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Transcript: Balancing innovation with efficiency

Balancing innovation with efficiency

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Karl Moore: This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for the Globe and Mail. Today I am delighted to speak to Paul Adler, who is a senior professor at the University of Southern California.

Good afternoon, Paul.

Paul Adler: Good afternoon, Karl. Thanks for having me here!

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KM: Paul, we see a real tension here: We need more and more innovation and, at the same time we need to be efficient. I know some of your research has reflected on that – how can we be both those things at the same time?

PA: A fascinating question for a scholar to be studying because so many of our organizational theory, design and research tells us that those are two very antithetical goals and you need a very different kind of organization to tackle them: a more bureaucratic organization, if your goals are efficiency, and a more ad hoc organic organization if your goal is innovation. So it has been quite a conundrum for the management scholars to understand how organizations can design themselves to achieve both.

I don't think in practice it is that complicated. I think many leading firms are much better at combining those two goals than academics have known how to account for. So for me, in a nutshell, the critical ingredient is a fabric of trust and [a]distinctive kind of trust.

Trust, because you need to be able to trust people to be balancing those two priorities in their minds, in their daily work or, indeed, if you have partitioned them and you have an R&D group doing the innovation stuff and an operations group doing the efficiency-oriented stuff, then you need those groups to be able to trust each other. So I think trust is the first key element of this.

The second key one that I have spent a lot of time thinking about over the last couple [of]years is when I first began talking about trust with managers many of them were skeptical because they would say, "What do you mean trust?" Blind trust was what the term evoked. "You mean I should trust you even though you are incompetent, even though you seem to be failing all the time?"

That obviously is not the kind of trust we need in industry, so I have been trying to think through how we would characterize different kinds of trust and, in particular, contrast a traditionalistic kind of trust based on loyalty, and what we are calling a collaborative form of trust based on a shared purpose – a shared commitment to a common goal for the organization. Once you have put your mind to the idea that we are going to trust people, because we feel they share that same goal, then very different organizational design principles start emerging – many of them quite familiar [and]already in practice in industry but not well-theorized by my academic scholars or myself up until we put our minds to it recently.

KM: So what, exactly, would this collaborate trust look like in practice?

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PA: Distinctive kinds of values, distinctive behavioural expectations – we could call those "norms," and then, supportive systems of rewards and authority structures.

So, distinctive values: We are going to value not loyalty to the institution, not loyalty to your company, [or]mutual loyalty of boss and employee, but commitment to that shared goal – that's a very different fabric of values in the organization.

Norms or behavioural expectations: Typically the norms in a larger firm are focused on – what should I say – "You do me a favour and I'll do you a favour." We expect people to live up to their commitments. Our norms are not organized, however, to structure dialogue across the white space in the organizational chart so that people can systematically improve the processes they are using to deliver on this ultimate shared goal. So you need a different set of norms that enable people, throughout the organization, to check that what they are doing in their day-to-day work, the interactions they have with each other in their specialized roles, is in fact contributing to that ultimate goal.

And then different incentives obviously go with this: You need much more shared teamwork-based incentives. You need an incentive system that involves a 360 [degree]evaluation so that people are getting really rigorous input on whether or not people are in fact delivering on their contribution to the goals of the organization, and we have some open discussion of that in our rewards system. So that's a distinctive kind of rewards system that goes with this collaborative structure, this collaborative organization or collaborative form of trust.

KM: This has been Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe & Mail.

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