Liberating leadership: How the initiative-freeing radical organizational form has been successfully adopted

California Management Review

Volumn 51, Issue 4, 2009, Pages

  Getz, Isaac ^a  

^a Europe Business School

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EID: 70349192885     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41166504     Document Type: Conference Paper

References (118)

1. Video documents on the Kauffman Foundation's website , accessed March 20, 2007.
2. Personal interviews on April 8, 2005 and January 25, 2006. We will try, as much as possible, to present our illustrations in a narrative form. Though unusual for most scientific texts, narrative form is common for fieldwork-based disciplines, such as ethnography or anthropology, where, beyond getting close to the empirical fact, research must be factual, descriptive, and rely on quotations in reporting.
3. See John Lofland, Analyzing Social Settings: A Guide to Qualitative Observation and Analysis (Belmont, CA: Wadsworth, 1971).
4. Regarding the narrative form in organizational research, see Haridimos Tsoukas and Mary Jo Hatch, "Complex Thinking, Complex Practice: The Case for a Narrative Approach to Organizational Complexity", Human Relations, 54(2001):979-1013. (Pubitemid 33582398)
5. Adjustments are only made to world prices in raw materials.
6. Chris Argyris, Personality and Organization (New York, NY: Harper Collins, 1957);
7. Integrating the Individual and the Organization (New York, NY: Wiley, 1964);
8. Rensis Likert, New Patterns of Management (New York, NY: McGraw-Hill, 1961);
9. Douglas McGregor, The Human Side of Enterprise [annotated edition, originally published in 1960] (New York, NY: McGraw- Hill, 2006);
10. The Human Side of Enterprise, conference at MIT on April 9, 1957, reprinted in McGregor, op. cit., pp. 341-356.
11. Warren Bennis, "Foreword to the Twenty-Fifth Anniversary Printing", in McGregor, op. cit., p. xx.
12. On "new forms of organizing"/"new organizational forms", see Nicolai J. Foss, "Introduction: New Organizational Forms-Critical Perspectives", International Journal of the Economics of Business, 9/1(February 2002):1-8;
13. Anne Y. Ilinitch, Richard A. D'Aveni, and Arie Y. Lewin, "New Organizational Forms and Strategies for Managing in Hypercompetitive Environments", Organization Science, 7/3(May/June 1996):211-220;
14. Andrew M. Pettigrew and Evelyn M. Fenton, eds., The Innovating Organization (Thousand Oaks, CA: Sage, 2000);
15. Andrew M. Pettigrew, Leif Melin, Richard Whittington, Tsuyoshi Numagami, Winfried Ruigrok, eds., Innovative Forms of Organizing: International Perspectives (Thousand Oaks, CA: Sage, 2003).
16. On "advanced HRM practices", see Mark A. Huselid, "The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance", Academy of Management Journal, 38/3(June 1995):635-672;
17. Casey Ichniowski, Kathryn Shaw, and Giovanna Prennushi, "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines", American Economic Review, 87/3(June 1997):291-313;
18. John Paul MacDuffie, "Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry", Industrial & Labor Relations Review, 48/2(January 1995):197-221. On the "cellular form", see
19. Raymond E. Miles, Charles S. Snow, John A. Mathews, Grant Miles, and Henry J. Coleman Jr., "Organizing in the Knowledge Age: Anticipating the Cellular Form", Academy of Management Executive, 11/4(November 1997):7-20.
20. On the "post-bureaucratic type", see Charles Heckscher, "Defining the Post-Bureaucratic Type", in Charles Heckscher and Anne Donnellon, eds., The Post-Bureaucratic Organization: New Perspectives on Organizational Change (Newbury Park, CA: Sage, 1994), pp. 14-62.
21. On "people-based" forms, see Jeffrey Pfeffer, The Human Equation: Building Profits by Putting People First (Boston, MA: Harvard Business School Press, 1998).
22. On the "individualized corporation", see Christopher A. Bartlett and Sumantra Ghoshal, "Beyond the M-form: Toward a Managerial Theory of the Firm", Strategic Management Journal, 14(Winter 1993):23-46;
23. Sumantra Ghoshal and Christopher A. Bartlett, The Individualized Corporation: A Fundamentally New Approach to Management (New York, NY: Harper, 1997).
24. Tuomo Alasoini, "In Search of Generative Results: A New Generation of Programmes to Develop Work Organization", Economic and Industrial Democracy, 27/1(February 2006):9-37.
