The Restructuring Challenge: How Manufacturers Can Break 'Tribal' Barriers to Foster Innovation

Feb. 23, 2012
Manufacturers need to move beyond organizational charts to unlock creative potential across the enterprise.

Can corporate restructuring enhance creativity and make large companies more innovative? Not often. The history of business is littered with examples that show organizational restructuring is not a reliable tool for unlocking creativity.

Sony Corp., for instance, has undergone organizational shifts over a decade and has not captured ground lost in the consumer products game to Apple Inc. and others. Or Hewlett-Packard Co., where multiple organizational restructurings still left it struggling to find a more profitable pathway for its enterprise and consumer businesses.

Once you think about a company as a meshed network of small groups -- let's call them tribes -- you immediately see why restructurings don't improve outcomes. Big organizational changes are often financially costly. They are also traumatic, breaking up trusted relationships and creating insecurity even among the very creative people you are trying to encourage.

But senior managers and executives can break through these organizational barriers by soliciting and incentivizing employee ideas.

The Tribal Mindset

The challenge is the complexity of relationships within companies. Restructuring strategies tend to focus on the formal world of departmental structure, such as operations, manufacturing or procurement. Yet the formal structure, reflected in organizational charts, doesn't neatly align with how people actually relate to each other, which is based on personal relationships within small groups of individuals, in which ideas, issues and business solutions are shared.

Comparative psychological research says the human brain is designed first for personal survival and second for operating in small groups. Whether it's the CEO or the person operating a robot on the shop floor, loyalty and ideas tend to connect only within small groups that interact frequently.

This means that small groups can both nurture and block creativity. When people feel comfortable with their selected set of insiders, they can be comfortable with informal conversations about new ideas and inspiration. Yet small groups, precisely because they reinforce a tribal relationship, can make it more difficult to share knowledge or ideas outside of these groups -- so smart ideas don't flow easily around larger companies.

Think about it: Are there times when you feel guarded in what you say outside of those whom you interact with daily? Do you second guess the language of memos or your comments in meetings because you are uncertain of the reaction? Will it be friendly reciprocity, or will my idea be stolen? Will I inspire or offend someone by my comments? Will those outside my small group treat me and my ideas fairly?

Also, "smallness" by itself is not a virtue. Companies form small ad hoc committees and brainstorming groups all the time, but research shows they tend to not deliver the best ideas. Creative clusters of individuals take time and frequency of interaction to develop, which is rarely the case when in most cross-company working groups.

Identifying tribes within a firm is challenging. Groups that operate within formal divisions in the company, for example a design center, are somewhat easier to spot. A senior executive can have conversations around specific work because work and ask what or who inspires you? Are there any ideas we have overlooked and who can I ask about them?

Yet as people progress in their careers to occupy positions across departmental lines, these personal groups become harder to identify. Consequently, someone has to incentivize members of that group to reach out to senior management.

Create an Idea Marketplace

One approach is actually the simplest: Senior management can treat the company like a marketplace of ideas. It makes an effort to communicate its creative needs, and then purchases the best ideas from the individuals or groups that generate them.

In this sense the firm would act much as venture capitalists do - soliciting and funding a spread of ideas from entrepreneurial individuals and groups, then buying the ones that deliver breakthroughs. Some ideas come to fruition quickly; others fail. But overall the company realizes the benefits of invention while avoiding structural dislocation.

Boeing Co. is a solid example of this model. As early as the late 1990s, the company has incentivized employee-generated solutions to production issues. More recently, the company has worked to increase the empowerment of employee "innovation crews," small groups built around inspired individuals who experiment with new production methods.

The expectation is that many ideas take time to refine; not all can be adopted. Yet by allowing tribes to focus on solutions, and funding the range of tribal experimentation, Boeing has achieved sharp reductions in the production time of its 737 aircraft by more than 50% in the past nine years -- a number that will likely be improved even further. It has also created production best practice which filter into later generations, such as its new 787 long range aircraft.

Getting corporate tribes to bring good ideas forward is a bit like a continuous talent search. You need to define an end goal that you want (for example, faster product cycles, streamlined procurement, a more elegant package) and then let the marketplace of ideas within your company get to work.

Then there needs to be the expectation of reasonably quick rewards. Sometimes the reward is funding to bring your idea to fruition, which provides a substantive feeling of tribal prestige.

The reward response needs to be fast, however. The human mind is designed for fast gratification if we deliver the goods. With these mechanisms in place, tribes will encourage their members to come to the fore to "audition" their ideas

Once great ideas surface, cross-departmental, task-driven tribes can be formed to bring them to life. There needs to be a clear mandate and budget. There needs to be the expectation of frequency and continuity. There needs to be a reporting line to someone with the leverage and funding to fulfill the tribe's mission. Often that means a CEO, C-suite member or divisional head.

Each of these tactics has one goal: leveraging our natural tribal proclivities to achieve company excellence. They take into account how people -- not boxes on a chart -- can be engaged to give their best.

Andrew Goldberg serves as executive vice president of public relations firm Makovsky & Co. Inc.s Corporate Advisors division,which counsels CEOs and other C-suite executives in restructuring, change management and M&A situations. Goldberg was previously the president of WPP-owned Pivot Red and chairman of the corporate practice at Burson-Marsteller. He earned a Ph.D. at Columbia University in international affairs, specializing in the psychology of decision-makers under stress.

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