Dave Logan

Peter: Let me ask you a question already with that which is … And I’m sure the answer to this is embedded in one of those four, but people is the obvious, like if you think about strategy and structure and culture, culture and processes and systems, in some ways the people are embedded all over that. In other ways, people are in the culture, but I wonder where are the people being left out in those four?

Dave: Well, I mean that’s an interesting question. There are older models that broke people out. The problem is how do you have strategy without people? How do you have anything without people? On this new model, [inaudible 00:05:02] called the Vital Four Factors Model, you’re describing the people in two different ways. The formal relationships between them, like the hierarchy or the matrix, that’s the org structure. Then, the informal side is culture.

Those two again, will work together. It’s very common for example, to do a reorg, and nothing changes. We move the boxes around but nothing actually changes. Why? Because the culture, as Peter Drucker liked to say, culture eats strategy for breakfast. It also eats structure for breakfast. The specific answer to your question is people live in those two boxes, so in terms of is someone a fit for their job? That shows up in structure. Do they have the capabilities? Do they have the talents? Do they have the background?

Then, the informal side, how do they work together? Do you have a team based structure? That shows up in culture.

Peter: Got it. Great. Why don’t you unpack for us a little bit the culture piece?

Dave: Okay, sure. What we did that was at least a little different than what people had done before, is we noticed a couple things. One is that when you think of a culture of a company, like I’m across the street from a Target, Target retail place, here in Tucson. I live in Los Angeles, I’m just borrowing a conference room for our call here, but if you think of Target, what’s their culture? The answer is it’s too big to know.

Culture is composed of subcultures and so this one across the street probably has a culture, and the one, I think there’s another one here in Tucson, has a culture. There are five within driving distance of where I live in LA. They’ve all got cultures, and company headquarters is in Minneapolis I think. They’ve got a whole bunch of cultures.

The first thing we noticed is that you have to get more micro, more tribal, more local, with this idea of culture. What we define a tribe to be is a group of between 20 and 150 people. With that definition, this Target across the street has at least one culture. They might have several, because they have shifts. People probably work together in different ways.

That’s the first thing that we noticed, is you have to get micro, not macro, about culture. Almost all the studies go down the big company road. Wells Fargo’s in the news. Well why? Because they’ve got a bad culture. No, they don’t have a bad culture. In some branches, the culture is whatever you want to say, toxic or promotes illegal activities. But all of Wells Fargo does not have a single culture.

Even my own company, we’re private equity based, we’re hiring people as fast as we can, we’re still understand 300 people, but still we’ve got multiple cultures because we operate in many different geographies, many different clinics. The second thing we noticed, and this gets to the heart of why I think we’re on the phone today, is that within these little cultures, there’s a stage development model.

You have to figure out what stage you’re in, and you can go to the next stage. The later stages are better. They get more done, they’re more able, they’re more competent, they’re more innovative, and the earlier stages are less all of those things. They’re less productive, they’re less innovative.

To unpack it, we’ve got five tribal stages, so starting with one, which is everything you don’t want, going up to five, everything you do want. Stage one, this is about 2% of again, the little tribes that exist in organizations. We’re measuring tribes, we’re not measuring people. We’re also not measuring companies. Again, Target, they might have 1000 tribes, so there’s a pretty good chance some of those are this stage one.

The theme of stage one is life sucks. It’s where people will actively go against their values. They will actively undermine their values. Stage one is where you have illegal activity, it’s where you have criminal activity, which is why I bring up Wells Fargo. There clearly was criminal activity happening in at least some branches. Again, that’s not to condemn the whole thing. That’s stage one.

Stage two is about 25% of tribes, and the theme there is not life sucks but it’s, “My life sucks.” In these types of places, in these cultures, it’s not that people undermine their values, they don’t really have a relationship with values. They don’t make decisions from values. Then stage three, which is the case about 49% of the time, so about half of all tribes are here, the theme, “I’m great,” and, “Peter I’m sorry, but you’re not.”

But if you and I were to have this together you’d say, “No, no Dave. You’re confused. Let me, Peter, tell you why I’m great.” I would say, “Well okay, Peter, but do you teach at a university? Do you have a New York” … You said, “Well, actually, I’ve done things that are better than that.” We go back and forth, and it’s a really nauseating discussion. We’ve all been in them and they go by all sorts of unhappy names, and I won’t say this in case children are listening, but essentially it’s just a big clash of egos. That’s stage three.

