Netflix’s culture of freedom and responsibility has been addressed on quite a few blogs, including Strategic HCM, and on other social networking sites, including the Moon Shots ning.
But it’s comments on the company’s open culture and predisposition to the use of social media – and particularly whether this makes it an example of Enterprise 2.0, that I want to address here (for examples of these comments see Fast Forward and Bertrand Duperrin’s Notepad).
And I just don’t see it. A great company – absolutely. Enterprise 2.0 – no.
Enterprise 2.0 isn’t just about using web 2.0, but it’s not just about anything new, innovative and exciting either. It’s about creating an environment where the value of social capital: the connections, relationships and conversations in a business, is taken seriously. And I don’t see any of this at Netflix. So:
“Few organizations are more able to access the power of the collective than Netflix”? – I just don’t see it, sorry.
The presentation suggests the company does work as a team – but stresses that this is a pro-sports team, not a kid’s recreation team. And definitely not a family. To me, even though they want to avoid brilliant jerks (recognising that the cost to teamwork being too high), it doesn’t even sound like a real pro-sports team. This impression is strengthened by the description of their ‘loosely coupled’ approach. It sounds like a group of highly talented individuals (“stars in every position”). Perhaps the business equivalent of the Madrid Galacticos?
There’s also the issue about the impact of not investing in recruiting and therefore having to fire people, that I touch on at Strategic HCM.
The presentation notes that high performance people and effective teamwork can be in tension as these people have strong opinions. This supports Boris Groysberg’s conclusions that a focus on recruiting stars can be bad for business. But I’m not at all sure that Netflix has has revolved this dilemma sufficiently.
I recently commented on a couple of posts on Dan Pontefract’s Training Wreck where he provides his perspectives on the 2.0 meme (web 2.0, enterprise 2.0, learning 2.0, Claire 2.0 etc…).
And I thought I would post here to expand on my response:
“2.0 can mean a couple of things. One is that it simply refers to any significant, qualitative vs quantitative shift over the ways things were done before (otherwise we’d be talking about 1.1 not 2.0). But then work 2.0, culture 2.0 could mean anything. So I don’t think that’s a useful route to go.
But I’d suggest that the other way of looking at this, and the only way I can see to bring these terms closer together is that they’re all about ’social’. Web 2.0 = social technology, enterprise 2.0 = a more social way of organising etc.
In fact, as we’ve discussed on your previous post, HR in a 2.0 World: Leading vs. Following (http://www.danpontefract.com/?p=117), they’re all about generating social capital.
Just a personal view of course!”
I’ve previously provided my own view on a few of the 2.0 components listed by Dan:
However, I do tend to agree with Dan that ‘2.0’ is used a bit too much these days, particularly when there is little cohesion between these different applications.
Take Dan’s Enterprise 2.0 and Work 2.0:
Enterprise 2.0: “The use of emergent social software platforms within companies”
Work 2.0: “The shift from a 9-5 workday to a flexible workweek inclusive of work locations.”
What’s the similarity between these, other than the 2.0 variants of each terms are somehow more modern? (This isn’t a criticism of Dan’s analysis, simply of the framework he’s working in).
My other criticism of this approach is that it leads us to be overly utopian. Eg:
Culture 2.0: “The shift from white ivory tower hierarchical / manage by fear structure to one that is wirearchical, heterarchical, flat, connected and community-driven.”
People 2.0: “Employees will seek out an employer that provides an experience, a second family, a place to feel valued, the new ‘employee’ will not be institutionalised.
I believe we can make a step-change to a qualitatively different way of managing organisations without requiring businesses to become social paradises.
My suggestion, that I made to Dan, and I’ve made previously on this blog too, is that resolving this tension requires us to link a single factor to all 2.0 components. This will allow us to define all components upon this single common factor, rather than having to create lists of attributes for each one.
I then suggest that this single factor is a more social approach, based upon connections and relationships. As evidence of this conclusion, I point towards the fact the web 2.0 (the originating component) is also called the social web ( / social media / social technology etc).
But that’s a bit vague, so the further refinement that I make to this, is that each 2.0 component focuses on creating social capital. So web 2.0 is technology that enables the development of social capital, enterprise 2.0 is an organisation than invests in the development of social capital, HR 2.0 is the management of people in a way that leads to the development of social capital, etc.
This view may not (yet) have wide support, but it does have the considerable benefit of consistency!
The Guardian has published an interesting survey of FTSE 100 Directors pay.
It’s interesting firstly because of the ongoing debate about executive reward at the moment.
