Creative Reaction

It really bugs me when I see lists of how NOT to do things. Sure it’s an attention-getting device, but it is one with a completely negative undertone, requiring translation of all the negatives into positives. Besides, you can’t tell people to not do something negative. It doesn’t work. You can’t say to someone, “Whatever you do, don’t think about man-eating cows”; he is going to think about man-eating cows! Instruct people to do something positive, so they can do something positive!

So, I’m translating this otherwise excellent blog post into positives.

Ten Steps to Allow Creativity to Flourish:

1. Brainstorm constantly. Focus on one issue at a time for best results.
2. Praise new and unusual ideas. Even if they are incomplete or flawed, give them some breathing room.
3. Stress innovation, even with its inefficiencies. Innovation is supposed to be a little sloppy. (See below.)
4. Manage mistakes. Allow them to happen; in fact, encourage them. They are an inevitable part of pushing boundaries. Learn from them. Do not create rules to prevent them except in mission critical areas (or issues of public safety and medicine). Most importantly, teach mistake recovery.
5. Hold loosely onto plans. Better yet, build a prototype rapidly and cheaply, learn from its shortcomings. Reiterate, rinse & repeat.
6. Look to competitors, other industries, and academia for ideas. The buzzword for this is Open Innovation.
7. Find fresh brains! Recruit outsiders. People in an industry tend to think alike and to be blind in all the same ways.
8. Lead transparently. Share the business’ successes and problems. Work together to find solutions.
9. Stress health. Encourage breaks, adequate rest, exercise and socialization – both inside and outside of the workplace.
10. Train, train, train. Train people about your culture. Train them to lead. Train them to further your vision when you are gone.

Last week I posted my transcription (with some editing) of Netflix’s HR Reference Guide, which was quite a project. Today I’d like to explain what I love and what I’d love to see. Maybe we’ll see some of the slides get updated one of these days.

(To follow along, you may want to open my transcription in another browser window)

I love that Netflix starts off by stating the importance of culture, something that most folks don’t even think about. Netflix stakes its future on it!

“Culture gives Netflix the best chance of continuous success for many generations of technology and people.”

This is completely true. A business’ strategy, goals, or mission will not last very long unless everybody in the company, from the leadership down, espouses them. However, the presentation doesn’t actually define culture. Creating and Sustaining a Winning Culture at Harvard Business Publishing offers this definition:

“Culture (is)… the values, mindsets, and behaviors that constitute an environment conducive to success. (It is) what holds an organization together and motivates the people within it to do the right thing rather than the easy thing.”

This definition ties in well with other elements of the presentation, though they may need to reframe things in terms of “mindsets” and “behaviors”.

To me, the most thought-provoking concept in the reference guide had to do with growth, rules, creativity, performance, freedom, and responsibility, where they took concepts that tend to be antithetical and rearranged them in a way that work together in a system of checks and balances. It goes something like this:

Most companies – Great Idea>Great Culture>Success!>Growth>Mistakes>Knee-jerk Reaction>Rules & Procedures>Beaurocracy>Brain Drain>Mediocrity>Crappy Culture>Murky Vision>Slow Death

Netflix – Great Idea>Great Culture>Success!>Growth>Mistakes>Recovery>Post Mortem>Fewer Rules>Flexibility>Better Talent>Better Company>More Great Ideas>More Success!

It’s brilliant!

I love their stress on personal responsibility as well. Responsible people deserve more freedom. They shouldn’t be punished (with Rules and Procedures) when someone acts irresponsibly. Responsible people own up to their mistakes, then have an opportunity to wow a customer by making things right.

Another awesome idea – basing compensation on market value. Wow. You want a raise? Don’t work harder; make yourself more valuable. You want to keep your head down and not be noticed? Here’s a nice severance plan for you. Buh-bye! There’s no tolerance for dead wood. And if you salary goes down a bit, it’s because the market as a whole went down. So learn a new skill. That is so refreshing.

A few things I’d like to see?

• Some mention of the importance of good physical health (diet & exercise), which boosts performance. (See Brain Rules and The Power of Full Engagement)
• Some mention of the importance of proper rest and vacations, which boosts performance.(See The Power of Full Engagement)
• Some mention of the importance of workplace friendships, which boosts performance. (See Vital Friends)
• Some mention of the importance of  healthy family life, which boosts performance. (See Brain Rules)

Bravo, Netflix! Let me know if you’d like to compare notes.

