Spreading Operational Excellence: An Interview With Stanford Professor Robert Sutton

Professor Robert Sutton of Stanford University is a leading thinker in the field of operational excellence. Cofounder of the Center for Work, Technology, and Organization, Sutton has been conducting research into operational excellence for decades, having written more than 100 scholarly articles and several books. Sutton's 2010 book Good Boss, Bad Boss: How to be Best ...and Learn from the Worst was a New York Times bestseller.

Sutton's latest book, Scaling Up Excellence: Getting to More Without Settling for Less (Crown Business), cowritten with Stanford colleague Huggy Rao, explores one of the biggest challenges facing any company - how to spread pockets of organizational excellence across the entire enterprise. Sutton believes that creating the right organizational mindset is key, and doing so takes persistence and long-term vision. He spoke recently with the National Center for the Middle Market.

Professor Robert Sutton of Stanford is a leading expert on developing operational excellence

NCMM: How do your insights in Scaling Up Excellence apply specifically to middle market companies?

Sutton: Organizations of any size have two kinds of scaling issues. First, the challenge of spreading better, new ways of doing things. As organizations get larger, say more than 20 people, spreading a consistent mindset becomes a real challenge. Second, even when organizations grow a little bit, there's more cognitive load on individuals and process becomes more necessary. Small companies sometimes have problems accepting process but know they need it. Getting the balance right between having structure, but not too much structure, is always a challenge, no matter the organization's size.

NCMM: What is the recipe for success in developing operational excellence?

Sutton: There are some similarities among organizations and leaders who are hallmarks of scaling up excellence, and one is accepting the messiness of the process, while always trying to clean it up. Being patient is part of it, as is linking the short-term and the long-term. You need a relentless restlessness, people who are never quite satisfied that things are good enough the way they are.

Plans are a useful point of departure, but when you treat a plan as something that will go forward regardless of the evidence before you, it becomes a problem. My co-author Huggy Rao likes to say that "no battle plan has ever survived the first five minutes of contact with the enemy." Organizations that have the right balance have the ability to act with confidence based on what they know combined with the ability to doubt what they know. You need to improvise depending on what's in front of you and change if things aren't working.

NCMM: How should organizations scaling up operational excellence balance "imposing" standardization versus allowing for individual flexibility?

Sutton: In the book, we call this "Buddhism" [more flexibility] versus "Catholicism" [imposing standards]. At the operational level, smart leaders are always asking "what can we flex," so that there's local individuality, which is vital because people are more committed to the things they develop themselves, and what do we need to keep standardized.

For example, healthcare giant Kaiser Permanente, which has 9 million patients and 170,000 employees in nine different states, had too much Buddhism (local flexibility) and during a big project to build a massive, company-wide electronic records system, they decided on some "guardrails," a few crucial standards that everyone needed to pay attention to. But they also allowed for enough local autonomy so that people could flex around those guardrails. This balanced approach worked.

NCMM: How can companies create "excellent" teams?

Sutton: I learned from the late Richard Hackman [a Harvard psychologist and leading scholar on team dynamics] that giant teams don't work. If you think you have a bad team leader of a big team, then try cutting the team in half. Two former students of mine started a company called Pulse, which was eventually bought by LinkedIn, and when they went from four to seven people, it was too big, so they had to break into three teams. And when they went from seven people to eleven, they had to break into four teams, and then add more process.

Team stability is also really important, so that members can work out their relationships. The two founders of Pulse figured out that they were a good team together. Many startups, even Hewlett and Packard, start as a duo. Airlines have done research, for example, that shows that two pilots may be better than three for actually flying the plane, especially when things go wrong.

NCMM: How can teams promote accountability and squelch negative behaviors?

Sutton: The biggest problem is ambiguity. Managers have to make clear what "bad" looks like for them. Some organizations, like Mozilla for example, don't like secrecy, while companies like Apple demand secrecy and fire people who talk too openly.

When everyone on the team looks at everyone else, and roles aren't clearly defined, nobody does anything. One of the things that Apple did under Steve Jobs was to always have a D.R.I., which was a "directly responsible individual." That gets rid of ambiguity about who's responsible and promotes accountability.

NCMM: How should excellence be spread from teams to entire organizations?

Sutton: It's not like peanut butter. You can't spread things too thin. We talked earlier about Kaiser Permanente. The project manager, Louise Liang, had a budget of billions of dollars but she started by focusing only on getting Hawaii right. This is something President Obama should have considered [with the troubled health-care roll-out]. Liang first got Hawaii working, and then spread that success to the next group and the one after that. When Liang went to the next region after Hawaii, she took people from Hawaii to work with the next group and also invited members of the third group to watch. The past, present, and future were in one place, and everyone was learning.

What doesn't work is simply inviting a speaker, or organizing some event or three days of training, and then afterwards never mentioning the initiative again. And then starting the next one, while forgetting the previous initiative. That's just peanut butter spread too thin. 

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