But what I wanted to focus on here, particularly given my recent post on Whole Foods, is the differential in pay between CEOs and average employees.
In general, the differential is quite a bit less that that described by John Mackey in his presentation on Conscious Capitalism – I presume because we’re looking at the UK rather than the US where the differential is presumably higher? It’s still a lot higher than Mackey’s recommendation of 19x though.
And the highest differential – for Bart Becht, CEO at Reckitt Benckiser - is 1374! (ie Becht gets paid 1374 times the amount (£37m) paid to Reckitt Beckiser’s average employee - £27k).
This clearly isn’t a great basis for effective up and down collaboration.
Mind you, Cisco CEO, John Chambers’, recent $2m under-performance bonus doesn’t seem to be affecting the way it’s becoming more collaborative.
In the latest issue of the MLab’s Labnotes, Julian Birkinshaw suggests that organisations need to think as much about their management models (the choices firms make about what happens inside their organisations) as they do their business models (choices about their sources of revenue, their cost structure etc).
These choices include:
Choices about the nature of the objectives the firm pursues (ranging from alignment to obliquity)
Choices about how individuals are motivated to pursue these objectives (extrinsic to intrinsic)
Choices about how activities are co-ordinated in the firm (bureaucracy to emergence)
Choices about how decisions are made in the firm (hierarchy or collective wisdom).
I think this is a useful, new input to management thinking.
However, I’m not sure about the four dimensions of Birkinshaw’s framework (the four choices above). Where does the Social Advantage approach fit into it this for example?
Social Advantage as collective wisdom
Although it doesn’t fit the framework that neatly, I’d have to say that Social Advantage fits best with the last two choices: managing across (emergence vs bureaucracy) and especially managing down (collective wisdom vs hierarchy). But then these are ‘means’, and think Social Advantage is very much about ‘ends’.
And I think some other dimensions are probably at least as important to Social Advantage as those presented in the model. For example, what the organisation focuses on – outcomes or business impacts, And how importantly the organisation sees people working together in teams, or just sharing information between themselves.
Collective wisdom AND hierarchy
Also, although Social Advantage is probably best supported by a flat structure, I don’t see that it requires the end of hierarchy. To me, the dimensions of the model are probably paradoxes (this and that) rather than polar opposites (this or that).
Anyway, polar opposites aren’t really in the spirit of the Moon Shots – particularly M20:
“ Better optimise trade-offs. Management systems tend to force either-or choices. What’s needed are hybrid systems that subtly optimise key trade-offs.”
So, I don’t feel very positive about the framework, but I suppose if it encourages organisational leaders to think about their management model, and perhaps what dimensions will be important to them, then I guess it will do its job.
As Birkinshaw himself notes,
“There is no one best management model… Rather, there are choices to be made, and the appropriate choice depends on a host of circumstantial and competitive factors. Firms who generate competitive advantage out of their management model are the ones that make conscious and distinctive choices about what principles to follow.”
This is why I think Social Advantage is particularly important at the moment:
“A new survey from The Workforce Institute at Kronos Incorporated suggests that the layoffs experienced by many organizations in the recent economic downturn have had a more adverse impact on productivity than employers may have thought. The ‘Productivity Drain’ survey finds that 40 percent of employees at organizations affected by layoffs would classify productivity as having been negatively impacted. Furthermore, of those 40 percent, two-thirds of them state that morale is suffering and that employees are less motivated than before. This is in large part due to the level of work that employees are dealing with. Sixty-four percent of respondents felt that there was too much work and not enough employees to do it, and with employees frustrated with the additional workload, half of those surveyed expressed dissatisfaction with their employers’ effort to maintain morale. Perhaps more concerning is that 36 percent of respondents believe that when the economy picks up, as an organization, they would not be prepared to meet the increased demand.”
How do you deal with more work with less people? – manage the relationships between the people, as well as the people themselves.
“I have the same concern about ‘enterprise 2.0’ which the CIPD report (based on Andrew McAfee’s work) describes as web 2.0 behind an enterprise’s firewall (eg Yammer vs Twitter). To me, enterprise 2.0, or ‘business 2.0’ anyway, is about a new way of working, which can be enabled through the use of web 2.0, but can also be supported through other face-to-face techniques.”
But I do think there is some value in the term too. Here are some thoughts on Howlett’s points:
“Regardless of what you’re told by the E2.0 mavens, business has far more pressing problems. The world is NOT made up of knowledge driven businesses. It’s made up of a myriad of design, make and buy people who -quite frankly - don’t give a damn about the ‘emergent nature‘ of enterprise. To most of those people, the talk is mostly noise they don’t need.They just want to get things done with whatever the best tech they can get their hands on at reasonable price. That doesn’t mean some wiki, blog or whatnot.”
