Learning Organizations And Value Creation Discussion
Review the 6 key elements of a learning organization (Ch. 11 of Strategic Management, by Dess). – see attached.
Complete the Learning Organizations worksheet, evaluating the extent to which The Caterpillar company epitomizes each of the 6 elements. (https://www.caterpillar.com/en/company.html)
Use the template attached.
Creating a Learning Organization
The importance of creating a learning organization.
To enhance the long-term viability of organizations, leaders also need to build a learning organization. Such an organization is capable of adapting to change, fostering creativity, and succeeding in highly competitive markets.
Successful, innovative organizations recognize the importance of having everyone involved in the process of actively learning and adapting. As noted by a leading expert on learning organizations, MIT’s Peter Senge, the days when Henry Ford, Alfred Sloan, and Tom Watson “learned for the organization” are gone:
In an increasingly dynamic, interdependent, and unpredictable world, it is simply no longer possible for anyone to “figure it all out at the top.” The old model, “the top thinks and the local acts,” must now give way to integrating thinking and acting at all levels. While the challenge is great, so is the potential payoff. “The person who figures out how to harness the collective genius of the people in his or her organization,” according to former Citibank CEO Walter Wriston, “is going to blow the competition away.” 29
Learning and change typically involve the ongoing questioning of an organization’s status quo or method of procedure. This means that all individuals throughout the organization must be reflective. 30 Many organizations get so caught up in carrying out their day-to-day work that they rarely, if ever, stop to think objectively about themselves and their businesses. They often fail to ask the probing questions that might lead them to call into question their basic assumptions, to refresh their strategies, or to reengineer their work processes.
To adapt to change, foster creativity, and remain competitive, leaders must build learning organizations. Exhibit 11.4 lists the six key elements of a learning organization.
EXHIBIT 11.4 Key Elements of a Learning Organization
These are the six key elements of a learning organization. Each of these items should be viewed as necessary, but not sufficient. That is, successful learning organizations need all six elements.
1. Inspiring and motivating people with a mission or purpose.
2. Developing leaders.
3. Empowering employees at all levels.
4. Accumulating and sharing internal knowledge.
5. Gathering and integrating external information.
6. Challenging the status quo and enabling creativity.
Inspiring and Motivating People with a Mission or Purpose
Successful learning organizations create a proactive, creative approach to the unknown, actively solicit the involvement of employees at all levels, and enable all employees to use their intelligence and apply their imagination. Higher-level skills are required of everyone, not just those at the top. 31 A learning environment involves organizationwide commitment to change, an action orientation, and applicable tools and methods. 32 It must be viewed by everyone as a guiding philosophy and not simply as another change program.
A critical requirement of all learning organizations is that everyone feels and supports a compelling purpose. In the words of William O’Brien, former CEO of Hanover Insurance, “Before there can be meaningful participation, people must share certain values and pictures about where we are trying to go. We discovered that people have a real need to feel that they’re part of an enabling mission.” 33 Medtronic, a medical products company, does this well. The company’s motto is “restoring patients to full life,” and it works to bring this to life for its employees. At the company’s holiday party, patients, their families, and their doctors come and share their survival and recovery stories. The event inspires employees, who are moved to tears, are able to directly see the results of their work, and are motivated to do even more.
Inspiring and motivating people with a mission or purpose is a necessary but not sufficient condition for developing an organization that can learn and adapt to a rapidly changing, complex, and interconnected environment.
Empowering Employees at All Levels
“The great leader is a great servant,” asserted Ken Melrose, former CEO and chairman of Toro Company and author of Making the Grass Greener on Your Side. 34 A manager’s role becomes one of creating an environment where employees can achieve their potential as they help move the organization toward its goals. Instead of viewing themselves as resource controllers and power brokers, leaders must envision themselves as flexible resources willing to assume numerous roles as coaches, information providers, teachers, decision makers, facilitators, supporters, or listeners, depending on the needs of their employees. 35
The central key to empowerment is effective leadership. Empowerment can’t occur in a leadership vacuum. According to Melrose, “You best lead by serving the needs of your people. You don’t do their jobs for them; you enable them to learn and progress on the job.”
