The Challenge of Lost Trust In the first and second installment of this series I looked at what makes trusted friends turn into fatal enemies in business. When trust dissipates into posturing and the emergence of win/loose competition or attempts to annihilate a foe the result is a toxic impasse. In my example I cited the situation in which an owner became his own worst enemy – his quest for power, prestige and privilege divorced from the responsibility, discipline and trust needed to sustain his quest ended in the demise of his business and the blatant quest of his partner to put him out of business.
There is no single issue at work in the demise of interpersonal relationships. Personal histories show up in the stressors of a startup business with wildly different sets of assumptions. Yet in the growth of any organization (for profit or non-profit) a tipping point exists that predicts stressors in the relationship among leaders and one of two outcomes: (1) leadership divorce or (2) leadership conflict toward discovery.
Predictable Tension Points
Dynamic organizations grow as a result of the driving vision of an entrepreneurial founder and reach a point at which the founder can no longer keep up with the multiple demands of the organization. At this crossroad the owner or founder (remember this stage of organizational development occurs in non-profit and for profit organizations) realizes that he/she needs help.
The organization must develop its own identity and processes that move the vision and mission of the Founder forward beyond the skills and abilities of the founder. One of my favorite organizational theorist calls this the need for organizational versus personal sovereignty.
Organizational sovereignty is an essential building block to the development of great internal structures and processes. Leaders need to understand the logic behind the development of processes and rules that make sure consistent quality and accountability in the performance of the core competencies of a company or organization as it pursues the vision that birthed it in the first place.
In my view organizations won’t die for lack of core competencies per se. I have been a part of growing organizations that suffered for lack of competence but survived because their vision temporarily moved them past the restrictions of incompetence. This is not to say that the lack of competence in leadership has no eventual adverse or destructive impact. When an organization possesses a vision for a different reality, and that the vision permeates every aspect of the organization it can weather periods of slowed momentum regardless of incomplete competencies.
However, when an owner/founder recognizes the need for new management talent yet consistently usurps their input once hired the talent will disengage. If this occurs the organization reverts to a earlier stage of development or begins a death cycle. Owners or founders who find their organizations repeating the same growth and loss patterns should look in the mirror.
Conceptualizing the Tension Points - Organizational Sovereignty
The challenge an owner/founder faces is how to alter his or her perspective on leadership to proactively engage in the development of leadership at every level of their organization – this sounds simple until the owner realizes that developing leadership means redefining control. Two classic mistakes occur.
On the one hand the cost of talent leads an owner to reject the right talent in favor of the almost right talent. The results of a bad hire are obvious almost immediately multiplying the owner/founder’s worries and work than streamlining both.
Similarly owners who hire the right talent, delegate the right decisions then panic and revert to withdrawing control also face the likelihood that (a) their talent will leave or (b) they will fire their new managers because they don’t know how to redefine the locus of control from themselves to the organization. The result is disastrous.
If the organization is to thrive then it must successfully carry out a different approach to authority. Adizes (1988) makes this observation:
The move to Adolescence requires delegation of authority. In a society this is analogous to making the move from an absolute monarchy to a constitutional monarch where the king is willing to abide by a constitution. The Founder must be willing to say, "I am willing to subject myself to the company rather than have the company subject to me. I will be bound by the same policies that bind everyone else."
The illustration of a constitutional monarchy is an important one. In a privately held company the owner does bear the bulk of the risk in the early days. Typically it is the owner’s house, savings, or equity that is on the line when it comes to the financial performance of the organization. It is this risk that causes owners to jerk back on the reigns of delegation to override organizational sovereignty. History demonstrates that any monarch’s attempt to reassert absolute control after having set up a constitutional existence is sure to end poorly.
In non-profits the same dynamic works. It is still the founder’s assets, equity and sweat equity that has built the original organization (e.g., church startups). In this situation a pastor feels all the same sense of threat and fear a business owner does at the prospect of relinquishing control by subjecting themselves to an emerging leadership team of staff and governance members. The question remains – will the pastor abide by the same policies that bind everyone else?
The move toward organizational sovereignty is a screening time -- "...it separates those organizations which will advance and flourish from those which will flounder. It separates those organizations that have self-discipline and those that don't." To become a great organization requires self-discipline to control urges and short-term temptations. Organizational self-discipline keeps its focus on the long-term while simultaneously turning its attention to its internal controls and processes with the goal of doing fewer things better as defined by its core vision and core competencies.
The transition even when done well is not instantaneous. Adizes (1988) observed:
…management can spend a year defining the organization chart, determining its corporate mission (not only deciding what else its going to do but also deciding what it's not going to do), developing training programs, salary administration systems, and incentive systems. If this is done proactively, the reorganization can avoid the emergence of future problems such as lack of salary administration, lack of clarity in the organizational structure and hiring tomorrow, people who were needed yesterday.
Does it take a year to carry out this kind of structuring? Yes, my experience has been that organizations that need to define the systems of organizational sovereignty have already begun to experience the dissipation of their energy and resources by trying to be all things to all people – their leaders have already experienced mixed messages and bungee cord delegation that usually signals that the top decision maker or makers are overtaxed and not sure what the next steps should be.
What are the primary components involved in building organizational sovereignty?
1) Appropriately delegating authority (this is where defining organizational structure, determining mission and reviewing personnel occur).
2) Creating policies that consistently apply to all (this is where developing training programs, salary administration systems and hiring the right people occur).
3) Creating a learning environment and the systems needed to help transform experience into knowledge.