I totally disagree with this. I think society’s expectations of business have changed drastically (the global reset), and businesses understand the way they need t operate to take account of these shifts. Plus post recession, many organisations are going to have to do the same or more with less people. There are two key ways to deal with this situation. Either improve the capability of each person (their human capital), or the relationships that provide the synergy between the people (the social capital). E2.0, in my terms (I don’t care that much about whether it’s emergent), provides one means of developing the social capital to respond to this new situation (see my next post for more on this).
“Communities are driven by passionate community evangelists who, for the most part I see as driven people. They don’t have an allegiance to the company or brand but to the idea of community. There’s nothing wrong with that but I have to ask the question - what happens when they move on or become tired of batting their head against a brick wall? As someone engaged with community building as a stepping stone to transformation I understand the challenges.”
I agree community participation will often follow the power law – a few people will make most of the contribution. So what do you do? You recruit and develop your employees to get more people who will participate and hence, shift the curve. And when one of your evangelists leave, you try hard to recruit another.
“Like it or not, large enterprises - the big name brands - have to work in structures and hierarchies that most E2.0 mavens ridicule but can’t come up with alternatives that make any sort of corporate sense. Therein lies the Big Lie. Enterprise 2.0 pre-supposes that you can upend hierarchies for the benefit of all. Yet none of that thinking has a credible use case you can generalize back to business types - except: knowledge based businesses such as legal, accounting, architects etc.”
I’m a fan of flat structures and squashed hierarchies, but I don’t think these are essential parts of E2.0. The key is to identify the sort of social capital you want to develop, then identify how you can create this. The strategy that emerges may be to flatten hierarchies, but it may not. There are plenty of other very valid ways to develop social capital too.
“In the meantime, can someone explain to me the problem Enterprise 2.0 is trying to solve?”
Enterprise 2.0 in my terms creates social capital that enables organisations to set new or more stretching business goals. It doesn’t necessarily solve a problem. It certainly provides an opportunity.
As you’ll see if you read these posts (and can probably tell from their titles), these posts; readers’ comments on these posts; and also employee feedback (eg on Glassdoor.com) are quite disparaging.
I’ve also posted previously on Cisco’s network organisation structure design, and on their new Collaboration Framework. Both of my posts are broadly favourable (although they don’t deal specifically with this top level structure), so what’s going on?
Cisco’s management structure
During the last eight years, Cisco has been replacing its top-down divisional structure with committees of executives from across the company. More than 750 company leaders are currently involved in 59 committees (12 councils for $10m+ business opportunities, 47 boards for $1m+ opportunities, and below this, a number of working groups) - see Cisco’s top level organisation chart at the top of this post, and also take a look at a previous post of mine that also refers to some of this. Cisco’s current goal is to broaden participation on these committees to 2500 or more employees.
The motivation behind these changes has been to move from a command-and-control operation dominated by competing departments to a widely cross-functional, collaborative company which uses the various standing committees to facilitate executive decision-making, create cross functional alignment, and guide business initiatives. Cisco now makes 70% of its decisions in these committees (up from 10% just two years ago).
In addition, the new structure has enabled Cisco to increase the number of markets the company is targeting from two in 2007 to 26 today (each of which could soon reach sales of $1 billion, accounting for more than 25% of Cisco’s revenue) and this number could increase to 50 next year.
Cisco’s CEO, John Chambers has said that part of his goal in making the changes has been to make spread his executives thinly, making them rethink how they work and what they work on.
Eventually they "realize they can’t keep their head above water and if they want to swim they have to give [some responsibilities] to their teams". The new management structure "makes everyone uncomfortable, including the CEO," he says.
The criticism
While most commentators understand that Cisco needs to change, becoming more innovative in order to grow organically, rather than relying on acquisition as it has in the past, its recent changes have drawn substantial criticism.
The new structure is reported to add bureaucracy, remove accountability and slow down decision making. It’s also blamed for the company’s falling market share in certain key product categories.
My perspectives
Cisco’s structure is certainly different, and it must have been a brave, or foolhardy, decision to require top executives to spend 30% of their time serving on 10 or more committees.
I’ve worked myself in one public sector organisation in which I and other executives were required to spend significant time working in committees and this certainly generated a lot of waste there. So it’s easy to see how this committee based structure could result in a massive bureaucracy that simply produces slower and lower quality decisions.
