Use Values To Decentralize Decisions

Leadership Workshop (2 of 12) – Align the Core Values

Leading at Light Speed is a must-have leadership book by Eric Douglas highlighting the 10 Quantum Leaps to build trust, spark innovation, and create a high-performing organization.

On pages 24-26 of Chapter One, Align the Core Values, Eric talks about Using Core Values ot Decentralize Decisions.

In practical terms, one of the greatest benefits of creating a framework of core values is that decision making can be decentralized. When people understand the core values, there is no need for top-down command and control. As an alternative, one can implement “values-based decision making.The return is extraordinary levels of innovation and performance~{“Extraordinary levels of innovation and performance were the result}~The results were extraordinary levels of innovation and performance~The end-product was incredibly high levels of innovation and team performance}.

Decentralized decision making leads to higher levels of creativity. In the early days of Southwest Airlines, Herb Kelleher and his management team wanted to reduce the turnaround time for aircraft on the ground. Their goal was fifteen minutes. They got it down to ten. Kelleher watched in amazement as maintenance supervisors and frontline employees alike suggested innovation after innovation to meet what had been seen as an impossible standard. Why did they succeed? A culture of decentralized decision making and performance had already been implemented by Southwest. What was standard at Southwest was the exception elsewhere.

The tension between centralization and decentralization tends to disappear when a values-based decision making is in place. One California state agency, for example, articulated a set of values and tied them to performance measures. The return? Dozens of new entrepreneurial ideas sprang up, with far less need for centralized check-off or intervention.

However, bureucracy and centralization tend to take over when core values are missing. One state agency insisted on a uniform hardware and software platform for every single employee, despite the obvious differences in end users’ needs. Customers complained that the agency wasn’t able to perform. Further internal tensions were increased as a “black market” emerged to address the problem. Lacking an explicit framework, the de facto values continued to reign, with the press for uniformity trumping employee innovation, trust, and satisfaction.

The link between core values and decentralized decision making is one of the most powerful arguments for the first quantum leap. CEO Ken Iverson took the reigns of Nucor, a manufacturer of steel products, in 1986. The results can be extraordinary, when this happens}.

As you align the core values, look around and see what remnants of older thinking you can get rid of. Ask yourself whether the following systems need to be retooled to make them consistent with your organization’s core values:

• Reporting systems – the organizational structure and hierarchy
• Executive perks
• Hiring practices and systems
• Training systems
• Compensation systems
• Performance review systems
• Internal communication systems
• Information technology systems
• Rules on information access and disclosure

Jim Collins tells the following story that serves as a good example of realignment. CEO Ken Iverson took the reigns of Nucor, a manufacturer of steel products, in 1986. He was presented with an out-dated corporate culture, characterized by increasingly hostile relationships between management and front-line employees. Executives enjoyed considerable perks. Club memberships and access to the executive dining room were the determining factors for executive importance.

Iverson turned the culture around by doing three things:

1. He did away with titles
2. He did away with hierarchies
3. He did away with all executive perks

Until Iverson, Nucor appeared destined for oblivion. Under Iverson’s tenure, Nucor changed its values, changed its structure, and changed its culture. The “we” versus “them” mentality evaporated – one of the hallmarks of a high-performing organization. He achieved a total shift in business focus and an extraordinary level of success. Nucor negotiated a highly successful profit-sharing arrangement with its trade unions. Foreign competition never frightened Nucor; rather, they embraced it. Nucor’s performance over a fifteen-year period was absolutely amazing, when compared with that of one of its chief rivals, Bethlehem Steel. It increased its share value more than twenty times that of Bethlehem Steel.

Here is the main point: Once the core values are defined, time is necessary to bring the organization into compliance. That’s okay. It takes time to build up to light speed.

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