Enter the discussion.
The Place: Nantucket, Massachusetts
The Event: The Fast Company Advance, a celebration of Fast Company’s fourth anniversary.
The Gathering: A roundtable with 45 of the best brains in the new world of work — a two-day conversation among change agents from some of the world’s biggest and best-known companies; leaders from young, fast-growing companies; business thinkers and educators from across the country and across the economy; CEOs and soloists, Web stars and manufacturers.
The Rules: No canned speeches. No slide decks. A great question beats a smooth answer. And check your ego at the door.
The Topics: Four ideas and issues that cut across the world of work and that come from the new “dotcom” environment: In a world where people matter most, how do you bring hope to inner cities — on a scale that touches as many lives as possible? At a time when big companies seek change to become more nimble, and small companies seek change to become more potent, how can you make innovation an enduring reality?
In an economy where people work faster, at greater distances from one another, and more independently than ever before, how do you create a culture of grassroots leadership? And finally, at a time when we’re witnessing the “dotcom-ing” of just about everything, what does it all mean — and what’s the best way to think about, and to participate in, this facet of the new economy?
The Record: We taped the entire two-day conversation. Here we present an edited selection of comments made by 24 of the participants — provocative insights and useful practices drawn from the table talk on Nantucket.
Mike Abrashoff (email@example.com) is deputy director for global information and network systems at the U.S. Space and Naval Warfare Systems. He was formerly the commander of the USS Benfold, a $1 billion Navy warship.
Mark Albion (firstname.lastname@example.org), after spending 20 years at Harvard University and the Harvard Business School, is now a founding partner of You&Company, a career-management consulting firm based in Dover, Massachusetts. He is also the author of “Making a Life, Making a Living” (Warner Books, January 2000).
Gil Bashe (email@example.com) is CEO of HealthQuest, a $60 million health-care and marketing-services startup in Metuchen, New Jersey that focuses on the emotional impact of health communications. Formerly, he was the chairman and CEO of CommonHealth Group.
Laurie Coots (firstname.lastname@example.org), chief marketing officer of TBWA Chiat/Day in Los Angeles, markets the agency brand, tracks future trends, and meets with dotcom companies (more than 200 since April 1999) about their marketing needs.
Philip N. Diehl (email@example.com) has been director and CEO of the U.S. Mint since June 1994. He’s turned the Mint into a world-class organization that now earns $2.5 billion in annual revenues, makes $1.1 billion in profits, and has 2,200 employees.
Liz Dolan (firstname.lastname@example.org) is the president of Dolan St. Clair Inc., a sports- and entertainment-marketing firm, in Portland, Oregon, that she cofounded with two partners in 1997. Previously, she was corporate VP and director of global marketing at Nike.
Lisa Gansky (email@example.com) is an investor, entrepreneur, and environmentalist based in Berkeley, California. She was cofounder and CEO of Global Network Navigator, which was the first commercial Web site. (America Online acquired GNN in 1995.)
Seth Godin (firstname.lastname@example.org) is permission-marketing yahoo! at Yahoo! He also teaches at NYU and is author of “Permission Marketing: Turning Strangers Into Friends, and Friends Into Customers” (Simon & Schuster, 1999).
Margaret Heffernan (email@example.com) is the president and COO of iCast.com, a user-driven entertainment Web site. Before joining iCast, she was founder and CEO of ZineZone.com, a Web site that targets “trailblazers,” which she launched in March 1999.
Bubba Levy (firstname.lastname@example.org), CEO of Redi Packaging Inc., based in Cypress, Texas, has 25 years of experience in manufacturing and distributing corrugated cardboard boxes and packaging materials. He has long been active in the Young Presidents Organization.
Terri Lonier (email@example.com), is the CEO of Working Solo Inc., in New York City. She consults for Fortune 500 and high-tech companies that want to connect with the small-business and SOHO (small office-home office) markets. She also founded the annual SOHO Summit.
Brook Manville (firstname.lastname@example.org) is the chief learning officer and customer evangelist at SABA Corp., a Redwood Shores, California-based company that provides companies around the world with e-learning infrastructures. Before joining SABA, he was a partner at McKinsey & Co.’s organization practice.
Steve McCallion (email@example.com) is director of research and design planning at Ziba Design, a design strategy and development firm in Portland, Oregon. Before joining Ziba, he was a designer, architect, and entrepreneur.
Chris Meyer (firstname.lastname@example.org) is a partner at Ernst & Young, as well as director of the company’s Center for Business Innovation. He and Stan Davis coauthored “BLUR: The Speed of Change in the Connected Economy” (Perseus Books, 1999).
Blake Nordstrom (email@example.com) is co-president of Nordstrom stores. He’s got retail management in his blood: He represents the fourth generation of his family to operate the Seattle-based department-store chain.
