Volume 20 IVolumessue 7 21 Issue 4 April 12, 2007 An Interview with Lynda Hot Spots Gratton Part 2 Although she Editor’s Note: The name Lynda Grat- is based at the ton is becoming ever more renowned London Business in management circles on both sides of School, Professor the Atlantic, and rightly so. The Financial Lynda Gratton’s Times raves about her new book Hot Spots: influence is global “Gratton has written a succinct and ut- and evident seem- terly compelling book. She is really a kind ingly wherever of one-woman businesses prac- hot spot in her- tice an enlight- self. To avoid the ened approach next business ice toward creativity age, try to make and human capital. sure you have a few hot spots of A visit to her website lyndagratton. your own burning com reveals her boundless energy: With within your walls.” Laura Tyson, she is academic lead at the Lehman Centre for Women in Business. A “hot spot” is a She has written five books, publishes place within an in Academic journals, and has an active enterprise where speaking schedule around the world, in- the energy is cluding keynoting the Human Resourc- flowing at a high es Planning Society global meeting this level. You know it when you see it. Hall- week. She teaches with the Concours marks include extreme creativity, spirited Group on both sides of the Atlantic, and collaboration, innovation, flawless team- consults with companies such as Nortel, work, friendship, and more often than not, Kraft, Philips, BP, Hewlett Packard, Unit- superb results. ed Technologies and Unilever. Based on empirical research with dozens Her take on management is efferves- of global corporations, Hot Spots tells us cent, optimistic, and deeply rooted in how to create the conditions for these loci empirical research. We hope you enjoy of high performance. time with Dr. Gratton as much as we did. The final installment begins on page 9. World Business Academy

Could you place Hot Spots in the context of your previous work? I think that is a royally important question. I started life as a psycholo- gist. My interest was in what individuals do in organizations. When I went to business school I became much more interested in strategy. That’s what my first book, Living Strategy, was about. How do you work at the strategic level to make sure that people are placed right at the center, the heart of things? Then in The Democratic Enterprise my in- terest was more practices and processes. I became very interested in them because I think they really create the bones of an organization. Those are the routines, the things that you do. Democratic Enterprise was how you bring more flexibility into that. With Hot Spots I have been looking at the organization more as teams, some of which have been brought together because they have asked to be brought together. Others will be volunteers, like the Linux team or the Wikipedia people. These days I am much more focused on Hot Spots, and what it is to be a member of a team, particularly one where you are working virtually. It is highly complicated. That is where I am positioning Hot Spots. Was the book Hot Spots created inductively or deductively? It was a very, very detailed piece of work. We set up a set of hypotheses, and we looked at all the data, all the research that has been done on teams. We do have two academic papers from that research with the Academy of Management as we speak, and they have been accepted for their conference. We did a huge data search. We ended up with a set of hypotheses and the research that we did tested those hypotheses. But, of course, when I came to write something like Hot Spots, which was written for managers, I also had to use my own intuition and in- sights about companies. So I added and created a context in many ways as I have been advising and consulting to companies for 20 years. Do you find as you work in companies that there are certain industries or functions that are more conducive to Hot Spots? Historically, we have always said that the so-called creative industries are likely to have Hot Spots. We would have said that the advertising industry or the creative design industry would be examples. Actually, we didn’t really find that to be the case. Interestingly, one of the places where we found Hot Spots was in an oil company. Another was in a telecom. We realized that it had a lot more to do with the culture and the people than it has to do with the industry, which I think is good news for everyone who happens not to be working in a sexy, creative industry.