Let’s see some other companies step up to the plate!

Back in August, I wrote that Netflix’s HR Guidelines Could be a Covert Recruitment Pitch when I read TechCrunch’s commentary on the slides and browsed through them myself. (“Reference Guide on our Freedom & Responsibility Culture” can be found here.)

Over the past weeks, not only did I read all 128 slides, I also transcribed them because I found them to be so inspiring. I then edited the resulting text quite a bit so it would make better sense to me, made some of the grammar a little more consistent, and added a few notes of my own, especially in the “Development” section, with which I have some issues. It was quite a project and it really opened my eyes. I’m a fan of Netflix and admire the company, but until now I did not realize what an outstanding culture they have.

The slides were intentionally uploaded by Netflix and contain no copyright. One important purpose of codifying a company’s culture is to attract talent which can self-identify with a company, so it is my hope that Netflix  continues to attract high-performance talent by posting my edited  and notated transcription below.

(PLEASE NOTE: Many of the notes are my interpretation. They clearly do NOT represent official Netflix policies, OK? Links to the original slide deck are above.)

—————————————————————————–

A Reference Guide for our Culture of Freedom & Responsibility

This Guide is for our salaried employees, as hourly workers have more structured jobs.

Q:
What gives Netflix the best chance of continuous success for many generations of technology and people?

A:
Culture.

Culture is how a firm operates.

Culture gives Netflix the best chance of continuous success for many generations of technology and people

For Netflix, continuous success = continuous growth in revenue, profits, and reputation.

Netflix needs a culture that supports rapid innovation and excellent execution, which are both required for our continuous growth.

There is often tension between rapid innovation and excellent execution, similar to the tension between creativity and discipline.

The culture must support effective teamwork of high-performance people, which can also provide tension, as high-performance people are very passionate.

The culture must avoid the rigidity, politics, mediocrity, and complacency that infects most organizations as they grow.

7 aspects of Netflix’s culture (a work in progress as we continue to refine it)

1. Emphasis on Values
2. High-performance (Employees)
3. Freedom & Responsibility
4. Context, not Control
5. Highly aligned, Loosely Coupled model of organization
6. Top of the market Salaries
7. Promotion & Development

VALUES
Nine behaviors and skills we value in fellow employees.

Judgement:

• Making wise decisions despite ambiguity
• Identifying root causes
• Thinking strategically and articulating what you are and are NOT trying to do.
• Knowing what must be done well now
• Knowing what can be improved later

Communication

• Listening to better understand, and not immediately reacting
• Being concise and articulate in speech and writing
• Treating people with respect regardless of status or agreement.
• Showing poise in stressful situations

Impact

• Accomplishing amazing amounts of important work
• Performing in a consistently strong manner so that others can rely on you
• Focusing on results (rather than process)
• Showing bias-to-action (rather than over-analyzing)

Curiosity

• Learning eagerly and rapidly
• Understanding our strategy, market, subscribers and suppliers
• Being broadly knowledgeable about business, technology and entertainment
• Contributing effectively outside of your specialty

Innovation

• Re-conceptualizing issues to discover practical solutions to difficult problems
• Challenging the prevailing assumptions when warranted and suggesting better approaches
• Creating new ideas that prove useful
• Keeping us nimble by minimizing complexity and finding time to simplify.

Courage

• Saying what you think even when it is controversial
• Making tough decisions without excessive agonizing
• Taking smart risks
• Questioning actions inconsistent with our values.

Passion

• Inspiring others with your thirst for excellence
• Caring intently about our success
• Celebrating wins
• Being tenacious

Honesty

• Being known for candor and directness
• Not being political when you disagree with others
• Only saying things about others that you would say to their faces
• Being quick to admit mistakes.

Selflessness

• Seeking what is best for the company, rather than yourself or the group
• Putting your ego aside when searching for the best ideas
• Making time to help colleagues
• Sharing information openly and proactively

Judgement. Communication. Impact. Curiosity. Innovation. Courage. Passion. Honesty. Selflessness.

We want every employee to embody these nine values.

A characteristic of Courage:
Questioning actions inconsistent with our values.

This one is especially important.
Akin to the honor code pledge, “I will not lie, nor cheat, nor steal, nor tolerate those who do.”

We are all responsible for consistency in our values.

Values are reinforced in our rewards, promotions and even how we fire.