Steve Pontell (firstname.lastname@example.org) is founder and president of the La Jolla Institute, located in Ontario, California, a nonprofit think tank that focuses on pioneering new communities.
Mary Lou Quinlan (email@example.com) is vice chairman of the MacManus Group and founder of Just Ask a Woman , a New York City-based marketing firm for companies that are targeting female customers, as well as a resource for female professionals.
Steve Rosenbaum (firstname.lastname@example.org) is president and CEO of BNNtv.com, a New York City-based company that challenges the way media is created, delivered, and consumed through “participatory storytelling.” His team’s work can be seen on A&E, CBS, CNN, CourtTV, the History Channel, and MTV.
Bill Strickland (email@example.com) is president and CEO of both the Manchester Craftsmen’s Guild, an arts-education program that he founded in 1968 for at-risk high-school students, and the Bidwell Training Center, a vocational school for adults, in Pittsburgh.
Jeff Taylor (firstname.lastname@example.org) is founder and CEO of Monster.com, the Web’s leading career hub, and CEO of TMP Interactive, a division of TMP Worldwide, Monster.com’s parent company.
Phil Terry (email@example.com) is the CEO of Creative Good, a New York City-based consulting firm that specializes in Internet strategy. Previously, he was a technology strategist at Moody’s Investor Service, where he helped to launch one of Wall Street’s first Web sites.
Chris Turner (firstname.lastname@example.org), a writer and consultant, partners with organizations to create environments that support creative thinking, learning, innovation, fun, and meaning. Before that, she spent 16 years at Xerox Business Services. In addition, she’s author of “All Hat and No Cattle: Shaking Up the System and Making a Difference at Work” (Perseus Books, 1999).
Barbara Waugh (email@example.com) is the worldwide change manager at Hewlett-Packard Laboratories, in Palo Alto, California. Her long career as a change agent goes back to the 1960s, when she was involved in the Civil Rights and Women’s Rights movements.
Bill Weiss (firstname.lastname@example.org) is chairman and CEO of the Promar Group LLC, a strategic-consulting and investment firm based in Cary, North Carolina. He is also a thought leader, future strategist, and technology analyst.
Can Hope Scale Up?
A very quick version of my story is this: I am — or at least I was — a ceramic artist. I got into ceramics when I was a hostile kid in a predominantly black public school during the time of the riots. This artist-teacher, a white guy named Frank Ross, taught at my school. One day, I was walking down the hall, and I saw a great big plaque that he’d made. I walked into his art room and asked him what it was. He said, “It’s called ceramics.” I’d never in my life seen anything like Mr. Ross’s plaque. So I said, “I want to learn how to do that.” He told me that if my homeroom teacher gave me written permission, I could come back for some lessons.
For the next two years, I studied Shakespeare with my English teacher, and I made pots with Mr. Ross. I gave my pots to my other teachers, and they gave me passing grades. As graduation approached, Mr. Ross took me to the University of Pittsburgh to apply for admission. He told me that he didn’t want it on his conscience that he didn’t give me every possible opportunity for success. Today, I’m a trustee of the University of Pittsburgh. And my message is a simple one: Don’t give up on poor kids just because they don’t fit a certain profile, or because they look a certain way — you never know where they might end up.
Since the ’60s, I’ve been saying to myself, “If I can create the same conditions that Mr. Ross created in his art room, then I’ll be able to get the same results.” Mr. Ross had food and clay and coffee and affection and decency in that room. He created magic in a room in an inner-city high school. And he saved my life.
Now, 25 years later, here’s what I’ve done: I hired one of Frank Lloyd Wright’s students to design a building in a funky, crime-ridden, old industrial park in the worst neighborhood in Pittsburgh. And in that building, I provide local high-school students and adults with art education. My building has a fountain in front of it. Why? One of the Carnegie museums has a fountain in front of it because the people who built that museum thought that visitors deserved a fountain. (I know this because I’m on the board of the museums.) So I had my designer put a fountain in front of my building because I think that welfare mothers and steel workers deserve a fountain too.
The only thing wrong with poor people is that they don’t have any money, which is a curable condition. I round up kids — 400 of them in grades 8 through 12, half of them white, half of them black. I teach them clay or photography or computer imaging, and three years later, 80% are in college, and that’s happened 10 years in a row. I don’t teach them academics; I teach them attitude. Because you can’t teach these kids algebra if they don’t want to live. How do you get them to want to live? You show them affection and aesthetics and enthusiasm. Then you say to them, “Do you want to live like this — with people celebrating your talent? Then you’ve got to go to school. You’ve got to get good grades.” And they do.
