The Culture of Collaboration

Fixing Wells Fargo

Wells Fargo CEO John Stumpf will testify before the Senate Banking Committee next Tuesday about the company’s sales practices. This word comes less than a week after Wells Fargo agreed to pay $185 million in fines from the Consumer Financial Protection Bureau, the Comptroller of the Currency and the City Attorney of Los Angeles. So what went wrong?

Well, I’ve seen similar disasters in other companies when the structure—and, yes, the culture—of  the organization encourages competing with colleagues and cutting corners rather than collaborating with colleagues, customers and partners. The key building blocks of the organizational structure are principles, practices and processes. We get clues about Wells Fargo’s principles from its written “vision and values” which include:

“Our ethics are the sum of all the decisions each of us makes every day. If you want to find out how strong a company’s ethics are, don’t listen to what its people say. Watch what they do.”

So what exactly did Wells Fargo people do to cost the company $185 million plus untold damage to its brand and reputation?

According to the Consumer Financial Protection Bureau, Wells Fargo opened over 1.5 million unauthorized deposit accounts and may have funded these accounts by transferring funds from existing customer accounts without consent or through “simulated” funding. This practice generated about two million dollars in fees from 85,000 accounts. The CFPB consent order also states that Wells Fargo submitted credit card applications, ordered debit cards and enrolled consumers in online banking without customer consent. Clearly, this behavior represents at best a disconnect between principles and processes particularly the reward system process.

© John Doe / Wikimedia Commons / CC BY-SA 4.0

Wells Fargo’s “vision and values” cover everything from ethics to doing what’s right for customers. But written “vision and values” and mission statements don’t tell the whole story for many companies. Often, the real principles that govern an organization are unwritten. These principles manifest in break rooms, cafeterias, meetings, “off-site” sessions and sometimes during dreaded performance reviews. At best, Wells Fargo’s unwritten principles echo its written values and the problem is a disconnect between principles and processes that culminated in widespread abuses.

At worst, the company’s unwritten principles are something like “win at all costs” and “loyalty above all” which by some accounts were the unwritten principles of Lehman Brothers.  Lehman, once the fourth largest investment bank in the United States, no longer exists. Neither does Enron which embraced the principle of following orders without questioning them. The wrong unwritten principles or a disconnect between the right principles and processes can start small with, say, approving mortgages for people who don’t qualify and culminate in a near collapse of the financial system.

Many organizations espouse collaborative principles while short circuiting collaboration and value creation through reward systems that reinforce internally-competitive, command-and-control behavior which can easily morph into cutting corners and illegally fudging numbers. Along the way, trust dies among team members and ultimately among customers, partners, regulators and others. This happens in industries ranging from financial services and healthcare to manufacturing and technology. And it doesn’t help that increasingly team members across multiple industries prefer to interact with devices and computer systems rather than with their customers.

Why would the third largest U.S. bank by assets—and a favorite stock of Warren Buffett—risk its reputation by cutting corners? The most likely answer: to keep the squeeze on team members through a reward system that the bank believed would deliver ever better quarterly returns.

When I hear analysts and others suggest that a company has a secret sauce shrouded in mystery that delivers outlier returns, alarm bells reverberate in my brain. This is also true of financial advisors touting a particular investment. In 2009, Warren Buffett suggested in a Fortune interview that there was something special about how Wells Fargo does business. “The key to the future of Wells Fargo is continuing to get the money in at very low costs, selling all kinds of services to their customer and having spreads like nobody else has.” This sounds sort of like a secret sauce—and there go the alarm bells. Sometimes there’s a reason why a company is an outlier. Mostly, what Buffett was referring to is the Wells Fargo practice of cross selling which is simply selling more products to existing customers. It turns out that cross selling involved phantom sales. Wells has told some team members to stop cross-selling amid the crisis.

So how can Wells Fargo be fixed?  The company has fired more than 5000 employees, because of the illegal practices. But is the real problem these team members or the company’s principles, practices and processes?  Wells Fargo CFO John Shrewsberry apparently feels it’s the former. Shrewsberry reportedly told the Barclays Global Financial Conference in New York on Tuesday that the team members who committed the illegal acts were “at the lower end of the performance scale” and they were trying to hold onto their jobs.

