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THE FOUR LIVING ENTERPRISES

Determining Your Organization’s Type

John Garner, VP Operations for an oil drilling company, was chatting with his drilling supervisor, Frank. Frank mentioned that he had hired a sensitivity consultant to work with his tool-pushers, those who guide the oil drill into the ground. John, curious, asked if he could attend one of the sessions.

The tool-pushers sat in a circle while the consultant asked them each to tell how they felt about the others; obviously uncomfortable, the men said as little as they could. This went on for an hour. Try as he might, John could see no earthly reason for any of it. He knew that when people are operating complicated machinery like drilling rigs, their attention needs to be totally focused on what they are doing, not people’s feelings. If their attention wanders from the drill even for an instant, they put themselves and others at risk. So after the meeting, John spoke to Frank. “What were you thinking?” John said, and told Frank to fire the consultant.

Frank was shocked. A friend had recommended the training, which had really helped the employees at a PR firm get along better. But it was worse than useless in an oilfield—and potentially dangerous.

Ideas like this come out of left field all the time due to the one-size-fits-all mentality that dominates too much business thinking today. That approach assumes that what works in one enterprise will work in another. Although it is propounded by many, many consultants and books, this approach does not work.

If you don’t know already which type of enterprise yours is, you will by the end of this chapter. This chapter will:

Describe the four fundamental kinds of enterprises

Show how the four kinds of enterprises focus attention and make decisions

Tell you how to determine which is yours

The Four Types of Enterprises

What an enterprise promises its customers determines its type. Customer promise is an enterprise’s magnetic north—it guides enterprises to the right culture and leadership practices. These practices are completely different in each of the four enterprise types. Taking the cultural and leadership practices of one type of enterprise and trying to force them on another type pulls an enterprise apart.

But this is just what many business books advise leaders to do. I searched “consensus decision-making” on Amazon books in January 2017 and came up with 153 results. Each of these 153 books is claiming that consensus decision-making is right for every enterprise. But consensus decision-making works only in a customized enterprise—there, decisions should be based on the collective judgments of the team. For example, an architect and client need to make many decisions together to come up with a house that suits the customer. This kind of decision-making would be disastrous at a predictable and dependable enterprise like a utility company or NASA, where decisions often need to be made very quickly and must be based on facts, data, and established procedures.

The customized enterprise promises a unique tailored solution to each customer. It must partner closely with each customer and discuss decisions in detail, which takes highly collaborative leadership and cultural practices. For example, Ogilvy & Mather provides a customized YE campaign for customers. Each customer gets its own carefully built team of people. Leadership is participative and helps team members work together and deliver on the company’s customer promise. The customer is always a member of the team.

The predictable and dependable enterprise promises customers reliability, safety, security, or, sometimes, commodities. For example, predictable and dependable enterprises like Pacific Gas & Electric (PG&E) keep tight control with highly structured leadership and cultural practices; consistent, efficient operations; and clear, detailed policies and procedures. Decisions depend on facts and data. Directive, authoritative leadership focuses on attaining operational goals and adhering to role requirements.

The best-in-class enterprise promises superior products and/or services. Best-in-class enterprises like Apple need the most expert people they can find to imagine and innovate products and services. Leaders and cultural practices focus on excellence. Expertise remains center stage. Decisions are based on facts and hard data. This enterprise must constantly innovate, so leaders identify challenges and then challenge others to be the best that they can be. People follow leaders in this enterprise because they believe in being the best.

The enrichment enterprise aims to help people fulfill their potential, have a healthier life, and realize higher-level purposes. For example, Habitat for Humanity helps house less-fortunate people. It keeps its values center stage and focuses on applying them for the betterment of others. Leadership and cultural practices empower customers and employees. Decision-making depends on values, and decisions in this enterprise type are highly subjective. Leaders energize others, continually striving to realize the potential in employees and customers. Enrichment enterprises grow organically.

Leadership, Empowerment, and Culture in the Four Enterprise Types

Leadership is about empowerment—creating the conditions for employees, managers, and fellow leaders to deliver on the enterprise’s customer promise. But different types of enterprises must use empowerment in different ways. For example, an electric utility can’t empower employees to “follow what they believe in”—that would create chaos and danger. A PR firm has to include the customer on the team and empower the team to consensually come to its best judgment about what the customer’s PR campaign should look like.

Culture is about implementation and identity. Culture means how we hire, structure, deploy, compensate, and develop our employees to deliver on our customer promise. Culture is essentially formed by what it takes for your people to fully deliver on your enterprise’s customer promise. It is driven by the nature of your business and what it takes for you to succeed in your marketplace.

