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July/August 1999
Turning Goals Into Results: The Power
of Catalytic Mechanisms
Harvard Business Review
by Jim Collins
Most executives have a big, hairy, audacious goal. One dreams
of making his brand more popular than Coke; another aspires to
create the most lucrative Web site in cyberspace; yet another
longs to see her organization act with the guts necessary to depose
its arch rival. So, too, most executives ardently hope that their
outsized goals will become a reality. To that end, they write
vision statements, deliver speeches, and launch change initiatives.
They devise complicated incentive programs, formalize rules and
checklists, and pen policies and procedures. In other words, with
the best intentions, they create layer upon layer of stultifying
bureaucracy. Is it any surprise that their wildly ambitious dreams
are seldom realized?
But companies don’t have to act that way. Over the past six years,
I have observed and studied a simple yet extremely powerful managerial
tool that helps organizations turn goals into results. I have
recently codified it; I call it the catalytic mechanism.
Catalytic mechanisms are the crucial link between objectives and
performance; they are a galvanizing, nonbureaucratic means to
turn one into the other. Put another way, catalytic mechanisms
are to vision what the central elements of the U.S. Constitution
are to the Declaration of Independence—devices that translate
lofty aspirations into concrete reality. They make big, hairy,
audacious goals reachable.
My research indicates that few companies—perhaps only 5% or 10%—currently
employ catalytic mechanisms, and some of them aren’t even aware
that they do. I have also found that catalytic mechanisms are
relatively easy to create and implement. Given their effectiveness,
they are perhaps the most underutilized—and most promising—devices
that executives can use to achieve their big, hairy, audacious
goals, or BHAGs. (For more on BHAGs, see the article “Anatomy
of a BHAG.”)
Consider Granite Rock, a 99-year-old company in Watsonville, California,
that sells crushed gravel, concrete, sand, and asphalt. Twelve
years ago, when brothers Bruce and Steve Woolpert became copresidents,
they gave their company a new BHAG. Granite Rock would provide
total customer satisfaction and achieve a reputation for service
that met or exceeded that of Nordstrom, the upscale department
store that is world famous for delighting its customers. Not exactly
a timid goal for a stodgy, family-owned company whose employees
are mostly tough, sweaty people operating rock quarries and whose
customers—mainly tough, sweaty construction workers and contractors—are
not easily dazzled.
Now stop and think for a minute: what would it take to actually
reach such an ambitious goal? Most people automatically think
of galvanizing leadership. But that wasn’t an option for Granite
Rock, as the Woolperts are a quiet, thoughtful, and bookish clan.
Nor did the answer lie in hosting hoopla events or launching grand
customer service initiatives. The brothers had seen such efforts
at other companies and believed they had little lasting effect.
They chose instead to implement a radical new policy called short
pay. The bottom of every Granite Rock invoice reads, “If you are
not satisfied for any reason, don’t pay us for it. Simply scratch
out the line item, write a brief note about the problem, and return
a copy of this invoice along with your check for the balance.”
Let me be clear about short pay. It is not a refund policy. Customers
do not need to return the product. They do not need to call and
complain. They have complete discretionary power to decide whether
and how much to pay based on their satisfaction level.
To put the radical nature of short pay in perspective, imagine
paying for airline tickets after the flight and having the power
to short pay depending on your travel experience—not just in the
air, but during ticketing and deplaning as well. Or suppose universities
issued tuition invoices at the end of the semester, along with
the statement, “If you are not satisfied with the dedication of
the professor in any course, simply scratch out that course and
send us a tuition check for the balance.” Or suppose that your
cell phone bill came with a statement that said, “If you are not
satisfied with the quality of connection of any calls, simply
identify and deduct those from the total and send a check for
the balance.”
In the years since it was instituted, short pay has had a profound
and positive impact on Granite Rock. It serves as a warning system,
providing hard-to-ignore feedback about the quality of service
and products. It impels managers to relentlessly track down the
root causes of problems in order to prevent repeated short payments.
It signals to employees and customers alike that Granite Rock
is dead serious about customer satisfaction in a way that goes
far beyond slogans. Finally, it keeps Granite Rock from basking
in the glory of its remarkable success.
