In Search of Excellence September 2005

In Search of Excellence

Autonomy and entrepreneurship

Peter Jansen
September 2005

In our search for excellent Romanian companies, this time we look into another important attribute of excellent companies as found by Peters and Waterman in their management bestseller In Search of Excellence; that is, the ability to be big and yet to act small at the same time. Often, a common characteristic that big corporations lose over time is that which made them big in the first place: innovation.

As companies grow, management attention too frequently focuses on the “hardware” of organisations, the strategy and especially structure of the company. The general assumption is that as long as there is an organisational structure with a clearly defined chain of command and corresponding responsibilities, checks and balances, procedures and job descriptions, people will know what to do and the company will be productive and efficient. This might be true in a monopolistic and stable market, but it is not good enough for a highly dynamic and competitive environment as the one Romania is moving towards, where continuous improvement and innovation are vital for survival.

In other words, there is no such thing as a good structural answer apart from people considerations, and vice versa. Peters and Waterman concluded that any intelligent approach to organising had to encompass at least seven variables: structure, strategy, systems – the so called ‘hardware’ – and skills, staff, style and shared values – the ‘software’. This diagnostic model became later known as the McKinsey 7-S Framework and reminded the world of professional managers that ‘soft is also hard’ and that soft attributes can actually be managed.

The central question again is: how have large excellent companies avoided this slide into inertia and inflexibility? What they found was that innovative companies are not only good at producing commercially viable products or services; innovative companies are especially good at continually responding to change of any sort in their environment. As the needs of their customers shift, the skills of their competitors improve, the forces of international trade realign, and government regulations shift, these companies adjust, transform and adapt. In short, as a whole culture, they innovate.

An essential feature of innovative companies is that they encourage the entrepreneurial spirit among their people, because they push autonomy remarkably far down the line, a phenomenon nowadays known as empowerment. It became clear that all of these companies were creating almost radical decentralisation and autonomy, with its attendant overlap, lack of coordination, internal competition, and somewhat chaotic conditions, in order to breed the entrepreneurial spirit.

Now how do Romanian companies score on these features? How does decentralisation and autonomy, the main drivers of innovation, fit into the Romanian management culture? The answer is they don’t. The Romanian management style is mainly based on control and centralisation, the opposite of autonomy and decentralisation. Whenever I had the pleasure of having to deal with middle management, it basically led to nothing. Why? Because they are not empowered to make any real decisions and therefore prefer to do nothing. By doing nothing, no mistakes can be made, and making no mistakes has become the predominant career enhancer. Only in those cases where the issue at stake is well known and a clear set of procedures exists, progress can be made. Anything else has to be discussed with top management. It is not middle management who is to blame though, it is top management. They simply don’t create the kind of conditions in which people can flourish and are allowed to take certain risks. They are too concerned with controlling instead of stimulating.

It is interesting to see that this phenomenon is not only confined to Romanian companies, but also many multinational companies operating in Romania have fallen into the same trap. The result of this is a severe form of inertia and lack of innovation.

Peters and Waterman found out that successful projects always have one or more zealous “champions”. These are people who believe in an idea and will not stop till they have realised it. Don’t mistake them for creative people. All too often, people believe that creativity leads to innovation. It doesn’t. Creative people make none of the right kind of effort to help their ideas get a hearing and a try. The scarce people are the ones who have the know-how, energy, daring and staying power to implement ideas. Most companies fail to tolerate the creative fanatic or “champion” who usually is the driving force behind most major innovations. Innovations, being far removed from the mainstream of the business, show little promise in the early stages of development. Moreover, the champion or “corporate entrepreneur” is impatient, egoistic, anti-authoritarian and perhaps a bit irrational in organisational terms. For most managers in Romania that’s too much to handle.

My advice to managers and owners would be: step over your ego and go out and hire or develop champions and support them by acting as their sponsor. They will make your business more dynamic and innovative and therefore more competitive.

Peter Jansen is the Managing Partner of Bucharest Consulting Group, the exclusive partner of Boston Consulting Group (BCG) in Romania.