As we continue to frequently lurch from one crisis to another, forging a sustainable path forward requires business leaders to rethink the very nature of how their organizations conduct business. The "New Normal" -- defined by hyper-transparency, hyper-connectivity, and ever-deepening interdependencies -- demands new governance structures, organization models and leadership styles.
More leaders recognize that traditional approaches to business are no longer sufficient. Hierarchical command-and-control styles of leadership are giving way to flatter and more collaborative leadership frameworks. Rules-based management systems are evolving into values-based corporate practices. Short-term mindsets are being displaced by long-term considerations.
Organizations can no longer afford the inefficiencies and obstacles that result from treating governance, culture and leadership as distinct systems.
We need a Super System in which the separate systems of governance, culture and leadership are harmonized and synchronized. Call it a "Human Operating System," one that fosters self-governance and puts humanity at the core, trusting employees to act, inspired by values and purpose versus being coerced by rules or motivated by dollars and cents.
Leaders of medical schools, including those at Stanford, UCLA, University of Cincinnati, are building new operating systems by identifying and recruiting specific behaviors they believe are crucial to their success -- and the success of their graduates in the field. Top test scores and grades? Still necessary, but no longer sufficient. New hands-on behavioral assessments are being used to help determine if candidates possess the necessary ethical decision-making and social skills to succeed in a healthcare system where those qualities are critical. Humanity is now job #1.
A Stanford University School of Medicine administrator described a similar evaluation exercise designed to more effectively determine if candidates are able to work collaboratively and ensure trust-filled relationships between patients, doctors and the healthcare institution itself.
Understanding the Super System that is the Human Operating System
What is the Human Operating System? The answer is found by embarking on a journey that begins with values and behaviors. Simply defined, the Human Operating System is the sum total of the behaviors of the individuals that comprise an organization. And it is these very behaviors -- how decisions are made on a daily basis, how employees are treated, how service is delivered, how the organization behaves toward all stakeholders -- that drive important business outcomes. We have entered a new Era -- an Era of Behavior -- where these behaviors can be measured and therefore better managed.
Our research demonstrates that there are three distinct categories of governance, culture and leadership systems that can characterize an organization -- based on the actual behaviors that take place on a daily basis.
These archetypes of Governance, Culture, and Leadership exist today. In fact, characteristics of each archetype exist in every organization:
1. Blind Obedience: These organizations are characterized by command and control, top-down leadership and coercion. Blind Obedience systems rely on rules and policing, are transactional, and focus on short-term objectives -- there is little focus on building enduring relationships in the workplace, the marketplace or society.
2. Informed Acquiescence: These are organizations that reflect good 20th century management practices like hierarchy, structure and control processes. Employees follow the rules, policies and procedures established by what they believe to be a skilled management team. Managers rely on performance-based rewards and punishments to motivate people. Long-term goals are important but often give way to considerations of short-term success.
3. Self-Governance: These organizations are primarily values-based. The organization's purpose and values inform decision-making and guide all employee and company behavior. In short, people act on the basis of a set of core principles and values that inspire everyone to align around a company's mission, purpose and definition of significance. Employees at all levels strive to be leaders and the company is focused on its long-term legacy and endurance.
The right Super System that inspires employees to self-govern through inspirational leadership and shared values can drive sustainable business performance and success.
The Case for Self-Governance
My experience, research and conversations with business leaders tells me that human behavior may not be nearly as intransigent, or uncompromising, as one might think. Many of the CEOs I work with express uncertainty about how to align a global team of thousands or hundreds of thousands of employees to deliver when they are confronted with the increasingly challenging objectives in front of them. Despite holding all the "reins of power," these CEOs increasingly are coming to believe that the traditional ingredients of success, such as a supportive board of directors, a strong executive team, clearly articulated corporate strategies, thoughtful resource allocations, differentiated product or service portfolios, elaborate control processes and highly refined incentive structures -- while necessary -- are no longer sufficient. What they are looking for -- what we all should be looking for -- is a better way to influence behavior through our cultures, governance and leadership approaches.
I think a better way is closer at hand than we realize. As leaders we know that one of the most effective ways to influence is to measure. By measuring quarterly earnings, we influence short-term financial performance, for example. We can now measure how companies do business by analyzing links between their Human Operating Systems and a range of quantifiable business outcomes. This will be the subject of my next column.
The role of a company's purpose and core values is particularly important as it harmonizes them with leadership and governance systems to help define its unique corporate culture. In short, culture as a conscious, deliberate, long-term strategy can be the key to differentiation, success and significance for companies in the 21st-century. Companies and leaders who pioneer and forge ahead on a genuine journey of governance, culture and leadership are the ones who will be around in the 22nd-century.