My reaction to everything that you’ve told us is that what you’re doing is spectacular — but it isn’t good enough. Here’s what I mean. You can go from city to city in the United States and find people who are creating powerful institutions that deal with kids and poverty. St. Louis, Seattle, Boston, San Francisco, and other cities across the country have these programs. But that’s not enough. You tell us that it could take 30 years or more to return hope to our inner cities. But we don’t have 30 years! It’s got to happen in 5 years. So the question is “How do we get programs like yours into 100 cities within 5 years?” We need to figure out how to get that done, because the problem is growing faster than the solution.
One of the biggest challenges that we face is to break the lock of the existing interest groups that tie up the established systems. Whether they’re teachers, school administrators, or other groups, powerful established interests spend billions of dollars to deliver the kind of education system that we currently have. We’ve got to find a way to end run those groups and, at the same time, to reach the critical masses. Until we can do both, changing the system in any fundamental way is going to be very difficult.
When you look at the problem of education in inner cities, it strikes me that a lot of tactical solutions are out there. Many companies are adopting a school, funding a program, sharing some of their resources. But despite those efforts, there’s still a lot of hopelessness. What Bill is doing is taking the next step. He’s offering the hope that there’s actually a strategic solution to an overwhelming problem. If his approach works in Pittsburgh, that’s great. If he opens a center in San Francisco, and it’s successful there too, that’s even better. If he can start a center in a third city, then we’ll really start to gain momentum — and that’s what people are looking for: a place to put their hope.
To me, this discussion leads to one question: Can this solution scale? Can it scale in a world where public resources and public dialogue are far from the field of discussion? I look at what Bill is doing, and then I look at the billions and billions of dollars that are going into absolute sinkholes. And I wonder how a project like Bill’s can achieve national scale when so much political discussion and public debate is focused on cutting taxes and on eliminating capital-gains taxes — political causes that are diametrically opposed to solving the problems of education and unemployment.
I start with the premise that Bill Strickland is the most fabulous CEO I’ve met in years. The way in which he leverages the infrastructure that’s around him is absolutely brilliant. He’s magnificent at the art of organized serendipity. That leads me to my second premise: The way to scale programs like Bill’s is to create a public corporation. Use the free market to create a capital base that would allow the Bill Stricklands of the world to grow at their own rate, not at a rate that’s dictated by the government or by grants. This man has a world-class corporation in his soul, and he needs investors to provide him with the capital to take it out of his soul and into the country.
To me, the lesson here is that the antidote for despair is both dignity and beauty. There’s a Navajo expression that says, “Always walk in beauty.” Bill’s story reminds me that poverty exists not only for poor people but also for rich people. For the rich, it’s the kind of poverty that comes from disassociating yourself from nature and from others. It’s the kind of poverty that comes when each day of your life ends at an airport, and you just want to make it all happen faster by connecting the airports with a tunnel. It’s the kind of poverty that exists when you’re eating the rind and throwing away the fruit.
For me, the solution is for those of us who’ve been fortunate enough to do well in the IPO game, and who’ve created wealth, to connect that wealth to the earth and to things that matter.
Here’s how I think about it from an entrepreneur’s point of view. The knee-jerk question from people in the business community is, “How do we scale a program like Bill Strickland’s?” As businesspeople, what we’re all looking for is a model that works like this: You come up with a decent idea, you make money, and then you spend money to get bigger. That makes even more money for you, and at that point, the idea simply grows larger as a self-fulfilling, self-funding proposition. That’s how scalable business ideas work.
But nonprofits don’t work that way. With nonprofits, the bigger they get, the more money it takes to operate them. Not only that, but the additional people who come on board as the idea grows aren’t nearly as good as you are. So I’d like to throw an idea on the table: You can scale a nonprofit by writing a manual and then finding the right people locally to put that manual to work. The beauty of this idea is that it allows you to centralize the thinking and to decentralize the operation.
Philip N. Diehl
My main message is “Don’t write off Washington, DC.” I’m speaking from my perspective at the U.S. Mint and taking into account what we’ve been able to accomplish over the past five or six years. I have no illusions that Washington has all the solutions — or even any of the solutions necessarily. Although most of the time our government is dormant, which is the way our Founding Fathers designed it to be, occasionally — as in the 1930s and again in the 1960s — it plays a crucial role. And it takes on that role when people like us lay a foundation and begin to shape opinions — and the time to shape our opinions is now. Bill Strickland’s story is every bit as compelling inside Washington as it is outside Washington.
I also look at public policy, but I have a slightly different vantage point. Lately, I’ve been doing a lot of work with rural communities in central California. This area is one of the agricultural heartlands in the country, and it has had an unemployment rate of roughly 25% for the past decade — but many of the agricultural interests there don’t mind. Having such a high unemployment rate gives them a readily available, low-cost labor force. But the families and individuals who live in these communities look at their future and ask, “Who is going to choose to come to — and stay in — our communities? How many of our high-school valedictorians will come back here after college? With all of the choices that are available in the new economy, who is going to choose to live here — and why would they do so?” These people see a direct link between future economic-development options for their communities and the education, skills, and abilities of their people.