HIGH PERFORMANCE
Imagine if every person you work with was someone you respect and learn from…
Imagine if all of your colleagues were stunning.

This is how we define a Great Workplace.

We do not define a Great Workplace by having benefits such as day-care, espresso, health care, sushi lunches, nice offices, or big compensation. We only do what efficiently attracts and keeps stunning colleagues.

We practice the art of hiring well.

We also have another practice:
(Merely) Adequate performance results in a generous severance package.

We are like a professional sports team (not a family).

Like a Professional Sports coach, managers must recruit, hire, develop and cut smartly to have excellent players in every position.

Who makes the cut?

This is the Keeper Test:
“Which of my people, if they told me they were leaving in two months for a competitor, would I fight to keep?”

Any people who you would not fight hard to keep need to be offered a generous severance package to make room for an excellent colleague.

You are responsible for your job security.
Ask your manager from time to time, “If I told you I were leaving, how hard would you work to change my mind?”

Q:
“Isn’t Loyalty good?”

A:
Loyalty is good; it is a stabilizer. As individuals and as a company, we will all hit rough patches. Star employees will be given an opportunity to prove themselves again. Loyalty however must have its limits.

Q:
“What about Hard Workers?”

A:
Hard work is about effectiveness, not effort. It is not about working long hours. Measurements can be based on how much, how quickly, and how well work is done, especially under a deadline.

Q:
“How do we handle brilliant jerks?”

A:
Some companies tolerate them; not us. The cost to teamwork is too high. Everyone must embody all nine values, and being a brilliant jerk contradicts many of them.

Q:
Why do we place such a premium on high performance?

A1:
For procedural work, the best perform at 2x average.
For creative work (“knowledge work”) the best perform at 10x average.

Q:
Why do we place such a premium on high performance?

A2:
We define a Great Workplace as having stunning colleagues.

FREEDOM AND RESPONSIBILITY
Characteristics of the rare responsible person:

• Self-motivated
• Self-aware
• Self-disciplined
• Self-improving
• Behaves like a leader
• Proactive
• Considers everything “his job”
• Picks up trash
• Behaves like an owner

Responsible people thrive on freedom and are therefore worthy of freedom.

Our model is to increase employee freedom, rather than limit it, to continue to attract and nourish innovative people, to have a better chance of continued long-term success. (Most companies restrict freedom as they grow.)

The relationship between growth, chaos, and restrictions:
Growth increases complexity and shrinks talent density, which leads to errors and chaos. Often rules and procedures (process) are created to avoid chaos. Procedures drive the talent away. Process inhibits innovation.

A better option.

• Ever-increasing performance, rather than rules, to fight chaos.
• Ever-increasing performance, which outpaces complexity.
• Running informally, utilizing self-discipline to fight chaos.
• Minimizing complexity.
• Valuing simplicity.
• Enabling and attracting creative talent by running informally, high compensation, and offering the freedom to make a difference.

Two types of necessary Rules;
Those that prevent disaster

• e.g. Incorrect financials
• e.g. Hackers steal CC data

Those that spell out immoral, unethical, and illegal behavior

In a safety-critical or manufacturing industry, preventing errors through procedures is mission-critical (or at the very least the most cost-effective)

In knowledge work/creative environments, “rapid recovery” is the best model.
Besides, high-performers make fewer mistakes.
If mistakes happen, high-performers fix them quickly!

Is a Process Good or Bad?
Good processes help talented people get more done.

• Updating a web site at regular intervals instead of randomly
• Keeping spending within budget
• Having regularly scheduled strategy meetings

Bad processes try to prevent mistakes which are easily recoverable.

• Pre-approvals for spending
• Multiple required sign-offs, projects
• Permission needed to hang a poster

Bad processes tend to creep in because preventing errors is so attractive.
(They often result from knee-jerk reactions to embarrassing mistakes)

Rules and procedures should be questioned and eliminated whenever possible.

Our culture is Results-Oriented

• No 9-5 work days.
• No vacation policy.

Netflix’s Expensing, Entertainment, Gift & Travel Policy is five words long.
“Act in Netflix’s Best Interests”

This generally means:

• Expense only what you would otherwise not spend, and is worthwhile for work.
• Travel as you would if it were your money.
• Disclose non-trivial vendor gifts.
• Take from Netflix only when it is inefficient and inconsequential to not take.
• To avoid using the company phone for personal reasons may be an inefficient use of time.
• To avoid using the company printer for personal reasons may be an inefficient use of time.

