Tuesday, August 4, 2015

Influence-by-Culture vs. Influence-by-Bureaucracy

One of the largest hi-tech companies on the planet now allows coworkers to see expense reports of each other's.  It is a brilliant move because it is always better to manage by peers than by process/managers, and it is always better to influence by culture than influence by bureaucracy/process.

As a leader, there are two methods to influence the troop:
  1. Influence via culture, lead by example, establish a "social norm", and leverage the bottom-up social control system; Or
  2. Influence via middle management, rely on the management team for practice/policy creation/enforcement, and leverage the "command and control".
These two methods are complementary to each other a great deal, however whenever it is possible, it is often more effective to manage the team via peer pressure (culture), than via command and control (bureaucracy).

When there is a great and cohesive culture, magic will often happen: expense reports will be done right, products will be designed better, and customer satisfaction will be higher too.

Legendary former CEO of IBM Lou Gerstner once said, "it took me to age 55 to figure that out, culture is everything."

Award-winning journalist Bryce Hoffman recorded Ford's turnaround story in his bestselling "American Iron", and he noted once, "The biggest and most important difference between Alan Mulally and his predecessors is that he attacked the root of the problem: Ford's corporate culture."

I personally lived through VMware's hyper growth period when we beat software giant Microsoft and grew from a start-up to a multi-billion dollar company.   I was often asked why we were able to build a superior product while Microsoft had lots of smart engineers too, and they had far more resources.

In my opinion, it is because we had a better engineering culture first and foremost -- the peer pressure we had, the social norm we lived by, the engineering day-to-day practice we followed, the laser focus we had in our execution, all of the culture stuff shaped us a great deal to deliver one of the most amazing products of the past decade.

While some "command and control" by middle management/bureaucracy is still necessary to provide scaling as well as check-and-balance, leaders should not forget about the magical wand of "influencing by culture".

PS: Special thanks to Stanford Professor Charles O’Reilly for my learning on culture from him!
PPS: While in theory there is no necessary correlation, but in practice there is a tendency to see more influence-by-culture in an "agile" team and more influence-by-bureaucracy in a "waterfall" team.

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