Can Change Scale Down?
I’ve always been about changing the world. One of the most important things that I’ve ever read concerning sustainable change is a two-page article about malnourished children in North Vietnam. Written by the Save the Children organization, the article is about that organization’s research on past attempts to eradicate malnutrition in the area. According to the article, none of those earlier efforts provided a long-term solution. Development initiatives would provide feeding programs for malnourished children, but when those programs ended, the children would again become malnourished. But Save the Children field-workers discovered that not all of the kids were malnourished. In fact, some were actually thriving. The workers decided to find out what the parents of the healthier children were feeding them. The workers learned that those parents were giving their children foods that weren’t necessarily the norm in the village — foods like shrimp, crabs, and the greens from sweet-potato plants. As a result, their kids were getting additional nutrients.
The workers decided to develop a program based on the way the healthy children ate to teach everyone in the village how to feed their children nutritiously. They offered two-week sessions, during which parents practiced gathering foods from the village that would benefit their children. After two years, 93% of the kids whose parents had participated in the program had been rehabilitated — and, more important, they remained that way for a long time.
What the field-workers had done was to apply “positive deviance” — a concept created by nutritionist Marian Zeitlan that absolutely contradicts the so-called expert model of change that most organizations use. According to the expert model, if you bring in an expert to stir the pot, then eventually everybody will be convinced that they need to change. Positive deviance says that if you want to create change, you must scale it down to the lowest level of granularity and look for people within the social system who are already manifesting the desired future state. Take only the arrows that are already pointing toward the way you want to go, and ignore the others. Identify and differentiate those people who are headed in the right direction. Give them visibility and resources. Bring them together. Aggregate them.
In most organizations, the people who are pointed in the right direction are isolated in small working groups. They’re alone; they feel as if they’re the only ones who get it. But if you bring them together, even if it’s only for one day, suddenly they’re in the majority! They start their own newsletter or chat group. And in the process, they amplify who they are, and they demonstrate in a powerful, visible way that they are not alone. These are the concepts that begin to offer us a sense of the emerging paradigm for change.
I was at Xerox for 16 years, most of that time as a line manager. And because I was always nearly 300 miles away from my boss, I figured out how to work within a system while going around it at the same time. When Xerox wanted to create a strategy for transformation, they asked me to lead it. So in this large, widely dispersed organization, I helped establish a new kind of community — one with 15,000 exceptional businesspeople.
We did this by treating the company as a natural system. And because the way you change a natural system is by disturbing it, we disturbed our company in a bunch of ways: We did an ethnographic study of the culture, and we found kindred spirits and brought them together. We also created experiential-learning events called Camp Lur’ning, which consisted of large-group activities where we created the future that we wanted at that moment, so that people could experience it. And in the process, we challenged the assumptions of how work really got done in our organization.
We also were able to combine different approaches for getting people to learn. We realized that the only way to get large-scale productivity improvements was to make everybody in the organization totally aware of how we make money, totally familiar with our profit-and-loss picture, and totally informed on a daily basis of the decisions that were being made that affected our performance. We ultimately created a new level of consciousness.
My experience is of a different scale — it’s with a startup. And it’s at a different level — it revolves around my senior managers. I found that, not unlike a lot of work relationships, the relationships between my senior managers were very thin. Everyone was friendly, but getting people to rally was really difficult. So last September, I took all 14 managers to an off-site. I didn’t tell them what we were going to do. I took away their cell-phones, and I made sure that nobody could do any business that day.
I told them that there was only one thing that we had to do: I wanted everyone to pick five or six defining moments in their life, and then each of us would present one of those moments. And I said that I would go first.
Of course, I’d had three weeks to get prepared and to get all emotional about it. So by the end of 20 minutes, I’d shared my experience, I’d had a good cry, and I’d set the tone for the rest of the day. Nine hours later, all of the senior managers had completed the task. And when we left, the relationships that had formed between team members were absolutely huge. After five years in the business, our culture is still innovative, and we still look for ways to keep growing the grassroots experiences.
In the future — the not-too-distant future — only two groups of people will be in the world of work: entrepreneurs and those who think like entrepreneurs. I also envision a pendulum swing — free agents coming back inside the corporate fold after having spent some time on the outside. But when they come back, it won’t be business as usual. There will be two differences. First, they’ll know that they don’t have to stay. They’ll know that they can always make it on their own. Second, they’ll have different sensibilities. If they’ve been part of the dotcom world, they’ll come back to their companies with questions like, “What’s the viscosity of this organization?” The lower the viscosity, the faster things happen. So they’ll become advocates for a low viscosity, for a quick execution, for a shedding of bureaucracy. Their dream will be to work for a company that gets it. Their nightmare will be to be part of an organization that’s sludge.
