“We trust people to be adults in so many areas of their lives,” says journalist and author Brian Carney. “But when they walk through the doors at work, we insist they need detailed rules and descriptions for how to do a job.”

Controlling, top-down leadership creates a culture of “how,” according to Carney. At best, it limits growth and innovation. At worse, it solidifies inefficiencies, undermines company goals and creates an environment where employees are unmotivated and disengaged.

In his book Freedom, Inc., Carney writes about companies as diverse as a California winery, an insurance company, an advertising agency and a fiber manufacturer that overcame “the hidden cost of how” — by giving up control.

FAVI, for example, is a brass foundry in Northern France and major supplier of gear forks for cars made in Europe. Jean-Francois Zobrist became CEO of FAVI in 1983 bringing a new philosophy to the business. Carney writes:

“There are, Zobrist said, two kinds of companies: “Comment” in French, or “how” companies, and “pourquoi,” or “why” companies. “How” companies spend their time telling workers how to do their jobs — where to place the machinery, when to come to work and when to leave, and so on.

“This has two consequences. The first is that you end up judging employees by everything except what counts, which is whether the job gets done and the customer is happy. The second is that it becomes difficult, if not impossible, to change any of the myriad rules about how to get things done …

“A pourquoi company is different. It replaces all the myriad “hows” with a single question: Why are you doing what you’re doing?”

Transforming FAVI from a management-by-rules culture to one that gives all employees freedom to make decisions has set it apart from the competition, Carney reports. For 25 years, it has been able to reduce prices 3 percent a year on average and has never been late with a delivery. In an era where old-world businesses face stiff competition from emerging economies, FAVI has been successfully exporting parts to China. As for the current economic downturn, FAVI expects to come out of it with an 80 percent share of the European market because a number of its international competitors couldn’t survive.

Carney argues that FAVI has succeeded because Zobrist understood the hidden costs of how all along. “In most organizations, the costs of command-and-control are not accounted for — we don’t see what is not being done; we don’t measure missed opportunities; we can’t track potential efficiencies.”

As a result, top-down firms suffer from what Carney calls low “execution capacity.” “Whether working on a mundane task or a major corporate initiative, employees who aren’t engaged — and more so the actively disengaged ones — don’t go the extra mile that is so often critical to meeting deadlines or avoiding penalties or the loss of a customer,” he notes.

In contrast, when leaders give people control over their work, stop telling them how to do their jobs and focus on the goals, the hidden costs are replaced with numerous benefits. Employee stress goes down, absenteeism decreases and engagement goes up. Productivity improves and innovation is possible.

“Anybody who does a job eight hours a day is going to see ways in which that job could be improved or simplified,” Carney explains. “Giving them the freedom to do so can, when multiplied across an entire organization, reap enormous gains.”

Culture Eats Strategy for Breakfast

Organizational culture is a powerful force. If a strategy or directive doesn’t mesh with the beliefs about “how things are done around here,” then the culture will simply reject it, says CCL’s John McGuire, author of Transforming Your Leadership Culture.

“Culture eats strategy for breakfast” has become shorthand among CCL’s faculty and clients for the reason as many as 75 percent of organizational change efforts fail. The expression was also on a banner hanging in Ford Motor Company’s “war room,” from which the company was plotting an ambitious change strategy to save it from near bankruptcy in 2005, writes Brian Carney, author of Freedom, Inc.

Carney continues: “And for those who didn’t get it, the plan’s czar, Mark Fields, would add: “You can have the best plan in the world, and if the culture isn’t going to let it happen, it’s going to die on the vine.” Sure, companies can find ways to coerce, or “bribe,” their employees — and many do — into executing what they are ordered to do, but corporate history is full of stories of how badly such workers accomplished their appointed tasks.”

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