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HBR036chfm 1/29/02 11:47 AM Page i Harvard Business Review HBR036chfm 1/29/02 11:47 AM Page ii The series is designed to bring today’s managers and professionals the fundamental information they need to stay competitive in a fast- moving world. From the preeminent thinkers whose work has defined an entire field to the rising stars who will redefine the way we think about business, here are the leading minds and landmark ideas that have established the Harvard Business Review as required reading for ambitious businesspeople in organizations around the globe. Other books in the series: Harvard Business Review Interviews with CEOs Harvard Business Review on Advances in Strategy Harvard Business Review on Brand Management Harvard Business Review on Breakthrough Leadership Harvard Business Review on Breakthrough Thinking Harvard Business Review on Business and the Environment Harvard Business Review on the Business Value of IT Harvard Business Review on Change Harvard Business Review on Compensation Harvard Business Review on Corporate Governance Harvard Business Review on Corporate Strategy Harvard Business Review on Crisis Management Harvard Business Review on Customer Relationship Management Harvard Business Review on Decision Making Harvard Business Review on Effective Communication Harvard Business Review on Entrepreneurship Harvard Business Review on Finding and Keeping the Best People Harvard Business Review on Innovation Harvard Business Review on Knowledge Management Harvard Business Review on Leadership HBR036chfm 1/29/02 11:47 AM Page iii Other books in the series (continued): Harvard Business Review on Managing High-Tech Industries Harvard Business Review on Managing People Harvard Business Review on Managing Diversity Harvard Business Review on Managing Uncertainty Harvard Business Review on Managing the Value Chain Harvard Business Review on Marketing Harvard Business Review on Measuring Corporate Performance Harvard Business Review on Mergers and Acquisitions Harvard Business Review on Negotiation and Conflict Resolution Harvard Business Review on Nonprofits Harvard Business Review on Organizational Learning Harvard Business Review on Strategies for Growth Harvard Business Review on Turnarounds Harvard Business Review on Work and Life Balance HBR036chfm 1/29/02 11:47 AM Page iv This Page Intentionally Left Blank HBR036chfm 1/29/02 11:47 AM Page v Harvard Business Review HBR036chfm 1/29/02 11:47 AM Page vi Copyright 1999, 2001, 2002 Harvard Business School Publishing Corporation All rights reserved Printed in the United States of America 06 05 04 03 02 5 4 3 2 1 All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, elec- tronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the copyright holder. The Harvard Business Review articles in this collection are available as individual reprints. Discounts apply to quantity purchases. For informa- tion and ordering, please contact Customer Service, Harvard Business School Publishing, Boston, MA 02163. Telephone: (617) 783-7500 or (800) 988-0886, 8 A.M. to 6 P.M. Eastern Time, Monday through Friday. Fax: (617) 783-7555, 24 hours a day. E-mail: [email protected] Library of Congress Control Number: 2002100250 The paper used in this publication meets the requirements of the Ameri- can National Standard for Permanence of Paper for Publications and Documents in Libraries and Archives Z39.48-1992. HBR036chfm 1/29/02 11:47 AM Page vii Contents The Nut Island Effect: When Good Teams Go Wrong 1 . Changing a Culture of Face Time 21 The Real Reason People Won’t Change 37 Radical Change, the Quiet Way 59 . Why Good Companies Go Bad 83 . Transforming a Conservative Company— One Laugh at a Time 107 . When Your Culture Needs a Makeover 125 Conquering a Culture of Indecision 143 About the Contributors 165 Index 171 vii HBR036chfm 1/29/02 11:47 AM Page viii This Page Intentionally Left Blank HBR036chfm 1/29/02 11:47 AM Page ix Harvard Business Review HBR036chfm 1/29/02 11:47 AM Page x This Page Intentionally Left Blank HBR036ch1 1/29/02 3:38 PM Page 1 The Nut Island Effect When Good Teams Go Wrong . Executive Summary THE TEAM THAT OPERATED the Nut Island sewage treatment plant in Quincy, Massachusetts, was every manager’s dream. Members of the group performed dif- ficult, dangerous work without complaint. They needed little supervision. They improvised their way around oper- ational difficulties and budgetary constraints. They were dedicated to the organization’s mission. But their hard work let to catastrophic failure. How could such a good team go so wrong? In this article, the author tells the story of the Nut Island plant and identifies a common, yet destructive organizational dynamic that can strike any business. The Nut Island effect begins with a deeply committed team that is isolated from a company’s mainstream