In short, the four enterprise types are four different worlds and can’t practice empowerment or culture the same way. What drives the culture and leadership of the four enterprise types is different, depending upon the kind of customer promise they have. These drivers and how they should be practiced in each type of enterprise are all discussed in detail in the next four chapters, but Figures 1-1a through 1-1c and Figure 1-2 list them all and summarize each type’s basic approach to them. Control culture aligns to predictable and dependable type organizations; collaboration to customized organizations; competence to best-in-class and cultivation aligns to enrichment organizations.

Figure 1-1a. Summary of Culture Drivers

Figure 1-1b. Summary of Culture Drivers

Figure 1-1c. Summary of Culture Drivers

Figure 1-2. Summary of Leadership

Attention and Decision-Making

What an organization pays attention to and how it makes decisions drive the delivery of its customer promise. Each enterprise type is a unique blend of where it puts its attention and how it makes decisions. In Figure 1-3, the vertical axis shows what an enterprise primarily pays attention to. Phe horizontal axis shows how an enterprise primarily makes decisions.

Figure 1-3. Attention and Decision-Making

The attention axis has Actuality at one end and Possibility at the other; the decision-making axis has Impersonal at one end and Personal at the other. Customized enterprises and predictable and dependable enterprises are actuality enterprises. Enrichment enterprises and best-in-class enterprises are possibility enterprises. Customized and enrichment are personal enterprises. Predictable and dependable and best-in-class are impersonal enterprises.

Each enterprise is a unique mix of one attention element and one decision-making element. Customized is an actuality-personal enterprise; predictable and dependable is actuality-impersonal; enrichment is possibility-personal; and best-in-class is possibility-impersonal. An enterprise’s unique mix of attention and decision-making can include elements from other types. For example, predictable and dependable and best-in-class enterprises both make decisions based on facts and hard data; this means that both make decisions primarily by relying on facts and hard data. It does not mean that they never consider personal matters when they make decisions. Every enterprise’s main tendencies are like right- and left-handedness in people: One hand dominates, but we use both hands. Similarly, one way of making decisions dominates an enterprise, but it will use other ways at times.

Attention

John (Skip) Coleman, deputy chief of fire prevention, Toledo (Ohio) Department of Fire and Rescue, once said that of all the advances in firefighting apparatus since motors replaced horses he considered “positive-pressure self-contained breathing apparatus [SCBA] to be the greatest. That along with National Fire Protection Association [NFPA] 1500 and mandatory mask policies developed by the NFPA and OSHA [Occupational Safety and Health Administration] have extended the life expectancy of firefighters by at least ten years over those who fought fires without them.” The SCBA was invented by Zodiac Oxygen Systems U.S.

The Toledo Department of Fire and Rescue and Zodiac Oxygen Systems are both in the firefighting business, but what each pays attention to couldn’t be more different. Toledo Department of Fire and Rescue firefighters deal with the immediate present: When the bell rings, they spring into action. By contrast, Zodiac Oxygen Systems’ workers spend their time on what will make firefighters safe in the future. They envision, design, test, and experiment with new kinds of equipment to make firefighters safer.

At the most fundamental level, every enterprise focuses either on the actual or the possible. Actuality has to do with what is; possibility has to do what might be. The Toledo Department of Fire and Rescue is an actuality enterprise and Zodiac Oxygen Systems is a possibility enterprise.

An actuality enterprise focuses on:

Concrete, tangible reality

Immediate customer demand

Actual experience/actual occurrence

A possibility enterprise focuses on:

Imagined alternatives

What might occur in the future

Innovations/creative options

Theoretical concepts or frameworks

Ideals/beliefs

The actuality enterprise lives in immediate experience and reality. The possibility enterprise lives in anticipation and possibility.

Compare our enterprise pairs. The actuality enterprises—customized and predictable and dependable—focus on getting today’s job done. A public relations firm offers a customized solution for each customer that increases marketplace exposure—in its current marketplace. It builds a PR campaign that fits who the customer actually is and what her company actually does, today. The customer implements the PR campaign as soon as it is ready. Similarly, a predictable and dependable enterprise provides a product or service today: A fire needs to be put out immediately, emergency room patients have to be treated ASAP, an electric utility has to provide predictable and dependable electricity 24/7.

By contrast, enrichment and best-in-class enterprises, the possibility enterprises, focus on goals that take time to reach—educating children, or creating one-of-a-kind products or services that may take years to design and develop. The next, distinctive smartphone may take ten years to imagine, design, build, and test before it is actually available for sale. Helping children to fulfill their potential is a future-focused endeavor. A scientific theory may take fifty years to be proven or disproven. Inspiration and imagined alternatives fuel these enterprises. Workers engage in explorations that stretch far beyond present reality. For enrichment and best-in-class enterprises, life lies beyond the horizon.