And it has had success, as has been widely reported. The little
company—it has only 610 employees—has consistently gained market
share in a commodity business dominated by behemoths, all while
charging a 6% price premium. It won the prestigious Malcolm Baldrige
National Quality Award in 1992. And its financial performance
has significantly improved—from razor-thin margins to profit ratios
that rival companies like Hewlett-Packard, which has a pretax
return of roughly 10%. No doubt, short pay was a critical device
for turning the Woolpert brothers’ BHAG into a reality.
Five parts of a whole
Obviously, not every company should institute short pay. Rather,
companies should have catalytic mechanisms as powerful as short
pay. What, then, is the difference between a catalytic mechanism
and most traditional managerial devices, such as a company’s hiring
and compensation policies? Catalytic mechanisms share five distinct
characteristics. Let’s look at them in turn.
Characteristic #1: A catalytic mechanism produces desired results
in unpredictable ways. When executives identify a bold organizational
goal, the first thing they usually do is design a plethora of
systems, controls, procedures, and practices that seem likely
to make it happen. That process is called alignment, and it’s
wildly popular in the world of management among business academics
and executives alike. After all, alignment makes sense. If you
want to make your brand more popular than Coke, you had better
measure the effectiveness of advertising and reward successful
marketing managers with big bonuses. But the problem, as I’ve
said, is that the controls that undergird alignment also create
bureaucracy, and it should be news to no one that bureaucracy
does not breed extraordinary results.
Don’t get me wrong. Bureaucracy may deliver results, but they
will be mediocre, because bureaucracy leads to predictability
and conformity. History shows us that organizations achieve greatness
when people are allowed to do unexpected things—to show initiative
and creativity, to step outside the scripted path. That is when
delightful, interesting, and amazing results occur.
Take 3M. For decades, its executives have dreamed of a constant
flow of terrific new products. To achieve that end, in 1956, the
company instituted a catalytic mechanism that is by now well known:
scientists are urged to spend 15% of their time experimenting
and inventing in the area of their own choice. How very unbureaucratic!
No one is told what products to work on, just how much to work.
And that loosening of controls has led to a stream of profitable
innovations, from the famous Post-it Notes to less well-known
examples such as reflective license plates and machines that replace
the functions of the human heart during surgery. 3M’s sales and
earnings have increased more than 40-fold since instituting the
15% rule. The mechanism has helped generate cumulative stock returns
36% in excess of the market and has earned the company a frequent
ranking in the top ten of Fortune’s most admired list.
In a happy coincidence, the variation sparked by catalytic mechanisms
forces learning to occur. Suppose you set out to climb the 3,000-foot
sheer rock face of El Capitan in Yosemite Valley. Once you pass
pitch 15, you cannot possibly retreat from your particular route:
you are, by dint of nature, 100% committed. Although you can’t
predict how you will overcome the remaining pitches—you
have to improvise as you go along—you can predict that you will
invent a way to the top. Why? Because the reality of having no
easy retreat forces you to reach the summit. Catalytic mechanisms
have the same effect. Granite Rock’s short pay commits the company
to achieving complete customer satisfaction. Every time a customer
exercises short pay, Granite Rock learns or invents a way to run
its operations more effectively. Ultimately, such new knowledge
leads to better results, making the catalytic mechanism part of
a virtuous circle of variation, learning, improvement, and enhanced
results.
My “red flag” device also illustrates that circle. When I first
began teaching Stanford M.B.A. students by the case method in
1988, I noticed that a small number of them tended to dominate
the discussion. I also noticed that there was no correlation between
the degree of vocal aggressiveness and how much these students
improved the class’s overall learning experience. Some vocal students
had much to contribute; others just liked to hear themselves talk.
Worse, I noticed when chatting with students after class that
some of the quieter individuals had significant contributions
but were selective or shy about sharing them. Furthermore, seeing
15 to 20 hands raised at a time, I had no way of knowing which
one represented a truly significant insight, and I sensed that
I was frequently missing some students’ one best contribution
for the entire quarter.
I solved that problem by giving each student an 8.5 inch by 11
inch bright red sheet of paper at the beginning of every quarter.
It had the following instructions: “This is your red flag for
the quarter. If you raise your hand with your red flag, the classroom
will stop for you. There are no restrictions on when and how to
use your red flag; the decision rests entirely in your hands.
