Yesterday the Wall Street Journal interviewed Yahoo’s new CEO, Carol Bartz. When asked about the structure of Yahoo and it’s history she states:
…Organizations can get in the way of innovation, because if people are all bound up, and if they don’t know if they get to make the decision or somebody else, and if they do, what happens to them, and so on and so forth. There’s a freeing when you organize around the idea that you’re clearly in charge and go for it. It’s really a fantastic group of people, and just cleaner lines and cleaner responsibility, and freedom to make mistakes, and have some fun. This whole business that there’s no innovation side of Yahoo is just the craziest thing I’ve ever heard.
Before the dot com bubble burst in the late 1990s many start-ups were run in an extremely facilitative manner, with an emphasis on teams rather than a hierarchy and an overflow of resources for R&D. When the bubble burst facilitative managerial structure was thrown out the window in favor of hierarchical control, fiduciary responsibility and mundane job descriptions. In other words, these new companies adopted a directive-based approach when re-tooling their organizational structure.
Facilitative organizations invest in exciting projects and innovation in hopes that creativity will beat out the competition. However, there is no guarantee return on investment–the innovation may never come, the exciting project may be out-dated. On the other hand directive leadership, perpetually focused on short and long term cost reduction, will suppress innovation and creativity in the long run. However, that said a directive leadership style does at least go a long way in guaranteeing accountability, coordination, and control. So the trick is knowing how to balance the two. It’s easy to be facilitative when, as we said the other day, you can accommodate experimentation and failure. It’s easy to be facilitative when you are playing a non-zero-sum game. It’s tempting to be directive when resources are scare, when time is pressured, and when your playing a zero-sum-game. The trick is how to be both facilitative and directive.
Carol Bartz, taking the helm of Yahoo in January of this year, did what any good CEO should do: she implemented both a facilitative and directive organizational leadership so Yahoo could continue to innovate without taking dangerous leaps of faith. She is both establishing a clear chain of command and asking her employees to innovate and make mistakes.