Professor Murmann's Blog: New Management Focus: Invest in Relationships!

New Management Focus: Invest in Relationships!

Designing an organization requires making a million decisions both large (e.g. picking a strategy) and small (e.g. picking out paper for the PC printer). It is easy to get lost in the trivial instead of focusing on getting the critical elements right. In my courses, I try to present ideas and frameworks that help identify what is important. At the recent Academy of Management Conference in Montreal I came across a phrase that was new to me. In my view,  it crystallizes what managers need to do to design an organization that is able to respond to all the unexpected events that invariably occur in the life of an organization:

Invest in relationships!

The person who articulated this idea is Jodi Hofer Gittel.  She has studied the practices of the fantastically successful Southwest airlines for over a decade. Gittel was asked to comment on an earlier presentation in Montreal by the former CEO of Southwest airlines, James F. Parker. Parker remarked that when he first joined Southwest as an in-house lawyer he thought that letting employees at headquarters spend days planning the annual Halloween party was a poor use of the company’s resources. But he later came to appreciate that this activity, rather being wasteful, was an efficient way to allow low-level employees practice leadership skills that could be carried over into their regular jobs.  It was also an investment into forming strong bonds among employees that would enable them to tackle other challenges together or simply help each other out when one of them ran into problem. Top down organizational design sees it the task of management to coordinate people by dividing up the work into separate well-defined roles. An organization like Southwest asks employees to figure out in part themselves how they need to coordinate their actions to get the jobs of the airline done. Investing in strong relationships is the basis for bottom up coordination. Gittel explains that such relational coordination requires three foundations:  shared knowledge, shared goals and mutual respect. Parker went on to say that Southwest was able to deal with the dramatic fall in demand after September 11, 2001, because employees had such a strong identification with the airline, and with each other, that they were willing go along with big operational changes to help save costs. At the same time, management did bear the short-term cost of not laying off employees as most other airlines did because these violate psychological contract Southwest had developed with its people over three decades.  Parker emphasized that if people feel that the company “loves” them, then they will be much more willing to accept changes that require sacrifices on the part of individuals. This idea of coordinating people by investing in developing strong relationships rings true for me when I ask myself what distinguishes organizations that are able to change their practices and respond effectively to unforeseen challenges.

As an aside: Parker reconfirmed for the evolutionary theorist in me that organizational practices at Southwest came about in large measure because of idiosyncratic constraints the airline faced in the early period rather than because an organizational designer had evaluated different options and then decided that it was a really smart idea, for example, to just fly one particular airplane type or to encourage flight attendants to crack jokes.  Many effective organizational practices emerge without foresight. The task of the manager, then, is often simply to recognize when something works and then expand the practices and making sure not to tinker with the formula for success whose causal microstructure is not fully understood by the managers themselves. Just like an as an aspiring parent, as a manager you often don’t have to understand why a practice works as long as you understand that a practice works!