To sum up: Customized and predictable and dependable focus on present needs. Enrichment and best-in-class enterprises focus on future goals.

Decision-Making

Market Point describes itself as a “storytelling firm working with new companies to build engaging brands that inspire.” It “partners with” clients and helps them develop “their own stories that inspire and reach into audience’s hearts and minds. . . . We build emotional, intuitive and visceral connections. We collaborate closely with you and work step by step with you to build a PR campaign.”

TrendKite’s software helps PR agencies build a timely, highly accurate picture of their media coverage. TrendKite promises “deep domain expertise and thorough understanding of the complex PY landscape. Together we are focused on the problems around PR analytics and reporting. We’ve felt your pain. To relieve it, we are bringing to bear the latest in big data analytics technology and presenting it elegantly.”

Market Point and TrendKite are both in the public relations business but make decisions totally differently. Market Point and each customer decide together. They brainstorm ideas, experiment, and interpret the marketplace together. TrendKite bases all of its decision-making on hard data, analytics, dashboards, and quantitative formulas. The essence of its business is to provide verifiable information.

When making decisions, every enterprise emphasizes either impersonal data-based analysis or personal judgment-making. Personal decision-making relies on individuals’ and groups’ own subjective, values-based judgments. Impersonal decision-making relies on data and detached reasoning. The process is different in each.

The decision process in personal enterprises is:

People coming to a judgment

Organic/evolutionary/dynamic Oarticipative

Subjective

Open-ended

Emotional

The decision process in impersonal enterprises is:

Detached reasoning

Fact and data based

System, policy, and procedure oriented

Objective

Formula oriented

Law oriented

Emotionless

A personal process enterprise relies on the minds and hearts of people—their values, beliefs, and mutually arrived-at judgments—to make decisions. An impersonal process enterprise relies on systems, data, facts, formulas, and methods to make decisions.

Customized and enrichment enterprises are personal decision-making enterprises. Decisions in a customized enterprise are made by consensus, and customers are closely involved. Decisions in an enrichment enterprise are made according to values. These two enterprise types are focused on forming judgments and trust their people to make them. Decision-making is quite subjective; mistakes are par for the course. The judgment and wisdom of people carries the enterprise forward.

For example, a PR firm typically operates with teams of very diverse people, puts the customer on the team, and brainstorms and pushes for consensus. An enrichment enterprise centers its decision-making on its values and the extent to which those values are realized. It is belief-driven. An enterprise that provides physical therapy to patients needs to know how well the patient feels. A nonprofit enterprise that finds and provides foster parents relies upon personal judgment to decide whether or not particular foster parents are benefiting the child under their care.

Predictable and dependable and best-in-class enterprises make decisions by prescribing operational systems, formulas, and methods for people to follow. They provide people with ways to get and keep control, emphasizing precedents and requiring objectivity and order. People decide based on facts and hard data, using established policies and procedures.

For example, decisions in a nuclear power plant are based on hard data, gauges, and fact-based reports. Police need reliable information and data to catch lawbreakers. Low-margin grocery stores require constant tracking of inventory, product placement, and customer buying patterns. Low-price retail operations that sell necessities need the same.

A best-in-class enterprise establishes achievement goals and deploys people to reach them. It sets standards and challenges people to surpass them. People often use the scientific method, which relies on formal logic and emphasizes an empirical approach. A scientific research firm emphasizes hypotheses and then uses the scientific method to test them. A high-tech firm building sophisticated software bases decisions on tests to ensure that the software actually does what it promises. A consulting firm that offers a proprietary methodology for determining where exactly a customer derives its greatest return on investment has to develop a formula and then be able to prove that it works. These enterprises must rely on externally verifiable data to succeed.

Opposite Enterprise Pairs

Enterprises on the diagonal to one another in Figure 1-3 are opposites. Customized (actuality-personal) enterprises contrast most sharply with best-in-class (possibility-impersonal) enterprises; predictable and dependable (actuality-impersonal) contrast with enrichment (possibility-personal). Interestingly, knowing about these opposite enterprise pairs helps you understand and predict more about each enterprise.

For example, you can predict that a best-in-class enterprise will struggle with teaming by knowing that its opposite, a customized enterprise, relies on teams. Conversely, you can predict that a customized enterprise will have trouble using expertise by knowing that its opposite, a best-in-class enterprise, relies on expertise. Just picture a Ph.D. scientist expounding about relativity to a PR firm’s clients!