Wells Fargo senior leaders are missing the point. The real villain is the reward system they created or approved that drives the behavior of team members at bank branches. This system apparently rewarded employees for opening accounts regardless of whether customers funded these accounts with new money. What value does this create? None. In fact, it likely costs more to open and ultimately close an unauthorized account than to do nothing. It makes little sense to blame bank branch employees for trying to retain their jobs when senior leaders have likely created principles, practices and processes that prevented more than 5000 people from acting ethically, selling products and creating value.

As its CEO prepares to testify before the Senate Banking Committee, Wells Fargo announced today the company is eliminating sales goals for retail bankers. Fixing the reward system without systemic repair may help for a while, but a lasting solution requires a more comprehensive approach. I’ve learned that trying to change an ingrained culture fails without changing the organizational structure.

The unfolding crisis provides an opportunity for Wells Fargo and many other companies in multiple industries with similar issues to replace an obsolete organizational structure while revamping the flawed reward system. This involves focusing like a laser beam on the key building blocks of a value-creating collaborative company: principles, practices and processes. Only then can the culture evolve.

Socrates and New York Mayor Bill de Blasio’s City Hall

The in-box culture is dead, but that may be news to the mayor and officials in New York City.

New York’s City Hall apparently never got the message about deserialization. What I mean by deserialization is curbing the in-box or pass-along approach to work and interaction that is critical for collaboration and value creation. But New York Mayor Bill de Blasio has sure received plenty of memos…decision memos, that is.

 

New York City's City Hall reportedly embraces the pass-along approach to work and interaction

Before Mayor de Blasio makes many decisions, his staff prepares memos. And before these decision memos reach the Mayor, they reportedly require the signatures of at least eight officials including the first deputy mayor, the law department, the Mayor’s counsel, the budget director, the press secretary, the head of intergovernmental affairs and the deputy mayor with direct responsibility, according to a recent story by J. David Goodman in the New York Times. This is the antiquated pass-along approach.  

The Wall Street Journal reports that a memo on flight rules for helicopters took at least nine rounds of revisions. Nine rounds! This is pass-along times nine. And we wonder why citizens complain that government is mired in bureaucracy. The Times story quotes the Mayor’s chief of staff Tom Snyder as saying the Mayor’s decision-making process is “extremely granular, engaged, semi-Socratic.”

Actually, Mayor de Blasio’s approach is anything but Socratic. Socrates believed that the way to the truth was through questioning and dialogue. Socrates rejected writing, because writing meant—quite literally in ancient Athens—that ideas were set in stone or wax and that the process of developing those ideas was dead.  Socrates also rejected scripted speeches, because these are essentially the recitation of written words. For organizations making decisions, one form of the truth is accurate information—which is dynamic rather than set in stone. As the situation changes, sometimes hour-to-hour, what can be considered accurate information also shifts.

Using memos or email to make decisions compromises collaboration and disrupts value creation. This approach is a hallmark of command-and-control organizational structure and culture. By the time each department head or official has signed off on the course of action and passed the baton to the next official, the “truth” or facts have often changed. Socrates would roll over. Yet dialogue and questioning without a structure can also pose problems particularly for complex organizations such as New York City government and large, distributed enterprises. So what’s the alternative?

My most recent book, The Bounty Effect: 7 Steps to The Culture of Collaboration, shows how to change the structure of organizations so that they can evolve from command and control to collaborative. And a fundamental element is creating an Open-Access Enterprise which enables the organization for spontaneous dialogue. In the Open-Access Enterprise, everybody has access to everybody else—and that access is immediate.

Using unified communications, we can see who is available and connect instantly. We can bring key stakeholders into collaborative group sessions (CGS) so we can hash out issues in real time, make decisions and create a work product without getting mired in the pass-along approach of memos and meetings. A CGS can occur virtually using unified communications and related tools or the session can happen physically with all participants in the same room.

