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Grant Gatsby III stood looking out the window of his sprawling, high-rise office. From the 52nd floor he could see the beauty of the city spread out before him. But today, Grant was in no mood to take-in the vista. He had just reviewed several company reports including sales and marketing. They all contained the same bad news … competition was killing his company. Compounding the problem was the fact that the new products the company had in the pipeline were a couple of years away from being launched. How was the company going to compete? How was it going to survive? How should Grant lead it?

Grant is not alone in facing the scenario described above. Many of the world’s storied companies, like GE, are stumbling today and only 54 of the original 1955 Fortune 500 companies are still in business(1). Welcome to the Open Source Era, where information is ubiquitous, ideas represent currency and entrepreneurship is the dominant platform for business success. Competition is fierce, technology advances at breakneck speed, and, thanks to social media, people are more empowered to make employment choices than ever before.

One of the biggest problems facing companies like Grant’s is that they continue to operate like it is still 1955, when predictability and stability drove the need to maintain control in order to maximum efficiency. Over time these organizations built bureaucratic hierarchies which stifled, and in many cases, killed their ability to innovate. They fell victim to what I call the Three Dysfunctions of Bureaucracy:

1. Arrogance: no one knows as much as we do about … (that’s right, Kodak).

2. Ignorance: we know what our customers want … (you betcha, Sony Walkman).

3. Complacency: we’ll be okay … (sure you will, Blackberry).

Can Grant’s company survive? Possibly, but not without a lot of hard work, which starts with shifting his corporate culture from one of command and control to one based upon Freedom Within a Framework.

What is Freedom Within a Framework? It’s an approach to creating a corporate culture that overcomes the Three Dysfunctions of Bureaucracy. As the title suggests, Freedom Within a Framework is based upon two essential elements, freedom, and an operating framework.

Freedom, first and foremost, means trusting employees. It is about believing that if you treat your employees like fully formed adults and give them the latitude to think, make decisions, and act on behalf of the (business, company, organization), they will do the right things.

Framework means providing employees with a set of guidelines within which to work. Traditionally, these guidelines have taken the form of rigid, unyielding rules, policies, and procedures; all the bureaucratic trappings that stifle innovation. In the Open Source Era, it is more effective to build the guidelines around your organization’s values (what’s important to us) and purpose (what are we trying to accomplish). When values and purpose become a living set of guidelines, they provide employees with a clear and positive sense of what they can and cannot do, to support the better future the organization wishes to create. Values and purpose, when clearly understood and embraced, provide employees with the tools they need to set priorities, make decisions, and take risks. Clarity of organisational values and purpose encourages and nourishes freedom when intentionally designed, communicated, and executed well.

Developing a corporate culture based upon Freedom Within a Framework has several positive implications that can lead to greater innovation. It:

  • Shifts the corporate mindset from policies and procedures to people, resulting in greater organization agility and speed.
  • Reduces fear of failure and as a result, people are more willing to experiment and take risks on new ideas.
  • Builds greater levels of collaboration and teamwork. Employees are more willing to speak-up express their opinions, and share ideas.

If Grant really wants his company to survive, be more innovative, and successful, here are 10 questions he should ask himself:

1. Does my company’s culture support innovation?
2. Is my company’s culture based upon clear values and sense of purpose?
3. Do I hire people that fit the type of culture the company needs?
4. Do my employees make decisions based upon the company’s values and purpose?
5. Do my employees take responsibility for their actions?
6. Do I trust my employees?
7. Do I encourage employees to think independently?
8. Does my company minimize its policies and procedures?
9. Am I willing to let me employees take risks on behalf of the company?
10. Do I forgive employees who makes an honest mistake?

The more Grant can answer “yes” to the above questions, the closer he is to building a company culture based upon freedom within a framework.