Leading-edge organizations recognize the need for trust, cultural control, and expertise at all levels instead of the extensive and cumbersome rules and regulations inherent in hierarchical control. 36 Some commentators have argued that too often organizations fall prey to the “heroes-and-drones syndrome,” wherein the value of those in powerful positions is exalted and the value of those who fail to achieve top rank is diminished. Such an attitude is implicit in phrases such as “Lead, follow, or get out of the way” or, even less appealing, “Unless you’re the lead horse, the view never changes.” Few will ever reach the top hierarchical positions in organizations, but in the information economy, the strongest organizations are those that effectively use the talents of all the players on the team.
Empowering individuals by soliciting their input helps an organization to enjoy better employee morale. It also helps create a culture in which middle- and lower-level employees feel that their ideas and initiatives will be valued and enhance firm performance.
Accumulating and Sharing Internal Knowledge
Effective organizations must also redistribute information, knowledge (skills to act on the information), and rewards. 37 To do so, firms need to develop a culture that: (1) encourages employees to offer ideas, ask questions, and express concerns, (2) encourages widespread sharing of information from various sources, (3) identifies opportunities and makes it safe to experiment, (4) encourages collaborative decision making and the sharing of best practices, and (5) utilizes technology to facilitate both the gathering and sharing of information.
Let’s take a look at Whole Foods Market, Inc., the largest natural-foods grocer in the United States. 38 An important benefit of the sharing of internal information at Whole Foods becomes the active process of internal benchmarking. Competition is intense at Whole Foods. Teams compete against their own goals for sales, growth, and productivity; they compete against different teams in their stores; and they compete against similar teams at different stores and regions. There is an elaborate system of peer reviews through which teams benchmark each other. The “Store Tour” is the most intense. On a periodic schedule, each Whole Foods store is toured by a group of as many as 40 visitors from another region. Lateral learning—discovering what your colleagues are doing right and carrying those practices into your organization—has become a driving force at Whole Foods.
In addition to enhancing the sharing of company information both up and down as well as across the organization, leaders also have to develop means to tap into some of the more informal sources of internal information. In a survey of presidents, CEOs, board members, and top executives in a variety of nonprofit organizations, respondents were asked what differentiated the successful candidates for promotion. The consensus: The executive was seen as a person who listens. According to Peter Meyer, the author of the study, “The value of listening is clear: You cannot succeed in running a company if you do not hear what your people, customers, and suppliers are telling you. . . . Listening and understanding well are key to making good decisions.” 39
Gathering and Integrating External Information
Recognizing opportunities, as well as threats, in the external environment is vital to a firm’s success. As organizations and environments become more complex and evolve rapidly, it is far more critical for employees and managers to become more aware of environmental trends and events—both general and industry-specific—and more knowledgeable about their firm’s competitors and customers. Next, we will discuss some ideas on how to do it.
First, company employees at all levels can use a variety of sources to acquire external information. Firms can tap into knowledge from alliance partners, suppliers, competitors, and the scientific community. For example, in the pharmaceutical and biotechnology industries, Page 347participation in networks and alliances is increasingly common and critical to knowledge diffusion and learning. To gain up-to-date information on particular rivals, firms can monitor the direct communications from rival firms and their executives, such as press releases and quarterly-earnings calls. These communications can provide insight on the rival’s actions and intended actions. It may also be valuable to follow rival-firm employees’ online postings, on Twitter and other platforms, to gain insights on rivals’ investments and actions.
Second, benchmarking can be a useful means of employing external information. Here managers seek out the best examples of a particular practice as part of an ongoing effort to improve the corresponding practice in their own organization. 40 There are two primary types of benchmarking. Competitive benchmarking restricts the search for best practices to competitors, while functional benchmarking endeavors to determine best practices regardless of industry. Industry-specific standards (e.g., response times required to repair power outages in the electric utility industry) are typically best handled through competitive benchmarking, whereas more generic processes (e.g., answering 1-800 calls) lend themselves to functional benchmarking because the function is essentially the same in any industry.