You can use it to voice an observation, share a personal experience,
present an analysis, disagree with the professor, challenge a
CEO guest, respond to a fellow student, ask a question, make a
suggestion, or whatever. There will be no penalty whatsoever for
any use of a red flag. Your red flag can be used only once during
the quarter. Your red flag is nontransferable; you cannot give
or sell it to another student.”
I had no idea precisely what would happen each day in class. And
yet, the red flag device quickly created a better learning experience
for everyone. In one case, it allowed a very thoughtful and quiet
student from India to challenge Anita Roddick of the Body Shop’s
manufacturing practices in the Third World. Roddick, a charismatic
CEO with ferociously held views, usually dominates any discussion.
The red flag forced her to listen to a critic. The spirited interchange
between these two passionate and well-informed people produced
more learning than anything I could have scripted. Without the
red flag, we would have just had another session of “I’m CEO and
let me tell you how it is.”
In another situation, a student used her red flag to state, “Professor
Collins, I think you are doing a particularly ineffective job
of running class today. You are leading too much with your questions
and stifling our independent thinking. Let us think for ourselves.”
That was a tough moment for me. My BHAG as a professor was to
create the most popular class at the business school while imposing
the highest workload and stiffest daily standards. The red flag
system confronted me with the fact that my own questioning style
stood in the way of my dream—but it also pointed the way to improvement,
again, to everyone’s benefit.
Interestingly, no other professors on campus adopted the red flag.
One of them told me, “I can’t imagine doing that. I mean, you
never know what might happen. I could never give up that much
control in my classroom.” What he and others missed was a great
paradox: by giving up control and decreasing predictability, you
increase the probability of attaining extraordinary results.
Characteristic #2: A catalytic mechanism distributes power
for the benefit of the overall system, often to the great discomfort
of those who traditionally hold power. With enough power,
executives can always get people to jump through hoops. If it
is customer service they are after, for instance, they can threaten
dismissal to coerce salespeople to smile and act friendly. If
they seek higher profits per store, they can pay employees according
to flow-through. And if increased market share is the dream, they
can promote only those managers who make it happen.
But consider how catalytic mechanisms work. Short pay distributes
power to the customer, to the great discomfort of Granite Rock’s
executives, but toward the greater goal of continuous improvement
for the benefit of customers and company alike. The red flag distributes
power to the students, to the great discomfort of the teacher,
but to the ultimate improvement of learning in general. The founders
of the United States understood this point when they wrote the
Constitution. After all, the Constitution is the set of catalytic
mechanisms that reinforce and support the national vision. Voting,
the system of checks and balances, the two-thirds vote to amend,
the impeachment process—these disperse power away from one central
source, to the great discomfort of those who seek power, but to
the benefit of the overall nation.
Catalytic mechanisms force the right things to happen even though
those in power often have a vested interest in the right things
not happening. Or they have a vested interest in inertia—letting
pointless, expensive practices stay in place. That’s what happened
for years, perhaps decades, at U.S. Marine recruit depots. All
recruits are issued a uniform on their first day. Two weeks later,
they need another—the pounds melt away when you run 12 miles every
dawn. The military’s rules required those two-week-old uniforms
to be destroyed. Not washed and reissued, but destroyed.
In the early 1990s, Phil Archuleta, a materials manager at a recruiting
depot in San Diego, suggested that they reuse the uniforms. His
boss’s response: “No. It’s against regulations. Forget about it.”
So in a fabulous act of insubordination, Archuleta washed the
uniforms, hid them in boxes, and bided his time until he finally
got a supervisor willing to challenge the regulation.
In an effort to empower the Phil Archuletas of the world, the
government launched a wide-ranging initiative in 1994 to fix its
bureaucratic quagmire. A new rule regarding waivers was put in
place, and it is a catalytic mechanism that exemplifies the beauty
and power of redistributing power. It has two primary components:
- Waiver-of-regulation requests must be acted upon within 30
days. After 30 days, if no answer is forthcoming, the party
asking for the waiver can assume approval and implement
the waiver.
- Those officials who have the authority to change regulations
can approve waiver requests, but only the head of an agency
can deny a request.
Think for a minute about the impact of this catalytic mechanism.