Similarly, customized enterprises can get very close to customers; best-in-class enterprises can get lost in ideas and pay too little attention to customers. A predictable and dependable enterprise tends to take its customers for granted (e.g., describes them as “ratepayers”); an enrichment enterprise tends to have trouble scaling its business and balancing its books.

An enrichment enterprise may tend to have too much mission and not enough margin; put another way, it has a hard time controlling operations. It’s preoccupied by its intention—benefiting others and helping them have a better life. Adhering to a budget often contravenes its organic, evolutionary growth. A predictable and dependable enterprise tends to take its people for granted and not train them enough. It has a hard time empowering employees, which is a hallmark of an enrichment enterprise. An enrichment enterprise fully embraces change; a predictable and dependable enterprise has huge difficulty with it, trying to anticipate change and stop it from happening.

A customized enterprise meets too much; a best-in-class enterprise doesn’t meet enough. A predictable and dependable enterprise tends to ignore the purpose and value of what it is doing; an enrichment enterprise emphasizes both too much and struggles with how to build a more systematic way to accomplish its goals.

How to Determine Your Enterprise Type

By now, you may know your enterprise type; if not, this last section will help you learn what it is. Before we begin, there is one caveat: Your enterprise may consist of many enterprise types because it has different customer promises. This happens roughly 20 percent of the time. If this is the case, restructure your enterprise into as many separate and singularly focused strategic business units or lines of businesses as you have customer promises. Not doing so will embed a myriad of cross-purpose behaviors that will impede each enterprise.

If you are already a holding company, like General Electric (GE), apply the information in this section to each separate strategic business unit or line of business under your over-arching umbrella.

When determining your enterprise type, base your thinking on your core enterprise. “Core” means everything required to deliver on your customer promise. A simple way to find the core of your enterprise is to ask what your enterprise needs to stay in business. If you can outsource it, then it is not part of your core; it is support to the core. A support unit itself can be a “sub-enterprise” and be any one of the four customer-culture-leadership networks. The core is the support unit’s customer.

Your customer promise determines your type. Because words—including “customer promise”—could mean different things to different people, when trying to determine this clearly, look at how you actually interact with your customers. Focus on how you behave with your customers to learn your type. For example, ask yourself: What exact behaviors do we actually exhibit when we deliver on our customer promise? What exactly is our customer buying?

In our experience, many leaders believe that their enterprise is a mixture of two, three, or even all four of the enterprises discussed in this book. When we started with Synergis Education, the company’s leaders believed that their enterprise was both a customized enterprise and a best-in-class enterprise. They had their own definition of each. But, when we simply asked them to describe exactly what the enterprise does (what exact actions it takes and in what sequence), it became crystal clear that they were in the best-in-class business. They designed software—the best of its kind!—their customers chose which of their distinctive software products they wanted to buy. They didn’t ask each customer what they wanted and then design software just for that customer.

Lastly, a word of warning about your own bias. Leaders often unconsciously bias their thinking about their enterprise’s type by reasoning from their own approach to leadership. A chief operating officer (COO) with one of our clients, a commercial construction business, kept insisting that his enterprise was best-in-class even though his construction business was obviously a predictable and dependable enterprise, because his leadership style fit a best-in-class enterprise. Concluding that his enterprise was predictable and dependable was unconsciously (and unnecessarily) threatening to him. His boss, the CEO, was rather dictatorial, and he came to understand that this was so offensive to him that he was refusing to consider the idea that his business was inherently a predictable and dependable enterprise because, on some level, it was giving in to his boss to do so. The real issue was his disconnect with his boss.

This kind of biased thinking happens most with leaders of predictable and dependable enterprises because this enterprise and its need to stay in control is anathema to so many people. This type of enterprise has been lambasted, particularly by consultants, for over fifty years. Ironically, predictable and dependable is the most prevalent enterprise type in the developed world. It seems obvious that a utility company is a predictable and dependable enterprise, but a CEO who dislikes the idea of control may see her utility as an enrichment enterprise.

Finally, if you are a start-up and don’t yet have actual customers, you can still use the process here and in the rest of this book—just ask yourself how you will interact with customers once you get them. If you use your enterprise type and the ideas in this book as a planning guide for building your cultural and leadership approach, you’ll get a major head start in building your business.

To learn or check your enterprise type, ask yourself exactly how your enterprise behaves with customers. If the behavior is:

Highly customized, personalized, tailored to each unique customer; built on a close partnership with the customer; characterized by a great deal of co-involvement with each customer each step of the way; focused on addressing the special, unique need of each customer; contingent on building a strong relationship with each customer; or the solution you offer is unique to each customer, then your customer promise is customized. Examples here are public relations firms, marketing consultants, executive search firms, executive coaching firms, and residential real estate companies.

