Last week I gave a talk to a group of Berkeley Haas School alums on Wall Street. My talk was about meaningfully involving employees in the strategy development process, and from the get go, to find better solutions and implement faster without the cost of change management. We were in the beating heart of American capitalism, so it wasn’t surprising that bankers, traders, and financial consultants filled the audience.  To say the least, this was a bottom-line oriented group.

So I started with the data: 70% of organizational transformations fail to meet their objectives.  Since the purpose of transformations is to increase profitability and promote growth, and since these transformations are so costly to attempt, 70% failure rates are pretty grim.  But data from a McKinsey survey of over 1,000 executives shows if employees are meaningfully involved in transformation efforts the success rates are closer to 80%.  (Just how you can “meaningfully” involve employees in the strategy process is the focus of my writing and work these days.)

This survey data, while dramatic, didn’t surprise many in the audience. Having gone to school in the Bay Area, they had been exposed to the ethos of the startup, where it’s all hands on deck to improve the business model, and good ideas, not titles, win the day. Most were now working for larger companies where strategy was the purview of the C-suite and maybe a few consultants.  In these organizations, employee participation was perfunctory at best.

A mid-career executive from a large bank asked whether there was a way to get involved in setting strategy even though he wasn’t being invited to the table by the titans of finance that ran his institution.

This is a question I often get by ambitious intrapreneurs.  And the answer is “yes,” if you’re willing to be bold.

In our book, Strategic Conversations, my co-author and I describe a type of conversation we call “chaordic.”  Chaordic strategic conversations celebrate the philosophy that it’s better to ask for forgiveness than to ask for permission.  In this model, employees, with strong customer backing, first take the initiative to make changes to the business model, and then communicate what they’ve done to senior management.

The most interesting example of chaordic strategic conversations we’ve encountered occurred at the World Bank.  A little background is necessary to be able to fully appreciate the often subversive–in a good way–power of this type of strategic conversation.

The Bank’s declared mission is to reduce global poverty.  It has traditionally provided technical and financial assistance, often through low-cost loans, to governments, most often at a macro level in the areas of physical infrastructure (e.g., water), health, and education.  In this sense it has acted as a commercial, not retail, bank, with a strong consulting arm to help guide investment.  Interaction was most often with governments and non-governmental organizations (NGOs), rather than beneficiaries (the people that the Bank was working to help out of poverty).

Not everyone found this model compelling, as the leaders of the Bank’s Latin America Region discovered in a meeting with Brazil’s president Luiz Inácio Lula da Silva (president from 2003-2010).  The team was pitching the Bank’s usual portfolio of macroeconomically-oriented products and services, and Lula wasn’t buying.  “I grew up hungry — what are you doing to feed the hungry in my country?”  The meeting was going downhill fast and the World Bank team feared that they would be kicked out of the country (not a good career outcome for any of the Bank personnel involved).

The suggestion that saved the day came from a World Bank secretary who was taking notes.  Why not suggest a program she had heard about that was being used by the Mexican government: conditional cash transfers (CCFs)?  The program was entirely results-based.  A family received cash, which they could spend in any way they wanted, as long as their children attended school regularly and received the vaccinations the program required.

Lula loved the idea and gave the approach his blessing. The result—the Bolsa Familia program—is a huge development success for a sector where successes tend to be few and far between. About 11 million families receive small amounts of money – monthly cash transfers to poor families with children average US$35.  Ninety-four percent of program funds reach the poorest forty percent of Brazil’s population.  In the first five years of the program, Brazil’s absolute poverty rate declined from thirty-nine percent to twenty-five percent, and extreme poverty dropped from more than seventeen percent, to just under nine percent.

The effect on the World Bank itself has been equally powerful.

  • First, the initial emphasis on transferring western practices to the developing world is being replaced with a multilateral approach that places more value on “south-south” knowledge transfers (e.g., from Mexico to Brazil).  Instead of being the font of development knowledge, the Bank is moving towards adopting a more humble convener role.
  • Second, instead of funding large infrastructure projects, working through large institutions and governments, the Bank is beginning to fund projects that directly affect beneficiaries.  This new orientation has had profound effects.  The Bank now relies on beneficiaries to provide data on the effectiveness of programs and to alert the Bank to issues of corruption, often through social media accessed by increasingly ubiquitous cell phone use, a truly revolutionary change for the Bank.
  • Finally, this story has begun to erode the strongly hierarchical culture at the Bank.  After all, the idea was originally proposed by a secretary working in the Latin American regional office.

With chaordic strategic conversations, the ingenuity and passion of employees working with clients to create successful new models drives the strategizing process.  Employees who bring lead customers to their point of view are in a powerful position to initiate change. Smart leaders will follow even though they may not have been inclined to listen to employees in the past, because smart leaders always listen to their lead customers.

About Author:
Bruce A. Strong is thought leader and author on the topic of organizational transformation.  He co-wrote Strategic Conversations: Creating and Directing the Entrepreneurial Workforce, a book that explains how companies can transform transformation from an onerous, episodic, and failure-prone process to a continuous one that enriches both the organization and participants.  He is also the Executive Director of the Data Economy Institute.

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