By Ryan W. Quinn and Shawn E. Quinn
It is common, in the courses we teach about Lift and about Positive Organizational Scholarship, for managers to express frustration. Hearing about positive leadership and positive management can be difficult for people whose organizations do not seem to be positive right now.
In one class, a strategist from the largest business unit in his company expressed frustration because his CEO and the other senior leaders kept saying that they needed new revenue streams, but when he shared with them an idea for a new revenue stream, the CEO said he did not like the idea and told him to not spend any more time on it. The strategist said that this was common. The CEO claimed he wanted new revenue streams, but the culture and practices of the company reinforced the idea that people should not take risks. This strategist was thinking about leaving the company.
Two Types of Risk
When leaders face decisions like this strategist, there is usually more than one kind of risk in play. One kind of risk is a business risk: Is it worth investing our money in projects that may not pay off in the long run? The other kind of risk is personal risk: What will happen to me and my career, depending on the choices I make?
When the strategist expressed his frustration, he thought he had two choices: submitting to a risk-averse boss in a stagnating company or leaving. With the first option, he was risking his psychological health. In the second option, he could be risking his job, and a new company might not be any better. In both options, he was also contributing to the business risk of seeing the company decline.
By attending a course on Lift, this strategist began to discover other options. One of these options was to ignore the CEO and investigate his idea anyway. Eventually, this is what the strategist decided to do. Defying his boss felt, on the surface, like the riskiest option of all, but when compared to the risks of decline in his psychological health, in the health of the business, and of other companies being no better off, taking the risk of pursuing what he believed was a good idea did not seem as much like a risk. He began to talk to banks about possible investment options.
Moral Hazards in Empowerment
It is unfortunate that this strategist had to work around his boss in order to pursue a good idea. However, we have, up to this point, only told the story from one point of view. If we were to ask the CEO to tell the story from his point of view, he might say that it is not unfortunate at all. The idea was too risky, and one of the CEO’s jobs is to safeguard the financial health of the firm.
When we tell this story from two different points of view, we begin to see the tension that always arises when we talk about empowerment. On one hand, we want employees to be empowered, so that we do not waste time and lose opportunities because people are hamstrung by bureaucracy. On the other hand, we do not want people throwing good money after bad ideas and hurting the financial health of an organization. How do you know what to do?
Our colleague, Gretchen Spreitzer, is one of the world’s leading scholars on the topic of empowerment—if not the leading scholar. She recently reviewed twenty years of empowerment research for a handbook on Organizational Behavior.
Gretchen’s review covered two topics: The structural characteristics of an organization that empower people (high involvement work systems) and the feelings of empowerment that lead people to act in empowered ways (psychological empowerment). The research suggests that high involvement work systems and psychological empowerment lead to positive outcomes for both individuals and organizations. There are exceptions, though, and “moral hazards” can emerge in empowerment programs. If managers want to design systems that reap the benefits of empowerment for both the organizations and their people, they need to pay attention to the “how” of empowerment as well as the “what” of empowerment.
High Involvement Work Systems
An example can help illustrate this point. Five typical elements of a high-involvement work system include:
- an open flow of information up and down the organization,
- participative decision-making,
- flat organizational structures,
- relevant training for employees, and
- pay structures that enable employees to benefit from gains in the organization and improvements in their knowledge and skills.
There are many things that are compelling about these elements. But it is also clear how employees could abuse the freedom that these structures would provide, and it is also possible that organizations could implement these structures in a way that manipulates rather than empowers employees.
Shawn is currently working with a large financial services firm that is continually improving its organizational design in ways that seek to empower employees in ways that are productive for both the employees and the organization. In doing so, they have been attentive to the how of implementation. For example,
- Managers try to make information flow down the hierarchy by being honest and consistent about sensitive issues. Following the financial crash of 2008, they told their employees exactly what implications the crash had for the company, what that meant for strategic decision making, and what that meant for employee jobs. The employees appreciated the transparency and trusted the managers more as a result. Then, when the managers asked for feedback about the vision and mission of the company, employees were very forthcoming and managers saw into the hearts and minds of employees in ways that are normally hidden. The result was a vision and strategy that has a surprising level of buy-in from employees.
- This work on strategy went beyond sharing information to actually allowing employees to participate, first by contributing to the vision, but then also by working together to get more clear about what the strategy means for each person’s job, and trying to define the broad range of latitude each employee gets within the clear parameters of their jobs. This helps to keep the moral hazard of empowerment in balance, by collaboratively developing clear parameters to be reasonably broad, and then asking employees to take risks within, but not beyond those parameters.
- Because of this freedom-within-parameters approach, the organization is becoming increasingly flatter, with employees authority over more resources that they can exercise discretion in using without having to receive permission.
- Managers also realized that they needed to support employees in their decision making if they want employees to use their increased discretion well. Therefore, they made a commitment to training employees—a commitment that did not waver during the financial crisis—even though many companies tend to slash training budgets during down times.
- (We do not have data on compensation at this firm, so we cannot comment on their pay structures.)
Note the conversation and collaboration involved in the “how” of designing a system that empowers at the same time that it manages risk wisely.
My Organization is Not Like That
This kind of design process is useful if you have the authority to re-design your organization’s work systems. If you are the person who wants to be empowered—you don’t have a supportive boss or a well-designed job—and you want to do something to help your organization, but there is a good chance that you will get punished for it, what do you do?
We have discussed this question before in our entry on courage, but the short answer is that we often need to talk to other people, outside the situation. This may be family or friends who can help us put the situation in perspective, or it may, like the strategist who attended our course on Lift, be a trainer or a coach.
When the strategist returned to work he met with representatives from banks. When he found the right person from a bank, he put together a high level business plan. Then he shared the idea with the CEO. This time, the CEO caught the vision and saw that a bank would actually be willing to invest in it. He gave his approval, and early indications suggest that the business plan could bring in £100 million of new revenue for the company. The strategist has been promoted to sit on the CEO’s team. In retrospect, what looked risky was less risky than it appeared. After doing his homework and making the idea less intimidating to his CEO, the CEO was impressed with his initiative. He was not granted empowerment, but he chose to act in an empowered way and the risks were not what they seemed. Courage is prudent action in the face of risk for the greater good, and it is not something we can wait for others to give us.