Rita McGrath: Use Growth Business to Promote Employees

Last Updated Mar 31, 2009 7:08 PM EDT

In the newly released book Discovery-Driven Growth: A Breakthrough Process to Reduce Risk and Seize Opportunity, Columbia's Rita Gunther McGrath and Wharton's Ian MacMillan reveal some dangerous traps that companies pursuing new growth platforms must avoid. Over the last two weeks, we've heard McGrath's views on the best ways to define growth goals and the importance of consistency in the management of growth initiatives. Today we conclude our discussion with some "rubber to the road" advice about how managers can put a true growth agenda into action within larger organizations.

BNET: What kinds of new human resources decisions does one need to make to instill in an organization the kind of consistent growth mentality that you espouse?

McGrath: I can think of two right off the bat. The first is: don't promote people who haven't been involved with your growth businesses. You want your growth businesses to be seen as a place where people need to go to get their "ticket punched" for their career. It shouldn't be the case that when you hear Joe is assigned to a new business opportunity in the special projects department, you say, "Oh, I'm so sorry to hear that! I thought Joe was doing well in his career." The philosophy comes through in a great Lou Gerstner [former IBM CEO] phrase: "You want to put your best people on opportunities, not on problems." The second issue deals with how you allocate blame and praise within companies, especially for people working on speculative ventures. If you think about nanotechnology, the typical company will set up a project, a single one. How crazy is that? We don't know whether this technology is going to take root in medicine or household products or any of the other hundreds of potential areas. You want to go after this with four or five teams with enough variety between them that you have a better chance of landing on a long-run success. But not all of them are going to work, so a lot of your best people are going to feel like failures and just a couple are going to feel like the king of the universe, which is not what you want. What you want is them viewing the whole set of projects like a team, so if one of the teams wins, they all win. You can't allocate success and failure asymmetrically because there is so much random chance involved.

BNET: In your book, you talk about the importance of "specifying success." How do you specify goals that are defined enough to be actionable by managers and employees, yet grand enough to be motivating?

McGrath: The most common way is financial: "we want to deliver X growth in revenues or Y growth in profits by a certain date." Sometimes it's positional. "We want to create a category of handheld devices with great voice recognition that are cheap enough that everyone can carry one." It can be a specification of functionality, if you will. A third one can deal with the creation of very specific types of benefit -- in the case of internal projects, this is especially key. "I'm an insurance company with a claims operation. Through this initiative I want to improve the efficiency of my existing staff in processing claims by 30 percent and I want to reduce our exposure to fraud by 70 percent."

BNET: If you're a manager and you want to get your organization behind the kind of growth agenda you advocate and describe, what is that first meeting like? What is your first step?

McGrath: You need to have an important gap you want to fill, so your first step is to really make people aware of that gap and its importance. At DuPont, for example, if you drew a chart of their profit growth from say 1980 to 1999, you would have gotten this very nice upward sloping line. But if you looked at their revenue for this same period, what you saw was something pretty flat. Their revenue growth was basically 0.6 percent. So identifying this gap gave them the motivation to really get behind top-line growth, not just profit growth. They had done many initiatives that helped their organization like Six Sigma, but they had lost track of how to drive growth.

BNET: When things don't go so well on these new growth initiatives, sometimes it's important to become involved with what you call "the necessary art of disengagement." How can a manager do this artfully?

McGrath: Step one is to recognize that you may be escalating commitment, and there's a whole body of academic literature that shows why people continue to do things that in their heart of hearts they know are not going to go anywhere. You might have invited your most trusted colleagues or even friends to this new effort and they left their jobs for something that was going to change the world. But then you found the world rather resistant to change and you feel terrible for your friends; you would almost rather keep the project alive for their sake than admit it's not working. Step two has you thinking about all the people and organizations who might be affected by this project shutting down. Someone in the organization who stuck up for you or gave you resources. We suggest you make a list and then think through systemically how you make them whole. And then, one last thing: in many, many projects -- even if the initiative as a whole isn't going to go forward -- you need to take a good hard look at what you can recoup from the venture, because you have indeed created things of value. Technology or other capabilities can be transferred somewhere else. You may have developed a great relationship with suppliers that could be useful somewhere else in your company. You may have uncovered some talent that otherwise wouldn't have been found. Instead of wishing the "failed" project would go away and sweeping it under a rug, we suggest you make the extra effort to find the value that can still be added from what you created, even if the venture itself doesn't go forward.

  • Jeremy Dann

    Jeremy Dann is a Lecturer in Marketing at UCLA's Anderson School of Management and an innovation consultant and writer. He has been a contributor to several business and technology publications and is the founding editor of "Strategy & Innovation."