Summary:

• Minimize Rules while growing.
• Fight chaos with ever more high-performance people.
• Stress flexibility more than efficiency for long-tern success.

CONTEXT. NOT CONTROL
High-performance people will do better work when they understand the context.

The best managers set the context, rather than resorting to control.

Control-driven means:

• Top-down decision-making
• Management approval
• Committees
• Planning and process are valued instead of results
• (Do it because I say so.)

Context-driven means:

• Strategy
• Metrics
• Assumptions
• Objectives
• Clearly-defined roles
• Communication of what is at stake
• Transparent decision-making
• (Do this because it aligns with company objectives)

Control can be important under the following circumstances:

• In an emergency (procedures and commands must be followed.)
• When someone is in training (they need to learn context)
• When a colleague is temporarily in a position that is ill-suited.

If a talented employee does something dumb, a good manger will question the context (conditions) he set.

Instead of giving into the temptation to control, a good manger will put the desired results in context.

Managers must articulate goals and strategies.
Managers must inspire people to meet goals and follow strategies.

Proper context involves:
- Linking to functional and company goals
- Articulating importance and time-sensitivity
- Describing the desired level of precision and completeness

• No errors are permissible
• Errors can be corrected later
• Draft quality

- Pointing out the key stakeholders
- Explaining the metrics
- Defining a successful outcome

Investing in context is exemplified in:

• Training
• Openness to better strategies
• Focus on results

HIGHLY ALIGNED, LOOSELY COUPLED MODEL OF CORPORATE TEAMWORK

This is contrasted with the following models:
1) Tightly-coupled, Monolithic Model, where

• Sr. Mgt reviews and approves most tactics
• There are lots of cross-departmental buy-in meetings
• Keeping groups in agreement becomes as important as pleasing customers
• (which is dangerous and inefficient)
• Mavericks burn out
• Centralization allows for high degrees of coordination at the expense of agility

2) Independent Silo Model, where

• Each group executes its objectives with little central coordination
• Work requiring coordination suffers
• Alienation and suspicion between departments takes root
• Success occurs only when a conglomerate has companies in disparate markets

The Highly Aligned, Loosely Coupled Model

Goal: to be big, yet fast and flexible.

Teamwork effectiveness is dependent upon
1) high-performance people and
2) proper (good) context

Highly Aligned

• Strategy and goals are clear, specific, and broadly understood
• Team interactions are about strategy and goals rather than tactics.
• A large investment in management time is required to be transparent, articulate, perceptive and open

Loosely coupled

• Minimal cross-functional meetings except to get aligned on goals and strategy
• Trust between groups on tactics without previewing/approving each one – groups can move fast
• Leaders reaching out proactively for ad-hoc coordination and perspective as appropriate.
• Occasional post-mortems on tactics necessary to increase alignment

TOP-MARKET COMPENSATION
A core value of a high-performance culture.

Financial incentive from an Accounting perspective:
One outstanding employee gets more done and costs less than two adequate employees.

Instead of only making the hiring process market-based, Netflix also applies the same principles to its “Annual Compensation Review” (essentially re-hiring each high-performance employee for another year for the purposes of compensation.)

Top-Market Compensation Goals:
1) Every employee is an outstanding employee.
2) Every employee is paid his or her top-market rate.

(By the way, titles are not helpful when determining compensation.
Not every “Major League Pitcher” is equally effective or equally compensated.)

Three-part Compensation Test for an outstanding employee
1) How much would this employee be paid elsewhere?
2) How much would we have to pay to replace this person?
3) How much would we pay to keep this person if another company was “head-hunting”?

Three Corollaries:
1) Pay him more than anyone else likely would
2) Pay him (at least) as much as a replacement would cost
3) Pay him as much as we would pay if another company was “head-hunting”

Corporate Guidelines:

• There are no centrally-administered budgets.
• Each manager must use the above guidelines to align each team member’s compensation to “top-market” for his market and for his area each year
• Compensation is based on market value, not Netflix’s Success
• Managers should not use “fairness” or formulas such as percentiles or across the board raises

Therefore:

• Some team members’ compensation could rise dramatically based on their value in the marketplace (Also driven by their skills)
• Some team members’ compensation could remain flat or even decrease, while still remaining top-market

If managers use the three-part Compensation Test accurately, the following will be true:
1) Any employee leaving Netflix for another company will not be compensated as well
2) We will rarely need to counter an offer from another company for one of our high-performance employees
3) Employees will know they are being paid well relative to other options.