Delegated Authority and Roles of Management
The definition of delegated authority depends on understanding the roles of management or leadership. Managers or leaders must consistently solve problems and make decisions. Management defined here is the act, manner or practice of directing, supervising and controlling. Be careful to avoid mis-matching the adjectives in the definition to the wrong referent. Management directs strategies and responses to market pressures and opportunities. Management supervises the work of others offering mentoring, feedback and support. Management controls processes and expenditures. Controls make sure the efficient use of resources produce a profit or execute a mission while retaining enough cash reserves.
If the activities and the referents (measurements or results) are confused, such as a manager may attempt to control people and not processes or expenditures then relationships turn dysfunctional and damage the morale and productivity of the company and set up the loss of trust that eventually leads to betrayal. Management activities either undermine or reinforce the ownership of tasks in a department by the leadership skills employed. In other words management either reinforces or undermines organizational sovereignty leading to an organization that is smart, responsible and agile or an organization that is stupid, irresponsible and impulsive. Management techniques characterized in Table 1 illustrate the difference in approach and outcome management activities and referents can have.
Table 1: Management Techniques
How can Owners Successfully Navigate the Change to Organizational Sovereignty?
In watching owners wrestle with the issue of organizational sovereignty I have several suggestions to offer:
Look for feedback from the right people. Many owners suffer from self-inflicted injury by ignorance. Business schools, owner networking groups, consultants and successful entrepreneurs (who have already made the jump from personal to organizational sovereignty) offer a wealth of experience and insight. There is an old adage that carries a lot of truth – if you hang around with turkeys you will never fly with eagles. Some owners/founders find solace in those who are at the same level of development but that solace blinds them to the realities they should address.
Practice self-awareness. Stress and fear always distort a person’s most successful behavioral patterns. I have watched owners eviscerate their key talent with one of two common results. In the best case talent that is consistently undermined leaves the company as a result. This is best because it offers and immediate wake up call. In the worst case the talent stays but unplugs. Demoralized talent looses its commitment and engagement with the critical issues. Instead a survival mode results that resembles a brain-dead body animated with life support technology. If the tension remains talent will work to sabotage all attempts to change the status quo (i.e., survival). Lipman-Blumen (2005) offers an important insight; “followers knowingly tolerate, seldom unseat, often prefer, and sometimes even create toxic leaders.” Why does this dynamic occur? Lipman-Blumen (2005) suggests that such behavior is motivated by six human needs:
Need for reassuring authority figures to fill our parent’s shoes
Need for security and certainty – which prompts us to surrender freedom
Need to feel chosen or special
Need for membership in the human community
Fear of ostracism, isolation and social death
Fear of personal powerlessness to challenge a bad leader
It is difficult to hear how others experience one’s behaviors. But if you will listen your business and your personal life will improve. Find a coach. A good coach can help you identify the stress points in your behavior that tip the scales from creativity to chaos.
Realize that running a business is not being a technician. Often people strike out on their own because they want to focus on what they love doing…if this is the goal the last place to be is a business owner unless you work out of your garage and make the kind of money that never requires the purchase of equipment, assets or hiring of employees. If you dream of being a business success then you must learn to (a) run a business and find others who do the technical work or (b) hire someone to run the business while you run the R & D or the shop etc., while you learn how to read financials and balance sheets and check policies to make sure that the core values you set out to live by are invested in the daily operation of the company. Assume a learning posture. The moment you stop learning is the moment you start your own demise in business.
The loss of trust is a contributor to organizational demise. In young organizations the founder is often the biggest culprit in undermining trust because he or she does not understand the need for organizational sovereignty. Organizations experience common developmental life cycles and predictable tensions. The smart leader anticipates known tension points and learns how to navigate them successfully. The critical decision point young organizations face is the need to formalize structures away from the founder in a move toward organizational sovereignty. If the founder fails to learn the power of delegation the odds for creating a toxic organization exponentially increase. Toxic organizations tend to be self-perpetuating because the creation of toxic leaders often helps people meet psychological needs. Diagnosing the existence of good delegation is possible by looking that the management techniques typically employed to decide if management behavior contributes to or undermines organizational sovereignty (Table 1). Organizational success or demise is not set in stone. Leaders, founders, owners committed to learning and open to input have the best possible chance of success.
What kind of organizational culture will you build or support?
 Ichak Adizes. Corporate Life Cycles (Englewood Cliffs, NJ: Prentice Hall, 1988), 46.
 Adizes 1988:193
 Adizes suggests that a company needs to move from a sales driven organization to a market driven organization. The same concept is fundamental to the success of high-tech companies that attempt to jump from its sales to early adapters to securing a segment of the mainstream market. It is Geoffrey Moore’s contention that the failure to capture a market segment from which to anchor this leap to the mainstream market is root of a company’s ultimate demise. See, Crossing the Chasm, (New York,NY: Harper Collins Publishers, 2002), 68. Translated into the context of the non-profit organization this means that a disciplined action must occur that defines the primary focus of the organization and achieves success at rooting into its niche prior to expanding its base to related areas. In other words it must integrate its core values and driving vision into all aspects of its structure in a way that helps its leaders and workers know when it is time to say “no” to demanding opportunity to focus on how it answers to its primary purpose in a consistent and effective way.
 Adizes 1988:197
 Jean Lipman-Blumen. The Allure of Toxic Leaders: Why We Follow Destructive Bosses and Corrupt Politicians – and How We can Survive Them (New York, NY: Oxford University Press, 2005), 5.