In their book Why Nations Fail, an examination of the reasons for the prosperity of some nations and the poverty of others, Daron Acemoglu and James A. Robinson include a strong critique of the international aid community. Using Afghanistan after the fall of the Taliban as an example, the authors paint a picture of ineptitude as dozens upon dozens of World Bank and NGO officials descend on the country at great expense, siphoning off resources and inadvertently weakening the war-torn nation’s already fragile infrastructure.

I was particularly struck by a story about villagers in one remote area of Afghanistan who heard over their radios about a multimillion-dollar initiative to restore shelters that had been damaged during the fighting. No aid arrived for months. Of the money promised, the authors write, 20% was used to cover the United Nations’ overhead costs in Geneva. Another 20% went to an NGO. Three more layers of bureaucracy each took a cut as well. Finally, the money left over was used to purchase wooden beams at inflated prices through Western Iran. When these beams were finally ready, they were delivered to the village by a warlord—again at inflated costs—but were too large to be of any use for building shelters. Ultimately, the local villagers burned them for firewood—$20 million worth of firewood.

I hasten to point out that many in the aid community disagreed with Acemoglu and Robinson’s conclusions about foreign aid (this is one very thoughtful response).

But the story of the $20 million firewood provides a useful analogy for our work on Founder’s Mentality ^SM. The story is remarkably similar to the way many frontline folks talk about top-down initiatives in big struggling bureaucracies. Here’s the typical pattern:

• Executives at the group level devise a strategy that includes a key initiative to improve the customer experience. Money is allocated to train the front line in how to implement the initiative and provide them with new tools (much like the aid agencies targeting monies to replace village shelters).
• In budgeting, this money is allocated to the three main regional directors, minus the costs incurred by HR to mock up the training program (like the 20% the authors say went to UN overhead costs).
• The three regional directors are asked to design pilot programs, and they appoint local HR and sales teams to come up with a plan. They pick three markets in three geographies and provide funds to launch pilots, minus the costs incurred by regional HR and sales teams (akin to 20% being consumed by an NGO’s administrative costs).
• The three pilot markets work with a training firm, an ad agency and their respective regional teams to develop the pilot program in more detail (like the three more layers of bureaucracy that reportedly took a cut).
• The final pilot program is incomprehensible to the salesforce and there are insufficient funds left over to roll it out in a meaningful way to key customers. The salesforce rejects it out of hand. (The beams are too big to be of any use and are burned as firewood.)
• Group executives at the top view the pilot’s failure as further evidence that the salesforce is set in its ways and resistant to change. (Which would be analogous to aid agencies blaming the fiasco on incompetence and corruption in the countries they were trying to help).

I know this sounds far-fetched, but we hear examples of beam burning in the business world every day. Recently, I was at a board meeting of a company that had just hired a new executive. He had been asked to give his observations after his first 100 days, or what French companies call a rapport d’étonnement. He observed that in his previous company, 90% of initiatives were created by the front line in order to fulfill their mission of continuous cost improvement. “Initiatives are started with the front line, designed by the front line and executed by the front line,” he said. “The necessary change is pulled through the company.”

His new company, he said, had many strong qualities. But he had one telling observation: “Here, initiatives are designed at the top and then pushed on our people,” he said. “But to be honest, as far as I can tell, our people simply view them as fireworks displays. The initiatives are shot high into the air with great fanfare, but like fireworks, the color and excitement die by the time anything hits the ground. Our people are trained to ignore what the leaders say, because our initiatives and pronouncements have no meaning or impact.”

Figure 1

The most sustainably profitable companies nurture and maintain three traits

Fred Hassan, the extraordinary turnaround specialist, addressed this issue in a Harvard Business Review article called “The Frontline Advantage.” He wrote: “The managers most responsible for a company’s success or failure happen to be the ones with whom the CEO spends the least amount of time … It is the frontline managers who must motivate and bolster the morale of the people who do the work. … These managers are central to a company’s business strategy because they oversee its execution.”

In an earlier blog post, we noted that many leaders in large corporations continue to rely on old processes in which key initiatives are developed at the top and then pushed down through the organization. In contrast, companies that embrace their Founder’s Mentality create “pull” by engaging directly with frontline employees to determine what initiatives are necessary and then adjust incentives accordingly to ensure the needed buy-in. These companies think about strategy and frontline behaviors/routines as inseparable. They design with the front line, for the front line. Their CEOs get out of their box to work directly with the people accountable for delivering to customers.

The burning beams and fireworks analogies both highlight the debilitating costs of relying on push instead of pull.