It subverts the default, knee-jerk tendency of bureaucracies to
choose inaction over action, status quo over change, and idiotic
rules over common sense. Supervisors can no longer say no or not
respond. They would have to champion a no all the way to the head
of their agency—the equivalent of the head commandant of the entire
U.S. Marine Corps—within 30 days. Instead of having to go out
of their way to demonstrate why it is a good idea, they would
have to expend great energy to prove that it is a bad idea.
The catalytic mechanism tilts the balance of power away from inertia
and toward change.
Indeed, the primary effect of the new waiver rule—as with
all catalytic mechanisms—is to give people the freedom to
do the right thing. The waiver that allowed Archeluta to change
the regulation on uniforms created a savings of half a million
dollars in two years. Similar examples of people doing the right
thing with the waiver rule abound throughout the federal government,
from the FDA to NASA. Tort claims adjusters in the Department
of Agriculture, for instance, waived regulations to reduce processing
time of claims from 51 days to 8 days—a manpower savings of 84%.
When executives vest people with power and responsibility and
step out of the way, vast reservoirs of energy and competence
flow forth. Again we have a paradox: the more executives disperse
power and responsibility, the more likely the organization is
to reach its big, hairy, audacious goal.
Characteristic #3: A catalytic mechanism has teeth. Lots
of companies dream of total customer satisfaction; few have a
device for making it happen that has the teeth of short pay. Plenty
of organizations state the lofty intention to empower people;
few translate that into results with a mechanism that has the
teeth of the red flag. Many companies state that they intend to
“become number one or number two in every competitive arena”;
few have added an effective means of enforcement by saying, “and
if the business is not number one or number two, or on a clear
trajectory to get there, we will exit within three months.”
The fact is, executives spend hours drafting, redrafting, and
redrafting yet again statements of core values, missions, and
visions. This is often a very useful process, but a statement
by itself will not accomplish anything. By contrast, a catalytic
mechanism puts a process in place that all but guarantees that
the vision will be fulfilled. A catalytic mechanism has a sharp
set of teeth.
Consider the case of Nucor Corporation, the most successful U.S.
steel company of the last three decades. It has a unique vision
for a Rust Belt company: to be an organization whose workers and
management share the common goal of being the most efficient,
high-quality steel operation in the world, thereby creating job
security and corporate prosperity in an industry ravaged by foreign
competition. Behind that vision lies the belief held deeply by
Nucor’s senior leaders that decent, hard-working people should
be well paid for their efforts and, so long as they are highly
productive, that they need not worry about job security.
On the surface, Nucor’s vision may sound warm and fuzzy. Dig deeper,
and you’ll see that it actually leaves no room for unproductive
employees. Nucor has created a culture of intense productivity
whereby five people do the work that ten do at other steel companies,
and get paid like eight. The vision came to life through a series
of powerful catalytic mechanisms with teeth, such as the way front-line
workers get paid:
- Base hourly pay is 25% to 33% below industry average.
- People work in teams of 20 to 40; team productivity rankings
are posted daily.
- Bonus of 80% to 200% of base pay, based on team productivity,
is paid weekly to all teams that meet or exceed productivity
goals.
- If you are five minutes late, you lose your bonus for the
day.
- If you are 30 minutes late, you lose your bonus for the week.
- If a machine breaks down, thereby stopping production, there
is no compensating adjustment in the bonus calculation.
- If a product is returned for poor quality, bonus pay declines
accordingly.
You might be thinking that the Nucor system concentrates power
in the hands of management, which would seem to contradict the
idea of distributing power for the sake of the system. But in
fact, the catalytic mechanism actually takes the power out of
the hands of individual managers and their whims. Nucor has no
discretionary bonuses. It’s more like a sports bonus system: if
you score so many points or win a certain number of races, you
get a bonus based on a predetermined formula. Period. That formula
gives workers more power over their own destiny than bonus programs
that give large discretionary power to management. If your team
scores the points, your team gets the bonus, and no manager can
take it away, citing, “We’re just not having a very good year”
or “I don’t like your attitude.”
Nucor’s catalytic mechanisms for managers, incidentally, have
even sharper teeth. Its executive compensation system works very
much like its worker compensation system, except that the “team”
is the entire plant (for plant managers) or the entire company
(for corporate officers). And, unlike most companies, when times
are bad, Nucor’s executives assume greater pain than frontline
workers: workers’ pay drops about 25%, plant managers’ pay drops
about 40%, and corporate officers’ pay drops about 60%. In the
1982 recession, CEO Ken Iverson’s pay dropped 75%.