But Chambers clearly believes that business needs to change – see these comments in a recent New York Times interview:
“I’m a command-and-control person. I like being able to say turn right, and we truly have 67,000 people turn right. But that’s the style of the past. Today’s world requires a different leadership style — more collaboration and teamwork”
“Big time, the importance of collaboration. Big time, people who have teamwork skills, and their use of technology. If they’re not collaborative, if they aren’t naturally inclined toward collaboration and teamwork, if they are uncomfortable with using technology to make that happen both within Cisco and in their own life, they’re probably not going to fit in here.”
If Chambers is right that collaboration is the ‘next big thing’ then it might have been a bigger risk to keep things as they were than to change.
To a certain extent, I think criticism of the changes bear similarities to push back against organisations allowing people to use social media technologies during work times (the ban Facebook debate).
Both this structure, and individual use of social media, may lower individual productivity. But that’s no longer the point. They key now is productivity of the group, delivering organisational speed and innovation.
Cisco doesn’t want to replicate the experience of Sony being take over by Apple for design of the ipod (Chambers had a similar experience to this at Wang where the company got left behind by the rise of the PC) and it obviously needs to organise itself differently if it’s going to produce different results.
And the scale of the transformation will certainly make it very clear to executives how their behaviour is expected to change – avoiding one mistake made by a lot of organisations undergoing change. But given this, a lot of employee feedback bound to be negative. I think Chambers is right too see the fact that over 20% of his leaders have left the company as a positive.
The Difference
I think the key to Cisco’s success (and I predict they will continue to be successful) is the way that they have made these changes. Yes, the top level structure could have degenerated into a paralysing bureaucracy, but I don’t think it has, and I don’t think it will.
See my earlier post on Cisco’s Collaborative Framework for a review of the approach it’s taken to support these changes, and which I think have been critical to ensure that they have been implemented well.
And probably even more important, has been Cisco’s single minded focus on collaboration. This hasn’t been something it’s tried to introduce lightly, or quickly, or half heartedly. So it’s been able to produce, what in my terms I call organisational capability – a capability for collaboration.
I don’t know if collaboration will be ‘the next big thing’ – although I believe it will. But I also believe organisations have access to a wide variety of other different options for competing. They key is to choose one and do it properly, not worrying too much about the way that business has traditionally been done.
So I guess John Chambers won’t be too worried by the recent criticism!
The conference was opened Sisodia talking about ‘firms of endearment’ and the need for a ‘declaration of interdependence’ – a recognition that we are all interconnected and co-dependent.
Sisodia presented a number of statistics about trust with business, which provided a context for the later proceedings:
New York Times: “The majority of the public… believes that executives are bent on destroying the environment, cooking the books and lining their own pockets.”
Roper: “Only 2% of investors believe that CEOs are ‘very trustworthy’: 72% believe that wrongdoing is commonplace at companies.”
Harris Poll: “90% of Americans believe that big companies have too much influence on government.”
“80% believe business is too concerned about profits and not enough about responsibilities to workers, consumers and the environment.”
I thought the most interesting presentation during the conference came from John Mackey, CEO at Whole Foods.
Mackey continued Sisodia’s train of thought, noting that business is widely seen as greedy, untrustworthy and widely unethical, and putting the blame for this on poor business ideology. This has led to the current push back against capitalism and means that now “corporations and CEOs are in the toilet”.
In Mackey’s view, the narrative we use to describe businesses needs to change – and ‘conscious capitalism’ provides an appropriate alternative. This is about:
Enterprises having a deeper purpose behind maximising profit and shareholder value
Enterprises being managed to optimise value for all major interdependent stakeholders
Servant leadership to the enterprise and its stakeholders.
This approach means that profits should not be pursued – they ensue from working towards a higher purpose. In Mackey’s view, maximising profits is a curious purpose for a business – and one that typically hasn’t come from the entrepreneurs who created new businesses – but from economists. Entrepreneurs usually define an initial meaning for their businesses, and organisations need to hold on to this (accepting that meaning will evolve over time).
Great companies have great purposes which tap into the highest ideals that humans aspire to:
Service to others: expressing love and care (the good)
Discovery and the pursuit of truth (the true)
Excellence and the quest for perfection (the beautiful)
Changing and improving the world (the heroic).
Mackey notes he is not anti-profit. Profits are essential for doing business. But we need to recognise that profits are created through voluntary exchange, not from the exploitation of people. The paradox of profits (similar to happiness) is that they are best achieved as a by-product of something else.
