By David Kauffman
As I am now closer to the end of my career than the beginning, when I look back, the path looks different from this end. This week I was marveling at the culture of Creo and how it sustained rapid decision-making and competitive advantage even through its rapid growth.
Many companies adopt one or more of these principles. In this article, I will try to show you that these interlock to form a network of behavioral reinforcement that encourage each person to do what’s best for them in a way that’s also the best for the company.
Creating a culture that continuously adjusts to realign employee interests with company interests takes this kind of attention, and just like kicking the accelerator into gearing down, the speed of innovation and decision-making can be an order of magnitude better and faster that in an unaligned culture.
Those principles were:
- Economic Thinking
- Distributed Decision Making
- Act Like You Own the Company
- Leadership without Management
- 360 Review and Share Options
Amos Michelson, Creo’s CEO, taught every employee the basics of economic decision making including fixed and variable costs, opportunity cost, demand and supply curves, optimal pricing strategy and capturing consumer surplus. You can hear some of these articulated by Amos here.
By having every employee understand the basics of economic thinking, we could discuss at any team meeting decisions from a shared objective viewpoint and compare alternatives in terms of their costs and benefits instead of using opinion and authority.
Distributed decision-making is an active commitment to push decisions out to the edges of the company. It is the opposite of hierarchical decision-making. For example, Creo did not centralize decisions as to when people should travel (although they had a centralized travel agency to coordinate trips and get best prices). If you thought you needed to go to a conference or to a customer site you might confer with your colleagues, but did not have to submit a request for review. In contrast, when Kodak purchased Creo, they instituted a policy that the Kodak CEO had to approve all travel. This meant delaying any decision at least a week or two, and drove ticket prices way up once you were inside a two-week pricing window, and the criteria for who was permitted to travel and who was declined was opaque, arbitrary, and without rationale, creating appeal cycles and email and negotiations that made decisions even slower and forced flight cancellations and rescheduling that more that destroyed the gains they sought by centralizing the decision-making.
Distributed Decision Making requires three elements:
- employees that are smart, confident, and empowered enough to learn principles and be able and expected to apply them
- shared understanding of direct, indirect, and opportunity costs
- information sharing about current company revenue and expenditures so as to make contextually good decisions
Act Like You Own the Company
Any decision has to be rational and based on the best information you have at the moment. The results of being trusted to make good distributed decisions meant occasionally having to verify that your decision-making criteria was correct.
Creo let everyone in the company purchase what they needed and issue a purchase order. Within a day of me (nervously) ordering two Apple computers to run QuarkXPress, Ken Spencer, Creo’s first CEO, came into my office asking about them and I had to explain how we needed to have the same software as our customers use to test our prepress system and that had I obtained the lowest price through our developer discount. He left satisfied that I had made a good economic decision.
Leadership Without Management
Creo avoided hiring managers, preferring leaders. The theory was about added value: In a traditional corporate hierarchy, managers try to create perceived value by holding information and making decisions for their team, as opposed to leaders who share information and are rewarded by their team being autonomous, learning from their shared mistakes and growing in scope and expertise.
The few times we hired managers they failed miserably, like a Grand Marshal running to the front of a parade trying to demonstrate that the parade didn’t know which direction to go without them. But when you have a company full of smart, self-motivated people who share in the company growth and have the information and tools to make almost-as-good-decisions as the CEO, management was a brake, not an accelerator.
I had forgotten how important commitment was to the Creo culture until I worked places where deadlines slipped and there was ongoing forgiveness for it. Making a commitment to a colleague at Creo was a serious statement, and the 360 review top question that contributed to your annual share allocation was “How well did I meet my commitments?”
Making a commitment is not about trust. It is a promise of delivery. We trust each other to be honest and to do the best of our ability within the time and resources. But when you made a commitment, people counted on you, and a critical path was established. If you missed a commitment, that usually meant a trickle-out effect, and other people’s commitments would be at risk, which all would lead back to you, and that cascade was key to your 360 review, so was taken very seriously.
Not to say things always work out as you expect, but if you could not meet your commitment, the culture required you to alert your stakeholders as soon as you knew so their plans could be re-arranged.
Consensus is a difficult value to achieve, and requires both active listening and the ability to adapt to new ideas in real time.
By the Creo model, consensus meant “I can live with this decision”—not necessarily that you love it, or think it’s perfect, but after you would agree to a consensus decision, when you left the room it meant you had to actively support the decision and not sabotage it. It’s very damaging to a culture to have people leave a meeting not feeling heard and actively or passively trying to make that decision fail as a result.
Consensus is not the same as decision-by-committee or groupthink. Leaders had responsibility to deliver, and to make the decisions that would move the team forward. Good leaders gather information, share it, listen to ideas, discuss possibilities and tradeoffs, and lead the group to consensus, ensuring the team is aligned and running in the same direction. When there isn’t broad agreement, a leader ensures everyone has a voice and feels heard, then makes their decision explaining how they reached that often-difficult compromise and asks if everyone can support it.
360 Review and Share Distribution
Pivotal to a distributed economic decision-making and non-hierarchical structure is a 360 review with teeth—something that people really care about excelling at when that evaluation comes around once a year.
While salary was determined by the external market, Creo tied 360 review to share option allocation so there was a clear monetary aspect to performance. At its simplest 360 review was two questions, each with a rating from 1–10:
- Did I meet my commitments this year?
- How would you rate my contribution this year?
Through a somewhat onerous series of reviews, team leads would place staff on a spreadsheet sorted by contribution, then divide them into several buckets, the highest getting significantly more options than lower buckets. By building just one list for the entire company (and after managing a complicated meeting scheduling to ensure people didn’t argue their own rating) a distributed ranking of everyone in the company emerged. Perhaps surprisingly, hierarchy wasn’t always reflected strictly in the ranking. A stellar team member could rank well above team leads two or three levels above them some years when a project they worked on drove a spike in revenue, profitability, or in customer satisfaction.
Many organizations use 360 reviews but the results only go to the employee and their team lead. Because they have so little weight they tend to float up to be “attaboys” or appreciation without the hard edges of comparison or improvement. By linking the 360 review with actual incremental financial reward, people took great care to find equity in this additional compensation, and as a result Creo had a large distribution of people who could put a significant dent in their mortgages after the IPO who were from a wide range of roles within the company, not just the C-suite.
When you look at all the places you have worked, one thing is clear: The culture a company lives (as opposed to what is says) determines how employees feel about working there, the velocity at which decisions can be made (and un-made), and the quality of those decisions. It’s the difference between a place people work at, and a company they work for.