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If you are going into a company that does not yet have Hot Spots, you are likely to find a culture that is inimical to Hot Spots, and that’s why they haven’t organically appeared. So you, Lynda, would have to work with some of the cultural preconditions… Absolutely. That’s why, when I wrote the book, I tried to make it really clear you have to have a cooperative mindset. Without that, the prob- ability of Hot Spots emerging is very slight. That is why I said these are some of the things you have got to do. I have been presenting the Hot Story quite a few times in the last few weeks, and in my presenta- tions I have really stressed that if you have a highly competitive cul- ture, where people don’t trust each other, you may be destroying the possibility of Hot Spots emerging. I absolutely agree with you. I have described some of the levers that create the cooperation. From an HR perspective, our research has shown that the most im- portant lever is the actual behavior and role modeling of the senior ­executives. Can you tell any stories about how, in your work, you have been able to bring some of them around? I cannot tell you that I have. That is not the sort of work that I do. There are people that can do that sort of work. There are HR directors who are very courageous about confronting their senior teams about their behavior. Senior executives have talked to me about how they have liked having a really good coach work with them, using 360 degree feedback. I think that sometimes, senior executives do not realize the impact their behavior has on other people. Marshall Goldsmith says to his clients, “Either you want to change or you don’t.” I am a great friend of Marshall’s and I absolutely agree with what he says, that people think that the most important job executives do is to set the vision and tell everybody what to do, but my feeling is that ac- tually the most important job they have is to model how they want the organization to behave. In a sense it they who personally are the living embodiment of what it is they want the company to be. Have you encountered Hot Spots that are skunkworks or guerilla ­operations within a company! Oh yes! Absolutely! It is perfectly possible, even within a company that is highly competitive, to find these sorts of eddies, as it were, of Hot Spots, where people have decided to cooperate with each other. They decide to meet the challenge of doing a difficult task. So it is not as if Hot Spots never arise in highly competitive places, but as you say they are more skunkworks. The culture itself is not supporting them. They have to be anti-cultural.

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Looking longitudinally at your 20-plus years of work, do you see the tide shifting from the traditional, competitive, Darwinian capitalist approach that we’ve all grown up with to a more collaborative one? The timing of a book is the most important thing you have to get right. I haven’t been brilliant at that in the past. I honestly feel that the tim- ing is absolutely on the button. I was in America last week and I did a presentation to the Human Resource Planning Society group in Boston and in New York. In both cities the room was so full that people were standing in the back. In New York 50 percent of the people had never been to one of those meetings. I think that there is an actual yearning for a new language, a new way of doing business. I don’t want to start going crazy and talking about the Age of Aquarius, but I believe peo- ple understand that the old axioms are beginning to lose their excite- ment and strength. I think, on the side, there are a lot of macroeconomic statistics that say, at least in the States, our quality of life is diminishing and we are working harder for less. By the way, the same is true in the UK. I don’t know if you have seen the data, but we have been stunned that when UNICEF put out its rank of the quality of life of children in Europe, Britain came at the bottom. Wow… In fact, my sister is on the research team for UNICEF. They have had more press on that than any piece of research that she has ever done. I think that people were just horrified that while we may be earning more, actually, our kids are unhappy. They spend all their time eat- ing too much, watching television. I think that there is a real yearning. People say, “Why can’t we work in ways that make us feel good about ourselves — in ways which are healthy?” One of the things I said to the group I was teaching yesterday in Barcelona was that it is healthy to be in a Hot Spot. The Big Freeze is very unhealthy. [Editor’s note: This refers to a culture that is hostile to Hot Spot formation.] Anxiety, competition, it screws up our guts. It mucks about with our hearts, our hormones. We are happier people doing work that is exciting and cooperative. You began in psychology and the types of qualities you are describing are often associated with the female mind. Interestingly enough, one of the things that I do (If you look at my website you’ll see more about it) is that I was asked last year to run the Lehman Centre for Women in Business. Lehman has made a very significant donation to London Business School. I am not a gender researcher. I have never looked at gender. But what I am beginning to realize (and we are just about to build a diagnostic capacity around this) is that there is a dimension in organizations around masculinity