Again it’s, “I’m great and you’re not.” People tend to speak from the point of view of “I, I know better, I’m more experienced, I’m capable of solving this. If all of you would just shut up and do what I say, we’d get better.” Problem is everybody’s saying that.

In the next stage, stage four, the theme is, “We’re great.” This is the case about 22% of the time, and what makes the “We” form is not just a group of people that says, “We’re awesome.” It’s a group of people that forms around a commitment of some kind. It could be a commitment of values, like the company that I work for, we have a very strong commitment. We actually say it a bit more crassly than this, but again, in case children are listening, we want to unbreak healthcare. My mom died of a medical error. That’s a fancy way of saying she was killed by the healthcare system, not that anyone murdered here, but it was a series of mistakes that led to her death. That is intolerable.

The company that I work for, we’re doing our best to hang out in stage four, so we’re great. What makes us great is we’re all on the same page with that commitment, and then we get very specific with how we work with doctors, and how we train nurses, and how we handle incentives and the finances and the contracts that we take and everything else. That’s stage four, “We’re great.”

Before I get to five, just notice on the difference between three and four, if you can take a tribe that’s at three, and move it to four, your KPIs are going to jump way up. I’ll give you the conservative number that we published and a number of academics have actually thought, suggested that we were too conservative. But you can get a 500% to 700% improvement on your KPIs if you go from stage three, “I’m great, you’re not” where we’re constantly squabbling, and go to stage four where we make decisions from a common point of view.

There’s a lot of other things that go into stage four, I’m sure you want to unpack that. Then the last one, stage five, is life is great. Just to jump back to Target for a minute, actually having done some work with Target, they’re a pretty good company. You’ll get a Target that will be competitive with another Target. Again, I’m not from Tucson, but I bet the one across the street, if it’s a better run target, is probably competitive with the other Tucson target.

“We’re great, they’re not.” There’s a sense of a competitor. At USC where I teach, we all know who’s not great, and it’s UCLA. Our crosstown rival. At stage five, the theme is life is great. It’s a lot like stage four, but there is no them. It’s not us against them. It’s where the cause becomes much more central. On its best days, the company that I’m working for is stage five. We’re not trying to beat another healthcare company.

We’ll partner with whoever we can in service of that, but the really great examples are Pixar, where they just want to make great movies. You ask them who their competition is, and they say, “Water.” “Water, what do you mean?” “Yeah, we can’t render water. It doesn’t look like this in the movies that we make.” It just drives them crazy. You get a noble obsession, and just to summarize, that’s about 2% of tribes, and that’s where you get the world changing innovation. It’s often out of groups that are at stage five.

Peter: This is great. That was a great summary. It’s almost as though you had written the book. I have a lot of questions around this transition from stage three to stage four. It feels like the transition from stage four to stage five is almost easier. It almost feels like the biggest challenge is to move from this egocentric, “I’m going to do everything that I can to be the best I can possibly be” to, “I’m going to really devote myself to something bigger than me.”

That seems really challenging. I know, it’s funny because you write about this in the book, but if you ask most people what stage they’re at, they’ll say, “Oh, four or five.” If you ask other people what stage those people who think they’re four or five at, they’ll almost always says three. I’ll say, part of my interest in this is not only to help my clients, but personally, the book was a good eyeopener for me, because I’m somewhat embarrassingly, solidly in stage three, I think.

I mean, I think I take some dips into stage four in terms of what I’m trying to create in the world, but it definitely was very humbling. Like, I could read myself in there and think, “Huh, there’s a lot of ways in which it’s really about me and I don’t like that. I want to take this leap.” And yet, there’s this, you talk in the book about an epiphany, of having an epiphany, and it’s like the Saint Paul moment almost of falling out of the carriage and suddenly seeing God.

There’s this great cartoon, I’m sure you’ve seen it, or maybe not, but it’s of the scientist at the front of the room and there’s this blackboard. There’s all these equations, and that’s labeled stage one. Then, there’s all these equations with an answer and that’s stage three, and stage two, there’s an arrow connecting the two with the words “Then a miracle occurs.” There’s a scientist, this guy’s presenting to a room full of scientists, and one of them’s raising their hands saying, “I have a question about stage two” or step two.