This compensation model is better than the traditional model, where employees automatically receive a raise each year based on good performance, for the following reasons:
1) Employees can become grossly over- or under-paid over time
2) Under-paid otherwise satisfied employees will seek employment elsewhere
3) Overpaid, unsatisfied employees become trapped.

(These conditions also contribute to low morale and “poisonous” employees)

In our model, employee success is a major factor in compensation because it influences an employee’s market value.

(This also motivates an employee to improve his skill set and grow personally in ways that increase his value)

By the way, Netflix considers it to be a healthy idea, and not a traitorous one, for an employee to understand his value in the marketplace, by talking to peers at other companies and even interviewing with them. (An important exception is interviewing with direct competitors who may be trying to gather information that is confidential.)

Additional information about our compensation model:

Netflix focuses it’s compensation on the highest possible salary in the following ways:

• No free stock options
• No bonuses
• Great Health Plan options with intentionally higher Co-Pays (to keep the premiums lower)
• No company matching of specific benefits

This compensation model is most efficient the following reasons:

• Salary offers the highest motivation of any other form of compensation
• It simplified by not offering bonuses (saving the company labor)
• Paying for stock options (with pre-tax salary) is another form of motivating an employee to participate in the company’s future success.

In addition, the employee has more freedom to spend his salary as he sees fit.

• The mix of stock (or Stock options) is the employee’s choice
• Since there is no company matching of specific benefits, the employee is not pressured into a means of compensation he does not want or need.
• Since there is no company matching of specific benefits, the employee does not feel that others who want or need those benefits are better compensated

(On the other hand, the employees may want benefits that are not offered. Pre-tax medical accounts and pre-tax retirement accounts, for example, offer financial advantages that an employee could not otherwise obtain on his own, negating a top-market salary. In this case, his peers at another company would have a financial advantage.)

(It might also be that the health and financial stability of employees, conditions that improve physical and mental well-being, are possibly not being encouraged by offering benefits. A lack of physical and mental well-being will adversely affect a person’s work and the company. It is in the company’s interest to promote physical and mental health.)

Employees choose the degree to which they want to link their financial future to Netflix’s success or failure by choosing for themselves the amount of Netflix stock (or stock options) they would like as a component of their compensation.

PROMOTIONS AND DEVELOPMENT

Promotions
At times, and within certain groups,there will be opportunities and growth. Some people, due to timing and talent, will have the opportunity for extraordinary career growth.

Baseball Analogy: Minor & Major Leagues

• Only the very talented play in The Show. (The Majors.)
• Even the most talented are subject to timing and opportunities
• Some players move to other teams when opportunities arise.
• Some Minor League players keep playing because they love the game.

There may not be enough growth opportunities for everyone who deserves a promotion, in which case we should celebrate when someone leaves the company for a bigger opportunity elsewhere.

Two conditions necessary for promotion:
1) The job has to be big enough
2) The person has to be a superstar in the current role and talented enough for the new position

If a talented employee meeting the above criteria needs to be promoted to keep them from leaving, the manager should look for opportunities to promote him now, rather than wait.

Development
We develop people by giving them the opportunity to develop themselves, by surrounding them with stunning colleagues and giving them the opportunity to work on big challenges.

Mediocre colleagues and unchallenging work kills the progress of a person’s skills (as well as his morale)

Because formalized development is rarely effective, we do not pursue it. No courses, mentors, working in multiple depts.

(Sorry. I’m not going along with this! Any broadening of skills, better understanding of others’ roles, personal development is completely helpful, enriching all of a person’s life, not just his career! Take a look at Pixar University, as an example.)

High-performance people are generally self-improving through experience, observation, introspection, reading and discussion, as long as they have stunning colleagues. (OK, but give them some opportunities to do this at work, too!)

Individuals should manage their own career paths, and not rely on a corporation for planning their careers. Similar to retirement planning – largely a matter of individual responsibility. (Still, both should be encouraged)

(Yet many people would benefit greatly from career planning, mentoring, financial planning, marital counseling, first baby counseling, all of which would make for better employees and many of which would reduce health care costs and absenteeism. Read Brain Rules by John Medina)

An Individual’s economic security is based upon his skills and reputation. We try hard to consistently provide opportunities to grow both. (Maybe these opportunities should be listed. The above statements seem to contradict this.)

