Catalytic Mechanisms : Management Funda; V4 Issue 1
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You have set a really difficult goal like become the number one brand in your industry. How are you planning to achieve it? By including it in your vision? By designing a special incentive program for brand managers? Try implementing Catalytic Mechanisms. The term Catalytic Mechanisms appeared first in a now famous article in the Harvard Business Review in 1999 titled ‘Turning Goals into Results: The Power of Catalytic Mechanisms’. The author was Stanford Professor James C. (Jim) Collins, co-author of best-selling books ‘Good to Great’ and ‘Built to Last’. He defined it as the crucial link between goals and performance.
Characteristics of Catalytic Mechanisms
To understand catalytic mechanisms better we need to understand the five characteristics that distinguish catalytic mechanisms from traditional managerial tools. These are:-
- They produce desired results in unpredictable ways: Unlike traditional systems which lead to bureaucracy and mediocrity, catalytic mechanisms let organizations achieve greatness by allowing people to do unexpected things and to show initiative and creativity. Most of us are familiar with a catalytic mechanism in 3M. Yes, the rule of letting their scientists spend 15% of their time experimenting and inventing in an area they chose. Imagine how radical this must have sounded in 1956 - not being told what products to work on, just how much time to work.
- They distribute power for the benefit of the overall system often to the great discomfort of those who traditionally hold power: Catalytic mechanisms accomplish the organization’s goals by distributing power throughout the system and shifting the balance of power from a leader that may inadvertently support a sense of inertia to a system that is ready to implement change. At W.L. Gore & Associates, employees have the authority to fire their bosses - a catalytic mechanism that builds on the idea of non-hierarchical leadership.
- They have teeth: Just drafting vision, mission etc will not yield results. A catalytic mechanism puts a process in place that ensures result. Take Collins’ example of Granite Rock, a family-owned company that sells gravel, concrete and sand. It wanted to 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." It’s catalytic mechanism? A radical policy called ‘short pay.’ At the bottom of every Granite Rock invoice was a line saying "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." Every time a customer exercised short pay, Granite Rock learnt or invented a way to run its operations more effectively. "Imagine," says Collins, "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.” The short-pay policy forces both learning and change. It drives managers, says Collins, "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 that goes far beyond slogans."
- They eject viruses: In contrast to traditional controls that are designed to get employees to act in the right way, catalytic mechanisms 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. The Nucor Corporation, a successful U.S. steel company, used catalytic mechanisms to create a high-performance environment where innately hard working people thrive and free riders get ejected. For instance people work in teams of 20 to 40; team productivity rankings are posted daily. Though the base hourly pay is 25% to 33% below industry average, a bonus of 80% to 200% of base pay, based on team productivity, is paid weekly to all teams that meet or exceed productivity goals. The story goes that once team members chased a lazy coworker out of the plant.
- They produce an ongoing effect: Unlike a one off electrifying off-site meeting, an exciting strategic initiative or an impending crisis, a good catalytic mechanism can last for decades. Darwin Smith, Kimberly-Clark CEO, set in 1971 the goal to transform Kimberly-Clark from a mediocre forest-and paper-products company into a world-class consumer goods company. He created one catalytic event ie., selling a big chunk of the company’s traditional paper-production mills. This left no easy escape route from the dream. He also created one important catalytic mechanism ie., committing the company to head-to-head competition with the world’ best consumer-products company viz., Procter & Gamble. Kimberly-Clark would either become excellent at consumer products or get crushed. Unlike just saying “change or die” this catalytic mechanism’s ongoing effect is as powerful today as when it was put in place nearly 30 years ago.
Collins’ Guidelines for creating Catalytic Mechanisms
- Don't just add, remove:: Instead of adding new initiatives, new systems, new strategies and new priorities, taking something away can be as catalytic. HP started realizing its BHAG, when it removed its “buy internal” rule ie. HP’s started allowing their divisions to buy their components from outside competitors rather than only from HP’s circuit division. Faced with competition, the circuit division’s performance increase dramatically.
- Create, don't copy: The best catalytic mechanisms for your organization will be the ones that are idiosyncratic adaptations for your organization’s unique situation and not those you copy exactly.
- Make use of money, but not only money: Research shows that only about half of catalytic mechanisms use money. The effectiveness of Nucor’s catalytic mechanisms lies not only in the weekly bonuses earned but also in the peer pressure and the desire to not let teammates down.
- Allow your mechanisms to evolve: New catalytic mechanisms may produce unintended negative consequences which need to be corrected. Over time catalytic mechanisms tend to lose their strength. Reinforce them. In the 1990s, worried that fewer people were using the 15% mechanism than in previous decades, 3M put together a task force to reinvent it, bolstering it with special recognition rewards for those who used their 15% of time to create profitable innovations.
- Build an integrated set of catalytic mechanisms: One catalytic mechanism can do wonders. By that logic if there are several of them wouldn’t they create a greater impact? At Granite Rock apart from ‘short pay’ there are other mechanisms. Compensation ties directly to learning and improvement, not just job performance 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.
Conclusion
Catalytic mechanisms can work beautifully for individuals too. For example a free-lance writer routinely took on more assignments than she needed in order to support her family. Tired of being enlisted as a last-minute babysitter her sister nagged her to do something. So this writer thought of a catalytic mechanism. It was a $200 a day "penalty fee" her sister imposed on her every day she worked on projects in excess of those required to support her family. So folks don’t stop dreaming; there is always some catalytic mechanism to make them a reality. Find it!
References
Collins, J, ‘Turning Goals Into Results: The Power of Catalytic Mechanisms’, caplix.com/pdf/Turning%20Goals%20Into%20Results.pdf
Gilmore,T, ‘Using Catalytic Mechanisms to Drive and Institutionalize Change’, April 18, 2002