I feel like there’s an element of that to the shift, which is how do I give up, let go of what seems like we’ve spent our lives working towards, and school, and in jobs, to create personal success and let that go? It sounds like there’s a leap of faith that says, “I’m going to give that up for the sake of this larger purpose that I’m committed to.” Whether that purpose is the we or whether that purpose is stage five, which is something bigger, “We’re trying to fix healthcare, we’re trying to bring humanity into the workplace” or whatever. I’m really curious about the experience you’ve had about successfully shifting, and I’ll just throw one more challenge into this, which is shifting from stage three to stage four, but obviously not coming out of a stage three mentality.

In fact, if I’m using my stage three mentality, I’m going to say, “I know, I’m going to move myself into stage four” which seems like it’s a fool’s errand, because you’re just embedded in the same mentality you’re trying to get out of. That’s my big question that I’d love to talk to you about.

Dave: Yeah, well I appreciate what you’re saying, just to unpack it a little bit. Having been at this game for a long time, whatever people think is the hardest stage to move past, is generally the one where they spend the most time in. I’ve been in parts of world where people say, “You can’t get out of stage one. How would you ever do that?”

I’m working with somebody now, not at my current company, somebody in the USC world, that’s solidly at stage two. “Life just sucks.” Sorry, “My life just sucks and there’s no way that this is ever going to get better.” She cannot see a way passed that. That is an insurmountable goal, to get to the point where she could get to, and she has been at stage three, but where she can get back is just insurmountable.

To her, she looks at the model and says stage two’s the hardest. Then, to get to your specific question, on stage three-

Peter: I’d say also, if 50% of the people are in stage three, then we’re probably not alone. Meaning that there’s probably a hump there that a lot of people aren’t getting passed, no?

Dave: Yes, but remember, we’re measuring tribes. We’re not measuring people. People have the capacity to interact at a number of different levels. If you, Peter, were in stage two, you could certainly communicate that way. If you were in a really great group of stage four, it would be hard for you to not join the weness of it all. People have a certain amount of bandwidth, and difficulty is the way that we’ve structured organizations.

Again, I’m coming at this as an organizational scholar, is you look at how do we interview for a job? I’m actually in Tucson, mainly because I’m interviewing somebody for a job at the company where I’m working, and I’ve not met her before, but if she does her job, it’ll be a bunch of I statements. “Why are you interested in those job?” “Well, I’ve done this, I’ve done this, I’ve done this, I’ve done this, I’m good at this, I’m good at this, I’m good at this.”

Peter: Well, it’s not only that, but when I worked with the Hay Group and we designed, and I did a lot of teaching of competency based interviewing, you’re actually taught in competency based interviewing to interrupt them if they say, “We” and say, “Hold on, I’m trying to figure out what’s the difference between you in this picture and everybody else? Because I want to know your skills.” You’re coaching people to move out of stage four and into stage three.

Dave: And then we wonder why that number’s so high. 49% of the time in organizations, because it’s how we train people. We hire for whoever wins the stage three game. That person gets the job, then we say, “You’re here, congratulations, now you’re part of this team.” Well, I mean, what’s gotten me this far? What got me through middle school, high school, college, grad school?

Peter: And that’s the leap of faith. The leap of faith is to say, “It will be in my interest” but actually that’s not … I was going to say it would be in my interest to think in terms of the we, but even that is stage three thinking.

Dave: Yeah. What you started to say is it’s not just a fool’s errand, like it’s madness inducing. If you say, “Look, I Peter, recognize that I’m in stage three, so I am going to declare from this moment forward I will be a stage four person. I will lead from shared core values, I will set up triads” which is a part of that.

You’re just a slightly better version of stage three. You keep saying a leap of faith. There are two ways that people can get from three to four. But before we get to that, please remember, these are methods of communicating. No one’s asking you or anybody else to not be able to go to stage three when you need to.

