Elephants and Fleas: Is Your Organization Prepared for Change?
by Charles Handy
Leader To Leader, No.24, Spring 2002
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CEOs are not naturally inclined to look to Chairman Mao for inspiration, but Mao's insistence on the need for constant reinvention is something they need to contemplate, albeit without Mao's ruthless methods, if their organizations are going to survive in a turbulent and changing world. Reinvention, however, is easier to call for than to accomplish. For one thing, it is subject to the dilemmas of the Sigmoid Curves.
The first of these curves (Figure 1) describes the normal life cycle of almost anything, anybody, or any organism: a period of learning or investment, in which inputs exceed outputs, followed by steady growth that inevitably one day peaks and turns into decline. The only variable is the length of the curve, the time it takes to reach the various points on the curve.
 Figure 1. Sigmoid Curves |
The only way to prolong the life of the body in question, be it an organization or even a career, is to start a second curve. But to allow time and resources for the initial period of learning and investment, that second curve has to start before the first one peaks. You then encounter the paradox of success -- when things are going well, there seems to be no reason to change. "We know how to do it now," people feel, so "don't rock the boat or change the formula." That very reluctance to change ultimately turns success into failure. "Why cannot the status quo be the way forward?" one leader asked me. Sadly, he had to learn the answer by hard experience when his organization disintegrated a few years later.
Long-lasting organizations have to find ways to start second curves before the first curves peak. That's hard to do. It means recognizing, in the midst of a run of success, that it can't last forever and that paradoxically now is the time to start investigating alternatives. It is easier to do that when the need for change is obvious, when the curve is heading downhill. But that is just when morale is low, resources are depleted, and leaders are discredited -- the worst conditions for any radical thinking. There are earlier, often unnoticed, signs that perceptive leaders can use as triggers for starting a second curve. Customer or client complaints, if viewed objectively and not defensively, can point to areas where change is needed. Young people or new recruits can often see possibilities to which familiarity has blinded those in positions of power. This prescription, however, requires leaders to blend continuity, the first curve, with invention, the second curve. That, in turn, means finding ways for two very different cultures to live together and to value each other, because each needs the other if either is to survive. The second curve needs the resources of the first to support its experiments, and the first curve needs the second if it is to have any future at all. Sadly, this commonality of interests is not always perceived by either party. "Those Young Turks are all energy but no experience," says one party, while the Young Turks, so-called, mutter about the entrenched attitudes of the Old Guard. Both are right and both are needed.
Put another way, elephants need fleas to keep them alive, to start and then grow that second curve. By elephants I mean the established organizations, be they in business, government, or the voluntary sector. These organizations have a settled way of doing things; they have formalized systems and routines. They deliver efficiency and scale and cultivate predictability, which they see as the key to efficiency. To increase all three, elephants are currently allying themselves with other elephants, swallowing them, marrying them, or organizing friendships, believing that size is safest in a turbulent world. Airlines merge with airlines, banks with banks, pharmaceutical companies with pharmaceuticals. In any industry sector, there may soon be only half a dozen elephants accounting for more than half the output. It would be wrong, too, to imagine that the nonprofit sector could be insulated from the same sort of pressures. All these matings of elephants increase scale and pool resources, but they do not of themselves guarantee a different future, only more of the same if, perhaps sometimes, a little better. To grow that second and different future, the elephants need some fleas.
Fleas are the creative individuals or groups. They include small independent businesses or community ventures. Elizabeth Handy and I recently studied twenty-nine typical flea individuals in London, England, who had started their own new ventures -- theater companies, small businesses, design communities, and new social ventures. We called them the New Alchemists because of their ability to create metaphorical gold either from nothing or from desperate situations, the equivalent of base metal. We were interested to discover what circumstances or dispositions shaped them, what influences or happenings made them what they were, and how others could mirror their capacity for innovation, or alchemy.
The first important thing to note was that these innovators, or fleas, saw themselves as different from other people and destined, in their own eyes, to make a difference. They were not conformists, something that on its own makes it difficult to accommodate them in any institution. All the people interviewed were, in their own view, unemployable in any organization other than their own. They were not "boss compatible" themselves, however much they might seek to boss others. In other words, independence was a key element in their personality profiles. Fleas, it seems, prefer to live on top of elephants rather than in their bloodstreams. Swallowed by elephants, they die.
The New Alchemists were also dedicated. Passion was what drove them, whether they were creating businesses or theater groups or campaigning organizations. They had to believe in what they were doing, not simply use their talents as a means to an end. Those who had built successful businesses were clearly making small fortunes for themselves, but the fortune was not the initial motivation, or even the continuing one. It was the desire to start their own thing, to make a difference in some field they believed in, that had inspired them. Promises of future wealth or status are therefore not the kinds of things that will motivate such people. What they will want is a cause to commit to, space for independence, and the opportunity to make a difference. Given dedication and the chance to be different, these individuals were dogged in their determination and their application. They had what the poet Keats called negative capability, the capacity to ride through setbacks and failures and to keep going through all adversities -- because they believed in what they were attempting. Any organization using them must also, therefore, be prepared to be equally tolerant when such people suffer reverses or follow trails that come to a dead end -- that is how these individuals learn, by trial and as often as not by error.
