Leadership and Legitimate Interests

by Lanny Goodman on September 18, 2010

orgchartSome years ago I found myself contemplating the organization chart. It is a useful map of the organizational territory. But like all maps, it is a highly abstracted version of the reality. There are many dimensions of organizational life it doesn’t measure. Also, like all other metrics it has built in biases that are worth being aware of. In the case of the org chart, the hierarchical structure is explicit, but it also skews our frame of reference.

carlsonBack in the 80’s, Jan Carlson of SAS Airlines transformed his company by turning the org chart on its head. He also added the customers to the org chart. His message was simple: the front line people are there to support the customers and if you are not supporting the customers, you should be supporting someone who is.

It was a great reframing of the organizational model and became the foundation of service management theory (as opposed to traditional management theory that grew out of manufacturing). Service management theory was elegantly codified by Karl Albrecht in his classic work, Service America which remains well worth reading today, even if his stories and examples are dated.

But Carlson’s upside down org chart retains the same feature of the traditional org chart: it is hierarchical in nature.

sidewaysSo I found myself wondering, how might we eliminate that hierarchical quality and what might we learn in doing so. The simplest solution was just to turn the org chart on its side. Taking a cue from Carlson, I fleshed it out with the customers, the community and the planet on one side and the Board of Directors and shareholders on the other and stepped back to see if this map of organizational reality offered insights that the intrinsically hierarchical maps did not.

What became immediately apparent is that this horizontal chart is a map of constituencies, groups of individuals with congruent, if not identical interests. It also became clear that the CEO’s job is to create an ecosystem in which, to the greatest extent practical, the legitimate interests1 of all the constituencies are addressed and aligned.

What also becomes clear, the cost of ignoring the interests of any of these constituencies. The BP Gulf of Mexico oil well fire and blowout is a tragic but wonderful example. Drilling oil wells is an intrinsically hazardous business. Drilling oil wells at sea is doubly so. The people who do the work rely on their company to provide all the necessary and appropriate safety measures, equipment and most importantly, culture to insure the safety of the front line workers. BP is notorious in the industry for failing to do this.

Ignoring the safety of workers in this case also coincides with ignoring the safety of the community and the planet. What has been the result? Tragic loss of life, decimation of BP’s carefully constructed (and as it turns out, fallacious) image, severe damage to their retail distribution channel, total distraction at the top of the organization, loss of the CEO’s job (deservedly, in my opinion), and staggering financial cost. From my point of view, BP’s historical record of intransigence around safety (both environmental and for its workers) qualifies it for the corporate death penalty (see my blog post Corporate Death Penalty).

At one of my current clients an interesting model has emerged. The model is that is all decisions must be made in equal consideration of the interests of the customers, the company, and the employees. This model is rarely realized in my experience. In many closely held companies, entrepreneurs routinely sacrifice their own interests to the customer and frequently sacrifice their employees’ interests to the customer and company as well.

Looking at these constituencies’ legitimate interests as a touchstone for all decisions is a useful operating definition of integrity. It implies integrity in the exchange of service for money with the customers, it implies integrity in the exchange of service for money with the employees and integrity in honoring ones’ own legitimate interests.

Of course employees do not trust this at first, because it smacks of “managementspeak” to which they have been overexposed in their careers. But as the evidence of leadership walking the talk adds up, the result is a powerful mix of trust, engagement, commitment and optimism on the part of employees and trust and respect on the part of customers. For the owners, once they have overcome the habit of sacrificing their own interests, comes the comfort and confidence that comes from knowing they have built a network from which flows revenue and profit and all parts of the network are supportive of sustaining it.

The media enjoys trumpeting information about the economy. But for the business leader, this network is the only economy that matters.

1 The term legitimate interests is a hugely powerful one. For more information on the history of the term and the Harvard Negotiation Project where the concept was developed, read Getting to Yes by Roger Fisher and William Urey. This is a must read for every business person and every married person for that matter!

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