Mayor De Blasio’s apparent goal of getting broad input into decisions makes sense. Embracing the Socratic method has merit. But the structure and processes of the Mayor’s office appear flawed and are short circuiting the goal. This is typical of many organizations that embrace collaboration as a concept but sabotage collaboration with a command-and-control structure that encourages bureaucracy and reinforces hidden agendas and internal competition. The solution is to adopt a collaborative organizational structure that leaves memos and traditional meetings in the dust. The in-box culture is dead.

Lagoons and Collaborative Development

As the Falcon 2000LX reaches 41,000 feet, Uri Man begins answering questions from real estate developers. “It’s not stagnant. It’s circulating,” Man, the CEO of Crystal Lagoons USA, tells one inquiring passenger.

Soon we would see for ourselves. Man had chartered the plush jet and scooped up some developers and this author attending the Urban Land Institute’s Fall Meeting in San Francisco last Monday. Now we’re bound for Cabo San Lucas to tour a human-made lagoon.

“We are a technology company collaborating with developers,” Man explains. This unique collaboration for large-scale real estate development projects had piqued my interest. Crystal Lagoons has 300 lagoon projects underway globally.  Man did a stint as a developer before Crystal Lagoons founder Fernando Fischmann recruited him to accelerate lagoon projects in the U.S. “Right now we’re going to Cabo, because I can’t show you one yet in the U.S.” That’s about to change. The first Crystal Lagoon in the U.S. will reportedly open next summer at Epperson Ranch in Pasco County, Florida.

Meantime, we’re headed to the southern tip of Mexico’s Baja peninsula to see what a 10-acre salt water lagoon looks and feels like. As Man begins a slide presentation on his notebook computer, I begin

A 10-acre Crystal Lagoon at Diamante Cabo San Lucas, Mexico. (Photo credit: K.R. Hirzel)

visualizing the collaborative potential of lagoons. Resort developers need a new amenity to differentiate their projects. Coastal resorts can increase their waterfront, and inland resorts can gain a coastal experience. A Crystal Lagoons architect and project team collaborates with the developer’s planning team until they conceive a project with a lagoon as the centerpiece. The Crystal Lagoons technology uses disinfection “pulses” that reportedly allow using up to 100 times fewer chemicals than a swimming pool and an ultrasonic filtration system that allows using up to 50 times less energy than conventional filtration systems.

The Crystal Lagoons business model has nothing to do with construction and everything to do with licensing. The company has a major stake in the success of development projects, because it receives roughly two percent of every condominium and house sale and a similar cut of each time share dollar. For developers, constructing lagoons costs an average of $100,000 to $200,000 per acre.

The Falcon 2000X lands, and a greeting party boards the plane and passes out hand-blown shot glasses. After a ride through some dusty Cabo streets, we arrive at the Diamante development west of the city on the Pacific Ocean. After we tour the resort, I change into my swim suit and plunge into the salt water lagoon. As I swim laps in a life-guarded area near one of two beaches, kayaks explore the expanse of this man-made mini ocean.

En route back to San Francisco, Uri Man talks about the future of Crystal Lagoons with the gusto of a bond trader (he used to be one) and the chutzpah of a guy who once hit on Fox News anchor Ainsley Earhardt on live TV (which he did). That future may involve cross-sector collaboration among industry and governments.

Crystal Lagoons USA CEO Uri Man on board a Falcon 2000LX en route to Cabo San Lucas, Mexico. (Photo credit: K.R. Hirzel)

“Parks are big money losers for states, cities and countries,” Man insists. So why not collaborate with governments to transform parks with lagoons? “Then it’s not just ten people showing up with their dogs,” says Man. “You could have hundreds of thousands showing up.”

The licensing revenue business model, which the company would likely modify for government work, ties the success of Crystal Lagoons to the achievements of developers and their large-scale projects. Both parties share wins and losses. So Crystal Lagoons enters into collaborations carefully and works with developers to create mutual value. More broadly, business partners can achieve smashing success if incentives and business models foster symbiotic relationships and collaborative value creation.