Ford Motor Company works with its suppliers on benchmarking its competitors’ products during product redesigns. At the launch of the redesign, Ford and its suppliers identify a few key components they want to focus on improving. They then do a “tear down” of Ford’s components as well as matching components from three or four rivals. The idea is to get early input from suppliers so that Ford can design components that are best in class—lighter, cheaper, and more reliable. 41
Third, focus directly on customers for information. For example, William McKnight, head of 3M’s Chicago sales office, required that salesmen of abrasives products talk directly to the workers in the shop to find out what they needed, instead of calling on only front-office executives. 42 This was very innovative at the time—1909! But it illustrates the need to get to the end user of a product or service. (McKnight went on to become 3M’s president from 1929 to 1949 and chairman from 1949 to 1969.)
Challenging the Status Quo and Enabling Creativity
Earlier in this chapter we discussed some of the barriers that leaders face when trying to bring about change in an organization: vested interests in the status quo, systemic barriers, behavioral barriers, political barriers, and time constraints. For a firm to become a learning organization, it must overcome such barriers in order to foster creativity and enable it to permeate the firm. This becomes quite a challenge if the firm is entrenched in a status quo mentality.
Perhaps the best way to challenge the status quo is for the leader to forcefully create a sense of urgency. For example, when Tom Kasten was vice president of Levi Strauss, he had a direct approach to initiating change:
You create a compelling picture of the risks of not changing. We let our people hear directly from customers. We videotaped interviews with customers and played excerpts. One big customer said, “We trust many of your competitors implicitly. We sample their deliveries. We open all Levi’s deliveries.” Another said, “Your lead times are the worst. If you weren’t Levi’s, you’d be gone.” It was powerful. I wish we had done more of it. 43
Such initiative, if sincere and credible, establishes a shared mission and the need for major transformations. It can channel energies to bring about both change and creative endeavors.
Establishing a “culture of dissent” can be another effective means of questioning the status quo and serving as a spur toward creativity. Here norms are established whereby dissenters can openly question a superior’s perspective without fear of retaliation or retribution.
Closely related to the culture of dissent is the fostering of a culture that encourages risk taking. “If you’re not making mistakes, you’re not taking risks, and that means you’re not Page 348going anywhere,” claimed John Holt, coauthor of Celebrate Your Mistakes. 44 “The key is to make errors faster than the competition, so you have more chances to learn and win.”
Companies that cultivate cultures of experimentation and curiosity make sure that failure is not, in essence, an obscene word. They encourage mistakes as a key part of their competitive advantage. It has been said that innovation has a great paradox: Success—that is, true breakthroughs—usually come through failure. Below are some approaches to encourage risk taking and learning from mistakes in an organization: 45
· Formalize forums for failure. To keep failures and the important lessons that they offer from getting swept under the rug, carve out time for reflection. GE formalized the sharing of lessons from failure by bringing together managers whose “Imagination Breakthrough” efforts were put on the shelf.
· Move the goalposts. Innovation requires flexibility in meeting goals, since early predictions are often little more than educated guesses. Intuit’s Scott Cook even goes so far as to suggest that teams developing new products ignore forecasts in the early days. “For every one of our failures, we had spreadsheets that looked awesome,” he claims.
· Bring in outsiders. Outsiders can help neutralize the emotions and biases that prop up a flop. Customers can be the most valuable. After its DNA chip failed, Corning brought pharmaceutical companies in early to test its new drug-discovery technology, Epic.
· Prove yourself wrong, not right. Development teams tend to look for supporting, rather than countervailing, evidence. “You have to reframe what you’re seeking in the early days,” says Innosight’s Scott Anthony. “You’re not really seeking proof that you have the right answer. It’s more about testing to prove yourself wrong.”
Finally, failure can play an important and positive role in one’s professional development. Former Utah Governor Scott Matheson had strong views on the benefits of failure.
You have to suffer failures occasionally in order to have successes. You’ve got to back up risk-takers in order to encourage people to try out new ideas that might succeed. . . . I never had much patience with the “play it safe” m