25. For more on this, see Raymond E. Miles et al., "The I-Form Organization", California Management Review, 51/4(Summer 2009):59-74.
26. In reality, built structures are multifunctional: beyond the usage function, they also have historical, aesthetic, social, and other functions. See Donald Preziosi, Architecture, Language and Meaning: The Origins of the Built World and Its Semiotic Organization (The Hague, The Netherlands: Mouton, 1979.)
27. Personal interviews with Joel Quadracci and Karl Fritchen, September 25-27, 2007.
28. Ellen Wojahn, "Management by Walking Away", Inc. (October 1983), pp. 66-76, p. 76.
29. See Gerald R. Salancik and Jeffrey Pfeffer, "A Social Information Processing Approach to Job Attitudes and Task Design", Administrative Science Quarterly, 23/2(1979):224-253;
30. Charles O'Reilly, "Corporations, Culture, and Commitment: Motivation and Social Control in Organizations", California Management Review, 31/4(Summer 1989):9-25.
31. For the recent accounts see Edward L. Deci and Richard M. Ryan, "The 'What' and 'Why' of Goal Pursuits: Human Needs and the Serf-Determination of Behavior", Psychological Inquiry, 11(2000):227-268;
32. Marylène Gagné" and Edward L. Deci, "Self-Determination Theory and Work Motivation", Journal of Organizational Behavior, 26/4(June 2005):331-362.
33. Deci, Ryan, and associates' work began in the 1980s, but despite its empirical breadth and theoretical relevance, most management and leadership research still relies on the earlier motivational theories, including that of Maslow. For example, see James MacGregor Burns, Transforming Leadership (New York, NY: Grove Press, 2003);
34. Stephen P. Robins, Management Today! (Upper Saddle River, NJ: Prentice Hall, 2000).
35. It can be argued that the highest need in Maslow's hierarchy-self- actualization-is never fully satisfied and so continually motivates people to new action to satisfy it. Though this may be true for a small portion of human beings, even for them Maslow's view of an unsatisfied need is that of a tension that one strives to reduce, which is very different from Deci and Ryan's view of needs as nutriments.
36. We are not ignoring the importance of physical and security needs. A chronically hungry or hurt child obviously won't enjoy playing. At the workplace, whether the majority of employees in the developed countries have their essential physical and security needs satisfied or not is a subject of debate. See for example, Angus Maddison, Dynamic Forces in Capitalist Development (Oxford: Oxford University Press, 1991). More specifically, F-form companies, though not based on Maslow's hierarchy of needs, obviously don't ignore the fact that all employees sign a contract stipulating the material benefits for their work. Regarding the latter, most F-form companies pay salaries within the third quartile, a compromise between their unwillingness that employees stay "just for money" and their awareness that "if we don't pay a competitive wage, our competitors will." Though none offer stock options, they all provide a gain-sharing plan, from stock ownership, to ESOP, to annual performance-dependent bonuses. Such plans' technicalities can be notoriously complex and indeed they differed among the companies we studied in everything but one common feature: they all tried to make it fair and reflect both individual and collective contribution to the results. The fairness mattered in particular because material benefits were not considered as separate but rather a part of all the benefits employees gain through the satisfaction of their universal needs (see Figure 1.) Many liberating leaders referred to it as "psychic income" and were convinced that the F-form companies' extremely low turn-over rate and even "boomerang" rate (proportion of employees who leave and come back) are due to the totality of this income, not only to its material part.
37. Deci and Ryan define relatedness as "desire to love and care, and to be loved and cared for"; competence as a "propensity to have an effect on the environment as well as to attain valued outcomes within it"; and autonomy as a "desire to self-organize experience and behavior and to have adivity be concordant with one's integrated sense of self." Deci and Ryan, op. cit., p. 231.
38. Douglas McGregor, The Professional Manager (New York, NY: McGraw-Hill, 1967), pp. 10-11 [the emphasis is McGregor's].
39. We prefer these terms to denote people's universal needs rather than Deci and Ryan's "relatedness", "competence", and "autonomy" for two reasons. First, terms such as competence and autonomy have acquired spedfic meanings in management. Thus, "competence" is often used as an HR term, as in rather command-and-control "competency management" and autonomy is often discussed in "balance" with control within a company. Second, we want to stay dose to McGregor, who talked about treating people as if they are good and about self-direction and self-control.
40. In Tom Peters and Robert Townsend, Winning Management Strategies for the Real World, Audio Cassette (Chicago, IL: Nightingale Conant Corp, 1986).