Millennial Malarkey

“The people under 30 get it. It’s second nature to them.”

 “We have a bifurcated workforce.”

 “Let’s just turn the keys over to the Millennials. They get it. We don’t.”

These are some snippets of conversation from well-intentioned change agents who overemphasize generational differences while attempting to transform their organizations into collaborative enterprises. In The Bounty Effect: 7 Steps to The Culture of Collaboration®, I identify this scenario as the Generation Gap Trap. It’s a trap, because overemphasizing generational differences reinforces fear and internal competition which short circuit collaboration.

Undoubtedly, younger team members who are so-called “digital natives” are accustomed to using tools such as texting, instant messaging, and social media. It takes more than using tools, though, to collaborate. In The Culture of Collaboration® book, I define collaboration as working together to create value. And it’s quite possible to text, IM, or use social media without creating any value.

The point is that age is by no means a predictor of collaborative behavior.  Some people right out of college or graduate school internally compete while they use “collaborative” tools and technologies. Meantime, collaboration is baked into the behavior of some team members in their fifties and sixties. Some disciplines like aerospace engineering or animation are inherently collaborative, and therefore experience in these fields is a better predictor of collaborative behavior than age. I have worked with some “boring” industrial companies in which people work together to create value far more easily and often than team members in supposedly collaborative Silicon Valley companies.

After seemingly endless media reports describing how millennials demand a collaborative workplace, a new CEB study indicates that millennnials—those born between 1980 and 2000—are the most competitive generation in today’s workplace. Among CEB’s findings are that millennials are more driven by performance relative to others than by absolute performance and that millennials are less likely to trust peers and their peers’ input. Trust, incidentally, is one of the 10 Cultural Elements of Collaboration that my colleagues and I have identified. Without trust, collaboration is dead on arrival.

In an August 1, 2015 “Schumpeter” column in The Economist, the unidentified columnist explores some of these millennial myths and cites the CEB study. The columnist incorrectly concludes from the research that to motivate young team members, organizations should put less emphasis on collaboration. The real take-away regarding the CEB study is that emphasizing generational differences is folly.

De-emphasizing collaboration because millennials are less motivated by it would pander to a generation without guiding it. Instead, doubling down on adopting collaborative organizational structures and cultures will ultimately motivate team members regardless of generation and create far more value than command-and-control and internal competition.

Collaboration to Change Product Use and Brand Perception

The Apple iPod began as a music player and became a video player in part because consumers discovered a new use for the device. The brand perception then shifted.  Lego Mindstorms began as company-provided software and hardware to create small robots. Then consumers hacked the code, changed the products together and Lego ultimately began providing the source code and collaborating with its customers on new products. In time, consumers began perceiving Mindstorms as a collaborative activity.

As in these cases, sometimes consumers collaborate to alter a product or its use and this ultimately changes the brand perception. In other cases, companies can collaborate with partners to discover new uses for products and change how consumers perceive the brand.

Gin has traditionally involved martinis or gin and tonic—and at least one gin producer is collaborating with partners to change this use and brand perception. When Bombay Sapphire East

The LUCKYRICE festival's "custom tonic bar": bartenders mix flavor extracts with Bombay Sapphire East gin and club soda

emerged in test markets as the first product line extension of Bombay Sapphire gin in 2011, reviews described the gin as spicy. That’s because Bombay Sapphire East adds two new botanicals to Bombay Sapphire: lemongrass and black pepper. This “flavor profile” may seem a bit assertive to accompany typical cocktail fare like cheese and crackers. Therefore, it’s necessary for this brand to gain traction in a different culinary arena, namely Asian food.

This past Friday evening, Bombay Sapphire East sponsored the 6^th Annual LUCKYRICE feast at the Bently Reserve venue in San Francisco’s financial district. As I entered the event, an Asian woman handed me one of many varieties of exotic drinks bartenders were mixing with Bombay Sapphire East. A who’s who roster of upscale Asian restaurants with tables scattered around the event were cranking out specialties to accompany Bombay Sapphire East. The brand was clearly collaborating with chefs to create the perception that the gin goes well with Asian food. This is by no means a stretch.