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and femininity. It is not to do with being a man or a woman. You know masculine women and feminine men. It seems to me that the top 10% of masculinity has really dictated how organizations have been run. Increasingly, we are almost fighting back. It’s not just women who are doing this. It’s men, as well, who are saying, “I want to work in an organization that is more collaborative and coop- erative. “ I think the joining up of the world is a wonderful thing, and the extraor- dinary access we have to technology now allows us to work in ways that we just never could have done before. I am very optimistic that organi- zations can begin to create places which are more healthy and vibrant for individual employees. The more I think about your message, there are at least three iconoclastic elements to it in the world of business. First, competition has a different kind of role. Second, we should embrace our feminine sides. And the third element is the existential value of time. Asians get it right away. Time and energy are first nature. We have replaced that with Freud and Jung and toi- let training and why you hate your mother. These are new ideas, whereas, as your countryman Richard Dawkins says, these concepts about time and energy are memes that have survived for millennia in all cultures. I think you are right. One of my colleagues at London business School, a woman named Holly Arrow, is a straight-down-the-line academic. She and I are working on a paper at the moment on using thermodynam- ics and the concept of energy as a metaphor for organizations. I think the old metaphor was the imagery of wars and armies and hierarchies. I think energy is a very interesting metaphor. With Hot Spots the idea simply is to get people using the words Hot Spots and Big Freeze and so forth. I think next year with this energy work we can do it in a more finessed way. Why do you think we try to squash time like a bug in this culture? I think it is very addictive. I see that in myself, really, and I consider myself a psychologist, and having been in therapy for years, I consider myself a pretty grounded person. I feel very compelled to look at emails all the time. I think being in touch constantly is very compelling, particularly when people feel that they have more work than they can handle. It is very difficult to build a reflective mindset. I did talk about that in the book, and think that it’s a huge issue. That’s almost a cancer in the West. I worked for some years with one of the big Korean companies called LG, and what was very striking for me — even years ago before they were successful in the West as a company — was the way in which they ap- proached this whole piece about personal reflection and time. They took a year off at certain times of their life to wander around Europe and learn

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things. The Western executives that we were with could not believe that they could do that! As you say, there is a different view of time. The Japanese can reflect in silence for half an hour at their meetings. If you tried that here you’d be carted off in a straitjacket. We’ve replaced deep reflection at work with a lot of superficial pings that go a centimeter below the surface, as if the number of those interactions provides a suit- able substitute for a smaller number of deeper connections with that’s really going on. I see my book Hot Spots as just a small part of a whole change, with the Positive Psychology movement that is happening at the University of Michigan at the moment, the concept of time, and David Whyte — a whole movement of pieces that can almost be linked together. These are just beginning to change the vocabulary of companies. In the book you talk a great deal about the role of complexity (difference in time zone or location) in making the work of a cohesive team more dif- ficult. You also talked about diversity of perspectives. Could you speak to the value of diversity of perspectives as it relates to complexity, and how you help groups work though that? One of the things that I say in the book is that it is a paradox that cre- ative, innovative Hot Spots arise in several elements: one is a coopera- tive mindset when there is some sort of point of ignition, or spark, as it were; another is when there is boundary spanning, i.e., you meet strangers and associates — people you don’t know so well. The chal- lenge from the psychological perspective is that the meeting of strang- ers is very difficult for us. They have different frames, different ways of looking at the world, they have different mindsets. The paradox of Hot Spots is that the part which is potentially the most complicated is actu- ally the most beneficial value-laden activity an organization can get involved in. It is difficult to do that stuff, but if you can do it, then, my goodness, what a huge advantage. So diversity of perspective is implicit in boundary spanning, then? Yes. Absolutely. It is unusual that somebody would span a boundary and have the same points of view. A boundary could be an age bound- ary: 30-year-olds talking to 20-year-olds. That’s a boundary. It funda- mentally has to do with the mind as well as the more obvious things like gender and race and so on. When you look at Hot Spots in research or technical organizations, such as pharmaceutical companies, how do you work with people whose fun- damental mindset and values lead to them to silo information, to store it away in isolation? I absolutely agree with you. Pharmaceutical companies spend a huge amount of money on massive research budgets. One of the challenges