I look at change and the individual as a dynamic, relational activity. Wherever I find myself, I try to improve things, to change things, and to create conditions that allow others to change as well. I’ve also made the decision, when it’s been appropriate, not to continue in a certain environment because I liked other environments better. The real work of people who are trying to create change in their company is not to understand the company but to organize it.
When I look at companies, whether they are fast or slow, I see two common themes — two questions that define the way that they do business. How a company answers these questions will tell you whether it encourages innovation. The first question is “Who runs the company?” Very simply, if the person who runs the company is in favor of innovation, then it happens. If the person who runs the company isn’t in favor of innovation — doesn’t encourage, support, or reward it — then it doesn’t happen. Sure, the company might have pockets of resistance, places that go against the tide. But if those in leadership positions aren’t in favor of innovation, then it really won’t happen.
The second question is “What is the central organizing principle — the mission, the values — at the heart of the company?” If the people in the organization can sum up its mission, then they are confident enough and focused enough to try new things that fit within their company’s central purpose. Now, these two factors come in all kinds of combinations: You might find a company whose leader favors innovation but doesn’t have a mission. Or you might come across a company that has a mission, but whose leader opposes innovation. When a company has both — whether that company’s big or small, old or new — you can be sure that it embraces innovation, embraces the individual, and moves forward at a rapid speed.
Anyone who thinks that the CEO is in charge is out of touch with what’s happening in business. The customer is in charge. And the notion that the culture dictates the business is also wrong. The culture has to evolve and adapt to changing times — to be competitive, it has to be flexible.
Our company was founded in 1901, and until about 1965, my dad signed every paycheck himself. It wasn’t until 1978 that we opened our first store outside the Pacific Northwest. Today, we have stores in 23 states and have 42,000 employees — and our core assets are our people and our culture. How is that possible? Because of our relationships. We believe in the inverted pyramid: that the most important person in our culture is the customer, then the next-most-important person is the salesperson, and after that comes the department manager — that’s the person who deals directly with both the customers and the frontline employees. Our most important asset is our ability to give department managers the tools, the recognition, and the support they need to allow them to make mistakes, to learn, and to go for it.
I think that you can boil down change and innovation inside a company to three questions — and these three questions determine whether the people in the company genuinely like working there. First, “Do you feel important?” Second, “Do you feel that you can make a difference?” And third, “Do we have a community here that you would like to be a part of?” These questions don’t have much to do with the size of a company; but they have everything to do with the way you treat people.
Mary Lou Quinlan
The one thing that doesn’t go away in a company is the character and humanity of its leader. I’ve worked in big companies, and I’ve also run one, and the one thing that I’ve consistently seen is this: You can put the customer at the top of the pyramid, but a company’s leader has to be the soul of the company — the living, breathing believer in the company’s mission. That person has to be the best listener, the best interpreter, and the most passionate driver of the company’s purpose.
The other thing that I’ve learned about change over the years is that the whole group will never change. Ever. So you find the top 20% who are ready for change — they may be the youngest, the smartest, or the whatever-est — and you give those people all of your attention. You dump the bottom 20%, and you don’t spend a whole lot of time on the middle. That’s how you get change to happen.
Can Leadership Grow from the Grass Roots?
As many of you know, the U.S. military today is in deep trouble. People aren’t joining. More people are leaving. The attrition rates are going through the roof. In the Navy, 33% of those who join never complete their first tour of duty. Combat readiness is declining. I’d like to tell you something about a ship that I took command of two years ago — the USS Benfold.
As a result of a new leadership initiative on that ship, the Benfold’s retention rate went from about 25% to 100% in 20 of the Navy’s top three categories. Attrition went from more than 18% to less than 1%. Our mission-degrading casualties went from 75 to 24. And during my final 12 months in command, we ran the ship on 75% of our operating budget, returning millions of dollars to the Navy. All of those results were an outgrowth of having people who were motivated, people who wanted to do the right thing — to operate more efficiently and more intelligently, while improving our bottom line.
My conversion to grassroots leadership began the day that I took command of the Benfold. When there’s a change of command in an outfit, it’s a huge production: The crew stops working for two weeks to paint the ship, to rig bunting, and to set up a big tent and a lot of chairs. Then there’s a reception with music from the Navy band. The admirals all come and give speeches about how great the outgoing guy is. Then the outgoing guy is piped over the side. As my predecessor was leaving the ship with his family, the whole crew stood up and cheered.
My first reaction was, “What do I have to do to keep that from happening to me when I leave in two years?” So I looked in my leadership tool kit to see what I could pull out to change the situation. And I found that the tools that I had spent a lifetime accruing didn’t apply to my new situation. So I decided that very day that I was going to try some new initiatives–initiatives that connected with people, that made them want to perform, that made them want to stay, and that made them want to work.