I sampled a drink called Piman which includes Bombay Sapphire East, yellow pepper puree and Kalamansi (an orange/kumquat hybrid) syrup.  I also checked out the Bombay Sapphire East “custom tonic” bar at which bartenders combined such flavor extracts as bergamot and elderflower with club soda and gin (see above image). These drinks complimented available dishes including Dosa restaurant’s Hyderabad chicken biryani, M.Y. China’s black pepper beef with mushrooms and Brussels sprouts, and Asian Box’s lamb meatballs in coconut curry.

Collaborating with Asian chefs, the people behind Bombay Sapphire East are not only changing consumer perceptions about their gin. They’re also working with Asian restaurants to co-create and sell cocktails using a gin accented with botanicals that compliment Asian food.  This creates value for the restaurants and for Bacardi Limited, which owns Bombay Sapphire East.

Whether the product is booze, blenders, toothpaste or technology, collaborating with partners to change brand use and perception can transform a sleeper product into a sales leader.

 

 

Coffee and Collaboration

In San Francisco, where I live, coffee plays a major role in lifestyles and work styles. People stand in long lines at artisanal coffee businesses for coffee that’s sourced, roasted and prepared with care. It has become de rigueur for leading technology and social media companies to make artisanal coffee available to team members. Google stocks beans from the better San Francisco purveyors in snack areas throughout its “Googleplex” in Mountain View, California. Team members can grind the beans, brew a cup, or pull a shot of espresso on demand.

As the artisanal movement in coffee, often called “Third Wave Coffee,” sweeps the U.S. and infiltrates workplaces, people are becoming particular about what’s in their mug. Commercial brew just won’t do. Yet coffee consumption remains primarily a solitary activity. People fiddle with their smart phones or work on notebook computers as they sip that Yirgacheffe or Antigua drip-by-the-cup in cafes and in workplaces.

In contrast, workplace coffee consumption in Sweden is primarily a social activity. Swedes embrace the ritual consumption of coffee rather than the coffee itself. So Swedes care less about sourcing, roasting and preparation and more about gathering around a table with colleagues to consume the beverage.

I recently returned from Gothenburg, Sweden where I gave a keynote speech on collaboration to a group of government leaders, healthcare professionals and pharmaceutical executives. While in Sweden, I engaged in Fika which is an institution in the Swedish workplace. Fika is scheduled twice a day, typically at 9 a.m. and 3 p.m. Work groups sit around tables in break areas. They drink coffee, eat cake sometimes baked by a team member, and they discuss issues pertinent to their work. Fika helps achieve the consensus that is integral to Swedish business culture (consensus is not integral to collaboration, but that’s a different post). Fika’s limitation is that people share coffee and cake with the same team members every day.

Both U.S. and Swedish workplaces can enhance collaboration by changing how they consume coffee—but the challenges are different for each culture. In the U.S., the challenge is to put down the devices and engage others while enjoying that artisanal cup of joe.

In Sweden, the challenge is to include people from other levels, roles and regions so that fika is less insular. Collaborative tools such as telepresence could bridge the distance gap and offer the opportunity for a video fika. Because fika is so engrained in the Swedish business culture, it is a critical channel Swedes can use to enhance organizational collaboration.

 

The Collaborative Value of Getting Lost

Remember when it was possible to get lost? Global positioning systems (GPS) and satellite-based navigation tools have rendered losing one’s way an anachronism. Something is lost, though, in the inability to get lost. And that something is serendipity.

So what’s wrong with that? And what does this have to do with collaboration? Travel involves some structure. You may know approximate departure and arrival times. You may have an idea where you’re going and even some sort of a plan. Like travel, collaboration involves some structure. Balancing structure with serendipity is necessary to creating collaborative value.