Providing predictable, dependable, reliable products or services; commodity/commodity-like; high-distribution intensive; providing safety, security, emergency services; providing basic necessities; linked to life and death; or providing low-cost goods; then your customer promise is predictable and dependable. Examples are utilities, fire and police departments, overnight delivery companies, large retailers, retail banks, and mining companies.

Enrichment; helping people grow; developing and fulfilling people’s potential; offering people a better, fuller, healthier life; striving to raise the human spirit; based on values, realizing ideals, higher-order purposes; or providing therapeutic products or services; then your customer promise is enrichment. Examples are elementary and secondary schools, therapeutic service companies, arts and entertainment companies, and enterprises built to help the less fortunate.

Best-in-class; providing unparalleled products/services; providing one-of-a-kind products/services; dependent upon a high level of expertise; dependent on a high level of innovation; providing products or service that creates its own market; providing the best, most excellent products/services; contingent on unique technology or know-how; then your customer promise is best-in-class. Examples are high-tech companies, high-end hotel companies, medical products companies, law firms, and one-of-a-kind product companies.

Then ask yourself what your enterprise’s particular combination of attention (actuality or possibility) and decision-making (impersonal or personal) is. If it is:

Actuality and personal, then your enterprise is a customized enterprise

Actuality and impersonal, then your enterprise is a predictable and dependable enterprise

Possibility and personal, then your enterprise is an enrichment enterprise

Possibility and impersonal, then your enterprise is a best-in-class enterprise

Of the approximate 41,800 people who have completed our assessments that measure enterprise types and individual leadership approach, answers to these two questions have never contradicted one another. If your answers do, read the rest of this book (or at least the chapters describing each type of enterprise!) and then determine which enterprise type is yours.

If you never learn your enterprise type, you will:

keep dealing with the same people problems over and over

bring in new management and leadership ideas that don’t work

struggle with strategy implementation problems

give mixed messages to your customers

unintentionally demoralize your employees

Determining your enterprise type will benefit you in other ways. It will center your marketing message and approach with customers, which will substantively increase your revenues. It will get you and your employees focused and on the same page and set the stage for how to lead, what kind of culture to build, whom to hire, how to manage performance, how to build your team, and much more. It will help you decide whether to merge with another enterprise and—if you decide to merge—how to do it. Details on all these topics are covered in future chapters, but it all starts with determining your enterprise type.

A Note About Our Validated Assessments

I go into our validated assessments in the Appendix, but, because I reference their use in Section II quite a bit, I think it will be helpful to you if I give you a quick picture of what they are.

There are five assessments; three of them are enterprise-level and two of them are individual-level—meaning that three of them measure what is actually happening in the enterprise and two of them measure individual characteristics. All told, the assessments took six years to originally validate (the specifics of the validation work are covered in the Appendix). Ongoing validation work continues on a regular basis. There are a total of 28,400 respondents in the enterprise-level validation efforts—covering twenty-seven enterprises. There are a total of 5,400 leaders in the individual leader-level validation efforts.

The three enterprise-level assessments are the Enterprise Customer Promise Indicator (ECPI), Enterprise Culture Indicator (ECI), and Enterprise Leadership Team Indicator (ELTI). The two individual-level assessments are the Individual Leader Indicator (ILI) and Individual Contributor Indicator (ICI).

The enterprise-level assessments are “prevalence” based. They ask a stratified sample of leaders and employees to simply indicate the extent to which (prevalence) particular behaviors are occurring in their enterprise. Put simply, respondents are asked: 1. Does your enterprise promise this (or that) to your customers? 2. Do decisions get made this way (compensation occurs this way, teaming happens this way, etc.) and, if so, to what extent? and 3. Does your senior leadership team lead this way and, if so, to what extent? The items are not right and wrong or bad and good. They simply ask people what is actually happening in their enterprise and in each unit (department) of their enterprise.

Some significant findings from our research with our assessment results are:

68 percent of the time, leaders view what is happening in their enterprise differently from their own employees’ view of what is happening.

88 percent of the time, leaders and employees differ from one another about what is “core” to their enterprise and what is “support.” Individual status needs clash with objective system realities.

Compensation is treated as separate and distinct from the other fourteen cultural drivers. 55 percent of the time, compensation structure is disconnected from what the type of enterprise requires.

Misunderstandings about the four different kinds of power create considerable frustration and confusion.

Performance management is overly individual-centric and not enough system-centric. This leads to managing individual performance in a vacuum