The problem is that not many bosses act in this way – there are few servant leaders. Take executive reward.
In 1980, the average US CEO received $40 for every $ earned by the average worker
In 1990, it was $100
By 2006, this had increased to $364 for every $ earned by the average worker.
At Whole Foods Markets, the highest pay is limited to $19 for every $1 the average full-time team member earns.
Also stock options – typically the top five executives will received 75% of stock options. In Whole Foods Markets, the top executive only received 7%.
In Whole Foods, executive reward reflects the expectations of different stakeholders – in other firms, it “reflects a certain amount of greed”.
Comparing David Cameron’s reflections on the ‘broken society’ with John Major’s earlier attempts to get ‘back to basics’, blogger Neil Robertson suggests Cameron’s strategy is likely to be more successful, given that it avoids the potential for the government being seen as hypocritical:
“Where Major’s rhetoric was fogged-over by vague moralising about returning to the ‘neighbourliness, decency & courtesy’ of the past, Cameron is more precise, identifying the specific symptoms of the ‘Broken Society’ and arguing that only by reducing them can we have a happier, more equitable future. Significantly, all of the social evils he lists (however indirectly) either costs the state money or causes harm to law-abiding people, and he is not asking for anything more from the British people than those things most of us already do…
Just as Major & Cameron’s ideas are framed very differently, I suspect the consequences of the two speeches will also be very different. Thanks to the fuzziness with which ‘Back to Basics’ was sold, Major unwittingly committed the Conservatives to leading the country to a kind of moral reformation. Unfortunately for him, by doing so it became fair game to scrutinise the character of his cabinet, and when a number of those ministers failed to stand up to that scrutiny, it fatally undermined the project he was trying to sell.”
However, Robertson also refers to an earlier post by Melanchon and suggests:
“By seeking to describe the ‘Broken Society’ only in terms of those ’social evils’ which intrude upon the law-abiding majority, Melanchon essentially argues that Cameron has ripped the morality out of his crusade, creating a campaign which is more transactional than it is rooted in the values of religious conservatism. For him, the party isn’t calling for social change because it is moral and good; merely because it will save the state money & make us a little safer.”
There are a number of great points in this. The point about hypocrisy is definitely right and Cameron’s approach to societal renewal is definitely safer. But I do wonder, given further deterioration of societal mores and connection since the early 1990s, whether this is now enough?
The debate takes me back a couple of week to the arguments expressed by Michael Sandel in the second of the BBC’s Reith lectures (also see my post on the first of these).
Reviewing two hotly contested contemporary issue: the question of surrogacy, and same sex marriage, Sandel suggests that moral and religious arguments should play a role in political discourse and in justifying laws. He notes:
“Many people shudder at the prospect. ‘Isn’t it dangerous?’, they ask, ‘to bring morality and religion into politics? Isn’t it safer for a government to try to be neutral and avoid taking sides on the moral and religious convictions its citizens espouse?’ I say no, not necessarily, for two reasons. First, it’s often not possible for government to be neutral on substantive moral questions / it’s not always possible to decide questions of justice and rights without resolving substantive moral questions; and, second, the attempt to do so can make for an impoverished public discourse / even where it may be possible, it may not be desirable.”
Reith’s argues that we shouldn’t try to avoid morale issues but should take the opportunity to debate these factors publically. So perhaps Cameron is being politically smart, but may also be missing an opportunity by stressing redistribution of power and the need for more personal responsibility, political transparency etc.
I still find John Major’s speech resonates strongly with me – and I think that introduced differently, with more focus on serious debate / richer discourse, it could have resulted in different conclusions too.
From my own perspective, the question that arises is whether we perhaps need to have some back to basics debates within our organisations as well – taking one topical issue for example, on what do managers and employees collectively believe is a justifiable salary differential?
These wouldn’t be easy debates to have, but implemented well, might result in more committed, aligned workforces.
The other blogs in the circle seem to deal primarily with political and charitable issues, whereas this one focuses mainly on social issues within organisations. But I believe a lot of issues that are key concerns in society in general are also increasingly ones that organisations have to face, and that therefore, there is enough of an overlap between the other Circle blogs and this ones to make membership relevant and useful.
Therefore, I’ll be submitting some of my own posts to the circle and you’ll hopefully start to see some of them discussed by other circle members (I’ll let you know when they are). And I’ll also be discussing some posts from other Circle members on this blog – beginning with my next post -
And if you’re interested in joining the circle, you’ll find info on how to do this here.
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