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they face is that the very things that create innovation are the things that are hard for them to do. We are building a computer-based simula- tion at the moment, a game, where a bunch of high level people have to work together to see if they can bring a product to market, which in- volves creating a Hot Spot. So we have actually programmed in all these challenges and issues. I think this is so difficult for companies to do that a colleague of mine and I have just invested quite a bit of money and time to build a diagnostic to help companies find out how good they re- ally are at all these elements, and then to help them to practice it. I think it’s much more difficult than we imagine it to be, frankly. A lot of it has to do with how individuals in key positions like to spend their energy, doesn’t it? For example, in research companies, few individuals ­enjoy boundary spanning. We looked at a lot of prior research on boundary spanning and actually put within our survey a whole lot of questions about boundary span- ners. And we found the research really interesting. We have written one of the papers at the Academy of Management about boundary span- ning and virtual teams. We found that you really have to celebrate them, but on the other hand, you don’t want the whole team full of boundary spanning. If you don’t celebrate them and acknowledge them and legiti- mize them, then the boundaries or Fault Lines between the groups just get bigger and deeper, and knowledge is less and less likely to move across those boundaries. It has been accepted by the Academy and a similar piece will appear in the Harvard Business Review in October. We will be addressing the question of how you manage these complex, diverse virtual teams. Do you find that the analytical and execution-oriented mindset that has traditionally run business innately distrusts boundary spanners? Absolutely. I am a boundary spanner myself, which is why I have a huge empathy with that group because I span between practice and aca- demia. Practitioners think I am too academic and academics think I am too practice-oriented. It’s a very difficult position. I think it’s a hugely exciting place to be, but it’s not to see. Boundary spanning begs that controls be relaxed. When you span a ­boundary you don’t quite know what the result is going to be. If you spend your time boundary spanning, you are not spending all your time building your power base in one function. Some of the re- search, not by us but by other colleagues, shows that boundary span- ners tend not to get to the top of institutions. One of the things I say, to the companies I advise, is to be aware that members of your senior team are unlikely to be boundary spanners. So don’t be surprised that they don’t value it in other people.

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The flip side is a lack of cohesiveness. And then they wonder why people leave. The Gallup research shows people quit managers, not companies. They join to be with their friends and they leave because of their boss- es. One of the astounding things about the research, as we went back to the companies that participated and asked them to give us teams to research, was the size and complexity of these teams. I don’t think academics have any idea what they are dealing with! (Laughs.) We had teams in Nokia and in PWC and Reuters who were over 130 people. They were operating in five countries. We said, “No, no, no. That’s not a team. I think you have misunderstood.” And they said, “I think you have misun- derstood us because it is a team.” How do they begin to apprehend the strengths and attributes of the other members? That’s a huge problem. When I talk in the book about the final element, which I call Productive Hot Spots, the first thing I say is that you have got to appreciate talents. In a group of 140, where you don’t really know each other and there is no heritage network, we have said that one of the things you have to do is put together some people who already know each other because they act as the triangulation points. Without that you have to have some processes of appreciating talent. My 13-year-old son is brilliant at that because they all have Facebook, haven’t they? But we basically don’t do that. I think we should do something like the Facebook technology and get every person to talk about themselves with a video or something about what they are interested in. I think we should just use technology much more than we do. One of the outstanding results from the research is how little that sort of technology is used. We asked a couple of teams “Do you use video conferencing?” and a very, very tiny proportion does.

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Hot Spots Part 2 HE REAL CHALLENGE FOR EXECUTIVES is that many of them are leading companies which are themselves at a point of inflection. TThis point of inflection occurs when what has served well in the past will not serve well in the future. The two curves are illustrated in Figure 7.1. The characteristics of the first curve have been developed and honed over the last century. In a sense they illustrate the current rules of managing people in businesses. These rules have served us well. Many companies reached their current performance precisely because they concentrated on the rules of productivity and the leader oper- ated as the central control figure of the company. The emphasis was on creating schedules and importing best practice from other companies. The practices and processes of the company focused on the selection, rewarding and development of individuals who were managed through rules, procedures and directives. The challenge with these rules is that many of them will be less appropriate as companies become more glob- al, more complex, and more innovative. In fact, as the curve illustrates, there will be a time when these rules actually begin to work against the performance of the company. The challenge for leaders is that to move into the next curve of value creation requires them to be making significant changes, even as the first curve seems to be the most appropriate. To take on a whole new set of rules — even as the current rules appear appropriate. As the second curve of Figure 7.1 illustrates, the rules are beginning to change. In- creasingly, value in a company will be created less through incremental productivity improvements, and more through innovation through new combinations. The role of leader will be less about controlling and commanding, and more about igniting energy Figure 7.1 and enabling groups to volun- teer and emerge. Where schedules have dominated there has to be a stronger