If I’m teaching a class and somebody says, “Hey, everything you’re saying’s nonsense.” I’ve got to be able to say, “Let me tell you why your point of view is incorrect.” You’ve got to be able to play the stage three card. The problem is for most professionals, we spend almost all of our time at stage three, not at four, not at five.

So I mentioned to unpack the three to four, the most common way that we saw that people moved was not this leap of faith. “There’s something better, I just have to trust it.” It’s more almost a nauseating epiphany. “Wow, I’m an egomaniacal” to use Bob Sutton’s word, a guy from Stanford, “I’m an asshole.” He wrote a book called “The No Asshole Rule.”

“Wow, wherever I go, I do almost all the talking, I talk over people, I interrupt, I’m constantly pushing my view, and I wonder why when I look at the cultures around me, there’s a bunch of stage two. Why is that?” I get sickened by, “Did I do that?” Then, I almost observe myself dressing somebody down and I realize I’m dropping them in stage two because I’m so solidly in stage three, and then I’m holding them accountable for not being in the game.

People can get overwhelmed by that, and it can happen in a variety of ways. There’s a bunch of ways to jumpstart it, but I would say two things are required. One is just the nauseating realization that you are not going to get where you want to go in life using only stage three. It’s just not enough. It’s not that you want to lose it, you want to add to it. It’s necessary but it’s insufficient.

Then number two, the leap of faith I think is really valid. Where if you look at the best tribes, the best companies that are out there, they really do behave in a stage four way, and it really is a leap of faith to say, “This is really uncomfortable but I’m going try it and see how it goes.” Then, it’s about what we think.

Peter: When you say, “I’m going try it,” you’re really, and you mentioned this before and you talk about it in the book, you’re really talking about the language that we use. Like, “I’m going to use the language.” But it’s not just language, right? Meaning that you’re going to use the language of we, there’s all sorts of games we can play with language, especially if we’re good communicators, that create a disconnect between what we’re saying and what we actually believe, or the energy that we bring to a situation.

It’s the language you use, but I imagine it’s also the energy that you bring to the situation that makes a difference.

Dave: Yeah, and I know we just have a couple of minutes left, so let me wrap this up with the two telltale signs of moving from three to four, ’cause that’s the essence of it. Number one you’re right, is the language. There are people who say, “Here’s what we think, here’s what we believe” but if you really poke into it, it’s the royal we. They don’t actually mean we. They want to sound bigger.

That’s actually stage three. The other way to look at it is in the network of relationships. People at stage three, if I’m at stage three I’ll connect what’s called dyadically, so hub and spoke with you, Peter. And I’ll connect hub and spoke with this other person, hub and spoke.

Stage three loves to hub and spoke, because when we hub and spoke, it’s a matter of winning one person over at a time. From that point of view, when someone at stage three has a meeting and there’s a big conference table, “I talk to this person, I talk to this person, I talk to this person. Okay, now let me bring it back. Here’s the next question.” I’m actually having a whole set of dyadic conversations.

Stage four doesn’t do that. Stage four sets up what are called triads which are three person relationships where one person has the back of the relationship between the other two. If I notice that someone isn’t contributing, well, “What do you think? Let’s all stop for a minute and bring in this person’s point of view.” Or, “It seems that you to are having a disagreement. Let’s see if we can harmonize those.” That’s having the back of the relationship. Those are really the telltale signs of stage three and four. Listen, I’ve got to run in about one minute, so you get the parting shot here.

Peter: All right. Thank you. The parting shot is just to thank you. There’s obviously lots more to talk about, the book is very worth reading. It’s not a hard read. It has some main points that are really interesting and impactful and can serve as a useful mirror. The book is “Tribal Leadership: Leveraging Natural Groups to Build a Thriving Organization.” Dave, thank you so much for being on the Bregman Leadership Podcast.

Dave: Thank you Peter. Good talking with you. Bye.

Peter: I hope you enjoyed this episode of the Bregman Leadership Podcast. If you did, it would really help us if you subscribe on iTunes and leave a review. A common problem that I see in companies is a lot of busyness, a lot of hard work that fails to move the organization as a whole forward. That’s the problem that we solve with our Big Arrow process. For more information about that, or to access all of my articles, videos, and podcasts, visit PeterBregman.com. Thank you Claire Marshall for producing this episode, and thank you for listening.