Adopting a structure that lets team members use creativity and collective brain power nets far better results than dictating their moves.  Instructing collaborators each step of the way as GPS instructs navigators falls flat. When people get lost, they may discover something new or find a different way to get back on course. They may also determine there are several paths and that options exist.

Stopping and asking for directions lets us engage people rather than devices. Some months ago, a colleague who is a geographer and I tried an experiment while driving in France. We knew where we were going and we had some sense of how to get there. We skipped GPS and used no maps. Instead, when we veered off course, we stopped and asked directions. My colleague studied GPS in graduate school, but she realizes the technology’s limitations. She equates the “turn left, turn right” approach with command and control. Instead, she prefers to wander and discover new things. We lost our way a time or two with interesting results.

In one case, a Frenchman retorted “Don’t you have GPS?” In another instance, we stopped at a small- town bar and asked the imbibers for directions. They motioned us to sit down and have a drink, which we did. And they engaged us in a conversation about the differences between small-town and urban culture in France before getting us back on course. This serendipitous encounter connected us with people and ideas in a way that using GPS could never have accomplished. Like collaboration, our encounter offered a richer experience as other perspectives entered the mix.

The electronic mapping craze is now going indoors. I know a furrier in a mid-sized Midwestern city who keeps getting requests from Google to map the interior of his business. Security is a major concern considering the value of his inventory which includes exotic mink and other fur coats, and he has zero desire to publicize the layout of his store. Best I can tell, no banks have yet provided floor plans to Google.

The downside of never needing to ask for directions is that our lives and our travels become overly planned and controlled with little room for chance. This mirrors the struggles of organizations striving to become collaborative while their structures hold them back. Enabling serendipity is a key element in adopting a collaborative organizational structure. In command-and-control organizations, formality eclipses serendipity. It’s as if everything is scripted. Organizations on a collaborative path design physical and virtual work spaces with chance encounters in mind, as The Bounty Effect: 7 Steps to The Culture of Collaboration book details.

I live in San Francisco where many people ride company buses to work in Silicon Valley. In the morning, they board buses on which Wi-Fi and other amenities are provided. At work, food is available in free campus restaurants and canteens. Haircuts and dry cleaning services are also available. They ride the bus back in the evening. The idea is that without having to think about transportation, food and other services, team members can focus on innovation at work. The problem is that without having to deal with many of life’s necessities, people can become less resourceful. Work days become too scripted leaving little to chance. The lack of opportunity to “get lost” can interfere with progress.

Spontaneity breaks down barriers and silos among levels, roles and regions. A chance encounter with a colleague in another function or business unit may spark an idea for a process improvement or a new product. If our time and movements throughout the work day are overly planned, we lose the opportunity to engage colleagues on the fly.

GPS and satellite-based navigation technology have made the world smaller, but we must make sure that these tools and overly-controlled environments have not made our worlds smaller by preventing the serendipity and spontaneity necessary for travel and collaboration.

 

General Motors and the "C" Word

General Motors CEO Mary Barra is taking aim at the “C” word.

“I hate the word culture,” Barra is quoted as saying in an article by Joseph B. White in the September 30 edition of the Wall Street Journal. “Culture is really just how we all behave,” according to Barra. The comments are curious in that Barra testified before a Congressional subcommittee last June that she would

GM CEO Mary Barra outlines new strategic plan  (Image copyright GM)

not rest until GM’s “deep underlying cultural problems” are resolved. The subcommittee was investigating GM’s failure to recall thousands of cars with defective ignition switches for eleven years.

It’s myopic to dismiss the word culture. Merriam-Webster Dictionary’s third definition of culture is “a way of thinking, behaving, or working that exists in a place or organization.” GM would benefit from focusing on these issues plus the broader context of the word culture. In his Tusculan Disputations, the ancient Roman orator Cicero introduced the concept of culture as cultivation of the soul as a farmer cultivates crops. Culture has come to represent beliefs and customs of societies. Cultural anthropologists study social structure and customs in populations ranging from villages to corporations.