41. Gore's F-form being another early case, but in comparison to Avis, Bill Gore had little to remove since he was building an F-form from scratch.
42. Based on a personal interview, March 3, 2006.
43. Personal interview with Les Lewis, one of the early supervisors, March 1, 2006.
44. One reason invoked for the removal of the HR management procedures in companies like FAVI or GSI was that treating people as "resources"- instead of as human beings-introduces a fundamental intrinsic inequality between them and those who "manage human resources."
45. We observed this at both the company's U. S. and European facilities.
46. Ellen Bankert, Mary Dean Lee, and Candice Lange, "SAS Institute", International Journal of Leadership Education, 1/1(2005):93-114, p. 99; the emphasis is in the original.
47. Bankert et al., op. cit., p. 94.
48. Personal interview, May 23, 2008.
49. SAS performance of more than 30 years of profits and growth is indeed spectacular: only less than one tenth percent of comparable companies achieved such sustained competitive advantage (Robert R. Wiggins and Timothy W. Ruefli, "Sustained Competitive Advantage: Temporal Dynamics and the Incidence and Persistence of Superior Economic Performance", Organization Science, 13/1(2002):82-105). This also means that highly performing over a long span companies are rare-whether of SAS-type, F-form-type or other.
50. Based on many studies of Southwest, we considered including it in our panel of likely F-form companies. It didn't happen, in the end, since we were unable to study it firsthand and interview its co-founder Herb Kelleher.
51. There are several reasons for a leader to elaborate a world-class vision. One, given both by the liberating leaders and many leadership scholars is that a vision, in order to rally people, has to be inspirational. Another, offered by workplace design and transformation scholars is that the organizational design has to align itself with a corporate strategy. See Jeffrey K. Chan, Sara L. Beckman, and Peter G. Lawrence, "Workplace Design: A New Managerial Imperative", California Management Review, 49/2(Winter 2007):6-22;
52. Arnold C. Levin, "Changing the Role of Workplace Design within the Business Organization: A Model for Linking Workplace Design Solutions to Business Strategies", Journal of Facilities Management, 3/4(June 2005):299-311.
53. Personal interview, September 24, 2007.
54. Personal interview, March 3, 2006.
55. Personal interview, September 24, 2007.
56. Personal interview, March 1, 2006; other paragraph's details are based on the same interview.
57. Herman Miller is a candidate for an F-form company not studied in this research. For De Pree's leadership philosophy, see Max De Pree. Leadership Is an Art(New York, NY: Doubleday, 1987);
58. Max De Pree, "The Leadership Quest: Three Things Necessary", Business Strategy Review, 4/1(Spring 1993):69-74.
59. Personal interview with Rich Teerlink, August 15, 2005;
60. personal interview with Jim Ziemer, August 17, 2005.
61. McGregor, op. cit., p. 265. In that passage, McGregor was primarily concerned with the development of managers, but the overall argumentation is resonant with his similar views on human growth in other parts of the book.
62. Our interview took place on March 6, 2006. General Robert McDermott died at the age of 86 of complications from a stroke on August 28th of that year.
63. Changing jobs in these companies may simply require an employee to inform her current leader of her wish and to agree on the plan to phase out her engagement with her current team or project. This approach is very different from the so-called "job mobility" one run centrally by most HR departments.
64. Frederick F. Reichheld, The Ultimate Question: Driving Good Profits and True Growth (Boston, MA: Harvard Business Press, 2006), p. 20. NPS is calculated as the percentage of people who on the 11-point scale give 10 (extremely likely) or 9 to the question "How likely is it that you would recommend Company X to a friend or colleague?" minus the percentage of people who gave between 6 and 0 (not at all likely.)
65. Personal interview with Les Lewis, March 1, 2006.
66. Personal interview, September 24, 2007. Bob Davids credits this approach to Robert Townsend, from whom he borrowed it and who was Davids' mentor and friend.
67. The description is based on the following sources: Lars Kolind, The Second Cycle: Winning the War against Bureaucracy (Philadelphia, PA: Wharton School Publishing, 2006);
68. Nicolai J. Foss, "Selective Intervention and Internal Hybrids: Interpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization", Organization Science, 14/3(May/June 2003):331-349;
69. Nicolai J. Foss, "Internal Disaggregation in Oticon: Interpreting and Learning from the Rise and Decline of the Spaghetti Organization", LINK, Department of Industrial Economics and Strategy, Copenhagen Business School, 2000;
70. Pernille Eskerod, "Organizing by Projects: Experiences From Oticon's Product Development Function", in Mette Morsing and Kristian Eiberg, eds., Managing the Unmanageable For a Decade (Hellerup: Oticon, 1998), pp. 78-90;
71. Tom Peters, Liberation Management (New York, NY: Ballantine Books, 1992), pp. 201-4; e-mail interviews with Lars Kolind, January-May 2007. The unspecified quotes are from Kolind's book.
