thought of as simply informal creativity.

Katzenbach: Hopefully it implies that generating lots of innovative ideas is not enough to ensure breakthroughs in innovation — unless you systematically screen out those that lack promise.

Morris: Looking ahead (let’s say) 3-5 years, will organizations become even more informal than they are now? Please explain.

Katzenbach: If they heed our advice, they probably will — although what we really intend is that they seek a better balance between the formal and the informal

Khan: They will hopefully be as conscious and deliberate about mobilizing the informal as they currently are about managing the formal.

Morris: Which question had you hoped to be asked during this interview – but weren’t – and what is your response to it?

Khan: I was hoping you’d ask, “Should every leader attempt to build a stronger informal organization”?  My response would have been “no.”  The informal organization has to be viewed through its relevance in improving performance.  That’s the challenge with current efforts to build “employee engagement.”  Everyone feels they need to pay attention to it, but they don’t know why, hence it almost always falls down the priority list.

Katzenbach: The question I had hoped you would have asked is:  “Will those who really balance and integrate the formal with the informal outperform their competition?”   When we did the research for Peak Performance several years ago, this was clearly the case.  The formal provided peak performers with essential structure, discipline and consistency — and the informal accelerated and helped to sustain (and adapt) the behaviors that matter most for performance over time.

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To check out a wealth of resources (including a videotaped interview of Katzenbach and Khan) please click here.