Culture is inextricably intertwined with collaboration in that how “we all behave” in Barra’s words determines whether we’re working together towards common goals or working at cross purposes. Ironically, in a July 28, 2014 post, The Culture of Collaboration® blog took General Motors to task for overemphasizing culture change without structural change. Culture change typically delivered as an edict often highlights the desired result without providing a way to get there. This common prescription from leaders, pundits and management gurus often fails, because the shift originates with executives without detail, discussion or broad buy-in. Meantime, the outmoded organizational structure stays the same. To achieve collaborative culture and the payoff that collaboration provides, it’s necessary to change the organizational structure. Then culture change can happen.

On October 1, GM outlined its new strategic plan that focuses on technology and product advances, growth in China, establishing Cadillac as a separate business unit “headquartered” in New York City and delivering “core operating efficiencies.” Incidentally, the notion of headquarters is a relic of Industrial Age command and control. Nowhere does the plan mention structural change, which the automaker sorely needs. Changing GM’s structure requires overhauling everything from how team members share information across levels, roles and regions to how the company recognizes and rewards people as I detail in my book, The Bounty Effect: 7 Steps to The Culture of Collaboration®.

 

 

Fixing General Motors and Curing Veterans Affairs

General Motors chief executive Mary Barra has vowed to change the company’s culture and has testified
before Congress that GM has taken steps to increase internal transparency and information sharing. This commitment follows a report exposing that GM discouraged raising or sharing safety concerns. The company commissioned the report, because GM failed to recall thousands of cars with defective ignition switches for eleven years.

Similar calls for culture change have followed the Veterans Health Administration’s wait-for-care and numbers fudging scandal. President Obama has remarked that the VA needs a culture change so that “bad news gets surfaced quickly.” Not content to wait for culture change, House and Senate negotiators today announced a $17 billion plan that, among other provisions, provides money to lease clinics so that veterans can get treatment outside the VA’s system.

Culture change emphasizes the result without a way to get there. It’s like telling a poor person to become rich. Culture change has become a common prescription from leaders, pundits and management gurus. The prescription often fails, because the shift originates with executives without detail, discussion or broad buy-in. Meantime, the organizational structure stays the same.

The Bounty Effect has hit GM and the VA. As I describe in my new book, The Bounty Effect happens when exigent circumstances compel businesses, government and organizations to change their structures from command-and-control to collaborative. The solution for these organizations is to seize the opportunity The Bounty Effect provides and fundamentally change their structures so that people can spontaneously engage one another, share information and participate in decisions regardless of level, role or region. This will cost far less than $17 billion.

Many organizations, including GM and the VA, still operate with a structure that has barely changed since the Industrial Age.  This obsolete structure based on command-and-control promotes hierarchy and internal competition plus rewards information hoarding, secrecy, and cutting corners. GM and the VA also share a need to go through channels. This inhibits the participation and information flow critical to Information Age organizations.

Safety concerns apparently never reached GM’s chief executive, nor did problems with scheduling reporting systems apparently flow to former VA Secretary Eric Shinseki.  And both organizations apparently discouraged people from sharing concerns. VA supervisors often retaliated against workers who raised valid complaints, according to a White House report.

GM chief executive Mary Barra has said that culture change must be leader-led. Barra has also promoted a program called “speak up for safety” plus three GM “core values.” These are “the customer is our compass, relationships matter, and individual excellence is crucial.” But a leader’s words have modest impact without structural change. Yes, GM has added safety investigators, increased safety data mining, and created a vice president of safety position. Nevertheless, none of these actions will reduce information hoarding and internal competition. None of these actions will change GM’s structure from command-and-control to collaborative. 

When an organization rewards obsolete behavior, change dies on the vine despite a leader’s mandate. If hoarding and hiding information or failing to act on knowledge results in a raise or a promotion, people are unlikely to share information or take action. Pushing safety issues at GM was seemingly no path to promotion. VA managers reportedly kept patient names off the official waiting list, because bonuses depended on concealing information. Recognition and reward systems in obsolete organizational structures often reinforce bad behavior and the status quo regardless of culture change efforts. The same flawed practices and processes that encourage internal competition and information hoarding lead companies to compromise safety and fudge numbers.