Elephants need fleas such as these to keep them innovating, but fleas cannot easily live in elephants. The inevitable bureaucracy and need for conformity suffocates them, be they individuals or groups. Some organizations put their fleas in separate pens, in what used to be called skunk works, only to find -- too often -- that the fleas' innovative ideas are then rejected by the core organization as "not invented here." In a variation of this tactic, some elephant organizations set out to buy successful flea organizations and then incorporate the fleas' innovations into their own workings, meanwhile spitting out the original flea creator, who finds corporate life intolerable after independence. Others have turned a part of themselves into a venture capitalist, encouraging and financing would-be fleas to set up their own innovative organizations with the elephant organization's backing, thereby keeping a degree of ownership in any successful innovations. These latter strategies, however, are not readily available to nonprofit organizations, who cannot, by definition, act as conventional venture capitalists, although they can, of course, find other ways of nurturing potential fleas until they either prove themselves or die.
Many organizations look for a more all-embracing cultural approach, trying to create an environment more friendly to fleas by, for instance, rewarding creative ideas from any source or even requiring everyone to spend some 10 percent of the time doing nonessential work. Still others seek to encourage creativity by running seminars with the creative arts -- for dancers, actors, or musicians -- or by decorating their walls with stimulating art or employing artists in residence. None of these ideas are wrong. They all make it more legitimate to think and act like a flea, but unless the whole culture of the organization is biased toward constant reinvention, these devices are only lip salve, soon to be obliterated by the need for efficiency and the measurements and controls that inevitably follow in efficiency's wake. It is not surprising, therefore, that so many organizations bring in temporary fleas from the outside to tickle them behind the ears. These are the strategy and change consultants who find that the easy way to riches is to be a flea on the back of an elephant. In a perfect organizational world, importing fleas should not be necessary. The only way around it is to build an organization that sees itself as a natural home for fleas. Could elephants be, in effect, federations of fleas, cellular honeycombs of groups of fleas, united only by a common passion for a cause and therefore by a willingness to compromise some of their independence for the mutual advantage of everyone? Such a design principle would invert the traditional logic of organizations, which typically starts from the top and works down. Federalism builds from the individual parts to the center, delegating to the center those things that can only or best be done there, and nothing more.
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Can organizations combine the independent and the collective, t
he small and the big, the same but different? | Federalism was originally conceived as a way of combining the independent and the collective, of being both big and small, the same but different. Americans and Germans, Australians and Canadians, Spaniards and Swiss, all have federal constitutions, designed to allow independence within a union, but even these do not always see the sense in applying the same principles to their businesses. To the British, federalism is the "f-word," a dirty word, one that implies a loss of control to the center. This serious misunderstanding of the principles of federalism will be a handicap in the future development of both their future and their economy.
This is not the place for a detailed discussion of federalism. The principles are spelled out in an article for the Harvard Business Review, "Balancing Corporate Power: A New Federal Paper." Suffice it here to say that federalism is a mixture of both centralization and decentralization, centralizing only those things that everyone agrees it would be crazy not to centralize and leaving as much autonomy as possible to the various states or business groups -- the space for the fleas. The retained powers of the center are often the traditional shareholder powers of decisions on new directions, new money, and new people in the key positions. If the strategic, financial, and personnel decisions are taken correctly, the rest should take care of itself, although most federal constitutions, in politics or in business, also give the center what has been called "the right to invade" should things seem to be going astray in any of the constituent parts. There is also, in federal institutions, a constitution that sets out rights and responsibilities, a common law or set of rules and a common information system. (For insight into how a common information system might work in a federal organization, see Michael Hammer's "Why Leaders Should Reconsider Their Measurement Systems").
Federalism is messy -- and political. There are disputes over the allocation of resources. Information is guarded when it should flow freely. There are boundary disputes, necessary compromises, and competing lines of accountability. To make it work requires an active understanding of "twin citizenship" -- the idea that one can have at least two loyalties, to one's own group and to the larger collective; one can be both a Texan and an American. The lesser loyalty is easy; it is the larger one that requires work because without it compromise is hard to obtain: why give up local priorities for the greater good if you have no interest in that greater good? Hence the critical importance of the talk of vision and values and the necessity for the top leader to accentuate these in every statement and action. (For another perspective on values, see Frances Hesselbein's "Carry a Big Basket".) Some distribution of the spoils of success from the center to the states also helps reinforce the idea of a common good.
Properly done, however, federalism allows room for the fleas inside the elephant. ABB tries to restrict the size of its business groups to 50 persons to recreate that sense of a small enterprise, personally led and motivated. In a world of hi-tech, hi-touch (to use Naisbitt's evocative terms), the touch can easily be neglected, yet fleas rely a lot on trust -- trust in those they work with -- and trust needs touch to be truly trust. Technology communicates facts but not feelings. Fleas need both for trust to flourish, and few of us can know more than 50 people well enough to gauge their feelings or to know whether they can be relied on. The Alchemists instinctively know this, which is one reason why they are reluctant to grow too big.
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Federalism offers a way forward. | Federalism offers a way forward, but it is neither easy nor tidy. Small wonder, perhaps, that many leaders of elephants shrink from it -- but without it they have to rely on the perspicacity and farsightedness of those in the center to spot the new trends. It would be easier and less risky to regard their organization as a collection of potential proving grounds, where new ideas could be tried and discarded if found wanting but pursued if thought promising. It is a learning organization in the sense that the constituent parts tend to learn from one another as they compete to make a difference to the whole. Federalism, in other words, provides the structure for growing second curves without betting the whole organization on one view of the future. For all its difficulties, it is, in the end, a safer bet than any of the alternatives to leading change.
| Copyright © 2002 by Charles Handy. Reprinted with permission from Leader to Leader, a publication of the Leader to Leader Institute and Jossey-Bass.
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Handy, Charles "Elephants and Fleas: Is Your Organization Prepared for Change?" Leader to Leader. 24 (Spring 2002): 29-33.
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