I decided that before I could fix the problems on the ship, I had to find out what those problems were. And to do that, I interviewed every crew member individually. I started each interview with several questions: Where are you from? Why did you join the Navy? What are your goals in the Navy? What are your goals in life? Then I asked three more questions: What do you like most about the Benfold? What do you like least? And what things would you change if you could?
The minute I started these interviews, our performance took off like a rocket. Whenever I got an outstanding idea from a sailor–and about 70% of the ideas that I got were, in fact, outstanding–I would implement that idea right on the spot. I didn’t form a committee, or check metrics, or do a cost-benefit analysis. If an idea made sense to me, I’d implement it then and there. I’d use the public-address system to tell the rest of the crew what the new idea was, which sailor I got it from, that we were implementing it immediately, that I wanted their support–and that if the idea wasn’t working after a month, we’d try something else.
Whenever I felt that I was losing my way as a leader, I would take out an index card that I always keep in my wallet. On the card are eight traits that I use as personal guidelines: A leader is trusted. A leader takes the initiative. A leader uses good judgment. A leader speaks with authority. A leader strengthens others. A leader is optimistic and enthusiastic. A leader never compromises his absolutes. A leader leads by example.
When it came time for my change of command, I decided to do that differently from my predecessor as well. The event was held at sea. And when it finally came time for the change of command, the entire crew gathered on the flight deck, and I gave the shortest change-of-command speech in the history of the U.S. Navy. All I said was “You know how I feel.” Then I saluted my relief and went to a ladder where a small boat was waiting to take me ashore. I turned to salute my crew and got into my boat and left for shore, as Toad the Wet Sprocket’s “Walk on the Ocean” played over the stereo speakers. By the time I got home, I already had an email on my computer from a crew member who had written to tell me that there hadn’t been a dry eye on the ship.
So my question for you is “When it comes time for you to leave your current organization, will you leave to cheers–or to tears?”
You raise an important issue for every company: Why do some people stay and contribute to a company, while others choose to leave? When you look at studies on why people leave, you’ll notice that money isn’t the most important reason. In fact, it’s way down on the list, around number five or six. It turns out that being treated as though your ideas matter, working in a climate where your recommendations have a chance of being implemented, and having an opportunity to make a difference in an organization are all more important than money. But senior management at most companies is convinced that money matters most. Some companies are even proud to have a high turnover rate. They don’t understand that in many cases, it can cost from $100,000 to more than $1 million to replace an employee, when you consider all the expenses associated with finding and training someone new and with losing an employee who has helped you compete in the marketplace.
So I made the determination when I started my company to do things differently. I made the culture and the way that we all work together the number-one priority. As far as I’m concerned, the biggest issue in the 21st century is learning new ways to do things that go beyond the old, outmoded command-and-control setup.
I remember reading somewhere that someone once asked Albert Einstein a question: “If you could ask God one question, what would that question be?” The first time that he was asked, Einstein supposedly said that he would ask God how the universe began, because after that, the rest is all math. But after some reflection, he said that he would ask God why the universe began, because then he’d know the meaning of his own life.
That’s the question that really lies behind people’s commitment to certain companies and not to others. Why are we here? Why are we here as a company? Why are we here as an organization? Why are we spending our life’s energy at this place? A leader provides the answer in three parts: logos, pathos, and ethos. Logos is the easiest. It’s the argument, the case for being here: why your company is important, how it can make a difference through its products and services. The second part is pathos–compassion: the feelings that you create by showing interest in your employees. And the third part is ethos: you, the leader. What is your story? Why is the company important to you?
My business is manufacturing corrugated boxes. We have 10 plants–7 in Texas, 3 in Mexico. We have a great level of retention in the company and very high morale. In the past couple of years, we’ve taken that morale to the next level. One way that we’ve found to make things even better is to implement a wellness program. But it’s about more than just disease and wellness; it’s about showing our people that we care about them and their families more than just in terms of what they can do for us. In most of our locations, we have two wellness fairs a year. At those fairs, there are 12 different stations that employees and their families can go to get various health checks, such as hearing, heart rate, cholesterol, and blood pressure. In order to get the whole family to come, we give away big door prizes–tvs, trips, and more. At every one of these fairs, at least two critical medical issues are uncovered among our employees and their family members–something that without immediate attention could have turned into a life-threatening condition.
You know, it’s all well and good to say that money is fifth on the list of reasons why people decide to join or leave a company. But it’s impossible to ignore the environment that’s been created in the past five years–the enormous amount of wealth that’s been created, and the desire for even more wealth. We have an economy that’s basically saying to people, “Come and join my company and become a millionaire!” The result is an intrinsic clash between a company’s goals and its employees’ goals.