Characteristic #4: A catalytic mechanism ejects viruses.
A lot of traditional controls are designed to get employees to
act the “right” way and do the “right” things, even if they are
not so inclined. Catalytic mechanisms, by contrast, help organizations
to get the right people in the first place, keep them, and eject
those who do not share the company’s core values.
Great organizations have figured something out. The old adage
“People are your most important asset” is wrong; the right
people are your most important asset. The right people are those
who would exhibit the desired behaviors anyway, as a natural extension
of their character and attitude, regardless of any control and
incentive system. The challenge is not to train all people to
share your core values. The real challenge is to find people who
already share your core values and to create catalytic mechanisms
that so strongly reinforce those values that the people who don’t
share them either never get hired or, if they do, they self-eject.
Let’s return to the Nucor example. Nucor doesn’t try to make lazy
people productive. Its catalytic mechanisms create a high-performance
environment in which those with an innate work ethic thrive and
free riders get out in a hurry. Management usually doesn’t fire
unproductive workers; workers do. In one case, team members
chased a lazy coworker out of the plant. And one reporter writing
a story on Nucor described showing up for a shift on time but
thinking that he was late because all the workers had been there
for 30 minutes arranging their tools and getting ready to fire
off the starting line precisely at 7:00 A.M.
Interestingly, Nucor sets up its mills not in traditional steel
towns, but primarily in rural, agricultural areas. The thinking
is simple: you can’t teach the work ethic—either a person has
it or he doesn’t. But you can teach steel making. That’s why Nucor
hires farmers and trains them. The company’s catalytic mechanisms
wouldn’t have it any other way.
Another example of a catalytic mechanism ejecting viruses comes
from W.L. Gore & Associates, a fabric company worth nearly $2
billion. Bill Gore founded the company in 1958 with the vision
of creating a culture of natural leadership. Leadership, in Gore’s
view, could not be assigned or bestowed by hierarchical position.
You are a leader if and only if people choose to follow you. Gore’s
theory sprang not just from his personal values but also from
his business sense: he thought that the most creative and productive
work came when people freely made commitments to one another,
not when bosses told them what to do.
To turn his vision into reality, Gore invented a catalytic mechanism
that attracted the right people like a magnet and scared away
the others. At W.L. Gore & Associates, employees have the authority
to fire their bosses. Now, they can’t fire the person from the
company, but, if they feet their boss isn’t leading them effectively,
they can simply bypass him or her and follow a different leader.
Who would want to work at such a company? Exactly the people who
belong there—people who know they can lead without the crutch
of a formal position or title and who believe in the philosophy
of nonhierarchical leadership. Who would avoid it like the plague?
Anyone who gets giddy pulling the levers of position and power
just for the pulling’s sake. And if you’re a hierarchical leader
who happens to make it through the company’s door but can’t quickly
shake the notion that “the boss has to be the boss,” it won’t
take you long to find the exit.
Characteristic #5: A catalytic mechanism produces an ongoing
effect. Catalytic mechanisms differ fundamentally from catalytic
events. A rousing speech to the troops, an electrifying off-site
meeting, a euphoria-producing new buzzword, a new initiative or
strategic imperative, an impending crisis—all of these are catalytic
events, and some are useful. But they do not produce the persistent,
ongoing effect of catalytic mechanisms. In fact, a good catalytic
mechanism, as long as it evolves, can last for decades, as the
15% rule at 3M and the impeachment mechanism in the Constitution
illustrate.
The lack of catalytic mechanisms is one reason many organizations
rally in a crisis but languish once the crisis has passed. Leaders
who feign a crisis—those who create a burning platform without
simultaneously building catalytic mechanisms—do more long-term
harm than good by creating a syndrome of crisis addiction. Executives
who rely only on catalytic events are left wondering why the momentum
stalls after the first phase of euphoria, excitement, or fear
has passed. To produce lasting results, they must shift from orchestrating
a series of events to building catalytic mechanisms.