72. Kolind himself suggests that though it was a setback, overall his project in Oticon of debureaucratizing its environment succeeded. Indeed even today, Oticon is not a typical command-and-control company.
73. Eskerod, op. cit., p. 87.
74. Foss [op. cit.] suggested that Oticon is an example of the impossibility of "hybrid" structures: a mix of market mechanisms-in Oticon, internal competition among projects-and of a hierarchical mechanism-in Oticon, the supervising PPC. It's true that Kolind sometimes refers to competition among the projects suggesting, for example, that with more people joining them, the more attractive projects will win over less attractive ones, which should be outsourced or simply eliminated. In that way, a sort of "collective wisdom", rather than senior management, orients product strategy. In reality, though, the Products and Projects Committee never let the "market forces" unfold, if that is in principle possible within a company. See Geoffrey M. Hodgson, "Knowledge at Work: Some Neoliberal Anachronisms", Review of Social Economy, 63/4(December 2005):547-565;
75. Todd R. Zenger, "Crafting Internal Hybrids: Complementarities, Common Change Initiatives, and the Team-Based Organization", International Journal of the Economics of Business, 9/1(February 2002):79-95.
76. Personal interview. May 18, 2008.
77. Personal interview. May 17, 2008.
78. Personal interview, September 15, 2008. All other Kelley quotes, unless specified, come from this interview.
79. See Lawrence M. Fisher, "Ricardo Semler Won't Take Control", Strategy+Business, 41(Winter 2005):1-11, . Semco is a candidate for the F-form we haven't studied in this research.
80. Personal interview, September 25, 2007.
81. Personal interview. May 18, 2008.
82. Interestingly, Kolind of Oticon understood the importance of maintaining the vision too: "The more freedom... we as a company want to give to staff, the more clarity we must create about mission, vision, strategy, and values." The problem in Oticon, as we have seen, was that this clarity has been blurred by a top-down committee that didn't share it, and Kolind wasn't able to catch that on time.
83. For rare examples, see Jeffrey Pfeffer and Robert I. Sutton. The Knowing-Doing Gap: How Smart Companies Turn Knowledge into Action (Boston, MA: Harvard Business Press, 2000), the book adopting the Socratic, "epistemic humility" conception of wisdom;
84. Karl E. Weick and Ted Putnam, "Organizing for Mindfulness: Eastern Wisdom and Western Knowledge", Journal of Management Inquiry, 15/3(2006):275-287.
85. Bums, op. cit.;
86. Joanne B. Ciulla, ed., Ethics, the Heart of Leadership (Westport, CT: Praeger, 2004);
87. De Pree (1987), op. cit.;
88. Robert Greenleaf, Servant Leadership (New York, NY: Paulist Press, 2002);
89. James O'Toole, Leading Change: The Argument for Values-Based Leadership (New York, NY: Ballantine Books, 1995).
90. "Organizing for Mindfulness: Eastern Wisdom and Western Knowledge", Management Review (July 1986), pp. 22-25, at p. 23.
91. See for example Robert J. Sternberg, James C. Kaufman, and Jean E. Pretz, "A Propulsion Model of Creative Leadership", Leadership Quarterly, 14/4-5(August-October 2003):455-473;
92. Bass emphasizes leaders' "originality in problem solving, "Bernard M. Bass, Bass & Stogdill's Handbook of Leadership: Theory, Research, and Managerial Applications, 3rd edition (New York, NY: Free Press, 1990), p. 87.
93. Teresa M. Amabile, "A Model of Creativity and Innovation in Organizations", Research in Organizational Behavior, 10(1988):123-167;
94. Robert J. Sternberg and Todd I. Lubart, Defying the Crowd: Cultivating Creativity in a Culture of Conformity (New York, NY: Free Press, 1995).
95. Based on personal interview, September 8, 2008.
96. The motto opens the book by Jean-François Zobrist, La Belle Histoire de FAVI: L'entreprise qui Croit que l'Homme est Bon (Tome 1: Nos Belles Histoires) [The nice story of FAVI: The company which believes that man is good (Vol. 1: Our nice stories)] (Paris: Humanisme & Organisations, 2007).
