Reversing the ratchet of control

The book explores the need to rethink the fundamental assumptions we have about management, the meaning of work and organisational life

In most organizations, the decision-making freedoms of frontline employees are highly circumscribed. Sales reps, call center staff, office managers, and assembly line workers are usually trussed up in a strait-jacket of rules and procedures. I believe that’s a problem, for it’s impossible to unleash human capabilities without first expanding the scope of employee autonomy. To create an organization that’s adaptable and innovative, people need the freedom to challenge precedent, to “waste” time, to go outside of channels, to experiment, to take risks, and to follow their passions.

Interestingly, humanity’s most adaptable social systems, democracies and markets, are the ones that extend the greatest freedom to their constituents. In a democracy, you don’t need anyone’s permission to start a political movement, organize a demonstration, or change your party affiliation; in open markets, individuals are free to buy and invest as they see fit.

 

Obviously, policies and rules are important — no organization can survive without them. Most organizations, though, are overcontrolled. That’s because control works like a ratchet. Managers are incentivized to create rules, not abolish them. More rules mean more things to control, and that means more job security and more power. As the years pass, rules and regulations accumulate, layer by layer. That’s why older organizations are usually more arthritic than younger ones. If you doubt whether this dynamic is at work in your organization, conduct a simple survey. Ask frontline employees whether they feel they have significantly more autonomy today than they had five years ago. Unless your company is truly exceptional, the answer will probably be “no.”

Imagine, then, the controls you might find in an organization that will soon celebrate its 150th birthday, a venerable institution like, let’s say, the Bank of New Zealand. BNZ is the 148-year-old subsidiary of National Australia Bank, but strangely enough it’s also a case study in the power of empowerment.

An impromptu experiment
It started simply enough. In June 2007, Chris Bayliss, BNZ’s general manager for retail banking, was visiting the bank’s City Center store in Christchurch. (Within BNZ’s retail-oriented culture, branch banks are known as “stores.”) It was just after 9 A.M. and the bank wasn’t open yet, but a long line of customers was already forming on the sidewalk. On most days, BNZ’s stores opened at 9:00, but today was Tuesday, and on Tuesdays and Wednesdays, staff training sessions kept the doors locked until 9:30 — hence the queue. At BNZ, corporate policy dictated opening hours, and all of the bank’s 180 stores, from Invercargill in the south to Kaitaia in the north, adhered to the same schedule.

As the line of impatient customers continued to grow, Chris turned to Sue Eden, the store manager: “If you owned this store, would you open earlier and find another time for staff training?” “Of course,” replied Sue, “just look outside!” Chris frowned. Here was a store manager eager to serve her customers, yet bank policy was tripping her up. “OK then,” Chris said, “you choose when to open and close, but don’t expect any extra money from me for more staff.” The store manager quickly agreed, and Chris walked out of the store scarcely aware that he had just launched a mini-revolution in employee freedom.

Within days, news of the policy shift had spread across BNZ’s retail network. Soon Chris was fielding requests from managers throughout New Zealand, all of whom, it seemed, were eager for the same freedom that had just been granted to the Christchurch store. With e-mails flooding in, Chris reached out to his colleague, Blair Vernon, general manager of marketing. Within the bank, opening hours were considered a “brand and customer experience issue,” and that was Blair’s bailiwick. As a teenager, Blair had flipped burgers at McDonald’s, a company that lets its franchisees decide when to open and close. Reckoning that what worked for McDonald’s might work for BNZ, Blair agreed that the petitioners should be able to set their own hours.

In Takapuna, a tiny Auckland suburb, BNZ became the first bank to open on Sunday mornings. This allowed the store to serve the thousands of customers who flocked to the local farmers’ market. In South Island ski towns, store managers opted to stay open until late in the evening so skiers could do their banking after a day on the slopes. Within city centers, many store managers chose to synchronize their schedules with nearby retailers rather than keep bankers’ hours. Within six months, nearly 95% of BNZ’s 180 stores had altered their opening hours in some way.

Not so fast
While store managers were moving quickly to exploit their newfound freedom, there were many at the head office who fretted about the loss of control. Chris and Blair soon found themselves fighting a rearguard action with head office staff who regarded the policy shift as rushed, if not reckless. Typically, a change of this magnitude went through a detailed risk assessment that gave every function the chance to weigh in.

Chris and Blair struggled to defend their hurried decision. They hadn’t set out to bypass the usual decision-making process, but had simply been overwhelmed by the horde of frontline managers who were eager to operate more flexibly.

Within the bank’s HR function, there was a concern that the bank employees union, Finsec, would raise a “ruckus” and object to any changes that extended the workday or compelled employees to come in on weekends. Others worried that store managers might choose to cut opening hours-a move that would jeopardize customer satisfaction. BNZ’s risk management experts had their own issues. There were detailed policies that governed how a store was supposed to be opened, and cash transfers to and from armored vehicles had to be scheduled at precise times. Given this, how could managers be allowed to open up “any old time they felt like it?” Information technology was another sticking point. The bank’s IT staff typically scheduled major maintenance during times when the stores were closed. What would happen if a store opened at an odd hour and the IT system was down?

Then there was corporate marketing. Charged with protecting the brand, senior staffers worried that a hodge-podge of opening times might damage the bank’s carefully built reputation for consistency and reliability. And what about all those hand-lettered signs that were being used to announce new opening hours? They looked tacky.

Although many of the objections were more political than practical, some were well grounded and prompted policy adjustments. A software template was developed that allowed store managers to print out a simple sign displaying local opening hours. Team members were reminded they had to abide by the bank’s security policies and could do nothing that would jeopardize employee safety. Furthermore, store managers were expected to consult with team members before making any changes to staff schedules; new opening hours required the agreement of every store employee. This caveat also helped to neutralize objections from BNZ’s union. How could the union demur when the new work schedules had been set by employees rather than imposed from above?

“What everyone learned,” says Blair, “is that when you treat people like adults, they act like adults.” The operational Armageddon that some had feared never came to pass.

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WHAT MATTERS NOW
AUTHOR: Gary Hamel
PUBLISHER: Jossey-Bass A Wiley Imprint
PRICE: $26.95 (US)

What Matters Now: How to Win in a World of Relentless Change, Ferocious Competition, and Unstoppable Innovation by Gary Hamel. Copyright © 2012 by Gary Hamel. Reprinted with permission of Wiley.