Take, for example, the decades of ineffectual attempts to reform
public education in the United States. Part of the failure lies
in the approach to reform; too often it is based on onetime events
and fashionable buzzwords rather than on catalytic mechanisms
that produce sustained effects. As Roger Briggs, a high school
teacher in Boulder, Colorado, wrote in an essay on school reform:
“Every year we get a new program or fad. And they never really
work. And we teachers eventually just learn to ignore them, smile,
and go about our business of teaching.”
Now take a look at what happened when the state of Texas started
using a catalytic mechanism in 1995: comparison-band ranking of
schools, which is directly tied to resource allocation and, in
some cases, school closures. The ongoing effect of this device
forced the momentum of reform forward. Why? Well, if you rank
fifth out of 40 schools but you just sit still, you’ll drop in
the ratings. Sit still long enough, and you’ll eventually rank
35th rather than fifth, and you may face closure. Because every
school is ranked on the same criteria, the bar for performance
keeps rising. Within four years of installing the mechanism, student
achievement in Texas improved across the board. The percentage
of students who passed the Texas math skill exam, for example,
rose from roughly half to 80%, and the share of black and Hispanic
students who passed doubled to 64% and 72%, respectively.
And consider the ongoing impact of a good catalytic mechanism
in a more corporate setting. Darwin Smith, former CEO of Kimberly-Clark,
created in 1971 the BHAG to transform Kimberly-Clark from a mediocre
forest- and paper-products company into a world-class consumer
goods company. At the time, Wall Street analysts scoffed at the
idea, as did most of Kimberly-Clark’s competitors. Smith was undeterred.
He created one catalytic event and one equally important catalytic
mechanism. For the first, he sold a big chunk of the company’s
traditional paper-production mills, thus leaving no easy escape
route from the dream. For the second, he committed the company
to head-to-head competition with the best consumer-products company
in the world: Procter & Gamble. With its entry into disposable
diapers, Kimberly-Clark would henceforth be a direct rival of
P&G. Kimberly-Clark would either become excellent at consumer
products or get crushed. The beauty of this catalytic mechanism
is that, unlike the “change or die” ranting all too common among
modern executives, its ongoing effect is as powerful today as
when it was first put in place nearly 30 years ago.
Getting started
This is not intended to be a how-to article; my main objective
has been to introduce the concept of catalytic mechanisms and
demonstrate how they have helped some companies—and individuals—turn
their BHAGs into reality. (For more on the personal use of catalytic
mechanisms, see the article “Not for Companies Only.”)
Nonetheless, my research suggests that there are a few general
principles that support the process of building catalytic mechanisms
effectively.
Don’t just add, remove. When pursuing BHAGs, our natural
inclination is to add—new initiatives, new systems, new strategies,
new priorities, and now, new catalytic mechanisms. But in doing
so, we overwhelm ourselves. Isn’t it frightening that the new
version of Palm Pilot has space for 1,500 items on its to-do list?
Sadly, few of us have a “Stop Doing” list. We should, because
to take something away—to unplug it—can be as catalytic as adding
something new.
Take the case of a circuit division at Hewlett-Packard. It had
tried countless programs and initiatives to reach its BHAG of
becoming “a place where people would walk on the balls of their
feet, feel exhilarated about their work, and search for imaginative
ways to improve and innovate everything we do.” The events produced
short-term results—a moment of sparkle and excitement—but within
a month or two, the division always drifted back into its sleepy,
humdrum mode.
Then its executives considered the question, “What policies should
we remove?” For most of its history, the division had comfortably
lived off a captive internal market. What if HP’s divisions were
allowed to buy their components from outside competitors? Never
again would the circuit division have fat internal orders just
handed to it. Never again could it just sit still. Two months,
four months, a year, five years, and ten years down the road—fierce
competitors would still be there, constantly upping the ante.
The prospect was both terrifying and exhilarating. Managers decided
to unplug the “buy internal” requirement and open the doors to
free-market competition.
Within weeks, the circuit division was well on its way to realizing
its BHAG. You could sense a completely different environment the
moment you walked in the door. The place hummed with activity,
and its performance showed for it.
Create, don’t copy. Creating mechanisms is exactly that:
a creative act. You can, of course, get good ideas by looking
at what other organizations do, but the best catalytic mechanisms
are idiosyncratic adaptations, if not wholesale creations, for
a unique situation.