activi- ties. Pitted against this team is its senior management. Pre- occupied with high-visibility problems, management 1 HBR036ch1 1/29/02 3:38 PM Page 2 2 Levy assigns the team a vital but behind-the-scenes task. Allowed considerable autonomy, team members become adept at managing themselves. Management takes the team’s self-sufficiency for granted and ignores team members when they ask for help. When trouble strikes and management is unresponsive, team members feel betrayed and develop an us-against-the-world men- tality. They stay out of management’s line of sight, hiding problems. The team begins to make up its own rules, which mask grave problems in its operations. Manage- ment, disinclined in the first place to focus on the team’s work, is easily misled by team members’ skillful disguising of its performance deficiencies. The resulting stalemate typically can be broken only by an external event. The Nut Island story serves as a warning to man- agers who concentrate their efforts on their organiza- tion’s most visible shortcomings: sometimes the most debilitating problems are the ones we can’t see. T ’ dream team. They performed difficult, dirty, dangerous work without com- plaint, they put in thousands of hours of unpaid over- time, and they even dipped into their own pockets to buy spare parts. They needed virtually no supervision, han- dled their own staffing decisions, cross-trained each other, and ingeniously improvised their way around operational difficulties and budgetary constraints. They had tremendous esprit de corps and a deep commitment to the organization’s mission. There was just one problem: their hard work helped lead to that mission’s catastrophic failure. HBR036ch1 1/29/02 3:38 PM Page 3 The Nut Island Effect 3 The team that traced this arc of futility were the 80 or so men and women who operated the Nut Island sewage treatment plant in Quincy, Massachusetts, from the late 1960s until it was decommissioned in 1997. During that period, these exemplary workers were determined to protect Boston Harbor from pollution. Yet in one six- month period in 1982, in the ordinary course of business, they released 3.7 billion gallons of raw sewage into the harbor. Other routine procedures they performed to keep the harbor clean, such as dumping massive amounts of chlorine into otherwise untreated sewage, actually wors- ened the harbor’s already dreadful water quality. How could such a good team go so wrong? And why were the people of the Nut Island plant—not to mention their supervisors in Boston—unable to recognize that they were sabotaging themselves and their mission? These questions go to the heart of what I call the Nut Island effect, a destructive organizational dynamic I came to understand after serving four and a half years as the executive director of the public authority responsible for the metropolitan Boston sewer system. Since leaving that job, I have shared the Nut Island story with managers from a wide range of organizations. Quite a few of them—hospital administrators, research librarians, senior corporate officers—react with a shock of recognition. They, too, have seen the Nut Island effect in action where they work. Comparing notes with these managers, I have found that each instance of the Nut Island effect features a simi- lar set of antagonists—a dedicated, cohesive team and distracted senior managers—whose conflict follows a predictable behavioral pattern through five stages. (The path of the Nut Island effect is illustrated in “Five Steps to HBR036ch1 1/29/02 3:38 PM Page 4 4 Levy Failure” at the end of this article.) The sequence of the stages may vary somewhat from case to case, but in its broad outlines, the syndrome is unchanging. In a dynamic that is not so much a vicious circle as a vicious spiral, the relationship between the two sides gradually crumbles under the weight of mutual mistrust and incomprehen- sion until it can hardly be called a relationship at all. The consequences of this organizational pathology are not always as vivid and unmistakable as they were in the case of the Nut Island team. More frequently, I sus- pect, its effects are like a slow leak—subtle, gradual, and difficult to trace. Nevertheless, the Nut Island story should serve as a warning to managers who spend the bulk of their time on an organization’s most visible and obvious shortcomings: sometimes the most debilitating problems are the ones we can’t see. The Nut Island Effect Defined The Nut Island effect begins with a homogeneous, deeply committed team working in isolation that can be physi- cal, psychological, or both. Pitted against this team are its senior supervisors, who are usually separated from the team by several layers of management. In the first stage of the Nut Island effect, senior management, preoc- cupied with high-visibility problems, assigns the team a vital but behind-the-scenes task.