Supposedly it’s “common sense” that critical thinking suffocates creativity. Mark McGuinness has a great essay over at Lateral Action explaining how and when critical thinking plays a role in the creative process. Most importantly, he defines “creativity”, “creative thinking”, “critical thinking”, “criticism”, and “negative criticism”.

He also touches on a hugely important issue – that of corporate culture. Sadly, there are organizations that punish for mistakes, “wrong answers” and even attempts to innovate. (Click here for related articles.)

One company that successfully combines creativity and critical thinking is Pixar Animation Studios, in its extremely iterative process, where each animator’s work is screened in front of the entire department and all are encouraged to comment. (Now, you must first understand that a core value at Pixar is creating an atmosphere of trust, and people at all levels help one another.) According to Pixar President Ed Catmull these screenings offer many benefits:

1. Once people get over the awkwardness of showing their unfinished work, they become more creative
2. The director or creative leads can communicate important objectives to the group as a whole
3. creatives learn from and inspire one another to do their best

So Mark McGuinness is clearly on to something here; “the function of critical thinking is to make something better. Used wisely, your critical faculty is one of the most powerful creative tools at your disposal”

“I make more mistakes than anyone I know. And eventually I patent them.”
-Thomas Edison

Harvard Business Publishing’s Discussion Leader Blog has a post about the value of learning from mistakes, which is an ongoing theme here at CR. (See here, here, and here.) The post is framed by current political discussion of choosing leaders, so for those of you who need a break, I’ve excised the good stuff and brought it here.

In choosing leaders “most people seek a litany of accomplishments that demonstrate sound judgment, and failure is considered radioactive.” This is a shame, as “the character and worldview of leaders are shaped not via their accomplishments but by their setbacks in the crucibles of challenge”.

Shifting gears slightly to look at “mistakes” in a business context, the post points to a Business Week cover story, saying that “breakthroughs depend on failure, and the best companies leverage their mistakes” and that “according to that article, ‘breakthrough innovation… requires well-honed organizations built for efficiency and speed to do that what feels unnatural: Explore. Experiment. Foul up, sometimes. Then repeat.’” (italics mine) This is a business principal known as “intelligent fast failure.”

So experimentation and honest mistakes should be expected and encouraged as many creative breakthroughs are happy accidents. Are we encouraging creativity and innovation in our workplaces through experimentation and fast failure? Or are we stifling creativity by quashing mistakes?

“You need to have muscles. You need to have muscles on your muscles! You need to have muscles on your eyeballs!”
-Reg, Bouncer for the Salty Spitoon

Three Traits of a Tough Leader is a brief post on leadership traits on Harvard Business Publishing’s Blog, and despite the above SpongeBob quote, the traits all have to do with inner strength.

Toughness, defined by the author as inner resilience and character, is often overlooked, and yet is an essential leadership quality.

“Toughness matters because you need a leader who has the wherewithal to stand up for what she believes in, as well as stand up to others to achieve team and organizational goals.”

(I find humor in that the author apparently lacks the toughness to stand up to the politically-correct grammar-rewriting Nazis. Counting skills come into question as well, since there are actully four traits listed, in boldface type, no less. But I digress; I really like the post.)

Anyways, the four traits common to tough leaders are that they:

1. Defuse tension
2. Get up off the floor (when knocked down)
3. Let off some steam (in a good way) and
4. Are humble (which seems to be counter-intuitive)

It take a tough man to make a tender chicken. Likewise, being humble and “owning up to failure, is not a weakness; it’s a measure of strength.”

(I’ve written about the freedom to make mistakes in Making Mistakes Must Be Corporate Policy  and Making Mistakes Must Be Corporate Policy II)

Good reading. Check it out, then see where you might stand some toughening up.

In Let People Fail over at HR World, S. Caron encourages managers to back off and not redo employees’ wrongly implemented tasks the right way, otherwise employees will be deprived of a valuable learning experience. Worth reading, especially if the advice seems counter-intuitive.

This is a perfect tie-in to today’s inspirational quote over at Make it Great:
“The greatest glory in living lies not in never falling, but in rising every time we fall.” – Nelson Mandela

As I wrote earlier, it is experience and learning from mistakes which allow for the biggest opportunities for personal growth and innovation. If we are to retain our employees by fostering an atmosphere of growth and trust, we have to think long-term.