Because catalytic mechanisms require fresh ideas, it makes sense
to invite all members of an organization to participate in their
creation. Everyone. Certainly, some mechanisms require input from
senior executives, like short pay at Granite Rock. Yet many of
the best catalytic mechanisms were not created by top management.
The idea for the federal government waiver rule, for example,
originated with two staff members—Lance Cope and Jeff Goldstein.
They were working in the national reinvention labs, and neither
had direct authority over any federal agency.
Allow me also to use a personal example. Part of my professional
vision is to contribute through teaching and to harness my curiosity
and passion for learning in ways that make a positive impact on
the world. From that goal flows the imperative that I allocate
time primarily to research, writing, and teaching and limit consulting
work only to those situations in which I can contribute as a teacher.
To reinforce that imperative, I have created two catalytic mechanisms:
the “come to Boulder rule” and the “four-day rule.” The first
rule states that I will not engage in a direct advisory relationship
with any organization unless the chief executive agrees to travel
to my Boulder research laboratory. Executives spend huge sums
of money on consultants, but money doesn’t equal commitment—if
you have a big enough budget, invoices just don’t hurt. Yet all
chief executives, no matter how large their budgets, have only
24 hours in a day. If a CEO flies all the way to Boulder, he or
she has demonstrated commitment to serious discussions and hard
work, and the likelihood that I will make a significant impact
as a teacher increases exponentially. Most important, those not
committed to real (and perhaps uncomfortable) change eject right
up front.
The second mechanism—my four-day rule—states that any given organization
has an upper limit of four days of my advisory time in a year.
The most lasting impact comes by teaching people how to fish,
not by fishing for them. Organizations that want an adviser to
fish for them self-eject through this catalytic mechanism. Admittedly,
these are highly unusual devices, and they would be disastrous
for most consulting firms that depend upon continual growth to
feed their machine. Yet they are perfectly designed for a strategy
aimed at explicitly not building a large consulting business.
They are unique to me, as all catalytic mechanisms should be to
their creators.
Use money, but not only money. The examples in this article
may lead you to believe that most catalytic mechanisms use money.
But, in fact, when my research colleague Lane Hornung cataloged
my database of catalytic mechanisms, he found that only half do.
That might surprise some people—in particular those who subscribe
to the old saw that money is the best motivator. I’m not going
to claim that money doesn’t impel people toward desired results;
money can add teeth to any catalytic mechanism. But to rely entirely
on money reflects a shallow understanding of human behavior.
The U.S. Marine Corps illustrates my point precisely. The Corps
builds extraordinary commitment through a set of catalytic mechanisms
that create intense psychological bonds among its members. By
isolating recruits at boot camps and creating an environment where
recruits survive only by relying upon one another, the Corps triggers
the deep human drive, hard-wired into most of us, to support and
protect those we consider family. Most people will not risk their
lives for a year-end bonus, but they will go to great lengths
to earn the respect and protect the well-being of their comrades.
William Manchester, who returned to his unit on Okinawa after
receiving a wound that earned him a Purple Heart, eloquently describes
the psychology of commitment in his book Goodbye Darkness1:
And then, in one of those great thundering jolts in which a
man’s real motives are revealed to him in an electrifying vision,
I understand, at last, why I jumped hospital that Sunday thirty-five
years ago, and, in violation of orders, returned to the front
and almost certain death. It was an act of love. Those men on
the line were my family, my home. … They had never let
me down, and I couldn’t do it to them. I had to be with them
rather than to let them die and me live with the knowledge that
I might have saved them. Men, I now knew, do not fight for flag
or country, for the Marine Corps or glory or any other abstraction.
They fight for one another.
Yes, catalytic mechanisms sometimes use money to add bite, but
the best ones also tap deeper wells of human motivation. Even
at Nucor, the effectiveness of its catalytic mechanisms lies as
much in the peer pressure and the desire to not let teammates
down as in the number of dollars in the weekly bonus envelope.
The best people never work solely for money. And catalytic
mechanisms should reflect that fact.
Allow your mechanisms to evolve. New catalytic mechanisms
sometimes produce unintended negative consequences and need correction.