When I listen to the way that Mike ran his ship or to Bubba describing the program that he set up for his employees, what comes to my mind is that if I tried some of those ideas in my company, my investors would kill me! And if my investors didn’t kill me, my employees would. All I’d hear would be “What the hell are you doing? You’re wasting our time and our money! Faster, faster, cheaper, cheaper! We want more millionaires by the end of the month! Here are the numbers! You haven’t hit them!” That’s the reality of the environment we’re working in–and people who think otherwise get terribly, terribly shocked when they actually encounter it.
ceos today run their lives by numbers. And by the way, it’s a system of metrics that we’ve all supported in one way or another, simply because we haven’t torn it down and replaced it with something more meaningful. So we can all bitch about it if we want, or we can pretend that the problem lies with big companies and then choose to leave them, but the fact remains that we create our own heroes. Right now, the object of the game is instant wealth. That’s the only story that we as a society are talking about these days.
What really strikes me about today’s ceos is that they’re afraid to fail. They’re afraid to make a mistake. Think about Mike Abrashoff’s world: In that world, in the military, a mistake could mean death. Yet in the world of the ceo, the only consequences of making a mistake are abstractions or fabrications. So if Mike can move away from a command-and-control structure in a situation where life-or-death decisions are literally on the line, surely we can afford to apply that same approach in our companies, even if we regard it as a risk.
Everything that’s wrong with humanity can be fixed by everything that’s right with humanity. Humanity is what’s missing in our companies. And it’s what’s missing in our communities.
You know, it’s necessary to remember that money is still somewhat important to people. About once a week, one of my employees comes to me and says, “I love working here. I love working on the things that we do. I know that this is a great place. But I just got an offer for this much more money.” I always ask these people, “How much more?” And they tell me. Then I ask, “If I offered you $10,000 more than that, would you sweep streets?” And the answer is always no. So then I say, “Make certain that you keep at least some kind of a parallel between what you do and how much money you make. Because you could easily find yourself earning $10,000 more than you’re currently getting–and being really unhappy with what you’re doing.”
The fact is that a vibe is out there–one that tells people that they’re on a ladder and that the ladder is moving really fast. And if they want to keep moving up that ladder, they’ve got to grab the biggest check offered them.
I’ve discovered something else at my company: It’s the leader’s job to protect the traditions that no one else has time for. Every Monday morning, for the past 15 years, we’ve had a meeting during which everybody from every division of the company talks about what they’re doing. Those meetings give us a chance to see one another and to have coffee–and they keep us all together. In most companies, people eventually form little groups. And before you know it, they lose their connections, their sense of community, and their sense of appreciation for one another.
Most people in management positions define their job as mistake prevention. After all, we’ve been through it, right? That’s why we’re the managers. It’s our job to watch everyone else and to ensure that nobody makes the same mistakes that we made.
But, of course, learning comes from making mistakes. At Nike, there was a big sign on the wall with a quote from John Wooden, the great former ucla basketball coach: “The team that makes the most mistakes wins.” You have to keep reminding yourself of that every single day. And the bigger you get, the harder it is to allow yourself to make those mistakes.
There’s another discussion here in the context of people becoming free agents and also thinking about leadership. That discussion leads to the question “Can soloists also be leaders?” For me, the answer is clearly yes. In fact, soloists often come inside a company and see a situation much more clearly than those who are there full-time. Frequently, soloists are called on to negotiate between different components of an organization. Soloists have certain advantages: They can see the entire operation, and they have no vested interest in the company. What that tells me is that leadership isn’t about a job title in a company; leadership comes from within–and from realizing that one person can make a difference.
What’s the Meaning of “Dotcom Mania”?
Here’s a metaphor from our gathering that tells you how I think about dotcom mania: When you were standing in line at last night’s buffet, you saw a long boardwalk heading out toward the beach. That’s the buffet of the Internet. Right now, smart people who are at the right place at the right time have a ticket to that meal. Any idiot can go up to a buffet and fill up a plate. If you want to do that, go ahead. But that’s not really success. Success on the Internet is about choosing from that buffet–choosing where you’re going to position yourself, the ways in which you’re going to touch the market, whom you’re going to influence, and whom you’re going to hang out with in the new space. The mind-set of success is “I don’t want to blow this opportunity by just going with the next gimmick. I want to invest in this and do the right thing moving forward.”
The flip side of that–the side that you most often read about in the media–is the mind-set that says, “Let’s do Amazon.com for pool cues.” If you listen to venture capitalists today, all of them are saying the same thing to people who bring them business plans: “I’ve seen four of those in the last two weeks. We funded the first two; you’re too late.” It’s not good business to say that you have to write a business plan and launch a company in six weeks. That’s almost a guarantee that you’re going to make all sorts of bad mistakes–and you’ll have to live with them for a long, long time.