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­emphasis on rhythm and timelessness. In the first curve the role of the leader was as supporter of the importation of best practice. In the sec- ond curve it is as the champion of signature processes. The emphasis in the first curve is on individuals, in the second curve it is groups and the relationships and networks between them. Shifting from old rules to new will assume ever greater importance. The second curve is less about rules and procedures, and more about commitments and conversations. Many companies are beginning to approach the apex of the first curve, when simply doing more of the same is not increasing the value of their company. To do so they will have to abandon some of the old rules, and begin to build competence and energy around the new rules of the second curve. Those that fail to do so will see a gradual but consistent decline in the capacity to create value. At the heart of the second curve are the rules of Hot Spots — the idea that energy can be ignited, that relationships and networks are crucial, that commitments and conversations can replace rules and directives. This is no easy challenge. As leaders and members of organizations, we often find ourselves at a point of inflection. What worked in the past is not working so well anymore. The context in which we work has changed fundamentally as technology joins up the world and globalization opens up new markets for capital, talent, products, and services. We see this in the Hot Spots we observed earlier. Recall how technology has enabled Amit to converse with Linux colleagues around the world free of charge. Consider how the globalization of telecoms has meant that within the Hot Spot that links Finland and China, an executive like Pertti needs to know as much about the buying habits of fourteen-year-olds in China as he does about the buying habits of the children in his own country. We are all at a point of inflection as the nature of working together has changed almost beyond recognition. At this point of inflection, some of the old rules remain, and these can act as barriers to change and ulti- mately to the emergence of Hot Spots. Yet simply getting rid of the old rules would create a free-for-all. The Hot Spots at Linux and Wikipedia are not manifestations of anarchy. In fact, although they are emergent and self-directed, they are also highly orchestrated. Each has evolved its own identity, its own norms of behavior, and its own ways of working. The mistake would be for companies to see these emerging Hot Spots as entirely self-directed and anarchistic. There is still a place for routine work and formal work groups. Yet as you have seen, the innovation and value creation of Hot Spots will increasingly emerge across boundaries where individuals have choices regarding participation and opportuni- ties to indulge their passion and volunteer their knowledge.

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Hot Spots are not amenable to the old rules of command and control, under which employees are told what to do and then rewarded for their actions. In the new rules of Hot Spots, rather than be commanded, employees choose to develop important relationships with others, and rather than be controlled, they actively choose to make their time avail- able to this collective sense of purpose.

The Rules of a Hot Spot Leaders can play a crucial role in creating a context in which Hot Spots can emerge. To do so requires them to move to the second curve in Fig- ure 7.1 — to replace some of the old ways of working with new rules. As we have progressed through the four elements of a Hot Spot, we have considered the new rules associated with each one of these elements. Let us now review all nine new rules. Value creation. Value within companies is created by exploiting what is already known through strong bonds. Novelty and innovation emerge through exploration, facilitated by relationships and networks of relationships that cross boundaries. Be absolutely aware of what is ­appropriate and where, and design networks around this. Ignition and leadership. The latent energy in boundaryless cooperation is ignited with a spark. It could be the spark of a compelling vision, the stimulus of a question, or the excitement of a complex and meaningful task. The responsibility of the leader is to ensure that this spark is created. Emergence. Hot Spots emerge; they cannot be ordered forth or di- rected. People choose freely to give of their human capital (intellectual, emotional, or social), or they volunteer. Rhythm and timelessness. A Hot Spot is marked by periods of intense activity that fuel its productive capacity. The creative output of a Hot Spot is fueled by times of reflection and timelessness. Without these mo- ments, the Hot Spot burns out and sub-optimizes the creative endeavor. Signature processes. Much can be done to create an environment in which boundaryless cooperation will emerge. However, although the importation of best practices is important, it is not sufficient. The new rule is to move beyond best practices to signature processes. Relationships. The value of Hot Spots is created in the space between people. Hot Spots are fundamentally relational, whether the relation- ship is between close friends or acquaintances. The new rule is that the focus of resources with regard to support and development needs to be on the individual and on the network of relationships. Boundary spanners. Hot Spots become moribund without boundary spanners, who bring insights from outside the Hot Spot group. But the