97. Robert J. Sternberg, "What Is Wisdom and How Can We Develop It?" Annals, AAPSS, 591(January 2004):164-174.
98. Paul B. Baltes and Ute Kunzmann, "The Two Faces of Wisdom: Wisdom as a General Theory of Knowledge and Judgment about Excellence in Mind and Virtue vs. Wisdom as Everyday Realization in People and Products", Human Development, 47(2004):290-299, at pp. 295-296.
99. Richard E. Nisbett, Kaiping Peng, Inched Choi, and Ara Norenzayan, "Culture and Systems of Thought: Holistic versus Analytic Cognition", Psychological Review, 108(2001):291-310.
100. Michael W. Morris and Kaiping Peng, "Culture and Cause: American and Chinese Attributions for Social and Physical Events", Journal of Personality and Social Psychology, 67(1994):949-971;
101. Nisbett et al., op. cit.
102. Lao Tzu, Tao Te Ching, the definitive edition, J. Star, translator (New York, NY: Tarcher/Putnam, 2001), p. 54.
103. Nisbett et al., op. cit.
104. Patricia K. Arlin, "Cognitive Development in Adulthood: A Fifth Stage?" Developmental Psychology, 11(1975):602-606;
105. Patricia K. Arlin, "The Wise Teacher: A Developmental Model of Teaching", Theory into Practice, 38/1(1999):12-17;
106. Michael Lamport Commons and Francis A. Richards, "Four Postformal Stages", in Jack Demick and Carrie Andreoletti, eds., Handbook of Adult Development (New York, NY: Kluwer Academic/Plenum, 2003), pp. 199-219.
107. Bums, op. cit., p. 25. Bums, who coined the transforming leadership term, believes it similar and yet different from the transformational leadership later proposed by Bernard Bass. Personal exchange with Bums, August 20, 2005.
108. Personal interview, August 15, 2005.
109. James Mackay, The Economy of Happiness (Boston, MA: Little, Brown, and Co., 1906, reprinted by Kessinger Publishing, 2007).
110. John Rawls, A Theory of Justice (Cambridge, MA: Harvard University Press, 1971);
111. Edmund S. Phelps, "The Good Life and the Good Economy: The Humanist Perspective of Aristotle, the Pragmatists and Vitalists; and the Economic Justice of John Rawls", Lecture in the Annual Series "Aristotle and the Modems", Low Library, Columbia University, New York, NY, October 3, 2007.
112. Martin E. P. Seligman, Authentic Happiness: Using the New Positive Psychology to Realize Your Potential for Lasting Fulfillment (New York, NY: Free Press, 2002).
113. Interestingly, this specific wisdom and its resulting happiness also constitute a major sustainability advantage for an organization. As O'Reilly discusses in this issue [California Management Review, 51/4(Summer 2009)], organizational cultures composed of "helpers" outperform and outlive cultures where purely individualistic behavior prevails.
114. The F-form may be thought of as simply an alternative-disguised-means of employee control since instead of directly controlling their behavior through orders, policies, and motivational schemes, the F-form culture replaces these with a number of "unwritten rules" that every employee must respect or face "soft excommunication" (one expression we often heard is: "We don't fire people; they fire themselves." For discussion of social control, see Charles A. O'Reilly and Jennifer A. Chatman, "Culture as Social Control: Corporations, Cults, and Commitment", Research in Organizational Behavior, 18(1996):157-200;
115. see also O'Reilly, op. cit.) However, there are some fundamental differences between both sets of rules. First, in the command-and-control culture, the rules are formal and plethoric, while in the F-form culture they are "unwritten" and few. Second, in the command-and-control culture they are thought up and enforced from on high, while in the F-form they grow up organically from people's own interactions with each other and are enforced by no one of authority but by all members.
116. Personal exchange with Liisa Joronen, May 10, 2009. Despite the reduction in its revenues, SOL remains profitable thanks to its employees' increased initiative and productivity.
117. Heinz K. Klein and Michael D. Myers, "A Set of Principles for Conducting and Evaluating Interpretive Field Studies in Information Systems", MIS Quarterly, 23/1(March 1999):67-94.
118. Companies are ordered by the year when the adoption of the F-form or similar organizational form began. Only part of the listed companies are referred to in this article others being described in Brian M. Carney and Isaac Getz, Freedom, Inc.: The Remarkable, No-Cost Way to Lead Your Business to Higher Productivity, Profits, and Growth (New York, NY: Crown, 2009).