March 16, 2017 | by Matt Warner Print

In the early 1980s, the workers at a General Motors plant in California had become so disillusioned with their jobs that they sometimes sabotaged the quality of the cars on purpose. The plant began to perform so poorly that the company shut it down. That failure, though, is only the first part of a great turnaround story. In a strange twist, two years later GM found itself partnering with Toyota to reopen the plant. This time, it became a top performer despite a staff comprising mostly the same workers.

What changed? According to the National Public Radio program All Things Considered, the workers experienced a reawakening after studying the “Toyota Way” on the ground in Japan. One key difference they saw was how management thought about the rules governing who can stop the assembly line, and why. At the underperforming GM plant, the mantra had been “never stop the line.” In Japan, any worker was encouraged to signal a problem by pulling the “andon cord,” named after the Japanese word for a lantern, and management was willing to stop the line if needed to ensure quality.

This practice has two powerful implications. First, the workers feel trusted and empowered to take part in quality assurance, and this contributes to a culture that invites everyone to take pride in the plant’s output. Second, management benefits from the knowledge and judgment of the workers, a resource that the GM plant’s management never chose to access.

The andon cord symbolizes a broader insight about management and workplace decision-making, one that acknowledges the limitations of centralized knowledge. It’s a lesson that has not always been understood in the context of work, and it’s one about which we need continual reminding.

The Industrial Revolution both introduced and accelerated an appetite for figuring out effective management. The presumption of autocratic management dominated and the cultural caricature continues in some measure today. Even in the late 19th century, though, budding management theorists like Frederick Winslow Taylor saw the flaws that resulted from depending so heavily on “personally brilliant” captains of industry, and expecting them to have all the answers.

If you’re in management today and you find the idea of having all the answers intimidating, take heart. According to a century’s worth of research, it’s not your job to have all the answers. Any manager who admires the Nobel laureate economist Friedrich A. Hayek can apply the lessons he taught about knowledge in his 1974 address to an audience of his peers (if you grant that Hayek had peers).

To explain why economists are unable to calculate prices and wages ex ante, he pointed to the dispersed knowledge “possessed by every one of the participants in the market process — a sum of facts which in their totality cannot be known to the scientific observer, or to any other single brain.”

Although many leaders and managers no doubt possess above-average familiarity with their organizations and the tasks associated with the fulfillment of their missions, any leader who wishes to optimize decision-making should consider supplementing that knowledge with the wisdom and insights of the team.

In the same address, Hayek concluded, “If man is not to do more harm than good … [h]e will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.”

This suggests a concept of leadership in which leaders add to their own expertise by developing a process to influence decisions by engaging the expertise and insights of others in the organization. This process design then becomes a key management task, and it is also one the leader need not perform alone.

Recently, in a meeting of department managers at Atlas Network, we decided to brainstorm ways to improve our monthly all-staff meeting. One of the agreed-upon goals of this meeting is to provide an opportunity for everyone to have a voice. This is an area in which we decided we needed to improve. Although our staff meetings tend to involve a variety of voices, we recognized that there remained a subset of team members who almost never participated in staff meeting discussions.

We had experimented with round-robin updates in the past, but our growing staff size and the hit-or-miss relevance of the content led us to discontinue the practice. Not everyone is particularly fond of speaking in front of a large group, so the department managers wanted to come up with a new solution. After a few minutes discussing the problem, they identified a new exercise whereby different departments or team members could lead a small-group brainstorming session by posing a prompt or question.

During the first of these exercises, the training department asked the staff to break into teams of three to brainstorm speakers and topics for Atlas Network’s webinar series. In just seven minutes, the training department came away with more than 100 new ideas.

Based on staff feedback, we’re confident that this improved the overall experience of attending the meeting because everyone had a chance to make a contribution. Just as importantly, the organization benefitted by capturing valuable ideas and insights from dispersed knowledge. The idea for the exercise itself came from a brainstorming process, not from some omniscient manager.

What does this mean for traditional hierarchies? Organizational Development (OD) professionals consider “democracy” a key value to pursue in improving the health and effectiveness of organizations. Acknowledging that “people tend to support what they help create,” OD literature encourages processes that engage team members and empower them to use their own best judgment to achieve shared organizational aims.

Even that, however, has its limits. In their classic tome Reframing Organizations, now in its fifth edition, leadership scholars Lee Bolman and Terrence Deal wrote, “The idea of a democratic workplace goes beyond participation, often viewed as a matter of style and climate rather than sharing authority. Even in participative systems, managers still make key decisions.”

Like most democracies in the political context, the use of this concept in OD is more nuanced than a “pure democracy” would imply. There is a place for executive leadership, which may include veto power, formal constraints on workplace behaviors, and even dismissal. But the role of leader as principally the chief designer and steward of the decision-making process is a more sophisticated and potentially more productive approach to navigating organizational challenges and choices.

Summarizing early 20th century polymath Michael Polanyi’s key insight about polycentricity — the idea of using multiple centers of decision-making to achieve shared aims — governance experts Paul Aligica and Vlad Tarko wrote in 2012, “the authority structure has to allow a multitude of opinions to exist, and to allow them not just as hypotheticals but as ideas actually implemented into practice.”                            

This means that your andon cord has to be an authentic mechanism for capturing ideas, not just a gesture of inclusion. Economist Elinor Ostrom won a Nobel Prize in Economic Sciences in part for her work demonstrating the effectiveness of using polycentricity to optimize the use of dispersed knowledge. In 1965, she and her husband Victor Ostrom succinctly described the power of polycentricity as a way to unleash “efficiency-inducing and error-correcting behavior.” For leaders who are aiming for error-free efficiency, multiple centers of decision-making are a promising way to go.

In the end, the challenge is not to decide whether autocratic rule or pure democracy is right for your organization. The challenge is to use leadership wisely, to define the processes by which dispersed knowledge and the unique contributions of every voice can be brought to bear on the decisions that will optimize your organization’s resources toward fulfilling its mission. Your job as a leader is to create the ideal andon cord in your workplace and to make sure everyone is encouraged to “pull” it when they think best.

Matt Warner portrait
Matt Warner is Chief Operating Officer of Atlas Network. Prior to joining Atlas Network, Matt Warner served in several policy and leadership positions at free-market organizations including the James Madison Institute in Florida and the American Legislative Exchange Council in Washington, D.C. Learn More about Matt Warner >