2. Holistic and Long-Term-Oriented Performance Measurement. For open sharing and collective learning to take place, incentive and performance measurement systems must consider holistic results and reward collective achievements instead of individual performance. Only then will the corporate-wide forums of interaction bring the intended benefits: Individual know-how will be continually enriched and applied throughout the company instead of remaining isolated in competing business units.
Many global companies have launched programs to enhance worldwide sharing of best practices. So far, only a few companies recognize that for each best practice identified, pairs of givers and takers have to be explicitly assigned. Perhaps most important of all, the “knowledge taker” must receive at least as much positive recognition in the corporation as the giver does.
The Balanced Scorecard (BSC) is often proposed as the perfect solution to all problems. Mapping and translating important strategic objectives into individual goals and putting these on a scorecard for clarity and follow-up certainly has some merit, but the BSC needs to be both well balanced between short-term and long-term objectives and intelligently applied to drive desired behaviors like knowledge sharing and entrepreneurship.
At Canon Inc., the BSC has been replaced by vision-driven holistic evaluation. The Corporate Strategy and Development Headquarters formulates corporate visions and ensures that business groups set goals in accordance with these visions. This headquarters also plays a key role in the evaluation of business group leaders and project leaders. The key evaluation criterion is the extent to which achieved goals correspond to the visions, not individual P&L results.
3. The Courage to Perform Creative Destruction. Lewis Platt, the former chairman and CEO of Hewlett-Packard Company, once said, “We have to be willing to cannibalize what we’re doing today in order to ensure our leadership in the future. It’s counter to human nature, but you have to kill your business while it is still working.” It’s the kind of creative destruction the economist Joseph A. Schumpeter described in 1951 as “dynamic disequilibrium” — a process that promotes creativity for further innovation. Creative destruction is an explicit business strategy of companies like Sony, Canon, and HP.
“Only the paranoid survive” is a key mantra at the Intel Corporation — another creative company with the courage to make its own products obsolete before others do so. Developing an entirely new product that competes with and kills other products offered by the same company is a difficult task that usually meets a lot of internal resistance, especially when there is no holistic performance measurement.
A senior project manager in a Western IT company says, “We need more entrepreneurial bosses who dare to take risks and expand the horizon.” Similarly, a large number of middle managers in a large company complain, “No one in our global leadership team dares to back up a new concept until it is a proven success in the marketplace. This lack of courage and risk taking kills a lot of entrepreneurship.” Clearly, entrepreneurship takes both visionary and challenging leadership, with a top management that actively shows interest and willingness to take calculated risk.
Excessive criticism of failure can also build strong barriers against entrepreneurship. A human resources director at a large insurance company blames top management for his company’s lack of innovativeness: “The most critical problem of our company is that nobody was ever punished for a decision he did not make. In contrast, when someone actually makes a decision that turns out to be [a bad one], we take an unhealthy pleasure in punishing the poor guy. How can you expect anybody to be innovative and willing to take risks in such a culture?”