Changing the VA’s structure will enhance transparency and efficiency while saving money rather than costing the $17 billion Congress is authorizing. Changing GM’s structure will ensure that people across the organization share and act on critical information.  And changing the structure of GM and the VA will accomplish what many leaders and pundits are recommending: culture change.

Bankruptcy of Purse--and of Culture

Can an organization’s culture portend disaster?

For the answer, we need look no further than some of the most high-profile corporate scandals. Lehman Brothers, Worldcom and Enron— companies that experienced some of the largest bankruptcies in history— used accounting gimmicks which stemmed from bankrupt cultures. Command-and-control, internally-competitive, autocratic, star-oriented organizational cultures breed unethical and—in extreme cases—illegal behavior.

Now Big Law gives us a new don’t-let-this-happen-to-you poster child for embracing the right culture. Leaders of the once top-tier law firm of Dewey & LeBoeuf overstated revenue and used accounting tricks to hide losses and cash flow shortfalls, according to a 106-count indictment that a New York state grand jury handed up last Thursday. If convicted of the most serious charges, Chairman Steven Davis, Executive Director Stephen DiCarmine and Chief Financial Officer Joel Sanders, each face up to 25 years in prison. Dewey filed for Chapter 11 bankruptcy in May of 2012. The alleged financial shenanigans began as billings dipped and clients evaporated during the depths of the 2008 financial crisis.

But Dewey’s problems began long before the firm’s leaders allegedly began their deceit, as I describe in my new book, The Bounty Effect: 7 Steps to The Culture of Collaboration®. Formed in 2007 from a merger of two venerable firms, Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae, the firm reportedly employed three thousand people globally at its height. Dewey’s roots date back a century, but it took roughly five years for the firm to come unglued.

Among other cultural defects, the newly-merged firm created a two-tier partnership system in which it treated “stars” differently than other “partners.” After the merger, Dewey began recruiting so-called “lateral partners” rather than promoting from within. These partners received multiyear, multimillion-dollar guarantees. Dewey’s secretive culture prevented the firm from sharing this information with all of the partners. While one lateral partner reportedly had a six-million-dollar-a-year guarantee, other partners received four hundred and fifty thousand dollars a year.

The stars were those who the firm expected would bring in the most business. Dewey considered other partners “service partners,” the ones who wrote briefs and performed or managed the legal heavy lifting. When word of the wide compensation gap spread, the service partners—many of whom had worked for the firm much longer than the newly-recruited “stars”—became resentful. Clearly, star culture had compromised trust and poisoned the organization. And, guess what? Some highly-touted “stars” were unable to live up to their hype, and therefore revenue fell short of what Dewey needed for paying annual compensation commitments to these “stars.”

The merger occurred right before the financial crisis. By the end of 2008, Dewey had more than $100 million in term debt outstanding and available lines of credits totaling more than $130 million with four banks. The firm’s credit agreements required Dewey to maintain a minimum cash flow. To abide by this covenant, the firm’s leaders and others conspired to misrepresent Dewey’s financial performance, according to the indictment.

So brazen were the defendants, according to the indictment, that they created a document called the “Master Plan” which outlined fraudulent accounting tricks. Plus they reportedly discussed the alleged fraud in a series of emails. One of these apparently read, “Can you find another clueless auditor for next year?”

Suppose Dewey had fostered a collaborative rather than command-and-control culture and organizational structure? What if Dewey had shared rather than hoarded information, harnessed broad input into decisions, and encouraged partners to work together both in developing business and producing legal work? The firm may have weathered the financial crisis rather than devolving into apparent unethical and possibly illegal activity.

Dewey is by no means the only law firm with a two-tier partnership system. Nor is it the only firm that embraces a star-oriented, command-and-control culture. Many law firms and organizations in multiple industries and sectors run the risk of financial implosion, because their cultures are bankrupt. The solution, as I describe in The Bounty Effect, is to change the structure of organizations from Industrial Age command-and-control to Information Age collaborative