What can shake organizations out of the cycle of doing things the way they have always been done because that’s the way they have always been done? Will a shift within an organization be more likely to stick with a top-down approach or a bottom-up approach? How can organizations allow freedom for their employees, but still be in control of the direction of that freedom?
Freek Vermeulen is a professor of strategy and entrepreneurship at London Business School and the author of Business Exposed: The Naked Truth about What Really Goes on in the World of Business and Breaking Bad Habits: Why Best Practices Are Killing Your Business.
Greg and Freek discuss the essence of strategy in organizations, highlighting the complexities and dysfunctions within organizations, the evolutionary parallels in human behavior and cultural practices, and the critical importance of understanding organizational strategy at all levels. Freek emphasizes the necessity of both top-down strategic direction and bottom-up innovation, the pitfalls of over-reliance on visible metrics, and the value of periodic organizational changes.
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Episode Quotes:
A strategy no one follows is no strategy at all
40:14: Strategy can not only be top-down, it has also to be bottom-up, that people display initiative themselves in line with strategy. And this is how it relates to it being a collective cognitive construct, and people knowing about the firm's strategy. A strategy is only a strategy if people do something different as a result of it in their daily job. If the C-suite changes the strategy, but everybody in the cubicles keeps doing the same thing, I'm sorry, you don't have a strategy. Now you have a McKinsey PowerPoint deck, but you don't have a strategy. It's only a strategy if people do something different as a result of it. And one aspect of this is that can only happen if they know about it and if they understand it. And that places a big onus on how you communicate it, how you put that in people's minds or so.
Strategy is collective cognitive construct
39:26: Strategy is in the mind, and it is a mindset and understanding of what we're trying to work towards and trying to do as an organization. And it's collective because it has to be shared. It’s a tool to cooperate, that we have a joint understanding of what we're actually trying to do and what we're not trying to do.
What gets you to the top won’t always keep you there
14:50: What we certainly know, and also that's what we see in research in cultural anthropology, by the way, as well, where there is research on what sort of individuals are most likely to become the head of a tribe, where we observe highly similar things, is to say your chances of making it to the next level, what sort of variables determine your probability of making it to the next level, and hence eventually reaching the top, are not necessarily the same traits that make you a good CEO and a good steward in the long term for an organization. There can be mismatches between these things. In a tribe, for instance, if you are a very combative individual and prone to a good fight or something like that, that may make you more likely to go through the tournament and become the head of a tribe. But it may also make you more likely to take your tribe on the warpath, which may not be so good for survival. So the same characteristics that make people more likely to become CEO are not necessarily the same characteristics that make them better as CEOs for organizations.
Are business schools equipping mba students with the right tools for leadership success?
53:23: This understanding about how behavioral mechanisms, including norms and so on, work is something that we need to do better in business schools. The experiment... is indeed to see if people who have more managerial experience and more economics training get it more wrong because we have some other studies that suggest that understanding more about financial incentives and economic rational behavior makes you less aware of these other aspects of human behavior, which of course exist in organizations and in reality.
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