Building Mechanisms Drives Progress

Audio Transcript

This is one of those great questions. It’s a little bit like, “So, how does gravity work?”

{Laughter}

But let me really take a cut at that because I’m very intrigued by the question. The question, essentially, as I understand it, is we’ve got our mission and our values, and they’re going to be the framework within which we’re going to operate. So, the conceptual framework, and philosophical and spiritual framework. But what about other frameworks? Concrete aspects of the framework? Structure? Processes? Procedures? Mechanisms of different kinds? How much is the right amount and how much is too much and how do we not kill the goose in the process of having structure to make it go? Is that the essence of the question?

[Male Speaker:] Yes.

Okay, great. I think our research sheds light on this. What our research would show is the following: that, first of all, one of the things I would encourage you to do is to think less in terms of constricting policies and procedures, which we all know tend to stifle everything; but you still need structure, and I would encourage you to think in terms of building mechanisms, which is really different. Building catalytic mechanisms that drive progress consistent with those values and mission.

Let me give you an example of what I mean by a catalytic mechanism. There’s a company called Graniterock, and part of its values is to deliver absolutely off-the-charts customer service—something it believes in very, very deeply, going all the way back to its early days. Bruce Woolpert said, “How are we going to continue to drive progress consistent with that value, in a way that really has some creativity and innovation, and isn’t just a bunch of guck that we gum up the system with?”

He began thinking about it, and he began to realize what’s really powerful is having mechanisms that vest the information with power and allow the right things to happen, regardless of how the system might fight against it. So, he began to think about it. He said, “You know, a lot of stuff is more bureaucratic. Like, we could do customer surveys.” And they do those. “But, you know, a customer survey is reams of information and data, and how are we really doing?” The truth is, bureaucracies will start to grow up that basically want to ignore that anyway to preserve their bureaucracy. “So, how would we break that down?”

He came up with this mechanism, a catalytic mechanism called short pay. At the bottom of every Graniterock invoice is a little statement. It says that if there’s anything you’re not completely satisfied with for any reason, simply circle the item, deduct it from the total, and send us a check for the balance. You as the customer have total and complete discretionary power to decide whether and how much to pay based upon your subjective assessment of how satisfied you feel yourself to be. Imagine if the airlines . . .

{Laughter}

Okay? Now, I asked Bruce what short pay does. What he said is, “It forces us to change consistent with the value because we’re getting information all the time, and we can ignore that or not, and our whole system can begin to fight against the real information. But when you start getting short pays, you pay attention, and they will drive change, and they will drive us.”

Let me just give an example of this. One time they got a short pay from somebody who said they were building a road in the middle of the night (they crush rocks and things like that), and they found that Graniterock wasn’t open at 2:00 a.m. So, they short-paid. They weren’t happy.

Graniterock was, “Give me a break. We’re a rock quarry. You expect us to be open at two o’clock in the morning?” They said, but – yes, but still, it’s data; it’s information we can’t ignore. They short-paid.

So, they used that mechanism to then stimulate a form of progressive innovation. Now there’s a thing that’s called Granite Express, which is a card. They have ATM machines for rocks. If you’re building a road at two o’clock in the morning outside Watsonville, California, and you need a load of size X73 rocks, you go to the Graniterock ATM dispenser. You put in your Granite Express card and you get a load of rocks and you go on your way.

Now, the beauty of that is that you have a structure. You have a mechanism. You have something very, very concrete. It’s not just words on the wall at this point. This is a mechanism. But the beauty of that mechanism is that it drives innovative ways of living those values. So, what I encourage everyone to do—the first answer I’m going to give you is to break down all the junk by building very concrete catalytic mechanisms.