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role is complex and at times distracting. Be committed to boundary spanners; nurture and cherish them. Commitments. Hot Spots are formed at the nexus of a network of com- mitments that establish what actions will be taken and by whom. The responsibility of Hot Spot participants is to make and keep the commit- ments public, voluntary, and explicit. Purposeful conversation. Conversation is the source of igniting pur- pose. Support and shape conversation with insightful data, an emphasis on values, and space for reflection. Much of our way of thinking about the role of management has cen- tered on the rules of command and control. Supporting the emergence of Hot Spots requires a whole new set of rules and a whole new way of approaching the challenge. To take a mechanistic approach to the emergence of Hot Spots is to entirely miss the point of their develop- ment. This does not mean that nothing can be done, but it takes a more subtle, more nuanced, and I believe more sophisticated approach. It re- quires unlearning some of the old rules and learning a whole new set of rules. Executives who create a space where Hot Spots can emerge live by the rules of Hot Spots, and employees act and behave by them. These new rules require a rather different way of thinking about the cre- ation of value in organizations. These new rules invite us to change our conceptions of organizations and some of our underlying assumptions. They challenge our thinking about practices and habits of behavior. We cannot order Hot Spots to emerge, but we can create an environment in which the probability of their emergence is significantly increased. Leaders can take an active role in championing and supporting Hot Spots, and employees can strive to adopt a mindset of cooperation and act as boundary spanners. Enabling the emergence of Hot Spots is essentially about context and leadership behaviors. The challenge is knowing where to start, knowing what aspects of the context and behaviors to change and what aspects to retain.

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About the author: Dr Lynda Gratton is Professor of Management Practice at London Business School where she directs the school’s executive program, “Human Resource Strategy in Transforming Organisations”. From 1992-2002 Lynda led the Leading Edge Research Consortium, a major research initiative involving companies such as Hewlett Packard and Citibank. The initial results from the research were published by Oxford University Press in 2000 in the book Strate- gic Human Resource Management: Corporate Rhetoric and Human Reality. She has recent- ly launched a second research consortium, The Cooperative Research Initiative. In Living Strategy: Putting People at the Heart of Corporate Purpose, published by FT/ Prentice Hall in 2000, Lynda called for a more strategic approach to people manage- ment. The book has been translated into ten languages and was voted one of the 20 most influential books by American CEOs. More recently she has addressed the issue of organizational purpose in The Democratic Enterprise: Liberating Your Business with Freedom, Flexibility and Commitment, published by FT/Prentice Hall in 2004. Lynda is currently working on a book provisionally titled Cooperating on Purpose: How organiza- tions create value more successfully when people collaborate more skilfully. Her current research, “The Collaborative Research Initiative”, was launched in October 2005 and involves 20 large companies in the USA and Europe. Lynda has written for managers and academics. Her article “Integrating the Enterprise” was awarded the Sloan Management Review’s best article of 2003, and her case on BP was recently awarded the ECCH best strategy case of 2005. Lynda is acknowledged as one of the world’s most influential thinkers in HR Strat- egy. She serves on the advisory boards of Exult and the Concours Group and consults to a wide range of multinational companies including Shell, Unilever, Royal Bank of ­Scotland and HP. In 2004 Lynda was appointed a Research Fellow of the Advanced Institute of Manage- ment in the UK (www.aimresearch.org) and is a Visiting Professor at the Center for ­Human Resource Strategy at Michigan Business School.

Hot Spots, © 2007, Lynda Gratton. Reprinted by permission of Berrett-Koehler, Inc. Transformation © 2007 World Business Academy 428 Bryant Circle, Suite 109, Ojai, CA 93023 Academy Phone 805 640-3713 • Fax 805 640-9914 • Website www.worldbusiness.org Senior Editor, David Zweig, [email protected] Phone 510 547-3223

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