For instance, the first version of the red flag failed because
certain students continued to dominate class discussion, thinking
that every comment of theirs was worth a red flag. So I added
the stipulation: “Your red flag can be used only once during the
quarter. Your red flag is nontransferable; you cannot give or
sell it to another student.”
All catalytic mechanisms, in fact, even if they work perfectly
at first, should evolve. 3M’s 15% rule is a case in point. In
1956, executives urged 3M scientists to use 3M labs during their
lunch break to work on anything they wanted. In the 1960s, that
catalytic mechanism became formalized as the “15% rule,” whereby
scientists could use any 15% of their time. In the 1980s, the
15% rule became widely available to 3Mers other than scientists,
to be used for manufacturing and marketing innovations, for example.
In the 1990s, 3M executives worried that fewer people were using
the mechanism than in previous decades. It put together a task
force to reinvent the 15% rule, bolserting it with special recognition
rewards for those who used their “bootleg time”—as it has come
to be called—to create profitable innovations.
The 15% rule has been a catalytic mechanism at 3M for more than
40 years, but it has continually evolved in order to remain relevant
and effective. That’s the right approach; no catalytic mechanism
should be viewed as sacred. In a great company, only the core
values and purpose are sacred; everything else, including a catalytic
mechanism, should be open for change.
Build an integrated set. One catalytic mechanism is good;
several that reinforce one another as a set are even better. That’s
not to say a company needs hundreds of catalytic mechanisms—a
handful will do. Consider Granite Rock again. It certainly doesn’t
rely just on short pay. It also has a catalytic mechanism that
requires an employee and manager to create a focused development
plan for the employee during the performance evaluation process.
Indeed, every employee and manager must together complete a form
that reads: “Learn _____ so that I can contribute _______.” Two
sets of teeth make this form effective. First, employees and their
managers must both sign off on the final development plan, which
forces a continual dialogue until they reach agreement. Second,
compensation ties directly to learning and improvement, not just
job performance: people who do not go out of their way to improve
their skills receive lower than midpoint pay. Only those who do
a good job and improve their skills and make a contribution
to improving the overall Granite Rock system receive higher than
midpoint pay. So people who merely do a good job self-eject out
of Granite Rock. This catalytic mechanism has produced delightful
surprises: one previously illiterate employee used it to get the
company to send him to a reading program. When Granite Rock won
the Baldrige Award, he read an acceptance speech.
Granite Rock also uses catalytic mechanisms to guide hiring, encourage
risk taking, and stimulate new capabilities. The point here is
not so much in the details as it is in the big picture: Granite
Rock does not rely solely on short pay to pursue its BHAG of attaining
a reputation for customer satisfaction that exceeds Nordstrom’s.
It has about a dozen catalytic mechanisms that support and reinforce
one another.
That said, however, it would be a mistake to take this article
and launch a grand catalytic mechanism initiative. Developing
a set of catalytic mechanisms should be an organic process, an
ongoing discipline, a habit of mind and action. The dozen or so
catalytic mechanisms at Granite Rock came into being over a ten-year
period. You certainly don’t want to use the idea to create another
layer of bureaucracy. Catalytic mechanisms should be catalysts,
not inhibitors.
Castles in the Air
I recently worked with a large retail chain to define its BHAG
for the twenty-first century. The company is doing well, but it
wants its performance to be outrageously great. And so its executives
came up with a wildly ambitious goal: to make its brand more popular
than Coke.
That company’s challenge now is to invent the catalytic mechanisms
that will make the dream a reality. I’ve advised its executives
against investing heavily in hoopla events to fire up thousands
of frontline employees about the new BHAG. Instead, they should
create and implement a set of catalytic mechanisms—specific, concrete,
and powerful devices to lend discipline to their vision. After
all, catalytic mechanisms alone will not create greatness; they
need a dream to guide them. But if you can blend huge, intangible
aspirations with simple, tangible catalytic mechanisms, then you’ll
have the magical combination from which sustained excellence grows.
At the conclusion of Walden, Henry David Thoreau wrote:
“If you have built castles in the air, your work need not be lost;
that is where they should be. Now put the foundations under them.”
BHAGs are a company’s wildest dreams. Catalytic mechanisms are
their foundations. Build them both.
Footnote 1: Goodbye Darkness (Boston: Little, Brown and
Company, 1979), p. 391.
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