Here’s what I see on the Web: no discipline and too much money. Most dotcom startups don’t have a unique consumer proposition anywhere in their idea. They’re technology-driven. They’re there because they can be there. I’m waiting for the revenge of the brick-and-mortar company. I think that we’re going to see a lot of really smart companies that have been in business for a long time coming back with their core proposition, and doing it in a much more meaningful way. They’re going to take advantage of everything that the Internet is good at: community, personalization, customization. But right now, all I see is an incredible lack of discipline–and I think that we have to be adults and fix that. Things are out of control. If the emperor has no clothes, then 90% of the time we need to say, “Hello! You’re naked!”
When I look at my own business, I see something like 5,000 newspapers milling about, bumping into one another, trying to figure out what to do. Meanwhile, our market share is growing, and all of these young, “undisciplined and overpaid” Internet entrepreneurs are hacking away in the jungle, creating a brand-new area. I see the brick-and-mortar companies falling apart, trying just to hold on to their current market share.
I have just a couple of words of advice: First, don’t sell your company too soon. Second, recognize that consumer control affects all Internet businesses. The brick-and-mortar companies are treating this as if it’s all evolutionary. The dotcom companies are taking revolutionary steps to change their industries. No industry today is immune to consumer control.
We’ve all watched as lots of people got obscenely rich very quickly. The danger in that is that these people really think they’re responsible for their wealth. They begin to believe that because they’re millionaires, everything that they say must be a pearl of wisdom. But they didn’t create the wealth; the market did. So good luck to all those people who’ve made money–but don’t believe that they had anything to do with it.
The other thing that I’d say about the debate between brick-and-mortar and dotcom companies is that it’s completely spurious. In about 5 or 10 years, we’re not going to be talking about dotcom companies. We’ll be talking about entertainment companies, publishing companies, furniture companies, gardening companies. And these companies will be multifaceted: They’ll use the Internet. They’ll use direct mail. They’ll use bricks and mortar. It will all be part of their core business.
We want to give our customers as many options as possible, so that wherever that customer turns, we’re there in a way that makes sense for our brand. So we want to have full-line stores, discount stores, catalogs, the Internet–all of it.
We don’t think that these different channels cannibalize one another; we think that they reinforce one another. For example, we’re continuing to plan roughly six stores per year. It takes about five years to plan a store. We think those brick-and-mortar stores, done right, enhance the brand. They give our customers confidence that we’re there for them. It’s part of how we try to tell customers that we’re listening to them, that they can trust us, and that we’ve got a long-term relationship with them.
At the same time, we’re launching Nordstromshoes.com, which will offer 20 million pairs of shoes, compared with the 100,000 pairs of shoes that our average store carries. On the Internet, the name of the game is fulfillment–and you can’t underestimate the importance of all your hourly support employees. I see Amazon.com as more of a brick-and-mortar company than most people do, because I’ve seen the warehouse they’re opening and some of the inefficiencies they’re wrestling with in their fulfillment operation.
A phenomenon that I see in the dotcom world is something that I call “category drafting.” If you’ve ever gone on a bike ride with a bunch of people, you know that if you follow the other riders closely, you won’t have to work as hard to get up a hill, because you’ll draft behind them. You see this all the time on the Web: Someone will come up with an important concept in a new category. That person is full of passion about creating a new space. Then others follow. They figure that it’s good enough to be number two or three or even five. If they sell out at $100 million in eight months, they’ll high-five each other and have a few beers.
What I see on the Web is a simple proposition: When you change either the packaging or the distribution of a product, you fundamentally change that product. That’s true in Nordstrom’s case, that’s true in the music industry with MP3 technology, and it’s true in the career-search industry. The offering can actually start to play out in a way that the previous packaging or distribution system wouldn’t allow it to. A magazine reaches some people, an airport kiosk reaches other people, a Web site other people, a radio show still other people. And each medium will change the demographics of your audience–and eventually it will change your product.
The problem in the dotcom world is the flimsiness of most ideas. There’s a presumption that anyone with a PowerPoint presentation can be in business. In the dotcom world, there are people with 15-page PowerPoint presentations and no core ideas. There’s nothing to differentiate what they’re trying to do. There’s no experience for the consumer that is transforming in any way. And most of all, there are no values. Occasionally, you hear about companies that are changing an industry or changing people’s lives. Most of the people whom I’ve encountered are only motivated by greed.
People may tell you that they want to build a brand. But a brand has to have some inherent values. A brand delivers something important to people. Too many people think a brand is something that you create with advertising. If you tell them that a brand flows from a set of values, they’ll say, “Sorry, I don’t have time for that. I have $10 million, and I need a lot of ads to create my brand.” You want to tell these people, “Go away! You people are jerks! I couldn’t create a brand for you for $100 million, because you don’t care about consumers, you have no values, and you’re not offering people anything important. So keep your money.”