Giving up power can boost performance and profits

21st Oct 2011
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It's time for leaders to eschew formal power, relax their control and empower employees, says Vlatka Hlupic.

It’s an accepted truth that empowering employees can boost morale and even productivity – particularly in tough times – but surprisingly few organisations are genuinely strategic in taking such an approach.

The need for a new mindset and leadership skills has never been more urgent, but translating it into action remains a challenge for many. The result? Conventional leadership and management approaches reflecting an organisational culture based on rules, command and control and formal relationships are still very much the norm.

While this approach might work in predictable and stable environments, there is ample research evidence that in dynamic and complex business environments this traditional approach inhibits creativity and innovation and decreases staff engagement, motivation and productivity.

"Alternative forms of leadership are arguably more relevant today than ever before due to the financial crisis."

Having researched this area for years, I see evidence pointing to a community-based, collaborative approach where leaders eschew formal power, delegate responsibilities rather than tasks, relax their control and empower employees to make decisions on the basis of their knowledge, skills and experience rather than on their formal position in the organisational hierarchy.

Furthermore, encouraging self-organisation into informal networks and communities of interest leads to more interactions, experimentation with new ideas and knowledge sharing. In short, strategic implementation of this collaborative approach has a marked, distinctly positive impact on the bottom line.

When such a community-based culture is implemented, employees are intrinsically motivated to perform well, a strong team ethos is developed, staff engagement is improved and levels of stress and absenteeism are reduced. For leaders – paradoxically perhaps – giving away formal power means getting more power back in that more is achieved with less effort. Moreover they will develop and lead more motivated, innovative, and energized employees.

CSC Germany, one of the companies I studied, is a division of the leading global IT consulting and services firm, and it is a case in point. After experiencing poor financial and market performance, the division realised in 2008 that a move away from a command and control style of leadership was in order if it was to improve communication and reduce bureaucracy – and boost profits.

Collaboration and freedom

Starting in the Enterprise Content Management unit comprising 60 employees, the division implemented a new corporate strategy for a knowledge culture based on collaboration and freedom for employees in decision making. The view of management at the time was that the problem was not simply the market or a skills deficit among their people. They openly realised it was the type of management and that staff quite simply were not getting as involved as much as they could be.

Where leadership had previously been focused on delegating tasks and monitoring results – and an emphasis on hierarchy had slowed decision making – the new priority was on instilling a sense of shared responsibility and motivation to succeed by freeing staff to work on topic areas (known as "communities" in areas such as innovation or strategy) according to what they felt best matched their interests and strengths.

Through this practice of "mutualism", community members took decisions collectively through discussion and they also agreed their own community leaders, democratically and on a shifting basis as they saw fit. Those leaders, known as competency managers, would represent their respective communities and hold regular meetings, with those not on site joining by telephone. Such collaboration and communication ensures cross-fertilisation of ideas between communities.

Our research shows that values such as trust, responsibility and innovation are far more likely to motivate staff, particularly in knowledge companies such as CSC Germany, than numerical goals or measurements. Achieving the numerical goals does happen, but it results from leadership that is not about dictating vision and strategy but engaging and empowering staff.

Alternative forms of leadership are arguably more relevant today than ever before due to the financial crisis. For example, the public sector is in a state of unprecedented challenge as leaders and staff grapple with managing change amid major spending cuts.

In such a climate, maintaining high performance, innovation and resilience can be difficult, but it’s critical that public sector organisations keep striving for innovation. As a first step, they should look at themselves as complex, adaptive systems which facilitate networking and cooperation among their people and where managers use a coaching style, delegating responsibilities rather than tasks and recognising the competencies of their people rather than their positions. This will help empower staff to make decisions.

Culture change

Mutualism really can unleash the power of employees’ creativity, and our research shows a clear impact on the bottom line. However, it is important that organisations change their culture in this way on a sustainable basis. To do that, they must change their mindset and distribute authority and decision making on the basis of knowledge and skills rather than on one’s formal position in the organisational hierarchy.

They also need to support self-organisation in informal networks and communities of interests, encourage collaboration, knowledge sharing and  experimentation with ideas. Last but not least, developing a caring culture based on trust and transparency is also an important part of this strategy, which can make a significant impact on staff engagement, productivity and overall performance of an organisation.

I believe that if decisions are made on the basis of expertise rather than formal position in a hierarchical structure, more decisions can be made in parallel – and more efficiently – leading to better performance and customer satisfaction.

Leaders who can adapt their approach to meet the needs of the team help create motivation and gain commitment from their people. In such a strategy, leaders come to realise that while it may not initially be easy to give up power, more power and influence are gained subsequently by letting go.

Vlatka Hlupic, professor of business and management, Westminster Business School.


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