*if you are to deliver a breakthrough product or service.

I am not talking about a culture of sloppiness or irresponsibility, but one of difference, change, and creativity. Our society, our educational systems and our workplaces stress rewarding what we do correctly, yet it is experience, and, yes, making mistakes, which allow for the biggest opportunities for personal growth and innovation.

Two items I recently read support the above statements. The first is a ChangeThis manifesto, Turning Learning Right Side Up, a free .pdf report and an excellent read for “students” of any age. The second is an NYT article (free subscription required) explaining the importance of being “growth-minded”; the mindset of lifelong learners and entrepreneurs. If You’re Open to Growth, You Tend to Grow, talks of managers who hire the “best & brightest”, only to hamstring them by placing them in an environment of high expectations and fear (of failure).

The best part of the article details how Scott Forstall, an SVP at Apple, put together the team which developed the iPhone’s software. First, Forstall “identified a number of superstars within various departments at Apple and asked them in for a chat.” During the subsequent interview he explained that though he could not reveal the details of the project, he said to each recruit, “(we may) make mistakes and struggle, but eventually we may do something that we’ll remember the rest of our lives”. It is important to note that these people would be walking away from their previous successes and positions. Those who jumped at the opportunity made the team; Forstall was looking for people willing to stretch themselves, rather than rest on previous successes.

A post I wrote about Google back in September ‘06 also addresses this way of thinking. And 10 Ways to Foster Innovation in Your Company ties the room together.

So… Be great! Encourage greatness!

Australian online business magazine Smart Company has a great article on company-wide innovation, based on the research of RMIT University in Melbourne. The researchers studied 92 fast growing companies, finding 10 common characteristics which promote innovative business cultures.

The first finding: innovation starts with the leadership qualities of the CEOs or founders. “They were passionate about their work, had a positive and optimistic outlook, do not allow setbacks to hinder their drive and vision, are forward thinkers, determined, thrive on difference and change; surround themselves with like-minded individuals, concentrate on team culture, learn from their mistakes, and aim to resolve problems quickly.”

Not surprisingly, many of the other characteristics had to do with the work environments, made possible by savvy management; an emphasis on training and learning, collaboration, and open communication.

A few other things we’ve recently mentioned include investing in technology and recruiting (and rewarding) innovative people; it’s good to see some common themes here within Creative Reaction’s pages.

One characteristic I found interesting was making sure that vendors, suppliers, and even bankers understand the company’s vision, which makes sense as they all play supporting roles.

The article covers a lot of ground in four pages. Worth reading.

Fortune Magazine completely misses something here while they are trashing Google in a PRI/Marketplace interview, the transcript of which is here.

(EXCERPT)
INTERVIEWER:
They’ve got this culture where anything goes and you can learn from your mistakes. Do you ever get fired, though, from Google? I mean, I’ve never heard of anybody losing their job there.

FORTUNE MAGAZINE:
In fact, one of Google’s most senior executives Sheryl Sanberg, who’s a vice president and runs all of the automated advertising systems that Google has, told me about a multimillion-dollar mistake that she made. And when she realized her mistake she walked across the street at the Googleplex in Mountain View and she told cofounder Larry Page about it. What was interesting was his reaction. He said, “Yeah, we shouldn’t have done that. We’ll know better next time. But, oh, by the way, it’s good that you made this mistake. I’m glad,” he told her, “because we need to be the kind of company that is willing to make mistakes. Because if we’re not making mistakes, then we’re not taking risks. And if we’re not taking risks, we won’t get to the next level.”

INTERVIEWER:
You think about that for a second. I mean, if you and I made a million-dollar mistake, even a $100,000 mistake, we’d be gone.

FORTUNE MAGAZINE:
Right, but this is a company that makes so much money, first of all, that it can afford it.
(END EXCERPT)

These guys are both oblivious to something really important here. They are fixated on the money. And they’re wrong to do so. This is about allowing – even encouraging – their employees to take risks and possibly make mistakes. This is part of the corporate culture and more importantly, it is supported all the way up the chain to the CxO level, because they know this is the path to success.

Companies must be eager to extend forgiveness to employees who make mistakes, and then take complete responsibility for their mistakes. These are good, honest people. Be assured, such employees will be grateful, loyal, and willing to work hard for you.